SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
           ACT OF 1934 - For the fiscal year ended December 31, 2004

                         Commission file number 1-31763

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

           Delaware ___________                                76-0294959____
(State or other jurisdiction of                              (IRS Employer
 incorporation or organization)                            Identification No.)

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

Registrant's telephone number, including area code:          (972)_233-1700 _

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)

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

                  None.

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

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.

Indicate  by check mark  whether  the  Registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Securities Exchange Act). Yes X No

The  aggregate  market  value of the 2.9 million  shares of voting stock held by
nonaffiliates of Kronos  Worldwide,  Inc. as of June 30, 2004 (the last business
day  of  the  Registrant's  most   recently-completed   second  fiscal  quarter)
approximated $98 million.

As of February 28, 2005, 48,946,049 shares of the Registrant's common stock were
outstanding.

                       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.


                                     PART I


ITEM 1.  BUSINESS

     Kronos Worldwide, Inc., (NYSE: KRO) organized as a Delaware corporation, is
a leading global producer and marketer of value-added  titanium dioxide pigments
("TiO2").  Approximately  one-half  of the  Company's  2004 sales  volumes  were
attributable  to  markets  in Europe,  where the  Company is the second  largest
producer of TiO2 with an estimated 20% share of European TiO2 sales volumes. The
Company has an estimated 14% share of North  American TiO2 sales volume.  Kronos
has production  facilities  throughout Europe and North America.  Kronos and its
consolidated  subsidiaries are sometimes referred to herein  collectively as the
"Company."

     At December 31, 2004,  (i) Valhi,  Inc (NYSE:  VHI)  directly and through a
wholly-owned subsidiary held approximately 57% of the Company's common stock and
NL Industries,  Inc. (NYSE: NL) held an additional 37% of the outstanding common
stock of the Company,  (ii) Valhi and its  wholly-owned  subsidiary  held 83% of
NL's outstanding common stock and (iii) Contran Corporation and its subsidiaries
held approximately 91% of Valhi's outstanding common stock. Substantially all of
Contran's outstanding voting stock is held by trusts established for the benefit
of certain children and  grandchildren of Harold C. Simmons of which Mr. Simmons
is sole trustee,  or is held by Mr. Simmons or persons or other entities related
to Mr. Simmons.  Consequently, Mr. Simmons may be deemed to control each of such
companies.

     As  provided  by the  safe  harbor  provisions  of the  Private  Securities
Litigation  Reform Act of 1995, the Company cautions that the statements in this
Annual  Report on Form 10-K relating to matters that are not  historical  facts,
including,  but not limited to,  statements  found in this Item 1 -  "Business,"
Item 3 - "Legal Proceedings," Item 7 - "Management's  Discussion and Analysis of
Financial  Condition and Results of Operations" and Item 7A - "Quantitative  and
Qualitative Disclosures About Market Risk," are forward-looking  statements that
represent  management's  beliefs and  assumptions  based on currently  available
information.  Forward-looking  statements  can be identified by the use of words
such  as  "believes,"   "intends,"  "may,"  "should,"  "could,"   "anticipates,"
"expected" or comparable terminology, or by discussions of strategies or trends.
Although  the  Company  believes  that  the   expectations   reflected  in  such
forward-looking  statements are  reasonable,  it cannot give any assurances that
these  expectations  will prove to be correct.  Such  statements by their nature
involve  substantial risks and  uncertainties  that could  significantly  impact
expected  results,  and actual future results could differ materially from those
described  in such  forward-looking  statements.  While  it is not  possible  to
identify   all   factors,   the  Company   continues  to  face  many  risks  and
uncertainties.  Among the factors  that could  cause  actual  future  results to
differ  materially  are the risks and  uncertainties  discussed  in this  Annual
Report and those described from time to time in the Company's other filings with
the SEC including, but not limited to, the following:

o    Future supply and demand for the Company's products,
o    The extent of the  dependence  of certain of the  Company's  businesses  on
     certain market sectors,
o    The cyclicality of the Company's businesses,
o    Customer  inventory  levels  (such as the  extent  to which  the  Company's
     customers may, from time to time,  accelerate  purchases of TiO2 in advance
     of  anticipated  price  increases or defer  purchases of TiO2 in advance of
     anticipated price decreases),
o    Changes in raw material and other operating costs (such as energy costs),
o    The possibility of labor disruptions,
o    General global  economic and political  conditions  (such as changes in the
     level of gross  domestic  product in  various  regions of the world and the
     impact of such changes on demand for TiO2),
o    Competitive products and substitute products,
o    Customer and competitor strategies,
o    The impact of pricing and production decisions,
o    Competitive technology positions,
o    The introduction of trade barriers,
o    Fluctuations  in currency  exchange  rates (such as changes in the exchange
     rate between the U.S. dollar and each of the euro, the Norwegian kroner and
     the Canadian dollar),
o    Operating  interruptions  (including,  but not limited to, labor  disputes,
     leaks,   fires,   explosions,   unscheduled   or  unplanned   downtime  and
     transportation interruptions),
o    The ability of the Company to renew or refinance credit facilities,
o    The ultimate  outcome of income tax audits,  tax settlement  initiatives or
     other tax matters,
o    The ultimate ability to utilize income tax attributes, the benefit of which
     has been recognized under the "more-likely-than-not" recognition criteria,
o    Environmental  matters  (such as those  requiring  emission  and  discharge
     standards for existing and new facilities),
o    Government laws and regulations and possible changes therein,
o    The ultimate resolution of pending litigation, and
o    Possible future litigation.

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

     Industry.  Titanium dioxide pigments are inorganic  chemical  products used
for imparting  whiteness,  brightness and opacity to a diverse range of customer
applications and end-use markets,  including coatings,  plastics, paper, fibers,
food,  ceramics and cosmetics.  TiO2 is considered a  "quality-of-life"  product
with demand affected by gross domestic  product in various regions of the world.
TiO2, the largest  commercially  used whitening  pigment by volume,  derives its
value from its whitening properties and opacifying ability (commonly referred to
as hiding power).  As a result of TiO2's high  refractive  index rating,  it can
provide more hiding power than any other commercially produced white pigment. In
addition,  TiO2  demonstrates  excellent  resistance  to chemical  attack,  good
thermal stability and resistance to ultraviolet degradation. TiO2 is supplied to
customers in either a powder or slurry form.

     Per capita  consumption of TiO2 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  consumers  of TiO2.  Significant  markets for TiO2
consumption  could  emerge  in  Eastern  Europe,  the Far  East or  China as the
economies in these regions develop to the point that  quality-of-life  products,
including TiO2, experience greater demand.  Geographic  information is contained
in Note 2 to the Consolidated Financial Statements.

     Products and operations.  TiO2 is produced in two crystalline forms: rutile
and  anatase.  Both the  chloride and sulfate  production  processes  (discussed
below)  produce  rutile  TiO2.  Chloride  process  rutile is  preferred  for the
majority of customer applications. From a technical standpoint, chloride process
rutile has a bluer  undertone and higher  durability than sulfate process rutile
TiO2.  Although many end-use  applications can use either form of TiO2, chloride
process rutile TiO2 is the preferred form for use in coatings and plastics,  the
two largest end-use  markets.  Anatase TiO2,  which is produced only through the
sulfate  production  process,  represents  a much smaller  percentage  of annual
global TiO2  production  and is preferred for use in selected  paper,  ceramics,
rubber tires, man-made fibers, food and cosmetics.

     The Company  believes  that there are no  effective  substitutes  for TiO2.
Extenders, such as kaolin clays, calcium carbonate and polymeric opacifiers, are
used in a number of end-use  markets as white  pigments,  however the opacity in
these products is not able to duplicate the performance characteristics of TiO2,
and the Company believes these products are unlikely to replace TiO2.

     The Company  currently  produces over 40 different TiO2 grades,  sold under
the Kronos trademark,  which provide a variety of performance properties to meet
customers' specific requirements. The Company's major customers include domestic
and international paint, plastics and paper manufacturers.

     The Company  and its  distributors  and agents  sell and provide  technical
services for its products to over 4,000 customers in over 100 countries with the
majority  of sales in Europe and North  America.  TiO2 is  distributed  by rail,
truck and ocean  carrier  in either  dry or slurry  form.  The  Company  and its
predecessors  have  produced and marketed  TiO2 in North  America and Europe for
over 80 years,  and  Kronos  is the only  leading  TiO2  producer  committed  to
producing TiO2 and related  products as its sole business.  The Company believes
that it has developed  considerable expertise and efficiency in the manufacture,
sale,  shipment  and  service of its  products  in  domestic  and  international
markets.

     Sales of TiO2  represented  about 90% of Kronos' total sales in 2004. Sales
of other products,  complementary to Kronos' TiO2 business, are comprised of the
following:

o    Kronos  operates an  ilmenite  mine in Norway  pursuant  to a  governmental
     concession with an unlimited term. Ilmenite is a raw material used directly
     as a  feedstock  by some  sulfate-process  TiO2  plants,  including  all of
     Kronos' European  sulfate-process  plants.  The mine has estimated reserves
     that  are  expected  to  last  at  least  20  years.   Ilmenite   sales  to
     third-parties  represented  approximately 4% of the Company's  consolidated
     net sales in 2004.

o    Kronos manufactures and sells iron-based  chemicals,  which are by-products
     and processed  by-products of the TiO2 pigment  production  process.  These
     co-product chemicals are marketed through Kronos' Ecochem division, and are
     used  primarily  as  treatment  and  conditioning   agents  for  industrial
     effluents and municipal  wastewater as well as in the  manufacture  of iron
     pigments,  cement and agricultural  products.  Sales of iron based chemical
     products were about 3% of sales in 2004.

o    Kronos  manufactures and sells certain titanium chemical products (titanium
     oxychloride and titanyl sulfate),  which are side-stream  products from the
     production of TiO2. Titanium oxychloride is used in specialty  applications
     in the formulation of pearlescent  pigments,  production of  electroceramic
     capacitors for cell phones and other  electronic  devices.  Titanyl sulfate
     products  are  used  primarily  in  pearlescent  pigments.  Sales  of these
     products were about 1% of sales in 2004.

