SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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





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



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


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


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



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





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

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

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

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






                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                                      INDEX




                                                                          Page
Part I.        FINANCIAL INFORMATION                                     Number

  Item 1.      Financial Statements

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

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

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

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

               Consolidated Statement of Stockholders' Equity -
                   Nine months ended September 30, 2006 (unaudited)           7

               Notes to Condensed Consolidated Financial Statements
                  (unaudited)                                                 8

   Item 2.     Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                        22

   Item 3.     Quantitative and Qualitative Disclosure About Market Risk     35

   Item 4.     Controls and Procedures                                       36

Part II.       OTHER INFORMATION

   Item 1.     Legal Proceedings                                             37

   Item 1A.    Risk Factors                                                  39

   Item 6.     Exhibits                                                      39

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









                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                 (In thousands)

<TABLE>

               ASSETS                                                  December 31,      September 30,
                                                                           2005              2006
                                                                      --------------    --------------
                                                                                          (unaudited)

Current assets:
    <S>                                                                <C>                 <C>
    Cash and cash equivalents                                          $   76,912          $   48,133
    Marketable securities                                                   9,265               9,255
    Restricted cash and cash equivalents                                    4,327               6,061
    Accounts and other receivables, net                                    23,392              24,537
    Refundable income taxes                                                   424                 643
    Receivable from affiliates                                              3,291               6,923
    Inventories, net                                                       22,538              23,631
    Prepaid expenses                                                        1,718               1,141
    Deferred income taxes                                                   7,295               7,074
                                                                       ----------          ----------

         Total current assets                                             149,162             127,398
                                                                       ----------          ----------

Other assets:
    Marketable equity securities                                           87,120             109,488
    Investment in Kronos Worldwide, Inc.                                  146,774             155,984
    Goodwill                                                               27,240              32,541
    Deferred income taxes                                                       4                   -
    Other, net                                                              5,499               8,979
                                                                       ----------          ----------

         Total other assets                                               266,637             306,992
                                                                       ----------          ----------

Property and equipment:
    Land                                                                    8,511               9,485
    Buildings                                                              28,001              29,090
    Equipment                                                             110,917             116,692
    Construction in progress                                                2,015               8,637
                                                                       ----------          ----------
                                                                          149,444             163,904
    Less accumulated depreciation and amortization                         80,540              90,972
                                                                       ----------          ----------

         Net property and equipment                                        68,904              72,932
                                                                       ----------          ----------

         Total assets                                                  $  484,703          $  507,322
                                                                       ==========          ==========
</TABLE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                 (In thousands)


<TABLE>

    LIABILITIES AND STOCKHOLDERS' EQUITY                               December 31,      September 30,
                                                                           2005              2006
                                                                      --------------    --------------
                                                                                          (unaudited)

Current liabilities:
    <S>                                                                <C>                  <C>
    Current maturities of long-term debt                               $      171           $       37
    Accounts payable                                                       11,079               10,344
    Accrued liabilities                                                    29,859               30,130
    Accrued environmental costs                                            13,302                9,229
    Payable to affiliates                                                     982                  382
    Income taxes                                                              599                  271
                                                                       ----------           ----------

         Total current liabilities                                         55,992               50,393
                                                                       ----------           ----------

Noncurrent liabilities:
    Long-term debt                                                          1,425                   17
    Accrued pension costs                                                     942                    -
    Accrued postretirement benefits costs                                  10,141                8,911
    Accrued environmental costs                                            41,645               42,250
    Deferred income taxes                                                 107,000              123,966
    Other                                                                   2,246                2,336
                                                                       ----------           ----------

         Total noncurrent liabilities                                     163,399              177,480
                                                                       ----------           ----------

Minority interest                                                          45,630               45,723
                                                                       ----------           ----------

Stockholders' equity:
    Common stock                                                            6,070                6,070
    Additional paid-in capital                                            363,233              357,633
    Retained earnings                                                        -                       -
    Accumulated other comprehensive income (loss):
       Marketable securities                                               34,084               48,562
       Currency translation                                              (141,018)            (135,852)
       Pension liabilities                                                (42,687)             (42,687)
                                                                       ----------           ----------

          Total stockholders' equity                                      219,682              233,726
                                                                       ----------           ----------

          Total liabilities and stockholders' equity                   $  484,703           $  507,322
                                                                       ==========           ==========
</TABLE>

Commitments and contingencies (Note 12)




     See accompanying Notes to Condensed Consolidated Financial Statements.



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

                                                                 Three months ended                  Nine months ended
                                                                    September 30,                      September 30,
                                                                ----------------------            ---------------------
                                                                2005              2006            2005             2006
                                                                ----              ----            ----             ----
                                                                                      (unaudited)


<S>                                                           <C>             <C>              <C>             <C>
Net sales                                                     $  47,134       $  48,812        $ 139,707       $ 145,984
Cost of goods sold                                               36,153          35,955          107,916         109,150
                                                              ---------       ---------        ---------       ---------

     Gross margin                                                10,981          12,857           31,791          36,834

Selling, general and administrative expense                       6,049           6,673           17,979          19,832
Other operating income (expense):
   Currency transaction gains (losses), net                         (43)             31              (58)            (80)
   Insurance recoveries                                           1,231              48            2,431           2,864
   Other income                                                   -                 124              207             128
   Corporate expense                                             (3,900)         (7,686)         (13,928)        (18,275)
                                                              ---------       ---------        ---------       ---------

     Income (loss) from operations                                2,220          (1,299)           2,464           1,639

Equity in earnings of Kronos Worldwide, Inc.                      2,847           4,154           22,403          14,393
Other income (expense):
   Trade interest income                                             32             115               76             252
   Interest and dividend income from affiliates                     619             471            1,858           1,413
   Other interest income                                            785             743            2,445           2,369
   Securities transactions, net                                     (93)             82           14,603             146
   Interest expense                                                 (90)            (50)            (287)           (162)
                                                              ---------       ---------        ---------       ---------

     Income from continuing operations before
        income taxes and minority interest                        6,320           4,216           43,562          20,050

Provision for income taxes (benefit)                              5,460             (52)          16,485           4,379

Minority interest in after-tax earnings                          (1,929)          1,126             (413)          2,999
                                                              ---------       ---------        ---------       ---------

     Income from continuing operations                            2,789           3,142           27,490          12,672

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

     Net income                                               $   2,789        $   3,142       $  27,164       $  12,495
                                                              =========        =========       =========       =========

 Basic and diluted net income per share                       $     .06        $     .06       $     .56       $     .26
                                                              =========        =========       =========       =========

Weighted-average shares outstanding:
     Basic                                                       48,558          48,569           48,534          48,566
     Dilutive impact of stock options                                36              15               49              18
                                                              ---------       ---------        ---------       ---------

     Diluted                                                     48,594          48,584           48,583          48,584
                                                              =========       =========        =========       =========
</TABLE>


     See accompanying Notes to Condensed Consolidated Financial Statements.



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                    Nine months ended September 2005 and 2006

                                 (In thousands)

<TABLE>

                                                                           2005             2006
                                                                           ----             ----
                                                                                (unaudited)

<S>                                                                      <C>              <C>
Net income                                                               $  27,164        $  12,495
                                                                         ---------        ---------

Other comprehensive income, net of tax:

     Marketable securities adjustment                                        5,728           14,478

     Currency translation adjustment                                        (4,718)           5,166
                                                                         ---------        ---------

        Total other comprehensive income                                     1,010           19,644
                                                                         ---------        ---------

           Comprehensive income                                          $  28,174        $  32,139
                                                                         =========        =========
</TABLE>



     See accompanying Notes to Condensed Consolidated Financial Statements.



