10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

X   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934 (FEE REQUIRED) - FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994

                          COMMISSION FILE NUMBER 1-5467


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

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

5430 LBJ FREEWAY, SUITE 1700, DALLAS, TEXAS                     75240-2697    
 (Address of principal executive offices)                       (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:           (214) 233-1700  

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                                   NAME OF EACH EXCHANGE ON
        TITLE OF EACH CLASS                            WHICH REGISTERED    

            Common stock                            New York Stock Exchange
     ($.01 par value per share)                     Pacific Stock Exchange

  9.25% Liquid Yield Option Notes,                  New York Stock Exchange
        due October 20, 2007

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

             None.

INDICATE BY CHECK MARK 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.    X


INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST 90 DAYS.  YES  X   NO    

AS OF FEBRUARY 28, 1995, 113,826,014 SHARES OF COMMON STOCK WERE OUTSTANDING. 
THE AGGREGATE MARKET VALUE OF THE 10.3 MILLION SHARES OF VOTING STOCK HELD BY
NONAFFILIATES OF VALHI, INC. AS OF SUCH DATE APPROXIMATED $82 MILLION.

                       DOCUMENTS INCORPORATED BY REFERENCE

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.
                              (INSIDE FRONT COVER)


    (A chart showing (i) Valhi's 53% ownership of NL Industries, Inc., (ii)
Valhi's 100% ownership of Valcor, Inc. and The Amalgamated Sugar Company and

(iii) Valcor's 100% ownership of Medite Corporation, National Cabinet Lock, Inc.
and Sybra, Inc.)

                                     PART I

ITEM 1.   BUSINESS

    Valhi, Inc. (NYSE: VHI), based in Dallas, Texas, is engaged in the
chemicals, refined sugar, building products, hardware products and fast food
industries.  Information regarding the Company's business segments and the
operating subsidiaries conducting such businesses is set forth below.  Business
and geographic segment financial information is included in Note 2 to the
Company's Consolidated Financial Statements, which information is incorporated
herein by reference.


          Chemicals                       NL is the world's fourth-largest
            NL Industries, Inc.           producer of titanium dioxide
             (53%-owned)                  pigments ("TiO2"), used for
                                          imparting whiteness, brightness
                                          and opacity to a wide range of
                                          products including paints,
                                          plastics, paper, fibers and other
                                          "quality-of-life" products.  With
                                          annual TiO2 production capacity
                                          of 380,000 metric tons, NL has an
                                          11% share of the worldwide market
                                          (18% in Europe).  NL is also the
                                          world's largest producer of
                                          rheological additives for
                                          solvent-based systems, supplying
                                          an estimated 40% of the worldwide
                                          market.  NL has production
                                          facilities throughout Europe and
                                          North America.

          Refined Sugar                   Amalgamated is the second-largest
            The Amalgamated Sugar         U.S. refiner and processor of
             Company (100%-owned)         sugarbeets with annual production
                                          of approximately 11/2 billion
                                          pounds of sugar.  Sales from
                                          Amalgamated's factories in Idaho
                                          and Oregon are principally to
                                          industrial sugar users.

          Building Products               Medite is the world's second
            Medite Corporation            largest producer of medium
             (100%-owned)                 density fiberboard ("MDF"), a
                                          wood fiber-based engineered
                                          building board product serving as
                                          a cost-effective alternative to
                                          certain traditional timber
                                          products.  With MDF plants in the
                                          United States and Ireland, Medite
                                          has an estimated 13% market share
                                          in North America, a 5% share in
                                          Europe and offers a wide range of
                                          specialty MDF products.  Medite
                                          also conducts traditional timber
                                          products operations in Oregon
                                          where it owns 168,000 acres of
                                          timberland.


          Hardware Products               National Cabinet Lock is a
            National Cabinet Lock,        leading North American

             Inc. (100%-owned)            manufacturer of low and medium
                                          security locks, computer keyboard
                                          support arms and precision ball
                                          bearing drawer slides for
                                          furniture and other markets.
          
          Fast Food                       Sybra is the second-largest
            Sybra, Inc.                   franchisee of Arby's restaurants
             (100%-owned)                 with approximately 160 stores
                                          clustered principally in Texas,
                                          Michigan, Pennsylvania and
                                          Florida.


    Valhi, a Delaware corporation, is the successor of the 1987 merger of The
Amalgamated Sugar Company and LLC Corporation.  Contran Corporation holds,
directly or through subsidiaries, approximately 90% of Valhi's outstanding
common stock.  Substantially all of Contran's outstanding voting stock is held
by trusts established for the benefit of the children and grandchildren of
Harold C. Simmons, of which Mr. Simmons is the sole trustee.  Mr. Simmons is
Chairman of the Board and Chief Executive Officer of Contran, Valhi and Valcor
and Chairman of the Board of NL and may be deemed to control each of such
companies.

      During 1994, Valhi purchased additional NL common shares in market
transactions and thereby increased its direct ownership of NL from 49% to more
than 50% in mid-December 1994.  Accordingly, the Company ceased to report its
interest in NL by the equity method and commenced reporting NL as a consolidated
subsidiary.  The Company consolidated NL's financial position at December 31,
1994 and will consolidate NL's results of operations and cash flows beginning in
1995.  See Note 3 to the Consolidated Financial Statements.

    In December 1994, Valhi's Board of Directors declared a special dividend on
its common stock of all of its 48% ownership interest in Tremont Corporation
(3.5 million shares).  Valhi stockholders received approximately .03 (three one-
hundreds) of a share of Tremont for each share of Valhi common stock held as of
the record date in a taxable transaction.  The Distribution of Tremont common
stock was accounted for as a spin-off (recorded at book value, net of tax), and
the Company's equity in losses of Tremont's titanium metals operations are
reported as discontinued operations for all periods presented.  Tremont also
holds 18% of NL's outstanding common stock.  See Note 3 to the Consolidated
Financial Statements.

    In March 1995, Medite filed a Registration Statement with the Securities
and Exchange Commission for a proposed public offering of approximately $100
million of its common stock, which Registration Statement has not yet become
effective.  If such offering is completed, the Company's ownership of Medite
would be reduced by approximately one-third.  There can be no assurance that the
proposed Medite stock offering will be consummated.  See Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

    The Company has tentatively agreed to sell Amalgamated's sugar business,
for $325 million cash, to an agricultural cooperative comprised of sugarbeet
growers in Amalgamated's area of operations.  The proposed transaction is
subject to significant conditions, including financing, grower commitments and
execution of a definitive purchase agreement, and no assurance can be given that
any such transaction will be consummated.

CHEMICALS - NL INDUSTRIES, INC.:

    NL Industries (NYSE: NL) is an international producer and marketer of TiO2
and specialty chemicals to customers in over 100 countries from facilities
located throughout Europe and North America.  Kronos, Inc., the largest of NL's
two principal operating subsidiaries, is the world's fourth-largest TiO2
producer, with an estimated 11% share of the worldwide market.  Approximately
one-half of Kronos' 1994 sales volume was in Europe, where Kronos is the second-
largest producer of TiO2.  Specialty chemicals, primarily rheological additives,
are produced through NL's Rheox, Inc. subsidiary.  In 1994, Kronos accounted for
87% of NL's sales and Rheox accounted for 13%.

    NL's objectives are to (i) focus on continued cost control, (ii) deleverage
during the current upturn cycle and (iii) invest in certain cost effective
debottlenecking projects to increase TiO2 production capacity.

    TiO2 products and operations.  Titanium dioxide pigments are chemical
products used for imparting whiteness, brightness and opacity to a wide range of
products, including paints, paper, plastics, fibers and ceramics.  TiO2 is
considered to be a "quality-of-life" product with demand affected by the gross
domestic product in various regions of the world.

    Demand, supply and pricing of TiO2 have historically been cyclical.  The
last cyclical peak for TiO2 prices occurred in early 1990, with a cyclical low
in the third quarter of 1993.  Kronos' average TiO2 selling prices began an
upward trend during 1994, and prices at the end of 1994 were about 10% higher
than the 1993 low point but were still approximately 26% below those of the 1990
peak.

    The Company believes the TiO2 industry has significant potential for future
earnings improvment from supply/demand-driven product price changes.  During the
early 1990's, the TiO2 industry operated at lower capacity utilization levels
relative to the high utilization levels prevalent during the late 1980's, in
part because of the slow recovery from the worldwide recession but primarily due
to the impact of capacity additions since the late 1980's.  NL expects that the
TiO2 industry will recover more slowly compared with the previous recovery in
the late 1980s, primarily because of the more gradual nature of recent growth of
the worldwide economy and the impact of capacity additions since the late 1980s.
Recent improvements in the economic growth rates have resulted in increased
demand for TiO2.  Industry capacity utilization, which NL believes was below 90%
during 1990 through 1993, was about 92% in 1994 and is continuing to rise due to
improved demand.

    Kronos has an estimated 18% share of European TiO2 sales and an estimated
9% share of the U.S. market.  Consumption per capita in the United States and
Western Europe far exceeds that in other areas of the world and these regions
are expected to continue to be the largest geographic markets for TiO2
consumption.  If the economies in Eastern Europe, the Far East and China
continue to develop, a significant market for TiO2 could emerge in those
countries and Kronos believes it is well positioned to participate in growth in
Eastern European market.

    NL believes that there are no effective substitutes for TiO2.  However,
extenders such as kaolin clays, calcium carbonate and polymeric opacifiers are
used in a number of Kronos' markets.  Generally, extenders are used to reduce to
some extent the utilization of higher cost TiO2.  The use of extenders has not
significantly affected TiO2 consumption over the past decade because extenders
generally have, to date, failed to match the performance characteristics of
TiO2.  NL believes that the use of extenders will not materially alter the
growth of the TiO2 business in the foreseeable future.

    NL currently produces over 40 different TiO2 grades, sold under the Kronos
and Titanox trademarks, which provide a variety of performance properties to
meet customers' specific requirements.  Major TiO2 customers include
international paint, paper and plastics manufacturers.  Kronos and its
distributors and agents sell and provide technical services for its products to
over 5,000 customers with the majority of sales in Europe, the United States and
Canada.

    Kronos and its predecessors have produced and marketed TiO2 in North
America and Europe for over 70 years.  As a result, Kronos believes that it has
developed considerable expertise and efficiency in the manufacture, sale,
shipment and service of its products in domestic and international markets.  By
volume, about one-half of Kronos' 1994 TiO2 sales were to Europe, with 36% to
North America and the balance to export markets.  Kronos' international

operations are conducted through Kronos International, Inc. ("KII"), a German-
based holding company formed in 1989 to manage and coordinate NL's manufacturing
operations in Europe and Canada and its sales and marketing activities in over
100 countries.  NL believes the KII structure allows it to capitalize on
expertise and technology developed in Germany over a 60-year period.

    Kronos is also engaged in 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 (derived from co-products of
the pigment production processes). Water treatment chemicals are used as
treatment and conditioning agents for industrial effluents and municipal
wastewater and in the manufacture of iron pigments.

    TiO2 manufacturing process, properties and raw materials.  TiO2 is
manufactured by Kronos using either the chloride or sulfate pigment production
processes.  Although most end-use applications can use pigments produced by
either process, chloride process pigments are generally preferred in certain
segments of the coatings and plastics applications, and sulfate process pigments
are generally preferred for paper, fibers and ceramics applications. 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 in the past few years.  About two-thirds of Kronos'
current production capacity is based on an efficient chloride process
technology.

    Kronos currently has four TiO2 facilities in Europe  (Leverkusen and
Nordenham, Germany; Langerbrugge, Belgium; and Fredrikstad, Norway).  In North
America, Kronos has a facility in Varennes, Quebec and, through a manufacturing
joint venture discussed below, a one-half interest in a plant in Lake Charles,
Louisiana which commenced production in 1992.  Kronos' principal German
operating subsidiary leases the land under its Leverkusen production facility
pursuant to a lease expiring in 2050.  The Leverkusen plant, with approximately
one-third of Kronos' current TiO2 production capacity, is located within the
lessor's extensive manufacturing complex, and Kronos is the only unrelated party
so situated.  Under a separate supplies and services agreement, which expired in
1991 and to which an extension through 2011 has been agreed to in principle, the
lessor provides some raw materials, auxiliary and operating materials and
utilities services necessary to operate the Leverkusen plant.  Kronos and the
lessor are continuing discussions regarding a definitive agreement for the
extension of the supplies and services agreement.  Both the lease and supplies
and services agreement restrict NL's ability to transfer ownership or use of the
Leverkusen plant.  Kronos also has a governmental concession with an unlimited
term to operate its ilmenite mine in Norway.

    Kronos produced 357,000 metric tons of TiO2 in 1994, compared to 352,000
metric tons in 1993 and 358,000 metric tons in 1992.  Kronos believes its annual
attainable production capacity is approximately 380,000 metric tons, including
its one-half interest in the Louisiana plant.  Kronos plans to spend
approximately $25 million in capital expenditures over the next three years for
a debottlenecking project at its Leverkusen, Germany facility that is expected
to increase Kronos' worldwide attainable production capacity by 20,000 metric
tons to about 400,000 tons in 1997.

    The primary raw materials used in the TiO2 chloride production process are
chlorine, coke and titanium-containing feedstock derived from beach sand
ilmenite and rutile.  Chlorine and coke are available from a number of
suppliers.  Titanium-containing feedstock suitable for use in the chloride
process is available from a limited number of suppliers around the world,
principally in Australia, Africa, India and the United States.  Kronos purchases
slag refined from beach sand ilmenite from Richards Bay Iron and Titanium
(Proprietary) Ltd. (South Africa), approximately 50% of which is owned by Q.I.T.
Fer et Titane Inc. ("QIT"), an indirect subsidiary of RTZ Corp.  Natural rutile
ore is purchased from suppliers in Australia and Africa.

    The primary raw materials used in the TiO2 sulfate production process are
sulfuric acid and titanium-containing feedstock derived primarily from rock and
beach sand ilmenite.  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 around the world.  Currently, the
principal active sources are located in Norway, Canada, Australia, India and
South Africa.  As one of the few vertically-integrated producers of sulfate
process pigments, Kronos operates a rock ilmenite mine near Hauge i Dalane,
Norway, which provided all of Kronos' feedstock for its European sulfate process
pigment plants in 1994.  Kronos' mine is also a major commercial source of rock
ilmenite for other sulfate process producers in Europe, and NL believes the mine
supplies nearly 40% of Western European demand, including NL, for sulfate
feedstock.  Kronos also purchases sulfate grade ilmenite slag under contracts
negotiated annually with QIT and Tinfos Titanium and Iron K/S.

    Kronos believes the availability of titanium-containing feedstock for both
the chloride and sulfate processes is adequate in the near-term; however
tightening supplies for the chlorine process may be encountered in the late
1990's.  Kronos does not anticipate experiencing any interruptions of its raw
material supplies.

    TiO2 manufacturing joint venture.  In October 1993, Kronos formed a
manufacturing joint venture with Tioxide Group, Ltd., a wholly-owned subsidiary
of Imperial Chemicals Industries PLC.  The joint venture, which is equally owned
by subsidiaries of Kronos and Tioxide, owns and operates the Louisiana chloride
process TiO2 plant formerly owned by Kronos.  Production from the plant is
shared equally by Kronos and Tioxide pursuant to separate offtake agreements.

    A supervisory committee, composed of four members, two of whom are
appointed by each partner, directs the business and affairs of the joint
venture, including production and output decisions.  Two general managers, one
appointed and compensated by each partner, manage the day-to-day operations of
the joint venture acting under the direction of the supervisory committee.

    The manufacturing joint venture is intended to be operated on a break-even
basis, and accordingly Kronos' transfer price for its share of the TiO2 produced
is equal to its share of the joint venture's production costs and interest
expense.  Kronos' share of the production costs are reported as part of its cost
of sales as the related TiO2 acquired from the joint venture is sold, and
Kronos' share of the joint venture's interest expense is reported as a component
of its interest expense.

    Specialty chemicals products and operations.  Rheological additives
produced by Rheox control the flow and levelling characteristics of a variety of
products, including paints, inks, lubricants, sealants, adhesives and cosmetics.
Organoclay rheological additives are clays which have been chemically reacted
with organic chemicals and compounds.  Rheox produces rheological additives for
both solvent-based and water-based systems.  Rheox believes that it is the
world's largest producer of rheological additives for solvent-based systems,
supplying approximately 40% of the worldwide market, and is also a supplier for
rheological additives used in water-based systems.  Rheological additives for
solvent-based systems accounted for 84% of Rheox's sales in 1994, with the
remainder principally rheological additives for water-based systems.  Rheox has
introduced a number of new products during the past three years, many of which
are for water-based systems, which currently represent a larger portion of the
market than solvent-based systems.  As a result, the portion of Rheox's sales
representing additives for water-based systems has increased from 10% to 16%
during the past few years.  Rheox believes water-based additives will account
for an increasing portion of the market in the long term.  Rheox is also focused
on product development for environmental applications with new products
introduced for non-volatile additives in both water and solvent-based coatings. 
Rheox's plants are in Charleston, West Virginia, Newberry Springs, California,
St. Louis, Missouri, Livingston, Scotland and Nordenham, Germany.

    The primary raw materials for rheological additives are bentonite clays,
hectorite clays, quaternary amines, polyethylene waxes and castor oil
derivatives.  Bentonite clays are currently purchased under a three-year
contract, renewable through 2004, with a subsidiary of Dresser Industries, Inc.,

which has significant bentonite reserves in Wyoming.  This contract assures
Rheox the right to purchase its anticipated requirements of bentonite clays for
the foreseeable future, and Dresser's reserves are believed to be sufficient for
such purpose.  Hectorite clays are mined from company-owned reserves in Newberry
Springs, California, which NL believes are adequate to supply its needs for the
foreseeable future.  The Newberry Springs ore body contains the largest known
commercial deposit of hectorite clays in the world.  Quaternary amines are
purchased primarily from a joint venture company 50%-owned by Rheox and are also
generally available on the open market from a number of suppliers.  Castor oil-
based rheological additives are purchased from sources in the United States and
abroad.  Rheox has a supply contract with a manufacturer of these products,
which may not be terminated without 180 days notice by either party.

    Competition.  The TiO2 industry is highly competitive.  During the late
1980's worldwide demand approximated available supply and the major producers,
including Kronos, were operating at or near available capacity and customers
were generally served on an allocation basis.  During the early 1990's, supply
exceeded demand, primarily due to new chloride process capacity coming
on-stream.  Relative supply/demand relationships, which favorably impacted
industry-wide prices during the late 1980's, had a negative impact on prices
during the recent downward cycle.  During 1994, growth in demand resulting from
improved economic conditions, coupled with limited capacity increases, improved
industry capacity utilization to about 92% and resulted in increases in
worldwide TiO2 prices.  During the last upturn cycle, which ended in early 1990,
peak average TiO2 prices were about 70% higher than the previous trough.

    Worldwide capacity additions in the TiO2 market are slow to develop because
of the significant capital expenditures and substantial lead time (typically
three to five years in NL's experience) for, among other things, planning,
obtaining environmental approvals and construction.

    Kronos competes primarily on the basis of price, product quality and
technical service, and the availability of high performance pigment grades. 
Although certain TiO2 grades are considered specialty pigments, the majority of
grades and substantially all of Kronos' production are considered commodity
pigments with price generally being a most significant competitive factor. 
Kronos has an estimated worldwide TiO2 market share of 11%, and believes that it
is the leading marketer of TiO2 in a number of countries, including Germany and
Canada.  Kronos' principal competitors are E.I. du Pont de Nemours & Co.;
Tioxide; Hanson PLC (SCM Chemicals); Kemira Oy; Ishihara Sangyo Kaisha, Ltd;
Bayer AG; Thann et Mulhouse and Kerr-McGee Corporation.  These eight competitors
have estimated individual worldwide market shares ranging from 4% to 21%, and an
aggregate estimated 74% share.  Du Pont has over one-half of total U.S. TiO2
production capacity and is Kronos' principal North American competitor.

    Kronos has completed a major environmental protection and improvement
program commenced in the early 1980's to replace or modify its TiO2 production
facilities for compliance with various environmental laws by the respective
effective dates.  All of Kronos' TiO2 facilities now use either the low-waste
yielding chloride process, or the sulfate process with reprocessing or
neutralization of waste acid.  Although these upgrades increased operating
costs, they are expected to reduce future capital expenditures that Kronos would
otherwise need to incur as environmental standards are increased.  See "--
Regulatory and environmental matters."

    Competition in the specialty chemicals industry is generally concentrated
in the areas of product uniqueness, quality and availability, technical service,
knowledge of end-use applications and price.  Rheox's principal competitors for
rheological additives for solvent-based systems are LaPorte PLC and Sud-Chemie
AG.  Principal competitors for water-based systems are Rohm and Haas Company,
Hercules Incorporated, The Dow Chemical Company and Union Carbide Corporation.

    Research and development.  NL's annual expenditures for research and
development and technical support programs have averaged approximately $10
million during the past three years, with Kronos accounting for about three-
fourths of the annual totals.  TiO2 research and development activities are
conducted principally at KII's Leverkusen, Germany facility.  Such activities
are directed primarily towards improving both the chloride and sulfate
production processes, improving product quality and strengthening Kronos'
competitive position by developing new pigment applications.  Activities
relating to rheological additives are conducted primarily in the U.S. and are
directed towards the development of new products for water-based systems,
environmental applications and new end-use applications for existing product
lines.

    Patents and trademarks.  Patents held for products and production processes
are believed to be important to NL and contribute to the continuing business
activities of Kronos and Rheox.  NL continually seeks patent protection for its
technical developments, principally in the United States, Canada and Europe, and
from time to time enters into licensing arrangements with third parties.  In
connection with the formation of the manufacturing joint venture with Tioxide,
Kronos and certain of its subsidiaries exchanged proprietary chloride process
and product technologies with Tioxide and certain of its affiliates.  Use by
each recipient of the other's technology in Europe is restricted until October
1996.  NL's major trademarks, including Kronos, Titanox and Rheox, are protected
by registration in the United States and elsewhere with respect to those
products it manufactures and sells.

    Customer base and seasonality.  NL believes that neither its aggregate
sales nor those of any of its principal product groups are concentrated in or
materially dependent upon any single customer or small group of customers. 
Neither NL's business as a whole nor that of any of its principal product groups
is seasonal to any significant extent.  Due in part to the increase in paint
production in the spring to meet spring and summer painting season demand, TiO2
sales are generally higher in the second and third calendar quarters than in the
first and fourth calendar quarters.  Sales of rheological additives are
influenced by the worldwide industrial protective coatings industry, where
second calendar quarter sales are generally the strongest. 

    Employees.  As of December 31, 1994, NL employed approximately 3,100
persons (excluding the joint venture employees), with 400 employees in the
United States and 2,700 at non-U.S. sites.  Hourly employees in production
facilities worldwide are represented by a variety of labor unions, with labor
agreements having various expiration dates.  NL believes its labor relations are
satisfactory.

    Regulatory and environmental matters.  Certain of NL's 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.  As with other companies engaged in similar businesses,
certain past and current operations and products of NL have the potential to
cause environmental or other damage.  NL has implemented and continues to
implement various policies and programs in an effort to minimize these risks. 
NL's policy is to achieve compliance with applicable environmental laws and
regulations at all of its facilities and to strive to improve its environmental
performance.  It is possible that future developments, such as stricter
requirements of environmental laws and enforcement policies thereunder, could
affect NL's production, handling, use, storage, transportation, sale or disposal
of such substances.

    NL's U.S. manufacturing operations are governed by federal environmental
and worker health and safety laws and regulations, principally the Resource
Conservation and Recovery Act, 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, as amended by the Superfund Amendments and Reauthorization Act
("CERCLA"), as well as the state counterparts of these statutes.  NL believes
that all of its U.S. plants and the Louisiana plant owned and operated by the
joint venture are in substantial compliance with applicable requirements of
these laws.  From time to time, NL facilities may be subject to environmental
regulatory enforcement under such statutes.  Resolution of such matters
typically involves the establishment of compliance programs.  Occasionally,
resolution may result in the payment of penalties, but to date such penalties
have not involved amounts having a material adverse effect on NL's consolidated
financial position, results of operations or liquidity.

    NL's European and Canadian production facilities operate in an
environmental regulatory framework in which governmental authorities typically
are granted broad discretionary powers which allow them to issue operating
permits required for the plants to operate.  NL believes all of its European and
Canadian plants are in substantial compliance with applicable environmental
laws.

    While the laws regulating operations of industrial facilities in Europe
vary from country to country, a common regulatory denominator is provided by the
European Union ("EU"). Germany, Belgium and the United Kingdom, members of the
EU, follow the initiatives of the EU; Norway, although not a member, generally
patterns its environmental regulatory actions after the EU.  Kronos believes it
is in substantial compliance with agreements reached with European environmental
authorities and with an EU directive to control the effluents produced by TiO2
production facilities.  Rheox believes it is in substantial compliance with
environmental regulations in Germany and the United Kingdom.

    In order to reduce sulfur dioxide emissions into the atmosphere, Kronos is
currently installing off-gas desulfurization systems at its German and Norwegian
plants at an estimated cost of approximately $32 million and expects to complete
the systems in 1996.  The Louisiana manufacturing joint venture installed a $17
million off-gas desulfurization system which commenced operations in early 1995
and Kronos intends to install a $10 million system in Belgium by 1998.  In
addition, Kronos completed in February 1994 an onshore disposal system to
replace offshore disposal of tailings from its ilmenite mine near Hauge i
Dalane, Norway and expects to complete an $11 million wastewater treatment
chemical purification project at its Leverkusen, Germany facility in 1996.

    The Quebec provincial government has environmental regulatory authority
over Kronos' Canadian TiO2 production facilities, which currently consist of
plants utilizing both the chloride and sulfate process technologies. The
provincial government regulates discharges into the St. Lawrence River.  In May
1992, the Quebec provincial government extended Kronos' right to discharge
effluents from its sulfate process TiO2 plant into the St. Lawrence River until
June 1994.  Kronos completed a new $25 million waste acid neutralization
facility and discontinued discharging effluents into the St. Lawrence River in
June 1994.  Notwithstanding the above-described agreement, in March 1993 Kronos'
Canadian subsidiary and two of its directors were charged by the Canadian
federal government with five violations of the Canadian Fisheries Act relating
to discharges into the St. Lawrence River from the Varennes sulfate TiO2
production facility.  The penalty for these violations, if proven, could be up
to Canadian $15 million.  Additional charges, if brought, could involve
additional penalties.  NL has moved to dismiss the case, and believes that this
charge is inconsistent with the extension granted by provincial authorities
referred to above.

    NL's future capital expenditures related to its ongoing environmental
protection and improvement programs, including those described above, are
currently expected to approximate $57 million, including $33 million in 1995.

    NL has been named as a defendant, potentially responsible party ("PRP") or
both, pursuant to CERCLA and similar state laws in approximately 80 governmental
enforcement and private actions associated with waste disposal sites and
facilities currently or previously owned, operated or used by NL, many of which
are on the U.S. Environmental Protection Agency's Superfund National Priority
List or similar state lists.  See Item 3 - "Legal Proceedings."

REFINED SUGAR - THE AMALGAMATED SUGAR COMPANY:

    Amalgamated is the second-largest U.S. beet sugar producer with
approximately 10% of United States annual sugar production.  Amalgamated's
primary strategic focus is to improve its efficiency in extracting and refining

sugar in order to increase sugar production, reduce unit production costs and
maintain market share.  Amalgamated's recent capital investments, and those
planned for the next several years, have emphasized extraction and other
productivity improvement projects.

    Products and operations.  Refined sugar accounts for approximately 90% of
Amalgamated's annual sales.  Animal feed in the forms of beet pulp and molasses,
by-products of sugarbeet processing, accounts for most of its remaining sales. 
Each spring, Amalgamated contracts with approximately 1,600 individual farmers
to plant a specified number of acres of sugarbeets and to deliver the sugarbeets
to Amalgamated upon harvest in the fall.  Amalgamated's sugarbeet processing,
which consists of extracting sugar from the sugarbeets and refining the sugar,
begins upon harvest and usually lasts until February.  Approximately one-fourth
of the sugarbeet crop is initially processed into a thick syrup, which is stored
in Amalgamated's facilities and subsequently processed into refined sugar. 
Refined sugar is sold throughout the year while by-products are sold primarily
in the first and fourth calendar quarters.  Amalgamated's profitability is
determined primarily by the quantity and quality of the sugarbeets processed,
its efficiency in extracting and refining sugar, and the sales price of refined
sugar.

    Amalgamated's four factories operate at approximately full capacity during
the annual sugarbeet processing campaigns, and annual sugar production has
generally averaged 1.5 billion to 1.6 billion pounds over the past few years. 
Due principally to an abnormally high yield per acre resulting from extremely
favorable weather conditions during the 1994 growing season, sugar production
from the crop harvested in the fall of 1994 is currently projected to be between
1.7 billion and 1.8 billion pounds.  Production from the 1995 crop will likely
be more in line with prior crop levels.

    The price paid to growers for sugarbeets is a function of Amalgamated's
average sales price for refined sugar during the contract settlement year, which
runs from October through September, and of the sugar content of the sugarbeets.
This variable cost feature serves as a partial hedge of selling price changes. 
The cost of transporting sugarbeets to Amalgamated's factories generally limits
the geographic area from which sugarbeets are purchased.  The anticipated price
of sugar and the price of competing crops influence the number of acres of
sugarbeets planted.  The available sugarbeet acreage in Amalgamated's geographic
area of operations exceeds Amalgamated's processing capacity.

    Amalgamated sells sugar primarily in the North Central and Intermountain
Northwest regions of the United States.  Approximately 80% of sugar sales are to
industrial sugar users and approximately 20% are to wholesalers or retailers in
consumer-sized packages.  As is customary in the sugar industry, Amalgamated
sells sugar to its customers under contract for future delivery, generally
within one to six months.  Amalgamated does not otherwise engage in the purchase
or sale of sugar futures contracts.

    Beet pulp and molasses, by-products of the sugar extraction process,
constitute approximately 10% of Amalgamated's sales and are sold primarily to
animal feeders in the U.S. Intermountain Northwest region and Japan.  The
quantity of by-products available for sale is determined principally by the size
of the sugarbeet crop.  By-product sales prices are influenced by the prices of
competing animal feeds and have no direct relation to refined sugar prices.

    Competitors and competition.  Sugar production in the United States has
increased in recent years, and the U.S. sugar industry currently produces over
85% of the country's sugar needs from domestically-grown sugarbeets and
sugarcane.  The remainder of the country's sugar supply is imported, principally
as raw sugar that is processed into refined sugar by coastal refiners.  There is
no difference between domestically-produced sugar, either from sugarbeets or
sugarcane, and that produced from imported raw sugar.  Amalgamated competes with
virtually all processors of either domestically-grown sugar crops or imported
raw sugar.  Major competitors in Amalgamated's geographic sales area include the
American Crystal, C&H, Domino, Imperial Holly, Savannah Foods and Western Sugar
companies.  Because refined sugar is a commodity product, Amalgamated has little
ability to independently establish selling prices.

    Total and per capita domestic sugar consumption has been increasing
slightly during the past ten years after declining during the early 1980's as a
result of increased consumption of high fructose corn syrup and non-caloric
sweeteners such as aspartame.  According to published sources, the percentage of
total United States caloric sweetener use attributable to refined sugar has
averaged around 43% to 45% during the last five years.  Per capita consumption
of refined sugar in 1994 is estimated at 64.6 pounds, as compared to actual
consumption of 64.5 pounds in 1990, 63.4 pounds in 1985 and 83.6 pounds in 1980.

    Amalgamated does not believe it is dependent upon one or a few customers;
however, major food processors are substantial customers and represent an
important portion of sales.  Amalgamated's ten largest customers accounted for
slightly more than one-third of its sales in each of the past three years, with
the largest customer accounting for 4% to 7% of sales in each year.

    Governmental sugar price support program.  The Food, Agriculture,
Conservation and Trade Act of 1990 (the "1990 Farm Bill"), as amended by the
Omnibus Budget Reconciliation Act of 1993, continues, through the 1997 crop year
ending in September 1998, the sugar price support program for domestically-grown
sugarcane and sugarbeets established by the Agriculture and Food Act of 1981. 
Amalgamated understands that the sugar industry believes sugar will be included
as a part of any new 1995 Farm Bill expected to be considered by Congress.

    Under the sugar price support loan program, Amalgamated is able to obtain,
from the federal government, nonrecourse loans on its refined sugar inventories
at loan rates based upon a raw sugar support price of no less than 18 cents per
pound.  The effective net government loan rate applicable to Amalgamated's 1994
crop sugar is 20.69 cents per pound.  The 1990 Farm Bill implemented marketing
assessments on domestically-produced beet and cane sugars.  The marketing
assessment cost is shared by the processors and the growers, and results in a
net cost to Amalgamated of about 0.08 cents per pound, or approximately $1.5
million per year.

    The sugar price support loan program is to be operated at no cost to the
federal government, which requires the government to take actions to maintain
sugar market prices above the price support loan levels in order to prevent
defaults on the nonrecourse loans extended under the program.  Currently, the
government restricts sugar supply to help maintain domestic market prices both
by imposing quotas and duties on imported sugar and limiting quantities which
domestic producers can sell in the U.S. market.

    The 1990 Farm Bill guarantees a minimum annual import quota of 1.25 million
short tons (1.1 million metric tons) of raw sugar and the United States
Department of Agriculture can impose marketing allotments on domestic sugarcane
and sugarbeet processors to limit the amount of raw and refined sugar which each
domestic processor may market.  Marketing allotments were imposed during the
1992 crop year (for the first time in over 20 years) while the 1993 crop was
free of allotments.  Marketing allotments have been imposed on the current 1994
crop year, which runs through September 30, 1995.  Amalgamated's current
allotment is approximately 16 million hundredweight ("cwt"), or about 1.5
million cwt less than estimated sugar production from the crop.  Amalgamated
expects to sell a portion of its excess sugar into foreign markets, which are
not covered by the allotments, however "carryover" sugar quantities into the
next crop year are expected to be well above normal carryover levels.  See also
Item 7 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

    Research and development.  Amalgamated maintains research and development
programs emphasizing processing technology and its annual research and
development expense has been around $500,000 to $600,000 during the past three
years.  Amalgamated has developed various proprietary technologies related to
sugar processing and employs these process improvements to reduce its operating
costs.  Some of these techniques apply to fructose and cane refinery operations

as well as sugarbeet operations.  Amalgamated presently holds patents on certain
of its proprietary technology.  The loss of any of such patents would not have a
material adverse effect on Amalgamated.

    Employees.  Amalgamated employs approximately 2,700 persons at the height
of the production season, of which approximately 1,400 are year-round employees.
Amalgamated's three-year labor agreement with the American Federation of Grain
Millers, which represents production employees through local unions, expires
July 1996.  Amalgamated believes its labor relations are satisfactory.

    Energy.  Amalgamated's primary fuel is coal, but it can utilize other
fuels.  The supply of coal is provided under a long-term contract expiring
February 1998, subject to extension at Amalgamated's option for three five-year
periods.  Energy is an important element in the processing of sugarbeets, and
the use of coal has historically resulted in lower production costs than if oil,
natural gas or electricity were Amalgamated's primary energy source.

    Properties.  Amalgamated owns four sugar processing factories, located in
Paul, Twin Falls and Nampa, Idaho and Nyssa, Oregon, and also owns its general
office facilities in Ogden, Utah, three distribution terminals in three states,
and six storage facilities in two states.  The Nampa factory, with a daily slice
rate approaching 12,000 tons per day, is the largest such facility in the United
States.  Amalgamated believes the capacity of each of its four factories exceed
the U.S. average.

    Regulatory and environmental matters.  Amalgamated's operations are
governed by federal, state and local laws and regulations relating to production
procedures, operating environment, emissions and waste disposal, air and water
quality and worker and product safety and protection.  Amalgamated believes that
it is currently in substantial compliance with existing permits and regulations
relating to its facilities; however, federal and state environmental compliance
requirements are becoming more stringent in certain respects and are expected to
result in expenditures in excess of the relatively nominal amounts spent in
recent years.  Amalgamated's capital budget for 1995 includes over $1 million in
the area of environmental protection and improvement, principally related to air
and water treatment facilities at certain of its factories.

BUILDING PRODUCTS - MEDITE CORPORATION:

    Medite's principal business is the international production and sale of
medium density fiberboard.  MDF is a fiber-based engineered building board
product manufactured primarily from pre-commercial forest thinnings and forest
product industry residuals (wood chips, shavings and sawdust) which are bonded
together with resins to form a machineable, composite panel.  Relative to
traditional timber products, MDF has cost-in-use advantages which promote the
use of MDF in an increasing variety of applications, including furniture,
cabinetry, shop fittings, moulding, millwork and joinery.  According to industry
sources, furniture currently accounts for approximately 85% of MDF use in Europe
and 55% in the United States.

    Medite sells MDF primarily in North America (48% of 1994 MDF sales) and
Europe (43%) and believes that Medite is the world's most recognized MDF
trademark.  In addition to standard Medite, the Company offers a wide range of
specialty MDF products which are typically sold for higher prices and result in
higher operating margins than standard MDF products.

    Medite's MDF production facilities are located in the Republic of Ireland,
Oregon and New Mexico.  The Company expects a capacity addition completed in
late 1994 at Medite's Irish plant will increase its annual MDF production
capacity by 15% (to 580,000 cubic meters) in 1995 and ultimately increase it by
25% (to 635,000 M3) by 1998.  With the recently completed capacity addition in
Ireland, Medite is the world's second largest MDF producer, in terms of rated
capacity.

