SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q


|X|   QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
      EXCHANGE ACT OF 1934 - For the quarter ended September 30, 1997

                                      OR

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

                         Commission file number 1-640


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



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



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



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




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



Number of shares of common stock outstanding on October 31, 1997:  51,149,614


<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                                     INDEX




                                                                         Page
PART I.     FINANCIAL INFORMATION

  Item 1.   Financial Statements.

            Consolidated Balance Sheets - December 31, 1996
             and September 30, 1997                                       3-4

            Consolidated Statements of Operations - Three months
             and nine months ended September 30, 1996 and 1997             5

            Consolidated Statement of Shareholders' Deficit
             - Nine months ended September 30, 1997                        6

            Consolidated Statements of Cash Flows - Nine
             months ended September 30, 1996 and 1997                     7-8

            Notes to Consolidated Financial Statements                   9-13

  Item 2.   Management's Discussion and Analysis of Financial
             Condition and Results of Operations                         14-18


PART II.    OTHER INFORMATION

  Item 1.   Legal Proceedings                                             19

  Item 6.   Exhibits and Reports on Form 8-K                              20


                                   - 2 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                                (In thousands)


<TABLE>
<CAPTION>


                                                     December 31,  September 30,
              ASSETS                                     1996           1997
                                                     ------------  -------------
<S>                                                    <C>            <C>       
Current assets:
  Cash and cash equivalents, including
   restricted cash of $10,895 and $9,524 .........     $  114,115     $  102,214
  Accounts and notes receivable ..................        138,538        160,625
  Refundable income taxes ........................          9,267          4,282
  Inventories ....................................        232,510        172,308
  Prepaid expenses ...............................          4,219          6,752
  Deferred income taxes ..........................          1,597          1,498
                                                       ----------     ----------

      Total current assets .......................        500,246        447,679
                                                       ----------     ----------


Other assets:
  Marketable securities ..........................         23,718         31,147
  Investment in joint ventures ...................        181,479        175,423
  Prepaid pension cost ...........................         24,821         24,408
  Deferred income taxes ..........................            223            222
  Other ..........................................         24,825         20,357
                                                       ----------     ----------

      Total other assets .........................        255,066        251,557
                                                       ----------     ----------

Property and equipment:
  Land ...........................................         21,963         19,878
  Buildings ......................................        165,479        153,271
  Machinery and equipment ........................        660,333        622,667
  Mining properties ..............................         95,891         90,277
  Construction in progress .......................         13,231          8,469
                                                       ----------     ----------
                                                          956,897        894,562
  Less accumulated depreciation and depletion ....        490,851        470,636
                                                       ----------     ----------

      Net property and equipment .................        466,046        423,926
                                                       ----------     ----------

                                                       $1,221,358     $1,123,162
                                                       ==========     ==========

</TABLE>



                                   - 3 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                (In thousands)


<TABLE>
<CAPTION>


                                                   December 31,    September 30,
   LIABILITIES AND SHAREHOLDERS' DEFICIT               1996             1997
                                                   ------------    -------------

<S>                                                 <C>             <C>        
Current liabilities:
  Notes payable ................................    $    25,732     $    17,139
  Current maturities of long-term debt .........         91,946          61,534
  Accounts payable and accrued liabilities .....        153,904         165,773
  Payable to affiliates ........................         10,204          10,199
  Income taxes .................................          5,664           6,781
  Deferred income taxes ........................          2,895           2,660
                                                    -----------     -----------

      Total current liabilities ................        290,345         264,086
                                                    -----------     -----------

Noncurrent liabilities:
  Long-term debt ...............................        737,100         694,606
  Deferred income taxes ........................        151,221         139,484
  Accrued pension cost .........................         57,941          50,588
  Accrued postretirement benefits cost .........         55,935          52,168
  Other ........................................        132,048         150,650
                                                    -----------     -----------

      Total noncurrent liabilities .............      1,134,245       1,087,496
                                                    -----------     -----------

Minority interest ..............................            249             253

Shareholders' deficit:
  Common stock .................................          8,355           8,355
  Additional paid-in capital ...................        759,281         759,281
  Adjustments:
    Currency translation .......................       (118,629)       (125,199)
    Pension liabilities ........................         (1,822)         (1,822)
    Marketable securities ......................          1,278           6,107
  Accumulated deficit ..........................       (485,948)       (509,653)
  Treasury stock ...............................       (365,996)       (365,742)
                                                    -----------     -----------

      Total shareholders' deficit ..............       (203,481)       (228,673)
                                                    -----------     -----------

                                                    $ 1,221,358     $ 1,123,162
                                                    ===========     ===========
</TABLE>

Commitments and contingencies (Note 13)

         See accompanying notes to consolidated financial statements.
                                   - 4 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS

                     (In thousands, except per share data)


<TABLE>
<CAPTION>


                                Three months ended      Nine months ended
                                   September 30,          September 30,
                              ---------------------    ----------------------
                                 1996        1997        1996        1997
                              ---------   ---------    ---------    ---------