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Nine months ended September 30, 2005 and 2006

                                 (In thousands)

<TABLE>

                                                                         2005             2006
                                                                         ----             ----
                                                                               (unaudited)

Cash flows from operating activities:
    <S>                                                                <C>             <C>
    Net income                                                         $ 27,164        $ 12,495
    Depreciation and amortization                                         8,420           8,644
    Deferred income taxes:
       Continuing operations                                            (11,411)          5,546
       Discontinued operations                                             (187)              -
    Minority interest:
       Continuing operations                                               (413)          2,999
       Discontinued operations                                             (151)           (148)
    Equity in earnings of Kronos Worldwide, Inc.                        (22,403)        (14,393)
    Dividends from Kronos Worldwide, Inc.                                13,214          13,137
    Securities transactions, net                                        (14,603)           (146)
    Benefit plan expense less than cash funding:
       Defined benefit pension plans                                       (660)         (1,552)
       Other postretirement benefit plans                                  (991)         (1,230)
    Other, net                                                            1,195             971
    Change in assets and liabilities:
       Accounts and other receivables                                    (1,994)         (1,557)
       Inventories                                                         (763)            536
       Prepaid expenses                                                  (1,279)            549
       Accrued environmental costs                                       (8,685)         (3,468)
       Accounts payable and accrued liabilities                              19          (1,173)
       Income taxes                                                      (1,370)           (422)
       Accounts with affiliates                                          (1,407)         (4,250)
       Other, net                                                          (404)         (2,552)
                                                                       --------        --------

            Net cash provided by (used in)
              operating activities                                      (16,709)         13,986
                                                                       --------        --------

Cash flows from investing activities:
    Capital expenditures                                                 (8,828)         (9,117)
    Acquisition, net of cash acquired                                    (7,342)         (9,832)
    Collection of note receivable                                          -              1,306
    Collection of loans to affiliates                                     2,000            -
    Change in restricted cash equivalents
       and marketable debt securities, net                                4,278          (1,537)
    Proceeds from disposal of:
       Business unit                                                     18,094            -
       Kronos common stock                                               19,176            -
       Marketable securities                                              5,614           9,209
       Property and equipment                                                19              45
    Purchase of:
       CompX common stock                                                  (707)         (2,278)
       Marketable securities                                             (4,758)         (9,357)
    Cash of disposed business unit                                       (4,006)           -
                                                                       --------        --------

            Net cash provided by (used in) investing activities          23,540         (21,561)
                                                                       --------        --------
</TABLE>

     See accompanying Notes to Condensed Consolidated Financial Statements.


                      NL INDUSTRIES, INC. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                  Nine months ended September 30, 2005 and 2006

                                 (In thousands)

<TABLE>

                                                                          2005              2006
                                                                          ----              ----
                                                                              (unaudited)

Cash flows from financing activities:
    Indebtedness:
       <S>                                                              <C>               <C>
       Principal payments                                               $    (48)         $ (1,516)
       Deferred financing costs paid                                         (28)             (105)
    Cash dividends paid                                                  (24,279)          (18,213)
    Distributions to minority interest                                    (1,805)           (1,708)
    Proceeds from issuance of common stock:
       NL common stock                                                     2,488                 9
       CompX common stock                                                    639               104
                                                                        --------          --------

              Net cash used in financing activities                      (23,033)          (21,429)
                                                                        --------          --------

Cash and cash equivalents - net change from:
    Operating, investing and financing activities                        (16,202)          (29,004)
    Currency translation                                                     120               225
Cash and cash equivalents at beginning of period                          99,185            76,912
                                                                        --------          --------

Cash and cash equivalents at end of period                              $ 83,103          $ 48,133
                                                                        ========          ========


Supplemental disclosures - cash paid for:
       Interest, net of amounts capitalized                             $    105          $    105
       Income taxes, net                                                  32,117             3,330

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




     See accompanying Notes to Condensed Consolidated Financial Statements.



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                      Nine months ended September 30, 2006

                                 (In thousands)

<TABLE>

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

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

Net income                          -            -          12,495           -               -               -             12,495

Issuance of common stock            -              80         -              -               -               -                 80

Dividends                           -          (5,718)     (12,495)          -               -               -            (18,213)

Other comprehensive income, net     -            -            -            14,478           5,166            -             19,644

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

Balance at September 30, 2006     $6,070     $357,633      $  -          $ 48,562       $(135,852)      $ (42,687)       $233,726
                                  ======     ========      =======       ========       =========       =========        ========
</TABLE>



     See accompanying Notes to Condensed Consolidated Financial Statements.



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                               September 30, 2006

                                   (unaudited)

Note 1 - Organization and basis of presentation:

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

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

     The unaudited Condensed Consolidated Financial Statements contained in this
Quarterly   Report  have  been  prepared  on  the  same  basis  as  the  audited
Consolidated Financial Statements in our Annual Report on Form 10-K for the year
ended  December 31, 2005 that we filed with the SEC on March 16, 2006 (the "2005
Annual Report").  In our opinion, we have made all necessary  adjustments (which
include only normal  recurring  adjustments)  in order to state  fairly,  in all
material respects,  our consolidated  financial position,  results of operations
and cash flows as of the dates and for the periods presented.  We have condensed
the Consolidated  Balance Sheet at December 31, 2005 contained in this Quarterly
Report as compared  to our audited  Consolidated  Financial  Statements  at that
date,  and  we  have  omitted  certain  information  and  footnote   disclosures
(including those related to the Consolidated Balance Sheet at December 31, 2005)
normally included in financial statements prepared in accordance with accounting
principals  generally  accepted in the United  States of America  ("GAAP").  Our
results of operations for the interim  periods ended  September 30, 2006 may not
be  indicative  of our  operating  results  for the  full  year.  The  Condensed
Consolidated  Financial  Statements contained in this Quarterly Report should be
read in conjunction with our 2005 Consolidated Financial Statements contained in
our 2005 Annual Report.  Certain  reclassifications have been made to prior year
balances to conform to the current year presentation.

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

     Stock purchases - Our ownership of CompX is primarily  through CompX Group,
Inc., our majority-owned subsidiary. CompX Group's sole asset consists of 83% of
the  outstanding  common stock of CompX.  We also own an  additional 2% of CompX
directly.  During  the first nine  months of 2006,  we  purchased  approximately
145,000  shares of CompX  common stock in market  transactions  for an aggregate
purchase  price  of $2.3  million.  We  accounted  for this  purchase  as a step
acquisition under the purchase method of accounting.

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

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

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

<S>                                                                   <C>                 <C>
Trade receivables                                                     $ 20,921            $ 23,461
Other receivables                                                        2,783               1,506
Allowance for doubtful accounts                                           (312)               (430)
                                                                      --------            --------

       Total                                                          $ 23,392            $ 24,537
                                                                      ========            ========
</TABLE>

Note 3 - Inventories, net:

<TABLE>

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

<S>                                                                   <C>                 <C>
Raw materials                                                         $  6,801            $  6,268
In process products                                                      9,116               9,260
Finished products                                                        6,621               8,103
                                                                      --------            --------

       Total                                                          $ 22,538            $ 23,631
                                                                      ========            ========
</TABLE>

Note 4 - Noncurrent marketable equity securities:

     At December 31, 2005 and  September 30, 2006,  we owned  approximately  4.7
million  shares of Valhi common  stock.  At September 30, 2006 the quoted market
price was $23.25 per share, or an aggregate market value of $109.5 million,  and
at  December  31,  2005 the quoted  market  price was  $18.50  per share,  or an
aggregate market value of $87.1 million.

Note 5 - Investment in Kronos:

     At December 31, 2005 and September 30, 2006,  we owned  approximately  17.5
million  shares of Kronos common stock.  At September 30, 2006 the quoted market
price was $28.79 per share, or an aggregate market value of $504.3 million,  and
at December 31, 2005 the quoted market price was $29.01,  or an aggregate market
value of $508.1 million.

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

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

<S>                                                                   <C>                <C>
Current assets                                                        $   525.3          $   586.6
Property and equipment, net                                               418.9              437.4
Investment in TiO2 joint venture                                          115.3              114.8
Other noncurrent assets                                                   239.4              252.9
                                                                      ---------          ---------

    Total assets                                                      $ 1,298.9          $ 1,391.7
                                                                      =========          =========

Current liabilities                                                   $   205.1          $   211.7
Long-term debt                                                            464.4              528.3
Accrued pension and post retirement benefits                              150.0              149.3
Other noncurrent liabilities                                               69.4               66.7
Stockholders' equity                                                      410.0              435.7
                                                                      ---------          ---------

    Total liabilities and stockholders' equity                        $ 1,298.9          $ 1,391.7
                                                                      =========          =========
</TABLE>

<TABLE>

                                                           Three months ended                Nine months ended
                                                               September 30,                   September 30,
                                                          ---------------------            --------------------
                                                          2005             2006            2005            2006
                                                          ----             ----            ----            ----
                                                              (In millions)                     (In millions)

<S>                                                      <C>             <C>             <C>             <C>
Net sales                                                $292.1          $ 331.7         $ 895.7         $ 981.0
Cost of sales                                             216.2            256.2           640.9           748.8
Income from operations                                     38.2             34.3           142.3           105.4
Net income                                                  8.0             11.6            62.2            40.2
</TABLE>

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

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

<S>                                                                   <C>                 <C>
Intangible assets, net                                                $  3,432            $  4,160
Prepaid pension cost                                                         -                 638
Other                                                                    2,067               4,181
                                                                      --------            --------

        Total                                                         $  5,499            $  8,979
                                                                      ========            ========
</TABLE>

Note 7 - Current accrued liabilities:
<TABLE>

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

<S>                                                                   <C>                 <C>
Employee benefits                                                     $ 10,933            $ 12,387
Professional fees                                                        5,269               3,238
Other                                                                   13,657              14,505
                                                                      --------            --------

        Total                                                         $ 29,859            $ 30,130
                                                                      ========            ========
</TABLE>

Note 8 - Other noncurrent liabilities:
<TABLE>

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

<S>                                                                   <C>                 <C>
Insurance claims and expenses                                         $  2,224            $  2,336
Other                                                                       22                -
                                                                      --------            --------

        Total                                                         $  2,246            $  2,336
                                                                      ========            ========
</TABLE>

     We recorded a $745,000  charge in the third  quarter of 2006 in  connection
with our self-insurance obligations. This charge resulted from an understatement
of our accrual and originated over several years.  The effect of this adjustment
on our expected results for the full year 2006 is not expected to be material.

