| For      the quarter ended September 30,      2008 | Commission      file number 1-5467 |
|----------------------------------------------------|------------------------------------|

| VALHI,      INC.                                           |
|------------------------------------------------------------|
| (Exact      name of Registrant as specified in itscharter) |

| Delaware                                                                |   | 87-0110150                                 |
|-------------------------------------------------------------------------|--------|--------------------------------------------|
| (State      or other jurisdiction ofincorporation      or organization) |   | (IRS      EmployerIdentification      No.) |

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

----

|                                                                                                                                                                                                                                      | Pagenumber    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|
| Part      I.                           FINANCIAL      INFORMATION                                  |          |
|                                                                                                                                                                                                                                      |          |
| Item      1.                   Financial      Statements.                                                                                  |          |
|                                                                                                                                                                                                                                      |          |
| Condensed Consolidated Balance      Sheets – December 31, 2007; and      September 30, 2008 (unaudited)                                                                                                                        |  3       |
|                                                                                                                                                                                                                                      |          |
| Condensed Consolidated      Statements of Operations (unaudited)  – Three and nine months ended      September 30, 2007 and 2008                                                                                               |  5       |
|                                                                                                                                                                                                                                      |          |
| Condensed Consolidated      Statements of Cash Flows (unaudited) – Nine months ended      September 30, 2007 and 2008                                                                                                          |  6       |
|                                                                                                                                                                                                                                      |          |
| Condensed Consolidated      Statement of Stockholders’ Equity and Comprehensive      Loss –  Nine months ended  September 30, 2008      (unaudited)                                                  |   8 |
|                                                                                                                                                                                                                                      |          |
| Notes to Condensed Consolidated      Financial Statements (unaudited)                                                                                                                                                                |  9       |
|                                                                                                                                                                                                                                      |          |
| Item      2.                   Management’s      Discussion and Analysis of Financial Condition and Results of      Operations. | 26            |
|                                                                                                                                                                                                                                      |          |
| Item      3.                   Quantitative      and Qualitative Disclosures About Market Risk                                        | 44            |
|                                                                                                                                                                                                                                      |          |
| Item      4.                   Controls      and Procedures                                                                                | 45            |
|                                                                                                                                                                                                                                      |          |
| Part      II.                      OTHER      INFORMATION                                                                   |          |
|                                                                                                                                                                                                                                      |          |
| Item      1.                   Legal      Proceedings.                                                                                     | 46            |
|                                                                                                                                                                                                                                      |          |
| Item      1A.                              Risk      Factors.                       | 46            |
|                                                                                                                                                                                                                                      |          |
| Item      2.                   Unregistered      Sales of Equity Securities and Use of Proceeds; Share      Repurchases               | 47            |
|                                                                                                                                                                                                                                      |          |
| Item      6.                   Exhibits.                                                                                                   | 47            |
|                                                                                                                                                                                                                                      |          |

----

|               ASSETS |   | December      31, 2007 |    |   | September      30, 2008   |   |
|--------------------------------------------------------------------------------------------|--------|-----------------------------|---------|--------|-------------------------------------|--------|
|                                                                                       |   |                        |    |   | (unaudited)                         |   |
|                                                                                       |   |                        |    |   |                                |   |
| Current assets:                                                                       |   |                        |    |   |                                |   |
|   Cash and cash equivalents                                       |   | $                           | 138.3   |   |                                | $      | 58.2 |   |
|   Restricted cash equivalents                                          |   |                        | 7.2     |   |                                |   | 11.0 |   |
|   Marketable securities                                                     |   |                        | 7.2     |   |                                |   | 7.4 |   |
|   Accounts and other receivables, net                        |   |                        | 253.7   |   |                                |   | 284.2 |   |
|   Inventories, net                                                          |   |                        | 337.9   |   |                                |   | 328.1 |   |
|   Prepaid expenses and      other                                      |   |                        | 16.2    |   |                                |   | 25.1 |   |
|   Deferred income taxes                                                |   |                        | 10.4    |   |                                |   | 10.5 |   |
|                                                                                       |   |                        |    |   |                                |   |   |   |
|       Total current assets                         |   |                        | 770.9   |   |                                |   | 724.5 |   |
|                                                                                       |   |                        |    |   |                                |   |   |   |
| Other assets:                                                                         |   |                        |    |   |                                |   |   |   |
|   Marketable      securities                                                     |   |                        | 319.8   |   |                                |   | 282.3 |   |
|   Investment in affiliates                                             |   |                        | 137.9   |   |                                |   | 132.2 |   |
|   Pension assets                                                            |   |                        | 47.6    |   |                                |   | 53.6 |   |
|   Goodwill                                                                       |   |                        | 406.8   |   |                                |   | 396.4 |   |
|   Other intangible assets                                              |   |                        | 2.7     |   |                                |   | 2.2 |   |
|   Deferred income taxes                                                |   |                        | 168.7   |   |                                |   | 171.4 |   |
|   Other assets                                                              |   |                        | 67.3    |   |                                |   | 81.7 |   |
|                                                                                       |   |                        |    |   |                                |   |   |   |
|       Total other assets                           |   |                        | 1,150.8 |   |                                |   | 1,119.8 |   |
|                                                                                       |   |                        |    |   |                                |   |   |   |
| Property and equipment:                                                          |   |                        |    |   |                                |   |   |   |
|   Land                                                                           |   |                        | 48.2    |   |                                |   | 48.8 |   |
|   Buildings                                                                      |   |                        | 277.1   |   |                                |   | 284.1 |   |
|   Equipment                                                                      |   |                        | 1,051.9 |   |                                |   | 1,076.9 |   |
|   Mining properties                                                         |   |                        | 39.8    |   |                                |   | 38.7 |   |
|   Construction in progress                                             |   |                        | 48.9    |   |                                |   | 69.9 |   |
|                                                                                       |   |                        | 1,465.9 |   |                                |   | 1,518.4 |   |
|   Less accumulated depreciation                                        |   |                        | 784.6   |   |                                |   | 841.8 |   |
|                                                                                       |   |                        |    |   |                                |   |   |   |
|       Net property and equipment              |   |                        | 681.3   |   |                                |   | 676.6 |   |
|                                                                                       |   |                        |    |   |                                |   |   |   |
|       Total assets                                      |   | $                           | 2,603.0 |   |                                | $      | 2,520.9 |   |

----

|    LIABILITIES AND STOCKHOLDERS'      EQUITY                                                                                                               |   | December      31, 2007 |    |   | September      30, 2008 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|--------|------------------------------|--------|
|                                                                                                                                                                      |   |                        |    |   | (unaudited)                  |   |
|                                                                                                                                                                      |   |                        |    |   |                         |   |
| Current liabilities:                                                                                                                                                 |   |                        |    |   |                         |   |
|   Current maturities of long-term debt                                                                                                      |   | $                           | 16.8    |   |                         | $      | 1.8 |   |
|   Accounts payable      and accrued liabilities                                                                                                            |   |                        | 267.8   |   |                         |   | 295.0 |   |
|   Income taxes                                                                                                                                             |   |                        | 9.8     |   |                         |   | 8.7 |   |
|   Deferred income taxes                                                                                                                               |   |                        | 3.3     |   |                         |   | 2.2 |   |
|                                                                                                                                                                      |   |                        |    |   |                         |   |   |   |
|       Total current liabilities                                                                                                   |   |                        | 297.7   |   |                         |   | 307.7 |   |
|                                                                                                                                                                      |   |                        |    |   |                         |   |   |   |
| Noncurrent liabilities:                                                                                                                                              |   |                        |    |   |                         |   |   |   |
|   Long-term debt                                                                                                                                           |   |                        | 889.8   |   |                         |   | 934.8 |   |
|   Deferred income taxes                                                                                                                               |   |                        | 415.0   |   |                         |   | 382.5 |   |
|   Accrued pension costs                                                                                                                               |   |                        | 140.0   |   |                         |   | 130.1 |   |
|   Accrued postretirement      benefits costs                                                                                                               |   |                        | 33.6    |   |                         |   | 32.8 |   |
|   Accrued environmental costs                                                                                                                         |   |                        | 40.3    |   |                         |   | 36.4 |   |
|   Other liabilities                                                                                                                                        |   |                        | 77.7    |   |                         |   | 86.5 |   |
|                                                                                                                                                                      |   |                        |    |   |                         |   |   |   |
|       Total noncurrent liabilities                                                                                                |   |                        | 1,596.4 |   |                         |   | 1,603.1 |   |
|                                                                                                                                                                      |   |                        |    |   |                         |   |   |   |
| Minority interest      in net assets of subsidiaries                                                                                                                 |   |                        | 90.5    |   |                         |   | 81.1 |   |
|                                                                                                                                                                      |   |                        |    |   |                         |   |   |   |
| Stockholders' equity:                                                                                                                                                |   |                        |    |   |                         |   |   |   |
|   Preferred stock                                                                                                                                          |   |                        | 667.3   |   |                         |   | 667.3 |   |
|   Common stock                                                                                                                                             |   |                        | 1.2     |   |                         |   | 1.2 |   |
|   Additional paid-in capital                                                                                                                          |   |                        | 10.4    |   |                         |   | - |   |
|   Accumulated      deficit                                                                                                                                      |   |                        | (74.1   | )      |                         |   | (127.0 | ) |
|   Accumulated other comprehensive income                                                                                                    |   |                        | 51.5    |   |                         |   | 25.4 |   |
|   Treasury stock                                                                                                                                           |   |                        | (37.9   | )      |                         |   | (37.9 | ) |
|                                                                                                                                                                      |   |                        |    |   |                         |   |   |   |
|       Total stockholders' equity                                                                                                  |   |                        | 618.4   |   |                         |   | 529.0 |   |
|                                                                                                                                                                      |   |                        |    |   |                         |   |   |   |
|       Total liabilities, minority interest and       stockholders’ equity |   | $                           | 2,603.0 |   |                         | $      | 2,520.9 |   |
|                                                                                                                                                                      |   |                        |    |   |                         |   |   |   |