<S>                           <C>          <C>         <C>          <C>      
Revenues and other income:
  Net sales ...............   $ 248,462    $ 248,153   $ 752,064    $ 740,423
  Other, net ..............       5,013        3,023      25,890       11,681
                              ---------    ---------   ---------    ---------

                                253,475      251,176     777,954      752,104
                              ---------    ---------   ---------    ---------

Costs and expenses:
  Cost of sales ...........     193,271      180,784     557,881      557,442
  Selling, general and
   administrative .........      45,274       38,448     131,313      152,730
  Interest ................      18,472       19,476      56,127       57,853
                              ---------    ---------   ---------    ---------

                                257,017      238,708     745,321      768,025
                              ---------    ---------   ---------    ---------

     Income (loss) before       
      income taxes and
      minority interest ...      (3,542)      12,468      32,633      (15,921)

Income tax expense ........         698        2,700      11,552        7,749
                              ---------    ---------   ---------    ---------

     Income (loss) before       
      minority interest ...      (4,240)       9,768      21,081      (23,670)

Minority interest .........           9            7         (33)          35
                              ---------    ---------    ---------    ---------

     Net income (loss) ....   $  (4,249)   $   9,761   $  21,114    $ (23,705)
                              =========    =========   =========    =========

Net income (loss) per share 
 of common stock ..........   $    (.08)   $     .19   $     .41    $    (.46)
                              =========    =========   =========    =========

Weighted average common and
 common equivalent shares
 outstanding                     51,118       51,585      51,376        51,143
                              =========    =========   =========     =========

</TABLE>

         See accompanying notes to consolidated financial statements.
                                   - 5 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT

                     Nine months ended September 30, 1997

                                (In thousands)


<TABLE>
<CAPTION>


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

<S>                             <C>         <C>         <C>          <C>          <C>         <C>          <C>          <C>       
Balance at December 31, 1996    $   8,355   $ 759,281   $(118,629)   $  (1,822)   $   1,278   $(485,948)   $(365,996)   $(203,481)

Net loss ....................          --          --          --           --           --     (23,705)          --      (23,705)

Adjustments .................          --          --      (6,570)          --        4,829          --           --       (1,741)

Treasury stock reissued .....          --          --          --           --           --          --          254          254
                                ---------   ---------   ---------    ---------    ---------   ---------    ---------    ---------

Balance at September 30, 1997   $   8,355   $ 759,281   $(125,199)   $  (1,822)   $   6,107   $(509,653)   $(365,742)   $(228,673)
                                =========   =========   =========    =========    =========   =========    =========    =========

</TABLE>


         See accompanying notes to consolidated financial statements.
                                   - 6 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                 Nine months ended September 30, 1996 and 1997

                                (In thousands)

<TABLE>
<CAPTION>



                                                           1996          1997
                                                         --------      --------

<S>                                                      <C>           <C>      
Cash flows from operating activities:
  Net income (loss) ................................     $ 21,114      $(23,705)
  Depreciation, depletion and amortization .........       30,154        28,414
  Noncash interest expense .........................       15,500        17,388
  Deferred income taxes ............................       (4,864)       (2,108)
  Change in accounting for environmental
   remediation liabilities .........................           --        30,000
  Other, net .......................................      (12,401)      (10,729)
                                                         --------      --------

                                                           49,503        39,260
  Change in assets and liabilities:
    Accounts and notes receivable ..................      (21,289)      (32,834)
    Inventories ....................................       26,424        44,595
    Prepaid expenses ...............................       (3,863)       (3,085)
    Accounts payable and accrued liabilities .......       (1,363)       18,792
    Income taxes ...................................         (166)        8,217
    Other, net .....................................      (10,994)       (4,132)
                                                         --------      --------

     Net cash provided by operating activities .....       38,252        70,813
                                                         --------      --------

Cash flows from investing activities:
  Capital expenditures .............................      (52,328)      (23,349)
  Purchase of minority interest ....................       (5,168)           --
  Investment in joint ventures, net ................        4,123         5,836
  Proceeds from disposition of property and
   equipment .......................................          478         2,922
                                                         --------      --------

     Net cash used by investing activities .........      (52,895)      (14,591)
                                                         --------      --------

</TABLE>


                                   - 7 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                 Nine months ended September 30, 1996 and 1997

                                (In thousands)


<TABLE>
<CAPTION>


                                                            1996        1997
                                                        ---------    ---------

<S>                                                      <C>          <C>      
Cash flows from financing activities:
  Indebtedness:
    Borrowings .......................................   $  64,712    $ 140,000
    Principal payments ...............................     (43,359)    (203,349)
    Deferred financing costs .........................          --       (3,958)
  Dividends ..........................................     (15,333)          --
  Other, net .........................................        (202)         252
                                                         ---------    ---------

      Net cash provided (used) by financing
       activities ....................................       5,818      (67,055)
                                                         ---------    ---------

Cash and cash equivalents:
  Net change from:
    Operating, investing and financing activities ....      (8,825)     (10,833)
    Currency translation .............................      (2,312)      (1,068)
  Balance at beginning of period .....................     141,333      114,115
                                                         ---------    ---------

