Valhi, Inc. Annual Report 2015

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FY2015 Annual Report · Valhi, Inc.

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VALHI

2015

ANNUAL REPORT

VALHI, INC. CORPORATE AND OTHER INFORMATION

Board of Directors Continuing in Office

Corporate Officers

Operating Management of Subsidiaries

Thomas E. Barry (a) (b)
Vice President
Southern Methodist University

Loretta J. Feehan
Financial Consultant

Elisabeth C. Fisher (a)
Private Investor

W. Hayden Mcllroy (a)
Private Investor

Bobby D. O’Brien
President and
Chief Financial Officer

Mary A. Tidlund (a)
President
The Mary A. Tidlund
Charitable Foundation

Steven L. Watson
Chairman and
Chief Executive Officer

Board Committees

(a) Audit Committee

(b) Management Development and
Compensation Committee

Steven L. Watson
Chairman and
Chief Executive Officer

Bobby O’Brien
President and
Chief Financial Officer

Kronos Worldwide Inc.
Steven L. Watson
Chairman

Bobby D. O’Brien
Vice Chairman, President and
Chief Executive Officer

Robert D. Graham
Executive Vice President and Chief Legal
Officer

NL Industries, Inc.
Steven L. Watson
Chairman

Robert D. Graham
Vice Chairman, President and
Chief Executive Officer

CompX International Inc.
David A. Bowers
Vice Chairman and
Chief Executive Officer

Scott C. James
President and Chief Operating Officer

Waste Control Specialists LLC
Rodney A. Baltzer
President and Chief Executive Officer

Basic Management, Inc. and
The LandWell Company
T. Mark Paris
President and Chief Executive Officer

Kelly D. Luttmer
Executive Vice President and
Chief Tax Officer

Gregory M. Swalwell
Executive Vice President, Controller and
Chief Accounting Officer

Andrew B. Nace
Senior Vice President and General Counsel

James W. Brown
Vice President, Business Planning and
Strategic Initiatives

Steve S. Eaton
Vice President and Director of Internal
Control Over Financial Reporting

Janet G. Keckeisen
Vice President – Corporate Strategy and
Investor Relations

A. Andrew R. Louis
Vice President, Secretary and
Associate General Counsel

Courtney J. Riley
Vice President – Environmental Affairs

John A. St.Wrba
Vice President and Treasurer

John A. Sunny
Vice President – Information Technology

Stock Exchanges

Annual Meeting

Transfer Agent

Valhi’s common shares are listed on the New
York Stock Exchange under the symbol
“VHI.”

Kronos’ common shares are listed on the
New York Stock Exchange under the symbol
“KRO.”

NL’s common shares are listed on the New
York Stock Exchange under the symbol “NL.”

CompX’s Class A common shares are listed
on the NYSE Amex under the symbol “CIX.”

Computershare acts as transfer agent,
registrar and dividend paying agent for the
Company’s common stock. Communications
regarding stockholder accounts, dividends
and change of address should be directed to:

Computershare Trust Company, N.A.
P.O. Box 30170
College Station, TX 77842-3170
(877) 373-6374

Visit us on the Web
http: //www.valhi.net

The 2016 Annual Meeting of Stockholders
will be held at the office of the Company,
Three Lincoln Centre, 5430 LBJ Freeway,
Suite 1700, Dallas, Texas 75240-2697, on
the date and time as set forth in the notice of
the meeting, proxy statement and form of
proxy that will be mailed to stock holders in
advance of the meeting

Form 10-K Report

The Company’s Annual Report on Form 10-K
for the year ended December 31, 2015, as
filed with the Securities and Exchange
Commission, is printed as part of this Annual
Report. Additional copies are available
without charge upon written request to:

Janet G. Keckeisen
Vice President, Investor Relations
Valhi, Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(cid:95) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934—For the fiscal year ended December 31, 2015
Commission file number 1-5467

VALHI, INC.

(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of
Incorporation or organization)

5430 LBJ Freeway, Suite 1700, Dallas, Texas
(Address of principal executive offices)

87-0110150
(IRS Employer
Identification No.)

75240-2697
(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common stock ($.01 par value per share)

Name of each exchange on which registered
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None.

Indicate by check mark:

If the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:133) No (cid:95)
If the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:133) No (cid:95)
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 (or for such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes (cid:95) No (cid:133)
Whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes (cid:95) No (cid:133)
If disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes (cid:133) No (cid:95)(cid:3)
Whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer or a smaller reporting company (as
defined in Rule 12b-2 of the Act).

Large accelerated filer

Non-accelerated filer

(cid:133)
(cid:133)

Accelerated filer

(cid:95)
Smaller reporting company (cid:133)

Whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:133) No (cid:95).
The aggregate market value of the 19.1 million shares of voting common stock held by nonaffiliates of Valhi, Inc. as of June 30, 2015
(the last business day of the Registrant’s most recently-completed second fiscal quarter) approximated $108.2 million.

As of March 4, 2016, 339,142,949 shares of the Registrant’s common stock were outstanding.

The information required by Part III is incorporated by reference from the Registrant’s definitive proxy statement to be filed with the
Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.

Documents incorporated by reference

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ITEM 1.

BUSINESS

PART I

Valhi, Inc. (NYSE: VHI) is primarily a holding company. We operate through our wholly-owned and majority-owned
subsidiaries, including NL Industries, Inc., Kronos Worldwide, Inc., CompX International Inc. and Waste Control Specialists LLC
(“WCS”). Kronos (NYSE: KRO), NL (NYSE: NL) and CompX (NYSE MKT: CIX) each file periodic reports with the U.S. Securities
and Exchange Commission (“SEC”).

Our principal executive offices are located at Three Lincoln Center 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240.

Our telephone number is (972) 233-1700. We maintain a worldwide website at www.valhi.net.

Brief History

LLC Corporation, our legal predecessor, was incorporated in Delaware in 1932. We are the successor company of the
1987 merger of LLC Corporation and another entity controlled by Contran Corporation. One of Contran’s wholly-owned subsidiaries
held approximately 93% of Valhi’s outstanding common stock at December 31, 2015. As discussed in Note 1 to our Consolidated
Financial Statements, Lisa K. Simmons and Serena Simmons Connelly may be deemed to control Contran and us.

Key events in our history include:

(cid:120)

1979—Contran acquires control of LLC;

1981—Contran acquires control of our other predecessor company;

1982—Contran acquires control of Keystone Consolidated Industries, Inc., a predecessor to CompX;

1984—Keystone spins-off an entity that includes what is to become CompX; this entity subsequently merges with
LLC;

1986—Contran acquires control of NL, which at the time owns 100% of Kronos and a 50% interest in Titanium
Metals Corporation (“TIMET”);

1987—LLC and another Contran controlled company merge to form Valhi, our current corporate structure;

1988—NL spins-off an entity that includes its investment in TIMET;

1995—WCS begins start-up operations;

1996—TIMET completes an initial public offering;

2003—NL completes the spin-off of Kronos through the pro-rata distribution of Kronos shares to its shareholders
including us;

2004 through 2005—NL distributes Kronos shares to its shareholders, including us, through quarterly dividends;

2007—We distribute all of our TIMET common stock to our shareholders through a stock dividend;

2008—WCS receives a license for the disposal of byproduct material and begins construction of the byproduct
facility infrastructure;

2009—WCS receives a license for the disposal of Class A, B and C low-level radioactive waste (“LLRW”) and
completes construction of the byproduct facility;

2010—Kronos completes a secondary offering of its common stock lowering our ownership of Kronos to 80%;

2011—WCS begins construction on its Compact and Federal “LLRW” and mixed LLRW disposal facilities;

2012—WCS completes construction of its Compact and Federal LLRW disposal facilities and commences operations
at the Compact facility;

2012—In December we sell all of our remaining interest in TIMET and TIMET is no longer our affiliate;

2012—In December CompX completes the sale of its furniture components business;

2013—WCS commences operations at the Federal LLRW facility;

- 1 -

(cid:120)

2013—In December we purchased an additional ownership interest in and became the majority owner of Basic
Management, Inc. and The LandWell Company; both companies are now included in our Consolidated Financial
Statements effective December 31, 2013;

2015—The first homes in our Cadence planned community were completed by third-party builders and sold to the
public; and

2015—In November we entered into an agreement for the sale of WCS which is expected to close in the first half of
2016.

Unless otherwise indicated, references in this report to “we”, “us” or “our” refer to Valhi, Inc. and its subsidiaries, taken

as a whole.

Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, as amended. Statements in this Annual Report that are not historical facts are forward-looking in
nature and represent management’s beliefs and assumptions based on currently available information. In some cases, you can identify
forward-looking statements by the use of words such as “believes,” “intends,” “may,” “should,” “could,” “anticipates,” “expects” or
comparable terminology, or by discussions of strategies or trends. Although we believe that the expectations reflected in such forward-
looking statements are reasonable, we do not know if these expectations will be correct. Such statements by their nature involve
substantial risks and uncertainties that could significantly impact expected results. Actual future results could differ materially from
those predicted. The factors that could cause actual future results to differ materially from those described herein are the risks and
uncertainties discussed in this Annual Report and those described from time to time in our other filings with the SEC include, but are
not limited to, the following:

(cid:120) Future supply and demand for our products;

(cid:120) The extent of the dependence of certain of our businesses on certain market sectors;

(cid:120) The cyclicality of certain of our businesses (such as Kronos’ TiO2 operations);

(cid:120) Customer and producer inventory levels;

(cid:120) Unexpected or earlier-than-expected industry capacity expansion (such as the TiO2 industry);

(cid:120) Changes in raw material and other operating costs (such as energy, ore, zinc and brass costs) and our ability to pass

those costs on to our customers or offset them with reductions in other operating costs;

(cid:120) Changes in the availability of raw materials (such as ore);

(cid:120) General global economic and political conditions (such as changes in the level of gross domestic product in various
regions of the world and the impact of such changes on demand for, among other things, TiO2 and component
products);

(cid:120) Competitive products and prices and substitute products, including increased competition from low-cost

manufacturing sources (such as China);

(cid:120) Possible disruption of our business or increases in the cost of doing business resulting from terrorist activities or

global conflicts;

(cid:120) Customer and competitor strategies;

(cid:120) Potential difficulties in integrating future acquisitions;

(cid:120) Potential difficulties in upgrading or implementing new accounting and manufacturing software systems;

(cid:120) Potential consolidation of our competitors;

(cid:120) Potential consolidation of our customers;

(cid:120) The impact of pricing and production decisions;

(cid:120) Competitive technology positions;

(cid:120) The introduction of trade barriers;

(cid:120) The ability of our subsidiaries to pay us dividends;

- 2 -

(cid:120) The impact of current or future government regulations (including employee healthcare benefit related regulations);

(cid:120) Uncertainties associated with new product development and the development of new product features;

(cid:120) Fluctuations in currency exchange rates (such as changes in the exchange rate between the U.S. dollar and each of the
euro, the Norwegian krone and the Canadian dollar) or possible disruptions to our business resulting from potential
instability resulting from uncertainties associated with the euro or other currencies;

(cid:120) Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions,

unscheduled or unplanned downtime, transportation interruptions and cyber attacks);

(cid:120) Decisions to sell operating assets other than in the ordinary course of business;

(cid:120) The timing and amounts of insurance recoveries;

(cid:120) Our ability to renew, amend, refinance or establish credit facilities;

(cid:120) Our ability to maintain sufficient liquidity;

(cid:120) The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters;

(cid:120) Our ultimate ability to utilize income tax attributes, the benefits of which may not presently have been recognized

under the more-likely-than-not recognition criteria;

(cid:120) Environmental matters (such as those requiring compliance with emission and discharge standards for existing and
new facilities, or new developments regarding environmental remediation at sites related to our former operations);

(cid:120) Government laws and regulations and possible changes therein (such as changes in government regulations which
might impose various obligations on former manufacturers of lead pigment and lead-based paint, including NL, with
respect to asserted health concerns associated with the use of such products);

(cid:120) The ultimate resolution of pending litigation (such as NL’s lead pigment litigation, environmental and other litigation

and Kronos’ class action litigation);

(cid:120) Our ability to comply with covenants contained in our revolving bank credit facilities;

(cid:120) Our ability to complete and comply with the conditions of our licenses and permits;

(cid:120) Our ability to successfully defend against any possible future challenge to WCS’ operating licenses and permits;

(cid:120) Unexpected delays in the operational start-up of shipping containers procured by WCS;

(cid:120) Changes in real estate values and construction costs in Henderson, Nevada;

(cid:120) Water levels in Lake Mead; and

(cid:120) Possible future litigation.

Should one or more of these risks materialize (or the consequences of such development worsen), or should the
underlying assumptions prove incorrect, actual results could differ materially from those currently forecasted or expected. We
disclaim any intention or obligation to update or revise any forward-looking statement whether as a result of changes in information,
future events or otherwise.

- 3 -

Segments

We have four consolidated reportable operating segments at December 31, 2015:

Chemicals

Kronos Worldwide, Inc.

Component Products

CompX International Inc.

Waste Management

Waste Control Specialists LLC

Real Estate Management and Development

Basic Management, Inc. and The LandWell Company

Our chemicals segment is operated through our majority control of
Kronos. Kronos is a leading global producer and marketer of
value-added titanium dioxide pigments (“TiO2”). TiO2 is used to
impart whiteness, brightness, opacity and durability to a wide
variety of products, including paints, plastics, paper, fibers and
ceramics. Additionally, TiO2 is a critical component of everyday
applications, such as coatings, plastics and paper, as well as many
specialty products such as inks, foods and cosmetics.

We operate in the component products industry through our
majority control of CompX. CompX is a leading manufacturer of
security products used in the recreational transportation, postal,
office and institutional furniture, cabinetry, tool storage, healthcare
and a variety of other industries. CompX is also a leading
manufacturer of stainless steel exhaust systems, gauges, throttle
controls and trim tabs for the recreational marine industry.

WCS is our subsidiary which operates a West Texas facility for the
processing, treatment, storage and disposal of a broad range of
low-level radioactive, hazardous, toxic and other wastes. WCS
obtained a byproduct disposal license in 2008 and began disposal
operations at this facility in October 2009. WCS received a LLRW
disposal license in September 2009. The Compact LLRW disposal
facility commenced operations in 2012, and the Federal LLRW
commenced operations in 2013. We reached an agreement for the
sale of our Waste Management Segment in November 2015. See
Note 3 to our Consolidated Financial Statements.

We operate in real estate management and development through
our majority control of BMI and LandWell. BMI provides utility
services to certain industrial and municipal customers and owns
real property in Henderson, Nevada. LandWell is engaged in
efforts to develop certain land holdings for commercial, industrial
and residential purposes in Henderson, Nevada. In December
2013, we acquired a controlling interest in each of these
companies, and they are included in our results of operations and
cash flows beginning on January 1, 2014. See Note 3 to our
Consolidated Financial Statements.

For additional information about our segments and equity investments see “Part II—Item 7. Management’s Discussion

and Analysis of Financial Condition and Results of Operations” and Notes 2 and 7 to our Consolidated Financial Statements.

CHEMICALS SEGMENT—KRONOS WORLDWIDE, INC.

Business Overview

Through our majority-controlled subsidiary, Kronos, we are a leading global producer and marketer of value-added
titanium dioxide pigments, or TiO2, a base industrial product used in a wide range of applications. We, along with our distributors and
agents, sell and provide technical services for our products to approximately 4,000 customers in 100 countries with the majority of
sales in Europe and North America. We believe we have developed considerable expertise and efficiency in the manufacture, sale,
shipment and service of our products in domestic and international markets.

TiO2 is a white inorganic pigment used in a wide range of products for its exceptional durability and its ability to impart
whiteness, brightness and opacity. TiO2 is a critical component of everyday applications, such as coatings, plastics and paper, as well
as many specialty products such as inks, food and cosmetics. TiO2 is widely considered to be superior to alternative white pigments in
large part due to its hiding power (or opacity), which is the ability to cover or mask other materials effectively and efficiently. TiO2 is
designed, marketed and sold based on specific end-use applications.

- 4 -

TiO2 is the largest commercially used whitening pigment because it has a high refractive rating, giving it more hiding
power than any other commercially produced white pigment. In addition, TiO2 has excellent resistance to interaction with other
chemicals, good thermal stability and resistance to ultraviolet degradation. Although there are other white pigments on the market, we
believe there are no effective substitutes for TiO2 because no other white pigment has the physical properties for achieving comparable
opacity and brightness or can be incorporated in as cost-effective a manner. Pigment extenders such as kaolin clays, calcium
carbonate and polymeric opacifiers are used together with TiO2 in a number of end-use markets. However, these products are not able
to duplicate the opacity performance characteristics of TiO2 and we believe these products are unlikely to have a significant impact on
the use of TiO2.

TiO2 is considered a “quality-of-life” product. Demand for TiO2 has generally been driven by worldwide gross domestic
product and has generally increased with rising standards of living in various regions of the world. According to industry estimates,
TiO2 consumption has grown at a compound annual growth rate of approximately 3.0% since 1990. Per capita consumption of TiO2 in
Western Europe and the United States far exceeds that in other areas of the world, and these regions are expected to continue to be the
largest consumers of TiO2 on a per capita basis. We believe that Western Europe and North America currently account for
approximately 20% and 18% of global TiO2 consumption, respectively. Markets for TiO2 are generally increasing in South America,
Eastern Europe, the Asia Pacific region and China and we believe these are significant markets where we expect continued growth as
economies in these regions continue to develop and quality-of-life products, including TiO2, experience greater demand.

Products and End-use Markets

Including our predecessors, we have produced and marketed TiO2 in North America and Europe, our primary markets, for
almost 100 years. We believe that we are the largest producer of TiO2 in Europe with approximately one-half of our sales volumes
attributable to markets in Europe. The table below shows our market share for our significant markets, Europe and North America, for
the last three years.

Europe ........................................................................
North America ............................................................

18%
18%

18 %
17 %

18%
15%

2013

2014

2015

We believe we are the leading seller of TiO2 in several countries, including Germany, with an estimated 9% share of

worldwide TiO2 sales volume in 2015. Overall, we are one of the top five producers of TiO2 in the world.

We offer our customers a broad portfolio of products that include over 40 different TiO2 pigment grades under the
Kronos® trademark, which provide a variety of performance properties to meet customers’ specific requirements. Our major
customers include domestic and international paint, plastics, decorative laminate and paper manufacturers. We ship TiO2 to our
customers in either a powder or slurry form via rail, truck and/or ocean carrier. Sales of our core TiO2 pigments represented
approximately 90% of our net sales in 2015. We and our agents and distributors primarily sell our products in three major end-use
markets: coatings, plastics and paper.

The following tables show our approximate TiO2 sales volume by geographic region and end use for the year ended

December 31, 2015:

Sales volumes percentages
by geographic region

Sales volumes percentages
by end-use

Europe ..........................................................
North America ..............................................
Asia Pacific ..................................................
Rest of World ...............................................

52% Coatings ................................................
29% Plastics ..................................................
8% Other......................................................
11% Paper......................................................

55%
31%
9%
5%

Some of the principal applications for our products include the following.

TiO2 for coatings - Our TiO2 is used to provide opacity, durability, tinting strength and brightness in industrial coatings, as
well as coatings for commercial and residential interiors and exteriors, automobiles, aircraft, machines, appliances, traffic paint and
other special purpose coatings. The amount of TiO2 used in coatings varies widely depending on the opacity, color and quality
desired. In general, the higher the opacity requirement of the coating, the greater the TiO2 content.

TiO2 for plastics - We produce TiO2 pigments that improve the optical and physical properties in plastics, including
whiteness and opacity. TiO2 is used to provide opacity in items such as containers and packaging materials, and vinyl products such
as windows, door profiles and siding. TiO2 also generally provides hiding power, neutral undertone, brightness and surface durability
for housewares, appliances, toys, computer cases and food packages. TiO2’s high brightness along with its opacity, is used in some

- 5 -

engineering plastics to help mask their undesirable natural color. TiO2 is also used in masterbatch, which is a concentrate of TiO2 and
other additives and is one of the largest uses for TiO2 in the plastics end-use market. In masterbatch, the TiO2 is dispersed at high
concentrations into a plastic resin and is then used by manufacturers of plastic containers, bottles, packaging and agricultural films.

TiO2 for paper - Our TiO2 is used in the production of several types of paper, including laminate (decorative) paper, filled
paper and coated paper to provide whiteness, brightness, opacity and color stability. Although we sell our TiO2 to all segments of the
paper end-use market, our primary focus is on the TiO2 grades used in paper laminates, where several layers of paper are laminated
together using melamine resin under high temperature and pressure. The top layer of paper contains TiO2 and plastic resin and is the
layer that is printed with decorative patterns. Paper laminates are used to replace materials such as wood and tile for such applications
as counter tops, furniture and wallboard. TiO2 is beneficial in these applications because it assists in preventing the material from
fading or changing color after prolonged exposure to sunlight and other weathering agents.

TiO2 for other applications - We produce TiO2 to improve the opacity and hiding power of printing inks. TiO2 allows inks
to achieve very high print quality while not interfering with the technical requirements of printing machinery, including low abrasion,
high printing speed and high temperatures. Our TiO2 is also used in textile applications where TiO2 functions as an opacifying and
delustering agent. In man-made fibers such as rayon and polyester, TiO2 corrects an otherwise undesirable glossy and translucent
appearance. Without the presence of TiO2, these materials would be unsuitable for use in many textile applications.

We produce high purity sulfate process anatase TiO2 used to provide opacity, whiteness and brightness in a variety of
cosmetic and personal care products, such as skin cream, lipstick, eye shadow and toothpaste. Our TiO2 is also found in food
products, such as candy and confectionaries, and in pet foods where it is used to obtain uniformity of color and appearance. In
pharmaceuticals, our TiO2 is used commonly as a colorant in pill and capsule coatings as well as in liquid medicines to provide
uniformity of color and appearance. Kronos® purified anatase grades meet the applicable requirements of the CTFA (Cosmetics,
Toiletries and Fragrances Association), USP and BP (United States Pharmacopoeia and British Pharmacopoeia) and the FDA (United
States Food and Drug Administration).

Our TiO2 business is enhanced by the following three complementary businesses, which comprised approximately 10% of

our net sales in 2015:

(cid:121) We own and operate two ilmenite mines in Norway pursuant to a governmental concession with an unlimited term.
Ilmenite is a raw material used directly as a feedstock by some sulfate-process TiO2 plants. We believe that we have
a significant competitive advantage because our mines supply our feedstock requirements for all of our European
sulfate-process plants. We also sell ilmenite ore to third parties, some of whom are our competitors, and we sell an
ilmenite-based specialty product to the oil and gas industry. The mines have estimated ilmenite reserves that are
expected to last at least 50 years.

(cid:121) We manufacture and sell iron-based chemicals, which are co-products and processed co-products of the sulfate and
chloride process TiO2 pigment production. These co-product chemicals are marketed through our Ecochem division
and are primarily used as treatment and conditioning agents for industrial effluents and municipal wastewater as well
as in the manufacture of iron pigments, cement and agricultural products.

(cid:121) We manufacture and sell titanium oxychloride and titanyl sulfate, which are side-stream specialty products from the
production of TiO2. Titanium oxychloride is used in specialty applications in the formulation of pearlescent
pigments, production of electroceramic capacitors for cell phones and other electronic devices. Titanyl sulfate
productions are used in pearlescent pigments, natural gas pipe and other specialty applications.

Manufacturing, operations and properties

We produce TiO2 in two crystalline forms: rutile and anatase. Rutile TiO2 is manufactured using both a chloride
production process and a sulfate production process, whereas anatase TiO2 is only produced using a sulfate production process.
Manufacturers of many end-use applications can use either form, especially during periods of tight supply for TiO2. The chloride
process is the preferred form for use in coatings and plastics, the two largest end-use markets. Due to environmental factors and
customer considerations, the proportion of TiO2 industry sales represented by chloride process pigments has increased relative to
sulfate process pigments, and in 2015, chloride process production facilities represented approximately 49% of industry capacity. The
sulfate process is preferred for use in selected paper products, ceramics, rubber tires, man-made fibers, food products and cosmetics.
Once an intermediate TiO2 pigment has been produced by either the chloride or sulfate process, it is “finished” into products with
specific performance characteristics for particular end-use applications through proprietary processes involving various chemical
surface treatments and intensive micronizing (milling).

(cid:121) Chloride process - The chloride process is a continuous process in which chlorine is used to extract rutile TiO2. The
chloride process produces less waste than the sulfate process because much of the chlorine is recycled and feedstock
bearing higher titanium content is used. The chloride process also has lower energy requirements and is less labor-

- 6 -

intensive than the sulfate process, although the chloride process requires a higher-skilled labor force. The chloride
process produces an intermediate base pigment with a wide range of properties.

(cid:121) Sulfate process - The sulfate process is a batch process in which sulfuric acid is used to extract the TiO2 from ilmenite
or titanium slag. After separation from the impurities in the ore (mainly iron), the TiO2 is precipitated and calcined to
form an intermediate base pigment ready for sale or can be upgraded through finishing treatments.

We produced 528,000 metric tons of TiO2 in 2015, up from the 511,000 metric tons we produced in 2014. Our production
amounts include our share of the output produced by our TiO2 manufacturing joint venture discussed below in “TiO2 Manufacturing
Joint Venture.” Our average production capacity utilization rates were approximately 86%, 92% and 95% of capacity in 2013, 2014
and 2015, respectively. Our production utilization rates in 2013 were impacted by the previously-reported lockout at our Canadian
production facility that began in June 2013. We operated our Canadian plant at approximately 15% of the plant’s capacity with non-
union management employees during the lockout. Our production rates in 2014 were also impacted by such lockout, as restart of
production at the facility did not begin until February 2014. Our production rates in 2014 and in the first quarter of 2015 were also
impacted by the implementation of certain productivity-enhancing improvement projects at other facilities, as well as necessary
improvements to ensure continued compliance with our permit regulations, which resulted in longer-than-normal maintenance
shutdowns in some instances.

We operate four TiO2 plants in Europe (one in each of Leverkusen, Germany; Nordenham, Germany; Langerbrugge,
Belgium; and Fredrikstad, Norway). In North America, we have a TiO2 plant in Varennes, Quebec, Canada and, through the
manufacturing joint venture described below in “TiO2 Manufacturing Joint Venture,” a 50% interest in a TiO2 plant in Lake Charles,
Louisiana.

Our production capacity in 2015 was 555,000 metric tons, approximately three-fourths of which was from the chloride

production process.

The following table presents the division of our expected 2016 manufacturing capacity by plant location and type of

manufacturing process:

Facility

Description

Leverkusen, Germany (1) .......... TiO2 production, chloride and sulfate process, co-products
Nordenham, Germany ................ TiO2 production, sulfate process, co-products
Langerbrugge, Belgium .............

TiO2 production, chloride process, co-products, titanium

chemicals products

Fredrikstad, Norway (2) ............. TiO2 production, sulfate process, co-products
Varennes, Canada.......................

TiO2 production, chloride and sulfate process, slurry facility,

Lake Charles, LA, US (3) .......... TiO2 production, chloride process

titanium chemicals products

Total .................................

% of capacity by TiO2
manufacturing process

Chloride

Sulfate

39%
—

21
—

19
100%

25%
39

—
23
13

—
100%

(1) The Leverkusen facility is located within an extensive manufacturing complex owned by Bayer AG. We own the Leverkusen
facility, which represents about one-third of our current TiO2 production capacity, but we lease the land under the facility from
Bayer under a long-term agreement which expires in 2050. Lease payments are periodically negotiated with Bayer for periods of
at least two years at a time. A majority-owned subsidiary of Bayer provides some raw materials including chlorine, auxiliary
and operating materials, utilities and services necessary to operate the Leverkusen facility under separate supplies and services
agreements.

(2) The Fredrikstad plant is located on public land and is leased until 2063.
(3) We operate the Lake Charles facility in a joint venture with Tioxide Americas LLC (Tioxide), a subsidiary of Huntsman
Corporation and the amount indicated in the table above represents the share of TiO2 produced by the joint venture to which we
are entitled. See Note 7 to our Consolidated Financial Statements and “TiO2 Manufacturing Joint Venture.”

We own the land underlying all of our principle production facilities unless otherwise indicated in the table above.

Our production capacity has increased by approximately 12% over the past ten years due to debottlenecking programs,
with only moderate capital expenditures. We believe that our annual attainable production capacity for 2016 is approximately 555,000
metric tons, and we currently expect our production capacity rate will be at near-capacity levels in 2016.

- 7 -

We also operate two ilmenite mines in Norway pursuant to a governmental concession with an unlimited term. In
addition, we operate a rutile slurry manufacturing plant in Lake Charles, Louisiana, which converts dry pigment manufactured for us
at the Lake Charles TiO2 facility into a slurry form that is then shipped to customers.

We have various corporate and administrative offices located in the U.S., Germany, Norway, Canada and Belgium and

various sales offices located in the U.S., Canada, Belgium, France, the Netherlands and the United Kingdom.

TiO2 Manufacturing Joint Venture

Kronos Louisiana, Inc., one of our subsidiaries, and Tioxide each own a 50% interest in a manufacturing joint venture,
Louisiana Pigment Company, L.P., or LPC. LPC owns and operates a chloride-process TiO2 plant located in Lake Charles, Louisiana.
We and Huntsman share production from the plant equally pursuant to separate offtake agreements, unless we and Huntsman
otherwise agree (such as in 2015, when we purchased approximately 52% of the production from the plant).

A supervisory committee directs the business and affairs of the joint venture, including production and output decisions.
This committee is composed of four members, two of whom we appoint and two of whom Huntsman appoints. Two general
managers manage the operations of the joint venture acting under the direction of the supervisory committee. We appoint one general
manager and Huntsman appoints the other.

The joint venture is not consolidated in our financial statements, because we do not control it. We account for our interest
in the joint venture by the equity method. The joint venture operates on a break-even basis and therefore we do not have any equity in
earnings of the joint venture. We are required to purchase one half of the TiO2 produced by the joint venture. All costs and capital
expenditures are shared equally with Huntsman with the exception of feedstock (purchased natural rutile ore or slag) and packaging
costs for the pigment grades produced. Our share of net costs is reported as cost of sales as the TiO2 is sold. See Note 7 to our
Consolidated Financial Statements.

Raw materials

The primary raw materials used in chloride process TiO2 are titanium-containing feedstock (purchased natural rutile ore or
slag), chlorine and coke. Chlorine is available from a number of suppliers, while petroleum coke is available from a limited number
of suppliers. Titanium-containing feedstock suitable for use in the chloride process is available from a limited but increasing number
of suppliers principally in Australia, South Africa, Canada, India and the United States. We purchase chloride process grade slag from
Rio Tinto Iron and Titanium Limited under a long-term supply contract that expires at the end of 2018, subject to two-year renewal
periods if both parties agree. We also purchase upgraded slag from Rio Tinto Iron and Titanium Limited under a long-term supply
contract that expires at the end of 2019. We purchase natural rutile ore under contracts primarily from Iluka Resources, Limited and
Sierra Rutile Limited, all of which expire in 2016. In the past we have been, and we expect that we will continue to be, successful in
obtaining short-term and long-term extensions to these and other existing supply contracts prior to their expiration. We expect the raw
materials purchased under these contracts, and contracts that we may enter into, will meet our chloride process feedstock requirements
over the next several years.

The primary raw materials used in sulfate process TiO2 are titanium-containing feedstock, primarily ilmenite or purchased
sulfate grade slag and sulfuric acid. Sulfuric acid is available from a number of suppliers. Titanium-containing feedstock suitable for
use in the sulfate process is available from a limited number of suppliers principally in Norway, Canada, Australia, India and South
Africa. As one of the few vertically-integrated producers of sulfate process TiO2, we operate two rock ilmenite mines in Norway,
which provided all of the feedstock for our European sulfate process TiO2 plants in 2015. We expect ilmenite production from our
mines to meet our European sulfate process feedstock requirements for the foreseeable future. For our Canadian sulfate process plant,
we purchase sulfate grade slag primarily from Rio Tinto Fer et Titane Inc. under a supply contract that renews annually, subject to
termination upon twelve months written notice. We expect the raw materials purchased under these contracts, and contracts that we
may enter into, to meet our sulfate process feedstock requirements over the next several years.

Many of our raw material contracts contain fixed quantities we are required to purchase, or specify a range of quantities

within which we are required to purchase. The pricing under these agreements is generally negotiated quarterly.

- 8 -

The following table summarizes our raw materials purchased or mined in 2015.

Production process/raw material

Raw materials
procured or mined
(In thousands
of metric tons)

Chloride process plants—

Purchased slag or rutile ore............................................

Sulfate process plants:

Ilmenite ore mined and used internally ..........................
Purchased slag ...............................................................

451

323
10

Sales and Marketing

Our marketing strategy is aimed at developing and maintaining strong customer relationships with new and existing
accounts. Because TiO2 represents a significant raw material cost for our customers, the purchasing decisions are often made by our
customers’ senior management. We work to maintain close relationships with the key decision makers, through in-depth and frequent
in-person meetings. We endeavor to extend these commercial and technical relationships to multiple levels within our customers’
organization using our direct sales force and technical service group to accomplish this objective. We believe this has helped build
customer loyalty to Kronos and strengthened our competitive position. Close cooperation and strong customer relationships enable us
to stay closely attuned to trends in our customers’ businesses. Where appropriate, we work in conjunction with our customers to solve
formulation or application problems by modifying specific product properties or developing new pigment grades. We also focus our
sales and marketing efforts on those geographic and end-use market segments where we believe we can realize higher selling prices.
This focus includes continuously reviewing and optimizing our customer and product portfolios.

Our marketing strategy is also aimed at working directly with customers to monitor the success of our products in their
end-use applications, evaluate the need for improvements in product and process technology and identify opportunities to develop new
product solutions for our customers. Our marketing staff closely coordinates with our sales force and technical specialists to ensure
that the needs of our customers are met, and to help develop and commercialize new grades where appropriate.

We sell a majority of our products through our direct sales force operating from six sales offices in Europe and one sales
office in North America. We also utilize sales agents and distributors who are authorized to sell our products in specific geographic
areas. In Europe, our sales efforts are conducted primarily through our direct sales force and our sales agents. Our agents do not sell
any TiO2 products other than Kronos® brand products. In North America, our sales are made primarily through our direct sales force
and supported by a network of distributors. In addition to our direct sales force and sales agents, many of our sales agents also act as
distributors to service our smaller customers in all regions. We offer customer and technical service to the customers who purchase
our products through distributors as well as to our larger customers serviced by our direct sales force.

We sell to a diverse customer base with only one customer representing 10% or more of our sales in 2015 (Behr Process

Corporation – 10%). Our largest ten customers accounted for approximately 34% of sales in 2015.

Neither our business as a whole nor any of our principal product groups is seasonal to any significant extent. However,
TiO2 sales are generally higher in the second and third quarters of the year, due in part to the increase in paint production in the spring
to meet demand during the spring and summer painting seasons. With certain exceptions, we have historically operated our
production facilities at near full capacity rates throughout the entire year, which among other things helps to minimize our per-unit
production costs. As a result, we normally will build inventories during the first and fourth quarters of each year, in order to maximize
our product availability during the higher demand periods normally experienced in the second and third quarters.

Competition

The TiO2 industry is highly competitive. We compete primarily on the basis of price, product quality, technical service
and the availability of high performance pigment grades. Since TiO2 is not a traded commodity, its pricing is largely a product of
negotiation between suppliers and their respective customers. Although certain TiO2 grades are considered specialty pigments, the
majority of our grades and substantially all of our production are considered commodity pigments with price and availability being the
most significant competitive factors along with quality and customer service. During 2015, we had an estimated 9% share of
worldwide TiO2 sales volume, and based on sales volumes, we believe we are the leading seller of TiO2 in several countries, including
Germany.

Our principal competitors are The Chemours Company, or Chemours (which was spun-off from E.I. du Pont de Nemours
& Co. into a separate publicly-traded company in 2015); Millennium Inorganic Chemicals, Inc. (a subsidiary of National Titanium

- 9 -

Dioxide Company Ltd.), or Cristal; Huntsman Corporation; and Tronox Incorporated. The top five TiO2 producers (i.e. we and our
four principal competitors) account for approximately 56% of the world’s production capacity. Huntsman completed its purchase of
the TiO2 business of Sachtleben Chemie GmbH in 2014, and has also announced its intent to exit the TiO2 business by December 31,
2016. In February 2015, Huntsman announced a plan to reduce its TiO2 capacity by approximately 100,000 metric tons at one of its
European sulfate process facilities. In August 2015, Chemours announced plans to close its plant in Delaware and shut down a
production line at its facility in Tennessee, reducing its overall capacity by approximately 150,000 metric tons.

The following chart shows our estimate of worldwide production capacity in 2015:

Worldwide production capacity—2015

Chemours .............................................................................
Huntsman .............................................................................
Cristal ...................................................................................
Kronos ..................................................................................
Tronox ..................................................................................
Other ....................................................................................

17 %
12 %
12 %
8 %
7 %
44 %

Chemours has over one-half of total North American TiO2 production capacity and is our principal North American

competitor.

Over the past ten years, we and our competitors increased industry capacity through debottlenecking projects, which in
part compensated for the shut-down of various TiO2 plants in France, the United States, the United Kingdom and China. Chemours
has announced the scheduled production start-up of a 200,000 metric ton line at its plant in Mexico in mid-2016. Although overall
industry demand is expected to be generally higher in 2016 as compared to 2015 as a result of improving worldwide economic
conditions, we do not expect any other significant efforts will be undertaken by us or our principal competitors to further increase
capacity for the foreseeable future, other than through debottlenecking projects. If actual developments differ from our expectations,
the TiO2 industry’s performance and that of our own could be unfavorably affected.

The TiO2 industry is characterized by high barriers to entry consisting of high capital costs, proprietary technology and
significant lead times (typically three to five years in our experience) required to construct new facilities or to expand existing
capacity. We believe it is unlikely any new TiO2 plants will be constructed in Europe or North America in the foreseeable future.

Research and development

We employ scientists, chemists, process engineers and technicians who are engaged in research and development, process
technology and quality assurance activities in Leverkusen, Germany. These individuals have the responsibility for improving our
chloride and sulfate production processes, improving product quality and strengthening our competitive position by developing new
applications. Our expenditures for these activities were approximately $18 million in 2013, $19 million in 2014 and $16 million in
2015. We expect to spend approximately $14 million on research and development in 2016.

We continually seek to improve the quality of our grades and have been successful at developing new grades for existing
and new applications to meet the needs of our customers and increase product life cycles. Since 2010, we have added seven new
grades for pigments and other applications.

Patents, trademarks, trade secrets and other intellectual property rights

We have a comprehensive intellectual property protection strategy that includes obtaining, maintaining and enforcing our
patents, primarily in the United States, Canada and Europe. We also protect our trademark and trade secret rights and have entered
into license agreements with third parties concerning various intellectual property matters. We have also from time to time been
involved in disputes over intellectual property.

Patents - We have obtained patents and have numerous patent applications pending that cover our products and the
technology used in the manufacture of our products. Our patent strategy is important to us and our continuing business activities. In
addition to maintaining our patent portfolio, we seek patent protection for our technical developments, principally in the United States,
Canada and Europe. U.S. Patents are generally in effect for 20 years from the date of filing. Our U.S. patent portfolio includes
patents having remaining terms ranging from one year to 19 years.

Trademarks and trade secrets - Our trademarks, including Kronos®, are covered by issued and/or pending registrations,
including in Canada and the United States. We protect the trademarks that we use in connection with the products we manufacture

- 10 -

and sell and have developed goodwill in connection with our long-term use of our trademarks. We conduct research activities in
secret and we protect the confidentiality of our trade secrets through reasonable measures, including confidentiality agreements and
security procedures, including data security. We rely upon unpatented proprietary knowledge and continuing technological innovation
and other trade secrets to develop and maintain our competitive position. Our proprietary chloride production process is an important
part of our technology and our business could be harmed if we fail to maintain confidentiality of our trade secrets used in this
technology.

Employees

As of December 31, 2015, we employed the following number of people:

Europe ............................................................................................
Canada ...........................................................................................
United States (1) ............................................................................
Total .....................................................................................

1,890
345
45
2,280

(1) Excludes employees of our Louisiana joint venture

Certain employees at each of our production facilities are organized by labor unions. In Europe, our union employees are
covered by master collective bargaining agreements for the chemical industry that are generally renewed annually. In Canada, our
union employees are covered by a collective bargaining agreement that expires in June 2018. At December 31, 2015, approximately
87% of our worldwide workforce is organized under collective bargaining agreements. It is possible that there could be future work
stoppages or other labor disruptions that could materially and adversely affect our business, results of operations, financial position or
liquidity.

Regulatory and environmental matters

Our operations and properties are governed by various environmental laws and regulations, which are complex, change
frequently and have tended to become stricter over time. These environmental laws govern, among other things, the generation,
storage, handling, use and transportation of hazardous materials; the emission and discharge of hazardous materials into the ground,
air or water; and the health and safety of our employees. Certain of our operations are, or have been, engaged in the generation,
storage, handling, manufacture or use of substances or compounds that may be considered toxic or hazardous within the meaning of
applicable environmental laws and regulations. As with other companies engaged in similar businesses, certain of our past and current
operations and products have the potential to cause environmental or other damage. We have implemented and continue to implement
various policies and programs in an effort to minimize these risks. Our policy is to comply with applicable environmental laws and
regulations at all our facilities and to strive to improve our environmental performance. It is possible that future developments, such
as stricter requirements in environmental laws and enforcement policies, could adversely affect our operations, including production,
handling, use, storage, transportation, sale or disposal of hazardous or toxic substances or require us to make capital and other
expenditures to comply, and could adversely affect our consolidated financial position and results of operations or liquidity.

Our U.S. manufacturing operations are governed by federal, state and local environmental and worker health and safety
laws and regulations. These include the Resource Conservation and Recovery Act, or RCRA, the Occupational Safety and Health
Act, the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Toxic Substances Control Act and the Comprehensive
Environmental Response, Compensation and Liability Act (“CERCLA”), as amended by the Superfund Amendments and
Reauthorization Act, or CERCLA, as well as the state counterparts of these statutes. Some of these laws hold current or previous
owners or operators of real property liable for the costs of cleaning up contamination, even if these owners or operators did not know
of, and were not responsible for, such contamination. These laws also assess liability on any person who arranges for the disposal or
treatment of hazardous substances, regardless of whether the affected site is owned or operated by such person. Although we have not
incurred and do not currently anticipate any material liabilities in connection with such environmental laws, we may be required to
make expenditures for environmental remediation in the future.

While the laws regulating operations of industrial facilities in Europe vary from country to country, a common regulatory
framework is provided by the European Union, or the EU. Germany and Belgium are members of the EU and follow its initiatives.
Norway is not a member but generally patterns its environmental regulatory actions after the EU.

At our sulfate plant facilities in Germany, we recycle spent sulfuric acid either through contracts with third parties or at
our own facilities. In addition, at our German locations we have a contract with a third-party to treat certain sulfate-process effluents.
At our Norwegian plant, we ship spent acid to a third party location where it is used as a neutralization agent. These contracts may be
terminated by either party after giving three or four years advance notice, depending on the contract.

- 11 -

From time to time, our facilities may be subject to environmental regulatory enforcement under U.S. and non-U.S.
statutes. Typically we establish compliance programs to resolve these matters. Occasionally, we may pay penalties. To date such
penalties have not involved amounts having a material adverse effect on our consolidated financial position, results of operations or
liquidity. We believe that all of our facilities are in substantial compliance with applicable environmental laws.

Our capital expenditures related to ongoing environmental compliance, protection and improvement programs, including
capital expenditures which are primarily focused on increased operating efficiency but also result in improved environmental
protection such as lower emissions from our manufacturing facilities, were $6.9 million in 2015 and are currently expected to be
approximately $9 million in 2016.

COMPONENT PRODUCTS SEGMENT—COMPX INTERNATIONAL INC.

Business Overview

Through our majority-controlled subsidiary, CompX, we are a leading manufacturer of security products used in the
recreational transportation, postal, office and institutional furniture, cabinetry, tool storage, healthcare and a variety of other industries.
CompX is also a leading manufacturer of stainless steel exhaust systems, gauges, throttle controls, and trim tabs for the recreational
marine industry. Our products are principally designed for use in medium to high-end product applications, where design, quality and
durability are valued by our customers.

Manufacturing, Operations and Products

Security Products. CompX’s security products reporting unit manufactures mechanical and electrical cabinet locks and
other locking mechanisms used in a variety of applications including ignition systems, mailboxes, file cabinets, desk drawers, tool
storage cabinets, vending and gaming machines, high security medical cabinetry, electronic circuit panels, storage compartments and
gas station security. CompX’s security products reporting unit has one manufacturing facility in Mauldin, South Carolina and one in
Grayslake, Illinois shared with its marine components reporting unit. We believe we are a North American market leader in the
manufacture and sale of cabinet locks and other locking mechanisms. These products include:

(cid:120)

disc tumbler locks which provide moderate security and generally represent the lowest cost lock to produce;

pin tumbler locking mechanisms which are more costly to produce and are used in applications requiring higher
levels of security, including KeSet® and System 64® (which each allow the user to change the keying on a single lock
64 times without removing the lock from its enclosure) TuBar® and Turbine™; and

our innovative CompX eLock® and StealthLock® electronic locks which provide stand-alone or networked security and
audit trail capability for drug storage and other valuables through the use of a proximity card, magnetic stripe or
keypad credentials.

A substantial portion of our security products reporting unit’s sales consist of products with specialized adaptations to an
individual customer’s specifications, some of which are listed above. We also have a standardized product line suitable for many
customers, which is offered through a North American distribution network to locksmith and smaller original equipment manufacturer
distributors via our STOCK LOCKS® distribution program.

Marine Components. CompX’s marine components reporting unit manufactures and distributes stainless steel exhaust
components, gauges, throttle controls, trim tabs, hardware and accessories primarily for performance and ski/wakeboard boats.
CompX’s marine components reporting unit has a facility in Neenah, Wisconsin and a facility in Grayslake, Illinois shared with its
security products reporting unit. Our specialty marine component products are high-precision components designed to operate within
tight tolerances in the highly demanding marine environment. These products include:

(cid:120)

original equipment and aftermarket stainless steel exhaust headers, exhaust pipes, mufflers and other exhaust
components;

high-performance gauges such as GPS speedometers and tachometers;

(cid:120) mechanical and electronic controls and throttles;

(cid:120)

steering wheels and other billet aluminum accessories; and

dash panels, LED lighting, wire harnesses and other accessories.

- 12 -

Our Component Products Segment operated three manufacturing facilities at December 31, 2015 as shown below. For

additional information, see also “Item 2 – Properties”, including information regarding leased and distribution-only facilities.

Facility Name
Owned Facilities:

National (1) ......................
Grayslake(1) ....................
Custom(2) ........................

Leased Facilities:

Reporting
Unit

SP
SP/MC
MC

Location

Size
(square feet)

Mauldin, SC
Grayslake, IL

Neenah, WI

198,000
133,000
95,000

Distribution Center ........

SP/MC

Rancho Cucamonga, CA

11,500

(1)
(2)

ISO-9001 registered facilities
ISO-9002 registered facility

Raw Materials

CompX’s primary raw materials are:

(cid:120)

zinc and brass (used in the security products reporting unit for the manufacture of locking mechanisms); and

stainless steel (used primarily in the marine components reporting unit for the manufacture of exhaust headers and
pipes), aluminum (used for the manufacture of throttles and trim tabs), and other components).

These raw materials are purchased from several suppliers, are readily available from numerous sources and accounted for
approximately 10% of CompX’s total cost of sales for 2015. Total material costs, including purchased components, represented
approximately 48% of CompX’s cost of sales in 2015.

We occasionally enter into short-term commodity-related raw material supply arrangements to mitigate the impact of
future increases in commodity-related raw material costs. These arrangements generally provide for stated unit prices based upon
specified purchase volumes, which help us to stabilize our commodity-related raw material costs to a certain extent. We periodically
enter into such arrangements for zinc and brass. Following a general softening of commodity metal markets during 2015, we expect
commodity-related raw material prices to remain relatively stable during 2016; however, these raw materials purchased on the spot
market are sometimes subject to unanticipated and sudden price increases. We generally seek to mitigate the impact of fluctuations in
these raw material costs on our margins through improvements in production efficiencies or other operating cost reductions. In the
event we are unable to offset raw material cost increases with other cost reductions, it may be difficult to recover those cost increases
through increased product selling prices or raw material surcharges due to the competitive nature of the markets served by our
products. Consequently, overall operating margins can be affected by commodity-related raw material cost pressures. Commodity
market prices are cyclical, reflecting overall economic trends, specific developments in consuming industries and speculative investor
activities.

Patents and Trademarks

We hold a number of patents relating to our component products, certain of which we believe to be important to us and
our continuing business activity. Patents generally have a term of 20 years, and our patents have remaining terms ranging from less
than 1 year to 17 years at December 31, 2015. Our major trademarks and brand names in addition to CompX® include:

Security Products

Lockview®
System 64®
SlamCAM®
RegulatoR®
CompXpress®
GEM®

CompX® Security Products™
National Cabinet Lock®
Fort Lock®
Timberline® Lock
Chicago Lock®
STOCK LOCKS®
KeSet®
TuBar®
StealthLock®
ACE®
ACE® II
CompX eLock®

- 13 -

Marine Components

Custom Marine®
Livorsi® Marine
Livorsi II® Marine
CMI Industrial®
Custom Marine® Stainless Exhaust
The #1 Choice in Performance Boating®
Mega Rim®
Race Rim®
CompX Marine®
Vantage View®
GEN-X®

Sales, Marketing and Distribution.

A majority of our component sales are direct to large OEM customers through our factory-based sales and marketing
professionals supported by engineers working in concert with field salespeople and independent manufacturer’s representatives. We
select manufacturer’s representatives based on special skills in certain markets or relationships with current or potential customers.

In addition to sales to large OEM customers, a substantial portion of our security products reporting unit’s sales are made
through distributors. We have a significant North American market share of cabinet lock security product sales as a result of the
locksmith distribution channel. We support our locksmith distributor sales with a line of standardized products used by the largest
segments of the marketplace. These products are packaged and merchandised for easy availability and handling by distributors and
end users.

In 2015, our ten largest customers, all customers of our security products reporting unit, accounted for approximately 48%
of our total sales. United States Postal Service and Harley Davidson accounted for approximately 13% and 12%, respectively, of total
sales for the year ended December 31, 2015. Overall, our customer base is diverse and the loss of any single customer would not in
itself have a material adverse effect on our operations.

Competition

The markets in which we participate are highly competitive. We compete primarily on the basis of product design,
including space utilization and aesthetic factors, product quality and durability, price, on-time delivery, service and technical support.
We focus our efforts on the middle and high-end segments of the market, where product design, quality, durability and service are
valued by the customer. Our security products reporting unit competes against a number of domestic and foreign manufacturers. Our
marine components reporting unit competes with small domestic manufacturers and is minimally affected by foreign competitors.

Regulatory and Environmental Matters

Our operations are subject to federal, state and local laws and regulations relating to the use, storage, handling, generation,
transportation, treatment, emission, discharge, disposal, remediation of and exposure to hazardous and non-hazardous substances,
materials and wastes (“Environmental Laws”). Our operations also are subject to federal, state and local laws and regulations relating
to worker health and safety. We believe we are in substantial compliance with all such laws and regulations. To date, the costs of
maintaining compliance with such laws and regulations have not significantly impacted our results. We currently do not anticipate
any significant costs or expenses relating to such matters; however, it is possible future laws and regulations may require us to incur
significant additional expenditures.

Employees

As of December 31, 2015, we employed 512 people, all in the United States. We believe our labor relations are good at

all of our facilities.

WASTE MANAGEMENT SEGMENT—WASTE CONTROL SPECIALISTS LLC

Business Overview

Our Waste Management Segment was formed in 1995, and in early 1997 we completed construction of the initial phase of
our waste management facility in West Texas. The original facility was initially designed for the processing, treatment, storage and
disposal of certain hazardous and toxic wastes. We received the first wastes for disposal in 1997. Subsequently, we expanded our
authorizations to include the processing, treatment and storage of LLRW and mixed LLRW and the disposal of certain types of
exempt LLRW. In May 2008, the Texas Commission on Environmental Quality (“TCEQ”) issued a byproduct materials disposal
license to us. In January 2009, TCEQ issued a near-surface LLRW disposal license to us. This license was signed in September 2009.

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We began construction of the byproduct facility infrastructure at our site in Andrews County, Texas in the third quarter of
2008, and this facility began disposal operations in October 2009. Construction of the Compact and Federal LLRW sites began in
January 2011. The Compact LLRW site was fully certified and operational in April 2012. The Federal LLRW site was fully certified
and operational in September 2012 and received its first waste for disposal in 2013.

Facility, Operations and Services

Our Waste Management Segment operates one waste management facility located on a 1,338-acre site in West Texas. The
facility is permitted for 3.8 million cubic yards of airspace landfill capacity for the disposal of RCRA, Toxic Substance Control Act
(“TSCA”), Byproduct and LLRW and mixed LLRW wastes. We also own approximately 13,000 acres of additional land surrounding
the permitted site, a small portion of which is located in New Mexico, which is available for future expansion. We believe our facility
has superior geological characteristics which make it an environmentally-desirable location for this type of waste disposal. The facility
is located in a relatively remote and arid section of West Texas. The possibility of leakage into any underground water table is
considered highly remote because the ground is composed of Triassic red bed clay, and we do not believe there are any underground
aquifers or other usable sources of water below the site based in part on extensive drilling by the oil and gas industry and our own test
wells. Pursuant to the requirements of WCS’ LLRW disposal license, the State of Texas, acting by and through the TCEQ, owns the
real property for WCS’ licensed “compact waste disposal facility” and leases it back to WCS; and WCS owns the real property for its
licensed “federal waste disposal facility”. The remainder of WCS’ permitted site, and the Texas portion of the surrounding land
described above, is subject to the sale-leaseback transaction WCS entered into with the County of Andrews, Texas, as discussed in
Note 9 to our Consolidated Financial Statements.

The waste management facility operates under various licenses and permits, including in the following categories:

(cid:120) LLRW Disposal. The LLRW disposal license allows WCS to dispose of Class A, B and C LLRW in the Compact
LLRW disposal facility and the Federal LLRW disposal facility. The Federal LLRW disposal facility is for LLRW
that is the responsibility of the U.S. government under applicable law, and is also permitted for disposal of mixed
LLRW. The Compact LLRW disposal facility is licensed to accept LLRW that was either generated in Texas or
Vermont, or has been approved for importation to Texas by the Texas Low-Level Radioactive Waste Disposal
Compact Commission. Construction of the Compact and Federal LLRW disposal facilities began in January 2011.
Both facilities were fully certified and operational in 2012. We accepted our first Compact waste disposal shipments
in April 2012, but routine Compact disposal receipts did not occur until July 2012. We received a national disposal
contract for our Federal LLRW disposal facility from the Department of Energy (“DOE”) in April 2013, and we have
regularly received waste for disposal in the Federal LLRW disposal facility since the end of the second quarter of
2013.

(cid:120) LLRW Treatment/Storage. In November 1997, the Texas Department of State Health Services (“TDSHS”) issued a
license to us for the treatment and storage, but not disposal, of LLRW and mixed LLRW. In June 2007, the TDSHS
regulatory authority for this license was transferred to TCEQ. The current provisions of this license generally enable
us to accept such wastes for treatment and storage from U.S. commercial and federal generators, including the DOE
and other governmental agencies. We accepted the first shipments of such wastes in 1998.

(cid:120) RCRA/Exempt. Our Waste Management Segment has permits from the TCEQ to accept hazardous wastes governed
by RCRA, for treatment, storage and/or disposal. In March 2015, we submitted our renewal application for our
RCRA permit for a new ten-year period. The application is still pending, but we are permitted to continue to accept
hazardous waste governed by RCRA while under review. We have obtained additional authority to dispose of certain
categories of LLRW, including naturally-occurring radioactive material (“NORM”) and waste that is exempt from
radioactive waste disposal regulations (radioactive materials that do not exceed certain specified radioactive
concentrations and are exempt from licensing). Waste disposed of under these permits and authorizations are
disposed of in what we call the “RCRA landfill.”

(cid:120) TSCA. Our Waste Management Segment has permits from the U.S. Environmental Protection Agency (“EPA”) to
accept toxic wastes governed by TSCA for treatment, storage and/or disposal. In May 2015, we submitted our
application for renewal of our five-year TSCA authorization for a new five-year period beginning in 2015 (which
application is still pending, but we are permitted to continue to accept toxic waste pending receipt of the new five-
year authorization), and in 2012 our TSCA authorization was amended to include our Federal LLRW disposal
facility.

(cid:120) Byproduct Disposal. In May 2008, TCEQ issued us a license for the disposal of byproduct material. Byproduct
material includes uranium or thorium mill tailings as well as equipment, pipe and other materials used to handle and
process the mill tailings. We completed construction of the byproduct facility infrastructure at our site in Andrews
County, Texas in the third quarter of 2009, and this facility began disposal operations in October 2009. Byproduct
materials are disposed of in what we call the “Byproduct landfill.”