----

|                                                                                            |   | Three      months ended |        |   | Nine      months ended |   |
|-------------------------------------------------------------------------------------------------|--------|-------------------------|-------------|--------|------------------------|--------|
|                                                                                            |   | September 30,           |        |   | September 30,          |   |
|                                                                                            |   | 2007                    |        |   | 2008                   |   |   | 2007 |   |   | 2008 |   |
|                                                                                            |   | (unaudited)             |        |
|                                                                                            |   |                    |        |   |                   |   |   |   |   |   |   |   |
| Revenues      and other income:                                                                 |   |                    |        |   |                   |   |   |   |   |   |   |   |
|   Net      sales                                                                      |   | $                       | 390.6       |   |                   | $      | 390.2 |   |   | $ | 1,138.6 |   |   | $ | 1,200.3 |   |
|   Other      income, net                                                              |   |                    | 8.7         |   |                   |   | 11.0 |   |   |   | 32.5 |   |   |   | 29.1 |   |
|   Equity      in earnings of:                                                         |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|     Titanium      Metals Corporation     ("TIMET") |   |                    |  -     |   |                   |   |  - |   |   |   |  26.9 |   |   |   |  - |   |
|     Other                                                                   |   |                    | 1.3         |   |                   |   | (.2 | ) |   |   | 1.8 |   |   |   | (.8 | ) |
|                                                                                            |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|     Total      revenues and other income                                    |   |                    | 400.6       |   |                   |   | 401.0 |   |   |   | 1,199.8 |   |   |   | 1,228.6 |   |
|                                                                                            |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Costs      and expenses:                                                                        |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|   Cost      of sales                                                                  |   |                    | 314.3       |   |                   |   | 332.2 |   |   |   | 909.3 |   |   |   | 1,012.3 |   |
|   Selling,      general and administrative                                            |   |                    | 59.8        |   |                   |   | 58.6 |   |   |   | 175.2 |   |   |   | 182.6 |   |
|   Goodwill      impairment                                                            |   |                    | -           |   |                   |   | 10.1 |   |   |   | - |   |   |   | 10.1 |   |
|   Interest                                                                            |   |                    | 16.0        |   |                   |   | 17.7 |   |   |   | 47.5 |   |   |   | 52.8 |   |
|                                                                                            |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|       Total      costs and expenses                               |   |                    | 390.1       |   |                   |   | 418.6 |   |   |   | 1,132.0 |   |   |   | 1,257.8 |   |
|                                                                                            |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|     Income      (loss) before income taxes                                  |   |                    | 10.5        |   |                   |   | (17.6 | ) |   |   | 67.8 |   |   |   | (29.2 | ) |
|                                                                                            |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Provision      for income taxes                                                                 |   |                    | 69.1        |   |                   |   | 7.9 |   |   |   | 102.2 |   |   |   | 1.0 |   |
|                                                                                            |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Minority      interest in after-tax losses                                                      |   |                    | (5.9        | )      |                   |   | (2.3 | ) |   |   | (2.9 | ) |   |   | (.9 | ) |
|                                                                                            |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|     Net      loss                                                           |   | $                       | (52.7       | )      |                   | $      | (23.2 | ) |   | $ | (31.5 | ) |   | $ | (29.3 | ) |
|                                                                                            |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      and diluted net loss per share                                                       |   | $                       | (.46        | )      |                   | $      | (.20 | ) |   | $ | (.27 | ) |   | $ | (.25 | ) |
|                                                                                            |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      dividends per share                                                                   |   | $                       | .10         |   |                   | $      | .10 |   |   | $ | .30 |   |   | $ | .30 |   |
|                                                                                            |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      and diluted weighted average      shares outstanding                            |   |                    |  114.6 |   |                   |   |  114.4 |   |   |   |  114.8 |   |   |   |  114.4 |   |

----

|                                                                                                                                |   | Nine      months ended September 30, |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                                                                                |   | 2007                                      |   |   | 2008 |   |
|                                                                                                                                |   | (unaudited)                               |   |
|                                                                                                                                |   |                                      |   |   |   |   |
| Cash flows from operating activities:                                                                           |   |                                      |   |   |   |   |
|   Net loss                                                                                                           |   | $                                         | (31.5  | ) |   | $ | (29.3 | ) |
|   Depreciation and amortization                                                                                 |   |                                      | 49.1   |   |   |   | 51.4 |   |
|   Benefit plan expense greater      (less)   than cash funding requirements: |   |                                      |   |   |   |   |   |   |
|     Defined benefit pension expense                                                              |   |                                      | (4.8   | ) |   |   | (9.4 | ) |
|     Other postretirement benefit expense                                                         |   |                                      | .4     |   |   |   | .4 |   |
|   Goodwill      impairment                                                                                                |   |                                      | -      |   |   |   | 10.1 |   |
|   Deferred income taxes                                                                                         |   |                                      | 82.0   |   |   |   | (24.4 | ) |
|   Minority interest                                                                                                  |   |                                      | (2.9   | ) |   |   | (.9 | ) |
|   Equity in:                                                                                                         |   |                                      |   |   |   |   |   |   |
|     TIMET                                                                                                       |   |                                      | (26.9  | ) |   |   | - |   |
|     Other                                                                                                  |   |                                      | (1.8   | ) |   |   | .8 |   |
|   Net distributions from (contributions      to) Ti02   manufacturing      joint venture    |   |                                      | (3.9   | ) |   |   |  4.9 |   |
|   Other, net                                                                                                         |   |                                      | 4.4    |   |   |   | 3.3 |   |
|   Change in assets and liabilities:                                                                   |   |                                      |   |   |   |   |   |   |
|     Accounts and other receivables, net                                                     |   |                                      | (44.6  | ) |   |   | (40.6 | ) |
|     Inventories, net                                                                                       |   |                                      | 17.0   |   |   |   | 1.6 |   |
|     Accounts payable and accrued liabilities                                                |   |                                      | 25.5   |   |   |   | 20.5 |   |
|     Accounts with affiliates                                                                          |   |                                      | .4     |   |   |   | 19.4 |   |
|     Income taxes                                                                                           |   |                                      | 9.7    |   |   |   | (1.4 | ) |
|     Other, net                                                                                             |   |                                      | (15.7  | ) |   |   | (5.5 | ) |
|                                                                                                                                |   |                                      |   |   |   |   |   |   |
|         Net cash provided      by operating activities                       |   |                                      | 56.4   |   |   |   | .9 |   |
|                                                                                                                                |   |                                      |   |   |   |   |   |   |
| Cash flows from investing activities:                                                                           |   |                                      |   |   |   |   |   |   |
|   Capital expenditures                                                                                               |   |                                      | (41.0  | ) |   |   | (64.7 | ) |
|   Capitalized      permit costs                                                                                           |   |                                      | (5.5   | ) |   |   | (11.3 | ) |
|   Purchases of:                                                                                                      |   |                                      |   |   |   |   |   |   |
|     CompX common stock                                                                                |   |                                      | (2.2   | ) |   |   | (1.0 | ) |
|     TIMET      common stock                                                                                     |   |                                      | (.7    | ) |   |   | - |   |
|     Marketable securities                                                                                  |   |                                      | (19.1  | ) |   |   | (3.8 | ) |
|   Proceeds from disposal of marketable      securities                                                |   |                                      | 23.6   |   |   |   | 5.9 |   |
|   Change in restricted cash equivalents, net                                                     |   |                                      | 2.6    |   |   |   | (3.8 | ) |
|   Other, net                                                                                                         |   |                                      | 1.9    |   |   |   | 1.8 |   |
|                                                                                                                                |   |                                      |   |   |   |   |   |   |
|         Net cash used in investing activities                      |   |                                      | (40.4  | ) |   |   | (76.9 | ) |
|                                                                                                                                |   |                                      |   |   |   |   |   |   |

----

|                                                                                                                       |   | Nine      months ended September 30, |         |
|----------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------------|
|                                                                                                                       |   | 2007                                      |         |   | 2008 |   |
|                                                                                                                       |   | (unaudited)                               |         |
|                                                                                                                       |   |                                      |         |   |   |   |
| Cash      flows from financing activities:                                                                                 |   |                                      |         |   |   |   |
|   Indebtedness:                                                                                                  |   |                                      |         |   |   |   |
|     Borrowings                                                                                         |   | $                                         | 263.3        |   |   | $ | 335.4 |   |
|     Principal payments                                                                            |   |                                      | (247.5       | ) |   |   | (298.4 | ) |
|     Deferred      financing costs paid                                                                 |   |                                      | -            |   |   |   | (1.3 | ) |
|   Valhi      cash dividends paid                                                                            |   |                                      | (34.2        | ) |   |   | (34.1 | ) |
|   Distributions to minority interest                                                              |   |                                      | (6.6         | ) |   |   | (5.5 | ) |
|   Treasury stock acquired                                                                         |   |                                      | (9.8         | ) |   |   | - |   |
|   Issuance      of common stock and other                                                                        |   |                                      | 2.4          |   |   |   | - |   |
|                                                                                                                       |   |                                      |         |   |   |   |   |   |
|       Net cash used      in financing activities                                   |   |                                      | (32.4        | ) |   |   | (3.9 | ) |
|                                                                                                                       |   |                                      |         |   |   |   |   |   |
| Cash and cash equivalents - net change from:                                            |   |                                      |         |   |   |   |   |   |
|   Operating, investing and financing activities                                              |   |                                      | (16.4        | ) |   |   | (79.9 | ) |
|   Currency translation                                                                                      |   |                                      | 5.1          |   |   |   | (.2 | ) |
| Cash and cash      equivalents at beginning of period                                        |   |                                      | 189.2        |   |   |   | 138.3 |   |
|                                                                                                                       |   |                                      |         |   |   |   |   |   |
| Cash and cash      equivalents at end of period                                              |   | $                                         | 177.9        |   |   | $ | 58.2 |   |
|                                                                                                                       |   |                                      |         |   |   |   |   |   |
|                                                                                                                       |   |                                      |         |   |   |   |   |   |
| Supplemental disclosures:                                                                                             |   |                                      |         |   |   |   |   |   |
|   Cash paid for:                                                                                       |   |                                      |         |   |   |   |   |   |
|     Interest, net of amounts capitalized                                           |   | $                                         | 37.3         |   |   | $ | 42.9 |   |
|     Income taxes, net                                                                        |   |                                      | 14.1         |   |   |   | .9 |   |
|   Accrual      for capital expenditures                                                                          |   |                                      | 1.2          |   |   |   | 4.7 |   |
|   Accrual      for capitalized permit costs                                                                      |   |                                      | .5           |   |   |   | .8 |   |
|                                                                                                                       |   |                                      |         |   |   |   |   |   |
|   Noncash      financing activities:                                                                             |   |                                      |         |   |   |   |   |   |
|     Dividend      of TIMET common stock                                                                |   | $                                         | 899.3        |   |   | $ | - |   |
|     Issuance      of preferred stock in settlement of     tax      obligation |   |                                      |   667.3 |   |   |   |  - |   |
|                                                                                                                       |   |                                      |         |   |   |   |   |   |
|                                                                                                                       |   |                                      |         |   |   |   |   |   |