Note 9 - Provision for income taxes:
<TABLE>

                                                                         Nine months ended
                                                                           September 30,
                                                                      ----------------------
                                                                      2005              2006
                                                                      ----              ----
                                                                          (In millions)

<S>                                                                  <C>              <C>
Expected tax expense                                                 $ 15.2           $ 7.0
Non-U.S. tax rates                                                      (.1)            (.3)
Incremental U.S. tax and rate differences on
  equity in earnings                                                    3.5            (2.7)
Nondeductible expenses                                                   .2              .2
U.S. state income taxes, net                                             .3              .5
Excess of book basis over tax basis of Kronos common
  stock sold or distributed                                             2.7              -
Tax contingency reserve adjustment, net                                (4.1)             .2
Reduction in Canadian income tax rate                                      -            (.2)
Other, net                                                             (1.2)            (.3)
                                                                     ------           -----

        Total                                                        $ 16.5           $ 4.4
                                                                     ======           =====

Comprehensive  provision (benefit) for income
  taxes allocable to:
        Income from continuing operations                            $ 16.5           $ 4.4
        Discontinued operations                                          .4             (.2)
        Other comprehensive income:
        Marketable securities                                           3.2             7.8
        Currency translation                                           (2.9)            3.3
                                                                     ------           -----

        Total                                                        $ 17.2           $15.3
                                                                     ======           =====
</TABLE>

     In June 2006,  Canada enacted a 2% reduction in the Canadian federal income
tax rate and eliminated the federal  surtax.  The 2% reduction will be phased in
from 2008 through 2010,  and the federal surtax will be eliminated in 2008. As a
result,  during the second  quarter of 2006 we recognized a $0.2 million  income
tax benefit  related to the effect of such reduction on our previously  recorded
net deferred income tax liability.

Note 10 - Employee benefit plans:

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

                                                          Three months ended                Nine months ended
                                                              September 30,                   September 30,
                                                         ---------------------            --------------------
                                                         2005             2006            2005            2006
                                                         ----             ----            ----            ----
                                                                            (In thousands)

<S>                                                    <C>              <C>             <C>             <C>
Interest cost                                          $   753          $   751         $ 2,271         $ 2,234
Expected return on plan assets                          (1,010)          (1,352)         (3,041)         (4,045)
Amortization of net transition obligations                 (16)             (17)            (51)            (50)
Recognized actuarial losses                                 93              107             291             308
                                                       -------          -------         -------         -------

      Total                                            $  (180)         $  (511)        $  (530)        $(1,553)
                                                       =======          =======         =======-        =======
</TABLE>

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

                                                          Three months ended                Nine months ended
                                                              September 30,                   September 30,
                                                         ---------------------            --------------------
                                                         2005             2006            2005            2006
                                                         ----             ----            ----            ----
                                                                            (In thousands)

<S>                                                    <C>              <C>             <C>             <C>
Interest cost                                          $   211          $   184         $   633         $   551
Amortization of prior service credit                       (72)             (28)           (215)            (84)
                                                       -------          -------         -------         -------

       Total                                           $   139          $   156         $   418         $   467
                                                       =======          =======         =======         =======
</TABLE>

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

Note 11 - Accounts with affiliates:
<TABLE>

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

Current receivables from affiliates:
    <S>                                                               <C>                  <C>
    Valhi - federal income taxes                                      $3,146               $ 6,791
    Kronos - trade items                                                 145                   132
                                                                      ------               -------

            Total                                                     $3,291               $ 6,923
                                                                      ======               =======

Current payables to affiliates:
    Valhi - state income taxes                                        $  771               $   161
    Tremont Corporation - trade items                                    211                   221
                                                                      ------               -------

            Total                                                     $  982               $   382
                                                                      ======               =======
</TABLE>

Note 12 - Commitments and contingencies:

Lead pigment litigation

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

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

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

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

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

Environmental matters and litigation

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

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

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

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

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

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

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

     Changes in the accrued  environmental costs during the first nine months of
2006 are as follows:

<TABLE>

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

<S>                                                                               <C>
Balance at the beginning of the period                                            $ 54,947
Additions charged to expense, net                                                    2,454
Payments, net                                                                       (5,922)
                                                                                  --------

       Balance at the end of the period                                           $ 51,479
                                                                                  ========

Amounts recognized in the balance sheet at the end of the period:
     Current liability                                                            $  9,229
     Noncurrent liability                                                           42,250
                                                                                  --------

       Total                                                                      $ 51,479
                                                                                  ========
</TABLE>

     On a quarterly basis, we evaluate the potential range of liability at sites
where we have been named as a PRP or  defendant.  At September  30, 2006, we had
accrued  $51.5  million  for those  environmental  matters  which we believe are
reasonably  estimable.  We believe that it is not possible to estimate the range
of costs for certain  sites.  The upper end of the range of reasonably  possible
costs to us for sites for which we believe it is possible  to estimate  costs is
approximately $78 million, including the amount we have accrued.

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

Other litigation

     We  have  been  named  as  a  defendant  in  various  lawsuits  in  several
jurisdictions,  alleging personal injuries as a result of occupational  exposure
primarily to products manufactured by our former operations containing asbestos,
silica  and/or  mixed dust.  Approximately  500 of these  types of cases  remain
pending, involving a total of approximately 10,700 plaintiffs and their spouses.
We have not accrued any amounts for this  litigation  because of the uncertainty
of liability  and  inability to reasonably  estimate the  liability,  if any. To
date,  we have not been  adjudicated  liable in any of these  matters.  Based on
information available to us, including facts concerning  historical  operations,
the rate of new claims,  the number of claims from which we have been dismissed,
and our prior  experience in the defense of these  matters,  we believe that the
range of reasonably  possible  outcomes of these matters will be consistent with
our historical costs (which are not material). Furthermore, we do not expect any
reasonably  possible  outcome would involve amounts material to our consolidated
financial  position,  results  of  operations  or  liquidity.  We have  and will
continue to vigorously seek dismissal and/or a finding of no liability from each
claim.  In  addition,  from time to time,  we have  received  notices  regarding
asbestos or silica claims purporting to be brought against former  subsidiaries,
including  notices  provided  to  insurers  with  which  we  have  entered  into
settlements  extinguishing  certain insurance policies.  These insurers may seek
indemnification from us.

     For a discussion of other legal proceedings to which we are a party,  refer
to the financial statements included in our 2005 Annual Report and our Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006.

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

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

Insurance coverage claims

     For a complete discussion of certain litigation involving us and certain of
our former insurance carriers, refer to our 2005 Annual Report and our Quarterly
Report on Form 10-Q for the  quarters  ended March 31,  2006 and June 30,  2006.
Additional information regarding such litigation, or new litigation, is below.

     Certain  Underwriters at Lloyds,  London v. Millennium Holdings LLC et. al.
(Supreme  Court  of the  State  of New  York,  County  of New  York,  Index  No.
06/60026).  In August 2006, the trial court denied our motion to dismiss, and we
have appealed that decision.

     NL Industries, Inc. v. American Re Insurance Company, et al. (Dallas County
Court at Law,  Texas,  Case No.  CC-06-04523-E).  In September  2006,  the court
stayed  this  proceeding  pending  outcome  of the  appeal  in the two New  York
actions.

     In September 2006, we filed a declaratory judgment action against OneBeacon
and certain other former insurance companies,  captioned NL Industries,  Inc. v.
OneBeacon America Insurance Company,  et al. (Dallas County Court at Law, Texas,
Case No. CC-06-13934-A) seeking interpretation of a Stand-Still Agreement, which
is governed by Texas law. The defendants have filed a motion to consolidate this
case with the NL Industries,  Inc. v. American Re Insurance Company, et al. case
which we filed in April 2006. We intend to oppose consolidation of the cases.

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

Income tax matters

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

     o    Kronos received a preliminary tax assessment  related to 1993 from the
          Belgian tax authorities proposing tax deficiencies,  including related
          interest, of approximately euro 6 million. The Belgian tax authorities
          filed a lien on  Kronos'  Belgian  TiO2  operation's  fixed  assets in
          connection  with  their  assessment.  Kronos  filed a protest  to this
          assessment and in July 2006, the Belgian tax authorities  withdrew the
          assessment. The lien was subsequently released.

