3SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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





For the quarter ended   June 30, 2002           Commission file number 1-5467
                      -----------------                                ------




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




           Delaware                                             87-0110150
- -------------------------------                            -------------------
(State or other jurisdiction of                               (IRS Employer
 incorporation or organization)                            Identification No.)


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



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




Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.



                                                  Yes  X      No
                                                      ---        -



Number of shares of common stock outstanding on July 31, 2002: 115,118,917






                          VALHI, INC. AND SUBSIDIARIES

                                      INDEX




                                                                     Page
                                                                    number

Part I.          FINANCIAL INFORMATION

  Item 1.        Financial Statements.

                 Consolidated Balance Sheets -
                  December 31, 2001 and June 30, 2002                 3

                 Consolidated Statements of Income -
                  Three months and six months ended
                  June 30, 2001 and 2002                              5

                 Consolidated Statements of Comprehensive Income -
                  Six months ended June 30, 2001 and 2002             6

                 Consolidated Statements of Cash Flows -
                  Six months ended June 30, 2001 and 2002             7

                 Consolidated Statement of Stockholders' Equity -
                  Six months ended June 30, 2002                      9

                 Notes to Consolidated Financial Statements           10

  Item 2.        Management's Discussion and Analysis of Financial
                  Condition and Results of Operations.                23

Part II.         OTHER INFORMATION

  Item 1.        Legal Proceedings.                                   43

  Item 6.        Exhibits and Reports on Form 8-K.                    44





                          VALHI, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                 (In thousands)



              ASSETS                                 December 31,       June 30,
                                                         2001             2002
                                                         ----             ----

Current assets:
                                                                
  Cash and cash equivalents ....................      $  154,413      $  195,470
  Restricted cash equivalents ..................          63,257          54,405
  Marketable securities ........................          18,465          17,022
  Accounts and other receivables ...............         162,310         191,236
  Refundable income taxes ......................           3,564           7,194
  Receivable from affiliates ...................             844           4,443
  Inventories ..................................         262,733         209,698
  Prepaid expenses .............................          11,252           7,900
  Deferred income taxes ........................          12,999          12,431
                                                      ----------      ----------

      Total current assets .....................         689,837         699,799
                                                      ----------      ----------

Other assets:
  Marketable securities ........................         186,549         181,525
  Investment in affiliates .....................         211,115         192,829
  Receivable from affiliate ....................          20,000          20,000
  Loans and other receivables ..................         105,940         108,663
  Mining properties ............................          12,410          13,705
  Prepaid pension costs ........................          18,411          22,266
  Unrecognized net pension obligations .........           5,901           5,901
  Goodwill .....................................         349,058         358,079
  Other intangible assets ......................           2,440           4,813
  Deferred income taxes ........................           3,818           3,829
  Other ........................................          30,109          39,854
                                                      ----------      ----------

      Total other assets .......................         945,751         951,464
                                                      ----------      ----------

Property and equipment:
  Land .........................................          28,721          30,682
  Buildings ....................................         163,995         177,373
  Equipment ....................................         569,001         635,221
  Construction in progress .....................           9,992          18,787
                                                      ----------      ----------
                                                         771,709         862,063
  Less accumulated depreciation ................         253,450         304,998
                                                      ----------      ----------

      Net property and equipment ...............         518,259         557,065
                                                      ----------      ----------

                                                      $2,153,847      $2,208,328
                                                      ==========      ==========






                          VALHI, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                 (In thousands)




   LIABILITIES AND STOCKHOLDERS' EQUITY           December 31,          June 30,
                                                      2001               2002
                                                      ----               ----

Current liabilities:
                                                              
  Notes payable ..............................     $    46,201      $      --
  Current maturities of long-term debt .......          64,972           96,251
  Accounts payable ...........................         114,474           71,980
  Accrued liabilities ........................         166,488          153,972
  Payable to affiliates ......................          38,148           31,979
  Income taxes ...............................           9,578            9,034
  Deferred income taxes ......................           1,821            1,976
                                                   -----------      -----------

      Total current liabilities ..............         441,682          365,192
                                                   -----------      -----------

Noncurrent liabilities:
  Long-term debt .............................         497,215          576,408
  Accrued OPEB costs .........................          50,146           48,490
  Accrued pension costs ......................          33,823           33,132
  Accrued environmental costs ................          54,392           55,545
  Deferred income taxes ......................         268,468          288,339
  Other ......................................          32,642           31,544
                                                   -----------      -----------

      Total noncurrent liabilities ...........         936,686        1,033,458
                                                   -----------      -----------

Minority interest ............................         153,151          158,445
                                                   -----------      -----------

Stockholders' equity:
  Common stock ...............................           1,258            1,260
  Additional paid-in capital .................          44,982           46,822
  Retained earnings ..........................         656,408          645,154
  Accumulated other comprehensive income:
    Marketable securities ....................          86,654           88,535
    Currency translation .....................         (79,404)         (40,755)
    Pension liabilities ......................         (11,921)         (14,134)
  Treasury stock .............................         (75,649)         (75,649)
                                                   -----------      -----------

      Total stockholders' equity .............         622,328          651,233
                                                   -----------      -----------

                                                   $ 2,153,847      $ 2,208,328
                                                   ===========      ===========




Commitments and contingencies (Note 1)




                          VALHI, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

                      (In thousands, except per share data)





                                                        Three months ended          Six months ended
                                                              June 30,                  June 30,
                                                       ---------------------      -------------------
                                                         2001          2002        2001        2002
                                                         ----          ----        ----        ----

Revenues and other income:
                                                                                
  Net sales ........................................   $ 276,270    $ 279,051    $565,105   $ 532,798
  Other, net .......................................      63,640       16,793     107,731      31,733
                                                       ---------    ---------    --------   ---------

                                                         339,910      295,844     672,836     564,531
                                                       ---------    ---------    --------   ---------
Costs and expenses:
  Cost of sales ....................................     200,010      222,651     402,701     424,046
  Selling, general and administrative ..............      48,757       43,666      97,950      90,715
  Interest .........................................      15,666       15,930      32,776      30,363
                                                       ---------    ---------    --------   ---------

                                                         264,433      282,247     533,427     545,124
                                                       ---------    ---------    --------   ---------

                                                          75,477       13,597     139,409      19,407
Equity in earnings (losses) of:
  Titanium Metals Corporation ("TIMET") ............      12,877       (2,717)     13,002     (14,557)
  Other ............................................        (136)         (14)        522         312
                                                       ---------    ---------    --------   ---------

    Income before income taxes .....................      88,218       10,866     152,933       5,162

Provision for income taxes .........................      31,953        1,591      55,675         394

Minority interest in after-tax earnings ............       8,597        2,903      18,029       2,107
                                                       ---------    ---------    --------   ---------

    Net income .....................................   $  47,668    $   6,372    $ 79,229   $   2,661
                                                       =========    =========    ========   =========

Earnings per share:
  Basic ............................................   $     .41    $     .05    $    .69   $     .02
                                                       =========    =========    ========   =========

  Diluted ..........................................   $     .41    $     .05    $    .68   $     .02
                                                       =========    =========    ========   =========


Cash dividends per share ...........................   $     .06    $     .06    $    .12   $     .12
                                                       =========    =========    ========   =========

Shares used in the calculation of per share amounts:
  Basic earnings per common share ..................     115,169      115,257     115,166     115,250
  Dilutive impact of outstanding
   stock options ...................................         931          357         886         517
                                                       ---------    ---------    --------   ---------

  Diluted earnings per share .......................     116,100      115,614     116,052     115,767
                                                       =========    =========    ========   =========








                          VALHI, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                     Six months ended June 30, 2001 and 2002

                                 (In thousands)





                                                            2001          2002
                                                            ----          ----

                                                                 
Net income ...........................................    $ 79,229     $  2,661
                                                          --------     --------

Other comprehensive income (loss), net of tax:
  Marketable securities adjustment:
    Unrealized gains arising during the period .......       2,053        1,881
    Less reclassification for gains included in
     net income ......................................     (33,190)        --
                                                          --------     --------

                                                           (31,137)       1,881

  Currency translation adjustment ....................     (22,507)      38,649

  Pension liabilities adjustment .....................        (332)      (2,213)
                                                          --------     --------

    Total other comprehensive income (loss), net .....     (53,976)      38,317
                                                          --------     --------

      Comprehensive income ...........................    $ 25,253     $ 40,978
                                                          ========     ========







                          VALHI, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                     Six months ended June 30, 2001 and 2002

                                 (In thousands)



                                                            2001           2002
                                                            ----           ----

Cash flows from operating activities:
                                                                 
  Net income .........................................    $ 79,229     $  2,661
  Depreciation, depletion and amortization ...........      37,132       29,936
  Legal settlements, net .............................     (10,307)        --
  Securities transaction gains, net ..................     (50,803)      (1,915)
  Proceeds from disposal of marketable
   securities (trading) ..............................        --          8,659
  Noncash interest expense ...........................       4,179        2,031
  Deferred income taxes ..............................      10,147        4,753
  Minority interest ..................................      18,029        2,107
  Other, net .........................................      (3,634)      (7,388)
  Equity in:
    TIMET ............................................     (13,002)      14,557
    Other ............................................        (522)        (312)
  Distributions from:
    Manufacturing joint venture ......................       4,950        2,250
    Other ............................................       1,300          361
                                                          --------     --------

                                                            76,698       57,700

  Change in assets and liabilities:
    Accounts and other receivables ...................     (23,797)     (17,993)
    Inventories ......................................      20,994       69,096
    Accounts payable and accrued liabilities .........     (22,453)     (60,190)
    Accounts with affiliates .........................      15,662       (6,366)
    Income taxes .....................................       4,347       (3,270)
    Other, net .......................................      (2,400)       4,749
                                                          --------     --------

        Net cash provided by operating activities ....      69,051       43,726
                                                          --------     --------

Cash flows from investing activities:
  Capital expenditures ...............................     (27,150)     (19,973)
  Purchases of:
    Business unit ....................................        --         (9,149)
    NL common stock ..................................      (2,718)      (3,272)
    CompX common stock ...............................      (2,650)        --
    Tremont common stock .............................        (198)        --
  Proceeds from disposal of marketable securities
   (available for sale) ..............................      16,802         --
  Loans to affiliate .................................     (20,000)        --
  Property damaged by fire:
    Insurance proceeds ...............................       5,500         --
    Other, net .......................................      (1,000)        --
  Change in restricted cash equivalents, net .........         428          421
  Other, net .........................................        (573)       2,505
                                                          --------     --------

        Net cash used by investing activities ........     (31,559)     (29,468)
                                                          --------     --------







                          VALHI, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                     Six months ended June 30, 2001 and 2002

                                 (In thousands)



                                                            2001         2002
                                                            ----         ----

Cash flows from financing activities:
  Indebtedness:
                                                                
    Borrowings .......................................   $  41,356    $ 319,275
    Principal payments ...............................     (75,303)    (266,945)
    Deferred financing costs paid ....................        --         (9,342)
  Loans from affiliate:
    Loans ............................................      60,753        7,135
    Repayments .......................................     (68,631)      (9,225)
  Valhi dividends paid ...............................     (13,906)     (13,915)
  Distributions to minority interest .................      (5,360)      (4,907)
  Other, net .........................................         766        1,096
                                                         ---------    ---------

      Net cash provided (used) by financing
       activities ....................................     (60,325)      23,172
                                                         ---------    ---------

Cash and cash equivalents - net change from:
  Operating, investing and financing activities ......     (22,833)      37,430
  Currency translation ...............................      (3,256)       3,431
  Business unit acquired .............................        --            196
Cash and equivalents at beginning of period ..........     135,017      154,413
                                                         ---------    ---------

Cash and equivalents at end of period ................   $ 108,928    $ 195,470
                                                         =========    =========


Supplemental disclosures:
  Cash paid for:
    Interest, net of amounts capitalized .............   $  28,868    $  32,332
    Income taxes, net ................................      25,861        9,811

  Business unit acquired - net assets consolidated:
    Cash and cash equivalents ........................   $    --      $     196
    Restricted cash ..................................        --          2,685
    Goodwill and other intangible assets .............        --          9,007
    Other noncash assets .............................        --          1,259
    Liabilities ......................................        --         (3,998)
                                                         ---------    ---------

    Cash paid ........................................   $    --      $   9,149
                                                         =========    =========









                          VALHI, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                         Six months ended June 30, 2002

                                 (In thousands)




                                       Additiona         Accumulated other comprehensive income                Total
                               Common   paid-in    Retained  Marketable  Currency     Pension    Treasury    stockholders'
                                stock   capital    earnings  securities translation liabilities   stock        equity

                                                                                     
Balance at December 31, 2001   $1,258   $44,982   $ 656,408    $86,654   $(79,404)   $(11,921)   $(75,649)   $ 622,328

Net income .................     --        --         2,661       --         --          --          --          2,661

Dividends ..................     --        --       (13,915)      --         --          --          --        (13,915)

Other comprehensive income
 (loss), net ...............     --        --          --        1,881     38,649      (2,213)       --         38,317

Other, net .................        2     1,840        --         --         --          --          --          1,842
                               ------   -------   ---------    -------   --------    --------    --------    ---------

Balance at June 30, 2002 ...   $1,260   $46,822   $ 645,154    $88,535   $(40,755)   $(14,134)   $(75,649)   $ 651,233
                               ======   =======   =========    =======   ========    ========    ========    =========








                          VALHI, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Basis of presentation:

     The   consolidated   balance   sheet  of  Valhi,   Inc.  and   Subsidiaries
(collectively,  the  "Company") at December 31, 2001 has been condensed from the
Company's  audited   consolidated   financial   statements  at  that  date.  The
consolidated balance sheet at June 30, 2002, and the consolidated  statements of
income,  comprehensive  income,  stockholders'  equity  and cash  flows  for the
interim periods ended June 30, 2001 and 2002, have been prepared by the Company,
without audit, in accordance with accounting  principles  generally  accepted in
the United  States of  America  ("GAAP").  In the  opinion  of  management,  all
adjustments,  consisting  only of normal  recurring  adjustments,  necessary  to
present fairly the consolidated  financial  position,  results of operations and
cash flows have been made.

     The  results of  operations  for the interim  periods  are not  necessarily
indicative  of the  operating  results for a full year or of future  operations.
Certain  information  normally  included  in  financial  statements  prepared in
accordance   with  GAAP  has  been  condensed  or  omitted.   The   accompanying
consolidated  financial  statements  should  be read  in  conjunction  with  the
Company's  Annual Report on Form 10-K for the year ended  December 31, 2001 (the
"2001 Annual Report").

     Commitments and contingencies are discussed in "Management's Discussion and
Analysis of Financial  Condition and Results of Operations," "Legal Proceedings"
and the 2001 Annual Report.

     Contran Corporation holds, directly or through subsidiaries,  approximately
93%  of  Valhi's  outstanding  common  stock.  Substantially  all  of  Contran's
outstanding  voting  stock is held by  trusts  established  for the  benefit  of
certain children and grandchildren of Harold C. Simmons, of which Mr. Simmons is
sole trustee.  Mr. Simmons,  the Chairman of the Board of Valhi and Contran, may
be deemed to control such companies.

     The Company adopted Statement of Financial  Accounting  Standards  ("SFAS")
No. 142, Goodwill and Other Intangible Assets, and SFAS No. 144,  Accounting for
the Impairment or Disposal of Long-Lived Assets,  effective January 1, 2002, and
adopted SFAS No. 145,  Rescission of FASB Statements No. 4, 44 and 64, Amendment
of FASB Statement No. 13, and Technical  Corrections,  effective  April 1, 2002.
See Note 14.


Note 2 -       Business segment information:



                                                        % owned by Valhi at
  Business segment                Entity                   June 30, 2002

                                                           
  Chemicals             NL Industries, Inc.                      62%
  Component products    CompX International Inc.                 69%
  Waste management      Waste Control Specialists                90%
  Titanium metals       Tremont Group, Inc.                      80%


     Tremont Group is a holding  company  which owns 80% of Tremont  Corporation
("Tremont") at June 30, 2002. NL owns the other 20% of Tremont Group. Tremont is
also a holding  company  and owns an  additional  21% of NL and 39% of  Titanium
Metals Corporation at June 30, 2002.