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Our LLRW Treatment/Storage facility also serves as a staging and processing location for material that requires other
forms of treatment prior to final disposal as mandated by the EPA or other regulatory bodies. Our 20,000 square foot treatment facility
provides for waste treatment/stabilization, warehouse storage and treatment facilities for hazardous, toxic and mixed LLRW, drum to
bulk, and bulk to drum materials handling and repackaging capabilities. Treatment operations involve processing wastes through one
or more chemical or other treatment methods, depending upon the particular waste being disposed and regulatory and customer
requirements. Chemical treatment uses chemical oxidation and reduction, chemical precipitation of heavy metals, hydrolysis and
neutralization of acid and alkaline wastes, and results in the transformation of waste into inert materials through one or more of these
chemical processes. Certain treatment processes involve technology which we may acquire, license or subcontract from third
parties. Once treated and stabilized, waste currently is either: (i) placed in our landfills, (ii) stored onsite in drums or other specialized
containers or (iii) shipped to third-party facilities for final disposition. Only waste that meets certain specified regulatory requirements
can be disposed of in our landfills.

In February 2015, we sent a notification to the Nuclear Regulatory Commission (“NRC”) expressing our intent to apply
for a license for the interim storage of used nuclear fuel at our facility. Currently used nuclear fuel is stored at 63 locations in 33 states.
If approved and constructed, we would become the nation’s first centralized storage facility for such high level waste. We currently
expect to submit a final license application by April 2016, and currently expect the licensing, regulatory requirements and construction
process to be completed by December 2020. If approved and completed, we believe the storage facility will further enhance our one-
stop shop for radioactive waste to provide a comprehensive disposal and storage solution for the entire range of waste produced in the
nuclear fuel cycle for our customers. There can be no assurance that we would be successful in obtaining any license for such interim
storage of used nuclear fuel.

Sales

Our Waste Management Segment’s target customers are industrial companies, including nuclear utilities, chemical,
aerospace and electronics businesses and governmental agencies, including the DOE, which generate low-level radioactive, hazardous,
mixed low-level radioactive and other wastes. We employ our own salespeople to market our services to potential customers. During
2015, we had sales to five customers that exceed 10% of our net sales: Exelon Generation (19%), U.S. Department of Energy (16%),
Nuclear Waste Partnership (12%), Arizona Public Service (12%), and Zion Solutions (11%). We have long-term agreements with
many of our customers.

Competition

The hazardous waste industry (other than LLRW and mixed LLRW) currently has excess industry capacity caused by a
number of factors, including a relative decline in the number of environmental remediation projects generating hazardous waste and
efforts on the part of waste generators to reduce the volume of waste and/or manage waste onsite at their facilities. These factors have
led to reduced demand and increased price pressure for non-radioactive hazardous waste management services.

Competition within the hazardous waste industry is diverse and based primarily on facility location/proximity to
customers, pricing and customer service. We expect price competition to continue to be intense for RCRA- and TSCA-related wastes.

This price competition resulted in minimal use of our RCRA landfill in the past. Beginning in 2014, we gained the ability
to accept a broader range of waste for disposal in the RCRA landfill. This has increased the use of our RCRA landfill because it has
allowed us to be more competitive for “exempt waste,” which is hazardous waste that possesses very low levels of radioactivity and
has been exempted by law from management and disposal requirements applicable to LLRW. We believe our broad range of permits
for the treatment, storage and disposal of exempt waste, LLRW and mixed LLRW streams may position us better than our competitors
and are a key element of our long-term strategy to provide “one-stop shopping” for exempt waste, LLRW and mixed LLRW.

The LLRW industry is very competitive. Our principal competitors with respect to LLRW are EnergySolutions, Inc., US
Ecology Inc., and Perma-Fix Environmental Services, Inc. These competitors are well established, and some may have significantly
greater resources than we do, which could be important factors to our potential customers. We believe we may be better positioned
than our competitors due to our environmentally-desirable location, a broad level of local community support, a rail transportation
network leading to our facility, our capability for future site expansion and the fact that the State of Texas takes title to the LLRW in
our Compact disposal facility.

LLRW, mixed LLRW and exempt waste can be and currently is stored in numerous sites around the country and,
alternatively, generators can dispose of LLRW, mixed LLRW and exempt waste in facilities operated by us and our competitors.
Many of our customers store these waste streams onsite, which serves as an alternative to our and our competitors’ disposal services.

Facilities that dispose of LLRW, mixed LLRW and exempt waste, such as our facility in Texas, are generally subject to
the following requirements: (i) commercial LLRW disposal facilities can only be licensed by the NRC or states that have an

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agreement with NRC to assume portions of its regulatory authority (“Agreement States”); (ii) the facilities must be designed,
constructed and operated to meet strict safety standards and (iii) the operator of a facility must extensively characterize the site on
which the facility is located and analyze how the facility will perform for thousands of years into the future. Further, certain LLRW
disposal sites are restricted from accepting Class B or C LLRW from generators located in states which do not have a formal
agreement with the state in which the disposal facility is located (the “Compact”). Our facility may accept Class B or C LLRW from
generators that are not located in a Compact.

Other commercial options are, and may in the future become, available for the disposal of Class B and C LLRW. One
such option offered by one of our competitors is the “downblending” of Class B and C LLRW in order to permit the reclassification
and disposal of this waste as Class A LLRW. WCS does not offer a downblending option to its customers, and WCS does not support
downblending because we believe that direct disposal of Class B and C LLRW results in a more environmentally safe solution that is
less complex and less likely to be subject to regulatory changes. In addition, the State of Texas does not permit LLRW to be
reclassified as a result of downblending.

Regulatory and Environmental Matters

While the waste management industry has benefited from increased governmental regulation, it has also become subject
to extensive and evolving regulation by federal, state and local authorities. The regulatory process requires waste management
businesses to obtain and retain numerous operating permits covering various aspects of their operations, any of which could be subject
to revocation, modification or denial. Regulations also allow public participation in the permitting process. Individuals as well as
companies may oppose the granting of permits. In addition, governmental policies and the exercise of broad discretion by regulators
are subject to change. It is possible our ability to modify, obtain or retain permits on a timely basis could be impaired in the future.
The loss of an individual permit or the failure to modify or obtain a permit could have a significant impact on our Waste Management
Segment’s future operating plans, financial condition, results of operations or liquidity, especially because we only operate one
disposal site. For example, adverse decisions by governmental authorities on our permit applications could cause us to abandon
projects, prematurely close our facility or restrict operations. See “Facility, Operations and Services” above for a discussion of some
of our Waste Management Segment’s permits. Our RCRA permit for the RCRA landfill renewal was filed in March 2015 and is under
review. The TSCA authorization for the RCRA landfill and Federal LLRW disposal facility was filed in May 2015 and is under
review. We believe our permits will be renewed in the ordinary course of business. Our byproduct material disposal license expires in
2018 and our LLRW disposal license expires in 2024. Our RCRA permit for the Federal LLRW disposal facility expires in 2018. Our
LLRW treatment/storage license was combined into one license with our LLRW disposal license and now expires in 2024. Such
permits, licenses and authorizations can be renewed subject to compliance with the requirements of the application process and
approval by the TCEQ or the EPA, as applicable.

The Texas Low-Level Radioactive Waste Disposal Compact Commission (“Texas Compact Commission”) is responsible
for managing the disposal capacity of the Compact LLRW disposal facility. They do this by approving or denying export petitions
from Texas Compact generators that wish to ship their waste to a different disposal site or approving or denying import petitions from
out-of-compact generators that wish to ship their waste to the Compact LLRW disposal facility. The Texas Compact Commission has
approved rules for the export and import of LLRW and began approving import agreements in 2012.

From time to time federal, state and local authorities have proposed or adopted other types of laws and regulations for the
waste management industry, including laws and regulations restricting or banning the interstate or intrastate shipment of certain waste,
changing the regulatory agency issuing a license, imposing higher taxes on out-of-state waste shipments compared to in-state
shipments, reclassifying certain categories of hazardous waste as non-hazardous and regulating disposal facilities as public utilities.
Certain states have issued regulations that attempt to prevent waste generated within a particular Compact from being sent to disposal
sites outside that Compact. The U.S. Congress has also considered legislation that would enable or facilitate such bans, restrictions,
taxes and regulations. Due to the complex nature of industry regulation, implementation of existing or future laws and regulations by
different levels of government could be inconsistent and difficult to foresee. While we attempt to monitor and anticipate regulatory,
political and legal developments that affect the industry, we cannot assure you we will be able to comply with such developments. Nor
can we predict the extent to which legislation or regulations that may be enacted, or any failure of legislation or regulations to be
enacted, may affect our operations in the future.

The demand for certain hazardous and radioactive waste services we intend to provide is dependent in large part upon the
existence and enforcement of federal, state and local environmental laws and regulations governing the discharge of those wastes into
the environment. We and the industry as a whole could be adversely affected to the extent such laws or regulations are amended or
repealed or their enforcement is lessened.

Because of the high degree of public awareness of environmental issues, companies in the waste management business
may be, in the normal course of their business, subject to judicial and administrative proceedings. Governmental agencies may seek to
impose fines or revoke, deny renewal of, or modify any applicable operating permits or licenses. In addition, private parties and

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special interest groups could bring actions against us alleging, among other things, a violation of operating permits or opposition or
challenges to current or new license authorizations.

Employees

At December 31, 2015, WCS had 196 employees. We believe our labor relations are good.

REAL ESTATE MANAGEMENT AND DEVELOPMENT SEGMENT—BASIC MANAGEMENT, INC. AND THE
LANDWELL COMPANY

Business Overview

We acquired a controlling interest in our Real Estate Management and Development Segment in December 2013. Prior to
December 2013, we owned a 32% interest in BMI, which among other things provides utility services to an industrial park located in
Henderson, Nevada, and is responsible for the delivery of water to the city of Henderson and various other users through a water
distribution system owned by BMI. We also had a 12% interest in LandWell, which is actively engaged in efforts to develop certain
real estate in Henderson, Nevada including approximately 2,100 acres zoned for residential/planned community purposes and
approximately 400 acres zoned for commercial and light industrial use. BMI owns an additional 50% interest in LandWell. In
December 2013 we completed the acquisition of an additional 31% ownership interest in BMI and 15% ownership interest in
LandWell. We completed this acquisition to obtain control of BMI and LandWell (with the consent of BMI and LandWell and their
other owners), which increased our direct ownership interest of BMI to 63% and our direct ownership of LandWell to 27%, which
also resulted in our control of 77% of LandWell including the 50% ownership interest held by BMI. See Notes 3 and 7 to our
Consolidated Financial Statements.

Operations and Services

Over the years, LandWell and BMI have focused on developing and selling the land transferred to LandWell as part of its
formation in the early 1950’s as well as additional land holdings acquired by LandWell in the surrounding area subsequent to
LandWell’s formation (although BMI and LandWell have not had significant real property acquisitions since 2004). Since
LandWell’s formation, LandWell and BMI have a history of successfully developing and selling over 1,200 acres of retail, light
industrial, commercial and residential projects in the Henderson, Nevada area. However, a substantial portion of such projects, had
been completed prior to the 2008 economic downturn which was particularly acute in the Las Vegas area real estate market which
includes Henderson. Following such economic downturn, LandWell’s land sales were substantially reduced as compared to prior
years, and LandWell did not recognize any material amount of land sales in the 2008 to 2013 time period. During this time period,
LandWell focused primarily on the development of a large tract of land in Henderson zoned for residential/planned community
purposes (approximately 2,100 acres). Planning and zoning work on such project began in 2007, but LandWell delayed significant
development efforts until economic conditions had improved. As general economic conditions improved in 2011 and 2012, LandWell
began intensive development efforts of the residential/planned community in 2013 (with LandWell acting as the master developer for
all such development efforts). We market and sell our residential/planned community to established home builders in tracts of land
that are pre-zoned for a maximum number of home lots. We support the builders efforts to market and sell specific residential homes
within our residential/planned community through joint marketing campaign and community wide education efforts.

In addition, BMI delivers utility services to an industrial park located in Henderson, Nevada and also delivers water to the

city of Henderson and various other users through a water delivery system owned by BMI.

Sales

Through December 31, 2015, LandWell has closed or entered into escrow on approximately 410 acres of the
residential/planned community and certain other acreage. Contracts for land sales are negotiated on an individual basis and sales
terms and prices will vary based on such factors as location (including location within a planned community), expected development
work and individual buyer needs. Although land may be under contract, we do not recognize revenue until we have satisfied the
criteria for revenue recognition set forth in Accounting Standards Codification (“ASC”) Topic 976. In some instances, we will receive
cash proceeds at the time the contract closes and record deferred revenue for some or all of the cash amount received, with such
deferred revenue being recognized in subsequent periods. Because land held for development was initially recognized at estimated fair
value at the acquisition date as required by ASC Topic 805, we do not expect to recognize significant operating income on land sales
for the land currently under contract. We expect the development work to continue for 10 to 15 years on the rest of the land held for
development, consisting primarily of the residential/planned community.

Our Real Estate Management and Development Segment’s sales consist principally of land sales and water and electric
delivery fees. During 2015 we had sales to four customers that each exceeded 10% of our net sales: Richmond Homes of Nevada

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(27%), LV East Gibson, LLC (17%) and Prologis, L.P. (11%) all relate to land sales; the City of Henderson (15%) relates to our water
delivery services.

Competition

There are multiple new construction residential communities in the greater Las Vegas, Nevada area. We compete with
these communities on the basis of location; planned community amenities and features; proximity to major retail and recreational
activities; and the perception of quality of life within the new community. We believe our residential/planned community is unique
within the greater Las Vegas area due to its location and planned amenities which include: 490 acres of major and neighborhood parks
and open space interconnected with major regional trails and parks; and features that no other new construction residential community
currently offers including builder floorplans designed exclusively for our community. We are marketing our residential/planned
community to builders who target a range of home buyers to maximize sales.

Regulatory and Environmental Matters

We and the subcontractors we use must comply with many federal, state and local laws and regulations, including zoning,
density and development requirements, building, environmental, advertising, labor and real estate sales rules and regulations. These
regulations and requirements affect substantially all aspects of our land development. Our operations are subject to federal, state and
local laws and regulations relating to the use, storage, handling, generation, transportation, treatment, emission, discharge, disposal,
remediation of and exposure to hazardous and non-hazardous substances, materials and wastes. Our operations also are subject to
federal, state and local laws and regulations relating to worker health and safety. We believe we are in substantial compliance with all
such laws and regulations. To date, the costs of maintaining compliance with such laws and regulations have not significantly
impacted our results. We currently do not anticipate any significant costs or expenses relating to such matters; however, it is possible
future laws and regulations may require us to incur significant additional expenditures.

Employees

At December 31, 2015, BMI had 24 employees. We believe our labor relations are good.

OTHER

NL Industries, Inc.—At December 31, 2015, NL owned 87% of CompX and 30% of Kronos. NL also owns 100% of
EWI RE, Inc., an insurance brokerage and risk management services company and also holds certain marketable securities and other
investments. See Note 16 to our Consolidated Financial Statements for additional information.

Tremont LLC—Tremont is primarily a holding company through which we hold our 63% ownership interest in BMI and
our 77% ownership interest in LandWell. Such 77% ownership interest in LandWell includes 27% we hold through our ownership of
Tremont and 50% held by a subsidiary of BMI. Tremont also owns 100% of Tall Pines Insurance Company, an insurance company
that also holds certain marketable securities and other investments. See Note 16 to our Consolidated Financial Statements.

In addition, we also own real property related to certain of our former business units.

Business Strategy—We routinely compare our liquidity requirements and alternative uses of capital against the estimated
future cash flows to be received from our subsidiaries and unconsolidated affiliates, and the estimated sales value of those businesses.
As a result, we have 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 our dividend policy, consider the sale of an interest in our subsidiaries,
business units, marketable securities or other assets, or take a combination of these or other steps, to increase liquidity, reduce
indebtedness and fund future activities, which have in the past and may in the future involve related companies. From time to time, we
and our related entities consider restructuring ownership interests among our subsidiaries and related companies. We expect to
continue this activity in the future.

We and other entities that may be deemed to be controlled by or affiliated with Ms. Simmons and Ms. Connelly routinely
evaluate acquisitions of interests in, or combinations with, companies, including related companies, we perceive to be undervalued in
the marketplace. These companies may or may not be engaged in businesses related to our current businesses. In some instances we
actively manage the businesses we acquire with a focus on maximizing return-on-investment through cost reductions, capital
expenditures, improved operating efficiencies, selective marketing to address market niches, disposition of marginal operations, use of
leverage and redeployment of capital to more productive assets. In other instances, we have disposed of our interest in a company
prior to gaining control. We intend to consider such activities in the future and may, in connection with such activities, consider
issuing additional equity securities and increasing our indebtedness.

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Website and Available Information—Our fiscal year ends December 31. We furnish our stockholders with annual reports
containing audited financial statements. In addition, we file annual, quarterly and current reports, proxy and information statements
and other information with the SEC. Certain of our consolidated subsidiaries (Kronos, NL and CompX) also file annual, quarterly and
current reports, proxy and information statements and other information with the SEC. We also make our annual reports on Form 10-
K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments thereto, available free of charge through our website
at www.valhi.net as soon as reasonably practical after they have been filed with the SEC. We also provide to anyone, without charge,
copies of such documents upon written request. Requests should be directed to the attention of the Corporate Secretary at our address
on the cover page of this Form 10-K.

Additional information, including our Audit Committee charter, our Code of Business Conduct and Ethics and our
Corporate Governance Guidelines, can also be found on our website. Information contained on our website is not part of this Annual
Report.

The general public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F
Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. We are an electronic filer. The SEC maintains an Internet website at www.sec.gov that contains reports,
proxy and information statements and other information regarding issuers, such as us, that file electronically with the SEC.

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ITEM 1A. RISK FACTORS

Listed below are certain risk factors associated with us and our businesses. See also certain risk factors discussed in Item 7
— “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and
Estimates.” In addition to the potential effect of these risk factors, any risk factor which could result in reduced earnings or increased
operating losses, or reduced liquidity, could in turn adversely affect our ability to service our liabilities or pay dividends on our
common stock or adversely affect the quoted market prices for our securities.

Our assets consist primarily of investments in our operating subsidiaries, and we are dependent upon distributions

from our subsidiaries to service our liabilities.

The majority of our operating cash flows are generated by our operating subsidiaries, and our ability to service liabilities
and to pay dividends on our common stock depends to a large extent upon the cash dividends or other distributions we receive from
our subsidiaries. Our subsidiaries are separate and distinct legal entities and they have no obligation, contingent or otherwise, to pay
such cash dividends or other distributions to us. In addition, the payment of dividends or other distributions from our subsidiaries
could be subject to restrictions on, or taxation of, dividends or repatriation of earnings under applicable law, monetary transfer
restrictions, currency exchange regulations in jurisdictions in which our subsidiaries operate or any other restrictions imposed by
current or future agreements to which our subsidiaries may be a party, including debt instruments. Events beyond our control,
including changes in general business and economic conditions, could adversely impact the ability of our subsidiaries to pay dividends
or make other distributions to us. If our subsidiaries were to become unable to make sufficient cash dividends or other distributions to
us, our ability to service our liabilities and to pay dividends on our common stock could be adversely affected.

In addition, a significant portion of our assets consist of ownership interests in our subsidiaries. If we were required to
liquidate any of such securities in order to generate funds to satisfy our liabilities, we may be required to sell such securities at a time
or times at which we would not be able to realize what we believe to be the long-term value of such assets.

Demand for, and prices of, certain of our products are influenced by changing market conditions for our products,

which may result in reduced earnings or operating losses.

Approximately 90% of our Chemicals Segment’s revenues are attributable to sales of TiO2. Pricing within the global TiO2
industry over the long term is cyclical and changes in economic conditions, especially in Western industrialized nations, can
significantly impact our earnings and operating cash flows. Historically, the markets for many of our products have experienced
alternating periods of increasing and decreasing demand. Relative changes in the selling prices for our products are one of the main
factors that affect the level of our profitability. In periods of increasing demand, our selling prices and profit margins generally will
tend to increase, while in periods of decreasing demand our selling prices and profit margins generally tend to decrease. In addition,
pricing may affect customer inventory levels as customers may from time to time accelerate purchases of TiO2 in advance of
anticipated price increases or defer purchases of TiO2 in advance of anticipated price decreases. Our ability to further increase
capacity without additional investment in greenfield or brownfield capacity increases may be limited and as a result, our profitability
may become even more dependent upon the selling prices of our products.

The TiO2 industry is concentrated and highly competitive and we face price pressures in the markets in which we

operate, which may result in reduced earnings or operating losses.

The global market in which we operate our Chemicals Segment’s business is concentrated with the top five TiO2
producers accounting for over 50% of the world’s production capacity and is highly competitive. Competition is based on a number
of factors, such as price, product quality and service. Some of our competitors may be able to drive down prices for our products if
their costs are lower than our costs. In addition, some of our competitors’ financial, technological and other resources may be greater
than our resources and such competitors may be better able to withstand changes in market conditions. Our competitors may be able
to respond more quickly than we can to new or emerging technologies and changes in customer requirements. Further, consolidation
of our competitors or customers may result in reduced demand for our products or make it more difficult for us to compete with our
competitors. The occurrence of any of these events could result in reduced earnings or operating losses.

Higher costs or limited availability of our raw materials may reduce our earnings and decrease our liquidity. In

addition, many of our raw material contracts contain fixed quantities we are required to purchase.

The number of sources for and availability of certain raw materials is specific to the particular geographical region in
which a facility is located. For example, titanium-containing feedstocks suitable for use in our Chemicals Segment’s TiO2 facilities
are available from a limited number of suppliers around the world. Political and economic instability in the countries from which we
purchase our raw material supplies could adversely affect their availability. If our worldwide vendors were unable to meet their
contractual obligations and we were unable to obtain necessary raw materials, we could incur higher costs for raw materials or may be
required to reduce production levels. We experienced significantly higher ore costs in 2012 which carried over into 2013. We have
seen moderation in the purchase cost of third-party feedstock ore in 2013 and throughout 2014 and 2015, but such reductions did not

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begin to be significantly reflected in our cost of sales until the third quarter of 2013. We may also experience higher operating costs
such as energy costs, which could affect our profitability. We may not always be able to increase our selling prices to offset the
impact of any higher costs or reduced production levels, which could reduce our earnings and decrease our liquidity.

Our Chemicals Segment has long-term supply contracts that provide for our TiO2 feedstock requirements that currently
expire through 2019. While we believe we will be able to renew these contracts, there can be no assurance we will be successful in
renewing these contracts or in obtaining long-term extensions to these contracts prior to expiration. Our current agreements (including
those entered into through February 2016) require us to purchase certain minimum quantities of feedstock with minimum purchase
commitments aggregating approximately $865 million in years subsequent to December 31, 2015. In addition, we have other long-
term supply and service contracts that provide for various raw materials and services. These agreements require us to purchase certain
minimum quantities or services with minimum purchase commitments aggregating approximately $147 million at December 31, 2015.
Our commitments under these contracts could adversely affect our financial results if we significantly reduce our production and were
unable to modify the contractual commitments.

Certain of the raw materials used in our Component Products Segment’s products are commodities that are subject to
significant fluctuations in price in response to world-wide supply and demand as well as speculative investor activity. Zinc and brass
are the principal raw materials used in the manufacture of security products. Stainless steel tubing is the major raw material used in
the manufacture of marine exhaust systems. These raw materials are purchased from several suppliers and are generally readily
available from numerous sources. We occasionally enter into short-term raw material supply arrangements to mitigate the impact of
future increases in commodity-related raw material costs. Materials purchased outside of these arrangements are sometimes subject to
unanticipated and sudden price increases. Should our vendors not be able to meet their contractual obligations or should we be
otherwise unable to obtain necessary raw materials, we may incur higher costs for raw materials or may be required to reduce
production levels, either of which may decrease our liquidity as we may be unable to offset the higher costs with increases in our
selling prices or reductions in other operating costs.

We could incur significant costs related to legal and environmental remediation matters.

NL formerly manufactured lead pigments for use in paint. NL and others have been named as defendants in various legal
proceedings seeking damages for personal injury, property damage and governmental expenditures allegedly caused by the use of
lead-based paints. These lawsuits seek recovery under a variety of theories, including public and private nuisance, negligent product
design, negligent failure to warn, strict liability, breach of warranty, conspiracy/concert of action, aiding and abetting, enterprise
liability, market share or risk contribution liability, intentional tort, fraud and misrepresentation, violations of state consumer
protection statutes, supplier negligence and similar claims. The plaintiffs in these actions generally seek to impose on the defendants
responsibility for lead paint abatement and health concerns associated with the use of lead-based paints, including damages for
personal injury, contribution and/or indemnification for medical expenses, medical monitoring expenses and costs for educational
programs. As with all legal proceedings, the outcome is uncertain. Any liability we might incur in the future could be material. See
also Item 3 - “Legal Proceedings - Lead Pigment Litigation - NL.”

Certain properties and facilities used in NL’s former operations are the subject of litigation, administrative proceedings or
investigations arising under various environmental laws. These proceedings seek cleanup costs, personal injury or property damages
and/or damages for injury to natural resources. Some of these proceedings involve claims for substantial amounts. Environmental
obligations are difficult to assess and estimate for numerous reasons, and we may incur costs for environmental remediation in the
future in excess of amounts currently estimated. Any liability we might incur in the future could be material. See also Item 3 - “Legal
Proceedings - Environmental Matters and Litigation.”

Many of the markets in which our Component Products Segment operates are mature and highly competitive

resulting in pricing pressure and the need to continuously reduce costs.

Many of the markets our Component Products Segment serves are highly competitive, with a number of competitors
offering similar products. We focus our efforts on the middle and high-end segment of the market where we feel that we can compete
due to the importance of product design, quality and durability to the customer. However, our ability to effectively compete is
impacted by a number of factors. The occurrence of any of these factors could result in reduced earnings or operating losses.

(cid:120) Competitors may be able to drive down prices for our products beyond our ability to adjust costs because their costs

are lower than ours, especially products sourced from Asia.

(cid:120) Competitors’ financial, technological and other resources may be greater than our resources, which may enable them

to more effectively withstand changes in market conditions.

(cid:120) Competitors may be able to respond more quickly than we can to new or emerging technologies and changes in

customer requirements.

- 22 -

(cid:120) Consolidation of our competitors or customers in any of the markets in which we compete may result in reduced

demand for our products.

(cid:120) New competitors could emerge by modifying their existing production facilities to manufacture products that

compete with our products.

(cid:120) We may not be able to sustain a cost structure that enables us to be competitive.

(cid:120) Customers may no longer value our product design, quality or durability over the lower cost products of our

competitors.

Our development of innovative features for current products is critical to sustaining and growing our Component

Product Segment’s sales.

Historically, our Component Products Segment’s ability to provide value-added custom engineered products that address
requirements of technology and space utilization has been a key element of our success. We spend a significant amount of time and
effort to refine, improve and adapt our existing products for new customers and applications. Since expenditures for these types of
activities are not considered research and development expense under accounting principles generally accepted in the United States of
America (“GAAP”), the amount of our research and development expenditures, which is not significant, is not indicative of the overall
effort involved in the development of new product features. The introduction of new product features requires the coordination of the
design, manufacturing and marketing of the new product features with current and potential customers. The ability to coordinate these
activities with current and potential customers may be affected by factors beyond our control. While we will continue to emphasize
the introduction of innovative new product features that target customer-specific opportunities, we do not know if any new product
features we introduce will achieve the same degree of success that we have achieved with our existing products. Introduction of new
product features typically requires us to increase production volume on a timely basis while maintaining product quality.
Manufacturers often encounter difficulties in increasing production volumes, including delays, quality control problems and shortages
of qualified personnel or raw materials. As we attempt to introduce new product features in the future, we do not know if we will be
able to increase production volume without encountering these or other problems, which might negatively impact our financial
condition or results of operations.

Failure to protect our intellectual property rights or claims by others that we infringe their intellectual property

rights could substantially harm our business.

Our Component Products Segment relies on patent, trademark and trade secret laws in the United States and similar laws
in other countries to establish and maintain our intellectual property rights in our technology and designs. Despite these measures, any
of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated. Others may independently
discover our trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such
parties. Further, we do not know if any of our pending trademark or patent applications will be approved. Costly and time-consuming
litigation could be necessary to enforce and determine the scope of our intellectual property rights. In addition, the laws of certain
countries do not protect intellectual property rights to the same extent as the laws of the United States. Therefore, in certain
jurisdictions, we may be unable to protect our technology and designs adequately against unauthorized third party use, which could
adversely affect our competitive position.

Third parties may claim that we or our customers are infringing upon their intellectual property rights. Even if we believe
that such claims are without merit, they can be time-consuming and costly to defend and distract our management’s and technical
staff’s attention and resources. Claims of intellectual property infringement also might require us to redesign affected technology,
enter into costly settlement or license agreements or pay costly damage awards, or face a temporary or permanent injunction
prohibiting us from marketing or selling certain of our technology. If we cannot or do not license the infringed technology on
reasonable pricing terms or at all, or substitute similar technology from another source, our business could be adversely impacted.

- 23 -

Our Waste Management Segment operates in a highly regulated industry, and third parties may from time to time
seek to challenge our Waste Management Segment’s licenses and permits. We may not be successful in obtaining new business
to effectively operate our LLRW disposal facilities.

Our Waste Management Segment is required to comply with various federal, state and local regulations, as well as comply
with the terms of our operating permits and licenses as they may be modified or amended. Failure to comply with any such regulation
or permit requirements, or failure to obtain renewals, could adversely impact our operations. In addition, we must be successful in
obtaining new business from our commercial and governmental customers in order to effectively operate our Compact and Federal
LLRW disposal facilities. Third parties may from time to time seek to challenge our current operating licenses and permits. We do not
know if we will be successful in obtaining such new business. Failure to obtain a sufficient amount of new business to effectively
operate our LLRW disposal facilities could adversely impact our earnings and decrease our liquidity.

Our Real Estate Management and Development Segment owns a significant amount of real property in Henderson,
Nevada. A prolonged downturn in the local real estate market in Nevada could negatively impact our ability to successfully
complete the development of such real property.

A substantial portion of the revenues and assets associated with our Real Estate Management and Development Segment
relate to certain real estate under development in Henderson, Nevada, including approximately 2,100 acres zoned for
residential/planned community purposes and approximately 400 acres zoned for commercial and light industrial use. A prolonged
downturn in the local real estate market in Nevada or other events could negatively impact our ability to successfully complete the
development of such real property, either by requiring us to incur future development costs in excess of our current estimates, or by
resulting in selling prices for future retail land sales lower than what we currently expect. If any of these events were to occur,
revenue and profits in our Real Estate Management and Development segment may be significantly and negatively affected.

Our leverage may impair our financial condition or limit our ability to operate our businesses.

We have a significant amount of debt, primarily related to Kronos’ term loan, our loan from Contran Corporation, our
loans from Snake River Sugar Company and the WCS financing capital lease. As of December 31, 2015, our total consolidated debt
was approximately $960.5 million. Our level of debt could have important consequences to our stockholders and creditors, including:

(cid:120) making it more difficult for us to satisfy our obligations with respect to our liabilities;

(cid:120)

increasing our vulnerability to adverse general economic and industry conditions;

requiring that a portion of our cash flows from operations be used for the payment of interest on our debt, which
reduces our ability to use our cash flow to fund working capital, capital expenditures, dividends on our common
stock, acquisitions or general corporate requirements;

limiting the ability of our subsidiaries to pay dividends to us;

limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or
general corporate requirements;

limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
and

placing us at a competitive disadvantage relative to other less leveraged competitors.

In addition to our indebtedness, we are party to various lease and other agreements (including feedstock ore purchase
contracts as previously described) pursuant to which, along with our indebtedness, we are committed to pay approximately
$524.6 million in 2016. Our ability to make payments on and refinance our debt and to fund planned capital expenditures depends on
our future ability to generate cash flow. To some extent, this is subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond our control. In addition, our ability to borrow funds under certain of our revolving credit
facilities in the future will, in some instances, depend in part on these subsidiaries’ ability to maintain specified financial ratios and
satisfy certain financial covenants contained in the applicable credit agreement.

Our businesses may not generate cash flows from operating activities sufficient to enable us to pay our debts when they
become due and to fund our other liquidity needs. As a result, we may need to refinance all or a portion of our debt before maturity.
We may not be able to refinance any of our debt in a timely manner on favorable terms, if at all, in the current credit markets. Any
inability to generate sufficient cash flows or to refinance our debt on favorable terms could have a material adverse effect on our
financial condition.

- 24 -

Global climate change legislation could negatively impact our financial results or limit our ability to operate our

businesses.

We operate production facilities in several countries. In many of the countries in which we operate, legislation has been
passed, or proposed legislation is being considered, to limit greenhouse gases through various means, including emissions permits
and/or energy taxes. In several of our production facilities, we consume large amounts of energy, primarily electricity and natural gas.
To date, the permit system in effect in the various countries in which we operate has not had a material adverse effect on our financial
results. However, if further greenhouse gas legislation were to be enacted in one or more countries, it could negatively impact our
future results from operations through increased costs of production, particularly as it relates to our energy requirements or our need to
obtain emissions permits. If such increased costs of production were to materialize, we may be unable to pass price increases onto our
customers to compensate for increased production costs, which may decrease our liquidity, operating income and results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

We along with our subsidiaries: Kronos, CompX, WCS and NL lease office space through Contran for our principal
executive offices in Dallas, Texas. Our BMI and LandWell subsidiaries’ principal offices are in an owned building in Henderson,
Nevada. A list of operating facilities for each of our subsidiaries is described in the applicable business sections of Item 1—
“Business.” We believe our facilities are generally adequate and suitable for their respective uses.

ITEM 3.

LEGAL PROCEEDINGS

We are involved in various legal proceedings. In addition to information included below, certain information called for by

this Item is included in Note 17 to our Consolidated Financial Statements, which is incorporated herein by reference.

Lead Pigment Litigation—NL

NL’s former operations included the manufacture of lead pigments for use in paint and lead-based paint. NL, other
former manufacturers of lead pigments for use in paint and lead-based paint (together, the “former pigment manufacturers”), and the
Lead Industries Association (“LIA”), which discontinued business operations in 2002, have been named as defendants in various legal
proceedings seeking damages for personal injury, property damage and governmental expenditures allegedly caused by the use of
lead-based paints. Certain of these actions have been filed by or on behalf of states, counties, cities or their public housing authorities
and school districts, and certain others have been asserted as class actions. These lawsuits seek recovery under a variety of theories,
including public and private nuisance, negligent product design, negligent failure to warn, strict liability, breach of warranty,
conspiracy/concert of action, aiding and abetting, enterprise liability, market share or risk contribution liability, intentional tort, fraud
and misrepresentation, violations of state consumer protection statutes, supplier negligence and similar claims.

The plaintiffs in these actions generally seek to impose on the defendants responsibility for lead paint abatement and
health concerns associated with the use of lead-based paints, including damages for personal injury, contribution and/or
indemnification for medical expenses, medical monitoring expenses and costs for educational programs. To the extent the plaintiffs
seek compensatory or punitive damages in these actions, such damages are generally unspecified. In some cases, the damages are
unspecified pursuant to the requirements of applicable state law. A number of cases are inactive or have been dismissed or
withdrawn. Most of the remaining cases are in various pre-trial stages. Some are on appeal following dismissal or summary judgment
rulings or a trial verdict in favor of either the defendants or the plaintiffs.

We believe that these actions are without merit, and we intend to continue to deny all allegations of wrongdoing and
liability and to defend against all actions vigorously. We do not believe it is probable that we have incurred any liability with respect
to all of the lead pigment litigation cases to which we are a party, and liability to us that may result, if any, in this regard cannot be
reasonably estimated, because:

(cid:120) we have never settled any of the market share, intentional tort, fraud, nuisance, supplier negligence, breach of

warranty, conspiracy, misrepresentation, aiding and abetting, enterprise liability, or statutory cases,

(cid:120)

no final, non-appealable adverse verdicts have ever been entered against us, and

(cid:120) we have never ultimately been found liable with respect to any such litigation matters, including over 100 cases over
a twenty-year period for which we were previously a party and for which we have been dismissed without any finding
of liability.

- 25 -

Accordingly, we have not accrued any amounts for any of the pending lead pigment and lead-based paint litigation cases
filed by or on behalf of states, counties, cities or their public housing authorities and school districts, or those asserted as class actions.
In addition, we have determined that liability to us which may result, if any, cannot be reasonably estimated because there is no prior
history of a loss of this nature on which an estimate could be made and there is no substantive information available upon which an
estimate could be based.

In one of these lead pigment cases, in April 2000 NL was served with a complaint in County of Santa Clara v. Atlantic
Richfield Company, et al; (Superior Court of the State of California, County of Santa Clara, Case No. 1-00-CV-788657) brought by a
number of California government entities against the former pigment manufacturers, the LIA and certain paint manufacturers. The
County of Santa Clara sought to recover compensatory damages for funds the plaintiffs had expended or would in the future expend
for medical treatment, educational expenses, abatement or other costs due to exposure to, or potential exposure to, lead paint,
disgorgement of profit, and punitive damages. In July 2003, the trial judge granted defendants’ motion to dismiss all remaining
claims. Plaintiffs appealed and the intermediate appellate court reinstated public nuisance, negligence, strict liability, and fraud claims
in March 2006. A fourth amended complaint was filed in March 2011 on behalf of The People of California by the County Attorneys
of Alameda, Ventura, Solano, San Mateo, Los Angeles and Santa Clara, and the City Attorneys of San Francisco, San Diego and
Oakland. That complaint alleged that the presence of lead paint created a public nuisance in each of the prosecuting jurisdictions and
seeks its abatement. In July and August 2013, the case was tried. In January 2014, the Judge issued a judgment finding NL, The
Sherwin Williams Company and ConAgra Grocery Products Company jointly and severally liable for the abatement of lead paint in
pre-1980 homes, and ordered the defendants to pay an aggregate $1.15 billion to the people of the State of California to fund such
abatement. In February 2014, we filed a motion for a new trial, and in March 2014 the court denied the motion. Subsequently in
March 2014, NL filed a notice of appeal with the Sixth District Court of Appeal for the State of California and the appeal is
proceeding with the appellate court. NL believes that this judgment is inconsistent with California law and is unsupported by the
evidence, and we will defend vigorously against all claims.

The Santa Clara case is unusual in that this is the second time that an adverse verdict in the lead pigment litigation has
been entered against NL (the first adverse verdict against NL was ultimately overturned on appeal). We have concluded that the
likelihood of a loss in this case has not reached a standard of “probable” as contemplated by ASC 450, given (i) the substantive,
substantial and meritorious grounds on which the adverse verdict in the Santa Clara case will be appealed, (ii) the uniqueness of the
Santa Clara verdict (i.e. no final, non-appealable verdicts have ever been rendered against us, or any of the other former lead pigment
manufacturers, based on the public nuisance theory of liability or otherwise), and (iii) the rejection of the public nuisance theory of
liability as it relates to lead pigment matters in many other jurisdictions (no jurisdiction in which a plaintiff has asserted a public
nuisance theory of liability has ever successfully been upheld). In addition, liability that may result, if any, cannot be reasonably
estimated, as NL continues to have no basis on which an estimate of liability could be made, as discussed above. However, as with
any legal proceeding, there is no assurance that any appeal would be successful, and it is reasonably possible, based on the outcome of
the appeals process, that NL may in the future incur some liability resulting in the recognition of a loss contingency accrual that could
have a material adverse impact on our results of operations, financial position and liquidity.

In June 2000, a complaint was filed in Illinois state court, Lewis, et al. v. Lead Industries Association, et al (Circuit Court
of Cook County, Illinois, County Department, Chancery Division, Case No. 00CH09800.) Plaintiffs seek to represent two classes, one
consisting of minors between the ages of six months and six years who resided in housing in Illinois built before 1978, and another
consisting of individuals between the ages of six and twenty years who lived in Illinois housing built before 1978 when they were
between the ages of six months and six years and who had blood lead levels of 10 micrograms/deciliter or more. The complaint seeks
damages jointly and severally from the former pigment manufacturers and the LIA to establish a medical screening fund for the first
class to determine blood lead levels, a medical monitoring fund for the second class to detect the onset of latent diseases and a fund for
a public education campaign. In April 2008, the trial court judge certified a class of children whose blood lead levels were screened
venously between August 1995 and February 2008 and who had incurred expenses associated with such screening. In March 2012,
the trial court judge decertified the class. In June 2012, the trial court judge granted plaintiffs the right to appeal his decertification
order, and in August 2012 the appellate court granted plaintiffs permission to appeal. In March 2013, the appellate court agreed with
the trial court’s rationale regarding legislative requirements to screen children’s blood lead levels and remanded the case for further
proceedings in the trial court. In July 2013, plaintiffs moved to vacate the decertification. In October 2013, the judge denied plaintiffs’
motion to vacate the decertification of the class. In March 2014, plaintiffs filed a new class certification motion. In April 2015, a
class was certified consisting of parents or legal guardians of children who lived in certain “high risk” areas in Illinois between August
18, 1995 and February 19, 2008, and incurred an expense or liability for having their children’s blood lead levels tested.

In addition to the foregoing litigation, various legislation and administrative regulations have, from time to time, been
proposed that seek to (a) 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 (b) effectively overturn court decisions in which we
and other pigment manufacturers have been successful. Examples of such proposed legislation include bills which would permit civil
liability for damages on the basis of market share, rather than requiring plaintiffs to prove that the defendant’s product caused the
alleged damage, and bills which would revive actions barred by the statute of limitations. While no legislation or regulations have

- 26 -

been enacted to date that are expected to have a material adverse effect on our consolidated financial position, results of operations or
liquidity, the imposition of market share liability or other legislation could have such an effect.

New cases may continue to be filed against us. We cannot assure you that we will not incur liability in the future in
respect of any of the pending or possible litigation in view of the inherent uncertainties involved in court and jury rulings. In the
future, if new information regarding such matters becomes available to us (such as a final, non-appealable adverse verdict against us
or otherwise ultimately being found liable with respect to such matters), at that time we would consider such information in evaluating
any remaining cases then-pending against us as to whether it might then have become probable we have incurred liability with respect
to these matters, and whether such liability, if any, could have become reasonably estimable. The resolution of any of these cases
could result in the recognition of a loss contingency accrual that could have a material adverse impact on our net income for the
interim or annual period during which such liability is recognized and a material adverse impact on our consolidated financial
condition and liquidity.

Environmental Matters and Litigation

Our operations are governed by various environmental laws and regulations. Certain of our businesses are and have been
engaged in the handling, manufacture or use of substances or compounds that may be considered toxic or hazardous within the
meaning of applicable environmental laws and regulations. As with other companies engaged in similar businesses, certain of our past
and current operations and products have the potential to cause environmental or other damage. We have implemented and continue
to implement various policies and programs in an effort to minimize these risks. Our policy is to maintain compliance with applicable
environmental laws and regulations at all of our plants and to strive to improve environmental performance. From time to time, we
may be subject to environmental regulatory enforcement under U.S. and non-U.S. statutes, the resolution of which typically involves
the establishment of compliance programs. It is possible that future developments, such as stricter requirements of environmental
laws and enforcement policies, could adversely affect our production, handling, use, storage, transportation, sale or disposal of such
substances. We believe that all of our facilities are in substantial compliance with applicable environmental laws.

Certain properties and facilities used in NL’s former operations, including divested primary and secondary lead smelters
and former mining locations, are the subject of civil litigation, administrative proceedings or investigations arising under federal and
state environmental laws and common law. Additionally, in connection with past operating practices, we are currently involved as a
defendant, potentially responsible party (“PRP”) or both, pursuant to CERCLA, and similar state laws in various governmental and
private actions associated with waste disposal sites, mining locations, and facilities that we or our predecessors, our subsidiaries or
their predecessors currently or previously owned, operated or used, certain of which are on the United States EPA’s Superfund
National Priorities List or similar state lists. These proceedings seek cleanup costs, damages for personal injury or property damage
and/or damages for injury to natural resources. Certain of these proceedings involve claims for substantial amounts. Although we
may be jointly and severally liable for these costs, in most cases we are only one of a number of PRPs who may also be jointly and
severally liable, and among whom costs may be shared or allocated. In addition, we are also a party to a number of personal injury
lawsuits filed in various jurisdictions alleging claims related to environmental conditions alleged to have resulted from our operations.

Obligations associated with environmental remediation and related matters are difficult to assess and estimate for

numerous reasons including the:

(cid:120)

complexity and differing interpretations of governmental regulations;

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

financial capabilities of the PRPs and the allocation of costs among them;

solvency of other PRPs;

(cid:120) multiplicity of possible solutions;

(cid:120)

number of years of investigatory, remedial and monitoring activity required;

uncertainty over the extent, if any, to which our former operations might have contributed to the conditions allegedly
giving rise to such personal injury, property damage, natural resource and related claims; and

number of years between former operations and notice of claims and lack of information and documents about the
former operations.

- 27 -

costs will not exceed accrued amounts or the upper end of the range for sites for which estimates have been made, and we cannot
assure you that costs will not be incurred for sites where no estimates presently can be made. Further, additional environmental and
related matters may arise in the future. If we were to incur any future liability, this could have a material adverse effect on our
consolidated financial statements, results of operations and liquidity.

We record liabilities related to environmental remediation and related matters (including costs associated with damages
for personal injury or property damage and/or damages for injury to natural resources) when estimated future expenditures are
probable and reasonably estimable. We adjust such accruals as further information becomes available to us or as circumstances
change. Unless the amounts and timing of such estimated future expenditures are fixed and reasonably determinable, we generally do
not discount estimated future expenditures to their present value due to the uncertainty of the timing of the payout. We recognize
recoveries of costs from other parties, if any, as assets when their receipt is deemed probable. At December 31, 2014 and 2015, we
have not recognized any material receivables for recoveries.

We do not know and cannot estimate the exact time frame over which we will make payments for our accrued
environmental and related costs. The timing of payments depends upon a number of factors, including but not limited to the timing of
the actual remediation process; which in turn depends on factors outside of our control. At each balance sheet date, we estimate the
amount of our accrued environmental and related costs which we expect to pay within the next twelve months, and we classify this
estimate as a current liability. We classify the remaining accrued environmental costs as a noncurrent liability.

On a quarterly basis, we evaluate the potential range of our liability for environmental remediation and related costs at
sites where we have been named as a PRP or defendant, including sites for which NL’s wholly-owned environmental management
subsidiary, NL Environmental Management Services, Inc., (“EMS”), has contractually assumed our obligations. At December 31,
2015, NL had accrued approximately $113 million related to approximately 42 sites associated with remediation and related matters
that we believe are at the present time and/or in their current phase reasonably estimable. The upper end of the range of reasonably
possible costs to us for remediation and related matters for which we believe it is possible to estimate costs is approximately $166
million, including the amount currently accrued.

We believe that it is not reasonably possible to estimate the range of costs for certain sites. At December 31, 2015, there
were approximately 5 sites for which NL is not currently able to estimate a range of costs. For these sites, generally the investigation
is in the early stages, and NL is unable to determine whether or not we actually had any association with the site, the nature of its
responsibility, if any, for the contamination at the site and the extent of contamination at and cost to remediate the site. The timing and
availability of information on these sites is dependent on events outside of our control, such as when the party alleging liability
provides information to us. At certain of these previously inactive sites, NL has received general and special notices of liability from
the EPA and/or state agencies alleging that we, sometimes with other PRPs, are liable for past and future costs of remediating
environmental contamination allegedly caused by former operations. These notifications may assert that NL, along with any other
alleged PRPs, are liable for past and/or future clean-up costs. As further information becomes available to us for any of these sites
which would allow us to estimate a range of costs, we would at that time adjust our accruals. Any such adjustment could result in the
recognition of an accrual that would have a material effect on our consolidated financial statements, results of operations and liquidity.

In June 2006, NL and several other PRPs received a Unilateral Administrative Order (UAO) from the EPA regarding a
formerly-owned mine and milling facility located in Park Hills, Missouri. The Doe Run Company is the current owner of the site,
which was purchased by a predecessor of Doe Run from us in approximately 1936. Doe Run is also named in the Order. In April
2008, the parties signed a definitive cost sharing agreement for sharing of the costs anticipated in connection with the order and in
May 2008, the parties began work at the site as required by the UAO and in accordance with the cost sharing agreement. In the fourth
quarter of 2010, NL reached its capped payment obligation under the cost sharing agreement with Doe Run. In the fourth quarter of
2013, Doe Run completed the remainder of the construction work. A Removal Action Report and Post-Removal Site Control plan is
expected to be submitted to the EPA by Doe Run in 2016.

In June 2008, NL received a Directive and Notice to Insurers from the New Jersey Department of Environmental
Protection (“NJDEP”) regarding the Margaret’s Creek site in Old Bridge Township, New Jersey. NJDEP alleged that a waste hauler
transported waste from one of our former facilities for disposal at the site in the early 1970s. NJDEP referred the site to the EPA, and
in November 2009, the EPA added the site to the National Priorities List under the name “Raritan Bay Slag Site.” In 2012, EPA
notified NL of its potential liability at this site. In May 2013, EPA issued its Record of Decision for the site. In June 2013, NL filed a
contribution suit under CERCLA and the New Jersey Spill Act titled NL Industries, Inc. v. Old Bridge Township, et al. (United States
District Court for the District of New Jersey, Civil Action No. 3:13-cv-03493-MAS-TJB) against the current owner, Old Bridge
Township, and several federal and state entities NL alleges designed and operated the site and who have significant potential liability
as compared to NL which is alleged to have been a potential source of material placed at the site by others. NL’s suit also names
certain former NL customers of the former NL facility alleged to be the source of some of the materials. In January 2014, EPA issued
a UAO to NL for clean-up of the site based on the EPA’s preferred remedy set forth in the Record of Decision. NL is in discussions
with EPA about NL’s performance of a defined amount of the work at the site and is otherwise taking actions necessary to respond to

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the UAO. If these discussions and actions are unsuccessful, NL will defend vigorously against all claims while continuing to seek
contribution from other PRPs.

In September 2008, NL received a Special Notice letter from the EPA for liability associated with the Tar Creek
Superfund site in Ottawa County, Oklahoma (Tar Creek) and a demand for related past and future costs. NL responded with a good-
faith offer to pay certain of the EPA’s past costs and to complete limited work in the areas in which NL operated. In October 2008,
NL received a claim from the State of Oklahoma for past, future and relocation costs in connection with the site. In November 2015,
the United States Department of Justice lodged with the federal court a fully-executed consent decree between the United States, the
State of Oklahoma and NL that resolves the claims of the United States and the State of Oklahoma for past and future cleanup costs at
Tar Creek. The consent decree will become effective after it has been reviewed and officially approved by the federal court.

In August 2009, NL was served with a complaint in Raritan Baykeeper, Inc. d/b/a NY/NJ Baykeeper et al. v. NL
Industries, Inc. et al. (United States District Court, District of New Jersey, Case No. 3:09-cv-04117). This is a citizen’s suit filed by
two local environmental groups pursuant to the Resource Conservation and Recovery Act and the Clean Water Act against NL,
current owners, developers and state and local government entities. The complaint alleges that hazardous substances were and
continue to be discharged from NL’s former Sayreville, New Jersey property into the sediments of the adjacent Raritan River. The
former Sayreville site is currently being remediated by owner/developer parties under the oversight of the NJDEP. The plaintiffs seek
a declaratory judgment, injunctive relief, imposition of civil penalties and an award of costs. NL has denied liability and will defend
vigorously against all claims.

In June 2011, NL was served in ASARCO LLC v. NL Industries, Inc., et al. (United States District Court, Western
District of Missouri, Case No. 4:11-cv-00138-DGK). The plaintiff brought this CERCLA contribution action against several
defendants to recover a portion of the amount it paid in settlement with the U.S. Government during its Chapter 11 bankruptcy in
relation to the Tar Creek site, the Cherokee County Superfund Site in southeast Kansas, the Oronogo-Duenweg Lead Mining Belt
Superfund Site in Jasper County, Missouri and the Newton County Mine Tailing Site in Newton County, Missouri. NL has denied
liability and will defend vigorously against all of the claims. In the second quarter of 2012, NL filed a motion to stay the case. In the
first quarter of 2013, NL’s motion was granted and the court entered an indefinite stay. In the first quarter of 2015, Asarco was
granted permission to seek an interlocutory appeal of that stay order. In March 2015, the Eighth Circuit Court of Appeals denied
Asarco’s request for an interlocutory appeal of the stay order and the trial court’s indefinite stay remains in place.

In September 2011, NL was served in ASARCO LLC v. NL Industries, Inc., et al. (United States District Court, Eastern
District of Missouri, Case No. 4:11-cv-00864). The plaintiff brought this CERCLA contribution action against several defendants to
recover a portion of the amount it paid in settlement with the U.S. Government during its Chapter 11 bankruptcy in relation to the
Southeast Missouri Mining District. In May 2015, the trial court on its own motion entered an indefinite stay of the litigation. In June
2015, Asarco filed an appeal of the stay in the Eighth Circuit Court of Appeals. NL has moved to dismiss that appeal as improperly
filed. In October 2015, the Eighth Circuit Court of Appeals granted NL’s motion to dismiss Asarco’s appeal and the trial court’s
indefinite stay remains in place.

In July 2012, NL was served in EPEC Polymers, Inc., v. NL Industries, Inc., (United States District Court for the District
of New Jersey, Case 3:12-cv-03842-PGS-TJB). The plaintiff, a landowner of property located across the Raritan River from NL’s
former Sayreville, New Jersey operation, claims that contaminants from NL’s former Sayreville operation came to be located on its
land. The complaint seeks compensatory and punitive damages and alleges, among other things, trespass, private nuisance, negligence,
strict liability, and claims under CERCLA and the New Jersey Spill Act. NL has denied liability and will defend vigorously against
all of the claims.

In March 2013, NL received Special Notice from EPA for Operable Unit 1, residential area, at the Big River Mine
Tailings Superfund Site in St. Francois County, Missouri. The site encompasses approximately eight former mine and mill areas, only
one of which is associated with former NL operations, as well as adjacent residential areas. NL initiated a dialog with EPA regarding
a potential settlement for this operable unit.

In September 2013, EPA issued to NL and 34 other PRPs general notice of potential liability and a demand for payment of
past costs and performance of a Remedial Design for the Gowanus Canal Superfund Site in Brooklyn, New York. In March 2014,
EPA issued a UAO to NL and approximately 27 other PRPs for performance of the Remedial Design at the site. EPA contends that
NL is liable as the alleged successor to the Doehler Die Casting Company, and therefore responsible for any potential contamination
at the Site resulting from Doehler’s ownership/operation of a warehouse and a die casting plant it owned 90 years ago. NL believes
that it has no liability at the Site. NL is currently in discussions with EPA regarding a de minimis settlement and is otherwise taking
actions necessary to respond to the UAO. If these discussions are unsuccessful, NL will continue to deny liability and will defend
vigorously against all of the claims.

See also Item 1 “Regulatory and Environmental Matters” and Note 17 to our Consolidated Financial Statements.

- 29 -

Other—We have also accrued approximately $7.4 million at December 31, 2015 for other environmental cleanup matters.

This accrual is near the upper end of the range of our estimate of reasonably possible costs for such matters.

Other Litigation

In addition to the matters described above, we and our affiliates are also involved in various other environmental,
contractual, product liability, patent (or intellectual property), employment and other claims and disputes incidental to present and
former businesses. In certain cases, we have insurance coverage for these items, although we do not expect additional material
insurance coverage for environmental claims.

We currently believe that the disposition of all claims and disputes, individually or in the aggregate, should not have a

material adverse effect on our consolidated financial position, results of operations or liquidity beyond the accruals already provided.

Insurance Coverage Claims

NL is involved in certain legal proceedings with a number of its former insurance carriers regarding the nature and extent
of the carriers’ obligations to NL under insurance policies with respect to certain lead pigment and asbestos lawsuits. The issue of
whether insurance coverage for defense costs or indemnity or both will be found to exist for our lead pigment and asbestos litigation
depends upon a variety of factors and we cannot assure you that such insurance coverage will be available.

NL has agreements with four former insurance carriers pursuant to which the carriers reimburse it for a portion of our
future lead pigment litigation defense costs, and one such carrier reimburses us for a portion of its future asbestos litigation defense
costs. We are not able to determine how much we will ultimately recover from these carriers for defense costs incurred by us because
of certain issues that arise regarding which defense costs qualify for reimbursement. While NL continues to seek additional insurance
recoveries, we do not know if it will be successful in obtaining reimbursement for either defense costs or indemnity. Accordingly, we
recognize insurance recoveries in income only when receipt of the recovery is probable and we are able to reasonably estimate the
amount of the recovery. See Note 17 to our Consolidated Financial Statements.

NL has settled insurance coverage claims concerning environmental claims with certain of its principal former carriers.

We do not expect further material settlements relating to environmental remediation coverage.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

- 30 -

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND

ISSUER PURCHASES OR EQUITY SECURITIES

Common Stock and Dividends—Our common stock is listed and traded on the New York Stock Exchange (symbol: VHI).
As of March 4, 2016, there were approximately 2,000 holders of record of our common stock. The following table sets forth the high
and low closing per share sales prices for our common stock and dividends for the periods indicated. On March 4, 2016 the closing
price of our common stock was $1.59.

Year ended December 31, 2014

First Quarter ......................................................... $
Second Quarter .....................................................
Third Quarter .......................................................
Fourth Quarter ......................................................

