SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarter ended September 30, 1999     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 October 29, 1999: 114,570,514.

VALHI, INC. AND SUBSIDIARIES

INDEX

Page
number

Part I.          FINANCIAL INFORMATION

Item 1.        Financial Statements.

Consolidated Balance Sheets -
December 31, 1998 and September 30, 1999             3-4

Consolidated Statements of Income -
Three months and nine months ended
September 30, 1998 and 1999                          5-6

Consolidated Statements of Comprehensive Income -
Nine months ended September 30, 1998 and 1999         7

Consolidated Statement of Stockholders' Equity -
Nine months ended September 30, 1999                  8

Consolidated Statements of Cash Flows -
Nine months ended September 30, 1998 and 1999        9-10

Notes to Consolidated Financial Statements           11-18

Item 2.        Management's Discussion and Analysis of Financial
Condition and Results of Operations.                19-40

Part II.         OTHER INFORMATION

Item 1.        Legal Proceedings.                                   41-42

Item 6.        Exhibits and Reports on Form 8-K.                      42

VALHI, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

ASSETS                                   December 31,   September 30,
1998          1999
----          ----

Current assets:

Cash and cash equivalents ......................     $  224,572     $  205,574
Accounts and other receivables .................        167,660        216,186
Refundable income taxes ........................         16,443          3,511
Receivable from affiliates .....................         11,890         14,198
Inventories ....................................        246,338        201,474
Prepaid expenses ...............................          3,723          9,812
Deferred income taxes ..........................          4,836         14,717
----------     ----------

Total current assets .......................        675,462        665,472
----------     ----------

Other assets:
Marketable securities ..........................        265,567        264,364
Investment in and advances to affiliates .......        370,654        340,867
Loans and notes receivable .....................         82,290         85,895
Mining properties ..............................         15,581         18,291
Prepaid pension cost ...........................         24,190         24,461
Goodwill .......................................        259,336        264,578
Deferred income taxes ..........................           --            2,619
Other ..........................................         21,737         22,247
----------     ----------

Total other assets .........................      1,039,355      1,023,322
----------     ----------

Property and equipment:
Land ...........................................         16,364         19,689
Buildings ......................................        150,879        154,695
Equipment ......................................        511,042        517,070
Construction in progress .......................          7,918         28,571
----------     ----------
686,203        720,025
Less accumulated depreciation ..................        158,867        180,659
----------     ----------

Net property and equipment .................        527,336        539,366
----------     ----------

$2,242,153     $2,228,160
==========     ==========

VALHI, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In thousands)

LIABILITIES AND STOCKHOLDERS' EQUITY                December 31,   September 30,
1998           1999
----           ----

Current liabilities:

Notes payable ..................................     $   36,391     $   32,428

Current maturities of long-term debt ...........         65,448         70,512
Accounts payable ...............................         67,592         58,262
Accrued liabilities ............................        148,838        174,991
Payable to affiliates ..........................         20,137         10,112
Income taxes ...................................         12,943         11,427
Deferred income taxes ..........................          1,237          1,734
----------     ----------

Total current liabilities ..................        352,586        359,466
----------     ----------

Noncurrent liabilities:
Long-term debt .................................        630,554        628,847
Accrued pension costs ..........................         44,929         45,745
Accrued OPEB costs .............................         41,981         37,910
Accrued environmental costs ....................         83,922         63,228
Deferred income taxes ..........................        353,717        261,641
Other ..........................................         44,220         39,784
----------     ----------

Total noncurrent liabilities ...............      1,199,323      1,077,155
----------     ----------

Minority interest ................................        111,722        167,826
----------     ----------

Stockholders' equity:
Common stock ...................................          1,255          1,256
Additional paid-in capital .....................         42,789         43,444
Retained earnings ..............................        512,468        569,552
Accumulated other comprehensive income:
Marketable securities ........................        122,826        126,608
Currency translation .........................        (22,712)       (35,475)
Pension liabilities ..........................         (2,845)        (6,413)
Treasury stock .................................        (75,259)       (75,259)
----------     ----------

Total stockholders' equity .................        578,522        623,713
----------     ----------

$2,242,153     $2,228,160
==========     ==========

Commitments and contingencies (Note 1)

VALHI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

Three months ended          Nine months ended
September 30,               September 30,
1998          1999           1998          1999

Revenues and other income:

Net sales ...........................   $ 260,218    $   303,282    $   808,939    $ 847,592
Gain on:
Disposal of business unit .........        --             --          330,217         --   
Reduction in interest in CompX ....        --             --           67,902         --   
Other, net ..........................      12,531         15,511         62,729       52,488
---------    -----------    -----------    ---------

272,749        318,793      1,269,787      900,080
---------    -----------    -----------    ---------
Costs and expenses:
Cost of sales .......................     180,062        228,981        563,772      626,457
Selling, general and administrative .      41,034         45,812        164,956      135,087
Interest ............................      23,005         18,020         71,889       54,383
---------    -----------    -----------    ---------

244,101        292,813        800,617      815,927
---------    -----------    -----------    ---------

28,648         25,980        469,170       84,153

Equity in earnings of:
Tremont Corporation .................       2,986         (1,102)         2,986        3,389
Waste Control Specialists (prior to
consolidation) .....................      (2,706)          --           (9,552)      (8,496)
---------    -----------    -----------    ---------

Income before income taxes ........      28,928         24,878        462,604       79,046

Provision for income taxes (benefit) ..         531          7,330        184,908      (61,849)

Minority interest in after-tax earnings      15,322          9,341         61,997       68,453
---------    -----------    -----------    ---------

Income from continuing operations .      13,075          8,207        215,699       72,442

Discontinued operations ...............        --             --             --          2,000

Extraordinary item ....................      (1,424)          --           (2,747)        --
---------    -----------    -----------    ---------

Net income ......................   $  11,651    $     8,207    $   212,952    $  74,442
=========    ===========    ===========    =========

VALHI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)

(In thousands, except per share data)

Three months ended           Nine months ended
September 30,                September 30,
1998         1999           1998          1999

Basic earnings per share:

Continuing operations ...............   $     .11    $       .07    $      1.87    $     .63
Discontinued operations .............        --             --             --            .02
Extraordinary item ..................        (.01)          --             (.02)        --
---------    -----------    -----------    ---------

Net income ..........................   $     .10    $       .07    $      1.85    $     .65
=========    ===========    ===========    =========

Diluted earnings per share:
Continuing operations ...............   $     .11    $       .07    $      1.86    $     .62
Discontinued operations .............        --             --             --            .02
Extraordinary item ..................        (.01)          --             (.02)        --
---------    -----------    -----------    ---------

Net income ..........................   $     .10    $       .07    $      1.84    $     .64
=========    ===========    ===========    =========

Cash dividends per share ..............   $     .05    $       .05    $       .15    $     .15
=========    ===========    ===========    =========

Shares used in the calculation of per share amounts:
Basic earnings per common share .....     114,946        115,061        115,011      115,018
Dilutive impact of outstanding
stock options ......................       1,337          1,190          1,090        1,191
---------    -----------    -----------    ---------

Diluted earnings per share ..........     116,283        116,251        116,101      116,209
=========    ===========    ===========    =========

VALHI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Nine months ended September 30, 1998 and 1999

(In thousands)

1998           1999
----           ----

Net income .......................................     $  212,952     $   74,442
----------     ----------

Other comprehensive income, net of tax:
Marketable securities adjustment:
Unrealized gains (losses) arising
during the period ...........................           (799)         4,225
Less reclassification for gains included
in net income ...............................         (5,204)          (443)
----------     ----------
(6,003)         3,782

Currency translation adjustment ................          2,313        (12,763)

Pension liabilities adjustment .................          1,013         (3,568)
----------     ----------

Total other comprehensive income, net ........         (2,677)       (12,549)
----------     ----------

Comprehensive income .......................     $  210,275     $   61,893
==========     ==========

VALHI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

Nine months ended September 30, 1999

(In thousands)

Additional                    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, 1998 ..   $1,255   $42,789   $ 512,468    $122,826   $(22,712)   $(2,845)   $(75,259)   $ 578,522

Net income ....................     --        --        74,442        --         --         --          --         74,442
Dividends .....................     --        --       (17,358)       --         --         --          --        (17,358)
Other comprehensive income, net     --        --          --         3,782    (12,763)    (3,568)       --        (12,549)
Other, net ....................        1       655        --          --         --         --          --            656
------   -------   ---------    --------   --------    -------    --------    ---------

Balance at September 30, 1999 .   $1,256   $43,444   $ 569,552    $126,608   $(35,475)   $(6,413)   $(75,259)   $ 623,713
======   =======   =========    ========   ========    =======    ========    =========

VALHI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended September 30, 1998 and 1999

(In thousands)

1998            1999
----            ----

Cash flows from operating activities:

Net income .....................................     $  212,952     $   74,442
Depreciation, depletion and amortization .......         43,881         48,091
Gain on:
Disposal of business unit ....................       (330,217)          --
Reduction in interest in CompX ...............        (67,902)          --
Noncash interest expense .......................         23,107          7,261
Deferred income taxes ..........................        139,240        (80,610)
Minority interest ..............................         61,997         68,453
Other, net .....................................        (15,000)        (8,114)
Equity in:
Tremont Corporation ..........................         (2,986)        (3,389)
Waste Control Specialists (prior to consolidation)      9,552          8,496
Discontinued operations ......................           --           (2,000)
Extraordinary item ...........................          2,747           --   
Distributions from:
Manufacturing joint venture ..................           --           12,050
Tremont Corporation ..........................            215            655
----------     ----------

77,586        125,335

Change in assets and liabilities:
Accounts and other receivables ...............        (36,285)       (48,164)
Inventories ..................................        (15,886)        40,337
Accounts payable and accrued liabilities .....         14,099         (7,083)
Accounts with affiliates .....................        (29,806)        (7,333)
Income taxes .................................         (5,307)        11,747
Other, net ...................................          5,827        (14,289)
----------     ----------

Net cash provided by operating activities          10,228        100,550
----------     ----------

Cash flows from investing activities:
Capital expenditures ...........................        (20,446)       (38,820)
Purchases of:
Business units ...............................        (33,372)       (53,121)
Tremont Corporation common stock .............       (172,918)        (1,945)
NL common stock ..............................        (13,890)          --
CompX common stock ...........................         (5,587)          (624)
Marketable securities ........................         (3,766)          --
Investment in Waste Control Specialists ........        (10,000)       (10,000)
Proceeds from disposal of:
Business unit ................................        435,080           --
Marketable securities ........................          6,875          6,588
Discontinued operations ......................           --            2,000
Loans to affiliates:
Loans ........................................       (123,250)        (6,000)
Collections ..................................        120,250          6,000
Other, net .....................................            590           (616)
----------     ----------

Net cash provided (used) by investing activitie   179,566        (96,538)
----------     ----------

VALHI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Nine months ended September 30, 1998 and 1999

(In thousands)

1998             1999
----             ----

Cash flows from financing activities:
Indebtedness:

Borrowings ...................................     $   31,012     $   97,271
Principal payments ...........................       (288,479)       (94,319)
Deferred financing costs paid ................           (220)          --   
Loans from affiliate:
Loans ........................................          3,000         35,700
Repayments ...................................           --          (45,200)
Valhi dividends paid ...........................        (17,347)       (17,358)
Distributions to minority interest .............         (1,287)        (2,278)
Proceeds from issuance of CompX common stock ...        110,378           --   
Common stock reacquired ........................         (3,692)          --   
Other, net .....................................          1,267            854
----------     ----------

Net cash used by financing activities ......       (165,368)       (25,330)
----------     ----------

Cash and cash equivalents - net change from:
Operating, investing and financing activities ..         24,426        (21,318)
Currency translation ...........................           (297)        (2,571)
Business units acquired ........................           --            4,157
Consolidation of Waste Control Specialists .....           --              734
Business unit sold .............................         (7,630)          --   
Cash and equivalents at beginning of period ......        360,369        224,572
----------     ----------

Cash and equivalents at end of period ............     $  376,868     $  205,574
==========     ==========

Supplemental disclosures:
Cash paid for:
Interest, net of amounts capitalized ...........     $   40,326     $   39,238
Income taxes, net ..............................         77,917          7,375

Business units acquired - net assets consolidated:
Cash and cash equivalents ......................     $     --       $    4,157
Goodwill and other intangible assets ...........         23,399         15,837
Other non-cash assets ..........................         17,782         52,799
Liabilities ....................................         (7,809)       (19,672)
----------     ----------

Cash paid ......................................     $   33,372     $   53,121
==========     ==========

Waste Control Specialists - net assets consolidated:
Cash and cash equivalents ......................     $     --       $      734
Property and equipment .........................           --           23,128
Other non-cash assets ..........................           --            9,843
Liabilities ....................................           --          (22,201)
----------     ----------

Net investment at date of consolidation ........     $     --       $   11,504
==========     ==========

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, 1998 has been condensed from the
Company's  audited   consolidated   financial   statements  at  that  date.  The
consolidated balance sheet at September 30, 1999 and the consolidated statements
of income,  comprehensive  income,  stockholders'  equity and cash flows for the
interim  periods  ended  September  30, 1998 and 1999 have been  prepared by the
Company,  without  audit.  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 generally accepted  accounting  principles 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, 1998 (the "1998 Annual Report").