    The Company believes MDF is among the world's fastest growing building
board products with increased demand during recent years driven primarily by

increasing product substitution principally resulting from (i) MDF product
characteristics that have expanded the range of MDF applications, (ii) certain
cost advantages relative to traditional timber products, (iii) the development
of specialty MDF products satisfying specialized customer requirements and (iv)
increased environmental awareness.

    Medite's strategy consists of the following components: (i) continue to
focus on MDF; (ii) strive to remain at the forefront of developing higher margin
specialty MDF products; (iii) continue to focus on developing new commercial
uses for MDF, including applications in cabinetry, joinery, millwork and
mouldings; (iv) continue to seek to expand its MDF operations through
acquisitions, strategic joint ventures and capacity additions; and (v) manage
its fee timber resources on a longer-term sustainable basis and seek to maximize
the operating contribution of its harvested timber.

    In addition to its MDF operations, Medite owns 168,000 acres of timberland
in Southern Oregon containing approximately 660 million board feet ("MMBF") of
generally second growth merchantable timber and produces and sells traditional
timber products including logs, lumber, veneer and wood chips.  Medite actively
manages its fee timberlands, which have become an increasingly valuable resource
as the volume of timber offered for sale in the Pacific Northwest by U.S.
government agencies has declined substantially in recent years.

    In March 1995, Medite filed a Registration Statement with the Securities
and Exchange Commission for a proposed public offering of approximately $100
million of its common stock, which Registration Statement has not yet become
effective.  If such offering is completed, the Company's ownership of Medite
would be reduced by approximately one-third.  See Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

    MDF products.  Medite's standard MDF product, Medite, was first introduced
in 1975 and is produced exclusively for interior applications such as furniture,
shelving, door frames, cabinet doors and interior paneling.  In 1994, standard
Medite accounted for approximately 72% of Medite's total MDF sales dollars with
specialty products, described below, accounting for 28%.

    Medex, designed for exterior applications, is used in facade application on
storefronts, decorative shop fronts in many areas in Europe, counter tops, doors
and window sills.  Medite believes that it is currently the leading exterior
grade MDF producer in the world.  Medex, first produced in 1987, accounted for
8% of 1994 MDF sales.

    Medite 313 is a specialty MDF product designed for interior applications
that involve high-humidity environments, such as bathroom and kitchen cabinetry
and mouldings.  Medite 313 was introduced in 1987 and accounted for 13% of 1994
MDF sales.  Principal markets for Medite 313 have been in the U.K. and Ireland.

    Medite FR, developed by Medite primarily to address strict building code
requirements in Europe for flame/fire resistance, meets Class 1 flame-retardant
guidelines in France and Germany.  Medite FR, first produced in 1989, accounted
for 4% of 1994 MDF sales.

    Medite II was developed by Medite in 1991 to meet the market need for a low
formaldehyde-content MDF product for use in sensitive interior applications such
as schools, museums  and hospitals.  Medite II is produced without the
introduction of formaldehyde based resins (bonding agents) and additives. 
Medite believes that it is a leader in the production of interior MDF that does
not utilize resins containing formaldehyde.  Medite II accounted for 3% of 1994
MDF sales.

    MDF production facilities and raw materials.  Medite believes it is one of
a relatively small number of MDF manufacturers in the world with the technology
and expertise to currently produce specialty MDF products, such as exterior
grade, moisture resistant and fire retardant MDF.  Medite uses two different
press technologies in completing its finished MDF products.  Multiopening
presses, used at all of Medite's facilities, are more efficient in producing
thicker MDF (16 to 30 millimeters) while a continuous line press is more
efficient in producing thin board MDF (three to 15 millimeters).  Medite
operates a continuous press at its Irish MDF plant.

    Medite's Clonmel, Republic of Ireland MDF plant produces standard and
specialty MDF products under the ISO 9000 quality management certification.  A
$31 million expansion was completed in the fourth quarter of 1994, raising
future production capacity to 300,000 M3.  Production during 1994 (excluding the
new continuous press production line) amounted to approximately 160,000 M3
(approximately 100% of the capacity of the original production line). 
Approximately 40% of 1994 Clonmel production consisted of specialty MDF
products.  Medite believes this plant is the only MDF facility in the world that
operates both a multiopening and continuous press in one location, making it
unique in its ability to offer to its customers high quality products in the
full range of MDF thicknesses (from three to 30 millimeters).  Medite has what
it considers to be an attractive long-term supply contract with the Irish
Forestry Service, pursuant to which Medite has a reliable, fixed price supply of
pre-commercial thinnings from Irish forests.  These and other private sources of
pre-commercial thinnings accounted for approximately one-half of the Clonmel
plant's fiber raw materials in 1994.  The balance of fiber requirements are
provided by wood chips acquired from local sawmill operators, which Medite
believes will be available in adequate supply due to the continuing development
of the Irish forest products industry.  In 1994, approximately 50% of Medite's
Irish production was sold in the United Kingdom, with 18% sold within Ireland
and the balance sold primarily in other Northern European countries.

    Production at the Oregon MDF plant during 1994 was approximately 94% of its
175,000 M3 capacity, with standard Medite accounting for approximately 84% of
production.  The primary fiber sources are wood chips, shavings and sawdust,
almost all purchased from sawmills located in close proximity to the plant at
spot market prices. 

    While the Irish and Oregon MDF plants were built by Medite, the New Mexico
MDF plant was built by a third party and purchased by Medite in 1989. 
Production at the New Mexico plant during 1994 was approximately 93% of its
160,000 M3 capacity, substantially all of which was standard Medite product. 
The primary fiber sources are wood chips, shavings and sawdust produced within a
150-mile radius of the plant, most of which are purchased pursuant to short-term
purchase contracts.  Increasingly, however, fiber has been acquired from the
"urban forest" (sawdust and shavings produced from shipping crates, pallets and
recycled lumber).  In 1994, these "post-consumer" fiber sources comprised
approximately 14% of the New Mexico plant's fiber supply.

    Through its Oregon fee timberlands, its long-term wood supply agreements
with the Irish Forestry Service and other sources, Medite believes it has access
to adequate fiber supplies to meet current and expected operating needs for its
existing facilities.  However, Medite anticipates increasing competition for
wood fiber in future years and, accordingly, there can be no assurance that
long-term future fiber supply will be adequate, with respect to quantity and
price, to maintain Medite's recent MDF margins or to provide for future capacity
expansion.

    Medite purchases urea formaldehyde resins for standard MDF products from
suppliers located in close proximity to its plants.  Resins for U.S. specialty
MDF products are purchased primarily from suppliers in Texas and Louisiana with
resins for specialty MDF products produced in Ireland purchased primarily from
U.K. suppliers.

    Traditional timber products - products, operations and properties.  Medite
produces and sells lumber used in residential and commercial construction, and
veneer which is used in the production of plywood and laminated veneer lumber
("LVL"), and wood chips, which are a basic raw material for the MDF and paper
industries.  Logs harvested from Medite's fee timberlands are utilized in the
production of lumber, veneer and wood chips.  Certain sizes and species of logs
harvested by Medite that are not used in its manufacturing operations are sold
to other mills in the Northwest.

    Medite owns approximately 168,000 acres of timberland, including 77,000
acres added since Medite was acquired by Valhi in 1984.  Medite's timberlands
contain approximately 660 million board feet of generally second growth
merchantable timber. The dominant species is Douglas Fir and the average annual
timber growth rate is approximately 4%.  Medite's timber holdings are within
close proximity to its Oregon production facilities and are in relatively
accessible terrain.

    Medite produces veneer in Rogue River, Oregon and stud lumber in White
City, Oregon.  Annual capacities of these plants are 80,000 square feet (3/8"
basis) of veneer and 70,000 board feet of lumber plus a combined annual wood
chip capacity of 70,000 bone dry units.  The Rogue River plant, completed in
late 1993 to replace a similar facility destroyed by fire in June 1992, is
designed to process cull (defective) logs from throughout the Southern Oregon
area and the smaller second-growth timber expected to be available from Company-
owned timberlands on a longer-term basis.  Veneer from this plant is sold to the
LVL industry as well as to traditional soft-wood and hardwood plywood products
manufacturers.  The White City mill produces primarily 2x4 studs, used in
residential construction in California, from small logs and "peeler cores", a
by-product of veneer conversion facilities.

    Distribution and sale of products.  Medite's manufactured products are sold
primarily to wholesalers of building materials.  Medite's MDF major markets
include the United Kingdom, Northern Europe and the Republic of Ireland; West
and Central United States; the Pacific Rim and Mexico.  In 1994, approximately
48% of Medite's total MDF sales were in North America with 43% in Europe (21% in
the United Kingdom).  U.S. distribution is primarily by rail and common carrier
trucking, while most Irish production is shipped by containerized ocean cargo.

    Manufactured traditional timber products are sold primarily in Western U.S.
markets.  Logs are sold primarily to other Oregon mills.  Although logging
operations are seasonal due to inclement weather conditions during winter and
spring months, the production and sale of manufactured products is not
particularly seasonal in nature.

    Medite's operations are not dependent upon one or a few customers, the loss
of which would have a material adverse effect on its operations.  Medite's ten
largest customers accounted for about one-fourth of sales in each of the past
three years.  Reflecting Medite's evolving MDF focus, six of the ten largest
1994 customers were primarily MDF customers, up from five in 1993 and two in
1992.

    Cyclicality.  Demand for Medite's MDF products is in part derived from the
general level of economic activity in the principal markets served by Medite
(North America and Europe).  Economic activity in these markets is currently
expanding but as recently as 1991 was at one of its lower levels since World War
II.  In contrast to demand for MDF, demand for Medite's traditional timber
products is largely influenced by new U.S. construction, which is highly
cyclical in nature.  Medite believes that demand for its MDF products is
significantly less cyclical than demand for its traditional timber products due
to more geographically dispersed production and markets, the wide range and
relative diversity of MDF applications, the overall growth in MDF unit demand
and Medite's broad range of specialty MDF products.  Nonetheless, Medite expects
its future operating performance will be affected in part by both general and
industry specific economic conditions, some of which are cyclical in nature.

    Competition.  Medite operates in highly competitive industries.  Within the
MDF segment of its business, Medite competes on the basis of quality, product
breadth, customer service and price.  In the traditional timber products
business, Medite competes primarily on the basis of price.  Transportation costs
generally limit the geographic markets in which Medite's and its competitors'
products are sold.

    Medite's MDF operations compete in North America principally with a number
of producers of MDF and other composite board products such as particle board,
and in the Pacific Rim with Australian, New Zealand and other U.S.

manufacturers.  In Europe, Medite competes principally with other European Union
producers.  The cost of shipping products, which is borne by the customer, is
significant and Medite may operate at a competitive disadvantage relative to
certain other producers who are located closer to certain markets.  In addition,
some of Medite's competitors may possess greater financial resources, including
in some cases the financial support of the governments of the countries in which
such competitors are located.  Due to periodic declines in the value of the U.S.
dollar relative to other currencies, Medite's operations in Ireland have also
experienced periodic competition from North American producers. 

    Recently, global demand for MDF has exceeded availability and numerous
producers, including Medite, have placed customers on allocation.  High MDF
operating rates and increasing product prices, coupled with favorable forecasts
for increasing MDF demand, are expected to attract additional competition.  A
survey by Wood Based Panels International, an MDF industry trade publication,
projects worldwide capacity increases of 15% through 1996, which could outstrip
demand growth and result in excess MDF production capacity in certain regional
markets.  Historically, due to the technological difficulties traditionally
encountered with new MDF manufacturing facilities that generally adversely
impact their effective operating rates, announced MDF capacity additions may be
delayed or deferred and effective production levels can be significantly below
forecasted "nameplate" capacity.  In addition, Medite believes its specialty MDF
products provide it with a certain degree of insulation from the competitive
effects of future MDF capacity additions.

    Medite's traditional timber products operations compete primarily with
numerous other producers in the Pacific Northwest, Canada and, increasingly, the
Southern United States.  While Medite's fee timber is a valuable resource which
aids its ability to control product costs, other companies with greater supplies
of fee timber may have a competitive product cost advantage.

    Environmental matters and governmental regulation.  Medite's MDF and
traditional timber products manufacturing operations are subject to numerous
national, state and local laws and regulations relating to, among other things,
raw materials handling, production procedures, operating environment, emissions
and waste disposal, air and water quality, worker and product safety and
protection of the environment generally.  As Medite engages in manufacturing
activities in the United States and Europe, it must at times contend with
differing regulatory standards and requirements.  Medite believes that it is in
material compliance with all such existing regulations and does not believe that
future expenditures to comply with such regulations will be material.  There can
be no assurance, however, that new or more rigorous regulations affecting
Medite's products or manufacturing operations will not be adopted or that future
expenditures to comply with any such regulations would not be material.

    Medite's traditional timber products operations are subject to a variety of
Oregon and federal laws and regulations dealing with timber harvesting,
reforestation and endangered species.  The Northern Spotted Owl is currently
designated as a threatened species under the Endangered Species Act ("ESA"). 
Generally, habitat for these owls is found in old growth timber stands, and not
in Medite's predominantly second growth timber.  Consequently, the Northern
Spotted Owl's ESA status has not to date had, and, Medite believes, will not in
the future have, a material adverse effect on its timber harvesting practices. 
A 1994 amendment to the Oregon Forest Practices Act imposed more restrictive
regulations on the harvest of timber near rivers and streams, including
intermittent stream beds.  Medite believes that this amendment will not
materially impact its ability to harvest timber from its timberlands.  There can
be no assurance, however, that future legislation or governmental regulations
will not adversely affect Medite or its ability to harvest timber and sell logs
in the manner currently contemplated.

    Urea formaldehyde resin is used as a binding agent in the production of
standard MDF products.  Formaldehyde, which also occurs naturally in wood and
other natural resources, is listed as a "suspected" carcinogen by the U.S.
federal government based upon results of laboratory studies performed using
maximum tolerated doses.  While Medite's MDF products that contain urea
formaldehyde resins currently meet applicable regulations, there can be no
assurance that the MDF industry, including Medite, will not be compelled to
reduce or even eliminate the use of urea formaldehyde resins in the future.  As
Medite is currently manufacturing a "formaldehyde-free" MDF product (Medite II),
Medite believes that the adverse impact of any such changes on it would be less
than for certain competitors.

    Medite's MDF manufacturing operations also release formaldehyde into the
atmosphere as a waste by-product.  These emissions have been targeted for
increasingly stringent regulation under the U.S. Clean Air Act, although final
regulations for emissions are not scheduled to be promulgated by the
Environmental Protection Agency until 1997.  While Medite currently meets air
emission permit requirements at all of its MDF operating facilities, it cannot
predict what, if any, future pollution control technology may be required.  The
cost of any such technology could be significant in the years in which it might,
in the future, be required to be installed.

    Trademarks and patents.  Medite believes that the patents it holds for MDF
products and production processes are important to its MDF business.  Medite's
major MDF trademarks, Medite and Medex, are protected by registration in the
United States and certain other countries.  Medite also has a non-exclusive
worldwide license relating to application of resins in the manufacture of Medex
and a patent on the apparatus and method of manufacture of Medex.

    Employees.  As of December 31, 1994, Medite employed approximately 710
persons  including 510 in the U.S. and 200 in Europe. Approximately 30% of U.S.
employees and 70% of non-U.S. employees were represented by various labor
unions.  The collective bargaining agreements related to its veneer plant, its
Irish MDF plant and its Oregon MDF plant expire in June 1996, March 1997 and
September 1997, respectively.  Medite believes that its labor relations are
satisfactory.

    Risk of loss from fire or other casualties.  Medite assumes substantially
all risks of loss from fire and other casualties on its timberlands, as do the
owners of most other timber tracts in the United States.  Consistent with the
past practices of Medite and most other U.S. timber owners, Medite does not
maintain  fire insurance in respect of standing timber.  Medite is a participant
with state agencies and other timberland owners in cooperative fire fighting and
aerial fire surveillance programs.  The extensive roads on Medite's acreage also
serve as fire breaks and facilitate implementation of fire control techniques
and utilization of fire fighting equipment.  Medite's various timber tracts are
also somewhat geographically dispersed, which also reduces the possibility of
significant fire damage.  The only forest fire on Medite's timberlands of any
significance during the past five years occurred in July 1994 and resulted in
damage to approximately 1,200 acres, which were salvaged with minimal loss.

    Medite's production facilities are susceptible to fire because of the
nature of their operations, and in 1992 the Rogue River veneer mill was
completely destroyed by fire.  To reduce the risk of significant fire damage,
Medite's present facilities employ sophisticated fire monitoring and detection
systems.  The Company also maintains property and business interruption
insurance to mitigate potential risk of loss arising from fires or other
casualty losses.

HARDWARE PRODUCTS - NATIONAL CABINET LOCK, INC.:

    Products, operations and properties.  National Cabinet Lock manufactures
low and medium-security locks, precision ball bearing drawer slides, computer
keyboard support arms and other components for furniture and a variety of other
applications.  Lock products accounted for approximately 40% of the Company's
hardware products sales in 1994 with drawer slides constituting 34% and keyboard
arms 26%.  Locks are produced by National Cabinet Lock in Mauldin, South
Carolina and Mississauga, Ontario.  Drawer slides and keyboard support arms are
produced in Kitchener, Ontario under the Waterloo Furniture Components name. 
The Company believes that its hardware products compete in relatively well-
defined niche markets and that it is (i) the largest U.S. cabinet lock producer,
(ii) the largest Canadian producer of drawer slides and (iii) the largest
supplier of computer keyboard support arms to the North American office
furniture manufacturing market.

    Purchased components, including zinc castings, are the principal raw
materials used in the manufacture of latching and security products.  Strip
steel is the major raw material used in the manufacture of drawer slides and
keyboard arm products.  These raw materials are purchased from several suppliers
and are readily available.  The cost of zinc, copper and steel increased
throughout 1994 as general economic activity has increased, and such costs have
continued to rise into 1995.  There can be no assurance that any future raw
material cost increases can be fully recovered through product price increases.

    Strategy.  National Cabinet Lock seeks to maintain its relatively high
margins through improved manufacturing efficiency and cost control, development
of specialty, higher margin products focused on niche markets and engineered to
customer specification and by capitalizing on future opportunities that may
emerge with targeted original equipment manufacturers.  In this regard, the
newly developed patented Swinglift work surface arm and ISL (integrated
slidelock) drawer slide are expected to be important contributors to future
sales volume growth.  National Cabinet Lock will also search for synergistic
acquisitions or product licensing to expand its product base and seek to expand
its established market positions by emphasizing customer service, promoting its
distribution programs and seeking greater penetration of the replacement lock
market.

    Competition and customer base.  Competition in the Company's hardware
products markets is based on product features, customer service, quality,
distribution channels, consumer brand preferences and price.  Approximately 30%
of lock sales are made through National Cabinet Lock's STOCK LOCKS distribution
program, a program believed to offer a competitive advantage because delivery
generally is made within 72 hours.  Most remaining lock sales are to original
equipment manufacturers' specifications.  Precision ball bearing drawer slides
and computer keyboard support arms are produced in Canada under the Waterloo
Furniture Components tradename.  The primary market for these products are
office furniture manufacturers in the United States and Canada.  National
Cabinet Lock markets its products primarily through its own sales organization
as well as select manufacturers' representatives.

    The Company's major competitors include Chicago Lock, Hudson Lock and Fort
Lock (locks), Accuride and Hettich/Grant (drawer slides) and Weber Knapp and
Jacmorr (computer keyboard support arms).  National Cabinet Lock also competes
with a large number of other manufacturers, and the variety of relatively small
competitors generally makes significant price increases difficult.  National
Cabinet Lock does not believe it is dependent upon one or a few customers, the
loss of which would have a material adverse effect on its operations.  National
Cabinet Lock's ten largest customers accounted for about one-third of its sales
in each of the past three years, with the largest customer less than 10% in each
year.  In 1994, seven of the ten largest customers were located in the U.S. with
three in Canada.  Of such customers, nine were primarily purchasers of Waterloo
Furniture Components' products and one was a U.S. lock customer.

    Patents and trademarks.  National Cabinet Lock holds a number of patents
relating to its hardware products operations, none of which by itself is
considered significant, and owns a number of trademarks, including National
Cabinet Lock, STOCK LOCKS and Waterloo Furniture Components, which the Company
believes are well recognized in the hardware products industry.

    Employees.  As of December 31, 1994, National Cabinet Lock employed
approximately 640 persons, of which 240 were in the United States and 400 were
in Canada.  Approximately 60% of Canadian employees are covered by a three-year
collective bargaining agreement expiring February 1997.  National Cabinet Lock
believes that its labor relations are satisfactory.

    Regulatory and environmental matters.  The Company's hardware products
operations are subject to various federal, state, provincial and local
provisions regulating, among other things, worker and product safety and
protection, the discharge of materials into the environment and other
environmental protection matters.  National Cabinet Lock believes that it is in
substantial compliance with existing permits and regulations and does not
believe future expenditures to comply with these regulations will be material.

FAST FOOD - SYBRA, INC.:

    Products and operations.  Sybra (Arby's spelled backwards) operates
approximately 160 Arby's restaurants clustered in four regions, principally in
Michigan, Texas, Pennsylvania and Florida, pursuant to licenses with Arby's,
Inc.  According to information provided by Arby's, Sybra is the second-largest
franchisee in the Arby's restaurant system based upon the number of restaurants
operated and gross sales.  Arby's is a well-established fast food restaurant
chain and features a menu that highlights roast beef sandwiches along with a
variety of chicken sandwiches and products, deli sandwiches, potato products and
soft drinks.  Arby's represents a niche segment of the fast food restaurant
industry.  Arby's current advertising campaign includes the slogan "Go West....,
It's Better Out Here" and emphasizes the Arby's western hat logo.  

    Sandwich category items have accounted for over 60% of Sybra's total sales
during the past few years.  New product development is important to the
continued success of a restaurant system, and Sybra has introduced several new
menu items in recent years including chicken fingers, chicken, submarine and
alternative roast beef sandwiches, curly fried potatoes and desserts.  Sybra's
menu has evolved whereby roast beef accounts for approximately two-thirds of
sandwich sales compared to 80% five years ago.

    Sybra's 162 Arby's restaurants at the end of 1994 represent a net increase
of 103 stores from the 59 Arby's restaurants Sybra operated when it was acquired
in 1979 by a predecessor of Valhi.  Sybra has also remodeled over 35 stores
during the past five years.  Sybra currently expects a net increase of two to
three stores in 1995, as it plans to open eight to ten new restaurants within
its existing regions and to close five to seven stores.  The first new
restaurants in 1995 are scheduled to open in March, with five stores closed or
to be closed during the first quarter.  During the past three years, 13 of the
14 new restaurants opened were free-standing stores as are all of the new stores
planned for 1995.  Sybra continuously evaluates its individual restaurants and
closes unprofitable stores when considered appropriate.

    Strategy.  Given the extremely competitive environment in which Sybra
operates, Sybra will (i) continue its strong emphasis on operational details,
(ii) routinely review the profit contribution of each restaurant with a view
toward closing those stores which do not meet expectations; and (iii) continue
to follow its "clustering" concept in opening new stores in order to capitalize
on the economies of scale realized in management and advertising as a result of
geographic proximity.  Sybra's development rights with Arby's in the Dallas/Ft.
Worth, Texas and Tampa, Florida areas, discussed below, provide future growth
opportunities consistent with Sybra's store clustering concept.  New stores are
likely to be free-standing restaurants, which the Company has found generally to
yield a greater rate of return, and most stores likely to be closed will be mall
units.  Sybra also plans to continue to increase market share in its geographic
markets through periodic promotions including the introduction of innovative
menu items to complement its main product offerings.

    Properties.  At the end of 1994, Sybra operated 162 Arby's restaurants of
which 57 were in its Southwestern Region (Texas), 52 in the Northern Region
(principally Michigan), 32 in the Eastern Region (Pennsylvania and Maryland/
Virginia) and 21 in the Southeastern Region (Florida).

    Of the 162 stores operated at the end of 1994, 121 were free-standing
stores and the remaining 41 are located within regional shopping malls or strip
shopping centers.  Sybra leases 109 locations and owns the remainder.  Lease
terms vary with most leases being on a long-term basis and providing for
contingent rents based on sales in addition to base monthly rents.  At the end
of 1994, approximately 90% of the leases of free-standing locations contain
purchase options at fair market values and/or various renewal options.  During
the next five years, 29 free-standing leases and 33 mall or food court leases
will expire.  In most cases, Sybra expects that leases could be renewed or
replaced by other leases, although rental rates may increase.  Contingent
rentals based upon various percentages of gross sales of individual restaurants
were less than 10% of Sybra's total rent expense in each of the past three
years.  Sybra also leases corporate or regional office space in five states.

    Sybra has a Consolidated Development Agreement ("CDA") with Arby's, Inc.
which, as revised in 1994, provides Sybra with exclusive development rights
within certain counties in the Dallas/Fort Worth, Texas area, and provides Sybra
and Arby's with joint development rights in the Tampa, Florida area.  Sybra is
required to open an aggregate of 31 stores in its existing regional markets
during the five year term (1993 - 1997) of the CDA.  Sybra had opened ten stores
pursuant to the CDA through December 31, 1994, is required to open eight more
stores in 1995 and is required to open 13 additional stores by various dates
through 1997.  Sybra currently expects its expansion program will meet or exceed
this schedule.  Sybra does not have any other territorial or development
agreements which would prohibit others from operating an Arby's restaurant in
the general geographic markets in which Sybra now operates.

    Food products and supplies.  Sybra and other Arby's franchisees are members
of ARCOP, Inc., a non-profit cooperative purchasing organization.  ARCOP
facilitates negotiations of national contracts for food and distribution, taking
advantage of the larger purchasing requirements of the member franchisees. 
Since Arby's franchisees are not required to purchase any food products or
supplies from Arby's, Inc., ARCOP facilitates control over food supply costs and
avoids franchisor conflicts of interest.

    License terms and royalty fees.  The 28-year relationship between Sybra and
Arby's, Inc. has been governed principally by licenses relating to each
restaurant location.  Generally, such franchise agreements require that Sybra
comply with certain requirements as to business operations and facility
maintenance.  Currently, Sybra pays an initial franchise fee of $25,000 and a
royalty rate of 4% of sales for a standard 20-year license.  Because some of
Sybra's licenses were issued at times when license terms were perpetual and
lower royalty rates were in effect, 44% of Sybra's franchise agreements have no
fixed termination date and royalties for all locations aggregated 2.6% to 2.8%
of sales in each of the past three years.  Sybra's average royalty rate is
expected to increase over time as new stores are opened or existing 20-year
licenses are renewed at then-prevailing royalty rates.  The first of Sybra's 20-
year licenses expires in 2003.

    In 1993, there was a change in ownership of the controlling interest in
Triarc Company (formerly DWG Corporation), the parent company of Arby's, Inc. 
Sybra believes that the new ownership of Triarc is a positive development for
the Arby's system.

    Advertising and marketing.  For the past several years, Sybra has directed
about 71/2% of its total restaurant sales toward marketing.  All franchisees of
Arby's, Inc. must belong to AFA Service Corporation ("AFA"), a non-profit
association of Arby's restaurant operators, and must contribute a specified
portion (up to 1.2%) of their gross revenues as dues to AFA.  In return, AFA
provides franchisees creative materials such as television and radio
commercials, ad mats for newspapers, point-of-purchase graphics and other
advertising materials.  Although Arby's, Inc., as an operator of Arby's
restaurants, is a member of AFA, the direction and management of AFA is
principally controlled by the member franchisees.  Sybra and other franchisees
currently contribute .7% of their gross revenues to AFA.  In addition to the AFA
contribution, Sybra devotes approximately 3% of its restaurant sales to coupon
sales promotions, including the direct cost of discounted food, and newspaper
and direct mail inserts, and approximately 3.5% of its restaurant sales to local
advertising, including outdoor advertising and electronic media.

    Competition and seasonality.  The fast food industry is extremely
competitive and subject to pressures from major business cycles and competition
from many established and new restaurant concepts.  According to industry data,
there is a significant disparity in the revenues and number of restaurants
operated by the largest restaurant systems and the Arby's system.  As a result,
some organizations and franchised restaurant systems have significantly greater
resources for advertising and marketing than the Arby's restaurant system and
Sybra, which is an important competitive factor.  Sybra's response to these
competitive factors has been to cluster its stores in certain geographic areas
where it can achieve economies of scale in advertising and other activities.

    Operating results of Sybra's restaurants have historically been affected by
both retail shopping patterns and weather conditions.  Accordingly, Sybra
historically has experienced its most favorable results during the fourth
calendar quarter (which includes the holiday shopping season) and its least
favorable results during the first calendar quarter (which includes winter
weather that can be adverse in certain markets).

    Employees.  As of December 31, 1994, Sybra had approximately 4,300
employees, of which 3,700 were part-time employees.  Approximately 4,200
employees work in Sybra's restaurants with the remainder in its corporate  or
regional offices.  Employees are not covered by collective bargaining agreements
and Sybra believes that its employee relations are satisfactory.

    Governmental regulation.  A significant portion of Sybra's restaurant
employees work on a part-time basis and are paid at rates related to the minimum
wage rate.  Restaurant labor costs currently are approximately 28% of sales. 
The increase in the minimum wage rate being considered by the current session of
Congress and any mandatory medical insurance benefits to part-time employees
would increase Sybra's labor costs.  Although Sybra's competitors would likely
experience similar increases, there can be no assurance that Sybra will be able
to increase sales prices to offset future increases, if any, in these costs.

    Various federal, state and local laws affect Sybra's restaurant business,
including laws and regulations relating to minimum wages, overtime and other
working conditions, health, sanitation, employment and safety standards and
local zoning ordinances.  Sybra has not experienced and does not anticipate
unusual difficulties in complying with such laws and regulations.

OTHER:

    Foreign operations.  The Company has substantial operations and assets
located outside the United States, principally chemicals operations in Germany,
Belgium, Norway and the United Kingdom, chemicals and hardware products
operations in Canada and MDF operations in Ireland.  See Note 2 to the
Consolidated Financial Statements.  Foreign operations are subject to, among
other things, currency exchange rate fluctuations and the Company's results of
operations have in the past been both favorably and unfavorably affected by
fluctuations in currency exchange rates.  See Item 7 - "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

    The Company uses multi-currency revolving credit borrowings to mitigate
exchange rate risk on certain receivables and also monitors net receivable/
payable currency positions.  While the Company has in the past used currency
forward contracts to fix the dollar equivalent of specific commitments, the
Company does not generally engage in currency derivative transactions.

    Political and economic uncertainties in certain of the countries in which
the Company operates may expose the Company to risk of loss.  The Company does
not believe that there is currently any likelihood of material loss through
political or economic instability, seizure, nationalization or similar event. 
The Company cannot predict, however, whether events of this type in the future
could have a material effect on its operations.  The Company's manufacturing and
mining operations are also subject to extensive and diverse environmental
regulation in each of the foreign countries in which they operate, as discussed
in the respective business sections elsewhere herein.

    Regulatory and environmental matters.  Regulatory and environmental matters
are discussed in the respective business sections contained elsewhere herein and
in Item 3 - "Legal Proceedings."  In addition, the information included in Note
20 to the Consolidated Financial Statements under the captions "Legal
proceedings -- Lead pigment litigation and -- Environmental matters and
litigation" is incorporated herein by reference.

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

    The Company and other entities that may be deemed to be controlled by or
affiliated with Mr. Harold C. Simmons routinely evaluate acquisitions of
interests in, or combinations with, companies, including related companies,
perceived by management to be undervalued in the marketplace.  These companies
may or may not be engaged in businesses related to the Company's current
businesses.  In a number of instances, the Company has actively managed the
businesses acquired 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, the Company has disposed of the acquired interest in a company prior
to gaining control.  The Company intends to consider such activities in the
future and may, in connection with such activities, consider issuing additional
equity securities and increasing the indebtedness of Valhi, its subsidiaries and
related companies.

    Other.  Through June 1989, Valmont Insurance Company, a wholly-owned
captive insurance subsidiary, reinsured workers' compensation and employers'
liability, auto liability, and comprehensive general liability risks of Valhi
and certain affiliates.  Through April 1989, Valmont assumed certain third-party
reinsurance business, primarily property, marine and casualty risks from
insurance subsidiaries of other industrial firms, and a small amount of U.S.
quota share property and casualty risks.  Valmont currently writes certain
miscellaneous direct coverages of Valhi and affiliates.  All of Valmont's third-
party reinsurance risks are on a runoff basis.

    The Company, through a general partnership, has an interest in certain
medical-related research and development activities pursuant to sponsored
research agreements.  See Note 19 to the Consolidated Financial Statements.

ITEM 2. PROPERTIES

    Valhi leases approximately 34,000 square feet of office space for its
principal executive offices in a building located at 5430 LBJ Freeway, Dallas,
Texas, 75240-2697.

    The principal properties used in the operations of the Company are
described in the applicable business sections of Item 1 - "Business."  The
Company believes that its facilities are adequate and suitable for their
respective uses.

ITEM 3. LEGAL PROCEEDINGS

    The Company is involved in various legal proceedings.  In addition to
information that is included below, certain information called for by this Item

is included in Note 20 to the Consolidated Financial Statements under the
caption "Legal proceedings -- Other litigation," which information is
incorporated herein by reference.

    Lead pigment litigation.  NL was formerly involved in the manufacture of
lead pigments for use in paint and lead-based paint.  NL has been named as a
defendant or third party defendant in various legal proceedings alleging that NL
and other manufacturers are responsible for personal injury and property damage
allegedly associated with the use of lead pigments.  NL is vigorously defending
such litigation.  Considering NL's previous involvement in the lead pigment and
lead-based paint businesses, there can be no assurance that additional
litigation, similar to that described below, will not be filed.  In addition,
various legislation and administrative regulations have, from time to time, been
enacted or 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 NL and other pigment manufacturers
have been successful.  One such bill that would subject lead pigment
manufacturers to civil liability for damages caused by lead-based paint on the
basis of market share, and that extends certain statutes of limitations, passed
the Massachusetts House of Representatives in 1993.  The same bill, reintroduced
in the Massachusetts legislature in 1994 and defeated in the House of
Representatives, was again reintroduced in 1995.  No legislation or regulations
have been enacted to date which are expected to have a material adverse effect
on NL's consolidated financial position, results of operations or liquidity.  NL
has not accrued any amounts for the pending lead pigment litigation.  Although
no assurance can be given that NL will not incur future liability in respect of
this litigation, based on, among other things, the results of such litigation to
date, NL believes that the pending lead pigment litigation is without merit. 
Liability, if any, that may result is not reasonably capable of estimation.

    In 1989 and 1990, the Housing Authority of New Orleans ("HANO") filed
third-party complaints for indemnity and/or contribution against NL, other
alleged manufacturers of lead pigment (together with NL, the "pigment
manufacturers") and the Lead Industries Association (the "LIA") in 14 actions
commenced by residents of HANO units seeking compensatory and punitive damages
for injuries allegedly caused by lead pigment.  The actions in the Civil
District Court for the Parish of Orleans, State of Louisiana were dismissed by
the district court in 1990.  Subsequently, HANO agreed to consolidate all the
cases and appealed eleven of them.  In March 1992, the Louisiana Court of
Appeals, Fourth Circuit, dismissed HANO's appeal as untimely with respect to
three of these cases.  With respect to the other eight cases included in the
appeal, the court of appeals reversed the lower court decision dismissing the
cases due to inadequate pleading of facts.  These eight cases have been remanded
to the district court for further proceedings.  In November 1994, the district
court granted defendants' motion for summary judgment in one of the eight
remaining cases.

    In December 1991, NL received a copy of a complaint filed in the Civil
District Court for the Parish of Orleans seeking indemnification and/or
contribution against NL and eight other defendants for approximately $4.5
million in settlements paid to HANO residents (Housing Authority of New Orleans
v. Hoechst Celanese Corp., et al., No. 91-28067).  These claims appear to be
based upon the same theories which HANO had previously filed. NL has not been
served.

    In June 1989, a complaint was filed in the Supreme Court of the State of
New York, County of New York, against the pigment manufacturers and the LIA. 
Plaintiffs seek damages, contribution and/or indemnity in an amount in excess of
$50 million for monitoring and abating alleged lead paint hazards in public and
private residential buildings, diagnosing and treating children allegedly
exposed to lead paint in city buildings, the costs of educating city residents
to the hazards of lead paint, and liability in personal injury actions against
the City and the Housing Authority based on alleged lead poisoning of city
residents (The City of New York, the New York City Housing Authority and the New
York City Health and Hospitals Corp. v. Lead Industries Association, Inc., et
al., No. 89-4617).  In December 1991, the court granted the defendants' motion
to dismiss claims alleging negligence and strict liability and denied the
remainder of the motion.  In January 1992, defendants appealed the denial.  NL
has answered the remaining portions of the complaint denying all allegations of
wrongdoing, and the case is in discovery.  In December 1992, plaintiffs filed a
motion to stay the claims of the City of New York and the New York City Health
and Hospitals Corporation pending resolution of the Housing Authority's claim. 
In May 1993, the Appellate Division of the Supreme Court affirmed the denial of
the motion to dismiss plaintiffs' fraud, restitution, conspiracy and concert of
action claims.  In August 1993, the defendants' motion for leave to appeal was
denied.  In May 1994, the trial court granted the defendants' motion to dismiss
the plaintiffs' restitution and indemnification claims, and plaintiffs have
appealed.  Defendants have moved for summary judgment on the remaining fraud
claim.  