                                         Three months ended    Six months ended
                                               June 30,            June 30,
                                         ------------------    ----------------
                                           2001       2002       2001       2002
                                           ----       ----       ----       ----
                                                       (In millions)

Net sales:
                                                             
  Chemicals ............................   $220.1    $226.9    $446.2    $429.3
  Component products ...................     53.3      51.1     112.9      99.6
  Waste management .....................      2.9       1.1       6.0       3.9
                                           ------    ------    ------    ------

    Total net sales ....................   $276.3    $279.1    $565.1    $532.8
                                           ======    ======    ======    ======

Operating income:
  Chemicals ............................   $ 38.8    $ 21.7    $ 84.2    $ 41.0
  Component products ...................      5.3       2.2      12.3       4.3
  Waste management .....................     (4.4)     (2.1)     (7.6)     (4.1)
                                           ------    ------    ------    ------

    Total operating income .............     39.7      21.8      88.9      41.2

General corporate items:
  Legal settlements gains, net .........     --          .5      30.7       2.4
  Securities transactions, net .........     50.8      --        50.8       1.9
  Interest and dividend income .........      9.4       8.4      19.7      16.9
  Foreign currency transaction gain
                                             --         6.3      --         6.3
  Gain on disposal of fixed assets
                                             --         1.6      --         1.6
  Insurance gain .......................       .7      --          .7      --
  Expenses, net ........................     (9.4)     (9.0)    (18.6)    (20.5)
Interest expense .......................    (15.7)    (16.0)    (32.8)    (30.4)
                                           ------    ------    ------    ------
                                             75.5      13.6     139.4      19.4
Equity in:
  TIMET ................................     12.9      (2.7)     13.0     (14.5)
  Other ................................      (.2)     --          .5        .3
                                           ------    ------    ------    ------

    Income before income taxes .........   $ 88.2    $ 10.9    $152.9    $  5.2
                                           ======    ======    ======    ======



     During  the first six  months of 2002,  NL  purchased  shares of its common
stock in  market  transactions  for an  aggregate  of $3.3  million,  increasing
Valhi's  ownership  of NL to 62%.  As  previously  reported  in the 2001  Annual
Report,  in  January  2002  NL  purchased  the  insurance  brokerage  operations
conducted by EWI Re, Inc. and EWI Re, Ltd. for an aggregate  cash purchase price
of $9 million. The pro forma impact assuming the acquisition of EWI had occurred
as of January 1, 2001 is not material.

     In July 2002,  Valhi  proposed a merger of Valhi and  Tremont  pursuant  to
which  stockholders  of Tremont  (including  NL, to the extent of NL's ownership
interest in the Tremont shares held by Tremont Group),  other than Valhi,  would
receive  between 2 and 2.5 shares of Valhi common  stock for each Tremont  share
held.  Tremont  has  formed  a  special  committee  of its  board  of  directors
consisting of members unrelated to Valhi to review the proposal. There can be no
assurance  that any such merger will be  completed  or completed on the proposed
terms.

     NL (NYSE: NL), CompX (NYSE: CIX), Tremont (NYSE: TRE) and TIMET (NYSE: TIE)
each file periodic reports  pursuant to the Securities  Exchange Act of 1934, as
amended.

Note 3 -       Marketable securities:



                                                         December 31,    June 30,
                                                              2001         2002
                                                              ----         ----
                                                               (In thousands)

Current assets:
  Halliburton Company common stock
                                                                  
   (available-for-sale) ..............................     $  8,138     $  9,903
  Halliburton Company common stock (trading) .........        6,744         --
  Restricted debt securities (available-for-sale) ....        3,583        7,119
                                                           --------     --------

                                                           $ 18,465     $ 17,022
                                                           ========     ========

Noncurrent assets (available-for-sale):
  The Amalgamated Sugar Company LLC ..................     $170,000     $170,000
  Restricted debt securities .........................       16,121       10,860
  Other common stocks ................................          428          665
                                                           --------     --------

                                                           $186,549     $181,525
                                                           ========     ========


     At June 30, 2002,  Valhi held  approximately  621,000 shares of Halliburton
common stock (aggregate cost of $5 million) with a quoted market price of $15.94
per share,  or an  aggregate  market value of $10  million.  Valhi's  LYONs debt
obligations are exchangeable at any time, at the option of the LYON holder,  for
such  shares  of  Halliburton  common  stock,  and the  carrying  value  of such
Halliburton  shares  is  limited  to  the  accreted  LYONs   obligations.   Such
Halliburton  shares  are held in escrow for the  benefit  of the  holders of the
LYONs.  Valhi receives the regular quarterly  dividend on all of the Halliburton
shares  held,  including  shares  held in escrow.  Such  Halliburton  shares are
classified  as a  current  asset at June 30,  2002  because  the  related  LYONs
obligations,  which are redeemable at the option of the holders in October 2002,
are classified as a current  liability at such date. During the first six months
of 2002, the Company sold approximately 515,000 Halliburton shares classified as
trading  securities  in  market  transactions  for  aggregate  proceeds  of $8.7
million. See Notes 9 and 12.

     See the 2001 Annual Report for a discussion of the Company's  investment in
The  Amalgamated  Sugar Company LLC. The aggregate cost of the debt  securities,
restricted  pursuant to the terms of one of NL's  environmental  special purpose
trusts  discussed  in the 2001 Annual  Report,  approximates  their net carrying
value   at  June   30,   2002.   The   aggregate   cost  of   other   noncurrent
available-for-sale securities is nominal at June 30, 2002.






Note 4 -       Inventories:



                                                     December 31,      June 30,
                                                        2001             2002
                                                        ----             ----
                                                            (In thousands)

Raw materials:
                                                                  
  Chemicals ..................................         $ 79,162         $ 34,855
  Component products .........................            9,677            7,907
                                                       --------         --------
                                                         88,839           42,762
                                                       --------         --------
In process products:
  Chemicals ..................................            9,675           10,431
  Component products .........................           12,619           13,726
                                                       --------         --------
                                                         22,294           24,157
                                                       --------         --------
Finished products:
  Chemicals ..................................          117,976          104,242
  Component products .........................            8,494            9,329
                                                       --------         --------
                                                        126,470          113,571
                                                       --------         --------

Supplies (primarily chemicals) ...............           25,130           29,208
                                                       --------         --------

                                                       $262,733         $209,698
                                                       ========         ========


Note 5 -       Accrued liabilities:



                                                     December 31,        June 30,
                                                         2001              2002
                                                         ----              ----
                                                             (In thousands)

Current:
                                                                  
  Employee benefits ..........................         $ 39,974         $ 38,595
  Environmental costs ........................           64,165           56,503
  Interest ...................................            5,162            1,149
  Deferred income ............................            9,479            2,946
  Other ......................................           47,708           54,779
                                                       --------         --------

                                                       $166,488         $153,972
                                                       ========         ========

Noncurrent:
  Insurance claims and expenses ..............         $ 19,182         $ 18,379
  Employee benefits ..........................            8,616            8,911
  Deferred income ............................            1,333            1,952
  Other ......................................            3,511            2,302
                                                       --------         --------

                                                       $ 32,642         $ 31,544
                                                       ========         ========







Note 6 - Accounts and other receivables:



                                                    December 31,       June 30,
                                                        2001             2002
                                                        ----             ----
                                                            (In thousands)

                                                                
Accounts receivable ..........................       $ 166,126        $ 194,481
Notes receivable .............................           2,484            3,324
Accrued interest .............................              26               23
Allowance for doubtful accounts ..............          (6,326)          (6,592)
                                                     ---------        ---------

                                                     $ 162,310        $ 191,236
                                                     =========        =========


Note 7 - Other assets:



                                                      December 31,       June 30,
                                                          2001            2002
                                                          ----            ----
                                                             (In thousands)

Investment in affiliates:
                                                                  
TiO2 manufacturing joint venture ...............        $138,428        $136,178
TIMET ..........................................          60,272          44,285
Other ..........................................          12,415          12,366
                                                        --------        --------

                                                        $211,115        $192,829
                                                        ========        ========

Loans and other receivables:
  Snake River Sugar Company:
    Principal ..................................        $ 80,000        $ 80,000
    Interest ...................................          22,718          25,314
  Other ........................................           5,706           6,673
                                                        --------        --------
                                                         108,424         111,987

  Less current portion .........................           2,484           3,324
                                                        --------        --------

  Noncurrent portion ...........................        $105,940        $108,663
                                                        ========        ========

Other noncurrent assets:
  Restricted cash equivalents ..................        $  4,713        $  7,619
  Waste disposal operating permits .............           2,527           2,141
  Refundable insurance deposits ................           1,609           1,864
  Deferred financing costs .....................           1,120           9,627
  Other ........................................          20,140          18,603
                                                        --------        --------

                                                        $ 30,109        $ 39,854
                                                        ========        ========


     At June 30, 2002,  Tremont  held 12.3 million  shares of TIMET common stock
with a quoted  market price of $3.50 per share,  or an aggregate of $43 million.
At  June  30,  2002,   TIMET   reported  total  assets  of  $642.7  million  and
stockholders'  equity of $257.4  million.  TIMET's total assets at June 30, 2002
include  current  assets of $288.0  million,  property  and  equipment of $265.4
million and goodwill and other intangible assets of $54.0 million. TIMET's total
liabilities  at June 30, 2002 include  current  liabilities  of $108.5  million,
long-term debt of $18.7 million, accrued OPEB and pension costs of $39.0 million
and convertible  preferred  securities of $201.2  million.  During the first six
months of 2002, TIMET reported net sales of $198.7 million, an operating loss of
$11.7  million and a net loss of $48.4  million  (first six months of 2001 - net
sales of $244.0  million,  operating  income of $46.8  million and net income of
$25.9 million).


Note 8 - Goodwill and other intangible assets:

        Goodwill.


                                                   Operating segment
                                                             Component
                                                Chemicals     products     Total
                                                           (In millions)

                                                                 
Balance at December 31, 2001 ................      $307.2      $ 41.9     $349.1

Goodwill acquired during the period .........         7.6        --          7.6
Changes in foreign exchange rates ...........        --           1.4        1.4
                                                   ------      ------     ------

Balance at June 30, 2002 ....................      $314.8        43.3     $358.1
                                                   ======      ======     ======


     Upon adoption of SFAS No. 142 effective  January 1, 2002 (see Note 14), the
goodwill  related  to  the  chemicals  operating  segment  was  assigned  to the
reporting  unit (as that term is defined in SFAS No.  142)  consisting  of NL in
total, and the goodwill related to the component  products operating segment was
assigned to two reporting units within that operating segment, one consisting of
CompX's  security  products  operations  and the  other  consisting  of  CompX's
ergonomic and slide products operations.

        Other intangible assets.



                                                          December 31,    June 30,
                                                              2001          2002
                                                              ----          ----
                                                                (In millions)

Patents:
                                                                      
  Cost .............................................          $3.4          $3.5
  Less accumulated amortization ....................           1.0           1.1
                                                              ----          ----

    Net ............................................           2.4           2.4
                                                              ----          ----

Customer list:
  Cost .............................................           --            2.6
  Less accumulated amortization ....................           --             .2
                                                              ----          ----

    Net ............................................           --            2.4
                                                              ----          ----

                                                              $2.4          $4.8
                                                              ====          ====


     The patent  intangible asset relates to the estimated fair value of certain
patents acquired in connection with the acquisition of certain business units by
CompX, and the customer list intangible asset relates to NL's acquisition of EWI
discussed in Note 2. The patent  intangible  asset was, and will  continue to be
after  adoption  of SFAS No. 142  effective  January 1, 2002,  amortized  by the
straight-line  method over the lives of the patents  (approximately  10.75 years
remaining at June 30, 2002),  with no assumed  residual  value at the end of the
life of the patents. The customer list intangible asset will be amortized by the
straight-line method over the estimated seven-year life of such intangible asset
(approximately  6.5 years remaining at June 30, 2002),  with no assumed residual
value at the end of the life of the intangible  asset.  Amortization  expense of
intangible assets was approximately $120,000 in the first six months of 2001 and
approximately $305,000 in the first six months of 2002, and amortization expense
of  intangible  assets  is  expected  to be  approximately  $620,000  in each of
calendar 2002 through 2006.

Note 9 - Notes payable and long-term debt:



                                                       December 31,      June 30,
                                                           2001            2002
                                                           ----            ----
                                                              (In thousands)

Notes payable -
                                                                  
  Kronos - non-U.S. bank credit agreements .........      $ 46,201      $   --
                                                          ========      ========

Long-term debt:
  Valhi:
    Snake River Sugar Company ......................      $250,000      $250,000
    LYONs ..........................................        25,472        26,651
    Bank credit facility ...........................        35,000        35,000
    Other ..........................................         2,880         2,880
                                                          --------      --------

                                                           313,352       314,531
                                                          --------      --------

  Subsidiaries:
    NL Senior Secured Notes ........................       194,000          --
    Kronos International:
      Senior Secured Notes .........................          --         283,005
      Bank credit facility .........................          --          39,649
    CompX bank credit facility .....................        49,000        30,000
    Valcor Senior Notes ............................         2,431         2,431
    Other ..........................................         3,404         3,043
                                                          --------      --------

                                                           248,835       358,128
                                                          --------      --------

                                                           562,187       672,659

  Less current maturities ..........................        64,972        96,251
                                                          --------      --------

                                                          $497,215      $576,408
                                                          ========      ========


     In June  2002,  Kronos  International  ("KII"),  which  conducts  NL's TiO2
operations  in Europe,  issued euro 285 million  principal  amount ($280 million
when issued) of its 8.875% Senior Secured Notes due 2009. The KII Senior Secured
Notes are  collateralized by a pledge of the stock or other ownership  interests
of KII's  first-tier  operating  subsidiaries.  The KII Senior Secured Notes are
issued  pursuant  to an  indenture  which  contains  a number of  covenants  and
restrictions  which,  among other  things,  restricts the ability of KII and its
subsidiaries to incur debt,  incur liens,  pay dividends or merge or consolidate
with, or sell or transfer all or  substantially  all of their assets to, another
entity.  The KII Senior  Secured Notes are  redeemable,  at KII's option,  on or
after  December  30, 2005 at  redemption  prices  ranging  from  104.437% of the
principal amount,  declining to 100% on or after December 30, 2008. In addition,
on or before June 30, 2005, KII may redeem up to 35% of its Senior Secured Notes
with the net proceeds of a qualified  public equity  offering at 108.875% of the
principal  amount.  In the event of a change of control of KII, as defined,  KII
would be required to make an offer to purchase its Senior  Secured Notes at 101%
of the principal amount. KII would also be required to make an offer to purchase
a specified  portion of its Senior  Secured  Notes at par value in the event KII
generates a certain  amount of net proceeds from the sale of assets  outside the
ordinary  course of business,  and such net proceeds are not otherwise  used for
specified  purposes within a specified time period. The interest rate on the KII
Senior Secured Notes will increase by up to 75 basis points if KII fails to file
a registration statement with the U.S. Securities and Exchange Commission,  have
such registration  statement declared effective and complete a subsequent tender
offer to  exchange  the  currently  outstanding  KII  Senior  Secured  Notes for
substantially identical,  registered publicly-traded Senior Secured Notes within
specified time periods.