  Balance at end of period ...........................   $ 130,196    $ 102,214
                                                         =========    =========


Supplemental disclosures - cash paid for:
  Interest, net of amounts capitalized ...............   $  31,485    $  35,262
  Income taxes, net ..................................      16,652        1,317

</TABLE>



         See accompanying notes to consolidated financial statements.
                                   - 8 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Organization and basis of presentation:

      NL Industries,  Inc. conducts its operations primarily through its wholly-
owned  subsidiaries,  Kronos,  Inc.  (titanium dioxide pigments,  or "TiO2") and
Rheox, Inc. (specialty  chemicals).  Valhi, Inc. and Tremont  Corporation,  each
affiliates of Contran Corporation, hold approximately 56% and 18%, respectively,
of NL's  outstanding  common  stock,  and  together may be deemed to control NL.
Contran and its  subsidiaries  and other  entities  related to Harold C. Simmons
hold approximately 92% of Valhi's and 47% of Tremont's outstanding common stock.

      The  consolidated  balance sheet of NL Industries,  Inc. and  Subsidiaries
(collectively,  the  "Company") at December 31, 1996 has been condensed from the
Company's  audited   consolidated   financial   statements  at  that  date.  The
consolidated balance sheet at September 30, 1997 and the consolidated statements
of  operations,  shareholders'  deficit and cash flows for the  interim  periods
ended  September 30, 1996 and 1997,  have been prepared by the Company,  without
audit. In the opinion of management, all adjustments necessary to present fairly
the consolidated  financial position,  results of operations and cash flows have
been made. The results of operations for the interim periods are not necessarily
indicative of the operating results for a full year or of future operations.

      Certain  information  and  footnote   disclosures   normally  included  in
financial  statements  prepared in accordance with generally accepted accounting
principles have been condensed or omitted.  Certain prior-year amounts have been
reclassified to conform to the 1997 presentation.  The accompanying consolidated
financial  statements  should  be  read in  conjunction  with  the  consolidated
financial  statements  included in the Company's  Annual Report on Form 10-K for
the year ended December 31, 1996 (the "1996 Annual Report").

      The Company  adopted a new method of accounting as required by the AICPA's
Statement of Position ("SOP") No. 96-1, "Environmental Remediation Liabilities,"
in the first quarter of 1997. The SOP, among other things,  expands the types of
costs  which  must  be  considered  in  determining   environmental  remediation
accruals.  As a result of adopting  the SOP,  the Company  recognized  a noncash
cumulative charge of $30 million in the first quarter of 1997. The charge is not
expected to materially  impact the Company's 1997 income tax expense because the
Company  believes the  resulting  deferred  income tax asset does not  currently
satisfy the  more-likely-than-not  realization  criteria and,  accordingly,  the
Company  has  established  an  offsetting  valuation  allowance.  Such charge is
comprised  primarily of estimated future  undiscounted  expenditures  associated
with managing and  monitoring  existing  environmental  remediation  sites.  The
expenditures  consist  principally  of legal and  professional  fees, but do not
include litigation defense costs with respect to situations in which the Company
asserts that no liability exists. Previously, such expenditures were expensed as
incurred.


                                   - 9 -

<PAGE>



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

      Net  income  (loss)  per  share of common  stock is based on the  weighted
average  number of common  shares  and  equivalents  outstanding.  Common  stock
equivalents,  consisting of  nonqualified  stock options,  are excluded from the
computation  when their effect is antidilutive.  The Company will  retroactively
adopt Statement of Financial  Accounting  Standards  ("SFAS") No. 128, "Earnings
Per Share,"  effective  December 31, 1997.  Basic earnings per share pursuant to
SFAS No. 128 will not be materially  different from earnings per share presented
herein and diluted  earnings per share  pursuant to SFAS No. 128 is not expected
to be materially different from basic earnings per share.

Note 3 - Business segment information:

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

<TABLE>
<CAPTION>

                                        Three months ended         Nine months ended
                                           September 30,              September 30,
                                      ----------------------    ----------------------
                                         1996        1997         1996         1997
                                      ---------    ---------    ---------    ---------
                                                      (In thousands)
<S>                                   <C>          <C>          <C>          <C>      
Net sales:
  Kronos ..........................   $ 215,038    $ 210,344    $ 649,635    $ 629,087
  Rheox ...........................      33,424       37,809      102,429      111,336
                                      ---------    ---------    ---------    ---------

                                      $ 248,462    $ 248,153    $ 752,064    $ 740,423
                                      =========    =========    =========    =========

Operating income:
  Kronos ..........................   $   9,640    $  24,908    $  64,555    $  50,412
  Rheox ...........................       9,831       12,254       32,952       34,597
                                      ---------    ---------    ---------    ---------
                                         19,471       37,162       97,507       85,009
General corporate income (expense):
  Securities earnings, net ........       1,190          590        3,631        1,817
  Expenses, net ...................      (5,731)      (5,808)     (12,378)     (44,894)
  Interest expense ................     (18,472)     (19,476)     (56,127)     (57,853)
                                      ---------    ---------    ---------    ---------