----

|                               |   |                 |   |   |              |   |   |                 |   |   |               |   |   | Accumulated                     |   |   |                |   |   |                            |   |   |                    |   |
|------------------------------------|--------|----------------------|--------|--------|-------------------|--------|--------|----------------------|--------|--------|--------------------|--------|--------|---------------------------------|--------|--------|---------------------|--------|--------|---------------------------------|--------|--------|-------------------------|--------|
|                               |   |                 |   |   |              |   |   | Additional           |   |   |               |   |   | other                           |   |   |                |   |   | Total                           |   |   |                    |   |
|                               |   | Preferred stock |   |   | Common stock |   |   | paid-in capital |   |   | Accumulateddeficit |   |   | comprehensiveincome (loss) |   |   | Treasury stock |   |   | stockholders’ equity |   |   | Comprehensive loss |   |
|                               |   | (unaudited)          |   |
|                               |   |                 |   |   |              |   |   |                 |   |   |               |   |   |                            |   |   |                |   |   |                            |   |   |                    |   |
| Balance      at December 31, 2007  |   | $                    | 667.3  |   |              | $      | 1.2    |                 |   | $      | 10.4               |   |   | $                               | (74.1  | )      |                | $      | 51.5   |                            |   | $      | (37.9                   | )      |   | $ | 618.4 |   |   |   |   |
|                               |   |                 |   |   |              |   |   |                 |   |   |               |   |   |                            |   |   |                |   |   |                            |   |   |                    |   |   |   |   |   |   |   |   |
| Net      loss                      |   |                 | -      |   |              |   | -      |                 |   |   | -                  |   |   |                            | (29.3  | )      |                |   | -      |                            |   |   | -                       |   |   |   | (29.3 | ) |   | $ | (29.3 | ) |
|                               |   |                 |   |   |              |   |   |                 |   |   |               |   |   |                            |   |   |                |   |   |                            |   |   |                    |   |   |   |   |   |   |   |   |   |
| Other      comprehensive loss, net |   |                 | -      |   |              |   | -      |                 |   |   | -                  |   |   |                            | -      |   |                |   | (26.1  | )                               |   |   | -                       |   |   |   | (26.1 | ) |   |   | (26.1 | ) |
|                               |   |                 |   |   |              |   |   |                 |   |   |               |   |   |                            |   |   |                |   |   |                            |   |   |                    |   |   |   |   |   |   |   |   |   |
| Cash      dividends                |   |                 | -      |   |              |   | -      |                 |   |   | (10.5              | )      |   |                            | (23.6  | )      |                |   | -      |                            |   |   | -                       |   |   |   | (34.1 | ) |   |   | - |   |
|                               |   |                 |   |   |              |   |   |                 |   |   |               |   |   |                            |   |   |                |   |   |                            |   |   |                    |   |   |   |   |   |   |   |   |   |
| Other,      net                    |   |                 | -      |   |              |   | -      |                 |   |   | .1                 |   |   |                            | -      |   |                |   | -      |                            |   |   | -                       |   |   |   | .1 |   |   |   | - |   |
|                               |   |                 |   |   |              |   |   |                 |   |   |               |   |   |                            |   |   |                |   |   |                            |   |   |                    |   |   |   |   |   |   |   |   |   |
| Balance      at September 30, 2008 |   | $                    | 667.3  |   |              | $      | 1.2    |                 |   | $      | -                  |   |   | $                               | (127.0 | )      |                | $      | 25.4   |                            |   | $      | (37.9                   | )      |   | $ | 529.0 |   |   |   |   |   |
|                               |   |                 |   |   |              |   |   |                 |   |   |               |   |   |                            |   |   |                |   |   |                            |   |   |                    |   |   |   |   |   |   |   |   |   |
| Comprehensive      loss            |   |                 |   |   |              |   |   |                 |   |   |               |   |   |                            |   |   |                |   |   |                            |   |   |                    |   |   |   |   |   |   | $ | (55.4 | ) |
|                               |   |                 |   |   |              |   |   |                 |   |   |               |   |   |                            |   |   |                |   |   |                            |   |   |                    |   |   |   |   |   |   |   |   |   |
|                               |   |                 |   |   |              |   |   |                 |   |   |               |   |   |                            |   |   |                |   |   |                            |   |   |                    |   |   |   |   |   |   |   |   |   |
|                               |   |                 |   |   |              |   |   |                 |   |   |               |   |   |                            |   |   |                |   |   |                            |   |   |                    |   |   |   |   |   |   |   |   |   |

----

----

|   Businesssegment  |   |         Entity        |   | %      owned at September 30,    2008  |
|-----------------------------------|--------|--------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|
|                              |   |                                                                                             |   |                                             |
| Chemicals                         |   | Kronos                                                                                           |   |  95%                                        |
| Component      products           |   | CompX                                                                                            |   |  87%                                        |
| Waste      management             |   | WCS                                                                                              |   |  100%                                       |

|                                                                                                        |   | Three      months ended September 30, |   |   | Nine      months ended September 30, |   |
|-------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|--------|-------------------------------------------|--------|
|                                                                                                        |   | 2007                                       |   |   | 2008                                      |   |   | 2007 |   |   | 2008 |   |
|                                                                                                        |   | (In      millions)                         |   |
|                                                                                                        |   |                                       |   |   |                                      |   |   |   |   |   |   |   |
| Net sales:                                                                                             |   |                                       |   |   |                                      |   |   |   |   |   |   |   |
|   Chemicals                                                                                       |   | $                                          | 343.3  |   |                                      | $      | 345.6 |   |   | $ | 999.9 |   |   | $ | 1,070.0 |   |
|   Component products                                                                         |   |                                       | 46.4   |   |                                      |   | 43.9 |   |   |   | 135.2 |   |   |   | 128.1 |   |
|   Waste management                                                                           |   |                                       | .9     |   |                                      |   | .7 |   |   |   | 3.5 |   |   |   | 2.2 |   |
|                                                                                                        |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
|     Total net sales                                                           |   | $                                          | 390.6  |   |                                      | $      | 390.2 |   |   | $ | 1,138.6 |   |   | $ | 1,200.3 |   |
|                                                                                                        |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
| Cost of sales:                                                                                    |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
|   Chemicals                                                                                       |   | $                                          | 277.3  |   |                                      | $      | 295.9 |   |   | $ | 801.4 |   |   | $ | 905.2 |   |
|   Component products                                                                         |   |                                       | 34.4   |   |                                      |   | 32.7 |   |   |   | 99.2 |   |   |   | 96.5 |   |
|   Waste management                                                                           |   |                                       | 2.6    |   |                                      |   | 3.6 |   |   |   | 8.7 |   |   |   | 10.6 |   |
|                                                                                                        |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
|     Total cost of sales                                                  |   | $                                          | 314.3  |   |                                      | $      | 332.2 |   |   | $ | 909.3 |   |   | $ | 1,012.3 |   |
|                                                                                                        |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
| Gross margin:                                                                                          |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
|   Chemicals                                                                                       |   | $                                          | 66.0   |   |                                      | $      | 49.7 |   |   | $ | 198.5 |   |   | $ | 164.8 |   |
|   Component products                                                                         |   |                                       | 12.0   |   |                                      |   | 11.2 |   |   |   | 36.0 |   |   |   | 31.6 |   |
|   Waste management                                                                           |   |                                       | (1.7   | )      |                                      |   | (2.9 | ) |   |   | (5.2 | ) |   |   | (8.4 | ) |
|                                                                                                        |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
|     Total gross margin                                                        |   | $                                          | 76.3   |   |                                      | $      | 58.0 |   |   | $ | 229.3 |   |   | $ | 188.0 |   |
|                                                                                                        |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
| Operating income (loss):                                                                          |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
|   Chemicals                                                                                       |   | $                                          | 23.4   |   |                                      | $      | 8.8 |   |   | $ | 78.3 |   |   | $ | 30.6 |   |
|   Component products                                                                         |   |                                       | 4.3    |   |                                      |   | (5.2 | ) |   |   | 14.7 |   |   |   | 2.3 |   |
|   Waste management                                                                           |   |                                       | (3.5   | )      |                                      |   | (5.7 | ) |   |   | (9.7 | ) |   |   | (15.6 | ) |
|                                                                                                        |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
|     Total operating income                                                    |   |                                       | 24.2   |   |                                      |   | (2.1 | ) |   |   | 83.3 |   |   |   | 17.3 |   |
|                                                                                                        |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
| Equity in      earnings of:                                                                            |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
|   TIMET                                                                                           |   |                                       | -      |   |                                      |   | - |   |   |   | 26.9 |   |   |   | - |   |
|   Other                                                                                      |   |                                       | 1.3    |   |                                      |   | (.2 | ) |   |   | 1.8 |   |   |   | (.8 | ) |
|                                                                                                        |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
| General corporate items:                                                                          |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
|   Securities      earnings                                                                        |   |                                       | 7.6    |   |                                      |   | 6.6 |   |   |   | 23.9 |   |   |   | 24.2 |   |
|   Insurance recoveries                                                                       |   |                                       | 1.2    |   |                                      |   | .7 |   |   |   | 4.2 |   |   |   | 2.4 |   |
|   General expenses, net                                                                 |   |                                       | (7.8   | )      |                                      |   | (4.9 | ) |   |   | (24.8 | ) |   |   | (19.5 | ) |
| Interest expense                                                                                       |   |                                       | (16.0  | )      |                                      |   | (17.7 | ) |   |   | (47.5 | ) |   |   | (52.8 | ) |
|                                                                                                        |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
|     Income (loss)      before income      taxes |   | $                                          | 10.5   |   |                                      | $      | (17.6 | ) |   | $ | 67.8 |   |   | $ | (29.2 | ) |