Year ended December 31, 2015

High

Low

Cash
dividends
paid

16.40 $
8.08
7.95
6.41

6.54 $
7.10
5.31
2.81
1.59 $

8.82 $
4.99
6.53
4.81

5.31 $
5.66
1.89
1.21

.93 $

.05
.02
.02
.02

.02
.02
.02
.02
—

We paid regular quarterly cash dividends of $.05 per share the first quarter of 2014. In May 2014, after considering our
results of operations, financial conditions, cash requirements for our businesses and our current expectations regarding reduced
aggregate dividend distributions to be received from our subsidiaries, our Board of Directors reduced our regular quarterly dividend to
$.02 per share effective with the second quarter 2014 dividend payment and such $.02 cash dividend per share was paid in the second,
third and fourth quarters of 2014 and throughout 2015. In February 2016, our board of directors declared a first quarter 2016 dividend
of $.02 per share to be paid on March 24, 2016 to stockholders of record as of March 7, 2016. However, declaration and payment of
future dividends, and the amount thereof, is discretionary and is dependent upon our results of operations, financial condition, cash
requirements for our businesses, contractual or other requirements and restrictions and other factors deemed relevant by our Board of
Directors. The amount and timing of past dividends is not necessarily indicative of the amount or timing of any future dividends which
we might pay.

- 31 -

Performance Graph—Set forth below is a line graph comparing the yearly change in our cumulative total stockholder
return on our common stock against the cumulative total return of the S&P 500 Composite Stock Price Index and the S&P 500
Industrial Conglomerates Index for the period from December 31, 2010 through December 31, 2015. The graph shows the value at
December 31 of each year assuming an original investment of 100 at December 31, 2010, and assumes the reinvestment of our regular
quarterly dividends in shares of our stock.

$300

$200

$100

2010

2011

2012

2013

2014

2015

Valhi, Inc.

S&P 500 Index

S&P 500 Industrial Conglomerates

Valhi common stock ......................................... $
S&P 500 Composite Stock Price Index.............
S&P 500 Industrial Conglomerates Index .........

100 $
100
100

276 $
102
101

174 $
118
121

248 $
157
170

92 $
178
172

20
181
202

2010

2011

2012

2013

2014

2015

December 31,

The information contained in the performance graph shall not be deemed “soliciting material” or “filed” with the SEC, or
subject to the liabilities of Section 18 of the Securities Exchange Act, as amended, except to the extent we specifically request that the
material be treated as soliciting material or specifically incorporate this performance graph by reference into a document filed under
the Securities Act or the Securities Exchange Act.

Equity Compensation Plan Information—We have an equity compensation plan, which was approved by our
stockholders, pursuant to which an aggregate of 200,000 shares of our common stock can be awarded to members of our board of
directors. At December 31, 2015, an aggregate of 166,500 shares were available for future award under this plan. See Note 14 to our
Consolidated Financial Statements.

Treasury Stock Purchases—In March 2005, our board of directors authorized the repurchase of up to 5.0 million shares of
our common stock in open market transactions, including block purchases, or in privately negotiated transactions, which may include
transactions with our affiliates. In November 2006, our board of directors authorized the repurchase of an additional 5.0 million
shares. We may purchase the stock from time to time as market conditions permit. The stock repurchase program does not include
specific price targets or timetables and may be suspended at any time. Depending on market conditions, we could terminate the
program prior to completion. We will use our cash on hand to acquire the shares. Repurchased shares will be retired and cancelled or
may be added to our treasury stock and used for employee benefit plans, future acquisitions or other corporate purposes. See Note 14
to our Consolidated Financial Statements.

- 32 -

ITEM 6.

SELECTED FINANCIAL DATA

The following selected financial data has been derived from our audited Consolidated Financial Statements. The following
selected financial data should be read in conjunction with our Consolidated Financial Statements and related Notes and Item 7—
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

2011

2012

Years ended December 31,
2013(1)
(In millions, except per share data)

2014(1)

2015(1)

STATEMENTS OF OPERATIONS DATA:

Net sales:

Chemicals ....................................... $
Component products .......................
Waste management .........................
Real estate management and

development(1) ............................
Total net sales ........................ $

Operating income (loss):

Chemicals ....................................... $
Component products .......................
Waste management .........................
Real estate management and

development(1) ............................

Total operating income

1,943.3 $
79.8
2.0

1,976.3 $
83.2
27.8

1,732.4 $
92.0
39.2

1,651.9 $
103.9
66.5

—
2,025.1 $

—
2,087.3 $

—

1,863.6 $

40.3
1,862.6 $

553.0 $
6.4
(38.0)

366.8 $
5.4
(26.8)

(125.4) $
9.3
(22.6)

156.8 $
13.6
(2.2)

—

2.0

(loss) ................................. $
Net income (loss) ............................ $

521.4 $
295.0 $

345.4 $
222.1 $

(138.7) $
(126.9) $

170.2 $
79.5 $

Amounts attributable to Valhi

stockholders:

Income (loss) from continuing

1,348.8
109.0
45.0

30.1
1,532.9

7.1
14.0
(26.5)

—

(5.4)
(171.1)

operations ................................... $

214.5 $

141.4 $

(98.0) $

53.8 $

(133.6)

Income from discontinued

operations(4) ................................
Net income(loss) ............................. $

DILUTED EARNINGS PER SHARE

DATA:

Net income (loss) attributable to Valhi

stockholders:

Income from continuing

3.0
217.5 $

18.4
159.8 $

—
(98.0) $

—
53.8 $

—
(133.6)

operations ................................... $

.63 $

.41 $

(.29) $

Income (loss) from discontinued

operations(4) ................................
Net income (loss) ............................ $
Cash dividends ......................................... $
Weighted average common shares

.01
.64 $
.158 $

.06
.47 $
.192 $

—
(.29) $
.20 $

.16 $

—
.16 $
.11 $

(.39)

—
(.39)
.08

outstanding ..........................................

342.1

342.0

STATEMENTS OF CASH FLOW DATA:

Cash provided by (used in):

Operating activities ......................... $
Investing activities ..........................
Financing activities .........................

BALANCE SHEET DATA (at year end):

Total assets (2)(3) ..................................... $
Long-term debt (2) ...................................
Valhi stockholders’ equity ........................
Total equity ..............................................

292.4 $
(220.9)
(299.8)

2,814.8 $
716.2
657.2
993.0

71.9 $
100.9
96.0

3,151.5 $
876.5
733.6
1,091.7

117.1 $
(56.2)
(286.2)

2,951.7 $
741.7
601.3
992.8

67.3 $
(55.1)
110.2

2,945.2 $
919.7
477.6
813.9

22.5
(57.0)
(10.6)

2,537.4
951.0
268.7
526.9

(1) In December 2013 we acquired a controlling interest in BMI, Inc. and The LandWell Company and they are included in our
Consolidated Balance Sheet beginning at December 31, 2013, and in our Consolidated Statement of Operations beginning
January 1, 2014. See Note 3 to our Consolidated Financial Statements.

- 33 -

(2) Prior period amounts have been reclassified to reflect the change in the balance sheet classifications of unamortized debt issuance
costs effective December 31, 2015. See Note 18 to our Consolidated Financial Statements. As a result, deferred financing costs
of $1.2 million at December 31, 2011, $4.0 million at December 31, 2012, $.1 million at December 31, 2013 and $5.1 million at
December 31, 2014, previously recognized as a noncurrent asset, are now classified as a direct deduction from the carrying value
of its related debt liability.

(3) Prior period amounts have been reclassified to reflect the change in the balance sheet classification of deferred income taxes
effective December 31, 2015. See Note 18 to our Consolidated Financial Statements. As a result, total assets decreased as
compared to previously reported amounts by $22.0 million at December 31, 2011, $15.0 million at December 31, 2012, $15.4
million at December 31, 2013 and $16.9 million at December 31, 2014.

(4) In 2012, CompX sold its furniture components operations for a gain, net of income taxes and noncontrolling interest, of $15.7

million, which is included in discontinued operations.

- 34 -

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

RESULTS OF OPERATIONS

Business Overview

We are primarily a holding company. We operate through our wholly-owned and majority-owned subsidiaries, including
NL Industries, Inc., Kronos Worldwide, Inc., CompX International, Inc., Waste Control Specialists LLC (“WCS”), Tremont LLC,
Basic Management, Inc. (“BMI”) and the LandWell Company (“LandWell”). Kronos (NYSE: KRO), NL (NYSE: NL) and CompX
(NYSE MKT: CIX) each file periodic reports with the SEC.

We have four consolidated reportable operating segments:

(cid:121) Chemicals—Our chemicals segment is operated through our majority control of Kronos. Kronos is a leading global
producer and marketer of value-added titanium dioxide pigments (“TiO2”). TiO2 is used to impart whiteness,
brightness, opacity and durability to a wide variety of products, including paints, plastics, paper, fibers and ceramics.
Additionally, TiO2 is a critical component of everyday applications, such as coatings, plastics and paper, as well as
many specialty products such as inks, foods and cosmetics.

(cid:121) Component Products—We operate in the component products industry through our majority control of CompX.
CompX is a leading manufacturer of security products used in the recreational transportation, postal, office and
institutional furniture, cabinetry, tool storage, healthcare and a variety of other industries. CompX is also a leading
manufacturer of stainless steel exhaust systems, gauges, throttle controls and trim tabs for the recreational marine
industry.

(cid:121) Waste Management—WCS is our subsidiary which operates a West Texas facility for the processing, treatment,
storage and disposal of a broad range of low-level radioactive, hazardous, toxic and other wastes. WCS obtained a
byproduct disposal license in 2008 and began disposal operations at this facility in October 2009. WCS received a
low-level radioactive waste (“LLRW”) disposal license in September 2009. The Compact LLRW disposal facility
commenced operations in 2012, and the Federal LLRW site commenced operations in 2013. We reached an
agreement to sell our Waste Management Segment in November 2015. See Note 3 to our Consolidated Financial
Statements.

(cid:121) Real Estate Management and Development—We operate in real estate management and development through our
majority control of BMI and LandWell. BMI provides utility services to certain industrial and municipal customers
and owns real property in Henderson, Nevada. LandWell is engaged in efforts to develop certain land holdings for
commercial, industrial and residential purposes in Henderson, Nevada. In December 2013, we acquired a controlling
interest in each of these companies, and they are included in our results of operations and cash flows beginning on
January 1, 2014. See Note 3 to our Consolidated Financial Statements.

Income (Loss) from Operations Overview

Year Ended December 31, 2014 Compared to Year Ended December 31, 2015—

We reported a net loss attributable to Valhi stockholders of $133.6 million or $.39 per diluted share in 2015 compared to

net income attributable to Valhi stockholders of $53.8 million or $.16 per diluted share in 2014.

Our net income (loss) attributable to Valhi stockholders decreased from 2014 to 2015 primarily due to the net effects of:

(cid:121)

the recognition of an aggregate $159.0 million non-cash deferred income tax asset valuation allowance related to our
Chemicals Segment’s German and Belgian operations primarily in the second quarter of 2015;

lower operating income from our Chemicals Segment in 2015 compared to 2014, in part due to a charge associated
with the implementation of certain workforce reductions primarily in the second quarter of 2015;

(cid:121) higher operating losses at our Waste Management segment in 2015; and

(cid:121) higher insurance recoveries in 2014.

- 35 -

Our diluted loss per share attributable to Valhi stockholders in 2015 includes:

(cid:121)

the recognition of the non-cash deferred income tax asset valuation allowance related to our Chemicals Segment’s
German and Belgian operations aggregating a charge of $.27;

a charge of $.03 related to our Chemicals Segment’s accrued workforce reduction costs; and

income of $.01 related to income from insurance recoveries.

Our diluted earnings per share attributable to Valhi stockholders in 2014 includes:

(cid:121)

an aggregate non-cash income tax benefit of $.01 (mostly in the second quarter) related to a net reduction in our
reserve for uncertain tax positions; and

insurance recoveries of $.03.

We discuss these amounts more fully below.

Year Ended December 31, 2013 Compared to Year Ended December 31, 2014—

We reported a net income attributable to Valhi stockholders of $53.8 million or $.16 per diluted share in 2014 compared

to a net loss attributable to Valhi stockholders of $98.0 million or $.29 per diluted share in 2013.

Our net income attributable to Valhi stockholders increased from 2013 to 2014 primarily due to the net effects of:

(cid:121) operating income from our Chemicals Segment in 2014 compared to an operating loss in 2013;

(cid:121)

an aggregate non-cash gain related to our purchase of a controlling interest in BMI and LandWell in December 2013,
consisting of (i) a gain from the remeasurement of our existing interest in BMI and LandWell to estimated fair value
and (ii) a bargain purchase gain related to the additional interest in BMI and LandWell acquired in 2013;

a loss on the prepayment of debt in 2013;

lower environmental remediation and related expenses in 2014;

(cid:121) higher insurance recoveries recognized in 2014;

(cid:121)

a lower operating loss at our Waste Management segment in 2014; and

inclusion of operating income from our Real Estate Management and Development Segment beginning January 1,
2014.

Our diluted earnings per share attributable to Valhi stockholders in 2014 includes:

(cid:121)

an aggregate non-cash income tax benefit of $.01 (mostly in the second quarter) related to a net reduction in our
reserve for uncertain tax positions; and

insurance recoveries of $.03.

Our diluted loss per share attributable to Valhi stockholders in 2013 includes:

(cid:121)

a gain of $.14 related to our purchase of a controlling interest in BMI and LandWell in December 2013;

insurance recoveries of $.02;

a charge of $.01 related to the voluntary prepayments of the entire $390 million principal amount of Kronos’ term
loan; and

a charge of $.05 related to a litigation settlement of Kronos.

- 36 -

We discuss these amounts more fully below.

Current Forecast for 2016—

We currently expect to report higher net income attributable to Valhi stockholders for 2016 as compared to 2015 primarily

due to the net effects of:

(cid:121)

the 2015 recognition of an aggregate $159.0 non-cash deferred income tax asset valuation allowance related to the
Chemicals Segment’s German and Belgium operations

(cid:121) operating income from our Chemicals Segment in 2016 as compared to an operating loss in 2015, in part due to

anticipated costs savings as a result of its workforce reductions and other cost reduction initiatives;

(cid:121)

lower operating losses at WCS in 2016 as we expect more revenue from the Compact and Federal LLRW disposal
facilities during 2016;

lower operating income from our Component Products Segment as we anticipate lower security product sales due to
the completion of a large contract during 2015; and

lower expected insurance recoveries received in 2016 compared to 2015.

Critical accounting policies and estimates

We have based the accompanying “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” upon our Consolidated Financial Statements. We prepare our Consolidated Financial Statements in accordance with
accounting principles generally accepted in the United States of America (“GAAP”). In many cases the accounting treatment of a
particular transaction does not require us to make estimates and judgments. However, in other cases we are required to make estimates
and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses during the reported period. On an on-going basis, we
evaluate our estimates, including those related to impairments of investments in marketable securities and investments accounted for
by the equity method, the recoverability of other long-lived assets (including goodwill and other intangible assets), pension and other
postretirement benefit obligations and the underlying actuarial assumptions related thereto, the realization of deferred income and
other tax assets and accruals for environmental remediation, litigation, income tax contingencies. We base our estimates on historical
experience and on various other assumptions we believe are reasonable under the circumstances, the results of which form the basis
for making judgments about the reported amounts of assets, liabilities, revenues and expenses. Actual results might differ significantly
from previously-estimated amounts under different assumptions or conditions.

Our “critical accounting policies” relate to amounts having a material impact on our financial position and results of
operations, and that require our most subjective or complex judgments. See Note 1 to our Consolidated Financial Statements for a
detailed discussion of our significant accounting policies.

(cid:121) Marketable securities—We own investments in certain companies that we account for as marketable securities
carried at fair value or that we account for under the equity method. For these investments, we evaluate the fair value
at each balance sheet date. We use quoted market prices, Level 1 inputs as defined in Accounting Standards
Codification (“ASC”) 820-10-35, Fair Value Measurements and Disclosures, to determine fair value for certain of
our common stock, marketable debt securities and publicly traded investees. For other of our marketable debt
securities, the fair value is generally determined using Level 2 inputs as defined in the ASC because although these
securities are traded in many cases the market is not active and the year-end valuation is based on the last trade of the
year which may be several days prior to December 31. We use Level 3 inputs to determine fair value of our
investment in Amalgamated Sugar Company LLC. See Note 4 to our Consolidated Financial Statements. We record
an impairment charge when we believe an investment has experienced an other than temporary decline in fair value
below its cost basis (for marketable securities) or below its carrying value (for equity method investees). Further
adverse changes in market conditions or poor operating results of underlying investments could result in losses or our
inability to recover the carrying value of the investments that may not be reflected in an investment’s current carrying
value, thereby possibly requiring us to recognize an impairment charge in the future.

At December 31, 2015, the carrying value (which equals their fair value) of substantially all of our marketable
securities approximated the cost basis of each investment. Our investment in The Amalgamated Sugar Company LLC
represents approximately 97% of the aggregate carrying value of all of our marketable securities at December 31,
2015 and its $250 million carrying value is equal to its cost basis.

- 37 -

(cid:121) Goodwill—Our net goodwill totaled $379.7 million at December 31, 2015 resulting primarily from our various step
acquisitions of Kronos and NL (which occurred before the implementation of the current accounting standards related
to noncontrolling interest) and to a lesser extent CompX’s purchase of various businesses. In accordance with the
applicable accounting standards for goodwill, we do not amortize goodwill.

We perform a goodwill impairment test annually in the third quarter of each year. Goodwill is also evaluated for
impairment at other times whenever an event occurs or circumstances change that would more likely than not reduce
the fair value of a reporting unit below its carrying value. A reporting unit can be a segment or an operating division
based on the operations of the segment. For example, our Chemicals Segment produces a globally coordinated
homogeneous product whereas our Component Products Segment operates as two distinct business units. If the fair
value of the reporting unit is less than its book value, the goodwill is written down to estimated fair value.

For our Chemicals Segment, we use Level 1 inputs of publicly traded market prices to compare the book value to
assess impairment. We also consider control premiums when assessing fair value. Substantially all of the goodwill for
our Component Products Segment relates to our security products reporting unit. Since 2013, we have used the
qualitative assessment of ASC 350-20-35 for our annual impairment test of our security products reporting unit and
determined it was not necessary to perform the two-step quantitative goodwill impairment test, as we concluded it is
more likely than not that the fair value of the security products reporting unit exceeded its carrying amount.

Considerable management judgment is necessary to evaluate the qualitative impact of events and circumstances on
the fair value of a reporting unit. Events and circumstances considered in our impairment evaluations, such as
historical profits and stability of the markets served, are consistent with factors utilized with our internal projections
and operating plan. However, future events and circumstances could result in materially different findings which
could result in the recognition of a material goodwill impairment.

We performed our annual goodwill impairment test in the third quarter of 2015 for each of our reporting units and
concluded there was no impairment of the goodwill for those reporting units. The impairment test as it relates to our
security products reporting unit was based on our qualitative assessment, and as a result a quantitative assessment was
not required for such reporting unit for 2015. When we performed our annual goodwill impairment test in the third
quarter of 2015 for our Chemicals Segment goodwill we concluded there was no impairment of such goodwill.
However, future events and circumstances could change (i.e. a significant decline in quoted market prices) and result
in a materially different finding which could result in the recognition of a material impairment with respect to such
goodwill.

(cid:121) Long-lived assets—We assess our long-lived assets, consisting principally of property, equipment, land held for
development and capitalized operating permit costs for impairment only when circumstances as specified in ASC
360-10-35, Property, Plant, and Equipment, indicate an impairment may exist. As a result of continued operating
losses, certain long-lived assets of our Waste Management Segment were evaluated for impairment as of
December 31, 2015. WCS has had limited operations as it sought regulatory approval for several licenses it needs for
full scale operations. WCS obtained a byproduct disposal license in 2008 and began disposal operations in October
2009. In January 2010 WCS received a LLRW disposal permit. Construction of the Compact and Federal LLRW sites
began in January 2011. The Compact LLRW site was fully certified and operational in April 2012, and the Federal
LLRW site was fully certified and operational in September 2012 and commenced operations in the second quarter of
2013. Revenues in 2013 dropped significantly in the latter half of 2013 and the first half of 2014 as customers were
unable to ship waste to WCS as a result of an industry-wide shortage of approved shipping containers. WCS ordered
three shipping containers in 2012 which were placed into service in 2014. Shipping volumes increased significantly in
the third and fourth quarters of 2014 reflecting the industry-wide easing of transportation issues and WCS had
positive gross margins on an annual basis in 2014 for the first time in its history. Shipments were negatively impacted
by availability of certain classifications of waste shipping containers to us during the latter part of the second quarter
of 2015. In July 2015 we entered into an exclusive leasing arrangement to secure dedicated access to two such
containers although fully implementing these containers into our shipping schedules has been slower than we
anticipated. In November 2015 we secured the availability of certain shipping containers which had previously been
unavailable to us. Our impairment analysis is based on estimated future undiscounted cash flows of WCS’
operations, and this analysis indicated no impairment was present at December 31, 2015 and that the carrying value
of WCS is recoverable as the aggregate future undiscounted cash flow estimate exceeded the carrying value of WCS’
net assets by at least two times. Considerable management judgment is necessary to evaluate the impact of operating
changes and to estimate future cash flows. Assumptions used in our impairment evaluations, such as the timing and
amounts of revenue associated with our LLRW facilities, forecasted growth rates and our cost of capital, are
consistent with our internal projections and operating plans. However, if our future cash flows from operations less
capital expenditures were to drop significantly (approximately 75% or more) below our current expectations, it is
reasonably likely we would conclude an impairment was present. At December 31, 2015 the carrying value of WCS’
total assets was $231.9 million. In additional as noted in Note 3 to our Consolidated Financial Statements we reached

- 38 -

(cid:121)

an agreement to sell the entirety of our Waste Management Segment in November 2015 for cash consideration of
$270 million, $20 million face amount preferred stock and the assumption of all of WCS’ third-party indebtedness
incurred prior to the date of the agreement and such third-party consideration is in excess of our carrying amount of
WCS’ total assets at December 31, 2015.

No other long-lived assets in our other reporting units were tested for impairment during 2015 because there were no
circumstances indicating an impairment might exist.

Intangible assets— Upon acquiring a controlling interest in our Real Estate Management and Development segment
in December 2013, we recognized an indefinite-lived customer relations intangible asset of $5.1 million for long-term
contracts related to water delivery services to the City of Henderson, Nevada and various other users through a water
system owned by BMI. These contracts generally span many years and feature automatic renewing provisions. The
City of Henderson water delivery contract extended for a period of 25 years, and contained an automatic renewal
provision. In assessing the intangible asset for impairment, we first perform a qualitative analysis to determine
whether it is more likely than not that the intangible asset has been impaired, using the guidance specified in ASC
305-30-35. If after assessing the totality of events and circumstances and their potential effect on significant inputs to
the fair value determination, an entity determines that it is not more likely than not that the indefinite-lived intangible
asset is impaired, then the entity need not calculate the fair value of the intangible asset and perform the quantitative
impairment test in accordance with paragraph 350-30-35-19. Based on all relevant events and circumstances
considered, we concluded it was not more likely than not that the intangible asset was impaired at December 31, 2015,
and accordingly we were not required to perform a quantitative impairment analysis. In January 2016, the water
delivery contract with the City of Henderson was amended. As part of such amendment, the automatic renewal
provision of the contract was eliminated, and the new contract runs through June 2040. The amendment to the City
of Henderson water delivery contract represents an event or circumstance which would trigger the need to perform a
quantitative impairment analysis with respect to the intangible asset. However, this January 2016 contract
amendment represents a subsequent event which is not given accounting recognition at December 31, 2015 under
ASC 855-10-25-3, as it does not relate to conditions that existed at December 31, 2015. Accordingly, the required
quantitative impairment analysis will be completed in conjunction with our first quarter 2016 close. It is possible our
impairment review may conclude that the value of the intangible asset is less than the carrying amount, in which case
we would recognize an impairment charge in the first quarter of 2016.

(cid:121) Percentage completion revenue recognition—Certain real estate land sales by our Real Estate Management and
Development segment (generally land sales associated with our residential/planned community) require us to
complete property development and improvements after title passes to the buyer and we have received all or a
substantial portion of the selling price. To date, all of the land sales associated with the residential/planned
community have been recognized under the percentage-of-completion method of accounting in accordance with ASC
970-605-30. Under such method, revenues and profits are recognized in the same proportion of our progress towards
completion of our contractual obligations, with our progress measured by costs incurred as a percentage of total costs
estimated to be incurred. Such costs incurred and total estimated costs include amounts specifically identifiable with
the parcels sold as well as certain development costs for the entire residential/planned community which are allocated
to the parcels sold under applicable GAAP. Estimates of total costs expected to be incurred require significant
management judgment, and the amount of revenue and profits that have been recognized to date are subject to
revisions throughout the development period. The impact on the amount of revenue recognized resulting from any
future change in the estimate of total costs estimated to be incurred would be accounted for prospectively in
accordance with GAAP.

(cid:121) Benefit plans—We provide a range of benefits including various defined benefit pension and other postretirement
benefits (“OPEB”) for our employees. We record annual amounts related to these plans based upon calculations
required by GAAP, which make use of various actuarial assumptions, such as: discount rates, expected rates of
returns on plan assets, compensation increases, employee turnover rates, expected mortality rates and expected health
care trend rates. We review our actuarial assumptions annually and make modifications to the assumptions based on
current rates and trends when we believe appropriate. As required by GAAP, modifications to the assumptions are
generally recorded and amortized over future periods. Different assumptions could result in the recognition of
materially different expense amounts over different periods of times and materially different asset and liability
amounts in our Consolidated Financial Statements. These assumptions are more fully described below under “—
Assumptions on Defined Benefit Pension Plans and OPEB Plans.”

- 39 -

(cid:121)

Income taxes—We recognize deferred taxes for future tax effects of temporary differences between financial and
income tax reporting. Deferred income tax assets and liabilities for each tax-paying jurisdiction in which we operate
are netted and presented as either a noncurrent deferred tax asset or liability, as applicable. We record a valuation
allowance to reduce our deferred income tax assets to the amount that is believed to be realized under the more-
likely-than-not recognition criteria. While we have considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for a valuation allowance, it is possible that we may change our
estimate of the amount of the deferred income tax assets that would more-likely-than-not be realized in the future,
resulting in an adjustment to the deferred income tax asset valuation allowance that would either increase or decrease,
as applicable, reported net income in the period such change in estimate was made.

For example, at December 31, 2015 our Chemicals Segment has substantial net operating loss (“NOL”) carryforwards
in Germany (the equivalent of $683 million for German corporate purposes and $96 million for German trade tax
purposes) and in Belgium (the equivalent of $86 million for Belgian corporate tax purposes), all of which have an
indefinite carryforward period. As a result, we have net deferred income tax assets with respect to these two
jurisdictions, primarily related to these NOL carryforwards. The German corporate tax is similar to the U.S. federal
income tax, and the German trade tax is similar to the U.S. state income tax. Prior to June 30, 2015, and using all
available evidence, we had concluded no deferred income tax asset valuation allowance was required to be recognized
with respect to these net deferred income tax assets under the more-likely-than-not recognition criteria, primarily
because (i) the carryforwards have an indefinite carryforward period, (ii) we utilized a portion of such carryforwards
during the most recent three-year period, and (iii) we expected to utilize the remainder of the carryforwards over the
long term. We had also previously indicated that facts and circumstances could change, which might in the future
result in the recognition of a valuation allowance against some or all of such deferred income tax assets. However, as
of June 30, 2015, and given our operating results during the second quarter of 2015 and our expectations at that time
for our operating results for the remainder of 2015, which as discussed elsewhere in this Annual Report have been
driven in large part by the trend in our average TiO2 selling prices over such periods as well as the $21.1 million pre-
tax charge recognized in the second quarter of 2015 in connection with the implementation of certain workforce
reductions, we did not have sufficient positive evidence to overcome the significant negative evidence of having
cumulative losses in the most recent twelve consecutive quarters in both our Chemicals Segment’s German and
Belgian jurisdictions at June 30, 2015 (even considering that the carryforward period of our German and Belgian
NOL carryforwards is indefinite, one piece of positive evidence). Accordingly, at June 30, 2015, we concluded that
we were required to recognize a non-cash deferred income tax asset valuation allowance under the more-likely-than-
not recognition criteria with respect to our German and Belgian net deferred income tax assets. Such valuation
allowance aggregated $150.3 million at June 30, 2015. We recognized an additional $8.7 million non-cash deferred
income tax asset valuation allowance under the more-likely-than-not recognition criteria during the second half of
2015, due to losses recognized by our German and Belgian operations during such period. See Note 12 to our
Consolidated Financial Statements.

We record a reserve for uncertain tax positions where we believe it is more-likely-than-not our tax positions will not
prevail with the applicable tax authorities. It is possible that in the future we may change our assessment regarding
the probability that our tax positions will prevail that would require an adjustment to the amount of our reserve for
uncertain tax positions that could either increase or decrease, as applicable, reported net income in the period the
change in assessment was made.

(cid:121)

In addition, we evaluate at the end of each reporting period as to whether or not some or all of the undistributed
earnings of our non-U.S. subsidiaries are permanently reinvested (as that term is defined in GAAP). While we may
have concluded in the past that some of such undistributed earnings are permanently reinvested, facts and
circumstances can change in the future and it is possible that a change in facts and circumstances, such as a change in
the expectation regarding the capital needs of our non-U.S. subsidiaries, could result in a conclusion that some or all
of such undistributed earnings are no longer permanently reinvested. In such an event, we would be required to
recognize a deferred income tax liability in an amount equal to the estimated incremental U.S. income tax and
withholding tax liability that would be generated if all of such previously-considered permanently reinvested
undistributed earnings were to be distributed to the U.S.

(cid:121) Litigation and environmental liabilities—We are involved in numerous legal and environmental actions in part due to
NL’s former involvement in the manufacture of lead-based products. In accordance with applicable GAAP for
accounting for contingencies, we record accruals for these liabilities when estimated future expenditures associated
with such contingencies become probable, and we can reasonably estimate the amounts of such future expenditures.
However, new information may become available to us, or circumstances (such as applicable laws and regulations)
may change, thereby resulting in an increase or decrease in the amount we are required to accrue for such matters
(and therefore a decrease or increase in our reported net income in the period of such change). At December 31, 2015
we have recorded total accrued environmental liabilities of $120.4 million.

- 40 -

Operating income (loss) for each of our four operating segments is impacted by certain of these significant judgments and

estimates, as summarized below:

(cid:121) Chemicals—allowance for doubtful accounts, reserves for obsolete or unmarketable inventories, impairment of equity

method investments, goodwill and other long-lived assets, benefit plans; and loss accruals.

(cid:121) Component Products—impairment of goodwill and long-lived assets and loss accruals.

(cid:121) Waste Management—impairment of long-lived assets and loss accruals.

(cid:121) Real Estate Management and Development—impairment of long-lived assets and revenue recognition under the

percentage-of-completion method of accounting.

In addition, general corporate and other items are impacted by the significant judgments and estimates for impairment of

marketable securities and equity method investees, defined benefit pension and OPEB plans, and loss accruals.

Segment Operating Results—2014 Compared to 2015 and 2013 Compared to 2014

Chemicals—

We consider TiO2 to be a “quality of life” product, with demand affected by gross domestic product, or GDP, and overall
economic conditions in our markets located in various regions of the world. Over the long-term, we expect demand for TiO2 will grow
by 2% to 3% per year, consistent with our expectations for the long-term growth in GDP. However, even if we and our competitors
maintain consistent shares of the worldwide market, demand for TiO2 in any interim or annual period may not change in the same
proportion as the change in GDP, in part due to relative changes in the TiO2 inventory levels of our customers. We believe that our
customers’ inventory levels are influenced in part by their expectation for future changes in market TiO2 selling prices as well as their
expectation for future availability of product. Although certain of our TiO2 grades are considered specialty pigments, the majority of
our grades and substantially all of our production are considered commodity pigment products with price and availability being the
most significant competitive factors along with quality and customer service.

The factors having the most impact on our reported operating results are:

(cid:121) Our TiO2 sales and production volumes,

(cid:121) TiO2 selling prices,

(cid:121) Manufacturing costs, particularly raw materials such as third-party feedstock ore, maintenance and energy-related

expenses, and

(cid:121) Currency exchange rates (particularly the exchange rate for the U.S. dollar relative to the euro, the Norwegian krone

and the Canadian dollar).

- 41 -

Our key performance indicators are our TiO2 average selling prices, our level of TiO2 sales and production volumes and
the cost of our third-party feedstock ore. TiO2 selling prices generally follow industry trends and the selling prices will increase or
decrease generally as a result of competitive market pressures.

2013

Years ended December 31,
2014
(Dollars in millions)

2015

2013-14

2014-15

% Change

Net sales ............................................................................... $
Cost of sales .........................................................................
Gross margin ........................................................................ $
Operating income (loss) ....................................................... $
Percent of net sales:

Cost of sales ...............................................................
Gross margin ..............................................................
Operating income (loss) .............................................

TiO2 operating statistics:

Sales volumes* ...........................................................
Production volumes* ..................................................
Production rate as percent of capacity ........................

Percent change in TiO2 net sales:

TiO2 product pricing ...................................................
TiO2 sales volumes......................................................
TiO2 product mix ........................................................
Changes in currency exchange rates ...........................
Total ..................................................................

Thousands of metric tons

1,732.4
1,622.6
109.8
$
(125.4) $

1,651.9 $
1,304.6

347.3 $
156.8 $

1,348.8
1,158.5
190.3
7.1

(5)%
(20)%
216 %
225 %

94%
6%
(7)%

498
474

86%

79%
21%
9%

496
511

92%

86%
14%
1%

525
528
95%

— %
8 %

(6)%
—
—
1
(5)%

(18)%
(11)%
(45)%
(95)%

6%
3%

(14)%
6
(2)
(8)
(18)%

Industry conditions and 2015 overview – Due to competitive pressures, our Chemicals Segment’s average TiO2 selling
prices decreased throughout 2014 and 2015. Our Chemicals Segment’s average selling prices at the end of 2015 were 17% lower than
at the end of 2014, with lower prices in all major markets, most notably in North American and certain export markets. Our
Chemicals Segment’s average selling prices in 2015 were also impacted by a higher percentage of sales to lower-priced export
markets in 2015 compared to 2014. We experienced higher sales volumes in European and export markets in 2015 as compared to
2014, partially offset by lower volumes in North American markets in 2015 as compared to 2014.

The following table shows our capacity utilization rates during 2014 and 2015.

First Quarter ........................................................
Second Quarter ....................................................
Third Quarter .......................................................
Fourth Quarter .....................................................
Overall ...........................................................

2014

2015

90%
97%
96%
86%
92%

93 %
100 %
95 %
92 %
95 %

Our production capacity utilization rates in the first quarter of 2014 were impacted by a union labor lockout at our
Chemicals Segment’s Canadian production facility that ended in December 2013, as restart of production at the facility did not begin
until February 2014. Our production rates in the fourth quarter of 2014 and the first and fourth quarters of 2015 were impacted by the
implementation of certain productivity-enhancing improvement projects at certain facilities, as well as necessary improvements to
ensure continued compliance with our permit regulations, which resulted in longer-than-normal maintenance shutdowns in some
instances.

We continued to experience moderation in the cost of TiO2 feedstock ore procured from third parties in 2014 and 2015.
Given the time lag between when third-party feedstock ore is procured and when the TiO2 product produced with such ore is sold and
recognized in our cost of sales, our cost of sales per metric ton of TiO2 sold declined throughout 2014 and 2015. Consequently, our
cost of sales per metric ton of TiO2 sold in 2015 was slightly lower than our cost of sales per metric ton of TiO2 sold in 2014
(excluding the effect of changes in currency exchange rates).

In the second quarter of 2015, our Chemicals Segment initiated a restructuring plan designed to improve our long-term
cost structure. A portion of such expected cost savings are planned to occur through workforce reductions. During the second, third
and fourth quarters of 2015, we implemented certain voluntary and involuntary workforce reductions at certain of our facilities

- 42 -

impacting approximately 160 individuals. We recognized an aggregate $21.7 million charge in 2015 (substantially all of which was
recognized in the second quarter) for such workforce reductions we had implemented through December 31, 2015, $10.8 million of
which is classified as part of cost of sales and $10.9 million of which is classified in selling, general and administrative expense. The
charge associated with the workforce reductions implemented in the third and fourth quarters of 2015, which impacted approximately
50 individuals, was not material due to the applicable law affecting such individuals, which generally provides for a short notice
period (if any) and the payment of a nominal amount of severance (if any). See Note 19 to our Consolidated Financial Statements.

Net Sales—Our Chemicals Segment’s net sales decreased 18% or $303.1 million in 2015 compared to 2014, primarily due
to the net effect of a 14% decrease in average TiO2 selling prices (which decreased net sales by approximately $231 million) and a 6%
increase in sales volumes (which increased net sales by approximately $99 million). TiO2 selling prices will increase or decrease
generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes in raw
material and other manufacturing costs.

Our Chemicals Segment’s sales volumes increased primarily due to higher sales in certain European and export markets,
partially offset by lower sales in North American markets. We estimate that changes in currency exchange rates decreased our net
sales by approximately $138 million, or 8%, as compared to 2014.

Our Chemicals Segment’s net sales decreased 5% or $80.5 million in 2014 compared to 2013, primarily due to a 6%
decrease in average TiO2 selling prices (which decreased net sales by approximately $104 million). TiO2 selling prices will increase or
decrease generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes
in raw material and other manufacturing costs.

Our Chemicals Segment’s sales volumes remained relatively stable in 2014 as compared to 2013 as slightly higher sales in
Europe were offset by lower sales in certain export markets. In addition, we estimate the favorable effect of changes in currency
exchange rates increased our net sales by approximately $12 million, or 1%, as compared to 2013.

Cost of Sales—Our Chemicals Segment’s cost of sales decreased $146.1 million or 11% in 2015 compared to 2014 due to
the net impact of lower raw materials and other production costs of approximately $26 million (primarily caused by the lower third-
party feedstock ore costs, as discussed above), a 3% increase in TiO2 production volumes and currency fluctuations (primarily the
euro). In addition, cost of sales in 2015 includes approximately $10.8 million of severance costs related to the workforce reduction
plan discussed above.

Our cost of sales as a percentage of net sales increased to 86% in 2015 compared to 79% in 2014, as the unfavorable
impact of lower average selling prices and the workforce reduction charge more than offset the favorable effects of lower raw material
costs and efficiencies related to higher production volumes, as discussed above.

Our Chemicals Segment’s cost of sales decreased $318.0 million or 20% in 2014 compared to 2013 due to the net impact
of lower raw materials and other production costs of approximately $250 million (primarily caused by the lower third-party feedstock
ore costs, as discussed above), an 8% increase in TiO2 production volumes and currency fluctuations (primarily the euro). Our cost of
sales as a percentage of net sales improved to 79% in 2014 compared to 94% in 2013, primarily due to the net effects of lower raw
material and other production costs and the lower average TiO2 selling prices discussed above. In addition, cost of sales in 2013
includes approximately $19 million of unabsorbed fixed production and other manufacturing costs associated with the lockout at the
Canadian TiO2 production facility and approximately $9 million of one-time costs resulting from the terms of the new collective
bargaining agreement for our Canadian workforce, each of which were charged directly to cost of sales as discussed below.

Unionized employees in our Canadian TiO2 production facility were covered by a collective bargaining agreement that
expired June 15, 2013. The Canadian facility represents approximately 19% of our worldwide TiO2 production capacity. The union
employees represented by the Confederation des Syndicat National (“CSN”) rejected our revised global offer, and we declared a
lockout of unionized employees upon the expiration of the existing contract. Effective the end of November 2013, a new collective
bargaining agreement was reached with CSN and production at the facility resumed in February 2014. During the lockout we
operated our Canadian plant at approximately 15% of the plant’s capacity with non-union management employees. The reduction in
our TiO2 production volumes at our Canadian facility resulted in approximately $19 million of unabsorbed fixed production and other
manufacturing costs that were charged directly to cost of sales. In addition, we recognized approximately $9 million in expenses
associated with reaching a new collective bargaining agreement, consisting of a net $7 million non-cash charge due to the curtailment
of one of our Canadian defined benefit pension plans and our Canadian other postretirement benefit plan and approximately $2 million
of severance and other back-to-work expenses.

Gross Margin and Operating Income—Our Chemicals Segment’s operating income as a percentage of net sales decreased
to 1% in 2015 from 9% in 2014. This decrease was driven by the decline in gross margin, which decreased to 14% in 2015 compared
to 21% in 2014, as well as the negative impact of the workforce reduction charge classified as part of other operating expense ($10.9

- 43 -

million). As discussed and quantified above, our gross margin decreased primarily due to the net effect of lower selling prices,
workforce reduction costs classified as part of cost of sales ($10.8 million), lower manufacturing costs (primarily raw materials),
higher production volumes, and higher sales volumes. We estimate that changes in currency exchange rates increased operating
income by approximately $40 million in 2015 as compared to 2014.

Our Chemicals Segment’s operating income increased significantly in 2014, primarily due to the significant increase in
our gross margin, which increased to 21% in 2014 compared to 6% in 2013, and the 2013 litigation settlement charge of $35 million,
see Note 17 to our Consolidated Financial Statements. As discussed and quantified above, our gross margin increased primarily due to
the net effect of lower manufacturing costs (primarily raw materials), lower selling prices, higher production volumes and 2013 costs
associated with reaching a new Canadian collective bargaining agreement and related unabsorbed fixed costs charged directly to cost
of sales. Additionally, changes in currency exchange rates have positively affected our gross margin and operating income. We
estimate that changes in currency exchange rates increased operating income by approximately $42 million in 2014 as compared to
2013.

Our Chemicals Segment’s operating income (loss) is net of amortization of purchase accounting adjustments made in
conjunction with our acquisitions of interests in NL and Kronos. As a result, we recognize additional depreciation expense above the
amounts Kronos reports separately, substantially all of which is included within cost of sales. We recognized additional depreciation
expense of $2.6 million in each of 2013 and 2014 and $2.2 million in 2015, which reduced our reported Chemicals Segment’s
operating income (loss) as compared to amounts reported by Kronos.

Currency Exchange Rates—– Our Chemicals Segment has substantial operations and assets located outside the United
States (primarily in Germany, Belgium, Norway and Canada). The majority of our sales from non-U.S. operations are denominated in
currencies other than the U.S. dollar, principally the euro, other major European currencies and the Canadian dollar. A portion of our
sales generated from our non-U.S. operations is denominated in the U.S. dollar (and consequently our non-U.S. operations will
generally hold U.S. dollars from time to time). Certain raw materials used worldwide, primarily titanium-containing feedstocks, are
purchased in U.S. dollars, while labor and other production and administrative costs are incurred primarily in local currencies.
Consequently, the translated U.S. dollar value of our non-U.S. sales and operating results are subject to currency exchange rate
fluctuations which may favorably or unfavorably impact reported earnings and may affect the comparability of period-to-period
operating results. In addition to the impact of the translation of sales and expenses over time, our non-U.S. operations also generate
currency transaction gains and losses which primarily relate to (i) the difference between the currency exchange rates in effect when
non-local currency sales or operating costs (primarily U.S. dollar denominated) are initially accrued and when such amounts are
settled with the non-local currency, (ii) changes in currency exchange rates during time periods when our non-U.S. operations are
holding non-local currency (primarily U.S. dollars), and (iii) relative changes in the aggregate fair value of currency forward contracts
held from time to time. As discussed in Note 18 to our Consolidated Financial Statements, we periodically use currency forward
contracts to manage a portion of our currency exchange risk, and relative changes in the aggregate fair value of any currency forward
contracts we hold from time to time serves in part to mitigate the currency transaction gains or losses we would otherwise recognize
from the first two items described above.

Overall, we estimate that fluctuations in currency exchange rates had the following effects on the reported amounts of our

sales and operating income (loss) for the periods indicated.

Impact of changes in currency exchange rates—2015 vs. 2014

Transaction gains/(losses) recognized

2014

2015

Change
(in millions)

Translation
gain/loss-
impact of
rate changes

Total currency
impact
2015 vs.2014

Impact on:
Net sales ........................................................... $
Operating income .............................................

— $
4

— $
—

— $
(4)

(138) $
44

(138)
40

The $138 million reduction in net sales (translation loss) was caused primarily by a strengthening of the U.S. dollar
relative to the euro, as our Chemicals Segment’s euro-denominated sales were translated into fewer U.S. dollars in 2015 as compared
to 2014. The strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2015 did not have a
significant effect on the reported amount of our net sales, as a substantial portion of the sales generated by our Chemicals Segment’s
Canadian and Norwegian operations are denominated in the U.S. dollar.

The $40 million increase in operating income comprised the following net effects:

(cid:121) A reduction in the amount of net currency transaction gains during the two periods of approximately $4 million.
Such net currency transaction gains (losses) result primarily from U.S. dollar-denominated receivables and U.S.

- 44 -

dollar currency held by our Chemicals Segment’s non-U.S. operations, which are translated into the applicable local
currency at each balance sheet date. During 2014, a relative strengthening of the U.S. dollar relative to the euro and
the Norwegian krone gave rise to a net $4 million currency transaction gain, whereas we recognized a nominal
currency transaction loss during 2015, and

(cid:121) Approximately $44 million from net currency translation gains caused primarily by a strengthening of the U.S. dollar
relative to the Canadian dollar and the Norwegian krone, as their local currency-denominated operating costs were
translated into fewer U.S. dollars in 2015 as compared to 2014. Overall, the strengthening of the U.S. dollar relative
to the euro in 2015 did not have a significant impact on our Chemicals Segment’s operating income, as the reduction
in net sales caused by such strengthening was substantially offset by the effect of our euro-denominated operating
costs being translated into fewer U.S. dollars.

Impact of changes in currency exchange rates—2014 vs. 2013

Transaction gains/(losses) recognized

2013

2014

Change
(in millions)

Translation
gains-
impact of
rate changes

Total currency
impact
2014 vs. 2013

Impact on:
Net sales ............................................................ $
Operating income ..............................................

— $
(4)

— $
4

— $
8

12 $
34

12
42

The $12 million increase in net sales (translation gain) was caused primarily by a weakening of the U.S. dollar relative to
the euro, as our euro-denominated sales were translated into more U.S. dollars in 2014 as compared to 2013. The strengthening of the
U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2014 did not have a significant effect on the reported amount of
our Chemicals Segment’s net sales, as a substantial portion of the sales generated by our Chemicals Segment’s Canadian and
Norwegian operations are denominated in the U.S. dollar.

The $42 million increase in operating income comprised the following net effects:

(cid:121) An increase in the amount of net currency transaction gains (losses) during the two periods of approximately $8
million. Such net currency transaction gains (losses) result primarily from U.S. dollar-denominated receivables and
U.S. dollar currency held by our Chemicals Segment’s non-U.S. operations, which are translated into the applicable
local currency at each balance sheet date. During 2013, a relative strengthening of the U.S. dollar relative to the
Canadian dollar and the krone, partially offset by a relative weakening of the USD to the euro, gave rise to a net $4
million currency transaction loss, whereas we recognized a $4 million currency transaction gain during 2014, and

(cid:121) Approximately $34 million from net currency translation gains caused primarily by a strengthening of the U.S. dollar
relative to the Canadian dollar and the Norwegian krone, as their local currency-denominated operating costs were
translated into fewer U.S. dollars in 2014 as compared to 2013, and the weakening of the U.S. dollar relative to the
euro in 2014 as their U.S. dollar denominated raw materials purchases resulted in a favorable currency impact relative
to 2013.

Outlook— During 2015 we operated our Chemicals Segment’s production facilities at 95% of practical capacity compared
to 92% in 2014. We expect our production volumes to be higher in 2016 as compared to 2015, as our production rates in 2015 were
impacted by the implementation of certain productivity-enhancing improvement projects at certain facilities, as well as necessary
improvements to ensure continued compliance with our permit regulations, which resulted in longer-than-normal maintenance
shutdowns in some instances. Assuming economic conditions do not deteriorate in the various regions of the world, we expect our
sales volumes to be higher in 2016 as compared to 2015. We will continue to monitor current and anticipated near-term customer
demand levels and align our production and inventories accordingly.

We continued to experience moderation in the cost of TiO2 feedstock ore procured from third parties in 2014 and 2015.
Given the time lag between when third-party feedstock ore is procured and when the TiO2 product produced with such ore is sold and
recognized in our cost of sales, our cost of sales per metric ton of TiO2 sold in 2015 was slightly lower than our cost of sales per
metric ton of TiO2 sold in 2014 (excluding the effect of changes in currency exchange rates). We expect our cost of sales per metric
ton of TiO2 sold in 2016 will be lower than our per-metric ton cost in 2015, due in part to the favorable effect of the workforce
reductions and other cost reduction initiatives we are undertaking as well as some modest improvement in the cost of feedstock ore.

We started 2015 with selling prices 9% lower than the beginning of 2014, and prices declined by an additional 17%
during 2015. Industry data indicates that overall TiO2 inventory held by producers has declined significantly during 2015. In
addition, we believe most customers hold very low inventories of TiO2 with many operating on a just-in-time basis. With the
improvement in sales volumes experienced in 2015, we continue to see evidence of strengthening demand for our TiO2 products in

- 45 -

certain of our primary markets. We and our major competitors announced a price increase in late 2015, which is expected to be
implemented in the first quarter of 2016, or as contracts allow. The extent to which we will be able to achieve any price increases in
the near term will depend on market conditions.

Our Chemicals Segment initiated a restructuring plan in 2015 designed to improve its long-term cost structure. A portion
of such expected cost savings is planned to occur through workforce reductions. During 2015, our Chemicals Segment implemented
certain voluntary and involuntary workforce reductions at certain of its facilities impacting approximately 160 individuals. As of
December 31, 2015 we have recognized an aggregate $21.7 million charge for such workforce reductions we had implemented
through that date, $10.8 million of which is classified as part of cost of sales and $10.9 million of which is classified in selling, general
and administrative expense. The workforce reductions we have implemented through December 31, 2015 are not expected to
negatively impact our ability to operate our production facilities at their practical capacity rates.

In addition to the workforce reductions implemented through December 31, 2015, our Chemicals Segment is also in the
process of implementing other cost reduction initiatives throughout the organization, including the implementation of continued
process productivity improvements. The workforce reductions we have implemented through December 31, 2015, combined with
certain open positions that are not expected to be filled and cost savings expected to be realized from other cost reduction initiatives
we are undertaking, are expected to result in a payback of the aggregate workforce reduction charge accrued at December 31, 2015
within approximately one year, the benefit of which we began to recognize in the second half of 2015.

Overall, we expect our Chemicals Segment’s operating income in 2016 will be higher as compared to 2015 as a result of:

(cid:121)

the favorable effects of anticipated higher sales and production volumes in 2015,

the favorable effect of lower-cost feedstock ore, and

the expected cost savings from workforce reductions and other cost reduction initiatives throughout the organization.

However, given, among other things, the level of our average selling prices at the beginning of 2016, we believe it is

possible we would report an operating loss in the first quarter of 2016.

Due to the constraints of high capital costs and extended lead time associated with adding significant new TiO2 production
capacity, especially for premium grades of TiO2 products produced from the chloride process, we believe increased and sustained
profit margins will be necessary to financially justify major expansions of TiO2 production capacity required to meet expected future
growth in demand. As a result of customer decisions over the last year and the resulting adverse effect on global TiO2 pricing, some
industry projects to increase TiO2 production capacity have been cancelled or deferred indefinitely, and announcements have been
made regarding the closure of certain facilities. Given the lead time required for production capacity expansions, a shortage of TiO2
products could occur if economic conditions improve and global demand levels for TiO2 increase sufficiently.

Our expectations for our future operating results are based upon a number of factors beyond our control, including
worldwide growth of gross domestic product, competition in the marketplace, continued operation of competitors, unexpected or
earlier-than-expected capacity additions or reductions and technological advances. If actual developments differ from our
expectations, our results of operations could be unfavorably affected.

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Component Products—

Our Component Products Segment’s product offerings consist of a significantly large number of products that have a wide
variation in selling price and manufacturing cost, which results in certain practical limitations on our ability to quantify the impact of
changes in individual product sales quantities and selling prices on our net sales, cost of goods sold and gross margin. In addition,
small variations in period-to-period net sales, cost of goods sold and gross margin can result from changes in the relative mix of our
products sold. The key performance indicator for our Component Products Segment is operating income margins.

Net sales ............................................................ $
Cost of sales ......................................................
Gross margin ..................................................... $
Operating income .............................................. $
Percent of net sales:

Cost of sales ............................................
Gross margin ...........................................
Operating income ....................................

2013

Years ended December 31,
2014
(Dollars in millions)
$

92.0
64.5
27.5
9.3

$
$

103.9
71.6
32.3
13.6

$
$

2015

2013-14

2014-15

% Change

109.0
75.6
33.4
14.0

13%
11%
17%
46%

5%
6%
4%
2%

70%
30%
10%

69%
31%
13%

Net Sales—Our Component Products Segment’s net sales increased approximately $5.1 million in 2015 principally due to
higher demand within the security products reporting unit including $3.0 million related to existing government customers. Sales
within the marine component reporting unit increased 8% compared to prior year due to increased demand for products sold to the
ski/wakeboard boat market, including the introduction of new product lines to that market. Relative changes in selling prices did not
have a material impact on net sales comparisons.

Our Component Products Segment’s net sales increased approximately $11.9 million in 2014 principally due to higher
demand within the security products reporting unit including $5.0 million related to a new initiative for an existing government
customer, increased market penetration in electronic locks which increased $1.7 million in 2014 and strong demand in transportation
markets which increased $2.9 million in 2014. Sales within the marine component reporting unit increased 17% compared to prior
year and also contributed to the increase, reflecting greater penetration into non high-performance marine markets. Relative changes
in selling prices did not have a material impact on net sales comparisons.

Costs of Goods Sold and Gross Margin—Our Component Products Segment’s cost of sales and gross margin both
increased from 2014 to 2015 primarily due to increased sales volumes. As a percentage of sales, cost of goods sold were flat primarily
due to improved coverage of fixed manufacturing costs over increased production volumes to meet higher demand at each of our
reporting units, partially offset by increased costs noted above.

Our Component Products Segment’s cost of sales and gross margin both increased from 2013 to 2014 primarily due to
increased sales volumes. As a percentage of sales, cost of goods sold decreased 1% primarily due to improved coverage of fixed
manufacturing costs over increased production volumes to meet higher demand at each of our reporting units, partially offset by the
impact of lower variable margins due to relative changes in customer and product mix within the security products reporting unit.

Operating Income—Our Component Products Segment operating income improved in 2015 compared to 2014 and also in
2014 compared to 2013. Operating costs and expenses consists primarily of sales and administrative-related personnel costs, sales
commissions and advertising expenses directly related to product sales and administrative costs relating to business unit and corporate
management activities, as well as gains and losses on disposal of plant, property and equipment. Operating costs and expenses
increased in 2015 primarily due to an increase of $.5 million in 2015 compared to 2014 as a result of increased personnel costs.
Operating costs and expenses increased in 2014 compared to 2013 primarily as a result of increased administrative personnel costs and
increased depreciation expense in the security products reporting unit partially offset by reduced corporate administrative personnel
costs.

General—Our Component Products Segment’s profitability primarily depends on our ability to utilize our production
capacity effectively, which is affected by, among other things, the demand for our products and our ability to control our
manufacturing costs, primarily comprised of labor costs and materials. The materials used in our products consist of purchased
components and raw materials some of which are subject to fluctuations in the commodity markets such as zinc, brass and stainless
steel. Total material costs represented approximately 48% of our Component Products Segment’s cost of sales in 2015, with
commodity-related raw materials accounting for approximately 10% of our cost of sales. With the exception of a moderate midyear
2014 increase in mined metals, including zinc, worldwide commodity raw material costs were mostly stable during 2013 and 2014.
During 2015, markets for our primary commodity-related raw materials, including zinc, brass and stainless steel, have generally

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softened and are expected to remain soft well into 2016. We occasionally enter into short-term commodity-related raw material supply
arrangements to mitigate the impact of future increases in commodity related raw material costs. See Item 1 - “Business Component
Products Segment – CompX International, Inc. - Raw Materials.”

Outlook— The robust demand for our products experienced in 2015 was supported by continued high demand from
certain large existing customers, including those serving the government security applications and recreational transportation markets.
In addition, 2015 sales included over $5 million in sales for a government security end-user which is not expected to recur in 2016.
We also continue to experience the benefits of innovation and diversification in our product offerings to the recreational boat markets
served by our marine components reporting unit. We anticipate continued strong demand for our products in 2016, though we do not
expect demand for government security applications to approach 2015 volumes. As in prior periods, we will continue to monitor
general economic conditions and sales order rates and respond to fluctuations in customer demand through continuous evaluation of
staffing levels and consistent execution of our lean manufacturing and cost improvement initiatives. Additionally, we continue to seek
opportunities to gain market share in markets we currently serve, to expand into new markets and to develop new product features in
order to mitigate the impact of changes in demand as well as broaden our sales base.

Waste Management—

Net sales ........................................................................ $
Cost of sales...................................................................
Gross margin ................................................................. $
Operating loss ................................................................ $

39.2 $
42.3
(3.1) $
(22.6) $

66.5 $
49.7
16.8 $
(2.2 ) $

45.0
50.5
(5.5)
(26.5)

2013

Years ended December 31,
2014
(In millions)

2015

General—We have operated our Waste Management Segment’s waste management facility on a relatively limited basis
while we navigated the regulatory licensing and permitting requirements for the disposal of byproduct waste material and a broad
range of LLRW and mixed LLRW. In May 2008, the TCEQ issued us a license for the disposal of byproduct material. Byproduct
material includes uranium or thorium mill tailings as well as equipment, pipe and other materials used to handle and process the mill
tailings. We began construction of the byproduct facility infrastructure at our site in Andrews County, Texas in the first quarter of
2008, and this facility began disposal operations in October 2009. In January 2009, the TCEQ issued a near-surface LLRW disposal
license to us. This license was signed in September 2009. Construction of the Compact and Federal LLRW sites began in January
2011. The Compact LLRW site was fully certified and operational in April 2012, and the Federal LLRW site was fully certified and
operational in September 2012 and received its first waste for disposal in the latter part of the second quarter of 2013.