     Manufacturing  process  and  raw  materials.  TiO2 is  manufactured  by the
Company using both the chloride process and the sulfate  process.  Approximately
73% of the  Company's  current  production  capacity  is based  on the  chloride
process.  The chloride process is a continuous process in which chlorine is used
to extract rutile TiO2. The chloride process  typically has lower  manufacturing
costs than the sulfate  process due to higher yield and production of less waste
and lower energy  requirements and labor costs.  Because much of the chlorine is
recycled and feedstock  bearing a higher titanium  content is used, the chloride
process produces less waste than the sulfate  process.  The sulfate process is a
batch  chemical  process  that  uses  sulfuric  acid to  extract  TiO2.  Sulfate
technology can produce either anatase or rutile  pigment.  Once an  intermediate
TiO2 pigment has been produced by either the chloride or sulfate process,  it is
'finished'  into  products  with  specific   performance   characteristics   for
particular end-use applications through proprietary  processes involving various
chemical  surface  treatments  and  intensive  micronizing  (milling).   Due  to
environmental  factors  and  customer  considerations,  the  proportion  of TiO2
industry sales represented by  chloride-process  pigments has increased relative
to sulfate-process pigments and, in 2004, chloride-process production facilities
represented approximately 64% of industry capacity.

     Kronos  produced a new Company  record 484,000 metric tons of TiO2 in 2004,
compared to the prior records of 476,000  metric tons in 2003 and 442,000 metric
tons in 2002. Such production amounts include the Company's one-half interest in
the  joint-venture  owned Louisiana plant discussed below. The Company's average
production capacity  utilization rates in 2003 and 2004 were near full capacity,
up from 96% in 2002. Kronos  production  capacity has increased by approximately
30% over the past ten years due to debottlenecking  programs, with only moderate
capital  expenditures.  The Company  believes its annual  attainable  production
capacity  for 2005 is  approximately  500,000  metric  tons,  with  some  slight
additional capacity available in 2006 through Kronos' continued  debottlenecking
efforts.

     The primary raw materials used in the TiO2 chloride  production process are
titanium-containing   feedstock,  chlorine  and  coke.  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 but increasing number of
suppliers  around the world,  principally  in Australia,  South Africa,  Canada,
India and the United States. The Company purchased  approximately 410,000 metric
tons of chloride  feedstock in 2004,  of which the vast  majority was slag.  The
Company  purchased  chloride process grade slag in 2004 from a subsidiary of Rio
Tinto plc UK - Richards  Bay Iron and  Titanium  Limited  South  Africa  under a
long-term supply contract that expires at the end of 2007. Natural rutile ore is
purchased primarily from Iluka Resources,  Limited (Australia), a company formed
through  the merger of  Westralian  Sands  Limited  (Australia)  and RGC Mineral
Sands,  Ltd., under a long-term supply contract that expires at the end of 2007.
The  Company  does not  expect to  encounter  difficulties  obtaining  long-term
extensions  to  existing  supply  contracts  prior  to  the  expiration  of  the
contracts.  Raw materials purchased under these contracts and extensions thereof
are expected to meet the Company's chloride process feedstock  requirements over
the next several years.

     The primary raw materials used in the TiO2 sulfate  production  process are
titanium-containing  feedstock,  derived  primarily  from  rock and  beach  sand
ilmenite,  and  sulfuric  acid.  Sulfuric  acid is  available  from a number  of
suppliers. Titanium-containing feedstock suitable for use in the sulfate process
is available from a limited number of suppliers 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,  the Company operates a rock ilmenite mine in Norway,
which provided all of the Company's  feedstock for its European  sulfate-process
pigment plants in 2004. The Company produced  approximately  867,000 metric tons
of  ilmenite  in 2004 of which  approximately  311,000  metric  tons  were  used
internally  with  the  remainder  sold  to  third  parties.   For  its  Canadian
sulfate-process   plant,   the  Company  also   purchases   sulfate  grade  slag
(approximately  20,000 metric tons in 2004) primarily from Q.I.T.  Fer et Titane
Inc. Canada, a subsidiary of Rio Tinto plc UK, under a long-term supply contract
that expires at the end of 2009. Raw materials  purchased  under these contracts
and  extensions  thereof are  expected  to meet the  Company's  sulfate  process
feedstock requirements over the next several years.

     Kronos has sought to minimize the impact of potential  changes in the price
of its feedstock raw  materials by entering into the contracts  discussed  above
which fix, to a large  extent,  the price of its raw  materials.  The  contracts
contain fixed  quantities that Kronos is required to purchase,  although certain
of these  contracts  allow for an upward or downward  adjustment in the quantity
purchased,  generally  no  more  than  10%,  based  on the  Company's  feedstock
requirements.  The  quantities  under these  contracts do not require  Kronos to
purchase  feedstock in excess of amounts that Kronos would reasonably consume in
any given year. The pricing under these agreements is generally based on a fixed
price with price escalation  clauses  primarily based on consumer price indices,
as defined in the respective contracts.

     The number of sources of, and  availability  of,  certain raw  materials is
specific to the particular  geographic region in which a facility is located. As
noted  above,  Kronos  purchases   titanium-bearing  ore  from  three  different
suppliers in different  countries under multiple-year  contracts.  Political and
economic  instability in certain  countries from which Kronos  purchases its raw
material  supplies could  adversely  affect the  availability of such feedstock.
Should  Kronos'  vendors not be able to meet their  contractual  obligations  or
should Kronos be otherwise unable to obtain necessary raw materials,  Kronos may
incur  higher costs for raw  materials  or may be required to reduce  production
levels,  which  may have a  material  adverse  effect  on  Kronos'  consolidated
financial position, results of operations or liquidity.

     TiO2 manufacturing joint venture.  Subsidiaries of the Company and Huntsman
Holdings LLC  ("Huntsman")  each own a  50%-interest  in a  manufacturing  joint
venture,   Louisiana   Pigment  Company   ("LPC").   LPC  owns  and  operates  a
chloride-process TiO2 plant located in Lake Charles, Louisiana.  Production from
the plant is  shared  equally  by the  Company  and  Huntsman  (the  "Partners")
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 LPC,  including
production  and output  decisions.  Two  general  managers,  one  appointed  and
compensated  by each Partner,  manage the operations of the joint venture acting
under the direction of the supervisory committee.

     Kronos is required to purchase  one-half of the TiO2  produced by the joint
venture. Because Kronos does not control the joint venture, the joint venture is
not consolidated in the Company's financial statements. The Company accounts for
its interest in the joint venture by the equity method. The manufacturing  joint
venture operates on a break-even basis and, accordingly,  the Company reports no
equity in earnings of the joint  venture.  With the  exception  of raw  material
costs for the pigment grades  produced,  Kronos and Huntsman share all costs and
capital  expenditures of the joint venture  equally.  The Company's share of net
costs is reported as cost of sales as the related TiO2  acquired  from the joint
venture is sold. See Notes 6 and 15 to the Consolidated Financial Statements.

     Competition.  The TiO2 industry is highly competitive. The Company 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 the Company's  grades and
substantially all of the Company's  production are considered commodity pigments
with price generally being the most significant  competitive factor. During 2004
the Company had an estimated 12% share of worldwide  TiO2 sales volume,  and the
Company  believes  that it is the leading  seller of TiO2 in several  countries,
including  Germany and Canada.  Overall,  Kronos is the  world's  fifth  largest
producer of TiO2.

     The  Company's  principal  competitors  are E.I.  du Pont de  Nemours & Co.
("DuPont");  Millennium Chemicals, Inc.; Huntsman;  Kerr-McGee Corporation;  and
Ishihara  Sangyo  Kaisha,  Ltd.  The  Company's  five largest  competitors  have
estimated  individual shares of TiO2 production capacity ranging from 24% to 4%,
and an estimated aggregate 70% share of worldwide TiO2 production volume. DuPont
has about one-half of total North American TiO2  production  capacity and is the
Company's principal North American competitor.

     Worldwide capacity additions in the TiO2 market resulting from construction
of greenfield plants require  significant  capital  expenditures and substantial
lead time (typically three to five years in Kronos'  experience).  No greenfield
plants are currently under construction in North America or Europe.  Kronos does
expect  that  industry  capacity  will  increase  as Kronos and its  competitors
continue to debottleneck their existing facilities. In addition to the potential
capacity additions through  debottlenecking,  certain  competitors have recently
either idled or shut down facilities. In the past year, certain competitors have
announced  the  idling or shut down of an  aggregate  of  approximately  135,000
metric tons of sulfate  production  capacity by early 2005. Based on the factors
described  above,  Kronos expects that the average  annual  increase in industry
capacity from announced  debottlenecking  projects will be less than the average
annual demand growth for TiO2 during the next three to five years.  However,  no
assurance  can be given that future  increases in the TiO2  industry  production
capacity and future  average annual demand growth rates for TiO2 will conform to
Kronos'  expectations.  If actual developments differ from Kronos' expectations,
Kronos and the TiO2 industry's performances could be unfavorably affected.