----

|                                               |   | December      31, 2007 |   |   | September      30, 2008   |   |
|----------------------------------------------------|--------|-----------------------------|--------|--------|-------------------------------------|--------|
|                                               |   | (In      millions)          |   |
|                                               |   |                        |   |   |                                |   |
| Accounts      receivable                           |   | $                           | 239.2  |   |                                | $      | 275.0 |   |
| Refundable      income taxes                       |   |                        | 7.7    |   |                                |   | 7.8 |   |
| Receivable      from affiliates:                   |   |                        |   |   |                                |   |   |   |
|   Contran      – income taxes, net |   |                        | 4.4    |   |                                |   | - |   |
|   Other                                  |   |                        | .2     |   |                                |   | - |   |
| Other      receivables                             |   |                        | 4.6    |   |                                |   | 3.8 |   |
| Allowance      for doubtful accounts               |   |                        | (2.4   | )      |                                |   | (2.4 | ) |
|                                               |   |                        |   |   |                                |   |   |   |
|       Total          |   | $                           | 253.7  |   |                                | $      | 284.2 |   |

|                                                                    |   | December      31, 2007 |   |   | September      30, 2008   |   |
|-------------------------------------------------------------------------|--------|-----------------------------|--------|--------|-------------------------------------|--------|
|                                                                    |   | (In      millions)          |   |
|                                                                    |   |                        |   |   |                                |   |
| Raw materials:                                                     |   |                        |   |   |                                |   |
|   Chemicals                                                   |   | $                           | 66.2   |   |                                | $      | 48.1 |   |
|   Component products                                     |   |                        | 6.3    |   |                                |   | 8.4 |   |
|                                                                    |   |                        |   |   |                                |   |   |   |
|       Total raw materials       |   |                        | 72.5   |   |                                |   | 56.5 |   |
|                                                                    |   |                        |   |   |                                |   |   |   |
| Work      in process:                                                   |   |                        |   |   |                                |   |   |   |
|   Chemicals                                                   |   |                        | 19.9   |   |                                |   | 16.8 |   |
|   Component products                                     |   |                        | 9.8    |   |                                |   | 9.1 |   |
|                                                                    |   |                        |   |   |                                |   |   |   |
|       Total in-process products |   |                        | 29.7   |   |                                |   | 25.9 |   |
|                                                                    |   |                        |   |   |                                |   |   |   |
| Finished products:                                                 |   |                        |   |   |                                |   |   |   |
|   Chemicals                                                   |   |                        | 171.6  |   |                                |   | 180.4 |   |
|   Component products                                     |   |                        | 8.2    |   |                                |   | 7.9 |   |
|                                                                    |   |                        |   |   |                                |   |   |   |
|       Total finished products   |   |                        | 179.8  |   |                                |   | 188.3 |   |
|                                                                    |   |                        |   |   |                                |   |   |   |
| Supplies (primarily chemicals)                                |   |                        | 55.9   |   |                                |   | 57.4 |   |
|                                                                    |   |                        |   |   |                                |   |   |   |
|       Total                          |   | $                           | 337.9  |   |                                | $      | 328.1 |   |

----

|                                                                            |   | December      31, 2007   |   |   | September      30, 2008 |   |
|---------------------------------------------------------------------------------|--------|------------------------------------|--------|--------|------------------------------|--------|
|                                                                            |   | (In      millions)                 |   |
|                                                                            |   |                               |   |   |                         |   |
| Available-for-sale      marketable securities:                                  |   |                               |   |   |                         |   |
|   The      Amalgamated Sugar Company LLC                              |   | $                                  | 250.0  |   |                         | $      | 250.0 |   |
|   TIMET                                                               |   |                               | 60.2   |   |                         |   | 25.8 |   |
|   Other                                                          |   |                               | 9.6    |   |                         |   | 6.5 |   |
|                                                                            |   |                               |   |   |                         |   |   |   |
|       Total                                       |   | $                                  | 319.8  |   |                         | $      | 282.3 |   |
|                                                                            |   |                               |   |   |                         |   |   |   |
|                                                                            |   |                               |   |   |                         |   |   |   |
| Investment      in affiliates:                                                  |   |                               |   |   |                         |   |   |   |
|   TiO2 manufacturing joint venture                     |   | $                                  | 118.5  |   |                         | $      | 113.6 |   |
|   Other                                                          |   |                               | 19.4   |   |                         |   | 18.6 |   |
|                                                                            |   |                               |   |   |                         |   |   |   |
|       Total                                       |   | $                                  | 137.9  |   |                         | $      | 132.2 |   |
|                                                                            |   |                               |   |   |                         |   |   |   |
| Other assets:                                                              |   |                               |   |   |                         |   |   |   |
|   Waste disposal site operating permits, net |   | $                                  | 29.8   |   |                         | $      | 41.5 |   |
|   Deferred financing costs                                  |   |                               | 8.2    |   |                         |   | 7.9 |   |
|   IBNR      receivables                                               |   |                               | 7.8    |   |                         |   | 8.4 |   |
|   Other                                                               |   |                               | 21.5   |   |                         |   | 23.9 |   |
|                                                                            |   |                               |   |   |                         |   |   |   |
|       Total                                       |   | $                                  | 67.3   |   |                         | $      | 81.7 |   |

----

|                                                           |   |                        |   |   |                         |   |
|----------------------------------------------------------------|--------|-----------------------------|--------|--------|------------------------------|--------|
|                                                           |   | December      31, 2007 |   |   | September      30, 2008 |   |
|                                                           |   | (In      millions)          |   |
|                                                           |   |                        |   |   |                         |   |
| Current:                                                       |   |                        |   |   |                         |   |
|   Accounts      payable                              |   | $                           | 115.6  |   |                         | $      | 99.0 |   |
|   Employee benefits                             |   |                        | 37.6   |   |                         |   | 39.5 |   |
|   Payable      to affiliates:                        |   |                        |   |   |                         |   |   |   |
|     Louisiana      Pigment Company         |   |                        | 11.4   |   |                         |   | 10.0 |   |
|     Contran      – trade items       |   |                        | 7.1    |   |                         |   | 8.9 |   |
|     Contran      – income taxes, net |   |                        | -      |   |                         |   | 12.4 |   |
|     TIMET                                  |   |                        | .5     |   |                         |   | .5 |   |
|   Accrued      sales discounts and rebates           |   |                        | 15.3   |   |                         |   | 22.4 |   |
|   Environmental costs                           |   |                        | 15.4   |   |                         |   | 12.5 |   |
|   Interest                                           |   |                        | 8.3    |   |                         |   | 17.7 |   |
|   Deferred income                               |   |                        | 4.0    |   |                         |   | 10.9 |   |
|   Reserve      for uncertain tax positions           |   |                        | .3     |   |                         |   | .1 |   |
|   Other                                              |   |                        | 52.3   |   |                         |   | 61.1 |   |
|                                                           |   |                        |   |   |                         |   |   |   |
|       Total                      |   | $                           | 267.8  |   |                         | $      | 295.0 |   |
|                                                           |   |                        |   |   |                         |   |   |   |
| Noncurrent:                                                    |   |                        |   |   |                         |   |   |   |
|   Reserve      for uncertain tax positions           |   | $                           | 47.2   |   |                         | $      | 56.5 |   |
|   Insurance claims and expenses       |   |                        | 15.2   |   |                         |   | 14.7 |   |
|   Employee benefits                             |   |                        | 8.4    |   |                         |   | 8.4 |   |
|   Other                                              |   |                        | 6.9    |   |                         |   | 6.9 |   |
|                                                           |   |                        |   |   |                         |   |   |   |
|       Total                      |   | $                           | 77.7   |   |                         | $      | 86.5 |   |

|                                                                                                   |   | December      31, 2007 |        |   | September      30, 2008   |   |
|--------------------------------------------------------------------------------------------------------|--------|-----------------------------|-------------|--------|-------------------------------------|--------|
|                                                                                                   |   | (In      millions)          |        |
|                                                                                                   |   |                        |        |   |                                |   |
| Valhi:                                                                                                 |   |                        |        |   |                                |   |
|   Snake      River Sugar Company                                                             |   | $                           | 250.0       |   |                                | $      | 250.0 |   |
|   Revolving      bank credit facility                                                        |   |                        | -           |   |                                |   | 7.0 |   |
|       Total      Valhi debt                                              |   |                        | 250.0       |   |                                |   | 257.0 |   |
|                                                                                                   |   |                        |        |   |                                |   |   |   |
| Subsidiary      debt:                                                                                  |   |                        |        |   |                                |   |   |   |
|   Kronos International:    6.5% Senior Secured Notes |   |                        |  585.5 |   |                                |   |  580.7 |   |
|   European      revolving bank credit facility                                               |   |                        | -           |   |                                |   | 21.9 |   |
| CompX      promissory note payable to TIMET                                                            |   |                        | 50.0        |   |                                |   | 43.0 |   |
|   Kronos U.S. revolving      bank credit facility                        |   |                        | 15.4        |   |                                |   | 28.8 |   |
|   Other                                                                                      |   |                        | 5.7         |   |                                |   | 5.2 |   |
|                                                                                                   |   |                        |        |   |                                |   |   |   |
|       Total subsidiary debt                                    |   |                        | 656.6       |   |                                |   | 679.6 |   |
|                                                                                                   |   |                        |        |   |                                |   |   |   |
|       Total debt                                                    |   |                        | 906.6       |   |                                |   | 936.6 |   |
|                                                                                                   |   |                        |        |   |                                |   |   |   |
|       Less current maturities                                  |   |                        | 16.8        |   |                                |   | 1.8 |   |
|                                                                                                   |   |                        |        |   |                                |   |   |   |
|       Total long-term debt                                     |   | $                           | 889.8       |   |                                | $      | 934.8 |   |