     Also in June 2002,  KII's operating  subsidiaries  in Germany,  Belgium and
Norway  entered into a new,  three-year  euro 80 million  revolving  bank credit
facility,  of which euro 13  million  ($13  million)  and NOK 200  million  ($26
million) was borrowed at closing and used, along with available cash on hand, to
repay  and  terminate  Kronos'  short-term  non-U.S.   bank  credit  agreements.
Borrowings may be demoninated in euros,  Norwegian kroner, U.S. dollars or other
currencies  as  mutually  agreed  upon,  and  bear  interest  at the  applicable
interbank  market rate plus 1.75%  (weighted  average  interest  rate of 7.6% on
outstanding  borrowings  at June 30,  2002).  The facility also provides for the
issuance  of  letters of credit up to euro 5  million.  The new KII bank  credit
agreement is  collateralized  by the accounts  receivable and inventories of the
borrowers,  plus a  limited  pledge of all of the  other  assets of the  Belgian
borrower.  The  new KII  bank  credit  agreement  contains  certain  restrictive
covenants which,  among other things,  restricts the ability of the borrowers to
incur debt, incur liens, pay dividends or merge or consolidate  with, or sell or
transfer all or substantially all of their assets to, another entity.

     In March 2002,  NL redeemed $25 million  principal  amount of the NL Senior
Secured Notes at par value, using available cash on hand. In addition, NL used a
portion of the net proceeds from the issuance of the KII Senior Secured Notes to
redeem in full the  remaining  $169  million  principal  amount of the NL Senior
Secured Notes.  In accordance  with the terms of the indenture  governing the NL
Senior  Secured Notes,  on June 28, 2002, NL irrevocably  placed on deposit with
the NL Senior Secured Note trustee funds in an amount  sufficient to pay in full
the  redemption  price plus all accrued and unpaid  interest due on the July 28,
2002  redemption  date.  Immediately  thereafter,   NL  was  released  from  its
obligations  under  such  indenture,   the  indenture  was  discharged  and  all
collateral was released to NL. Because NL had been released as being the primary
obligor  under the  indenture as of June 30, 2002,  the NL Senior  Secured Notes
were  eliminated  from the  balance  sheet as of that date  along with the funds
placed on deposit  with the trustee to effect the July 28, 2002  redemption.  NL
recognized  a loss on the  early  extinguishment  of debt  of  approximately  $2
million in the second quarter of 2002,  consisting  primarily of the interest on
the NL Senior  Secured  Notes for the period from July 1 to July 28, 2002.  Such
loss is recognized as a component of interest expense. See Note 14.






Note 10 - Accounts with affiliates:



                                                       December 31,      June 30,
                                                            2001           2002
                                                            ----           ----
                                                               (In thousands)

Current receivables from affiliates:
                                                                   
  Income taxes receivable from Contran .............       $  --         $ 4,274
  TIMET ............................................           677            67
  Other ............................................           167           102
                                                           -------       -------

                                                           $   844       $ 4,443
                                                           =======       =======

Noncurrent receivable from affiliate -
 loan to Contran family trust ......................       $20,000       $20,000
                                                           =======       =======

Payables to affiliates:
  Valhi demand loan from Contran ...................       $24,574       $22,484
  Income taxes payable to Contran ..................         6,410          --
  Louisiana Pigment Company ........................         6,362         8,622
  Contran - trade items ............................           501           790
  TIMET ............................................           286             2
  Other, net .......................................            15            81
                                                           -------       -------

                                                           $38,148       $31,979
                                                           =======       =======


Note 11 - Provision for income taxes:



                                                                Six months ended
                                                                    June 30,
                                                               2001         2002
                                                               ----         ----
                                                                 (In millions)

                                                                     
Expected tax expense ....................................      $53.5       $ 1.8
Incremental U.S. tax and rate differences on
 Equity in earnings of non-tax group companies ..........        1.9          .3
Non-U.S. tax rates ......................................       (3.6)        (.7)
Change in NL's and Tremont's deferred income tax
 valuation allowance, net ...............................       (1.8)       (1.5)
No tax benefit for goodwill amortization ................        2.9        --
U.S. state income taxes, net ............................        1.8          .1
Other, net ..............................................        1.0          .4
                                                               -----       -----

                                                               $55.7       $  .4
                                                               =====       =====
Comprehensive provision for income taxes
 allocated to:
  Net income ............................................      $55.7       $  .4
  Other comprehensive income:
    Marketable securities ...............................      (16.2)        1.3
    Currency translation ................................       (2.6)        3.2
    Pension liabilities .................................        (.4)       (1.5)
                                                               -----       -----

                                                               $36.5       $ 3.4
                                                               =====       =====






Note 12 -      Other income:



                                                             Six months ended
                                                                 June 30,
                                                          2001             2002
                                                          ----             ----
                                                              (In thousands)

Securities earnings:
                                                                   
  Dividends and interest ......................         $ 19,718         $16,930
  Securities transactions, net ................           50,803           1,915
                                                        --------         -------

                                                          70,521          18,845

Legal settlement gains, net ...................           30,723           2,355
Noncompete agreement income ...................            2,000           2,000
Currency transactions, net ....................            1,193           3,890
Pension settlement gain .......................             --               677
Insurance gain ................................              650            --
Other, net ....................................            2,644           3,966
                                                        --------         -------

                                                        $107,731         $31,733
                                                        ========         =======


     The securities  transaction  gain in 2002 is discussed in Note 3. The legal
settlement  gain in 2002  relates to NL's  settlement  with  certain  additional
former insurance carriers from whom NL had been seeking  reimbursement for legal
defense  expenditures and indemnity coverage claims. The pension settlement gain
relates  to a  defined  benefit  plan  previously  sponsored  by  CompX  in  The
Netherlands.  The net currency  transaction  gain in 2002  includes $6.3 million
related to the extinguishment of certain intercompany indebtedness of NL.


Note 13 - Minority interest:



                                                    December 31,        June 30,
                                                        2001              2002
                                                        ----              ----
                                                              (In thousands)

Minority interest in net assets:
                                                                  
NL Industries ............................           $ 68,566           $ 73,568
Tremont Corporation ......................             32,610             31,118
CompX International ......................             44,767             46,156
Subsidiaries of NL .......................              7,208              7,603
                                                     --------           --------

                                                     $153,151           $158,445
                                                     ========           ========




                                                           Six months ended
                                                               June 30,
                                                        2001              2002
                                                        ----              ----
                                                            (In thousands)

Minority interest in net earnings (losses):
                                                                  
NL Industries .............................           $11,623           $ 3,550
Tremont Corporation .......................             3,448            (2,489)
CompX International .......................             2,005               676
Subsidiaries of NL ........................               953               370
                                                      -------           -------

                                                      $18,029           $ 2,107
                                                      =======           =======



     As  previously  reported,  all  of  Waste  Control  Specialists  aggregate,
inception-to-date net losses have accrued to the Company for financial reporting
purposes,  and all of Waste Control  Specialists future net income or net losses
will also accrue to the Company until Waste Control Specialists reports positive
equity  attributable to its other owner.  Accordingly,  no minority  interest in
Waste Control  Specialists'  net assets or net earnings  (losses) is reported at
June 30, 2002.

Note 14 - Accounting principles newly adopted in 2002:

     Goodwill.  The Company adopted SFAS No. 142,  Goodwill and Other Intangible
Assets,  effective  January 1, 2002.  Under SFAS No.  142,  goodwill,  including
goodwill arising from the difference between the cost of an investment accounted
for by the equity method and the amount of the  underlying  equity in net assets
of  such  equity  method  investee  ("equity  method  goodwill"),  is no  longer
amortized on a periodic basis.  Goodwill (other than equity method  goodwill) is
subject to an impairment  test to be performed at least on an annual basis,  and
impairment  reviews  may  result  in  future  periodic  write-downs  charged  to
earnings. Equity method goodwill is not tested for impairment in accordance with
SFAS No. 142;  rather,  the overall carrying amount of an equity method investee
will continue to be reviewed for  impairment in accordance  with existing  GAAP.
There  is  currently  no  equity  method  goodwill  associated  with  any of the
Company's equity method investees.  Under the transition  provisions of SFAS No.
142,  all  goodwill  existing  as of June 30,  2001  ceased  to be  periodically
amortized as of January 1, 2002, and all goodwill arising in a purchase business
combination (including step acquisitions) completed on or after July 1, 2001 was
not periodically amortized from the date of such combination.

     As  discussed  in Note 8, the Company has  assigned  its  goodwill to three
reporting units (as that term is defined in SFAS No. 142). Goodwill attributable
to the chemicals operating segment was assigned to the reporting unit consisting
of NL in  total.  Goodwill  attributable  to the  component  products  operating
segment was assigned to two reporting units within that operating  segment,  one
consisting of CompX's security  products  operations and the other consisting of
CompX's ergonomic  products and slide products  operations.  Under SFAS No. 142,
such goodwill  will be deemed to not be impaired if the estimated  fair value of
the applicable  reporting unit exceeds the respective net carrying value of such
reporting  units,  including  the allocated  goodwill.  If the fair value of the
reporting  unit is less than carrying  value,  then a goodwill  impairment  loss
would be recognized  equal to the excess,  if any, of the net carrying  value of
the  reporting  unit  goodwill  over its  implied  fair  value  (up to a maximum
impairment equal to the carrying value of the goodwill).  The implied fair value
of  reporting  unit  goodwill  would be the  amount  equal to the  excess of the
estimated  fair  value of the  reporting  unit  over the  amount  that  would be
allocated  to the  tangible  and  intangible  net assets of the  reporting  unit
(including  unrecognized  intangible  assets) as if such reporting unit had been
acquired in a purchase  business  combination  accounted for in accordance  with
GAAP as of the date of the impairment testing.

     In  determining  the  estimated  fair value of the NL reporting  unit,  the
Company will consider quoted market prices for NL common stock. The Company will
also use other appropriate valuation techniques,  such as discounted cash flows,
to estimate the fair value of the two CompX reporting units.

     The Company has completed  its initial,  transitional  goodwill  impairment
analysis under SFAS No. 142 as of January 1, 2002,  and no goodwill  impairments
were deemed to exist. In accordance  with the  requirements of SFAS No. 142, the
Company will review the  goodwill of its three  reporting  units for  impairment
during the third  quarter of each year  starting in 2002.  Goodwill will also be
reviewed for  impairment  at other times during each year when events or changes
in circumstances indicate that an impairment might be present.

     As shown in the following table, the Company would have reported net income
of $87.1  million,  or $.75 per diluted  share,  in the first six months of 2001
($51.6 million, or $.44 per diluted share, in the second quarter of 2001) if the
goodwill amortization included in the Company's reported net income had not been
recognized.



                                           Three months ended    Six months ended
                                                 June 30,             June 30,
                                             ---------------     ---------------
                                             2001       2002     2001       2002
                                             ----       ----     ----       ----
                                           (In millions, except per share amounts)

                                                               
Net income as reported .................    $ 47.6     $  6.4   $ 79.2     $  2.7
Adjustments:
  Goodwill amortization ................       4.3       --        8.5       --
  Incremental income taxes .............       (.1)      --        (.1)      --
  Minority interest in goodwill
   amortization ........................       (.2)      --        (.5)      --
                                            ------     ------   ------     ------

    Adjusted net income ................    $ 51.6     $  6.4   $ 87.1     $  2.7
                                            ======     ======   ======     ======

Diluted net income  per share as
 reported ..............................    $  .41     $  .05   $  .68     $  .02
Adjustments:
  Goodwill amortization ................       .03       --        .07       --
  Incremental income taxes .............      --         --       --         --
  Minority interest in goodwill
   amortization ........................      --         --       --         --
                                            ------     ------   ------     ------

    Adjusted diluted net income
     per share .........................    $  .44     $  .05   $  .75     $  .02
                                            ======     ======   ======     ======



     Impairment  of  long-lived  assets.  The  Company  adopted  SFAS  No.  144,
Accounting  for the  Impairment  or Disposal  of  Long-Lived  Assets,  effective
January 1, 2002.  SFAS No. 144 retains the  fundamental  provisions  of existing
GAAP with  respect  to the  recognition  and  measurement  of  long-lived  asset
impairment  contained  in  SFAS  No.  121,  Accounting  for  the  Impairment  of
Long-Lived  Assets and for Lived-Lived  Assets to be Disposed Of. However,  SFAS
No. 144 provides new guidance intended to address certain  implementation issues
associated  with SFAS No.  121,  including  expanded  guidance  with  respect to
appropriate  cash  flows  to be used to  determine  whether  recognition  of any
long-lived  asset  impairment  is  required,  and if required how to measure the
amount of the  impairment.  SFAS No.  144 also  requires  that net  assets to be
disposed of by sale are to be  reported  at the lower of carrying  value or fair
value less cost to sell, and expands the reporting of discontinued operations to
include any  component of an entity with  operations  and cash flows that can be
clearly distinguished from the rest of the entity.  Adoption of SFAS No. 144 did
not have a significant effect on the Company.






     Debt  extinguishment  gains and losses.  The Company  adopted  SFAS No. 145
effective April 1, 2002. SFAS No. 145, among other things,  eliminated the prior
requirement that all gains and losses from the early extinguishment of debt were
to be classified as an extraordinary  item. Upon adoption of SFAS No. 145, gains
and  losses  from the  early  extinguishment  of debt are now  classified  as an
extraordinary  item  only if they meet the  "unusual  and  infrequent"  criteria
contained in Accounting  Principles  Board Opinion ("APBO") No. 30. In addition,
upon   adoption  of  SFAS  No.  145,   all  gains  and  losses  from  the  early
extinguishment  of debt that had previously been classified as an  extraordinary
item are to be  reassessed  to determine if they would have met the "unusual and
infrequent"  criteria  of APBO No. 30; any such gain or loss that would not have
met the APBO No. 30 criteria are  retroactively  reclassified  and reported as a
component of income before  extraordinary  item.  The Company has concluded that
all of its previously-recognized  gains and losses from the early extinguishment
of debt that  occurred  on or after  January 1, 1998 would not have met the APBO
No. 30 criteria for  classification  as an  extraordinary  item, and accordingly
such previously-reported  gains and losses from the early extinguishment of debt
have been  retroactively  reclassified  and are now  reported as a component  of
income before extraordinary item.

Note 15 - Accounting principles not yet adopted:

     The  Company  will  adopt SFAS No.  143,  Accounting  for Asset  Retirement
Obligations,  no later than January 1, 2003.  Under SFAS No. 143, the fair value
of a liability  for an asset  retirement  obligation  covered under the scope of
SFAS No.  143  would be  recognized  in the  period in which  the  liability  is
incurred,  with an  offsetting  increase in the  carrying  amount of the related
long-lived  asset.  Over time,  the  liability  would be accreted to its present
value, and the capitalized cost would be depreciated over the useful life of the
related asset.  Upon settlement of the liability,  an entity would either settle
the obligation for its recorded amount or incur a gain or loss upon  settlement.
The Company is still  studying this  standard to determine,  among other things,
whether it has any asset  retirement  obligations  which are  covered  under the
scope of SFAS No. 143, and the effect,  if any, on the Company of adopting  SFAS
No. 143 has not yet been determined.

     The Company will adopt SFAS No. 146,  Accounting for Costs  Associated with
Exit or Disposal Activities,  no later than January 1, 2003 for exit or disposal
activities initiated on or after the date of adoption. Under SFAS No. 146, costs
associated with exit  activities,  as defined,  that are covered by the scope of
SFAS No. 146 will be recognized and measured initially at fair value,  generally
in the period in which the liability is incurred.  Costs covered by the scope of
SFAS No. 146  include  termination  benefits  provided  to  employees,  costs to
consolidate  facilities or relocate employees,  and costs to terminate contracts
(other than a capital lease).  Under existing GAAP, a liability for such an exit
cost is recognized at the date an exit plan is adopted,  which may or may not be
the date at which the liability has been incurred.






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

RESULTS OF OPERATIONS:

General

     The Company reported net income of $6.4 million, or $.05 per diluted share,
in the second quarter of 2002 compared to net income of $47.6  million,  or $.41
per diluted share,  in the second quarter of 2001.  Excluding the effects of the
items  discussed  below,  the  Company  would have  reported  net income of $1.6
million in the second quarter of 2002 compared to net income of $10.8 million in
the  second  quarter  of 2001.  For the first six  months of 2002,  the  Company
reported net income of $2.7 million, or $.02 per diluted share,  compared to net
income of $79.2 million,  or $.68 per diluted share,  in the first six months of
2001. Excluding the effects of the items discussed below, the Company would have
reported net income of $1.0 million in the first six months of 2002  compared to
net income of $28.0 million in the first six months of 2001.