Basic  earnings  per share of common  stock is based upon the  weighted
average number of common shares actually outstanding during each period. Diluted
earnings per share of common stock includes the impact of  outstanding  dilutive
stock options.

Commitments and contingencies are discussed in "Management's Discussion
and  Analysis  of  Financial   Condition  and  Results  of  Operations,"  "Legal
Proceedings" and the 1998 Annual Report.

Discontinued  operations  in 1999  represent  $2 million of  additional
consideration  received  by the  Company  related  to the 1997  disposal  of the
Company's former fast food operations.  No income tax provision is required with
respect to such additional consideration.

Contran   Corporation   holds,   directly   or   through   subsidiaries,
approximately  92% of Valhi's  outstanding  common stock.  Substantially  all of
Contran's  outstanding voting stock is held either by trusts established for the
benefit of certain children and grandchildren of Harold C. Simmons, of which Mr.
Simmons is sole trustee, or by Mr. Simmons directly.  Mr. Simmons,  the Chairman
of the Board and Chief Executive Officer of Valhi and Contran,  may be deemed to
control such companies.

The Company  will adopt  Statement of  Financial  Accounting  Standards
("SFAS") No. 133, Accounting for Derivative  Instruments and Hedging Activities,
as amended,  no later than the first  quarter of 2001.  Under SFAS No. 133,  all
derivatives  will be recognized as either assets or liabilities  and measured at
fair value.  The accounting for changes in fair value of derivatives will depend
upon the intended use of the  derivative.  The impact on the Company of adopting
SFAS No. 133, if any, has not yet been determined but will be dependent upon the
extent  to which the  Company  is a party to  derivative  contracts  or  hedging
activities covered by SFAS No. 133 at the time of adoption.

Note 2 -       Business segment information:

% owned at  
Operations               Principal entities          September 30, 1999 

Chemicals             NL Industries, Inc.                     58.2%*
Component products    CompX International Inc.                64.2%
Waste management      Waste Control Specialists               68.8%
Titanium metals       Tremont Corporation                     49.7%*

* Tremont owns an additional 19.7% of NL.

Three months ended             Nine months ended
September 30,                September 30,
1998           1999          1998          1999
(In millions)

Net sales:

Chemicals ...........................   $   221.5    $     242.7    $     698.4    $   676.8
Component products ..................        38.7           55.9          110.5        166.1
Waste management (after consolidation)       --              4.7           --            4.7
---------    -----------    -----------    ---------

$   260.2    $     303.3    $     808.9    $   847.6
=========    ===========    ===========    =========

Operating income:
Chemicals ...........................   $    40.2    $      30.0    $     119.6    $    95.2
Component products ..................         8.8            9.8           22.2         29.0
Waste management (after consolidation)       --             (1.5)          --           (1.5)
---------    -----------    -----------    ---------
49.0           38.3          141.8        122.7
Gain on:
Disposal of business unit ...........        --             --            330.2         --   
Reduction in interest in CompX ......        --             --             67.9         --   
General corporate items:
Interest and dividend income ........         8.2           10.7           42.9         32.2
Securities transactions .............          .1             .1            8.0           .7
Expenses, net .......................        (5.6)          (5.0)         (49.7)       (17.0)
Interest expense ......................       (23.0)         (18.0)         (71.9)       (54.4)
---------    -----------    -----------    ---------
28.7           26.1          469.2         84.2

Equity in:
Tremont Corporation .................         3.0           (1.1)           3.0          3.4
Waste Control Specialists (prior
to consolidation) ..................        (2.8)          --             (9.6)        (8.5)
---------    -----------    -----------    ---------

Income before income taxes ........   $    28.9    $      25.0    $     462.6    $    79.1
=========    ===========    ===========    =========

In January 1999,  CompX acquired Thomas Regout Holding N.V., a producer
of precision ball bearing slides, for $53 million cash consideration.  CompX has
signed a definitive  agreement to acquire a Taiwanese  slide  producer for $11.5
million  cash  consideration.  CompX  expects  this  transaction  will  close in
November 1999.

In  February  1999,  Valhi  contributed  $10  million to Waste  Control
Specialists'  equity,  thereby increasing its membership  interest from 64.3% to
68.8%.  The Company  also holds an option,  as amended in July 1999,  to make an
additional $20 million equity  contribution to Waste Control  Specialists which,
if contributed, would increase its membership interest to 90%. Prior to June 30,
1999, the Company did not consolidate Waste Control Specialists. The Company was
not deemed to control Waste Control  Specialists because the controlling general
partner of the other owner of Waste  Control  Specialists  had been  granted the
duties  of  chief  executive  officer  of  Waste  Control  Specialists  under an
employment agreement. As of June 1999, that individual resigned as CEO and a new
CEO unrelated to the other owner was appointed.  Accordingly, the Company is now
deemed to control Waste Control Specialists. The Company commenced consolidating
Waste  Control  Specialists'  balance  sheet at June  30,  1999,  and  commenced
consolidating  its results of operations  and cash flows in the third quarter of
1999.

Each of NL (NYSE:  NL),  CompX (NYSE:  CIX),  Tremont  (NYSE:  TRE) and
Tremont's 39%-owned  affiliate Titanium Metals Corporation  ("TIMET," NYSE: TIE)
file  periodic  reports  pursuant to the  Securities  Exchange  Act of 1934,  as
amended.

Note 3 -       Marketable securities:

December 31,    September 30,
1998           1999
----           ---- 
(In thousands)

Noncurrent assets (available-for-sale):                                         

The Amalgamated Sugar Company LLC ................     $  170,000     $  170,000
Halliburton Company common stock .................         79,710         89,861
Other securities .................................         15,857          4,503
----------     ----------

$  265,567     $  264,364
==========     ==========

At September  30,  1999,  Valhi held 2.7 million  shares of  Halliburton
common stock  (aggregate  cost of $22 million) with a quoted market price of $41
per share,  or an aggregate  market  value of $110  million.  Valhi's  LYONs are
exchangeable at any time, at the option of the LYON holder, for such Halliburton
shares,  and the  carrying  value of the  Halliburton  stock is  limited  to the
accreted  LYONs  obligation.  See  Note 8.  See the  1998  Annual  Report  for a
discussion of the Company's investment in The Amalgamated Sugar Company LLC. The
aggregate cost of other available-for-sale  securities (primarily common stocks)
is $8 million at September 30, 1999. In the second  quarter of 1999, the Company
sold certain  available-for-sale  marketable  securities with a cost basis of $6
million for aggregate proceeds of $6.6 million.

Note 4 -       Inventories:

December 31,  September 30,
1998          1999
----         ------
(In thousands)

Raw materials:

Chemicals ......................................     $   46,114     $   40,191
Component products .............................          6,520          8,851
----------     ----------
52,634         49,042
----------     ----------
In process products:
Chemicals ......................................         11,530          8,073
Component products .............................          5,748          7,907
----------     ----------
17,278         15,980
----------     ----------
Finished products:
Chemicals ......................................        137,000        100,116
Component products .............................          4,634          8,270
----------     ----------
141,634        108,386
----------     ----------

Supplies (primarily chemicals) ...................         34,792         28,066
----------     ----------

$  246,338     $  201,474
==========     ==========

Note 5 -       Accrued liabilities:

December 31,  September 30,
1998          1999
----          ----
(In thousands)

Current:

Employee benefits ..............................     $   42,665     $   42,048
Environmental costs ............................         46,059         58,141
Interest .......................................          7,397         15,267
Deferred income ................................          4,353          7,538
Other ..........................................         48,364         51,997
----------     ----------

$  148,838     $  174,991
==========     ==========

Noncurrent:
Insurance claims and expenses ..................     $   15,321     $   15,077
Employee benefits ..............................         12,523         11,853
Deferred income ................................         13,693         10,603
Other ..........................................          2,683          2,251
----------     ----------

$   44,220     $   39,784
==========     ==========

Note 6 - Other noncurrent assets:

December 31,  September 30,
1998           1999
----           ----
(In thousands)

Investment in affiliates:

Tremont Corporation ............................     $  179,452     $  181,715
TiO2 manufacturing joint venture ...............        171,202        159,152
Waste Control Specialists LLC ..................         10,000           --
----------     ----------
360,654        340,867
Loan to Waste Control Specialists LLC ............         10,000           --
----------     ----------

$  370,654     $  340,867
==========     ==========

Loans and notes receivable:
Snake River Sugar Company ......................     $   80,000     $   80,000
Other ..........................................          5,912          9,280
----------     ----------
85,912         89,280
Less current portion ...........................          3,622          3,385
----------     ----------

Noncurrent portion .............................     $   82,290     $   85,895
==========     ==========

Deferred financing costs .........................     $    5,674     $    4,137
Intangible assets ................................          4,923          7,184
Other ............................................         11,140         10,926
----------     ----------

$   21,737     $   22,247
==========     ==========

At September 30, 1999,  Valhi held 3.2 million shares of Tremont common
stock with a quoted  market  price of $23.88 per share,  or an  aggregate of $76
million.  See "Management's  Discussion and Analysis of Financial  Condition and
Results of  Operations"  for a discussion of the Company's net carrying value of
its investment in Tremont.  The Company  commenced  consolidating  Waste Control
Specialists at June 30, 1999. See Note 2.

Note 7 - Accounts with affiliates:

December 31,   September 30,
1998           1999
----           ----
(In thousands)

Receivables from affiliates:

Income taxes, net ..............................     $   11,719     $   12,045
Other ..........................................            171          2,153
----------     ----------

$   11,890     $   14,198
==========     ==========

Payables to affiliates:
Loan from Contran ..............................     $    9,500     $     --   
Louisiana Pigment Company ......................          8,264          7,131
Tremont Corporation ............................          3,053          2,953
Other, net .....................................           (680)            28
----------     ----------

$   20,137     $   10,112
==========     ==========

Note 8 - Notes payable and long-term debt:

December 31,  September 30,
1998           1999
----           ----
(In thousands)

Notes payable -
Kronos - non-U.S. bank credit agreements

(DM 60,500 and DM 60,500) .....................     $   36,391     $   32,428
==========     ==========

Long-term debt:
Valhi:
Snake River Sugar Company ....................     $  250,000     $  250,000
LYONs ........................................         84,104         89,861
Bank credit facility .........................           --           21,000
----------     ----------

334,104        360,861
----------     ----------

NL Industries:
Senior Secured Notes .........................        244,000        244,000
Deutsche mark bank credit facility
(DM 187,322 and DM 120,072) .................        112,674         64,359
Other ........................................            955            552
----------     ----------

357,629        308,911
----------     ----------

Other subsidiaries:
CompX bank credit facility ...................           --           20,000
Waste Control Specialists bank term loan .....           --            4,437
Valcor Senior Notes ..........................          2,431          2,431
Other ........................................          1,838          2,719
----------     ----------

4,269         29,587
----------     ----------

696,002        699,359

Less current maturities ........................         65,448         70,512
----------     ----------

$  630,554     $  628,847
==========     ==========

In November  1999,  the maturity date of Valhi's  revolving  bank credit
facility was extended one year to November 2000.