----

|                                                                       |   | Three      months ended September 30, |     |   | Nine      months ended September 30, |   |
|----------------------------------------------------------------------------|--------|--------------------------------------------|----------|--------|-------------------------------------------|--------|
|                                                                       |   | 2007                                       |     |   | 2008                                      |   |   | 2007 |   |   | 2008 |   |
|                                                                       |   | (In      millions)                         |     |
|                                                                       |   |                                       |     |   |                                      |   |   |   |   |   |   |   |
| Service cost                                                     |   | $                                          | 2.0      |   |                                      | $      | 1.7 |   |   | $ | 5.9 |   |   | $ | 5.2 |   |
| Interest cost                                                    |   |                                       | 7.0      |   |                                      |   | 7.4 |   |   |   | 20.0 |   |   |   | 22.4 |   |
| Expected return on plan assets                         |   |                                       | (7.2     | )      |                                      |   | (8.1 | ) |   |   | (21.2 | ) |   |   | (24.3 | ) |
| Amortization of prior service cost                     |   |                                       | .2       |   |                                      |   | .2 |   |   |   | .5 |   |   |   | .7 |   |
| Amortization of net transition   obligations |   |                                       |  .1 |   |                                      |   |  .2 |   |   |   |  .3 |   |   |   |  .4 |   |
| Recognized actuarial losses                                      |   |                                       | 2.0      |   |                                      |   | 1.3 |   |   |   | 5.9 |   |   |   | 3.6 |   |
|                                                                       |   |                                       |     |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
|       Total                                  |   | $                                          | 4.1      |   |                                      | $      | 2.7 |   |   | $ | 11.4 |   |   | $ | 8.0 |   |

|                                      |   | Three      months ended September 30, |   |   | Nine      months ended September 30, |   |
|-------------------------------------------|--------|--------------------------------------------|--------|--------|-------------------------------------------|--------|
|                                      |   | 2007                                       |   |   | 2008                                      |   |   | 2007 |   |   | 2008 |   |
|                                      |   | (In      millions)                         |   |
|                                      |   |                                       |   |   |                                      |   |   |   |   |   |   |   |
| Service      cost                         |   | $                                          | -      |   |                                      | $      | - |   |   | $ | .2 |   |   | $ | .2 |   |
| Interest      cost                        |   |                                       | .6     |   |                                      |   | .6 |   |   |   | 1.6 |   |   |   | 1.7 |   |
| Amortization      of prior service credit |   |                                       | (.1    | )      |                                      |   | (.1 | ) |   |   | (.3 | ) |   |   | (.3 | ) |
| Recognized      actuarial losses          |   |                                       | .1     |   |                                      |   | .1 |   |   |   | .2 |   |   |   | .2 |   |
|                                      |   |                                       |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
|       Total |   | $                                          | .6     |   |                                      | $      | .6 |   |   | $ | 1.7 |   |   | $ | 1.8 |   |

----

|                                                                    |   | Nine      months ended September 30, |   |
|-------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                    |   | 2007                                      |   |   | 2008 |   |
|                                                                    |   | (In      millions)                        |   |
|                                                                    |   |                                      |   |   |   |   |
| Securities      earnings:                                               |   |                                      |   |   |   |   |
|   Dividends and interest                            |   | $                                         | 23.4   |   |   | $ | 25.0 |   |
|   Securities transactions, net                      |   |                                      | .5     |   |   |   | (.8 | ) |
|                                                                    |   |                                      |   |   |   |   |   |   |
|       Total securities earnings |   |                                      | 23.9   |   |   |   | 24.2 |   |
|                                                                    |   |                                      |   |   |   |   |   |   |
| Currency transactions, net                                    |   |                                      | (.3    | ) |   |   | (.2 | ) |
| Insurance recoveries                                               |   |                                      | 4.2    |   |   |   | 2.4 |   |
| Other, net                                                         |   |                                      | 4.7    |   |   |   | 2.7 |   |
|                                                                    |   |                                      |   |   |   |   |   |   |
|       Total                          |   | $                                         | 32.5   |   |   | $ | 29.1 |   |

|                                                                                                 |   | Nine      months ended September 30,  |      |
|------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|-----------|
|                                                                                                 |   | 2007                                            |      |   | 2008 |   |
|                                                                                                 |   | (In      millions)                              |      |
|                                                                                                 |   |                                            |      |   |   |   |
| Expected      tax expense (benefit), at U.S. federal statutory income      tax rate of 35% |   | $                                               | 23.7      |   |   | $ | (10.2 | ) |
| Incremental      U.S. tax and rate differences on Equity      in earnings                       |   |                                            | (15.9     | ) |   |   |  2.9 |   |
| Non-U.S.      tax rates                                                                              |   |                                            |  (.2 | ) |   |   | .4 |   |
| German      tax rate change                                                                          |   |                                            | 87.5      |   |   |   | - |   |
| Nondeductible      expenses                                                                          |   |                                            | 2.6       |   |   |   | 1.5 |   |
| German      tax attribute adjustment                                                                 |   |                                            |  8.7 |   |   |   | (7.2 | ) |
| Change      in reserve for uncertain tax positions                                                   |   |                                            | (4.7      | ) |   |   | 8.7 |   |
| No      income tax benefit on goodwill impairment                                                    |   |                                            | -         |   |   |   | 3.5 |   |
| U.S.      state income taxes, net                                                                    |   |                                            | 1.0       |   |   |   | 1.1 |   |
| Other,      net                                                                                      |   |                                            | (.5       | ) |   |   | .3 |   |
|                                                                                                 |   |                                            |      |   |   |   |   |   |
|      Provision      for income taxes                                        |   | $                                               | 102.2     |   |   | $ | 1.0 |   |

----

|                                      |   | December      31, 2007 |   |   | September      30, 2008   |   |
|-------------------------------------------|--------|-----------------------------|--------|--------|-------------------------------------|--------|
|                                      |   | (In      millions)          |   |
|                                      |   |                        |   |   |                                |   |
| Minority      interest in net assets:     |   |                        |   |   |                                |   |
|   NL Industries            |   | $                           | 55.6   |   |                                | $      | 50.4 |   |
|   Kronos Worldwide         |   |                        | 20.5   |   |                                |   | 18.4 |   |
|   CompX International      |   |                        | 14.4   |   |                                |   | 12.3 |   |
|                                      |   |                        |   |   |                                |   |   |   |
|       Total |   | $                           | 90.5   |   |                                | $      | 81.1 |   |

|                                                         |   | Nine      months ended September 30, |   |
|--------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                         |   | 2007                                      |   |   | 2008 |   |
|                                                         |   | (In      millions)                        |   |
|                                                         |   |                                      |   |   |   |   |
| Minority interest in after-tax      earnings: |   |                                      |   |   |   |   |
|   NL Industries                               |   | $                                         | (2.0   | ) |   | $ | (.5 | ) |
|   Kronos Worldwide                            |   |                                      | (3.4   | ) |   |   | .1 |   |
|   CompX International                         |   |                                      | 2.5    |   |   |   | (.5 | ) |
|                                                         |   |                                      |   |   |   |   |   |   |
|       Total                    |   | $                                         | (2.9   | ) |   | $ | (.9 | ) |

----

|   | · | we      have never settled any of thesecases; |
|--------|--------|-----------------------------------------------|

|   | · | no      final, non-appealable verdicts have ever been entered against us;      and |
|--------|--------|------------------------------------------------------------------------------------|

|   | · | we      have never ultimately been found liable with respect to any such      litigation matters. |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | complexity      and differing interpretations of governmental  regulations; |
|--------|--------|-----------------------------------------------------------------------------|

|   | · | number      of PRPs and their ability or willingness to fund such allocation of      costs; |
|--------|--------|---------------------------------------------------------------------------------------------|

|   | · | financial      capabilities of the PRPs and the allocation of costs among      them; |
|--------|--------|--------------------------------------------------------------------------------------|

|   | · | solvency      of other PRPs; |
|--------|--------|------------------------------|

|   | · | multiplicity      of possible solutions; and |
|--------|--------|----------------------------------------------|

|   | · | number      of years of investigatory, remedial and monitoring activity      required. |
|--------|--------|----------------------------------------------------------------------------------------|

----

|                                                                                                                                             |   | Amount             |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|
|                                                                                                                                             |   | (In      millions) |   |
|                                                                                                                                             |   |               |   |
| Balance      at the beginning of the period                                                                                                      |   | $                  | 55.7   |   |
| Additions      charged to expense, net                                                                                                           |   |               | .2     |   |
| Payments,      net                                                                                                                               |   |               | (7.0   | ) |
|                                                                                                                                             |   |               |   |   |
|       Balance      at the end of the period                                                                        |   | $                  | 48.9   |   |
|                                                                                                                                             |   |               |   |   |
| Amounts recognized in the Consolidated Balance Sheet at the  end of the period: |   |               |   |   |
|   Current liability                                                                                                               |   | $                  | 12.5   |   |
|   Noncurrent liability                                                                                                            |   |               | 36.4   |   |
|                                                                                                                                             |   |               |   |   |
|       Total                                                                                                        |   | $                  | 48.9   |   |