                                      $  (3,542)   $  12,468    $  32,633    $ (15,921)
                                      =========    =========    =========    =========
</TABLE>

Note 4 - Inventories:

<TABLE>
<CAPTION>

                                                  December 31,     September 30,
                                                      1996             1997
                                                  ------------     -------------
                                                          (In thousands)

<S>                                                  <C>                <C>     
Raw materials ............................           $ 43,284           $ 40,139
Work in process ..........................             10,356              5,767
Finished products ........................            142,091             94,216
Supplies .................................             36,779             32,186
                                                     --------           --------

                                                     $232,510           $172,308
                                                     ========           ========

</TABLE>

                                   - 10 -

<PAGE>



Note 5 - Marketable securities:

<TABLE>
<CAPTION>
                                                      December 31, September 30,
                                                          1996           1997
                                                      ------------ -------------
                                                            (In thousands)
<S>                                                      <C>            <C>     
Available-for-sale securities - noncurrent
 marketable equity securities:
  Unrealized gains ................................      $  3,516       $  9,395
  Unrealized losses ...............................        (1,550)            --
  Cost ............................................        21,752         21,752
                                                         --------       --------

      Aggregate market ............................      $ 23,718       $ 31,147
                                                         ========       ========
</TABLE>

Note 6 - Investment in joint ventures:

<TABLE>
<CAPTION>
                                                     December 31,  September 30,
                                                          1996          1997
                                                     ------------  -------------
                                                            (In thousands)
<S>                                                     <C>             <C>     
TiO2 manufacturing joint venture ...............        $179,195        $173,359
Other ..........................................           2,284           2,064
                                                        --------        --------

                                                        $181,479        $175,423
                                                        ========        ========
</TABLE>

Note 7 - Other noncurrent assets:

<TABLE>
<CAPTION>
                                                    December 31,   September 30,
                                                        1996            1997
                                                    ------------   -------------
                                                          (In thousands)
<S>                                                    <C>               <C>    
Intangible assets, net .....................           $ 7,939           $ 5,075
Deferred financing costs, net ..............             9,791            10,866
Other ......................................             7,095             4,416
                                                       -------           -------

                                                       $24,825           $20,357
                                                       =======           =======
</TABLE>

Note 8 - Accounts payable and accrued liabilities:

<TABLE>
<CAPTION>
                                                   December 31,    September 30,
                                                       1996             1997
                                                   ------------    -------------
                                                          (In thousands)
<S>                                                  <C>                <C>     
Accounts payable .........................           $ 60,648           $ 58,385
                                                     --------           --------
Accrued liabilities:
  Employee benefits ......................             34,618             37,006
  Environmental costs ....................              6,000              9,000
  Interest ...............................              9,429             14,532
  Miscellaneous taxes ....................              4,073              1,100
  Other ..................................             39,136             45,750
                                                     --------           --------

                                                       93,256            107,388
                                                     --------           --------

                                                     $153,904           $165,773
                                                     ========           ========
</TABLE>

                                   - 11 -

<PAGE>



Note 9 - Other noncurrent liabilities:

<TABLE>
<CAPTION>

                                                    December 31,   September 30,
                                                        1996            1997
                                                    ------------   -------------
                                                            (In thousands)

<S>                                                   <C>               <C>     
Environmental costs ........................          $106,849          $127,291
Insurance claims and expenses ..............            11,673            11,372
Employee benefits ..........................            11,960            10,747
Other ......................................             1,566             1,240
                                                      --------          --------

                                                      $132,048          $150,650
                                                      ========          ========
</TABLE>

Note 10 - Notes payable and long-term debt:
<TABLE>
<CAPTION>


                                                      December 31, September 30,
                                                        1996           1997
                                                      ------------ -------------
                                                             (In thousands)

<S>                                                       <C>           <C>     
Notes payable - Kronos (DM 40,000 and DM 30,000,
 respectively) .....................................      $ 25,732      $ 17,139
                                                          ========      ========

Long-term debt:
  NL Industries:
    11.75% Senior Secured Notes ....................      $250,000      $250,000
    13% Senior Secured Discount Notes ..............       149,756       164,535
                                                          --------      --------

                                                           399,756       414,535
                                                          --------      --------
  Kronos:
    DM bank credit facility (DM 539,971 and
     DM 288,322, respectively) .....................       347,362       164,718
    Joint venture term loan ........................        57,858        46,286
    Other ..........................................         9,125         5,266
                                                          --------      --------

                                                           414,345       216,270
                                                          --------      --------
  Rheox:
    Bank credit facility ...........................        14,659       125,250
    Other ..........................................           286            85
                                                          --------      --------

                                                            14,945       125,335
                                                          --------      --------

                                                           829,046       756,140

Less current maturities ............................        91,946        61,534
                                                          --------      --------

