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 June 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 August 1, 1997:  51,146,214


<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                                     INDEX




                                                                         Page
PART I.     FINANCIAL INFORMATION

  Item 1.   Financial Statements.

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

            Consolidated Statements of Operations - Three months
             and six months ended June 30, 1996 and 1997                   5

            Consolidated Statement of Shareholders' Deficit
             - Six months ended June 30, 1997                              6

            Consolidated Statements of Cash Flows - Six
             months ended June 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                                            18-19

  Item 4.   Submission of Matters to a Vote of Security Holders           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,     June 30,
              ASSETS                                       1996           1997
                                                       ------------     --------

<S>                                                    <C>            <C>       
Current assets:
  Cash and cash equivalents, including
   restricted cash of $10,895 and $9,494 .........     $  114,115     $   74,579
  Accounts and notes receivable ..................        138,538        167,664
  Refundable income taxes ........................          9,267          4,037
  Inventories ....................................        232,510        188,544
  Prepaid expenses ...............................          4,219          6,120
  Deferred income taxes ..........................          1,597          1,358
                                                       ----------     ----------

      Total current assets .......................        500,246        442,302
                                                       ----------     ----------


Other assets:
  Marketable securities ..........................         23,718         26,745
  Investment in joint ventures ...................        181,479        178,245
  Prepaid pension cost ...........................         24,821         23,301
  Deferred income taxes ..........................            223            222
  Other ..........................................         24,825         22,458
                                                       ----------     ----------

      Total other assets .........................        255,066        250,971
                                                       ----------     ----------

Property and equipment:
  Land ...........................................         21,963         20,827
  Buildings ......................................        165,479        155,727
  Machinery and equipment ........................        660,333        625,548
  Mining properties ..............................         95,891         88,662
  Construction in progress .......................         13,231          4,101
                                                       ----------     ----------
                                                          956,897        894,865
  Less accumulated depreciation and depletion ....        490,851        466,331
                                                       ----------     ----------

      Net property and equipment .................        466,046        428,534
                                                       ----------     ----------

                                                       $1,221,358     $1,121,807
                                                       ==========     ==========

</TABLE>



                                   - 3 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                (In thousands)

<TABLE>
<CAPTION>



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

<S>                                                  <C>            <C>       
Current liabilities:
  Notes payable                                      $   25,732     $   23,168
  Current maturities of long-term debt                   91,946         33,819
  Accounts payable and accrued liabilities              153,904        149,586
  Payable to affiliates                                  10,204         10,177
  Income taxes                                            5,664          6,706
  Deferred income taxes                                   2,895          2,582
                                                     ----------     ----------

      Total current liabilities                         290,345        226,038
                                                     ----------     ----------

Noncurrent liabilities:
  Long-term debt                                        737,100        738,774
  Deferred income taxes                                 151,221        140,407
  Accrued pension cost                                   57,941         52,714
  Accrued postretirement benefits cost                   55,935         53,217
  Other                                                 132,048        152,651
                                                     ----------     ----------

      Total noncurrent liabilities                    1,134,245      1,137,763
                                                     ----------     ----------

Minority interest                                           249            249

Shareholders' deficit:
  Common stock                                            8,355          8,355
  Additional paid-in capital                            759,281        759,281
  Adjustments:
    Currency translation                               (118,629)      (126,134)
    Pension liabilities                                  (1,822)        (1,822)
    Marketable securities                                 1,278          3,245
  Accumulated deficit                                  (485,948)      (519,414)
  Treasury stock                                       (365,996)      (365,754)
                                                     ----------     ---------- 

      Total shareholders' deficit                      (203,481)      (242,243)
                                                     ----------     ---------- 

                                                     $1,221,358     $1,121,807
                                                     ==========     ==========
</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       Six months ended
                                        June 30,                June 30,
                                  --------------------    --------------------
                                    1996        1997        1996        1997
                                  --------    --------    --------    --------