     The  Company's  equity in  losses of TIMET in the first six  months of 2002
includes  losses in the first  quarter of $10.6  million  ($5.4  million  net of
income taxes and minority interest),  related to the Company's pro-rata share of
TIMET's $27.5 million  impairment  charge for an other than temporary decline in
value of certain preferred  securities held by TIMET.  Legal settlement gains in
the second  quarter  and first six months of 2002 of $500,000  and $2.4  million
($224,000  and  $1.2  million,  net  of  income  taxes  and  minority  interest,
respectively)  relate to legal settlements with certain of NL's former insurance
carriers,  and securities  transactions gains in the first six months of 2002 of
$1.9 million  ($1.2  million net of income  taxes)  relate to the first  quarter
disposal  of certain  shares of  Halliburton  Company  common  stock held by the
Company.  Currency transaction gains in the second quarter of 2002 include gains
of $6.3 million ($4.7 million net of income taxes and minority interest) related
to the extinguishment of certain intercompany  indebtedness of NL. The Company's
results  in  the  second  quarter  of  2001  include  aggregate  net  securities
transaction  gains of $50.8  million  ($33.2  million  net of  income  taxes and
minority interest) related principally to the disposal of additional Halliburton
shares.  The Company's equity in earnings of TIMET in the second quarter of 2001
includes $15.7 million ($7.5 million net of income taxes and minority  interest)
related to TIMET's  previously-reported  settlement  with Boeing.  The Company's
results in the first six months of 2001  include the  previously-reported  first
quarter legal settlement gains  aggregating  $30.7 million ($18.4 million net of
income taxes and minority interest).

     As discussed in Note 14 to the Consolidated Financial Statements, beginning
in 2002 the Company no longer  recognizes  periodic  amortization of goodwill in
its  results  of  operations.  The  Company  would have  reported  net income of
approximately  $51.6  million  in the second  quarter of 2001 and  approximately
$87.1  million in the first six months of 2001,  or about $4.0  million and $7.9
million  higher,  respectively,  if the  goodwill  amortization  included in the
Company's  reported  net income had not been  recognized.  Of such $7.9  million
difference in the first six months of 2001,  approximately $7.2 million and $1.3
million  relates to  amortization  of  goodwill  attributable  to the  Company's
chemicals and component products operating segments, respectively, approximately
$100,000 relates to incremental income taxes and approximately  $500,000 relates
to minority  interest  associated with the goodwill  amortization  recognized by
certain of the Company's less-than-wholly-owned subsidiaries.

     Total  operating  income in the second quarter and first six months of 2002
was  lower as  compared  to the  same  periods  in 2001  due to lower  chemicals
earnings at NL and lower component products earnings at CompX, offset in part by
lower waste management operating losses at Waste Control Specialists.

     As  provided  by the  safe  harbor  provisions  of the  Private  Securities
Litigation  Reform Act of 1995, the Company cautions that the statements in this
Quarterly  Report on Form 10-Q relating to matters that are not historical facts
are  forward-looking   statements  that  represent   management's   beliefs  and
assumptions based on currently available information. Forward-looking statements
can be  identified  by the use of words such as  "believes,"  "intends,"  "may,"
"should," "could," "anticipates,"  "expected" or comparable  terminology,  or by
discussions  of  strategies  or trends.  Although the Company  believes that the
expectations  reflected in such  forward-looking  statements are reasonable,  it
cannot give any  assurances  that these  expectations  will prove to be correct.
Such statements by their nature involve substantial risks and uncertainties that
could  significantly  impact expected  results,  and actual future results could
differ materially from those described in such forward-looking statements. While
it is not possible to identify all factors,  the Company  continues to face many
risks and  uncertainties.  Among the  factors  that could  cause  actual  future
results to differ materially are the risks and  uncertainties  discussed in this
Quarterly  Report and those  described from time to time in the Company's  other
filings with the Securities and Exchange Commission  including,  but not limited
to,  future  supply  and demand for the  Company's  products,  the extent of the
dependence of certain of the  Company's  businesses  on certain  market  sectors
(such as the  dependence of TIMET's  titanium  metals  business on the aerospace
industry),  the cyclicality of certain of the Company's businesses (such as NL's
TiO2 operations and TIMET's titanium metals  operations),  the impact of certain
long-term  contracts on certain of the Company's  businesses (such as the impact
of TIMET's long-term contracts with certain of its customers and such customers'
performance  there  under and the impact of  TIMET's  long-term  contracts  with
certain of its vendors on its  ability to reduce or  increase  supply or achieve
lower  costs),  customer  inventory  levels  (such as the  extent to which  NL's
customers  may,  from time to time,  accelerate  purchases of TiO2 in advance of
anticipated price increases or defer purchases of TiO2 in advance of anticipated
price  decreases,  or the  relationship  between  inventory  levels  of  TIMET's
customers and such customer's  current inventory  requirements and the impact of
such  relationship on their  purchases from TIMET),  changes in 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, customer and competitor strategies, the impact
of pricing and  production  decisions,  competitive  technology  positions,  the
introduction of trade barriers, fluctuations in currency exchange rates (such as
changes in the exchange  rate  between the U.S.  dollar and each of the euro and
the Canadian dollar),  operating interruptions  (including,  but not limited to,
labor disputes, leaks, fires, explosions,  unscheduled or unplanned downtime and
transportation  interruptions),  recoveries from insurance claims and the timing
thereof,  potential  difficulties  in integrating  completed  acquisitions,  the
ability of the Company to renew or refinance  credit  facilities,  uncertainties
associated with new product  development (such as TIMET's ability to develop new
end-uses  for its  titanium  products),  environmental  matters  (such  as those
requiring  emission and discharge  standards  for existing and new  facilities),
government laws and  regulations and possible  changes therein (such as a change
in Texas state law which would allow the applicable regulatory agency to issue a
permit for the disposal of low-level radioactive wastes to a private entity such
as Waste Control Specialists,  or 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, Tremont and TIMET) and possible future litigation.
Should one or more of these risks  materialize  (or the  consequences  of such a
development  worsen),  or should the  underlying  assumptions  prove  incorrect,
actual results could differ  materially from those  forecasted or expected.  The
Company   disclaims  any  intention  or  obligation  to  update  or  revise  any
forward-looking statement whether as a result of new information,  future events
or otherwise.

Chemicals

     Selling  prices for titanium  dioxide  pigments  ("TiO2"),  NL's  principal
product,  were generally  decreasing during all of 2001 and the first quarter of
2002,  and were  generally  flat  during the second  quarter of 2002.  NL's TiO2
operations are conducted through its wholly-owned subsidiary Kronos, Inc.



                           Three months ended           Six months ended
                                June 30,           %       June 30,             %
                             2001      2002      Change  2001     2002       Change
                             ----      ----      ------  ----     ----       ------
                                         (In millions, except percentages)

                                                              
Net sales ..............    $220.1    $226.9       +3%  $446.2    $429.3       -4%
Operating income .......      38.8      21.7      -44%    84.2      41.0      -51%



     Chemicals  operating  income  declined in the second  quarter and first six
months of 2002  compared  to the same  periods  of 2001 due  primarily  to lower
average selling prices for titanium dioxide pigments ("TiO2"), offset in part by
higher TiO2 sales and production  volumes.  Excluding the effect of fluctuations
in the value of the U.S. dollar relative to other currencies,  NL's average TiO2
selling  prices in the  second  quarter  of 2002 were 14% lower  than the second
quarter of 2001,  and were 15% lower in the first six months of 2002 compared to
the same period in 2001.  While NL's average TiO2 selling  prices had  generally
been  declining  during all of 2001 and the first  quarter of 2002,  the rate of
decline  abated during the second quarter of 2002, and NL's average TiO2 selling
prices in the second  quarter of 2002 were flat compared to the first quarter of
the year,  with  increases in European and export  markets offset by declines in
North American markets.

     NL's  TiO2  sales  volumes  in the  second  quarter  of 2002,  the  highest
quarterly sales volumes in NL's history, were 17% higher than the second quarter
of 2001. NL's TiO2 sales volumes in the first six months of 2002 were 13% higher
than the first six months of 2001.  NL's TiO2  production  volumes in the second
quarter of 2002 were 14% higher  than the  second  quarter of 2001,  and were 6%
higher in the first six months of 2002 compared to the same period in 2001.  The
increases in NL's TiO2 production  volumes were due in part to the effect of the
previously-reported  fire at NL's  Leverkusen,  Germany  TiO2  facility in March
2001. As  previously  reported,  NL settled its  insurance  claim related to the
Leverkusen  fire during the fourth quarter of 2001. NL recognized  $19.3 million
of business  interruption  insurance proceeds during the fourth quarter of 2001,
of which $16.6 million was attributable to recovery of unallocated  period costs
and lost margin related to the first, second and third quarters of 2001.

     NL  believes  that the  strong  demand  for TiO2 in the first  half of 2002
reflected  improving  economic   conditions,   some  seasonality  and  customers
restocking their inventories ahead of  previously-announced  price increases. NL
expects  that TiO2  industry  demand in the second half of 2002 should be better
than industry demand in the second half of 2001 due to economic  conditions.  In
January 2002, NL announced price increases in all major markets of approximately
5% to 8% above existing  December 2001 prices, a portion of which NL realized in
the second quarter of 2002, with additional increases expected to be realized in
the third  quarter of this year.  In May 2002,  NL  announced a second  round of
price increases in all major markets of  approximately 7% to 11% above June 2002
prices.  NL is hopeful that it will realize a portion of the  announced May 2002
price  increases  during  the fourth  quarter  of 2002,  but the extent to which
Kronos can realize any price increases  during the remainder of 2002 will depend
on improving  market  conditions.  Because TiO2 prices were generally  declining
during all of 2001 and the first  quarter of 2002,  NL believes that its average
TiO2 selling prices in 2002 will be significantly below its average 2001 prices,
even if price increases  continue to be realized.  NL expects its TiO2 sales and
production  volumes in 2002 should be higher as compared to 2001, in part due to
the effects in 2001 of the previously-reported  fire at its Leverkusen,  Germany
facility,  with the level of its production  volumes  approximating the level of
its sales volumes.  NL expects its TiO2 sales volumes in the second half of 2002
will be lower than the first  half of the year.  Overall,  NL  expects  its TiO2
operating income in 2002 will be significantly lower than 2001, primarily due to
lower average TiO2 selling prices.  NL's expectations as to the future prospects
of NL and the TiO2  industry  are based  upon a number of  factors  beyond  NL's
control,  including  worldwide growth of gross domestic product,  competition in
the  marketplace,  unexpected or  earlier-than-expected  capacity  additions and
technological  advances.  If actual  developments differ from NL's expectations,
NL's results of operations could be unfavorably affected.

     NL has substantial  operations and assets located outside the United States
(principally Germany,  Belgium, Norway and Canada). A significant amount of NL's
sales generated from its non-U.S. operations are denominated in currencies other
than the U.S. dollar,  primarily the euro,  other major European  currencies and
the Canadian  dollar.  In addition,  a portion of NL's sales  generated from its
non-U.S.  operations are denominated in the U.S. dollar.  Certain raw materials,
primarily  titanium-containing  feedstocks, are purchased in U.S. dollars, while
labor and other production costs are denominated  primarily in local currencies.
Consequently,  the  translated  U.S.  dollar  value of NL's  foreign  sales  and
operating results are subject to currency  exchange rate fluctuations  which may
favorably or adversely impact reported earnings and may affect the comparability
of period-to-period  operating results.  Including the effect of fluctuations in
the value of the U.S. dollar relative to other currencies,  Kronos' average TiO2
selling  prices (in billing  currencies) in the second quarter of 2002 decreased
13% compared to the second  quarter of 2001,  and decreased 15% during the first
six  months  of 2002.  Overall,  fluctuations  in the  value of the U.S.  dollar
relative to other currencies,  primarily the euro, increased TiO2 sales slightly
in the second  quarter of 2002,  and decreased  Ti02 sales slightly in the first
six months of 2002, as compared to the same periods in 2001. Fluctuations in the
value of the U.S. dollar relative to other  currencies  similarly  impacted NL's
foreign  currency-denominated  operating expenses. NL's operating costs that are
not denominated in the U.S.  dollar,  when translated  into U.S.  dollars,  were
lower  during  2002 as  compared  to 2001.  Overall,  the net impact of currency
exchange rate fluctuations  decreased NL's TiO2 operating income by $3.6 million
and  $2.5  million  in  the  second  quarter  and  first  six  months  of  2002,
respectively, as compared to the same periods in 2001.

     Chemicals   operating   income,  as  presented  above,  is  stated  net  of
amortization of Valhi's purchase accounting adjustments made in conjunction with
its  acquisitions of its interest in NL. Such  adjustments  result in additional
depreciation,  depletion and  amortization  expense  beyond  amounts  separately
reported by NL. Such additional  non-cash expenses reduced  chemicals  operating
income,  as reported by Valhi, by  approximately  $12.8 million in the first six
months of 2001 and approximately $5.8 million in the first six months of 2002 as
compared to amounts separately  reported by NL. The decline from 2001 to 2002 in
such additional  non-cash  expenses relates primarily to ceasing to periodically
amortize  goodwill  beginning  in 2002 (the 2001 amount  included  $7.2  million
related to goodwill  amortization).  See Note 14 to the  Consolidated  Financial
Statements.


Component Products



                             Three months ended         Six months ended
                                   June 30,         %        June 30,         %
                                 2001    2002     Change  2001      2002    Change
                                 ----    ----     ------  ----      ----    ------
                                           (In millions, except percentages)

                                                             
Net sales .................    $ 53.3   $ 51.1      -4%  $112.9    $ 99.6     -12%
Operating income ..........       5.3      2.2     -59%    12.3       4.3     -65%


     Component  products  sales and  operating  income  decreased  in the second
quarter and first six months of 2002 compared to the same periods in 2001 as the
manufacturing   recession  continued  to  negatively  impact  CompX's  operating
results.   Sales  of  slide  and  ergonomic   products  decreased  4%  and  16%,
respectively,  in the second  quarter of 2002 compared to the second  quarter of
2001, with year-to-date  declines of 16% and 19%,  respectively.  While sales of
security  products  increased 3% in the second  quarter of 2002  compared to the
same  period in 2001,  in part due to new  business  development  and  increased
orders in advance of implementation of certain price increases effective July 1,
2002,  sales of security  products  were down 4% in the first six months of 2002
compared  to  the  same  period  in  2001.  Operating  income  comparisons  were
negatively impacted by increases in certain raw material costs, primarily steel,
changes in product mix as well as the adverse  impact of reduced  selling prices
resulting  from  competitive   pressures.   Operating  income  comparisons  were
favorably impacted by ceasing to periodically amortize goodwill,  which amounted
to  approximately  $700,000 and $1.3 million in the second quarter and first six
months of 2001,  respectively  (none in 2002),  as well as the impact of certain
cost reductions that were implemented. See Note 14 to the Consolidated Financial
Statements.

     CompX has  substantial  operations  and assets  located  outside the United
States (principally in Canada, The Netherlands and Taiwan). A portion of CompX's
sales generated from its non-U.S. operations are denominated in currencies other
than the U.S.  dollar,  principally  the Canadian  dollar,  the euro and the New
Taiwan  dollar.  In  addition,  a portion of CompX's  sales  generated  from its
non-U.S.  operations (principally in Canada) are denominated in the U.S. dollar.
Most  raw  materials,  labor  and  other  production  costs  for  such  non-U.S.
operations are  denominated  primarily in local  currencies.  Consequently,  the
translated U.S. dollar value of CompX's foreign sales and operating  results are
subject  to  currency  exchange  rate   fluctuations   which  may  favorably  or
unfavorably   impact  reported   earnings  and  may  affect   comparability   of
period-to-period operating results. Excluding the effect of currency,  component
products  sales  decreased  5% in the second  quarter of 2002 as compared to the
same period in 2001, and operating income decreased 49%. Excluding the effect of
currency, component products sales decreased 11% in the first six months of 2002
as compared to the same period in 2001, and operating income decreased 59%.