Net Sales and Operating Loss— The Waste Management Segment’s net sales decreased $21.5 million in 2015 compared
to 2014. Disposal volumes for the second, third and fourth quarters of 2015 were negatively impacted by availability of certain
classifications of waste shipping containers to us beginning during the latter part of the second quarter of 2015. In July 2015 we
entered into an exclusive leasing arrangement to secure dedicated access to two such containers although fully implementing these
containers into our shipping schedules has been slower than we anticipated. In November 2015 we signed an agreement which
allowed us to resume utilizing the shipping containers which had been unavailable to us for much of the year. In addition we
benefited from a one-time disposal campaign related to the decommissioning of a nuclear power plant which contributed $11.9 million
in disposal revenue in 2014 and $4.8 million in 2015. Lower disposal volumes in 2015 led to lower coverage of fixed costs as
compared to 2014. As a result, our Waste Management Segment’s operating loss increased significantly in 2015 as compared to 2014.

The Waste Management Segment’s net sales increased in 2014 compared to 2013 due to increased disposal volumes in the
third quarter and fourth quarters of 2014. Disposal volumes for these quarters were favorably impacted by the industry-wide
availability of disposal shipping containers. While disposal volumes were higher in 2014 as compared to 2013, the average per-unit
disposal price was lower in 2014 due to relative changes in the mix of waste disposed. Strong results in the third and fourth quarters
of 2014 allowed for greater coverage of fixed costs as compared to prior periods. As a result, our Waste Management Segment had
operating income in the third and fourth quarters of 2014 and a lower operating loss for the full year 2014 compared to the full year of
2013.

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We recognized an operating loss in all years because we have not yet achieved sufficient revenues to offset the high cost
structure associated with operating under our byproduct and LLRW disposal licenses relative to the waste treatment and disposal
volume, in part because we have not consistently received sufficient volume of LLRW for disposal in both our Compact and Federal
LLRW disposal facilities to overcome our fixed operating cost structure. However, as noted above, our operating results in the second
half of 2014 were profitable and demonstrate that with consistent disposal activity we can minimize operating losses. We continue to
seek to increase our Waste Management Segment’s sales volumes from waste streams permitted under our current licenses.

Outlook— With both of the Compact LLRW disposal facility and the Federal LLRW disposal facility certified and
operational, we now provide “one-stop shopping” for treatment, storage and disposal of hazardous, toxic, LLRW and radioactive
byproduct material. WCS has the broadest range of capabilities of any commercial enterprise in the U.S. for the storage, treatment and
permanent disposal of these materials, which we believe gives WCS a significant and valuable competitive advantage in the industry.
We are also exploring opportunities to obtain certain types of new business (including disposal and storage of certain other types of
waste) that, if obtained, could increase our Waste Management Segment’s sales and decrease our Waste Management Segment’s
operating loss. Our ability to increase our Waste Management Segment’s sales volumes through these waste streams, particularly as it
relates to the Compact and Federal LLRW disposal facilities, together with improved operating efficiencies through cost reductions
and increased capacity utilization, are important factors in improving our Waste Management operating results and cash flows. We
have obtained long-term disposal contracts with several waste generators and are actively pursuing additional contracts. We were
awarded a national disposal contract for our Federal LLRW disposal facility in April 2013. The contract is for a period of five years
and up to $300 million; however, tasks awarded under the contract to date have been for smaller dollar-value waste streams. We have
regularly received waste for disposal since the end of the second quarter of 2013 for the Federal LLRW disposal facility, but it may be
difficult for us to generate positive operating results until we begin routinely receiving larger Federal LLRW streams for disposal. In
addition we are dependent to a certain extent on large commercial projects in order to receive sufficient disposal volumes to operate at
full capacity. Most large projects, both federal and commercial, are subject to a competitive bidding and delays in the expected time
line for waste disposal to be completed. While we are the only commercial facility licensed to take Class A, B and C LLRW and
Mixed LLRW (LLRW mixed with hazardous waste) other facilities can accept Class A waste including facilities that in some
circumstances mix waste in such a way that some Class B waste may meet the Class A disposal requirements at these facilities.

With the receipt of our recent license amendments and our dedicated shipping containers now in service, including
containers we leased in July 2015, we believe we are positioned to take full advantage of our disposal facilities going forward. We
recognized an operating loss in 2015 primarily due to delayed disposal shipments including shipments from generator sites which
were adversely impacted by the severe winter weather which limited the ability of some generators to ship waste during the first
quarter and the availability of certain classifications of waste shipping containers beginning in latter part of the second quarter through
November of 2015.

We believe our Waste Management Segment can become a viable, profitable operation; however, we do not know if we
will be successful in improving cash flows. We have in the past, and we may in the future, consider strategic alternatives with respect
to our Waste Management Segment. We could report a loss in any such strategic transaction; however we expect to recognize a gain if
the pending transaction noted about is successfully closed.

Real Estate Management and Development—

Net sales ....................................................................... $
Cost of sales .................................................................
Gross margin ................................................................
Operating income ......................................................... $

Years ended December 31,
2015

2014

(In millions)
40.3 $
33.9
6.4 $
2.0 $

30.1
25.4
4.7
—

General—We obtained a controlling interest in our Real Estate Management and Development Segment in December
2013. Prior to December 2013, we owned a 32% interest in BMI, which among other things provides utility services to an industrial
park located in Henderson, Nevada and is responsible for the delivery of water to the city of Henderson and various other users
through a water distribution system owned by BMI. Prior to December 2013, we also had a 12% interest in LandWell, which is
actively engaged in efforts to develop certain real estate in Henderson, Nevada including approximately 2,100 acres zoned for
residential/planned community purposes and approximately 400 acres zoned for commercial and light industrial use at December 31,
2013. BMI owns an additional 50% interest in LandWell. In December 2013 we completed the acquisition of an additional 31%
ownership interest in BMI and an additional 15% ownership interest in LandWell. We completed this acquisition to obtain control of
BMI and LandWell (with the consent of BMI and LandWell and their other owners), which increased our direct ownership interest of

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BMI to 63% and our direct ownership of LandWell to 27%, which also resulted in our control of 77% of LandWell, including the 50%
ownership interest held by BMI.

Over the years, LandWell and BMI have focused on developing and selling the land transferred to LandWell as part of its
formation in the early 1950’s as well as additional land holdings acquired by LandWell in the surrounding area subsequent to
LandWell’s formation (although BMI and LandWell have not had significant real property acquisitions since 2004). Since LandWell’s
formation, LandWell and BMI have a history of successfully developing and selling over 1,200 acres of retail, light industrial,
commercial and residential projects in the Henderson, Nevada area. However, a substantial portion of such projects, had been
completed prior to the 2008 economic downturn which was particularly acute in the Las Vegas area real estate market which includes
Henderson. Following such economic downturn, LandWell’s land sales were substantially reduced as compared to prior years, and
LandWell did not recognize any material amount of land sales in the 2008 to 2013 time period. During this time period, LandWell has
been primarily focusing on the development of a large tract of land in Henderson zoned for residential/planned community purposes
(approximately 2,100 acres). Planning and zoning work on such project began in 2007, but LandWell delayed significant development
efforts until economic conditions had improved. As general economic conditions improved in 2011 and 2012, LandWell began
intensive development efforts of the residential/planned community in 2013 (with BMI acting as the general contractor for all such
development efforts). At the time of our December 2013 acquisition of the additional ownership interests in BMI and LandWell,
LandWell owned such 2,100 acres as well as approximately 400 acres zoned for commercial and light industrial purposes.

In December 2013 and through the end 2015, LandWell has closed or entered into escrow on approximately 410 acres of
the residential/planned community and certain other acreage at contracted prices that support the estimated fair value assigned to the
land held for development that was acquired with consideration of development costs expected to be incurred after the acquisition
date. See Note 3 to our Consolidated Financial Statements. Contracts for land sales are negotiated on an individual basis and sales
terms and prices will vary based on such factors as location (including location within a planned community), expected development
work, and individual buyer needs. Although land may be under contract, we do not recognize revenue until we have satisfied the
criteria for revenue recognition set forth in ASC Topic 976. In some instances, we will receive cash proceeds at the time the contract
closes and record deferred revenue for some or all of the cash amount received, with such deferred revenue being recognized in
subsequent periods. Because land held for development was initially recognized at estimated fair value at the acquisition date as
required by ASC Topic 805, we do not expect to recognize significant operating income on land sales for the land currently under
contract. We expect the development work to continue for 10 to 15 years on the rest of the land held for development, especially the
remainder of the residential/planned community.

Prior to gaining control of BMI and LandWell in December 2013, we accounted for our existing ownership interest in
BMI and LandWell by the equity method of accounting, as discussed in Notes 3 and 7 to our Consolidated Financial Statements. As
noted above, following the 2008 economic downturn LandWell’s land sales were substantially reduced as compared to prior years,
and LandWell did not recognize any material land sales in the 2008 to 2013 time period. Consequently, we did not recognize any
material amounts of equity in earnings of BMI and LandWell during such time periods. However, we do not believe that LandWell’s
operating results during such time period are indicative of LandWell’s expected future operating results or the fair value of
LandWell’s assets at the time of our December 2013 acquisition, given that LandWell had not recognized any material land sales in
recent years, the significant development work that had been undertaken in 2013, the revenue that was expected to be recognized with
respect to the land sales that have closed or entered into escrow (as noted above), and an expectation that LandWell will continue its
development efforts for the rest of its land held for development, especially the remainder of the residential/planned community.

Net Sales and Operating Income— A substantial portion of the net sales from our Real Estate Management and
Development segment in 2015 consisted of revenues from land sales. We recognized $21.5 million in revenues on land sales during
2015 compared to $31.9 million in 2014. As noted above we recognize revenue in our residential/planned community under
percentage completion accounting and a large majority of the revenue we recognized in 2014 and 2015 was under this method of
revenue recognition. We also have commercial property not included in the planned community for which revenue is generally
recognized in full at closing, as we generally have no further obligations after the closing date of the sale for these properties. Almost
half of our land sales revenue in 2015 were for such property sales not included in the planned community. The contracts on these
sales (both within the planned community and otherwise) include approximately 270 acres of the residential planned community and
certain other acreage which closed in December 2013 and through the end of 2015. Cost of sales related to land sales revenues was
$19.9 million in 2015 and $28.1 million in 2014. The remainder of net sales and cost of sales related to this segment primarily relates
to water delivery fees and expenses. We deliver water to several customers under long-term contracts; sales and cost of sales related to
water delivery are expected to be relatively consistent from period to period. As noted above, because land held for development was
initially recognized at estimated fair value at the acquisition date as required by ASC Topic 805, we did not recognize significant
operating income in either 2014 or 2015.

Outlook—Having obtained a controlling interest in BMI and LandWell in December 2013, we are actively pursuing
opportunities to maximize cash proceeds from the sale of our land held for development. In the near term, we are focused on
developing and selling land we manage, primarily to residential builders, for the approximately 2,100 acres zoned for

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residential/planned community in Henderson, Nevada. We expect the development work for the residential/planned community to
continue over the next several years, including those parcels currently under contract for which the development work is expected to
be completed in 2017. As noted above, we do not expect to recognize significant amounts of operating income related to these sales
for the parcels currently under contract; however, we do expect to generate cash proceeds from these sales in excess of our acquisition
costs, which proceeds are expected to be used, in part, to fund ongoing development work for the remainder of these properties.

General Corporate Items, Interest Expense, Provision for Income Taxes (Benefit), Noncontrolling Interest and Related Party
Transactions

Securities Earnings—A significant portion of our interest and dividend income in 2013, 2014 and 2015 relates to the
distributions we received from The Amalgamated Sugar Company LLC. We recognized dividend income from the LLC of $25.4
million in each of 2013, 2014 and 2015.

Insurance Recoveries—Insurance recoveries relate to amounts NL received from certain of its former insurance carriers,
and relate principally to the recovery of prior lead pigment and asbestos litigation defense costs incurred by NL. We have agreements
with four former insurance carriers pursuant to which the carriers reimburse us for a portion of our future lead pigment litigation
defense costs, and one such carrier reimburses us for a portion of our future asbestos litigation defense costs. We are not able to
determine how much we will ultimately recover from these carriers for defense costs incurred by us because of certain issues that arise
regarding which defense costs qualify for reimbursement. Substantially all of $10.4 million in the insurance recoveries we recognized
in 2014 relate to a settlement NL reached with one of its insurance carriers in September 2014 in which it agreed to reimburse NL for
a portion of its past litigation defense costs. While we continue to seek additional insurance recoveries for lead pigment and asbestos
litigation matters, we do not know the extent to which we will be successful in obtaining additional reimbursement for either defense
costs or indemnity. Any additional insurance recoveries would be recognized when the receipt is probable and the amount is
determinable. Substantially all of the insurance recoveries recognized in 2013 and 2015 relate to reimbursement of ongoing litigation
defense costs. See Note 17 to our Consolidated Financial Statements.

Other General Corporate Items—We recognized an aggregate non-cash gain of $54.6 million related to our purchase of a
controlling interest in BMI and LandWell in December 2013, consisting of (i) a gain from the remeasurement of our existing interest
in BMI and LandWell to estimated fair value and (ii) a bargain purchase gain related to the additional interest in BMI and LandWell
acquired. See Note 3 to our Consolidated Financial Statements.

Corporate expenses were 2% higher at $39.6 million in 2015 compared to $38.8 million in 2014. Corporate expenses
increased primarily due to higher administrative related expenses in 2015, offset in part by lower environmental remediation and
related costs and to a lesser extent lower litigation and related costs in 2014. Included in corporate expense are:

(cid:121)

litigation and related costs at NL of $4.8 million in 2015 compared to $7.0 million in 2014; and

environmental remediation and related costs of $5.7 million in 2015 compared to $6.6 million in 2014.

Corporate expenses were 63% lower at $38.8 million in 2014 compared to $105.3 million in 2013. Corporate expenses
decreased primarily due to lower environmental remediation and related costs and to a lesser extent lower in litigation and related
costs in 2013. Included in corporate expense are:

(cid:121)

litigation and related costs at NL of $7.0 million in 2014 compared to $10.2 million in 2013; and

environmental remediation and related costs of $6.6 million in 2014 compared to $69.0 million in 2013.

Overall, we currently expect that our net general corporate expenses in 2016 will be lower than in 2015 primarily due to

lower expected environmental remediation and related costs and lower litigation and related costs.

The level of our litigation and related expenses varies from period to period depending upon, among other things, the
number of cases in which we are currently involved, the nature of such cases and the current stage of such cases (e.g. discovery, pre-
trial motions, trial or appeal, if applicable). See Note 17 to our Consolidated Financial Statements. If our current expectations
regarding the number of cases in which we expect to be involved during 2016, or the nature of such cases, were to change our
corporate expenses could be higher than we currently estimate.

Obligations for environmental remediation and related costs are difficult to assess and estimate, and it is possible that
actual costs for environmental remediation and related costs will exceed accrued amounts or that costs will be incurred in the future
for sites in which we cannot currently estimate the liability. If these events occur in 2016, our corporate expense could be higher than
we currently estimate. In addition, we adjust our accruals for environmental remediation and related costs as further information
becomes available to us or as circumstances change. Such further information or changed circumstances could result in an increase or
reduction in our accrued environmental remediation and related costs. See Note 17 to our Consolidated Financial Statements.

- 51 -

Loss on Prepayment of Debt and Interest Expense— Interest expense increased to $59.0 million in 2015 from $56.7
million in 2013 primarily due to the net effects of higher 2015 average debt levels and mostly offset by lower average interest rates on
outstanding borrowings (principally Kronos’ term loan amended in May 2015).

Interest expense increased slightly to $56.7 million in 2014 from $56.1 million in 2013 primarily due to the net effects of
higher 2014 average debt levels of our Chemicals Segment as a result of the transactions noted above and the addition of debt related
to the acquisition of BMI and LandWell, offset by lower average interest rates on outstanding borrowings (principally Kronos’ new
term loan issued in February 2014).

In 2013, we recognized an aggregate $8.9 million pre-tax charge, consisting of the write-off of unamortized original issue
discount costs and deferred financing costs related to the voluntary prepayment of Kronos’ prior term loan by $290 million in the first
quarter of 2013 and the remaining $100 million in the third quarter of 2013. See Note 9 to our Consolidated Financial Statements.

We expect interest expense will be slightly higher in 2016 as compared to 2015 due to higher average balances of
outstanding borrowings at Valhi and higher average interest rates as a result of the increase in the prime rate on variable rate debt and
the Kronos interest rate swap. See Note 19 to our Consolidated Financial Statements.

Provision for Income Taxes (Benefit)— We recognized income tax expense of $97.3 million in 2015 compared to income
tax expense of $32.5 million in 2014. As discussed above in “Critical Accounting Policies and Estimates” subsection, our income tax
expense in 2015 includes an aggregate non-cash deferred income tax expense of $159.0 million related to the recognition of a deferred
income tax asset valuation allowance for our German and Belgian operations (mostly recognized in the second quarter). We continue
to believe we will ultimately realize the full benefit of our German and Belgian NOL carryforwards, in part because of their indefinite
carryforward period. However, our ability to reverse all or a portion of such valuation allowance in the future is dependent on the
presence of sufficient positive evidence, such as the existence of cumulative profits in the most recent twelve consecutive quarters,
and the ability to demonstrate future profitability for a sustainable period. Until such time as we are able to reverse the valuation
allowance in full, to the extent we generate additional losses in Germany or Belgium in the intervening periods, our effective income
tax rate would be impacted by the existence of such valuation allowance, because such losses would effectively be recognized without
any associated net income tax benefit, as such losses would result in a further increase in the deferred income tax asset valuation
allowance. Alternatively, until such time as we are able to reverse the valuation allowance in full, to the extent we generate income in
Germany or Belgium in the intervening periods, our effective income tax rate would also be impacted by the existence of such
valuation allowance, because such income would effectively be recognized without any associated net income tax expense, as we
would reverse a portion of the valuation allowance to offset the income tax expense attributable to such income. In addition, any
change in tax law related to the indefinite carryforward period of these NOLs could adversely impact our ability to reverse the
valuation allowance in full. Consistent with our expectation regarding our consolidated results of operations in 2016 (as discussed
above in the “Chemicals - Outlook” subsection), we currently believe it is likely Kronos’ German and Belgian operations will report
improved operating results in 2016 as compared to 2015. However, we currently do not expect that our German and Belgian
operating results would improve to such an extent in 2016 that reversal of the valuation allowance in full would be supported by the
presence of sufficient positive evidence.

We recognize deferred income taxes with respect to the excess of the financial reporting carrying amount over the income
tax basis of our direct investment in Kronos common stock because the exemption under GAAP to avoid such recognition of deferred
income taxes is not available to us. There is a maximum amount (or cap) of such deferred income taxes we are required to recognize
with respect to our direct investment in Kronos, and we previously reached such maximum amount in the fourth quarter of 2010.
Since that time and through March 31, 2015, we were not required to recognize any additional deferred income taxes with respect to
our direct investment in Kronos because the deferred income taxes associated with the excess of the financial reporting carrying
amount over the income tax basis of our direct investment in Kronos common stock continued to be above such cap. However, at
June 30, 2015, the deferred income taxes associated with the excess of the financial reporting carrying amount over the income tax
basis of our direct investment in Kronos common stock was, for the first time since the fourth quarter of 2010, below such cap, in
large part due to the net loss reported by Kronos in the second quarter of 2015. Accordingly, our provision for income taxes in 2015
includes an aggregate non-cash income tax benefit of $29.3 million for the reduction in the deferred income taxes required to be
recognized with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in
Kronos common stock, to the extent such reduction related to our equity in Kronos’ net loss. A substantial portion of such $29.3
million was recognized in the second quarter of 2015, with the remainder recognized in the third and fourth quarters. Such amount is
included in the table of our income tax rate reconciliation for incremental net benefit on earnings and losses on non-U.S. and U.S.
subsidiaries in Note 12 to our Consolidated Financial Statements (in addition to the other items indicated above). A portion of such
reduction also related to our equity in Kronos’ other comprehensive income (loss) items, and the amounts shown in the table above for
income tax expense (benefit) allocated to other comprehensive income (loss) includes amounts related to our equity in Kronos’ other
comprehensive income (loss) items.

- 52 -

Our income tax expense was favorably impacted by an aggregate non-cash income tax benefit of $3.7 million in 2014

(mostly in the second quarter) related to a net reduction in our reserve for uncertain tax positions.

As discussed above, our income tax expense in 2015 includes a non-cash deferred income tax expense of $159.0 million
related to the recognition of a deferred income tax asset valuation allowance for our German and Belgian operations, and a non-cash
deferred income tax benefit of $29.3 million associated with the reduction in the deferred income taxes required to be recognized with
respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common
stock. Generally, we expect the effective tax rate associated with our non-U.S. earnings to be lower than our U.S. statutory tax rate of
35%. Excluding the impact of the net reduction our reserve for uncertain tax positions in 2014, our effective tax rate in such period
was lower than the U.S. federal statutory tax rate of 35% primarily due to our non-U.S. earnings. Our effective tax rate in 2015,
excluding the impact of the deferred income tax asset valuation allowance and the deferred income tax benefit associated with our
direct investment in Kronos we recognized, was higher than the U.S. federal statutory tax rate of 35%, primarily due to a current U.S.
income tax benefit attributable to current year losses of one of our Chemical Segment’s non-U.S. subsidiaries.

We recognized income tax expense of $32.5 million in 2014 and an income tax benefit of $91.0 million in 2013. This
difference is primarily due to fluctuations in our earnings. See Note 12 to our Consolidated Financial Statements for a tabular
reconciliation of our statutory tax expense to our actual tax expense. Some of the more significant items impacting this reconciliation
are summarized below. Our income tax benefit in 2013 includes an aggregate $11.1 million benefit related to the re-measurement of
our deferred income tax liability with respect to our investment in BMI from capital gains rates to dividend received deduction rates,
including the deferred income taxes related to (i) the gain from the remeasurement of our existing investment in BMI to estimated fair
value and (ii) the bargain purchase gain related to the additional ownership interest in BMI acquired in December 2013. See Notes 3
and 12 to our Consolidated Financial Statements. See Note 12 to our Consolidated Financial Statements for a tabular reconciliation of
our statutory tax expense to our actual tax expense, and a summation of some of the more significant items impacting this
reconciliation.

Noncontrolling Interest in Net Income (Loss) of Subsidiaries—Noncontrolling interest in operations of subsidiaries
decreased from 2015 to 2014 primarily due to decreased operating income at Kronos. Noncontrolling interest in continuing operations
of subsidiaries increased from 2014 to 2013 primarily due to increased operating income at Kronos and the addition of noncontrolling
interest in BMI and LandWell during 2014.

Related Party Transactions—We are a party to certain transactions with related parties. See Note 16 to our Consolidated

Financial Statements.

Assumptions on Defined Benefit Pension Plans and OPEB Plans.

Defined Benefit Pension Plans—We maintain various defined benefit pension plans in the U.S., Europe and Canada. See

Note 11 to our Consolidated Financial Statements.

Under defined benefit pension plan accounting, we recognize defined benefit pension plan expense and prepaid and
accrued pension costs based on certain actuarial assumptions, principally the assumed discount rate, the assumed long-term rate of
return on plan assets and the assumed increase in future compensation levels. We recognize the full funded status of our defined
benefit pension plans as either an asset (for overfunded plans) or a liability (for underfunded plans) in our Consolidated Balance Sheet.

We recognized consolidated defined benefit pension plan expense of $36.2 million in 2013, $22.0 million in 2014, and
$23.7 million in 2015. Included in our 2013 defined benefit plan expense is a curtailment charge of $7.3 million resulting from
amendments to one of our Canadian plans. Certain non-U.S. employees are covered by plans in their respective countries, principally
in Germany, Canada and Norway. Participation in the defined benefit pension plan in Germany was closed to new participants
effective in 2005. German employees hired beginning in 2005 participate in a new plan in which the retirement benefit is based upon
the amount of employee and employer contributions to the plan, but for which in accordance with German law the employer
guarantees a minimum rate of return on invested assets and a guaranteed indexed lifetime benefit payment after retirement based on
the participant’s account balance at the time of retirement. In accordance with GAAP, the new pension plan is accounted for as a
defined benefit plan, principally because of such guaranteed minimum rate of return and guaranteed lifetime benefit payment.
Participation in the defined benefit plan in Canada with respect to hourly and salaried workers was closed to new participants in
December 2013 and 2014, respectively, and existing hourly and salaried plan participants will no longer accrue additional defined
pension benefits after December 2013 and 2014, respectively. Our U.S. plan for both NL and Kronos was closed to new participants
in 1996, and existing participants no longer accrued any additional benefits after that date. The amount of funding requirements for
these defined benefit pension plans is generally based upon applicable regulations (such as ERISA in the U.S.) and will generally
differ from pension expense for financial reporting purposes. The amount of funding requirements for these defined benefit pension
plans is generally based upon applicable regulations (such as ERISA in the U.S.), and will generally differ from pension expense

- 53 -

recognized under GAAP for financial reporting purposes. We made contributions to all of our defined benefit pension plans of $28.4
million in 2013, $21.7 million in 2014, and $18.0 million in 2015.

The discount rates we use for determining defined benefit pension expense and the related pension obligations are based
on current interest rates earned on long-term bonds that receive one of the two highest ratings given by recognized rating agencies in
the applicable country where the defined benefit pension benefits are being paid. In addition, we receive third-party advice about
appropriate discount rates and these advisors may in some cases use their own market indices. We adjust these discount rates as of
each December 31 valuation date to reflect then-current interest rates on such long-term bonds. We use these discount rates to
determine the actuarial present value of the pension obligations as of December 31 of that year. We also use these discount rates to
determine the interest component of defined benefit pension expense for the following year.

At December 31, 2015, approximately 63%, 15%, 8% and 10% of the projected benefit obligations related to our plans in
Germany, Canada, Norway and the U.S., respectively. We use several different discount rate assumptions in determining our
consolidated defined benefit pension plan obligation and expense. This is because we maintain defined benefit pension plans in
several different countries in Europe and North America and the interest rate environment differs from country to country.

We used the following discount rates for our defined benefit pension plans:

Obligations
at December 31, 2013
and expense in 2014

Discount rates used for:
Obligations
at December 31, 2014
and expense in 2015

Obligations
at December 31, 2015
and expense in 2016

Kronos and NL Plans:

Germany..........................................
Canada ............................................
Norway............................................
U.S. .................................................

3.5%
4.7%
4.0%
4.5%

2.3%
3.8%
2.3%
3.8%

2.3%
3.9%
2.8%
4.1%

The assumed long-term rate of return on plan assets represents the estimated average rate of earnings expected to be
earned on the funds invested or to be invested in the plans’ assets provided to fund the benefit payments inherent in the projected
benefit obligations. Unlike the discount rate, which is adjusted each year based on changes in current long-term interest rates, the
assumed long-term rate of return on plan assets will not necessarily change based upon the actual short-term performance of the plan
assets in any given year. Defined benefit pension expense each year is based upon the assumed long-term rate of return on plan assets
for each plan, the actual fair value of the plan assets as of the beginning of the year and an estimate of the amount of contributions to
and distributions from the plan during the year. Differences between the expected return on plan assets for a given year and the actual
return are deferred and amortized over future periods based either upon the expected average remaining service life of the active plan
participants (for plans for which benefits are still being earned by active employees) or the average remaining life expectancy of the
inactive participants (for plans for which benefits are not still being earned by active employees).

At December 31, 2015, the fair value of plan assets for all defined benefit plans comprised $47.6 million related to U.S.
plans and $382.5 million related to foreign plans. Substantially all of plan assets attributable to foreign plans related to plans
maintained by Kronos, and approximately 71% and 29% of the plan assets attributable to U.S. plans related to plans maintained by NL
and Kronos, respectively. At December 31, 2015, approximately 58%, 24%, 12% and 4% of the plan assets of Kronos’ plans were in
Germany, Canada, Norway and the U.S., respectively. We use several different long-term rates of return on plan asset assumptions in
determining our consolidated defined benefit pension plan expense. This is because the plan assets in different countries are invested
in a different mix of investments and the long-term rates of return for different investments differ from country to country.

In determining the expected long-term rate of return on plan asset assumptions, we consider the long-term asset mix (e.g.
equity vs. fixed income) for the assets for each of our plans and the expected long-term rates of return for such asset components. In
addition, we receive third-party advice about appropriate long-term rates of return. Substantially all of the assets of our U.S. plan are
invested in the Combined Master Retirement Trust (“CMRT”), a collective investment trust sponsored by Contran to permit the
collective investment by certain master trusts which fund certain employee benefits sponsored by Contran and certain of its affiliates,
including us. Such assumed asset mixes are discussed in Note 11 to our Consolidated Financial Statements.

- 54 -

Our pension plan weighted average asset allocations by asset category were as follows:

Germany

Canada

Norway

CMRT

December 31, 2015

Equity securities and limited partnerships .......................
Fixed income securities ...................................................
Real estate .......................................................................
Other ...............................................................................
Total .......................................................................

20%
70
9
1
100%

36%
56
—
8
100%

12%
62
9
17
100%

56%
38
—
6
100%

Germany

Canada

Norway

CMRT

December 31, 2014

19%
67
11
3
100%

43%
47
—
10
100%

13%
60
8
19
100%

60%
32
—
8
100%

We regularly review our actual asset allocation for each non-US plan and will periodically rebalance the investments in
each plan to more accurately reflect the targeted allocation when considered appropriate. The CMRT trustee and investment
committee do not maintain a specific target asset allocation in order to achieve their objectives, but instead they periodically change
the asset mix of the CMRT based upon, among other things, advice they receive from third-party advisors and their expectations
regarding potential returns for various investment alternatives and what asset mix will generate the greatest overall return while
maintaining an acceptable level of risk.

The assumed long-term rates of return on plan assets used for purposes of determining net period pension cost for 2013,

2014 and 2015 were as follows:

Kronos and NL plans:

2013

2014

2015

Germany..............................................................
Canada ................................................................
Norway................................................................
U.S. .....................................................................

4.8%
5.8%
4.8%
10.0%

4.3%
5.5%
3.8%
7.5%

4.3%
5.8%
3.8%
7.5%

We currently expect to use the same long-term rate of return on plan asset assumptions in 2016 as we used in 2015 for

purposes of determining the 2016 defined benefit pension plan expense.

To the extent that a plan’s particular pension benefit formula calculates the pension benefit in whole or in part based upon
future compensation levels, the projected benefit obligations and the pension expense will be based in part upon expected increases in
future compensation levels. For all of our plans for which the benefit formula is so calculated, we generally base the assumed
expected increase in future compensation levels upon average long-term inflation rates for the applicable country.

In addition to the actuarial assumptions discussed above, the amount of recognized defined benefit pension expense and

the amount of net pension asset and net pension liability will vary based upon relative changes in currency exchange rates.

A reduction in the assumed discount rate generally results in an actuarial loss, as the actuarially-determined present value
of estimated future benefit payments will increase. Conversely, an increase in the assumed discount rate generally results in an
actuarial gain. In addition, an actual return on plan assets for a given year that is greater than the assumed return on plan assets results
in an actuarial gain, while an actual return on plan assets that is less than the assumed return results in an actuarial loss. Other actual
outcomes that differ from previous assumptions, such as individuals living longer or shorter than assumed in mortality tables, which
are also used to determine the actuarially-determined present value of estimated future benefit payments, changes in such mortality
table themselves or plan amendments, will also result in actuarial losses or gains. These amounts are recognized in other
comprehensive income. In addition, any actuarial gains generated in future periods would reduce the negative amortization effect of
any cumulative unrecognized actuarial losses, while any actuarial losses generated in future periods would reduce the favorable
amortization effect of any cumulative unrecognized actuarial gains.

- 55 -

During 2015, our defined benefit pension plans generated a combined net actuarial gain of $.3 million. This actuarial gain
resulted primarily from the increase in discount rates from December 31, 2014 to December 31, 2015, partially offset by an actual
return on plan assets during 2015 below the expected return.

Based on the actuarial assumptions described above and our current expectations for what actual average currency
exchange rates will be during 2016, we currently expect our aggregate defined benefit pension expense will approximate $22 million
in 2016. In comparison, we currently expect to be required to make approximately $16 million of aggregate contributions to such
plans during 2016.

As noted above, defined benefit pension expense and the amounts recognized as prepaid and accrued pension costs are
based upon the actuarial assumptions discussed above. We believe all of the actuarial assumptions used are reasonable and
appropriate. If we had lowered the assumed discount rates by 25 basis points for all of our plans as of December 31, 2015, our
aggregate projected benefit obligations would have increased by approximately $29 million at that date, and our aggregate defined
benefit pension expense would be expected to increase by approximately $2 million during 2015. Similarly, if we lowered the
assumed long-term rates of return on plan assets by 25 basis points for all of our plans, our defined benefit pension expense would be
expected to increase by approximately $1 million during 2015.

OPEB Plans—We provide certain health care and life insurance benefits for certain of our eligible retired employees. See
Note 11 to our Consolidated Financial Statements. At December 31, 2015, approximately 54%, 25% and 21% of our aggregate
accrued OPEB costs relate to Kronos, NL and Tremont, respectively. Kronos provides such OPEB benefits to eligible retirees in the
U.S. and Canada, and NL and Tremont provide such OPEB benefits to eligible retirees in the U.S. Under accounting for other
postretirement employee benefits, OPEB expense and accrued OPEB costs are based on certain actuarial assumptions, principally the
assumed discount rate and the assumed rate of increases in future health care costs. We recognize the full unfunded status of our
OPEB plans as a liability.

Based on such actuarial assumptions and our current expectation for what actual average currency exchange rates will be
during 2016, we expect our consolidated OPEB benefit will approximate $1.1 million in 2016 because our OPEB plans have no plan
assets we will be required to make the entire benefit as of contributions to such plans during 2016.

We believe that all of the actuarial assumptions used are reasonable and appropriate. However, if we had lowered the
assumed discount rate by 25 basis points for all plans as of December 31, 2015, our aggregate projected benefit obligations at that date
and our OPEB cost during 2015 would increase by approximately $.3 million. Similarly, a one percent assumed change in health care
trend rates for all plans would not materially impact our OPEB costs.

Foreign Operations

We have substantial operations located outside the United States, principally our Chemicals Segment’s operations in
Europe and Canada. The functional currency of these operations is the local currency. As a result, the reported amount of our assets
and liabilities related to these foreign operations will fluctuate based upon changes in currency exchange rates. At December 31,
2015, we had substantial net assets denominated in the euro, Canadian dollar and Norwegian krone.

LIQUIDITY AND CAPITAL RESOURCES

Consolidated Cash Flows

Operating Activities—

Trends in cash flows from operating activities (excluding the impact of significant asset dispositions and relative changes

in assets and liabilities) are generally similar to trends in our operating income.

Cash flows from operating activities decreased from $67.3 million in 2014 to $22.5 million in 2015. This $44.8 million

decrease in cash provided by operations was primarily due to the net effects of the following items:

(cid:121)

consolidated operating loss of $5.4 million in 2015, a decline of $175.6 million compared to operating income of
$170.2 million in 2014;

lower net cash paid for income taxes in 2015 of $23.2 million resulting from our decreased profitability;

lower net distributions received from our TiO2 joint venture in 2015 of $4.1 million, primarily due to the timing of the
joint venture’s working capital needs;

- 56 -

(cid:121)

lower cash funding of pension plans in 2015 of $3.7 million; and

changes in receivables, inventories, payables and accrued liabilities in 2015 provided $21.3 million in net cash
compared to net cash used of $116.9 million in 2014, an increase in the amount of cash provided of $139.2 million
compared to 2014, primarily due to the relative changes in our inventories, receivables, prepaids, land held for
development, payables and accruals.

Cash flows from operating activities decreased from $117.1 million in 2013 to $67.3 million in 2014. This $49.8 million

decrease in cash provided by operations was primarily due to the net effects of the following items:

(cid:121)

consolidated operating income of $170.2 million in 2014, a $308.9 million improvement compared to an operating
loss of $138.7 million in 2013;

higher net cash paid for income taxes in 2014 of $17.8 million resulting from our increased profitability;

lower cash funding of pension plans in 2014 of $6.7 million; and

changes in receivables, inventories, payables and accrued liabilities in 2014 used $116.9 million of net cash in 2014, a
decrease in the amount of cash provided of $410.5 million compared to 2013, primarily due to the relative changes in
our inventories, receivables, prepaids, land held for development, payables and accruals, primarily due to a significant
amount of cash provided by relative changes in our inventories in 2013 resulting principally from lower inventory
costs in our Chemicals Segment.

Changes in working capital were affected by accounts receivable and inventory changes. As shown below:

(cid:121) Kronos’ average days sales outstanding (“DSO”) increased from December 31, 2014 to December 31, 2015 due to
higher sales volume in 2015, partially offset by the effect of lower sales prices in the fourth quarter of 2015 as
compared to the fourth quarter of 2014.

(cid:121) Kronos’ average days sales in inventory (“DSI”) increased from December 31, 2014 to December 31, 2015 due to

higher inventory volumes offset by lower inventory raw material costs.

(cid:121) CompX’s average DSO decreased slightly from December 31, 2014 to December 31, 2015 as a result of the timing of

sales and collections in the last month of 2015 as compared to 2014.

(cid:121) CompX’s average DSI decreased from December 31, 2014 to December 31, 2015 to more normal levels following

the intentional fourth quarter inventory build at the end of 2014, in anticipation of elevated sales in early 2015.

For comparative purposes, we have also provided comparable prior year numbers below.

Kronos:

Days sales outstanding ..................
Days sales in inventory .................

CompX:

Days sales outstanding ..................
Days sales in inventory .................

December 31,
2013

December 31,
2014

December 31,
2015

62 days
75 days

35 days
76 days

61 days
76 days

32 days
90 days

66 days
80 days

31 days
76 days

- 57 -

We do not have complete access to the cash flows of our majority-owned subsidiaries, due in part to limitations contained
in certain credit agreements of our subsidiaries and because we do not own 100% of these subsidiaries. A detail of our consolidated
cash flows from operating activities is presented in the table below. Intercompany dividends have been eliminated.

Cash provided by (used in) operating activities:

Kronos ......................................................... $
Valhi exclusive of subsidiaries ....................
CompX ........................................................
NL exclusive of subsidiaries .......................
Waste Control Specialists ...........................
Tremont .......................................................
BMI .............................................................
LandWell .....................................................
Other ...........................................................
Eliminations ................................................
Total................................................... $

2013

Years ended December 31,
2014
(In millions)

2015

130.1 $
60.8
(4.1)
19.1
(7.6)
(1.5)
—
—
(.6)
(79.1)
117.1 $

87.6 $
15.5
12.2
12.0
7.9
3.7
5.9
(1.3)
(.6)
(75.6)
67.3 $

52.0
12.3
13.5
15.6
(12.2)
(.6)
(1.7)
4.8
—
(61.2)
22.5

Investing Activities—

We disclose capital expenditures by our business segments in Note 2 to our Consolidated Financial Statements. All of

our capitalized permit costs relate to our Waste Management Segment.

During 2015 we had net proceeds of $1.4 million from the disposal of marketable securities and we had net restricted cash

payments of $2.9 million, see Note 17 to our Consolidated Financial Statements.

During 2014 we had net purchases of $1.2 million of marketable securities and we received a net $18.6 million from the

release of restricted cash, see Notes 12 and 17 to our Consolidated Financial Statements.

We had the following investing activities during 2013:

(cid:121) we paid $5.3 million in cash (plus we issued a promissory note and a deferred payment obligation) to purchase
additional interests in BMI and LandWell in December 2013. These businesses had $27.4 million in cash and cash
equivalents at the December 31, 2013 acquisition date, see Note 3 to our Consolidated Financial Statements

(cid:121) we collected $3.0 million in principal payments on a note receivable;

(cid:121) we received $1.6 million in net proceeds on the sale of an asset held for sale;

(cid:121) we made required payments of $11.4 million to certain collateral trusts for WCS; and

(cid:121) we received net proceeds from the sales and purchases of all other marketable securities of $3.2 million in market

transactions.

Financing Activities –

During 2015, we:

(cid:121) borrowed a net $40.1 million on Valhi’s credit facility with Contran; and

(cid:121)

repaid $.3 million under Tremont’s promissory note payable.

During 2014, we:

(cid:121) borrowed $348.3 million under Kronos’ new term loan and subsequently repaid $2.6 million;

(cid:121)

repaid $170.0 million under Kronos’ note payable to Contran;

(cid:121) borrowed $81.0 million under Kronos’ North American credit facility and subsequently repaid $92.1 million;

(cid:121) borrowed a net $17.2 million on Valhi’s credit facility with Contran;

(cid:121)

repaid $1.7 million under Tremont’s promissory note payable;

- 58 -

(cid:121) borrowed $1.1 million from a Canadian economic development agency and

(cid:121)

repaid $.9 million under BMI’s bank note payable.

During 2013, we:

(cid:121) voluntarily prepaid $390.0 million principal amount of Kronos’ term loan;

(cid:121) borrowed $190.0 million under Kronos’ new note payable to Contran, and subsequently repaid $20.0 million;

(cid:121) borrowed $162.1 million and subsequently repaid $151.0 million under Kronos’ North American credit facility;

(cid:121) borrowed €10 million ($12.8 million when borrowed) on Kronos’ European credit facility and subsequently repaid

€20 million ($26.5 million when repaid);

(cid:121) borrowed $1.7 million from a Canadian economic development agency;

(cid:121) prepaid $18.5 million remaining principal amount under CompX’s promissory note payable to Timet Finance

Management Company, a subsidiary of TIMET (a company formerly affiliated with us);

(cid:121) borrowed a net $48.9 million on Valhi’s credit facility with Contran; and

(cid:121) Kronos repurchased 49,000 shares of its common stock in open market transactions for $.7 million.

We paid aggregate cash dividends on our common stock of $67.9 million in 2013, $37.3 million in 2014 and $27.1 million
in 2015 ($.05 per share in the first quarter of 2014, and $.02 per share for the second, third and fourth quarters of 2014 and each
quarter of 2015). Distributions to noncontrolling interest in 2013, 2014 and 2015 are primarily comprised of NL dividends paid to
shareholders other than us; CompX dividends paid to shareholders other than NL; and Kronos cash dividends paid to shareholders
other than us and NL.

Other cash flows from financing activities in 2013, 2014 and 2015 relate principally to shares of common stock issued by

us and our subsidiaries upon the exercise of stock options or the issuance of shares to directors.

Outstanding Debt Obligations

At December 31, 2015, our consolidated indebtedness was comprised of:

(cid:121) Valhi’s $250 million loan from Snake River Sugar Company due in 2027;

(cid:121) Valhi’s $263.8 million outstanding on its $325 million credit facility with Contran which is due no earlier than

December 31, 2017;

(cid:121) $343.9 million aggregate borrowing under Kronos’ term loan ($338.0 million carrying amount, net of unamortized

original issue discount and debt issuance costs) due through February 2020;

(cid:121) WCS’ financing capital lease with Andrews County, Texas ($65.6 million outstanding) which has an effective interest

rate of 7.0% and is due in monthly installments through August 2035;

(cid:121) Tremont’s promissory note payable ($17.1 million outstanding) due in December 2023;

(cid:121) $9.4 million on BMI’s bank note payable ($9.3 million carrying amount, net of debt issuance costs), due through

January 2025;

(cid:121) $3.1 million on LandWell’s note payable to the City of Henderson due in October 2020; and

(cid:121)

approximately $13.6 million of other indebtedness, primarily capital lease obligations.

Certain of our credit facilities require the respective borrowers to maintain a number of covenants and restrictions which,
among other things, restrict our ability to incur additional debt, incur liens, pay dividends or merge or consolidate with, or sell or
transfer substantially all of our assets to, another entity, and contain other provisions and restrictive covenants customary in lending
transactions of this type. Certain of our credit agreements contain provisions which could result in the acceleration of indebtedness
prior to their stated maturity for reasons other than defaults for failure to comply with typical financial or payment covenants. For
example, certain credit agreements allow the lender to accelerate the maturity of the indebtedness upon a change of control (as defined
in the agreement) of the borrower. In addition, certain credit agreements could result in the acceleration of all or a portion of the
indebtedness following a sale of assets outside the ordinary course of business. Kronos’ North American and European revolvers
contain a number of covenants and restrictions which, among other things, restrict its ability to incur additional debt, incur liens, pay
dividends or merge or consolidate with, or sell or transfer substantially all of its assets to, another entity, and contains other provisions
and restrictive covenants customary in lending transactions of this type. Kronos’ European revolving credit facility also requires the

- 59 -

maintenance of certain financial ratios, and one of such requirements is based on the ratio of net debt to the last twelve months
EBITDA of the borrowers. The terms of all of our debt instruments (including revolving lines of credit for which we have no
outstanding borrowings at December 31, 2015) are discussed in Note 9 to our Consolidated Financial Statements. We are in
compliance with all of our debt covenants at December 31, 2015. We believe that we will be able to continue to comply with the
financial covenants contained in our credit facilities through their maturity.

Future Cash Requirements

Liquidity—

Our primary source of liquidity on an ongoing basis is our cash flows from operating activities and borrowings under
various lines of credit and notes. We generally use these amounts to (i) fund capital expenditures, (ii) repay short-term indebtedness
incurred primarily for working capital purposes and (iii) provide for the payment of dividends (including dividends paid to us by our
subsidiaries) or treasury stock purchases. From time-to-time we will incur indebtedness, generally to (i) fund short-term working
capital needs, (ii) refinance existing indebtedness, (iii) make investments in marketable and other securities (including the acquisition
of securities issued by our subsidiaries and affiliates) or (iv) fund major capital expenditures or the acquisition of other assets outside
the ordinary course of business. Occasionally we sell assets outside the ordinary course of business, and we generally use the proceeds
to (i) repay existing indebtedness (including indebtedness which may have been collateralized by the assets sold), (ii) make
investments in marketable and other securities, (iii) fund major capital expenditures or the acquisition of other assets outside the
ordinary course of business or (iv) pay dividends.

We routinely compare our liquidity requirements and alternative uses of capital against the estimated future cash flows we
expect to receive from our subsidiaries, and the estimated sales value of those units. As a result of this process, we have in the past
sought, and may in the future seek, to raise additional capital, refinance or restructure indebtedness, repurchase indebtedness in the
market or otherwise, modify our dividend policies, consider the sale of our interests in our subsidiaries, affiliates, business units,
marketable securities or other assets, or take a combination of these and 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. From time to time we and our
subsidiaries may enter into intercompany loans as a cash management tool. Such notes are structured as revolving demand notes and
pay and receive interest on terms we believe are more favorable than current debt and investment market rates. The companies that
borrow under these notes have sufficient borrowing capacity to repay the notes at any time upon demand. All of these notes and
related interest expense and income are eliminated in our Consolidated Financial Statements.

We periodically evaluate acquisitions of interests in or combinations with companies (including our affiliates) that may or
may not be engaged in businesses related to our current businesses. We intend to consider such acquisition activities in the future and,
in connection with this activity, may consider issuing additional equity securities and increasing indebtedness. From time to time, we
also evaluate the restructuring of ownership interests among our respective subsidiaries and related companies.

We believe we will be able to comply with the financial covenants contained in our credit facilities through their
maturities; however, if future operating results differ materially from our expectations we may be unable to maintain compliance.
Based upon our expectations of our operating performance, and the anticipated demands on our cash resources, we expect to have
sufficient liquidity to meet our short-term (defined as the twelve-month period ending December 31, 2016) and long-term obligations
(defined as the five-year period ending December 31, 2020). In this regard, see the discussion above in “Outstanding Debt
Obligations.” If actual developments differ from our expectations, our liquidity could be adversely affected.

At December 31, 2015, we had credit available under existing facilities of $154.8 million, which was comprised of:

(cid:121) $25.3 (1) million under Kronos’ European revolving credit facility;

(cid:121) $68.3 million under Kronos’ North American revolving credit facility; and

(cid:121) $61.2 (2) million under Valhi’s Contran credit facility.

(1) Based on the terms of Kronos’ European credit facility (including the net debt to EBITDA financial test discussed above), and

the borrowers’ EBITDA over the last twelve months ending December 31, 2015, Kronos’ borrowing availability at
December 31, 2015 under this facility is approximately 19% of the credit facility, or €23.1 million.

(2) Amounts available under this facility are at the sole discretion of Contran.

- 60 -

At December 31, 2015, we had an aggregate of $235.9 million of restricted and unrestricted cash, cash equivalents and

marketable securities. A detail by entity is presented in the table below.

Total
amount

Held outside
U.S.

Kronos.......................................................................... $
CompX .........................................................................
NL exclusive of its subsidiaries ...................................
WCS .............................................................................
BMI ..............................................................................
Tremont exclusive of its subsidiaries ...........................
LandWell .....................................................................
Valhi exclusive of its subsidiaries ................................
Total cash and cash equivalents, restricted cash and

(In millions)
94.3 $
52.3
48.6
16.8
5.7
8.8
9.0
.4

marketable securities .......................................... $

235.9 $

78.1
—
.2
—
—
—
—
—

78.3

Capital Expenditures and other investments—

We currently expect our aggregate capital expenditures for 2016 will be approximately $96 million as follows:

(cid:121) $63 million by our Chemicals Segment, including approximately $9 million in the area of environmental compliance,

protection and improvement;

(cid:121) $19 million by our Waste Management Segment;

(cid:121) $4 million by our Component Products Segment; and

(cid:121) $10 million by our Real Estate Management and Development Segment.

The WCS amount includes approximately $2 million in capitalized operating permit costs. In addition LandWell expects
to spend approximately $12 million on land development costs during 2016 (which are included in the determination of cash provided
by operating activities).

Capital spending for 2016 is expected to be funded primarily through cash generated from operations and borrowing
under existing credit facilities. Planned capital expenditures in 2016 at Kronos and CompX will primarily be to maintain and improve
the cost-effectiveness of our facilities. A significant portion of Kronos’ planned capital expenditures in 2016 relates to the
implementation of a new accounting and manufacturing system. In addition, Kronos’ capital expenditures in the area of
environmental compliance, protection and improvement include expenditures which are primarily focused on increased operating
efficiency but also result in improved environmental protection, such as lower emissions from our manufacturing plants.

Repurchases of our Common Stock and Common Stock of Our Subsidiaries—

We have in the past, and may in the future, make repurchases of our common stock in market or privately-negotiated
transactions. At December 31, 2015 we had approximately 4.0 million shares available for repurchase of our common stock under the
authorizations described in Note 14 to our Consolidated Financial Statements.

Prior to 2013, Kronos’ board of directors authorized the repurchase of up to 2.0 million shares of its common stock in
open market transactions, including block purchases, or in privately-negotiated transactions at unspecified prices and over an
unspecified period of time. Kronos may repurchase its common stock from time to time as market conditions permit. The stock
repurchase program does not include specific price targets or timetables and may be suspended at any time. Depending on market
conditions, Kronos may terminate the program prior to its completion. Kronos will use cash on hand to acquire the shares.
Repurchased shares will be added to Kronos’ treasury and cancelled. In the third quarter of 2013 Kronos repurchased approximately
49,000 shares for an aggregate of $.7 million under its repurchase program. The third quarter purchases are the only purchases Kronos
has made to date under the plan and at December 31, 2015 approximately 1.95 million shares are available for repurchase.

- 61 -

Prior to 2013, CompX’s board of directors authorized various repurchases of its Class A common stock in open market
transactions, including block purchases, or in privately-negotiated transactions at unspecified prices and over an unspecified period of
time. CompX may repurchase its common stock from time to time as market conditions permit. The stock repurchase program does
not include specific price targets or timetables and may be suspended at any time. Depending on market conditions, CompX may
terminate the program prior to its completion. CompX will generally use cash on hand to acquire the shares. Repurchased shares will
be added to CompX’s treasury and cancelled. CompX did not make any repurchases under the plan during 2013, 2014 and 2015, and
at December 31, 2015 approximately 678,000 shares were available for purchase under these authorizations.

Dividends—

Because our operations are conducted primarily through subsidiaries and affiliates, our long-term ability to meet parent
company level corporate obligations is largely dependent on the receipt of dividends or other distributions from our subsidiaries and
affiliates. If Kronos pays its regular dividend of $.15 per share in each quarter of 2016, based on the 58.0 million shares we held of
Kronos common stock at December 31, 2015, we would receive aggregate annual regular dividends from Kronos of $34.8 million.
During 2013 NL paid a quarterly cash dividend of $.125 per share. We received aggregate annual dividends from NL of $20.2 million
in 2013 based on the 40.4 million shares we held of NL common stock during those periods. In February 2014 NL’s Board of
Director’s deferred consideration of NL’s first quarter dividend, and no dividend was paid by NL in the first quarter of 2014. In May
2014, NL’s Board of Directors suspended NL’s cash dividend. We did not receive any dividends from NL during 2014 or 2015 and
we do not know if we will receive any cash dividends from NL during 2016. We did not receive any distributions from WCS during
2015, and we do not expect to receive any distributions from WCS during 2016. We expect that our newest consolidated subsidiaries,
BMI and LandWell, which we acquired a controlling interest in during December 2013, will pay cash dividends, but the timing and
amount of such dividends are uncertain. In this regard, we received aggregate dividends from BMI and LandWell of $7.0 million in
the first quarter of 2014, and we received aggregate dividends from BMI and LandWell of $.5 million in February 2015 and $.9
million in December 2015. We do not know if we will receive additional distributions from BMI and LandWell during 2016. All of
our ownership interest in CompX is held through our ownership in NL, as such we do not receive any dividends from CompX. Instead
any dividend paid by CompX is paid to NL.

Our subsidiaries have various credit agreements with unrelated third-party lenders which contain customary limitations on
the payment of dividends, typically a percentage of net income or cash flow; however, these restrictions in the past have not
significantly impacted their ability to pay dividends.

Investment in our Subsidiaries and Affiliates and Other Acquisitions—

We have in the past, and may in the future, purchase the securities of our subsidiaries and affiliates or third parties in
market or privately-negotiated transactions. We base our purchase decision on a variety of factors, including an analysis of the optimal
use of our capital, taking into account the market value of the securities and the relative value of expected returns on alternative
investments. In connection with these activities, we may consider issuing additional equity securities or increasing our indebtedness.
We may also evaluate the restructuring of ownership interests of our businesses among our subsidiaries and related companies.

We generally do not guarantee any indebtedness or other obligations of our subsidiaries or affiliates. Our subsidiaries are
not required to pay us dividends. If one or more of our subsidiaries were unable to maintain its current level of dividends, either due to
restrictions contained in a credit agreement or to satisfy its liabilities or otherwise, our ability to service our liabilities or to pay
dividends on our common stock could be adversely impacted. If this were to occur, we might consider reducing or eliminating our
dividends or selling interests in subsidiaries or other assets. If we were required to liquidate assets to generate funds to satisfy our
liabilities, we might be required to sell at what we believe would be less than what we believe is the long-term value of such assets.

WCS’ primary source of liquidity currently consists of intercompany borrowings from one of our wholly-owned
subsidiaries under the terms of a revolving credit facility. We eliminate these intercompany borrowings in our Consolidated Financial
Statements. WCS has borrowed substantial amounts from us over the years. Prior to 2015, we contributed these amounts to WCS’
capital. WCS had borrowed an aggregate $33 million from our subsidiary in 2013 which we contributed to WCS’s capital. WCS did
not borrow any amounts from us during 2014. During 2015, WCS borrowed an aggregate $19.0 million from our subsidiary, and
WCS could borrow an additional $41.0 million under its current intercompany facility with such subsidiary at December 31, 2015. It
is probable WCS will borrow additional amounts from our subsidiary during 2016 under the terms of the revolving credit facility.

We have an unsecured revolving demand promissory note with NL whereby, as amended, we agreed to loan NL up to $40
million. We also eliminate any such intercompany borrowings in our Consolidated Financial Statements. We had no loans to NL
during 2015 under this facility, which as amended is due on demand, but in any event no earlier than March 31, 2017 and no later than
December 31, 2017. Our obligation to loan NL money under this note is at our discretion.

- 62 -

We have an unsecured revolving demand promissory note with Kronos which, as amended, provides for borrowings from
Kronos of up to $100 million. We also eliminate any such intercompany borrowings in our Consolidated Financial Statements. We
had no borrowings from Kronos during 2015 under this facility, which as amended is due on demand, but in any event no earlier than
December 31, 2017. Kronos’ obligation to loan us money under this note is at Kronos’ discretion.

Investment in The Amalgamated Sugar Company LLC—

The terms of The Amalgamated Sugar Company LLC Company Agreement provide for an annual “base level” of cash
dividend distributions (sometimes referred to as distributable cash) by the LLC of $26.7 million, from which we are entitled to a 95%
preferential share. Distributions from the LLC are dependent, in part, upon the operations of the LLC. We record dividend
distributions from the LLC as income when they are declared by the LLC, which is generally the same month in which we receive the
distributions, although distributions may in certain cases be paid on the first business day of the following month. To the extent the
LLC’s distributable cash is below this base level in any given year, we are entitled to an additional 95% preferential share of any
future annual LLC distributable cash in excess of the base level until such shortfall is recovered. Based on the LLC’s current
projections for 2016, we expect distributions received from the LLC in 2016 will exceed our debt service requirements under our $250
million loans from Snake River Sugar Company by approximately $1.8 million.