<S>                              <C>         <C>         <C>          <C>      
Revenues and other income:
  Net sales ..................   $ 263,162   $ 252,794   $ 503,602    $ 492,270
  Other, net .................      10,329       6,416      20,877        8,658
                                 ---------   ---------   ---------    ---------

                                   273,491     259,210     524,479      500,928
                                 ---------   ---------   ---------    ---------

Costs and expenses:
  Cost of sales ..............     194,794     191,623     364,610      376,658
  Selling, general and
   administrative ............      43,148      43,136      86,039      114,282
  Interest ...................      18,516      19,419      37,655       38,377
                                 ---------   ---------   ---------    ---------

                                   256,458     254,178     488,304      529,317
                                 ---------   ---------   ---------    ---------

     Income (loss) before
      income taxes and
      minority interest ......      17,033       5,032      36,175      (28,389)

Income tax expense ...........       5,114       2,757      10,854        5,049
                                 ---------   ---------   ---------    ---------

     Income (loss) before
      minority interest ......      11,919       2,275      25,321      (33,438)

Minority interest ............          --          20         (42)          28
                                 ---------   ---------   ---------    ---------

     Net income (loss) .......   $  11,919   $   2,255   $  25,363    $ (33,466)
                                 =========   =========   =========    =========

Net income (loss) per share
 of common stock .............   $     .23   $     .04   $     .49    $    (.65)
                                 =========   =========   =========    =========

Weighted average common and
 common equivalent shares
 outstanding .................      51,493      51,380      51,499       51,142
                                 =========   =========   =========    =========

</TABLE>

         See accompanying notes to consolidated financial statements.
                                   - 5 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT

                        Six months ended June 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 ...................        --          --           --          --         --      (33,466)           --       (33,466)

Adjustments ................        --          --       (7,505)         --      1,967           --            --        (5,538)

Treasury stock reissued ....        --          --           --          --         --           --           242           242
                                ------    --------    ---------     -------     ------    ---------     ---------     ---------

Balance at June 30, 1997 ...    $8,355    $759,281    $(126,134)    $(1,822)    $3,245    $(519,414)    $(365,754)    $(242,243)
                                ======    ========    =========     =======     ======    =========     =========     =========

</TABLE>


         See accompanying notes to consolidated financial statements.
                                   - 6 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                    Six months ended June 30, 1996 and 1997

                                (In thousands)


<TABLE>
<CAPTION>


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

<S>                                                      <C>           <C>      
Cash flows from operating activities:
  Net income (loss) ................................     $ 25,363      $(33,466)
  Depreciation, depletion and amortization .........       20,076        19,291
  Noncash interest expense .........................       10,250        11,338
  Deferred income taxes ............................       (3,496)         (539)
  Change in accounting for environmental
   remediation liabilities .........................           --        30,000
  Other, net .......................................       (8,746)       (7,702)
                                                         --------      --------

                                                           43,447        18,922
  Change in assets and liabilities:
    Accounts and notes receivable ..................      (37,852)      (38,112)
    Inventories ....................................       10,168        29,706
    Prepaid expenses ...............................       (3,390)       (1,952)
    Accounts payable and accrued liabilities .......      (13,554)        1,694
    Income taxes ...................................        3,620         8,447
    Other, net .....................................       (8,033)       (4,385)
                                                         --------      --------

     Net cash provided (used) by operating
      activities ...................................       (5,594)       14,320
                                                         --------      --------

Cash flows from investing activities:
  Capital expenditures .............................      (31,358)      (16,326)
  Purchase of minority interest ....................       (5,168)           --
  Investment in joint ventures, net ................        1,632         3,507
  Proceeds from disposition of property and
   equipment .......................................          110         2,910
                                                         --------      --------

     Net cash used by investing activities .........      (34,784)       (9,909)
                                                         --------      --------
</TABLE>