                                                          $737,100      $694,606
                                                          ========      ========
</TABLE>

      Rheox has entered into interest rate collar  agreements which  effectively
set minimum and maximum U.S. LIBOR interest rates of 5.25% and 8%, respectively,
on $50 million principal amount of its variable-rate  bank term loan through May
2001. The margin on such  borrowings  ranges from .75% to 1.75%,  depending upon
the level of a certain Rheox financial ratio.  Rheox is exposed to interest rate
risk in the event of  nonperformance  by the other  parties  to the  agreements,
although Rheox does not anticipate  nonperformance by such parties. At September
30, 1997, the estimated fair value of such  agreements was estimated to be a $.1
million liability. Such fair value represents the amount Rheox would

                                   - 12 -

<PAGE>



pay if it  terminated  the collar  agreements  at that  date,  and is based upon
quotes obtained from the counter party financial institutions.

Note 11 - Income taxes:

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

<TABLE>
<CAPTION>

                                                            Nine months ended
                                                               September 30,
                                                             1996        1997
                                                           --------    --------
                                                               (In thousands)

<S>                                                        <C>         <C>      
Expected tax expense (benefit) .........................   $ 11,422    $ (5,573)
Non-U.S. tax rates .....................................       (273)       (462)
Incremental tax on income of companies not included
 in NL's consolidated U.S. federal income tax return ...      2,559       2,171
Valuation allowance ....................................     (1,150)     10,459
U.S. state income taxes ................................      1,350       1,432
Other, net .............................................     (2,356)       (278)
                                                           --------    --------

      Income tax expense ...............................   $ 11,552    $  7,749
                                                           ========    ========
</TABLE>

Note 12 - Other income, net:

<TABLE>
<CAPTION>

                                     Three months ended      Nine months ended
                                        September 30,          September 30,
                                   --------------------    --------------------
                                     1996        1997        1996        1997
                                   --------    --------    --------    --------
                                                (In thousands)


<S>                                <C>         <C>         <C>         <C>     
Interest and dividends .........   $  1,190    $    590    $  3,631    $  1,817
Currency transaction gains .....      4,491
 (losses), net .................        624         (57)      2,670
Disposition of property and ....       (304       2,452
 equipment .....................       (758)                      )      (1,677)
Pension curtailment gain .......         --          --       4,791          --
Technology fee income ..........      2,606          --       8,280          --
Litigation settlement gain .....         --          --       2,756          --
Other, net .....................      1,351       2,794       3,618       4,742
                                   --------    --------    --------    --------

                                   $  5,013    $  3,023    $ 25,890    $ 11,681
                                   ========    ========    ========    ========
</TABLE>

Note 13 - Commitments and contingencies:

      For  descriptions  of  certain  legal  proceedings,  income  tax and other
commitments and contingencies  related to the Company,  reference is made to (i)
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations,  (ii) Part II,  Item 1  -"Legal  Proceedings,"  (iii) the  Company's
Quarterly Report on Form 10-Q for the quarters ended March 31, 1997 and June 30,
1997, and (iv) the 1996 Annual Report.

                                   - 13 -

<PAGE>



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

RESULTS OF OPERATIONS

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


                              Three months ended     %    Nine months ended    %
                                September 30,     Change    September 30,    Change
                                1996      1997            1996      1997
                                  (In millions)              (In millions)

<S>                             <C>      <C>      <C>     <C>      <C>      <C>
Net sales:
  Kronos ....................   $215.1   $210.4     -2%   $649.7   $629.2    -3%
  Rheox .....................     33.4     37.8    +13%    102.4    111.3    +9%
                                ------   ------           ------   ------   ------

                                $248.5   $248.2     NC    $752.1   $740.5    -2%
                                ======   ======           ======   ======

Operating income:
  Kronos ....................   $  9.7   $ 24.9   +157%   $ 64.6   $ 50.4   -22%
  Rheox .....................      9.8     12.3    +26%     32.9     34.6    +5%
                                ------   ------           ------   ------

                                $ 19.5   $ 37.2    +91%   $ 97.5   $ 85.0   -13%
                                ======   ======           ======   ======

Percent changes in TiO2:
  Sales volume ..............                       +7%                     +12%
  Average selling prices (in 
   billing currencies).......                       +1%                      -8%

</TABLE>

      Kronos' TiO2 operating  income in the third quarter of 1997 increased from
the comparable  period in 1996 due to higher  production  and sales volumes,  1%
higher  average TiO2 selling  prices and $9.7 million of income  resulting  from
refunds of German trade  capital  taxes.  Kronos'  operating  income in the nine
months ended  September  30, 1997  declined from the 1996 period due to 8% lower
average selling prices, partially offset by higher sales and production volumes.
Kronos' average TiO2 selling prices for the third quarter of 1997 were 3% higher
than the second  quarter of 1997 and 6% higher  than the first  quarter of 1997.
Selling  prices at the end of the third  quarter of 1997 were 2% higher than the
average for the quarter.  Kronos  achieved  record third  quarter  sales volumes
reflecting continued strong TiO2 demand,  particularly in Europe.  Kronos' third
quarter and nine months sales volumes increased 7% and 12%,  respectively,  from
the year-earlier periods.