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

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

Note 13 - Discontinued operations, net of tax:

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

Note 14 - Recent accounting pronouncements:

     Quantifying  financial statement  misstatements - In September 2006 the SEC
issued  Staff  Accounting  Bulletin  ("SAB")  No.  108  expressing  their  views
regarding the process of quantifying financial statement misstatements.  The SAB
is effective for us no later than the fourth  quarter of 2006.  According to SAB
No. 108, both the "rollover" and "iron  curtain"  approaches  must be considered
when evaluating a misstatement for materiality. We do not expect the adoption of
the  SAB to  have a  material  effect  on our  previously-reported  consolidated
financial position or results of operations at the date of adoption.

     Fair  value  measurements  - In  September  2006 the  Financial  Accounting
Standards  Board ("FASB")  issued  Statement of Financial  Accounting  Standards
("SFAS") No. 157, Fair Value Measurements, which will become effective for us on
January  1, 2008.  SFAS No.  157  generally  provides  a  consistent  fair value
definition and measurement framework for GAAP pronouncements.  SFAS No. 157 also
establishes a fair value hierarchy for different measurement techniques based on
the  objective  nature of the inputs in various  valuation  methods.  We will be
required to ensure all of our fair value  measurements  are in  compliance  with
SFAS No. 157 on a prospective  basis  beginning in the first quarter of 2008. In
addition,  we will be required to expand our disclosures regarding the valuation
methods  and level of inputs  we  utilize  in the  first  quarter  of 2008.  The
adoption of this  standard will not have a material  effect on our  Consolidated
Financial Statements.

     Pension and other  postretirement  plans - Also in September  2006 the FASB
issued SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other
Postretirement  Plans.  SFAS  No.  158  requires  us to  recognize  an  asset or
liability for the over or under funded status of each of our individual  defined
benefit pension and  postretirement  benefit plans on our  Consolidated  Balance
Sheets. We will recognize through other comprehensive  income prior unrecognized
gains and losses and prior service costs or credits, net of tax, at December 31,
2006 that we currently  amortize  through net periodic  benefit cost. All future
changes  in the  funded  status  of  these  plans  will  be  recognized  through
comprehensive income, net of tax (either in net income or in other comprehensive
income). We will also provide certain new disclosures related to these plans. In
addition,  we currently use  September 30 as a measurement  date for our defined
benefit  pension  plans,  but under this  standard  we will be  required  to use
December 31 as the measurement  date for all of our plans.  The measurement date
requirement of SFAF No. 158 will become  effective for us by the end of 2008 and
provides two alternate  transition  methods;  we have not yet  determined  which
transition  method we will select.  This  standard  does not change the existing
recognition and measurement  requirements  that determine the amount of periodic
benefit cost recognized in net income.

     The asset and liability  recognition  and disclosure  requirements  of this
standard  will  become  effective  for us as of  December  31,  2006 and will be
adopted  prospectively.  We will not complete the 2006  assessment of the funded
status of our pension and postretirement  benefit plans until after December 31,
2006.  At December 31, 2005,  our pension plans were  over-funded  by a net $2.6
million,  and we had a net $1.2 million liability recognized on our Consolidated
Balance Sheet related to these plans.  At December 31, 2005, our post retirement
benefit plans were  under-funded by a net $14.0 million,  and we had a net $12.0
million liability  recognized on our Consolidated Balance Sheet related to these
plans.  Our  2006  funded  status  will be based  in part on  certain  actuarial
assumptions that we cannot yet determine and differences  between the actual and
expected  return on plan assets during the year.  Therefore,  we are not able to
determine  the impact  this  standard  will have on our  Consolidated  Financial
Statements.  Because the difference  between the aggregate  funded status of our
defined  benefit  and  post  retirement  benefits  plans  and  the  net  amounts
recognized with respect to these plans on our Consolidated  Financial Statements
at December  31, 2005 is not  materially  significant,  we cannot yet  determine
whether  the net effect of  adopting  SFAS No. 158 will  increase  or reduce our
stockholders'  equity at  December  31,  2006,  in so far as it  relates  to our
benefit plans.  However,  our investment in Kronos and our stockholders'  equity
will be affected  by our  pro-rata  share of the effect to Kronos from  adopting
this standard,  and Kronos believes the net effect of adopting SFAS No. 158 will
reduce their  stockholders'  equity. The full disclosure of the funded status of
our defined  benefit  pension and  postretirement  benefit plans at December 31,
2005 can be found in Note 16 to our 2005 Annual Report.

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

     Stock  options - We adopted  the fair value  provisions  of SFAS No.  123R,
Share-Based   Payment,  on  January  1,  2006  using  the  modified  prospective
application  method.  SFAS No. 123R,  among other  things,  requires the cost of
employee  compensation paid with equity  instruments to be measured based on the
grant date fair value.  That cost is then  recognized  over the vesting  period.
Using the  modified  prospective  method,  we will apply the  provisions  of the
standard to all new equity  compensation  granted  after January 1, 2006 and any
existing  awards which are modified,  repurchased or cancelled  after January 1,
2006. The number of non-vested  equity awards we or our  subsidiaries had issued
as of  December  31, 2005 was not  material.  Before  adopting  SFAS No. 123R we
accounted  for our equity  compensation  under the  variable  accounting  method
whereby the equity  awards were revalued  based on the current  trading price at
each balance  sheet date.  We now account for these  awards using the  liability
method under SFAS No.  123R,  which is  substantially  identical to the variable
accounting  method we previously  used. We recorded  compensation  income in the
nine  months  ended  September  30,  2005  and  2006  of  $53,000  and  $25,000,
respectively.  If we or our  subsidiaries  grant a significant  number of equity
awards or modify, repurchase or cancel existing equity awards in the future, the
amount of equity compensation  expense in our Consolidated  Financial Statements
could be material.

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

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

     Planned Major  Maintenance  Activities - In September 2006, the FASB issued
FASB Staff  Position  ("FSP")  No.  AUG  AIR-1,  Accounting  for  Planned  Major
Maintenance Activities,  which will become effective for Kronos in January 2007,
although  early  adoption  is  permitted.  Under FSP No. AUG AIR-1  accruing  in
advance for major maintenance is no longer permitted.  Companies that previously
accrued in advance for major  maintenance  activities  (such as Kronos)  will be
required  to  retroactively  restate  their  financial  statements  to reflect a
permitted method of expense for all periods  presented.  Concurrent with Kronos,
we will retroactively  restate our financial statements in the fourth quarter of
2006 when Kronos adopts the direct expense method of accounting. The adoption of
the FSP will have the following effect on our previously reported net income for
the periods indicated:
<TABLE>

                                                 Increase (decrease) in net income
                                                 ---------------------------------
                                                   2005                     2006
                                                   ----                     ----
Quarter Ended:                                             (In millions)

 <S>                                              <C>                      <C>
 March 31                                          $ .3                     $ .2
 June 30                                            (.2)                     (.1)
 September 30                                         -                       -
 December 31                                        (.1)                      na
                                                   ----                     ----

       Total                                       $ -                      $ .1
                                                   ====                     ====
</TABLE>


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

RESULTS OF OPERATIONS

Business and results of operations overview

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

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

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

Forward-looking information

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

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

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

Results of Operations

Net Income Overview

     Quarter Ended September 30, 2006 Compared to
       Quarter Ended September 30, 2005

     Our net income was $3.1 million,  or $.06 per diluted  share,  in the third
quarter of 2006  compared  to net income of $2.8  million,  or $.06 per  diluted
share,  in the third quarter of 2005.  Our diluted  earnings per share  remained
consistent from 2005 to 2006 due primarily to the net effects of:

     o    higher equity in earnings of Kronos in 2006, and
     o    higher  component  products  income from  operations of CompX in 2006,
          offset by
     o    higher environmental and legal defense costs for NL in 2006.

     Our income from  continuing  operations  in 2005  includes  (net of tax and
minority interest):

     o    a loss of $.13  per  diluted  share  related  to a change  in  CompX's
          permanent  reinvestment  conclusion  regarding certain of its non-U.S.
          subsidiaries,
     o    income of $.08 per diluted share related to developments  with respect
          to certain income tax audits of NL,
     o    income  of  $.02  per  diluted  share  related  to  certain  insurance
          recoveries we received, and
     o    a net expense included in our equity in earnings of Kronos of $.02 per
          diluted  share related to the aggregate  effect of  developments  with
          respect to certain non-U.S.  income tax audits of Kronos,  principally
          in Germany, Belgium and Canada.

     Our income  from  continuing  operations  in 2006  includes  a net  expense
included in our equity in earnings of Kronos of $.02 per diluted  share  related
to the  unfavorable  resolution of certain  income tax issues related to Kronos'
operations in Germany and an increase in Kronos' income tax contingency  reserve
principally related to ongoing income tax audits of Kronos in Germany.

