Note 2—Business and geographic segments:

Business segment	Entity	% controlled at December 31, 2016
Chemicals	Kronos		80	%
Component products	CompX		87	%
Waste management	WCS		100	%
Real estate management and development	BMI and LandWell		63% - 77	%

Our control of Kronos includes 50% we hold directly and 30% held directly by NL. We own 83% of NL. Our control of CompX is through NL. We own 63% of BMI. Our control of LandWell includes the 27% we hold directly and 50% held by BMI. See Note 3.

We are organized based upon our operating subsidiaries. Our operating segments are defined as components of our consolidated operations about which separate financial information is available that is regularly evaluated by our chief operating decision maker in determining how to allocate resources and in assessing performance. Each operating segment is separately managed, and each operating segment represents a strategic business unit offering different products.

We have the following four consolidated reportable operating segments.

•

Chemicals—Our chemicals segment is operated through our majority control of Kronos. Kronos is a leading global producer and marketer of value-added titanium dioxide pigments (“TiO₂”). TiO₂ is used to impart whiteness, brightness, opacity and durability to a wide variety of products, including paints, plastics, paper, fibers and ceramics. Additionally, TiO₂is a critical component of everyday applications, such as coatings, plastics and paper, as well as many specialty products such as inks, foods and cosmetics. See Note 7.

•

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

•

Waste Management—WCS is our subsidiary which operates a West Texas facility for the processing, treatment, storage and disposal of a broad range of low-level radioactive, hazardous, toxic and other wastes. WCS obtained a byproduct disposal license in 2008 and began disposal operations at this facility in 2009. WCS received a low-level radioactive waste (“LLRW”) disposal license in 2009. The Compact LLRW disposal facility commenced operations in 2012, and the Federal LLRW site commenced operations in 2013. We reached an agreement for the sale of our Waste Management Segment in November 2015, and which sale is subject to certain customary closing conditions, including the receipt of U.S. antitrust approval. See Note 3.

•

Real Estate Management and Development—We operate in real estate management and development through our majority control of BMI and LandWell. BMI provides utility services to certain industrial and municipal customers and owns real property in Henderson, Nevada. LandWell is engaged in efforts to develop certain land holdings for commercial, industrial and residential purposes in Henderson, Nevada.

We evaluate segment performance based on segment operating income, which we define as income before income taxes and interest expense, exclusive of certain non-recurring items (such as gains or losses on disposition of business units and other long-lived assets outside the ordinary course of business and certain legal settlements) and certain general corporate income and expense items (including securities transactions gains and losses and interest and dividend income), which are not attributable to the operations of the reportable operating segments. The accounting policies of our reportable operating segments are the same as those described in Note 1. Segment results we report may differ from amounts separately reported by our various subsidiaries and affiliates due to purchase accounting adjustments and related amortization or differences in how we define operating income. Intersegment sales are not material.

Interest income included in the calculation of segment operating income is not material in 2014, 2015 or 2016. Capital expenditures include additions to property and equipment but exclude amounts we paid for business units acquired in business combinations. Depreciation and amortization related to each reportable operating segment includes amortization of any intangible assets attributable to the segment. Amortization of deferred financing costs and any premium or discount associated with the issuance of indebtedness is included in interest expense.

Segment assets are comprised of all assets attributable to each reportable operating segment, including goodwill and other intangible assets. Our investment in the TiO₂ manufacturing joint venture (see Note 7) is included in the Chemicals Segment’s assets. Corporate assets are not attributable to any operating segment and consist principally of cash and cash equivalents, restricted cash equivalents and marketable securities. Our Real Estate Management and Development Segment’s operating loss in 2016 includes a first quarter $5.1 million contract related intangible asset impairment which is included in the determination of its operating income, see Note 7. Our Chemicals Segment’s operating income in 2016 includes $4.3 million in business interruption insurance proceeds which is included in the determination of its operating income, see Note 12.