Note 9 -       Other income:

Nine months ended
September 30,
1998              1999
----              ----
(In thousands)

Securities earnings:

Dividends and interest .........................     $   42,855     $   32,191
Securities transactions ........................          8,006            681
----------     ----------
50,861         32,872
Noncompete agreement income ......................          2,667          3,000
Currency transactions, net .......................          3,085          8,505
Other, net .......................................          6,116          8,111
----------     ----------

$   62,729     $   52,488
==========     ==========

Note 10 - Provision for income taxes:

Nine months ended
September 30,
1998           1999
----           ----
(In millions)

Income from continuing operations:

Expected tax expense ...........................     $    161.9     $     27.7
Incremental U.S. tax and rate differences on
equity in earnings of non-tax group companies .           74.5           13.9
Change in NL's deferred income tax
valuation allowance ...........................          (49.7)         (89.9)
Resolution of German income tax audits .........           --            (36.5)
Change in German income tax law ................           --             24.1
U.S. state income taxes, net ...................            8.0            (.6)
Refund of prior year withholding tax ...........           (8.2)          --
No tax benefit for goodwill amortization .......           11.6            3.0
Non-U.S. tax rates .............................             .1            (.4)
Excess of tax basis over book basis of the
common stock of foreign subsidiaries sold .....          (12.1)          --
Other, net .....................................           (1.2)          (3.1)
----------     ----------

$    184.9     $    (61.8)
==========     ==========

Comprehensive provision (benefit) for income taxes allocated to:
Continuing operations ..........................     $    184.9     $    (61.8)
Discontinued operations ........................           --             --
Extraordinary item .............................           (2.8)          --
Other comprehensive income:
Marketable securities ........................           (3.2)           1.4
Currency translation .........................            1.0           (7.9)
Pension liabilities ..........................             .6           (2.3)
----------     ----------

$    180.5     $    (70.6)
==========     ==========

See  "Management's  Discussion and Analysis of Financial  Condition and
Results of  Operations"  for a discussion of a $90 million  non-cash  income tax
benefit recognized by NL in the second quarter of 1999.

Note 11 - Minority interest:

The  components  of  minority  interest  in net assets and income  from
continuing operations of subsidiaries are presented in the following tables.

December 31,   September 30,
1998          1999
----        ----
(In thousands)

Minority interest in net assets:

NL Industries ....................................     $   64,268     $  113,022
CompX ............................................         46,817         51,853
Subsidiaries of NL ...............................            633          2,853
Subsidiaries of CompX ............................              4             98
----------     ----------

$  111,722     $  167,826
==========     ==========

Nine months ended
September 30,
1998           1999
----           ----
(In thousands)

Minority interest in net earnings (losses) income from continuing operations:

NL Industries ....................................     $   57,011     $   59,808
CompX ............................................          5,082          6,478
Subsidiaries of NL ...............................             36          2,261
Subsidiaries of CompX ............................           (132)           (94)
----------     ----------

$   61,997     $   68,453
==========     ==========

Waste  Control  Specialists  was  formed in 1995 by Valhi  and  another
entity. 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.  Consequently,  all of Waste Control Specialists' net losses or
net income will accrue to the Company for  financial  reporting  purposes  until
Waste Control  Specialists  reports  positive  equity  attributable to the other
owner.  Accordingly,  no minority  interest in Waste  Control  Specialists'  net
assets or net losses is reported at September 30, 1999, and no minority interest
in Waste Control Specialists' net assets, net earnings or net losses is expected
to be reported at least through the remainder of 1999.

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

RESULTS OF OPERATIONS:

The Company  reported income from  continuing  operations for the first
nine months of 1999 of $72.4  million,  or $.62 per diluted  share,  compared to
income of $215.7  million,  or $1.86 per diluted share, in the first nine months
of 1998. For the third quarter of 1999,  Valhi reported  income from  continuing
operations of $8.2  million,  or $.07 per diluted  share,  compared to income of
$13.1 million, or $.11 per diluted share, in the third quarter of 1998. The 1999
year-to-date  results  include a second quarter $90 million  non-cash income tax
benefit  ($52  million,  or $.45 per diluted  share,  net of minority  interest)
recognized by NL, as discussed  below.  The 1998  year-to-date  results  include
gains aggregating $196 million,  or $1.69 per diluted share, net of income taxes
and minority interest, related to the sale of NL Industries' specialty chemicals
business and the initial public offering of CompX International  common stock, a
charge of $32 million ($21  million,  or $.18 per diluted  share,  net of income
taxes)  related to the settlement of two lawsuits and a third quarter $8 million
tax benefit ($5 million,  or $.04 per diluted share,  net of minority  interest)
resulting from refunds of prior-year German withholding taxes received by NL.

The  statements  in this  Quarterly  Report  on Form 10-Q  relating  to
matters that are not historical facts, including, but not limited to, statements
found in this "Management's  Discussion and Analysis of Financial  Condition and
Results  of   Operations,"   are   forward-looking   statements  that  represent
management's  belief and assumptions based on currently  available  information.
Forward-looking  statements  can be  identified  by the  use of  words  such  as
"believes," "intends," "may," "should," "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.  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 on its ability to
raise selling prices 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),   the  possibility  of  labor   disruptions,   general  global  economic
conditions,   competitive  products  and  substitute   products,   customer  and
competitor strategies, the impact of pricing and production decisions, potential
difficulties  in integrating  completed  acquisitions,  the possibility of labor
disruptions,  environmental matters, government regulations and possible changes
therein,  the  ultimate  resolution  of  pending  litigation,   possible  future
litigation and possible  disruptions of normal business  activity from Year 2000
issues.  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

NL's  titanium  dioxide  pigments  ("TiO2")  operations  are  conducted
through its wholly-owned subsidiary Kronos, Inc. NL sold its specialty chemicals
business unit, conducted by its wholly-owned  subsidiary Rheox, Inc., in January
1998.

Three months ended       Nine months ended
September 30,    %         September 30,     %
1998   1999   Change       1998    1999   Change
(In millions)             (In millions)

Net sales:

Kronos ........   $  221.5 $242.7   +10%     $685.7   $676.8    -1%
Rheox .........       --     --                12.7     --
------ ------            ------   ------

$  221.5 $242.7   +10%     $698.4   $676.8    -3%
====== ======            ======   ======

Operating income:
Kronos ........   $   40.2 $ 30.0   -26%     $116.9   $ 95.2   -19%
Rheox .........        --     --                2.7     --
------ ------            ------   ------

$   40.2 $ 30.0   -26%     $119.6   $ 95.2   -20%
====== ======            ======   ======

Kronos' TiO2  operating  income  decreased in the third quarter of 1999
compared  to the third  quarter  of 1998 due  primarily  to lower  average  TiO2
selling prices and lower Ti02  production  volumes,  partially  offset by higher
TiO2 sales  volumes.  Kronos' TiO2 operating  income  declined in the first nine
months of 1999  compared to the same period in 1998 due  primarily to lower TiO2
production  volumes,  as average TiO2 selling prices and sales volumes were each
approximately  the same in both periods.  In addition,  operating  income in the
1999 year-to-date period includes a second quarter $5.3 million foreign currency
transaction gain related to certain of NL's short-term intercompany cross-border
financings that were settled in July 1999.

NL's average TiO2 selling  prices in the third  quarter of 1999 were 4%
lower than the third  quarter of 1998 and were 2% lower than the second  quarter
of this year.  NL's TiO2 selling  prices at the end of the third quarter of 1999
approximated  the average for the quarter.  NL's average TiO2 selling  prices in
the first nine months of 1999  approximated  average  selling prices in the same
period in 1998,  with  slightly  higher North  American  prices  offset by lower
prices in export markets and slightly lower prices in Europe.  NL and certain of
its competitors have announced  worldwide TiO2 price  increases,  and NL expects
its average  selling prices should  increase  beginning in late in 1999 or early
2000.

Kronos'  record  TiO2  sales  volumes  in the  third  quarter  of  1999
increased 18% compared to the third  quarter of 1998,  and increased 6% compared
to the second  quarter of this year,  with strong  demand in all major  regions.
Sales volumes in the first nine months of 1999 approximated volumes in the first
nine months of 1998.  Kronos' TiO2  production  volumes in the third  quarter of
1999 were 10% lower  than the  comparable  period in 1998 and were 8% lower than
the second  quarter of 1999  primarily as a result of scheduled  downtime in the
third quarter of 1999 for maintenance at NL's  chloride-process TiO2 facilities.
Production volumes in the first nine months of 1999 were 8% lower than the first
nine months of 1998 primarily due to this maintenance downtime and NL's decision
to manage  inventory  levels by  curtailing  production  in the first quarter of
1999.  Kronos'  average  production  capacity  utilization  was 90% in the third
quarter of 1999 and 91% for the first nine months of the year.  Kronos  produced
at full capacity during 1998. Due to strong  worldwide demand and Kronos' modest
inventory  levels,  NL intends to increase  its TiO2  production  volumes in the
fourth quarter of 1999, but NL expects its TiO2  production  volumes in calendar
1999 will be below its TiO2 sales volumes for the year.

Overall,  NL expects its calendar  1999 TiO2  operating  income will be
lower than 1998 primarily because of lower TiO2 production  volumes and slightly
lower  average  TiO2  selling  prices,  partially  offset by higher  TiO2  sales
volumes.

As discussed above,  worldwide demand for TiO2 was strong in the second
and third  quarters of 1999,  and NL expects the strong  demand will continue in
the fourth  quarter of 1999.  NL believes  the  increased  demand is primarily a
result of strong worldwide market conditions,  although NL believes a portion of
this increased demand is related to customers  building their inventory  levels.
Customers'  decision to increase their inventory levels may be influenced by (i)
announced price increases,  as discussed above in more detail,  and (ii) general
concerns  regarding  the Year 2000 issue.  NL  believes  that TiO2 demand in the
first half of 2000 could be lower  than the last half of 1999  should  customers
build significant inventories prior to year-end 1999.

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
major European currencies and the Canadian dollar. 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 affect the  comparability  of period to period  operating
results.  In  addition,  a portion of NL's  sales  generated  from its  non-U.S.
operations are denominated in the U.S. dollar, and exchange rate fluctuations do
not  impact  the  reported  amount of such net  sales.  Certain  raw  materials,
primarily  titanium-containing  feedstocks, are purchased in U.S. dollars, while
labor  and  other  production  costs  are  denominated  primarily  in the  local
currencies.  Fluctuations  in the  value of the U.S.  dollar  relative  to other
currencies  decreased  NL's sales in the third  quarter and first nine months of
1999 by $5 million and $4 million, respectively, compared to the same periods in
1998.  Fluctuations in the value of the U.S. dollar relative to other currencies
similarly impacted NL's foreign currency-denominated operating expenses. The net
impact  of  currency   exchange  rate  fluctuations  on  NL's  operating  income
comparisons,  other than the $5.3  million  foreign  currency  transaction  gain
discussed above, was not significant in 1999 compared to 1998.