      Kronos'  operating  income for the third quarter  included  income of $9.7
million  resulting from German trade capital tax refunds related to prior years,
including  interest.  The German tax authorities  were required to remit refunds
based on (i) recent court decisions which resulted in reducing the trade capital
tax base and (ii)  prior  agreements  between  the  Company  and the  German tax
authorities regarding payment of disputed taxes.

      Kronos  expects  further  increases in its TiO2 selling  prices during the
fourth  quarter of 1997 and expects its  full-year  1997  operating  income will
exceed that of 1996. Kronos' cost of sales as a percentage of net sales compared
to 1996  decreased in the third  quarter of 1997 and increased in the first nine
months of 1997 due to higher  average  prices in the third  quarter  of 1997 and
lower average prices in the first nine months of 1997. Kronos' selling,  general
and administrative expenses in the third quarter and the first nine months of

                                   - 14 -

<PAGE>



1997 were  lower  than the 1996  periods  due to  favorable  effects  of foreign
currency  translation and German trade capital tax refunds,  partially offset by
higher distribution expenses associated with higher 1997 sales volumes.

      Rheox's  operating  income for the third  quarter of 1997  increased  $2.5
million  compared to the third  quarter of 1996 on higher  sales and  production
volumes.  Rheox's  operating  income in the first  nine  months of 1997 was $4.4
million higher than the 1996 period, excluding a first-quarter 1996 $2.7 million
gain related to the  curtailment  of certain  U.S.  employee  pension  benefits.
Rheox's  cost of sales as a  percentage  of net  sales  decreased  in the  third
quarter and first nine months of 1997 due to higher  production  volumes in both
periods of 1997 compared to 1996. Selling,  general and administrative  expenses
increased  in the third  quarter and first nine  months of 1997  compared to the
1996  periods  primarily  due  to  higher  selling  and  distribution   expenses
associated with higher 1997 sales volumes.

      A significant  amount of the Company's  sales  generated from its non-U.S.
operations  are  denominated  in  currencies  other  than the U.S.  dollar,  and
fluctuations  in the  value  of the U.S.  dollar  relative  to other  currencies
decreased  the dollar value of sales for the third quarter and first nine months
of 1997 by $23 million and $46 million, respectively, compared to the respective
1996 periods.  Although  exchange rate  fluctuations  resulted in an unfavorable
impact on operating income for the third quarter of 1997, the impact was nominal
for the first nine months of 1997 compared with the same periods in 1996.

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


                             Three months ended                    Nine months ended
                                September 30,        Difference      September 30,        Difference
                             -------------------     ----------  ---------------------    ----------
                               1996       1997                      1996         1997
                             -------     -------                 --------     --------             

<S>                          <C>         <C>         <C>         <C>          <C>          <C>     
Securities earnings ...      $   1.2     $    .6     $   (.6)    $    3.6     $    1.8     $  (1.8)
Corporate expenses, net         (5.7)       (5.8)        (.1)       (12.4)       (44.8)      (32.4)
Interest expense ......        (18.5)      (19.5)       (1.0)       (56.1)       (57.9)       (1.8)
                             -------     -------     -------     --------     --------     -------

                             $ (23.0)    $ (24.7)    $  (1.7)    $  (64.9)    $ (100.9)    $ (36.0)
                             =======     =======     =======     ========     ========     =======
</TABLE>


      Securities earnings declined due to lower average cash equivalent balances
available for investment.  Corporate  expenses,  net in the first nine months of
1997 were  higher  than the  comparable  period  in 1996 due to the $30  million
noncash charge related to the Company's adoption of SOP No. 96-1, "Environmental
Remediation  Liabilities." See Note 1 to the Consolidated  Financial Statements.
This charge is included in selling,  general and  administrative  expense in the
Company's Consolidated Statements of Operations.  Interest expense was higher in
the third quarter and first nine months of 1997 primarily due to higher variable
interest rates and higher average principal balances.


                                   - 15 -

<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

      The  Company's  consolidated  cash flows  from  operating,  investing  and
financing  activities for the nine months ended  September 30, 1996 and 1997 are
presented below.

<TABLE>
<CAPTION>

                                                              Nine months ended
                                                                September 30,
                                                            -------------------
                                                              1996        1997
                                                             -----        -----
                                                                (In millions)
<S>                                                          <C>          <C>   
Net cash provided (used) by:
  Operating activities ...............................       $ 38.3       $ 70.8
  Investing activities ...............................        (52.9)       (14.6)
  Financing activities ...............................          5.8        (67.0)
                                                             ------       ------

      Net cash used by operating, investing
       and financing activities ..........                   $ (8.8)      $(10.8)
                                                             ======       ======
</TABLE>


      The TiO2  industry is cyclical and changes in economic  conditions  within
the industry  significantly  impact the earnings and operating cash flows of the
Company.  Cash flows from operations  before change in assets and liabilities in
the  first  nine  months of 1997  declined  from the  comparable  period in 1996
primarily  due to lower  operating  income.  In the  aggregate,  changes  in the
Company's  inventories,  receivables  and  payables  (excluding  the  effect  of
currency  translation)  provided  cash in both the first nine months of 1996 and
1997;  however,  the  cash  provided  in the  first  nine  months  of  1997  was
significantly higher than the first nine months of 1996 primarily due to greater
reductions in inventory levels in the 1997 period.