     Nine Months Ended September 30, 2006 Compared to
       Nine Months Ended September 30, 2005 -

     Our consolidated  income from continuing  operations was $12.7 million,  or
$.26 per diluted share, in the first nine months of 2006 compared to income from
continuing  operations of $27.5 million, or $.57 per diluted share, in the first
nine months of 2005.

     The  decrease  in our diluted  earnings  per share from 2005 to 2006 is due
primarily  to the net effects of:

     o    lower equity in earnings of Kronos in 2006, and
     o    higher environmental and legal defense costs for NL in 2006, offset by
     o    certain securities transactions gains in 2005, and
     o    higher component products income from operations at CompX in 2006.

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

     Our income from  continuing  operations  in 2005  includes  (net of tax and
minority interest):

     o    gains  from our sales of shares  of  Kronos  common  stock of $.17 per
          diluted share, net of income tax,
     o    income of $.08 per diluted share related to developments  with respect
          to certain income tax audits of NL,
     o    income  included  in our  equity  in  earnings  of  Kronos of $.02 per
          diluted  share  related to Kronos'  sale of its passive  interest in a
          Norwegian smelting operation,
     o    income  of  $.03  per  diluted  share  related  to  certain  insurance
          recoveries we received,
     o    a loss of $.13  per  diluted  share  related  to a change  in  CompX's
          permanent  reinvestment  conclusion  regarding certain of its non-U.S.
          subsidiaries, and
     o    a net expense included in our equity in earnings of Kronos of $.02 per
          diluted  share related to the aggregate  effect of  developments  with
          respect to certain non-U.S.  income tax audits of Kronos,  principally
          in Germany, Belgium and Canada.

Our income from continuing operations in 2006 includes:

     o    a charge  included  in our  equity in  earnings  of Kronos of $.07 per
          diluted  share,  net  of  income  tax  benefit,   related  to  Kronos'
          redemption of its 8.875% Senior Secured Notes,
     o    income  included  in our  equity  in  earnings  of  Kronos of $.04 per
          diluted  share  related  to  Kronos'   aggregate  income  tax  benefit
          associated  with the  withdrawal  of certain  income  tax  assessments
          previously  made  by  the  Belgian  and  Norwegian  tax   authorities,
          favorable  developments  with  certain  income tax  issues  related to
          Kronos' German and Belgian operations and the enactment of a reduction
          in the  Canadian  federal  income tax rate  offset by the  unfavorable
          resolution  of certain  other  income  tax  issues  related to Kronos'
          German  operations,  and an increase in Kronos' income tax contingency
          reserve  principally  related to ongoing income tax audits in Germany,
          and
     o    income  of  $.04  per  diluted  share  related  to  certain  insurance
          recoveries we received.

Income from Operations

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

<TABLE>
                                        Three months ended                      Nine months ended
                                          September 30,                           September 30,
                                        ------------------         %           -------------------          %
                                        2005          2006       Change        2005           2006        Change
                                        ----          ----       ------        ----           ----        ------
                                           (In millions)                          (In millions)

<S>                                    <C>           <C>           <C>        <C>            <C>            <C>
CompX                                  $ 4.8         $ 6.2         30%        $13.6          $16.8          23%
Insurance recoveries                     1.2            .1        -92%          2.4            2.9          21%
Corporate expense and other, net        (3.8)         (7.6)       100%        (13.5)         (18.1)         34%
                                       -----         -----                    -----          -----

Income (loss) from operations          $ 2.2         $(1.3)                   $ 2.5          $ 1.6
                                       =====         =====                    =====          =====
</TABLE>

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







CompX International Inc.
<TABLE>

                                        Three months ended                      Nine months ended
                                          September 30,                           September 30,
                                        ------------------         %           -------------------          %
                                        2005          2006       Change        2005           2006        Change
                                        ----          ----       ------        ----           ----        ------
                                           (In millions)                          (In millions)

<S>                                   <C>            <C>            <C>       <C>            <C>            <C>
Net sales                             $ 47.1         $ 48.8         4%        $139.7         $146.0         4%
Cost of goods sold                      36.1           35.9        -1%         107.9          109.2         1%
                                      ------         ------                   ------         ------
Gross margin                          $ 11.0         $ 12.9                   $ 31.8         $ 36.8
                                      ======         ======                   ======         ======

Income from operations                $  4.8         $  6.2        30%        $ 13.6         $ 16.8        23%
                                      ======         ======                   ======         ======

Percentage of net sales:
   Cost of goods sold                   77%            74%                      77%            75%
   Income from operations               10%            13%                      10%            12%
</TABLE>

     Net sales - Our component products sales increased in the third quarter and
first nine months of 2006 as compared to the third quarter and first nine months
of 2005. The increases are due mainly to:

     o    sales  volumes  from  the two  marine  component  products  businesses
          acquired in April 2006 and August 2005,  which increased sales by $2.1
          million and $10.4  million in the third  quarter and first nine months
          of 2006, respectively, and
     o    sales volume increases in security products due to improved demand and
          the favorable effect of currency exchange rates, offset by
     o    sales volume decreases in furniture components due to competition from
          lower-priced Asian manufacturers.

     Cost of goods sold and gross margin - Our component  products cost of goods
sold  percentage  improved  in the third  quarter  and first nine months of 2006
compared to the third  quarter and first nine months of 2005. As a result of our
improvements in cost of goods sold, our gross margin  percentage  increased from
23% in the  third  quarter  of  2005 to 26% in the  third  quarter  of 2006  and
increased  from 23% to 25% in the first nine  months of 2006 as  compared to the
first nine months of 2005. The improvements in gross margin  percentages for the
comparable  periods are primarily due to an improved  product mix as the decline
in  lower-margin  furniture  components  sales were offset by increased sales of
higher-margin security products and marine components.

     Operating income - Our component products income from operations  increased
$1.4  million,  or 30%, to $6.2  million in the third  quarter of 2006 from $4.8
million in the third quarter of 2005.  Income from  operations in the first nine
months of 2006  increased  $3.2 million,  or 23%, to $16.8  million  compared to
$13.6  million for the first nine months of 2005.  As a percentage of net sales,
income from  operations  increased to 12% for the first nine months of 2006 from
10% for the first nine months of 2005 primarily due to the increase in net sales
and more favorable  product mix as well as the favorable  impact of a continuous
focus on reducing  costs across all segments,  partially  offset by the negative
impact of currency exchange rates (as discussed below).

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

                                              Three months ended            Nine months ended
                                              September 30, 2006           September 30, 2006
                                                   vs. 2005                     vs. 2005
                                              ------------------           ------------------
                                                     (Increase (decrease), in thousands)
                                              -----------------------------------------------
Impact on:
    <S>                                              <C>                        <C>
    Net sales                                        $ 265                      $ 1,009
    Income from operations                           $(226)                     $(1,178)
</TABLE>

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

     Raw  material  prices,  especially  steel,  zinc and copper  continue to be
volatile,  putting  pressure on our  margins.  We actively  seek to mitigate the
margin  impact by  entering  into raw  material  supply  agreements  in order to
stabilize the cost for a period of time,  execute  larger  volume  tactical spot
purchases at prices that are expected to be favorable  compared to future prices
and,  if  necessary,  pass  on  the  cost  increases  to our  customers  through
surcharges  and  price  increases.  To  date we have  been  able to  effectively
mitigate the impact of higher materials cost on our margins through raw material
supply  agreements,  tactical spot  purchases,  surcharges and price  increases;
however, we may not be able to achieve these same results in future periods.