The Company's purchase accounting  adjustments made in conjunction with
the  acquisitions  of its  interest  in NL  result in  additional  depreciation,
depletion and amortization  expense beyond those amounts separately  reported by
NL. Such additional non-cash expense currently reduces NL's operating income, as
reported by Valhi, by approximately $19 million per year.

Component Products

Three months ended         Nine months ended
September 30,   %          September 30,     %
1998   1999   Change       1998    1999   Change
(In millions)             (In millions)

Net sales .......   $   38.7 $ 55.9   +45%     $  110.5 $  166.1 +50%
Operating income         8.8    9.8   +12%         22.2     29.0 +31%

Component products sales increased in 1999 compared to the same periods
in 1998 due primarily to sales  generated by the Thomas Regout slide  operations
acquired in January 1999 and sales  generated by two lock producers  acquired in
March and November 1998.  Component  products operating income in the first nine
months of 1998  included a $3.3  million  first  quarter  non-recurring  pre-tax
charge related to certain stock awarded in  conjunction  with CompX's March 1998
initial public offering.

Excluding  the effect of these  acquisitions,  component  products  net
sales increased 9% in the third quarter of 1999 compared to the third quarter of
1998,  and  operating  income  increased 3% in the same period.  The increase in
sales is due  primarily  to a 13%  increase  in sales  of  slide  and  ergonomic
products  reflecting  strengthened demand in the office furniture industry and a
3% increase in sales of security products.

Excluding the effect of these  acquisitions  and the stock award charge
discussed  above,  component  products net sales  increased 6% in the first nine
months  of 1999  compared  to the same  period  in 1998,  and  operating  income
decreased 2% in the same period. The increase in sales is due primarily to a 10%
increase in sales of security  products  and a 3% increase in sales of slide and
ergonomic products.  This year-to-date percentage increase in sales of slide and
ergonomic products is less than the comparable  percentage increase in the third
quarter of this year due  primarily to the slowdown in CompX's  product sales to
the office furniture  industry  (primarily slide and ergonomic  products) during
the first half of the year,  partially offset by an increase in product sales to
the  office  furniture  industry  in  the  third  quarter  of  1999  due  to the
strengthened demand.

Waste Management

As discussed in Note 2 to the Consolidated  Financial  Statements,  the
Company commenced consolidating Waste Control Specialists' results of operations
in the third quarter of 1999.  During the third  quarter of 1999,  Waste Control
Specialists  reported net sales of $4.7  million and an  operating  loss of $1.5
million  compared  to net sales of $3.5  million and an  operating  loss of $2.4
million in the third quarter of 1998.  For the first nine months of 1999,  Waste
Control  Specialists  reported net sales of $13 million and an operating loss of
$9.5 million compared to net sales of $6.9 million and an operating loss of $8.7
million  in the first  nine  months of 1998.  While  Waste  Control  Specialists
continued to report  losses in the third  quarter of 1999 due  primarily to weak
demand for its hazardous and toxic waste disposal  services,  its operating loss
in the third  quarter of 1999 was less than the second  quarter of this year due
in part to the  favorable  effect of certain cost control  measures  implemented
during the third quarter of 1999.

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.  As
previously-reported,  the hazardous  waste  industry  (other than  low-level and
mixed  radioactive  waste)  currently has excess  industry  capacity caused by a
number of factors,  including a relative  decline in the number of environmental
remediation  projects  generating  hazardous  wastes and  efforts on the part of
generators  to reduce the volume of waste and/or  manage  wastes onsite at their
facilities.  These  factors  have led to  reduced  demand  and  increased  price
pressure for non-radioactive  hazardous 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' strategy to
provide  "one-stop  shopping" for  hazardous,  low-level  and mixed  radioactive
wastes  includes  obtaining  permits  for the  disposal of  low-level  and mixed
radioactive wastes.

The  current  state  law in Texas  (where  Waste  Control  Specialists'
disposal  facility is located)  prohibits the applicable Texas regulatory agency
from  issuing a permit for the  disposal  of  low-level  radioactive  waste to a
private  enterprise.  During the latest Texas legislative session which ended in
May 1999,  Waste Control  Specialists  was supporting a proposed change in state
law which  would  allow the  regulatory  agency to issue a disposal  permit to a
private entity.  While the legislative session ended without any change in state
law, Waste Control Specialists has been pursuing other alternatives with respect
to the disposal of low-level and mixed radioactive  wastes,  including obtaining
certain  modifications  to its existing  permits that would allow Waste  Control
Specialists  to dispose  of certain  types of  low-level  and mixed  radioactive
wastes.  Waste Control Specialists has obtained additional authority that allows
Waste  Control  Specialists  to  dispose  of  certain  categories  of  low-level
radioactive  materials,   including  naturally  occurring  radioactive  material
("NORM") and exempt level  materials  (radioactive  materials that do not exceed
certain  specified  radioactive  concentrations  and are exempt from licensing).
Although there are other  categories of low-level and mixed  radioactive  wastes
that continue to be ineligible for disposal under the increased authority, Waste
Control  Specialists  will  continue to pursue permit  modifications  to further
expand  its  treatment  and  disposal   capabilities  for  low-level  and  mixed
radioactive wastes. In addition,  Waste Control Specialists currently expects to
continue to support a change in state law, as discussed  above,  during the next
Texas legislative session which begins in January 2001.  Expenditures associated
with any additional  permit  modifications  concerning the disposal of low-level
and  mixed  radioactive  wastes  in the next few  quarters  are  expected  to be
significantly lower than those incurred in connection with the Texas legislative
session  which ended in May 1999.  There can be no assurance  that Waste Control
Specialists will be successful in obtaining any future permit modifications.

In June 1999,  Waste Control  Specialists was awarded a contract by the
Kansas  City  District  of the  Corps of  Engineers  for the  disposal  of NORM,
low-level  radioactive  materials and certain hazardous wastes, all of which are
eligible for treatment and disposal  under Waste  Control  Specialists'  permits
currently in place. The Corps of Engineers  oversees the Formerly Utilized Sites
Remedial  Action  Program   ("FUSRAP")  that  involves  the  remediation  of  46
government  sites in 14 states  throughout  the U.S. The  contract  provides for
disposal of FUSRAP wastes for a minimum  volume of $500,000 and a maximum volume
of $96 million  over a  five-year  period  ending  July 2004,  with an option to
extend the contract for an  additional  five years (the maximum  contract  value
remains $96 million).  Waste Control Specialists believes this contract provides
a convenient  vehicle for a variety of federal  facilities to directly  contract
with Waste  Control  Specialists  for disposal of such wastes at listed  prices.
Waste  Control  Specialists  began  receiving  orders under this contract in the
third quarter of 1999. Waste Control Specialists' ability to realize significant
future sales  pursuant to this  contract is dependent  upon a number of factors,
including the  availability of government  funding for the clean-up of specified
sites and Waste  Control  Specialists'  successful  marketing  efforts that will
focus on getting  managers and  operators of these sites to select this contract
vehicle for disposal of specified wastes.

The completion of the Texas legislative session in May 1999 resulted in
a significant reduction in the Company's  expenditures for permitting during the
third  quarter of 1999  compared to the first half of this year.  Waste  Control
Specialists'  program  to  improve  operating  efficiencies  at its  West  Texas
facility and to curtail  certain of its corporate and  administrative  costs has
also reduced  operating costs in the third quarter of 1999 compared to the first
half of the year.  Waste Control  Specialists  is also  refocusing its sales and
marketing efforts to (i) emphasize opportunities where Waste Control Specialists
believes it has unique permitting  capabilities for the treatment and storage of
mixed radioactive  wastes that currently provide Waste Control  Specialists with
certain  competitive  advantages  and  (ii)  capitalize  on  the  recent  permit
modifications  regarding  disposal  of certain  types of  low-level  radioactive
wastes.  Realizing  significant  sales volumes from these types of waste streams
may involve  lengthy  negotiations  and due  diligence  processes  necessary  to
satisfy  potential  customers  of the  adequacy  of Waste  Control  Specialists'
permitting  ability for its facility and compliance with regulatory  procedures.
The ability of Waste Control  Specialists to achieve  increased 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 with its current operating permits. However, there can be no assurance
that Waste Control  Specialists'  efforts will prove successful in improving its
cash  flows.  In the event such  efforts  are not  successful  or Waste  Control
Specialists  is not  successful  in  expanding  its  disposal  capabilities  for
low-level  radioactive  wastes,  it is possible that Valhi will  consider  other
strategic alternatives with respect to Waste Control Specialists.

Equity affiliate - Tremont Corporation

As previously  reported,  Valhi commenced reporting equity in Tremont's
earnings  in the third  quarter  of 1998.  The  Company's  equity  in  Tremont's
earnings  differs  from the  amount  that  would be  expected  by  applying  the
Company's ownership percentage to Tremont's separately-reported earnings because
of the  effect  of  amortization  of  purchase  accounting  adjustments  made in
conjunction  with the Company's  acquisitions  of its interest in Tremont.  Such
non-cash   amortization   currently   reduces  earnings  (or  increases  losses)
attributable to Tremont as reported by the Company by  approximately  $3 million
per year.

Tremont  accounts for its  interests in both NL and TIMET by the equity
method.  In the first nine months of 1999,  Tremont reported net income of $12.3
million comprised primarily of equity in earnings of NL of $25.7 million, equity
in losses of TIMET of $4.6  million  and a  provision  for income  taxes of $6.6
million.  For the third  quarter  of 1999,  Tremont  reported  a net loss of $.5
million comprised primarily of equity in earnings of NL of $2.5 million,  equity
in losses of TIMET of $2.7 million and an income tax benefit of $.7 million. For
the third quarter of 1998, Tremont reported net income of $7.5 million comprised
primarily of equity in earnings of TIMET and NL of $5 million and $4.8  million,
respectively, and a provision for income taxes of $1.8 million. Tremont's equity
in earnings of TIMET and NL differs  from the amounts  that would be expected by
applying Tremont's ownership percentage to TIMET's and NL'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 and NL.  Amortization  of such basis  differences  generally
increases  earnings  (or reduces  losses)  attributable  to TIMET as reported by
Tremont, and generally reduces earnings (or increases losses) attributable to NL
as reported by Tremont.

NL's  operating  results  are  discussed  above.  Tremont's  equity  in
earnings  of NL in the first nine  months of 1999  includes  Tremont's  pro-rata
share  ($17.7  million)  of NL's  second  quarter  non-cash  income tax  benefit
discussed below.

For the first  nine  months  of 1999,  TIMET  reported  sales of $374.5
million,  an  operating  loss of $8.2  million  and a net loss of $13.9  million
compared  to sales,  operating  income and net income of $551.4  million,  $82.9
million and $48.2  million,  respectively,  in the first nine months of 1998. In
the third quarter of 1999, TIMET reported sales of $112.7 million,  an operating
loss of $7.8 million and a net loss of $7.5 million compared to sales, operating
income  and net  income of $173.5  million,  $27.3  million  and $16.1  million,
respectively, in the third quarter of 1998.

TIMET's  results in 1999 were below those of 1998  principally due to a
25%  decline  in  year-to-date   mill  products  sales  volumes  caused  by  the
previously-reported  lower demand in both its aerospace and industrial  markets.
TIMET's  sales in the third quarter of 1999 were 12% lower than TIMET's sales in
the second quarter of this year due to the lower sales volumes and to changes in
TIMET's product mix, as lower-priced  industrial  products  represented a higher
percentage of TIMET's mill  products  sales  volumes  during the third  quarter.
TIMET's  average mill product  selling prices  decreased in the third quarter of
1999 compared to the prior quarter due largely to this mix change. TIMET's ingot
sales  volumes  in the third  quarter  of 1999 were also  lower  than the second
quarter.  TIMET's volumes in the third quarter of 1999 were impacted by declines
in demand,  including  cancellations and push-outs by major aerospace customers,
and by production  difficulties  and  inefficiencies  at TIMET's North  American
operations. TIMET's yield, rework and deviated material costs were higher, plant
operating  rates were  lower and  resumption  of  production  following  certain
maintenance  shutdowns took longer than expected.  TIMET is focusing  additional
attention  and  resources  on  immediately  improving  certain  aspects  of  its
operating performance.