----

|   | · | to      recover response and remediation costs incurred at the    site; |
|--------|--------|-------------------------------------------------------------------------|

|   | · | a      declaration of the parties’ liability for response and remediation costs      incurred at the site; |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

|   | · | a      declaration of the parties’ liability for response and remediation costs      to be incurred in the future at the site;and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a      declaration regarding the obligation of Tremont to indemnify Halliburton      and DII for costs and expenses attributable to the  site. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | facts      concerning our historicaloperations; |
|--------|--------|-------------------------------------------------|

|   | · | the      rate of new claims; |
|--------|--------|------------------------------|

|   | · | the      number of claims from which we have been dismissed;  and |
|--------|--------|-------------------------------------------------------------------|

|   | · | our      prior experience in the defense of these  matters; |
|--------|--------|-------------------------------------------------------------|

----

----

|   | · | Chemicals – Our      chemicals segment is operated through our majority ownership of      Kronos.  Kronos is a leading global producer and marketer of      value-added titanium dioxide pigments (“TiO2”).  TiO2 is      used for a variety of manufacturing applications, including plastics,      paints, paper and other industrialproducts. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Component Products – We      operate in the component products industry through our majority ownership      of CompX.  CompX is a leading manufacturer of security products,      precision ball bearing slides and ergonomic computer support systems used      in the office furniture, transportation, tool storage and a variety of      other industries.  CompX is also a leading manufacturer of      stainless steel exhaust systems, gauges and throttle controls for the      performance marine industry. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Waste Management – WCS      is our wholly-owned subsidiary which owns and operates a West Texas      facility for the processing, treatment and, storage of hazardous, toxic      and low level radioactive waste as well as the disposal of hazardous,      toxic and certain low level radioactive waste.  WCS is in the      process of seeking to obtain regulatory authorization to expand its      low-level and mixed low-level radioactive waste disposal      capabilities. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Future      supply and demand for our products; |
|--------|--------|-------------------------------------------------|

|   | · | The      cyclicality of certain of our businesses (such as Kronos’ TiO2      operations; |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | · | Customer      inventory levels (such as the extent to which Kronos’ customers may, from      time to time, accelerate purchases of TiO2 in      advance of anticipated price increases or defer purchases of TiO2in      advance of anticipated pricedecreases; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Changes      in our raw material and other operating costs (such as energy      costs); |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | The      possibility of labor disruptions; |
|--------|--------|--------------------------------------------|

|   | · | General      global economic and political conditions (such as changes in the level of      gross domestic product in various regions of the world and the impact of      such changes on demand for, among other things, TiO2); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Competitive      products and substitute products; |
|--------|--------|----------------------------------------------------|

|   | · | Possible      disruption of our business or increases in the cost of doing business      resulting from terrorist activities or global  conflicts; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Customer      and competitor strategies; |
|--------|--------|------------------------------------------|

|   | · | The      impact of pricing and productiondecisions; |
|--------|--------|-----------------------------------------------------|

|   | · | Competitive      technology positions; |
|--------|--------|----------------------------------------|

|   | · | The      introduction of trade barriers; |
|--------|--------|------------------------------------------|

|   | · | Restructuring      transactions involving us and ouraffiliates; |
|--------|--------|-----------------------------------------------------------------|

|   | · | Potential      consolidation or solvency of ourcompetitors; |
|--------|--------|-------------------------------------------------------------|

|   | · | Demand      for high performance marinecomponents; |
|--------|--------|----------------------------------------------------|

|   | · | The      extent to which our subsidiaries were to become unable to pay us      dividends; |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | Uncertainties      associated with new productdevelopment; |
|--------|--------|------------------------------------------------------------|

|   | · | Fluctuations      in currency exchange rates (such as changes in the exchange rate between      the U.S. dollar and each of the euro, the Norwegian kroner and the      Canadian dollar); |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Operating      interruptions (including, but not limited to, labor disputes, leaks,      natural disasters, fires, explosions, unscheduled or unplanned downtime      and transportation interruptions); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      timing and amounts of insurancerecoveries; |
|--------|--------|-----------------------------------------------------|

|   | · | Our      ability to renew or refinance creditfacilities; |
|--------|--------|----------------------------------------------------------|

|   | · | Our      ability to maintain sufficientliquidity; |
|--------|--------|---------------------------------------------------|

|   | · | The      ultimate outcome of income tax audits, tax settlement initiatives or other      tax matters; |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | The      ultimate ability to utilize income tax attributes or changes in income tax      rates related to such attributes, the benefit of which has been recognized      under the more likely than not recognition criteria (such as Kronos’      ability to utilize its German net operating loss      carryforwards); |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Environmental      matters (such as those requiring compliance with emission and discharge      standards for existing and new facilities, or new developments regarding      environmental remediation at sites related to our former      operations); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Government      laws and regulations and possible changes therein (such as changes in      government regulations which might impose various obligations on present      and former manufacturers of lead pigment and lead-based paint, including      NL, with respect to asserted health concerns associated with the use of      such products); |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      ultimate resolution of pending litigation (such as NL's lead pigment      litigation and litigation surrounding environmental matters of NL and      Tremont); and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Possible      future litigation. |
|--------|--------|----------------------------------|

----

|   | · | lower      operating income from each of our Chemicals, Component Products and Waste      Management Segments in 2008; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------|

|   | · | interest      income related to an escrow fund recognized by NL in  2008; |
|--------|--------|---------------------------------------------------------------------------|

|   | · | a      goodwill impairment recognized by our Component Products Segment in      2008; |
|--------|--------|---------------------------------------------------------------------------------------|

|   | · | an      income tax charge recognized in 2008 due to a net increase in our reserve      for uncertain tax positions; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|

|   | · | an      income tax charge recognized by our Chemicals Segment in 2007;      and |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | an      income tax benefit recognized by our Chemicals Segment in      2008. |
|--------|--------|------------------------------------------------------------------------------|

|   | · | lower      operating income from each of our Chemicals, Component Products and Waste      Management Segments in 2008; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------|

|   | · | the      elimination of equity in earnings from TIMET starting in the second      quarter of 2007 due to the distribution of our TIMET shares in the first      quarter of 2007 as a special dividend to our  stockholders; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | interest      income related to an escrow fund recognized by NL in  2008; |
|--------|--------|---------------------------------------------------------------------------|

|   | · | a      goodwill impairment recognized by our Component Products Segment in      2008; |
|--------|--------|---------------------------------------------------------------------------------------|

|   | · | an      income tax charge recognized in 2008 due to a net increase in our reserve      for uncertain tax positions; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|

|   | · | an      income tax charge recognized by our Chemicals Segment in 2007;      and |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | an      income tax benefit recognized by our Chemicals Segment in      2008. |
|--------|--------|------------------------------------------------------------------------------|

|   | · | a      charge of $.05 per diluted share  related to the adjustment of      certain German income tax attributes within our Chemicals      Segment; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | income      of $.02 per diluted share related to certain insurance recoveries we      recognized; |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | a      charge of $.52 per diluted share as a result of the effect of a reduction      of the German income tax rates in 2007;and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|

|   | · | an      income tax benefit of $.04 per diluted share due to a net decrease in our      reserve for uncertain taxpositions. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------|

|   | · | income      of $.04 per diluted share  related to the adjustment of certain      German income tax attributes within our Chemicals  Segment; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | interest      income of $.02 per diluted share related to certain escrow funds of      NL; |
|--------|--------|--------------------------------------------------------------------------------------------|

|   | · | income      of $.01 per diluted share related to certain insurance recoveries we      recognized; |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | a      charge of $.06 per diluted share related to goodwill impairment recognized      on the marine products reporting unit of our Component Products Segment;      and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a      charge of $.07 per diluted share due to a net increase in our reserve for      uncertain tax positions. |
|--------|--------|----------------------------------------------------------------------------------------------------------------|

|   | · | lower      income taxes as the effect of a reduction in German income taxes rates was      recognized in 2007; |
|--------|--------|----------------------------------------------------------------------------------------------------------------|

|   | · | no      equity in earnings from TIMET as we ceased to account for our interest in      TIMET by the equity method following our March 2007 special distribution      of TIMET common stock to ourstockholders; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a      goodwill impairment charge in the third quarter of 2008 relating to the      marine products reporting unit of our Component Products      Segment; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a      gain in the fourth quarter of 2008 related to the October 2008 initial      closing contained in a settlement agreement related to condemnation      proceedings on certain real property formerly owned by NL;    and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | lower      expected operating income from our Chemicals Segment in 2008 due to      continued lower average selling prices and increases in raw material      costs. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Our      TiO2      average selling prices; |
|--------|--------|--------------------------------------------|

|   | · | Foreign      currency exchange rates (particularly the exchange rate for the U.S.      dollar relative to the euro and the Canadian  dollar); |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our      TiO2      sales and production volumes; and |
|--------|--------|------------------------------------------------------|

|   | · | Our manufacturing costs,      particularly raw materials, maintenance and energy-related      expenses. |
|--------|--------|---------------------------------------------------------------------------------------------------------|