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

                                        Three months ended                      Nine months ended
                                          September 30,                           September 30,
                                        ------------------         %           -------------------          %
                                        2005          2006       Change        2005           2006        Change
                                        ----          ----       ------        ----           ----        ------
                                           (In millions)                          (In millions)
 Kronos historical:
     <S>                               <C>           <C>           <C>        <C>            <C>           <C>
     Net sales                         $292.1        $331.6        14 %       $895.7         $981.0        10 %
     Cost of sales                      216.2         256.2        19 %        640.9          748.8        17 %
                                       ------        ------                   ------         ------

        Gross margin                   $ 75.9        $ 75.4                   $254.8         $232.2
                                       ======        ======                   ======         ======

     Income from operations            $ 38.2        $ 34.3       (10)%       $142.3         $105.4       (26)%
     Other general corporate, net          .4            .8                      6.7            2.7
     Loss on prepayment of debt            -             -                        -           (22.3)
     Interest expense                   (10.6)         (9.7)                   (34.0)         (33.5)
                                       ------        ------                   ------         ------
                                         28.0          25.4                    115.0           52.3
     Income tax expense                 (20.0)        (13.8)                   (52.8)         (12.1)
                                       ------        ------                   ------         ------

        Net income                     $  8.0        $ 11.6                   $ 62.2         $ 40.2
                                       ======        ======                   ======         ======

 Percentage of net sales:
     Cost of sales                       74%           77%                       72%           76%
     Income from operations              13%           11%                       16%           11%

 Equity in earnings of Kronos
     Worldwide, Inc.                   $  2.8        $  4.1                   $ 22.4         $ 14.4
                                       ======        ======                   ======         ======

 TiO2 operating statistics:
     Sales volumes*                       119         132          11 %        356            396         11 %
     Production volumes*                  122         126           3 %        371            383          3 %

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

        Total                                                      14 %                                    10 %
                                                                   ===                                    ===
-------------------------------
</TABLE>

* Thousands of metric tons

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

     Net sales - Kronos' net sales  increased 14% or $39.5  million  compared to
the third quarter of 2005 primarily due to an 11% increase in TiO2 sales volumes
and the impact of currency  exchange rates.  The benefit of higher sales volumes
was offset  somewhat by a 1% decrease in average  TiO2  selling  prices.  Kronos
estimates the favorable  effect of changes in currency  exchange rates increased
net sales by  approximately  $9 million,  or 3%,  compared to the same period in
2005.  Kronos  expects  selling  prices to decline in the fourth quarter of 2006
compared to the third quarter of 2006.

     Kronos'  net sales  increased  10% or $85.3  million  compared  to the nine
months ended September 30, 2005,  primarily due to an 11% increase in TiO2 sales
volumes,  offset  somewhat  by the impact of  currency  exchange  rates.  Kronos
estimates the unfavorable effect of changes in currency exchange rates decreased
net sales by  approximately  $11 million,  or 1%, compared to the same period in
2005.

     Kronos' 11% increase in TiO2 sales  volumes in the third  quarter and first
nine  months of 2006 was due  primarily  to higher  sales  volumes in the United
States, Europe and in export markets,  which were somewhat offset by lower sales
volumes in Canada.  Kronos  believes  sales volumes in Canada have  decreased as
customer  demand has been  impacted by  decreased  demand for TiO2 used in paper
products.  Kronos'  sales  volumes  in the first  nine  months of 2006 set a new
record for Kronos.  Kronos  expects  demand will continue to remain high for the
remainder of the year.

     Cost of sales and gross margin - Kronos' cost of sales increased in 2006 as
compared to the same periods in 2005 due primarily to the impact of higher sales
volumes and increased raw material and utility costs  (primarily  energy costs.)
Kronos' raw material and utility costs  increased 4% and 24%,  respectively,  in
the third  quarter  of 2006 as  compared  to the  third  quarter  of 2005  (with
year-to-date  increases  of 5%  and  21%,  respectively).  Cost  of  sales  as a
percentage  of sales  increased  in 2006 as compared to the same periods in 2005
primarily  due to increases  in operating  costs  (including  energy  costs) and
higher raw materials costs. The negative impact of the increase in raw materials
and energy costs on Kronos' gross margin and income from operations  comparisons
was  somewhat  offset by the 3% increase  in TiO2  production  volumes.  Kronos'
operating  rates  were near full  capacity  in both 2005 and 2006,  and  Kronos'
production  volumes  in the first  nine  months of 2006  were a new  record  for
Kronos.

     Kronos  continued  to  gain   operational   efficiencies  at  its  existing
production  facilities by  debottlenecking  production to meet long-term demand.
Such  debottlenecking  efforts  include,  among other  things,  the  addition of
finishing  capacity  in the  German  chloride  process  facility  and  equipment
upgrades and enhancements in several locations to allow for reduced downtime for
maintenance   activities.   Kronos'   production   capacity  has   increased  by
approximately   30%  over  the  past  ten  years  with  only  moderate   capital
expenditures.  Kronos believes annual attainable production capacity for 2006 is
approximately  515,000 metric tons, with some additional capacity expected to be
available in 2007 through continued debottlenecking efforts.

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

                                              Three months ended            Nine months ended
                                              September 30, 2006           September 30, 2006
                                                   vs. 2005                     vs. 2005
                                              ------------------           ------------------
                                                     (Increase (decrease), in millions)
                                              -----------------------------------------------

Impact on:
    <S>                                              <C>                         <C>
    Net sales                                        $ 9                         $ (11)
    Income from operations                           $(3)                        $ (18)
</TABLE>

     Interest  expense - In the second  quarter of 2006,  Kronos issued euro 400
million  principal amount of 6.5% Senior Secured Notes, and used the proceeds to
redeem its euro 375 million  principal amount of 8.875% Senior Secured Notes. As
a result of the prepayment of the 8.875% Senior Secured Notes, Kronos recognized
a $22.3 million  pre-tax  interest  charge in the second quarter of 2006 for the
prepayment of the notes, representing (1) the call premium on the notes, (2) the
write-off  of  deferred  financing  costs  and  (3)  write  off of the  existing
unamortized premium on the notes.

     Kronos'  interest expense in 2006 decreased as compared to the same periods
in 2005  due to the  redemption  of the  8.875%  Senior  Secured  Notes  and the
issuance of the 6.5% Senior Secured Notes,  which is partially offset by changes
in currency  exchange  rates in 2006  compared to 2005.  Excluding the effect of
currency exchange rates, Kronos expects interest expense will be lower in fourth
quarter of 2006 as compared to the fourth quarter of 2005.

     Kronos  has a  significant  amount of  indebtedness,  primarily  the Senior
Secured Notes,  denominated in the euro. The interest  expense  recognized  will
vary with fluctuations in the euro exchange rate.

     Income  taxes - Kronos'  income  tax  expense  for the third  quarter  2006
includes an aggregate provision for income taxes of $3.4 million, which includes
a  $1.4  million  provision  resulting  from  the  increase  in the  income  tax
contingency reserves related to unfavorable developments with respect to ongoing
income  tax  audits in  Germany,  and a $2 million  provision  for income  taxes
related to the  unfavorable  resolution  of certain  income tax audit  issues in
Germany.  Kronos'  provision  for income  taxes in the first nine months of 2006
also  includes  a $9.5  million  benefit  related  to the  reduction  in its tax
contingency  reserves  resulting  from  favorable  developments  with income tax
audits in Belgium and Norway,  a $2 million  benefit  associated  with favorable
developments  with certain  income tax issues  related to the Belgian and German
operations  and a  $1.1  million  benefit  resulting  from  the  enactment  of a
reduction in Canadian income tax rates.

     Kronos'  income tax  expense in the third  quarter and first nine months of
2005 also  includes  an income tax benefit of $12.5  million  for the  aggregate
effect of  favorable  developments  with respect to income tax audits in Belgium
and  Canada  offset  by a charge of $17.5  million  for the  unfavorable  effect
related to the loss of certain German income tax attributes.

     Other - On September 22, 2005, the chloride-process  TiO2 facility operated
by  Kronos'   50%-owned  joint  venture,   Louisiana  Pigment  Company  ("LPC"),
temporarily halted production due to Hurricane Rita.  Although there was minimal
storm damage to core processing facilities, a variety of factors, including loss
of utilities,  limited access and  availability  of employees and raw materials,
prevented the  resumption of partial  operations  until October 9, 2005 and full
operations  until late 2005. LPC expects the majority of its property damage and
unabsorbed  fixed costs for periods in which normal  production  levels were not
achieved will be covered by insurance,  and we believe  insurance will cover its
lost profits (subject to applicable deductibles) resulting from its share of the
lost  production  at LPC.  Both  Kronos  and LPC have  filed  claims  with their
insurers. Kronos expects to recover their losses through the insurer late in the
fourth  quarter of 2006 or early in 2007,  although the amount and timing of the
insurance  recovery  is not yet known.  Accordingly,  Kronos  has not  accrued a
receivable  for the amount of the insurance  claim and will not record the claim
until negotiations with their insurer are finalized. The effect on our financial
results will depend on the timing and amount of insurance recoveries.

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

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

     Insurance recoveries - We have reached an agreement with a former insurance
carrier in which the  carrier  will  reimburse  us for a portion of our past and
future lead pigment  litigation  defense costs. We received  approximately  $1.1
million  during the first nine months of 2006 under the  agreement.  We received
$1.2 million in the third quarter of 2005 under this agreement.  We are not able
to determine how much we will  ultimately  recover from the carrier for the past
defense costs we incurred because the carrier has certain  discretion  regarding
which past defense costs qualify for reimbursement.

     We also  received  $1.8 million in insurance  recoveries  in the first nine
months of 2006 in  settlements  with certain of our former  insurance  carriers.
These  settlements,  as well as similar  settlements  we reached in the past few
years (including $1.2 million in the first nine months of 2005),  resolved court
proceedings  in which we sought  reimbursement  from  carriers for legal defense
costs and  indemnity  coverage  for  certain  of our  environmental  remediation
expenditures.  We do not  expect  to  receive  any  further  material  insurance
settlements  relating  to  litigation   concerning   environmental   remediation
coverages.