     Research  and  development.  The  Company's  expenditures  for research and
development,   process   technology  and  quality   assurance   activities  were
approximately  $6  million  in 2002,  $7 million in 2003 and $8 million in 2004.
Research and development activities are conducted principally at the Leverkusen,
Germany facility.  Such activities are directed  primarily toward improving both
the chloride and sulfate  production  processes,  improving  product quality and
strengthening  the  Company's  competitive  position by  developing  new pigment
applications.

     Kronos continually seeks to improve the quality of its grades, and has been
successful at developing  new grades for existing and new  applications  to meet
the needs of  customers  and  increase  product  life cycle.  Over the last five
years,  ten new grades have been added for plastics,  coatings,  fiber and paper
laminate applications.

     Patents and trademarks.  Patents held for products and production processes
are important to Kronos and its  continuing  business  activities.  Kronos 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.  Kronos' existing patents generally have a term
of 20 years from the date of filing,  and have remaining  terms ranging from one
to 19 years. Kronos seeks to protect its intellectual property rights, including
its patent  rights,  and from time to time  Kronos  will be involved in disputes
relating to the  protection  and use of  intellectual  property  relating to its
products.

     Kronos' major trademarks,  including Kronos,  are protected by registration
in  the  United  States  and  elsewhere   with  respect  to  those  products  it
manufactures and sells.  Kronos also relies on unpatented  proprietary  know-how
and continuing  technological  innovation and other trade secrets to develop and
maintain its  competitive  position.  Kronos'  proprietary  chloride  production
process is an important part of Kronos'  technology,  and Kronos' business could
be harmed if Kronos should fail to maintain confidentiality of its trade secrets
used in this technology.

     Foreign  operations.  The Company's  chemical  businesses  have operated in
non-U.S.  markets  since the 1920s.  Most of the  Company's  current  production
capacity  is located  in Europe  and  Canada  with  non-U.S.  net  property  and
equipment  aggregating  approximately $464 million at December 31, 2004. Kronos'
European  operations  include  production  facilities  in  Germany,  Belgium and
Norway.  Approximately  $813 million  (72%) of the Company's  2004  consolidated
sales were to non-U.S.  customers,  including  $98 million  (9%) to customers in
areas other than Europe and Canada.  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.  Effects of fluctuations in currency
exchange  rates on the Company's  results of operations are discussed in Item 7.
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and Item 7A. "Quantitative and Qualitative  Disclosures about Market
Risk."

     Political and economic  uncertainties  in certain of the countries in which
the Company operates may expose it 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.  See  "Regulatory  and
Environmental Matters."

     Customer base and annual seasonality. The Company 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.  The Company's  largest ten customers  accounted for approximately
25% of net sales in 2004.  Neither the Company'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 the spring and
summer painting season demand, TiO2 sales are generally higher in the first half
of the year than in the second half of the year.

     Employees.  As of December 31,  2004, Kronos employed  approximately  2,420
persons (excluding employees of the Louisiana joint venture),  with 50 employees
in the United States, 420 employees in Canada and 1,950 employees in Europe.

     Hourly  employees in production  facilities  worldwide,  including the TiO2
joint  venture,  are  represented  by a  variety  of labor  unions,  with  labor
agreements having various  expiration dates. In Europe,  Kronos' union employees
are covered by master collective bargaining agreements in the chemicals industry
that are renewed annually.  In Canada,  Kronos' union employees are covered by a
collective  bargaining  agreement that expires in June 2007. Kronos believes its
labor relations are good.

     Regulatory and environmental  matters.  Kronos'  operations are governed by
various  environmental laws and regulations.  Certain of Kronos' operations are,
or have been,  engaged in the  handling,  manufacture  or use of  substances  or
compounds  that may be  considered  toxic or  hazardous  within  the  meaning of
applicable  environmental laws and regulations.  As with other companies engaged
in similar  businesses,  certain  past and current  operations  and  products of
Kronos have the potential to cause  environmental  or other  damage.  Kronos has
implemented  and  continues  to  implement  various  policies and programs in an
effort to minimize these risks.  Kronos' policy is to maintain  compliance  with
applicable  environmental  laws and  regulations  at all its  facilities  and to
strive to improve its  environmental  performance.  It is  possible  that future
developments,   such  as  stricter   requirements  in  environmental   laws  and
enforcement  policies  thereunder,  could adversely  affect Kronos'  production,
handling, use, storage,  transportation,  sale or disposal of such substances as
well as  Kronos'  consolidated  financial  position,  results of  operations  or
liquidity.

     Kronos' U.S. manufacturing operations are governed by federal environmental
and worker  health and safety laws and  regulations,  principally  the  Resource
Conservation and Recovery Act ("RCRA"),  the Occupational Safety and Health Act,
the Clean Air Act, the Clean Water Act, the Safe  Drinking  Water Act, the Toxic
Substances   Control   Act  and  the   Comprehensive   Environmental   Response,
Compensation  and  Liability  Act, as amended by the  Superfund  Amendments  and
Reauthorization  Act  ("CERCLA"),  as well as the  state  counterparts  of these
statutes.  Kronos  believes the TiO2 plant owned by the LPC joint  venture and a
TiO2  slurry  facility  owned  by  Kronos  in  Lake  Charles,  Louisiana  are in
substantial compliance with applicable  requirements of these laws or compliance
orders issued thereunder. Kronos has no other U.S. plants.

     While the laws  regulating  operations of  industrial  facilities in Europe
vary from country to country,  a common regulatory  framework is provided by the
European Union (the "EU").  Germany and Belgium are members of the EU and follow
its initiatives. Norway, although not a member of the EU, generally patterns its
environmental  regulatory  actions  after the EU.  Kronos  believes  that it has
obtained all required  permits and is in substantial  compliance with applicable
EU requirements.

     At its sulfate plant  facilities in Germany,  Kronos recycles weak sulfuric
acid either through contracts with third parties or using its own facilities. At
Kronos' Fredrikstad,  Norway plant, Kronos ships its spent acid to a third party
location  where it is treated  and  disposed.  Kronos'  Canadian  sulfate  plant
neutralizes its spent acid and sells its gypsum  by-product to a local wallboard
manufacturer.  Kronos  has a  contract  with a  third  party  to  treat  certain
sulfate-process  effluents  at  its  German  sulfate  plant.  Either  party  may
terminate  the contract  after giving four years  advance  notice with regard to
Kronos' Nordenham, Germany plant.

     Kronos  is also  involved  in  various  other  environmental,  contractual,
product liability and other claims and disputes incidental to its business.

     From time to time,  Kronos'  facilities  may be  subject  to  environmental
regulatory  enforcement  under U.S.  and foreign  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
Kronos'  consolidated  financial  position,  results of operations or liquidity.
Kronos  believes  that  all  its  plants  are  in  substantial  compliance  with
applicable environmental laws.

     Kronos'  capital   expenditures   related  to  its  ongoing   environmental
protection and improvement  programs in 2004 were approximately $7 million,  and
are currently expected to be approximately $7 million in 2005.

     Website and other available information. The Company maintains a website on
the  Internet  with the  address of  www.kronostio2.com.  Copies of this  Annual
Report on Form  10-K for the year  ended  December  31,  2004 and  copies of the
Company's  Quarterly  Reports  on Form  10-Q for  2003 and 2004 and any  Current
Reports on Form 8-K for 2003 and 2004, and any amendments  thereto,  are or will
be  available  free of charge at such  website as soon as  reasonably  practical
after they are filed with the SEC. Additional information regarding the Company,
including  the  Company's  Audit  Committee  charter and the  Company's  Code of
Business  Conduct and  Ethics,  can also be found at this  website as  required.
Information contained on the Company's website is not part of this report.

     The general  public may read and copy any  materials the Company files with
the  SEC  at  the  SEC's  Public  Reference  Room  at 450  Fifth  Street,  N.W.,
Washington,  D.C. 20549.  The public may obtain  information on the operation of
the Public Reference Room by calling the SEC at  1-800-SEC-0330.  The Company is
an electronic  filer,  and the SEC  maintains an Internet  website that contains
reports,  proxy and  information  statements,  and other  information  regarding
issuers  that file  electronically  with the SEC,  including  the  Company.  The
Internet address of the SEC's website is www.sec.gov.

ITEM 2.  PROPERTIES

     During 2004,  the Company  operated four TiO2 plants in Europe (one in each
of  Leverkusen,   Germany,  Nordenham,  Germany,   Langerbrugge,   Belgium,  and
Fredrikstad,  Norway).  In  North  America,  the  Company  has a TiO2  plant  in
Varennes,  Quebec, Canada and, through the manufacturing joint venture described
above,  a one-half  interest  in a TiO2 plant in Lake  Charles,  Louisiana.  The
Company  operates an ilmenite ore mine in Hauge i Dalane,  Norway  pursuant to a
governmental concession with an unlimited term and also owns a TiO2 slurry plant
in Lake Charles, Louisiana. See Note 6 to the Consolidated Financial Statements.
TiO2 is produced  using the chloride  process at the  Leverkusen,  Langerbrugge,
Varennes  and Lake  Charles  facilities  and is  manufactured  using the sulfate
process in Nordenham, Leverkusen,  Fredrikstad and Varennes. Kronos' co-products
are produced at its  Norwegian,  Belgian and German  facilities and its titanium
chemicals are produced at its Belgian and Canadian facilities.