|                                      |   | Three months ended Sept.30, |   |   | Nine months ended Sept.      30, |   |
|-------------------------------------------|--------|-----------------------------|--------|--------|---------------------------------------|--------|
|                                      |   | 2007                        |   |   | 2008                                  |   |   | % Change |   |   | 2007 |   |   | 2008 |   |   | % Change |   |
|                                      |   | (Dollars      in millions)  |   |   |                                  |   |
|                                      |   |                        |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      sales                            |   | $                           | 343.3  |   |                                  | $      | 345.6 |   |   |   | 1 | % |   | $ | 999.9 |   |   | $ | 1,070.0 |   |   |   | 7 | % |
| Cost      of sales                        |   |                        | 277.3  |   |                                  |   | 295.9 |   |   |   | 7 |   |   |   | 801.4 |   |   |   | 905.2 |   |   |   | 13 |   |
|                                      |   |                        |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      margin                         |   | $                           | 66.0   |   |                                  | $      | 49.7 |   |   |   | (25 | ) |   | $ | 198.5 |   |   | $ | 164.8 |   |   |   | (17 | ) |
|                                      |   |                        |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      income                     |   | $                           | 23.4   |   |                                  | $      | 8.8 |   |   |   | (63 | ) |   | $ | 78.3 |   |   | $ | 30.6 |   |   |   | (61 | ) |
|                                      |   |                        |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Percent      of net sales:                |   |                        |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Cost      of sales            |   |                        | 81     | %      |                                  |   | 86 | % |   |   |   |   |   |   | 80 | % |   |   | 85 | % |   |   |   |   |
|   Gross      margin             |   |                        | 19     |   |                                  |   | 14 |   |   |   |   |   |   |   | 20 |   |   |   | 15 |   |   |   |   |   |
|   Operating      income         |   |                        | 7      |   |                                  |   | 3 |   |   |   |   |   |   |   | 8 |   |   |   | 3 |   |   |   |   |   |
|                                      |   |                        |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ti02      operating statistics:           |   |                        |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Sales      volumes*           |   |                        | 138    |   |                                  |   | 121 |   |   |   | (12 | )% |   |   | 400 |   |   |   | 389 |   |   |   | (3 | )% |
|   Production      volumes*      |   |                        | 126    |   |                                  |   | 136 |   |   |   | - |   |   |   | 386 |   |   |   | 390 |   |   |   | 1 |   |
|                                      |   |                        |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Percent      change in net sales:    |   |                        |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Ti02      product pricing     |   |                        |   |   |                                  |   |   |   |   |   | 6 | % |   |   |   |   |   |   |   |   |   |   | - | % |
|   Ti02      sales volumes       |   |                        |   |   |                                  |   |   |   |   |   | (12 | ) |   |   |   |   |   |   |   |   |   |   | (3 | ) |
|   Ti02      product mix         |   |                        |   |   |                                  |   |   |   |   |   | - |   |   |   |   |   |   |   |   |   |   |   | 2 |   |
| Changes      in currency exchange rates   |   |                        |   |   |                                  |   |   | 7 |   |   |   |   |   |   |   |   |   |   |   | 8 |   |
|                                      |   |                        |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total |   |                        |   |   |                                  |   |   |   |   |   | 1 | % |   |   |   |   |   |   |   |   |   |   | 7 | % |

----

|                              |   | Three      months endedSeptember      30, 2008 vs. 2007 |   |   | Nine      months endedSeptember      30, 2008 vs. 2007 |   |
|-----------------------------------|--------|--------------------------------------------------------------|--------|--------|-------------------------------------------------------------|--------|
|                              |   | Increase      (decrease) in millions                         |   |
|                              |   |                                                         |   |   |                                                        |   |
| Impact      on:                   |   |                                                         |   |   |                                                        |   |
|   Net      sales        |   | $                                                            | 24     |   |                                                        | $      | 77 |   |
|   Operating      income |   |                                                         | 1      |   |                                                        |   | (14 | ) |

|                              |   | Three months ended Sept.      30, |   |   | Nine months ended Sept.      30, |   |
|-----------------------------------|--------|----------------------------------------|--------|--------|---------------------------------------|--------|
|                              |   | 2007                                   |   |   | 2008                                  |   |   | % Change |   |   | 2007 |   |   | 2008 |   |   | % Change |   |
|                              |   | (Dollars      in millions)             |   |   |                                  |   |
|                              |   |                                   |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      sales                    |   | $                                      | 46.4   |   |                                  | $      | 43.9 |   |   |   | (5 | )% |   | $ | 135.2 |   |   | $ | 128.1 |   |   |   | (5 | )% |
| Cost      of sales                |   |                                   | 34.4   |   |                                  |   | 32.7 |   |   |   | (5 | ) |   |   | 99.2 |   |   |   | 96.5 |   |   |   | (3 | ) |
|                              |   |                                   |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      margin                 |   | $                                      | 12.0   |   |                                  | $      | 11.2 |   |   |   | (7 | )% |   | $ | 36.0 |   |   | $ | 31.6 |   |   |   | (12 | )% |
|                              |   |                                   |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      income (loss)      |   | $                                      | 4.3    |   |                                  | $      | (5.2 | ) |   |   | (219 | )% |   | $ | 14.7 |   |   | $ | 2.3 |   |   |   | (84 | )% |
|                              |   |                                   |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Percent      of net sales:        |   |                                   |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Cost      of sales    |   |                                   | 74     | %      |                                  |   | 74 | % |   |   |   |   |   |   | 73 | % |   |   | 75 | % |   |   |   |   |
|   Gross      margin     |   |                                   | 26     |   |                                  |   | 26 |   |   |   |   |   |   |   | 27 |   |   |   | 25 |   |   |   |   |   |
|   Operating      income |   |                                   | 9      |   |                                  |   | (12 | ) |   |   |   |   |   |   | 11 |   |   |   | 2 |   |   |   |   |   |

----

|                                     | Three      months endedSeptember      30, 2008     Vs.      2007     | Nine      months endedSeptember      30, 2008    Vs.      2007     |
|------------------------------------------|-------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------|
|                                     | Increase      (decrease) in millions                                                                              |
| Impact      on:                          |                                                                                                              |                                                                                                       |
|   Net      sales               |  $ -                                                                                                    |  $1.0                                                                                                 |
|   Operating      income (loss) |  .3                                                                                                          |  (.1)                                                                                                 |

|   | · | Our      Security Products reporting unit is the least affected by the softness in      consumer demand, because we sell products to a diverse number of business      customers across a wide range of markets, most of which are not directly      impacted by changes in consumer demand.  While demand within      this segment is not as affected by softness in the overall economy, we      expect sales to be lower in the shortterm. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our      Furniture Components reporting unit sales are primarily concentrated in      the office furniture, toolbox, home appliance and a number of other      industries.  Several of these industries are more directly      affected by consumer demand than those served by our Security Products      segment.  We expect many of the markets served by Furniture      Components to continue to experience low demand in the short      term. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our      Marine Component reporting unit has been affected the most by the slowing      economy as the decrease in consumer confidence, the decline in home      values, a tighter credit market and higher fuel costs have resulted in a      significant reduction in consumer spending in the marine      market.  The marine market is not currently expected to recover      until consumer confidence returns and home values    stabilize. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                |   | Three      months ended |   |   | Nine      months ended |   |
|---------------------|--------|-------------------------|--------|--------|------------------------|--------|
|                |   | September 30,           |   |   | September 30,          |   |
|                |   | 2007                    |   |   | 2008                   |   |   | 2007 |   |   | 2008 |   |
|                |   | (In      millions)      |   |
|                |   |                    |   |   |                   |   |   |   |   |   |   |   |
| Net      sales      |   | $                       | .9     |   |                   | $      | .7 |   |   | $ | 3.5 |   |   | $ | 2.2 |   |
| Cost      of sales  |   |                    | 2.6    |   |                   |   | 3.6 |   |   |   | 8.7 |   |   |   | 10.6 |   |
|                |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      margin   |   | $                       | (1.7   | )      |                   | $      | (2.9 | ) |   | $ | (5.2 | ) |   | $ | (8.4 | ) |
|                |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      loss |   | $                       | (3.5   | )      |                   | $      | (5.7 | ) |   | $ | (9.7 | ) |   | $ | (15.6 | ) |

----

|   | · | lower      consolidated operating income in 2008 of $66.0 million, due to the lower      earnings at all of our segments; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

|   | · | lower      cash paid for income taxes in 2008 of $13.2 million due in part to the      2007 capital gains generated on our March 2007 special dividend of our      TIMET common stock to our stockholders as well as lower earnings in 2008      as compared to 2007; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | higher      general corporate interest income in 2008 of $1.6 million principally due      to $4.3 million of interest received from certain escrow funds of      NL; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | higher      net distributions from our TiO2      joint venture in 2008 of $8.8 million due to relative changes in its cash      requirements; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | higher      cash paid for interest in 2008 of $5.6 million due to higher average debt      balances and the unfavorable effect of foreign currency changes on Kronos’      outstanding Senior Notes; and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | higher      net cash used by changes in receivables, inventories, payables and accrued      liabilities in 2008 of $9.8 million, due primarily to relative changes in      Kronos’ inventory levels. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                  |   | Nine      months ended September 30, |   |
|-------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                  |   | 2007                                      |   |   | 2008 |   |
|                                                  |   | (In      millions)                        |   |
|                                                  |   |                                      |   |   |   |   |
| Cash      provided by (used in) operating activities: |   |                                      |   |   |   |   |
|   Kronos                                    |   | $                                         | 69.0   |   |   | $ | 13.3 |   |
|   CompX                                     |   |                                      | 9.5    |   |   |   | 10.6 |   |
|   Waste Control Specialists       |   |                                      | (8.6   | ) |   |   | (7.6 | ) |
|   NL Parent                            |   |                                      | (4.8   | ) |   |   | 5.0 |   |
|   Tremont                                   |   |                                      | (2.8   | ) |   |   | (.8 | ) |
|   Valhi Parent                         |   |                                      | 48.4   |   |   |   | 35.3 |   |
|   Other                                     |   |                                      | (.2    | ) |   |   | (1.1 | ) |
|   Eliminations                              |   |                                      | (54.1  | ) |   |   | (54.1 | ) |
|                                                  |   |                                      |   |   |   |   |   |   |
|       Total        |   | $                                         | 56.4   |   |   | $ | .6 |   |

|   | · | $54.4      million in our Chemicals Segment; |
|--------|--------|----------------------------------------------|

|   | · | $5.4      million in our Component ProductsSegment; |
|--------|--------|-----------------------------------------------------|

|   | · | $4.4      million in our Waste Management Segment;and |
|--------|--------|-------------------------------------------------------|

|   | · | $.5      million at corporate and other. |
|--------|--------|------------------------------------------|

|   | · | CompX      common stock for $1.0 million; and |
|--------|--------|-----------------------------------------------|

|   | · | other      marketable securities of $3.8million. |
|--------|--------|--------------------------------------------------|