    In March 1992, NL was served with a complaint in Skipworth v. Sherwin-
Williams Co., et al. (No. 92-3069), Court of Common Pleas, Philadelphia County. 
Plaintiffs are a minor and her legal guardians seeking damages from lead paint
and pigment producers, the LIA, the Philadelphia Housing Authority and the
owners of the plaintiffs' premises for bodily injuries allegedly suffered by the
minor from lead-based paint.  Plaintiffs' counsel has asserted that
approximately 200 similar complaints would be served shortly, but no such
complaints have yet been served.  In April 1994, the court granted defendants'
motion for summary judgment and plaintiffs appealed that decision in June 1994.

    In August 1992, NL was named as a defendant and served with an amended
complaint in Jackson, et al. v. The Glidden Co., et al., Court of Common Pleas,
Cuyahoga County, Cleveland, Ohio (Case No. 236835).  Plaintiffs seek
compensatory and punitive damages for personal injury caused by the ingestion of
lead, and an order directing defendants to abate lead-based paint in buildings. 
Plaintiffs purport to represent a class of similarly situated persons throughout
the State of Ohio.  The amended complaint identifies 18 other defendants who
allegedly manufactured lead products or lead-based paint, and asserts causes of
action under theories of strict liability, negligence per se,  negligence,
breach of express and implied warranty, fraud, nuisance, restitution, and
negligent infliction of emotional distress.  The complaint asserts several
theories of liability including joint and several, market share, enterprise and
alternative liability.  In October 1992, NL and the other defendants moved to
dismiss the complaint with prejudice.  In July 1993, the court dismissed the
complaint.  In December 1994, the Ohio Court of Appeals reversed the trial court
dismissal and remanded the case to the trial court.

    In November 1993, NL was served with a complaint in Brenner, et al. v.
American Cyanamid, et al., Supreme Court, State of New York, Erie County
alleging injuries to two children purportedly caused by lead pigment.  The
complaint seeks $24 million in compensatory and $10 million in punitive damages
for alleged negligent failure to warn, strict products liability, fraud and
misrepresentation, concert of action, civil conspiracy, enterprise liability,
market share liability, and alternative liability.  In January 1994, NL answered
the complaint, denying liability.  Discovery is proceeding.

    In January 1995, NL was served with complaints in Wright (Alvin) and Wright
(Allen) v. Lead Industries, et. al., (Nos. 94-363042 and 363043), Circuit Court,
Baltimore City, Maryland.  Plaintiffs are two brothers (one deceased) who allege
injuries due to exposure to lead pigment.  Each complaint seeks more than $100
million in compensatory and punitive damages for alleged strict liability,
breach of warranty, negligence, conspiracy and fraud claims.

    NL believes that the foregoing lead pigment actions are without merit and
intends to continue to deny all allegations of wrongdoing and liability and to
defend such actions vigorously.

    NL has filed declaratory judgment actions against various insurance
carriers seeking costs of defense and indemnity coverage for certain of its
environmental and lead pigment litigation.  NL Industries, Inc. v. Commercial
Union Insurance Cos., et al., Nos. 90-2124, -2125 (HLS).  In May 1990, NL filed
an action in the United States District Court for the District of New Jersey
against Commercial Union Insurance Company ("Commercial Union") seeking to
recover defense costs incurred in the City of New York lead pigment case and two
other cases which have since been resolved in NL's favor.  In July 1991, the
court granted NL's motion for summary judgment and ordered Commercial Union to
pay NL's reasonable defense costs for such cases.  In June 1992, NL filed an
amended complaint in the United States District Court for the District of New
Jersey against Commercial Union seeking to recover costs incurred in defending
four additional lead pigment cases which have since been resolved in NL's favor.
In August 1993, the court granted NL's motion for summary judgment and ordered
Commercial Union to pay the reasonable costs of defending those cases.  In July
1994, the court entered judgment on the order requiring Commercial Union to pay
previously-incurred NL costs in defending two lead pigment cases.  Commercial
Union has appealed.  Other than a magistrate's recommendation to grant motions
for summary judgment brought by two excess insurance carriers, which contended
their policies contained unique pollution exclusion language, and a grant by the
court of certain motions regarding policy periods, the court has not made any
rulings on defense costs or indemnity coverage with respect to NL's pending
environmental litigation or on indemnity coverage in the lead pigment
litigation.  No trial dates have been set.  Other than rulings to date, the
issue of whether insurance coverage for defense costs or indemnity or both will
be found to exist depends upon a variety of factors, and there can be no
assurance that such insurance coverage will exist in other cases.  NL has not
considered any insurance recoveries for lead pigment or environmental litigation
in determining related accruals.

    Environmental matters and litigation.  NL has been named as a defendant,
PRP, or both, pursuant to CERCLA and similar state laws in approximately 80
governmental and private actions associated with waste disposal sites and
facilities currently or previously owned, operated or used by NL, or its
subsidiaries, or their predecessors, many of which are on the U.S. Environmental
Protection Agency's Superfund National Priorities List or similar state lists. 
These proceedings seek cleanup costs, damages for personal injury or property
damage, or both.  Certain of these proceedings involve claims for substantial
amounts.  Although NL may be jointly and severally liable for such costs, in
most cases, it is only one of a number of PRPs who are also jointly and
severally liable.  In addition to the matters noted above, certain current and
former facilities of NL, including several divested secondary lead smelter and
former mining locations, are the subject of environmental investigations or
litigation arising out of industrial waste disposal practices and mining
activities.

    The extent of CERCLA liability cannot be determined until the Remedial
Investigation and Feasibility Study ("RIFS") is complete, the U.S. EPA issues a
record of decision and costs are allocated among PRPs.  The extent of liability
under analogous state cleanup statutes and for common law equivalents are
subject to similar uncertainties.  NL believes it has provided adequate accruals
for reasonably estimable costs for CERCLA matters and other environmental
liabilities.  At December 31, 1994, NL had accrued $87 million in respect of
those environmental matters which are reasonably estimable.  NL determines the
amount of accrual on a quarterly basis by analyzing and estimating the range of
possible costs to NL.  Such costs include, among other things, remedial
investigations, monitoring, studies, clean-up, removal and remediation.  It is
not possible to estimate the range of costs for certain sites.  NL has estimated
that the upper end of the range of reasonably possible costs to NL for sites for
which it is possible to estimate costs is approximately $160 million.  No
assurance can be given that actual costs will not exceed accrued amounts or the
upper end of the range for sites for which estimates have been made, and no
assurance can be given that costs will not be incurred with respect to sites as
to which no estimate presently can be made.  The imposition of more stringent
standards or requirements under environmental laws or regulations, new
developments or changes respecting site cleanup costs or allocation of such
costs among PRPs, or a determination that NL is potentially responsible for the
release of hazardous substances at other sites could result in expenditures in
excess of amounts currently estimated by NL to be required for such matters. 
Further, there can be no assurance that additional environmental matters will
not arise in the future.  More detailed descriptions of certain legal
proceedings relating to environmental matters are set forth below.

    NL has been identified as a PRP by the U.S. EPA because of its former
ownership of three secondary lead smelters (battery recycling plants) in
Pedricktown, New Jersey; Granite City, Illinois; and Portland, Oregon.  In all
three matters, NL voluntarily entered into administrative consent orders with
the U.S. EPA requiring the performance of a RIFS, a study with the objective of
identifying the nature and extent of the hazards, if any, posed by the sites,
and selecting a remedial action, if necessary.

    At Pedricktown, the U.S. EPA divided the site into two operable units. 
Operable unit one covers contaminated ground water, surface water, soils and
stream sediments.  NL submitted the final RIFS for operable unit one to the U.S.
EPA in May 1993.  In July 1994, the U.S. EPA issued the Record of Decision for
operable unit one.  The U.S. EPA estimates the cost to complete operable unit
one is $18.7 million.  The U.S. EPA has not yet issued a notice or an order
requiring implementation of  operable unit one.  In addition, the U.S. EPA has
completed the fifth phase of a removal action on the soils and sediments of a
stream at the site, at a U. S. EPA estimated total cost of $2 million. The U.S.
EPA issued a Unilateral Administrative Order (Index No. II-CERCLA 20205) with
respect to operable unit two in March 1992 to NL and 30 other PRPs directing
immediate removal activities including the cleanup of waste, surface water and
building surfaces.  NL has complied with the order, and the work with respect to
operable unit two is nearing completion.  NL has paid approximately 50% of 
operable unit two costs, or $2.5 million.

    At Granite City, the RIFS is complete, and in 1990 the U.S. EPA selected a
remedy estimated to cost approximately $28 million.  In July 1991, the United
States filed an action in the U.S. District Court for the Southern District of
Illinois against NL and others (United States of America v. NL Industries, Inc.,
et al., Civ. No. 91-CV 00578) with respect to the Granite City smelter.  The
complaint seeks injunctive relief to compel the defendants to comply with an
administrative order issued pursuant to CERCLA, and fines and treble damages for
the alleged failure to comply with the order.  NL and the other parties did not
comply with the order believing that the remedy selected by the U.S. EPA was
invalid, arbitrary, capricious and not in accordance with law.  The complaint
also seeks recovery of past costs of $.3 million and a declaration that the
defendants are liable for future costs.  Although the action was filed against
NL and ten other defendants, there are 330 other PRPs who have been notified by
the U.S. EPA.  Some of those notified were also respondents to the
administrative order.  In February 1992, the court entered a case management
order directing that the remedy issues be tried before the liability aspects are
presented.  In August 1994, when the U.S. EPA reinitiated the residential yard
soils remediation in Granite City after an agreed-upon stay of the cleanup
pending completion of a health study and reopening of the administrative record,
the PRPs and the City of Granite City sought an injunction against the U.S. EPA
to prevent further cleanup until after the record was reopened for submittal of
additional comments on the selected remedy.  In October 1994, the U.S. EPA
issued its proposed plan for addressing residential yard soils in Granite City. 
The U.S. EPA presented no estimate of costs for this work. The administrative
record was reopened for public comment, and NL, along with other PRPs, submitted
extensive comments on the proposed residential soils cleanup plan.  In February
1995, the U.S. EPA issued its proposed plan for the Main Industrial Area, the
remaining remote fill areas and ground water at the site, which is estimated by
the U. S. EPA to cost approximately $9.2 million.  The administrative record has
been reopened for public comments on this phase of the cleanup. 

    Having completed the RIFS at Portland, NL conducted predesign studies to
explore the viability of the U.S. EPA's selected remedy pursuant to a June 1989
consent decree captioned U.S. v. NL Industries, Inc., Civ. No. 89-408, United
States District Court for the District of Oregon.  Subsequent to the completion
of the predesign studies, the U.S. EPA issued notices of potential liability to
approximately 20 PRPs, including NL, directing them to perform the remedy, which
was initially estimated to cost approximately $17 million, exclusive of
administrative and overhead costs and any additional costs, for the disposition
of recycled materials from the site.  In January 1992, the U.S. EPA issued
unilateral administrative orders Docket No. 1091-01-10-106 to NL and six other
PRPs directing the performance of the remedy.  NL and the other PRPs commenced
performance of the remedy and, through December 31, 1994, NL and the other PRPs
had spent approximately $18 million.  Based upon site operations to date, the
remedy is not proceeding in accordance with engineering expectations or cost
projections; therefore, NL and the others PRPs have met with the U.S. EPA to
discuss alternative remedies for the site.  The U.S. EPA authorized NL and other
PRPs to cease performing most aspects of the selected remedy.  In September
1994, NL and the other PRPs submitted a focused feasibility study ("FFS") to the
U.S. EPA, which proposes alternative remedies for the site.  The U.S. EPA is
considering the alternatives proposed in the FFS.  Pursuant to an interim
allocation, NL's share of remedial costs is approximately 50%.  In November
1991, Gould, Inc., the current owner of the site, filed an action, Gould Inc. v.
NL Industries, Inc., No. 91-1091, United States District Court for the District
of Oregon, against NL for damages for alleged fraud in the sale of the smelter,
rescission of the sale, past CERCLA response costs and a declaratory judgment
allocating future response costs and $5 million in punitive damages.  The court
granted Gould's motion to amend the complaint to add additional defendants
(adjoining current and former landowners) and third party defendants
(generators).  The amended complaint deletes the fraud and punitive damages
claims asserted against NL; thus, the pending action is essentially one for
reallocation of past and future cleanup costs.  In March 1993, the parties
agreed to a case management order limiting discovery until 1995.  In December
1994, Gould amended its complaint adding approximately 15 additional generator
defendants and two additional owner/operator defendants.  Discovery is
proceeding.  A trial date has been tentatively set for September 1996.

    There are several actions pending relating to alleged contamination at
other properties formerly owned or operated by NL or its subsidiaries or their
predecessors.  In one of those cases, suit was filed in November 1992 against NL
asserting claims arising out of the sale of a former business of NL to Exxon
Chemical Company (Exxon Chemical Company v. NL Industries, Inc., United States
District Court for the Southern District of Texas, No. H-92-3360).  The action
sought contractual indemnification, contribution under CERCLA for costs
associated with the environmental assessment and cleanup at nine properties
included in the sale, a declaration of liability for future environmental
cleanup costs, and punitive damages for fraud.  Plaintiff asserted that past and
future cleanup costs, business interruption, and asset value losses and legal
and site assessment costs were approximately $25 million.  In December 1994,
this matter was settled within previously accrued amounts. 

    NL and other PRPs entered into an administrative consent order with the
U.S. EPA requiring the performance of a RIFS at two sites in Cherokee County,
Kansas, where NL and others formerly mined lead and zinc.  A predecessor of NL
mined at the Baxter Springs subsite, where it is the largest viable PRP.  The
final RIFS was submitted to the U.S. EPA in May 1993.   In August 1994, the U.S.
EPA issued its proposed plan for the cleanup of the Baxter Springs and Treece
sites in Cherokee County.   The proposed remedy is estimated by the U.S. EPA to
cost $6 million.

    In January 1989, the State of Illinois brought an action against NL and
several other subsequent owners and operators of the former lead oxide plant in
Chicago, Illinois (People of the State of Illinois v. NL Industries, et al., No.
88-CH-11618, Circuit Court, Cook County).  The complaint seeks recovery of $2.3
million of cleanup costs expended by the Illinois Environmental Protection
Agency, plus penalties and treble damages.  In October 1992, the Supreme Court
of Illinois reversed the Appellate Division, which had affirmed the trial
court's earlier dismissal of the complaint, and remanded the case for further
proceedings.  In December 1993, the trial court denied the State's petition to
reinstate the complaint, and dismissed the case with prejudice.  The State's
appeal of this ruling is pending. 

    In 1980, the State of New York commenced litigation against NL in
connection with the operation of a plant in Colonie, New York formerly owned by
NL.  Flacke v. NL Industries, Inc., No. 1842-80 ("Flacke I") and Flacke v.
Federal Insurance Company and NL Industries, Inc., No. 3131-92 ("Flacke II"),
New York Supreme Court, Albany County.  The plant manufactured military and
civilian products from depleted uranium and was acquired from NL by the U.S.
Department of Energy ("DOE") in 1984.  Flacke I seeks penalties for alleged
violations of New York's Environmental Conservation Law, and of a consent order
entered into to resolve these alleged violations.  Flacke II seeks forfeiture of
a $200,000 surety bond posted in connection with the consent order, plus
interest from February 1980.  NL denied liability in both actions.  The 
litigation had been inactive from 1984 until July 1993 when the State moved for
partial summary judgment for approximately $1.5 million on certain of its claims
in Flacke I and for summary judgment in Flacke II.  In January 1994, NL cross-
moved for summary judgment in Flacke I and Flacke II.  All summary judgment
motions have been denied and both parties have appealed.

    Residents in the vicinity of NL's former Philadelphia lead chemicals plant
commenced a class action allegedly comprised of over 7,500 individuals seeking
medical monitoring and damages allegedly caused by emissions from the plant. 
Wagner, et al v. Anzon and NL Industries, Inc., No. 87-4420, Court of Common
Pleas, Philadelphia County.  The complaint sought compensatory and punitive
damages from NL and the current owner of the plant, and alleged causes of action
for, among other things, negligence, strict liability, and nuisance.  A class
was certified to include persons who reside, owned or rented property, or who
work or have worked within up to approximately three-quarters of a mile from the
plant from 1960 through the present.  NL answered the complaint, denying
liability.  In November 1994, the jury returned a verdict in favor of NL. 
Plaintiffs have filed post-trial motions requesting a new trial.  Residents also
filed consolidated actions in the United States District Court for the Eastern
District of Pennsylvania, Shinozaki v. Anzon, Inc. and Wagner and Antczak v.
Anzon and NL Industries, Inc.  Nos. 87-3441 and 87-3502.  The consolidated
action is a putative class action seeking CERCLA response costs, including
cleanup and medical monitoring, declaratory and injunctive relief and civil
penalties for alleged violations of the Resource Conservation and Recovery Act
("RCRA"), and also asserting pendent common law claims for strict liability,
trespass, nuisance and punitive damages.  The court dismissed the common law
claims without prejudice, dismissed two of the three RCRA claims as against NL
with prejudice, and stayed the case pending the outcome of the state court
litigation. 

    In July 1991, a complaint was filed in the United States District Court for
the Central District of California, United States of America v. Peter Gull and
NL Industries, Inc., Civ. No. 91-4098, seeking recovery of $2 million in costs
incurred by the United States in response to the alleged release of hazardous
substances into the environment from a facility located in Norco, California,
treble damages and $1.75 million in penalties for NL's alleged failure to comply
with the U.S. EPA's administrative order No. 88-13.  The order, which alleged
that NL arranged for the treatment or disposal of materials at the Norco site,
directed the immediate removal of hazardous substances from the site.  NL
carried out a portion of the remedy at the Norco site, but did not complete the
ordered activities because it believed they were in conflict with California
law.  NL answered the complaint denying liability.  The government claims it
expended in excess of $2.7 million for this matter.  Trial was held in March and
April 1993.  In April 1994, the court entered final judgment in this matter
directing NL to pay $6.3 million plus interest.  The court ruled that NL was
liable for approximately $2.7 million in response costs plus approximately $3.6
million in penalties for failure to comply with the administrative order.  Both
NL and the government have appealed.  In August 1994, this matter was referred
to mediation, which is pending.

    At a municipal and industrial waste disposal site in Batavia, New York, NL
and six others have been identified as PRPs.  The U.S. EPA has divided the site
into two operable units.  Pursuant to an administrative consent order entered
into with the U.S. EPA, NL is conducting a RIFS for operable unit one, the
closure of the industrial waste disposal section of the landfill.  NL's RIFS
costs to date are approximately $2 million.  In August 1994, the U.S. EPA issued
the proposed plan for operable unit one, which the U.S. EPA has estimated to
cost approximately $12.3 million.  NL, along with other PRPs, submitted
extensive comments on the proposed plan.  With respect to the second operable
unit, the extension of the municipal water supply, the U.S. EPA estimated the
costs at $1 million plus annual operation and maintenance costs.  NL and the
other PRPs are performing the work comprising operable unit two.  The U.S. EPA
has also demanded approximately $.9 million in past costs from the PRPs.

    See also Item 1 - "Business - Chemicals - Regulatory and environmental
matters".

    In addition to the NL matters discussed above, the Company has been named
as a PRP pursuant to CERCLA at one Superfund site in Indiana and has also
undertaken a voluntary cleanup program approved by state authorities at another
Indiana site, both of which involve operations no longer conducted by the
Company.  The total estimated cost for cleanup and remediation at the Indiana
Superfund site is $45 million, of which the Company's share is currently
estimated to be approximately $2 million.  The Company's estimated cost to
complete the voluntary cleanup program at the other Indiana site, which involves
both surface and groundwater remediation, is relatively nominal.  The Company
believes it has adequately provided accruals for reasonably estimable costs for
CERCLA matters and other environmental liabilities.  At December 31, 1994, the
Company had accrued $3 million in respect of such matters, which accrual does
not reflect any amounts which the Company could recover from insurers or other
third parties and is near the Company's estimate of the upper end of range of
possible costs.  No assurance can be given that actual costs will not exceed
accrued amounts or the upper end of the range.  The imposition of more stringent
standards or requirements under environmental laws or regulations, new
developments or changes respecting site cleanup costs or allocation of such
costs among PRPs or a determination that the Company is potentially responsible
for the release of hazardous substances at other sites could result in
expenditures in excess of amounts currently estimated by the Company to be
required for such matters.  Furthermore, there can be no assurance that
additional environmental matters related to current or former operations will
not arise in the future.

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

    No matters were submitted to a vote of security holders during the quarter
ended December 31, 1994.




                                     PART II

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

    Valhi's common stock is listed and traded on the New York and Pacific Stock
Exchanges (symbol:  VHI).  As of February 28, 1995, there were approximately
6,500 holders of record of Valhi common stock.  The following table sets forth
the high and low sales prices for Valhi common stock for the years indicated,
according to the New York Stock Exchange Composite Tape, and dividends paid
during such periods.  On February 28, 1995 the closing price of Valhi common
stock according to the NYSE Composite Tape was $8.00.


                                                                                                 Dividends
                                                                       High          Low            paid    

Year ended December 31, 1993

                                                                                            
  First Quarter                                                       $6 1/2        $4 7/8           $.05
  Second Quarter                                                       5 1/4         3 3/4             - 
  Third Quarter                                                        5 3/4         4                 - 
  Fourth Quarter                                                       5 3/8         4 1/2             - 

Year ended December 31, 1994                                                                             

  First Quarter                                                       $7            $4 3/4           $.02
  Second Quarter                                                       6             4 7/8            .02
  Third Quarter                                                        6             5                .02
  Fourth Quarter                                                       8 1/8         5 5/8            .02


    In March 1995, the Company's Board of Directors increased the regular
quarterly dividend to $.03 per common share.  However, declaration and payment
of dividends and the amount thereof will be dependent upon the Company's results
of operations, financial condition, cash requirements for its businesses,
contractual requirements and restrictions and other factors deemed relevant by
the Board of Directors.  There are currently no contractual restrictions on the
ability of Valhi to declare or pay dividends.


ITEM 6.  SELECTED FINANCIAL DATA

    The following selected financial data should be read in conjunction with
the Company's Consolidated Financial Statements and Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations."


                                                                 YEARS ENDED DECEMBER 31,   
                                              
                                                 1990          1991           1992          1993       1994  
                                                            (IN MILLIONS, EXCEPT PER SHARE DATA)

                                                                                      
STATEMENTS OF OPERATIONS DATA:
  Net sales:
    Refined sugar                              $  410.9      $  439.7       $  459.2      $  430.8   $  457.3
    Building products                             197.4         179.7          194.8         174.3      189.9
    Hardware products                              52.6          44.8           54.0          64.4       70.0
    Fast food                                     103.6         101.5          103.8         111.6      115.5

                                               $  764.5      $  765.7       $  811.8      $  781.1   $  832.7

  Operating income:
    Refined sugar                              $   48.0      $   42.0       $   37.8      $   37.5   $   31.6
    Building products                              22.8           8.0           22.0          26.3       36.4
    Hardware products                               9.0           7.9           10.7          17.5       20.9
    Fast food                                       8.6           7.8            8.5           9.7        9.0


                                               $   88.4      $   65.7       $   79.0      $   91.0   $   97.9

  Equity in earnings (losses) of NL
   prior to 1994 consolidation:
    Operations                                 $   43.2      $  (19.5)      $  (37.4)     $  (52.4)  $  (25.1)
    Provision for market value impairment          -             -              -            (84.0)      -   

                                               $   43.2      $  (19.5)      $  (37.4)     $ (136.4)  $  (25.1)

  Income (loss) from continuing operations     $   66.8      $   19.9       $    (.8)     $  (59.3)  $   19.7
  Discontinued operations                           6.9            .1          (21.4)         (4.8)      (8.1)
  Extraordinary items                                .9           4.8           (6.3)        (15.4)      -   
  Cumulative effect of changes in                                                                        -   
   accounting principles (1)                       -             -             (69.8)           .4       -   

      Net income (loss)                        $   74.6      $   24.8       $  (98.3)     $  (79.1)  $   11.6

PER SHARE DATA:
  Income (loss) from continuing operations     $    .59      $    .18       $   (.01)     $   (.52)  $    .17

  Net income (loss)                            $    .66      $    .22       $   (.86)     $   (.69)  $    .10

  Cash dividends                               $    .20      $    .20       $    .20      $    .05   $    .08

  Weighted average common shares
   outstanding                                    113.3         113.5          113.9         114.1      114.3

BALANCE SHEET DATA (at year end):
  Total assets                                 $1,344.8      $1,177.1       $1,077.0      $  903.9   $2,480.7
  Long-term debt                                  584.2         352.7          288.7         302.5    1,086.7
  Stockholders' equity                            294.6         385.5          259.1         207.5      198.4


[FN]
(1) Relates to OPEB and income tax accounting in 1992 and marketable securities
    in 1993.

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

RESULTS OF OPERATIONS:

CONTINUING OPERATIONS

    The Company reported income from continuing operations of $.17 per share in
1994 following per share losses of $.52 in 1993 and $.01 in 1992.  The 1994
improvement in earnings from continuing operations over 1993, as well as the
1992 to 1993 decline, was significantly influenced by the Company's equity in
losses attributable to NL Industries.  During December 1994, Valhi increased its
ownership of NL to over 50% and as a result, will consolidate NL's results of
operations beginning in 1995.  The Company currently expects its consolidated
1995 earnings to be higher than in 1994, in large part due to expected
improvements in NL's chemicals earnings.

CHEMICALS

    Selling prices for TiO2, NL's principal chemical product, increased during
1994 after four consecutive years of declining prices.  NL's TiO2 operations are
conducted through Kronos while its specialty chemicals operations are conducted
through Rheox.


                                                           YEARS ENDED DECEMBER 31,         
                                                                                               PRO FORMA
                                                     NL'S HISTORICAL BASIS                    Valhi Basis
                                                       1992           1993           1994        1994*   

                                                                        (In millions)
                                                                                          
Net sales:
  Kronos                                              $784.6         $697.0         $770.1            $770.1
  Rheox                                                108.9          108.3          117.8             117.8

                                                      $893.5         $805.3         $887.9            $887.9

Operating income:
  Kronos                                              $ 81.9         $ 36.1         $ 80.5            $ 62.6
  Rheox                                                 28.8           26.3           30.8              29.3

                                                      $110.7         $ 62.4         $111.3            $ 91.9

Operating income margins:
  Kronos                                               10.4%           5.2%          10.5%              8.1%
  Rheox                                                26.4%          24.2%          26.2%             24.8%

TiO2 data:
  Sales volume (thousands of
   metric tons)                                          336            346            376               376
  Average price index (1983=100)                         139            127            131               131


[FN]
*  Valhi's purchase accounting adjustments made in conjunction with the
   acquisitions of its interest in NL result in additional depreciation,
   depletion and amortization expense beyond amounts separately reported by NL. 
   As a result, 1994 pro forma chemicals operating income is approximately $20
   million less than as reported by NL in its separate financial statements.

    The improvement in Kronos' 1994 results was primarily due to higher average
selling prices, higher production and sales volumes for TiO2 and higher
technology fee income.  In billing currency terms, Kronos' 1994 average TiO2
selling prices were approximately 3% higher than in 1993.  At year-end 1994,
average TiO2 selling prices were 6% higher than year-earlier levels and were 10%
above the low point reached in 1993.

    Record sales volume of 376,000 metric tons of TiO2 in 1994 represents an
increase of 9% over 1993, with increases in Europe, North American and other
regions.  Due to increasing demand for TiO2 and higher sales volumes, Kronos
increased its capacity utilization in 1994 to 94% after having reduced its TiO2
production rates in response to weakened demand in late 1992 and in 1993. 
Approximately one-half of Kronos' 1994 TiO2 sales, by volume, were attributable
to markets in Europe with 36% attributable to North America and the balance to
export markets.  TiO2 sales volumes increased 3% in 1993 over 1992, as increases
in North American sales volumes were partially offset by declining sales volumes
in European markets.  Average prices in 1993 were 8% lower than in 1992.

    As a result of Kronos' continued emphasis on cost reduction and containment
efforts, TiO2 per-unit production costs were relatively flat during 1992 to 1994
(up slightly in 1993 and down slightly in 1994).

    Demand, supply and pricing of TiO2 have historically been cyclical, with
the last cyclical peak for TiO2 prices in early 1990 and the trough in the third
quarter of 1993.  The average TiO2 selling price index (using 1983 = 100) of 131
for 1994 was 3% above the 1993 level but was still 25% below the TiO2 price
index of 175 for 1990.  Kronos believes that its operating income and margins
for 1995 will be higher than in 1994 due principally to the net effect of higher
average TiO2 selling prices and slightly higher sales and production volumes,
offset in part by increased raw material costs.

    Rheox's operating results improved in 1994 primarily as a result of higher
sales volume and lower operating costs.  Operating costs increased during 1993
over 1992, contributing to the decline in 1993 operating income.  Changes in
currency exchange rates had a slightly positive effect on Rheox's sales and
earnings in 1994 and a negative effect on 1993 results compared to 1992.

    NL has substantial operations and assets located outside the United States
(principally Germany, Norway, Belgium and Canada).  The U.S. dollar value of
NL's foreign sales and operating results are subject to currency exchange rate
fluctuations which may favorably or adversely impact reported earnings and
effect the comparability of period to period operating results.  A significant
amount of NL's sales are denominated in currencies other than the U.S. dollar
(67% in 1994), principally major European currencies and the Canadian dollar. 
Certain raw materials, primarily titanium-containing feedstocks, are purchased
in U.S. dollars, while labor and other production costs are denominated
primarily in the local currency.  Fluctuations in the value of the U.S. dollar
relative to other currencies decreased 1994 sales by $2 million compared to 1993
and decreased 1993 sales by $45 million compared to 1992.

REFINED SUGAR

    Sugar sales volume comparisons can be affected by relative timing of sales
during the crop year, which runs from October 1 to September 30, and by
marketing allotments as well as by the size of the respective crops. 
Government-imposed marketing allotments, which limit domestic sales volume and
are intended to help support prices, are in effect for the crop year ending
September 30, 1995.


                                         YEARS ENDED DECEMBER 31,         % CHANGE     
                                             1992         1993          1994        1992-93        1993-94
                                                    (IN MILLIONS)

                                                                                      
Net sales:
  Refined sugar                             $417.0       $396.6        $422.0        - 5%            + 6%
  By-products and other                       42.2         34.2          35.3        -19%            + 3%

                                            $459.2       $430.8        $457.3        - 6%            + 6%

Operating income:
  FIFO basis                                $ 32.2       $ 31.9        $ 29.3        - 1%            - 8%
  LIFO adjustment                              5.6          5.6           2.3

    LIFO (reporting basis)                  $ 37.8       $ 37.5        $ 31.6        - 1%            -16%

Operating income margin:
  FIFO accounting method                       7.0%         7.4%          6.4%
  LIFO accounting method                       8.2%         8.7%          6.9%

Sugar sales volume
 (cwt millions)                               15.1         14.9          15.8        - 2%            + 6%


    Average sugar selling prices in 1994 were slightly (less than 1%) higher
than in 1993 following three years of declines.  After continuing to fall during
much of 1994, average prices increased 4% in the fourth quarter compared to
third quarter averages, in large part due to the effects of the government-
imposed marketing allotments on domestic processors.  Amalgamated's allotment
for the current crop year, which runs through September 30, 1995, is
approximately 2% lower than the volume of sugar sold during the previous crop
year when no marketing allotments were imposed.  However, fourth quarter 1994
volume represented only about 20% of Amalgamated's current crop year marketing
allotment of 16 million hundredweight ("cwt").  As a result, sugar sales volume
for the first nine months of 1995 (the remainder of the crop year) should
approximate the cwt volume sold during the same period of 1994.

    Sugar sales volume in 1993 was lower than in 1992 in large part as a result
of imposition of marketing allotments during the crop year ended September 30,
1993.  The marketing allotments, imposed in June 1993, had a positive impact on
prices in the third quarter of 1993.  Prices weakened during the 1993 fourth
quarter following expiration of the allotments and average prices for the year
were 3% below those of 1992.

    Due primarily to an abnormally high yield per acre,  Amalgamated's sugar
production from the crop harvested in the fall of 1994 is currently expected to
be at least 10% higher than its previous record crop and exceed its domestic
marketing allotment quota by about 1.5 million cwt.  Due to the combined effects
of record production and marketing allotments, inventories were significantly
higher at December 31, 1994 than one year ago and are expected to continue to be
above historical norms throughout the remainder of the current crop year. 
Amalgamated expects to make limited sales into foreign markets (which are
excluded from domestic allotments) to help reduce the amount of "carryover"
sugar into the next crop year, however such sales will likely be at lower prices
than domestic sales.  Amalgamated currently expects contracted acreage for the
crop to be planted in the spring of 1995 will approximate the acreage harvested
in 1994.  However, the abnormally high yield per acre is unlikely to recur and
production is therefore expected to be more in line with historical levels of
the past few years.

    Refined sugar historically represents approximately 90% of Amalgamated's
annual sales.  Fluctuations in the volume of by-products sold, generally sold
principally in the first and fourth calendar quarters, approximate those of
refined sugar.  The selling prices of by-products are affected by the prices of
competing animal feeds and are, therefore, independent of the price of sugar. 
Average selling prices of dried pulp, the principal by-product, rose 5% in 1994
after falling over 10% in 1993.

    Sugarbeet purchase cost is the largest cost component of producing refined
sugar and the price paid for sugarbeets is, under the terms of contracts with
the sugarbeet growers, a function of the average selling price of Amalgamated's
refined sugar.  As a result, changes in sugar selling prices impact sugarbeet
purchase costs as well as revenues and serve as a partial hedge against changing
prices.  However, related LIFO adjustments can significantly affect operating
income and margin comparisons relative to FIFO basis comparisons.

    Processing costs per hundredweight of refined sugar were lower in 1993 than
in either 1992 or 1994 due in part to generally more favorable weather
conditions during 1993's sugarbeet processing campaign and a higher sugar
content of that year's sugarbeets.  Primarily due to the combination of the
bumper crop, which extended the current processing campaign into March 1995 (the
longest campaign in the Company's history), and relatively adverse weather
conditions during the campaign, 1995 per-unit processing costs are currently
estimated to be about 7% higher than in 1994.  The largest component of
Amalgamated's selling, general and administrative expenses is the freight cost
of sugar and by-products delivered to customers.  Consequently, such expenses
vary significantly with the volume of refined sugar and by-products sold.

    The Company has tentatively agreed to sell its sugar business, for $325
million cash, to an agricultural cooperative comprised of sugarbeet growers in
Amalgamated's area of operations.  The proposed transaction is subject to
significant conditions, including financing, grower commitments and execution of
a definitive purchase agreement, and no assurance can be given that any such
transaction will be consummated.

BUILDING PRODUCTS

    Results of operations during the past three years have been affected by
Medite's ongoing strategy to expand its emphasis on MDF, to increase the
relative proportion of higher margin specialty MDF products and to downsize its
commodity-type traditional timber products operations.


                                           YEARS ENDED DECEMBER 31,        % CHANGE     
                                             1992         1993         1994         1992-93        1993-94
                                                      (IN MILLIONS)
                                                                                      
Net sales:                                                       
  Medium density fiberboard                   $111.6       $112.1      $134.9        + 0%            +20%
  Traditional timber products                   85.4         63.7        56.1        -25%            -12%
  Eliminations                                  (2.2)        (1.5)       (1.1)

                                              $194.8       $174.3      $189.9        -11%            + 9%

Operating income:
  Medium density fiberboard                   $ 12.1       $ 13.9      $ 27.1        +15%            +95%
  Traditional timber products                    9.9         12.4         9.3        +26%            -25%

                                              $ 22.0       $ 26.3      $ 36.4        +20%            +38%

Operating income margins:
  Medium density fiberboard                     10.8%        12.4%       20.1%
  Traditional timber products                   11.6%        19.5%       16.5%
    Aggregate margin                            11.3%        15.1%       19.1%

MDF sales volume (M3 thousands):
  Specialty products                            28.0         55.4        94.7        + 98%           +71%
  Standard grade                               434.7        419.7       385.7        -  3%           - 8%

                                               462.7        475.1       480.4        +  3%           + 1%


    Medium density fiberboard.  Medite's MDF plants have been operating at a
high rate of capacity and, consequently, Medite's emphasis on the production of
higher margin specialty MDF products has displaced production of standard grade
MDF.  A new production line in Ireland became operational during the fourth
quarter of 1994 and is expected to enable Medite to increase both standard and
specialty product volumes and to more efficiently produce thin-board MDF.  Over
the past two years, the increased cost of traditional timber products has led to
higher demand for substitute products such as MDF and resulted in MDF operating
rates approaching effective capacity.  In this environment, MDF prices have
increased notably, and Medite's increased emphasis on specialty products has
also favorably impacted its average selling prices.  At the end of 1994, selling
prices of standard MDF products were approximately 27% higher than one year
earlier and Medite implemented additional price increases averaging over 4%
during the first quarter of 1995.  Further 1995 improvement in aggregate MDF
prices is currently expected to be influenced primarily by specialty product mix
and changes, if any, in raw material costs.

    The significant improvements in MDF sales, operating income and operating
income margins in 1994 were driven by both higher selling prices and higher
volumes of specialty MDF products.  Overall average MDF selling prices were up
19% in 1994 due to combined effects of a 16% increase in average selling prices
of standard MDF products and increased sales of higher-priced/higher margin
specialty products.  Average per-unit MDF costs increased approximately 6% in
1994 primarily as a result of higher resin costs (due to increased prices for
resins of standard MDF products and the increased use of higher-cost resins
associated with specialty MDF products) and higher wood fiber costs.  The price
of standard MDF resins increased principally due to recent worldwide shortages
of methanol, a primary element in resin manufacture.  Continued increases in
resin costs could hamper margins as there is no assurance that they can continue
to be recovered through additional product price increases.  Fluctuations in the
value of the U.S. dollar relative to other currencies accounted for
approximately one percentage point of the increase in average selling prices and
less than one percentage point of the increase in per-unit costs.