	Years ended December 31,
	2014			2015			2016
	(In millions)
Net sales:
Chemicals	$	1,651.9		$	1,348.8		$	1,364.3
Component products		103.9			109.0			108.9
Waste management		66.5			45.0			47.4
Real estate management and development		40.3			30.1			46.2
Total net sales	$	1,862.6		$	1,532.9		$	1,566.8
Cost of sales:
Chemicals	$	1,304.6		$	1,158.5		$	1,109.2
Component products		71.6			75.6			73.8
Waste management		49.7			50.5			55.5
Real estate management and development		33.9			25.4			36.2
Total cost of sales	$	1,459.8		$	1,310.0		$	1,274.7
Gross margin:
Chemicals	$	347.3		$	190.3		$	255.1
Component products		32.3			33.4			35.1
Waste management		16.8			(5.5	)		(8.1	)
Real estate management and development		6.4			4.7			10.0
Total gross margin	$	402.8		$	222.9		$	292.1
Operating income (loss):
Chemicals	$	156.8		$	7.1		$	91.0
Component products		13.6			14.0			15.6
Waste management		(2.2	)		(26.5	)		(26.2	)
Real estate management and development		2.0			—			.8
Total operating income (loss)		170.2			(5.4	)		81.2
Equity in earnings of investee		—			—			—
General corporate items:
Securities earnings		26.9			26.5			27.7
Insurance recoveries		10.4			3.7			.4
General expenses, net		(38.8	)		(39.6	)		(43.1	)
Interest expense		(56.7	)		(59.0	)		(63.2	)
Income (loss) before income taxes	$	112.0		$	(73.8	)	$	3.0

	Years ended December 31,
	2014		2015		2016
	(In millions)
Depreciation and amortization:
Chemicals	$	51.9	$	44.3	$	42.6
Component products		3.5		3.5		3.7
Waste management		20.3		19.3		18.3
Real estate management and development		2.7		2.8		2.9
Total	$	78.4	$	69.9	$	67.5
Capital expenditures:
Chemicals	$	61.3	$	47.5	$	53.0
Component products		2.8		4.2		3.2
Waste management		4.5		1.7		.7
Real estate management and development		4.0		1.2		2.0
Corporate		.1		—		—
Total	$	72.7	$	54.6	$	58.9

	December 31,
	2014		2015		2016
	(In millions)
Total assets:
Operating segments:
Chemicals	$	2,001.2	$	1,617.6	$	1,548.9
Component products		83.1		88.7		97.9
Waste management		257.7		231.9		228.6
Real estate management and development		246.1		232.9		200.9
Corporate and eliminations		357.1		366.3		366.9
Total	$	2,945.2	$	2,537.4	$	2,443.2

Geographic information. We attribute net sales to the place of manufacture (point-of-origin) and the location of the customer (point-of-destination); we attribute property and equipment to their physical location. At December 31, 2016 the net assets of our non-U.S. subsidiaries included in consolidated net assets approximated $621 million (in 2015 the total was $422 million).

	Years ended December 31,
	2014			2015			2016
	(In millions)
Net sales—point of origin:
United States	$	993.7		$	841.9		$	866.7
Germany		844.1			690.0			699.8
Canada		252.3			216.9			257.7
Belgium		249.3			198.8			187.4
Norway		256.8			183.5			164.8
Eliminations		(733.6	)		(598.2	)		(609.6	)
Total	$	1,862.6		$	1,532.9		$	1,566.8
Net sales—point of destination:
North America	$	753.2		$	604.0		$	614.2
Europe		883.6			700.9			698.2
Asia and other		225.8			228.0			254.4
Total	$	1,862.6		$	1,532.9		$	1,566.8

	December 31,
	2014		2015		2016
	(In millions)
Net property and equipment:
United States	$	234.4	$	227.1	$	214.7
Germany		259.5		229.9		223.7
Canada		63.4		55.0		60.5
Norway		85.5		71.9		75.5
Belgium		90.8		81.8		80.1
Total	$	733.6	$	665.7	$	654.5