     CompX currently  expects that soft market  conditions will continue for the
near term in the office furniture market, the primary end-use market for CompX's
products.  As a result, sales volumes are expected to remain at depressed levels
for at least the remainder of the year.  Competitive  pricing pressures are also
expected to continue.  In addition,  the  worldwide  steel price  increase  that
followed the steel tariff  imposed this year by the United States  government is
expected to continue to negatively impact component  products margins on CompX's
slide and ergonomic  products,  where steel is the primary raw  material.  CompX
intends to continue to focus on cost control  measures to minimize the affect of
the  anticipated  lower sales volumes,  pricing  pressures and raw material cost
increases.  In connection  with these cost  improvement  initiatives,  CompX may
consider strategies that could result in capacity  reductions,  consolidation of
existing facilities and production  rebalancing which, depending on the outcome,
may result in future restructuring charges.





Waste Management



                                      Three months ended       Six months ended
                                           June 30,                 June 30,
                                       ----------------        -----------------
                                       2001        2002        2001         2002
                                       ----        ----        ----         ----
                                                     (In millions)

                                                               
Net sales ......................       $2.9        $1.1        $6.0        $3.9
Operating loss .................       (4.4)       (2.1)       (7.6)       (4.1)


     Waste Control  Specialists' sales decreased in the second quarter and first
six months of 2002  compared to the same  periods in 2001 due  primarily  to the
effect of weak  demand for its waste  management  services.  Waste  management's
operating  losses  declined  during 2002 as the effect of certain cost  controls
implemented in 2002 more than offset the effects of the decline in sales.

     Waste  Control  Specialists  currently has permits which allow it to treat,
store and dispose of a broad range of hazardous and toxic  wastes,  and to treat
and store a broad range of low-level  and mixed  radioactive  wastes.  The waste
management  industry  currently is experiencing a relative decline in the number
of environmental remediation projects generating wastes. In addition, efforts on
the part of generators to reduce the volume of waste and/or manage wastes onsite
at  their  facilities  also  has  resulted  in weak  demand  for  Waste  Control
Specialists waste management services.  These factors have led to reduced demand
and increased price pressure for waste management services.  While Waste Control
Specialists'  believes its broad range of permits for the  treatment and storage
of low-level and mixed  radioactive  waste streams provides certain  competitive
advantages,  a key element of Waste Control  Specialists'  long-term strategy to
provide  "one-stop  shopping" for  hazardous,  low-level  and mixed  radioactive
wastes includes obtaining additional regulatory  authorizations for the disposal
of a broad range of low-level and mixed radioactive wastes.

     Waste Control  Specialists is continuing its attempts to increase its sales
volumes from waste  streams that conform to Waste Control  Specialists'  permits
currently in place. Waste Control Specialists is also continuing to identify and
attempt to obtain  modifications  to its  current  permits  that would allow for
treatment,  storage and disposal of additional  types of wastes.  The ability of
Waste  Control  Specialists  to achieve  increased  sales volumes of these waste
streams,  together with improved  operating  efficiencies  through  further cost
reductions and increased  capacity  utilization,  are important factors in Waste
Control  Specialists'  ability to  achieve  improved  cash  flows.  The  Company
currently  believes Waste Control  Specialists  can become a viable,  profitable
operation.  However,  there can be no assurance that Waste Control  Specialists'
efforts  will prove  successful  in improving  its cash flows.  Valhi has in the
past, and may in the future,  consider  strategic  alternatives  with respect to
Waste Control  Specialists.  Depending on the form of the  transaction  that any
such  strategic  alternative  might take,  it is possible that the Company might
report a loss with respect to such a transaction.

TIMET

     Tremont accounts for its interest in TIMET by the equity method.  Tremont's
equity in earnings  (losses)  of TIMET  differs  from the amounts  that would be
expected   by   applying    Tremont's    ownership    percentage    to   TIMET's
separately-reported  earnings  because of the effect of amortization of purchase
accounting   adjustments   made  by  Tremont  in   conjunction   with  Tremont's
acquisitions of its interests in TIMET.  Amortization of such basis  differences
generally  increases  earnings  (or  reduces  losses)  attributable  to TIMET as
reported by Tremont.








                                         Three months ended   Six months ended
                                              June 30,             June 30,
                                          ---------------     ----------------
                                          2001       2002     2001        2002
                                          ----       ----     ----        ----
                                                      (In millions)

TIMET historical:
                                                             
  Net sales .........................    $120.0     $ 94.3    $244.0     $198.7

  Operating income (loss):
    Boeing settlement, net ..........    $ 62.7     $ --      $ 62.7     $ --
    Fixed asset impairment ..........     (10.8)      --       (10.8)      --
    Tungsten accrual ................      (2.8)      --        (3.8)      --
    Other, net ......................       (.5)      (7.0)     (1.3)     (11.7)
                                         ------     ------    ------     ------
                                           48.6       (7.0)     46.8      (11.7)
  Impairment of convertible
   preferred securities .............      --         --        --        (27.5)
  Other general corporate, net ......       2.3        (.3)      4.0        (.8)
  Interest expense ..................      (1.1)       (.7)     (2.6)      (1.5)
                                         ------     ------    ------     ------
                                           49.8       (8.0)     48.2      (41.5)

  Income tax benefit (expense) ......     (17.5)       (.6)    (16.9)        .8
  Minority interest .................      (2.7)      (3.7)     (5.3)      (7.7)
                                         ------     ------    ------     ------

    Net income (loss) ...............    $ 29.6     $(12.3)   $ 26.0     $(48.4)
                                         ======     ======    ======     ======

Equity in earnings (losses)
 of TIMET ...........................    $ 12.9     $ (2.7)   $ 13.0     $(14.5)
                                         ======     ======    ======     ======


     Excluding the effect of TIMET's  previously-reported  legal settlement with
Boeing,  its impairment charge related to certain equipment and its accruals for
the tungsten matter  discussed  below,  TIMET reported lower sales, and a higher
operating  loss, in the second  quarter and first six months of 2002 compared to
the same  periods  in 2001.  During the second  quarter  of 2002,  TIMET's  mill
products sales volumes decreased 30% compared to the second quarter of 2001, and
its sales  volumes of melted  products  decreased  40%  during the same  period.
During  the first six  months  of 2002,  TIMET's  mill  products  sales  volumes
decreased  23%  compared  to the same period in 2001,  and its sales  volumes of
melted products decreased 39%. Excluding the effect of fluctuations in the value
of the U.S. dollar relative to other currencies,  TIMET's average selling prices
for mill products in the second  quarter of 2002 were 4% higher  compared to the
second quarter of 2001,  while selling prices for its melted products  increased
3%. TIMET's  average selling prices for mill products in the first six months of
2002 were 4% higher  compared to the same period in 2001,  while selling  prices
for its melted products  increased 5%. TIMET's operating income comparisons were
favorably impacted by TIMET ceasing to periodically amortize goodwill recognized
on its separate-company  books, which amounted to approximately $1.1 million and
$2.3 million in the second  quarter and first six months of 2001 (none in 2002).
TIMET's operating income comparisons were negatively impacted by lower operating
rates in 2002, with estimated capacity utilization  declining from 75% to 55% in
the second quarter of 2002 compared to the second quarter of 2001  (year-to-date
decline from 70% to 60%).

     Under TIMET's  previously-reported amended long-term agreement with Boeing,
Boeing has advanced  TIMET $28.5 million for 2002, and Boeing will advance TIMET
$28.5 million  annually from 2003 through 2007. The agreement is structured as a
take-or-pay  agreement such that Boeing,  beginning in calendar year 2002,  will
forfeit a proportionate part of the $28.5 million annual advance, or effectively
$3.80 per pound,  in the event that its orders for  delivery  for such  calendar
year are less than 7.5 million pounds.  TIMET can only be required,  however, to
deliver up to 3 million pounds per quarter.  Based on TIMET's actual  deliveries
to Boeing of  approximately  900,000  pounds during the first six months of 2002
and TIMET's contractual maximum obligation of delivering 6 million pounds during
the  remainder of 2002,  TIMET  recognized  $2.2 million of income in the second
quarter of 2002 related to the take-or-pay  provisions for the 600,000 pounds of
material  that  TIMET is no longer  obligated  to  provide  to Boeing  under the
agreement.  TIMET currently  expects that Boeing will purchase about 1.5 million
pounds of product under its agreement  during all of 2002. At that level,  TIMET
currently expects to recognize about $21 million of additional income during the
remainder of 2002 related to the take-or-pay  provisions of the contract.  These
earnings related to the take-or-pay  provisions distort TIMET's operating income
percentages as there is no corresponding amount reported in TIMET's sales.

     TIMET's  results  in the first six  months  of 2002 also  includes  a $27.5
million  first  quarter  provision  for an other than  temporary  impairment  of
TIMET's  investment in the  convertible  preferred  securities of Special Metals
Corporation ("SMC"). In addition,  TIMET's effective income tax rate in the 2002
periods varies from the 35% U.S. federal statutory income tax rate because TIMET
has concluded it is not currently appropriate to recognize an income tax benefit
related  to  its  U.S.  losses  under  the  "more-likely-than-not"   recognition
criteria.

     As  previously  reported,  in March 2001,  TIMET was notified by one of its
customers that a product  manufactured  from standard grade titanium produced by
TIMET  contained  what has been  confirmed  to be a  tungsten  inclusion.  TIMET
accrued $3.3 million during 2001, and an additional  $200,000  during the second
quarter of 2002, for its best estimate of the most likely amount of loss it will
incur.  However, it does not represent the maximum possible loss, which TIMET is
not  presently  able to  estimate,  and the amount  accrued may be  periodically
revised in the future as more facts become known. As of June 30, 2002, TIMET has
received  claims  aggregating  approximately  $5 million,  and TIMET had settled
claims totaling $500,000.  Pending claims are being investigated and negotiated,
and TIMET  believes  certain of the claims are without  merit and can be settled
for less than the amount of the claim.  There is no assurance that all potential
claims  have yet been  submitted  to TIMET.  TIMET has filed suit  seeking  full
recovery from its silicon supplier for any liability TIMET might incur, although
no assurances  can be give that TIMET will  ultimately be able to recover all or
any portion of such amounts.  TIMET has not recorded any  recoveries  related to
this matter as of June 30, 2002.

     The economic  slowdown  that began in 2001 in the economies of the U.S. and
other  regions of the world  combined with the events of September 11, 2001 have
resulted  in  the  major  commercial  airframe  and  jet  engine   manufacturers
substantially reducing their forecast of engine and aircraft deliveries over the
next few years and their production levels in 2002. TIMET expects that aggregate
industry mill product  shipments will decrease in 2002 by  approximately  18% to
about 45,000  metric tons and that demand for mill  products for the  commercial
aerospace  sector  could  decline  by up to  40%  in  2002,  primarily  due to a
combination  of  reduced   aircraft   production   rates  and  excess  inventory
accumulated throughout the aerospace supply chain. Excess inventory accumulation
typically  leads to order  demand for  titanium  products  falling  below actual
consumption.  TIMET  believes that demand for titanium is likely to recover more
gradually than it previously anticipated,  based primarily on recent projections
of large commercial  aircraft  deliveries by The Airline  Monitor.  Based on The
Airline Monitor's current forecast and TIMET's projected changes in supply chain
inventory  levels,  TIMET  anticipates a cyclical  trough in titanium demand may
occur in 2003  with a  gradual  recovery  beginning  thereafter.  Adverse  world
events,  including  terrorist  activities  and conflicts in the Middle East, the
financial  health of airlines and economic  growth in the U.S. and other regions
of the  world,  could  significantly  and  adversely  affect  the  timing of the
commercial aerospace recovery.

     Although the current business  environment makes it particularly  difficult
to predict TIMET's future performance, TIMET expects sales revenue for the third
quarter of 2002 to range between $75 million and $85 million. Mill product sales
volumes are expected to be about 2,000 metric tons with melted product shipments
of about 600 metric  tons.  Interest  expense  should be about $1 million  while
minority interest on TIMET's Convertible Preferred Securities should approximate
$3.3 million. With these estimates, TIMET expects an operating loss in the third
quarter of 2002 before special items of between $4 million and $7 million, and a
net loss before special items of between $8 million and $12 million.

     TIMET expects its sales for all of 2002 will decline to approximately  $375
million, reflecting the combined effects of decreases in sales volume, softening
of market  selling  prices and changes in customer and product mix. Mill product
sales  volumes are  expected to decline  approximately  25%  relative to 2001 to
about 9,100  metric  tons,  and melted  product  sales  volumes are  expected to
decline by 40% to about 2,600 metric tons. The sales volumes  decline in 2002 is
principally driven by an anticipated  reduction in TIMET's commercial  aerospace
sales  volumes of about 35%  compared  to 2001,  partly  offset by sales  volume
growth to other markets.  Selling prices on new orders for titanium products are
expected  to  soften  throughout  2002.  However,   about  one-half  of  TIMET's
commercial  aerospace volumes are under long-term  agreements that provide TIMET
with price stability on that portion of its business.  Overall,  TIMET currently
expects to report an  operating  loss  before  special  items for all of 2002 of
between  $25  million  and $35  million in 2002,  and a net loss of between  $40
million and $50 million.

     In  addition to its  agreement  with  Boeing,  TIMET has  long-term  supply
agreements  with certain other major  aerospace  customers,  including,  but not
limited to,  Rolls-Royce plc, United  Technologies  Corporation (Pratt & Whitney
and related companies) and Wyman-Gordon  Company (a unit of Precision  Castparts
Corporation).  These agreements  initially became effective in 1998 and 1999 and
expire in 2007  through  2008,  subject to certain  conditions.  The  agreements
generally  provide  for (i) minimum  market  shares of the  customers'  titanium
requirements   or  firm   annual   volume   commitments   and   (ii)   fixed  or
formula-determined   prices  generally  for  at  least  the  first  five  years.
Generally,  the agreements  require TIMET's  service and product  performance to
meet  specified  criteria,  and they also  contain  a number of other  terms and
conditions  customary  in  transactions  of these  types.  In certain  events of
nonperformance by TIMET, the agreements may be terminated  early.  Additionally,
under a group of related agreements (which group represents approximately 15% of
TIMET's 2001 sales  revenue),  which currently have fixed prices that convert to
formula-derived  prices in 2004,  the customer may terminate the agreement as of
the end of 2003 if the effect of the initiation of formula-derived pricing would
cause  such  customer  "material  harm."  If any of such  agreements  were to be
terminated  by the customer on this basis,  it is possible  that some portion of
the business  represented  by that agreement  would continue on a  non-agreement
basis.  However,  the  termination  of one or  more of  such  agreements  by the
customer in such circumstances  could result in a material and adverse effect on
TIMET's business,  results of operations,  consolidated  financial  condition or
liquidity.

     As a  consequence  of  uncertainties  surrounding  both  the  titanium  and
commercial aerospace  industries and broader economic conditions,  TIMET expects
to take  actions to reduce its cost and working  capital  over the  remainder of
2002. TIMET plans to reduce the operating rate of its sponge production facility
to about 70% of capacity in the last half of the year, and it recently  targeted
an additional  reduction in its company-wide  employment levels of 10% to 15% by
year-end.  At June 30, 2002,  TIMET employed  approximately  2,250  individuals.
These actions could result in restructuring or other charges in 2002. TIMET also
believes  assessments of the recoverability of its long-lived  assets,  that may
also  result in charges  for asset  impairments,  could  occur in the balance of
2002.  TIMET  will  consider  all  relevant  factors in  determining  whether an
impairment exists. The timing and effect of these actions is somewhat uncertain,
and  accordingly  the  effect of such  items has not been  included  in  TIMET's
forecasts  outlined  above.  Such  potential  future  charges,  if any, could be
material to TIMET.