    MDF sales in 1993, in U.S. dollar terms, were only nominally higher than
1992.  The positive effects of higher total volume, higher specialty products
volume and selling price increases (in billing currency terms) were
substantially offset by fluctuations in currency exchange rates.  Average
selling prices, in billing currency terms, of standard MDF increased 7% in the
U.S. and decreased 3% at the Ireland facility.  The decline in average prices in
Ireland was due primarily to lower volume of cut-to-size standard products.  MDF
operating income margins improved, however, as currency fluctuations were also a
significant factor in the 4% reduction of per-unit MDF costs.  The effect of
currency fluctuations, along with moderate improvement in operating efficiency
in the U.S., more than offset increased per-unit wood and resin costs resulting
primarily from higher production of specialty products.

    The U.S. dollar value of Medite's foreign sales and operating costs are
subject to currency exchange rate fluctuations which, as noted above, may
favorably or adversely impact reported earnings and affect the comparability of
operating results.  Approximately 30% of Medite's 1994 MDF sales were
denominated in currencies other than the U.S. dollar, principally the U.K. Pound
Sterling and the European Currency Unit.  Medite's Irish operations accounted
for approximately 35% of its MDF production in 1994.  Fiber, labor and most
other production costs in Ireland are denominated principally in Irish punts,
while Irish resins are purchased primarily in Sterling.  The percentage of non-
dollar sales and costs are expected to increase as a result of the additional
production capacity recently added to the Irish MDF plant and could, therefore,
increase the magnitude of the effect of future currency fluctuations.

    Traditional timber products.  Traditional timber products operations for
the past three years are not, in certain respects, directly comparable due to
the January 1993 closure of Medite's plywood operations (in response to the
rising cost and declining availability of government timber in recent years) and
the fire at its Rogue River chipping and veneer plant in June 1992, as discussed
below.  Rogue River chipping operations resumed in July 1993 and veneer
operations resumed in January 1994.  Medite expects to meet its longer-term
timber needs from its own lands and other private sources and does not
anticipate acquiring any significant amount of new government timber contracts
in the foreseeable future.

    Medite's strategy is to maximize the operating contributions from its fee
timberlands by allocating its harvested timber between log sales and its
traditional timber products conversion facilities depending upon prevailing
market conditions.  Primarily as a result of market-based volume decisions made
by Medite, including a relative reduction in the volume of logs offered for sale
and curtailment of veneer and lumber production during a portion of 1994,
traditional timber products sales and operating income declined in 1994 relative
to 1993.  Average sales prices for logs and lumber during 1994 were about 5%
higher than during 1993, although year-end 1994 prices were 15% and 25%,
respectively, below the averages for the year.  Operating income in 1994 was
favorably impacted by lower log costs, which on a per unit basis were 18% lower
than in 1993.  This decrease in average log costs results from the combined
effects of log mix (31% of logs obtained from lower cost fee timber in 1994
compared to 22% in 1993) and a $3 million favorable impact of reductions in LIFO
log inventories in 1994.  The favorable effects of lower log costs on operating
income, including the favorable LIFO effect that is not necessarily recurring,
were substantially offset by adverse effects of start-up of Rogue River veneer
operations in the first half of 1994.

    Average selling prices increased significantly in 1993 over 1992 levels
(lumber up 29%; logs up 46%) due primarily to the combined effects of the
continuing Pacific Northwest timber shortage, closure of certain competitor
operations and increased demand for building products.  These factors also
significantly increased Medite's timber costs.  The average unit cost of logs
used in Medite's traditional timber product operations increased about 24% in
1993 following a 28% increase in 1992 due primarily to increases in the cost of
timber from government and other sources.  Business interruption insurance from
the Rogue River fire recognized as a component of operating income ($3.7 million
in 1992 and $1.9 million in 1993) had a significant favorable, non-recurring
effect on traditional timber product operating income margins in 1992 and 1993
as this income had no associated cost.

HARDWARE PRODUCTS


                                         YEARS ENDED DECEMBER 31,                     % CHANGE     
                                          1992          1993          1994          1992-93        1993-94
                                                    (IN MILLIONS)

                                                                                      
Net sales                                   $54.0         $64.4         $70.0        +19%            + 9%
Operating income                             10.7          17.5          20.9        +63%            +19%

Operating income margin                      19.8%         27.2%         29.8%



    National Cabinet Lock reported new highs in both sales and operating income
in each of 1993 and 1994 as volumes increased in each of its three major product
lines (locks, computer keyboard support arms and drawer slides).  Keyboard
support arms have been the fastest growing product line and were up 18% in 1994,
to about one-fourth of total hardware product sales.  The Company's principal
production facilities are operating at a high rate of capacity, and overtime was
used throughout 1994 in order to meet market demand.

    National Cabinet Lock continues to add new products to its STOCK LOCKS
product line as well as to its Waterloo Furniture Components support arms and
drawer slide lines.  National Cabinet Lock currently expects more modest growth
in 1995 than in the past two years due to production capacity considerations and
certain changes in customer mix.  A lock contract with a U.S. Government agency
that accounted for approximately 5% of 1994 sales will be completed in about
March 1995, and the agency has indicated it has an adequate supply of locks for
its remaining 1995 requirements.  National Cabinet Lock believes it will be able
to compensate through increased sales to other customers.

    Almost two-thirds of National Cabinet Lock's sales are generated by its
Canadian operations.  About two-thirds of these Canadian-produced sales are
denominated in U.S. dollars while substantially all of the related costs are
incurred in Canadian dollars.  As a result, fluctuations in the value of the
U.S. dollar relative to the Canadian dollar favorably impacted operating results
in both 1994 and 1993 compared to the respective prior year.

FAST FOOD


                                        YEARS ENDED DECEMBER 31,                      % CHANGE     
                                            1992          1993          1994        1992-93        1993-94
                                                    (IN MILLIONS)

                                                                                      
Net sales                                  $103.8        $111.6        $115.5        + 7%            +3%
Operating income                              8.5           9.7           9.0        +13%            -6%

Operating income margin                       8.2%          8.6%          7.8%

Arby's units operated: 
  At end of year                              160           160           162        -               +1%
  Average during the year                     158           159           159        + 1%             - 


    Sales in 1994 were a new Sybra record, with comparable store sales up about
2% in large part because 1994 was a 53-week year.  An $800,000 year-to-year
increase in store closing costs was a principal factor in the decline in
operating income.  The fast food industry continues to be very competitive. 
Despite stable to lower food costs, increased usage of lower-margin value-priced
sandwiches and the market responsive introduction of higher cost new menu items
have served to dampen operating margins.  Any increase in the minimum wage rate
would increase labor costs, which currently are about 28% of sales.  There is no
assurance that any such cost increase could, particularly in the short-term, be
recovered through product price increases.

    Improving general economic conditions contributed significantly to a 6%
increase in comparable store sales during 1993.  Customer traffic increased in
part due to certain regional promotions marketed to price-driven consumers with
various levels of advertising support.

    Sybra expects to open eight to ten new Arby's restaurants in 1995, which is
expected to result in a net increase in the number of stores operated of two or
three.  Sybra continually evaluates the profitability of its individual
restaurants and intends to continue to close unprofitable stores when
appropriate.  In addition to five stores closed during the first quarter of
1995, Sybra may close one to two additional stores later in the year.

GENERAL CORPORATE AND OTHER ITEMS

    General corporate.  Lower securities earnings in 1994 resulted primarily
from a first quarter 1994 decline in the market value of the fixed-income
investments while average balances available for investment and yields thereon
were lower in 1993 than in 1992.  General expenses increased in 1994 as higher
legal-related expenses were only partially offset by lower environmental-related
charges.  The increase in general expenses in 1993 resulted in large part from
lower net charges to affiliates and additional environmental remediation
expenses relating to certain operations no longer conducted by the Company.

    Pro forma general corporate and other expenses for 1994 include $45 million
attributable to NL.  Such NL general corporate expenses include provisions for
environmental remediation and litigation costs of approximately $40 million and
$15 million, respectively, and a nonrecurring $20 million gain related to
settlement of NL's lawsuit against Lockheed Corporation.

    Interest expense.  Historical interest expense declined $13 million (25%)
in 1993 and further declined $3 million (9%) in 1994 as a result of lower
average indebtedness levels and interest rates.  The lower average interest
rates resulted in part from the prepayment of Valhi 121/2% Senior Subordinated
Notes from the proceeds of lower-rate borrowings.  Pro forma interest expense of
$119 million for 1994 includes $84 million attributable to NL.

    At December 31, 1994, approximately $645 million of consolidated
indebtedness, principally publicly-traded debt, bears interest at fixed rates
averaging 10.9%.  The average interest rate on floating rate borrowings
outstanding at December 31, 1994 was 7.4%, up from 4.4% on outstanding variable
rate borrowings from one year earlier.  NL has significant variable interest
rate borrowings in Germany (the DM bank credit facility) and, accordingly, NL's
interest expense is also subject to currency fluctuations.  Periodic cash
interest payments are not required on Valhi's 9.25% deferred coupon LYONs, and
NL's 13% Discount Notes do not require periodic interest payments until 1998. 
As a result, current cash interest expense payments are lower than accrual basis
interest expense.

    Minority interest.  Pro forma minority interest relates to certain
partially-owned foreign subsidiaries of NL.  At December 31, 1994, NL separately
reported a stockholders' deficit of approximately $293 million and, as a result,
no minority interest in NL Industries is recorded in the Company's consolidated
balance sheet.  Accordingly, until such time as NL reports positive
stockholders' equity in its separate financial statements, all future changes in
NL's equity, including all undistributed earnings or losses, will accrue to the
Company for financial reporting purposes.

PROVISION FOR INCOME TAXES

    The principal reasons for the difference between the Company's effective
income tax rates and the U.S. federal statutory income tax rates are explained
in Note 16 to the Consolidated Financial Statements.  Income tax rates vary by
jurisdiction (country and/or state), and relative changes in the geographic
source of the Company's pre-tax earnings can result in fluctuations in the
Company's consolidated effective income tax rate.

    NL's operations are conducted on a worldwide basis and the geographic mix
of income can significantly impact NL's effective income tax rate.  In each of
the past three years, such geographic mix included losses in certain of NL's tax
jurisdictions for which no current refund was available and in which recognition
of a deferred tax asset was not considered appropriate.  This contributed
significantly to NL's effective tax rates, and consequently the Company's pro
forma 1994 effective tax rate, varying from a normally expected rate.  Because
NL is not a member of the Contran Tax Group (of which Valhi is a member),
Valhi's incremental income taxes on its after-tax earnings or losses
attributable to NL also can increase the Company's overall effective tax rate.

DISCONTINUED OPERATIONS, EXTRAORDINARY ITEMS, AND CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES.

    See Notes 3, 13 and 17 to the Consolidated Financial Statements.

EQUITY IN EARNINGS OF NL PRIOR TO CONSOLIDATION

    As discussed in Note 3 to the Consolidated Financial Statements, the
Company's interest in NL was reported by the equity method during 1992 to 1994. 
As discussed above and in Note 3, the Company will consolidate NL's results of
operations beginning January 1, 1995.  NL's separately-reported results of
operations are summarized below.  The Company's equity in NL's results differ
from its effective percentage interest in NL's separate results.  Amortization
of basis differences arising from purchase accounting adjustments made by the
Company in conjunction with the acquisition of its interests in NL generally
reduces earnings, or increases losses, as reported by the Company compared to
amounts separately reported by NL.


                                                                     YEARS ENDED DECEMBER 31,   
                                                                         1992            1993          1994 
                                                                                 (In millions)

                                                                                             
Net sales                                                              $ 893.5          $805.3        $887.9

Operating income                                                       $ 110.7          $ 62.4        $111.3
Corporate, net                                                           (35.2)          (33.1)        (40.8)
Interest expense                                                        (118.5)          (99.1)        (83.9)
                                                                         (43.0)          (69.8)        (13.4)
Income tax expense                                                         (.5)          (12.7)         (9.8)
Minority interest                                                         (1.1)            (.7)          (.8)

Loss from continuing operations                                        $ (44.6)         $(83.2)       $(24.0)

The Company's equity in NL's losses, including
 amortization of basis differences                                     $ (37.4)         $(52.4)       $(25.1)



    NL's sales and operating income are discussed under "Chemicals" above. 
NL's corporate expenses, net in 1994 were higher than in 1993 as a $20 million
gain related to the settlement of a lawsuit against Lockheed was offset
primarily by increased provisions for environmental remediation and litigation
costs.  In 1993, higher environmental remediation costs were more than offset by
a $9 million reduction in certain proxy solicitation and litigation settlement
expenses.  NL's interest expense declined in both 1993 and 1994 principally as a
result of lower debt levels.  NL's tax provision is discussed under "Provision
for income taxes" above.

    The Company periodically evaluates the net carrying value of its long-term
assets to determine if there has been any decline in value below their
respective net carrying values that is considered to be other than temporary and
would, therefore, require a write-down accounted for as a realized loss.  As a
result of this process, Valhi recorded an $84 million pre-tax charge to earnings
for an other than temporary decline in market value of NL common stock in the
first quarter of 1993, which charge is reported as a separate item.  See Notes 2
and 3 to the Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES:

CONSOLIDATED CASH FLOWS

    Operating activities.  As noted above, the Company consolidated NL's
financial position at December 31, 1994 and will consolidate NL's results of
operations and cash flows beginning in 1995.  As historically reported, cash
flow from operating activities before changes in assets and liabilities
increased from $63 million in 1992 to $69 million in 1993 and to $80 million in
1994 reflecting the Company's improved operating results.  Changes in assets and
liabilities, which used cash in each of the past three years, result primarily
from the timing of production, sales and purchases, generally tend to even out
over time and include the impact of significant seasonal fluctuations related to

refined sugar operations.  Over 80% of the aggregate $48 million net change in
assets and liabilities during the past three years related to Amalgamated as
year-to-year fluctuations in the size of the sugarbeet crop can have a material
impact on working capital levels.

    Pro forma cash provided by operating activities for 1994 of $254 million
includes $136 million attributable to NL's receipt of German tentative income
tax refunds discussed below.

    Noncash interest expense consists of amortization of original issue
discount on certain indebtedness and amortization of deferred financing costs. 
The net deferred income tax benefit relates primarily to the Company's
incremental tax benefit on its equity in losses of NL.

    Investing activities.  Capital expenditures during the past three years are
disclosed by business segment in Note 2 to the Consolidated Financial Statements
and are discussed in the respective individual company sections below.  The
higher levels of capital expenditures in 1994 relate principally to capacity
projects, including Amalgamated's sugar productivity-enhancing equipment,
Medite's Irish MDF plant expansion and Sybra's new restaurants.  

    At December 31, 1994, the estimated cost to complete capital projects in
process approximated $74 million, most of which relates to environmental
protection and improvement programs at NL and productivity-enhancing equipment
at both NL and Amalgamated.  The Company's total capital expenditures for 1995
are estimated at approximately $126 million compared to 1994 pro forma capital
expenditures of $110 million.  Such 1995 estimated capital expenditures include
$35 million related to environmental protection and improvement programs,
principally desulfurization and water treatment chemical purification systems at
certain of NL's TiO2 plants and air and water facilities at certain of
Amalgamated's factories, $14 million for new productivity-enhancing equipment at
Amalgamated, $12 million for new Sybra stores and $7 million for NL TiO2
debottlenecking projects.  Other 1995 capital projects are principally of an
ongoing normal nature.  Capital expenditures in 1995 are expected to be financed
primarily from operations or existing cash resources and credit facilities.

    Net sales of securities in 1993 include sales made in conjunction with the
redemptions of Valhi's 121/2% Notes.  On a net basis, cash was used to purchase
Treasury securities in 1992.   Net cash provided in 1992 includes $11 million of
insurance proceeds related to the fire at Medite's Rogue River plant.

    Financing activities.  Net repayments of indebtedness in 1994 relate
principally to (i) $21 million of project financing related to Medite's Irish
MDF plant expansion and (ii) a net $11 increase in term borrowings at
Amalgamated for capital expenditures.  Pro forma 1994 net repayments of
indebtedness include $131 attributable to NL, principally reductions in DM
borrowings paid with proceeds of the German tentative tax refunds discussed
under "Chemicals" below.

    Net repayments of indebtedness in 1993 relate principally to (i) Valhi's
redemptions of $235 million principal amount of 121/2% Notes, (ii) Valcor's
issuance of $100 million of 95/8% Senior Notes, and (iii) net new borrowings of
approximately $39 million under Medite's Timber Credit Agreement.  Net
borrowings in 1992 include $94 million of net proceeds from the issuance of the
LYONs and $59 million expended to repurchase 121/2% Notes in market
transactions.

    At December 31, 1994, unused revolving credit available under the existing
facilities aggregated $284 million, including $209 million attributable to NL. 
Of such NL amount, $80 million is available only for (i) permanently reducing
NL's DM term loan or (ii) paying future German income tax assessments, as
discussed below.  See Note 11 to the Consolidated Financial Statements.

CHEMICALS - NL INDUSTRIES

    The TiO2 industry is cyclical, with the previous peak in selling prices in
early 1990 and the latest trough in the third quarter of 1993, and NL's
operations used significant amounts of cash during such TiO2 downturn cycle.  NL
operated with a strategy to maintain its competitive position during the past
few years and increased its estimated TiO2 worldwide market share from 10% to
11%.  NL also implemented cost reduction and control programs which favorably
impacted its operating results, and continued its environmental improvement
efforts.  In 1993, NL formed the TiO2 manufacturing joint venture with Tioxide
and refinanced certain debt which, among other things, increased NL's liquidity,
reduced its aggregate debt level and extended its debt maturities.

    Reflecting the improvement in Kronos' operating results, NL generated $39
million in cash from operating activities in 1994 before changes in assets and
liabilities.  Relative changes in NL's inventories, receivables and payables
(excluding the effect of currency fluctuation) also provided cash in 1994 while
receipt of the tentative German income tax refunds, discussed below,
significantly increased NL's cash flow from operating activities and was a major
factor in NL's improved liquidity.

    NL's capital expenditures during the past three years aggregated $170
million, including $63 million ($17 million in 1994) for NL's ongoing
environmental protection and compliance programs, including a Canadian waste
acid neutralization facility, a Norwegian onshore tailings disposal system and
various off-gas desulfurization systems.  NL's estimated 1995 capital
expenditures are $66 million and include $33 million in the area of
environmental protection and compliance, primarily related to the off-gas
desulfurization and water treatment chemical purification systems.  NL is
planning $25 million in capital expenditures ($7 million in 1995) related to a
debottlenecking project at its Leverkusen, Germany chloride process TiO2
facility that is expected to increase NL's annual attainable TiO2 production
capacity by 20,000 metric tons to 400,000 tons.  The capital expenditures of the
TiO2 manufacturing joint venture are not included in NL's capital expenditures.

    NL reduced its "net debt" (notes payable and long-term debt less cash,
equivalents and securities) by about $90 million during 1994, and currently
expects to have sufficient liquidity to meet its obligations including
operations, capital expenditures and debt service.  In addition to $156 million
of cash, equivalents and current securities held by NL and its subsidiaries at
December 31, 1994 (30% held by non-U.S. subsidiaries), of which $16 million is
restricted, NL had $14 million and $195 million available for borrowing under
existing U.S. and non-U.S. credit facilities, respectively, of which $80 million
is available only for (i) permanently reducing NL's DM term loan or (ii) paying
future German tax assessments, as described below.  NL and Kronos have agreed,
under certain conditions, to provide KII with up to an additional DM 125 million
through January 1, 2001.

    Certain of NL's U.S. and non-U.S. income tax returns, including Germany,
are being examined and tax authorities have or may propose tax deficiencies. 
During 1994, the German tax authorities withdrew certain tax assessment reports
which had proposed tax deficiencies of DM 100 million and remitted tax refunds
aggregating DM 225 million ($136 million), including interest, on a tentative
basis.  The examination of NL's German income tax returns is continuing and
additional substantial proposed tax deficiency assessments are expected.  NL
applied DM 174 million of the tentative tax refund to reduce outstanding
borrowings under its DM bank credit facility.  Although NL believes it will
ultimately prevail, NL has granted a DM 100 million ($64 million) lien on its
Nordenham, Germany TiO2 plant, and may be required to provide additional
security in favor of the German tax authorities until the assessments proposing
tax deficiencies are resolved.  NL believes that it has adequately provided
accruals for additional income taxes and related interest expense which may
ultimately result from all such examinations and believes that the ultimate
disposition of such examinations should not have a material adverse effect of
its consolidated financial position, results of operations or liquidity.  Cash
received for settlement of prior years' tax examinations aggregated $6 million
in 1994 and NL expects to make settlement payments of approximately $20 million
in 1995.

    At December 31, 1994, NL had recorded net deferred tax liabilities of $175
million.  NL, which is not a member of the Contran Tax Group, operates in
numerous tax jurisdictions, in certain of which it has temporary differences
that net to deferred tax assets (before valuation allowance).  NL has provided a
deferred tax valuation allowance of $165 million, principally related to the
U.S. and Germany, offsetting deferred tax assets which NL believes may not
currently meet the "more likely than not" realization criteria for asset
recognition.

    In addition to the chemicals businesses conducted through Kronos and Rheox, 
NL also has certain interests and associated liabilities relating to certain
discontinued or divested businesses.

    NL has been named as a defendant, PRP, or both, in a number of legal
proceedings associated with environmental matters, including waste disposal
sites currently or formerly owned, operated or used by NL, many of which
disposal sites or facilities are on the U.S. EPA's Superfund National Priorities
List or similar state lists.  On a quarterly basis, NL evaluates the potential
range of its liability at sites where it has been named as a PRP or defendant. 
NL believes it has provided adequate accruals for reasonably estimable costs of
such matters, but NL's ultimate liability may be affected by a number of
factors, including changes in remedial alternatives and costs and the allocation
of such costs among PRPs.  NL is also a defendant in a number of legal
proceedings seeking damages for personal injury and property damage arising out
of the sale of lead pigments and lead-based paints.  NL has not accrued any
amounts for the pending lead pigment litigation.  Although no assurance can be
given that NL will not incur future liability in respect of this litigation,
based on, among other things, the results of such litigation to date, NL
believes that the pending lead pigment litigation is without merit.  Any
liability that may result is not reasonably capable of estimation.  NL currently
believes the disposition of all claims and disputes, individually or in the
aggregate, should not have a material adverse effect on its consolidated
financial position, results of operations or liquidity.  There can be no
assurance that additional matters of these types will not arise in the future. 
See Item 3 - "Legal Proceedings" and Note 20 to the Consolidated Financial
Statements.

    As discussed in "Results of Operations - Chemicals,"  NL has substantial
operations located outside the United States for which the functional currency
is not the U.S. dollar. As a result, the reported amount of NL's assets and
liabilities related to its non-U.S. operations, and therefore NL's consolidated
net assets, will fluctuate based upon changes in currency exchange rates.  The
carrying value of NL's net investment in its German operations is a net
liability due principally to its DM bank credit facility, while its net
investment in its other non-U.S. operations are net assets.

    NL periodically evaluates its liquidity requirements, capital needs and
availability of resources in view of, among other things, debt service
requirements, capital expenditure requirements and estimated future operating
cash flows.  As a result of this process, NL has in the past and may in the
future seek to raise additional capital, restructure ownership interests,
refinance or restructure indebtedness, sell interests in subsidiaries or other
assets, or take a combination of such steps or other steps to increase its
liquidity and capital resources.

REFINED SUGAR - AMALGAMATED

    Amalgamated's cash requirements are seasonal in that a major portion of the
total payments for sugarbeets is made, and the costs of processing the
sugarbeets are incurred, in the fall and winter of each year.  Accordingly,
Amalgamated's operating activities use significant amounts of cash in the first
and fourth calendar quarters and provide significant cash flow in the second and
third quarters of each year.  To meet its  seasonal cash needs, Amalgamated
obtains short-term borrowings pursuant to the Government's sugar price support
loan program and bank credit facilities.  Borrowings under the Government loan
program are secured by refined sugar inventory and are otherwise nonrecourse to
Amalgamated.    Amalgamated expects to meet its seasonal cash needs for the
remainder of the 1994 crop year and for the 1995 crop through borrowings from
such sources and internally-generated funds.  At December 31, 1994, Amalgamated
had $22 million of borrowing availability under the government loan program and
existing revolving bank credit facilities.  In view of the increase in
inventories resulting from the record crop and the imposition of marketing
allotments, Amalgamated has obtained an increase in certain of the seasonally
adjusted maximum borrowing limits of its $75 million revolving working capital
facility.

    The effective net Government loan rate available to Amalgamated for refined
sugar from the 1994 crop is approximately 20.69 cents per pound, down from 20.75
cents per pound for the 1993 crop.  Borrowings under the Government loan program
are secured by refined sugar inventory and are otherwise nonrecourse to
Amalgamated.  At December 31, 1994, approximately 3.8 million cwt of refined
sugar inventory with a LIFO carrying value of approximately $72 million (18.8
cents per pound) was the sole collateral for $80 million of nonrecourse
Government loans.

    Amalgamated's capital expenditures in the past three years, which
emphasized equipment to improve productivity, aggregated $51 million and were
financed principally from operations and $26 million of term loan borrowings. 
Estimated 1995 capital expenditures approximate $23 million, including $14
million for sugar extraction enhancing equipment and $1 million for
environmental protection and improvement programs, principally air and water
treatment facilities.

BUILDING PRODUCTS - MEDITE

    Medite's capital expenditures over the past three years aggregated $63
million and included $52 million related to its Irish MDF plant expansion and
the rebuild of its Rogue River chipping and veneer plant.  Medite's MDF plants
have been operating at high levels of capacity utilization (approximately 100%
in Europe and 92% in the U.S. during 1994) and customers have been served on an
allocation basis.  The recent completion of a second MDF production line in
Ireland is expected to increase Medite's worldwide MDF capacity by approximately
25% by 1998 (by 15% in 1995).  This $31 million project was financed in part by
a $22 million bank term loan.  In connection with the expansion, Medite has
obtained $4 million in grants from the Irish government, $3 million of which is
expected to be received during 1995 and used to reduce bank borrowings.  At
December 31, 1994, amounts available for borrowing under Medite's existing bank
credit agreements aggregated $12 million.  

    Medite intends to add new MDF production capacity during the next two to
three years.  Although Medite has no plan or arrangement in place with respect
to such MDF capacity additions, it is actively exploring expansion opportunities
through acquisitions, strategic joint ventures and new construction.  Medite
recently offered to enter into exclusive negotiations with a third party for the
purchase of an existing MDF plant, certain timber resources and certain other
assets, which offer was declined.  While Medite may renew its efforts at a later
date, no assurance can be given that it will be successful in any such
acquisition efforts.  To the extent it identifies appropriate opportunities to
expand its MDF production capacity, Medite could use additional borrowings
(including credit availability resulting from the expected paydown of bank debt
described below) to fund such expansion opportunities.

    In February 1995, Medite paid a $50 million non-cash dividend to Valcor by
distributing Medite preferred stock bearing a 12% cumulative annual dividend
rate.  Such preferred stock is redeemable, at Medite's option, for $50 million
plus accrued dividends.  Valcor currently owns 100% of Medite's outstanding
common and preferred stock.

    In March 1995, Medite filed a Registration Statement with the Securities
and Exchange Commission for a proposed public offering of approximately $100
million of its common stock, which Registration Statement has not yet become
effective.  Medite intends to use a portion of the net proceeds of such proposed
stock offering to pay down approximately $40 million of variable interest rate

debt and to redeem the $50 million of its preferred stock (plus any accrued
dividends) held by Valcor.  The remainder of the net proceeds from the proposed
offering, along with the borrowing availability discussed below, would be
available for Medite's general corporate purposes, including capital
expenditures and expansion.  In March 1995, Medite also amended its Timber
Credit Agreement to, among other things, provide that prepayments of the fixed
term portion (Tranche A) of its term loan would increase the reducing revolving
term portion (Tranche B) of the facility.  Accordingly, the approximately $40
million of bank debt expected to be repaid from proceeds of the proposed common
stock offering could be reborrowed subject to reducing availability through
2000.  If the Company's ownership of Medite falls below 80%, as is contemplated
by the proposed offering, Medite would cease to be a member of the Contran Tax
Group and would become a separate U.S. taxpayer.  There can be no assurance that
any such public offering of Medite common stock will be completed.

    As a result of the closure of its plywood operations, Medite has a 105 acre
site in Medford, Oregon which is believed to have alternative development
possibilities and is held for sale.

HARDWARE PRODUCTS - NATIONAL CABINET LOCK

    National Cabinet Lock's major plants are operating at a high rate of
capacity and capital spending continues to address market demands.  In this
regard, a new $2 million plating line designed to increase capacity, reduce
costs and improve quality in the Canadian drawer slide line was recently
completed.  The Company continues to explore additional expansion and/or
acquisition opportunities for its high-margin hardware products business.

    At December 31, 1994, National Cabinet Lock had approximately $6 million of
borrowing availability under its existing Canadian credit agreements.

FAST FOOD - SYBRA

    Sybra, like most restaurant businesses, is able to operate with nominal
working capital because sales are for cash, inventory turnover is rapid, and
payments to trade suppliers are generally not due for 30 days.

    Sybra's Consolidated Development Agreement with Arby's, Inc. requires Sybra
to open 31 new stores during 1993-1997 in its existing markets, of which ten
units had been opened through December 31, 1994 with eight more required to be
opened in 1995.  The aggregate cost of this expansion during the remaining three
years of the CDA is estimated at approximately $25 million, including $12
million in 1995, and is expected to be financed primarily with revolving credit
borrowings and internally generated funds.  Sybra currently anticipates that its
planned expansion program, which includes eight to ten new stores in 1995, will
meet or exceed the CDA requirements.  Approximately one-fourth of Sybra's 1995
capital budget of $15 million relates to its continuing program to remodel and
update existing stores.  Approximately 40% of Sybra's capital expenditures in
the past three years related to remodeling older stores.

    At December 31, 1994, Sybra had $16 million of borrowing availability under
its existing revolving credit agreements.  Sybra is currently negotiating to
increase such credit facilities by $5 million for its expansion and remodeling
programs.

GENERAL CORPORATE - VALHI AND VALCOR

    Valhi's operations are conducted principally through subsidiaries (NL,
Industries, Amalgamated and Valcor).  Valcor is an intermediate parent company
with operations conducted through its subsidiaries (Medite, National Cabinet
Lock and Sybra).  Accordingly, Valhi's and Valcor's long-term ability to meet
their respective corporate obligations is dependent in large measure on the
receipt of dividends or other distributions from their respective subsidiaries,
the realization of their investments through the sale of interests in such
entities and investment income.  Various credit agreements to which subsidiaries
are parties contain customary limitations on the payment of dividends, typically

a percentage of net income or cash flow; however, such restrictions have not
significantly impacted the Company's ability to service parent company level
obligations.  Neither Valhi nor Valcor has guaranteed any indebtedness of their
respective subsidiaries.

    In the event Medite's proposed public offering is completed and Medite
redeems for cash the $50 million of Medite preferred stock held by Valcor (plus
any accrued dividends), availability of such funds for Valcor's general
corporate purposes could be influenced in part by the terms of the Indenture
governing the Valcor Senior Notes.  Under the terms of such Indenture, Medite's
sale of common stock to the public would constitute an "asset disposition" (as
defined) and a portion of the "available cash" (as defined) from Medite's
offering not used within one year of completing the offering to either (i) repay
certain indebtedness of Valcor or certain of Valcor's subsidiaries or (ii)
invest in related businesses, could constitute "excess proceeds" (as defined)
and require Valcor to make an offer to purchase a portion of its Senior Notes,
at par.  There is no assurance that Medite's offering will be completed, or that
if completed there will be any "excess proceeds" requiring an offer to purchase
the Senior Notes.

    Valhi's LYONs do not require current cash debt service.  Valhi owns 5.5
million shares of Dresser common stock, which shares are held in escrow for the
benefit of holders of the LYONs.  The LYONs are exchangeable, at the option of
the holder, for the Dresser shares owned by Valhi.  Exchanges of LYONs for
Dresser stock would result in the Company reporting income related to the
disposition of the Dresser stock for both financial reporting and income tax
purposes, although no cash proceeds would be generated by such exchanges.  Valhi
continues to receive regular quarterly Dresser dividends (recently increased to
$.17 per quarter) on the escrowed shares.  

    During the first quarter of 1995 (through March 15, 1995), Valhi purchased
additional NL common shares for an aggregate of $11.5 million ($12 per NL share)
and had borrowed $20 million on its existing revolving credit facility (none
outstanding at December 31, 1994).  Valhi has initiated discussions to increase
this credit facility to $50 million.

    The Company has tentatively agreed to sell Amalgamated's sugar business,
for $325 million cash, to an agricultural cooperative comprised of sugarbeet
growers in Amalgamated's area of operation.  The proposed transaction is subject
to significant conditions, including financing, grower commitments and execution
of a definitive purchase agreement, and no assurance can be given that any such
transaction will be consummated.  The net proceeds from the proposed sale, if
completed, would be available for general corporate purposes, including
expansion of Valhi's other businesses.

    The Company routinely compares its liquidity requirements and alternative
uses of capital against the estimated future cash flows to be received from its
subsidiaries, and the estimated sales value of those units.  As a result of this
process, the Company has in the past and may in the future seek to raise
additional capital, refinance or restructure indebtedness, modify its dividend
policy, consider the sale of interests in subsidiaries, business units,
marketable securities or other assets, or take a combination of such steps or
other steps, to increase liquidity, reduce indebtedness and fund future
activities.  Such activities have in the past and may in the future involve
related companies.  The Company routinely evaluates acquisitions of interests
in, or combinations with, companies, including related companies, perceived by
management to be undervalued in the marketplace.  These companies may or may not
be engaged in businesses related to the Company's current businesses.  The
Company intends to consider such acquisition activities in the future and, in
connection with this activity, may consider issuing additional equity securities
and increasing the indebtedness of the Company, its subsidiaries and related
companies.  From time to time, the Company and related entities also evaluate
the restructuring of ownership interests among their respective subsidiaries and
related companies.

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 and Schedules" (page
F-1).

ITEM 9. CHANGES  IN AND  DISAGREEMENTS WITH  ACCOUNTANTS ON  ACCOUNTING  AND
        FINANCIAL DISCLOSURE

    None.


                                    PART III


ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The information required by this Item is incorporated by reference to
Valhi's definitive Proxy Statement to be filed with the Securities and Exchange
Commission 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 the
Valhi Proxy Statement.

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information required by this Item is incorporated by reference to the
Valhi Proxy Statement.

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required by this Item is incorporated by reference to the
Valhi Proxy Statement.  See Note 19 to the Consolidated Financial Statements.


                                     PART IV


ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

 (a) and (d)     Financial Statements and Schedules


             The consolidated financial statements and schedules listed on the
             accompanying Index of Financial Statements and Schedules (see page
             F-1) are filed as part of this Annual Report.



 (b)             Reports on Form 8-K

             Reports on Form 8-K filed for the quarter ended December 31, 1994
             and the months of January and February 1995:

             October 26, 1994   - Reported Items 5 and 7.
             November 10, 1994  - Reported Items 5 and 7.
             December 27, 1994  - Reported Items 5 and 7.
             January 31, 1995   - Reported Items 5 and 7.

 (c)             Exhibits

             Included as exhibits are the items listed in the Exhibit Index. 
             Valhi will furnish a copy of any of the exhibits listed below upon
             payment of $4.00 per exhibit to cover the costs to Valhi of
             furnishing the exhibits.  Instruments defining the rights of

             holders of long-term debt issues which do not exceed 10% of
             consolidated total assets will be furnished to the Commission upon
             request.

                 PAGE NUMBER:
                 MANUALLY
        ITEM NO. SIGNED COPY                     EXHIBIT INDEX

           3.1                Restated Articles of Incorporation of the
                              Registrant - incorporated by reference to
                              Appendix A to the definitive Prospectus/Joint
                              Proxy Statement of The Amalgamated Sugar
                              Company and LLC Corporation (File No. 1-5467)
                              dated February 10, 1987.

           3.2                By-Laws of the Registrant as amended -
                              incorporated by reference to Exhibit 3.1 of
                              the Registrant's Quarterly Report on Form 10-Q
                              for the quarter ended March 31, 1992.

           4.1                Form of Indenture between the Registrant and
                              NationsBank of Georgia, N.A., as Trustee,
                              governing Liquid Yield Option Notes due
                              2007 - incorporated by reference to Exhibit
                              4.1 to a Registration Statement on Form S-2
                              (No. 33-49866) filed by the Registrant.

           4.2                Indenture dated November 1, 1993 governing
                              Valcor's 95/8% Senior Notes due 2003,
                              including form of note - incorporated by
                              reference to Exhibit 4.1 of Valcor's
                              Quarterly Report on Form 10-Q (File No. 33-
                              63044) for the quarter ended September 30,
                              1993.

           4.3                Indenture dated October 20, 1993 governing
                              NL's 113/4% Senior Secured Notes due 2003,
                              including form of note, - incorporated by
                              reference to Exhibit 4.1 of NL's Quarterly
                              Report on Form 10-Q (File No. 1-640) for the
                              quarter ended September 30, 1993.

           4.4                Indenture dated October 20, 1993 governing
                              NL's 13% Senior Secured Discount Notes due
                              2005, including form of note - incorporated
                              by reference to Exhibit 4.6 of NL's Quarterly
                              Report on Form 10-Q (File No. 1-640) for the
                              quarter ended September 30, 1993.