                                   - 7 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                    Six months ended June 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 ...............................     (33,112)    (178,333)
    Deferred financing costs .........................          --       (3,931)
  Dividends ..........................................     (10,221)          --
  Other, net .........................................        (202)         240
                                                         ---------    ---------

      Net cash provided (used) by financing
       activities ....................................      21,177      (42,024)
                                                         ---------    ---------

Cash and cash equivalents:
  Net change from:
    Operating, investing and financing activities ....     (19,201)     (37,613)
    Currency translation .............................      (2,038)      (1,923)
  Balance at beginning of period .....................     141,333      114,115
                                                         ---------    ---------

  Balance at end of period ...........................   $ 120,094    $  74,579
                                                         =========    =========


Supplemental disclosures - cash paid (received) for:
  Interest, net of amounts capitalized ...............   $  27,591    $  27,049
  Income taxes, net ..................................      10,702       (2,739)

</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 46% 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 June 30, 1997 and the consolidated  statements of
operations,  shareholders'  deficit and cash flows for the interim periods ended
June 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.  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          Six months ended
                                            June 30,                   June 30,
                                      ----------------------    ----------------------
                                         1996        1997         1996         1997
                                      ---------    ---------    ---------    ---------
                                                       (In thousands)


<S>                                   <C>          <C>          <C>          <C>      
Net sales:
  Kronos ..........................   $ 228,229    $ 214,354    $ 434,597    $ 418,743
  Rheox ...........................      34,933       38,440       69,005       73,527
                                      ---------    ---------    ---------    ---------

                                      $ 263,162    $ 252,794    $ 503,602    $ 492,270
                                      =========    =========    =========    =========

Operating income:
  Kronos ..........................   $  25,443    $  16,815    $  54,915    $  25,504
  Rheox ...........................      10,655       12,207       23,121       22,343
                                      ---------    ---------    ---------    ---------
                                         36,098       29,022       78,036       47,847
General corporate income (expense):
  Securities earnings, net ........       1,134          528        2,441        1,227
  Expenses, net ...................      (1,683)      (5,099)      (6,647)     (39,086)
  Interest expense ................     (18,516)     (19,419)     (37,655)     (38,377)
                                      ---------    ---------    ---------    ---------

                                      $  17,033    $   5,032    $  36,175    $ (28,389)
                                      =========    =========    =========    =========
</TABLE>

Note 4 - Inventories:
<TABLE>
<CAPTION>


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

<S>                                                  <C>                <C>     
Raw materials ............................           $ 43,284           $ 36,514
Work in process ..........................             10,356             11,456
Finished products ........................            142,091            107,585
Supplies .................................             36,779             32,989
                                                     --------           --------

                                                     $232,510           $188,544
</TABLE>
                                                     ========           ========

                                   - 10 -

<PAGE>

Note 5 - Marketable securities:
<TABLE>
<CAPTION>
                                                        December 31,   June 30,
                                                            1996         1997
                                                        ------------   --------
                                                             (In thousands)
<S>                                                     <C>            <C>     
Available-for-sale securities -
 noncurrent marketable equity securities:
  Unrealized gains ...............................      $  3,516       $  5,688
  Unrealized losses ..............................        (1,550)          (695)
  Cost ...........................................        21,752         21,752
                                                        --------       --------

      Aggregate market ...........................      $ 23,718       $ 26,745
                                                        ========       ========
</TABLE>
Note 6 - Investment in joint ventures:

<TABLE>
<CAPTION>
                                                       December 31,     June 30,
                                                           1996           1997
                                                       ------------     --------
                                                              (In thousands)

<S>                                                     <C>             <C>     
TiO2 manufacturing joint venture ...............        $179,195        $175,688
Other ..........................................           2,284           2,557
                                                        --------        --------

                                                        $181,479        $178,245
                                                        ========        ========
</TABLE>
Note 7 - Other noncurrent assets:

<TABLE>
<CAPTION>
                                                       December 31,     June 30,
                                                           1996           1997
                                                       ------------     --------
                                                              (In thousands)

<S>                                                      <C>             <C>    
Intangible assets, net .........................         $ 7,939         $ 5,831
Deferred financing costs, net ..................           9,791          11,721
Other ..........................................           7,095           4,906
                                                         -------         -------

                                                         $24,825         $22,458
                                                         =======         =======
</TABLE>
Note 8 - Accounts payable and accrued liabilities:
<TABLE>
<CAPTION>
                                                    December 31,        June 30,
                                                       1996               1997
                                                    ------------        --------
                                                           (In thousands)

<S>                                                  <C>                <C>     
Accounts payable .........................           $ 60,648           $ 48,729
                                                     --------           --------
Accrued liabilities:
  Employee benefits ......................             34,618             33,926
  Environmental costs ....................              6,000              9,000
  Interest ...............................              9,429              9,379
  Miscellaneous taxes ....................              4,073              5,300
  Other ..................................             39,136             43,252
                                                     --------           --------

                                                       93,256            100,857
                                                     --------           --------

                                                     $153,904           $149,586
                                                     ========           ========
</TABLE>
                                   - 11 -

<PAGE>



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


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

<S>                                                    <C>              <C>     
Environmental costs ..........................         $106,849         $128,972
Insurance claims and expenses ................           11,673           11,469
Employee benefits ............................           11,960           10,864
Other ........................................            1,566            1,346
                                                       --------         --------

                                                       $132,048         $152,651
                                                       ========         ========
</TABLE>

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


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

<S>                                                       <C>           <C>     
Notes payable - Kronos (DM 40,000) .................      $ 25,732      $ 23,168
                                                          ========      ========

Long-term debt:
  NL Industries:
    11.75% Senior Secured Notes ....................      $250,000      $250,000
    13% Senior Secured Discount Notes ..............       149,756       159,490
                                                          --------      --------

                                                           399,756       409,490
                                                          --------      --------
  Kronos:
    DM bank credit facility (DM 539,971 and
     DM 288,322, respectively) .....................       347,362       166,996
    Joint venture term loan ........................        57,858        50,143
    Other ..........................................         9,125         5,753
                                                          --------      --------

                                                           414,345       222,892
                                                          --------      --------
  Rheox:
    Bank credit facility ...........................        14,659       140,000
    Other ..........................................           286           211
                                                          --------      --------

                                                            14,945       140,211
                                                          --------      --------

                                                           829,046       772,593

Less current maturities ............................        91,946        33,819
                                                          --------      --------

                                                          $737,100      $738,774
                                                          ========      ========
</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 June 30,
1997,  the  estimated  fair value of such  agreements  was estimated to be a $.1
million receivable. Such fair value represents the amount Rheox would receive

                                   - 12 -

<PAGE>



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>

                                                              Six months ended
                                                                   June 30,
                                                           --------------------
                                                             1996        1997
                                                           --------    --------
                                                               (In thousands)

<S>                                                        <C>         <C>      
Expected tax expense (benefit) .........................   $ 12,661    $ (9,936)
Non-U.S. tax rates .....................................     (1,954)       (440)
Incremental tax on income of companies not included
 in NL's consolidated U.S. federal income tax return ...      2,808       1,440
Valuation allowance ....................................     (1,098)     12,775
U.S. state income taxes ................................      1,138       1,050
Other, net .............................................     (2,701)        160
                                                           --------    --------

      Income tax expense ...............................   $ 10,854    $  5,049
                                                           ========    ========
</TABLE>

Note 12 - Other income, net:

<TABLE>
<CAPTION>

                                      Three months ended      Six months ended
                                           June 30,                June 30,
                                     --------------------    -------------------
                                        1996       1997        1996        1997
                                     --------    --------    --------   --------
                                                    (In thousands)