We may, at our option, require the LLC to redeem our interest in the LLC, and the LLC has the right to redeem our
interest in the LLC beginning in 2027. The redemption price is generally $250 million plus the amount of certain undistributed income
allocable to us, if any. In the event we require the LLC to redeem our interest in the LLC, Snake River has the right to accelerate the
maturity of and call our $250 aggregate million loans from Snake River. Redemption of our interest in the LLC would result in us
reporting income related to the disposition of our LLC interest for income tax purposes, although we would not be expected to report a
gain in earnings for financial reporting purposes at the time our LLC interest is redeemed. However, because of Snake River’s ability
to call our $250 million loans from Snake River upon redemption of our interest in the LLC, the net cash proceeds (after repayment of
the debt) generated by the redemption of our interest in the LLC could be less than the income taxes that we would be required to pay
as a result of the disposition.

Off-balance Sheet Financing

We do not have any off-balance sheet financing agreements other than the operating leases discussed in Note 17 to our

Consolidated Financial Statements.

Commitments and Contingencies

We are subject to certain commitments and contingencies, as more fully described in the Notes to our Consolidated
Financial Statements and in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, including:

(cid:121)

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

certain environmental remediation matters involving NL, Tremont, BMI and Valhi;

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

certain other litigation to which we are a party.

In addition to those legal proceedings described in Note 17 to our Consolidated Financial Statements, various legislation
and administrative regulations have, from time to time, been proposed that seek to (i) impose various obligations on present and
former manufacturers of lead pigment and lead-based paint (including NL) with respect to asserted health concerns associated with the
use of such products and (ii) 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, and bills which would revive actions barred
by the statute of limitations. While no legislation or regulations have been enacted to date that are expected to have a material adverse
effect on our consolidated financial position, results of operations or liquidity, enactment of such legislation could have such an effect.

- 63 -

As more fully described in the Notes 9 and 17 to our Consolidated Financial Statements, we are a party to various debt,
lease and other agreements which contractually and unconditionally commit us to pay certain amounts in the future. Our obligations
related to the long-term supply contracts for the purchase of TiO2 feedstock are more fully described in Note 17 to our Consolidated
Financial Statements and above in “Business—Chemicals Segment—Kronos Worldwide, Inc. —Manufacturing, Operations and
Properties.” The following table summarizes our contractual commitments as of December 31, 2015 by the type and date of payment.

Contractual commitment

Indebtedness (1):

Principal..................................................................................... $
Interest payments .......................................................................
Operating leases (2) ..........................................................................................
Kronos’ long-term supply contracts for the purchase of TiO2

feedstock (3) .................................................................................................
Kronos’ long-term service and other supply contracts (4) ......................
CompX’s raw material and other purchase commitments (5)................
WCS collateral trust (6) ...................................................................................
Fixed asset acquisitions (2) ............................................................................
BMI and LandWell purchase commitments (7) ........................................
Deferred payment obligation (8) ...................................................................
Estimated income tax obligations (9) ...........................................................
Total ............................................................................................... $

2016

2017/
2018

Payment due date
2019/
2020

(In millions)

2021and
after

Total

14.7 $
58.8
11.4

289.0 $
104.4
13.3

354.1 $
76.4
8.0

366.5 $ 1,024.3
417.2
177.6
56.3
23.6

340.5
50.4
9.8
6.9
25.3
1.1
—
5.7
524.6 $

456.4
71.1
.1
13.8
2.7
—
—
—
950.8 $

68.0
15.7
—
13.8
—
—
—
—
536.0 $

—
9.5
—
48.1
—
—
11.1
—

864.9
146.7
9.9
82.6
28.0
1.1
11.1
5.7
636.4 $ 2,647.8

(1) The amount shown for indebtedness involving revolving credit facilities is based upon the actual amount outstanding at
December 31, 2015, and the amount shown for interest for any outstanding variable-rate indebtedness is based upon the
December 31, 2015 interest rate, reflects the net impact of the associated interest rate swap and assumes that such variable-rate
indebtedness remains outstanding until the maturity of the facility. The timing and amount shown for principal payments on
term loan indebtedness is based on the mandatory contractual principal repayment schedule of such indebtedness, and assumes
no voluntary principal prepayments. See Item 7A— “Quantitative and Qualitative Disclosures About Market Risk” and Note 9
to our Consolidated Financial Statements.

(2) The timing and amount shown for our operating leases and fixed asset acquisitions are based upon the contractual payment

amount and the contractual payment date for such commitments.

(3) Our contracts for the purchase of TiO2 feedstock contain fixed quantities that we are required to purchase, or specify a range of
quantities within which we are required to purchase based on our feedstock requirements. The pricing under these agreements is
generally negotiated quarterly or semi-annually. The timing and amount shown for our commitments related to the supply
contracts for TiO2 feedstock are based upon our current estimate of the quantity of material that will be purchased in each time
period shown, the payment that would be due based upon such estimated purchased quantity and an estimate of the prices for the
various suppliers which is primarily based on first half 2016 pricing. The actual amount of material purchased and the actual
amount that would be payable by us, may vary from such estimated amounts. Our obligation for the purchase of TiO2 feedstock
is more fully described in Note 17 to our Consolidated Financial Statements and above in “Business – Chemicals Segment –
Kronos Worldwide, Inc. raw materials.” The amounts shown in the table above include the feedstock ore requirements from
contracts we entered into through February 2016.

(4) The amounts shown for the long-term service and other supply contracts primarily pertain to agreements we have entered into
with various providers of products or services which help to run our plant facilities (electricity, natural gas, etc.), utilizing
December 31, 2015 exchange rates. See Note 17 to our Consolidated Financial Statements.

(5) CompX’s purchase obligations consist of all open purchase orders and contractual obligations (primarily commitments to
purchase raw materials) and are based on the contractual payment amount and the contractual payment date for those
commitments.

(6) The funding requirements for WCS collateral trust agreements are described in Note 17 to our Consolidated Financial

Statements.

(7) BMI and LandWell’s purchase obligations consist of contractual obligations (primarily commitments for land development and
improvement costs) and are based on the contractual payment amount and the contractual payment date for those commitments.

(8) The deferred payment obligation is described in Note 3 to our Consolidated Financial Statements.
(9) The amount shown for income taxes is the amount of our consolidated income taxes currently payable at December 31, 2015,
which is assumed to be paid during 2016 and includes taxes payable, if any, to Contran as a result of our being a member of the
Contran Tax Group. See Notes 1 and 16 to our Consolidated Financial Statements.

- 64 -

The table above does not include:

(cid:121) Our obligations under the Louisiana Pigment Company, L.P. joint venture, as the timing and amount of such
purchases are unknown and dependent on, among other things, the amount of TiO2 produced by the joint venture in
the future, and the joint venture’s future cost of producing such TiO2. However, the table of contractual commitments
does include amounts related to our share of the joint venture’s ore requirements necessary for it to produce TiO2 for
us. See Notes 7 and 17 to our Consolidated Financial Statements and “Business—Chemicals—Kronos Worldwide,
Inc.”

(cid:121) Amounts we might pay to fund our defined benefit pension plans and OPEB plans, as the timing and amount of any
such future fundings are unknown and dependent on, among other things, the future performance of defined benefit
pension plan assets, interest rate assumptions and actual future retiree medical costs. Our defined benefit pension
plans and OPEB plans are discussed in greater detail in Note 11 to our Consolidated Financial Statements. We
currently expect we will be required to contribute an aggregate of $16.9 million to our defined benefit pension and
OPEB plans during 2016.

(cid:121) Any amounts that we might pay to settle any of our uncertain tax positions, as the timing and amount of any such
future settlements are unknown and dependent on, among other things, the timing of tax audits. See Note 12 to our
Consolidated Financial Statements.

We occasionally enter into raw material supply arrangements to mitigate the short-term impact of future increases in raw
material costs. While these arrangements do not necessarily commit us to a minimum volume of purchase, they generally provide for
stated unit prices based upon achievement of specified volume purchase levels. This allows us to stabilize raw material purchase
prices to a certain extent, provided the specified minimum monthly purchase quantities are met.

Recent Accounting Pronouncements

See Note 20 to our Consolidated Financial Statements.

- 65 -

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

General—We are exposed to market risk from changes in interest rates, currency exchange rates, raw materials and equity

security prices.

Interest Rates—We are exposed to market risk from changes in interest rates, primarily related to our indebtedness.

At December 31, 2015 our aggregate indebtedness was split between 36% of fixed-rate instruments and 64% of variable-
rate borrowings (in 2014 the percentages were 38% of fixed-rate instruments and 62% of variable rate borrowings). The fixed-rate
debt instruments minimizes earnings volatility that would result from changes in interest rates. The following table presents principal
amounts and weighted average interest rates for our aggregate outstanding indebtedness at December 31, 2015.

The table below shows the fair value of our financial liabilities at December 31, 2015.

Indebtedness* Amount

Carrying
value

Fair
value

(In millions)

Year end
interest
rate

Maturity
date

Fixed-rate indebtedness:

Valhi loans from Snake River ......................................... $
Tremont promissory note payable ..................................
WCS financing capital lease ...........................................
Note payable to the City of Henderson ...........................
Total fixed-rate indebtedness ................................

Variable-rate indebtedness:

Kronos term loan ............................................................ $
Valhi Contran credit facility ...........................................
BMI bank note payable ...................................................
Total variable-rate indebtedness ............................

Total ............................................................. $

250.0
17.1
65.6
3.1
335.8

338.0
263.8
9.3
611.1
946.9

250.0
17.1
65.6
3.1
335.8

309.5
263.8
9.3
582.6
918.4

2027
2023
2035
2020

2020
2017
2025

9.4 %
3.0
7.0
3.0
8.5 %

4.0 %
4.5
3.5
4.2 %
5.8 %

Excludes capital lease obligations.

As part of our interest rate risk management strategy, in 2015 we entered into a pay-fixed/receive-variable interest rate
swap contract to minimize our exposure to volatility in the benchmark LIBOR interest rate as it relates to our forecasted outstanding
variable-rate indebtedness. As a result of this swap the amount of interest expense we will incur is fixed at the swap rate,
consequently a change in LIBOR rate will not impact the amount of interest expense recognized. Considering the effects of the
interest rate swap approximately 72% of our debt would be considered fixed-rate and our weighted average borrowing rate for such
indebtedness would be 6.1%. See Note 18 to our Consolidated Financial Statements for a discussion of this interest rate swap.

Currency Exchange Rates — We are exposed to market risk arising from changes in currency exchange rates as a result of
manufacturing and selling our products worldwide. Earnings are primarily affected by fluctuations in the value of the U.S. dollar
relative to the euro, the Canadian dollar and, the Norwegian krone.

Certain of our sales generated by our non-U.S. operations are denominated in U.S. dollars. We periodically use currency
forward contracts to manage a very nominal portion of currency exchange rate risk associated with trade receivables denominated in a
currency other than the holder’s functional currency or similar exchange rate risk associated with future sales. We have not entered
into these contracts for trading or speculative purposes in the past, nor do we currently anticipate entering into such contracts for
trading or speculative purposes in the future. See Note 18 to our Consolidated Financial Statements for a discussion of certain
currency forward contracts to which we are a party at December 31, 2015.

See Notes 1 and 18 to our Consolidated Financial Statements for a discussion of the assumptions we used to estimate the

fair value of the financial instruments to which we are a party at December 31, 2014 and 2015.

Raw Materials — Our Chemicals Segment generally enters into long-term supply agreements for certain critical raw
materials. Many of these raw material contracts contain fixed quantities we are required to purchase or specify a range of quantities
within which we are required to purchase. Raw material pricing under these agreements is generally negotiated quarterly or semi-
annually depending on the suppliers.

- 66 -

Our Component Products Segment will occasionally enter into short-term commodity related raw material supply
arrangements to mitigate the impact of future increases in commodity related raw material costs. We do not have long-term supply
agreements for our raw material requirements because either we believe the risk of unavailability of those raw materials is low and we
believe the downside risk of price volatility to be too great or because long-term supply agreements for those materials are generally
not available. We do not engage in commodity hedging programs.

Marketable Equity and Debt Security Prices — We are exposed to market risk due to changes in prices of the marketable
securities we own. The fair value of such debt and equity securities (determined using Level 1, Level 2 and Level 3 inputs) at
December 31, 2014 and 2015 was $256.8 million and $258.3 million, respectively. The potential change in the aggregate fair value of
these investments, assuming a hypothetical 10% change in prices, would be approximately $25.7 million at December 31, 2014 and
$25.8 million at December 31, 2015.

Other — We believe there may be a certain amount of incompleteness in the sensitivity analyses presented above. For
example, the hypothetical effect of changes in interest rates discussed above ignores the potential effect on other variables that affect
our results of operations and cash flows, such as demand for our products, sales volumes and selling prices and operating expenses.
Contrary to the above assumptions, changes in interest rates rarely result in simultaneous comparable shifts along the yield curve.
Also, our investment in The Amalgamated Sugar Company LLC represents a significant portion of our total portfolio of marketable
securities. That investment serves as collateral for our loans from Snake River Sugar Company, and a decrease in the fair value of that
investment would likely be mitigated by a decrease in the fair value of the related indebtedness. Accordingly, the amounts we present
above are not necessarily an accurate reflection of the potential losses we would incur assuming the hypothetical changes in market
prices were actually to occur.

The above discussion and estimated sensitivity analysis amounts include forward-looking statements of market risk which
assume hypothetical changes in market prices. Actual future market conditions will likely differ materially from such assumptions.
Accordingly, such forward-looking statements should not be considered to be projections by us of future events, gains or losses.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for by this Item is contained in a separate section of this Annual Report. See “Index of Financial

Statements” (page F-1).

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures—

We maintain disclosure controls and procedures which, as defined in Exchange Act Rule 13a-15(e), means controls and
other procedures that are designed to ensure that information required to be disclosed in the reports we file or submit to the SEC under
the Securities Exchange Act of 1934, as amended (the “Act”), is recorded, processed, summarized and reported, within the time
periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information we are required to disclose in the reports we file or submit to the SEC under the Act is
accumulated and communicated to our management, including our principal executive officer and our principal financial officer, or
persons performing similar functions, as appropriate to allow timely decisions to be made regarding required disclosure. Each of
Steven L. Watson, our Chairman of the Board and Chief Executive Officer, and Bobby D. O’Brien, our Director, President and Chief
Financial Officer, have evaluated the design and effectiveness of our disclosure controls and procedures as of December 31, 2015.
Based upon their evaluation, these executive officers have concluded that our disclosure controls and procedures were effective as of
the date of such evaluation.

- 67 -

Management‘s report on internal control over financial reporting —

Our management is responsible for establishing and maintaining adequate internal control over financial reporting which,
as defined by Exchange Act Rule 13a-15(f) means a process designed by, or under the supervision of, our principal executive and
principal financial officers, or persons performing similar functions, and effected by the board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

(cid:121) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and

dispositions of our assets,

(cid:121) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations
of management and directors and

(cid:121) Provide reasonable assurance regarding prevention or timely detection of an unauthorized acquisition, use or

disposition of assets that could have a material effect on our Consolidated Financial Statements.

Our evaluation of the effectiveness of internal control over financial reporting is based upon the criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013
(commonly referred to as the “2013 COSO” framework). Based on our evaluation under that framework, we have concluded that our
internal control over financial reporting was effective as of December 31, 2015.

PricewaterhouseCoopers LLP, the independent registered public accounting firm that has audited our consolidated
financial statements included in this Annual Report, has audited the effectiveness of our internal control over financial reporting as of
December 31, 2015, as stated in their report, which is included in this Annual Report on Form 10-K.

As permitted by the SEC, our assessment of internal control over financial reporting excludes (i) internal control over
financial reporting of equity method investees and (ii) internal control over the preparation of any financial statement schedules which
would be required by Article 12 of Regulation S-X. However, our assessment of internal control over financial reporting with respect
to equity method investees did include controls over the recording of amounts related to our investment that are recorded in the
consolidated financial statements, including controls over the selection of accounting methods for our investments, the recognition of
equity method earnings and losses and the determination, valuation and recording of our investment account balances.

Changes in internal control over financial reporting —

There has been no change to our internal control over financial reporting during the quarter ended December 31, 2015 that

has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Certifications —

Our chief executive officer is required to annually file a certification with the New York Stock Exchange, or NYSE,
certifying our compliance with the corporate governance listing standards of the NYSE. During 2015, our chief executive officer filed
such annual certification with the NYSE. The 2015 certification was unqualified.

Our chief executive officer and chief financial officer are also required to, among other things, file quarterly certifications
with the SEC regarding the quality of our public disclosures, as required by Section 302 of the Sarbanes-Oxley Act of 2002. The
certifications for the quarter ended December 31, 2015 have been filed as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K.

ITEM 9B. OTHER INFORMATION

Not applicable.

- 68 -

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated by reference to our 2016 definitive proxy statement we will file with
the SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report (the “Valhi Proxy
Statement”).

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to our 2016 proxy statement.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS

The information required by this Item is incorporated by reference to our 2016 proxy statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTORS INDEPENDENCE

The information required by this Item is incorporated by reference to our 2016 proxy statement. See also Note 16 to our

Consolidated Financial Statements.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is incorporated by reference to our 2016 proxy statement.

ITEM 15. EXHIBITS

(a) and (c) Financial Statements

The Registrant

PART IV

Our Consolidated Financial Statements listed on the accompanying Index of Financial Statements (see page F-
1) are filed as part of this Annual Report.

50%-or-less owned persons

We are not required to provide any consolidated financial statements pursuant to Rule 3-09 of Regulation S-X.

(b) Exhibits

Included as exhibits are the items listed in the Exhibit Index. We have retained a signed original of any of these
exhibits that contain signatures, and we will provide such exhibit to the Commission or its staff upon request.
We will furnish a copy of any of the exhibits listed below upon request and payment of $4.00 per exhibit to
cover our costs of furnishing the exhibits. Such requests should be directed to the attention of our Corporate
Secretary at our corporate offices located at 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240. Pursuant to
Item 601(b)(4)(iii) of Regulation S-K, we will furnish to the Commission upon request any instrument defining
the rights of holders of long-term debt issues and other agreements related to indebtedness which do not exceed
10% of our consolidated total assets as of December 31, 2015.

- 69 -

Item No.

3.1+

3.2

3.3

10.1

10.2

10.3

10.4

10.5**

10.6*

10.7*

10.8*

10.9*

10.10

10.11

10.12

10.13

10.14

10.15

Exhibit Index

Restated Certificate of Incorporation of Valhi, Inc.—incorporated by reference to Exhibit 3.1 to our Current Report on
Form 8-K (File No. 1-5467) dated May 10, 2012 and filed on May 10, 2012.

Consent Agreement dated as of March 29, 2007 between Valhi, Inc. and Contran Corporation regarding the Amended
and Restated Certificate of Designations, Rights and Preferences of 6% Series A Preferred Stock of Valhi, Inc.—
incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K/A (File No. 1-5467) dated March 26,
2007 and filed by us on March 30, 2007.

By-Laws of Valhi, Inc. as amended—incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K
(File No. 1-5467) dated November 6, 2007.

Intercorporate Services Agreement between Valhi, Inc. and Contran Corporation effective as of January 1, 2004—
incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.

Intercorporate Services Agreement between Contran Corporation and NL Industries, Inc. effective as of January 1,
2004—incorporated by reference to Exhibit 10.1 to NL’s Quarterly Report on Form 10-Q (File No. 1-640) for the
quarter ended March 31, 2004.

Intercorporate Services Agreement between Contran Corporation and CompX International Inc. effective January 1,
2004—incorporated by reference to Exhibit 10.2 to CompX’s Annual Report on Form 10-K (File No. 1-13905) for the
year ended December 31, 2003.

Intercorporate Services Agreement between Contran Corporation and Kronos Worldwide, Inc. effective January 1,
2004—incorporated by reference to Exhibit No. 10.1 to Kronos’ Quarterly Report on Form 10-Q (File No. 1-31763)
for the quarter ended March 31, 2004.

Tax Agreement between Valhi, Inc. and Contran Corporation dated June 3, 2015.

Valhi, Inc. 2012 Director Stock Plan—incorporated by reference to Exhibit 4.5 of the Registration statement on
Form S-8 of the Registrant (File No. 333-48391). Filed on May 31, 2012.

Kronos Worldwide, Inc. 2012 Director Stock Plan—incorporated by reference to Exhibit 4.4 of the Registration
statement on Form S-8 of the Registrant (File No. 333-113425). Filed on May 31, 2012.

CompX International Inc. 2012 Director Stock Plan—incorporated by reference to Exhibit 4.4 of the Registration
statement on Form S-8 of the Registrant (File No. 333-47539). Filed on May 31, 2012.

NL Industries, Inc. 2012 Director Stock Plan—incorporated by reference to Exhibit 4.4 of the Registrant’s statement
on Form S-8 (File No. 001-00640) Filed on May 31, 2012.

First Amended and Restated Agreement Regarding Shared Insurance among CompX International Inc., Contran
Corporation, Keystone Consolidated Industries, Inc., Kronos Worldwide, Inc., NL Industries, Inc. and Valhi, Inc.
dated October 15, 2015 incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K of Kronos
Worldwide, Inc. (File No. 001-31763) for the year ended December 31, 2015.

Formation Agreement of The Amalgamated Sugar Company LLC dated January 3, 1997 (to be effective
December 31, 1996) between Snake River Sugar Company and The Amalgamated Sugar Company—incorporated by
reference to Exhibit 10.19 to Valhi, Inc.’s Annual Report on Form 10-K (File No. 1-5467) for the year ended
December 31, 1996.

Master Agreement Regarding Amendments to The Amalgamated Sugar Company Documents dated October 19,
2000—incorporated by reference to Exhibit 10.1 to Valhi, Inc.’s Quarterly Report on Form 10-Q (File No. 1-5467) for
the quarter ended September 30, 2000.

Prepayment and Termination Agreement dated October 14, 2005 among Valhi, Inc., Snake River Sugar Company and
Wells Fargo Bank Northwest, N.A.—incorporated by reference to Exhibit No. 10.1 to Valhi, Inc.’s Amendment No. 1
to its Current Report on Form 8-K (File No. 1-5467) dated October 18, 2005.

Company Agreement of The Amalgamated Sugar Company LLC dated January 3, 1997 (to be effective December 31,
1996)—incorporated by reference to Exhibit 10.20 to Valhi, Inc.’s Annual Report on Form 10-K (File No. 1-5467) for
the year ended December 31, 1996.

First Amendment to the Company Agreement of The Amalgamated Sugar Company LLC dated May 14, 1997—
incorporated by reference to Exhibit 10.1 to Valhi, Inc.’s Quarterly Report on Form 10-Q (File No. 1-5467) for the
quarter ended June 30, 1997.

- 70 -

Item No.

10.16

10.17

10.18

10.19

10.20

10.21

10.22

10.23

10.24

10.25

10.26

10.27

10.28

10.29

Exhibit Index

Second Amendment to the Company Agreement of The Amalgamated Sugar Company LLC dated November 30,
1998—incorporated by reference to Exhibit 10.24 to Valhi, Inc.’s Annual Report on Form 10-K (File No. 1-5467) for
the year ended December 31, 1998.

Third Amendment to the Company Agreement of The Amalgamated Sugar Company LLC dated October 19, 2000—
incorporated by reference to Exhibit 10.2 to Valhi, Inc.’s Quarterly Report on Form 10-Q (File No. 1-5467) for the
quarter ended September 30, 2000.

Amended and Restated Company Agreement of The Amalgamated Sugar Company LLC dated October 14, 2005
among The Amalgamated Sugar Company LLC, Snake River Sugar Company and The Amalgamated Collateral
Trust—incorporated by reference to Exhibit No. 10.7 to Valhi, Inc.’s Amendment No. 1 to its Current Report on
Form 8-K (File No. 1-5467) dated October 18, 2005.

Subordinated Promissory Note in the principal amount of $37.5 million between Valhi, Inc. and Snake River Sugar
Company, and the related Pledge Agreement, both dated January 3, 1997— incorporated by reference to Exhibit 10.21
to Valhi, Inc.’s Annual Report on Form 10-K (File No. 1-5467) for the year ended December 31, 1996.

Limited Recourse Promissory Note in the principal amount of $212.5 million between Valhi, Inc. and Snake River
Sugar Company, and the related Limited Recourse Pledge Agreement, both dated January 3, 1997—incorporated by
reference to Exhibit 10.22 to Valhi, Inc.’s Annual Report on Form 10-K (File No. 1-5467) for the year ended
December 31, 1996.

Subordinated Loan Agreement between Snake River Sugar Company and Valhi, Inc., as amended and restated
effective May 14, 1997—incorporated by reference to Exhibit 10.9 to Valhi, Inc.’s Quarterly Report on Form 10-Q
(File No. 1-5467) for the quarter ended June 30, 1997.

Second Amendment to the Subordinated Loan Agreement between Snake River Sugar Company and Valhi, Inc. dated
November 30, 1998—incorporated by reference to Exhibit 10.28 to Valhi, Inc.’s Annual Report on Form 10-K (File
No. 1-5467) for the year ended December 31, 1998.

Third Amendment to the Subordinated Loan Agreement between Snake River Sugar Company and Valhi, Inc. dated
October 19, 2000—incorporated by reference to Exhibit 10.3 to Valhi, Inc.’s Quarterly Report on Form 10-Q (File No.
1-5467) for the quarter ended September 30, 2000.

Fourth Amendment to the Subordinated Loan Agreement between Snake River Sugar Company and Valhi, Inc. dated
March 31, 2003—incorporated by reference to Exhibit No. 10.1 to Valhi, Inc.’s Quarterly Report on Form 10-Q (file
No. 1-5467) for the quarter ended March 31, 2003.

Contingent Subordinate Pledge Agreement between Snake River Sugar Company and Valhi, Inc., as acknowledged by
First Security Bank National Association as Collateral Agent, dated October 19, 2000—incorporated by reference to
Exhibit 10.4 to Valhi, Inc.’s Quarterly Report on Form 10-Q (File No. 1-5467) for the quarter ended September 30,
2000.

Contingent Subordinate Security Agreement between Snake River Sugar Company and Valhi, Inc., as acknowledged
by First Security Bank National Association as Collateral Agent, dated October 19, 2000—incorporated by reference
to Exhibit 10.5 to Valhi, Inc.’s Quarterly Report on Form 10-Q (File No. 1-5467) for the quarter ended September 30,
2000.

Contingent Subordinate Collateral Agency and Paying Agency Agreement among Valhi, Inc., Snake River Sugar
Company and First Security Bank National Association dated October 19, 2000— incorporated by reference to
Exhibit 10.6 to Valhi, Inc.’s Quarterly Report on Form 10-Q (File No. 1-5467) for the quarter ended September 30,
2000.

Deposit Trust Agreement related to the Amalgamated Collateral Trust among ASC Holdings, Inc. and Wilmington
Trust Company dated May 14, 1997—incorporated by reference to Exhibit 10.2 to Valhi, Inc.’s Quarterly Report on
Form 10-Q (File No. 1-5467) for the quarter ended June 30, 1997.

First Amendment to Deposit Trust Agreement dated October 14, 2005 among ASC Holdings, Inc. and Wilmington
Trust Company—incorporated by reference to Exhibit No. 10.2 to Valhi, Inc.’s Amendment No. 1 to its Current
Report on Form 8-K (File No. 1-5467) dated October 18, 2005.

- 71 -

Item No.

10.30

10.31

10.32

10.33

10.34

10.35

10.36

10.37

10.38

10.39

10.40

10.41

10.42

10.43

10.44

10.45

Exhibit Index

Pledge Agreement between The Amalgamated Collateral Trust and Snake River Sugar Company dated May 14,
1997—incorporated by reference to Exhibit 10.3 to Valhi, Inc.’s Quarterly Report on Form 10-Q (File No. 1-5467) for
the quarter ended June 30, 1997.

Second Pledge Amendment (SPT) dated October 14, 2005 among The Amalgamated Collateral Trust and Snake River
Sugar Company—incorporated by reference to Exhibit No. 10.4 to Valhi, Inc.’s Amendment No. 1 to its Current
Report on Form 8-K (File No. 1-5467) dated October 18, 2005.

Guarantee by The Amalgamated Collateral Trust in favor of Snake River Sugar Company dated May 14, 1997—
incorporated by reference to Exhibit 10.4 to Valhi, Inc.’s Quarterly Report on Form 10-Q (File No. 1-5467) for the
quarter ended June 30, 1997.

Second SPT Guaranty Amendment dated October 14, 2005 among The Amalgamated Collateral Trust and Snake
River Sugar Company—incorporated by reference to Exhibit No. 10.5 to Valhi, Inc.’s Amendment No. 1 to its Current
Report on Form 8-K (File No. 1-5467) dated October 18, 2005.

Voting Rights and Collateral Deposit Agreement among Snake River Sugar Company, Valhi, Inc., and First Security
Bank, National Association dated May 14, 1997—incorporated by reference to Exhibit 10.8 to Valhi, Inc.’s Quarterly
Report on Form 10-Q (File No. 1-5467) for the quarter ended June 30, 1997.

Subordination Agreement between Valhi, Inc. and Snake River Sugar Company dated May 14, 1997—incorporated by
reference to Exhibit 10.10 to Valhi, Inc.’s Quarterly Report on Form 10-Q (File No. 1-5467) for the quarter ended
June 30, 1997.

First Amendment to the Subordination Agreement between Valhi, Inc. and Snake River Sugar Company dated
October 19, 2000—incorporated by reference to Exhibit 10.7 to Valhi, Inc.’s Quarterly Report on Form 10-Q (File No.
1-5467) for the quarter ended September 30, 2000.

Form of Option Agreement among Snake River Sugar Company, Valhi, Inc. and the holders of Snake River Sugar
Company’s 10.9% Senior Notes Due 2009 dated May 14, 1997—incorporated by reference to Exhibit 10.11 to the
Valhi, Inc.’s Quarterly Report on Form 10-Q (File No. 1-5467) for the quarter ended June 30, 1997.

Option Agreement dated October 14, 2005 among Valhi, Inc., Snake River Sugar Company, Northwest Farm Credit
Services, FLCA and U.S. Bank National Association—incorporated by reference to Exhibit No. 10.6 to Valhi, Inc.’s
Amendment No. 1 to its Current Report on Form 8-K (File No. 1-5467) dated October 18, 2005.

First Amendment to Option Agreements among Snake River Sugar Company, Valhi Inc., and the holders of Snake
River’s 10.9% Senior Notes Due 2009 dated October 19, 2000—incorporated by reference to Exhibit 10.8 to the
Valhi, Inc.’s Quarterly Report on Form 10-Q (File No. 1-5467) for the quarter ended September 30, 2000.

Formation Agreement dated as of October 18, 1993 among Tioxide Americas Inc., Kronos Louisiana, Inc. and Louisiana
Pigment Company, L.P.—incorporated by reference to Exhibit 10.2 of NL’s Quarterly Report on Form 10-Q (File No. 1-
640) for the quarter ended September 30, 1993.

Joint Venture Agreement dated as of October 18, 1993 between Tioxide Americas Inc. and Kronos Louisiana, Inc.—
incorporated by reference to Exhibit 10.3 of NL’s Quarterly Report on Form 10-Q (File No. 1-640) for the quarter
ended September 30, 1993.

Kronos Offtake Agreement dated as of October 18, 1993 by and between Kronos Louisiana, Inc. and Louisiana
Pigment Company, L.P.—incorporated by reference to Exhibit 10.4 of NL’s Quarterly Report on Form 10-Q (File No.
1-640) for the quarter ended September 30, 1993.

Amendment No. 1 to Kronos Offtake Agreement dated as of December 20, 1995 between Kronos Louisiana, Inc. and
Louisiana Pigment Company, L.P.—incorporated by reference to Exhibit 10.22 of NL’s Annual Report on Form 10-K
(File No. 1-640) for the year ended December 31 1995.

Allocation Agreement dated as of October 18, 1993 between Tioxide Americas Inc., ICI American Holdings, Inc.,
Kronos Worldwide, Inc. (f/k/a Kronos, Inc.) and Kronos Louisiana, Inc.—incorporated by reference to Exhibit 10.10
to NL’s Quarterly Report on Form 10-Q (File No. 1-640) for the quarter ended September 30, 1993.

Lease Contract dated June 21, 1952, between Farbenfabrieken Bayer Aktiengesellschaft and Titangesellschaft mit
beschrankter Haftung (German language version and English translation thereof)—incorporated by reference to
Exhibit 10.14 of NL’s Annual Report on Form 10-K (File No. 1-640) for the year ended December 31, 1985.

- 72 -

Item No.

10.46

10.47

10.48

10.49

10.50

10.51

10.52

21.1**

23.1**

31.1**

31.2**

32.1**

Exhibit Index

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

Restated and Amended Agreement by and between Richards Bay Titanium (Proprietary) Limited (acting through its
sales agent Rio Tinto Iron & Titanium Limited) and Kronos (US), Inc. effective January 1, 2016 – incorporated by
reference to Exhibit 10.26 to the Annual Report on Form 10-K of Kronos Worldwide, Inc. (File No. 001-31763) for
the year ended December 31, 2015.

Credit Agreement, dated February 18, 2014, by and among Kronos Worldwide, Inc. and Deutsche Bank AG New
York Branch - incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K and filed by Kronos
Worldwide, Inc. (File No. 001-31763) dated February 18, 2014 and filed by the registrant on February 18, 2014.

First Amendment to Credit Agreement dated May 21, 2015 among Kronos Worldwide, Inc., Deutsche Bank AG New
York Branch, as Administrative Agent, and the lenders a party thereto - incorporated by reference to Exhibit 10.1 to
the current report on Form 8-K and filed by Kronos Worldwide, Inc. (File No. 001-31763) dated May 21, 2015 and
filed by the registrant on May 21, 2015.

Guaranty and Security Agreement, dated February 18, 2014, among Kronos Worldwide, Inc., Kronos Louisiana, Inc.,
Kronos (US), Inc., Kronos International, Inc. and Deutsche Bank AG New York Branch - incorporated by reference to
Exhibit 10.2 to the Current Report on Form 8-K (File No. 001-31763) dated February 18, 2014 and filed by and filed
by Kronos Worldwide, Inc. on February 18, 2014.

Intercreditor Agreement dated as of February 18, 2014, by and between Wells Fargo Capital Finance and Deutsche
Bank AG New York Branch, and acknowledged by Kronos Worldwide, Inc., Kronos Louisiana, Inc. and Kronos (US),
Inc. - incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K (File No. 001-31763) dated
February 18, 2014 and filed by and filed by Kronos Worldwide, Inc. on February 18, 2014.

Purchase Agreement by and between Rockwell Holdco, Inc. and Andrews County Holding, Inc.—incorporated by
reference to Exhibit No. 2.1 to Valhi, Inc.’s Current Report on Form 8-K (File No. 333-48391) dated November 19,
2015.

Subsidiaries of Valhi, Inc.

Consent of PricewaterhouseCoopers LLP with respect to Valhi’s Consolidated Financial Statements

Certification

101.INS **

XBRL Instance Document

101.SCH **

XBRL Taxonomy Extension Schema

101.CAL **

XBRL Taxonomy Extension Calculation Linkbase

101.DEF **

XBRL Taxonomy Extension Definition Linkbase

101.LAB **

XBRL Taxonomy Extension Label Linkbase

101.PRE **

XBRL Taxonomy Extension Presentation Linkbase

* Management contract, compensatory plan or agreement.
**
+

Filed herewith.
Exhibit 3.1 is restated for the purposes of the disclosure requirements of Item 601 of Regulation S-K promulgated by the U.S.
Securities and Exchange Commission and does not represent a restated certificate of incorporation that has been filed with the
Delaware Secretary of State.

- 73 -

Annual Report on Form 10-K

Items 8, 15(a) and 15(c)

Index of Financial Statements

Financial Statements

Report of Independent Registered Public Accounting Firm ................................................................................................

Consolidated Balance Sheets—December 31, 2014 and 2015 ............................................................................................

Consolidated Statements of Operations—Years ended December 31, 2013, 2014 and 2015 .............................................

Consolidated Statements of Comprehensive Income (Loss)—Years ended December 31, 2013, 2014 and 2015 ..............

Consolidated Statements of Stockholders’ Equity—Years ended December 31, 2013, 2014 and 2015 .............................

Consolidated Statements of Cash Flows—Years ended December 31, 2013, 2014 and 2015 ............................................

Page

F-2

F-3

F-5

F-6

F-7

F-8

Notes to Consolidated Financial Statements .......................................................................................................................

F-11

We have omitted all financial statement schedules because they are not applicable or the required amounts are either not
material or are presented in the Notes to the Consolidated Financial Statements.

F-1

F-2

VALHI, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions)

December 31,

2014

2015

Current assets:

ASSETS

Cash and cash equivalents .................................................................................... $
Restricted cash equivalents ...................................................................................
Marketable securities ............................................................................................
Accounts and other receivables, net .....................................................................
Refundable income taxes ......................................................................................
Receivable from affiliates .....................................................................................
Land held for development ...................................................................................
Inventories, net .....................................................................................................
Other current assets ..............................................................................................
Total current assets .....................................................................................

Other assets:

Marketable securities ............................................................................................
Investment in TiO2 manufacturing joint venture ..................................................
Goodwill ...............................................................................................................
Deferred income taxes ..........................................................................................
Pension asset .........................................................................................................
Other assets ...........................................................................................................
Total other assets .........................................................................................

Property and equipment:

Land ......................................................................................................................
Buildings ..............................................................................................................
Equipment ............................................................................................................
Treatment, storage and disposal facilities .............................................................
Mining properties .................................................................................................
Construction in progress .......................................................................................

Less accumulated depreciation .............................................................................
Net property and equipment ........................................................................
Total assets .................................................................................................. $

255.8 $
10.6
2.7
271.3
8.7
23.9
15.0
443.0
17.6
1,048.6

255.6
89.0
379.7
160.9
—
277.8
1,163.0

49.1
263.1
1,139.9
159.9
52.0
26.2
1,690.2
956.6
733.6
2,945.2 $

202.3
7.2
2.0
228.9
7.4
10.3
9.9
405.2
23.0
896.2

254.9
82.9
379.7
1.3
1.7
255.0
975.5

45.4
239.7
1,061.6
159.5
35.5
33.1
1,574.8
909.1
665.7
2,537.4

F-3

VALHI, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In millions, except share data)

December 31,

2014

2015

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Current maturities of long-term debt .................................................................... $
Accounts payable..................................................................................................
Accrued liabilities .................................................................................................
Payable to affiliates ..............................................................................................
Income taxes .........................................................................................................
Total current liabilities ......................................................................

Noncurrent liabilities:

Long-term debt .....................................................................................................
Deferred income taxes ..........................................................................................
Accrued pension costs ..........................................................................................
Accrued environmental remediation and related costs .........................................
Accrued postretirement benefits costs ..................................................................
Other liabilities .....................................................................................................
Total noncurrent liabilities ................................................................

Equity:

Valhi stockholders’ equity:

9.3 $
136.2
128.0
46.0
7.8
327.3

919.7
399.8
249.4
108.3
14.1
112.7
1,804.0

Preferred stock, $.01 par value; 5,000 shares authorized; 5,000 shares

issued ......................................................................................................

667.3

Common stock, $.01 par value; 500.0 million shares authorized;

355.2 million shares issued and outstanding ..........................................
Additional paid-in capital ............................................................................
Retained earnings (deficit) ..........................................................................
Accumulated other comprehensive loss ......................................................
Treasury stock, at cost—13.2 million shares ..............................................
Total Valhi stockholders’ equity .......................................................
Noncontrolling interest in subsidiaries .................................................................
Total equity........................................................................................
Total liabilities and equity ................................................................. $

3.6
—
4.9
(148.6 )
(49.6 )
477.6
336.3
813.9
2,945.2 $

Commitments and contingencies (Notes 9, 12, 16 and 17)

See accompanying Notes to Consolidated Financial Statements.

9.5
104.8
121.1
45.5
5.7
286.6

951.0
321.0
216.8
108.7
11.8
114.6
1,723.9

667.3

3.6
—
(155.6)
(197.0)
(49.6)
268.7
258.2
526.9
2,537.4

F-4

VALHI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

Revenues and other income:

Net sales ......................................................................................................... $
Other income, net ...........................................................................................
Total revenues and other income ..........................................................

Costs and expenses:

Cost of sales ....................................................................................................
Selling, general and administrative.................................................................
Loss on prepayment of debt, net .....................................................................
Interest ............................................................................................................
Total costs and expenses .......................................................................
Income (loss) before income taxes ........................................................
Income tax expense (benefit) ...................................................................................
Net income (loss) .....................................................................................................
Noncontrolling interest in net income (loss) of subsidiaries ....................................
Net income (loss) attributable to Valhi stockholders ...................................... $

Basic and diluted net income (loss) per share ................................................. $
Cash dividends per share ................................................................................ $
Basic and diluted weighted average shares outstanding .................................

2013

Years ended December 31,
2014

2015

1,863.6 $
88.0
1,951.6

1,729.4
375.1
8.9
56.1
2,169.5
(217.9 )
(91.0 )
(126.9 )
(28.9 )
(98.0 ) $

(.29 ) $
.20 $

342.0

1,862.6 $
42.0
1,904.6

1,459.8
276.1
—
56.7
1,792.6
112.0
32.5
79.5
25.7
53.8 $

.16 $
.11 $
342.0

1,532.9
32.0
1,564.9

1,310.0
269.7
—
59.0
1,638.7
(73.8)
97.3
(171.1)
(37.5)
(133.6)

(.39)
.08
342.0

See accompanying Notes to Consolidated Financial Statements.

F-5

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

Net income (loss) .................................................................................................... $
Other comprehensive income (loss), net of tax:

Currency translation ......................................................................................
Interest rate swap ...........................................................................................
Marketable securities .....................................................................................
Defined benefit pension plans .......................................................................
Other postretirement benefit plans.................................................................
Total other comprehensive income (loss), net .....................................
Comprehensive loss ................................................................................................
Comprehensive loss attributable to noncontrolling interest ....................................
Comprehensive loss attributable to Valhi stockholders ................................. $

2013

Years ended December 31,
2014

2015

(126.9 ) $

79.5 $

(`171.1)

7.5
—
10.3
32.1
3.2
53.1
(73.8 )
(9.8 )
(64.0 ) $

(105.8)
—
(22.1)
(71.6)
(2.5)
(202.0)
(122.5)
(35.7)
(86.8) $

(77.0)
(1.8)
(7.5)
12.6
(.7)
(74.4)
(245.5)
(63.5)
(182.0)

See accompanying Notes to Consolidated Financial Statements.

F-6

VALHI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years ended December 31, 2013, 2014 and 2015

(In millions)

Valhi Stockholders’ Equity

Preferred
stock

Common
stock

Additional
paid-in
capital

Retained
earnings
(deficit)

Balance at December 31, 2012 ............ $ 667.3 $
—
Net loss ................................................
—
Cash dividends .....................................
Other comprehensive income, net ........
—
Noncontrolling interest of businesses

3.6 $
—
—
—

78.9 $
—
(50.9)
—

Accumulated
other
comprehensive
income (loss)
(42.0) $
—
—
34.0

75.4 $
(98.0)
(17.0)
—

Treasury
stock

Non-
controlling
interest

Total
equity

(49.6) $ 358.1 $ 1,091.7
(126.9)
(86.1)
53.1

(28.9)
(18.2)
19.1

—
—
—

acquired..............................................

—

61.5

Equity transactions with

noncontrolling interest, net ..............
Balance at December 31, 2013 ............
Net income ...........................................
Cash dividends .....................................
Other comprehensive loss, net .............
Equity transactions with

noncontrolling interest, net ..............
Balance at December 31, 2014 ............
Net loss ................................................
Cash dividends .....................................
Other comprehensive loss, net .............
Equity transactions with

—
667.3
—
—
—

—
3.6
—
—
—

(.4)
27.6
—
(28.0)
—

—
(39.6)
53.8
(9.3)
—

.4
—
—
(.2)
—

—
4.9
(133.6)
(26.9)
—

—
(8.0)
—
—
(140.6)

—
(148.6)
—
—
(48.4)

—
(49.6)
—
—
—

(.1)
391.5
25.7
(19.3)
(61.4)

(.2)
336.3
(37.5)
(14.6)
(26.0)

(.5)
992.8
79.5
(56.6)
(202.0)

.2
813.9
(171.1)
(41.7)
(74.4)

—

.2
(49.6) $ 258.2 $ 526.9

—

noncontrolling interest, net ..............

—
Balance at December 31, 2015 .......... $ 667.3 $

—
3.6 $

.2
—
— $ (155.6) $

—
(197.0) $

See accompanying Notes to Consolidated Financial Statements.

F-7

VALHI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

Cash flows from operating activities:

Net income (loss)............................................................................................. $
Depreciation and amortization ........................................................................
Net (gain) loss from:

Bargain purchase and re-measurement of our existing investment in

acquiree .............................................................................................
Securities transactions, net .....................................................................
Disposal of property and equipment, net ...............................................
Loss on prepayment of debt, net ......................................................................
Noncash interest expense ................................................................................
Benefit plan expense greater (less) than cash funding .....................................
Deferred income taxes .....................................................................................
Distributions from TiO2 manufacturing joint venture, net ...............................
Other, net .........................................................................................................
Change in assets and liabilities:

Accounts and other receivables, net .......................................................
Land held for development, net .............................................................
Inventories, net.......................................................................................
Accounts payable and accrued liabilities ...............................................
Income taxes ..........................................................................................
Accounts with affiliates .........................................................................
Other noncurrent assets ..........................................................................
Other noncurrent liabilities ....................................................................
Other, net ...............................................................................................
Net cash provided by operating activities .....................................

2013

Years ended December 31,
2014

2015

(126.9) $
74.5

79.5 $
78.4

(171.1)
69.9

(54.6)
(.2)
.5
8.9
1.5
7.0
(114.8)
10.9
6.0

22.9
—
220.0
73.4
(9.6)
(18.7)
(2.1)
.2
18.2
117.1

—
(.3)
.9
—
2.3
(3.1)
10.0
10.6
8.0

(27.2)
(6.8)
(55.1)
(26.4)
5.4
(13.2)
2.8
4.8
(3.3)
67.3

—
—
.8
—
2.5
2.9
85.7
6.5
7.8

22.2
7.1
(8.4)
(13.9)
(.9)
17.1
(2.5)
2.7
(5.9)
22.5

F-8

VALHI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In millions)

Cash flows from investing activities:

Capital expenditures ......................................................................................... $
Capitalized permit costs ...................................................................................
Acquisition of a businesses ..............................................................................
Cash of businesses acquired .............................................................................
Purchases of marketable securities ...................................................................
Proceeds from:

Disposal of marketable securities ...........................................................
Collection of real-estate related note receivable .....................................
Disposal of assets held for sale ...............................................................
Change in restricted cash equivalents, net ........................................................
Other, net ..........................................................................................................
Net cash used in investing activities .......................................................

Cash flows from financing activities:

Indebtedness:

Borrowings .............................................................................................
Principal payments ..................................................................................
Deferred financing costs paid .................................................................
Valhi cash dividends paid .................................................................................
Distributions to noncontrolling interest in subsidiaries ....................................
Purchase of Kronos common stock ..................................................................
Other, net ..........................................................................................................
Net cash provided by (used in) financing activities ..........................................
Net increase (decrease) .............................................................................................. $

2013

Years ended December 31,
2014

2015

(74.6) $
(1.5)
(5.3)
27.4
(7.9)

11.1
3.0
1.6
(9.9)
(.1)
(56.2)

493.8
(693.3)
—
(67.9)
(18.2)
(.7)
.1
(286.2)
(225.3) $

(72.7) $
(.3)
—
—
(16.3)

15.1
—
—
18.6
.5
(55.1)

515.6
(343.1)
(6.1)
(37.3)
(18.9)
—
—

110.2
122.4 $

(54.6)
(1.3)
—
—
(13.6)

15.0
—
—
(2.9)
.4
(57.0)

84.9
(53.4)
—
(27.1)
(15.0)
—
—
(10.6)
(45.1)

F-9

VALHI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In millions)

2013

Years ended December 31,
2014

2015

Cash and cash equivalents—net change from:

Operating, investing and financing activities .................................................... $
Effect of exchange rates on cash .......................................................................
Net change for the year .........................................................
Balance at beginning of year .............................................................................
Balance at end of year ....................................................................................... $

(225.3) $
1.2
(224.1)
366.9
142.8 $

Supplemental disclosures:
Cash paid for:

Interest, net of amounts capitalized.......................................................... $
Income taxes, net .....................................................................................

Noncash investing activities: .............................................................................

Change in accruals for capital expenditures.............................................
Accruals for capital lease additions .........................................................

Noncash financing activities:

Amounts issued in connection with business combination:

Promissory note ..............................................................................
Deferred payment obligation ..........................................................
Accrued construction retainage payable converted to note payable ........

55.0 $
15.6

4.6
—

19.1
8.2
2.8

See accompanying Notes to Consolidated Financial Statements.

122.4 $
(9.4)

113.0
142.8
255.8 $

53.9 $
33.4

6.5
8.9

—
—
—

(45.1)
(8.4)
(53.5)
255.8
202.3

56.6
10.2

6.7
—

—
—
—

F-10

VALHI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015

Note 1—Summary of significant accounting policies:

Nature of our business. Valhi, Inc. (NYSE: VHI) is primarily a holding company. We operate through our wholly-owned
and majority-owned subsidiaries, including NL Industries, Inc., Kronos Worldwide, Inc., CompX International Inc., Waste Control
Specialists LLC (“WCS”), Tremont LLC, Basic Management, Inc. (“BMI”) and The LandWell Company (“LandWell”). Kronos
(NYSE: KRO), NL (NYSE: NL), and CompX (NYSE MKT: CIX) each file periodic reports with the Securities and Exchange
Commission (“SEC”).

Organization. We are majority owned by a wholly-owned subsidiary of Contran Corporation (“Contran”), which owns
approximately 93% of our outstanding common stock at December 31, 2015. All of Contran's outstanding voting stock is held by a
family trust established for the benefit of Lisa K. Simmons and Serena Simmons Connelly and their children, for which Ms. Simmons
and Ms. Connelly are co-trustees, or is held directly by Ms. Simmons and Ms. Connelly or entities related to them. Consequently, Ms.
Simmons and Ms. Connelly may be deemed to control Contran and us.

Unless otherwise indicated, references in this report to “we,” “us” or “our” refer to Valhi, Inc. and its subsidiaries, taken

as a whole.

Management’s estimates. The preparation of our Consolidated Financial Statements in conformity with accounting
principles generally accepted in the United States of America (“GAAP”), requires us to make estimates and assumptions that affect the
reported amounts of our assets and liabilities and disclosures of contingent assets and liabilities at each balance sheet date and the
reported amounts of our revenues and expenses during each reporting period. Actual results may differ significantly from previously-
estimated amounts under different assumptions or conditions.

Principles of consolidation. Our consolidated financial statements include the financial position, results of operations and
cash flows of Valhi and our majority-owned and wholly-owned subsidiaries. We eliminate all material intercompany accounts and
balances. Changes in ownership are accounted for as equity transactions with no gain or loss recognized on the transaction unless
there is a change in control. See Note 3.

Foreign currency translation. The financial statements of our foreign subsidiaries are translated to U.S. dollars. The
functional currency of our foreign subsidiaries is generally the local currency of the country. Accordingly, we translate the assets and
liabilities at year-end rates of exchange, while we translate their revenues and expenses at average exchange rates prevailing during
the year. We accumulate the resulting translation adjustments in stockholders’ equity as part of accumulated other comprehensive
income (loss), net of related deferred income taxes and noncontrolling interest. We recognize currency transaction gains and losses in
income.

Derivatives and hedging activities. We recognize derivatives as either an asset or liability measured at fair value in
accordance with Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging. We recognize the effect of
changes in the fair value of derivatives either in net income or other comprehensive income (loss), depending on the intended use of
the derivative. See Note 18.

Cash and cash equivalents. We classify bank time deposits and government and commercial notes and bills with original

maturities of three months or less as cash equivalents.

Restricted cash, cash equivalents and marketable debt securities. We classify cash, cash equivalents and marketable debt
securities that have been segregated or are otherwise limited in use as restricted. To the extent the restricted amount relates to a
recognized liability, we classify the restricted amount as current or noncurrent according to the corresponding liability. To the extent
the restricted amount does not relate to a recognized liability, we classify restricted cash as a current asset and we classify the
restricted debt security as either a current or noncurrent asset depending upon the maturity date of the security.

F-11

Marketable securities and securities transactions. We carry marketable debt and equity securities at fair value. ASC
Topic 820, Fair Value Measurements and Disclosures, establishes a consistent framework for measuring fair value and (with certain
exceptions) this framework is generally applied to all financial statements items required to be measured at fair value. The standard
requires fair value measurements to be classified and disclosed in one of the following three categories:

(cid:121) Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical,

unrestricted assets or liabilities;

(cid:121) Level 2—Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for

substantially the full term of the assets or liability; and

(cid:121) Level 3—Prices or valuation techniques that require inputs that are both significant to the fair value measurement and

unobservable.

We recognize unrealized and realized gains and losses on trading securities in income. We accumulate unrealized gains
and losses on available-for-sale securities as part of accumulated other comprehensive income (loss), net of related deferred income
taxes and noncontrolling interest. Realized gains and losses are based on specific identification of the securities sold.

Accounts receivable. We provide an allowance for doubtful accounts for known and estimated potential losses arising

from our sales to customers based on a periodic review of these accounts.

Inventories and cost of sales. We state inventories at the lower of cost or market, net of allowance for obsolete and slow-
moving inventories. We generally base inventory costs for all inventory categories on average cost that approximates the first-in, first-
out method. Inventories include the costs for raw materials, the cost to manufacture the raw materials into finished goods and
overhead. Depending on the inventory’s stage of completion, our manufacturing costs can include the costs of packing and finishing,
utilities, maintenance, depreciation, shipping and handling, and salaries and benefits associated with our manufacturing process. We
allocate fixed manufacturing overhead costs based on normal production capacity. Unallocated overhead costs resulting from periods
with abnormally low production levels are charged to expense as incurred. As inventory is sold to third parties, we recognize the cost
of sales in the same period the sale occurs. We periodically review our inventory for estimated obsolescence or instances when
inventory is no longer marketable for its intended use, and we record any write-down equal to the difference between the cost of
inventory and its estimated net realizable value based on assumptions about alternative uses, market conditions and other factors.

Land held for development. Land held for development relates to BMI and LandWell, for which we acquired a
controlling interest in December 2013, see Note 3. The primary asset of LandWell is certain real property in Henderson, Nevada some
of which we are developing for residential lots in a master planned community. Land held for development was recorded at the
estimated acquisition date fair value based on a value per developable acre at the time of purchase. Development costs, including
infrastructure improvements, real estate taxes, capitalized interest and other costs, some of which may be allocated, are capitalized
during the period incurred. We allocate costs to each parcel sold on a pro-rata basis associated with the relevant development
activity. As land parcels are sold, costs of land sales, including land and development costs, are allocated based on specific
identification, relative sales value, square footage or a combination of these methods. All sales and marketing activities and general
overhead are charged to selling, general and administrative expense as incurred.

Investment in TiO2 manufacturing joint venture. We account for our investment in a 50%-owned manufacturing joint

venture by the equity method. See Note 7.

Goodwill and other intangible assets; amortization expense. Goodwill represents the excess of cost over fair value of
individual net assets acquired in business combinations. Goodwill is not subject to periodic amortization. We amortize other intangible
assets by the straight-line method over their estimated lives and state them net of accumulated amortization. We evaluate goodwill for
impairment, annually, or when circumstances indicate the carrying value may not be recoverable. We evaluate other intangible assets
for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. See Note 8.

Capitalized operating permits. Our Waste Management Segment capitalizes direct costs related to the acquisition or
renewal of operating permits and amortizes such costs by the straight-line method over the term of the applicable permit. Our net
capitalized operating permit costs include (i) costs to renew certain permits for which the renewal application is pending with the
applicable regulatory agency and (ii) costs to apply for certain new permits which have not yet been issued by the applicable
regulatory authority. We currently expect renewal of the permits for which application is still pending will occur in the ordinary
course of business, and we are amortizing costs related to such renewals from the date the prior permit expired. All operating permits
are generally subject to renewal at the option of the issuing governmental agency. See Note 7.

F-12

Property and equipment; depreciation expense. We state property and equipment at acquisition cost, including
capitalized interest on borrowings during the actual construction period of major capital projects. In 2013, 2014 and 2015 we
capitalized $1.6 million, $2.9 million and $1.1 million, respectively, of interest costs. We compute depreciation of property and
equipment for financial reporting purposes (including mining equipment) principally by the straight-line method over the estimated
useful lives of the assets as follows:

Asset
Buildings and improvements .................................................... 10 to 40 years
Machinery and equipment......................................................... 3 to 20 years
Mine development costs ........................................................... Units-of-production
Landfill disposal costs .............................................................. Units-of-consumption

Useful lives

We use accelerated depreciation methods for income tax purposes, as permitted. Upon the sale or retirement of an asset,

we remove the related cost and accumulated depreciation from the accounts and recognize any gain or loss in income currently.

We expense expenditures for maintenance, repairs and minor renewals as incurred that do not improve or extend the life

of the assets, including planned major maintenance.

We have a governmental concession with an unlimited term to operate our ilmenite mines in Norway. Mining properties
consist of buildings and equipment used in our Norwegian ilmenite mining operations. While we own the land and ilmenite reserves
associated with the mining operations, such land and reserves were acquired for nominal value and we have no material asset
recognized for the land and reserves related to our mining operations.