     The  Company  owns all of its  principal  production  facilities  described
above, except for the land under the Fredrikstad and Leverkusen facilities.  The
Norwegian  plant is located on public  land and is leased  until  2013,  with an
option to extend the lease for an additional 50 years.  The Company's  principal
German operating subsidiary leases the land under its Leverkusen TiO2 production
facility  pursuant to a lease expiring in 2050. The  Leverkusen  facility,  with
about one-third of the Company's  current TiO2 production  capacity,  is located
within  an  extensive  manufacturing  complex  owned by Bayer  AG.  Rent for the
Leverkusen  facility is  periodically  established  by agreement  with Bayer for
periods of at least two years at a time. Under a separate  supplies and services
agreement  expiring  in  2011,  Bayer  provides  some raw  materials,  including
chlorine and certain amounts of sulfuric acid, auxiliary and operating materials
and utilities services necessary to operate the Leverkusen  facility.  The lease
and the supplies  and services  agreement  have certain  restrictions  regarding
ownership and use of the Leverkusen facility.

     The Company has under lease various  corporate and  administrative  offices
located in the U.S. and various sales offices located in the U.S.,  France,  the
Netherlands, Denmark and the U.K.

ITEM 3.  LEGAL PROCEEDINGS

     Kronos is involved in various environmental, contractual, product liability
and other claims and disputes  incidental to its business.  Certain  information
called for by this Item is  included  in Note 16 to the  Consolidated  Financial
Statements, which information is incorporated herein by reference.

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, 2004.


                                     PART II


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

     Prior to December 2003, the Company was a wholly-owned subsidiary of NL. On
December 8, 2003, NL completed  the pro-rata  distribution  to its  stockholders
(including Valhi and a wholly-owned  subsidiary of Valhi) of approximately 48.8%
of the Company's outstanding common stock. Stockholders of NL received one share
of common stock of Kronos for every two shares of NL common stock outstanding as
of the  close  of  business  on  November  17,  2003,  the  record  date for the
distribution.

     The  Company's  common  stock is listed  and  traded on the New York  Stock
Exchange (symbol:  KRO). As of February 28, 2005, there were approximately 5,300
holders of record of common stock. The Company's common stock commenced  trading
on December 8, 2003.  For the period from December 8, 2003 to December 31, 2003,
the high and low closing per share sales price of Kronos common stock  according
to Bloomberg was $24.79 and $16.00 respectively.  The following table sets forth
the high and low closing per share sales price for Kronos  common  stock for the
periods  indicated  according  to  Bloomberg,  and  dividends  paid  during such
periods. On February 28, 2005 the closing price of Kronos common stock according
to the NYSE Composite Tape was $47.09.

                                                                        Cash
                                                                      dividends
                                            High         Low            paid
                                            ----         ---          ---------

 Year ended December 31, 2004

   First Quarter                           $33.25      $22.22          $ .25
   Second Quarter                           34.20       29.11            .25
   Third Quarter                            39.70       30.80            .25
   Fourth Quarter                           48.48       38.50            .25

     Immediately  prior to NL's distribution of shares of Kronos common stock to
its  stockholders on December 8, 2003, the Company  declared and paid a dividend
to NL in the form of a $200 million  long-term note payable.  See Note 10 to the
Consolidated Financial Statements.

     The Company paid four  quarterly  $.25 per share cash dividends in 2004. On
February 17, 2005, the Company's Board of Directors declared a regular quarterly
dividend of $.25 per share to  stockholders of record as of March 10, 2005 to be
paid on  March  25,  2005.  However,  the  declaration  and  payment  of  future
dividends,  and the amount thereof,  is  discretionary,  and the amount, if any,
will be dependent upon the Company's results of operations, financial condition,
contractual  restrictions  and other  factors  deemed  relevant by the Company's
Board of Directors.  The amount and timing of past dividends is not  necessarily
indicative of the amount and timing of any future dividends which might be paid.

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."  The
following selected historical financial data of Kronos with respect to the years
ended December 31, 2000,  2001, 2002, 2003 and 2004 and as of December 31, 2001,
2002,  2003 and 2004, is derived from, and should be read in  conjunction  with,
Kronos'  audited  Consolidated  Financial  Statements.  The selected  historical
financial  data as of December  31,  2000,  is derived  from  Kronos'  unaudited
Consolidated Financial Statements. The earnings per share and cash dividends per
share data  presented  below has been  restated to give effect to the  September
2003  change  in  Kronos'  capital  structure  discussed  in  Note 1 to  Kronos'
Consolidated  Financial  Statements in which the 1,000 shares of Kronos'  common
stock previously outstanding were reclassified in the form of a stock split into
approximately  48.9  million  shares  of  Kronos'  common  stock.  The  selected
historical  financial data reflects Kronos' results as it has historically  been
operated  as a part of NL, and these  results may not be  indicative  of Kronos'
future performance as a publicly traded company following the distribution.


                                                                      Years ended December 31,
                                                   ----------------------------------------------------------
                                                    2000         2001        2002         2003         2004
                                                    ----         ----        ----         ----         -----
                                                         (In millions, except per share data and TiO2
                                                                        operating statistics)

 STATEMENTS OF OPERATIONS DATA:
                                                                                      
    Net sales                                    $ 922.3      $ 835.1      $ 875.2      $1,008.2     $1,128.6
    Net income                                     130.2        154.5         66.3          87.5        314.9
    Net income per share                            2.66         3.16         1.35          1.79         6.43
    Cash dividends per share (1)                    1.12          .62         2.27           .14         1.00

 BALANCE SHEET DATA (at year end):
    Total assets                                   893.4        910.1        988.5       1,121.9      1,353.3
    Notes payable and long-term debt
      including current maturities                 266.1        242.7        370.5         556.7        533.2
    Common stockholder's equity                    346.6        378.5        314.2         159.4        470.8

 TiO2 OPERATING STATISTICS:
    Average selling price
      Index (1990=100)                              92           89           81             84            82

    Sales volume*                                  436          402          455            462           500
    Production volume*                             441          412          442            476           484
    Production capacity at
      beginning of year*                           440          450          455            470           480
    Production rate as a
      percentage of capacity                      Full          91%          96%            Full          Full


    __________________________________

        * Metric tons in thousands

(1)  Excludes Kronos' December 2003 dividend to NL in the form of a $200 million
     long-term  note  payable.  See  Note  10  to  the  Consolidated   Financial
     Statements.

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

Critical accounting policies and estimates

     The  accompanying   "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations"  are based upon the Company's  consolidated
financial  statements,  which have been prepared in accordance  with  accounting
principles  generally  accepted in the United  States of America  ("GAAP").  The
preparation of these financial statements requires the Company to make estimates
and judgments  that affect the reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements, and the reported amount of revenues and expenses during the reported
period.  On an on-going basis,  the Company  evaluates its estimates,  including
those related to bad debts,  inventory  reserves,  impairments of investments in
marketable  securities and investments  accounted for by the equity method,  the
recoverability  of  other  long-lived  assets  (including   goodwill  and  other
intangible assets),  pension and other  post-retirement  benefit obligations and
the  underlying  actuarial  assumptions  related  thereto,  the  realization  of
deferred  income tax assets and  accruals for  litigation,  income tax and other
contingencies.  The Company bases its estimates on historical  experience and on
various  other   assumptions  that  it  believes  to  be  reasonable  under  the
circumstances,  the results of which form the basis for making  judgments  about
the  reported  amounts of assets,  liabilities,  revenues and  expenses.  Actual
results may differ from previously-estimated amounts under different assumptions
or conditions.

     The Company believes the following critical  accounting policies affect its
more  significant  judgments  and  estimates  used  in  the  preparation  of its
consolidated financial statements:

o    The Company maintains allowances for doubtful accounts for estimated losses
     resulting from the inability of its customers to make required payments and
     other factors.  The Company takes into  consideration the current financial
     condition  of its  customers,  the age of the  outstanding  balance and the
     current economic  environment when assessing the adequacy of the allowance.
     If the financial  condition of the Company's customers were to deteriorate,
     resulting in an impairment of their  ability to make  payments,  additional
     allowances  may be  required.  During 2002,  2003 and 2004,  the net amount
     written off against the allowance for doubtful  accounts as a percentage of
     the balance of the allowance  for doubtful  accounts as of the beginning of
     the year ranged from 17% to 20%.

o    The Company  provides  reserves for estimated  obsolescence or unmarketable
     inventories  equal to the difference  between the cost of inventory and the
     estimated net realizable  value using  assumptions  about future demand for
     its products and market  conditions.  If actual market  conditions are less
     favorable than those projected by management, additional inventory reserves
     may be required.  The Company also provides reserves for tools and supplies
     inventory  based  generally on both  historical  and expected  future usage
     requirements.

o    The Company  recognizes an impairment charge associated with its long-lived
     assets,  including  property and  equipment,  whenever it  determines  that
     recovery of such long-lived  asset is not probable.  Such  determination is
     made in accordance  with the applicable GAAP  requirements  associated with
     the long-lived  asset, and is based upon, among other things,  estimates of
     the amount of future net cash flows to be generated by the long-lived asset
     and  estimates of the current fair value of the asset.  Adverse  changes in
     such  estimates  of future net cash flows or  estimates of fair value could
     result in an  inability  to recover the  carrying  value of the  long-lived
     asset,  thereby possibly requiring an impairment charge to be recognized in
     the future.