<S>                                  <C>         <C>         <C>        <C>     
Interest and dividends ...........   $  1,134    $    528    $  2,441   $  1,227
Currency transaction gains, net ..      2,821       2,210       3,867      2,727
Disposition of property and ......      2,784       2,756
 equipment .......................       (405)       (919)
Pension curtailment gain .........         --          --       4,791         --
Technology fee income ............      2,593          --       5,674         --
Litigation settlement gain .......      2,756          --       2,756         --
Other, net .......................      1,430         894       2,267      1,948
                                     --------    --------    --------   --------

                                     $ 10,329    $  6,416    $ 20,877   $  8,658
                                     ========    ========    ========   ========
</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 quarter ended March 31, 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     %       Six months ended     %
                                         June 30,      Change        June 30,       Change
                                  ------------------   ------   ------------------  ------
                                    1996      1997                1996       1997
                                  --------  --------            --------  --------  
                                     (In millions)                 (In millions)

<S>                               <C>       <C>         <C>     <C>       <C>       <C>
Net sales:
  Kronos .....................    $  228.3  $  214.4     -6%    $  434.6  $  418.8   -4%
  Rheox ......................        34.9      38.4    +10%        69.0      73.5   +7%
                                  --------  --------            --------  --------

                                  $  263.2  $  252.8     -4%    $  503.6  $  492.3   -2%
                                  ========  ========            ========  ========

Operating income:
  Kronos .....................    $   25.4  $   16.8    -34%    $   54.9  $   25.5  -54%
  Rheox ......................        10.7      12.2    +14%        23.1      22.3   -3%
                                  --------  --------            --------  --------

                                  $   36.1  $   29.0    -20%    $   78.0  $   47.8  -39%
                                  ========  ========            ========  ========

Percent changes in TiO2:
  Sales volume ...............                           +9%                        +14%
  Average selling prices (in
   billing currencies) .......                           -8%                        -12%
</TABLE>

      Kronos' TiO2 operating income in the second quarter and first half of 1997
decreased from the comparable  periods in 1996 due to lower average TiO2 selling
prices, partially offset by higher production and sales volumes. Kronos' average
TiO2 selling prices for the second quarter of 1997 were 3% higher than the first
quarter of 1997 and 8% lower than the second quarter of 1996.  Selling prices at
the end of the second  quarter of 1997 were 1% higher  than the  average for the
quarter.  Kronos  achieved  record  second  quarter  sales  volumes,  reflecting
continued  strong TiO2  demand.  Kronos'  second  quarter  and six months  sales
volumes increased 9% and 14%,  respectively,  from the year-earlier periods with
higher sales volumes  worldwide.  While Kronos  currently  expects its full-year
1997 TiO2 sales  volumes will be higher than the full-year  1996  volumes,  TiO2
sales  volumes in the last half of 1997 are  expected to be lower than the first
half of 1997.  Kronos' operating income in the second quarter of 1997 includes a
$2.7 million gain related to the sale of surplus assets.

      Although  Kronos  expects  further  increases in its TiO2  selling  prices
during the second half of 1997,  Kronos  expects its  full-year  1997  operating
income will be below that of 1996, due to lower anticipated  average TiO2 prices
for full-year  1997  compared to 1996.  Kronos' cost of sales as a percentage of
net sales  increased  in the second  quarter and first half of 1997 due to lower
average  prices in both  periods  of 1997  compared  to 1996.  Kronos'  selling,
general and  administrative  expenses  decreased in the second quarter and first
half of 1997 due to favorable effects of foreign currency translation, partially
offset by  higher  distribution  expenses  associated  with  higher  1997  sales
volumes.

      Rheox's  operating  income for the second  quarter of 1997  increased  14%
compared to the second  quarter of 1996 on higher  sales  volumes  and  slightly
higher selling prices. As a result, Rheox's operating income in the first half

                                   - 14 -

<PAGE>



of 1997 was $1.9 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 in the
second  quarter and first half of 1997 were  comparable to the  respective  1996
periods.  Selling,  general and administrative  expenses increased in the second
quarter and first half of 1997  compared to the 1996  periods  primarily  due to
higher  selling  and  distribution  expenses  associated  with higher 1997 sales
volumes and higher variable compensation expense.