We operate waste disposal facilities. We capitalize preparation costs for landfill disposal cells, including costs relating to
excavation and grading and the design and construction of liner and leachate collection system. We recognize closure and post closure
costs as part of the carrying value of our disposal facilities.

We perform impairment tests when events or changes in circumstances indicate the carrying value may not be
recoverable. We consider all relevant factors. We perform the impairment test by comparing the estimated future undiscounted cash
flows (exclusive of interest expense) associated with the asset or asset group to the asset’s net carrying value to determine if a write-
down to fair value is required.

Closure and post closure costs. The closure and post closure obligations related to our Waste Management Segment’s
waste disposal sites are covered by the scope of ASC Topic 410, Asset Retirement and Environmental Obligations. We recognize the
fair value of a liability for an asset retirement obligation in accordance with ASC Topic 410 in the period in which the liability is
incurred, with an offsetting increase in the carrying amount of the related long-lived asset. Over time, we accrete the liability to its
future value, and we depreciate the capitalized cost over the useful life of the related asset. The accretion and depreciation expenses
are reported as a component of cost of sales in the accompanying statement of operations. We account for future revisions in the
estimated fair value of the asset retirement obligation due to changes in the amount and/or timing of the expected future cash flows to
settle the retirement obligation, prospectively as an adjustment to the previously-recognized asset retirement cost. Upon settlement of
the liability, we will either settle the obligation for its recorded amount or incur a gain or loss upon settlement. See Note 10.

Long-term debt. We state long-term debt net of any unamortized original issue premium, discount or deferred financing
costs. We classify amortization of deferred financing costs and any premium or discount associated with the issuance of indebtedness
as interest expense, and compute amortization by either the interest method or the straight-line method over the term of the applicable
issue.

Employee benefit plans. Accounting and funding policies for our retirement plans are described in Note 11.

Income taxes. We and our qualifying subsidiaries are members of Contran’s consolidated U.S federal income tax group
(the “Contran Tax Group”). We and certain of our qualifying subsidiaries also file consolidated income tax returns with Contran in
various U.S. state jurisdictions. As a member of the Contran Tax Group, we are jointly and severally liable for the federal income tax
liability of Contran and the other companies included in the Contran Tax Group for all periods in which we are included in the
Contran Tax Group. See Note 17. As a member of the Contran Tax Group, we are a party to a tax sharing agreement which provides
that we compute our tax provision for U.S. income taxes on a separate-company basis using the tax elections made by
Contran. Pursuant to the tax sharing agreement, we make payments to or receive payments from Contran in amounts we would have
paid to or received from the U.S. Internal Revenue Service or the applicable state tax authority had we not been a member of the

F-13

Contran Tax Group. We made net cash payments for income taxes to Contran of $6.5 million in 2013, $19.3 million in 2014 and $2.5
million in 2015.

We recognize deferred income tax assets and liabilities for the expected future tax consequences of temporary differences
between amounts recorded in our Consolidated Financial Statements and the tax basis of our assets and liabilities, including
investments in our subsidiaries and affiliate who are not members of the Contran Tax Group and undistributed earnings of foreign
subsidiaries which are not deemed to be permanently reinvested. Deferred income tax assets and liabilities for each tax-paying
jurisdiction in which we operate are netted and presented as either a noncurrent deferred income tax asset or liability as applicable. In
addition, we recognize deferred income taxes with respect to the excess of the financial reporting carrying amount over the income tax
basis of our direct investment in Kronos common stock because the exemption under GAAP to avoid recognition of such deferred
income taxes is not available to us. The earnings of our foreign subsidiaries subject to permanent reinvestment plans aggregated $645
million at December 31, 2015. It is not practical for us to determine the amount of the unrecognized deferred income tax liability
related to these earnings due to the complexities associated with the U.S. taxation on earnings of foreign subsidiaries repatriated to the
U.S. We periodically evaluate our deferred tax assets in the various taxing jurisdictions in which we operate and adjust any related
valuation allowance based on the estimate of the amount of such deferred tax assets we believe does not meet the more-likely-than-not
recognition criteria.

We record a reserve for uncertain tax positions where we believe it is more-likely-than-not our position will not prevail
with the applicable tax authorities. The amount of the benefit associated with our uncertain tax positions that we recognize is limited
to the largest amount for which we believe the likelihood of realization is greater than 50%. We accrue penalties and interest on the
difference between tax positions taken on our tax returns and the amount of benefit recognized for financial reporting purposes. We
classify our reserves for uncertain tax positions in a separate current or noncurrent liability, depending on the nature of the tax
position. See Note 12.

Environmental remediation and related costs. We record liabilities related to environmental remediation and related
costs when estimated future expenditures are probable and reasonably estimable. We adjust these accruals as further information
becomes available to us or as circumstances change. We generally do not discount estimated future expenditures to its present value
due to the uncertainty of the timing of the ultimate payout. We recognize any recoveries of remediation costs from other parties when
we deem their receipt to be probable. We expense any environmental remediation related legal costs as incurred. At December 31,
2014 and 2015, we had not recognized any material receivables for recoveries. See Note 17.

Net sales. We record sales when products are shipped and title and other risks and rewards of ownership have passed to
the customer, or when we perform services. We include amounts charged to customers for shipping and handling costs in net sales.
We state sales net of price, early payment and distributor discounts and volume rebates. We report taxes assessed by a governmental
authority such as sales, use, value added, excise taxes and fees from the State of Texas and Andrews County, Texas on a net basis
(meaning we do not recognize these taxes in either our revenues or in our costs and expenses).

Certain retail land sales of our Real Estate Management and Development Segment are recognized under the under the
percentage-of-completion method when we are required to complete property development and improvements after title passes to the
buyer and when all of the criteria of ASC 970-605-30 are met. Under such method, revenues and profits are recognized in the same
proportion of our progress towards completion of our contractual obligations, with our progress measured by costs incurred as a
percentage of total costs estimated to be incurred. Such costs incurred and total estimated costs include amounts specifically
identifiable with the parcels sold as well as certain development costs for the entire residential/planned community which are allocated
to the parcels sold under applicable GAAP. Other retail land sales are generally recognized by the full accrual method of accounting at
closing, in which title passes to the customer and we have no remaining contractual obligations to the buyer.

Selling, general and administrative expenses; shipping and handling costs; advertising costs; research and
development costs. Selling, general and administrative expenses include costs related to marketing, sales, distribution, shipping and
handling, research and development, legal, environmental remediation and administrative functions such as accounting, treasury and
finance, and includes costs for salaries and benefits not associated with our manufacturing process, travel and entertainment,
promotional materials and professional fees. Shipping and handling costs of our Chemicals Segment were approximately $93 million
in 2013, $95 million in 2014 and $87 million in 2015. Shipping and handling costs of our Component Products and Waste
Management Segments are not material. We expense advertising and research, development and sales technical support costs as
incurred. Advertising costs were approximately $2 million in 2013 and $1 million in each of 2014 and 2015. Research, development
and certain sales technical support costs were approximately $18 million in 2013, $19 million in 2014 and $16 million in 2015.

F-14

Note 2—Business and geographic segments:

Business segment
Chemicals ................................................................. Kronos
Component products ................................................. CompX
Waste management ................................................... WCS
Real estate management and development ............... BMI and LandWell

Entity

% controlled at
December 31, 2015
80 %
87 %
100 %
63% - 77 %

Our control of Kronos includes 50% we hold directly and 30% held directly by NL. We own 83% of NL. Our control of
CompX is through NL. We own 63% of BMI. Our control of LandWell includes the 27% we hold directly and 50% held by BMI.
See Note 3.

We are organized based upon our operating subsidiaries. Our operating segments are defined as components of our
consolidated operations about which separate financial information is available that is regularly evaluated by our chief operating
decision maker in determining how to allocate resources and in assessing performance. Each operating segment is separately
managed, and each operating segment represents a strategic business unit offering different products.

We have the following four consolidated reportable operating segments.

(cid:121) Waste Management—WCS is our subsidiary which operates a West Texas facility for the processing, treatment,
storage and disposal of a broad range of low-level radioactive, hazardous, toxic and other wastes. WCS obtained a
byproduct disposal license in 2008 and began disposal operations at this facility in October 2009. WCS received a
low-level radioactive waste (“LLRW”) disposal license in September 2009. The Compact LLRW disposal facility
commenced operations in 2012, and the Federal LLRW site commenced operations in 2013. We reached an
agreement for the sale of our Waste Management Segment in November 2015, see Note 3.

We evaluate segment performance based on segment operating income, which we define as income before income taxes
and interest expense, exclusive of certain non-recurring items (such as gains or losses on disposition of business units and other long-
lived assets outside the ordinary course of business and certain legal settlements) and certain general corporate income and expense
items (including securities transactions gains and losses and interest and dividend income), which are not attributable to the operations
of the reportable operating segments. The accounting policies of our reportable operating segments are the same as those described in
Note 1. Segment results we report may differ from amounts separately reported by our various subsidiaries and affiliates due to
purchase accounting adjustments and related amortization or differences in how we define operating income. Intersegment sales are
not material.

Interest income included in the calculation of segment operating income is not material in 2013, 2014 or 2015. Capital
expenditures include additions to property and equipment but exclude amounts we paid for business units acquired in business
combinations. Depreciation and amortization related to each reportable operating segment includes amortization of any intangible
assets attributable to the segment. Amortization of deferred financing costs and any premium or discount associated with the issuance
of indebtedness is included in interest expense.

F-15

Segment assets are comprised of all assets attributable to each reportable operating segment, including goodwill and other
intangible assets. Our investment in the TiO2 manufacturing joint venture (see Note 7) is included in the Chemicals Segment’s assets.
Corporate assets are not attributable to any operating segment and consist principally of cash and cash equivalents, restricted cash
equivalents and marketable securities.

Net sales:

Chemicals ............................................................. $
Component products ............................................
Waste management ..............................................
Real estate management and development ...........
Total net sales ............................................. $

Cost of sales:

Chemicals ............................................................. $
Component products ............................................
Waste management ..............................................
Real estate management and development ...........
Total cost of sales ....................................... $

Gross margin:

Chemicals ............................................................. $
Component products ............................................
Waste management ..............................................
Real estate management and development ...........
Total gross margin ...................................... $

Operating income (loss):

Chemicals ............................................................. $
Component products ............................................
Waste management ..............................................
Real estate management and development ...........
Total operating income (loss) .....................
Equity in earnings of investee ........................................
General corporate items:

Securities earnings ...............................................
Insurance recoveries .............................................
Gain on bargain purchase and remeasurement of

our existing investment in acquiree ...................
General expenses, net ...........................................
Loss on prepayment of debt, net ..........................
Interest expense .............................................................
Income (loss) before income taxes ............. $

2013

Years ended December 31,
2014
(In millions)

2015

1,732.4 $
92.0
39.2
—
1,863.6 $

1,622.6 $
64.5
42.3
—
1,729.4 $

109.8 $
27.5
(3.1)
—
134.2 $

(125.4) $
9.3
(22.6)
—
(138.7)
.5

26.6
9.4

54.6
(105.3)
(8.9)
(56.1)
(217.9) $

1,651.9 $
103.9
66.5
40.3
1,862.6 $

1,304.6 $
71.6
49.7
33.9
1,459.8 $

347.3 $
32.3
16.8
6.4
402.8 $

156.8 $
13.6
(2.2 )
2.0
170.2
—

26.9
10.4

—
(38.8 )
—
(56.7 )
112.0 $

1,348.8
109.0
45.0
30.1
1,532.9

1,158.5
75.6
50.5
25.4
1,310.0

190.3
33.4
(5.5)
4.7
222.9

7.1
14.0
(26.5)
—
(5.4)
—

26.5
3.7

—
(39.6)
—
(59.0)
(73.8)

F-16

Depreciation and amortization:

Chemicals ............................................................. $
Component products ............................................
Waste management ..............................................
Real estate management and development ...........
Total............................................................ $

Capital expenditures:

Chemicals ............................................................. $
Component products ............................................
Waste management ..............................................
Real estate management and development ...........
Corporate ..............................................................
Total............................................................ $

2013

Years ended December 31,
2014
(In millions)

2015

52.8 $
3.3
18.4
—
74.5 $

67.6 $
3.5
3.5
—
—
74.6 $

51.9 $
3.5
20.3
2.7
78.4 $

61.3 $
2.8
4.5
4.0
.1
72.7 $

44.3
3.5
19.3
2.8
69.9

47.5
4.2
1.7
1.2
—
54.6

2013

December 31,
2014
(In millions)

2015

Total assets:

Operating segments:

Chemicals ................................................... $
Component products ...................................
Waste management .....................................
Real estate management and

development ...........................................
Corporate and eliminations ..................................
Total............................................................ $

1,975.8 $
80.6
270.1

253.6
371.6
2,951.7 $

2,001.2 $
83.1
257.7

246.1
357.1
2,945.2 $

1,617.6
88.7
231.9

232.9
366.3
2,537.4

Geographic information. We attribute net sales to the place of manufacture (point-of-origin) and the location of the
customer (point-of-destination); we attribute property and equipment to their physical location. At December 31, 2015 the net assets of
our non-U.S. subsidiaries included in consolidated net assets approximated $422 million (in 2014 the total was $703 million).

Net sales—point of origin:

United States ........................................................ $
Germany ...............................................................
Canada..................................................................
Belgium ................................................................
Norway .................................................................
Eliminations .........................................................
Total............................................................ $

Net sales—point of destination:

North America...................................................... $
Europe ..................................................................
Asia and other ......................................................
Total............................................................ $

2013

Years ended December 31,
2014
(In millions)

2015

961.5 $
915.8
246.5
254.6
261.3
(776.1)
1,863.6 $

690.5 $
905.0
268.1
1,863.6 $

993.7 $
844.1
252.3
249.3
256.8
(733.6 )
1,862.6 $

753.2 $
883.6
225.8
1,862.6 $

841.9
690.0
216.9
198.8
183.5
(598.2)
1,532.9

604.0
700.9
228.0
1,532.9

F-17

2013

December 31,
2014
(In millions)

2015

Net property and equipment:

United States ......................................................... $
Germany................................................................
Canada ..................................................................
Norway..................................................................
Belgium .................................................................
Total ............................................................ $

232.8 $
292.9
67.1
100.9
102.7
796.4 $

234.4 $
259.5
63.4
85.5
90.8
733.6 $

227.1
229.9
55.0
71.9
81.8
665.7

Note 3—Business combinations, dispositions and related transactions:

Kronos Worldwide, Inc.

Prior to 2013, Kronos’ board of directors authorized the repurchase of up to 2.0 million shares of its common stock in
open market transactions, including block purchases, or in privately-negotiated transactions at unspecified prices and over an
unspecified period of time. Kronos may repurchase its common stock from time to time as market conditions permit. The stock
repurchase program does not include specific price targets or timetables and may be suspended at any time. Depending on market
conditions, Kronos may terminate the program prior to its completion. Kronos would use cash on hand to acquire the shares.
Repurchased shares will be added to Kronos’ treasury and cancelled. During 2013 Kronos repurchased approximately 49,000 shares
for an aggregate of $.7 million in cash under its repurchase program. The 2013 purchases are the only purchases Kronos has made to
date under the plan and at December 31, 2015 approximately 1.95 million shares are available for repurchase.

CompX International Inc.

Prior to 2013, CompX’s board of directors authorized various repurchases of its Class A common stock in open market
transactions, including block purchases, or in privately-negotiated transactions at unspecified prices and over an unspecified period of
time. CompX may repurchase its common stock from time to time as market conditions permit. The stock repurchase program does
not include specific price targets or timetables and may be suspended at any time. Depending on market conditions, CompX may
terminate the program prior to its completion. CompX would generally use cash on hand to acquire the shares. Repurchased shares
will be added to CompX’s treasury and cancelled. CompX did not make any repurchases under the plan during 2013, 2014 or 2015,
and at December 31, 2015 approximately 678,000 shares were available for purchase under these authorizations.

Basic Management, Inc. and The LandWell Company

Prior to December 2013, we owned a 32% interest in BMI, which among other things provides utility services to an
industrial park located in Henderson, Nevada, and is responsible for the delivery of water to the city of Henderson, Nevada and
various other users through a water distribution system owned by BMI. We also had a 12% interest in LandWell, which is actively
engaged in efforts to develop certain real estate in Henderson, Nevada. BMI owns an additional 50% interest in LandWell. We
accounted for our 32% interest in BMI and 12% interest in LandWell by the equity method of accounting. See Note 7. Three other
entities owned the remaining ownership interest in BMI (a 32% interest, a 31% interest and a 5% interest) and LandWell (a 21%
interest, a 15% interest and a 2% interest). Provisions in the governing documents of BMI and LandWell give BMI and LandWell and
their owners a right of first refusal upon any proposed transfer of an ownership interest in BMI and LandWell.

Prior to November 2010, the 31% ownership interest in BMI and the 15% ownership interest in LandWell indicated above
were held by Tronox Incorporated, which among other things conducted operations at the Henderson industrial complex. Tronox filed
for bankruptcy protection in January 2009. As part of Tronox’s plan of reorganization, in November 2010 such BMI and LandWell
interests were transferred to the Nevada Environmental Response Trust (“NERT”), with the consent of BMI and LandWell and its
owners (including us), and the parties agreed to negotiate to establish the price at which such BMI and LandWell interests would be
transferred to BMI and LandWell or their owners. Such negotiations continued until February 2012, when the parties reached
agreement as to the basic monetary terms of such transfer. Further negotiations over all of the terms and conditions of a definitive
agreement continued until December 2013, when the parties reached agreement as to all terms and conditions, including the fact that
we would acquire the BMI and LandWell interests formerly owned by Tronox, with the consent of BMI and LandWell and their other
owners (who elected not to exercise their right-of-first-refusal rights).

As a result, in December 2013 we completed the acquisition of the 31% ownership interest in BMI and the 15%
ownership interest in LandWell held by NERT. We completed this acquisition because it allowed us to obtain control of BMI and

F-18

LandWell (with the consent of BMI and LandWell and their other owners), which increased our direct ownership interest of BMI to
63% and our direct ownership interest of LandWell to 27%, which also resulted in our control of 77% of LandWell (given BMI’s 50%
ownership interest in LandWell, our controlling ownership interest of BMI and our 27% direct ownership interest of LandWell). The
other owners did not exercise their first refusal or participation rights and accordingly did not participate in the acquisition of the
additional BMI and LandWell interests. As part of this transaction with NERT, we also acquired one parcel of real property located in
Henderson, and acquired an option to purchase four additional parcels of real property located in Henderson, without the payment of
additional consideration to NERT. These five additional parcels, which NERT had also acquired as part of Tronox’s plan of
reorganization, are not part of the land currently being developed by LandWell but are located in or are adjacent to the industrial park.
The aggregate fair value of the total consideration we gave for the acquisition of BMI and LandWell interest, the parcel of real
property acquired and the option to acquire the four other parcels was $32.6 million consisting of $5.3 million in cash, a $19.1 million
promissory note secured by the real property acquired, and a $11.1 million deferred payment obligation (which was discounted to
present value of $8.2 million, as discussed below). The acquisition of the BMI and LandWell interests, the parcel of real property and
the option for the four additional parcels was accounted for as a business combination under GAAP. The application of the purchase
method of accounting for business combinations required us to use significant estimates and assumptions in the determination of the
estimated fair value of assets acquired and liabilities assumed; it also required us to re-measure our existing ownership interest in BMI
and LandWell to their estimated fair value. Our estimates of the fair values of assets acquired and liabilities assumed were based upon
assumptions we believed were reasonable, and where appropriate, included assistance from independent third-party valuation firms.

The $19.1 million promissory note bears interest at 3% per annum, with interest payable annually and all principal due in
December 2023. The promissory note is collateralized by the BMI and LandWell interests acquired as well as the real property
acquired from NERT as part of the transaction. The note may be prepaid at any time, without penalty. We must make mandatory
prepayments on the note in specified amounts whenever we receive distributions from BMI or LandWell, or in the event we sell any
of the real property acquired. The acquisition date estimated fair value of this promissory note was equal to its $19.1 million face
amount. We made $1.7 million and $.3 million in principal prepayments during 2014 and 2015, respectively, under the terms of the
note.

The $11.1 million deferred payment obligation bears interest at 3% per annum, commencing in December 2023, and is
collateralized by the BMI and LandWell interests acquired. The deferred payment obligation has no specified maturity date. We are
required to make repayments on the deferred payment obligation, in specified amounts, whenever we receive distributions from BMI
and LandWell, and we may make voluntary repayments on the deferred payment obligation at any time, in each case without any
penalty, but in any case only after the promissory note discussed above has been repaid in full. For financial reporting purposes, the
acquisition date estimated fair value of the deferred payment obligation was approximately $8.2 million, which was determined by
discounting the $11.1 million face amount to its present value using a 3% discount rate from December 2023 (when it becomes
interest bearing at 3%).

Upon gaining ownership of the BMI and LandWell interests formerly held by Tronox in 2010, NERT concluded that it
would not be appropriate to take part in any corporate activities of BMI and LandWell, due to (i) the inherent conflict of interest
associated with the fact that NERT was responsible to the Nevada Department of Environmental Protection with respect to the
remediation of property NERT had acquired as a result of the Tronox plan of reorganization (including the five parcels of real
property discussed above as well as other real property formerly owned by Tronox in Nevada), (ii) BMI and LandWell were involved
in certain environmental remediation activities associated with the real property owned by LandWell which was under development,
and (iii) NERT was also charged with maximizing the value of its assets, including the interests in BMI and LandWell as well as the
real property it held directly. Accordingly, NERT never appointed any representatives to the board of directors of BMI,
representatives of NERT never attended any BMI and LandWell board meetings, and at NERT’s request NERT was not provided any
financial statements or other information regarding BMI and LandWell and their respective activities. In addition, NERT (which
received some cash and other assets at its formation as part of the Tronox plan of reorganization and also received the BMI/LandWell
interests as well as the real property formerly owned by Tronox) knew it would need to raise funds in order to continue the
environmental remediation obligation it assumed as part of its formation because the cash it received at its formation was substantially
less than the amount it would need in order to continue such remediation. We believe that due to these conflicts and its desire to raise
cash, NERT determined it needed to divest itself of the BMI and LandWell interests as soon as was practicable. And given the
provisions of the governing documents of BMI and LandWell that gave BMI and LandWell and their other owners a right-of-first-
refusal, there were a limited number of potential buyers for the BMI and LandWell interests held by NERT.

In January 2014, we engaged an independent third-party valuation firm to assist us with the overall fair value
determination for a portion of the assets acquired for financial reporting purposes in accordance with ASC 805. The third-party
valuation firm assisted us in the valuation of the land held for development we acquired, substantially all of the property, plant and
equipment acquired and a portion of the other noncurrent assets acquired. The land held for development we acquired consisted of
approximately 2,100 acres zoned for residential/planned community purposes and approximately 400 acres zoned for commercial and
light industrial use. In estimating the value of the land held for development we acquired, the valuation firm used a sales comparison

F-19

(or market) approach, in which the value of each parcel acquired was estimated by comparing it to similar properties that had recently
been sold or were currently being marketed for sale. The firm consulted local brokers, appraisers and databases for recent sales of
comparable property within the Henderson, Nevada area. The available market data was then investigated, analyzed and compared to
each parcel. The material factors considered by the valuation firm when investigating, analyzing and comparing the recent sales
include characteristics of such other sales (e.g., type of property rights conveyed, non-market oriented financing (if any), any atypical
conditions of the sale) and the physical characteristics of the property underlying such sales (e.g., location, topography, configuration,
exposure/frontage, condition, zoning). As applicable, the valuation firm made appropriate adjustments to such factors for any
dissimilar characteristics between such other sales and LandWell’s land held for development. In addition, we (as well as management
of BMI and LandWell) reviewed the fair value amounts we received from such valuation firm to determine that such fair values were
reasonable and consistent with our knowledge and experience with the local market, including the consideration of certain acreage in
the residential/ planned community that was under contract with homebuilders in December 2013 or in the final stages of negotiation
with homebuilders in December 2013 and subsequently became under contract in early 2014.

For financial reporting purposes, the assets acquired and liabilities assumed of BMI and LandWell were included in our
Consolidated Balance Sheet beginning as of December 31, 2013, and the results of the operations and cash flows of BMI and
LandWell are included in our Consolidated Statements of Operations and Cash Flows beginning January 1, 2014. Our costs associated
with the acquisition were not material.

We remeasured our existing ownership interests in BMI and LandWell to their estimated fair value at the acquisition date
in accordance with ASC 805-10-25, for a business combination which occurs in stages (because we previously had an ownership
interest in BMI and LandWell). As a result of such remeasurement, we recognized a pre-tax gain of $26.6 million in December 2013,
representing the difference between the $43.4 million estimated fair value of our existing ownership interests in BMI and LandWell at
the acquisition date and their aggregate $16.8 million carrying value at the acquisition date.

Under ASC 805-30-25, a “bargain purchase” occurs when the acquisition-date amounts for the identifiable net assets
acquired (measured as required by applicable GAAP) exceeds the sum of (i) the fair value of the consideration transferred to gain
control of the acquiree, (ii) the fair value of any previously-held ownership interests in the acquiree and (iii) the fair value of any
noncontrolling interest in the acquiree that exits at the acquisition date. If a bargain purchase is initially identified, the acquirer is to
reassess whether all of the assets acquired and liabilities assumed have been appropriately identified, recognized and measured, and
whether the fair value of the consideration transferred, previously-held ownership interests and noncontrolling interests that exist at
the acquisition date have been appropriately measured. If after this reassessment, a bargain purchase is still indicated, it is recognized
as a gain in earnings. After performing such reassessment with respect to this acquisition, we determined a bargain purchase exists.
We believe this acquisition gave rise to a bargain purchase because of NERT’s decision to sell the BMI and LandWell interests it
acquired as part of the Tronox plan of reorganization (for the reasons discussed above), the right-of-first-refusal rights granted to BMI
and LandWell and their owners under the governing documents of BMI and LandWell and the time (22 months) it took to reach
agreement on the terms and conditions of a definitive agreement after reaching agreement on the basic monetary terms. In addition
following the 2008 economic downturn, LandWell’s sales were substantially reduced as compared to prior years and LandWell did
not recognize any material land sales in the 2008 to 2013 time period. As a result, we recognized a pre-tax bargain purchase gain of
$28.0 million in December 2013.

The following table summarizes the aggregate fair value of the consideration we paid to gain control of BMI and
LandWell, the one parcel of real property acquired and the option to acquire the remaining four parcels of real property (which one
parcel and option to acquire the remaining four parcels collectively were estimated to have an aggregate fair value of $14.9 million),
and our current estimates for the fair value of our existing ownership interests in BMI and LandWell, the gain on bargain purchase
recognized (which along with the gain on remeasurement of our existing investment in BMI and LandWell, aggregated $54.6 million
and was recognized in the fourth quarter of 2013), the amounts assigned to the identifiable assets acquired and liabilities assumed at
the acquisition date and the fair value of the noncontrolling interest in BMI and LandWell that exists as the acquisition date. Our final
purchase price allocation indicated below was based upon the final fair value appraisal report issued by the independent valuation firm
of the assets acquired and liabilities assumed of BMI and LandWell, including the fair value of the noncontrolling interest in BMI and
LandWell at the acquisition date, using the fair value measurement principles of ASC 820. Such independent appraisal is considered a
Level 3 input under ASC 820. Such final purchase price allocation did not change from our previously-reported preliminary purchase
price allocation.

F-20

Based on our analysis of the amounts of the transaction at December 31, 2013 we recognized the following:

Amount
(In millions)

Consideration:

Cash ........................................................................................... $
Promissory note payable ...........................................................
Deferred payment, obligation ($11.1 million face value) ..........
Total fair value of consideration .................................

Fair value of our existing equity interest in BMI and

LandWell .........................................................................
Bargain purchase gain recognized ........................................
Total ....................................................................... $

Allocation of purchase price to identifiable assets acquired and

liabilities assumed:

Cash ...................................................................................... $
Land held for development: ..................................................
Current .............................................................................
Noncurrent .......................................................................
Other current assets ..............................................................
Property, plant and equipment ..............................................
Intangible asset .....................................................................
Other noncurrent assets ........................................................
Long-term debt .....................................................................
Other liabilities .....................................................................
Total net identifiable assets .........................................
Noncontrolling interest in BMI and LandWell ...........
Total ....................................................................... $

5.3
19.1
8.2
32.6

43.4
28.0
104.0

27.4

14.3
158.1
9.4
29.0
5.1
3.4
(14.3 )
(66.9 )
165.5
(61.5 )
104.0

The pro forma effect on our Consolidated Statement of Operations for 2013, assuming the acquisition of BMI and

LandWell had occurred at the beginning of such period, is not material.

F-21

Waste Control Specialists LLC

On November 18, 2015, we entered into an agreement with Rockwell Holdco, Inc. ("Rockwell"), for the sale of WCS to
Rockwell for $270 million in cash, $20 million face amount in Series A Preferred Stock of Rockwell plus the assumption of all of
WCS’ third-party indebtedness incurred prior to the date of the agreement. Additionally, Rockwell and its affiliates will assume all
financial assurance obligations related to the WCS business. Rockwell is the parent company of EnergySolutions, Inc. Completion
of the sale is subject to certain customary closing conditions, including the receipt of U.S. anti-trust approval, and is expected to close
in the first half of 2016, assuming all closing conditions are satisfied. There can be no assurance that any such sale of WCS would be
completed. Due to, among other things, the size of our WCS business relative to our other businesses in terms of both net sales and
asset size, the disposal of WCS would not constitute a strategic shift that would have a major effect on our consolidated operations and
financial results under the guidance in ACS 205-20. Accordingly, assuming the sale of WCS is completed, WCS would not be
presented as discontinued operations in our Consolidated Financial Statements. See Note 2 for additional information regarding the
operations of the Waste Management Segment. Significant items included in our Consolidated Balance Sheets related to WCS at
December 31, 2014 and 2015 included:

ASSETS

Current assets ........................................................................ $
Operating permits .................................................................
Restricted cash ......................................................................
Property and equipment, net .................................................

LIABILITIES

Current portion of long-term debt ......................................... $
Payable to Contran ................................................................
Long-term debt .....................................................................
Accrued noncurrent closure and post closure costs ..............

December 31,

2014

2015

(In millions)

14.6 $
53.2
11.0
161.5

4.5 $
26.1
76.4
25.7

10.1
48.1
16.2
150.0

4.9
26.1
71.4
27.4

Note 4—Marketable securities:

Market
value

Cost
basis
(In millions)

Unrealized
losses,
net

December 31, 2014:

Current assets ........................................................ $
Noncurrent assets:

2.7 $

The Amalgamated Sugar Company LLC .... $
Other ............................................................
Total ................................................... $

250.0 $
5.6
255.6 $

250.0 $
5.8
255.8 $

December 31, 2015:

Current assets ........................................................ $
Noncurrent assets:

2.0 $

The Amalgamated Sugar Company LLC .... $
Other ............................................................
Total ................................................... $

250.0 $
4.9
254.9 $

250.0 $
5.1
255.1 $

—

—
(.2)
(.2)

—

—
(.2)
(.2)

F-22

Fair Value Measurements
Quoted
Prices in
Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

(In millions)

Significant
Unobservable
Inputs
(Level 3)

Total

2.7 $

1.7 $

1.0 $

—

250.0 $
3.1
2.5
255.6 $

— $
—
2.5
2.5 $

— $
3.1
—
3.1 $

250.0
—
—
250.0

2.0 $

— $

2.0 $

—

December 31, 2014:
Current assets ........................................................... $
Noncurrent assets:

The Amalgamated Sugar Company LLC ....... $
Fixed income securities ..................................
Mutual funds and common stocks

Total ...................................................... $

December 31, 2015:
Current assets ........................................................... $
Noncurrent assets:

The Amalgamated Sugar Company LLC ....... $
Fixed income securities ..................................
Mutual funds and common stocks ..................
Total ...................................................... $

250.0 $
1.4
3.5
254.9 $

— $
—
3.5
3.5 $

— $
1.4
—
1.4 $

250.0
—
—
250.0

Amalgamated Sugar. Prior to 2013, we transferred control of the refined sugar operations previously conducted by our
wholly-owned subsidiary, The Amalgamated Sugar Company, to Snake River Sugar Company, an Oregon agricultural cooperative
formed by certain sugar beet growers in Amalgamated’s areas of operations. Pursuant to the transaction, we contributed substantially
all of the net assets of our refined sugar operations to The Amalgamated Sugar Company LLC, a limited liability company controlled
by Snake River, on a tax-deferred basis in exchange for a non-voting ownership interest in the LLC. The cost basis of the net assets we
transferred to the LLC was approximately $34 million. When we transferred control of our operations to Snake River in return for our
interest in the LLC, we recognized a gain in earnings equal to the difference between $250 million (the fair value of our investment in
the LLC as evidenced by its $250 million redemption price, as discussed below) and the $34 million cost basis of the net assets we
contributed to the LLC, net of applicable deferred income taxes. Therefore, the cost basis of our investment in the LLC is $250
million. As part of this transaction, Snake River made certain loans to us aggregating $250 million. These loans are collateralized by
our interest in the LLC. See Notes 9 and 15.

We and Snake River share in distributions from the LLC up to an aggregate of $26.7 million per year (the “base” level),
with a preferential 95% share going to us. To the extent the LLC’s distributions are below this base level in any given year, we are
entitled to an additional 95% preferential share of any future annual LLC distributions in excess of the base level until the shortfall is
recovered. Under certain conditions, we are entitled to receive additional cash distributions from the LLC. At our option, we may
require the LLC to redeem our interest in the LLC, and the LLC has the right to redeem, at their option, our interest in the LLC
beginning in 2027. The redemption price is generally $250 million plus the amount of certain undistributed income allocable to us. If
we require the LLC to redeem our interest in the LLC, Snake River has the right to accelerate the maturity of and call our $250 million
loans from Snake River.

The LLC Company Agreement contains certain restrictive covenants intended to protect our interest in the LLC, including
limitations on capital expenditures and additional indebtedness of the LLC. We also have the ability to temporarily take control of the
LLC if our cumulative distributions from the LLC fall below specified levels, subject to satisfaction of certain conditions imposed by
Snake River’s current third-party senior lenders.

Prior to 2013, Snake River agreed that the annual amount of distributions we receive from the LLC would exceed the
annual amount of interest payments we owe to Snake River on our $250 million in loans from Snake River by at least $1.8 million. If
we receive less than the required minimum amount, certain agreements we previously made with Snake River and the LLC, including
a reduction in the amount of cumulative distributions that we must receive from the LLC in order to prevent us from becoming able to
temporarily take control of the LLC, would retroactively become null and void and we would be able to temporarily take control of
the LLC if we so desired. Through December 31, 2015, Snake River and the LLC maintained the applicable minimum required levels
of cash flows to us.

We report the cash distributions received from the LLC as dividend income. We recognize distributions when they are
declared by the LLC, which is generally the same month we receive them, although in certain cases distributions may be paid on the

F-23

first business day of the following month. See Note 15. The amount of such future distributions we will receive from the LLC is
dependent upon, among other things, the future performance of the LLC’s operations. Because we receive preferential distributions
from the LLC and we have the right to require the LLC to redeem our interest for a fixed and determinable amount beginning at a
fixed and determinable date, we account for our investment in the LLC as a marketable security carried at its cost basis of $250
million. The cost basis is also the fair value of our investment determined using Level 3 inputs as the $250 million redemption price of
our investment in the LLC as well as the amount of our debt owed to Snake River Company that is collateralized by our investment in
the LLC. There has been no change to the fair value of our Amalgamated Sugar investment during 2013, 2014 or 2015. We do not
expect to report a gain on the redemption at the time our LLC interest is redeemed, as the redemption price of $250 million is expected
to equal the carrying value of our investment in the LLC at the time of redemption.

Other. The fair value of our other marketable securities are either determined using Level 1 inputs (because the securities
are actively traded) or determined using Level 2 inputs (because although these securities are traded, in many cases the market is not
active and the year-end valuation is generally based on the last trade of the year, which may be several days prior to December 31).

Note 5—Accounts and other receivables, net:

Trade accounts receivable:

Kronos ......................................................................... $
CompX ........................................................................
WCS ............................................................................
BMI/LandWell ............................................................
VAT and other receivables ...................................................
Allowance for doubtful accounts ..........................................
Total ................................................................... $

Note 6—Inventories, net:

Raw materials:

Chemicals .................................................................... $
Component products ...................................................
Total raw materials ............................................

Work in process:

Finished products:

Chemicals ....................................................................
Component products ...................................................
Total finished products ......................................
Supplies (primarily chemicals) .............................................
Total ................................................................... $

December 31,

2014

2015

(In millions)

230.9 $
8.8
7.7
1.4
24.3
(1.8)
271.3 $

194.8
8.8
5.2
1.2
20.1
(1.2)
228.9

December 31,

2014

2015

(In millions)

76.0 $
3.4
79.4

32.9
10.3
43.2

253.2
3.2
256.4
64.0
443.0 $

75.9
2.8
78.7

21.1
9.3
30.4

233.1
3.0
236.1
60.0
405.2

F-24

Note 7—Investment in TiO2 manufacturing joint venture and other assets:

December 31,

2014

2015

(In millions)

Other assets:

Land held for development ......................................... $
Waste disposal site operating permits, net ..................
Restricted cash............................................................
IBNR receivables .......................................................
Capital lease deposit ...................................................
Intangible assets .........................................................
Other ...........................................................................
Total .................................................................. $

165.1 $
53.2
13.9
6.8
6.2
5.1
27.5
277.8 $

157.2
48.1
19.6
7.0
6.2
5.1
11.8
255.0

Investment in TiO2 manufacturing joint venture. Our Chemicals Segment and another Ti02 producer, Tioxide Americas
LLC (“Tioxide”), are equal owners of a manufacturing joint venture (Louisiana Pigment Company, L.P., or “LPC”) that owns and
operates a TiO2 plant in Lake Charles, Louisiana. Tioxide is a wholly-owned subsidiary of Huntsman Corporation.

We and Tioxide are both required to purchase one-half of the TiO2 produced by LPC, unless we and Tioxide agree
otherwise (such as in 2015, when we purchased approximately 52% of the production from the plant). LPC operates on a break-even
basis and, accordingly, we report no equity in earnings of LPC. Each owner’s acquisition transfer price for its share of the TiO2
produced is equal to its share of the joint venture’s production costs and interest expense, if any. Our share of net cost is reported as
cost of sales as the related TiO2 acquired from LPC is sold. We report distributions we receive from LPC, which generally relate to
excess cash generated by LPC from its non-cash production costs, and contributions we make to LPC, which generally relate to cash
required by LPC when it builds working capital, as part of our cash flows from operating activities in our Consolidated Statements of
Cash Flows. The components of our net distributions (contributions) from LPC are shown in the table below.

Distributions from LPC ................................................. $
Contributions to LPC .....................................................
Net distributions ................................................... $

70.7 $
(59.8)
10.9 $

48.0 $
(37.4 )
10.6 $

48.2
(41.7)
6.5

2013

Years ended December 31,
2014
(In millions)

2015

Summary balance sheets of LPC are shown below:

ASSETS

Current assets ....................................................................... $
Property and equipment, net ................................................
Total assets ................................................................. $
LIABILITIES AND PARTNERS’ EQUITY

Other liabilities, primarily current ....................................... $
Partners’ equity ....................................................................
Total liabilities and partners’ equity ........................... $

December 31,

2014

2015

(In millions)

107.4 $
110.6
218.0 $

37.3 $
180.7
218.0 $

96.2
110.1
206.3

37.8
168.5
206.3

F-25

Summary income statements of LPC are shown below:

Revenues and other income:

Kronos .................................................................. $
Tioxide .................................................................
Total ..................................................

Cost and expenses:

Cost of sales .........................................................
General and administrative ..................................
Total ..................................................
Net income.................................................. $

2013

Years ended December 31,
2014
(In millions)

2015

224.5 $
224.6
449.1

448.7
.4
449.1
— $

193.1 $
193.8
386.9

386.4
.5
386.9
— $

176.5
162.5
339.0

338.5
.5
339.0
—

Investment in Basic Management and LandWell. As discussed in Note 3, prior to December 2013 we owned a 32%
interest in BMI and a 12% interest in LandWell. BMI owns an additional 50% interest in LandWell, and we accounted for our
ownership interests in BMI and LandWell by the equity method of accounting. In December 2013, we acquired a controlling interest
in BMI and LandWell, and we ceased to account for BMI and LandWell by the equity method and began to account for BMI and
LandWell as a consolidated subsidiary. For federal income tax purposes LandWell is treated as a partnership, and accordingly the
combined results of operations of BMI and LandWell include a provision for income taxes on LandWell’s earnings only to the extent
that such earnings accrue to BMI. We previously recorded our equity in earnings of BMI and LandWell on a one-quarter lag because
their financial statements were generally not available to us on a timely basis. Upon gaining control of BMI and LandWell in
December 2013, we eliminated the one-quarter lag by recognizing, in the fourth quarter of 2013, equity in earnings of BMI and
LandWell attributable to the six-month period ended December 31, 2013. The effect of this one-quarter lag, as well as the effect of us
recognizing five quarters of equity in earnings of BMI and LandWell in 2013, was not material to any period presented. Certain
selected combined financial information of BMI and LandWell is summarized below.

Total revenues .......................................................................... $
Loss before income taxes .........................................................
Net loss .....................................................................................

9.5
(3.9 )
(3.7 )

Twelve Months ended
September 30, 2013
(in millions)

Land held for development. The land held for development relates to BMI and LandWell and is discussed in Notes 1

and 3.

Capitalized permit costs. We obtained our byproducts disposal license in 2008 and began amortizing such license when
the byproduct disposal facility began operations in October 2009. We obtained our LLRW license in September 2009. Our LLRW
facilities commenced operations in 2012, at which time we began amortizing such license. Amortization of capitalized operating
permit costs was $6.5 million in 2013, $6.6 million in 2014 and $6.3 million in 2015. Our estimated aggregate amortization expense
for all our of capitalized permit costs as of December 31, 2015 is approximately $6.3 million in each of 2016 and 2017, $5.7 million in
2018 and $5.3 million in each of 2019 and 2020. Capitalized permit costs are stated net of accumulated amortization of $25.3 million
at December 31, 2014 and $31.6 million at December 31, 2015. The components of net capitalized permit costs are presented in the
table below.

December 31,
2014 2015
(In millions)

Net permit costs for issued permits which are being

amortized: ..............................................................
LLRW license (expires in 2024) ....................... $
Byproduct license (expires in 2018) .................
Other (expires 2015—2024) .............................
Total amortized permits ..........................

Permits not being amortized

Total ........................................................ $

49.6 $
3.5
.1
53.2
—
53.2 $

44.7
2.5
.1
47.3
.8
48.1

F-26

Other. We have certain related party transactions with LPC, as more fully described in Note 16.

The IBNR receivables relate to certain insurance liabilities, the risk of which we have reinsured with certain third party
insurance carriers. We report the insurance liabilities related to these IBNR receivables which have been reinsured as part of
noncurrent accrued insurance claims and expenses. Certain of our insurance liabilities are classified as current liabilities and the
related IBNR receivables are classified with other current assets. See Notes 10 and 16.

Restricted cash relates primarily relates to our Waste Management Segment. In April 2014, $18.0 million of such

restricted cash was released to WCS. See Note 17.

The capital lease deposit relates to certain indebtedness of our Waste Management Segment and is discussed in Note 9.

Upon acquiring a controlling interest in our Real Estate Management and Development segment in December 2013, we
recognized an indefinite-lived customer relations intangible asset of $5.1 million for long-term contracts related to water delivery
services to the City of Henderson, Nevada and various other users through a water system owned by BMI. See Note 3.

Note 8—Goodwill:

We have assigned goodwill to each of our reporting units (as that term is defined in ASC Topic 350-20-20, Goodwill)
which corresponds to our operating segments. All of our goodwill related to our Chemicals Segment is from our various step
acquisitions of NL and Kronos which occurred prior to 2013, as goodwill was determined prior to the adoption of the equity
transaction framework provisions of ASC Topic 810. Substantially all of the net goodwill related to the Component Products Segment
was generated from CompX’s acquisitions of certain business units and the step acquisitions of CompX. The Component Products
Segment goodwill is assigned to the security products reporting unit within that operating segment.

Operating segment

Chemicals

Component
Products

(In millions)

Total

Balance at December 31, 2013, 2014 and 2015............ $

352.6 $

27.1 $ 379.7

We test for goodwill impairment at the reporting unit level. In determining the estimated fair value of the reporting units,
we use appropriate valuation techniques, such as discounted cash flows and, with respect to our Chemicals Segment, we consider
quoted market prices, a Level 1 input, while discounted cash flows are a Level 3 input. We also consider control premiums when
assessing fair value using quoted market prices. If the carrying amount of goodwill exceeds its implied fair value, an impairment
charge is recorded. We review goodwill for each of our reporting units for impairment during the third quarter of each year. Goodwill
is also evaluated for impairment at other times whenever an event occurs or circumstances change that would more likely than not
reduce the fair value of a reporting unit below its carrying value. If the fair value of an evaluated asset is less than its book value, the
asset is written down to fair value. Prior to 2013, we used a quantitative assessment in determining the estimated fair value of our
Component Products security products reporting unit, using appropriate valuation techniques such as discounted cash flows. Such
discounted cash flows are a Level 3 input as defined by ASC 820-10-35. If the carrying amount of goodwill exceeds its implied fair
value, an impairment charge is recorded. In 2013 we adopted the guidance in ASU No. 2011-08 for testing goodwill for impairment
by assessing qualitative factors solely as it relates to our security products reporting unit, to determine whether it is necessary to
perform the two-step quantitative goodwill impairment test.

We performed our annual goodwill impairment test in the third quarter of 2015 for each of our reporting units and
concluded there was no impairment of the goodwill for those reporting units. The impairment test as it relates to our security products
reporting unit was based on our qualitative assessment, and as a result a quantitative assessment was not required for such reporting
unit for 2015. We also tested our goodwill for impairment in connection with our annual goodwill impairment test during the third
quarter of 2013 and 2014. No impairment was indicated as part of such 2013, 2014 or 2015 annual review of goodwill.

Prior to 2013, we recorded an aggregate $16.5 million goodwill impairment, mostly with respect to our Component

Products Segment. Our consolidated gross goodwill at December 31, 2015 is $396.2 million.

F-27

Note 9—Long-term debt:

December 31,

2014

2015

(In millions)

Valhi:

Snake River Sugar Company ..................................... $
Contran credit facility .................................................
Total Valhi debt ................................................

250.0 $
223.7
473.7

250.0
263.8
513.8

Subsidiary debt:
Kronos —

Term loan ..........................................................

340.9

338.0

WCS —

Financing capital lease ......................................

67.1

Tremont —

Promissory note payable ...................................

17.4

BMI —

Bank note payable .............................................

10.2

LandWell —

Note payable to the City of Henderson .............
Other ...........................................................................
Total subsidiary debt .........................................
Total debt ..........................................................
Less current maturities ......................................
Total long-term debt ......................................... $

3.1
16.6
455.3
929.0
9.3
919.7 $

65.6

17.1

9.3

3.1
13.6
446.7
960.5
9.5
951.0

Valhi—Snake River Sugar Company—Our $250 million in loans from Snake River Sugar Company are collateralized by
our interest in The Amalgamated Sugar Company LLC. The loans bear interest at a weighted average fixed interest rate of 9.4% and
are due in January 2027. At December 31, 2015, $37.5 million of the loans are recourse to us and the remaining $212.5 million is
nonrecourse to us. Under certain conditions, Snake River has the ability to accelerate the maturity of these loans. See Note 4.

Contran credit facility—We also have an unsecured revolving credit facility with Contran which, as amended, provides
for borrowings from Contran of up to $325 million. The facility, as amended, bears interest at prime plus 1% (4.50% at December 31,
2015), and is due on demand, but in any event no earlier than December 31, 2017. The facility contains no financial covenants or other
financial restrictions. Valhi pays an unused commitment fee quarterly to Contran on the available balance (except during periods
during which Contran would be a net borrower from Valhi). The average interest rate on the term loan borrowings for the year ended
December 31, 2015 was 4.26%. During 2015 we borrowed an additional net $40.1 million and at December 31, 2015 an additional
$61.2 million was available for borrowings under the amended facility.

Kronos—Term loans— In 2013, Kronos voluntarily repaid its entire $400 million term loan that was issued in June 2012.
Kronos prepaid an aggregate $390 million principal amount and recognized a non-cash pre-tax interest charge of $8.9 million in 2013
related to this prepayment consisting of the write-off of unamortized original issue discount costs and deferred financing costs
associated with such prepayment. Funds for the aggregate prepayment were provided by $150 million of cash on hand, borrowings of
$190 million under a 2013 loan agreement with Contran as described below, $50 million of cash on hand and borrowings of $50
million under its revolving North American credit facility.

In February 2014, Kronos entered into a new $350 million term loan. The term loan was issued at 99.5% of the principal
amount, or an aggregate of $348.3 million. Kronos used $170 million of the net proceeds of the new term loan to prepay the
outstanding principal balance of its note payable to Contran (along with accrued and unpaid interest through the prepayment date), and
such note payable was cancelled. The remaining net proceeds of the term loan are available for Kronos’ general corporate
purposes. The new term loan:

(cid:121) bears interest, at Kronos’ option, at LIBOR (with LIBOR no less than 1.0%) plus 3.75%, or the base rate, as defined

in the agreement, plus 2.75%;

(cid:121)

requires quarterly principal repayments of $875,000 which commenced in June 2014, other mandatory principal
repayments of formula-determined amounts under specified conditions with all remaining principal balance due in
February 2020. Voluntary principal prepayments are permitted at any time;

F-28

(cid:121)

is collateralized by, among other things, a first priority lien on (i) 100% of the common stock of certain of Kronos’
U.S. wholly-owned subsidiaries, (ii) 65% of the common stock or other ownership interest of Kronos’ Canadian
subsidiary (Kronos Canada, Inc.) and certain first-tier European subsidiaries (Kronos Titan GmbH and Kronos
Denmark ApS) and (iii) a $395.7 million unsecured promissory note issued by Kronos’ wholly-owned subsidiary,
Kronos International, Inc. (KII) to Kronos;

is also collateralized by a second priority lien on all of the U.S. assets which collateralize Kronos’ North American
revolving facility, as discussed below;

contains a number of covenants and restrictions which, among other things, restrict Kronos’ ability to incur additional
debt, incur liens, pay dividends or merge or consolidate with, or sell or transfer substantially all of Kronos’ assets to,
another entity, contains other provisions and restrictive covenants customary in lending transactions of this type
(however, there are no ongoing financial maintenance covenants); and

(cid:121)

contains customary default provisions, including a default under any of Kronos’ other indebtedness in excess of $50
million.

In May 2015 Kronos entered into an amendment to its term loan due in February 2020. As a result of the amendment:

(cid:120) The applicable margin on outstanding LIBOR-based borrowings was reduced from 3.75% to 3.00%, and the

applicable margin on outstanding base rate borrowings was reduced from 2.75% to 2.00%; and

(cid:120) A provision was added whereby if we elected to call all or a portion of the outstanding principal balance within six
months of completing the amendment (i.e. before November 2015), a 1% call premium of the aggregate principal
amount so prepaid would apply. There is no prepayment penalty applicable to any call after November 2015. We
made no such call prior to November 2015.

We accounted for such amendment to our term loan as a modification of the terms of the term loan. All other terms of the
term loan, including principal repayments, maturity and collateral remain unchanged. We paid a $750,000 refinancing fee in
connection with this amendment, which along with the existing unamortized deferred financing costs associated with the term loan are
being amortized over the remaining term of the loan.

The average interest rate on the term loan borrowings as of and for the year ended December 31, 2015 was 4.0% and
4.29%, respectively. The carrying value of the term loan at December 31, 2015 is stated net of unamortized original issue discount of
$1.2 million and debt issuance costs of $4.7 million (at December 31, 2014 the amounts were $1.5 million and $5.0 million). See
Note 20.

See Note 18 for a discussion of the interest rate swap we entered into in the third quarter of 2015 pursuant to our interest

rate risk management strategy.

Note payable to Contran—As discussed above, in February 2013 Kronos entered into a promissory note with Contran.
This loan from Contran contained terms and conditions similar to the terms and conditions of the prior $400 million term loan, except
that the loan from Contran was unsecured and contained no ongoing financial maintenance covenant. The independent members of
Kronos’ board of directors approved the terms and conditions of the loan from Contran. In 2013, Kronos borrowed $190 million and
subsequently repaid $20 million. In February 2014 Kronos used $170 million of the proceeds from its new term loan and prepaid the
remaining balance owed to Contran under this note payable (without penalty), and the note payable to Contran was cancelled.

Revolving North American credit facility—In June 2012, Kronos entered into a $125 million revolving bank credit facility
which matures in June 2017. Borrowings under the revolving credit facility are available for Kronos’ general corporate purposes.
Available borrowings on this facility are based on formula-determined amounts of eligible trade receivables and inventories, as
defined in the agreement, of certain of Kronos’ North American subsidiaries less any outstanding letters of credit up to $15 million
issued under the facility (with revolving borrowings by Kronos’ Canadian subsidiary limited to $25 million). Any amounts
outstanding under the revolving credit facility bear interest, at Kronos’ option, at LIBOR plus a margin ranging from 1.5% to 2.0% or
at the applicable base rate, as defined in the agreement, plus a margin ranging from .5% to 1.0%. The credit facility is collateralized
by, among other things, a first priority lien on the borrowers’ trade receivables and inventories. The facility contains a number of
covenants and restrictions which, among other things, restricts the borrowers’ ability to incur additional debt, incur liens, pay
dividends or merge or consolidate with, or sell or transfer all or substantially all of their assets to, another entity, contains other
provisions and restrictive covenants customary in lending transactions of this type and under certain conditions requires the
maintenance of a specified financial covenant (fixed charge coverage ratio, as defined) to be at least 1.1 to 1.0. During 2014, Kronos
borrowed $81.0 million and repaid an aggregate of $92.1 million under this facility. Kronos had no borrowings or repayments under

F-29

this facility during 2015, and at December 31, 2015 Kronos had approximately $68.3 million available for borrowing under this
revolving facility.

Revolving European credit facility—Kronos’ operating subsidiaries in Germany, Belgium, Norway and Denmark have a
€120 million secured revolving bank credit facility that, matures in September 2017. Kronos may denominate borrowings in Euros,
Norwegian kroner or U.S. dollars. Outstanding borrowings bear interest at LIBOR plus 1.90%. The facility is collateralized by the
accounts receivable and inventories of the borrowers, plus a limited pledge of all of the other assets of the Belgian borrower. The
facility contains certain restrictive covenants that, among other things, restrict the ability of the borrowers to incur debt, incur liens,
pay dividends or merge or consolidate with, or sell or transfer all or substantially all of the assets to, another entity, and requires the
maintenance of certain financial ratios. In addition, the credit facility contains customary cross-default provisions with respect to other
debt and obligations of the borrowers, KII and its other subsidiaries.

Kronos had no borrowing or repayments under this facility during 2015 and at December 31, 2015, there were no
outstanding borrowings under this facility. Kronos’ European credit facility requires the maintenance of certain financial
ratios. Kronos’ European revolving credit facility requires the maintenance of certain financial ratios, and one of such requirements is
based on the ratio of net debt to last twelve months earnings before income tax, interest, depreciation and amortization expense
(EBITDA) of the borrowers. Based upon the borrowers’ last twelve months EBITDA as of December 31, 2015 and the net debt to
EBITDA financial test, Kronos’ borrowing availability at December 30, 2015 is approximately 19% of the credit facility, or €23.1
million ($25.3 million).

Canada—In December 2011, Kronos’ Canadian subsidiary entered into an agreement with an economic development
agency of the Province of Quebec, Canada pursuant to which we may borrow up to Cdn. $4.5 million through December 31, 2015 (no
additional amounts are expected to be borrowed under this facility). Borrowings may only be used to fund capital improvements at its
Canadian plant and are limited to a specified percentage of such capital improvements. Borrowings are non-interest bearing, with
equal monthly payments commencing in 2018. The agreement contains certain restrictive covenants, which, among other things,
restricts the subsidiary’s ability to sell assets or enter into mergers, and requires Kronos’ subsidiary to maintain certain financial ratios
and maintain specified levels of employment. At December 31, 2015, Kronos had Cdn. $4.5 million (USD $3.3 million) outstanding
under this agreement.

Prior to December 31, 2014, Kronos’ Canadian subsidiary had an aggregate of Cdn. $7.9 million of letters of credit
outstanding issued by a bank its behalf. These letters of credit were issued in connection with the appeal of a Canadian income tax
assessment discussed in Note 12. Upon the successful completion of the appeal in 2014, such letters of credit were cancelled, and an
equivalent amount of restricted cash deposits which had been collateralizing such letters of credit, classified as noncurrent restricted
cash, were released.