     Under  applicable  GAAP (SFAS No. 144,  "Accounting  for the  Impairment or
     Disposal of Long-Lived Assets"), property and equipment is not assessed for
     impairment unless certain impairment  indicators,  as defined, are present.
     During 2004, no such impairment indicators, as defined, were present.

o    The  Company   maintains   various   defined   benefit  pension  plans  and
     postretirement   benefits  other  than  pensions   ("OPEB").   The  amounts
     recognized as defined benefit  pension and OPEB expenses,  and the reported
     amounts of prepaid and accrued  pension  costs and accrued OPEB costs,  are
     actuarially  determined based on several  assumptions,  including  discount
     rates,  expected  rates of returns on plan assets and expected  health care
     trend rates.  Variances from these actuarially assumed rates will result in
     increases or decreases,  as applicable,  in the recognized pension and OPEB
     obligations,  pension and OPEB  expenses  and funding  requirements.  These
     assumptions are more fully described below under  "Assumptions  on defined
     benefit pension plans and OPEB plans."

o    The Company records a valuation allowance to reduce its deferred income tax
     assets  to  the  amount  that  is   believed  to  be  realized   under  the
     "more-likely-than-not"   recognition   criteria.   While  the  Company  has
     considered  future  taxable  income and ongoing  prudent and  feasible  tax
     planning strategies in assessing the need for a valuation allowance,  it is
     possible  that in the future the  Company  may change its  estimate  of the
     amount of the deferred income tax assets that would  "more-likely-than-not"
     be realized in the  future,  resulting  in an  adjustment  to the  deferred
     income  tax  asset  valuation  allowance  that  would  either  increase  or
     decrease,  as applicable,  reported net income in the period such change in
     estimate was made. For example,  during 2004 the Company concluded that the
     more-likely-than-not  recognition criteria had been met with respect to the
     income  tax  benefit   associated   with  its  German  net  operating  loss
     carryforwards. The Company has substantial net operating loss carryforwards
     in Germany (the  equivalent of $671 million for German  corporate  purposes
     and $232 million for German trade tax purposes at December 31, 2004). Prior
     to the complete utilization of such carryforwards,  it is possible that the
     Company might conclude in the future that the benefit of such carryforwards
     would no longer  meet the  more-likely-than-not  recognition  criteria,  at
     which  point  the  Company  would be  required  to  recognize  a  valuation
     allowance  against  the  then-remaining  tax  benefit  associated  with the
     carryforwards.

o    The Company records accruals for legal,  income tax and other contingencies
     when  estimated  future  expenditures  associated  with such  contingencies
     become probable, and the amounts can be reasonably estimated.  However, new
     information may become available, or circumstances (such as applicable laws
     and regulations) may change,  thereby  resulting in an increase or decrease
     in the amount  required to be accrued  for such  matters  (and  therefore a
     decrease or increase in reported net income in the period of such change).

     Income  from  operations  are  impacted  by  certain  of these  significant
judgments and estimates,  such as allowance for doubtful accounts,  reserves for
obsolete or unmarketable inventories, impairment of equity method investees, and
other  long-lived  assets,  defined  benefit  pension  and OPEB  plans  and loss
accruals.  In  addition,  other  income and  expense  items are  impacted by the
significant  judgments  and estimates  for deferred  income tax asset  valuation
allowances and loss accruals.

Executive summary

     The Company  reported  net income of $314.9  million,  or $6.43 per diluted
share.  Net income in 2004  includes  (i) a second  quarter  income tax  benefit
related to the reversal of Kronos' deferred income tax asset valuation allowance
in  Germany  of $5.49 per  diluted  share and (ii)  income  related  to  Kronos'
contract  dispute  settlement of $4.1 million,  or $.08 per diluted  share.  Net
income in 2003  includes an income tax  benefit  relating to the refund of prior
year German income taxes of $.50 per diluted share.  Net income in 2002 includes
(i) an income tax benefit  related to the  reduction  in the  Belgian  corporate
income tax rate of $.05 per  diluted  share and (ii)  income of $.08 per diluted
share related to Kronos' foreign  currency  transaction  gain resulting from the
extinguishment of certain  intercompany  indebtedness of NL and Kronos.  Each of
these  items  is  more  fully  discussed  below  and/or  in  the  notes  to  the
Consolidated Financial Statements.

     The Company  currently expect income from operations will be higher in 2005
compared to 2004,  but this  increase  will not offset the decline in income tax
benefits in 2005 as compared to 2004.

     Relative  changes in the Company's  TiO2 sales and operating  income during
the past three years are primarily due to (i) relative changes in TiO2 sales and
production  volumes,  (ii) relative  changes in TiO2 average  selling prices and
(iii) relative changes in foreign currency exchange rates.

     Selling prices (in billing  currencies)  for TiO2, the Company's  principal
product,  were  generally:  decreasing  during the first  quarter of 2002,  flat
during the second quarter of 2002,  increasing  during the last half of 2002 and
the first quarter of 2003,  flat during the second  quarter of 2003,  decreasing
during the third and fourth quarters of 2003 and the first quarter of 2004, flat
during the second quarter of 2004 and increasing during the last half of 2004.

Results of operations



                                                    Years ended December 31,                     % Change
                                            ----------------------------------------       ---------------------
                                              2002          2003            2004           2002-03       2003-04
                                              ----          ----            ----           -------       -------
                                           (In millions, except selling price data)
                                                                                             
 Net sales                                  $ 875.2      $1,008.2         $1,128.6          +15%           +12%
 Cost of sales                                671.8         739.2            866.3          +10%           +17%
                                            -------      --------         --------

 Gross margin                                 203.4         269.0            262.3          +32%           - 2%

 Selling, general and administrative
     expense                                 (107.7)       (124.4)          (145.4)         +16%           +17%
 Currency transaction gains (losses), net       (.5)         (7.7)            (3.9)
 Corporate expense                             (3.3)         (4.2)            (3.5)
 Other operating income (expense), net          (.4)          (.2)             5.5
                                            -------      --------         --------

 Income from operations                     $  91.5      $  132.5         $  115.0          +45%           -13%
                                            =======      ========         ========

 TiO2 operating statistics:

 Percent change in average selling
     prices:
        Using actual foreign currency
           exchange rates                                                                   +13%           + 4%
        Impact of changes in foreign
           currency exchange rates                                                          -10%           - 6%
                                                                                            ----           ----

        In billing currencies                                                               + 3%           - 2%
                                                                                            ====           ====

 Sales volumes*                             455           462               500             + 2%           + 8%
 Production volumes*                        442           476               484             + 8%           + 2%
 Production rate as
     percent of capacity                    96%           Full              Full
___________________________________
* Thousands of metric tons





     Year ended December 31, 2004 compared to year ended December 31, 2003

     Kronos' sales increased $120.4 million (12%) in 2004 as compared to 2003 as
higher  sales  volumes  and the  favorable  effect of  fluctuations  in  foreign
currency  exchange rates,  which increased sales by approximately $60 million as
further  discussed  below,  more than  offset the impact of lower  average  TiO2
selling  prices.  Excluding the effect of  fluctuations in the value of the U.S.
dollar  relative to other  currencies,  Kronos'  average TiO2 selling  prices in
billing  currencies  were 2% lower in 2004 as compared to 2003.  When translated
from billing currencies into U.S. dollars using actual foreign currency exchange
rates  prevailing  during the respective  periods,  Kronos' average TiO2 selling
prices in 2004  increased  4% as  compared  to 2003.  See " - Effects of foreign
currency  exchange  rates"  below for a  discussion  of the  impact of  relative
changes in currency exchange rates on Kronos' operations.

     Kronos' TiO2 sales volumes in 2004 increased 8% compared to 2003, as higher
volumes in European and export markets more than offset lower volumes in Canada.
Approximately  one-half of Kronos' 2004 TiO2 sales volumes were  attributable to
markets in Europe,  with 38%  attributable  to North  America and the balance to
export markets.  Demand for TiO2 has remained strong  throughout 2004, and while
Kronos  believes that the strong demand is largely  attributable  to the end-use
demand of its  customers,  it is possible that some portion of the strong demand
resulted from customers  increasing their inventory levels of TiO2 in advance of
implementation  of announced or anticipated  price increases.  Kronos' operating
income  comparisons were also favorably  impacted by higher  production  levels,
which  increased  2%.  Kronos'  operating  rates were near full capacity in both
periods,  and Kronos' sales and production volumes in 2004 were both new records
for  Kronos,  setting new volume  records  for Kronos for the third  consecutive
year.

     The Company's cost of sales increased $127.1 million (17%) in 2004 compared
to 2003 due to  higher  raw  material  and  maintenance  costs as well as higher
production  volumes and related effects of translating  foreign  currencies into
the U.S.  dollar.  The  Company's  cost of sales,  as a percentage of net sales,
increased  from 73% in 2003 to 77% in 2004 due primarily to the effects of lower
average selling prices and higher costs.

     The Company's  gross margins  decreased $6.7 million (2%) from 2003 to 2004
due to the net effects of the aforementioned  changes in sales and cost of sales
during such periods.

     As a percentage of net sales, selling,  general and administrative expenses
were relatively  consistent from 2003 to 2004, increasing marginally from 12% to
13%, and  increasing  proportionately  with the increased  sales and  production
volume.

     Kronos'  income from  operations  in 2004  includes  $6.3 million of income
related to the settlement of a contract dispute with a customer.  As part of the
settlement,  the  customer  agreed  to make  payments  to  Kronos  through  2007
aggregating  $7.3  million.  The $6.3 million  gain  recognized  represents  the
present value of the future  payments to be made by the customer to Kronos.  The
dispute  with the  customer  concerned  the  customer's  alleged past failure to
purchase  the  required  amount of TiO2 from  Kronos  under the terms of Kronos'
contract with the customer. Under the settlement,  the customer agreed to pay an
aggregate of $7.3 million to Kronos  through 2007 to resolve such  dispute.  See
Note 12 to the Consolidated Financial Statements.

     Kronos'  income from  operations  decreased  $17.5 million (13%) in 2004 as
compared to 2003, as the effect of lower average TiO2 selling  prices and higher
raw material and  maintenance  costs more than offset the impact of higher sales
and production volumes and the income from the contract dispute settlement.  See
also " - Effects of foreign  currency  exchange rates" below for a discussion of
the impact of relative changes in currency exchange rates on Kronos' operations.