      Certain of the  Company's  income tax returns in various U.S. and non-U.S.
jurisdictions  are being  examined  and tax  authorities  have  proposed  or may
propose tax deficiencies.  The Company has previously  reached an agreement with
the German tax  authorities,  and paid certain tax deficiencies of approximately
DM 44 million  ($28  million  when paid),  including  interest,  which  resolved
significant tax contingencies for years through 1990.  Certain other significant
German tax contingencies  remain  outstanding and will continue to be litigated.
The Company has received certain tax assessments aggregating DM 130 million ($74
million),  including  interest,  for  years  through  1996 and may  receive  tax
assessments  for an  additional  DM 20 million  ($11  million)  related to these
remaining tax contingencies. No payments of tax or interest deficiencies related
to these assessments will be required until the litigation is resolved. A recent
German tax court proceeding involving a tax issue substantially the same as that
involved in the Company's  primary  remaining income tax contingency was decided
in favor of the taxpayer.  The German tax authorities have appealed the decision
to the German  Supreme  Court and the Company  believes that the decision by the
German  Supreme Court will be rendered  within two years and will become a legal
precedent  which will  likely  determine  the outcome of the  Company's  primary
dispute with the German tax  authorities.  Although the Company believes that it
will ultimately  prevail,  the Company has granted a DM 100 million ($57 million
at September 30, 1997) lien on its Nordenham, Germany TiO2 plant in favor of the
German tax  authorities.  No assurance can be given that this litigation will be
resolved in the Company's favor in view of the inherent  uncertainties  involved
in court proceedings. The Company believes that it has adequately provided

                                   - 16 -

<PAGE>



accruals for  additional  income taxes and related  interest  expense  which may
ultimately  result from all such  examinations  and  believes  that the ultimate
disposition of such  examinations  should not have a material  adverse effect on
the  Company's  consolidated  financial  position,   results  of  operations  or
liquidity.

      In order to improve its near-term  liquidity,  the Company  refinanced its
Rheox  subsidiary  during  January  1997,  obtaining  a net $125  million of new
long-term  financing.  The net proceeds,  along with other available funds, were
used to prepay DM 207 million  ($127 million when paid) of the Company's DM term
loan and to repay DM 43 million  ($26  million  when paid) of the  Company's  DM
revolving  credit facility.  As a result of the refinancing and prepayment,  the
Company's  aggregate scheduled debt payments for 1997 and 1998 decreased by $103
million ($64 million in 1997 and $39 million in 1998). Additionally,  total debt
was reduced by $28 million as part of the  refinancing.  In connection  with the
prepayment,  the Company and its lenders modified certain financial covenants of
the DM credit  agreement and NL guaranteed the facility.  At September 30, 1997,
the Company was in compliance  with all financial  covenants  governing its debt
agreements.

      In the first nine months of 1997, in addition to the above refinancing and
prepayment,  the Company  repaid $12 million of the joint venture term loan, $11
million of Rheox's  revolving credit  facility,  $4 million of Rheox's term loan
and DM 10 million ($6 million when paid) of short-term notes payable.

      At  September  30,  1997,  the  Company  had  cash  and  cash  equivalents
aggregating  $102  million  (54%  held  by  non-U.S.   subsidiaries)   including
restricted cash and cash equivalents of $10 million. The Company's  subsidiaries
had $21 million and $88 million  available  for  borrowing at September 30, 1997
under existing U.S. and non-U.S. credit facilities, respectively.

      The Company has been named as a defendant,  potentially  responsible party
("PRP"), or both, in a number of legal proceedings associated with environmental
matters,  including  waste  disposal  sites,  mining  locations  and  facilities
currently or previously owned, operated or used by the Company, certain of which
are on the U.S.  Environmental  Protection  Agency's (the "U.S.  EPA") Superfund
National  Priorities  List or similar  state lists.  On a quarterly  basis,  the
Company  evaluates  the  potential  range of its liability at sites where it has
been named as a PRP or defendant.  The Company believes it has adequate accruals
($136  million at September  30, 1997) for  reasonably  estimable  costs of such
matters,  but the  Company's  ultimate  liability may be affected by a number of
factors,   including  changes  in  remedial   alternatives  and  costs  and  the
allocations  of such costs among PRPs.  It is not possible to estimate the range
of costs for certain  sites.  The upper end of the range of reasonably  possible
costs to the Company  for sites for which it is  possible  to estimate  costs is
approximately $180 million. The Company's estimates of such liabilities have not
been  discounted  to present  value,  and the  Company  has not  recognized  any
potential insurance recoveries. No assurance can be given that actual costs will
not  exceed  accrued  amounts  or the upper end of the range for sites for which
estimates  have been made,  and no assurance can be given that costs will not be
incurred  with respect to sites as to which no estimate  presently  can be made.
Further,  there can be no assurance that additional  environmental  matters will
not arise in the future.