          10.1                Form of Intercorporate Services Agreement
                              between the Registrant and Contran
                              Corporation - incorporated by reference to
                              Exhibit 10.1 of the Registrant's Annual
                              Report on Form 10-K (File No. 1-5467) for the
                              year ended December 31, 1992.

          10.2                Intercorporate Services Agreement by and
                              between Contran Corporation and NL effective
                              as of January 1, 1994 - incorporated by
                              reference to Exhibit 10.30 to NL's Annual
                              Report on Form 10-K (File No. 1-640) for the
                              year ended December 31, 1993.

          10.3                Stock Purchase Agreement dated October 30,
                              1991 between the Registrant and Tremont
                              Corporation - incorporated by reference to

                              Exhibit 28.1 of the Registrant's Quarterly
                              Report on Form 10-Q for the quarter ended
                              September 30, 1991.

          10.4*               Valhi, Inc. 1987 Incentive Stock Option -
                              Stock Appreciation Rights Plan, as amended.

          10.5*               Valhi, Inc. 1990 Non-Employee Director Stock
                              Option Plan - incorporated by reference to
                              Exhibit 4.1 of a Registration Statement on
                              Form S-8 (No. 33-41508) filed by the
                              Registrant.

          10.6*               Description of terms of an executive
                              severance agreement between NL and Joseph S.
                              Compofelice (Executive Vice President of the
                              Registrant) - incorporated by reference to
                              the last paragraph of page 16 entitled
                              "Employment Agreements" of NL's definitive
                              proxy statement (File No. 1-640) dated March
                              30, 1994.

          10.7*               1989 Long Term Performance Incentive Plan of
                              NL Industries, Inc. - incorporated by
                              reference to Exhibit A to NL's Proxy
                              Statement on Schedule 14A (File No. 1-640)
                              for the annual meeting held on May 2, 1989.

          10.8*               Supplemental Executive Retirement Plan for
                              Executives and Officers of NL Industries,
                              Inc. effective as of January 1, 1991 -
                              incorporated by reference to Exhibit 10.26 to
                              NL's Annual Report on Form 10-K (File No. 1-
                              640) for the year ended December 31, 1992.

          10.9                Amended and Restated Loan Agreement dated
                              October 15, 1993 among Kronos International,
                              Inc., the Banks set forth therein and
                              Hypobank International S.A., as Agent, and
                              Banque Paribas, as Co-Agent - incorporated by
                              reference to Exhibit 10.17 of NL's Quarterly
                              Report on Form 10-Q (File No. 1-640) for the
                              quarter ended September 30, 1993.

          10.10               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.

          10.11               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.

          10.12               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.


          10.13               Master Technology and Exchange Agreement
                              dated as of October 18, 1993 among Kronos,
                              Inc., Kronos Louisiana, Inc., Kronos
                              International, Inc., Tioxide Group Limited
                              and Tioxide Group Services Limited -
                              incorporated by reference to Exhibit 10.8 of
                              NL's Quarterly Report on Form 10-Q (File No.
                              1-640) for the quarter ended September 30,
                              1993.

          10.14               Allocation Agreement dated as of October 18,
                              1993 between Tioxide Americas Inc., ICI
                              American Holdings, Inc., 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.

          10.15               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.

          10.16               Contract dated September 9, 1971, between
                              Farbenfabrieken Bayer Aktiengesellschaft and
                              Titangesellschaft mit beschrankter Haftung
                              concerning supplies and services (German
                              language version and English translation
                              thereof) - incorporated by reference to
                              Exhibit 10.15 of NL's Annual Report on Form
                              10-K (File No. 1-640) for the year ended
                              December 31, 1985.

          10.17               Agreement dated February 8, 1984 between
                              Bayer AG and Kronos Titan GmbH (German
                              language version and English translation
                              thereof) - incorporated by reference to
                              Exhibit 10.16 of NL's Annual Report on Form
                              10-K (File No. 1-640) for the year ended
                              December 31, 1985.

          10.18               Registration Rights Agreement dated October
                              30, 1991, by and between NL and Tremont -
                              incorporated by reference to Exhibit 4.3 of
                              NL's Annual Report on Form 10-K (File No. 1-
                              640) for the year ended December 31, 1991.

          10.19               Insurance Sharing Agreement, effective
                              January 1, 1990, by and between NL, NL
                              Insurance, Ltd. (an indirect subsidiary of
                              Tremont Corporation) and Baroid Corporation -
                              incorporated by reference to Exhibit 10.20 to
                              NL's Annual Report on Form 10-K (File No. 1-
                              640) for the year ended December 31, 1991.

          21.1                Subsidiaries of the Registrant.

          23.1                Consent of Coopers & Lybrand L.L.P.

          23.2                Consent of KPMG Peat Marwick LLP.

          23.3                Consent of Arthur Andersen LLP.

          27.1                Financial Data Schedule for the year ended
                              December 31, 1994.

[FN]
*  Management contract, compensatory plan or agreement.

                                   SIGNATURES


    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.

                                        VALHI, INC.
                                        (Registrant)


                                        By: /s/ Harold C. Simmons            
                                        Harold C. Simmons, March 17, 1995
                                        (President)



    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/ Arthur H. Bilger                    /s/ Harold C. Simmons               
Arthur H. Bilger, March 17, 1995        Harold C. Simmons, March 17, 1995
(Director)                              (Chairman of the Board, President and
                                         Chief Executive Officer)


/s/ Norman S. Edelcup                     /s/ Glenn R. Simmons               
Norman S. Edelcup, March 17, 1995       Glenn R. Simmons, March 17, 1995
(Director)                              (Vice Chairman of the Board)



 /s/ Robert J. Frame                     /s/ Michael A. Snetzer              
Robert J. Frame, March 17, 1995         Michael A. Snetzer, March 17, 1995
(Director)                              (Director)



 /s/ J. Walter Tucker, Jr.               /s/ William C. Timm                 
J. Walter Tucker, Jr., March 17, 1995   William C. Timm, March 17, 1995
(Director)                              (Vice President-Finance and Treasurer
                                         and Chief Financial Officer)



                                         /s/ J. Thomas Montgomery, Jr.       
                                        J. Thomas Montgomery, Jr., 
                                        March 17, 1995
                                        (Vice President, Controller and Chief
                                         Accounting Officer)


                                   SIGNATURES

    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.

                                        VALHI, INC.
                                        (Registrant)


                                        By:                                  
                                        Harold C. Simmons, March   , 1995
                                        (President)


    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:



                                                                             
Arthur H. Bilger, March   , 1995        Harold C. Simmons, March   , 1995
(Director)                              (Chairman of the Board, President and
                                         Chief Executive Officer)


                                                                             
Norman S. Edelcup, March   , 1995       Glenn R. Simmons, March   , 1995
(Director)                              (Vice Chairman of the Board)



                                                                             
Robert J. Frame, March   , 1995         Michael A. Snetzer, March   , 1995
(Director)                              (Director)



                                                                             
J. Walter Tucker, Jr., March   , 1995   William C. Timm, March   , 1995
(Director)                              (Vice President-Finance and Treasurer
                                         and Chief Financial Officer



                                                                             
                                        J. Thomas Montgomery, Jr., 
                                        March   , 1995
                                        (Vice President, Controller and Chief
                                         Accounting Officer)




                           ANNUAL REPORT ON FORM 10-K

                            ITEMS 8, 14(A) AND 14(D)

                   INDEX OF FINANCIAL STATEMENTS AND SCHEDULES


FINANCIAL STATEMENTS                                                   PAGE

  Reports of Independent Accountants                                  F-3/F-5

  Consolidated Balance Sheets - December 31, 1993 and 1994            F-6/F-7

  Consolidated Statements of Operations - Years ended
   December 31, 1992, 1993 and 1994                                   F-8/F-9

  Consolidated Statements of Cash Flows - Years ended
   December 31, 1992, 1993 and 1994                                   F-10/F-12

  Consolidated Statements of Stockholders' Equity - Years ended
   December 31, 1992, 1993 and 1994                                   F-13

  Notes to Consolidated Financial Statements                          F-14/F-47



FINANCIAL STATEMENT SCHEDULES

  Report of Independent Accountants                                   S-1

  Schedule I  - Condensed financial information of Registrant         S-2/S-9

  Schedule II - Valuation and qualifying accounts                     S-10


    Schedules III and IV are omitted because they are not applicable.


                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Stockholders and Board of Directors of Valhi, Inc.:

    We have audited the accompanying consolidated balance sheets of Valhi, Inc.
and Subsidiaries as of December 31, 1993 and 1994, and the related consolidated
statements of operations, cash flows and stockholders' equity for each of the
three years in the period ended December 31, 1994.  These financial statements
are the responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audits.  We did
not audit the financial statements of certain wholly-owned subsidiaries (The
Amalgamated Sugar Company and Medite Corporation) constituting approximately 59%
and 25% of consolidated assets as of December 31, 1993 and 1994, respectively,
and approximately 80% of consolidated sales for each of the three years in the
period ended December 31, 1994 (38% of pro forma sales for 1994).  These
statements were audited by other auditors whose reports thereon have been
furnished to us, and our opinion, insofar as it relates to amounts included for
such subsidiaries, is based solely upon their reports.

    We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.

    In our opinion, based upon our audits and the reports of other auditors,
the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Valhi, Inc. and Subsidiaries as
of December 31, 1993 and 1994, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994, in conformity with generally accepted accounting principles.

    As discussed in Note 17 to the consolidated financial statements, in 1993
the Company changed its method of accounting for certain investments in debt and
equity securities in accordance with Statement of Financial Accounting Standards
("SFAS") No. 115 and in 1992 changed its method of accounting for postretirement
benefits other than pensions and income taxes in accordance with SFAS Nos. 106
and 109, respectively.





                                                        COOPERS & LYBRAND L.L.P.

Dallas, Texas
February 28, 1995

                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Shareholder of The Amalgamated Sugar Company:

    We have audited the consolidated balance sheets of The Amalgamated Sugar
Company as of December 31, 1993 and 1994, and the related consolidated
statements of income and shareholder's equity and cash flows for each of the
three years in the period ended December 31, 1994 (not presented separately
herein).  These consolidated financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

    We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the consolidated financial statements (not presented
separately herein) referred to above present fairly, in all material respects,
the financial position of The Amalgamated Sugar Company at December 31, 1993 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.

    As discussed in Note 12 to the consolidated financial statements (not
presented separately herein), in 1992 the Company changed its method of
accounting for postretirement benefits other than pensions and income taxes in
accordance with Statements of Financial Accounting Standards Nos. 106 and 109,
respectively.

                                                           KPMG PEAT MARWICK LLP

Salt Lake City, Utah
January 27, 1995

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Stockholder of Medite Corporation:

    We have audited the consolidated balance sheets of Medite Corporation as of
December 31, 1993 and 1994, and the related consolidated statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1994 (not presented separately herein).  These financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.

    We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the consolidated financial statements (not presented
separately herein) referred to above present fairly, in all material respects,
the consolidated financial position of Medite Corporation as of December 31,
1993 and 1994, and the consolidated results of its operations and cash flows for
each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.

    As discussed in Note 7 to the consolidated financial statements (not
presented separately herein), in 1992 the Company changed its method of
accounting for postretirement benefits other than pensions and income taxes in
accordance with Statements of Financial Accounting Standards Nos. 106 and 109,
respectively.





                                                             ARTHUR ANDERSEN LLP

Portland, Oregon,
January 27, 1995

                          VALHI, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 1993 AND 1994

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)



              ASSETS
                                                                                     1993             1994  

                                                                                            
Current assets:
  Cash and cash equivalents                                                        $ 22,189       $  170,747
  Marketable securities                                                              28,518           49,233
  Accounts and notes receivable                                                      61,135          202,172

  Receivable from affiliates                                                            272            5,411
  Inventories                                                                       276,125          498,097
  Prepaid expenses                                                                    6,126            8,198
  Deferred income taxes                                                                  75            2,276

      Total current assets                                                          394,440          936,134

Other assets:
  Marketable securities                                                             108,800          115,527
  Investment in affiliates                                                           74,897             -   
  Investment in joint ventures                                                         -             187,480
  Natural resource properties                                                        51,868           93,400
  Prepaid pension cost                                                                4,864           24,496
  Goodwill                                                                            5,500          248,097
  Deferred income taxes                                                              27,723            2,827
  Other assets                                                                       32,523           65,011

      Total other assets                                                            306,175          736,838

Property and equipment:
  Land                                                                               18,822           38,393
  Buildings                                                                          43,522          184,009
  Equipment                                                                         341,868          809,758
  Construction in progress                                                           17,344           18,267
                                                                                    421,556        1,050,427
  Less accumulated depreciation                                                     218,300          242,696

      Net property and equipment                                                    203,256          807,731

                                                                                   $903,871       $2,480,703


                          VALHI, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                           DECEMBER 31, 1993 AND 1994

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)



   LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                                     1993             1994  

                                                                                            
Current liabilities:
  Notes payable                                                                    $117,753       $  124,893
  Current maturities of long-term debt                                               16,086           62,625
  Accounts payable and accrued liabilities                                          223,528          424,693
  Payable to affiliates                                                                  43           11,358
  Income taxes                                                                        4,916           24,192
  Deferred income taxes                                                               2,494            8,461

      Total current liabilities                                                     364,820          656,222

Noncurrent liabilities:
  Long-term debt                                                                    302,490        1,086,654
  Accrued pension cost                                                                  110           76,344
  Accrued OPEB cost                                                                  17,705           83,300
  Accrued environmental costs                                                          -              93,655
  Deferred income taxes                                                               1,732          226,789
  Other                                                                               9,513           56,890

      Total noncurrent liabilities                                                  331,550        1,623,632

Minority interest in NL Industries                                                     -                -   
Minority interest in NL foreign subsidiaries                                           -               2,425


Stockholders' equity:
  Preferred stock, $.01 par value; 5,000 shares
   authorized; none issued                                                             -                -   
  Common stock, $.01 par value; 150,000 shares
   authorized; 124,435 and 124,475 shares issued                                      1,244            1,245
  Additional paid-in capital                                                         33,409           33,341
  Retained earnings                                                                 222,810          209,071
  Adjustments:
    Currency translation                                                            (17,776)         (12,128)
    Marketable securities                                                            41,075           37,669
    Pension liabilities                                                              (1,619)            (506)
  Treasury stock, at cost - 10,182 and 10,077 shares                                (71,642)         (70,268)

      Total stockholders' equity                                                    207,501          198,424

                                                                                   $903,871       $2,480,703


[FN]
Commitments and contingencies (Notes 16 and 20)


                          VALHI, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                  YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)



                                                          HISTORICAL                               PRO FORMA
                                                      1992           1993           1994             1994*  
                                                                                                  (Unaudited)
                                                                                      
Revenues and other income:
  Net sales                                         $811,821      $ 781,154       $832,656        $1,720,610
  Other, net                                          23,541         12,858          9,748            52,775

                                                     835,362        794,012        842,404         1,773,385
Costs and expenses:
  Cost of sales                                      634,073        592,979        633,388         1,293,812
  Selling, general and
   administrative                                    114,500        113,107        119,519           339,129
  Interest                                            51,497         38,648         35,274           119,200

                                                     800,070        744,734        788,181         1,752,141
    Income of consolidated
     companies before taxes                           35,292         49,278         54,223            21,244

Equity in NL prior to
 consolidation                                       (37,411)      (136,441)       (25,078)             -   


    Income (loss) from continuing
     operations before taxes                          (2,119)       (87,163)        29,145            21,244

Income taxes (benefit)                                (1,292)       (27,835)         9,476             9,750
Minority interest                                       -              -              -                  843

    Income (loss) from continuing
     operations                                         (827)       (59,328)        19,669        $   10,651

Discontinued operations                              (21,410)        (4,796)        (8,069)
Extraordinary items                                   (6,277)       (15,390)          -   
Cumulative effect of changes in
 accounting principles                               (69,774)           429           -   


    Net income (loss)                               $(98,288)     $ (79,085)      $ 11,600




[FN]
*   Assuming the Company had consolidated NL Industries effective at the
    beginning of 1994.  See Notes 1 and 3.


                          VALHI, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)



                                                           HISTORICAL                              PRO FORMA
                                                       1992           1993            1994           1994*  
                                                                                                  (Unaudited)

                                                                                            
Income (loss) per common share:
  Continuing operations                                $(.01)         $(.52)         $ .17              $.09
  Discontinued operations                               (.18)          (.04)          (.07)
  Extraordinary items                                   (.06)          (.13)           -  
  Cumulative effect of changes in
   accounting principles                                (.61)           -              -  

    Net income (loss)                                  $(.86)         $(.69)         $ .10


Cash dividends per share                               $ .20          $ .05          $ .08


Weighted average common shares
 outstanding                                         113,886        114,098        114,303           114,303



                          VALHI, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994

                                 (IN THOUSANDS)



                                                          HISTORICAL                               PRO FORMA
                                                      1992           1993           1994             1994*  
                                                                                                  (Unaudited)
                                                                                        
Operating activities:
  Net income (loss)                                 $(98,288)      $(79,085)      $ 11,600          $ 10,651
  Depreciation, depletion and
   amortization                                       27,616         25,569         29,649            83,610
  Noncash interest expense                             3,097         10,267         10,959            29,030
  Deferred income tax benefits                       (15,252)       (44,693)        (7,260)           (4,813)
  Equity in NL prior to
   consolidation                                      37,411        136,441         25,078              -   
  Dividends from affiliates                           10,740           -              -                 -   
  Prepayments of senior
   subordinated notes                                  9,511          7,749           -                 -   
  Other, net                                          (3,005)        (1,730)         1,527              (496)

  Equity in discontinued
   operations, net                                    21,410          4,796          8,069              -   
  Equity in extraordinary items
   of affiliates, net                                   -            10,353           -                 -   
  Cumulative effect of changes in
   accounting principles                              69,774           (429)          -                 -   
                                                      63,014         69,238         79,622           117,982

  Change in assets & liabilities:
    Accounts and notes receivable                     (3,591)        (4,257)        (2,660)          (15,812)
    Inventories                                       (1,274)       (10,863)       (35,934)          (18,006)
    Accounts payable and accrued
     liabilities                                      (4,891)       (20,155)        31,150            13,807
    Income taxes                                       1,860          1,027         (1,589)          107,654
    Accounts with affiliates                           2,269         (1,546)        (5,172)           (7,196)
    Other, net                                         1,426           (672)         2,041            36,187
    Trading securities:
      Sale proceeds                                     -              -            29,375            44,905
      Purchases                                         -              -           (25,000)          (25,870)

        Net cash provided by
         operating activities                         58,813         32,772         71,833           253,651


                          VALHI, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994

                                 (IN THOUSANDS)



                                                         HISTORICAL                                PRO FORMA
                                                      1992           1993            1994            1994*  
                                                                                                  (Unaudited)
                                                                                       
Investing activities:
  Capital expenditures                             $ (27,954)     $ (39,086)      $ (73,190)       $(110,121)
  Insurance proceeds                                  10,887           -               -                -   
  Purchases of NL common stock                          -              -            (15,060)         (15,060)
  Marketable securities:
    Sale proceeds                                    280,486        381,395            -                -   
    Purchases                                       (294,105)      (281,795)           -                -   
  Loans to affiliates:
    Loans                                            (66,953)       (11,800)        (16,550)         (16,550)
    Collections                                       66,953         11,800          16,550           16,550
  Other, net                                          (8,753)         3,363           4,054            8,147

      Net cash provided (used)
       by investing activities                       (39,439)        63,877         (84,196)        (117,034)

Financing activities:
  Indebtedness:
    Borrowings                                       968,311        677,173         493,725          538,215
    Principal payments                              (931,462)      (790,308)       (455,827)        (631,713)
  Loans from affiliates:
    Loans                                               -             5,400            -                -   
    Repayments                                          -            (5,400)           -                -   
  Dividends                                          (22,753)        (5,704)         (9,145)          (9,145)
  Grants and other, net                                   48             53           1,464              722

      Net cash provided (used)
       by financing activities                        14,144       (118,786)         30,217         (101,921)

Net increase (decrease)                            $  33,518      $ (22,137)      $  17,854        $  34,696


[FN]
*   Assuming the Company had consolidated NL Industries effective at the
    beginning of 1994.  See Notes 1 and 3.


                          VALHI, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994

                                 (IN THOUSANDS)




                                                        HISTORICAL                                 PRO FORMA
                                                    1992            1993            1994             1994*  
                                                                                                  (Unaudited)
                                                                                        
Cash and cash equivalents:
  Net increase (decrease) from:
    Operating,investing and
     financing activities                          $33,518        $(22,137)       $ 17,854          $ 34,696
    Currency translation                              (309)           (212)           (420)            7,269
    Consolidation of NL
     Industries                                       -               -            131,124              -   
                                                    33,209         (22,349)        148,558            41,965
  Balance at beginning of year                      11,329          44,538          22,189           128,782

  Balance at end of year                           $44,538        $ 22,189        $170,747          $170,747


Supplemental disclosures:
  Cash paid for:
    Interest, net of amounts
     capitalized                                   $53,321        $ 37,028        $ 23,197          $ 89,998
    Income taxes (refund)                           13,055          14,764          23,307           (88,111)

  Net assets of NL consolidated:
    Cash and cash equivalents                                                     $131,124
    Other current assets                                                           356,173
    Goodwill                                                                       242,769
    Property and equipment                                                         560,926
    Other noncurrent assets                                                        301,891
    Current liabilities                                                           (245,241)
    Long-term debt                                                                (746,762)
    Other noncurrent liabilities                                                  (536,573)
    Minority interest                                                               (2,425)

      Net investment in NL at
       date of consolidation                                                     $  61,882





                                       VALHI, INC. AND SUBSIDIARIES

                             CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                               YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994

                                              (IN THOUSANDS)




                                                     ADDITIONAL

                                          COMMON      PAID-IN      RETAINED
                                          STOCK       CAPITAL      EARNINGS

                                                           
Balance at December 31, 1991               $1,241      $32,618      $428,640

Net loss                                     -            -          (98,288)
Dividends                                    -            -          (22,753)
Adjustments, net                             -            -             -   
Other, net                                      2          682          -   

Balance at December 31, 1992                1,243       33,300       307,599

Net loss                                     -            -          (79,085)
Dividends                                    -            -           (5,704)
Adjustments, net                             -            -             -   
Cumulative effect of change in
 accounting principle                        -            -             -   
Other, net                                      1          109          -   

Balance at December 31, 1993                1,244       33,409       222,810

Net income                                   -            -           11,600
Cash dividends                               -            -           (9,145)
Dividend - Tremont common stock              -                       (16,194)
Adjustments, net                             -            -             -   
Other, net                                      1          (68)         -   

Balance at December 31, 1994               $1,245      $33,341      $209,071




                                                       ADJUSTMENTS                                     TOTAL
                                         CURRENCY       MARKETABLE      PENSION        TREASURY     STOCKHOLDERS'
                                        TRANSLATION     SECURITIES    LIABILITIES       STOCK          EQUITY    

                                                                                         
Balance at December 31, 1991              $ (3,834)      $   (405)      $  -           $(72,744)        $385,516

Net loss                                      -              -             -               -             (98,288)
Dividends                                     -              -             -               -             (22,753)
Adjustments, net                            (6,443)           173          -               -              (6,270)
Other, net                                    -              -             -                235              919

Balance at December 31, 1992               (10,277)          (232)         -            (72,509)         259,124

Net loss                                      -              -             -               -             (79,085)
Dividends                                     -              -             -               -              (5,704)
Adjustments, net                            (7,499)          (221)       (1,619)           -              (9,339)
Cumulative effect of change in
 accounting principle                         -            41,528          -               -              41,528
Other, net                                    -              -             -                867              977

Balance at December 31, 1993               (17,776)        41,075        (1,619)        (71,642)         207,501


Net income                                    -              -             -               -              11,600
Cash dividends                                -              -             -               -              (9,145)
Dividend - Tremont common stock              1,439             73           445            -             (14,237)
Adjustments, net                             4,209         (3,479)          668            -               1,398
Other, net                                    -              -             -              1,374            1,307

Balance at December 31, 1994              $(12,128)      $ 37,669       $  (506)       $(70,268)        $198,424


                          VALHI, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

    Organization.  Valhi, Inc. (NYSE: VHI) is a subsidiary of Contran
Corporation which holds, directly or through subsidiaries, approximately 90% of
Valhi's outstanding common stock.  Substantially all of Contran's outstanding
voting stock is held by trusts established for the benefit of the children and
grandchildren of Harold C. Simmons, of which Mr. Simmons is sole trustee.  Mr.
Simmons, the Chairman of the Board and Chief Executive Officer of Valhi and
Contran, may be deemed to control each of Contran and Valhi.

    Principles of consolidation.  The consolidated financial statements include
the accounts of Valhi and its majority-owned subsidiaries (collectively, the
"Company"). All material intercompany accounts and balances have been
eliminated.  Certain prior year amounts have been reclassified to conform to the
current year presentation.  The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions 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 amount of revenues and expenses
during the reporting period.  Ultimate actual results may, in some instances,
differ from previously estimated amounts.

    Pro forma information (unaudited).  The accompanying consolidated financial
statements include certain pro forma financial information as if the Company's
December 31, 1994 consolidation of NL Industries, Inc. (see Note 3) had occurred
as of January 1, 1994.  All such pro forma information is unaudited.

    Translation of foreign currencies.  Assets and liabilities of subsidiaries
whose functional currency is deemed to be other than the U.S. dollar are
translated at year-end rates of exchange and revenues and expenses are
translated at average exchange rates prevailing during the year.  Resulting
translation adjustments are accumulated in the currency translation adjustments
component of stockholders' equity, net of related deferred income taxes. 
Currency transaction gains and losses are recognized in income currently.

    Net sales.  Sales are recorded when products are shipped (fast food sales
at the time of retail sale).

    Inventories and cost of sales.  Inventories are stated at the lower of cost
or market.  The last-in, first-out method is used to determine the cost of
approximately 55% of total inventories at December 31, 1994 (1993 - 85%).  Other
inventory costs are generally based on average cost.

    Under the terms of its contracts with sugarbeet growers, the Company's cost
of sugarbeets is based on average sugar sales prices during the beet crop
purchase contract year, which begins in October and ends the following
September.  Any differences between the sugarbeet cost estimated at the end of
the fiscal year and the amount ultimately paid is an element of cost of sales in
the succeeding year.

    Cash and cash equivalents.  Cash equivalents include bank time deposits and
government and commercial notes and bills with original maturities of three
months or less.  Cash and cash equivalents at December 31, 1994 include $16
million which is restricted pursuant to outstanding letters of credit and
certain indebtedness agreements.

    Marketable securities and securities transactions.  Marketable debt and
equity securities are carried at market, based upon quoted market prices. 
Unrealized gains and losses on trading securities are recognized in income
currently.  Unrealized gains and losses on available-for-sale securities are
accumulated in the marketable securities adjustment component of stockholders'
equity, net of related deferred income taxes.  Realized gains and losses are
based upon the specific identification of the securities sold.  Prior to the
adoption of Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" effective
December 31, 1993, marketable securities were generally carried at the lower of
aggregate market or amortized cost and unrealized net gains were not recognized.

    Investment in affiliates and joint ventures.  Investments in more than 20%-
owned but less than majority-owned companies are accounted for by the equity
method.  Differences between the cost of each investment and the Company's pro
rata share of the entity's separately-reported net assets, if any, are allocated
among the assets and liabilities of the entity based upon estimated relative
fair values.  Such differences are charged or credited to income as the entities
depreciate, amortize or dispose of the related net assets.  At December 31,
1994, the unamortized net difference was nominal.

    Natural resource properties and depletion.  Timber and timberlands and
mining properties are stated at cost less accumulated depletion.  Depletion is
computed primarily by the unit-of-production method.

    Intangible assets and amortization.  Goodwill, representing the excess of
cost over fair value of individual net assets acquired in business combinations
accounted for by the purchase method, is amortized by the straight-line method
over not more than 40 years.  Substantially all goodwill at December 31, 1994
relates to NL Industries.  The Company's criteria for evaluating the
recoverability of goodwill includes consideration of the fair value of the
applicable subsidiary.  At December 31, 1994, the quoted market price of NL
common stock ($12.63 per share) was substantially in excess of the Company's net
investment in NL at that date ($2.37 per NL share held).

    Fast food restaurant franchise fees and other intangible assets are
amortized by the straight-line method over the periods (10 to 20 years) expected
to be benefitted.

    Property, equipment and depreciation.  Property and equipment are stated at
cost.  Maintenance, repairs and minor renewals are expensed; major improvements
are capitalized.  Interest costs related to major long-term capital projects
capitalized as a component of construction costs were $342,000 in 1992, $420,000
in 1993 and $783,000 in 1994 (pro forma 1994 - $2 million).

    Depreciation is computed principally by the straight-line and unit-of-
production methods over the estimated useful lives of eight to 40 years for
buildings and three to 20 years for equipment.

    Long-term debt.  Long-term debt is stated net of unamortized original issue
discount ("OID").  OID and deferred financing costs are amortized over the life
of the applicable issue by the interest method.  Capital lease obligations are
stated net of imputed interest.  

    Income taxes.  Valhi and its qualifying subsidiaries are members of
Contran's consolidated United States federal income tax group (the "Contran Tax
Group"). The policy for intercompany allocation of federal income taxes provides
that subsidiaries included in the Contran Tax Group compute the provision for
income taxes on a separate company basis.  Subsidiaries make payments to or
receive payments from Contran in the amounts they would have paid to or received
from the Internal Revenue Service had they not been members of the Contran Tax
Group.  The separate company provisions and payments are computed using the tax
elections made by Contran.  NL is a separate U.S. taxpayer and is not a member
of the Contran Tax Group.

    Deferred income tax assets and liabilities are recognized for the expected
future tax consequences of temporary differences between the income tax and
financial reporting carrying amounts of assets and liabilities, including
investments in the Company's subsidiaries and affiliates not included in the
Contran Tax Group.

    Earnings per share.  Income (loss) per share of common stock is based upon
the weighted average number of common shares outstanding.  Common stock
equivalents are excluded from the computation because the dilutive effect is
either antidilutive or not material.

    Other.  Advertising costs, expensed as incurred, aggregated $9.3 million in
1992, $9.9 million in 1993 and $10.1 million in 1994 (pro forma 1994 including
NL - $12 million).

    Research and development costs, expensed as incurred, were $901,000 in
1992, $854,000 in 1993 and $899,000 in 1994 (pro forma 1994 including NL - $11
million).

    Deferred technology fee income of NL is being amortized by the straight
line method over three years through October 1996.

    Accounting and funding policies for retirement plans and postretirement
benefits other than pensions ("OPEB") are described in Note 18.


NOTE 2 -     BUSINESS AND GEOGRAPHIC SEGMENTS:
                                                                 % OWNED AT
 BUSINESS SEGMENT              PRINCIPAL ENTITIES            DECEMBER 31, 1994

  Chemicals             NL Industries, Inc.                          52%
  Refined sugar         The Amalgamated Sugar Company               100%
  Building products     Medite Corporation                          100%
  Hardware products     National Cabinet Lock, Inc.                 100%
  Fast food             Sybra, Inc.                                 100%




                                                           YEARS ENDED DECEMBER 31,       
                                                           HISTORICAL                         PRO FORMA
                                                       1992           1993            1994     1994(*) 
                                                                                                  (Unaudited)
                                                                        (IN MILLIONS)
                                                                                        
Net sales:
  Chemicals                                           $  -          $   -          $   -            $  887.9

  Refined sugar                                        459.2          430.8          457.3             457.3
  Building products                                    194.8          174.3          189.9             189.9
  Hardware products                                     54.0           64.4           70.0              70.0
  Fast food                                            103.8          111.6          115.5             115.5

                                                      $811.8        $ 781.1         $832.7          $1,720.6

Operating income:
  Chemicals                                           $  -          $   -          $   -            $   91.9
  Refined sugar                                         37.8           37.5           31.6              31.6
  Building products                                     22.0           26.3           36.4              36.4
  Hardware products                                     10.7           17.5           20.9              20.9
  Fast food                                              8.5            9.7            9.0               9.0
                                                        79.0           91.0           97.9             189.8
General corporate and other:
  Securities earnings                                   11.4            6.4            4.0               7.9
  General expenses and other, net                       (7.1)         (10.0)         (12.4)            (57.2)
  Business unit dispositions                             3.5             .5            -                 -  
  Interest expense                                     (51.5)         (38.6)         (35.3)           (119.2)

    Income of consolidated
     companies before taxes                             35.3           49.3           54.2              21.3

Equity in NL prior to
 consolidation:
  Operations                                           (37.4)         (52.4)         (25.1)              -  
  Provision for market value
   impairment of NL common stock                         -            (84.0)           -                 -  

                                                       (37.4)        (136.4)         (25.1)              -  

    Income (loss) from continuing
     operations before taxes                          $ (2.1)       $ (87.1)       $  29.1          $   21.3





                                                           YEARS ENDED DECEMBER 31,       
                                                           HISTORICAL                         PRO FORMA
                                                       1992           1993            1994     1994(*) 
                                                                                                  (Unaudited)
                                                                        (IN MILLIONS)
                                                                                        
Depreciation, depletion and
 amortization:
  Chemicals                                           $  -           $  -           $  -            $   53.7
  Refined sugar                                          8.7            9.0           12.2              12.2
  Building products                                     11.0            8.5            9.6               9.6
  Hardware products                                      1.7            1.7            1.8               1.8
  Fast food                                              6.1            6.2            5.9               5.9
  Corporate                                               .1             .2             .1                .4

                                                      $ 27.6         $ 25.6         $ 29.6          $   83.6

Capital expenditures:
  Chemicals                                           $  -           $  -           $  -            $   36.8
  Refined sugar                                         12.7           11.1           26.8              26.8
  Building products                                      9.7           20.8           32.0              32.0
  Hardware products                                      1.0            2.7            3.4               3.4
  Fast food                                              4.5            4.3           10.8              10.8
  Corporate                                               .1             .2             .2                .3

                                                      $ 28.0         $ 39.1         $ 73.2          $  110.1

Geographic segments

  Net sales - point of origin:
    United States                                     $722.1         $692.3         $727.7          $1,031.2

    Europe                                              54.9           47.1           58.8             646.1
    Canada                                              34.8           41.7           46.2             169.1
    Eliminations                                         -              -              -              (125.8)

                                                      $811.8         $781.1         $832.7          $1,720.6

  Net sales - point of
   destination:
    United States                                     $706.6         $686.8         $724.0          $  962.5
    Other North America                                 18.2           22.0           26.7              95.8
    Europe                                              58.1           44.2           58.5             527.4
    Other                                               28.9           28.1           23.5             134.9

                                                      $811.8         $781.1         $832.7          $1,720.6

  Operating income:
    United States                                     $ 64.7         $ 74.0         $ 72.5          $  120.6
    Europe                                               9.0            6.4           12.3              46.2
    Canada                                               5.3           10.6           13.1              23.0

                                                      $ 79.0         $ 91.0         $ 97.9          $  189.8


[FN]
(*) Assuming the Company had consolidated NL effective at the beginning of
    1994.  See Notes 1 and 3. 



Identifiable assets                                                                 DECEMBER 31,   
                                                                                       1993          1994  
                                                                                        (IN MILLIONS)
                                                                                             
  Business segments:
    Chemicals                                                                         $  -         $1,467.6
    Refined sugar                                                                      369.0          419.6
    Building products                                                                  170.6          208.1
    Hardware products                                                                   31.3           37.8
    Fast food                                                                           65.1           68.6
                                                                                       636.0        2,201.7
    Corporate and eliminations                                                         267.9          279.0

                                                                                      $903.9       $2,480.7

  Geographic segments:
    United States                                                                     $578.6       $  991.3
    Europe                                                                              38.4        1,006.6
    Canada                                                                              19.0          203.8
                                                                                       636.0        2,201.7
  Corporate and eliminations                                                           267.9          279.0

                                                                                      $903.9       $2,480.7


    NL's chemicals operations are conducted through Kronos, Inc. (titanium
dioxide pigments or "TiO2") and Rheox, Inc. (specialty chemicals).  The
Company's building products (Medite), hardware products (National Cabinet Lock)
and fast food (Sybra) subsidiaries are owned by Valcor, Inc., a wholly-owned
subsidiary of Valhi.

    Capital expenditures include additions to property and equipment and timber
and timberlands, excluding amounts attributable to business units acquired in
business combinations accounted for by the purchase method.  

    Corporate assets consist principally of cash, cash equivalents and
marketable securities and, at December 31, 1993, investments in affiliates.  At
December 31, 1994, about one-third of corporate assets were held by NL.  Valhi
has a wholly-owned captive insurance company ("Valmont") registered in Vermont. 
Valmont's operations, which are not significant, are included in general
expenses and other, net.

    At December 31, 1994, the net assets of non-U.S. subsidiaries included in
consolidated net assets approximated $441 million.

NOTE 3 -  BUSINESS COMBINATIONS AND DISCONTINUED OPERATIONS:

    NL Industries, Inc (NYSE: NL).  At the beginning of 1992, Valhi held 48% of
NL's outstanding common stock and accounted for its interest in NL by the equity
method during the three years in the period ended December 31, 1994.  The
Company's losses attributable to NL in 1993 include an $84 million first quarter
charge for an "other than temporary" decline in the market value of NL common
stock.  Under current accounting rules, a market value writedown of an
investment accounted for by the equity method is not reversed if the market
value subsequently recovers.