     Year ended December 31, 2003 compared to year ended December 31, 2002

     The Company's sales increased $133.0 million (15%) in 2003 compared to 2002
due primarily to higher  average  selling  prices,  higher sales volumes and the
favorable  effect of fluctuations  in foreign  currency  exchange  rates,  which
increased  sales by  approximately  $93  million  as  further  discussed  below.
Excluding the effect of fluctuations in the value of the U.S. dollar relative to
other currencies, the Company's average TiO2 selling price in 2003 was 3% higher
than 2002, with the greatest  improvement in European and export  markets.  When
translated from billing currencies to U.S. dollars using actual foreign currency
exchange rates prevailing during the respective  periods,  the Company's average
TiO2 selling  prices in 2003  increased 13% compared to 2002. See " - Effects of
foreign  currency  exchange  rates"  below  for a  discussion  of the  impact of
relative changes in currency exchange rates on Kronos' operations.

     The  Company's  TiO2 sales  volumes in 2003  increased  2% from 2002,  with
higher  volumes in European and North  American  markets more than  offsetting a
decline in volumes to export markets.

     The Company's cost of sales  increased $67.4 million (10%) in 2003 compared
to 2002 due to the higher  sales  volumes.  The  Company's  cost of sales,  as a
percentage of net sales, decreased from 77% in 2002 to 73% in 2003 due primarily
to the effects of continued cost reduction  efforts  combined with the impact of
higher  production  volumes and higher average selling  prices.  Operating rates
were near full capacity  during most of 2003,  setting a new Company  production
record.

     The Company's gross margins increased $65.5 million (32%) from 2002 to 2003
due to the net effects of the aforementioned  changes in sales and cost of sales
during such periods.

     As a percentage of net sales, selling,  general and administrative expenses
remained consistent at 12%, increasing  proportionately with the increased sales
and production volume.

     Corporate  expenses for 2003  increased  26% to $4.1 million as compared to
2002 primarily due to higher fees associated with Kronos becoming a separate SEC
registrant and certain corporate office relocation expenses.

     Kronos'  income  from  operations  increased  $41.0  million  (45%) in 2003
compared to 2002 due primarily to higher  average TiO2 selling prices and higher
TiO2 sales and  production  volumes.  See also " - Effects  of foreign  currency
exchange  rates"  below for a  discussion  of the impact of relative  changes in
currency exchange rates on Kronos' operations.

     Effects of foreign currency exchange rates

     Kronos' sales are  denominated  in various  currencies,  including the U.S.
dollar,  the euro, other major European  currencies and the Canadian dollar. The
disclosure of the  percentage  change in Kronos'  average TiO2 selling prices in
billing  currencies  (which excludes the effects of fluctuations in the value of
the U.S.  dollar  relative  to other  currencies)  is  considered  a  "non-GAAP"
financial measure under regulations of the SEC. The disclosure of the percentage
change in Kronos'  average TiO2 selling  prices  using actual  foreign  currency
exchange rates prevailing  during the respective  periods is considered the most
directly  comparable  financial measure presented in accordance with GAAP ("GAAP
measure").  Kronos  discloses  percentage  changes in its average TiO2 prices in
billing  currencies  because Kronos  believes such  disclosure  provides  useful
information  to  investors  to allow them to analyze  such  changes  without the
impact of changes in  foreign  currency  exchange  rates,  thereby  facilitating
period-to-period  comparisons of the relative  changes in average selling prices
in the actual various billing currencies. Generally, when the U.S. dollar either
strengthens  or weakens  against  other  currencies,  the  percentage  change in
average  selling  prices  in  billing   currencies  will  be  higher  or  lower,
respectively,  than such percentage changes would be using actual exchange rates
prevailing during the respective periods.  The difference between the 13% and 4%
increases  in  Kronos'  average  TiO2  selling  prices  during  2003  and  2004,
respectively,  as compared to the  respective  prior year using  actual  foreign
currency  exchange  rates  prevailing  during the  respective  periods (the GAAP
measure),  and the 3% increase  and 2% decrease in Kronos'  average TiO2 selling
prices in billing  currencies (the non-GAAP  measure) during such periods is due
to the effect of changes in foreign  currency  exchange  rates.  The above table
presents (i) the percentage  change in Kronos' average TiO2 selling prices using
actual foreign currency exchange rates prevailing during the respective  periods
(the GAAP measure),  (ii) the percentage  change in Kronos' average TiO2 selling
prices in billing  currencies  (the non-GAAP  measure) and (iii) the  percentage
change due to changes in foreign  currency  exchange  rates (or the  reconciling
item between the non-GAAP measure and the GAAP measure).

     Kronos has  substantial  operations and assets  located  outside the United
States (primarily in Germany,  Belgium, Norway and Canada). A significant amount
of Kronos' sales  generated  from its non-U.S.  operations  are  denominated  in
currencies  other  than the U.S.  dollar,  principally  the  euro,  other  major
European  currencies  and the  Canadian  dollar.  A  portion  of  Kronos'  sales
generated  from its non-U.S.  operations  are  denominated  in the U.S.  dollar.
Certain raw materials,  primarily titanium-containing  feedstocks, are purchased
in U.S.  dollars,  while  labor  and  other  production  costs  are  denominated
primarily in local currencies. Consequently, the translated U.S. dollar value of
Kronos'  foreign  sales and operating  results are subject to currency  exchange
rate fluctuations  which may favorably or adversely impact reported earnings and
may affect the comparability of  period-to-period  operating  results.  Overall,
fluctuations  in the  value of the U.S.  dollar  relative  to other  currencies,
primarily  the  euro,  increased  TiO2  sales  by a net $60  million  in 2004 as
compared to 2003,  and increased  sales by a net $93 million in 2003 as compared
to  2002.  Fluctuations  in the  value  of the  U.S.  dollar  relative  to other
currencies  similarly  impacted Kronos' foreign  currency-denominated  operating
expenses.  Kronos'  operating costs that are not denominated in the U.S. dollar,
when translated into U.S. dollars,  were higher in 2004 and 2003 compared to the
same periods of the  respective  prior years.  Overall,  currency  exchange rate
fluctuations  resulted in a net $6 million increase in Kronos'  operating income
in 2004 as compared to 2003, and resulted in a net decrease in Kronos' operating
income in 2003 of approximately $6 million as compared to 2002.

     Outlook

     Reflecting  the impact of partial  implementation  of prior price  increase
announcements,  Kronos' average TiO2 selling prices in billing currencies in the
fourth  quarter of 2004 were 2% higher than the third  quarter of 2004. In 2005,
Kronos expects income from operations will be higher than 2004, primarily due to
higher expected selling prices in 2005. The anticipated higher selling prices in
2005  reflects  the  expected   continued   implementation   of  price  increase
announcements, including Kronos' latest price increases announced in March 2005.
The  extent to which any of such price  increases  which  have  previously  been
announced,   and  any  additional   price   increases  which  may  be  announced
subsequently  in 2005,  will be  realized  will depend on,  among other  things,
economic factors.

     Kronos' efforts to debottleneck its production facilities to meet long-term
demand continue to prove successful.  Kronos' production  capacity has increased
by approximately  30% over the past ten years due to  debottlenecking  programs,
with only moderate  capital  investment.  Kronos believes its annual  attainable
production  capacity for 2005 is  approximately  500,000 metric tons,  with some
slight  additional   capacity   available  in  2006  through  Kronos'  continued
debottlenecking efforts.

     Kronos expects its TiO2 production  volumes in 2005 will be slightly higher
than its 2004  volumes,  with sales volumes  comparable to or slightly  lower in
2005 as compared to 2004. Kronos' average TiO2 selling prices,  which started to
increase  during the second half of 2004,  are  expected to continue to increase
during 2005, and consequently  Kronos currently expects its average TiO2 selling
prices,  in  billing  currencies,  will be higher in 2005 as  compared  to 2004.
Overall,  Kronos expects its income from  operations in 2005 will be higher than
2004, due primarily to higher expected selling prices.  Kronos'  expectations as
to the future  prospects of Kronos and the TiO2 industry are based upon a number
of factors beyond the Company's  control,  including  worldwide  growth of gross
domestic    product,    competition   in   the   marketplace,    unexpected   or
earlier-than-expected  capacity additions and technological  advances. If actual
developments  differ from Kronos'  expectations,  Kronos'  results of operations
could be unfavorably affected.

     Other income (expense).

     The following table sets forth certain  information  regarding other income
and expense items.




                                                   Years ended December 31,                    Change
                                           -------------------------------------     -------------------------
                                              2002          2003           2004         2002-03       2003-04
                                              ----          ----           ----         -------       -------
                                                                       (In millions)
 (In millions)
                                                                                       
 Currency transaction gains                 $  6.3       $   -           $   -          $ (6.3)       $   -
 Interest income from affiliates              20.7           .7              -           (20.0)          (.7)
 Trade interest income                         1.7           .7             1.1           (1.0)           .4
 Other interest income                          .7           .2             1.0            (.5)           .8
 Interest expense to affiliates              (12.3)        (1.8)          (15.2)          10.5         (13.4)
 Other interest expense                      (16.8)       (33.0)          (37.4)         (16.2)         (4.4)
                                            ------       ------          ------         ------        ------

                                            $   .3       $(33.2)         $(50.5)        $(33.5)       $(17.3)
                                            ======       ======          ======         ======        ======


     Interest income  fluctuates in part based upon the amount of funds invested
and yields thereon.  Aggregate interest income increased  approximately $500,000
in 2004  compared to 2003 due to higher  average  yields on invested  funds.  As
compared to 2002,  aggregate  interest  income in 2003  declined  $21.5  million
primarily due to lower amounts  outstanding on loans to affiliates.  The Company
expects  interest  income  will be lower in 2005 than 2004 due to lower  average
funds available for investment.