                                   - 17 -

<PAGE>



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

      The Company periodically evaluates its liquidity requirements, alternative
uses of capital,  capital needs and  availability of resources in view of, among
other  things,  its  debt  service  and  capital  expenditure  requirements  and
estimated future operating cash flows. As a result of this process,  the Company
in the past has  sought,  and in the  future  may seek,  to  reduce,  refinance,
repurchase  or  restructure   indebtedness,   raise  additional  capital,  issue
additional  securities,   modify  its  dividend  policy,  restructure  ownership
interests, sell interests in subsidiaries or other assets, or take a combination
of such steps or other steps to manage its liquidity and capital  resources.  In
the normal course of its business,  the Company may review opportunities for the
acquisition,  divestiture,  joint venture or other business  combinations in the
chemicals  industry.  In the event of any such  transactions,  the  Company  may
consider  using  available  cash,  issuing  equity  securities or refinancing or
increasing its indebtedness to the extent permitted by the agreements  governing
the Company's existing debt.

      The statements  contained in this Report on Form 10-Q ("Quarterly Report")
which are not historical facts, including,  but not limited to, statements found
under the captions "Results of Operations" and "Liquidity and Capital Resources"
above,  are  forward-looking  statements  that  involve  a number  of risks  and
uncertainties.  The  actual  results  of the  future  events  described  in such
forward-looking statements in this Quarterly Report could differ materially from
those stated in such  forward-looking  statements.  Among the factors that could
cause  actual  results  to differ  materially  are the  risks and  uncertainties
discussed in this  Quarterly  Report and in the 1996 Annual  Report,  including,
without  limitation,  the portions of such reports under the captions referenced
above, and the  uncertainties set forth from time to time in the Company's other
public reports and filings and public statements.



                                   - 18 -

<PAGE>



                          PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         Reference is made to the 1996 Annual Report and the Company's Quarterly
Report on Form 10-Q for the quarters  ended March 31, 1997 and June 30, 1997 for
descriptions of certain previously-reported legal proceedings.

         Wright v. Lead  Industries,  et al.,  (Nos.  94 363042 and 363043).  In
October 1997 the  Maryland  court of appeals  affirmed  the  previously-reported
summary judgment in defendants' favor. The time in which plaintiffs' may seek to
review the court of appeals decision has not yet expired.

         Gates v. American  Cyanamid Co., et al., (No.  I1996-2114).  In October
1997  plaintiffs  indicated that they intend to dismiss this case with prejudice
as to all defendants.

         Ritchie v. NL  Industries,  et al., (No.  5:96-CV-166).  In August 1997
plaintiffs dismissed the complaint with prejudice against all defendants.

         Gould v. NL Industries,  Inc., (No.  91-1091) ("Gould  Superfund Site,"
Portland,  Oregon). The U.S. EPA, the Company and other PRPs are negotiating the
terms of a consent decree to perform the remedial action selected in the amended
record  of  decision.  Trial in the  action  for  contribution  among  the PRPs,
previously set for September 1997, has been rescheduled for January 1998.

         Granite City  Superfund  Site. In September  1997 the U.S. EPA informed
the  Company  that  past  and  future  cleanup  costs  are  estimated  to  total
approximately $63.5 million.

         Cherokee County Sites. In August 1997 the U.S. EPA issued the record of
decision for the Baxter Springs and Treece subsites.  The U.S. EPA has estimated
that the selected remedy will cost approximately $7.1 million.

         State of Illinois vs. NL Industries. Inc. et al., (No. 88-CH-11618). In
August 1997 the trial court  dismissed the case. The State has filed a notice of
appeal.

         Flacke v. NL Industries, Inc., (No. 1842-80). The case has been settled
within previously accrued amounts.

         Rhodes,  et al. v. ACF  Industries,  Inc., et al., (No.  95-C-261).  An
agreement in principle has been reached  settling this matter,  with the Company
being indemnified by another party.


                                   - 19 -

<PAGE>



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits

             27.1 - Financial  Data  Schedule  for the  nine-month  period ended
             September 30, 1997.

         (b) Reports on Form 8-K

             Reports on Form 8-K for the quarter  ended  September  30, 1997 and
             through the date of this report:

             July 22, 1997 - reported Items 5 and 7. 
             October 17, 1997 - reported Items 5 and 7.

                                   - 20 -

<PAGE>



                                  SIGNATURES


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





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



Date:  October 31, 1997                   By   /s/ Joseph S. Compofelice
-----------------------                        -------------------------
                                               Joseph S. Compofelice
                                                Vice President and
                                                Chief Financial Officer



Date:  October 31, 1997                   By   /s/ Dennis G. Newkirk
-----------------------                        ---------------------
                                               Dennis G. Newkirk
                                                Vice President and Controller
                                                (Principal Accounting Officer)

                                   - 21 -


<PAGE>