The downturn in TIMET's commercial  aerospace markets is lasting longer
and is more pronounced than TIMET had previously  expected.  TIMET's backlog was
approximately  $260  million at September  30, 1999  compared to $350 million at
September 30, 1998.  TIMET currently  believes its results in the fourth quarter
of 1999, excluding  restructuring  charges, will improve from third quarter 1999
levels,  although TIMET expects to report an operating loss for the quarter. The
mid-October failure of a 2,500 ton press in TIMET's Ohio mill products plant may
result in lower sales volumes.  TIMET is currently  evaluating  alternatives for
production originally scheduled on this press. TIMET is also considering further
personnel  reductions  and  rationalization  of plant  capacity  in light of its
revised market  outlook and, as a result,  TIMET believes it will likely incur a
restructuring charge in the fourth quarter of this year.

TIMET  believes the year 2000  presents  continuing  challenges  as the
commercial aerospace market is expected to remain depressed.  TIMET believes its
results for next year will be heavily  dependent upon volumes  actually  ordered
under its long-term agreements, particularly TIMET's contract with Boeing. TIMET
is  continuing  to work with Boeing to determine  sales  volumes for 2000 and to
improve the way the contract is  administered by Boeing within its supplier base
in order to achieve the intended  benefits of both parties.  TIMET is continuing
its  efforts  to  return  to  profitability  by  focusing  on its  manufacturing
processes and reducing overall costs, in addition to its efforts to work closely
with other major customers to solidify its sales volumes for 2000.

Tremont periodically  evaluates the net carrying value of its long-term
assets,  principally  its investments in NL and TIMET, to determine if there has
been any decline in value below their net  carrying  amounts  that is other than
temporary and would,  therefore,  require a write-down  which would be accounted
for  as a  realized  loss.  Tremont's  per  share  net  carrying  amount  of its
investment in NL at September 30, 1999 was $11.12 per share,  compared to a NYSE
per share market price of $12.63 at that date. At September  30, 1999,  the NYSE
price of $8.94 per TIMET share  indicated  an  aggregate  NYSE  market  value of
Tremont's  investment  in  TIMET  of $110  million,  or $44  million  less  than
Tremont's  $154 million net carrying  value of its  investment  in TIMET at that
date  ($12.56 per TIMET share  held).  TIMET's NYSE price was $5.63 per share at
November 11,  1999.  TIMET's NYSE stock price was highest to date during 1999 on
July 28  ($13.25  per  share)  and it was the  lowest on  November  2 ($4.50 per
share).  Tremont  believes  NYSE  stock  prices  (particularly  in the  case  of
companies  such as TIMET  which have a major  shareholder)  are not  necessarily
indicative of a company's  enterprise  value or the value that could be realized
if the company were sold.  Tremont  believes no writedown of its  investment  in
TIMET is required at September 30, 1999.

Valhi  periodically  evaluates the net carrying  value of its long-term
assets,  including its investment in Tremont, to determine if there has been any
decline in value below their  carrying  amounts that is other than temporary and
would,  therefore,  require  a  write-down  which  would be  accounted  for as a
realized loss. At September 30, 1999, the NYSE price of $23.88 per Tremont share
indicated an aggregate NYSE market value of Valhi's investment in Tremont common
stock of  approximately  $76  million,  or $106  million  less than Valhi's $182
million net carrying value of its investment in Tremont at that date.  Tremont's
NYSE stock price was $15.75 per share at November 11, 1999. The Company believes
NYSE stock prices  (particularly  in the case of companies  such as Tremont that
have a  major  shareholder  and are  not  widely  followed  or  traded)  are not
necessarily  indicative of a company's  enterprise value or the value that could
be realized if the company were sold.  After  considering what it believes to be
all relevant factors  including,  among other things,  the NYSE market prices of
Tremont's  holdings of NL and TIMET,  the length of time during which  Tremont's
NYSE price has been less than the Company's per share net investment in Tremont,
recent ranges of Tremont's market price,  Tremont's (and hence NL's and TIMET's)
operating results, financial position, estimated asset values and prospects, the
Company  concluded that there had been no other than temporary  decline in value
of the Company's investment in Tremont below its net carrying value at September
30, 1999.

As discussed  above or as recently  reported by TIMET,  the  commercial
aerospace  market is expected to remain  depressed in 2000.  TIMET's results for
next year will be heavily  dependent upon sales volumes  actually  ordered under
its long-term  agreements,  particularly  TIMET's contract with Boeing. TIMET is
seeking to amend or replace  its U.S.  credit  agreement.  TIMET is  considering
further personnel  reductions and  rationalization of plant capacity in light of
its revised market outlook and, as a result, TIMET believes it will likely incur
a restructuring charge in the fourth quarter of this year. In addition, in early
November 1999 TIMET suspended its regular quarterly common stock dividend. TIMET
is  continuing  its  efforts  to  return to  profitability  by  focusing  on its
manufacturing  processes and reducing  overall costs, in addition to its efforts
to work closely with other major  customers to solidify its volume  position for
2000.

Tremont  will  continue  to  monitor  and  evaluate  the  value  of its
investment  in TIMET,  and the Company will continue to monitor and evaluate the
value of its investment in Tremont. The Company and Tremont believe that TIMET's
financial  position  and  prospects  for next year will be more fully  clarified
during the fourth quarter of 1999. The resolution of this uncertainty may either
positively  or  negatively  impact  Tremont's  ongoing   evaluation  of  TIMET's
prospects,  and similarly  positively or negatively impact the Company's ongoing
evaluation of Tremont's  prospects.  As Tremont's ongoing  evaluation of TIMET's
near-term  prospects are largely  dependent  upon the  resolution of the current
uncertainty  relating to TIMET's  sales  volumes for the next year,  Tremont can
give no  assurance  that it will not  conclude at the end of 1999 that there has
been an other than  temporary  decline in the value of its  investment  in TIMET
that would,  at that time,  require a writedown that would be accounted for as a
realized  loss.  Similarly,  the Company can give no assurance  that it will not
conclude at the end of 1999 that there has been an other than temporary  decline
in the value of its  investment in Tremont that would,  at that time,  require a
writedown that would be accounted for as a realized loss.

Other

General corporate items.  Interest and dividend income decreased in the
first  nine  months  of 1999  compared  to the  first  nine  months  of 1998 due
primarily to a lower level of funds available for investment,  partially  offset
by a higher level of dividend  distributions received from The Amalgamated Sugar
Company  LLC.  Interest  and  dividend  income in the third  quarter of 1999 was
higher than the third  quarter of 1998 due  primarily  to a higher  level of LLC
dividend distributions, partially offset by a lower level of funds available for
investment.  Dividend  distributions  from The Amalgamated Sugar Company LLC are
dependent,  in part, upon the LLC's results of operations.  The Company received
$17.6  million of  distributions  from the LLC in the first nine  months of 1999
compared to $12  million in the first nine months of 1998 ($5.9  million and nil
in the third quarter of 1999 and 1998, respectively). Based on the LLC's current
projections, the Company currently expects aggregate dividend distributions from
the LLC in  calendar  1999 will be higher  than the $18.4  million  received  in
calendar  1998.  Despite the higher  level of LLC  distributions  expected to be
received in 1999  compared to 1998,  aggregate  general  corporate  interest and
dividend  income is expected to be lower in 1999  compared to 1998 due primarily
to a lower level of funds available for investment.

Securities  transaction  gains in both periods include gains related to
the  disposition of a portion of the shares of Halliburton  common stock held by
the  Company  when  certain  holders of the  Company's  LYONs  debt  obligations
exercised their right to exchange their LYONs for such Halliburton  shares.  Any
additional  exchanges  in 1999 or later  would  similarly  result in  additional
securities transaction gains. Securities transactions gains in 1999 also include
an  aggregate  $.6  million  second  quarter  gain  from  the  sale  of  certain
available-for-sale  marketable securities. See Notes 3 and 9 to the Consolidated
Financial Statements.

NL's  previously-reported  $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 ($2.7
million and $3 million in the first nine months of 1998 and 1999, respectively).
Net general corporate  expenses in 1998 includes an aggregate $32 million second
quarter pre-tax charge associated to the settlement of two lawsuits.

Interest  expense.  Interest expense decreased in 1999 compared to 1998
due primarily to a lower average level of  outstanding  indebtedness  (primarily
related to NL's  Senior  Secured  Discount  Notes  redeemed  in  October  1998).
Interest  expense is expected to continue to be lower during the fourth  quarter
of 1999 compared to the same period in 1998.

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  rate  are  explained  in  Note  10 to  the  Consolidated  Financial
Statements.  Certain  subsidiaries,  including NL and,  beginning in March 1998,
CompX,  are not members of the  consolidated  U.S. tax group of which Valhi is a
member, and the Company provides incremental income taxes on such earnings.

In the second  quarter of 1999,  NL  recognized a $90 million  non-cash
income  tax   benefit   related   to  (i)  a   favorable   resolution   of  NL's
previously-reported  tax  contingency  in Germany  ($36  million) and (ii) a net
reduction in NL's  deferred  income tax  valuation  allowance due to a change in
estimate of NL's  ability to utilize  certain  income tax  attributes  under the
"more-likely-than-not"  recognition criteria ($54 million).  With respect to the
German tax contingency,  the German government has conceded substantially all of
its income tax  claims  against  NL,  and the  government  has  released a DM 94
million  ($50  million)  lien on one of NL's German TiO2 plants that secured the
government's  claim.  The $54 million net reduction in NL's deferred  income tax
valuation  allowance is comprised of (i) a $78 million decrease in the valuation
allowance to recognize the benefit of certain  deductible  income tax attributes
which NL now believes meets the recognition criteria as a result of, among other
things,  a corporate  restructuring  of NL's German  subsidiaries and (ii) a $24
million increase in the valuation allowance to reduce the  previously-recognized
benefit of certain other deductible  income tax attributes which NL now believes
do not meet the  recognition  criteria  due to a change in German  tax law.  The
German tax law change, enacted on April 1, 1999, was effective  retroactively to
January 1, 1999 and resulted in an additional  $6 million of current  income tax
expense during the first nine months of 1999 for NL.

Also  during the first nine  months of 1999,  NL reduced  its  deferred
income  tax  valuation  allowance  by  $12  million  primarily  as a  result  of
utilization  of  certain  tax  attributes  for  which the  benefit  had not been
previously recognized under the "more-likely-than-not" recognition criteria.

Minority  interest  and  discontinued  operations.  See Notes 11 and 1,
respectively,  to the Consolidated  Financial  Statements.  Minority interest in
NL's   subsidiaries   in  1999  relates   principally  to  NL's   majority-owned
environmental management subsidiary,  NL Environmental Management Services, Inc.
("EMS").

Year 2000 Issue

General.  As a result of certain computer  programs being written using
two digits  rather than four to define the  applicable  year,  certain  computer
programs  that have  date-sensitive  software may recognize a date using "00" as
the year 1900 rather than the year 2000.  This could result in a system  failure
or miscalculations  causing  disruptions of operations,  including,  among other
things, a temporary inability to process  transactions,  send invoices or engage
in normal business activities.

NL. NL has evaluated and  substantially  upgraded its computer systems,
both information technology ("IT") systems and non-IT systems involving embedded
chip technology,  and software  applications to ensure that the systems function
properly beginning January 1, 2000. To achieve its Year 2000 compliance plan, NL
is utilizing internal and external resources to identify,  correct or reprogram,
and test its systems.