     The Company has a significant  amount of  indebtedness  denominated  in the
euro,  including  KII's  euro-denominated  8.875% Senior  Secured Notes ("Senior
Secured Notes").  Accordingly, the reported amount of interest expense will vary
depending  on relative  changes in foreign  currency  exchange  rates.  Interest
expense  on  indebtedness  to third  parties  in 2004 was  higher  than 2003 due
primarily  to  relative  changes  in  foreign  currency  exchange  rates,  which
increased the U.S. dollar equivalent of interest expense on the euro 285 million
principal  amount of KII Senior Secured Notes  outstanding  during both years by
approximately  $3 million as compared to the respective prior year. In addition,
KII issued an additional euro 90 million  principal amount of KII Senior Secured
Notes  in  November  2004,  and  the  interest  expense  associated  with  these
additional Senior Secured Notes was $1 million in 2004.

     Interest expense to affiliates  increased $13.4 million in 2004 as compared
to 2003 due to higher amounts  outstanding on loans from  affiliates,  primarily
due to the $200 million  dividend  distributed to NL in December 2003. Such note
was repaid in 2004. See Note 10 to the Consolidated  Financial  Statements.  The
Company does not  currently  expect to report any material  interest  expense to
affiliates in 2005.

     Assuming interest rates and foreign currency exchange rates do not increase
significantly from current levels,  interest expense on third party indebtedness
in 2005 is expected to be higher  than 2004 due  primarily  to the effect of the
issuance of an additional euro 90 million principal amount of KII Senior Secured
Notes in November 2004.

     Aggregate  interest  expense  increased $5.7 million in 2003 as compared to
2002 due primarily to the net effects of higher average  levels of  indebtedness
and lower average interest rates on the Company's indebtedness.

     At  December  31,  2004,   approximately   $519  million  of   consolidated
indebtedness,  principally  KII's Senior Secured Notes,  bears interest at fixed
interest  rates  averaging  8.4% (2003 - $356  million  with a weighted  average
interest  rate of  8.9%;  2002 - $297  million  with a  weighted  average  fixed
interest  rate of 8.9%).  The weighted  average  interest rate on $14 million of
outstanding  variable rate borrowings at December 31, 2004 was 3.9% (2003 - none
outstanding;  2002  - $27  million  outstanding  at  6.5%).  See  Note  8 to the
Consolidated Financial Statements.

     As noted above, KII has a significant amount of indebtedness denominated in
currencies  other  than  the  U.S.  dollar.  See  Item  7A,   "Quantitative  and
Qualitative Disclosures About Market Risk."

     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  13 to the  Consolidated  Financial
Statements.  Income tax rates vary by jurisdiction  (country and/or state),  and
relative  changes in the  geographic mix of the Company's  pre-tax  earnings can
result in fluctuations in the effective income tax rate.

     At December 31, 2004,  Kronos had the  equivalent  of $671 million and $232
million of income tax loss  carryforwards  for  German  corporate  and trade tax
purposes,  respectively,  all of which have no  expiration  date.  As more fully
described  in Note  13 to the  Consolidated  Financial  Statements,  Kronos  had
previously  provided a deferred  income tax asset  valuation  allowance  against
substantially all of these tax loss carryforwards and other deductible temporary
differences   in  Germany   because   Kronos  did  not  believe   they  met  the
"more-likely-than-not"  recognition  criteria.  During  the first six  months of
2004,  Kronos  reduced its  deferred  income tax asset  valuation  allowance  by
approximately $8.7 million, primarily as a result of utilization of these German
net operating loss  carryforwards,  the benefit of which had not previously been
recognized.  At June 30, 2004, after considering all available evidence,  Kronos
concluded  that  these  German  tax  loss  carryforwards  and  other  deductible
temporary differences now met the  "more-likely-than-not"  recognition criteria.
Under applicable GAAP related to accounting for income taxes at interim periods,
a change in  estimate  at an  interim  period  resulting  in a  decrease  in the
valuation  allowance is segregated into two  components,  the portion related to
the remaining interim periods of the current year and the portion related to all
future years.  The portion of the valuation  allowance  reversal  related to the
former is recognized over the remaining interim periods of the current year, and
the portion of the  valuation  allowance  related to the latter is recognized at
the time the  change in  estimate  is made.  Accordingly,  as of June 30,  2004,
Kronos reversed  $268.6 million of the valuation  allowance (the portion related
to future years), and Kronos reversed the remaining $3.4 million during the last
six months of 2004. Because the benefit of such net operating loss carryforwards
and other deductible  temporary  differences in Germany has now been recognized,
the  Company's  effective  income tax rate in 2005 is expected to be higher than
what it would have otherwise been, although its future cash income tax rate will
not be  affected  by the  reversal  of the  valuation  allowance.  Prior  to the
complete  utilization  of such  carryforwards,  it is possible  that the Company
might  conclude in the future that the  benefit of such  carryforwards  would no
longer meet the "more-likely-than-not"  recognition criteria, at which point the
Company  would be  required  to  recognize  a  valuation  allowance  against the
then-remaining tax benefit associated with the carryforwards.

     In  January  2004,  the  German  federal  government  enacted  new  tax law
amendments  that limit the annual  utilization of income tax loss  carryforwards
effective  January  1, 2004 to 60% of  taxable  income  after  the first  euro 1
million of taxable income. The new law will have a significant effect on Kronos'
cash tax  payments  in  Germany  going  forward,  the  extent  of which  will be
dependent upon the level of taxable income earned in Germany.

     During  2003,  Kronos  reduced  its  deferred  income  tax asset  valuation
allowance by an aggregate of approximately  $6.7 million,  primarily as a result
of  utilization  of certain  income tax attributes for which the benefit had not
previously  been  recognized.  In addition,  Kronos  recognized a $38.0  million
income tax benefit related to the net refund of certain prior year German income
taxes.

     During  2002,  Kronos  reduced  its  deferred  income  tax asset  valuation
allowance by an aggregate of approximately  $1.8 million,  primarily as a result
of  utilization  of certain  income tax attributes for which the benefit had not
previously been recognized. The provision for income taxes in 2002 also includes
a $2.3 million  deferred  income tax benefit  related to certain  changes in the
Belgian tax law.

     In October  2004,  the American  Jobs Creation Act of 2004 was enacted into
law.  The new law  contains  several  provisions  that could impact the Company.
These provisions  provide for, among other things, a special deduction from U.S.
taxable  income  equal to a  stipulated  percentage  of  qualified  income  from
domestic  activities (as defined) beginning in 2005, and a special 85% dividends
received  deduction  for certain  dividends  received  from  controlled  foreign
corporations.  Both of these  provisions  are  complex  and  subject to numerous
limitations. See Note 13 to the Consolidated Financial Statements.

     Related party transactions.  The Company is a party to certain transactions
with related parties. See Note 15 to the Consolidated Financial Statements.

     Accounting  principles newly adopted in 2002, 2003 and 2004. See Note 18 to
the Consolidated Financial Statements.

     Accounting  principles  not yet  adopted.  See Note 20 to the  Consolidated
Financial Statements.

     Defined  benefit  pension  plans.  The Company  maintains  various  defined
benefit  pension  plans  in the  U.S.,  Europe  and  Canada.  See Note 14 to the
Consolidated Financial Statements.

     The Company  accounts for its defined  benefit pension plans using SFAS No.
87,  "Employer's  Accounting for Pensions."  Under SFAS No. 87, defined  benefit
pension plan expense and prepaid and accrued  pension costs are each  recognized
based on certain actuarial  assumptions,  principally the assumed discount rate,
the assumed  long-term rate of return on plan assets and the assumed increase in
future compensation levels. The Company recognized  consolidated defined benefit
pension  plan  expense of $7.1  million in 2002,  $8.4 million in 2003 and $13.2
million in 2004. The amount of funding  requirements  for these defined  benefit
pension plans is generally based upon applicable  regulations  (such as ERISA in
the U.S.), and will generally differ from pension expense  recognized under SFAS
No. 87 for financial  reporting  purposes.  Contributions made by the Company to
all of its plans  aggregated  $9.0  million in 2002,  $13.6  million in 2003 and
$17.1 million in 2004.

     The discount rates the Company  utilizes for  determining  defined  benefit
pension  expense  and the  related  pension  obligations  are  based on  current
interest  rates  earned on  long-term  bonds that receive one of the two highest
ratings given by recognized rating agencies in the applicable  country where the
defined  benefit  pension  benefits  are being paid.  In  addition,  the Company
receives advice about appropriate discount rates from the Company's  third-party
actuaries,  who may in some cases utilize their own market indices. The discount
rates  are  adjusted  as of each  valuation  date  (September  30th) to  reflect
then-current  interest  rates on such long-term  bonds.  Such discount rates are
used to determine the actuarial  present value of the pension  obligations as of
December 31st of that year,  and such discount  rates are also used to determine
the interest  component of defined  benefit  pension  expense for the  following
year.

     At December 31, 2004,  approximately  63%, 17%, 13% and 5% of the projected
benefit obligation related to Company plans in Germany,  Norway,  Canada and the
U.S., respectively. The Company uses several different discount rate assumptions
in determining its  consolidated  defined  benefit pension plan  obligations and
expense because the Company  maintains  defined benefit pension plans in several
different   countries  in  North  America  and  Europe  and  the  interest  rate
environment differs from country to country.