      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 second  quarter  and first half of
1997 by $13 million and $22 million,  respectively,  compared to the  comparable
1996  periods.  In  addition,  a  portion  of the net sales  generated  from the
Company's  non-U.S.  operations  are billed in U.S.  dollars,  and exchange rate
fluctuations do not impact such net sales.  Operating  margins on such net sales
improved  compared to 1996 as operating costs are lower in U.S. dollar terms due
to exchange rate  fluctuations.  Consequently,  fluctuations in the value of the
U.S.  dollar  relative to other  currencies  increased  operating  income in the
second quarter and first half 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             Six months ended
                                June 30,      Difference       June 30,      Difference
                           ------------------ ---------- -----------------   ----------
                             1996      1997                1996      1997
                           -------   -------             -------   -------          

<S>                        <C>       <C>       <C>       <C>       <C>       <C>     
Securities earnings ...    $   1.1   $    .5   $   (.6)  $   2.4   $   1.2   $  (1.2)
Corporate expenses, net       (1.7)     (5.1)     (3.4)     (6.6)    (39.1)    (32.5)
Interest expense ......      (18.5)    (19.4)      (.9)    (37.7)    (38.4)      (.7)
                           -------   -------   -------   -------   -------   -------

                           $ (19.1)  $ (24.0)  $  (4.9)  $ (41.9)  $ (76.3)  $ (34.4)
                           =======   =======   =======   =======   =======   ======= 
</TABLE>


      Securities  earnings declined due to lower average balances  available for
investment.  Corporate  expenses,  net was higher in the second  quarter of 1997
compared  to the  same  period  in 1996  primarily  due to a $2.8  million  gain
recognized  in the second  quarter of 1996 related to the  settlement of certain
litigation in which the Company was a plaintiff.  Corporate expenses, net in the
first half of 1997 was 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  second  quarter  and  first  half 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 six  months  ended  June  30,  1996  and 1997 are
presented below.

<TABLE>
<CAPTION>

                                                              Six months ended
                                                                   June 30,
                                                            -------------------
                                                             1996         1997
                                                            ------       ------
                                                                (In millions)
<S>                                                          <C>          <C>  
Net cash provided (used) by:
  Operating activities ...............................       $(5.6)       $14.3
  Investing activities ...............................       (34.8)        (9.9)
  Financing activities ...............................        21.2        (42.0)
                                                            ------       ------

      Net cash used by operating, investing ..........      $(19.2)      $(37.6)
       and financing activities ......................      ======       ======
</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  six  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)  used  cash in both  the  first  half of 1996  and  1997;
however, the cash used in the first half of 1997 was significantly less than the
first half of 1996 due to cash provided from  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 ($75
million),  including interest, for years through 1996 and expects to receive tax
assessments  for an  additional  DM 20 million  ($12  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,  which
the Company  anticipates may take approximately two to five years.  Although the
Company believes that it will ultimately  prevail,  the Company has granted a DM
100 million ($58 million at June 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  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.


                                   - 16 -

<PAGE>



      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 its  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 June 30, 1997, the
Company  was in  compliance  with all  financial  covenants  governing  its debt
agreements.

      In addition to the above  refinancing and  prepayment,  the Company repaid
$7.8 million of the joint venture term loan in the first six months of 1997.