NL has  conducted  an  inventory  of its IT  systems  worldwide  and is
currently testing, where practical,  the systems and applications that have been
corrected  or  reprogrammed  for  Year  2000  compliance.  NL has  completed  an
inventory of its non-IT systems and is in the process of correcting or replacing
date-deficient  systems.  The remediation  effort for all critical IT and non-IT
systems is complete. Once systems undergo remediation,  they are tested for Year
2000  compliance.  For critical  systems,  the testing process usually  involves
subjecting  the  remediated  system to a simulated  change of date from the year
1999 to the year 2000 using, in many cases, computer resources. NL uses a number
of packaged  software  products that have been upgraded to a Year 2000 compliant
version in the normal course of business.  Excluding the cost of these  software
upgrades,  NL's  cost  of  becoming  Year  2000  compliant  is  expected  to  be
approximately  $2  million,  substantially  all of which has been spent  through
September 30, 1999.

NL has approximately 30 major computer systems which have been assessed
for Year 2000 compliance. At September 30, 1999, NL believes all of such systems
are Year 2000  compliant.  Each  operating unit has  responsibility  for its own
conversion,   in  line  with  overall  guidance  and  oversight  provided  by  a
corporate-level  coordinator.  The  status  of each of the  remaining  non-major
systems will be specifically tracked and monitored.

As  part  of  its  Year  2000   compliance   plan,   NL  has  requested
confirmations from its major domestic and foreign software and hardware vendors,
primary  suppliers and major customers that they are developing and implementing
plans to become,  or that they have become,  Year 2000 compliant.  Confirmations
received by NL to date indicate  that such parties  generally are in the process
of  implementing  remediation  plans to  ensure  their  systems  are  Year  2000
compliant  by December  31,  1999.  The major  software  vendors used by NL have
already delivered Year 2000 compliant software.  Notwithstanding  these efforts,
NL's ability to affect the Year 2000 preparedness of such vendors, suppliers and
customers is limited.

NL is in the  process  of  developing  a  contingency  plan to  address
potential  Year 2000 issues related to business  interruption  that may occur on
January 1, 2000 or  thereafter.  NL's plan is  expected to be  completed  in the
fourth quarter of 1999. As part of the contingency plan, NL presently intends to
idle  its  manufacturing  facilities  shortly  before  the  end  of  1999  as an
additional  safeguard against the unexpected loss of utility services and resume
production shortly after midnight of year-end 1999.

Although  NL  expects  its  systems  to be Year 2000  compliant  before
December  31,  1999,  it cannot  predict the outcome or success of the Year 2000
compliance  programs of its vendors,  suppliers  and  customers.  NL also cannot
predict whether its major software  vendors,  who continue to test for Year 2000
compliance,  will find  additional  problems  that  would  result  in  unplanned
upgrades of their  applications  after  December 31, 1999.  As a result of these
uncertainties,  NL  cannot  predict  the  impact on its  consolidated  financial
condition,  results of operations or cash flows resulting from noncompliant Year
2000 systems that NL directly or indirectly  relies upon.  Should NL's Year 2000
compliance  plan not be  successful  or be delayed  beyond  January 1, 2000,  or
should one or more  suppliers,  vendors or customers fail to adequately  address
their  Year  2000  issues,  the  consequences  to NL could be  far-reaching  and
material,   including  an  inability  to  produce  TiO2  at  its   manufacturing
facilities,  which could lead to an indeterminate amount of lost revenue.  Other
potential  negative  consequences  could  include  plant  malfunction,   impeded
communications or power supplies, or slower transaction processing and financial
reporting.  Although not  anticipated,  the most  reasonably  likely  worst-case
scenario of failure by NL or its key  suppliers or customers to become Year 2000
compliant  would  be  a  short-term   slowdown  or  cessation  of  manufacturing
operations at one or more of its  facilities  and a short-term  inability on the
part of NL to process  orders and  billings in a timely  manner,  and to deliver
products to customers.

CompX.  CompX has installed  information  systems  upgrades for both its
U.S. and Canadian facilities which contain, among many other features,  software
compatibility  with the Year 2000 issue.  Excluding the cost of the  information
systems  upgrades,  CompX's  expenditures  to-date  to  address  the  Year  2000
compliance have not been  significant,  and CompX does not currently  anticipate
spending  significant  additional  funds to address Year 2000  compliance in the
future.  Thomas  Regout's Year 2000  preparedness  is  substantially  similar to
CompX's other operations.

As part of its Year 2000 compliance plan, CompX is seeking confirmation
from its major  software  and  hardware  vendors,  primary  suppliers  and major
customers  that they are developing and  implementing  plans to become,  or that
they have become, Year 2000 compliant.  Confirmations  received by CompX to-date
indicate that such vendors, suppliers and customers generally are in the process
of becoming Year 2000 compliant by December 31, 1999. The major software vendors
used  by  CompX  have   already   delivered   Year  2000   compliant   software.
Notwithstanding  these  efforts,   CompX's  ability  to  affect  the  Year  2000
preparedness of such vendors, suppliers and customers is limited.

CompX is developing a contingency plan to deal with potential Year 2000
issues  related to  business  interruption  that may occur on January 1, 2000 or
thereafter.  CompX's plan is expected to be  completed in the fourth  quarter of
1999.

Although  CompX  expects its systems to be Year 2000  compliant  before
December  31,  1999,  it cannot  predict the outcome or success of the Year 2000
compliance programs of its vendors,  suppliers, and customers. CompX also cannot
predict whether its major software  vendors,  who continue to test for Year 2000
compliance,  will find  additional  problems  that  might  result  in  unplanned
upgrades of their  applications  after  December 31, 1999.  As a result of these
uncertainties,  CompX cannot  predict the impact on its  consolidated  financial
condition,  results of operations or cash flows resulting from noncompliant Year
2000 systems that CompX directly or indirectly  relies upon. Should CompX's Year
2000  compliance  plan not be successful or be delayed  beyond  January 2000, or
should one or more  suppliers,  vendors or customers fail to adequately  address
their Year 2000 issues,  the  consequences  to CompX could be  far-reaching  and
material,  including  an  inability  to produce  products  at its  manufacturing
facilities,  which  could  lead to an  indeterminate  amount  of  lost  revenue.
Although not  anticipated,  the most reasonably  likely  worst-case  scenario of
failure by CompX or its key suppliers or customers to become Year 2000 compliant
would be a short-term  slowdown or cessation of manufacturing  operations at one
or more of CompX's facilities,  delays in delivering products to customers and a
short-term  inability  on the part of CompX to process  orders and billings in a
timely manner.

TIMET.  Most of  TIMET's  information  systems  have been  replaced  in
connection with the  implementation of its  business-enterprise  SAP system. The
initial  implementation  of SAP has been completed.  The cost of the new system,
including  related  equipment and networks,  aggregated $50 million ($41 million
capital; $9 million expense).

TIMET,  with the help of outside  specialists  and  consultants (i) has
completed an  assessment  of potential  Year 2000 issues in its  non-information
systems (e.g., its manufacturing and communication systems), as well as in those
information  systems  that were not  replaced by the new SAP system and (ii) has
completed its system remediation and testing.  Beginning in the third quarter of
1999,  TIMET's  Year 2000  efforts  shifted  from  remediation  and  testing  to
contingency  planning.  Nevertheless,  TIMET will continue its Year 2000 testing
and  monitoring  throughout  the end of 1999 and into 2000 to help  ensure  that
TIMET's systems will continue to operate  without Year 2000 problems.  TIMET has
developed contingency plans to be implemented in the event that mission critical
systems  and/or  associated  processes  experience  a  Year  2000  failure.  The

contingency plans will be tested and rehearsed through the remainder of 1999. In
this regard,  TIMET is considering the temporary  shutdown of certain  sensitive
production operations for a few days around the end of 1999 and early 2000 as an
additional  safeguard  against the unexpected loss of utilities  service.  TIMET
expects to schedule  production to provide for such temporary  shutdowns.  TIMET
has expended  approximately $4 million through September 1999 ($2 million in the
first  nine  months  of  1999) on  non-information  system  issues,  principally
embedded  system  technology,  and  expects to  additionally  incur less than $1
million on such issues in the remainder of 1999. TIMET's evaluation of potential
Year 2000 exposure related to key suppliers and customers is also in process and
will continue throughout 1999.

Although TIMET believes its key information and non-information systems
are Year 2000 ready, it cannot predict whether it will find additional  problems
that would result in unplanned upgrades of applications  during the rest of 1999
or even after  December 1999. As a result of these  uncertainties,  TIMET cannot
predict  the  impact  on  its  consolidated  financial  condition,   results  of
operations or cash flows resulting from Year 2000 failures in systems that TIMET
directly or indirectly relies upon. Should TIMET's Year 2000 readiness plans not
be successful or be delayed  beyond  December 1999,  the  consequences  to TIMET
could be far-reaching  and material,  including an inability to produce titanium
metal  products  at  its  manufacturing  facilities,  which  could  lead  to  an
indeterminate  amount of lost revenue.  Other  potential  negative  consequences
could include  impeded  communications  or power  supplies,  slower  transaction
processing and financial  reporting,  and potential  liability to third parties.
Although not  anticipated,  the most reasonably  likely  worst-case  scenario of
failure by TIMET or its key  suppliers  or  customers  to become Year 2000 ready
would be a short-term  slowdown or cessation of manufacturing  operations at one
or more of TIMET's facilities and a short-term inability on the part of TIMET to
process  orders and  billings  in a timely  manner,  and to deliver  products to
customers.

Waste    Control     Specialists.     Waste    Control     Specialists'
recently-installed  information system is Year 2000 compliant.  The cost of such
new  information  system was not material to Waste  Control  Specialists.  Waste
Control  Specialists  is in the process of evaluating  any  potential  Year 2000
issues with respect to embedded chip technology associated with the equipment at
its disposal  facility;  however,  because such facility was  constructed in the
past few years,  Waste  Control  Specialists  does not expect such  equipment to
present any significant Year 2000 compliance issues.  Waste Control  Specialists
is also in the  process of  contacting  its major  suppliers  and  customers  to
confirm they are developing and implementing  plans to become, or that they have
become,  Year 2000  compliant.  Notwithstanding  these  efforts,  Waste  Control
Specialists'  ability to affect the Year 2000 preparedness of such suppliers and
customers is limited. Waste Control Specialists has substantially  completed its
evaluation  of embedded  chip  technology  and will continue to update Year 2000
compliance  issues at  significant  suppliers and  customers  through the end of
1999. Any required  remedial  actions are expected to be completed  prior to the
end of 1999. Assuming Waste Control Specialists does not encounter a significant
Year 2000  compliance  issue  with  respect  to the  equipment  at its  disposal
facility,  Waste Control  Specialists  does not expect its costs associated with
Year 2000 compliance will be material.

Although Waste Control Specialists believes its information systems and
equipment at its disposal  facility will be Year 2000 compliant  before December
31, 1999, it cannot  predict the outcome or success of the Year 2000  compliance
programs at its significant suppliers and customers.  As a result, Waste Control
Specialists  cannot  predict the impact on its  financial  position,  results of
operations  or cash flows  resulting  from  noncompliant  Year 2000 systems that
Waste  Control  Specialists  directly or  indirectly  relies upon.  Should Waste
Control  Specialists' Year 2000 compliance  program not be successful or delayed
beyond  January  2000,  or should one or more  suppliers  or  customers  fail to
adequately  address their Year 2000 issues,  the  consequences  to Waste Control
Specialists  could be  far-reaching  and  material,  including  an  inability to
operate the disposal  facility,  which could lead to an indeterminate  amount of
lost  revenue.  Other  potential  adverse  consequences  could  include  impeded
communications or power supplies or slower transaction  processing and financial
reporting.