----

|   | · | KII’s      euro 400 million aggregate principal amount of its 6.5% Senior Secured      Notes ($580.7 million at September 30, 2008) due in  2013; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our      $250 million loan from Snake River Sugar Company due in    2027; |
|--------|--------|---------------------------------------------------------------------------|

|   | · | CompX’s      promissory note payable to TIMET ($43.0 million outstanding at September      30, 2008) which has quarterly principal repayments of $250,000 and is due      in 2014; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Kronos’      U.S. revolving credit facility ($28.8 million outstanding) due in      2011; |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | KII's      European revolving credit facility ($21.9 million outstanding) due in      2011; |
|--------|--------|---------------------------------------------------------------------------------------------|

|   | · | Valhi’s  revolving      credit facility ($7.0 million outstanding) due in 2009;  and |
|--------|--------|------------------------------------------------------------------------------------------------------|

|   | · | approximately      $5.2 million of other indebtedness. |
|--------|--------|--------------------------------------------------------|

|   | · | $131.0      million under Kronos’ various U.S. and non-U.S. credit      facilities; |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | $91.6      million under Valhi’s revolving bank credit facility;  and |
|--------|--------|-----------------------------------------------------------------------------|

|   | · | $50.0      million under CompX’s revolving creditfacility. |
|--------|--------|------------------------------------------------------------------|

----

|                                                                                             |   |               |   |
|--------------------------------------------------------------------------------------------------|--------|--------------------|--------|
|                                                                                             |   | Amount             |   |
|                                                                                             |   | (In      millions) |   |
|                                                                                             |   |               |   |
|   Valhi Parent                                                                    |   | $                  | 12.4   |   |
|   NL Parent                                                                       |   |               | 38.0   |   |
|   Kronos                                                                               |   |               | 34.6   |   |
|   CompX                                                                                |   |               | 12.6   |   |
|   Tremont                                                                              |   |               | 9.1    |   |
|   Waste Control Specialists                                                  |   |               | 2.1    |   |
|                                                                                             |   |               |   |   |
|   Total cash, cash equivalents and marketable securities |   | $                  | 108.8  |   |

----

|   | · | certain      income tax examinations which are underway in various U.S. and non-U.S.      jurisdictions; |
|--------|--------|----------------------------------------------------------------------------------------------------------|

|   | · | certain      environmental remediation matters involving NL, Tremont and      Valhi; |
|--------|--------|--------------------------------------------------------------------------------------|

|   | · | certain      litigation related to NL’s former involvement in the manufacture of lead      pigment and lead-based paint; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------|

|   | · | certain      other litigation to which we are aparty. |
|--------|--------|-------------------------------------------------------|

----

|   | · | our      Component Products Segment entered into a series of short-term forward      exchange contracts maturing through June 2009 to exchange an aggregate of      $9.9 million for an equivalent value of Canadian dollars at an exchange      rate of Cdn. $1.25 per U.S. dollar (the contracts mature at a rate of $1.2      million per month beginning in November2008); |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our      Chemicals Segment entered into a series of short-term forward exchange      contracts maturing through December 2009 to exchange an aggregate $35.0      million for an equivalent value of Canadian dollars at exchange rates      between Cdn. $1.25 and $1.26 per U.S. dollar (the contracts mature at a      rate of $2.5 million per month beginning in November  2008); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our      Chemicals Segment entered into a series of currency forward contracts to      exchange our aggregate $30.0 million for an equivalent value of Norwegian      kroners at exchange rates ranging from kroner 6.91 to kroner 6.94 (the      contracts mature from January 2009 through December 2009 at a rate of $2.5      million per month); and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our      Chemicals Segment entered into a series of currency forward contracts to      exchange an aggregate euro 8.4 million for an equivalent value of      Norwegian kroners at exchange rates ranging from kroner 8.64 to kroner      8.70 (the contracts mature from January 2009 through December 2009 at a      rate of euro .7 million per month). |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | pertain      to the maintenance of records that in reasonable detail accurately and      fairly reflect our transactions and dispositions of our      assets, |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | provide      reasonable assurance that transactions are recorded as necessary to permit      preparation of financial statements in accordance with GAAP, and that our      receipts and expenditures are made only in accordance with authorizations      of our management and directors,and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | provide      reasonable assurance regarding prevention or timely detection of      unauthorized acquisition, use or disposition of our assets that could have      a material effect on our Condensed Consolidated Financial      Statements. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Item      2. | Unregistered      Sales of Equity Securities and Use of Proceeds; Share      Repurchases. |
|--------------|-------------------------------------------------------------------------------------------|

|   | Item      No. |   | Exhibit      Index                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|---------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 10.1          |   | Reinstated      and Amended Settlement Agreement and Release, dated June 26, 2008, by and      among NL Industries, Inc., NL Environmental Management Services, Inc., the      Sayreville Economic and Redevelopment Agency, Sayreville Seaport      Associates, L.P., and the County of Middlesex.  Certain      schedules, exhibits, annexes and similar attachments to this Exhibit 10.1      have not been filed; upon request, the registrant will furnish      supplementally to the Commission a copy of any omitted exhibit, annex or      attachment (incorporated by reference to Exhibit 10.1 to NL’s Current      Report on NL’s Form 8-K, File No. 1-640, that was filed with the U.S.      Securities and Exchange Commission on October 16,2008). |
|   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.2          |   | Amendment      to Restated and Amended Settlement Agreement and Release, dated September      25, 2008 by and among NL Industries, Inc., NL Environmental      Management Services, Inc., the Sayreville Economic and Redevelopment      Agency, Sayreville Seaport Associates, L.P., and the County of Middlesex      (incorporated by reference to Exhibit 10.2 to NL’s Current Report on Form      8-K, File No. 1-640, that was filed with the U.S. Securities and Exchange      Commission on October 16, 2008).                                                                                                                                                                                                                                                       |
|   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.3          |   | Mortgage      Note, dated October 15, 2008 by Sayreville Seaport Associates, L.P. in      favor of NL Industries, Inc. and NL Environmental Management Services, Inc      (incorporated by reference to Exhibit 10.3 to NL’s Current Report on Form      8-K, File No. 1-640, that was filed with the U.S. Securities and Exchange      Commission on October 16, 2008).                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.4          |   | Leasehold      Mortgage, Assignment, Security Agreement and Fixture Filing, dated October      15, 2008, by Sayreville Seaport Associates, L.P. in favor of NL      Industries, Inc. and NL Environmental Management Services,      Inc.  Certain schedules, exhibits, annexes and similar      attachments to this Exhibit 10.4 have not been filed; upon request, the      registrant will furnish supplementally to the Commission a copy of any      omitted exhibit, annex or attachment (incorporated by reference to Exhibit      10.4 to NL’s Current Report on Form 8-K, File No. 1-640, that was filed      with the U.S. Securities and Exchange Commission on October 16,      2008).                                                                      |

----

|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 10.5   |   | Intercreditor,      Subordination and Standstill Agreement, dated October 15, 2008, by NL      Industries, Inc., NL Environmental Management Services, Inc., Bank of      America, N.A. on behalf of itself and the other financial institutions,      and acknowledged and consented to by Sayreville Seaport Associates, L.P.      and J. Brian O'Neill.  Certain schedules, exhibits, annexes and      similar attachments to this Exhibit 10.5 have not been filed; upon      request, the registrant will furnish supplementally to the Commission a      copy of any omitted exhibit, annex or attachment (incorporated by      reference to Exhibit 10.5 to NL’s Current Report on Form 8-K, File No.      1-640, that was filed with the U.S. Securities and Exchange Commission on      October 16, 2008).             |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 10.6   |   | Multi      Party Agreement, dated October 15, 2008 by and among Sayreville Seaport      Associates, L.P., Sayreville Seaport Associates Acquisition Company, LLC,      OPG Participation, LLC, J. Brian O'Neill, NL Industries, Inc., NL      Environmental Management Services, Inc., The Prudential Insurance Company      of America, Sayreville PRISA II LLC.  Certain schedules,      exhibits, annexes and similar attachments to this Exhibit 10.6 have not      been filed; upon request, the registrant will furnish supplementally to      the Commission a copy of any omitted exhibit, annex or attachment (incorporated      by reference to Exhibit 10.6 to NL’s Current Report on Form 8-K, File No.      1-640, that was filed with the U.S. Securities and Exchange Commission on      October 16, 2008). |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 10.7   |   | Guaranty      Agreement, dated October 15, 2008, by J. Brian O’Neill in favor of NL      Industries, Inc. and NL Environmental Management Services, Inc      (incorporated by reference to Exhibit 10.7 to NL’s Current Report on Form      8-K, File No. 1-640, that was filed with the U.S. Securities and Exchange      Commission on October 16, 2008).                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

|   | 31.1   |   | Certification |
|--------|--------|--------|---------------|
|   |   |   |          |
|   | 31.2   |   | Certification |
|   |   |   |          |
|   | 32.1   |   | Certification |

----

|                                                                                                                |   |           VALHI,      INC.          (Registrant) |
|---------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                |   |                                                                                                                                                 |
|                                                                                                                |   |                                                                                                                                                 |
|                                                                                                                |   |                                                                                                                                                 |
| Date        November 5,      2008             |   | /s/ Bobby D.      O’Brien                                           |
|                                                                                                                |   | Bobby      D. O’Brien(Vice      President and Chief Financial      Officer)                                                               |
|                                                                                                                |   |                                                                                                                                                 |
| Date        November 5, 2008                       |   | /s/ Gregory M.      Swalwell                                                             |
|                                                                                                                |   | Gregory      M. Swalwell(Vice      President and Controller, Principal      Accounting Officer)                                                 |
|                                                                                                                |   |                                                                                                                                                 |