    During 1994, Valhi purchased additional NL shares in market transactions
for an aggregate of approximately $15 million, and thereby increased its direct
ownership of NL to more than 50% in mid-December 1994.  The Company accounted
for such increase in its interest in NL by the purchase method (step purchase)
and, accordingly, consolidated NL's financial position as of December 31, 1994
and will consolidate NL's results of operations and cash flows in 1995.  NL's
separate financial statements reflect a stockholders' deficit of approximately
$293 million at December 31, 1994 and, accordingly, no minority interest in NL
is reported in the Company's consolidated financial statements.  Until such time
as NL reports positive stockholders' equity, all changes in NL's reported
stockholders' equity, including all undistributed income or loss, will accrue to
the Company for financial reporting purposes.

    Tremont Corporation (NYSE: TRE).  At the beginning of 1992, Valhi held 44%
of Tremont's outstanding common stock and accounted for its interest in Tremont
by the equity method during the three years in the period ended December 31,
1994.  During 1992, Valhi purchased additional Tremont shares in market
transactions for approximately $5 million, increasing its interest in Tremont to
48%.  In December 1994, Valhi's Board of Directors declared a special dividend
on its common stock of all of its 48% interest in Tremont (3.5 million Tremont
shares).  Valhi stockholders received approximately .03 (three one-hundreds) of
a share of Tremont for each Valhi share held.  The Distribution of Tremont
common stock was accounted for as a spin-off (recorded at book value, net of
tax).  The Distribution is currently taxable for federal income tax purposes to
both Valhi and Valhi stockholders based upon the aggregate fair market value
($11.19 per Tremont share) of the Tremont common stock distributed.  The
Company's equity in losses of Tremont's titanium metals operations, net of
allocable income tax benefit (see Note 16), are reported as discontinued
operations.  The 1992 loss from such discontinued operations includes a $22
million pre-tax charge for market value impairment of Tremont common stock.  

    Contran and certain of its subsidiaries, which hold approximately 90% of
Valhi's outstanding common stock, received approximately 3.2 million Tremont
shares in the Distribution (44% of Tremont's outstanding common stock), and may
be deemed to control Tremont.  Tremont holds 18% of NL's outstanding common
stock and accounts for its interest in NL by the equity method due to the common
control of Contran and certain of its subsidiaries.  As discussed above, Valhi
continues to own an interest in NL, and, accordingly, the Company's pro rata
portion of Tremont's equity in NL is included, for all periods presented, in
continuing operations as a component of the Company's equity in losses of NL
prior to consolidation.

NOTE 4 -     MARKETABLE SECURITIES AND SECURITIES TRANSACTIONS:


                                                                                     DECEMBER 31,   
                                                                                       1993           1994  
                                                                                        (IN THOUSANDS)  

                                                                                              
Current assets (trading securities):
  U.S. Treasury securities                                                           $ 28,518       $ 25,165
  Global bond investments                                                                -            24,068

                                                                                     $ 28,518       $ 49,233

Noncurrent assets (available-for-sale):
  Dresser Industries common stock                                                    $108,800       $103,243
  Other common stocks                                                                    -            12,284

                                                                                     $108,800       $115,527


    The global bond investments consist of fixed income government securities
denominated in various currencies, and related currency forward and option
contracts obtained to hedge exchange rate risk on the equivalent of
approximately $7 million of bond principal amount denominated primarily in
Deutsche marks and British pounds.  Realized and unrealized gains and losses on
trading securities, including related global bond investment currency gains and
losses, are reported as a component of securities earnings.  The amortized cost
of the Company's portfolio of trading securities approximated $28.6 million and
$50.4 million at December 31, 1993 and 1994, respectively.

    Valhi holds 5.5 million shares of Dresser common stock with a quoted market
price of $18.875 at December 31, 1994, or an aggregate market value of $103
million (cost $44 million).  The Company's Dresser stock is exchangeable for the
Company's LYONs at the option of the LYONs holder, and the carrying value of the
Dresser stock is limited to the accreted LYONs obligation.  Prior to the January
1994 merger of Dresser and Baroid Corporation, in which each share of Baroid
common stock was exchanged for .4 shares of Dresser common stock, Valhi held
13.7 million Baroid shares (quoted market price of $8.25 per share, or an
aggregate of $112.8 million, at December 31, 1993).  The other available-for-
sale common stocks have an aggregate cost basis of $15.4 million at December 31,
1994.

NOTE 5 -     ACCOUNTS AND NOTES RECEIVABLE:


                                                                                    DECEMBER 31,   
                                                                                       1993           1994  
                                                                                        (IN THOUSANDS)

                                                                                              
Accounts receivable                                                                   $58,834       $198,511
Notes receivable                                                                        2,548          6,317
Accrued interest                                                                          592            591
Refundable income taxes                                                                   135          1,187
Allowance for doubtful accounts                                                          (974)        (4,434)

                                                                                      $61,135       $202,172

NOTE 6 -     INVENTORIES:





                                                                                    DECEMBER 31,   
                                                                                       1993           1994  
                                                                                        (IN THOUSANDS)

                                                                                              
Raw materials:
  Chemicals                                                                          $   -          $ 30,118
  Sugarbeets                                                                           51,689         86,868
  Building products                                                                    14,704         13,050
  Hardware products                                                                     1,034          1,313
  Fast food                                                                             1,329          1,426
                                                                                       68,756        132,775

In process products:
  Chemicals                                                                              -             7,654
  Refined sugar and by-products                                                        56,798         54,700
  Building products                                                                     1,450          1,481
  Hardware products                                                                     3,179          4,437
                                                                                       61,427         68,272

Finished products:
  Chemicals                                                                              -           113,276

  Refined sugar and by-products                                                       107,158        107,236
  Building products                                                                     1,260          2,711
  Hardware products                                                                     1,901          2,510
                                                                                      110,319        225,733

Supplies                                                                               35,623         71,317

                                                                                     $276,125       $498,097


    The current cost of LIFO inventories exceeded the net carrying value of
such inventories by approximately $43 million and $37 million at December 31,
1993 and 1994, respectively.  The effect of reductions in certain LIFO inventory
quantities increased total operating income by $1.9 million in 1992, $.5 million
in 1993 and $3.2 million in 1994.

NOTE 7 -     INVESTMENT IN AFFILIATES AND JOINT VENTURES:


                                                                                     DECEMBER 31,   
                                                                                       1993            1994 
                                                                                         (IN THOUSANDS)

                                                                                               
Affiliates:
  NL Industries                                                                       $60,170       $   -   
  Tremont                                                                              14,727           -   

                                                                                      $74,897       $   -   

Joint ventures:
  Ti02 manufacturing joint venture                                                    $  -          $185,122
  Other                                                                                  -             2,358

                                                                                      $  -          $187,480


    Affiliates.  As a result of increasing its direct ownership of NL to more
than 50% in December 1994, the Company now accounts for NL as a consolidated
subsidiary.  In addition, the Company distributed all of its interest in Tremont
to Valhi stockholders in the form of a dividend declared in December 1994.  See
Note 3.  See also Item 7 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of this Annual Report on Form 10-K for
summarized financial information of NL prior to consolidation.

    Joint ventures.  A Kronos TiO2 subsidiary (Kronos Louisiana, Inc., or
"KLA") and Tioxide Group, Ltd., a wholly-owned subsidiary of Imperial Chemicals
Industries PLC ("Tioxide"), are equal owners of a manufacturing joint venture
(Louisiana Pigment Company, L.P.) that owns and operates a TiO2 plant in
Louisiana.  The joint venture has long-term debt which is collateralized by the
partnership interests of the partners and substantially all of the assets of the
joint venture.  The long-term debt consists of two tranches, one attributable to
each partner, and each tranche is serviced through (i) the purchase of the
plant's TiO2 output in equal quantities by the partners and (ii) cash capital
contributions.  KLA is required to purchase one-half of the TiO2 produced by the
joint venture.  The Company's tranche of the joint venture debt is reflected as
outstanding indebtedness of the Company because Kronos has guaranteed the
purchase obligation relative to the debt service of such tranche.  See Note 11.

    The manufacturing joint venture is intended to be operated on a break-even
basis and, accordingly, Kronos' 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.  Kronos' share of the production costs are reported as TiO2
cost of sales while Kronos' share of the joint venture's interest expense is
reported as a component of NL's interest expense.

    A summary balance sheet of the TiO2 manufacturing joint venture is shown
below.


                                                                                              December 31,
                                                                                                  1994    
              ASSETS                                                                         (In thousands)

                                                                                               
Current assets                                                                                    $ 38,052
Other assets                                                                                         1,969
Property and equipment, net                                                                        344,806

                                                                                                  $384,827


   LIABILITIES AND PARTNERS' EQUITY

Long-term debt, including current portion:
  Kronos tranche                                                                                  $ 88,715
  Tioxide tranche                                                                                   81,000
Other liabilities, primarily current                                                                12,355
                                                                                                   182,070

Partners' equity                                                                                   202,757

                                                                                                  $384,827


NOTE 8 -     NATURAL RESOURCE PROPERTIES AND OTHER NONCURRENT ASSETS:


                                                                                    DECEMBER 31,   
                                                                                        1993           1994 
                                                                                        (IN THOUSANDS)

                                                                                               
Natural resource properties:
  Timber and timberlands                                                              $51,868        $53,114
  Mining properties                                                                      -            40,286

                                                                                      $51,868        $93,400

Other assets:
  Franchise fees and other intangible assets                                          $15,580        $27,831
  Deferred financing costs                                                              7,817         23,102
  Other                                                                                 9,126         14,078

                                                                                      $32,523        $65,011


NOTE 9 -     ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:


                                                                                    DECEMBER 31,   
                                                                                       1993           1994  
                                                                                        (IN THOUSANDS)
                                                                                              
Accounts payable:
  Sugarbeet purchases                                                                $126,430       $146,638
  Other                                                                                36,908        120,409
                                                                                      163,338        267,047

Accrued liabilities:
  Employee benefits                                                                    17,657         50,929
  Sugar processing costs                                                               22,301         20,132
  Environmental costs                                                                   2,322         13,276
  Interest                                                                              3,987         11,363
  Miscellaneous taxes                                                                   1,586          9,080
  Other                                                                                12,337         52,866
                                                                                       60,190        157,646

                                                                                     $223,528       $424,693


NOTE 10 -    OTHER INCOME:


                                                                       YEARS ENDED DECEMBER 31, 
                                                                            1992          1993         1994 
                                                                                   (IN THOUSANDS)
                                                                                            
Securities earnings:
  Dividends and interest                                                  $ 9,279       $ 5,211      $ 6,033
  Securities transactions                                                   2,113         1,167       (2,054)
                                                                           11,392         6,378        3,979
Business unit dispositions:
  Insurance gain on plant destroyed by fire                                 8,490          -            -   
  Operations permanently closed                                            (5,000)          500         -   
                                                                            3,490           500         -   
Currency transactions, net                                                      1          (188)         911
Disposal of property and equipment                                            247           361          104
Other, net                                                                  8,411         5,807        4,754

                                                                          $23,541       $12,858      $ 9,748


    The 1992 insurance gain relates to Medite's veneer and chipping plant in
Rogue River, Oregon, as insurance proceeds exceeded the net carrying value of
the assets destroyed and cleanup costs.  The aggregate insurance proceeds of
$16.5 million included $10.9 million attributable to property loss and $5.6
million attributable to business interruption insurance, which was recognized as
a component of operating income through August 1993.  In 1992, Medite accrued a
loss on its plywood business and related facilities permanently closed in
January 1993, most of which related to the net carrying value of property and
equipment in excess of estimated net realizable sales value.  In 1993, Medite
changed its estimate of the aggregate loss primarily because the auction sale
proceeds of certain equipment exceeded the previously estimated net realizable
value.  

    Pro forma other income for 1994 (including NL) of $52.8 million includes
$10 million of NL technology fee income and $23 million of NL litigation
settlement gains.

NOTE 11 -    NOTES PAYABLE AND LONG-TERM DEBT:


                                                                                   DECEMBER 31,    
                                                                                     1993             1994  
                                                                                       (IN THOUSANDS)

                                                                                            
Notes payable - Amalgamated:
  United States Government loans                                                   $ 75,518       $   79,893
  Bank credit agreements                                                             42,235           45,000

                                                                                   $117,753       $  124,893

Long-term debt:
  Valhi - Liquid Yield Option NotesTM ("LYONsTM")                                  $108,800       $  119,096

  NL Industries:
    Senior Secured Notes                                                               -             250,000
    Senior Secured Discount Notes                                                      -             116,409
    Deutsche mark bank credit facility (DM 397,610)                                    -             255,703
    Joint venture term loan                                                            -              88,715
    Rheox bank term loan                                                               -              67,500
    Other                                                                              -              11,322
                                                                                       -             789,649

  Amalgamated - bank term loan                                                       15,000           26,000

  Valcor:
    Valcor - Senior Notes                                                           100,000          100,000
    Medite:

      Bank term loans                                                                62,700           89,411
      Bank working capital facilities                                                 6,741            8,802
      Other                                                                           4,595            4,360
                                                                                     74,036          102,573
    Other:
      Sybra bank credit agreements                                                   13,387            5,500
      Sybra capital lease obligations                                                 7,174            6,321
      National Cabinet Lock                                                             179              140
                                                                                     20,740           11,961
                                                                                    318,576        1,149,279
  Less current maturities                                                            16,086           62,625

                                                                                   $302,490       $1,086,654



    Valhi.  The zero coupon Senior Secured LYONs, $379 million principal amount
at maturity in October 2007, were issued with significant OID to represent a
yield to maturity of 9.25%.  No periodic interest payments are required.  Each
$1,000 in principal amount at maturity of the LYONs is exchangeable, at any
time, for 14.4308 shares of Dresser common stock held by Valhi.  The LYONs are
redeemable at the option of the holder in October 1997 or October 2002 at
$404.84 or $636.27, respectively, per $1,000 principal amount (the issue price
plus accrued OID through such purchase dates).  Such redemptions may be paid, at
Valhi's option, in cash, Dresser common stock, or a combination thereof.  The
LYONs are not redeemable at Valhi's option prior to October 1997 unless the
market price of Dresser common stock exceeds $35.70 per share for specified time
periods.  At December 31, 1993 and 1994, the net carrying value of the LYONs per
$1,000 principal amount at maturity was $287 and $314, respectively, and the
quoted market price was $330 and $320, respectively.

    The LYONs are secured by the 5.5 million shares of Dresser common stock
held by Valhi, which shares are held in escrow for the benefit of holders of the
LYONs.  Valhi receives the regular quarterly dividend on the escrowed Dresser
shares.

    Valhi has a $20 million revolving bank credit facility which matures in
October 1996, generally bears interest at LIBOR plus 1% and is collateralized by
all of the outstanding common stock of Amalgamated.  At December 31, 1994, the
full amount of the facility was available for borrowing.

    NL Industries.  NL's $250 million principal amount of 11.75% Senior Secured
Notes due 2003 and $188 million principal amount at maturity ($100 million
proceeds at issuance) of 13% Senior Secured Discount Notes due 2005
(collectively, the "NL Notes") are collateralized by a series of intercompany
notes from Kronos International, Inc. ("KII"), a wholly-owned subsidiary of
Kronos, to NL, the terms of which mirror those of the respective NL Notes (the
"NL Mirror Notes").  The 11.75% Notes are also collateralized by a first
priority lien on the stock of Kronos and a second priority lien on the stock of
Rheox.

    The 11.75% Notes and the 13% Discount Notes are redeemable, at NL's option,
after October 2000 and October 1998, respectively, except that up to one-third
of the aggregate principal amount of the 13% Discount Notes are redeemable (at
113% of the accreted value) upon any NL common stock offering, as defined, prior
to October 1996.  For redemptions, other than redemptions pursuant to any NL
common stock offering, the redemption prices range from 101.5% (starting October
2000) declining to 100% (after October 2001) of the principal amount for the
11.75% Notes and range from 106% (starting October 1998) declining to 100%
(after October 2001) of the accreted value of the 13% Discount Notes.  In the
event of an NL change of control, as defined, NL would be required to make an
offer to purchase the NL Notes at 101% of the principal amount of the 11.75%
Notes and 101% of the accreted value of the 13% Discount Notes.  The NL Notes
are issued pursuant to indentures which contain a number of covenants and
restrictions which, among other things, restrict the ability of NL and its
subsidiaries to incur debt, incur liens, pay dividends or merge or consolidate
with, or sell or transfer all or substantially all of its assets to, another
entity.  The 13% Discount Notes do not require cash interest payments for the
first five years.  At December 31, 1994, the net carrying value of the 13%
Discount Notes per $1,000 principal amount of maturity was $621 (quoted market
price - $613) and the quoted market price of the 11.75% Notes was $988 per
$1,000 principal amount.

    The DM credit facility consists of a DM 398 million term loan due from 1997
to 1999 and a DM 250 million revolving credit facility due no later than 2000. 
Borrowings bear interest at DM LIBOR plus 1.625% (6.9% at December 31, 1994). 
NL and Kronos have agreed, under certain circumstances, to provide KII with up
to DM 125 million through January 1, 2001.  The DM credit facility is
collateralized by pledges of the stock of certain KII subsidiaries.

    Borrowings under KLA's tranche of the joint venture term loan bear interest
at LIBOR plus 1.625% (8.125% at December 31, 1994) and are repayable in
quarterly installments through September 2000.  See Note 7.

    Rheox has a credit agreement providing for a seven-year term loan due in
quarterly installments through December 1997 and a $15 million revolving
credit/letter of credit facility due September 1995.  Borrowings bear interest,
at Rheox's option, at prime rate plus 1.5% or LIBOR plus 2.5% (9.0% at
December 31, 1994), and are collateralized principally by the stock of Rheox and
its U.S. assets.

    At December 31, 1994, unused lines of credit available for borrowings under
the Rheox U.S. facility and under non-U.S. NL subsidiary credit facilities
approximated $14 million and $195 million, respectively.  Approximately $80
million (DM 125 million) of such non-U.S. amount is available only to (i)
permanently reduce the DM term loan or (ii) pay certain future German income tax
assessments.

    Amalgamated.  The United States Government loans are made under the sugar
price support loan program, which program extends through the 1997 crop year
ending September 30, 1998.  These short-term nonrecourse loans are
collateralized by refined sugar inventories and are payable at the earlier of
the date the refined sugar is sold or upon maturity.  At December 31, 1994, the
weighted average interest rate on Government loans was 6.0% (1993 - 3.4%).

    Amalgamated's principal bank credit agreement (the "Sugar Credit
Agreement") provides for a revolving credit facility in varying amounts up to
$75 million, with advances based upon formula-determined amounts of accounts
receivable and inventories, and a term loan.  Borrowings under the revolving
credit facility bear interest, at Amalgamated's option, at the prime rate or
LIBOR plus 1.25% and mature not later than September 30, 1996.  The term loan
bears interest, at Amalgamated's option, at the prime rate plus .25% or LIBOR
plus 1.5% and matures in July 1998.  The Sugar Credit Agreement may be
terminated by the lenders in the event the sugar price support loan program is
abolished or materially and adversely modified, and borrowings are
collateralized by substantially all of Amalgamated's assets.  Amalgamated also
has a $5 million unsecured line of credit with the agent bank for the Sugar
Credit Agreement.  At December 31, 1994, the weighted average interest rate on
Amalgamated's outstanding bank borrowings was 7.7% (1993 - 4.9%).

    At December 31, 1994, unused credit available to Amalgamated under its bank
credit agreements and the sugar price support loan program aggregated
approximately $22 million.

    Valcor.  Valcor's unsecured 9 5/8% Senior Notes Due November 2003 are
redeemable at the Company's option beginning November 1998, initially at
104.813% of principal amount declining to 100% after November 2000.  In the
event of a change of control of Valcor, as defined, Valcor would be required to
make an offer to purchase the Valcor Notes at 101% of principal amount.  At
December 31, 1994, the quoted market price of the Valcor Notes per $1,000
principal amount was $896 (1993 - $1,008).  The indenture governing the Valcor
Notes, among other things, limits dividends and additional indebtedness, and
prohibits Valcor from co-investing with affiliates.

    Medite.  Medite's U.S. bank credit agreement (the "Timber Credit
Agreement") provides for (i) term loan financing ($67 million at December 31,
1994) due in annual installments of $8 million through 1999 with the balance due
in 2000, and (ii) a $15 million revolving working capital facility ($2 million
outstanding at December 31, 1994) through September 1996.  Borrowings generally
bear interest at rates 1.5% to 2% over LIBOR, are collateralized by Medite's
timber and timberlands, and borrowings under the working capital facility are
also collateralized by Medite's U.S. receivables and inventories.  Medite has
entered into interest rate swaps to effectively fix the interest rate on $26
million of the term loan due in 1998-2000 that results in a weighted average
interest rate of 7.6% for such borrowings.  The Company is exposed to interest
rate risk in the event of nonperformance by the other parties to the agreements,
although it does not anticipate nonperformance by such parties.  See Note 15.

    Medite's Irish subsidiary, Medite of Europe Limited, has bank credit
agreements providing for (i) a $22.4 million bank term loan repayable in
installments from 1995 through 2000 and (ii) a $12 million multi-currency
revolving working capital facility through April 1996.  Borrowings under both
facilities ($29.2 million at December 31, 1994) are collateralized by
substantially all of Medite/Europe's assets.  The term loan bears interest at a
weighted average fixed rate of 8.4% while borrowings under the revolving
facility bear interest at rates based upon LIBOR.

    At December 31, 1994, the weighted average interest rates on Medite's
outstanding U.S. and non-U.S. bank borrowings, including the effect of the
interest rate swaps discussed above, were 7.8% and 7.9%, respectively, (6.3% and
6.7%, respectively, at December 31, 1993).  Amounts available for borrowing
under the existing bank credit facilities aggregated approximately $12 million
at December 31, 1994.

    Other Medite indebtedness consists principally of a State of Oregon term
loan that matures in monthly installments through March 2008, bears interest at
6.9% and is collateralized by certain property and equipment.

    Other Valcor.  Sybra's revolving bank credit agreements provide for
unsecured credit facilities aggregating $21 million with interest generally at
LIBOR plus 1.25%.  Borrowings under these agreements mature July 1996, subject
to renewal through July 1997.  At December 31, 1993 and 1994, the weighted
average interest rate on outstanding revolving borrowings was 4.7% and 7.7%,
respectively.  Amounts available for borrowing aggregated approximately $15.5
million at December 31, 1994.  Future minimum payments under Sybra's capital
lease obligations at December 31, 1994, including amounts representing interest,
are approximately $1.5 million in each of the next four years and an aggregate
of $4.5 million thereafter.

    National Cabinet Lock has a Canadian bank credit agreement which currently
provides for approximately $6 million of U.S. or Canadian dollar borrowings,
with interest generally at LIBOR plus .5% and collateralized by substantially
all of National Cabinet Lock's Canadian assets.  At December 31, 1994, the full
amount of these facilities was available for borrowing.

    Aggregate maturities of long-term debt at December 31, 1994


YEARS ENDING DECEMBER 31,                                                                       AMOUNT
                                                                                            (IN THOUSANDS)

                                                                                              
  1995                                                                                          $   63,343
  1996                                                                                              77,645
  1997                                                                                             274,079
  1998                                                                                             118,792
  1999                                                                                             140,723
  2000 and thereafter                                                                              584,191
                                                                                                 1,258,773

  Less:
    Unamortized Valhi LYONs OID                                                                     34,355
    Unamortized NL Senior Secured Discount Notes OID                                                71,091
    Amounts representing interest on capital leases                                                  4,048

                                                                                                $1,149,279


    The LYONs are reflected in the above table as due October 1997, the first
of the two dates they are redeemable at the option of the holder, at the
aggregate redemption price on such date of $153.5 million ($404.84 per $1,000
principal amount at maturity in October 2007).

    Other.  In addition to the NL Notes and the Valcor Notes discussed above,
credit agreements of subsidiaries typically require the respective subsidiary to
maintain minimum levels of equity, require the maintenance of certain financial
ratios, limit dividends and additional indebtedness and contain other provisions
and restrictive covenants customary in lending transactions of this type.  At
December 31, 1994, the restricted net assets of consolidated subsidiaries
approximated $125 million.

NOTE 12 - OTHER NONCURRENT LIABILITIES:


                                                                                     DECEMBER 31,   
                                                                                        1993           1994 
                                                                                         (IN THOUSANDS)

                                                                                               
Insurance claims and expenses                                                         $ 5,141        $18,155
Employee benefits                                                                       1,874         15,440
Deferred technology fee income                                                           -            18,305
Other                                                                                   2,498          4,990

                                                                                      $ 9,513        $56,890


NOTE 13 - EXTRAORDINARY ITEMS:


                                                                       YEARS ENDED DECEMBER 31, 
                                                                           1992          1993          1994 
                                                                                  (IN THOUSANDS)

                                                                                           
Prepayments of Valhi 121/2% Notes                                       $(9,511)     $ (7,749)     $   -   
Income tax benefit                                                         3,234         2,712          -   
                                                                          (6,277)       (5,037)         -   

Equity in NL's prepayments of indebtedness                                  -          (15,928)         -   
Deferred income tax benefit                                                 -            5,575          -   
                                                                            -          (10,353)         -   

  Extraordinary loss                                                     $(6,277)     $(15,390)     $   -   



    Funds for the prepayment of $235 million principal amount of Valhi 121/2%
Senior Subordinated Notes during 1992 and 1993 were provided in part from net
proceeds of the LYONs ($95 million), Medite's Timber Credit Agreement ($60
million) and Valcor's Senior Notes ($50 million).

NOTE 14 - STOCKHOLDERS' EQUITY:


                                                                     SHARES OF COMMON STOCK    
                                                                   ISSUED     TREASURY       OUTSTANDING
                                                                                (IN THOUSANDS)

                                                                                           
Balance at December 31, 1991                                       124,105         (10,235)         113,870

Issued                                                                 185              24              209
Other                                                                 -                (26)             (26)


Balance at December 31, 1992                                       124,290         (10,237)         114,053

Issued                                                                 145              55              200

Balance at December 31, 1993                                       124,435         (10,182)         114,253

Issued                                                                  40              32               72
Other                                                                 -                 73               73

Balance at December 31, 1994                                       124,475         (10,077)         114,398


    Common stock issued includes 15,500 shares in 1992, 47,800 in 1993 and
20,000 shares in 1994 to pay accrued employee benefits of $87,000, $239,000 and
$98,000, respectively.

    Treasury stock includes the Company's proportional interest in 1.2 million
Valhi shares held by NL.  Under Delaware Corporation Law, all shares held by a
majority-owned company are considered to be treasury stock.  As a result, shares
outstanding for financial reporting purposes differ from those outstanding for
legal purposes.

    Options and restricted stock.  Valhi has an incentive stock option plan
that provides for the discretionary grant of qualified incentive stock options,
nonqualified stock options, restricted stock and stock appreciation rights.  Up
to nine million shares of Valhi common stock may be issued pursuant to this
plan.  Options are granted at a price not less than 85% of fair market value on
the date of grant, generally vest ratably over a five-year period beginning one
year from the date of grant and expire 10 years from the date of grant. 
Restricted stock, forfeitable unless certain periods of employment are
completed, is held in escrow in the name of the grantee until the restriction
period expires.  At December 31, 1994, approximately 100,000 shares restricted
for periods up to 18 months are included in outstanding shares.  No stock
appreciation rights have been granted.

    Pursuant to Valhi's Non-Employee Director Stock Option Plan, options to
purchase 2,000 shares of Valhi common stock are automatically granted once a
year to each non-employee director of Valhi.  Options are granted at a price
equal to the fair market value on the date of grant, vest one year from the date
of grant and expire five years from the date of grant.  Up to 50,000 shares of
Valhi common stock may be issued pursuant to this plan.


                                                                                                     AMOUNT 
                                                                             EXERCISE                PAYABLE
                                                                             PRICE PER                UPON  
                                                                  SHARES      SHARE                 EXERCISE
                                                                            (IN THOUSANDS, EXCEPT
                                                                              PER SHARE AMOUNTS)

                                                                                            
Outstanding at December 31, 1991                                   3,948            3.51-15.00       $31,308

Granted                                                                8                  5.50            44
Cancelled                                                            (46)           5.00-15.00          (393)

Outstanding at December 31, 1992                                   3,910            3.51-15.00        30,959

Granted                                                              620                  5.00         3,102
Exercised                                                             (5)                 3.61           (18)
Cancelled                                                             (1)                 3.51            (3)

Outstanding at December 31, 1993                                   4,524            3.51-15.00        34,040

Granted                                                            2,308            5.21- 6.89        13,520
Exercised                                                            (40)           3.51- 5.63          (172)
Cancelled                                                         (1,456)           5.00-12.50        (7,724)


Outstanding at December 31, 1994                                   5,336           $5.00-15.00       $39,664



    At December 31, 1994, options to purchase 3.4 million Valhi shares were
exercisable (1.1 million shares at prices lower than the December 31, 1994
market price of $7.63 per share), options to purchase 1 million shares are
scheduled to become exercisable in 1995, and an aggregate of 2.9 million shares
were available for future grants.  During 1994, options to purchase 1.4 million
shares at fixed prices ranging from $5.21 to $6.89 per share were granted in
exchange for cancellation of an equal number of options previously granted at
prices ranging from $5.00 to $5.50 per share, which prior options contained a
formula-based annual exercise price increase.

NOTE 15 - FINANCIAL INSTRUMENTS:



                                                                              DECEMBER 31,               
                                                                      1993                     1994       
                                                              CARRYING       FAIR      CARRYING      FAIR
                                                                AMOUNT       VALUE       AMOUNT      VALUE
                                                                            (IN MILLIONS)       

                                                                                        
Cash and cash equivalents                                       $ 22.2       $ 22.2      $170.7     $170.7
Marketable securities:
  Trading securities                                              28.5         28.5        49.2       49.2
  Available-for-sale securities                                  108.8        112.8       115.5      115.5

Notes payable and long-term debt (excluding
 capitalized leases):
  Publicly-traded fixed rate debt:
    Valhi LYONs                                                 $108.8       $125.1      $119.1     $121.3
    NL Senior Secured Notes                                        -            -         250.0      247.1
    NL Senior Secured Discount Notes                               -            -         116.4      114.8
    Valcor Senior Notes                                          100.0        100.8       100.0       89.6
  Medite debt with rates fixed via interest rate swaps            26.0         26.1        26.0       23.3
  Other fixed-rate debt                                            6.3          6.3        26.8       26.0
  Variable rate debt                                             187.9        187.9       630.4      630.4

Minority interest in NL Industries common stock                    N/A          N/A      $  -       $314.9

Valhi common stockholders' equity                               $207.5       $540.9      $198.4     $872.3



    Fair values of marketable securities and publicly traded debt are based
upon quoted market prices.  See Notes 4 and 11.  The fair value of the 48%
minority interest in NL Industries and of Valhi's common stockholders' equity
are based upon quoted market prices for NL common stock (1994 - $12.63 per
share) and Valhi common stock (1994 - $7.63 per share; 1993 - $4.88 per share).

    The fair value of debt on which interest rates have been effectively fixed
through the use of interest rate swaps is deemed to approximate the book value
of the debt plus or minus the fair value of the related swaps.  See Note 11. 
Fair values of Medite's interest rate swaps are estimated to be a $.1 million
payable at December 31, 1993 and a $2.7 million receivable at December 31, 1994,
representing the estimated amounts Medite would pay or receive if it terminated
the swap agreements at those dates, and are based upon quotes obtained from the
counter party financial institution.  Fair values of other fixed rate debt have
been estimated based upon relative changes in the Company's variable borrowing
rates since the dates the interest rates were fixed.  Fair values of variable
interest rate debt are deemed to approximate book value.

    Medite entered into certain forward currency contracts to eliminate
exchange rate fluctuation risk on the equivalent of approximately $1 million of
equipment purchase commitments denominated principally in Deutsche marks ($4
million at December 31, 1993).  Such currency forward contracts effectively
fixed the U.S. dollar cost of the related equipment.  At December 31, 1993 and
1994, the fair value of such currency contracts, estimated by obtaining quotes
from the counter party financial institutions, approximated the contract amount.

NOTE 16 - INCOME TAXES:


                                                                          YEARS ENDED DECEMBER 31,
                                                                               1992        1993        1994 
                                                                                     (IN MILLIONS) 
                                                                                             
Components of income (loss) from continuing
 operations before taxes:
  United States:
    Contran Tax Group:
      Consolidated companies                                                  $ 21.9     $  32.8      $ 29.7
      Dividends from NL                                                          8.7         -           -  
                                                                                30.6        32.8        29.7
    Undistributed equity in NL prior to
     consolidation                                                             (46.1)     (136.4)      (25.1)
                                                                               (15.5)     (103.6)        4.6
  Non-U.S. subsidiaries                                                         13.4        16.5        24.5

                                                                              $ (2.1)    $ (87.1)     $ 29.1

Expected tax expense (benefit), at U.S. federal
 statutory income tax rate of 35% (34% in 1992)                               $  (.7)    $ (30.5)     $ 10.2
Non-U.S. tax rates                                                              (1.8)       (1.8)       (2.4)
U.S. state income taxes, net                                                     1.7         1.8          .9
Incremental U.S. tax and rate differences on equity
 in earnings of non-tax group companies                                          1.0         3.6         1.7
Rate change adjustment of deferred taxes                                         -           (.1)        -  
Other, net                                                                      (1.5)        (.8)        (.9)

                                                                              $ (1.3)    $ (27.8)     $  9.5
Components of income tax expense (benefit):
  Currently payable:
    U.S. federal                                                              $  6.9     $  12.1      $ 10.7
    U.S. state                                                                   2.8         2.6         1.2
    Non-U.S.                                                                     2.2         4.3         4.9
                                                                                11.9        19.0        16.8
  Deferred income taxes, principally U.S.                                      (13.2)      (46.8)       (7.3)

                                                                              $ (1.3)    $ (27.8)     $  9.5

Comprehensive provision for income tax expense
 (benefit) allocable to:
  Pre-tax income                                                              $ (1.3)    $ (27.8)     $  9.5
  Discontinued operations                                                      (11.9)       (2.6)       (4.3)
  Extraordinary items                                                           (3.2)       (8.3)        -  
  Stockholders' equity, principally deferred taxes
   allocable to adjustments components                                          (3.5)       (4.9)         .5

                                                                              $(19.9)    $ (43.6)     $  5.7


    Changes in deferred income taxes related to adoption of new accounting
standards is disclosed in Note 17.

    The components of the net deferred tax liability are summarized in the
following table.  At December 31, 1994, all of the deferred tax valuation
allowance relates to NL tax jurisdictions, principally the U.S. and Germany.


                                                                                  DECEMBER 31,              
                                                                           1993                 1994        
                                                                   ASSETS  LIABILITIES  ASSETS   LIABILITIES
                                                                                  (IN MILLIONS)

                                                                                       
Tax effect of temporary differences relating to:
  Inventories                                                       $  .1     $ (8.8)   $   4.3    $ (11.8)
  Marketable securities                                               -        (23.5)       -        (18.5)

  Natural resource properties                                         -        (11.3)       -        (18.3)
  Property and equipment                                              -        (16.3)        .4     (186.2)
  Accrued OPEB cost                                                   7.2        -         32.3        -  
  Accrued environmental liabilities and other deductible
   differences                                                       14.5        -         90.8        -  
  Other taxable differences                                           -        (17.2)       -       (178.5)
  Investments in subsidiaries and affiliates not
   members of the consolidated tax group                             78.8        -         78.7      (22.0)
  Non-U.S. tax loss and credit carryforwards                           .1        -        163.1        -  
Valuation allowance                                                   -          -       (164.5)       -  
    Adjusted gross deferred tax assets (liabilities)                100.7      (77.1)     205.1     (435.3)
Netting of items by tax jurisdiction                                (72.9)      72.9     (200.0)     200.0
                                                                     27.8       (4.2)       5.1     (235.3)
Less net current deferred tax asset (liability)                        .1       (2.5)       2.3       (8.5)

    Net noncurrent deferred tax asset (liability)                  $ 27.7     $ (1.7)   $   2.8   $ (226.8)



    The Contran Tax Group is undergoing examinations of certain of its income
tax returns, and tax authorities have or may propose tax deficiencies.  The
Company believes that it has adequately provided accruals for additional income
taxes and related interest expense which may ultimately result from such
examinations and believes that the ultimate disposition of all such examinations
should not have a material adverse effect on its consolidated financial
position, results of operations or liquidity.

    Certain of NL's U.S. and non-U.S. income tax returns, including Germany,
are being examined and tax authorities have or may propose tax deficiencies. 
During 1994, the German tax authorities withdrew certain tax assessment reports
which had proposed tax deficiencies of DM 100 million and remitted tax refunds
aggregating DM 225 million ($136 million), including interest, on a tentative
basis.  The examination of NL's German income tax returns is continuing and
additional substantial proposed tax deficiency assessments are expected. 
Although NL believes it will ultimately prevail, NL has granted a DM 100 million
($64 million at December 31, 1994) lien on its Nordenham, Germany TiO2 plant,
and may be required to provide additional security in favor of the German tax
authorities until any assessments proposing tax deficiencies are resolved.  The
Company believes that it has adequately provided accruals for additional income
taxes and related interest expense which may ultimately result from all such
examinations and believes that the ultimate disposition of such examinations
should not have a material adverse effect on its consolidated financial
position, results of operations or liquidity.  NL expects to make examination
settlement payments aggregating $20 million in 1995. 

    At December 31, 1994, NL had approximately $300 million of non-U.S. income
tax loss carryforwards with no expiration dates, primarily in Germany.  As a
result of NL's German tentative tax refunds and redetermination of prior year's
U.S. tax liabilities, NL does not anticipate having any net operating loss or
alternative minimum tax credit carryforwards for U.S. federal income tax
purposes at December 31, 1994.