General corporate and other items

     General corporate interest and dividend income.  General corporate interest
and dividend income decreased in the second quarter and first six months of 2002
compared to the same  periods in 2001 due to a lower  average  level of invested
funds and  lower  average  yields.  Aggregate  general  corporate  interest  and
dividend  income is  currently  expected  to  continue  to be lower  during  the
remainder of 2002  compared to the same periods in 2001 due primarily to a lower
amount of funds available for investment and lower average interest rates.

     Legal settlement  gains. The legal settlement gains in the first six months
of 2002 relate to NL's first quarter  settlement  with certain former  insurance
carriers.  See  Note  12  to  the  Consolidated   Financial  Statements.   These
settlements,   similar  to  certain  previously-reported  NL  legal  settlements
recognized  during 2000 and 2001,  resolved  court  proceedings  in which NL had
sought  reimbursement  from the carriers for legal  defense  costs and indemnity
coverage for certain of its environmental remediation  expenditures.  No further
material settlements relating to litigation concerning environmental remediation
coverages are expected.

     Securities  transactions.  Securities  transactions  gains in the first six
months  of 2002  relate to the  first  quarter  disposal  of  certain  shares of
Halliburton  Company  common stock held by the Company that were  classified  as
trading securities. See Notes 3 and 12 to the Consolidated Financial Statements.
The remaining  Halliburton shares held by the Company are held in escrow for the
benefit  of the  holders  of the  Company's  LYONs  debt  obligation,  which are
exchangeable  at any time,  at the option of the  holder,  for such  Halliburton
shares.  Any  exchanges  of the LYONs in 2002 or  thereafter  would  result in a
securities transaction gain for financial reporting purposes.

     Other general  corporate  income items.  The $6.3 million foreign  currency
transaction gain in the second quarter of 2002 relates to the  extinguishment of
certain  intercompany  indebtedness  of NL. The gain on disposal of fixed assets
relates to the sale of certain  real estate held by Tremont.  See Note 12 to the
Consolidated Financial Statements.

     General corporate  expenses.  Net general corporate  expenses in the second
quarter of 2002 were slightly  lower than the second  quarter of 2001, as higher
environmental  and legal  expenses  of NL were more than offset by the effect of
lower  compensation-related  expenses of Tremont. Net general corporate expenses
in the first six months of 2002 were  higher  than the same  period in 2001,  as
higher  environmental  and  legal  expenses  of NL more  than  offset  the lower
compensation-related  expenses of Tremont. NL's $20 million of proceeds from the
disposal of its specialty  chemicals  business unit related to its agreement not
to  compete  in the  rheological  products  business  is being  recognized  as a
component of general  corporate  income  (expense)  ratably  over the  five-year
non-compete period ending in the first quarter of 2003 ($2 million recognized in
the  first  six  months  of 2001  and  2002).  See  Note 12 to the  Consolidated
Financial  Statements.  Net general corporate  expenses in the remainder of 2002
are currently  expected to continue to be somewhat  higher  compared to the same
periods in 2001.

     Interest  expense.  Interest expense in the second quarter of 2002 includes
$2.0  million  related to the loss on the early  extinguishment  of NL's  Senior
Secured Notes. See Note 9 to the Consolidated  Financial  Statements.  Excluding
this  amount,  interest  expense  declined  in the second  quarter and first six
months of 2002  compared  to the same  periods  in 2001 due  primarily  to lower
average  levels  of  outstanding  indebtedness  as well as  lower  average  U.S.
variable interest rates.  Assuming interest rates do not increase  significantly
from  year-end  2001  levels,  interest  expense  in the  remainder  of  2002 is
currently expected to continue to be somewhat lower compared to the same periods
in 2001 due to lower anticipated  interest rates on variable-rate  borrowings in
the U.S. and a lower average level of outstanding debt.

     Provision  for income  taxes.  The  principal  reasons  for the  difference
between the Company's  effective income tax rates and the U.S. federal statutory
income  tax  rates  are  explained  in  Note  11 to the  Consolidated  Financial
Statements.  Income tax rates vary by jurisdiction  (country and/or state),  and
relative  changes in the  geographic mix of the Company's  pre-tax  earnings can
result in fluctuations in the effective income tax rate.

     During the first six months of 2002,  NL reduced  its  deferred  income tax
asset valuation  allowance by approximately $3.0 million,  primarily as a result
of  utilization  of certain  income tax attributes for which the benefit had not
previously been recognized. In this regard, no income tax was recognized on NL's
$6.3 million general corporate  foreign currency  transaction gain, as NL offset
such income tax by utilizing certain income tax attributes, the benefit of which
had not previously been recognized. During the first six months of 2002, Tremont
increased  its  deferred  income  tax asset  valuation  allowance  (at the Valhi
consolidated  level) by a net $1.5 million  primarily  because Tremont concluded
certain  tax  attributes  do  not  currently  meet  the   "more-likely-than-not"
recognition criteria.

     As discussed in Note 14 to the Consolidated Financial Statements, effective
January 1, 2002,  the  Company no longer  recognizes  periodic  amortization  of
goodwill.  Under GAAP,  generally there is no income tax benefit  recognized for
financial reporting purposes attributable to goodwill amortization. Accordingly,
ceasing to periodically  amortize goodwill  beginning in 2002 contributed to the
reduction in the Company's overall effective income tax rate in 2002 as compared
to 2001.

     Minority interest.  See Note 13 to the Consolidated  Financial  Statements.
Minority   interest   in  NL's   subsidiaries   relates   principally   to  NL's
majority-owned  environmental management subsidiary, NL Environmental Management
Services,  Inc.  ("EMS").  EMS was  established  in  1998,  at  which  time  EMS
contractually assumed certain of NL's environmental  liabilities.  EMS' earnings
are based, in part, upon its ability to favorably  resolve these  liabilities on
an aggregate  basis. The shareholders of EMS, other than NL, actively manage the
environmental  liabilities  and  share in 39% of EMS'  cumulative  earnings.  NL
continues to consolidate EMS and provides accruals for the reasonably  estimable
costs for the settlement of EMS' environmental liabilities, as discussed below.

     As previously  reported,  Waste Control Specialists was formed by Valhi and
another entity in 1995. Waste Control Specialists assumed certain liabilities of
the other owner and such  liabilities  exceeded the carrying value of the assets
contributed  by the other  owner.  Since its  inception in 1995,  Waste  Control
Specialists  has  reported  aggregate  net  losses.  Consequently,  all of Waste
Control Specialists aggregate,  inception-to-date net losses have accrued to the
Company for financial reporting  purposes,  and all of Waste Control Specialists
future net income or net losses  will also  accrue to the  Company  until  Waste
Control  Specialists  reports  positive equity  attributable to the other owner.
Accordingly,  no minority  interest in Waste Control  Specialists' net assets or
net earnings (losses) is reported during the first six months of 2001 and 2002.

     In July 2002,  Valhi  proposed a merger of Valhi and  Tremont  pursuant  to
which  stockholders  of Tremont  (including  NL, to the extent of NL's ownership
interest in the Tremont shares held by Tremont Group),  other than Valhi,  would
receive  between 2 and 2.5 shares of Valhi common  stock for each Tremont  share
held.  See Note 2 to the  Consolidated  Financial  Statements.  There  can be no
assurance  that any such merger will be  completed  or completed on the proposed
terms.  If the merger is completed,  the Company would no longer report minority
interest in Tremont's net assets or net earnings (losses).

     Accounting  principles  not yet  adopted.  See Note 15 to the  Consolidated
Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES:

Consolidated cash flows

     Operating activities. Trends in cash flows from operating annual activities
(excluding the impact of significant asset  dispositions and relative changes in
assets  and  liabilities)  are  generally  similar  to trends  in the  Company's
earnings.  Changes in assets and liabilities generally result from the timing of
production, sales, purchases and income tax payments.

     Certain items included in the determination of net income are non-cash, and
therefore  such items have no impact on cash  flows from  operating  activities.
Non-cash items included in the determination of net income include depreciation,
depletion and amortization expense,  non-cash interest expense, asset impairment
charges  and  unrealized  securities  transactions  gains and  losses.  Non-cash
interest   expense  relates   principally  to  Valhi  and  NL  and  consists  of
amortization of original issue discount on certain indebtedness and amortization
of deferred  financing  costs.  In addition,  substantially  all of the proceeds
resulting from NL's legal  settlements in 2001 are shown as restricted cash, and
therefore  such   settlements  had  no  impact  on  cash  flows  from  operating
activities.

     Certain other items included in the determination of net income may have an
impact on cash flows from operating activities,  but the impact of such items on
cash  flows from  operating  activities  will  differ  from their  impact on net
income. For example, equity in earnings of affiliates will generally differ from
the amount of distributions received from such affiliates,  and equity in losses
of affiliates does not necessarily  result in a current cash outlay paid to such
affiliates.  The amount of periodic  defined  benefit  pension  plan expense and
periodic  OPEB  expense  depends  upon a number of  factors,  including  certain
actuarial assumptions,  and changes in such actuarial assumptions will result in
a change in the  reported  expense.  In  addition,  the amount of such  periodic
expense  generally  differs from the  outflows of cash  required to be currently
paid for such benefits.

     Certain  other items  included in the  determination  of net income have no
impact on cash flows from  operating  activities,  but such items do impact cash
flows  from  investing  activities  (although  their  impact on such cash  flows
differs from their impact on net income). For example, realized gains and losses
from the disposal of  available-for-sale  marketable  securities  and long-lived
assets are included in the  determination  of net income,  although the proceeds
from  any  such  disposal  are  shown  as  part  of cash  flows  from  investing
activities.

     Investing  and  financing  activities.  Approximately  60% of the Company's
consolidated capital expenditures in the first six months of 2002 relates to NL,
38%  relate to CompX and  substantially  all of the  remainder  relates to Waste
Control  Specialists.  Approximately  $2.2 million of NL's capital  expenditures
relates  to  the  ongoing  reconstruction  of  NL's  Leverkusen,   Germany  TiO2
production  facility  that was  damaged by fire  during  2001.  NL expects  such
reconstruction will be completed by the end of 2002. During the first six months
of 2002, NL purchased  $3.3 million of its common stock in market  transactions,
and NL purchased the EWI insurance brokerage services operations for $9 million.
See Note 2 to the Consolidated Financial Statements.

     During the first six months of 2002, (i) Valhi repaid a net $2.1 million of
its short-term demand loans from Contran, (ii) CompX repaid a net $19 million of
its  revolving  bank  credit  facility,  (iii)  NL  repaid  all of its  existing
short-term  notes payable  denominated in euros and Nowegian kroner ($53 million
when repaid) using  primarily  proceeds from borrowing ($39 million) under KII's
new revolving bank credit  facility and (iv) NL redeemed $194 million  principal
amount of its Senior  Secured Notes,  primarily  using the proceeds from the new
euro 285 million ($280 million when issued)  borrowing of KII. See Note 9 to the
Consolidated Financial Statements.

     At June 30, 2002,  unused credit available under existing credit facilities
approximated  $148.5  million,  which was comprised of $70 million  available to
CompX  under  its  revolving  credit  facility,  $42  million  available  to  NL
(primarily  under  KII's  new  revolving  credit  facility)  and  $36.5  million
available  to  Valhi  under  its  revolving  bank  credit  facility.  Provisions
contained  in certain of the  Company's  credit  agreements  could result in the
acceleration  of the applicable  indebtedness  prior to its stated  maturity for
reasons  other than  payment  defaults or defaults  from  failing to comply with
typical financial  covenants.  For example,  certain credit agreements allow the
lender to accelerate the maturity of the  indebtedness  upon a change of control
(as  defined)  of the  borrower.  The terms of  Valhi's  revolving  bank  credit
facility could require Valhi to either reduce  outstanding  borrowings or pledge
additional  collateral  in the  event  the fair  value of the  existing  pledged
collateral falls below specified levels. In addition,  certain credit agreements
could  result  in  the  acceleration  of all or a  portion  of the  indebtedness
following a sale of assets outside the ordinary  course of business.  Other than
operating  leases,  neither Valhi nor any of its  subsidiaries or affiliates are
parties to any off-balance sheet financing arrangements.

Chemicals - NL Industries

     At June 30, 2002, NL had cash,  cash  equivalents  and marketable  debt and
other securities of $251 million,  including restricted balances of $75 million,
and NL had $42  million  available  for  borrowing  (primarily  under  KII's new
revolving credit facility).

     NL's board of  directors  has  authorized  NL to purchase up to 4.5 million
shares of its common stock in open market or  privately-negotiated  transactions
over an unspecified  period of time. Through June 30, 2002, NL had purchased 3.5
million of its shares  pursuant to such  authorizations  for an aggregate of $57
million,  including  approximately 228,000 shares purchased during the first six
months of 2002 for an aggregate of $3.3 million.

     In March 2002,  NL  redeemed  $25  million  principal  amount of its Senior
Secured Notes, and in June 2002 NL redeemed the remaining $169 million principal
amount of such Senior Secured Notes.  See Note 9 to the  Consolidated  Financial
Statements.

     Certain of NL's U.S.  and non-U.S.  tax returns are being  examined and tax
authorities have or may propose tax deficiencies,  including  non-income related
items and interest.  NL's 1998 U.S. federal income tax return is currently being
examined by the U.S.  tax  authorities,  and NL has granted an  extension of the
statute of limitations for assessments until September 30, 2003. While EMS' 1998
U.S.  federal  income tax return is not currently  being  examined,  EMS, at the
request  of the U.S.  tax  authorities,  has also  granted an  extension  of the
statute of limitations for assessment  until September 30, 2003 for such return.
Based on the course of the examination to date, NL anticipates that the U.S. tax
authorities  may  propose  a  substantial   tax  deficiency.   NL  has  received
preliminary  tax  assessments  for the years 1991 to 1997 from the  Belgian  tax
authorities   proposing  tax  deficiencies,   including  related  interest,   of
approximately  euro 10.4 million ($10  million at June 30,  2002).  NL has filed
protests to the  assessments  for the years 1991 to 1997.  NL is in  discussions
with the Belgian tax authorities and believes that a significant  portion of the
assessments  are without merit. No assurance can be given that these tax matters
will be resolved in NL's favor in view of the inherent uncertainties involved in
court  proceedings.  NL believes  that it has  provided  adequate  accruals  for
additional taxes and related  interest expense which may ultimately  result from
all such  examinations  and  believes  that  the  ultimate  disposition  of such
examinations  should  not have a  material  adverse  effect on its  consolidated
financial position, results of operations or liquidity.

     NL has been named as a defendant,  potentially  responsible party, or both,
in  a  number  of  legal  proceedings  associated  with  environmental  matters,
including waste disposal  sites,  mining  locations and facilities  currently or
previously owned, operated or used by NL, certain of which are on the U.S. EPA's
Superfund National Priorities List or similar state lists. On a quarterly basis,
NL evaluates  the  potential  range of its  liability at sites where it has been
named as a PRP or  defendant,  including  sites for which EMS has  contractually
assumed NL's  obligation.  NL believes it has provided  adequate  accruals ($102
million at June 30, 2002) for reasonably  estimable  costs of such matters,  but
NL's  ultimate  liability  may be  affected  by a number of  factors,  including
changes in  remedial  alternatives  and costs and the  allocation  of such costs
among PRPs. It is not possible to estimate the range of costs for certain sites.
The  upper  end of the range of  reasonably  possible  costs to NL for sites for
which it is possible to  estimate  costs is  approximately  $150  million.  NL's
estimates of such  liabilities  have not been  discounted to present value,  and
other than certain  previously-reported  settlements  with respect to certain of
NL's former insurance carriers,  NL has not recognized any insurance recoveries.
No assurance can be given that actual costs will not exceed  accrued  amounts or
the upper end of the range for sites for which  estimates have been made, and no
assurance  can be given that costs will not be incurred with respect to sites as
to which no estimate  presently  can be made. NL is also a defendant in a number
of legal  proceedings  seeking  damages for personal  injury and property damage
allegedly  arising  from  the  sale  of lead  pigments  and  lead-based  paints,
including  cases in which  plaintiffs  purport  to  represent  a class and cases
brought on behalf of government entities. NL has not accrued any amounts for the
pending lead pigment and lead-based paint litigation. There is no assurance that
NL will not incur future liability in respect of this pending litigation in view
of the inherent  uncertainties involved in court and jury rulings in pending and
possible  future cases.  However,  based on, among other things,  the results of
such  litigation  to  date,  NL  believes  that the  pending  lead  pigment  and
lead-based paint litigation is without merit. Liability that may result, if any,
cannot   reasonably  be  estimated.   In  addition,   various   legislation  and
administrative  regulations  have,  from time to time,  been enacted or proposed
that seek to impose various  obligations on present and former  manufacturers of
lead  pigment and  lead-based  paint with  respect to asserted  health  concerns
associated  with  the use of  such  products  and to  effectively  overturn  the
precedent  set by court  decisions in which NL and other  pigment  manufacturers
have been successful.  Examples of such proposed legislation include bills which
would permit civil  liability for damages on the basis of market  share,  rather
than  requiring  plaintiffs  to prove that the  defendant's  product  caused the
alleged  damage,  and bills  which  would  revive  actions  currently  barred by
statutes of limitations. NL currently believes the disposition of all claims and
disputes,  individually or in the aggregate,  should not have a material adverse
effect  on  its  consolidated  financial  position,  results  of  operations  or
liquidity. There can be no assurance that additional matters of these types will
not arise in the future.