Tremont.  As  a  holding  company,   Tremont  does  not  have  numerous
applications  or systems.  Tremont has completed an assessment of potential Year
2000 issues in its  information  systems and has implemented  remedial  actions,
including testing. The cost for Tremont's Year 2000 readiness is not significant
to Tremont.  Although not  anticipated,  the most reasonably  likely  worst-case
scenario of failure by Tremont or its key service  providers to become Year 2000
ready would be a short-term  inability on the part of Tremont to process banking
transactions.

Valhi. As a holding company,  Valhi does not have numerous applications
or systems.  Valhi  believes  its  corporate  information  systems are Year 2000
compliant.  However,  for  the  reasons  discussed  above  with  respect  to its
subsidiaries and affiliates, Valhi cannot predict the impact on its consolidated
financial  position,   results  of  operations  or  cash  flows  resulting  from
noncompliant  Year 2000  systems  that Valhi,  it  subsidiaries  and  affiliates
directly or  indirectly  rely upon.  The  consequences  to the Company  could be
far-reaching  and  material,  including the loss of an  indeterminate  amount of
revenue.  Other  potential  negative  consequences  could include  manufacturing
equipment  malfunctions,  impeded  communications  or power  supplies  or slower
transaction processing and financial reporting.

Other. The completion  dates for these planned Year 2000  modifications
are based on management's best estimates,  which were derived utilizing numerous
assumptions of future events,  including the continued  availability  of certain
resources,  third party modification plans and other factors. However, there can
be no assurance  that these  estimates will be achieved and actual results could
differ  materially  from those  plans.  Specific  factors  that might cause such
material  differences include, but are not limited to, the availability and cost
of  personnel  trained in this area,  the  ability  to locate  and  correct  all
relevant computer codes, and similar uncertainties.

European monetary conversion

Beginning  January 1, 1999, 11 of the 15 members of the European  Union
("EU"),  including  Germany,  Belgium,  the Netherlands and France,  established
fixed conversion exchange rates between their existing sovereign  currencies and
the European  currency  unit  ("euro").  Such members  adopted the euro as their
common legal currency on that date. The remaining four EU members (including the
United  Kingdom) may convert their  sovereign  currencies to the euro at a later
date. Certain European countries,  such as Norway, are not members of the EU and
their sovereign currencies will remain intact. Each national government retained
authority to  establish  their own tax and fiscal  spending  policies and public
debt  levels,  although  such public  debt will be issued in, or  re-denominated
into, the euro. However, monetary policies,  including money supply and official
euro  interest  rates,  are now  established  by a new  European  Central  Bank.
Following the introduction of the euro, the  participating  countries'  national
currencies  are  scheduled to remain legal tender as  denominations  of the euro
through  January 1, 2002,  although the exchange rates between the euro and such
currencies will remain fixed.

NL. NL  conducts  substantial  operations  in  Europe,  principally  in
Germany,  Belgium,  the Netherlands,  France and Norway.  In addition,  NL has a
significant amount of outstanding indebtedness denominated in the Deutsche Mark.
The national  currency of the country in which such  operations  are located are
such operation's  functional  currency.  The functional  currency of the German,
Belgian,  Dutch  and  French  operations  will  convert  from  their  respective
sovereign  currencies to the euro over a two-year  period that began in 1999. NL
has assessed and evaluated the impact of the euro conversion on its business and
has made the necessary system  conversions.  The euro conversion may impact NL's
operations including,  among other things,  changes in product pricing decisions
necessitated  by  cross-border  price  transparencies.  Such  changes in product
pricing  decisions  could impact both sales  prices and  purchasing  costs,  and
consequently  favorably or unfavorably impact NL's reported consolidated results
of operations, financial condition or liquidity.

CompX.  The  functional  currency of CompX's  recently-acquired  Thomas
Regout  operations in the  Netherlands  and CompX's French lock  operations will
convert to the euro from their  respective  national  currencies over a two-year
period that began in 1999. The euro  conversion  may impact  CompX's  operations
including, among other things, changes in product pricing decisions necessitated
by cross-border price transparencies.  Such changes in product pricing decisions
could  impact  both  selling  prices and  purchasing  costs  and,  consequently,
favorably or unfavorably impact results of operations.

In 1998, CompX assessed and evaluated the impact of the euro conversion
on its business and made the  necessary  system  conversions.  Modifications  of
information   systems  to  handle   euro-denominated   transactions   have  been
implemented and were not extensive.  Because of the inherent  uncertainty of the
ultimate  effect of the euro  conversion,  CompX cannot  accurately  predict the
impact  of the  euro  conversion  on its  consolidated  results  of  operations,
financial condition or liquidity.

TIMET.  TIMET  also  has  operations  and  assets  located  in  Europe,
principally in the United Kingdom.  The United Kingdom has not adopted the euro.
Approximately  one-half of TIMET's  European sales are denominated in currencies
other than the U.S. dollar,  principally the major European currencies.  Certain
purchases of raw materials for TIMET's European operations, principally titanium
sponge  and  alloys,  are  denominated  in U.S.  dollars  while  labor and other
production costs are primarily denominated in local currencies.  The U.S. dollar
value of TIMET's  foreign  sales and  operating  costs are  subject to  currency
exchange rate  fluctuations that can impact reported earnings and may affect the
comparability  of  period-to-period  operating  results.  Costs  associated with
modification   of  certain  of  TIMET's   systems  to  handle   euro-denominated
transactions have not been significant.

LIQUIDITY AND CAPITAL RESOURCES:

Cash  flows  from  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. In addition,  cash flows from operating activities in 1998 include the
impact of the  payment of cash  income  taxes  related to the  disposal  of NL's
specialty  chemicals  business unit,  even though the pre-tax  proceeds from the
disposal are reported as a component  of cash flows from  investing  activities.
Noncash  interest expense consists of amortization of original issue discount on
certain Valhi and NL indebtedness and amortization of deferred financing costs.

Cash flows  from  investing  and  financing  activities.  Approximately
two-thirds of the Company's  aggregate  capital  expenditures  in the first nine
months of 1999  relates to NL, and  substantially  all of the  remaining  amount
relates to CompX.

During the first nine  months of 1999,  (i) CompX  acquired a precision
ball bearing slide  producer for  approximately  $53 million using funds on hand
and $20 million of borrowing under its unsecured revolving bank credit facility,
(ii) Valhi  contributed an additional $10 million to Waste Control  Specialists'
equity,  (iii) Valhi  purchased  $1.9  million of  additional  shares of Tremont
common stock and $.6 million of additional  shares of CompX common  stock,  (iv)
Valhi sold certain  marketable  securities  for an aggregate of $6.6 million and
(v) Valhi  received $2 million of additional  consideration  related to the 1997
disposal of its former fast food operations.

Net repayments of indebtedness in the first nine months of 1999 include
(i) NL's repayment in full of the remaining DM 107 million outstanding under the
term loan portion of its DM credit  facility  ($60  million  when repaid)  using
funds on hand and a net DM 40 million  ($23  million)  increase in the  revolver
portion of the DM  facility,  (ii)  CompX's $20 million of  borrowing  under its
revolving bank credit  facility and (iii) Valhi's $21 million of borrowing under
its  revolving  bank credit  facility  and Valhi's  repayment of $9.5 million of
short-term  borrowings from Contran. NL reduced the DM revolver's  September 30,
1999  outstanding  balance of DM 120 million ($64 million) by DM 20 million ($11
million) in October 1999. The remaining DM 100 million balance will be repaid or
refinanced on or before its scheduled maturity date in September 2000.

At September 30, 1999,  unused credit  available  under existing credit
facilities  approximated  $187  million,  which  was  comprised  of $80  million
available to CompX under its unsecured  revolving  senior credit  facility,  $78
million  available  to NL  under  non-U.S.  credit  facilities  and $29  million
available to Valhi under its bank credit facility. Of such $78 million available
to NL, $59 million relates to NL's DM credit facility.

Chemicals - NL Industries

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 tax
related items and interest.  As discussed  above,  in the second quarter of 1999
certain  significant  German tax  contingencies  aggregating an estimated DM 188
million ($100 million) through 1998 were resolved in NL's favor.

On April 1, 1999, the German government  enacted certain income tax law
changes that were retroactively  effective as of January 1, 1999. Based on these
changes,  NL's  effective  current  (cash) income tax rate in Germany  increased
beginning in the second quarter of 1999.

During  1997,  NL  received a tax  assessment  from the  Norwegian  tax
authorities  proposing  tax  deficiencies  of  NOK 51  million  ($7  million  at
September  30, 1999)  relating to 1994. NL has appealed  this  assessment  and a
local  Norwegian  court is  scheduled to hear the case in January  2000.  During
1998, NL was informed by the  Norwegian  tax  authorities  that  additional  tax
deficiencies of NOK 39 million ($5 million) will likely be proposed for 1996. NL
intends to vigorously contest this issue and litigate, if necessary. Although NL
believes that it will ultimately prevail, NL has granted a lien for the 1994 tax
assessment on its Norwegian Ti02 plant in favor of the Norwegian tax authorities
and will be required to grant security on the 1996 assessment when received.

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
("PRP"), or both, in a number of legal proceedings associated with environmental
matters,  including  waste  disposal  sites,  mining  locations  and  facilities
currently or previously  owned,  operated or used by 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 as discussed  above.  NL believes it has
provided  adequate  accruals ($117 million at September 30, 1999) 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  $160 million.  NL's estimates of such  liabilities  have not been
discounted to present value,  and NL has not recognized any potential  insurance
recoveries.  No assurance can be given that actual costs will not exceed accrued
amounts  or the upper end of the range for sites for which  estimates  have been
made and no assurance  can be given that costs will not be incurred with respect
to sites as to which no estimate  presently  can be made. NL is also a defendant
in a number  of legal  proceedings  seeking  damages  for  personal  injury  and
property damage arising from the sale of lead pigments and lead-based paints. 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  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.  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 capital resources, 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, issue additional securities,
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.   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. In this regard,  the indentures
governing NL's  publicly-traded  debt contain provisions which limit the ability
of  NL  and  its   subsidiaries  to  incur   additional   indebtedness  or  hold
noncontrolling interests in business units.

Component products - CompX International

In January 1999, CompX acquired a precision ball bearing slide producer
for approximately  $53 million,  using available cash on hand and $20 million of
borrowing  under  its  revolving  bank  credit  facility.  CompX  has 2 signed a
definitive  agreement to acquire a Taiwanese  slide  producer for $11.5  million
cash  consideration.  CompX currently  expects this  transactions  will close in
November 1999.

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 in light of its capital resources
and estimated  future  operating cash flows. As a result of this process,  CompX
may in the future seek to raise  additional  capital,  refinance or  restructure
indebtedness,  issue additional securities, modify its dividend policy 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,  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.

Certain of CompX's  sales  generated  by its  Canadian  operations  are
denominated in U.S.  dollars.  To manage a portion of the foreign  exchange rate
market risk associated with such receivables,  in July 1999 CompX entered into a
series of short-term  forward exchange  contracts maturing through November 1999
to exchange an  aggregate  of $7 million  for an  equivalent  amount of Canadian
dollars  at  exchange  rates  ranging  between  Cdn$ 1.49 and Cdn$ 1.50 per U.S.
dollar. At September 30, 1999, $5 million of such contracts remain  outstanding.
In October 1999, CompX entered into an additional  series of short-term  forward
contracts  maturing  through March 2000 to exchange an aggregate of $9.5 million
for an  equivalent  amount of Canadian  dollars at an exchange rate of Cdn$ 1.49
per U.S. dollar.

Tremont Corporation

Tremont is primarily a holding  company  which,  at September 30, 1999,
owned  approximately  39% of TIMET and 20% of NL. At  September  30,  1999,  the
market value of the 12.3 million  shares of TIMET and the 10.2 million shares of
NL  held  by  Tremont  was   approximately   $110  million  and  $129   million,
respectively.