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

     Corporate  expense -  Corporate  expenses  were $7.7  million  in the third
quarter of 2006,  $3.8  million or 97% higher than in the third  quarter of 2005
primarily  due  to  higher   litigation  and  related  expenses  and  to  higher
environmental remediation expenses. Corporate expenses were $18.3 million in the
first nine months of 2006, 31% higher  compared to the first nine months of 2005
due  mainly  to  the  higher   litigation   and  related   expenses  and  higher
environmental  remediation  expenses. We expect corporate expenses in 2006 to be
higher  than in 2005,  in part due to higher  expected  litigation  and  related
expenses.

     Obligations for environmental remediation costs are difficult to assess and
estimate,  and it is possible  that actual costs for  environmental  remediation
will  exceed  accrued  amounts or that costs will be  incurred in the future for
sites in which we cannot currently estimate our liability.  If these events were
to occur in the fourth quarter of 2006,  our corporate  expenses would be higher
than we currently estimate.  See Note 12 to the Condensed Consolidated Financial
Statements.

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

     Provision  for  income  taxes - See  Note 9 to the  Condensed  Consolidated
Financial  Statements for a tabular  reconciliation of our statutory tax expense
to our actual tax benefit.

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

     Our provision for income taxes in 2006 includes a second quarter benefit of
$159,000  related to the effect of the reduction in the Canadian  federal income
tax rate on our previously recorded net deferred income tax liability related to
our operations in Canada.

     Our  provision  for income taxes in the third  quarter of 2005 includes the
net effects of (i) the favorable effect of recent  developments  with respect to
certain  income tax items of $4.1 million and (ii) the  unfavorable  effect with
respect to a change in CompX's permanent  reinvestment  conclusion regarding its
foreign subsidiaries of $9.0 million.

     Minority interest - Minority interest in earnings increased $3.4 million in
the first nine months of 2006 as compared to the first nine months of 2005. This
increase  is due to higher  earnings of CompX in 2006,  partially  offset by the
increase in our ownership of CompX.

     Discontinued  operations  - See  Note  13  to  the  Condensed  Consolidated
Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

Consolidated cash flows

Operating activities

     Trends in cash flows from  operating  activities  (excluding  the impact of
significant  securities  transactions,  deferred  taxes and relative  changes in
assets and liabilities) are generally similar to trends in our earnings.

     Cash flows from operating  activities  increased from $16.7 million used in
operating  activities  in the first nine months of 2005 to $14.0 million of cash
provided by operating  activities  in the first nine months of 2006.  This $30.7
million  increase  is  primarily  due to a lower  amount of cash paid for income
taxes in 2006 as compared to 2005.  Cash paid for income taxes was $28.8 million
lower in 2006,  primarily  due to a $21  million  tax payment we made in 2005 to
settle a previously-reported income tax audit in the U.S.

     Relative  changes in working  capital  (primarily  in accounts  receivable,
payables,  and inventories) can have a significant effect on our cash flows from
operating  activities.  Our average days sales  outstanding  ("DSO")  related to
continuing  operations increased from 40 days at December 31, 2005 to 43 days at
September  30, 2006,  due to the timing of  collections  on our higher  accounts
receivable  balance  at the end of  September.  For  comparative  purposes,  our
average DSO increased  from 38 days at December 31, 2004 to 43 days at September
30,  2005.  Our  average  number  of days in  inventory  ("DII")  was 59 days at
December  31, 2005 and 60 days at  September  30,  2006.  The increase in DII is
primarily due to the higher cost of commodity raw materials balance at September
30, 2006. For comparative  purposes,  our average DII was 52 days and 57 days at
December 31, 2004 and September 30, 2005, respectively, primarily as a result of
lower commodity raw materials costs in the first nine months of 2005 compared to
2006.

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


<TABLE>
                                                                     Nine months ended
                                                                       September 30,
                                                                  -----------------------
                                                                  2005               2006
                                                                  ----               ----
                                                                        (In millions)

Cash provided (used) by operating activities:
    <S>                                                          <C>                <C>
    CompX                                                        $ 14.2             $ 19.7
    NL Parent and wholly-owned subsidiaries                       (27.0)              (1.7)
    Eliminations                                                   (3.9)              (4.0)
                                                                 ------             -------

Total                                                            $(16.7)            $ 14.0
                                                                 ======             ======
</TABLE>

Investing and financing activities

     Substantially all of our consolidated capital expenditures relate to CompX.
During the first nine months of 2006:

     o    We paid  aggregate cash dividends of $18.2 million ($.125 per share in
          each of the first, second and third quarters),
     o    CompX completed an acquisition of a marine component  products company
          for $9.8 million, net of cash acquired,
     o    We  purchased  approximately  145,000  shares of CompX common stock in
          market transactions for $2.3 million, and
     o    CompX prepaid $1.5 million of  indebtedness  assumed in prior business
          acquisitions.

     Investing activities in 2005 included CompX's net proceeds from the sale of
the  Thomas  Regout  operations  in  Europe  offset  by cash  paid  for a marine
component product business.

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

     At September 30, 2006, there were no amounts  outstanding under CompX's $50
million revolving credit facility that matures in January 2009.

     Provisions  contained in certain of CompX's and Kronos'  credit  agreements
could result in the  acceleration  of the applicable  indebtedness  prior to its
stated  maturity  for reasons  other than  defaults  from failing to comply with
typical financial  covenants.  For example,  certain credit agreements allow the
lender to accelerate the maturity of the  indebtedness  upon a change of control
(as defined) of the  borrower.  In addition,  certain  credit  agreements  could
result in the acceleration of all or a portion of the  indebtedness  following a
sale of assets outside the ordinary course of business.

Future cash requirements

Liquidity

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

     At September  30, 2006,  we had an aggregate of $63.4 million of restricted
and unrestricted cash, cash equivalents and debt securities.  A detail by entity
is presented in the table below.


<TABLE>

  <S>                                                     <C>
  CompX                                                   $25.8
  NL Parent and wholly-owned subsidiaries                  37.6
                                                          -----

Total                                                     $63.4
                                                          =====
</TABLE>


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

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

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

Capital Expenditures

     Firm purchase  commitments for capital projects in process at September 30,
2006 approximated $2.9 million.

Dividends

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

Investments in our Subsidiaries and Affiliates and other Acquisitions

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

Off-balance sheet financing arrangements

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

Commitments and contingencies

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

     We are  subject to certain  commitments  and  contingencies,  as more fully
described in Note 12 to the Condensed  Consolidated  Financial  Statements or in
Part II, Item 1 of this report. In addition to those legal proceedings described
in  Note  12  to  the  Condensed  Consolidated  Financial  Statements,   various
legislation  and  administrative  regulations  have,  from  time to  time,  been
proposed  that seek to (i) impose  various  obligations  on  present  and former
manufacturers  of lead pigment and lead-based  paint (including NL) with respect
to asserted  health  concerns  associated with the use of such products and (ii)
effectively overturn court decisions in which we and other pigment manufacturers
have been successful.  Examples of such proposed legislation include bills which
would permit civil  liability for damages on the basis of market  share,  rather
than  requiring  plaintiffs  to prove that the  defendant's  product  caused the
alleged  damage,  and bills which would revive  actions barred by the statute of
limitations.  While no legislation or regulations have been enacted to date that
are expected to have a material  adverse  effect on our  consolidated  financial
position,  results of  operations or  liquidity,  enactment of such  legislation
could have such an effect.

Recent accounting pronouncements

     See Note 14 to the Condensed Consolidated Financial Statements.

Critical accounting policies and estimates

     For a discussion of our critical accounting policies, refer to Part I, Item
7 - "Management's  Discussion and Analysis of Financial Condition and Results of
Operations"  in our 2005  Annual  Report.  There  have  been no  changes  in our
critical accounting policies during the first nine months of 2006.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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

     Certain  of  our  sales  generated  by  CompX's  non-U.S.   operations  are
denominated in U.S. dollars.  CompX periodically uses currency forward contracts
to manage a portion of  currency  exchange  rate  market  risk  associated  with
receivables,  or  similar  exchange  rate risk  associated  with  future  sales,
denominated in a currency other than the holder's functional currency. CompX has
not entered  into these  contracts  for trading or  speculative  purposes in the
past,  nor do they  anticipate  entering  into such  contracts  for  trading  or
speculative purposes in the future. A majority of the currency forward contracts
CompX  enters into meet the  criteria  for hedge  accounting  under GAAP and are
designated as cash flow hedges. For these currency forward contracts,  gains and
losses  representing  the  effective  portion of the hedges  are  deferred  as a
component  of  accumulated  other  comprehensive  income,  and are  subsequently
recognized   in  earnings  at  the  time  the  hedged  item  affects   earnings.
Occasionally,   CompX  enters  into  currency  forward  contracts  for  specific
transactions  which  do not  meet  the  criteria  for  hedge  accounting.  CompX
marks-to-market the estimated fair value of such contracts at each balance sheet
date, with any resulting gain or loss recognized in income  currently as part of
net currency transactions. At September 30, 2006, we had no outstanding currency
contracts.