NOTE 17 -    CHANGES IN ACCOUNTING PRINCIPLES:

    Marketable securities (SFAS No. 115).  Early compliance with SFAS No. 115
was elected effective December 31, 1993.  The amounts attributable to the
Company's investment in affiliates consist of the Company's equity in the
respective amounts reported by NL and Tremont.


                                                                                  AMOUNT REFLECTED IN
                                                                                                 EQUITY
                                                                                  EARNINGS      COMPONENT
                                                                                         (IN THOUSANDS) 

                                                                                              
Increase (decrease) in net assets at December 31, 1993:
  Marketable securities                                                                $ -          $ 64,550
  Investment in affiliates                                                               661            (661)

  Deferred income taxes                                                                 (232)        (22,361)

                                                                                       $ 429        $ 41,528


    OPEB (SFAS No. 106) and income taxes (SFAS No. 109).  Both SFAS No. 106 and
SFAS No. 109 were adopted as of January 1, 1992, SFAS No. 109 was applied
prospectively and immediate recognition of the OPEB transition obligation was
elected.  The amounts attributable to the Company's investments in affiliates
consist of the Company's equity in the respective historical amounts reported by
NL and Tremont and applicable adjustment of the Company's purchase accounting
basis differences originally recorded net-of-tax at rates differing from current
rates.


                                                                                             AMOUNT 
                                                                                        (IN THOUSANDS)

                                                                                              
Increase (decrease) in net assets at January 1, 1992:
  Inventories                                                                                    $  2,629
  Timber and timberlands                                                                            8,606
  Investment in affiliates                                                                        (74,107)
  Franchise fees and other intangible assets                                                        5,647
  Property and equipment                                                                           (1,696)
  Accrued OPEB cost                                                                               (16,965)
  Deferred income taxes, net                                                                        6,112

                                                                                                 $(69,774)


NOTE 18 - EMPLOYEE BENEFIT PLANS:

Company-sponsored plans

    The Company maintains various defined benefit and defined contribution
pension plans covering substantially all full-time employees.  Defined pension
benefits are generally based on years of service and compensation under fixed
dollar, final pay or career average formulas and the related expenses are based
on independent actuarial valuations.  The funding policies for U.S. defined
benefit plans are to contribute amounts satisfying funding requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").  Non-U.S.
defined benefit plans are funded in accordance with applicable statutory
requirements.

    Defined contribution plans.  A majority of the Company's full-time U.S.
employees are eligible to participate in contributory savings plans with Company
contributions based on matching or other formulas, and certain of such employees
also participate in Valhi's noncontributory unleveraged Employee Stock Ownership
Plan.  At December 31, 1994, 186,000 shares of Valhi common stock were held by
the ESOP, all of which were allocated to participants.  The Company's expense
related to the savings plans and the ESOP approximated $2.4 million in 1992,
$2.6 million in 1993 and $2.8 million in 1994.  Pro forma defined contribution
plan expense for 1994 (including NL) was $3 million.

    Defined benefit plans.  The funded status of the Company's defined benefit
pension plans and the components of net periodic defined benefit pension cost
are set forth below.  The rates used in determining the actuarial present value
of benefit obligations were (i) discount rate - 8.5% (1993 - 7.5%), and (ii)
rate of increase in future compensation levels - nil to 6% (1993 - 4% to 5%). 
The expected long-term rates of return on assets used ranged from 7.5% to 10%. 
Approximately 10% of the aggregate plan assets at December 31, 1994 (1993 - 50%)
consist of units in a combined investment fund for employee benefit plans
sponsored by Valhi and its affiliates, including Contran and certain Contran
affiliates.  Other plan assets are primarily investments in U.S. and non-U.S.
corporate equity and debt securities, short-term investments, mutual funds and
group annuity contracts.  Assets of the combined investment fund are primarily
investments in corporate equity and debt securities, short-term cash investments
and notes collateralized by residential and commercial real estate.  All of the
plans for which assets are less than the accumulated benefit obligation at
December 31, 1994 relate to NL's plans, approximately 60% of which unfunded
amount relates to non-U.S. NL plans.

    SFAS No. 87, "Employers' Accounting for Pension Costs" requires that an
additional pension liability be recognized when the unfunded accumulated pension
benefit obligation exceeds the unfunded accrued pension liability.  Variances
from actuarially assumed rates, including the rate of return on pension plan
assets, will result in additional increases or decreases in accrued pension
liabilities, pension expense and funding requirements in future periods.  The
adjustment required to recognize minimum liability relates to NL's plans.



                                                                PLAN ASSETS EXCEED       ACCUMULATED BENEFITS
                                                               ACCUMULATED BENEFITS       EXCEED PLAN ASSETS 
                                                                   DECEMBER 31,              DECEMBER 31,    
                                                                 1993        1994          1993       1994  
                                                                               (IN THOUSANDS)

                                                                                        
Actuarial present value of benefit obligations:
  Vested benefits                                               $35,141    $ 77,519       $  -      $132,419
  Nonvested benefits                                              4,134       7,136          -         2,155

  Accumulated benefit obligations                                39,275      84,655          -       134,574
  Effect of projected salary increases                           10,315      15,146          -        19,620

  Projected benefit obligations ("PBO")                          49,590      99,801          -       154,194
Plan assets at fair value                                        46,040     112,657          -       108,377

Plan assets over (under) PBO                                     (3,550)     12,856          -       (45,817)
Unrecognized net loss (gain) from experience different from
 actuarial assumptions                                            7,526       9,056          -       (32,808)
Unrecognized prior service cost (credit)                            938       3,959          -        (3,255)
Unrecognized net obligations (assets) being amortized
 over periods of 9 to 18 years                                     (140)       (440)         -         2,606
Adjustment required to recognize minimum liability                 -           -             -        (1,635)

Total prepaid (accrued) pension cost                              4,774      25,431          -       (80,909)
Current portion and reclassifications, net                           90        (935)         (110)     4,565

    Noncurrent prepaid (accrued) pension cost                   $ 4,864    $ 24,496       $  (110)  ( 76,344)





                                                                       YEARS ENDED DECEMBER 31, 
                                                                           1992          1993          1994 
                                                                                  (IN THOUSANDS)

                                                                                            
Net periodic pension cost:
  Service cost benefits                                                  $ 2,435       $ 2,291       $ 2,517
  Interest cost on PBO                                                     3,074         3,467         3,744
  Actual return on plan assets                                            (1,978)       (6,012)        1,253
  Net amortization and deferral                                           (1,848)        1,766        (5,739)

                                                                         $ 1,683       $ 1,512       $ 1,775


    Pro forma 1994 net periodic pension cost (including NL) approximated $8
million.  The 1992 loss related to the permanent closure of the Company's
plywood operations (see Note 10) includes a pension curtailment loss of $.6
million.

    Postretirement benefits other than pensions.  Certain subsidiaries
currently provide certain health care and life insurance benefits for eligible
retired employees.  Under plans currently in effect, some currently active
employees of NL, Amalgamated and Medite may become eligible for postretirement
health care benefits if they reach retirement age while working for the
applicable subsidiary.  In 1989, NL began phasing out such benefits for
currently active U.S. employees over a ten-year period.  The majority of NL
retirees, and substantially all Amalgamated and Medite retirees, are required to
contribute a portion of the cost of their benefits.  Certain current and future
NL retirees are eligible for reduced health care benefits at age 65, and certain
current and all future retirees of Amalgamated and Medite either cease to be
eligible for health care benefits at age 65 or are thereafter eligible only for
limited benefits.  Medical claims are funded as incurred, net of any
contributions by the retirees.

    The components of the periodic OPEB cost and accumulated OPEB obligation
are set forth below.  The rates used in determining the actuarial present value
of the accumulated OPEB obligations at December 31, 1994, were (i) discount rate
- - 8.5% (1993 - 7.5%), (ii) rate of increase in future compensation levels - 4%
to 6% (1993 - 4% to 4.5%), (iii) expected return on plan assets - 9% and (iv)
rate of increase in future health care costs - 12.5% to 14% in 1995, gradually
declining to 5% to 6% in 2016 and thereafter.  If the health care cost trend
rate was increased by one percentage point for each year, OPEB expense would
have increased $200,000 in 1994, and the actuarial present value of accumulated
OPEB obligations at December 31, 1994 would have increased $3.4 million.  At
December 31, 1994, about 80% of the Company's aggregate accrued OPEB cost
relates to NL, and substantially all of the remainder relates to Amalgamated. 
Pro forma 1994 OPEB cost (including NL) approximated $4 million.


                                                                       YEARS ENDED DECEMBER 31, 
                                                                           1992          1993          1994 
                                                                                  (IN THOUSANDS)

                                                                                             
Service cost benefits earned during the year                              $  498        $  527        $  499
Interest cost on accumulated OPEB obligation                               1,279         1,139         1,117
Net amortization and deferral                                               -              (86)         (110)

                                                                          $1,777        $1,580        $1,506





                                                                                     DECEMBER 31,   
                                                                                        1993           1994 
                                                                                         (IN THOUSANDS)
                                                                                               
Actuarial present value of accumulated OPEB obligations:
  Retiree benefits                                                                    $ 8,006        $58,586
  Other fully eligible active plan participants                                         1,876          4,357
  Other active plan participants                                                        5,527          6,543
                                                                                       15,409         69,486
Plan assets at fair value                                                                -             7,217
                                                                                       15,409         62,269
Unrecognized net gain from experience different
 from actuarial assumptions                                                             3,150         13,403
Unrecognized prior service credit                                                        -            13,672

Total accrued OPEB cost                                                                18,559         89,344
Less current portion                                                                      854          6,044

  Noncurrent accrued OPEB cost                                                        $17,705        $83,300


Multiemployer pension plans

    A small minority of the Company's employees are covered by union-sponsored,
collectively-bargained multiemployer pension plans.  Contributions to
multiemployer plans based upon collectively-bargained agreements were $95,000 in
1992, $53,000 in 1993 and $47,000 in 1994.  Based upon information provided by
the multiemployer plans' administrators, the Company's share of such plans'
unfunded vested benefits is not significant.

NOTE 19 - RELATED PARTY TRANSACTIONS:

    The Company may be deemed to be controlled by Harold C. Simmons (see
Note 1). Corporations that may be deemed to be controlled by or affiliated with
Mr. Simmons 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 minority equity interest in another related party.
While no transactions of the type described above are planned or proposed with
respect to the Company (except as otherwise set forth in this Annual Report on
Form 10-K), the Company continuously considers, reviews and evaluates, and
understands 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 the Company might be a party to one or more such
transactions in the future.

    It is the policy of the Company to engage in transactions with related
parties on terms, in the opinion of the Company, no less favorable to the
Company than could be obtained from unrelated parties.

    Receivables from affiliates at December 31, 1994 include $5.3 million of
refundable income taxes due from Contran.  Payables to affiliates at December
31, 1994 include $6.5 million payable to Louisiana Pigment Company, primarily
for the purchase of TiO2 (see Note 7), and $4.8 million payable to Tremont
related to NL's Insurance Sharing Agreement discussed below.

    Loans are made between the Company and related parties, including Contran,
pursuant to term and demand notes, principally for cash management purposes. 
Related party loans generally bear interest at rates related to credit
agreements with unrelated parties.  Interest income on loans to related parties
was $405,000 in 1992, $73,000 in 1993 and $398,000 in 1994 and related party
interest expense was nil in 1992, $39,000 in 1993 and nil in 1994.

    Contran has an $18 million bank credit agreement which includes a $10
million letter of credit facility.  Pursuant to such agreement, Contran may
authorize the banks to issue letters of credit on behalf of Valmont ($.6 million
outstanding at December 31, 1994).  Obligations under this Contran credit
agreement are collateralized by certain securities held by Contran.

    Under the terms of Intercorporate Services Agreements ("ISAs") with
Contran, Contran provides certain management, administrative and aircraft
maintenance services to the Company, and the Company provides various
administrative and other services to Contran, on a fee basis.  The net ISA fees
charged to the Company were approximately $1.2 million in each of 1992 and 1993
and $40,000 in 1994.  In addition, Contran ISA fees charged to NL and Tremont
for 1994 approximated $400,000 and $100,000, respectively.  Charges from
corporate related parties for services provided in the ordinary course of
business were less than $250,000 in each of the past three years.  Such charges
are principally pass-through in nature and, in the Company's opinion, are not
materially different from those that would have been incurred on a stand-alone
basis.  The Company has established a policy whereby the Board of Directors will
consider the payment of additional management fees to Contran for certain
financial advisory and other services provided by Contran beyond the scope of
the ISAs.  No such payments were made in the past three years.

    NL and Tremont are parties to ISAs with Valhi whereby Valhi provides
certain management, financial and administrative services to NL and Tremont on a
fee basis.  Fees charged to NL and Tremont pursuant to these agreements
aggregated $1.8 million in 1992, $1.0 million in 1993 and $.4 million in 1994.

    NL and a wholly-owned insurance subsidiary of Tremont that was a subsidiary
of NL prior to 1988 ("TRE Insurance"), are parties to an Insurance Sharing
Agreement with respect to certain loss payments and reserves established by TRE
Insurance that (i) arise out of claims against other entities for which NL is
responsible and (ii) are subject to payment by TRE Insurance under certain
reinsurance contracts.  Also, TRE Insurance will credit NL with respect to
certain underwriting profits or credit recoveries that TRE Insurance receives
from independent reinsurers that relate to retained liabilities. 

    In conjunction with the issuance of the LYONs in October 1992, Valhi
purchased 1.7 million shares of Baroid common stock from Contran at the then-
current market price of $6.375 per share.

    COAM Company is a partnership, formed prior to 1991, which has sponsored
research agreements with the University of Texas Southwestern Medical Center at
Dallas (the "University") to develop and commercially market a safe and
effective treatment for arthritis (the "Arthritis Research Agreement") and to
develop and commercially market patents and technology resulting from a cancer
research program (the "Cancer Research Agreement").  At December 31, 1994, COAM
partners are Contran, Valhi and another Contran subsidiary.  Harold C. Simmons
is the manager of COAM.  The Arthritis Research Agreement, as amended, provides
for payments by COAM of up to $8 million over the next 10 years and the Cancer
Research Agreement, as amended, provides for funds of up to $19 million over the
next 16 years.  Funding requirements pursuant to the Arthritis and Cancer
Research Agreements are without recourse to the COAM partners and the
partnership agreement provides that no partner shall be required to make capital
contributions.  The Company's contributions to COAM were approximately $1.7
million in 1992 and $2 million in each of 1993 and 1994.

NOTE 20 - COMMITMENTS AND CONTINGENCIES:

Legal proceedings

    Lead pigment litigation.  Since 1987, NL, other past manufacturers of lead
pigments for use in paint and lead-based paint and the Lead Industries
Association have been named as defendants in various legal proceedings seeking
damages for personal injury and property damage allegedly caused by the use of
lead-based paints.  Certain of these actions have been filed by or on behalf of
large United States cities or their public housing authorities and certain
others have been asserted as class actions.  These legal proceedings seek
recovery under a variety of theories, including negligent product design,
failure to warn, breach of warranty, conspiracy/concert of action, enterprise
liability, market share liability, intentional tort, and fraud and
misrepresentation.

    The plaintiffs in these actions generally seek to impose on the defendants
responsibility for lead paint abatement and asserted health concerns associated
with the use of lead-based paints, which was permitted for interior residential
use in the United States until 1973, including damages for personal injury,
contribution and/or indemnification for medical expenses, medical monitoring
expenses and costs for educational programs.  Most of these legal proceedings
are in various pre-trial stages; several are on appeal.

    NL believes these actions are without merit, intends to continue to deny
all allegations of wrongdoing and liability and to defend all actions
vigorously.  NL has not accrued any amounts for the pending lead pigment
litigation.  Considering NL's previous involvement in the lead and lead pigment
businesses, there can be no assurance that additional litigation similar to that
currently pending will not be filed.

    Environmental matters and litigation.  The Company's operations are
governed by various federal, state, local and foreign environmental laws and
regulations.  The Company's policy is to comply with environmental laws and
regulations at all of its plants and to continually strive to improve
environmental performance in association with applicable industry initiatives
and believes that its operations are in substantial compliance with applicable
requirements of environmental laws.  From time to time, the Company may be
subject to environmental regulatory enforcement under various statutes,
resolution of which typically involves the establishment of compliance programs.

    Some of NL's current and former facilities, including several divested
secondary lead smelters and former mining locations, are the subject of civil
litigation, administrative proceedings or of investigations arising under
federal and state environmental laws.  Additionally, in connection with past
disposal practices, NL has been named a potentially responsible party ("PRP")
pursuant to CERCLA in approximately 80 governmental enforcement and private
actions associated with hazardous waste sites and former mining locations, some
of which are on the U.S. EPA's Superfund National Priority List.  These actions
seek cleanup costs and/or damages for personal injury or property damage.  While
NL may be jointly and severally liable for such costs, in most cases, it is only
one of a number of PRPs who are also jointly and severally liable.  In addition,
NL is a party to a number of lawsuits filed in various jurisdictions alleging
CERCLA or other environmental claims.  At December 31, 1994, NL had accrued $87
million in respect of those environmental matters which are reasonably
estimable.  It is not possible to estimate the range of costs for certain sites.
The upper end of range of reasonably possible costs to NL for sites for which it
is possible to estimate costs is approximately $160 million.  The imposition of
more stringent standards or requirements under environmental laws or
regulations, new developments or changes respecting site cleanup costs or
allocation of such costs among PRPs, or a determination that NL is potentially
responsible for the release of hazardous substances at other sites, could result
in expenditures in excess of amounts currently estimated by NL to be required
for such matters.  No assurance can be given that actual costs will not exceed
accrued amounts or the upper end of the range for sites for which estimates have
been made, and no assurance can be given that costs will not be incurred with
respect to sites as to which no estimate presently can be made.  Further, there
can be no assurance that additional environmental matters will not arise in the
future.

    Certain other information relating to regulatory and environmental matters
pertaining to NL is included in Item 1 - "Business - Chemicals" of this Annual
Report on Form 10-K.

    At December 31, 1994, the Company has also accrued approximately $3 million
in respect of non-NL environmental cleanup matters, principally related to one
Superfund site in Indiana where the Company, as a result of former operations,
has been named as a PRP.  Such accrual does not reflect any amounts which the
Company could potentially recover from insurers or other third parties and is
near the upper end of the range of the Company's estimate of reasonably possible
costs for such matters.  The imposition of more strict standards or requirements
under environmental laws or regulations, new developments or changes in site
cleanup costs or allocations of such costs could result in expenditures in
excess of amounts currently estimated to be required for such matters.

    Other litigation.  In January 1990, an action was filed in the United
States District Court for the Southern District of Ohio against NLO, Inc., a
subsidiary of NL, and NL on behalf of a putative class of former NLO employees
and their families and former frequenters and invitees of the Feed Materials
Production Center ("FMPC") in Ohio (Day, et al. v. NLO, Inc., et al., No. C-1-
90-067).  The FMPC is owned by the United States Department of Energy (the
"DOE") and was formerly managed under contract by NLO.  The complaint seeks
damages for, among other things, emotional distress and damage to personal
property allegedly caused by exposure to radioactive and/or hazardous materials
at the FMPC and punitive damages.  This action was certified as a class action
by the court.  In July 1994, the parties reached a settlement agreement pursuant
to which the DOE would pay all costs of the settlement and NL and NLO were
released.

    During 1994, the Company and the plaintiffs in the 1987 pension-related
litigation (Holland, et al. v. Valhi, Inc., et al., No. 87-C-968G) agreed to
settle the case for $625,000, including attorney fees and interest.  The U.S.
District Court for the District of Utah has given preliminary approval to the
settlement and authorized the sending of a settlement notice to all class
members.  A final hearing is scheduled for March 24, 1995, at which time the
District Court is expected to grant formal approval to the settlement.

    In November 1992, a complaint was filed in the U.S. District Court for the
District of Utah against Valhi, Amalgamated and the Amalgamated Retirement Plan
Committee (American Federation of Grain Millers International, et al. v. Valhi,
Inc. et al., No. 29-NC-129J).  The complaint, a purported class action on behalf
of certain current and retired hourly employees of Amalgamated, alleges, among
other things, that the defendants breached their fiduciary duties under ERISA by
amending certain provisions of a retirement plan for hourly employees maintained
by Amalgamated to permit the reversion of excess plan assets to Amalgamated in
1986.  The complaint seeks a variety of remedies, including, among other things,
orders requiring a return of all reverted funds (alleged to be in excess of $8
million) and any profits earned thereon, a distribution of such funds to the
plan participants, retirees and their beneficiaries and enhancement of the
benefits under the plan, and an award of costs and expenses, including attorney
fees.  The hearing on the Company's motion to dismiss and/or for partial summary
judgment has been continued.  This litigation is similar in some respects to
Holland et al. described above and the Company believes it has adequately
accrued for the estimated effect of the ultimate resolution of this matter.

    In November 1991, a purported derivative complaint was filed in the Court
of Chancery of the State of Delaware, New Castle County (Alan Russell Kahn v.
Tremont Corporation, et al., No. 12339), in connection with Tremont's agreement
to purchase 7.8 million NL common shares from Valhi.  In addition to Tremont,
the complaint names as defendants the members of Tremont's board of directors
and Valhi.  The complaint alleges, among other things, that Tremont's purchase
of the NL shares constitutes a waste of Tremont's assets and that Tremont's
board of directors breached their fiduciary duties to Tremont's public
stockholders and seeks, among other things, to rescind Tremont's consummation of
the purchase of the NL shares and award damages to Tremont for injuries
allegedly suffered as a result of the defendants' wrongful conduct.  Valhi
believes, and understands that Tremont and the other defendants believe, that
the action is without merit.  Valhi has denied, and understands that Tremont and
the other defendants have denied, all allegations of wrongdoing and liability
and intends to defend the action vigorously.  The defendants moved to dismiss
the complaint on the ground that the plaintiff lacks standing to pursue this
action, which motion was denied.  Discovery is proceeding and a May 1995 trial
date has been set.

    In addition to the litigation described above, the Company is also involved
in various other environmental, contractual, product liability and other claims
and disputes incidental to its present and former businesses.  The Company
currently believes that the disposition of all claims and disputes, individually
or in the aggregate, should not have a material adverse effect on its
consolidated financial position, results of operations or liquidity.

    Concentrations of credit risk.  Sales of TiO2 account for approximately 90%
of NL's sales.  TiO2 is sold to the paint, paper and plastics industries, which
are generally considered "quality-of-life" markets whose demand for TiO2 is
influenced by the relative economic well-being of the various geographic
regions.  TiO2 is sold to over 5,000 customers, none of which represents a
significant portion of NL's sales.  In 1994, approximately 50% of NL's TiO2
sales by volume were to Europe with approximately 36% attributable to North
America.

    Amalgamated sells refined sugar primarily in the North Central and
Intermountain Northwest regions of the United States.  Amalgamated does not
believe it is dependent upon one or a few customers; however, major food
processors are substantial customers and represent an important portion of
refined sugar segment sales.  Amalgamated's ten largest customers accounted for
about one-third of its sales in each of the past three years.

    Medite's sales are made primarily to wholesalers of building materials
located principally in North America and Europe.  In each of the past three
years, Medite's ten largest customers accounted for approximately one-fourth of
its sales with at least seven of such customers in each year located in the U.S.

    National Cabinet Lock's sales are primarily to original equipment
manufacturers in the U.S. and Canada.  In each of the past three years, National
Cabinet Lock's ten largest customers accounted for approximately one-third of
its sales with at least seven of such customers in each year located in the U.S.

    Sybra's approximately 160 Arby's restaurants are clustered in four regions,
principally Texas, Michigan, Pennsylvania and Florida.  All fast food sales are
for cash.

    At December 31, 1994, consolidated cash and cash equivalents includes $80
million invested in U.S. Treasury securities purchased under short-term
agreements to resell, of which $73 million are held in trust for the Company by
a single U.S. bank.

    Operating leases.  Kronos' principal German operating subsidiary leases the
land under its Leverkusen TiO2 production facility pursuant to a lease expiring
in 2050.  The Leverkusen facility, with approximately one-third of Kronos'
current TiO2 production capacity, is located within the lessor's extensive
manufacturing complex, and Kronos is the only unrelated party so situated. 
Under a separate supplies and services agreement, which expired in 1991 and to
which an extension through 2011 has been agreed in principle, the lessor
provides some raw materials, auxiliary and operating materials and utilities
services necessary to operate the Leverkusen facility.  Kronos and the lessor
are continuing discussions regarding a definitive agreement for the extension of
the supplies and services agreement.  Both the lease and the supplies and
services agreements restrict NL's ability to transfer ownership or use of the
Leverkusen facility.

    The Company also leases various fast food retail and other manufacturing
facilities and equipment.  Most of the leases contain purchase and/or various
term renewal options at fair market values.  In most cases the Company expects
that, in the normal course of business, such leases will be renewed or replaced
by other leases.  

    Net rent expense approximated $6 million in each of the last three years
(pro forma 1994 including NL - $14 million).  Contingent rentals based upon
gross sales of individual fast food restaurants were less than 10% of total rent
expense in each of the past three years.  At December 31, 1994, future minimum
payments under noncancellable operating leases having an initial or remaining
term of more than one year were as follows:



YEARS ENDING DECEMBER 31,                                                 REAL ESTATE           EQUIPMENT
                                                                                  (IN THOUSANDS)

                                                                                              
  1995                                                                          $ 6,787             $ 1,815
  1996                                                                            6,076               1,295
  1997                                                                            5,230                 724
  1998                                                                            4,477                 371
  1999                                                                            3,478                 116
  2000 and thereafter                                                            23,025                  17
                                                                                 49,073               4,338
  Less minimum rentals due under noncancellable
   subleases                                                                      1,559                -   

      Net minimum commitments                                                   $47,514             $ 4,338



    Capital expenditures.  At December 31, 1994, the estimated cost to complete
capital projects in process approximated $74 million, including $56 million
related to environmental protection and improvement programs and productivity-
enhancing equipment at certain of NL's TiO2 facilities and $14 million for
productivity-enhancing equipment at Amalgamated.

    Timber cutting contracts.  Deposits are made on timber cutting contracts
with public and private sources from which Medite obtains a portion of its
timber requirements.  Medite records only the cash deposits and advances on
these contracts because it does not obtain title to the timber until it has been
harvested.  At December 31, 1994, timber and log purchase obligations aggregated
approximately $10 million under agreements expiring principally in 1995.

    Royalties.  Royalty expense, substantially all of which relates to fast
food operations, approximated $4 million in each of the past three years.  Fast
food royalties are paid to the franchisor based upon a percentage of gross
sales, as specified in the franchise agreement related to each individual
restaurant.

    Sugar marketing allotments.  The U.S. Department of Agriculture has imposed
marketing allotments on domestic sugar processors, including Amalgamated, for
the crop year ending September 30, 1995.  The purpose of the allotments is to
limit the supply of sugar available for domestic sale and thereby maintain
prices at levels sufficient to avoid forfeiture of sugar pledged under the
Government's non-recourse sugar price support loan program.  Allotments have
helped to stabilize sugar prices although they will restrict the volume of sugar
which domestic producers, including the Company, can sell in the domestic market
during the crop year.  The Company's preliminary marketing allotment (which is
subject to adjustment) equates to approximately 90% of its estimated record
production from the crop harvested in the fall of 1994 and, as a result, will
likely result in larger than normal carry-over inventories at the end of the
crop year.

    Potential sale.  The Company has tentatively agreed to sell Amalgamated's
sugar business, for $325 million cash, to an agricultural cooperative comprised
of sugarbeet growers in Amalgamated's area of operations.  The proposed
transaction is subject to significant conditions, including financing, grower
commitments and execution of a definitive purchase agreement, and no assurance
can be given that any such transaction will be consummated.


NOTE 21 -    QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):


                                                                  QUARTER ENDED            
                                                     MARCH 31       JUNE 30       SEPT. 30       DEC. 31
                                                               (IN MILLIONS, EXCEPT PER SHARE DATA)  
                                                                                         
YEAR ENDED DECEMBER 31, 1994
 1994 Historical
  Net sales                                               $188.9         $210.8        $232.6        $200.4
  Operating income                                          18.6           28.6          26.1          24.6

  Income from continuing operations                       $   .2         $  4.0        $  7.3        $  8.2
  Discontinued operations                                    (.9)          (1.0)         (2.7)         (3.5)

      Net income (loss)                                   $  (.7)        $  3.0        $  4.6        $  4.7

  Per common share:
    Continuing operations                                 $  -           $  .04        $  .06        $  .07
    Discontinued operations                                 (.01)          (.01)         (.02)         (.03)

      Net income (loss)                                   $ (.01)        $  .03        $  .04        $  .04

1994 Pro forma (*)
  Net sales                                               $390.7         $448.0        $457.8        $424.1
  Operating income                                          36.2           50.1          48.2          55.3

  Income (loss) from continuing
   operations                                             $ (2.3)        $  (.8)       $  5.4        $  8.4

  Per common share                                        $ (.02)        $ (.01)       $  .05        $  .07

YEAR ENDED DECEMBER 31, 1993
  Net sales                                               $171.3         $193.5        $213.2        $203.1
  Operating income                                          16.5           21.5          27.0          26.0

  Income (loss) from continuing
   operations                                             $(60.1)        $ (6.7)       $  2.9        $  4.6

  Net loss                                                $(60.3)        $ (7.1)       $ (2.0)       $ (9.7)

  Per common share:
    Continuing operations                                 $ (.53)        $ (.06)       $  .03        $  .04

    Net loss                                              $ (.53)        $ (.06)       $ (.02)       $ (.08)


[FN]
(*) Pro forma assuming the Company had consolidated NL's results of operations
    effective January 1, 1994.  See Note 3.









                        REPORT OF INDEPENDENT ACCOUNTANTS
                        ON FINANCIAL STATEMENT SCHEDULES



To the Stockholders and Board of Directors of Valhi, Inc.:

    Our report on the consolidated financial statements of Valhi, Inc. and
Subsidiaries as of December 31, 1993 and 1994 and for each of the three years in
the period ended December 31, 1994, which report is based in part upon the
reports of other auditors, is herein included on this Annual Report on Form 10-
K.  As discussed in Note 17 to the consolidated financial statements, in 1992
the Company changed its method of accounting for postretirement benefits other
than pensions and income taxes in accordance with Statements of Financial
Accounting Standards ("SFAS") Nos. 106 and 109, respectively, and in 1993
changed its method of accounting for certain investments in debt and equity
securities in accordance with SFAS No. 115.  In connection with our audits of
such financial statements, we have also audited the related financial statement
schedules listed in the index on page F-1 of this Annual Report on Form 10-K. 
These consolidated financial statement schedules are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
consolidated financial statement schedules based on our audits.

    In our opinion, based upon our audits and the reports of other auditors,
the financial statement schedules referred to above, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therein.





                                                        COOPERS & LYBRAND L.L.P.


Dallas, Texas
February 28, 1995

                          VALHI, INC. AND SUBSIDIARIES

           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                            CONDENSED BALANCE SHEETS

                           DECEMBER 31, 1993 AND 1994

                                 (IN THOUSANDS)


                                                                                       1993           1994  
                                                                                              
Current assets:
  Cash and cash equivalents                                                          $ 10,856       $ 15,292
  Marketable securities                                                                28,518         24,068
  Accounts and notes receivable                                                         2,505          1,413
  Receivable from subsidiaries and affiliates                                           2,061            930
  Deferred income taxes                                                                 1,619           -   
  Other                                                                                    96            661

      Total current assets                                                             45,655         42,364

Other assets:

  Marketable securities                                                               108,800        103,243
  Investment in subsidiaries and affiliates                                           113,993        129,729
  Deferred income taxes                                                                50,744         55,120
  Other assets                                                                          9,650          4,831
  Property and equipment, net                                                             418            416

      Total other assets                                                              283,605        293,339

                                                                                     $329,260       $335,703

Current liabilities:
  Accounts payable and accrued liabilities                                           $  7,222       $  9,315
  Payable to subsidiaries and affiliates                                                1,058            446
  Income taxes                                                                          1,464          1,461
  Deferred income taxes                                                                  -             4,124

      Total current liabilities                                                         9,744         15,346

Noncurrent liabilities:
  Long-term debt - LYONs                                                              108,800        119,096
  Other                                                                                 3,215          2,837

      Total noncurrent liabilities                                                    112,015        121,933

Stockholders' equity                                                                  207,501        198,424

                                                                                     $329,260       $335,703


                          VALHI, INC. AND SUBSIDIARIES

     SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)

                       CONDENSED STATEMENTS OF OPERATIONS

                  YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994

                                 (IN THOUSANDS)



                                                                       1992             1993          1994  

                                                                                           
Revenues and other income:
  Securities earnings, net                                           $ 10,942        $   6,281      $  3,348
  Other, net                                                            1,808              826         1,317
                                                                       12,750            7,107         4,665

Costs and expenses:
  General and administrative                                            8,534            9,139         9,449
  Interest                                                             40,992           26,563        10,437
  Other, net                                                                1            1,476           843
                                                                       49,527           37,178        20,729

                                                                      (36,777)         (30,071)      (16,064)
Equity in subsidiaries & affiliates                                     8,139          (88,500)       19,909

  Income (loss) before income taxes                                   (28,638)        (118,571)        3,845

Income tax benefit                                                     27,811           59,243        15,824

  Income (loss) from continuing operations                               (827)         (59,328)       19,669

Discontinued operations                                               (21,410)          (4,796)       (8,069)
Extraordinary items                                                    (6,277)         (15,390)         -   
Cumulative effect of changes in accounting
 principles                                                           (69,774)             429          -   

      Net income (loss)                                              $(98,288)       $ (79,085)     $ 11,600




                          VALHI, INC. AND SUBSIDIARIES

     SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)

                       CONDENSED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994

                                 (IN THOUSANDS)



                                                                    1992              1993            1994  

                                                                                           
Cash flows from operating activities:
  Net income (loss)                                              $ (98,288)         $(79,085)       $ 11,600
  Noncash interest expense                                           2,966            10,110          10,437
  Deferred income taxes                                            (28,689)          (54,636)        (13,531)
  Equity in subsidiaries & affiliates:
    Continuing operations                                           (8,139)           88,500         (19,909)
    Discontinued operations                                         33,289             7,378          12,414
    Extraordinary items                                               -               15,928            -   
  Dividends from subsidiaries & affiliates                          51,677           164,454          25,707
  Prepayments of indebtedness                                        9,511             7,749            -   
  Other, net                                                           (51)              918           1,045
  Cumulative effect of changes in
   accounting principles                                            69,774              (429)           -   
                                                                    32,050           160,887          27,763
  Net change in assets and liabilities                              (3,595)           (8,140)          2,368
  Net sales of trading securities                                     -                 -              4,375

      Net cash provided by operating
       activities                                                   28,455           152,747          34,506

Cash flows from investing activities:
  Purchase of NL common stock                                         -                 -            (15,060)
  Capital contribution to Amalgamated                                 -                 -            (10,000)
  Loans to subsidiaries & affiliates:
    Loans                                                          (68,953)          (11,800)        (34,550)
    Collections                                                     66,953            13,800          34,550
  Marketable securities:
    Purchases                                                     (294,105)         (281,795)           -   
    Proceeds                                                       280,486           381,395            -   
  Other, net                                                        (7,041)            3,574           3,906

      Net cash provided (used) by
       investing activities                                        (22,660)          105,174         (21,154)


                          VALHI, INC. AND SUBSIDIARIES

     SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)

                 CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994

                                 (IN THOUSANDS)



                                                                    1992              1993            1994  

                                                                                            
Cash flows from financing activities:
  Indebtedness:
    Borrowings                                                    $ 93,807         $    -          $    -   
    Principal payments                                             (58,565)         (241,715)           -   
  Loans from subsidiaries & affiliates:
    Loans                                                           55,801            27,631            -   
    Repayments                                                     (47,343)          (58,895)           -   
  Dividends                                                        (22,753)           (5,704)         (9,145)
  Other, net                                                            48                53             229

      Net cash provided (used) by
       financing activities                                         20,995          (278,630)         (8,916)

Cash and cash equivalents:
  Net increase (decrease)                                           26,790           (20,709)          4,436
  Balance at beginning of year                                       4,775            31,565          10,856

  Balance at end of year                                          $ 31,565         $  10,856       $  15,292


Supplemental disclosures-cash paid for:
  Interest                                                        $ 41,492         $  26,817       $    -   
  Income taxes (received)                                          (11,384)          (16,482)         (6,171)



                          VALHI, INC. AND SUBSIDIARIES

     SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)

                    NOTES TO CONDENSED FINANCIAL INFORMATION



NOTE 1 -     BASIS OF PRESENTATION:

    The Consolidated Financial Statements of Valhi, Inc. and Subsidiaries are
incorporated herein by reference.  Condensed financial information for all
periods presented is classified based on the Company's organizational structure
as of December 31, 1994, and certain prior year amounts have been reclassified
to conform with the 1994 presentation.