WCS—Financing capital lease—Prior to 2013, WCS closed under a Sale and Purchase Agreement with the County of
Andrews, Texas whereby WCS sold certain real and personal property constituting a substantial portion of its property and equipment
(“Transferred Assets”) to the County for gross proceeds of $75 million. WCS used the net proceeds received under the Agreement to
finance the construction of its Federal and Texas Compact LLRW disposal facilities. As a condition under the Agreement, WCS also
concurrently entered into a Lease Agreement (“Lease”) with the County pursuant to which WCS agreed to lease the Transferred
Assets back from the County for a period of 25 years. The Lease requires monthly rental payments payable through August 2035, and
during the Lease term WCS is responsible for all costs associated with the use, occupancy, possession and operation of the Transferred
Assets. Under the terms of the Agreement, WCS was also required to pay all of the County’s costs associated with the transactions,
and the proceeds WCS received from the County upon closing under the Sale and Purchase Agreement were net of the County’s cost,
which aggregated approximately $2.6 million At the end of the Lease term, title to the Transferred Assets automatically reverts back
to WCS without further payment obligation. Prior to the end of the Lease term, WCS may, at its option, terminate the Lease early
upon payment of specified amounts to the County, at which time the Transferred Assets would also revert back to WCS. For financial
reporting purposes, we have accounted for these transactions in tandem as a financing capital lease, in which we continue to recognize
the Transferred Assets on our Consolidated Balance Sheet and our rental payments due under the Lease are accounted for as debt. The
capital lease has an effective interest rate of approximately 7.0%. At the inception of the Lease, WCS was required to prepay to the
County an amount ($6.2 million) equal to its aggregate lease rentals due to the County in the final year of the Lease, the County will
hold the funds as a prepaid deposit. The deposit serves as collateral for WCS’ performance under the Lease and is included in our
other noncurrent assets. See Notes 7 and 16.

Other. Tremont’s promissory note payable is discussed in Notes 3 and 16.

In January 2013, BMI entered into an $11.9 million bank note payable to Meadows Bank. The proceeds of the note were
used to refinance previously outstanding debt obligations. The note requires monthly installments of $.1 million through the maturity
date in January 2025. The note bears interest at a variable rate equal to the prime rate with a floor of 3.25% and a ceiling of 9.0%. The

F-30

note is secured by certain real property. In addition we are required to maintain cash collateral of $750,000 with the lender, which
collateral is classified as noncurrent restricted cash in our Consolidated Balance Sheets. At December 31, 2015 the note had an
outstanding balance of $9.4 million and is stated net of debt issuance costs of $.1 million. The interest rate as of and for the year ended
December 31, 2015 was 3.50% and 3.25%, respectively.

In May 2012, LandWell entered into a $3.9 million promissory note payable to the City of Henderson, Nevada. The note
requires semi-annual principal payments of $250,000 payable solely from cash received from certain specified revenue sources with
any remaining unpaid balance due in October 2020, see Note 17. The loan bears interest at a 3% fixed rate. Due to the uncertainty in
timing of the cash to be received from the specified revenue sources, the outstanding balance of $3.1 million is deemed to be maturing
in 2020.

Aggregate maturities of long-term debt at December 31, 2015

Aggregate maturities of debt at December 31, 2015 are presented in the table below.

Years ending December 31,

Gross amounts due each year:

Amount
(In millions)

2016 ................................................................................... $
2017 ...................................................................................
2018 ...................................................................................
2019 ...................................................................................
2020 ...................................................................................
2021 and thereafter ............................................................
Subtotal ....................................................................

Less amounts representing interest on capital leases, original

issue discount and debt issuance costs....................................
Total long-term debt .................................................................... $

14.7
276.3
12.7
12.3
341.8
366.0
1,023.8

63.3
960.5

We are in compliance with all of our debt covenants at December 31, 2015.

F-31

Note 10—Accounts payable and accrued liabilities:

Accounts payable:

Kronos ......................................................................... $
CompX ........................................................................
WCS ............................................................................
BMI/LandWell ............................................................
NL ...............................................................................
Other............................................................................
Total ................................................................... $

Current accrued liabilities:

Employee benefits ....................................................... $
Accrued sales discounts and rebates ...........................
Deferred income ..........................................................
Environmental remediation and related costs ..............
Accrued workforce reduction costs ............................
Interest rate swap contract ...........................................
Other............................................................................
Total ................................................................... $

Noncurrent accrued liabilities:

Reserve for uncertain tax positions ............................. $
Asset retirement obligations ........................................
Deferred income ..........................................................
Employee benefits .......................................................
Insurance claims and expenses ....................................
Deferred payment obligation .......................................
Other............................................................................
Total ................................................................... $

December 31,

2014

2015

(In millions)

121.4 $
3.9
1.4
7.0
2.3
.2
136.2 $

34.6 $
23.0
19.8
10.2
—
—
40.4
128.0 $

34.1 $
27.2
18.9
8.1
9.5
8.5
6.4
112.7 $

96.1
2.7
1.3
2.1
1.9
.7
104.8

24.7
23.9
21.8
11.7
5.3
3.3
30.4
121.1

32.9
28.8
20.2
7.1
9.6
8.8
7.2
114.6

The risks associated with certain of our accrued insurance claims and expenses have been reinsured, and the related IBNR
receivables are recognized as noncurrent assets to the extent the related liability is classified as a noncurrent liability. See Note 7. Our
reserve for uncertain tax positions is discussed in Note 12.

Our asset retirement obligations include amounts related to the closure and post-closure obligations associated with our
Waste Management Segment’s facility in West Texas. We recognized accretion expense of $1.7 million in 2013, $1.8 million in 2014
and $2.0 million in 2015 on the closure and post-closure obligations. We are required to provide certain financial assurance to Texas
government agencies with respect to the decommissioning obligations related to such facility, as more fully described in Note 17.
Certain of our affiliates have provided or assisted us in providing such financial assurance, as discussed in Note 16.

Estimates of the ultimate cost to be incurred to settle our closure and post closure obligation require a number of
assumptions, are inherently difficult to develop and the ultimate outcome may differ materially from current estimates. However, we
believe our experience in the environmental services business provides a reasonable basis for estimating such costs. As additional
information becomes available, cost estimates will be adjusted as necessary. It is possible that technological, regulatory or
enforcement developments, the results of studies or other factors could necessitate the recording of additional liabilities which could
be material.

The deferred payment obligation relates to Tremont and is discussed in Notes 3 and 16.

Note 11—Employee benefit plans:

Defined contribution plans. Certain of our subsidiaries maintain various defined contribution pension plans for our
employees worldwide. Defined contribution plan expense approximated $4.2 million in 2013, $5.7 million in 2014 and $5.8 million in
2015.

F-32

Defined benefit plans. Kronos and NL sponsor various defined benefit pension plans worldwide. The benefits under our
defined benefit plans are based upon years of service and employee compensation. Our funding policy is to contribute annually the
minimum amount required under ERISA (or equivalent foreign) regulations plus additional amounts as we deem appropriate.

We expect to contribute the equivalent of $15.8 million to all of our defined benefit pension plans during 2016. Benefit

payments to plan participants out of plan assets are expected to be the equivalent of:

2016 ........................................................................................... $ 23.4 million
2017 ........................................................................................... 23.7 million
2018 ........................................................................................... 24.2 million
2019 ........................................................................................... 24.7 million
2020 ........................................................................................... 25.6 million
Next 5 years ............................................................................... 141.2 million

The funded status of our U.S. defined benefit pension plans is presented in the table below.

Change in projected benefit obligations (“PBO”):

Balance at beginning of the year ......................... $
Interest cost .........................................................
Actuarial loss (gain) ............................................
Benefits paid........................................................
Balance at end of the year ................ $

Change in plan assets:

Fair value at beginning of the year ...................... $
Actual return on plan assets ................................
Employer contributions .......................................
Benefits paid........................................................
Fair value at end of year ................... $
Funded status ................................................................ $
Amounts recognized in the Consolidated

Balance Sheets:

Accrued pension costs:

Current ....................................................... $
Noncurrent .................................................
Total .................................................

Accumulated other comprehensive loss—

Actuarial loss ..................................................
Total ................................................. $
Accumulated benefit obligations (“ABO”) ................... $

Years ended December 31,
2015
2014

(In millions)

62.0 $
2.9
9.9
(4.6)
70.2 $

54.9 $
2.0
1.3
(4.6)
53.6 $
16.6 $

(.3) $
(16.3)
(16.6)

39.5
22.9 $
70.2 $

70.2
2.7
(2.2 )
(4.1 )
66.6

53.6
(2.3 )
.4
(4.1 )
47.6
19.0

(.3 )
(18.7 )
(19.0 )

42.0
23.0
66.6

F-33

The components of our net periodic defined benefit pension benefit cost (credit) for U.S. plans are presented in the table
below. The amounts shown below for the amortization of unrecognized actuarial losses for 2013, 2014 and 2015 were recognized as
components of our accumulated other comprehensive income (loss) at December 31, 2012, 2013 and 2014, respectively, net of
deferred income taxes and noncontrolling interest.

2013

Years ended December 31,
2014
(In millions)

2015

Net periodic pension benefit cost (credit) for U.S.

plans:

Interest cost .......................................................... $
Expected return on plan assets .............................
Amortization of unrecognized net

actuarial loss ....................................................
Total ........................................................... $

2.4 $
(4.9)

1.6
(.9) $

2.9 $
(4.0)

1.2
.1 $

2.7
(3.9)

1.7
.5

Certain information concerning our U.S. defined benefit pension plans is presented in the table below.

Plans for which the ABO exceeds plan assets:

Projected benefit obligations .............................. $
Accumulated benefit obligations ........................
Fair value of plan assets .....................................

December 31,

2014

2015

(In millions)

70.2 $
70.2
53.6

66.6
66.6
47.6

The discount rate assumptions used in determining the actuarial present value of the benefit obligation for our U.S.
defined benefit pension plans as of December 31, 2014 and 2015 are 3.8% and 4.1%, respectively. The impact of assumed increases in
future compensation levels does not have an effect on the benefit obligation as the plans are frozen with regards to compensation.

The weighted-average rate assumptions used in determining the net periodic pension cost for our U.S. defined benefit
pension plans for 2013, 2014 and 2015 are presented in the table below. The impact of assumed increases in future compensation
levels does not have an effect on the periodic pension cost as the plans are frozen with regards to compensation.

Rate
Discount rate..................................................................
Long-term return on plan assets ....................................

2013

Years ended December 31,
2014

2015

3.6%
10.0%

4.5%
7.5%

3.8%
7.5%

Variances from actuarially assumed rates will result in increases or decreases in accumulated pension obligations, pension

expense and funding requirements in future periods.

F-34

The funded status of our foreign defined benefit pension plans is presented in the table below.

Change in PBO:

Balance at beginning of the year ........................ $
Service cost ........................................................
Interest cost ........................................................
Participants’ contributions ..................................
Actuarial loss (gain) ...........................................
Change in currency exchange rates ....................
Benefits paid .......................................................
Balance at end of the year ............... $

Change in plan assets:

Fair value at beginning of the year ..................... $
Actual return on plan assets ................................
Employer contributions ......................................
Participants’ contributions ..................................
Change in currency exchange rates ....................
Benefits paid .......................................................
Fair value at end of year .................. $
Funded status ............................................................... $
Amounts recognized in the Consolidated

Balance Sheets:

Pension asset ...................................................... $
Accrued pension costs:

Current ......................................................
Noncurrent ................................................
Total ................................................

Accumulated other comprehensive loss:

Actuarial loss ............................................
Prior service cost .......................................
Total ................................................
Total ................................................ $
ABO ............................................................................. $

Years ended December 31,
2015
2014

(In millions)

604.9 $
9.9
22.2
2.0
122.2
(75.3)
(26.7)
659.2 $

441.6 $
40.7
20.4
2.0
(52.5)
(26.7)
425.5 $
(233.7) $

659.2
11.2
15.1
1.6
(10.0 )
(76.9 )
(21.3 )
578.9

425.5
10.8
17.6
1.6
(51.7 )
(21.3 )
382.5
(196.4 )

— $

1.7

(.6)
(233.1)
(233.7)

252.3
2.2
254.5
20.8 $
627.5 $

—
(198.1 )
(196.4 )

234.1
1.9
236.0
39.6
554.4

F-35

The components of our net periodic defined benefit pension benefit cost for our foreign plans are presented in the table
below. In December 2013, we amended one of Kronos’ Canadian plans in which participation with respect to hourly workers was
closed to new participants in December 2013, and existing hourly plan participants will no longer accrue additional benefits after
December 2013, resulting in a $7.1 million curtailment charge for recognition of previously unamortized prior service cost and
transition obligation and $.2 million for special termination benefits. In 2014, we amended the other Kronos Canadian plan in which
participation with respect to salaried workers was closed to new participants in December 2014, and existing hourly plan participants
will no longer accrue additional benefits after December 2014, resulting in a nominal curtailment charge. The amounts shown below
for the amortization of unrecognized prior service cost, net transition obligations and actuarial losses for 2013, 2014 and 2015 were
recognized as components of our accumulated other comprehensive income (loss) at December 31, 2012, 2013 and 2014, respectively,
net of deferred income taxes and noncontrolling interest.

Net periodic pension cost for foreign plans:

Service cost ......................................................... $
Interest cost .........................................................
Settlement gain ....................................................
Curtailment loss ..................................................
Expected return on plan assets ............................
Amortization of unrecognized:

Prior service cost .......................................
Net transition obligations ...........................
Net actuarial loss .......................................
Total........................................................... $

2013

Years ended December 31,
2014
(In millions)

2015

13.1 $
21.6
—
7.3
(18.9)

1.1
.4
12.5
37.1 $

9.9 $
22.2
(.3 )
.1
(20.6 )

.5
—
10.1
21.9 $

11.2
15.1
—
—
(17.3)

.4
—
13.8
23.2

Certain information concerning our foreign defined benefit pension plans is presented in the table below.

Plans for which the ABO exceeds plan assets:

Projected benefit obligations ............................... $
Accumulated benefit obligations .........................
Fair value of plan assets ......................................

632.6 $
603.4
401.2

518.1
498.7
321.6

December 31,

2014

2015

(In millions)

A summary of our key actuarial assumptions used to determine foreign benefit obligations as of December 31, 2014 and

2015 was:

Rate
Discount rate ................................................................
Increase in future compensation levels ........................

December 31,

2014

2015

2.5%
2.6%

2.6 %
2.9 %

A summary of our key actuarial assumptions used to determine foreign net periodic benefit cost for 2013, 2014 and 2015

are as follows:

Rate
Discount rate ..................................................................
Increase in future compensation levels ..........................
Long-term return on plan assets ....................................

2013

Years ended December 31,
2014

2015

3.7%
3.1%
5.0%

3.8 %
2.7 %
5.0 %

2.5%
2.6%
4.6%

Variances from actuarially assumed rates will result in increases or decreases in accumulated pension obligations, pension

expense and funding requirements in future periods.

The amounts shown for all of our defined benefit plans for unrecognized actuarial losses and prior service cost at
December 31, 2014 and 2015 have not been recognized as components of our periodic defined benefit pension cost as of those

F-36

dates. These amounts will be recognized as components of our periodic defined benefit cost in future years. These amounts, net of
deferred income taxes and noncontrolling interest, are recognized in our accumulated other comprehensive income (loss) at
December 31, 2014 and 2015. We expect approximately $12.8 million and $.2 million of the unrecognized actuarial losses and prior
service cost, respectively, will be recognized as components of our periodic defined benefit pension cost in 2016. The table below
details the changes in other comprehensive income (loss) during 2013, 2014 and 2015.

Changes in plan assets and benefit obligations

recognized in other comprehensive income (loss):

Net actuarial gain (loss) ...................................... $
Plan curtailment ..................................................
Plan settlement ....................................................
Amortization of unrecognized:

Prior service cost .......................................
Net transition obligations ...........................
Net actuarial losses ....................................
Total ................................................. $

2013

Years ended December 31,
2014
(In millions)

2015

19.8 $
7.1
—

1.1
.4
14.2
42.6 $

(113.0 ) $
—
(.2 )

.5
—
11.3
(101.4 ) $

.3
—
—

.4
—
15.4
16.1

At December 31, 2014 and 2015, all of the assets attributable to our U.S. plan were invested in the Combined Master
Retirement Trust (“CMRT”), a collective investment trust sponsored by Contran to permit the collective investment by certain master
trusts that fund certain employee benefits plans sponsored by Contran and certain of its affiliates. Prior to his death in December 2013,
Mr. Harold C. Simmons was the sole trustee of the CMRT, and he along with the CMRT’s investment committee, of which
Mr. Simmons was a member, actively managed the investments of the CMRT. The CMRT’s long-term investment objective was to
provide a rate of return exceeding a composite of broad market equity and fixed income indices (including the S&P 500 and certain
Russell indices) while utilizing both third-party investment managers as well as investments directed by Mr. Simmons (prior to his
death). During the history of the CMRT from its inception in 1988 through December 31, 2013, the average annual rate of return was
14%. For the year ended December 31, 2013, the assumed long-term rate of return for plan assets invested in the CMRT was 10%. In
determining the appropriateness of the long-term rate of return assumption, we primarily relied on the historical rates of return
achieved by the CMRT, although we considered other factors as well including, among other things, the investment objectives of the
CMRT’s managers and their expectation that such historical returns would in the future continue to be achieved over the long-term.

Following the death of Mr. Simmons in December 2013, the Contran board of directors in January 2014 appointed a
financial institution as the new directed trustee of the CMRT, and the Contran board appointed five individuals (all executive officers
of Contran) as the new investment committee of the CMRT. During 2014, the new investment committee began a process of
reallocating to current and/or new investment managers or various mutual funds and commingled funds the portion of the CMRT
assets that had previously been under direct and active management by Mr. Simmons. The reallocation process was done prudently
over a period of time, given the diverse asset composition of this portion of the portfolio, and was substantially complete at December
31, 2015. Concurrent with this change in investment strategy in which there is no longer a portion of the CMRT’s assets under direct
and active management by Mr. Simmons, and considering the long-term asset mix of the assets of the CMRT and the expected long-
term rates of return for such asset components as well as advice from Contran’s actuaries, beginning in 2014 the assumed long-term
rate of return for plan assets invested in the CMRT was reduced to 7.5%.

F-37

The CMRT unit value is determined semi-monthly, and the plans have the ability to redeem all or any portion of their
investment in the CMRT at any time based on the most recent semi-monthly valuation. However, the plans do not have the right to
individual assets held by the CMRT and the CMRT has the sole discretion in determining how to meet any redemption request. For
purposes of our plan asset disclosure, we consider the investment in the CMRT as a Level 2 input because (i) the CMRT value is
established semi-monthly and the plans have the right to redeem their investment in the CMRT, in part or in whole, at anytime based
on the most recent value and (ii) observable inputs from Level 1 or Level 2 were used to value approximately 80% and 81% of the
assets of the CMRT at December 31, 2014 and 2015, respectively, as noted below. The aggregate fair value of all of the CMRT assets,
including funds of Contran and its other affiliates that also invest in the CMRT, and supplemental asset mix details of the CMRT are
as follows:

CMRT asset value ....................................................... $
CMRT fair value input:

Level 1 ...............................................................
Level 2 ...............................................................
Level 3 ...............................................................

CMRT asset mix:

Domestic equities, principally publicly

traded ............................................................

International equities, principally publicly

traded ............................................................

Fixed income securities, principally publicly

traded ............................................................
Privately managed limited partnerships ............
Hedge funds ......................................................
Other, primarily cash .........................................

December 31,

2014

2015

(In millions)

715.5

648.8

67%
13
20
100%

48%

32
7
—
2
100%

54 %
27
19
100 %

29 %

38
5
5
1
100 %

In determining the expected long-term rate of return on non-U.S. plan asset assumptions, we consider the long-term asset
mix (e.g. equity vs. fixed income) for the assets for each of our plans and the expected long-term rates of return for such asset
components. In addition, we receive third-party advice about appropriate long-term rates of return. Such assumed asset mixes are
summarized below:

(cid:121)

In Germany, the composition of our plan assets is established to satisfy the requirements of the German insurance
commissioner. Our German pension plan assets represent an investment in a large collective investment fund
established and maintained by Bayer AG in which several pension plans, including our German pension plan and
Bayer’s pension plans, have invested. Our plan assets represent a very nominal portion of the total collective
investment fund maintained by Bayer. These plan assets are a Level 3 input because there is not an active market that
approximates the value of our investment in the Bayer investment fund. We determine the fair value of the Bayer plan
assets based on periodic reports we receive from the managers of the Bayer plan. These periodic reports are subject to
audit by the German pension regulator.

In Canada, we currently have a plan asset target allocation of 38% to equity securities, 55% to fixed income securities
and 7% to other investments and cash. We expect the long-term rate of return for such investments to average
approximately 125 basis points above the applicable equity or fixed income index. The Canadian assets are Level 1
inputs because they are traded in active markets.

In Norway, we currently have a plan asset target allocation of 11% to equity securities, 79% to fixed income
securities, 7% to real estate and the remainder primarily to other investments and liquid investments such as money
markets. The expected long-term rate of return for such investments is approximately 7%, 3%, 5% and 5%,
respectively. The majority of Norwegian plan assets are Level 1 inputs because they are traded in active markets;
however approximately 11% of our Norwegian plan assets are invested in real estate and other investments not
actively traded and are therefore a Level 3 input.

(cid:121) We also have plan assets in Belgium and the United Kingdom. The Belgian plan assets are invested in certain
individualized fixed income insurance contracts for the benefit of each plan participant as required by the local

F-38

regulators and are therefore a Level 3 input. The United Kingdom plan assets consist of marketable securities which
are Level 1 inputs because they trade in active markets.

We regularly review our actual asset allocation for each plan, and will periodically rebalance the investments in each plan

to more accurately reflect the targeted allocation and/or maximize the overall long-term return when considered appropriate.

The composition of our December 31, 2014 and 2015 pension plan assets by asset category and fair value level is shown
in the table below. The amounts shown for plan assets invested in the CMRT include a nominal amount of cash held by our U.S.
pension plan which is not part of the plan’s investment in the CMRT.

Germany ................................................................... $
Canada:

Norway:

Local currency equities ...................................
Foreign currency equities ...............................
Local currency fixed income ..........................
Foreign currency fixed income .......................
Real estate .......................................................
Cash and other ................................................
US — CMRT ..........................................................
Other ........................................................................
Total ...................................................... $

Germany ................................................................... $
Canada:

Norway:

Local currency equities ...................................
Foreign currency equities ...............................
Local currency fixed income ..........................
Foreign currency fixed income .......................
Real estate .......................................................
Cash and other ................................................
US — CMRT .................................................
Other ........................................................................
Total ...................................................... $

Fair Value Measurements at December 31, 2014

Quoted
Prices in
Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

(In millions)
— $

— $

240.7

12.4
34.4
50.3
10.1
.6

1.9
5.1
29.3
3.8
—
9.2
—
14.3
171.4 $

—
—
—
—
—

—
—
—
—
—
—
53.6
—
53.6 $

—
—
—
—
—

—
—
—
—
4.5
1.1
—
7.8
254.1

Total

240.7 $

12.4
34.4
50.3
10.1
.6

1.9
5.1
29.3
3.8
4.5
10.3
53.6
22.1
479.1 $

Fair Value Measurements at December 31, 2015

Quoted
Prices in
Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

(In millions)
— $

— $

223.1

9.6
23.3
50.6
6.8
.5

2.0
3.6
24.5
4.7
—
6.7
—
14.0
146.3 $

—
—
—
—
—

—
—
—
—
—
—
47.6
—
47.6 $

—
—
—
—
—

—
—
—
—
4.2
1.2
—
7.7
236.2

Total

223.1 $

9.6
23.3
50.6
6.8
.5

2.0
3.6
24.5
4.7
4.2
7.9
47.6
21.7
430.1 $

F-39

A rollforward of the change in fair value of Level 3 assets follows.

Fair value at beginning of year ............................................ $
Gain on assets held at end of year .............................
Gain on assets sold during the year ...........................
Assets purchased .......................................................
Assets sold .................................................................
Currency exchange rate fluctuations .........................
Fair value at end of year .................................. $

Years ended December 31,
2015
2014

(In millions)

261.5 $
24.5
.3
16.9
(15.2)
(33.9)
254.1 $

254.1
6.5
.3
13.7
(12.4 )
(26.0 )
236.2

Postretirement benefits other than pensions (“OPEB”). NL, Kronos and Tremont provide certain health care and life
insurance benefits for their eligible retired employees. We have no OPEB plan assets, rather, we fund benefit payments as they are
paid. At December 31, 2015, we expect to contribute the equivalent of approximately $1.1 million to all of our OPEB plans during
2016. Benefit payments to OPEB plan participants are expected to be the equivalent of:

2016 ........................................................................................... $
2017 ...........................................................................................
2018 ...........................................................................................
2019 ...........................................................................................
2020 ...........................................................................................
Next 5 years ...............................................................................

1.1 million
1.1 million
1.0 million
1.0 million
.9 million
4.2 million

The funded status of our OPEB plans is presented in the table below.

Actuarial present value of accumulated OPEB obligations:
Obligations at beginning of the year .......................... $
Service cost ................................................................
Interest cost ................................................................
Actuarial loss (gain) ...................................................
Change in currency exchange rates ............................
Benefits paid from employer contributions ................
Obligations at end of the year.....................................
Fair value of plan assets .......................................................
Funded status ....................................................................... $
Accrued OPEB costs recognized in the Consolidated

Balance Sheets:

Current ....................................................................... $
Noncurrent .................................................................
Total ..................................................................

Accumulated other comprehensive income (loss):

Net actuarial losses ...........................................
Prior service credit ............................................
Total ..................................................................
Total .................................................................. $

Years ended December 31,
2015
2014

(In millions)

15.1 $
.1
.6
1.4
(.6)
(1.2)
15.4 $
—
(15.4) $

(1.3) $
(14.1)
(15.4)

3.2
(10.6)
(7.4)
(22.8) $

15.4
.1
.5
(.8 )
(1.2 )
(1.1 )
12.9
—
(12.9 )

(1.1 )
(11.8 )
(12.9 )

2.4
(8.6 )
(6.2 )
(19.1 )

F-40

The amounts shown in the table above for unrecognized actuarial losses and prior service credit at December 31, 2014 and
2015 have not been recognized as components of our periodic OPEB cost as of those dates. These amounts will be recognized as
components of our periodic OPEB cost in future years. These amounts, net of deferred income taxes and noncontrolling interest, are
now recognized in our accumulated other comprehensive loss at December 31, 2014 and 2015. We expect to recognize approximately
$1.8 million of prior service credit and $.2 million of unrecognized actuarial losses as components of our periodic OPEB cost in 2016.
The table below details the changes in other comprehensive income (loss) during 2013, 2014 and 2015. In the fourth quarter of 2013,
we amended the benefit formula for most Canadian participants of our plans effective January 1, 2014, resulting in a curtailment gain
as of December 31, 2013. Key assumptions including the service cost and benefit duration as of December 31, 2014 and 2015 now
reflect these plan revisions to the benefit formula.

Changes in benefit obligations recognized in other

comprehensive income (loss):

Net actuarial gain (loss) arising during the year ............ $
Plan amendments/curtailment ........................................
Amortization of unrecognized prior service credit ........
Total ..................................................................... $

2013

Years ended December 31,
2014
(In millions)

2015

2.2 $
4.5
(2.4)
4.3 $

(1.4 ) $
(.2 )
(2.0 )
(3.6 ) $

.8
—
(1.9)
(1.1)

The components of our periodic OPEB costs are presented in the table below. The amounts shown below for amortization
of prior service credit and recognized actuarial losses for 2013, 2014 and 2015 were recognized as components of our accumulated
other comprehensive income (loss) at December 31, 2012, 2013 and 2014, respectively, net of deferred income taxes and
noncontrolling interest.

2013

Years ended December 31,
2014
(In millions)

2015

Net periodic OPEB cost (credit):

Service cost .......................................................... $
Interest cost ..........................................................
Curtailment gain...................................................
Amortization of unrecognized:

Prior service credit .......................................
Net actuarial loss .........................................
Total ........................................................... $

.3 $
.7
(.6)

(1.8)
—
(1.4) $

.1 $
.6
—

(2.0)
(.2)
(1.5) $

.1
.5
—

(1.9)
—
(1.3)

A summary of our key actuarial assumptions used to determine the net benefit obligations as of December 31, 2014 and

2015 follows:

Healthcare inflation:

Initial rate ..............................................................
Ultimate rate ..........................................................
Year of ultimate rate achievement .........................
Discount rate ...................................................................

7.0%
5.0%

2021

3.4%

7.0%
5.0%

2021

3.6%

December 31,

2014

2015

Assumed health care cost trend rates affect the amounts we report for health care plans. A one percent change in assumed
health care trend rates would not have a material effect on the net periodic OPEB cost for 2015 or on the accumulated OPEB
obligations at December 31, 2015.

The weighted average discount rate used in determining the net periodic OPEB cost for 2015 was 3.4% (the rate was 4.0%
in 2014 and 3.5% in 2013). The weighted average rate was determined using the projected benefit obligations as of the beginning of
each year. The impact of assumed increases in future compensation levels does not have a material effect on the net periodic OPEB
cost as substantially all of such benefits relate solely to eligible retirees, for which compensation is not applicable. The impact of the
assumed rate of return on plan assets also does not have a material effect on the net periodic OPEB cost as there were no plan assets as
of December 31, 2014 or 2015.

F-41

Variances from actuarially-assumed rates will result in additional increases or decreases in accumulated OPEB

obligations, net periodic OPEB cost and funding requirements in future periods.

Note 12—Income taxes:

2013

Years ended December 31,
2014
(In millions)

2015

Pre-tax income (loss):

United States ........................................................ $
Non-U.S. subsidiaries ..........................................
Total ........................................................... $

(70.4) $
(147.5)
(217.9) $

40.1 $
71.9
112.0 $

Expected tax expense (benefit) at U.S. federal

statutory income tax rate of 35% ............................. $
Non-U.S. tax rates .........................................................
Incremental net benefit on earnings (losses) of non-

U.S. and U.S. subsidiaries ........................................
Valuation allowance ......................................................
U.S. state income taxes, net ...........................................
Adjustment to the reserve for uncertain tax

positions, net .............................................................
Nondeductible expenses ................................................
Tax rate changes ............................................................
Other, net .......................................................................
Provision for income taxes (benefit) .................... $

Components of income tax expense (benefit):
Currently payable (refundable):

U.S. federal and state .................................. $
Non-U.S. .....................................................
Total ..................................................

Deferred income taxes (benefit):

U.S. federal and state ..................................
Non-U.S. .....................................................
Total ..................................................
Provision for income taxes (benefit) .................... $

Comprehensive provision for income taxes (benefit)

allocable to:

Net income (loss) ................................................ $
Other comprehensive income (loss): ....................

(35.3)
(38.5)
(73.8)

(25.8)
.6

(37.6)
159.0
(1.3)

.8
3.0
—
(1.4)
97.3

7.6
3.3
10.9

(58.5)
144.9
86.4
97.3

(76.3) $
4.3

(18.5)
—
(3.4)

2.1
2.9
(.2)
(1.9)
(91.0) $

9.1 $
(1.2)
7.9

(57.9)
(41.0)
(98.9)
(91.0) $

39.2 $
(4.1)

(2.2)
—
4.1

(3.7)
2.8
—
(3.6)
32.5 $

7.4 $
15.2
22.6

3.8
6.1
9.9
32.5 $

(91.0) $

32.5 $

97.3

Marketable securities ..................................
Currency translation ...................................
Pension plans ..............................................
OPEB plans ................................................
Interest rate swap ........................................
Total .................................................. $

5.1
5.5
14.1
1.0
—
(65.3) $

(11.3)
(16.9)
(33.2)
(1.2)
—
(30.1) $

(4.1)
(17.3)
4.1
(.4)
(1.7)
77.9

The amount shown in the above table of our income tax rate reconciliation for non-U.S. tax rates represents the result
determined by multiplying the pre-tax earnings or losses of each of our non-U.S. subsidiaries by the difference between the applicable
statutory income tax rate for each non-U.S. jurisdiction and the U.S. federal statutory tax rate of 35%. The amount shown on such
table for incremental net tax (benefit) on earnings and losses on non-U.S. companies and U.S. subsidiaries includes, as applicable, (i)
current income taxes (including withholding taxes, if applicable), if any, associated with any current-year earnings of our Chemicals
Segments non-U.S. subsidiaries to the extent such current-year earnings were distributed to us in the current year, (ii) deferred income
taxes (or deferred income tax benefits) associated with the current-year change in the aggregate amount of undistributed earnings of
our Chemicals Segment’s Canadian subsidiary, which earnings are not subject to a permanent reinvestment plan, in an amount
representing the current-year change in the aggregate current income tax that would be generated (including withholding taxes, if
applicable) when such aggregate undistributed earnings are distributed to us, (iii) current U.S. income taxes (or current income tax
benefit) , including U.S. personal holding company tax, as applicable, attributable to current-year income (losses) of one of Kronos’

F-42

non-U.S. subsidiaries, which subsidiary is treated as a dual resident for U.S. income tax purposes, to the extent the current-year
income (losses) of such subsidiary is subject to U.S. income tax under the U.S. dual-resident provisions of the Internal Revenue Code,
and (iv) certain and deferred income taxes associated with distributions and earnings from our investment in LandWell and BMI.

The components of the net deferred tax liability at December 31, 2014 and 2015 are summarized below. See Note 20.

Tax effect of temporary differences related to:

Inventories .................................................... $
Marketable securities ....................................
Property and equipment ................................
Accrued OPEB costs ....................................
Accrued pension costs ..................................
Currency revaluation on intercompany debt .
Accrued environmental liabilities .................
Other deductible differences .........................
Other taxable differences ..............................
Investments in subsidiaries and affiliates .....
Tax on unremitted earnings of non-U.S.

subsidiaries ..............................................
Tax loss and tax credit carryforwards ...........
Valuation allowance .....................................
Adjusted gross deferred tax assets

(liabilities) ......................................
Netting of items by tax jurisdiction ........................

Net noncurrent deferred tax asset

2014

2015

Assets

Liabilities

Assets

Liabilities

December 31,

(In millions)

5.4 $
—
—
4.8
52.0
5.6
38.8
34.7
—
—

—
163.6
(.1)

304.8
(143.9)

(5.2) $
(126.4)
(109.2)
—
—
—
—
—
(21.6)
(278.7)

(2.6)
—
—

(543.7)
143.9

3.7 $
—
—
4.0
44.0
18.6
39.9
45.7
—
—

—
154.3
(168.9 )

141.3
(140.0 )

(3.7)
(98.2)
(96.6)
—
—
—
—
—
(21.7)
(238.8)

(2.0)
—
—

(461.0)
(140.0)

(liability) ......................................... $

160.9 $

(399.8) $

1.3 $

(321.0)

Our acquisition of an additional ownership interest in BMI in December 2013, discussed in Note 3, increased our
ownership interest in BMI from 32% to 63%. As a result, effective December 31, 2013 we no longer account for our ownership
interest in BMI by the equity method of accounting but instead BMI is a consolidated subsidiary. Prior to December 31, 2013, we
recognized a deferred income tax liability for the excess of our book basis over our tax basis of our investment in BMI at capital gains
rates, because we did not have the ability to control BMI and hence we could assume we would only realize such excess upon a
disposition of our ownership interest in BMI. Upon gaining control of BMI in December 2013, we now have the ability to control the
means in which such excess would be realized, and accordingly the deferred income tax liability we now recognize for such excess is
based on the assumption that we would realize such excess from dividend distributions from BMI (which are taxed at a lower rate,
after considering the effect of the dividends received deduction). Our income tax benefit in 2013 includes an aggregate $11.1 million
benefit (classified in the table above as part of our incremental U.S. tax on earnings of non-U.S. and non-tax group companies) related
to the remeasurement of such deferred income tax liability with respect to our investment in BMI from capital gains rates to dividend
received deduction rates, including the deferred income taxes related to (i) the gain from the re-measurement of our existing
investment in BMI to estimated fair value and (ii) the bargain purchase gain related to the additional ownership interest in BMI
acquired in December 2013.

Tax authorities are examining certain of our U.S. and non-U.S. tax returns and have or may propose tax deficiencies,
including penalties and interest. Because of the inherent uncertainties involved in settlement initiatives and court and tax proceedings,
we cannot guarantee that these tax matters will be resolved in our favor, and therefore our potential exposure, if any, is also uncertain.
In 2011 and 2012 Kronos received notices of re-assessment from the Canadian federal and provincial tax authorities related to the
years 2002 through 2004. We objected to the re-assessments and believed the position was without merit. Accordingly, we appealed
the re-assessments and in connection with such appeal we were required to post letters of credit aggregating Cdn. $7.9 million (see
Note 9). In 2014, the Appeals Division of the Canadian Revenue Authority ruled in our favor and reversed in their entirety such
notices of re-assessment. As a result, we recognized a non-cash income tax benefit of $3.0 million related to the release of a portion
of our reserve for uncertain tax positions in 2014 related to the completion of this Canadian income tax audit. In addition, the related
letters of credit have been cancelled. Also during 2014, we recognized a non-cash income tax benefit of $3.1 million related to the
release of a portion of our reserve for uncertain tax positions in conjunction with the completion of an audit of our U.S. income tax
return for 2009. We believe we have adequate accruals for additional taxes and related interest expense which could ultimately result

F-43

from tax examinations. We believe the ultimate disposition of tax examinations should not have a material adverse effect on our
consolidated financial position, results of operations or liquidity.

The following table shows the changes in the amount of our uncertain tax positions (exclusive of the effect of interest and

penalties) during 2013, 2014 and 2015:

2013

Years ended December 31,
2014
(In millions)

2015

Unrecognized tax benefits:

Amount beginning of year ................................... $
Net increase (decrease):

Tax positions taken in prior periods ...........
Tax positions taken in current period .........
Lapse due to applicable statute of limitations ......
Acquisition of BMI and LandWell ......................
Changes in currency exchange rates ....................
Amount at end of year .......................................... $

33.4 $

47.9 $

.5
11.3
3.4
.1
(.8)
47.9 $

(19.6)
3.6
(.7)
—
(1.1)
30.1 $

30.1

(.4)
6.4
(6.0)
—
(1.3)
28.8

If our uncertain tax positions were recognized, a benefit of $29.2 million, $24.2 million and $23.4 million at
December 31, 2013, 2014 and 2015, respectively, would affect our effective income tax rate. We currently estimate that our
unrecognized tax benefits will decrease by approximately $6.6 million during the next twelve months due to the reversal of certain
timing differences and the expiration of certain statutes of limitations.

We file income tax returns in various U.S. federal, state and local jurisdictions. We also file income tax returns in various
foreign jurisdictions, principally in Germany, Canada, Belgium and Norway. Our U.S. income tax returns prior to 2012 are generally
considered closed to examination by applicable tax authorities. Our foreign income tax returns are generally considered closed to
examination for years prior to: 2006 for Norway; 2010 for Canada; 2011 for Germany; and 2012 for Belgium.

We accrue interest and penalties on our uncertain tax positions as a component of our provision for income taxes. We
accrued interest and penalties of $1.3 million during 2013 and $1.2 million during 2014 and $1.3 million during 2015, and at
December 31, 2014 and 2015 we had $4.1 million and $4.2 million, respectively, accrued for interest and an immaterial amount
accrued for penalties for our uncertain tax positions.

Our Chemicals Segment has substantial net operating loss (“NOL”) carryforwards in Germany (the equivalent of $683
million and $96 million for German corporate and trade tax purposes, respectively, at December 31, 2015) and in Belgium (the
equivalent of $86 million for Belgian corporate tax purposes at December 31, 2015), all of which have an indefinite carryforward
period. As a result, we have net deferred income tax assets recognized with respect to these two jurisdictions, primarily related to
these NOL carryforwards. The German corporate tax is similar to the U.S. federal income tax, and the German trade tax is similar to
the U.S. state income tax. Prior to June 30, 2015, and using all available evidence, we had concluded no deferred income tax asset
valuation allowance was required to be recognized with respect to these net deferred income tax assets under the more-likely-than-not
recognition criteria, primarily because (i) the carryforwards have an indefinite carryforward period, (ii) we utilized a portion of such
carryforwards during the most recent three-year period, and (iii) we expected to utilize the remainder of the carryforwards over the
long term. We had also previously indicated that facts and circumstances could change, which might in the future result in the
recognition of a valuation allowance against some or all of such deferred income tax assets. However, as of June 30, 2015, and given
our operating results during the second quarter of 2015 and our expectations at that time for our operating results for the remainder of
2015, we did not have sufficient positive evidence to overcome the significant negative evidence of having cumulative losses in the
most recent twelve consecutive quarters in both our German and Belgian jurisdictions at June 30, 2015 (even considering that the
carryforward period of our German and Belgium NOL carryforwards is indefinite, one piece of positive evidence). Accordingly, at
June 30, 2015, we concluded that we were required to recognize a non-cash deferred income tax asset valuation allowance under the
more-likely-than-not recognition criteria with respect to our German and Belgian net deferred income tax assets. Such valuation
allowance aggregated $150.3 million at June 30, 2015. We recognized an additional $8.7 million non-cash deferred income tax
valuation allowance under the more-likely-than-not recognition criteria during the third and fourth quarters of 2015, due to losses
recognized by Kronos’ German and Belgium operations during such period. In addition to the aggregate $159.0 million increase in the
deferred income tax asset valuation allowance recognized as part of the provision for income taxes in 2015, the deferred income tax
asset valuation allowance also increased by an aggregate of $9.8 million in 2015 due to amounts recognized in other comprehensive
loss.

F-44

We recognize deferred income taxes with respect to the excess of the financial reporting carrying amount over the income
tax basis of our direct investment in Kronos common stock because the exemption under GAAP to avoid such recognition of deferred
income taxes is not available to us. There is a maximum amount (or cap) of such deferred income taxes we are required to recognize
with respect to our direct investment in Kronos, and we previously reached such maximum amount in the fourth quarter of 2010.
Since that time and through March 31, 2015, we were not required to recognize any additional deferred income taxes with respect to
our direct investment in Kronos because the deferred income taxes associated with the excess of the financial reporting carrying
amount over the income tax basis of our direct investment in Kronos common stock continued to be above such cap. However, at
June 30, 2015, the deferred income taxes associated with the excess of the financial reporting carrying amount over the income tax
basis of our direct investment in Kronos common stock was, for the first time since the fourth quarter of 2010, below such cap, in
large part due to the net loss reported by Kronos in the second quarter of 2015. Accordingly, our provision for income taxes in 2015
includes an aggregate non-cash income tax benefit of $29.3 million, recognized in the second, third and fourth quarters of, 2015, for
the reduction in the deferred income taxes required to be recognized with respect to the excess of the financial reporting carrying
amount over the income tax basis of our direct investment in Kronos common stock, to the extent such reduction related to our equity
in Kronos’ net loss. Such amount is included in the above table of our income tax rate reconciliation for incremental net benefit on
earnings and losses on non-U.S. and U.S. subsidiaries (in addition to the other items indicated above). A portion of such reduction
also related to our equity in Kronos’ other comprehensive income (loss) items, and the amounts shown in the table above for income
tax expense (benefit) allocated to other comprehensive income (loss) includes amounts related to our equity in Kronos’ other
comprehensive income (loss) items.

Note 13—Noncontrolling interest in subsidiaries:

December 31,

2014

2015

(In millions)

Noncontrolling interest in net assets:

Kronos Worldwide ..................................................... $
NL Industries ..............................................................
CompX International ..................................................
BMI ............................................................................
LandWell ....................................................................
Total .................................................................. $

211.0 $
54.4
14.4
31.7
24.8
336.3 $

147.9
39.5
15.3
31.6
23.9
258.2

2013

Years ended December 31,
2014
(In millions)

2015

Noncontrolling interest in net income (loss) of

subsidiaries:

Kronos Worldwide ............................................... $
NL Industries .......................................................
CompX International ...........................................
BMI ......................................................................
LandWell .............................................................
Total ........................................................... $

(20.3) $
(9.4)
.8
—
—
(28.9) $

19.2 $
4.8
1.1
.3
.3
25.7 $

(34.3)
(4.0)
1.2
.1
(.5)
(37.5)

Note 14—Valhi stockholders’ equity:

Balance at December 31, 2013, 2014 and 2015..........

355.2

(13.2)

342.0

Issued

Shares of common stock
Treasury
(In millions)

Outstanding

Valhi authorized shares. Prior to 2013, we amended our certificate of incorporation to increase the authorized number of

shares of our common stock to 500 million.

We issued a nominal number of shares of Valhi common stock during 2013, 2014 and 2015, associated with annual stock

awards to members of our board of directors.

F-45

Valhi share repurchases and cancellations. Prior to 2013, our board of directors authorized the repurchase of up to
10.0 million shares of our common stock in open market transactions, including block purchases, or in privately negotiated transactions,
which may include transactions with our affiliates or subsidiaries. We may purchase the stock from time to time as market conditions
permit. The stock repurchase program does not include specific price targets or timetables and may be suspended at any time. Depending
on market conditions, we may terminate the program prior to completion. We will use cash on hand to acquire the shares. Repurchased
shares could be retired and cancelled or may be added to our treasury stock and used for employee benefit plans, future acquisitions or
other corporate purposes. We did not make any such purchases under the plan in 2013, 2014 or 2015.

Treasury stock. The treasury stock we reported for financial reporting purposes at December 31, 2013, 2014 and 2015
represents our proportional interest in the shares of our common stock held by NL and Kronos. NL held approximately 14.4 million
shares of our common stock at December 31, 2014 and 2015. At December 31, 2014 and 2015 Kronos held an aggregate of
1.7 million shares of our common stock. Under Delaware Corporation Law, 100% (and not the proportionate interest) of a parent
company’s shares held by a majority-owned subsidiary of the parent is considered to be treasury stock for voting purposes. As a result,
our common shares outstanding for financial reporting purposes differ from those outstanding for legal purposes.

Preferred stock. Our outstanding preferred stock consists of 5,000 shares of our Series A Preferred Stock having a
liquidation preference of $133,466.75 per share, or an aggregate liquidation preference of $667.3 million. The outstanding shares of
Series A Preferred Stock are held by Contran and represent all of the shares of Series A Preferred Stock we are authorized to
issue. The preferred stock has a par value of $.01 per share and pays a non-cumulative cash dividend at an annual rate of 6% of the
aggregate liquidation preference only when authorized and declared by our board of directors. The shares of Series A Preferred Stock
are non-convertible, and the shares do not carry any redemption or call features (either at our option or the option of the holder). A
holder of the Series A shares does not have any voting rights, except in limited circumstances, and is not entitled to a preferential
dividend right that is senior to our shares of common stock. Upon the liquidation, dissolution or winding up of our affairs, a holder of
the Series A shares is entitled to be paid a liquidation preference of $133,466.75 per share, plus an amount (if any) equal to any
declared but unpaid dividends, before any distribution of assets is made to holders of our common stock. Through December 31, 2015,
we have not declared any dividends on the Series A Preferred Stock since its issuance prior to 2013.

Valhi long-term incentive compensation plan. Prior to 2013, our board of directors adopted a plan that provides for the
award of stock to our board of directors, and up to a maximum of 200,000 shares could be awarded. Under the plan, we awarded 5,000
shares in 2013, 12,000 shares in 2014 and 10,500 shares in 2015, and at December 31, 2015 166,500 shares are available for future
award under this new plan.

Stock plans of subsidiaries. Kronos, NL and CompX each maintain plans which provide for the award of their common
stock to their board of directors. At December 31, 2015, Kronos and NL each had 177,000 shares of common stock available for
future grant under its respective plan and CompX had 181,000 shares available for award.

Earnings per share. Basic earnings per share of common stock is based upon the weighted average number of our
common shares actually outstanding during each period. Diluted earnings per share of common stock includes the impact of our
outstanding dilutive stock options as well as the dilutive effect, if any, of diluted earnings per share reported by Kronos, NL or
CompX. The dilutive effect of dilutive earnings per share for Kronos, NL and CompX in 2013, 2014 and 2015 was not significant.

F-46

Accumulated other comprehensive income (loss). Accumulated other comprehensive income (loss) attributable to Valhi

stockholders comprises changes in equity as presented in the table below.

Accumulated other comprehensive income (loss) (net

of tax and noncontrolling interest):

Marketable securities:

Balance at beginning of year ...................... $
Other comprehensive income (loss):

Unrealized losses arising during the

2013

Years ended December 31,
2014
(In millions)

2015

2.1 $

2.8 $

year ...............................................

—

(1.0)

Less reclassification adjustments for
amounts included in realized loss
(gain) ............................................
Balance at end of year ................................ $

Interest rate swap:

Balance at beginning of year ...................... $
Other comprehensive loss:

Unrealized losses during the year .....
Less reclassification adjustments for
amounts included in interest
expense .........................................
Balance at end of year ....................... $

Currency translation::

.7
2.8 $

— $

—

—
— $

(.2)
1.6 $

— $

—
— $

—

(1.7)

Balance at beginning of year ...................... $
Other comprehensive income (loss)

arising during the year ...........................
Balance at end of year ................................ $

53.3 $

59.2 $

5.9
59.2 $

(81.8)
(22.6) $

Defined benefit pension plans:

Balance at beginning of year ...................... $
Other comprehensive income (loss):

Amortization of prior service cost
and net losses included in net
periodic pension cost ....................

Net actuarial gain (loss) arising

(101.5) $

(76.5) $

(132.0)

8.4

6.3

6.7

during the year .............................
Plan curtailment ................................
Balance at end of year ................................ $

12.6
4.0
(76.5) $

(61.7)
(.1)
(132.0) $

2.3
—
(123.0)

OPEB plans:

Balance at beginning of year ...................... $
Other comprehensive loss:

Amortization of prior service credit
and net losses included in net
periodic OPEB cost ......................

Net actuarial gain (loss) arising

4.1 $

6.5 $

4.4

(1.4)

(1.3)

during the year .............................
Plan amendment ................................
Balance at end of year ................................ $

1.3
2.5
6.5 $

(.8)
—
4.4 $

Total accumulated other comprehensive income

(loss):

Balance at beginning of year ...................... $
Other comprehensive income (loss) ...........
Balance at end of year ................................ $

(42.0) $
34.0
(8.0) $

(8.0) $
(140.6)
(148.6) $

(148.6)
(48.4)
(197.0)

See Note 11 for amounts related to our defined benefit pension plans and OPEB plans.

F-47

1.6

—

—
1.6

—

.4
(1.3)

(22.6)

(55.5)
(78.1)

(1.0)

.4
—
3.8

Note 15—Other income, net:

Securities earnings:

Dividends and interest .......................................... $
Securities transactions, net ...................................
Total ...........................................................
Equity in earnings of investees ......................................
Insurance recoveries ......................................................
Currency transactions, net .............................................
Disposal of property and equipment, net .......................
Gain on bargain purchase and remeasurement of our

existing investment in acquiree .................................
Other, net .......................................................................
Total ........................................................... $

2013

Years ended December 31,
2014
(In millions)

2015

26.4 $
.2
26.6
.5
9.4
(3.8)
(.5)

54.6
1.2
88.0 $

26.6 $
.3
26.9
—
10.4
4.0
(.9)

—
1.6
42.0 $

26.5
—
26.5
—
3.7
(.1)
(.8)

—
2.7
32.0

Dividends and interest income includes distributions from The Amalgamated Sugar Company LLC of $25.4 million in

each of 2013, 2014 and 2015 (see Note 4).

Insurance recoveries relate primarily to amounts NL received from certain of its former insurance carriers, and relate
principally to the recovery of prior lead pigment and asbestos litigation defense costs incurred by us. We have agreements with four
former insurance carriers pursuant to which the carriers reimburse us for a portion of our future lead pigment litigation defense costs,
and one such carrier reimburses us for a portion of our future asbestos litigation defense costs. We are not able to determine how much
we will ultimately recover from these carriers for defense costs incurred by us because of certain issues that arise regarding which
defense costs qualify for reimbursement. While we continue to seek additional insurance recoveries for lead pigment and asbestos
litigation matters, we do not know the extent to which we will be successful in obtaining additional reimbursement for either defense
costs or indemnity. Substantially all of $10.4 million in the insurance recoveries we recognized in 2014 relate to a settlement NL
reached with one of its insurance carriers in September 2014 in which it agreed to reimburse NL for a portion of its past litigation
defense costs. Any additional insurance recoveries would be recognized when the receipt is probable and the amount is determinable.
See Note 17.

Equity in earnings of investees relates to our investment in BMI and LandWell. The gain on bargain purchase and
remeasurement of our existing investment in acquiree relates to our acquisition of a controlling interest in BMI and LandWell. See
Note 3.

Note 16—Related party transactions:

We may be deemed to be controlled by Ms. Simmons and Ms. Connelly. See Note 1. Corporations that may be deemed to
be controlled by or affiliated with such individuals sometimes engage in (a) intercorporate transactions such as guarantees,
management and expense sharing arrangements, shared fee arrangements, joint ventures, partnerships, loans, options, advances of
funds on open account, and sales, leases and exchanges of assets, including securities issued by both related and unrelated parties and
(b) common investment and acquisition strategies, business combinations, reorganizations, recapitalizations, securities repurchases,
and purchases and sales (and other acquisitions and dispositions) of subsidiaries, divisions or other business units, which transactions
have involved both related and unrelated parties and have included transactions which resulted in the acquisition by one related party
of a publicly-held noncontrolling interest in another related party. While no transactions of the type described above are planned or
proposed with respect to us other than as set forth in these financial statements, we continuously consider, review and evaluate, and
understand that Contran and related entities consider, review and evaluate such transactions. Depending upon the business, tax and
other objectives then relevant, it is possible that we might be a party to one or more such transactions in the future.

From time to time, we may have loans and advances outstanding between us and various related parties, including Contran,
pursuant to term and demand notes. We generally enter into these loans and advances for cash management purposes. When we loan
funds to related parties, we are generally able to earn a higher rate of return on the loan than we would earn if we invested the funds in
other instruments. While certain of these loans may be of a lesser credit quality than cash equivalent instruments otherwise available to us,
we believe we have evaluated the credit risks involved and appropriately reflect those credit risks in the terms of the applicable loans.
When we borrow from related parties, we are generally able to pay a lower rate of interest than we would pay if we borrowed from

F-48

unrelated parties. See Note 9 for more information on the Valhi and Kronos credit facilities with Contran. We paid Contran $19.0
million, $11.0 million and $10.3 million in interest on borrowings under credit facilities in 2013, 2014 and 2015, respectively.

A subsidiary of Contran has guaranteed (i) WCS’s obligation under its financing capital lease with the County of
Andrews, Texas discussed in Note 9, (ii) Tremont’s obligation under its $17.1 million promissory note payable discussed in Notes 3
and 9 and (iii) Tremont’s $8.8 million ($11.1 million face value) deferred payment obligation discussed in Notes 3 and 10. The
guaranty obligation would only arise upon our failure to make any required repayments. We currently do not expect such Contran
subsidiary will be required to perform under such guarantees for the foreseeable future.

Under the terms of various intercorporate services agreements (“ISAs”) we enter into with Contran, employees of Contran
provide us certain management, tax planning, financial and administrative services on a fee basis. Such charges are based upon
estimates of the time devoted by the Contran employees to our affairs, and the compensation and other expenses associated with those
persons. Because of the large number of companies affiliated with Contran, we believe we benefit from cost savings and economies of
scale gained by not having certain management, financial and administrative staffs duplicated at all of our subsidiaries, thus allowing
certain Contran employees to provide services to multiple companies but only be compensated by Contran. The net ISA fees charged
to us by Contran and approved by the independent members of the applicable board of directors aggregated $36.1 million in 2013,
$33.4 million in 2014 and $35.8 million in 2015. These agreements are renewed annually, and we expect to pay a net amount of $36.5
million under the ISAs during 2016.

We had an aggregate 12.0 million shares at December 31, 2014 and 31.2 million shares at December 31, 2015 of our
Kronos common stock pledged as collateral for certain debt obligations of Contran. We receive a fee from Contran for pledging these
Kronos shares, determined by a formula based on the market value of the shares pledged. We received $.8 million in 2013, $.9 million
in 2014 and $.8 million in 2015 from Contran for this pledge.

Our subsidiaries Tall Pines Insurance Company and EWI RE, Inc. provide for or broker certain insurance or reinsurance
policies for Contran and certain of its subsidiaries and affiliates, including us. Tall Pines purchases reinsurance for substantially all of
the risks it underwrites from third party insurance carriers with an A.M. Best Company rating of generally at least A- (Excellent).
Consistent with insurance industry practices, Tall Pines and EWI receive commissions from insurance and reinsurance underwriters
and/or assess fees for the policies that they provide or broker to us. We received cash payments for insurance premiums from Contran
and certain other affiliates not members of our consolidated financial reporting group of $5.7 million in each of 2013 and 2014 and
$5.4 million in 2015. These amounts also include payments to insurers or reinsurers through EWI for the reimbursement of claims
within our applicable deductible or retention ranges that such insurers or reinsurers paid to third parties on our behalf, as well as
amounts for claims and risk management services and various other third-party fees and expenses incurred by the program. We
expect these relationships with Tall Pines and EWI will continue in 2016.

With respect to certain of such jointly-owned policies, it is possible that unusually large losses incurred by one or more
insureds during a given policy period could leave the other participating companies without adequate coverage under that policy for
the balance of the policy period. As a result, Contran and certain of its subsidiaries and affiliates, including us, have entered into a
loss sharing agreement under which any uninsured loss is shared by those entities who have submitted claims under the relevant
policy. We believe the benefits, in the form of reduced premiums and broader coverage associated with the group coverage for such
policies, justifies the risk associated with the potential for any uninsured loss.

Contran and certain of its subsidiaries, including us, participate in a combined information technology data recovery
program that Contran provides from a data recovery center that it established. Pursuant to the program, Contran and certain of its
subsidiaries, including us, as a group share information technology data recovery services. The program apportions its costs among
the participating companies. We paid Contran $186,000 in 2013, $243,000 in 2014 and $298,000 in 2015 for such services. We
expect that this relationship with Contran will continue in 2016.