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

Component products - CompX International

     CompX expects to renew its existing revolving bank credit facility prior to
its expiration in February 2003.  There can be no assurance  however,  that such
renewal will occur, or that CompX will be able to obtain  comparable terms under
the new credit facility.

     CompX periodically evaluates its liquidity  requirements,  alternative uses
of  capital,  capital  needs and  available  resources  in view of,  among other
things, its capital  expenditure  requirements,  capital resources and estimated
future operating cash flows. As a result of this process,  CompX has in the past
and may in the future seek to raise additional capital, refinance or restructure
indebtedness,   issue  additional   securities,   modify  its  dividend  policy,
repurchase  shares of its common  stock or take a  combination  of such steps or
other steps to manage its liquidity and capital resources.  In the normal course
of business,  CompX may review  opportunities  for  acquisitions,  divestitures,
joint  ventures  or  other  business  combinations  in  the  component  products
industry.  In the  event of any  such  transaction,  CompX  may  consider  using
available  cash,   issuing   additional  equity  securities  or  increasing  the
indebtedness of CompX or its subsidiaries.

Waste management - Waste Control Specialists

     At June 30, 2002,  Waste  Control  Specialists'  indebtedness,  as amended,
consists  principally  of (i) a $4.6 million term loan due in November  2004 and
(ii) $15.6 million of other  borrowings  under a $16.5 million  revolving credit
facility  that  also  matures  in 2004.  All of such  indebtedness  is owed to a
wholly-owned  subsidiary of Valhi, and is therefore  eliminated in the Company's
consolidated   financial  statements.   Waste  Control  Specialists  may  borrow
additional  amounts  during  the  remainder  of 2002  under  its  $16.5  million
revolving credit facility.

TIMET

     At June 30, 2002, TIMET had net debt of approximately  $13.0 million ($20.4
million of debt and $7.4  million of cash and  equivalents).  At June 30,  2002,
TIMET had approximately $139 million available for borrowing under its worldwide
credit  facilities.  TIMET's U.S. credit  facility,  a $125 million  asset-based
revolving  credit  agreement,  expires  in  February  2003.  TIMET is  currently
negotiating  with its lender to extend the  maturity  date of this  agreement on
substantially  similar terms, although there can be no assurance that TIMET will
be able to renew the facility on such terms.  The U.S. credit  agreement  allows
the lender to modify the borrowing base formulas at its  discretion,  subject to
certain  conditions.  In this  regard,  during the second  quarter of 2002,  the
lenders  reassessed  its  borrowing-base  formulas and reduced the rate at which
TIMET may borrow  against its  inventory  and  equipment.  This  change  reduced
TIMET's U.S. borrowing availability by about $7 million. In the event the lender
exercises  such  discretion  in the  future,  such  event  could have a material
adverse impact on TIMET's liquidity.

     On March 27, 2002, SMC and its U.S.  subsidiaries filed voluntary petitions
for  reorganization  under Chapter 11 of the U.S.  Bankruptcy Code. As a result,
TIMET,  with the  assistance of an external  valuation  specialist,  undertook a
further  assessment of its  investment  in SMC and recorded an additional  $27.5
million  impairment  charge  to  general  corporate  expense  for an other  than
temporary  decline in the fair vale of its investment in SMC,  reducing  TIMET's
carrying amount of its investment in SMC to zero.

     TIMET periodically evaluates its liquidity requirements,  capital needs and
availability of resources in view of, among other things,  its alternative  uses
of capital, its debt service requirements,  the cost of debt and equity capital,
and estimated  future  operating cash flows. As a result of this process,  TIMET
has in the past and may in the future seek to raise additional  capital,  modify
its common and preferred dividend  policies,  restructure  ownership  interests,
incur,  refinance  or  restructure  indebtedness,  repurchase  shares of capital
stock,  sell  assets,  or take a  combination  of such  steps or other  steps to
increase or manage its liquidity and capital resources.  In the normal course of
business, TIMET investigates,  evaluates,  discusses and engages in acquisition,
joint  venture,   strategic   relationship   and  other   business   combination
opportunities  in the titanium,  specialty  metal and other  industries.  In the
event of any  future  acquisition  or joint  venture  opportunities,  TIMET  may
consider using then-available liquidity,  issuing equity securities or incurring
additional indebtedness.

Tremont Corporation

     Tremont is  primarily a holding  company  which,  at June 30,  2002,  owned
approximately  39% of TIMET and 21% of NL. At June 30, 2002, the market value of
the 12.3  million  shares  of TIMET  and the 10.2  million  shares of NL held by
Tremont was approximately $43 million and $156 million, respectively.

     As  previously  reported,  in July 2000  Tremont  entered  into a voluntary
settlement  agreement with the Arkansas Department of Environmental  Quality and
certain other potentially responsible parties ("PRPs") pursuant to which Tremont
and  the  other  PRPs  will  undertake  certain  investigatory  and  remediation
activities  at a former  mining  site  located in Hot Spring  County,  Arkansas.
Tremont currently believes that it has accrued adequate amounts ($4.6 million at
June  30,  2002)  to  cover  its  share of  probable  and  reasonably  estimable
environmental  obligations.  Tremont expects to spend $1.8 million in the second
half of 2002 for remediation efforts related to this site.

     Tremont has  received a demand from  Halliburton  to assume the defense of,
and  indemnify  Halliburton  with  respect  to, the alleged  liability  of Atlas
Bradford  Corporation  as one of several PRPs in  connection  with a Texas State
Superfund Site known as the Force Road Oil and Vacuum Truck Company Site located
in Arcola,  Texas.  Atlas Bradford  allegedly disposed of wastes from its Bryan,
Texas  petroleum  services  operations at the Force Road Site. As part of a 1990
restructuring resulting in the separation of Tremont from Baroid Corporation,  a
wholly-owned  subsidiary  of  Tremont  received  title  to the  Bryan  property.
Halliburton  is the  successor  to Baroid.  Tremont  has  declined to assume the
defense of the Force Road Site matter and has rejected  Halliburton's  indemnity
claim with respect  thereto.  Tremont  believes  that any liability in the Force
Road Site matter represents an obligation  retained by Baroid in connection with
its  historical  petroleum  services  business.  At  present,   Tremont  has  no
information that would enable it to determine whether or not it might eventually
have any liability for the Force Road Site, or what the potential magnitude,  if
any, of such  liability  might be. Tremont  intends to vigorously  defend itself
against any and all  allegations of such liability in this matter.  Tremont sold
the Bryan property in 1994.  Tremont's  Chairman and Chief Executive  Officer is
also a member of the board of  directors  of  Halliburton  and intends to recuse
himself from any involvement in this matter.

     Tremont   records   liabilities   related  to   environmental   remediation
obligations  when  estimated  future  expenditures  are probable and  reasonably
estimable.  Such accruals are adjusted as further  information becomes available
or circumstances  change.  Estimated  future  expenditures are not discounted to
their  present  value.  It is not  possible to  estimate  the range of costs for
certain sites. The imposition of more stringent  standards or requirements under
environmental  laws or  regulations,  the results of future testing and analysis
undertaken by Tremont at its non-operating  facilities,  or a determination that
Tremont is potentially  responsible  for the release of hazardous  substances at
other  sites,  could  result in  expenditures  in excess  of  amounts  currently
estimated to be required for such matters. No assurance can be given that actual
costs will not exceed  accrued  amounts or that costs will not be incurred  with
respect to sites as to which no problem is currently  known or where no estimate
can  presently  be made.  Further,  there can be no  assurance  that  additional
environmental matters will not arise in the future.  Environmental exposures are
difficult to assess and estimate for numerous  reasons  including the complexity
and differing interpretations of governmental  regulations;  the number of PRPs,
their  financial  capabilities,  and the  allocation  of costs among  PRPs;  the
multiplicity of possible solutions; and the years of investigatory, remedial and
monitoring  activity  required.  It is possible that future  developments  could
adversely affect Tremont's business, results of operations,  financial condition
or liquidity.

     In February 2001,  Tremont entered into a $13.4 million reducing  revolving
credit  facility  with  EMS,  NL's   majority-owned   environmental   management
subsidiary.  Such  intercompany  loan  between  EMS and Tremont  ($12.2  million
outstanding  at June 30,  2002),  collateralized  by 10.2  million  shares of NL
common stock owned by Tremont, is eliminated in Valhi's  consolidated  financial
statements.

     Tremont's loan from EMS and its dividends  from NL are currently  Tremont's
primary sources of cash at the Tremont parent company level. Tremont's principal
cash uses at its parent  company level are dividends,  administrative  expenses,
interest on the loan from EMS and  payments  related to its  previously-reported
environmental  remediation  efforts.  The loan from EMS matures  March 31, 2003.
Tremont  believes  that its cash  outflows at the Tremont  parent  company level
during the balance of 2002 will increase relative to the first half of 2002, and
that it will be required to increase its parent company cash resources  prior to
December 31, 2002 in order to meet its near term obligations, even after Tremont
parent company receives a $1 million  dividend from its  wholly-owned  insurance
subsidiary  later in the year. To increase its liquidity,  Tremont has requested
as amendment to the terms of its loan from EMS to, among other things,  increase
the amount of  borrowing  availability  and extend the maturity  date.  However,
Tremont  understands  that there may be certain  regulatory  issues that will be
required  to be  satisfactorily  addressed  in  order  for the  amendment  to be
successfully  completed,  and such  amendment  would require the approval of the
independent  directors of both Tremont and NL.  Tremont has also  discussed  the
possibility  of a loan from  Contran  with  officers of  Contran.  Based on such
discussions,  Tremont believes such a loan from Contran could, if necessary,  be
achieved on mutually agreeable terms.  Tremont has other alternatives  available
to either  conserve or increase its  liquidity  including,  among other  things,
borrowings  collateralized  by Tremont's common stock of TIMET, the reduction or
suspension of Tremont's quarterly dividend payments and the sale, in whole or in
part, of assets,  including  Tremont's  investments in TIMET and NL. There is no
assurance  that  any of  these  options  or  alternatives  can  be  successfully
completed.

     In April 2002,  Tremont reached an agreement with the U.S. Internal Revenue
Service  ("IRS")  pursuant to which the IRS's  previously-reported  $8.3 million
assessment related to Tremont's 1998 federal income tax return was settled.  The
settlement  resulted in no additional cash income tax payment by Tremont but did
result in a  reduction  of the  amount of  Tremont's  U.S.  net  operating  loss
carryforwards  that arose in  periods  prior to the time when  Tremont  became a
member of the same U.S. federal income tax group of which Valhi is a member.

     Valhi has  proposed  a merger  pursuant  to which  Tremont  would  become a
wholly-owned  subsidiary  of  Valhi.  See Note 2 to the  Consolidated  Financial
Statements.

     Tremont periodically  evaluates its liquidity  requirements,  capital needs
and  availability  of resources in view of, among other things,  its alternative
uses of  capital,  its debt  service  requirements,  the cost of debt and equity
capital and estimated  future operating cash flows. As a result of this process,
Tremont  has in the past and may in the  future  seek to obtain  financing  from
related parties or third parties, raise additional capital,  modify its dividend
policy,  restructure ownership interests of subsidiaries and affiliates,  incur,
refinance or  restructure  indebtedness,  purchase  shares of its common  stock,
consider  the  sale  of  interests  in  subsidiaries,   affiliates,   marketable
securities or other assets,  or take a combination  of such steps or other steps
to increase or manage liquidity and capital  resources.  In the normal course of
business, Tremont may investigate,  evaluate, discuss and engage in acquisition,
joint venture and other business combination opportunities.  In the event of any
future  acquisition or joint venture  opportunities,  Tremont may consider using
then-available cash, issuing equity securities or incurring indebtedness.

General corporate - Valhi

     Valhi's  operations are conducted  primarily  through its subsidiaries (NL,
CompX, Tremont and Waste Control  Specialists).  Accordingly,  Valhi's long-term
ability to meet its parent company level  corporate  obligations is dependent in
large  measure  on the  receipt of  dividends  or other  distributions  from its
subsidiaries.  NL increased its quarterly  dividend from $.035 per share to $.15
per share in the first quarter of 2000,  and NL further  increased its quarterly
dividend to $.20 per share in the fourth  quarter of 2000.  At the current  $.20
per share  quarterly rate, and based on the 30.1 million NL shares held by Valhi
at June 30, 2002,  Valhi would receive  aggregate  annual  dividends  from NL of
approximately   $24.1  million.   Tremont  Group,   Inc.  owns  80%  of  Tremont
Corporation.  Tremont  Group is  owned  80% by  Valhi  and 20% by NL.  Tremont's
quarterly dividend is currently $.07 per share. At that rate, and based upon the
5.1 million  Tremont  shares owned by Tremont  Group at June 30,  2002,  Tremont
Group would receive  aggregate  annual  dividends from Tremont of  approximately
$1.4 million.  Tremont Group intends to  pass-through  the dividends it receives
from Tremont to its shareholders  (Valhi and NL). Based on Valhi's 80% ownership
of Tremont  Group,  Valhi would  receive $1.2 million in annual  dividends  from
Tremont  Group as a  pass-through  of Tremont  Group's  dividends  from Tremont.
CompX's  quarterly  dividend is currently  $.125 per share. At this current rate
and based on the 10.4 million  CompX  shares held by Valhi and its  wholly-owned
subsidiary Valcor at June 30, 2002,  Valhi/Valcor would receive annual dividends
from  CompX  of  $5.2  million.  Various  credit  agreements  to  which  certain
subsidiaries  or affiliates  are parties  contain  customary  limitations on the
payment  of  dividends,  typically  a  percentage  of net  income or cash  flow;
however,  such restrictions in the past have not significantly  impacted Valhi's
ability  to  service  its  parent  company  level  obligations.  Valhi  has  not
guaranteed any  indebtedness of its  subsidiaries  or affiliates.  To the extent
that one or more of Valhi's  subsidiaries  were to become unable to maintain its
current  level  of  dividends,  either  due  to  restrictions  contained  in the
applicable  subsidiary's credit agreements or otherwise,  Valhi parent company's
liquidity  could  become  adversely  impacted.  In such an  event,  Valhi  might
consider   reducing  or  eliminating  its  dividend  or  selling   interests  in
subsidiaries or other assets.

     At June 30,  2002,  Valhi had $6.5  million  of parent  level cash and cash
equivalents,  had $35 million of outstanding borrowings under its revolving bank
credit  agreement and had $22.5  million of  short-term  demand loans payable to
Contran.  In addition,  Valhi had $36.5 million of borrowing  availability under
its bank credit facility. During the first quarter of 2002, Valhi sold in market
transactions 515,000 shares of Halliburton common stock that had been classified
as trading  securities for an aggregate of $8.7 million,  and used a majority of
the proceeds to reduce its outstanding  borrowings from Contran.  In January and
February  2002,  the size of Valhi's bank credit  facility  was  increased by an
aggregate of $17.5 million to $72.5 million.