      At June 30, 1997,  the Company had cash and cash  equivalents  aggregating
$75 million (36% held by non-U.S.  subsidiaries)  including  restricted cash and
cash  equivalents of $9 million.  The Company's  subsidiaries had $9 million and
$92 million  available  for  borrowing at June 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
($138 million at June 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  $185
million. The Company's estimates of such liabilities have not been discounted to
present  value,  and the  Company has not  recognized  any  potential  insurance
recoveries.  No assurance can be given that actual costs will not exceed accrued
amounts  or the upper end of the range for sites for which  estimates  have been
made, and no assurance can be given that costs will not be incurred with respect
to sites as to which no estimate presently can be made. Further, there can be no
assurance that additional environmental matters will not arise in the future.

      The Company is also a defendant in a number of legal  proceedings  seeking
damages for personal  injury and property  damage  arising from the sale of lead
pigments and lead-based paints.  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

                                   - 17 -

<PAGE>



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.


                          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 quarter  ended March 31,  1997 for  descriptions  of
certain previously-reported legal proceedings.

         Gould Inc.  v. NL  Industries,  Inc.  ("Gould  Superfund  Site"),  (No.
91-1091). In May 1997 the U.S. EPA issued an Amended Record of Decision

                                   - 18 -

<PAGE>



("ARD") for the Gould  Superfund  Site soils  operable  unit.  The ARD  requires
construction of an onsite  containment  facility estimated to cost between $10.5
million and $12 million,  including  capital costs and operating and maintenance
costs.

         German, et al. v. Federal Home Mortgage Loan Corp., et al. (No. 93 Civ.
6941). In May 1997 plaintiffs moved for class certification and defendants moved
for summary judgment.  In June 1997 the Court stayed all further activity in the
case  pending  reconsideration  of its 1995  decision  permitting  filing of the
complaint  against the manufacturer  defendants and joinder of the new complaint
with the pre-existing complaint against New York City and other landlords.

         NL Industries,  Inc. v. Commercial Union, et al. (No. 90-2124). In June
1997 the Company  reached a settlement in principle with its insurers  regarding
allocation of defense costs in the lead pigment cases in which  reimbursement of
defense costs had been sought.

         Parker v. NL  Industries,  et al. (No.  97085060  CC915).  In June 1997
plaintiffs moved to remand to state court and the Company answered the complaint
denying liability. Trial is scheduled to begin in July 1998.

         Ritchie  v. NL  Industries,  et al.  (No.  5:96-CV-166).  In July  1997
defendants filed a second notice of removal to federal court.

         The City of New York, et al. v. Lead Industries  Association,  Inc., et
al. (No.  89-4617).  In July 1997 the trial court's  denials of defendants'  two
summary  judgment  motions on the fraud  claim were  affirmed  by the  Appellate
Division.


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

         The Company held its Annual Meeting of Shareholders on May 7, 1997. All
the  nominees for  director  were  elected  with the voting  results for each as
follows:
<TABLE>
<CAPTION>


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

<S>                                                 <C>                  <C>    
Joseph S. Compofelice ...................           48,823,898           445,657
J. Landis Martin ........................           48,814,783           454,772
Kenneth R. Peak .........................           48,823,484           446,071
Glenn R. Simmons ........................           48,814,210           455,345
Harold C. Simmons .......................           48,812,068           457,487
Lawrence A. Wigdor ......................           48,822,997           446,558
Admiral Elmo R. Zumwalt, Jr .............           48,821,656           447,899
</TABLE>



                                   - 19-

<PAGE>



ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

             (a)   Exhibits

                   27.1 - Financial Data Schedule for the six-month period ended
                   June 30, 1997.

             (b)   Reports on Form 8-K

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


                   April 22,  1997 -  reported  Items 5 and 7.  
                   July 22,  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:  August 1, 1997                     By   /s/ Joseph S. Compofelice
---------------------                          -------------------------
                                               Joseph S. Compofelice
                                                Vice President and
                                                Chief Financial Officer



Date:  August 1, 1997                     By   /s/ Dennis G. Newkirk
---------------------                          ---------------------
                                               Dennis G. Newkirk
                                                Vice President and Controller
                                                (Principal Accounting Officer)

                                   - 21 -

<PAGE>