NOTE 2 -     MARKETABLE SECURITIES:


                                                                                     DECEMBER 31,   
                                                                                        1993          1994  
                                                                                        (IN THOUSANDS) 

                                                                                               
Current assets (trading securities):
  U.S. Treasury securities                                                           $ 28,518       $   -   
  Global bond investments                                                                -            24,068

                                                                                     $ 28,518       $ 24,068

Noncurrent assets (available-for-sale) - 
 Dresser Industries common stock                                                     $108,800       $103,243


NOTE 3 -     INVESTMENT IN SUBSIDIARIES AND AFFILIATES:


                                                                                    DECEMBER 31,   
                                                                                       1993           1994  
                                                                                        (IN THOUSANDS)

                                                                                              
NL Industries                                                                        $ 60,170       $ 61,882
Amalgamated                                                                            25,245         32,997

Valcor                                                                                 13,851         34,850
Tremont                                                                                14,727           -   

                                                                                     $113,993       $129,729


NOTE 4 -     LONG-TERM DEBT:

    Long-term debt consists of Valhi's zero coupon LYONs, $379 million
principal amount at maturity in October 2007.  The LYONs were issued with
significant original issue discount ("OID") to represent a yield to maturity of
9.25% and no periodic interest payments are required.  The LYONs are secured by
the 5.5 million shares of Dresser common stock held by Valhi, which shares are
held in escrow for the benefit of holders of the LYONs.  Each $1,000 in
principal amount at maturity of the LYONs is exchangeable, at any time, for
14.4308 shares of Dresser common stock held by the Company.  The LYONs are
redeemable at the option of the holder in October 1997 or October 2002 at the
issue price plus accrued OID through such purchase date.  The aggregate
redemption price in October 1997 approximates $154 million.  Such redemptions
may be paid, at Valhi's option, in cash, Dresser common stock, or a combination
thereof.  The LYONs are not redeemable at Valhi's option prior to October 1997
unless the market price of Dresser common stock exceeds $35.70 per share for
specified time periods.  

    Valhi also has a $20 million bank revolving credit facility which matures
in October 1996, generally bears interest at LIBOR plus 1% and is collateralized
by all of Amalgamated's outstanding common stock.  At December 31, 1994, no
amounts were outstanding and the full amount of the facility was available for
borrowing.

NOTE 5 -     DIVIDENDS FROM SUBSIDIARIES AND AFFILIATES:


                                                                      YEARS ENDED DECEMBER 31,  
                                                                         1992           1993          1994  
                                                                                  (IN THOUSANDS)

                                                                                            
Amalgamated                                                             $19,823       $ 15,522       $16,137
Valcor                                                                   21,114        148,932         9,570
NL Industries                                                             8,675           -             -   
Tremont                                                                   2,065           -             -   

                                                                        $51,677       $164,454      $ 25,707


    Dividends from Valcor in 1993 include $135 million from the proceeds of new
borrowings.  NL and Tremont each suspended dividends during 1992.

NOTE 6 -     INCOME TAXES:


                                                                      YEARS ENDED DECEMBER 31,  
                                                                         1992           1993          1994  
                                                                                  (IN THOUSANDS)
                                                                                           
Income tax benefit attributable to 
 continuing operations:
  Currently refundable                                                  $13,195        $10,649      $  6,638
  Deferred income tax benefit                                            14,616         48,594         9,186

                                                                        $27,811        $59,243      $ 15,824

Cash received from income taxes, net:
  Received from subsidiaries                                            $20,243        $25,630      $ 20,479
  Paid to Contran                                                        (7,630)        (8,845)      (14,425)
  Paid to tax authorities, net                                           (1,229)          (303)          117

                                                                        $11,384        $16,482      $  6,171


    NL is a separate U.S. taxpayer and is not a member of the Contran Tax
Group.


                                                                                    DEFERRED TAX
                                                                                  ASSET (LIABILITY)
                                                                                    DECEMBER 31,   
                                                                                       1993           1994  
                                                                                        (IN THOUSANDS)

                                                                                              
Components of the net deferred tax asset:
  Tax effect of temporary differences related to:
    Marketable securities                                                            $(23,498)      $(21,469)
    Investment in subsidiaries and affiliates not
     members of the Contran Tax Group                                                  78,844         81,182
    Accrued liabilities and other deductible differences                                5,420          5,869
    Other taxable differences                                                          (8,403)       (14,586)

                                                                                     $ 52,363       $ 50,996

  Current deferred tax asset (liability)                                             $  1,619       $ (4,124)
  Noncurrent deferred tax asset                                                        50,744         55,120

                                                                                     $ 52,363       $ 50,996


NOTE 7 -     EQUITY IN EARNINGS OF SUBSIDIARIES AND AFFILIATES:


                                                                    YEARS ENDED DECEMBER 31,  
                                                                        1992            1993          1994  
                                                                                (IN THOUSANDS)  

                                                                                           
Continuing operations:
  NL Industries:
    Operations                                                        $(37,411)      $ (52,426)     $(25,078)
    Writedown of NL common stock                                          -            (84,015)         -   
                                                                       (37,411)       (136,441)      (25,078)
  Valcor                                                                25,092          28,350        31,098
  Amalgamated                                                           20,458          19,591        13,889

                                                                      $  8,139       $ (88,500)     $ 19,909

Discontinued operations - Tremont                                     $(33,289)      $  (7,378)     $(12,414)
Extraordinary items - NL Industries                                   $   -          $ (15,928)     $   -   


NOTE 8 -     CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES:

    Marketable securities (SFAS No. 115).  Early compliance with SFAS No. 115
was elected effective December 31, 1993.


                                                                           CUMULATIVE ADJUSTMENT TO
                                                                                                EQUITY
                                                                           EARNINGS            COMPONENT
                                                                                     (IN THOUSANDS) 
                                                                                              
Increase (decrease) in net assets at
 December 31, 1993:
  Marketable securities                                                         $  -                $ 64,550
  Investment in affiliates                                                          661                 (661)
  Deferred income taxes, net                                                       (232)             (22,361)

                                                                                $   429             $ 41,528


    OPEB (SFAS No. 106) and income taxes (SFAS No. 109).  Both SFAS No. 106 and
SFAS No. 109 were adopted in 1992, SFAS No. 109 was applied prospectively and
immediate recognition of the OPEB transition obligation was elected. 
Approximately 93% of the amount attributable to the Company's investment in
subsidiaries and affiliates relates to NL and Tremont.


                                                                                            AMOUNT
                                                                                         (IN THOUSANDS)
                                                                                              
Increase (decrease) in net assets at January 1, 1992:
  Investment in subsidiaries and affiliates                                                      $(79,811)
  Deferred income taxes, net                                                                       10,037

                                                                                                 $(69,774)


                                       VALHI, INC. AND SUBSIDIARIES

                             SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                              (IN THOUSANDS)



                                                                                         ADDITIONS
                                                                     BALANCE AT         CHARGED TO
                                                                     BEGINNING           COSTS AND
          DESCRIPTION                                                 OF YEAR            EXPENSES         DEDUCTIONS

                                                                                                        
Year ended December 31, 1992:
  Allowance for doubtful accounts                                            $1,175            $  641            $  (493)

  Amortization of intangibles:
    Goodwill                                                                 $  677            $  165            $  -   
    Franchise fees and other                                                  3,893             1,550                (19)

                                                                             $4,570            $1,715            $   (19)

Year ended December 31, 1993:
  Allowance for doubtful accounts                                            $1,323            $   31            $  (380)

  Amortization of intangibles:
    Goodwill                                                                 $  842            $  166            $  -   
    Franchise fees and other                                                  5,424             1,571               (147)

                                                                             $6,266            $1,737            $  (147)

Year ended December 31, 1994:
  Allowance for doubtful accounts                                            $  974            $  213            $  (502)

  Amortization of intangibles:
    Goodwill                                                                 $1,008            $  172            $  -   
    Franchise fees and other                                                  6,848             1,423               (900)

                                                                             $7,856            $1,595            $  (900)


[FN]
(a) Consolidation of NL Industries, Inc. effective December 31, 1994.



                                                                                         BALANCE
                                                                                         AT END 
          DESCRIPTION                                                OTHER(A)            OF YEAR

                                                                                    
Year ended December 31, 1992:
  Allowance for doubtful accounts                                          $ -            $1,323

  Amortization of intangibles:
    Goodwill                                                               $ -            $  842
    Franchise fees and other                                                 -             5,424

                                                                           $ -            $6,266

Year ended December 31, 1993:
  Allowance for doubtful accounts                                          $ -            $  974

  Amortization of intangibles:
    Goodwill                                                               $ -            $1,008
    Franchise fees and other                                                 -             6,848

                                                                           $ -            $7,856

Year ended December 31, 1994:
  Allowance for doubtful accounts                                          $3,749         $4,434

  Amortization of intangibles:
    Goodwill                                                               $ -            $1,180
    Franchise fees and other                                                 -             7,371

                                                                           $ -            $8,551


[FN]
(a) Consolidation of NL Industries, Inc. effective December 31, 1994.

EX-10.4

                                   VALHI, INC.
                1987 STOCK OPTION-STOCK APPRECIATION RIGHTS PLAN
                  AMENDED AND RESTATED AS OF NOVEMBER 10, 1994


     SECTION 1  Title and Purpose.  The plan described herein, as amended and
restated, shall be known as the "Valhi, Inc. 1987 Stock Option-Stock
Appreciation Rights Plan" (the "Plan").  The purpose of the Plan is to advance
the interests of Valhi, Inc. ("Valhi") and any parent or subsidiary corporation
of Valhi (together with Valhi referred to collectively as the "Company") by
strengthening the Company's ability to attract and retain individuals of
training, experience and ability in the employ of the Company and to furnish
additional incentive to such key employees to promote the Company's financial
success.  The Plan will be effected through the granting of stock options and/or
stock appreciation rights as herein provided, which stock options, it is
intended, may constitute "incentive stock options" ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended, (the "Code") or
stock options which do not constitute ISOs or as other options ("non-qualified
stock options" or "NSOs") (ISOs and NSOs being collectively referred to as
"Stock Options"), as specified by the Committee (as defined in Section 4 below).
Stock Options granted under the Plan may be accompanied by stock appreciation
rights ("Stock Rights") as hereinafter set forth.  The Plan may also be effected
through the awarding of restricted stock ("Restricted Stock Awards" or
"Restricted Stock") to key employees.  As used herein "subsidiary corporation"
and "parent corporation" shall have the same meaning as such terms are defined
in Code Section 425.   

     SECTION 2  Shares of Stock Subject to the Plan.  Stock which may be issued
pursuant to Stock Options, Stock Rights and/or Restricted Stock Awards,  granted
from time to time under the Plan, shall not exceed in the aggregate 9,000,000
shares of Valhi common stock, $.01 par value, (the "Common Stock") (subject to
adjustment as provided in Section 16).  The underlying shares issuable pursuant
to grants in any single fiscal year, of Stock Options, Stock Rights and/or
Restricted Stock Awards to a particular individual shall not exceed 500,000
shares of Common Stock.  It is contemplated that the shares to be issued under
the Plan will be approved for listing by each securities exchange on which
shares of Common Stock are then listed.

     In the event that any outstanding Stock Option granted under the Plan for
any reason expires or is terminated without having been exercised in full or
surrendered in full in connection with the exercise of Stock Rights, or any
shares awarded as Restricted Stock are forfeited, the shares of Common Stock
allocable to the unexercised portion of such Stock Option or Stock Right or
forfeited portion of such Restricted Stock Award shall (unless the Plan shall
have been terminated) become available for subsequent grants of Stock Options,
Stock Rights and/or Restricted Stock Awards under the Plan.

     SECTION 3  Eligibility.  Stock Options, Stock Rights and/or Restricted
Stock Awards may be granted to key employees of the Company (including officers
of the Company who may also be directors of the Company) by the Committee (as
defined in Section 4 below).  In determining the employees to whom Stock
Options, Stock Rights and/or Restricted Stock Awards will be granted and the
number of shares to be covered by each, the Committee shall take into account
the duties of the respective employees, their present and potential
contributions to the success of the Company, the anticipated number of years of
effective service remaining, and such other factors as they shall deem relevant
in connection with accomplishing the purposes of the Plan.  Neither Stock
Options, Stock Rights nor Restricted Stock Awards may be granted to an
individual under this Plan at a time when such individual is serving as a member
of the Committee.  An employee owning stock possessing more than 10 percent of
the total combined voting power or value of all classes of stock of Valhi or any
parent or subsidiary corporation ("Ten Percent Stockholder") is not eligible to
receive an ISO unless the option price is at least 110 percent of the fair
market value of the Common Stock at the time the ISO is granted and the ISO
option by its terms is not exercisable more than 5 years from the date it is

granted.  Restricted Stock Awards and Common Stock which a grantee may purchase
under outstanding Stock Options shall be treated as stock owned by such grantee
for purposes of this calculation.

     SECTION 4  Administration of the Plan.  The Plan shall be administered by
the Management Development and Compensation Committee (the "Committee")
consisting of three or more individuals appointed by the board of directors of
Valhi (the "Board of Directors").  No individual may be appointed to the
Committee who is not a "disinterested person" with respect to the Plan or any
other stock option, stock appreciation, stock bonus, restricted stock or other
stock plan of the Company, so as to disqualify such individual as an
administrator of the Plan under Rule 16(b)-3 of the Securities and Exchange Act
of 1934, as amended, or any rules promulgated in substitution thereof (the
"Rule").  One of the members of the Committee shall be designated as its
chairman and the Committee shall hold its meetings at such times and places as
it shall deem advisable.  A majority of the members of the Committee shall
constitute a quorum.  All action of the Committee shall be taken by a majority
of its members.  Any action may be taken by a written instrument signed by a
majority of the members of the Committee and any action so taken shall be fully
effective as if it had been taken by a vote of a majority of the members of the
Committee at a meeting duly called and held.  The Committee may appoint a
secretary, keep minutes of its meetings, and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.

          SECTION 5  Powers of the Committee.  The Committee shall have full
power and authority to determine the "key employees" of the Company to whom
Stock Options, Stock Rights and/or Restricted Stock Awards shall be granted, the
number of shares to be covered, the term period of each, the time or times at
which Stock Options, Stock Rights or Restricted Stock Awards shall be granted,
provided, with respect to ISOs, the term and the time are permitted by Section
422 of the Code, and to prescribe, amend, and rescind rules and regulations
relating to the Plan.  Except as otherwise expressly provided in the Plan, the
Committee shall also have the power to determine, at the time of the grant of
each Stock Option, Stock Right or Restricted Stock Award or subsequently if
permitted by the Plan,  all terms and conditions governing the rights and
obligations of the key employee with respect to such Stock Option, Stock Right
or Restricted Stock Award, including but not limited to:  (a) the exercise price
or the method by which the exercise price shall be determined for the Stock
Option or Stock Right; (b) the length of the period during which the Stock
Option or Stock Right may be exercised and any limitations on the number of
shares purchasable with the Stock Option at any given time during such period;
(c) the time at which the Stock Option or Stock Right may be exercised; (d) any
conditions precedent to be satisfied before the Stock Option or Stock Right may
be exercised; (e) the date on which the restriction period of any Restricted
Stock shall lapse; and (f) any restrictions on resale of any Restricted Stock,
any shares purchased upon exercise of a Stock Option or any shares received upon
exercise of a Stock Right.  The Committee shall also have full and final
authority: (i) to prescribe the form of each agreement evidencing Stock Options
and Stock Rights (the "Stock Option-Stock Appreciation Rights Agreement") and
Restricted Stock Awards (the "Restricted Stock Agreement"), which agreements
need not be identical for each grantee but shall be consistent with the Plan;
(ii) to adopt, amend and rescind such rules and regulations as may be advisable
in the opinion of the Committee to administer the Plan; (iii) to amend the terms
of any Stock Option or Stock Right in any manner the Committee could have
determined at the time the Stock Option or Stock Right was granted, including
the acceleration of the time at which the Stock Option or Stock Right may be
vested or exercised, and to remove any or all of the restrictions on any
Restricted Stock; (iv) to correct any defect or supply any omission or reconcile
any inconsistency in the Plan, including any correction or amendment which in
the judgment of the Committee is necessary to ensure compliance with the
requirements of the Rule; and (v) to construe and interpret the Plan and any
Stock Option - Stock Appreciation Rights Agreements and Restricted Stock
Agreements thereunder and any rules and regulations relating thereto, and to
make all other determinations deemed necessary or advisable for the
administration of the Plan.  The Committee shall not possess any  authority, the
possession or exercise of which would cause an ISO granted hereunder to be
disqualified as such under the Code.

     SECTION 6  Liability of the Committee.  In addition to such other rights of
indemnification as they may have as directors of Valhi or as members of the
Committee or otherwise, members of the Committee shall be indemnified by Valhi
as and to the fullest extent permitted by law, including without limitation,
indemnification against the reasonable expenses, including attorneys' fees,
actually and necessarily incurred in connection with the defense of any action,
suit or proceeding, or in connection with any appeal therein, to which they or
any of them may be a party by reason of any action taken or failure to act under
or in connection with the Plan, or any Stock Options, Stock Rights or Restricted
Stock Awards granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by Valhi), or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such Committee member
is liable for gross negligence, bad faith or misconduct in his duties.

     SECTION 7  Price of Stock Options.  The purchase price of the shares of
Common Stock which shall be covered by each NSO shall be established by the
Committee at the time of granting the NSO, but at no time shall such a grant be
less than 85% of the fair market value of the Common Stock as defined in this
Section 7 at the time of such grant.  The purchase price of the shares of Common
Stock which shall be covered by each  ISO shall be no less than the fair market
value of the Common Stock at the time of granting the ISO.  In the event that
any ISO is granted to a Ten Percent Stockholder, the price at which shares of
Common Stock shall be purchasable under such ISO shall not be less than 110
percent of the fair market value of such shares at the time of the grant.  If
the primary market for the Common Stock is a national securities exchange, the
NASDAQ National Market System, or other market quotation system in which last
sale transactions are reported on a contemporaneous basis, such fair market
value shall be deemed to be the last reported sale price of the Common Stock on
such exchange or in such quotation system on the day as of which the option
shall be granted, or, if there shall not have been a sale on such exchange or
reported through such system on such trading day, the closing or last bid
quotation therefor on such exchange or quotation system on such trading day.  If
the primary market for the Common Stock is not such an exchange or quotation
market in which transactions are contemporaneously reported, such fair market
value shall be deemed to be the closing or last bid quotation in the
over-the-counter market on such trading day as reported by the National
Association of Securities Dealers through NASDAQ, its automated system for
reporting quotations, or its successor or such other generally accepted source
of publicly reported bid quotations as the Company may reasonably designate on
the day as of which the option shall be granted.  In all other cases, such fair
market value shall be determined in good faith by the Committee as of the day
the option is granted.  If the price so determined shall include a fraction of a
cent, it shall be rounded up to the next full cent.

     SECTION 8  Medium and Time of Payment Upon Exercise of Stock Options.  The
purchase price payable upon the exercise of a Stock Option shall be payable at
the time of such exercise and may be paid in cash, by check, with shares of
Common Stock, or in any combination thereof.  For purposes of making such
payment in shares of Common Stock,  such shares shall be valued at their fair
market value as provided in Section 7 on the day of exercise of the Stock Option
and shall have been held by the grantee for a period of at least six (6) months.

     SECTION 9  Limitation on Grant of ISOs.  The aggregate fair market value
(determined as of the time the ISO is granted) of the shares with respect to
which ISOs are exercisable for the first time by a grantee during any calendar
year (under all such plans of the Company) shall not exceed $100,000.

     SECTION 10  Maximum Term of  Stock Option or Stock Right.  The period
during which each Stock Option or Stock Right granted hereunder may be exercised
will be determined by the Committee in each case; provided, however, that no
Stock Option or Stock Right shall by its terms be exercisable after the

expiration of 10 years from the date such Stock Option or Stock Right is
granted.  In the event that any ISO is granted to a Ten Percent Stockholder the
maximum expiration period described above shall be reduced to 5 years from the
date the ISO is granted.

     SECTION 11  Limitations on Right to Exercise.  The exercisability of Stock
Options or Stock Rights granted under the Plan shall be subject to such
restrictions as the Committee may impose, which restrictions may differ with
respect to each grantee and which may be included in a Stock Option - Stock
Appreciation Rights Agreement or which the Committee may otherwise inform the
grantee.  Absence or leave approved by the Company, to the extent permitted by
the applicable provisions of the Code, shall not be considered an interruption
of employment for any purpose under the Plan.  The exercise of any Stock Option
or Stock Right granted under the Plan will be contingent upon the advice of
counsel to the Company that such shares have been duly registered or are exempt
from registration under the applicable securities laws, and upon receipt by the
Committee of cash, check, Common Stock or combination thereof in payment of the
full purchase price of such shares.  Except upon the issuance of shares of
Common Stock upon the exercise of a Stock Option or Stock Right, the holder of a
Stock Option or Stock Right shall not have any of the rights of a stockholder
with respect to the shares covered by the Stock Option or Stock Right.

     SECTION 12  Award of Stock Rights.
     (a)  Stock Rights may be granted to such key employees holding Stock
Options granted under the Plan as the Committee may select and upon such terms
and conditions as the Committee may prescribe.  Each Stock Right shall relate to
a specific Stock Option granted and may be granted concurrently with the Stock
Option to which it relates or at any time prior to the exercise, expiration or
termination of such Stock Option (except as otherwise provided in Section 19
hereof).  A Stock Right shall entitle the grantee, subject to the provisions of
the Plan and the related Stock Option-Stock Appreciation Rights Agreement, to
receive from the Company an amount equal to the excess of the fair market value,
on the exercise date, of the number of shares of Common Stock for which the
Stock Right is exercised over the purchase price for such shares of Common Stock
under the related Stock Option.  For this purpose, such fair market value shall
be determined as provided in Section 7 on the close of business on the day of
exercise.

     (b)  A Stock Right shall be exercisable on such dates or during such
periods as may be determined by the Committee from time to time, except that in
no event shall such right be exercisable when the related Stock Option is not
eligible to be exercised or when the fair market value per share of the Common
Stock on the exercise date does not exceed the exercise price per share of the
related Stock Option.

     (c)  A Stock Right may be exercised only upon surrender of the related
Stock Option by the grantee which shall be terminated to the extent of the
number of shares for which the Stock Right is exercised.  Shares covered by such
a terminated Stock Option or portion thereof granted under the Plan shall not be
available for further grants under the Plan.

     (d)  The amount payable by the Company upon exercise of a Stock Right may
be paid in cash, in shares of Common Stock (valued at their fair market value on
the exercise date determined as provided in Section 7) or in any combination
thereof as the Committee shall determine from time to time.  No fractional
shares shall be issued and the grantee shall receive cash in lieu thereof.

     (e)  The Committee may impose any other conditions upon the exercise of a
Stock Right, which conditions may include a condition that the Stock Right may
be exercised only in accordance with rules and regulations adopted by the
Committee from time to time.  Such rules and regulations may govern the right to
exercise Stock Rights granted prior to the adoption or amendment of such rules
and regulations as well as Stock Rights granted thereafter.

     (f)  The Committee may at any time amend, terminate or suspend any Stock
Right theretofore granted under the Plan, provided that the terms of any Stock

Right after any amendment shall conform to the provisions of the Plan.  A Stock
Right shall terminate upon the termination or expiration of the related Stock
Option.

     (g)  Notwithstanding the provisions of this Section 12, a Stock Right may
not be exercised until the expiration of six (6) months from the date of grant
of such Stock Right unless, prior to the expiration of such six (6) month
period, the holder of such Stock Right ceases to be an employee of the Company
by reason of such holder's retirement, death or disability.

     (h)  The Company intends that this Section 12 shall comply with the
requirements of the Rule during the term of the Plan.  Should any provision of
this Section 12 not be necessary to comply with the requirements of the Rule or
should any additional provisions be necessary for this Section 12 to comply with
the requirements of the Rule, the Board of Directors may amend the Plan to add
or to modify the provisions of the Plan accordingly.

     SECTION 13  Award of Restricted Stock.  
     (a)  The Committee shall have the authority (i) to grant Restricted Stock
Awards, (ii) to issue or transfer Restricted Stock and (iii) to establish terms,
conditions and restrictions in connection with the issuance or transfer of
Restricted Stock.

     (b)  The grantee of a Restricted Stock Award shall execute and deliver to
the Committee a Restricted Stock Agreement satisfactory to the Committee with
respect to the Restricted Stock covered by such agreement as well as any other
documents that the Committee may require in connection with the Restricted Stock
Award.  The Committee shall then cause stock certificates registered in the name
of the grantee to be issued and deposited, together with the related Restricted
Stock Agreement, with an escrow agent to be designated by the Committee, which
may be the Company.  

     (c)  Restricted Stock Awards shall be subject to such restrictions as the
Committee may impose, which may differ with respect to each grantee and which
restrictions may be included in a Restricted Stock Agreement or which the
Committee may otherwise inform the grantee.

     (d)  The restriction period of Restricted Stock shall commence on the date
of grant and, unless otherwise established by the Committee in the Restricted
Stock Agreement setting forth the terms of the Restricted Stock Award, shall
expire five years from the date of grant. 

     (e)  Subject to Section 21 and any requirement imposed by the Committee in
a Restricted Stock Agreement, or otherwise, at the expiration of a restriction
period and at the written request of a grantee, a stock certificate evidencing
the Restricted Stock with respect to which a restriction period has expired (to
the nearest full share) shall be delivered without charge to the grantee, or his
personal representative, free of all restrictions under the Plan. 

     SECTION 14  Limitations on Transfer.  No Stock Option, Stock Right or
Restricted Stock Award granted under the Plan shall be transferable otherwise
than by will or the laws of descent and distribution, and no Stock Option or
Stock Right granted under the Plan may be exercised by any person other than the
person to whom the Stock Option or Stock Right shall initially have been granted
during the lifetime of such original grantee (other than the person's guardian
or legal representative).  After the death of such original grantee, the
"holder" of any Stock Option, Stock Right or Restricted Stock Award granted
under the Plan shall be deemed to be the person to whom the original grantee's
rights shall pass under the original grantee's will or under the laws of descent
and distribution.

     SECTION 15  No Right to Employment Conferred.  Nothing in the Plan or in
any Stock Option-Stock Appreciation Rights Agreement or Restricted Stock
Agreement shall confer upon any employee any right to continue in the employ of
the Company or interfere in any way with the right of the Company to terminate
such employee's employment at any time.

     SECTION 16  Adjustments.
     (a)  In the event the outstanding shares of Common Stock, as constituted
from time to time, shall be changed as a result of a stock dividend or stock
split or other change in the capitalization of the Company or a combination,
merger, or reorganization of the Company into or with any other corporation, or
any other transaction with similar effects, there then shall be substituted for
each share of Common Stock theretofore subject, or which may become subject, to
issuance or transfer under the Plan, the number and kind of shares of Common
Stock or other securities or other property as are equitably determined by the
Committee.  In the event of an equity restructuring transaction such as a spin-
off or recapitalization through an extraordinary, special and nonrecurring
dividend, or other distribution (including any distribution of shares of stock
of any subsidiary or other property to holders of shares of Common Stock) or
transactions with similar effects, the Committee shall make such adjustments to
the number of shares issuable pursuant to, and/or exercise price per share of,
any Stock Option or Stock Right theretofore granted and whether or not then
exercisable as are equitably determined by the Committee.  Notwithstanding any
other provision contained herein, the Committee shall make such other equitable
adjustments to any outstanding Stock Options, Stock Rights and/or Restricted
Stock Awards granted pursuant to the Plan as the Committee determines
appropriate.  Each adjustment made pursuant to this Section 16 shall be made
with a view toward preserving the value the affected Stock Option, Stock Right
or Restricted Stock Award had prior to the event or transaction giving cause to
such adjustment.

     (b)  In the event of any change in applicable laws or any change in
circumstances which results in or would result in any dilution of the rights
granted under the Plan, or which otherwise warrants equitable adjustment because
it interferes with the intended operation of the Plan, then, if the Committee
shall, in its sole discretion, determine that such change equitably requires an
adjustment in the number or kind of shares of stock or other securities or other
property theretofore subject, or which may become subject, to issuance or
transfer under the Plan or in the terms and conditions of any outstanding Stock
Option, Stock Right or Restricted Stock Award, such adjustment shall be made in
accordance with such determination.  Any adjustment of an ISO under this
paragraph shall be made only to the extent it does not constitute a
"modification" within the meaning of Section 425(h)(3) of the Code.  The
Committee shall give notice to each grantee of any adjustment made under the
Plan and, upon such notice, such adjustment shall be effective and binding for
all purposes of the Plan. 

     SECTION 17  Stockholder Approval.  The Plan is expressly made subject to
the approval by the holders of a majority of the issued and outstanding shares
of Valhi entitled to vote at a meeting of stockholders of Valhi (the
"Stockholders") duly called in accordance with applicable law.  If the Plan is
not so approved within one year after its adoption by the Board of Directors,
the Plan shall not come into effect, and any Stock Option, Stock Right or
Restricted Stock Award granted pursuant hereto shall terminate and end.  No
option or right granted hereunder shall be exercisable nor restricted stock vest
unless and until such Stockholder approval is obtained and unless and until such
further Stockholder approval required pursuant to Section 19 is obtained. 

     SECTION 18  Time of Granting  Stock Options, Stock Rights or Restricted
Stock Awards.  Neither anything contained in the Plan nor in any resolutions
adopted or to be adopted by the Board of Directors or the Stockholders nor any
action taken by the Committee shall constitute the granting of any Stock Option,
Stock Right or Restricted Stock Award.  The granting of a Stock Option, Stock
Right or Restricted Stock Award shall take place only when a written Stock
Option-Stock Appreciation Rights Agreement or Restricted Stock Agreement shall
have been duly executed and delivered by the Company and the grantee. 

     SECTION 19  Termination and Amendment of the Plan.  The Plan shall
terminate on the earlier of (i) ten years from the date the Plan is adopted by
the Board of Directors or by the Stockholders, whichever is earlier, or (ii)
such time as a new stock option-stock appreciation rights and restricted stock
plan is adopted by the Board of Directors in replacement of the Plan.  No Stock

Option, Stock Right or Restricted Stock Award shall be granted under the Plan
after its termination date, but the termination of the Plan shall not adversely
affect any Stock Option, Stock Right or Restricted Stock Award theretofore
granted under the Plan.  Subject to the foregoing, the Plan may at any time or
from time to time be terminated, modified or amended by (1) the Board of
Directors and (2), if and to the extent that Stockholder approval is required
under Section 422 of the Code or by any securities exchange on which the shares
of Common Stock are then listed, or if directed by the Board of Directors, by
the Stockholders.

     SECTION 20  Plan Provisions Control Terms of Agreement.  The terms of the
Plan shall govern all Stock Options, Stock Rights or Restricted Stock Awards
granted under the Plan and in no event shall the Committee have the power to
grant any Stock Option, Stock Right or Restricted Stock Award under the Plan
which is contrary to any of the provisions of the Plan.

     SECTION 21  Agreement by Grantee Regarding Withholding Taxes.  If the
Committee shall so require, as a condition of exercise of each Stock Option or
Stock Right and vesting of each Restricted Stock Award, each grantee shall agree
that:

     (a)  no later than the date of exercise of any Stock Option or Stock Right
granted hereunder, the grantee will pay to the Company or make arrangements
satisfactory to the Committee regarding payment of any Federal, state or local
taxes of any kind required by law to be withheld upon the exercise of such Stock
Option or Stock Right; 

     (b)  no later than the date of expiration of a restrictive period of any
Restricted Stock Award granted hereunder, the grantee will pay to the Company or
make arrangements satisfactory to the Committee regarding payment of any
Federal, state or local taxes of any kind required by law to be withheld upon
the vesting of such Restricted Stock; and 

     (c)  the Company shall, to the extent permitted or required by law, have
the right to deduct from any payment of any kind otherwise due to the grantee,
Federal, state or local taxes of any kind required by law to be withheld upon
the exercise of such Stock Option or Stock Right or vesting of such Restricted
Stock. 

     SECTION 22  Effective Date of Plan.  The Plan is effective as of May 28,
1987.  The Plan, as amended and restated, as of December 4, 1990,  shall be
effective as of December 4, 1990; the Plan, as amended and restated as of
January 28, 1991, shall be effective as of January 28, 1991; the Plan, as
amended and restated as of February 18, 1992, shall be effective as of February
18, 1992; the Plan, as amended and restated as of March 10, 1994, shall be
effective as of March 10, 1994; and the Plan, as amended and restated as of
November 10, 1994, shall be effective as of November 10, 1994.



                              W I T N E S S E T H:

     Pursuant to the authority granted to the undersigned by the Board of
Directors of Valhi, Inc., the amended and restated Valhi, Inc. 1987 Stock Option
- - Stock Appreciation Rights Plan attached hereto be,  and it hereby is, adopted
effective as of November 10, 1994.

     Dated as of this 10th day of November, 1994. 

                                   Valhi, Inc.



                                   By:  ____________________________________
                                        Harold C. Simmons, Chairman of the
                                        Board, President and Chief Executive
                                        Officer


Attest:



______________________________
Steven L. Watson, Secretary 

EX-23.1

                                           EXHIBIT 23.1







                       CONSENT OF INDEPENDENT ACCOUNTANTS


    We consent to the incorporation by reference in Valhi, Inc.'s (i)
Registration Statement (Form S-8 Nos. 33-53633, 33-48146, 33-41507 and 33-21758)
and related Prospectus pertaining to the Valhi, Inc. 1987 Incentive Stock Option
- - Stock Appreciation Rights Plan, and (ii) Registration Statement (Form S-8 No.
33-41508) and related Prospectus pertaining to the Valhi, Inc. 1990 Non-Employee
Director Stock Option Plan, of our reports dated February 28, 1995 on our audits
of the consolidated financial statements and financial statement schedules of
Valhi, Inc. and Subsidiaries included in this Annual Report on Form 10-K for the
year ended December 31, 1994.




                                           COOPERS & LYBRAND L.L.P.


Dallas, Texas
March 15, 1995









                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


    We consent to the incorporation by reference in Valhi, Inc.'s (i)
Registration Statement (Form S-8 Nos. 33-53633, 33-48146, 33-41507 and 33-21758)
and related Prospectus pertaining to the Valhi, Inc. 1987 Incentive Stock Option
- - Stock Appreciation Rights Plan, and (ii) Registration Statement (Form S-8 No.
33-41508) and related Prospectus pertaining to the Valhi, Inc. 1990 Non-Employee
Director Stock Option Plan, of our report dated January 27, 1995, relating to
the consolidated financial statements (not presented separately herein) of The
Amalgamated Sugar Company for each of the three years in the period ended
December 31, 1994, which reports are  included in this Annual Report on Form 10-
K of Valhi, Inc. for the year ended December 31, 1994.




                                           KPMG PEAT MARWICK LLP


Salt Lake City, Utah
March 15, 1995






                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


    As independent public accountants, we hereby consent to the incorporation
by reference of our report related to Medite Corporation dated January 27, 1995,
included in this Annual Report on Form 10-K of Valhi, Inc. for the year ended
December 31, 1994, into Valhi, Inc.'s previously filed  (i) Registration
Statement (Form S-8 Nos. 33-53633, 33-48146, 33-41507 and 33-21758) and related
Prospectus pertaining to the Valhi, Inc. 1987 Incentive Stock Option - Stock
Appreciation Rights Plan, and (ii) Registration Statement (Form S-8 No. 33-
41508) and related Prospectus pertaining to the Valhi, Inc. 1990 Non-Employee
Director Stock Option Plan.





                                           ARTHUR ANDERSEN & CO. LLP


Portland, Oregon,
March 15, 1995

EX-21.1

EXHIBIT 21.1   SUBSIDIARIES OF THE REGISTRANT



                                               Jurisdiction of     % of Voting
                                               Incorporation or    Securities
Name of Corporation                              Organization         Held    

Amcorp, Inc.                                   Delaware                 100%
  The Amalgamated Sugar Company                Utah                     100
    DRC Leasing Company                        Idaho                    100

Valcor, Inc.                                   Delaware                 100
  Medite Corporation                           Delaware                 100
    Medford International Holdings             Republic of Ireland      100
      Medite of Europe Limited                 Republic of Ireland      100
    Medite Timber Acquisitions Corporation     Delaware                 100
  National Cabinet Lock, Inc.                  Delaware                 100
    Waterloo Furniture Components Limited      Canada                   100
      National Cabinet Lock of Canada Inc.     Canada                   100
  Sybra, Inc.                                  Michigan                 100

Other wholly-owned
  Valmont Insurance Company                    Vermont                  100
    New England Insurance Services Company     Vermont                  100
  Impex Realty Holding, Inc.                   Delaware                 100
  Medco FSC, Inc.                              U.S. Virgin Islands      100

NL Industries, Inc. (1)                        New Jersey                53




(1) 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, 1994 (File No.
    1-640).

EX-27.1

 

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VALHI, INC.'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1994, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.

<MULTIPLIER> 1,000
       
                             
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1994
<PERIOD-START>                             JAN-01-1994
<PERIOD-END>                               DEC-31-1994
<CASH>                                         170,747
<SECURITIES>                                    49,233
<RECEIVABLES>                                  204,828
<ALLOWANCES>                                     4,434
<INVENTORY>                                    498,097
<CURRENT-ASSETS>                               936,134
<PP&E>                                       1,050,427
<DEPRECIATION>                                 242,696
<TOTAL-ASSETS>                               2,480,703
<CURRENT-LIABILITIES>                          656,222
<BONDS>                                      1,086,654
<COMMON>                                         1,245
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<OTHER-SE>                                     197,179
<TOTAL-LIABILITY-AND-EQUITY>                 2,480,703
<SALES>                                        832,656
<TOTAL-REVENUES>                               832,656
<CGS>                                          633,388
<TOTAL-COSTS>                                  633,388
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                   213
<INTEREST-EXPENSE>                              35,274
<INCOME-PRETAX>                                 29,145
<INCOME-TAX>                                     9,476
<INCOME-CONTINUING>                             19,669
<DISCONTINUED>                                 (8,069)
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    11,600
<EPS-PRIMARY>                                      .10
<EPS-DILUTED>                                      .10