     Valhi's LYONs do not require current cash debt service.  Exchanges of LYONs
for  Halliburton  stock result in the Company  reporting  income  related to the
disposition of the Halliburton stock for both financial reporting and income tax
purposes,  although no cash  proceeds are generated by such  exchanges.  Valhi's
potential  cash income tax liability  that would have been triggered at June 30,
2002,  assuming  exchanges of all of the outstanding LYONs for Halliburton stock
at such date, was approximately $9 million.

     At  June  30,  2002,  the  LYONs  had  an  accreted  value   equivalent  to
approximately  $42.90  per  Halliburton  share,  and  the  market  price  of the
Halliburton  common  stock was  $15.94 per share.  The  LYONs,  which  mature in
October  2007,  are  redeemable at the option of the LYON holder in October 2002
for an amount equal to $636.27 per $1,000  principal  amount at maturity,  or an
aggregate of $27.4 million.  Such October 2002 redemption price is equivalent to
about $44 per Halliburton share. If the market value of Halliburton common stock
equals or exceeds $44 per share in October  2002,  the Company does not expect a
significant  amount of LYONs would be tendered to the Company for  redemption at
that date. To the extent the Company was required to redeem the LYONs in October
2002 for cash and the market price of  Halliburton  was less than $44 per share,
the  Company  would  likely sell the  Halliburton  shares  underlying  the LYONs
tendered  in order to raise a portion  of the cash  redemption  price due to the
LYON holder,  and the Company would be required to use other resources to makeup
the shortfall due to the LYONs holder.

     During calendar 2001,  holders  representing $92.2 million principal amount
at maturity  exchanged  their LYONs debt  obligation  for shares of  Halliburton
common stock.  Also during  calendar  2001,  $50.4 million  principal  amount at
maturity of LYONs were  redeemed  by the Company for cash at various  redemption
prices equal to the  accreted  value of the LYONs on the  respective  redemption
dates. Valhi may consider additional partial redemptions or a full redemption of
the remaining notes based on future market conditions and other  considerations.
There can be no assurance, however, that Valhi will pursue an additional partial
redemption or a full redemption of the notes.

     The terms of The  Amalgamated  Sugar  Company LLC provide for annual  "base
level" of cash dividend distributions (sometimes referred to distributable cash)
by the LLC of $26.7  million,  from  which  the  Company  is  entitled  to a 95%
preferential share.  Distributions from the LLC are dependent, in part, upon the
operations of the LLC. The Company records dividend  distributions  from the LLC
as income upon  receipt,  which is the same month in which they are  declared by
the LLC. To the extent the LLC's  distributable cash is below this base level in
any given year, the Company is entitled to an additional 95% preferential  share
of any future  annual LLC  distributable  cash in excess of the base level until
such shortfall is recovered.  Based on the LLC's current  projections  for 2002,
Valhi currently  expects that  distributions  received from the LLC in 2002 will
approximate  its debt service  requirements  under its $250  million  loans from
Snake River Sugar Company.


     Certain covenants  contained in Snake River's third-party senior debt allow
Snake River to pay periodic installments of debt service payments (principal and
interest) under Valhi's $80 million loan to Snake River prior to its maturity in
2010, and such loan is subordinated to Snake River's third-party senior debt. At
June 30, 2002, the accrued and unpaid  interest on the $80 million loan to Snake
River aggregated  $25.3 million.  Such accrued and unpaid interest is classified
as a noncurrent asset at June 30, 2002. The Company  currently  believes it will
ultimately  realize  both the $80 million  principal  amount and the accrued and
unpaid  interest,  whether through cash generated from the future  operations of
Snake  River  and the LLC or  otherwise  (including  any  liquidation  of  Snake
River/LLC).  Following the repayment of Snake River's third-party senior debt in
April 2009, Valhi believes it will receive  significant debt service payments on
its loan to Snake River as the cash flows that Snake River previously would have
been using to fund debt service on its third-party senior debt ($14.5 million in
2002) would then become  available,  and would be  required,  to be used to fund
debt  service  payments on its loan from Valhi.  Prior to the  repayment  of the
third-party  senior debt,  Snake River might also make debt service  payments to
Valhi, if permitted by the terms of the senior debt.

     The Company  may, at its  option,  require the LLC to redeem the  Company's
interest in the LLC  beginning in 2010,  and the LLC has the right to redeem the
Company's  interest  in the LLC  beginning  in  2027.  The  redemption  price is
generally $250 million plus the amount of certain undistributed income allocable
to the  Company.  In the  event  the  Company  requires  the LLC to  redeem  the
Company's  interest  in the LLC,  Snake  River has the right to  accelerate  the
maturity of and call Valhi's $250 million loans from Snake River.  Redemption of
the Company's  interest in the LLC would result in the Company  reporting income
related to the disposition of its LLC interest for both financial  reporting and
income tax purposes.  However, because of Snake River's ability to call its $250
million loans to Valhi upon redemption of the Company's interest in the LLC, the
net cash proceeds  (after  repayment of the debt) generated by redemption of the
Company's  interest  in the LLC could be less than the  income  taxes that would
become payable as a result of the disposition.

     The Company routinely  compares its liquidity  requirements and alternative
uses of capital against the estimated  future cash flows to be received from its
subsidiaries,  and the estimated sales value of those units. As a result of this
process,  the  Company  has in the  past  and may in the  future  seek to  raise
additional   capital,   refinance  or   restructure   indebtedness,   repurchase
indebtedness in the market or otherwise,  modify its dividend policies, consider
the sale of interests in subsidiaries,  affiliates,  business units,  marketable
securities or other assets,  or take a combination of such steps or other steps,
to increase  liquidity,  reduce  indebtedness and fund future  activities.  Such
activities have in the past and may in the future involve related companies.

     The  Company  and  related  entities  routinely  evaluate  acquisitions  of
interests in, or combinations  with,  companies,  including  related  companies,
perceived by management to be undervalued in the  marketplace.  These  companies
may or may  not be  engaged  in  businesses  related  to the  Company's  current
businesses.  The Company intends to consider such acquisition  activities in the
future and, in connection with this activity,  may consider  issuing  additional
equity   securities  and  increasing  the  indebtedness  of  the  Company,   its
subsidiaries and related  companies.  From time to time, the Company and related
entities  also evaluate the  restructuring  of ownership  interests  among their
respective subsidiaries and related companies.






         Part II. OTHER INFORMATION


Item 1.  Legal Proceedings.

     Reference is made to the 2001 Annual Report and prior 2002 periodic reports
for descriptions of certain legal proceedings.

     In late July 2002,  three  separate  complaints  were filed in the Court of
Chancery of the State of Delaware, New Castle County, against Tremont, Valhi and
members of Tremont's board of directors (Crandon Capital Partners,  et al. v. J.
Landis Martin,  et al., CA No. 19785-NC,  Andrew Neyman v. J. Landis Martin,  et
al., CA No. 19787-NC, and Herman M. Weisman Revocable Trust v. J. Landis Martin,
et al., CA No.  19792-NC).  The complaints,  purported class actions,  generally
allege,  among other things,  that the terms of the proposed merger of Valhi and
Tremont are unfair,  and that defendants  have violated their fiduciary  duties.
The complaints seek, among other things, an order enjoining  consummation of the
proposed merger and the award of unspecified damages,  including attorney's fees
and  other  costs.  The  Company  believes,  and  understands  each of the other
defendants  believe,  that the  complaints  are without  merit,  and the Company
intends,  and understands  that each of the other defendants  intend,  to defend
against the actions vigorously.

     In re:  Lead Paint  Litigation  (Superior  Court of New  Jersey,  Middlesex
County,  Case Code 702). Two additional  municipalities  have filed suit in this
previously-reported  case.  NL  has  moved  to  dismiss  all  claims  of  all 25
municipalities.

     Brownsville Independent School District v. Lead Industries Association,  et
al. (District Court of Cameron County,  Texas, No.  2002-052081 B). In May 2002,
NL was served with a complaint seeking compensatory and punitive damages jointly
and severally  from the former lead pigment  manufacturers  and LIA for property
damage. NL has denied all allegations of liability.

     Spring Branch Independent  School District v. Lead Industries  Association,
et al. (District Court of Harris County,  Texas, No. 2000-31175).  In June 2002,
the trial court  granted NL's motion for summary  judgment.  The time for appeal
has not yet expired.

     City of Milwaukee v. NL Industries,  Inc., and Mautz Paint (Circuit  Court,
Civil Division,  Milwaukee County, Wisconsin, Case No. 01CV003066). A trial date
of October 27, 2003 has been set.

     Smith,  et al. v. Lead  Industries  Association,  et al. (Circuit Court for
Baltimore City, Maryland, Case No. 24-C-99-004490). A trial date of July 7, 2003
for the first of the four plaintiff families has been set.

     Quitman  County School  District v. Lead  Industries  Association,  et al.,
(Circuit Court of Quitman County, Mississippi,  Case No. 2001-0106).  Defendants
removed this case to federal  court.  In July 2002,  the United States  District
Court for the Northern  District of  Mississippi  denied  plaintiff's  motion to
remand the case to state court, and the case will remain pending in that federal
court as case number 2:02CV004-P-B.

     El Paso Independent School District v. Lead Industries Association, et al.,
(District Court of El Paso County,  Texas (No.  2002-2675)).  In August 2002, NL
was served with a complaint  seeking  compensatory and exemplary damages from NL
and twelve  other former lead pigment  and/or  paint  manufacturers  for alleged
property  damages  due to the  presence  of lead paint in the school  district's
buildings.   The  complaint   alleges  product   liability,   strict  liability,
negligence,  fraudulent  misrepresentation,   breach  of  warranties,  statutory
deceptive  trade  practices,  conspiracy,  fraud,  concert of action,  exemplary
damages, and indemnity causes of action. The time for NL to answer the complaint
has not yet expired.

     The  parties  in the  previously-reported  Brownsville  Independent  School
District,  Liberty  Independent  School  District,  Houston  Independent  School
District,  and Harris County, Texas cases have reached an agreement in principle
to abate,  or stay,  those cases pending  appellate  review of the trial court's
dismissal of the Spring Branch Independent School District case or certain other
events.  The agreement is subject to  completion  and to approval by the various
courts involved.

     Pulliam   v.   NL   (Superior   Court,   Marion   County,    Indiana,   No.
49F12-0104-CT-001301).  In May 2002, the court granted NL's motion to strike the
plaintiffs' allegations that the case should be certified as a class action.

     Dew, et al. v. Bill Richardson, et al. (U.S. District Court for the Western
District of Kentucky, No. 5:00CV-221-M). NL and NLO, Inc. answered the complaint
in this  previously-reported  case  in May  2002,  denying  all  allegations  of
wrongdoing and liability. Pre-trial proceedings and discovery continue.

     United  States of America v. NL  Industries,  Inc. et al.,  (U.S.  District
Court for the Southern District of Illinois,  No. 91-CV00578).  In July 2002, NL
executed a consent  decree  with the United  States in this  previously-reported
matter,  and NL is awaiting the  execution  of the consent  decree by the United
States. The decree embodies the previously-reported  agreement in principle with
the United States  pursuant to which NL will pay  approximately  $31.5  million,
including $1 million in penalties, to settle its liabilities at this site.

     NL has  received a request  from the U.S.  EPA with  respect to the on-site
portion of the  previously-reported  clean-up at NL's formerly-owned facility in
Chicago,  Illinois,  requesting that NL perform  additional  work. NL intends to
discuss the request with the U.S. EPA.

     Since the  filing of the  Company's  Quarterly  Report on Form 10-Q for the
quarter  ended  March 31,  2002,  NL has been named as a  defendant  in asbestos
and/or silica cases in various  jurisdictions brought on behalf of approximately
3,575 additional  personal injury claimants.  Included in the foregoing total is
one case in Mississippi  state court involving  approximately  3,005  plaintiffs
(Lawrence Graves, et al. vs. Monstanto  Company,  et al., Circuit Court,  Second
Judicial District, Jones County, Mississippi, Civil Action No. 2002-141-CV4).

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

        (a)    Exhibits

               3.1    -       Amended  and  Restated  Bylaws  of the  Registrant
                              dated as of August 9, 2002.

               10.1   -       Indenture  dated  June 28,  2002,  between  Kronos
                              International,  Inc. and The Bank of New York,  as
                              Trustee,  governing Kronos  International's 8.875%
                              Senior  Secured Notes Due 2009,  including form of
                              the notes, - incorporated  by reference to Exhibit
                              4.1 to NL's  Quarterly  Report on Form 10-Q  (File
                              No. 1-640) for the quarter ended June 30, 2002.

               10.2   -       Deposit  Agreement  dated  June 28,  2002 among NL
                              Industries,  Inc.  and JP Morgan  Chase  Bank,  as
                              trustee - incorporated by reference to Exhibit 4.9
                              to NL's  Quarterly  Report on Form 10-Q  (File No.
                              1-640) for the quarter ended June 30, 2002.

               10.3   -       Satisfaction and Discharge of Indenture,  Release,
                              Assignment and Transfer, dated June 28, 2002, made
                              by JP Morgan Chase Bank  pursuant to the Indenture
                              for NL  Industries,  Inc.'s 11 3/4% Senior Secured
                              Notes  due 2003 -  incorporated  by  reference  to
                              Exhibit 4.10 to NL's Quarterly Report on Form 10-Q
                              (File No.  1-640) for the  quarter  ended June 30,
                              2002.

               10.4   -       Purchase   and  Sale   Agreement   (for   titanium
                              products)  between  The  Boeing  Company,   acting
                              through its division, Boeing Commercial Airplanes,
                              and Titanium  Metals  Corporation  (as amended and
                              restated  effective April 19, 2001) - incorporated
                              by  reference  to  Exhibit  No.  10.2  to  TIMET's
                              Quarterly  Report on Form 10-Q (File No.  0-28538)
                              for the quarter ended June 30, 2002.

               10.5   -       Purchase and Sale  Agreement  between  Rolls-Royce
                              plc and Titanium Metals Corporation dated December
                              22, 1998 -  incorporated  by  reference to Exhibit
                              No. 10.3 to TIMET's  Quarterly Report on Form 10-Q
                              (File No.  0-28538) for the quarter ended June 30,
                              2002.

               10.6   -       Administrative  Settlement  for  Interim  Remedial
                              Measures, Site Investigation and Feasibility Study
                              dated July 7, 2000 between the Arkansas Department
                              of  Environmental   Quality,   Halliburton  Energy
                              Services,   Inc.,  M-I,  LLC  and  TRE  Management
                              Company -  incorporated  by  reference  to Exhibit
                              10.1 to  Tremont's  Quarterly  Report on Form 10-Q
                              (File No.  1-10126) for the quarter ended June 30,
                              2002.

               99.1   -       Certification  Pursuant to 18 U.S.C. Section 1350,
                              as  adopted   pursuant   to  Section  906  of  the
                              Sarbanes-Oxley Act of 2002.

               99.2   -       Certification  Pursuant to 18 U.S.C. Section 1350,
                              as  adopted   pursuant   to  Section  906  of  the
                              Sarbanes-Oxley Act of 2002.

        (b)    Reports on Form 8-K

               Reports on Form 8-K for the quarter ended June 30, 2002.

               None.





                                   SIGNATURES


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



                                                 VALHI, INC.
                                     ---------------------------------
                                                (Registrant)



Date   August 13, 2002        By /s/ Bobby D. O'Brien
     -------------------         ------------------------------
                                 Bobby D. O'Brien
                                 Vice President, Chief
                                 Financial Officer and Treasurer
                                 (Principal Financial Officer)



Date   August 13, 2002        By /s/ Gregory M. Swalwell
     ------------------          ------------------------------
                                 Gregory M. Swalwell
                                 Vice President and Controller
                                 (Principal Accounting Officer)