WCS is required to provide certain financial assurances to the Texas government agencies with respect to certain
decommissioning obligations related to our facility in West Texas. See Note 17. Such financial assurances may be provided by various
means. We and certain of our affiliates have provided or assisted WCS with providing such financial assurance, as specified below.
Upon completing the pending sale of WCS to Rockwell discussed in Note 3,we and our affiliates would no longer be required to
provide or assist with such financial assurance.

(cid:121) During 2013, 2014 and 2015, a subsidiary of Contran guaranteed certain of WCS’ specified decommissioning
obligations as it relates to its LLRW treatment and storage facility and RCRA permits, currently estimated at $3.9
million. Such Contran subsidiary was eligible to provide this guarantee because it met certain specified financial tests.
The obligations would arise only upon a closure of our West Texas facility and our failure to perform the required

F-49

decommissioning activities. We do not currently expect that such subsidiary will be required to perform under such
guarantee for the foreseeable future.

(cid:121) During 2013, 2014 and 2015, Contran issued a letter of credit (“LOC”) under its bank credit facility to the state of
Texas related to specified decommissioning obligations associated with our byproduct facility. At December 31,
2015, the amount of such LOC was $6.1 million. The LOC would only be drawn down upon the closure of our
byproduct facility and our failure to perform the required decommissioning activities. We do not currently expect that
the LOC will have to be drawn down for the foreseeable future. We reimbursed Contran for costs related to the LOC
of $.1 million in each of 2013, 2014 and 2015.

(cid:121) Prior to 2013, we, certain of our subsidiaries, Contran and certain subsidiaries of Contran guaranteed WCS’
obligations under the surety bond (currently valued at $87.9 million) discussed in Note 17. The obligations would
arise upon our failure to make the required quarterly payments into the surety bond trust discussed in Note 17. We do
not currently expect that we, certain of our subsidiaries, Contran and such certain Contran subsidiaries will be
required to perform under such guarantee for the foreseeable future.

Receivables from and payables to affiliates are summarized in the table below.

Current receivables from affiliates:

Louisiana Pigment Company, L.P .............................. $
Contran: ......................................................................
Trade items ..............................................................
Income taxes ...........................................................
Other ...........................................................................
Total .................................................................. $

Current payables to affiliates:

Louisiana Pigment Company, L.P. ............................. $
Contran - trade items...................................................
Total .................................................................. $

Payables to affiliate included in long-term debt:

December 31,

2014

2015

(In millions)

13.0 $

.2
9.2
1.5
23.9 $

19.9 $
26.1
46.0 $

—

.2
7.6
2.5
10.3

19.4
26.1
45.5

Valhi—Contran credit facility .................................... $

223.7 $

263.8

Amounts payable to LPC are generally for the purchase of TiO2, while amounts receivable from LPC are generally from
the sale of TiO2 feedstock. See Note 7. Purchases of TiO2 from LPC were $224.5 million in 2013, $193.1 million in 2014 and $176.5
million in 2015. Sales of feedstock to LPC were $141.1 million in 2013, $98.4 million in 2014 and $80.6 million in 2015.
Substantially all of the Contran trade payables relates to the ISA fees charged to WCS by Contran, which ISA fees had not been paid
by WCS to Contran for 2012 and prior years. Any amounts WCS owes to Contran and any other affiliates would be contributed to
WCS immediately prior to the completion of the pending sale of WCS to Rockwell and included in the calculation of gain or loss on
the sale discussed in Note 3.

Note 17—Commitments and contingencies:

Lead pigment litigation—NL

F-50

indemnification for medical expenses, medical monitoring expenses and costs for educational programs. To the extent the plaintiffs
seek compensatory or punitive damages in these actions, such damages are generally unspecified. In some cases, the damages are
unspecified pursuant to the requirements of applicable state law. A number of cases are inactive or have been dismissed or withdrawn.
Most of the remaining cases are in various pre-trial stages. Some are on appeal following dismissal or summary judgment rulings or a
trial verdict in favor of either the defendants or the plaintiffs.

NL believes that these actions are without merit, and NL intends to continue to deny all allegations of wrongdoing and
liability and to defend against all actions vigorously. NL does not believe it is probable that it has incurred any liability with respect to
all of the lead pigment litigation cases to which NL is a party, and liability to us that may result, if any, in this regard cannot be
reasonably estimated, because:

(cid:121) NL has never settled any of the market share, intentional tort, fraud, nuisance, supplier negligence, breach of

warranty, conspiracy, misrepresentation, aiding and abetting, enterprise liability, or statutory cases,

(cid:121) no final, non-appealable adverse verdicts have ever been entered against NL, and

(cid:121) NL has never ultimately been found liable with respect to any such litigation matters, including over 100 cases over a
twenty-year period for which NL was previously a party and for which NL has been dismissed without any finding of
liability.

Accordingly, neither we nor NL have accrued any amounts for any of the pending lead pigment and lead-based paint
litigation cases filed by or on behalf of states, counties, cities or their public housing authorities and school districts, or those asserted
as class actions. In addition, we have determined that liability to us which may result, if any, cannot be reasonably estimated because
there is no prior history of a loss of this nature on which an estimate could be made and there is no substantive information available
upon which an estimate could be based.

In one of these lead pigment cases, in April 2000 NL was served with a complaint in County of Santa Clara v. Atlantic
Richfield Company, et al. (Superior Court of the State of California, County of Santa Clara, Case No. 1-00-CV-788657) brought by a
number of California government entities against the former pigment manufacturers, the LIA and certain paint manufacturers. The
County of Santa Clara sought to recover compensatory damages for funds the plaintiffs have expended or would in the future expend
for medical treatment, educational expenses, abatement or other costs due to exposure to, or potential exposure to, lead paint,
disgorgement of profit, and punitive damages. In July 2003, the trial judge granted defendants’ motion to dismiss all remaining claims.
Plaintiffs appealed and the intermediate appellate court reinstated public nuisance, negligence, strict liability, and fraud claims in
March 2006. A fourth amended complaint was filed in March 2011 on behalf of The People of California by the County Attorneys of
Alameda, Ventura, Solano, San Mateo, Los Angeles and Santa Clara, and the City Attorneys of San Francisco, San Diego and
Oakland. That complaint alleged that the presence of lead paint created a public nuisance in each of the prosecuting jurisdictions and
sought its abatement. In July and August 2013, the case was tried. In January 2014, the Judge issued a judgment finding NL, The
Sherwin Williams Company and ConAgra Grocery Products Company jointly and severally liable for the abatement of lead paint in
pre-1980 homes, and ordered the defendants to pay an aggregate $1.15 billion to the people of the State of California to fund such
abatement. In February 2014, NL filed a motion for a new trial, and in March 2014 the court denied the motion. Subsequently in
March 2014, NL filed a notice of appeal with the Sixth District Court of Appeal for the State of California and the appeal is
proceeding with the appellate court. NL believes that this judgment is inconsistent with California law and is unsupported by the
evidence, and NL will defend vigorously against all claims.

The Santa Clara case is unusual in that this is the second time that an adverse verdict in the lead pigment litigation has
been entered against NL (the first adverse verdict against NL was ultimately overturned on appeal). We have concluded that the
likelihood of a loss in this case has not reached a standard of “probable” as contemplated by ASC 450, given (i) the substantive,
substantial and meritorious grounds on which the adverse verdict in the Santa Clara case will be appealed, (ii) the uniqueness of the
Santa Clara verdict (i.e. no final, non-appealable verdicts have ever been rendered against NL, or any of the other former lead pigment
manufacturers, based on the public nuisance theory of liability or otherwise), and (iii) the rejection of the public nuisance theory of
liability as it relates to lead pigment matters in many other jurisdictions (no jurisdiction in which a plaintiff has asserted a public
nuisance theory of liability has ever successfully been upheld). In addition, liability that may result, if any, cannot be reasonably
estimated, as NL continues to have no basis on which an estimate of liability could be made, as discussed above. However, as with
any legal proceeding, there is no assurance that any appeal would be successful, and it is reasonably possible, based on the outcome of
the appeals process, that NL may in the future incur some liability resulting in the recognition of a loss contingency accrual that could
have a material adverse impact on our results of operations, financial position and liquidity.

New cases may continue to be filed against NL. We cannot assure you that we will not incur liability in the future in
respect of any of the pending or possible litigation in view of the inherent uncertainties involved in court and jury rulings. In the
future, if new information regarding such matters becomes available to us (such as a final, non-appealable adverse verdict against us

F-51

or otherwise ultimately being found liable with respect to such matters), at that time we would consider such information in evaluating
any remaining cases then-pending against us as to whether it might then have become probable we have incurred liability with respect
to these matters, and whether such liability, if any, could have become reasonably estimable. The resolution of any of these cases
could result in the recognition of a loss contingency accrual that could have a material adverse impact on our net income for the
interim or annual period during which such liability is recognized and a material adverse impact on our consolidated financial
condition and liquidity.

Environmental matters and litigation

Our operations are governed by various environmental laws and regulations. Certain of our businesses are and have been
engaged in the handling, manufacture or use of substances or compounds that may be considered toxic or hazardous within the
meaning of applicable environmental laws and regulations. As with other companies engaged in similar businesses, certain of our past
and current operations and products have the potential to cause environmental or other damage. We have implemented and continue to
implement various policies and programs in an effort to minimize these risks. Our policy is to maintain compliance with applicable
environmental laws and regulations at all of our plants and to strive to improve environmental performance. From time to time, we
may be subject to environmental regulatory enforcement under U.S. and non-U.S. statutes, the resolution of which typically involves
the establishment of compliance programs. It is possible that future developments, such as stricter requirements of environmental laws
and enforcement policies, could adversely affect our production, handling, use, storage, transportation, sale or disposal of such
substances. We believe that all of our facilities are in substantial compliance with applicable environmental laws.

Certain properties and facilities used in NL’s former operations, including divested primary and secondary lead smelters
and former mining locations, are the subject of civil litigation, administrative proceedings or investigations arising under federal and
state environmental laws and common law. Additionally, in connection with past operating practices, we are currently involved as a
defendant, potentially responsible party (“PRP”) or both, pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act (“CERCLA”), and similar state laws in various
governmental and private actions associated with waste disposal sites, mining locations, and facilities that we or our predecessors, our
subsidiaries or their predecessors currently or previously owned, operated or used, certain of which are on the United States
Environmental Protection Agency’s (“EPA”) Superfund National Priorities List or similar state lists. These proceedings seek cleanup
costs, damages for personal injury or property damage and/or damages for injury to natural resources. Certain of these proceedings
involve claims for substantial amounts. Although we may be jointly and severally liable for these costs, in most cases we are only one
of a number of PRPs who may also be jointly and severally liable, and among whom costs may be shared or allocated. In addition, we
are occasionally named as a party in a number of personal injury lawsuits filed in various jurisdictions alleging claims related to
environmental conditions alleged to have resulted from our operations.

Obligations associated with environmental remediation and related matters are difficult to assess and estimate for

numerous reasons including the:

(cid:121)

complexity and differing interpretations of governmental regulations,

(cid:121) number of PRPs and their ability or willingness to fund such allocation of costs,

(cid:121)

financial capabilities of the PRPs and the allocation of costs among them,

solvency of other PRPs,

(cid:121) multiplicity of possible solutions,

(cid:121) number of years of investigatory, remedial and monitoring activity required,

(cid:121) uncertainty over the extent, if any, to which our former operations might have contributed to the conditions allegedly

giving rise to such personal injury, property damage, natural resource and related claims, and

(cid:121) number of years between former operations and notice of claims and lack of information and documents about the

former operations.

In addition, the imposition of more stringent standards or requirements under environmental laws or regulations, new
developments or changes regarding site cleanup costs or the allocation of costs among PRPs, solvency of other PRPs, the results of
future testing and analysis undertaken with respect to certain sites or a determination that we are potentially responsible for the release
of hazardous substances at other sites, could cause our expenditures to exceed our current estimates. We cannot assure you that actual
costs will not exceed accrued amounts or the upper end of the range for sites for which estimates have been made, and we cannot
assure you that costs will not be incurred for sites where no estimates presently can be made. Further, additional environmental and

F-52

related matters may arise in the future. If we were to incur any future liability, this could have a material adverse effect on our
consolidated financial statements, results of operations and liquidity.

The table below presents a summary of the activity in our accrued environmental costs during the past three years. The

amount charged to expense is included in corporate expense on our Consolidated Statements of Operations.

2013

Years ended December 31,
2014
(In millions)

2015

Balance at the beginning of the year.............................. $
Additions charged to expense, net .................................
Acquired ........................................................................
Payments, net.................................................................
Changes in currency exchange rates and other ..............
Balance at the end of the year ........................................ $
Amounts recognized in our Consolidated Balance

Sheet at the end of the year:

Current liabilities ................................................. $
Noncurrent liabilities ...........................................
Total ........................................................... $

50.2 $
69.0
7.0
(3.4)
(.1)
122.7 $

9.1 $
113.6
122.7 $

122.7 $
6.6
—
(13.0)
2.2
118.5 $

10.2 $
108.3
118.5 $

118.5
5.7
—
(3.5)
(.3)
120.4

11.7
108.7
120.4

NL—On a quarterly basis, NL evaluates the potential range of its liability for environmental remediation and related costs
at sites where it has been named as a PRP or defendant. At December 31, 2015, NL had accrued approximately $113 million related to
approximately 42 sites associated with remediation and related matters that it believes are at the present time and/or in their current
phase reasonably estimable. The upper end of the range of reasonably possible costs to NL for remediation and related matters for
which we believe it is possible to estimate costs is approximately $166 million, including the amount currently accrued.

NL believes that it is not reasonably possible to estimate the range of costs for certain sites. At December 31, 2015, there
were approximately 5 sites for which NL is not currently able to estimate a range of costs. For these sites, generally the investigation
is in the early stages, and NL is unable to determine whether or not NL actually had any association with the site, the nature of its
responsibility, if any, for the contamination at the site and the extent of contamination at and cost to remediate the site. The timing and
availability of information on these sites is dependent on events outside of our control, such as when the party alleging liability
provides information to us. At certain of these previously inactive sites, NL has received general and special notices of liability from
the EPA and/or state agencies alleging that NL, sometimes with other PRPs, are liable for past and future costs of remediating
environmental contamination allegedly caused by former operations. These notifications may assert that NL, along with any other
alleged PRPs, are liable for past and/or future clean-up costs. As further information becomes available to us for any of these sites
which would allow us to estimate a range of costs, we would at that time adjust our accruals. Any such adjustment could result in the
recognition of an accrual that would have a material effect on our consolidated financial statements, results of operations and liquidity.

WCS – Effective December 2015, WCS entered an Agreed Order with the TCEQ with regard to the disposition of certain
U.S. Department of Energy (“DOE”) waste currently stored at the WCS facility. WCS entered into the Agreed Order as the licensee of
the storage facility, and DOE entered into a similar order with the TCEQ as the owner of the waste. WCS asserts that the alleged
violations set forth in the orders are due to the acts and omissions of DOE and its contractor. WCS expects to work with TCEQ and
DOE to develop a compliance plan regarding the stored waste. While the cost of the compliance plan is not currently estimable, the

F-53

amount of such compliance costs could be material. On October 21, 2015 the U.S. Nuclear Regulatory Commission (“NRC”) Office
of Investigations commenced an investigation of WCS’s handling of the DOE waste described above. WCS is cooperating fully, and
no formal demands or claims have been asserted by the NRC. WCS believes the DOE or its contractor is required to reimburse WCS
for its cost to comply with the Agreed Order and the NRC investigation under the terms of the storage contract and pursuant to law,
and as such we believe the cost of compliance with the Agreed Order and the NRC investigation should not have a material effect on
our consolidated financial condition, results of operations or liquidity.

Other—We have also accrued approximately $7.4 million at December 31, 2015 for other environmental cleanup matters.

This accrual is near the upper end of the range of our estimate of reasonably possible costs for such matters.

Insurance coverage claims

We are involved in certain legal proceedings with a number of our former insurance carriers regarding the nature and
extent of the carriers’ obligations to us under insurance policies with respect to certain lead pigment and asbestos lawsuits. The issue
of whether insurance coverage for defense costs or indemnity or both will be found to exist for our lead pigment and asbestos
litigation depends upon a variety of factors and we cannot assure you that such insurance coverage will be available.

We have agreements with three former insurance carriers pursuant to which the carriers reimburse us for a portion of our
future lead pigment litigation defense costs, and one such carrier reimburses us for a portion of our future asbestos litigation defense
costs. We are not able to determine how much we will ultimately recover from these carriers for defense costs incurred by us because
of certain issues that arise regarding which defense costs qualify for reimbursement. While we continue to seek additional insurance
recoveries, we do not know if we will be successful in obtaining reimbursement for either defense costs or indemnity. Accordingly,
we recognize insurance recoveries in income only when receipt of the recovery is probable and we are able to reasonably estimate the
amount of the recovery.

In January 2014, NL was served with a complaint in Certain Underwriters at Lloyds, London, et al v. NL Industries, Inc.
(Supreme Court of the State of New York, County of New York, Index No. 14/650103). The plaintiff, a former insurance carrier of
ours, is seeking a declaratory judgment of its obligations to us under insurance policies issued to us by the plaintiff with respect to
certain lead pigment lawsuits. The case is now proceeding in the trial court. We believe the action is without merit and intend to
defend NL’s rights in this action vigorously.

In February 2014, NL was served with a complaint in Zurich American Insurance Company, as successor-in-interest to
Zurich Insurance Company, U.S. Branch vs. NL Industries, Inc., and The People of the State of California, acting by and through
county Counsels of Santa Clara, Alameda, Los Angeles, Monterey, San Mateo, Solano and Ventura Counties and the city Attorneys of
Oakland, San Diego, and San Francisco, et al (Superior Court of California, County of Santa Clara, Case No.: 1-14-CV-259924). In
January 2015, an Order of Deposit Under CCP § 572 was entered by the trial court.

Other litigation

NL—– NL has been named as a defendant in various lawsuits in several jurisdictions, alleging personal injuries as a result
of occupational exposure primarily to products manufactured by our former operations containing asbestos, silica and/or mixed dust.
In addition, some plaintiffs allege exposure to asbestos from working in various facilities previously owned and/or operated by NL.
There are 102 of these types of cases pending, involving a total of approximately 588 plaintiffs. In addition, the claims of
approximately 8,692 plaintiffs have been administratively dismissed or placed on the inactive docket in Ohio courts. We do not expect
these claims will be re-opened unless the plaintiffs meet the courts’ medical criteria for asbestos-related claims. We have not accrued
any amounts for this litigation because of the uncertainty of liability and inability to reasonably estimate the liability, if any. To date,
we have not been adjudicated liable in any of these matters. Based on information available to us, including:

(cid:121)

facts concerning historical operations,

the rate of new claims,

the number of claims from which we have been dismissed, and

(cid:121) our prior experience in the defense of these matters,

We believe that the range of reasonably possible outcomes of these matters will be consistent with our historical costs
(which are not material). Furthermore, we do not expect any reasonably possible outcome would involve amounts material to our
consolidated financial position, results of operations or liquidity. We have sought and will continue to vigorously seek, dismissal
and/or a finding of no liability from each claim. In addition, from time to time, we have received notices regarding asbestos or silica

F-54

claims purporting to be brought against former subsidiaries, including notices provided to insurers with which we have entered into
settlements extinguishing certain insurance policies. These insurers may seek indemnification from us.

Kronos— In 2013 Kronos entered into a settlement agreement with the class plaintiffs in the consolidated complaint,
Haley Paint et al. v. E.I. Du Pont de Nemours and Company, et al. (United States District Court, for the District of Maryland, Case
No. 1:10-cv-00318-RDB). Without admitting any fault or wrongdoing, Kronos agreed to pay an aggregate of $35 million (which was
paid in 2014), and Kronos and the other defendants have been dismissed with prejudice from this matter. Selling, general and
administrative expenses in 2013 includes a $35 million charge related to this settlement.

In March 2013, Kronos was served with the complaint, Los Gatos Mercantile, Inc. d/b/a Los Gatos Ace Hardware, et al v.
E.I. Du Pont de Nemours and Company, et al. (United States District Court, for the Northern District of California, Case No. 3:13-cv-
01180-SI). The defendants include us, E.I. Du Pont de Nemours & Company, Huntsman International LLC and Millennium Inorganic
Chemicals, Inc. As amended by plaintiffs’ second amended complaint, plaintiffs seek to represent a class consisting of indirect
purchasers of titanium dioxide in the states of Arizona, Arkansas, California, the District of Columbia, Florida, Kansas,
Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, New Mexico, New York, North Carolina,
Oregon, South Carolina, Tennessee and Wisconsin that indirectly purchased titanium dioxide from one or more of the defendants on
or after March 1, 2002. The complaint alleges that the defendants conspired and combined to fix, raise, maintain, and stabilize the
price at which titanium dioxide was sold in the United States and engaged in other anticompetitive conduct. The case is now
proceeding in the trial court. We believe the action is without merit, will deny all allegations of wrongdoing and liability and intend to
defend against the action vigorously. Based on our quarterly status evaluation of this case, we have determined that it is not
reasonably possible that a loss has been incurred in this case.

In November 2013, Kronos was served with the complaint, The Valspar Corporation, et al v. E.I. Du Pont de Nemours
and Company, et al. (United States District Court, for the District of Minnesota, Case No. 1:13-cv-03214-RHK-L1B). The defendants
include us, E.I. Du Pont de Nemours & Company, Huntsman International LLC, Millennium Inorganic Chemicals, Inc. and the
National Titanium Dioxide Company Limited (d/b/a Cristal). The plaintiff opted out of the settlement in the original lawsuit, Haley
Paint et al. v. E.I. Du Pont de Nemours and Company, et al. (United States District Court, for the District of Maryland, Case No. 1:10-
cv-00318-RDB) and filed its own lawsuit against the defendants. The complaint alleged that the defendants conspired and combined
to fix, raise, maintain, and stabilize the price at which titanium dioxide was sold in the United States and engaged in other
anticompetitive conduct. In October 2014, the court granted our motion to transfer, and the case is now proceeding in the trial court in
the United States District Court for the Southern District of Texas, Case No. 4:14-cv-01130. The trial in this case is currently set to
commence in September 2016. We believe the action is without merit, will deny all allegations of wrongdoing and liability and intend
to defend against the action vigorously. Based on our quarterly status evaluation of the case, we have determined that while it is
reasonably possible (but not probable) that a loss has been incurred in this case, we do not believe the amount of such loss will be
material to our consolidated financial condition, results of operations or liquidity.

WCS — Previously, the Lone Star Chapter of the Sierra Club filed various lawsuits in Texas District Court against the
Texas Commission on Environmental Quality (“TCEQ”). WCS intervened in these lawsuits. These lawsuits challenged WCS’ by-
product and low-level radioactive waste disposal licenses. Subsequently, the District Court upheld the TCEQ’s determination that the
Sierra Club lacked standing to pursue a challenge to the by-product disposal license. The Sierra Club appealed. WCS’ by-product
disposal license remained in effect pending resolution of the appeal. On April 4, 2014, the Third District of the Texas Court of
Appeals in Austin upheld the District Court’s ruling in favor of the TCEQ and WCS. On December 30, 2014 the Third District of the
Texas Court of Appeals issued a new opinion again upholding the District Court’s ruling in favor of the TCEQ and WCS. On
February 13, 2015, the Third District of the Texas Court of Appeals denied the Sierra Club’s motion for rehearing en banc. Sierra
Club petitioned for discretionary relief from the Texas Supreme Court on March 30, 2015. In October 2015 the Texas Supreme Court
denied Sierra Club’s petition. All appeals have been exhausted and the matter is concluded.

In May 2012, the same District Court subsequently held that TCEQ erred in denying the Sierra Club’s request for an
administrative contested case hearing regarding the low-level radioactive waste disposal license, and ordered the TCEQ to undertake a
contested case hearing in which the Sierra Club could participate. Shortly thereafter, both the TCEQ and WCS appealed the District
Court’s order with respect to the low-level radioactive waste disposal license. Because of the appeal, the District Court’s order was
suspended. WCS’ low-level radioactive waste disposal license remained in effect pending resolution of the appeal. On April 18, 2014,
the Third District of the Texas Court of Appeals in Austin reversed the District Court’s ruling and rendered judgment in favor of
TCEQ and WCS. On December 30, 2014, the Third District of the Texas Court of Appeals issued a new opinion, again reversing the
District Court’s ruling and rendering judgment in favor of the TCEQ and WCS. On February 17, 2015, the Third District of the Texas
Court of Appeals denied the Sierra Club’s motion for rehearing en banc. Sierra Club petitioned for discretionary relief from the Texas
Supreme Court on April 3, 2015. In October 2015, the Texas Supreme Court denied Sierra Club’s petition. All appeals have been
exhausted and the matter is concluded.

F-55

On February 10, 2015, WCS competitor EnergySolutions LLC (“EnergySolutions”) threatened to bring a civil action
against WCS related to WCS’s decision to not enter into a contract with EnergySolutions to dispose of low level radioactive waste
(“LLRW”) and other matters. On February 18, 2015, WCS filed suit against EnergySolutions in the 109th District Court of Andrews
County, Texas (Cause No. 19,785), seeking a declaratory judgment that WCS has no obligation to contract with EnergySolutions and
that WCS has the right to inform its current and potential customers that it will not enter into that contract. On March 13, 2015,
EnergySolutions removed the WCS action to federal court and asserted a counterclaim against WCS under Section 2 of the Sherman
Antitrust Act alleging anticompetitive conduct in the LLRW disposal market. This case is now captioned Energy Solutions, LLC,
Plaintiff and Counter Defendant vs. Waste Control Specialists LLC, Defendant and Counter Plaintiff (United States District Court for
the Western District of Texas, Civil Action No. 7:15-CV-00034). WCS moved to remand the WCS declaratory judgment action to
state court because EnergySolutions improperly removed it, and WCS moved to dismiss EnergySolutions’ counterclaim because it
fails to state a claim upon which relief can be granted. On August 19, 2015, the court denied WCS’ motion for remand. In connection
with the proposed sale of WCS to Rockwell discussed in Note 3, on November 20, 2015 the case was dismissed by joint request.

Other—In addition to the litigation described above, we and our affiliates are involved in various other environmental,
contractual, product liability, patent (or intellectual property), employment and other claims and disputes incidental to our present and
former businesses. In certain cases, we have insurance coverage for these items, although we do not expect any additional material
insurance coverage for our environmental claims.

We currently believe that the disposition of all of these various other claims and disputes, individually or in the aggregate,
should not have a material adverse effect on our consolidated financial position, results of operations or liquidity beyond the accruals
already provided.

Other matters

Concentrations of credit risk—Sales of TiO2 accounted for approximately 90% of our Chemicals Segment’s sales in each
of 2013, 2014 and 2015. The remaining sales result from the mining and sale of ilmenite ore (a raw material used in the sulfate
pigment production process), and the manufacture and sale of iron-based water treatment chemicals and certain titanium chemical
products (derived from co-products of the TiO2 production processes). TiO2 is generally sold to the paint, plastics and paper industries.
Such markets are generally considered “quality-of-life” markets whose demand for TiO2 is influenced by the relative economic well-
being of the various geographic regions. Our Chemicals Segment sells TiO2 to over 4,000 customers, with the top ten customers
approximating 34% of our Chemicals Segment’s net sales in 2013 and 2015 and 35% in 2014. In each of 2013, 2014 and 2015, one
customer, Behr Process Corporation, accounted for approximately 10% of our Chemicals Segment’s net sales. The table below shows
the approximate percentage of our TiO2 sales by volume for our significant markets, Europe and North America, for the last three
years.

Europe .............................................................
North America .................................................

49%
33%

50%
33%

52%
29%

2013

2014

2015

Our Component Products Segment’s products are sold primarily in North America to original equipment manufacturers.
The ten largest customers related to our Component Product’s Segment accounted for approximately 42% of sales in 2013, 47% in
2014, and 48% in 2015. United States Postal Service, a customer of the security products reporting unit, accounted for approximately
13% of the Component Products Segment’s total sales in both 2014 and 2015. Harley Davidson, also a customer of the security
products reporting unit, accounted for approximately 12% in each of 2013, 2014 and 2015.

Our Waste Management Segment’s revenues consist of storage and disposal fees at our facility located in Andrews
County, Texas. During 2013 we had sales to three customers that each exceeded 10% of our Waste Management Segment’s net sales:
Tennessee Valley Authority (30%), Studsvik, Inc. (15%) and the DOE (10%). During 2014 we had sales to two customers that each
exceed 10% of our Waste Management Segment’s total sales: Zion Solutions (18%), and Sacramento Municipal Utility District
(23%). During 2015 we had sales to five customers that each exceed 10% of our Waste Management Segment’s total sales: Exelon
Generation (19%), U.S. Department of Energy (16%), Nuclear Waste Partnership (12%), Arizona Public Service (12%), and Zion
Solutions (11%).

Our Real Estate Management and Development Segment’s revenues are land sales income and water and electric delivery
fees. During 2014 we had sales to four customers that each exceeded 10% of our Real Estate Management and Development
Segment’s net sales: Greystone Nevada (23%), Woodside Homes of Nevada (25%), and Richmond Homes of Nevada (20%) all relate
to land sales; the City of Henderson (12%) relates to our water delivery services. During 2015 we had sales to four customers that
each exceeded 10% of our Real Estate Management and Development Segment’s net sales: Richmond Homes of Nevada (27%), LV

F-56

East Gibson, LLC (17%), and Prologis, L.P. (11%) are all relate to land sales; the City of Henderson (15%) relates to our water
delivery services.

Long-term contracts—Our Chemicals Segment has long-term supply contracts that provide for certain of our TiO2
feedstock requirements through 2019. The agreements require Kronos to purchase certain minimum quantities of feedstock with
minimum purchase commitments aggregating approximately $865 million over the life of the contracts in years subsequent to
December 31, 2015. In addition, our Chemicals Segment has other long-term supply and service contracts that provide for various raw
materials and services. These agreements require Kronos to purchase certain minimum quantities or services with minimum purchase
commitments aggregating approximately $147 million at December 31, 2015.

Operating leases—Our Chemicals Segment’s principal German operating subsidiary leases the land under its Leverkusen
TiO2 production facility pursuant to a lease with Bayer AG that expires in 2050. The Leverkusen facility itself, which our Chemicals
Segment owns and which represents approximately one-third of its current TiO2 production capacity, is located within Bayer’s
extensive manufacturing complex. Kronos periodically establishes the amount of rent for the land lease associated with the
Leverkusen facility by agreement with Bayer for periods of at least two years at a time. The lease agreement provides for no formula,
index or other mechanism to determine changes in the rent for such land lease; rather, any change in the rent is subject solely to
periodic negotiation between Bayer and Kronos. We recognize any change in the rent based on such negotiations as part of lease
expense starting from the time such change is agreed upon by both parties, as any such change in the rent is deemed “contingent
rentals” under GAAP. Under the terms of a master supply and services agreements a majority-owned subsidiary of Bayer provides raw
materials, including chlorine, auxiliary and operating materials, utilities and services necessary to operate the Leverkusen facility. This
agreement, as amended, expires in 2017 and will automatically renew for successive three year terms until terminated by either party
upon one year’s prior notice.

We also lease various other manufacturing facilities and equipment. Some of the leases contain purchase and/or various
term renewal options at fair market and fair rental values, respectively. In most cases we expect that, in the normal course of business,
such leases will be renewed or replaced by other leases. Net rent expense approximated $15.8 million in 2013, $16.6 million in 2014
and $16.1 million in 2015. At December 31, 2015, future minimum payments under non-cancellable operating leases having an initial
or remaining term of more than one year were as follows:

Years ending December 31,

2016 ........................................................................................... $
2017 ...........................................................................................
2017 ...........................................................................................
2018 ...........................................................................................
2019 ...........................................................................................
2020 and thereafter.....................................................................
Total (1) ............................................................................ $

Amount
(In millions)

11.4
8.2
5.1
4.4
3.6
23.6
56.3

(1) Approximately $14 million of the $56.3 million aggregate future minimum rental commitments at December 31, 2015 relates to
Kronos’ Leverkusen facility lease discussed above. The minimum commitment amounts for such lease included in the table
above for each year through the 2050 expiration of the lease are based upon the current annual rental rate as of December 31,
2015. As discussed above, any change in the rent is based solely on negotiations between Bayer and Kronos, and any such
change in the rent is deemed “contingent rentals” under GAAP which is excluded from the future minimum lease payments
disclosed above.

Income taxes—Prior to 2013, NL made certain pro-rata distributions to its stockholders in the form of shares of Kronos
common stock. All of NL’s distributions of Kronos common stock were taxable to NL and NL recognized a taxable gain equal to the
difference between the fair market value of the Kronos shares distributed on the various dates of distribution and NL’s adjusted tax
basis in the shares at the dates of distribution. NL transferred shares of Kronos common stock to us in satisfaction of the tax liability
related to NL’s gain on the transfer or distribution of these shares of Kronos common stock and the tax liability generated from the use
of Kronos shares to settle the tax liability. To date, we have not paid the liability to Contran because Contran has not paid the liability
to the applicable tax authority. The income tax liability will become payable to Contran, and by Contran to the applicable tax
authority, when the shares of Kronos transferred or distributed by NL to us are sold or otherwise transferred outside the Contran Tax
Group or in the event of certain restructuring transactions involving us. We have recognized deferred income taxes for our investment
in Kronos common stock.

We are a party to a tax sharing agreement with Contran providing for the allocation of tax liabilities and tax payments as
described in Note 1. Under applicable law, we, as well as every other member of the Contran Tax Group, are each jointly and

F-57

severally liable for the aggregate federal income tax liability of Contran and the other companies included in the Contran Tax Group
for all periods in which we are included in the Contran Tax Group. Contran has agreed, however, to indemnify us for any liability for
income taxes of the Contran Tax Group in excess of our tax liability computed in accordance with the tax sharing agreement.

Financial assurance associated with Waste Management Segment—Our Waste Management Segment is required to
provide certain financial assurances to the Texas government agencies with respect to the decommissioning obligations related to the
its facility in West Texas. We and certain of our affiliates have provided or assisted us in providing such financial assurances, see Note
16. Other matters related to the financial assurance associated with our LLRW disposal facilities are discussed below:

(cid:121) A portion of WCS’ required financial assurance associated with its LLRW disposal facilities is in the form of a surety
bond issued by a third-party insurance company on its behalf for the benefit of the state of Texas. The value of the surety
bond was $32.2 million in December 2013. As part of such surety bond, WCS is required to make quarterly cash
payments into a collateral trust of 2.5% of the total value of the bonds which commenced in the fourth quarter of 2011.
In April 2014, WCS obtained a further increase in the surety bond from $32.2 million to $85.3 million. As part of the
increase in the surety bond, in April 2014, WCS paid an aggregate of $2.0 million into the first collateral trust.
Similar to the $32.2 million surety bond, WCS is still required to make quarterly cash payments into the first
collateral trust, but at a rate sufficient such that the aggregate amount of such payments funded into the collateral trust
would equal 50% of the total value of the new bond by April 2021. Such new quarterly cash payments are equal to
approximately $1.3 million and began in the third quarter of 2014. At December 31, 2015, we had made payments
totaling $16.1 million into this collateral trust (including a one-time $2.0 million payment made in April 2014), which is
reflected as part of our noncurrent restricted cash on our Consolidated Balance Sheet.

(cid:121) As additional surety for its LLRW disposal facility, WCS had also been required to make cash payments into a
second collateral trust annually in November of each of 2012 through 2016, and such payments aggregated $18.0
million at March 31, 2014. In April 2014, concurrent with WCS obtaining an increase in the surety bond from $32.2
million to $85.3 million as discussed above, in return the Texas government agency agreed to the release of the $18.0
million which WCS had previously paid into the second collateral trust. WCS received such $18.0 million in April
2014.

(cid:121) Valhi previously pledged certain of our marketable securities as collateral for the state of Texas related to specified
decommissioning obligations associated with WCS’ LLRW disposal facilities. In September 2014, concurrent with a
reduction in the amount of required financial assurance, the state of Texas released these marketable securities to us
and they are no longer pledged as collateral to the state of Texas.

Owner Participation Agreement of Real Estate Management and Development Segment —Under an Owner
Participation Agreement (“OPA”) entered into by LandWell with the Redevelopment Agency of the City of Henderson, Nevada, if
LandWell develops certain real property for commercial and residential purposes in a master planned community in Henderson,
Nevada, the cost of certain public infrastructure may be reimbursed to us through tax increment. The maximum reimbursement under
the OPA is $209 million, and is subject to, among other things, completing construction of approved qualifying public infrastructure,
transferring title of such infrastructure to the City of Henderson, receiving approval from the Redevelopment Agency of the funds
expended to be eligible for tax increment reimbursement and the existence of a sufficient property tax valuation base and property tax
rates in order to generate tax increment reimbursement funds. We are entitled to receive 75% of the tax increment generated by the
master planned community through 2036, subject to the qualifications and limitations indicated above. Due to the significant
uncertainty of the timing and amount of any of such potential tax increment reimbursements, we recognize any such tax increment
reimbursements only when received. The amount of such tax increments received in 2014 and 2015 were not material.

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Note 18—Financial instruments:

The following table summarizes the valuation of our short-term investments and financial instruments by the ASC Topic

820 categories as of December 31, 2014 and 2015:

Fair Value Measurements
Quoted
Prices in
Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

(In millions)

Significant
Unobservable
Inputs
(Level 3)

Total

Asset (liability)
December 31, 2014:

Marketable securities:

Current ................................................. $
Noncurrent ...........................................
Currency forward contracts ...........................

December 31, 2015:

Marketable securities:

Current ................................................. $
Noncurrent ...........................................
Currency forward contracts ...........................
Interest rate swap ...........................................

2.7 $
255.6
(4.2)

2.0 $
254.9
(1.2)
(3.5)

1.7 $
2.5
(4.2)

— $
3.5
(1.2)
—

1.0 $
3.1
—

2.0 $
1.4
—
(3.5)

—
250.0
—

—
250.0
—
—

See Note 4 for information on how we determine the fair value of our marketable securities.

Certain of our sales generated by Chemicals Segment’s non-U.S. operations are denominated in U.S. dollars. Our
Chemicals Segment periodically uses currency forward contracts to manage a very nominal portion of currency exchange rate risk
associated with trade receivables denominated in a currency other than the holder’s functional currency or similar exchange rate risk
associated with future sales. Derivatives that we use are primarily currency forward contracts and interest rate swaps. We have not
entered into these contracts for trading or speculative purposes in the past, nor do we currently anticipate entering into such contracts
for trading or speculative purposes in the future. Derivatives used to hedge forecasted transactions and specific cash flows associated
with financial assets and liabilities denominated in currencies other than the U.S. dollar and which meet the criteria for hedge
accounting are designated as cash flow hedges. Consequently, the effective portion of gains and losses is deferred as a component of
accumulated other comprehensive income (loss) and is recognized in earnings at the time the hedged item affects earnings. Contracts
that do not meet the criteria for hedge accounting are marked-to-market at each balance sheet date with any resulting gain or loss
recognized in income currently as part of net currency transactions. The fair value of the currency forward contracts is determined
using Level 1 inputs based on the currency spot forward rates quoted by banks or currency dealers.

At December 31, 2015, Kronos had currency forward contracts to exchange an aggregate of $17.9 million for an
equivalent value of Canadian dollars at an exchange rate of Cdn. $1.29 per U.S. dollar. These contracts with Wells Fargo Bank, N.A.
mature from January through July 2016 at a rate of $2.6 million per month.

The estimated fair value of such currency forward contracts at December 31, 2015 was a $1.2 million net liability, which
is recognized as part of accounts payable and accrued liabilities in our Consolidated Balance Sheet with a corresponding $1.2 million
currency transaction loss in our Consolidated Statement of Operations, (in 2014 we had a $4.2 million net liability of which
$4.2 million is recognized as part of accounts payable and accrued liabilities in our Consolidated Balance Sheet with a corresponding
$4.2 million currency transaction loss in our Consolidated Statement of Operations). We did not use hedge accounting for any of our
contracts to the extent we held such contracts during 2013, 2014 and 2015.

Interest rate swap contract - As part of our interest rate risk management strategy, in August 2015 Kronos entered into a
pay-fixed/receive-variable interest rate swap contract with Wells Fargo Bank, N.A. to minimize its exposure to volatility in LIBOR as
it relates to Kronos' forecasted outstanding variable-rate indebtedness. Under this interest rate swap, Kronos will pay a fixed rate of
2.016% per annum, payable quarterly, and receive a variable rate of three-month LIBOR (subject to a 1.00% floor), also payable
quarterly, in each case based on the notional amount of the swap then outstanding. The effective date of the swap contract was
September 30, 2015. The notional amount of the swap started at $344.75 million and declines by $875,000 each quarter beginning
December 31, 2015, with a final maturity of the swap contract in February 2020. This swap contract has been designated as a cash
flow hedge and qualified as an effective hedge at inception under ASC Topic 815. The effective portion of changes in fair value on

F-59

this interest rate swap is recorded as a component of other comprehensive income (loss), net of deferred income taxes and
noncontrolling interest. Commencing in the fourth quarter of 2015, as interest expense accrues on LIBOR-based variable rate debt,
we classify the amount we pay under the pay-fixed leg of the swap and the amount we receive under the receive-variable leg of the
swap as part of interest expense, with the net effect that the amount of interest expense we recognize on our LIBOR-based variable
rate debt each quarter, as it relates to the notional amount of the swap outstanding each quarter, will be based on a fixed rate of 2.016%
per annum in lieu of the level of LIBOR prevailing during the quarter. The amount of hedge ineffectiveness, if any, related to the
swap will be recorded in earnings (also as part of interest expense). As of December 31, 2015, there were no gains or losses
recognized in earnings in the current period representing hedge ineffectiveness with respect to the interest rate swap.

During the year ended December 31, 2015, the pretax amount recognized in other comprehensive income (loss) related to
the interest rate swap contract was a $4.4 million loss. During the same period, $.9 million was reclassified from accumulated other
comprehensive income (loss) into earnings. During the next twelve months the amount of the December 31, 2015 accumulated other
comprehensive income balance that is expected to be reclassified to earnings is $3.5 million pre-tax.

The fair value of the interest rate swap contract at December 31, 2015 was a liability of $3.5 million and is reflected in the
Consolidated Balance Sheet as part of accounts payable and accrued liabilities of $3.3 million and other noncurrent liabilities of $.2
million. See Note 10. The fair value of the interest rate swap was estimated by a third party using inputs that are observable or that
can be corroborated by observable market data such as interest rate yield curves, and therefore, is classified within Level 2 of the
valuation hierarchy.

The following table presents the financial instruments that are not carried at fair value but which require fair value

disclosure as of December 31, 2014 and 2015:

December 31, 2014

December 31, 2015

Carrying
amount

Fair
value

Carrying
amount

Fair
value

(In millions)

Cash, cash equivalents and restricted cash

equivalents ......................................................... $
Deferred payment obligation ..................................
Long-term debt (excluding capitalized leases):

Kronos term loan .......................................... $
Snake River Sugar Company fixed rate

loans .........................................................
WCS fixed rate debt ......................................
Valhi credit facility with Contran .................
Tremont promissory note payable ................
BMI bank note payable .................................
LandWell note payable to the City of

Henderson ................................................

280.3 $
8.5

229.1 $
8.8

229.1
8.8

340.9 $

341.5 $

338.0 $

309.5

250.0
67.1
223.7
17.4
10.2

250.0
67.1
223.7
17.4
10.3

250.0
65.6
263.8
17.1
9.3

250.0
65.6
263.8
17.1
9.4

3.1

At December 31, 2015, the estimated market price of Kronos’ term loan was $900 per $1,000 principal amount. At
December 31, 2014, the estimated market price of Kronos’ term loan was $983.1 per $1,000 principal amount. The fair value of
Kronos’ term loan was based on quoted market prices; however, these quoted market prices represent Level 2 inputs because the
markets in which the term loan trades were not active. The fair value of our fixed-rate nonrecourse loans from Snake River Sugar
Company is based upon the $250 million redemption price of our investment in the Amalgamated Sugar Company LLC, which
collateralizes the nonrecourse loans, (this is a Level 3 input). Fair values of variable interest rate notes receivable and debt and other
fixed-rate debt are deemed to approximate book value. Due to their near-term maturities, the carrying amounts of accounts receivable
and accounts payable are considered equivalent to fair value. See Notes 4 and 9.

Note 19 - Restructuring Costs

In the second quarter of 2015, our Chemicals Segment initiated a restructuring plan designed to improve its long-term cost
structure. A portion of such expected cost savings is planned to occur through workforce reductions. During the second, third and
fourth quarters of 2015 Kronos implemented certain voluntary and involuntary workforce reductions at certain of its facilities
impacting approximately 160 individuals. A substantial portion of such workforce reductions were accomplished through voluntary
programs, for which eligible workforce reduction costs are recognized at the time both the employee and employer are irrevocably

F-60

committed to the terms of the separation. For involuntary programs, eligible costs are recognized when management approves the
separation program, the affected employees are properly notified and the costs are estimable. To the extent there is a statutorily-
mandated notice period and the affected employee is not required to provide services to us during such notice period, severance and all
wages during such notice period are accrued at the time of separation. To the extent the affected employee is required to provide
services to us during all or a portion of such notice period, the severance (and if applicable notice period wages for any period beyond
the time the affected employee is required to provide future services to us) is accrued ratably over the period in which services will be
provided. As of December 31, 2015, we have recognized an aggregate $21.7 million charge for such workforce reductions Kronos
had implemented through that date (substantially all of which was recognized in the second quarter of 2015), $10.8 million of which is
classified in cost of sales and $10.9 million of which is classified in selling, general and administrative expense. For workforce
reductions implemented through December 31, 2015, we do not expect to accrue any further material amounts associated with the
affected individuals who are providing service to us past December 31, 2015. All accrued severance costs at December 31, 2015 are
expected to be paid through the third quarter of 2018.

A summary of the activity in our accrued workforce reduction costs during 2015 is shown in the table below:

Accrued workforce reduction costs as of January 1, 2015 ..... $
Workforce reduction costs accrued ........................................
Workforce reduction costs paid..............................................
Currency translation adjustments, net ....................................

Accrued workforce reduction costs at December 31,
2015 ............................................................................. $

Amounts recognized in our Consolidated Balance Sheet at
the end of the period:

Current liability ................................................................. $
Noncurrent liability ...........................................................
$

Amount
(in millions)

—
21.7
(15.9 )
(.2 )

5.6

5.3
.3
5.6

Note 20—Recent accounting pronouncements:

Adopted

In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the
Presentation of Debt Issuance Costs, which requires unamortized debt issuance costs (or deferred financing costs) to be presented in
the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a
debt discount. Previously, such unamortized debt issue costs were generally presented as a noncurrent asset. ASU 2015-15, issued
by the FASB in August 2015, clarified that the scope of ASU 2015-03 does not include deferred financing costs related to revolving
credit facilities. The guidance in the new standard is limited to the presentation of debt issuance costs within its scope and does not
affect the recognition, measurement or amortization of debt issuance costs. The standard is effective for financial statements issued
for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years and is applied on a retrospective
basis. Early adoption is permitted, and we have adopted this ASU in this Annual Report. As a result of adopting this ASU, deferred
financing costs of $5.1 million at December 31, 2014, previously recognized as an asset, are now classified as a direct deduction from
the carrying value of such term loan in our Consolidated Balance Sheet at such date. All of our other deferred financing costs at
December 31, 2014 and 2015 (see Note 9) relate to Kronos’ revolving credit facilities in North America and Europe, and continue to
be recognized as an asset under the guidance of the ASU.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred
Taxes, which eliminates the requirement to separate deferred income tax assets and liabilities into current and noncurrent amounts.
Under the ASU all deferred income tax assets and liabilities will be classified as noncurrent. The current requirement that deferred
income tax assets and liabilities of a tax-paying component of an entity be offset and presented as a single amount is not affected by
the amendments in this ASU. This amendment is effective for us beginning in the first quarter of 2017; however early adoption is
permitted. In addition, prospective or retrospective application is permitted. We have elected to adopt this ASU retrospectively
beginning with this Annual Report and accordingly we have presented all deferred income tax assets and liabilities as noncurrent in
our Consolidated Balance Sheets and related Footnotes. At December 31, 2014, we had previously recognized a current deferred
income tax asset and liability of $13.4 million and $3.9 million, respectively, and a noncurrent deferred income tax asset and liability
of $164.4 million and $412.8 million, respectively. As a result of the retrospective application of this ASU, we no longer have a

F-61

current deferred income tax asset or liability recognized at December 31, 2014, and the noncurrent deferred income tax asset and
liability we now have recognized at December 31, 2014 is $160.9 million and $399.8 million, respectively. See Note 12.

Pending Adoption

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2014-09, Revenue from Contracts with Customers (Topic 606). This standard replaces existing revenue recognition guidance, which
in many cases was tailored for specific industries, with a uniform accounting standard applicable to all industries and
transactions. The new standard, as amended, is currently effective for us beginning with the first quarter of 2018. Entities may elect
to adopt ASU No. 2014-09 retrospectively for all periods for all contracts and transactions which occurred during the period (with a
few exceptions for practical expediency) or retrospectively with a cumulative effect recognized as of the date of adoption. ASU No.
2014-09 is a fundamental rewriting of existing GAAP with respect to revenue recognition, and we are still evaluating the effect the
Standard will have on our Consolidated Financial Statements. We currently expect to adopt the standard in the first quarter of 2018.
In addition, we have not yet determined the method we will use to adopt the Standard.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects related to the recognition, measurement,
presentation and disclosure of financial instruments. The ASU requires equity investments (except for those accounted for under the
equity method of accounting or those that result in the consolidation of the investee) to generally be measured at fair value with
changes in fair value recognized in net income. The amendment also requires a number of other changes, including among others:
simplifying the impairment assessment for equity instruments without readily determinable fair values; eliminating the requirement
for public business entities to disclose methods and assumptions used to determine fair value for financial instruments measured at
amortized cost; requiring an exit price notion when measuring the fair value of financial instruments for disclosure purposes; and
requiring separate presentation of financial assets and liabilities by measurement category and form of asset. The changes indicated
above will be effective for us beginning in the first quarter of 2018, with prospective application required, and early adoption is not
permitted. The most significant aspect of adopting this ASU will be the requirement to recognize changes in fair value of our
available-for-sale marketable equity securities in net income (currently changes in fair value of such securities are recognized in other
comprehensive income).

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is a comprehensive rewriting of the lease
accounting guidance which aims to increase comparability and transparency with regard to lease transactions. The primary change
will be the recognition of lease assets for the right-of –use of the underlying asset and lease liabilities for the obligation to make
payments by lessees on the balance sheet for leases currently classified as operating leases. The ASU also requires increased
qualitative disclosure about leases in addition to quantitative disclosures currently required. Companies are required to use a modified
retrospective approach to adoption with a practical expedient which will allow companies to continue to account for existing leases
under the prior guidance unless a lease is modified, other than the requirement to recognize the right-of-use asset and lease liability for
all operating leases. The changes indicated above will be effective for us beginning in the first quarter of 2019, with early adoption is
permitted. We have not yet evaluated the effect this ASU will have on our Consolidated Financial Statements, but given the material
amount of our future minimum payments under non-cancellable operating leases at December 31, 2015 discussed in Note 17, we
expect to recognize a material right-of-use lease asset and lease liability upon adoption of the ASU.

F-62

Note 21—Quarterly results of operations (unaudited):

March 31

June 30

Sept. 30

Dec. 31

(In millions, except per share data)

Quarter ended

Year ended December 31, 2014
Net sales .................................................................. $
Gross margin ...........................................................
Operating income ....................................................
Net income ........................................... $

Amounts attributable to Valhi stockholders:

Net income (1) ..................................... $
Basic and diluted income per share ..... $

Year ended December 31, 2015
Net sales .................................................................. $
Gross margin ...........................................................
Operating income (loss) ..........................................
Net income (loss) ................................. $

Amounts attributable to Valhi stockholders:

Net income (loss) (2) .......................... $
Basic and diluted income (loss) per

share ................................................ $

(1) We recognized the following amounts during 2014:

462.4 $
85.8
22.8
4.6 $

.8 $
— $

416.1 $
89.3
34.6
17.3 $

491.7 $
104.2
46.7
23.7 $

15.5 $
.05 $

408.8 $
56.3
(10.1)
(139.4) $

476.5 $
115.8
60.2
37.5 $

28.7 $
.08 $

383.2 $
49.8
(5.0 )
(13.3 ) $

432.0
97.0
40.5
13.7

8.8
.03

324.8
27.5
(24.9)
(35.7)

11.9 $

(103.9) $

(11.7 ) $

(29.9)

.04 $

(.30) $

(.03 ) $

(.10)

(cid:121)

a $3.2 million net of noncontrolling interest non-cash income tax benefit in the second quarter of 2014 related to the
release of a portion of our reserve for uncertain tax positions related to the completion of a Canadian income tax audit
and to the release of a portion of our reserve for uncertain tax positions in conjunction with the completion of an audit
of our U.S. income tax return for 2009; see Note 12;

a $1.2 million net of noncontrolling interest cash tax benefit associated with certain U.S. income tax credits, which
we elected to claim on our 2013 amended U.S. federal tax return in the third quarter of 2014; and

aggregate insurance recoveries of $7.3 million, after-tax and noncontrolling interest in the third quarter of 2014.

(2) We recognized the following amounts during 2015:

(cid:121) pre-tax charges of $21.1 million, $.4 million and $.2 million in the second, third and fourth quarters, respectively, in

workforce reduction charges in our Chemicals Segment (see Note 19);

(cid:121)

aggregate insurance recoveries of $3.0 million, after-tax and noncontrolling interest primarily in the first quarter;

(cid:121) non-cash deferred income tax expense of $150.3 million, $2.3 million and $6.4 million in the second, third and fourth
quarters, respectively, related to the recognition of a deferred income tax asset valuation allowance related to our
Chemicals Segment’s German and Belgium operations (see Note 12); and

(cid:121)

related to the non-cash deferred income tax expense noted above we recognized non-cash income tax benefit of $29.3
million, in the second quarter of 2015 for the reduction in the deferred income taxes required to be recognized with
respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in
Kronos common stock, (see Note 12).

The sum of the quarterly per share amounts may not equal the annual per share amounts due to relative changes in the

weighted average number of shares used in the per share computations.

F-63

Pursuant to the requirements of Section 13 or 15(d) 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.

SIGNATURES

VALHI, INC.
(Registrant)

By: /s/ Steven L. Watson

Steven L. Watson, March 11, 2016
(Chairman and Chief Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following

persons on behalf of the Registrant and in the capacities and on the dates indicated:

/s/ Thomas E. Barry
Thomas E. Barry, March 11, 2016

(Director)

/s/ Norman S. Edelcup
Norman S. Edelcup, March 11, 2016

(Director)

/s/ W. Hayden McIlroy
W. Hayden McIlroy, March 11, 2016

(Director)

/s/ Loretta J. Feehan
Loretta J. Feehan, March 11, 2016

(Director)

/s/ Steven L. Watson
Steven L. Watson, March 11, 2016

(Chairman of the Board and Chief Executive Officer )

/s/ Bobby D. O’Brien
Bobby D. O’Brien, March 11, 2016

(President and Chief Financial Officer and Director,
Principal Financial Officer)

/s/ Gregory M. Swalwell
Gregory M. Swalwell, March 11, 2016

(Executive Vice President, Controller and Chief
Accounting Officer, Principal Accounting Officer)

F-64

SUBSIDIARIES OF THE REGISTRANT

EXHIBIT 21.1

Name of Corporation

ASC Holdings, Inc.
Andrews County Holdings, Inc.

Waste Control Specialists LLC

Kronos Worldwide, Inc. (2)
NL Industries, Inc. (2), (3), (4)

CompX International Inc. (4)

Tremont LLC

TRECO LLC

Basic Management, Inc.

Basic Water Company
Basic Water Company SPE LLC
Basic Environmental Company LLC
Basic Power Company
Basic Remediation Company LLC
Basic Land Company

The LandWell Company LP (5)

Henderson Interchange Sign LLC

TRE Holding Corporation

TRE Management Company

Tall Pines Insurance Company

Medite Corporation
Impex Realty Holding, Inc.

Jurisdiction of
Incorporation
or Organization

% of Voting
Securities
Held at
December 31,
2015 (1)

Utah
Delaware
Delaware
Delaware
New Jersey
Delaware
Delaware
Nevada
Nevada
Nevada
Nevada
Nevada
Nevada
Nevada
Nevada
Delaware
Nevada

Delaware
Delaware
Vermont

Delaware
Delaware

100%

100%
100%

50%

83%
87%

100%
100%
63%
100%
100%
100%
100%
100%
100%
50%
100%

100%
100%
100%

100%

(1) Held by the Registrant or the indicated subsidiary of the Registrant.

(2) Subsidiaries of Kronos are incorporated by reference to Exhibit 21.1 of Kronos’ Annual Report on Form 10-K
for the year ended December 31, 2015 (File No. 333-100047). NL owns an additional 30% of Kronos directly.

(3) Subsidiaries of NL are incorporated by reference to Exhibit 21.1 of NL’s Annual Report on Form 10-K for the

year ended December 31, 2015 (File No. 1-640).

(4) Subsidiaries of CompX are incorporated by reference to Exhibit 21.1 of CompX’s Annual Report on Form 10-

K for the year ended December 31, 2015 (File No. 1-13905).

(5) TRECO LLC owns an additional 27% of The LandWell Company LP directly.

Valhi, Inc.

Three Lincoln Centre

5430 LBJ Freeway, Suite 1700

Dallas, TX 75240-2697

(972) 233-1700