In 1998,  Tremont  entered  into a  revolving  advance  agreement  with
Contran.  Through  September  30,  1999,  Tremont had  borrowed $13 million from
Contran under such facility,  primarily to fund Tremont's purchases of shares of
NL and TIMET  common  stock.  The  revolving  advance  agreement  is currently a
significant  source of liquidity to Tremont and is expected to be a  significant
source of liquidity  in the future  absent an increase in dividends on Tremont's
shares of NL common stock or Tremont's receipt of cash from other sources.

At September 30, 1999,  Tremont  reported  total assets of $309 million
and  stockholders'  equity of $207 million.  Tremont's total assets at such date
include its  investments  in TIMET ($154  million),  NL ($114 million) and other
joint  ventures  ($14  million)  and $3  million  in cash and cash  equivalents;
Tremont's total liabilities at such date include the demand loan owed to Contran
($13 million),  accrued OPEB costs ($22 million),  accrued  insurance claims and
claim expenses related to its  wholly-owned  captive  insurance  subsidiary ($16
million) and deferred income taxes ($36 million).

Based upon certain technical  provisions of the Investment  Company Act
of 1940 (the "1940 Act"),  Tremont might arguably be deemed to be an "investment
company" under the 1940 Act,  despite the fact that Tremont does not now engage,
nor has it  engaged  or  intended  to  engage,  in the  business  of  investing,
reinvesting,  owning,  holding or trading of  securities.  Tremont has taken the
steps  necessary to give itself the benefits of a temporary  exemption under the
1940 Act and has sought an order from the  Securities  and  Exchange  Commission
that Tremont is primarily  engaged,  through  TIMET and NL, in a  non-investment
company business.  Tremont believes another exemption may be currently available
to it under the 1940 Act should the Commission deny Tremont's application for an
exemptive order.

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
available cash, issuing equity securities or incurring indebtedness.

General corporate - Valhi

Valhi's operations are conducted primarily through  subsidiaries and an
affiliate  (NL  Industries,  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, which paid dividends in the
first three  quarters of 1996,  suspended its dividend in the fourth  quarter of
1996.  Suspension of NL's dividend did not materially  adversely  impact Valhi's
financial  position or  liquidity.  Starting in the second  quarter of 1998,  NL
resumed  regular  quarterly  dividends  at a rate of $.03 per NL  share,  and NL
increased  its  quarterly  dividend  to $.035 per share in the first  quarter of
1999. At the $.035 per share  quarterly  rate,  and based on the 30.1 million NL
shares held by Valhi at September 30, 1999, Valhi would receive aggregate annual
dividends  from NL of  approximately  $4.2  million.  Tremont  currently  pays a
quarterly  dividend  of $.07 per share,  and Valhi  began to  receive  quarterly
dividends  from Tremont in the third  quarter of 1998.  At that rate,  and based
upon the 3.2 million Tremont shares owned by Valhi at September 30, 1999,  Valhi
would receive aggregate annual dividends from Tremont of approximately $890,000.
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  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. At September 30, 1999, Valhi had $5 million of parent level cash and
cash equivalents,  including a portion held by Valcor which could be distributed
to Valhi, and had $21 million of short-term bank borrowings.  In addition, Valhi
had $29 million of borrowing availability under its bank credit facility.

Valhi's LYONs do not require  current cash debt  service.  At September
30, 1999,  Valhi held 2.7 million  shares of  Halliburton  common  stock,  which
shares are held in escrow for the benefit of holders of the LYONs. The LYONs are
exchangeable  at any time,  at the  option of the  holder,  for the  Halliburton
shares owned by Valhi.  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 September 30, 1999,  assuming  exchanges of all of
the outstanding  LYONs for Halliburton stock at such date, was approximately $26
million.  Valhi continues to receive  regular  quarterly  Halliburton  dividends
(currently $.125 per share) on the escrowed  shares.  At September 30, 1999, the
LYONs had an accreted value equivalent to  approximately  $33.45 per Halliburton
share, and the market price of the Halliburton common stock was $41 per share.

Based on The Amalgamated Sugar Company LLC's current projections, Valhi
currently  expects that  distributions  received from the LLC in 1999, which are
dependent in part upon the future  operations of the LLC, will  approximate  its
debt service requirements under its $250 million loans from Snake River. Certain
covenants contained in Snake River Sugar Company's third-party senior debt limit
the amount of debt service  payments  (principal and interest) which Snake River
is  permitted  to remit to Valhi under  Valhi's $80 million loan to Snake River,
and such loan is subordinated to Snake River's  third-party  senior debt. Due to
these covenants,  Snake River has not made any principal or interest payments on
the $80  million  loan in 1998 or  to-date  in 1999  other  than  payment of the
accrued and unpaid  interest  owed as of December 31, 1997 ($3 million)  paid in
December 1998 and $3.6 million of accrued and unpaid  interest from 1998 paid in
September 1999. The Company  currently expects to receive at least an additional
$3.6 million of 1998 unpaid interest in the fourth quarter of 1999. Assuming the
additional $3.6 million is paid in the fourth quarter,  Snake River's  aggregate
accrued and unpaid interest would be  approximately  $12 million at December 31,
1999. The Company  believes both such accrued and unpaid interest as well as the
$80 million principal amount  outstanding at September 30, 1999, will ultimately
be collected.

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, although the net cash proceeds that
would be  generated  from  such a  disposition  would  likely  be less  than the
specified  redemption price due to Snake River's ability to simultaneously  call
its $250 million loans to Valhi. As a result,  such net cash proceeds  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.  In this regard, the indentures
governing  the  publicly-traded  debt of NL contain  provisions  which limit the
ability of NL and its  subsidiaries  to incur  additional  indebtedness  or hold
noncontrolling interests in business units.

Part II. OTHER INFORMATION

Item 1.  Legal Proceedings.

Reference  is made to the 1998  Annual  Report and prior 1999  periodic
reports for descriptions of certain legal proceedings.

In October 1999,  defendant was denied a judgment  notwithstanding  the
verdict,   and  defendant's   motion  for  a  new  trial  was  denied,   in  the
previously-reported Kenneth F. Jackson v. Waste Control Specialists LLC, et al.
Defendant has filed a notice of appeal.

In October  1999,  NL was  served  with a  complaint  in State of Rhode
Island v. Lead Industries  Association,  et al. (Superior Court of Rhode Island,
No.  99-5226).  Rhode  Island,  by  and  through  its  Attorney  General,  seeks
compensatory  and punitive  damages for  medical,  school and public and private
building  abatement  expenses  that the State alleges were caused by lead paint,
and for funding of a public education campaign and screening programs. Plaintiff
seeks judgments of joint and several liability against NL, seven other companies
alleged to have  manufactured  lead  products  in paint and the Lead  Industries
Association.  Plaintiffs  allege public nuisance,  violation of the Rhode Island
Unfair  Trade  Practices  and  Consumer   Protection   Act,  strict   liability,
negligence,    negligent    misrepresentation    and    omissions,    fraudulent
misrepresentation and omissions, civil conspiracy, unjust enrichment,  indemnity
and equitable relief to protect children.  NL intends to deny all allegations of
wrongdoing or liability and to defend the case vigorously.

In October 1999,  NL was served with a complaint in Cofield,  et al. v.
Lead Industries Association, et al. (Circuit Court for Baltimore City, Maryland,
Case No. 24-C-99-004491).  Plaintiffs, six homeowners, seek to represent a class
of all owners of non-rental residential properties in Maryland.  Plaintiffs seek
compensatory and punitive damages for the existence of lead-based paint in their
homes, including funds for monitoring, detecting and abating lead-based paint in
those residences. Plaintiffs allege that NL, fourteen other companies alleged to
have  manufactured  lead  pigment,  paint and/or  gasoline  additives,  the Lead
Industries  Association  and the  National  Paint and Coatings  Association  are
jointly and severally  liable for alleged  negligent  product design,  negligent
failure to warn, supplier negligence,  strict liability/defective design, strict
liability/failure  to  warn,  nuisance,   indemnification,   fraud  and  deceit,
conspiracy,  concert of action,  aiding and abetting,  and enterprise liability.
Plaintiffs  seek damages in excess of $20,000 per  household.  In October  1999,
defendants  removed the case to Maryland  federal court.  NL intends to deny all
allegations of wrongdoing or liability and to defend the case vigorously.

In October  1999,  NL was served with a complaint  in Smith,  et al. v.
Lead Industries Association, et al. (Circuit Court for Baltimore City, Maryland,
Case No. 24-C-99-004490). Plaintiffs, six minors, each seek compensatory damages
of $5 million and punitive  damages of $10 million.  Plaintiffs  allege that NL,
fourteen other companies alleged to have manufactured lead pigment, paint and/or
gasoline additives,  the Lead Industries  Association and the National Paint and
Coatings  Association  are jointly and  severally  liable for alleged  negligent
product  design,  negligent  failure  to warn,  supplier  negligence,  fraud and
deceit,   conspiracy,   concert  of  action,   aiding   and   abetting,   strict
liability/failure  to warn and  strict  liability/defective  design.  In October
1999,  defendants  removed the case to Maryland  federal court,  and in November
1999 the case was remanded to state court. NL intends to deny all allegations of
wrongdoing or liability and to defend the case vigorously.

In October 1999,  NL was served with an amended  complaint in Thomas v.
Lead Industries Association,  et al. (Circuit Court, Milwaukee,  Wisconsin, Case
No.  99-CV-6411)  adding as defendants NL and seven other  companies  alleged to
have  manufactured  lead  products in paint to a suit  originally  filed against
plaintiff's  landlords.  Plaintiff, a minor, alleges injuries purportedly caused
by lead on the  surfaces of  premises  in homes in which he  resided.  Plaintiff
seeks  compensatory and punitive  damages.  Plaintiff  alleges strict liability,
negligence,    negligent    misrepresentation    and    omissions,    fraudulent
misrepresentations  and  omissions,  concert of  action,  civil  conspiracy  and
enterprise liability causes of action against NL, six other former manufacturers
of lead  products  contained in paint and the Lead  Industries  Association.  NL
intends to deny all  allegations  of  wrongdoing  or liability and to defend the
case vigorously.

City of New York,  et al. v. Lead  Industries  Association,  et al (No.
89-4617).  In September  1999,  the trial court  denied the  previously-reported
plaintiffs'  motions for summary judgment on market share and conspiracy  issues
and denied  defendants'  April 1999  motion for  summary  judgment on statute of
limitations grounds. Plaintiffs have appealed the denial of their motions.

Parker v. NL  Industries,  et al. (No.  97085060 CC 915).  In September
1999,  the Special Court of Appeals  reversed the  previously-reported  grant of
summary judgment to defendants.  Defendants have requested review from the Court
of Appeals.

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

(a)    Exhibits

27.1 - Financial  Data Schedule for the  nine-month  period ended
September 30, 1999.

(b)    Reports on Form 8-K

Reports on Form 8-K for the quarter ended September 30, 1999.

July 29, 1999  - Reported Items 5 and 7. 
August 27 1999 - Reported Items 5 and 7.

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   November 12, 1999      By /s/ Bobby D. O'Brien          
---------------------------------------------
Bobby D. O'Brien
(Vice President and Treasurer,
Principal Financial Officer)

Date   November 12, 1999      By /s/ Gregory M. Swalwell       
---------------------------------------------
Gregory M. Swalwell

(Vice President and Controller,
Principal Accounting Officer)

<ARTICLE>                     5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VALHI
INC.'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED
FINANCIAL STATEMENTS.
</LEGEND>
<CIK>                         0000059255
<NAME>                        VALHI, INC.
<MULTIPLIER>                                   1,000

<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                              DEC-31-1999
<PERIOD-START>                                 JAN-01-1999
<PERIOD-END>                                   SEP-30-1999
<CASH>                                         205,574
<SECURITIES>                                   0
<RECEIVABLES>                                  205,740
<ALLOWANCES>                                   2,997
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<INCOME-TAX>                                   (61,849)
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