ITEM 4.  CONTROLS AND PROCEDURES

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

     Internal  Control  over  Financial  Reporting - We also  maintain  internal
control over  financial  reporting.  The term  "internal  control over financial
reporting," as defined by SEC regulations, means a process designed by, or under
the supervision of, our principal executive and principal financial officers, or
persons performing  similar  functions,  and effected by our board of directors,
management and other personnel,  to provide reasonable  assurance  regarding the
reliability of financial  reporting and the preparation of financial  statements
for external  purposes in accordance  with GAAP, and includes those policies and
procedures that:

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

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

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

                           PART II. OTHER INFORMATION

Item 1.      Legal proceedings

     In  addition  to the  matters  discussed  below,  refer  to  Note 12 to the
Condensed  Consolidated  Financial  Statements and to our 2005 Annual Report and
our  Quarterly  Reports on Form 10-Q for the  quarters  ended March 31, 2006 and
June 30, 2006.

     Thomas v. Lead Industries  Association,  et al. (Circuit Court,  Milwaukee,
Wisconsin,  Case No.  99-CV-6411).  In August 2006, the trial court rejected any
claim by the plaintiff other than a failure to warn claim.

     Smith,  et al. v. Lead  Industries  Association,  et al. (Circuit Court for
Baltimore  City,  Maryland,  Case No.  24-C-99-004490).  In September  2006, the
plaintiffs filed a certiorari  petition with the Maryland Court of Appeals,  and
we opposed the petition in October.

     City of Milwaukee v. NL Industries,  Inc. and Mautz Paint  (Circuit  Court,
Civil Division,  Milwaukee County, Wisconsin, Case No. 01CV003066). In September
2006,  the court  removed the case from the January  2007 trial  calendar and in
October 2006, the court set a trial date of May 23, 2007.

     Jones v. NL  Industries,  Inc., et al.  (Circuit  Court of LeFlore  County,
Mississippi,  Civil Action No.  2002-0241-CICI).  In August 2006, the plaintiffs
filed a motion  for a new  trial,  which  was  denied by the  district  court in
October 2006.

     Terry, et al. v. NL Industries, Inc., et al. (United States District Court,
Southern  District of Mississippi,  Case No. 4:04 CV 269 PB). In September 2006,
we informed the court of the result in the Jones case.

     In October  2006,  we were served with a complaint  in Davis v.  Millennium
Holding  LLC,  et al.  (District  Court,  Douglas  County,  Nebraska,  Case  No.
1061-619). Plaintiff alleges injuries purportedly caused by lead on the surfaces
of  various  homes  in  which  he has  resided.  Plaintiff  seeks  punitive  and
compensatory  damages. We intend to deny all liability and to defend against all
of the claims  vigorously.  In October  2006,  we filed a motion to dismiss  the
complaint.

     In October  2006,  we were  served  with a  complaint  in Tyler v.  Sherwin
Williams  Company et al.  (District Court,  Douglas County,  Nebraska,  Case No.
1058-174). Plaintiff alleges injuries purportedly caused by lead on the surfaces
of  various  homes  in  which  he has  resided.  Plaintiff  seeks  punitive  and
compensatory damages, as well as equitable relief to move the plaintiff's family
from a home alleged to contain lead paint.  We intend to deny all  liability and
to defend  against all of the claims  vigorously.  In October  2006,  we filed a
motion to dismiss the complaint.

     In October 2006, we were served with a complaint in City of Akron,  Ohio v.
Sherwin-Williams Company et al.(Court of Common Pleas, Summit County, Ohio, Case
No. CV-2006-106309). The City seeks compensatory and punitive damages, detection
and abatement in residences, schools, hospitals and public and private buildings
within the City  accessible  to  children  and  damages  for funding of a public
education campaign and health screening  programs.  Plaintiff seeks judgments of
joint and several  liability  against the former pigment  manufacturers  and the
Lead  Industries  Association  ("LIA").  We intend to deny all  liability and to
defend against all of the claims vigorously.

     In October 2006,  we were served with a complaint in City of E.  Cleveland,
Ohio v. Sherwin-Williams  Company et al.(Court of Common Pleas, Cuyahoga County,
Ohio, Case No.  CV06602785).  The City seeks  compensatory and punitive damages,
detection and abatement in residences, schools, hospitals and public and private
buildings  within the City  accessible  to children and damages for funding of a
public  education  campaign  and  health  screening  programs.  Plaintiff  seeks
judgments   of  joint  and  several   liability   against  the  former   pigment
manufacturers and the LIA. We intend to deny all liability and to defend against
all of the claims vigorously.

     In October 2006, we were served with a complaint in City of Lancaster, Ohio
v.  Sherwin-Williams  Company et al.(Court of Common  Pleas,  Fairfield  County,
Ohio, Case No. 2006 CV 01055). The City seeks compensatory and punitive damages,
detection and abatement in residences, schools, hospitals and public and private
buildings  within the City  accessible  to children and damages for funding of a
public  education  campaign  and  health  screening  programs.  Plaintiff  seeks
judgments   of  joint  and  several   liability   against  the  former   pigment
manufacturers and the LIA. We intend to deny all liability and to defend against
all of the claims vigorously.

     In October 2006, we were served with a complaint in City of Toledo, Ohio v.
Sherwin-Williams  Company et al.(Court of Common Pleas, Lucas County, Ohio, Case
No. G-4801-CI-200606040-000).  The City seeks compensatory and punitive damages,
detection and abatement in residences, schools, hospitals and public and private
buildings  within the City  accessible  to children and damages for funding of a
public  education  campaign  and  health  screening  programs.  Plaintiff  seeks
judgments   of  joint  and  several   liability   against  the  former   pigment
manufacturers and the LIA. We intend to deny all liability and to defend against
all of the claims vigorously.

     Brown et. al. v. NL Industries,  Inc. et. al.  (Circuit Court Wayne County,
Michigan,  Case No. 06-602096 CZ). In August 2006, the plaintiffs  amended their
complaint to drop the class  action  allegations,  and are now seeking  recovery
solely on their individual claims.

     Park Hills,  Mo. Site. In August 2006,  Doe Run ceased to negotiate with us
regarding  allocation.  We intend  to pursue  Doe Run for its share of the costs
associated with complying with the Order.

     Donnelly and  Donnelley v. NL  Industries,  Inc.  (United  States  District
Court, Northern District of New York, Case No.  1:06-CV-0851).  In July 2006, we
removed this case to Federal  Court.  In August 2006,  we answered the complaint
and denied all of the plaintiffs' allegations.

     In July 2006, we were served with a complaint in Norampac Industries,  Inc.
v. NL Industries,  Inc.  (United States District Court,  Western District of New
York,  Case No.  06-CV-0479).  The  plaintiff  sued under  CERCLA and New York's
Navigation Law for  contribution  for costs that have been, or will be, expended
by the plaintiff to clean up a former Magnus Metals facility. The complaint also
alleges  common-law  claims for negligence,  public nuisance,  private nuisance,
indemnification,  natural resource damages and declaratory  relief. In September
2006, we denied all liability for, and we intend to defend  vigorously  against,
all of the  claims  raised in the  complaint.  In October  2006,  the matter was
referred to mediation by the court.

     In October  2006,  we entered  into a consent  decree in the United  States
District  Court for the  District  of  Kansas,  in which we  agreed  to  perform
remedial  design and remedial  actions in OU-6,  Waco  Subsite,  of the Cherokee
County  Superfund  Site. We conducted  milling  activities on the portion of the
site which we have agreed to remediate.  We are also sharing responsibility with
other  potentially-responsible  parties for  remediating a tributary that drains
the portions of the site in which the potentially-responsible  parties operated.
We will also  reimburse EPA for a portion of its past and future  response costs
related to the site.

Item 1A. Risk Factors

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

Item 6.  Exhibits

               31.1 -  Certification

               31.2 -  Certification

               32.1 -  Certification








                                   SIGNATURES


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



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



Date November 6, 2006         By /s/ Gregory M. Swalwell
                                 ------------------------------
                                 Gregory M. Swalwell
                                   Vice President, Finance and Chief
                                   Financial Officer (Principal
                                   Financial Officer)


Date November 6, 2006         By /s/ Tim C. Hafer
                                 ------------------------------
                                  Tim C. Hafer
                                   Vice President and Controller
                                   (Principal Accounting Officer)