     The Company  used the  following  discount  rates for its  defined  benefit
pension plans:


                                             Discount rates used for:
                  -------------------------------------------------------------------------------
                  -------------------------------------------------------------------------------
                      Obligations at              Obligations at              Obligations at
                   December 31, 2002 and       December 31, 2003 and       December 31, 2004 and
                      expense in 2003             expense in 2004             expense in 2005
                  -----------------------     ------------------------     ----------------------

                                                                           
  Germany                 5.5%                         5.3%                         5.0%
  Norway                  6.0%                         5.5%                         5.0%
  Canada                  7.0%                         6.3%                         6.0%
  U.S.                    6.5%                         5.9%                         5.8%



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

     At December 31, 2004, approximately 56%, 21%, 14% and 5% of the plan assets
related to the  Company's  plans in the  Germany,  Norway,  Canada and the U.S.,
respectively.  The Company uses several  different  long-term rates of return on
plan asset  assumptions in determining its consolidated  defined benefit pension
plan expense  because the Company  maintains  defined  benefit  pension plans in
several  different  countries  in North  America and Europe,  the plan assets in
different  countries  are  invested in a different  mix of  investments  and the
long-term  rates of return for  different  investments  differ  from  country to
country.

     In  determining  the  expected  long-term  rate of  return  on  plan  asset
assumptions,  the Company  considers  the long-term  asset mix (e.g.  equity vs.
fixed  income) for the assets for each of its plans and the  expected  long-term
rates of return for such asset  components.  In addition,  the Company  receives
advice  about   appropriate   long-term  rates  of  return  from  the  Company's
third-party actuaries. Such assumed asset mixes are summarized below:

o    In Germany,  the composition of the Company's plan assets is established to
     satisfy the requirements of the German insurance commissioner.  The current
     plan asset allocation at December 31, 2004 was 23% to equity managers,  48%
     to fixed income managers and 29% to real estate.

o    In Norway,  the Company currently has a plan asset target allocation of 14%
     to equity  managers  and 62% to fixed  income  managers  and the  remainder
     primarily to cash and liquid  investments.  The expected  long-term rate of
     return for such  investments is approximately 8% and 4.5% to 6.5% and 2.5%,
     respectively.  The plan asset  allocation  at December  31, 2004 was 16% to
     equity  managers  and  64% to  fixed  income  managers  and  the  remainder
     primarily to cash and liquid investments.

o    In Canada,  the Company currently has a plan asset target allocation of 65%
     to equity  managers  and 35% to fixed  income  managers,  with an  expected
     long-term rate of return for such investments to average  approximately 125
     basis points above the applicable equity or fixed income index. The current
     plan asset  allocation at December 31, 2004 was 60% to equity  managers and
     40% to fixed income managers.

o    During  2004,  the plan assets in the U.S.  were  invested in the  Combined
     Master Retirement Trust ("CMRT"), a collective investment trust established
     by Valhi to permit the collective investment by certain master trusts which
     fund certain  employee  benefits plans  sponsored by Contran and certain of
     its affiliates.  Harold Simmons is the sole trustee of the CMRT. The CMRT's
     long-term  investment  objective is to provide a rate of return exceeding a
     composite of broad market equity and fixed income  indices  (including  the
     S&P 500 and certain Russell indices) utilizing both third-party  investment
     managers as well as investments directed by Mr. Simmons. During the 16-year
     history of the CMRT,  through  December 31, 2004 the average annual rate of
     return has been approximately 13%.

     The Company  regularly  reviews its actual asset allocation for each of its
plans,  and will  periodically  rebalance the  investments  in each plan to more
accurately reflect the targeted allocation when considered appropriate.

     The Company's  assumed  long-term  rates of return on plan assets for 2002,
2003 and 2004 were as follows:


                        2002            2003            2004
                        ----            ----            ----

  Germany               6.8%            6.5%            6.0%
  Norway                7.0%            6.0%            6.0%
  Canada                7.0%            7.0%            7.0%
  U.S.                  8.5%           10.0%           10.0%

     The Company  currently expects to utilize the same long-term rate of return
on plan asset assumptions in 2005 as it used in 2004 for purposes of determining
the 2005 defined benefit pension plan expense.

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

     In addition  to the  actuarial  assumptions  discussed  above,  because the
Company  maintains defined benefit pension plans outside the U.S., the amount of
recognized defined benefit pension expense and the amount of prepaid and accrued
pension costs will vary based upon relative changes in foreign currency exchange
rates.

     Based  on the  actuarial  assumptions  described  above  and the  Company's
current expectation for what actual average foreign currency exchange rates will
be during 2005, the Company  expects its defined  benefit  pension  expense will
approximate  $14  million in 2005.  In  comparison,  the  Company  expects to be
required to make  approximately $9 million of contributions to such plans during
2005.

     As noted above,  defined benefit pension expense and the amounts recognized
as accrued  pension  costs are based upon the  actuarial  assumptions  discussed
above. The Company believes all of the actuarial assumptions used are reasonable
and  appropriate.  If the Company had  lowered the assumed  discount  rate by 25
basis  points  for all of its  plans as of  December  31,  2004,  the  Company's
aggregate  projected  benefit  obligations would have increased by approximately
$13.1 million at that date, and the Company's  defined  benefit  pension expense
would be expected  to  increase  by  approximately  $1.7  million  during  2005.
Similarly,  if the Company lowered the assumed  long-term rate of return on plan
assets by 25 basis points for all of its plans,  the Company's  defined  benefit
pension expense would be expected to increase by  approximately  $600,000 during
2005.

     OPEB plans.  Certain  subsidiaries  of the  Company in the U.S.  and Canada
currently  provide certain health care and life insurance  benefits for eligible
retired employees.  See Note 14 to the Consolidated  Financial  Statements.  The
Company accounts for such OPEB costs under SFAS No. 106,  "Employers  Accounting
for  Postretirement  Benefits  other than  Pensions."  Under SFAS No. 106,  OPEB
expense  and  accrued  OPEB  costs are based on certain  actuarial  assumptions,
principally  the assumed  discount  rate and the assumed  rate of  increases  in
future health care costs.  The Company  recognized  consolidated  OPEB income of
approximately  $265,000 in 2002,  $133,000 in 2003 and consolidated OPEB cost of
approximately $455,000 in 2004. Similar to defined benefit pension benefits, the
amount  of  funding  will  differ  from the  expense  recognized  for  financial
reporting  purposes,  and  contributions  to the plans to cover benefit payments
aggregated $1.0 million in each of 2002, 2003 and 2004. Substantially all of the
Company's  accrued OPEB cost relates to benefits being paid to current  retirees
and their  dependents,  and no material amount of OPEB benefits are being earned
by current  employees.  As a result,  the amount recognized for OPEB expense for
financial  reporting  purposes  has been,  and is  expected  to  continue to be,
significantly  less than the  amount of OPEB  benefit  payments  made each year.
Accordingly,  the amount of accrued  OPEB  expense has been,  and is expected to
continue to, decline gradually.

     The  assumed  discount  rates the Company  utilizes  for  determining  OPEB
expense and the related accrued OPEB obligations are generally based on the same
discount rates the Company  utilizes for its Canadian  defined  benefit  pension
plans.

     In estimating  the health care cost trend rate,  the Company  considers its
actual health care cost experience,  future benefit structures,  industry trends
and advice from its third-party actuaries.  During each of the past three years,
the  Company has assumed  that the  relative  increase in health care costs will
generally  trend downward over the next several years,  reflecting,  among other
things,   assumed  increases  in  efficiency  in  the  health  care  system  and
industry-wide cost containment  initiatives.  For example, at December 31, 2004,
the  expected  rate of  increase in future  health care costs  ranges from 9% in
2005, declining to 5% to 5.5% in 2010 and thereafter.

     Based  on the  actuarial  assumptions  described  above  and the  Company's
current expectation for what actual average foreign currency exchange rates will
be  during  2005,  the  Company  expects  its  consolidated  OPEB  expense  will
approximate $200,000 in 2005. In comparison,  the Company expects to be required
to make approximately $800,000 of contributions to such plans during 2005.

     As noted  above,  OPEB  expense and the amount  recognized  as accrued OPEB
costs are based upon the  actuarial  assumptions  discussed  above.  The Company
believes all of the actuarial  assumptions  used are reasonable and appropriate.
If the Company had lowered the assumed  discount rate by 25 basis points for all
of its OPEB plans as of December 31, 2004,  the  Company's  aggregate  projected
benefit obligations would have increased by approximately $400,000 at that date,
and the  Company's  OPEB  expense  would be  expected  to  increase by less than
$50,000  during 2005.  Similarly,  if the assumed  future health care cost trend
rate had been  increased by 100 basis  points,  the Company's  accumulated  OPEB
obligations  would have increased by approximately  $1.1 million at December 31,
2004, and OPEB expense would have increased by $100,000 in 2004.

LIQUIDITY AND CAPITAL RESOURCES

Summary

     The Company's  primary  source of liquidity on an ongoing basis is its cash
flows from  operating  activities,  which is generally  used to (i) fund capital
expenditures,  (ii) repay short-term indebtedness incurred primarily for working
capital  purposes and (iii) provide for the payment of  dividends.  In addition,
from  time-to-time  the Company will incur  indebtedness,  generally to (i) fund
short-term working capital needs, (ii) refinance existing  indebtedness or (iii)
fund major capital  expenditures  or the acquisition of other assets outside the
ordinary course of business. Also, the Company may from time-to-time sell assets
outside the  ordinary  course of business,  the proceeds of which are  generally
used to (i) repay existing indebtedness  (including  indebtedness which may have
been collateralized by the assets sold), (ii) fund major capital expenditures or
the acquisition of other assets outside the ordinary course of business or (iii)
pay dividends.

     At  December  31,  2004,  the  Company's   indebtedness  was  substantially
comprised of $519 million  related to KII's Senior Secured Notes due in 2009 and
the  equivalent  of $13.6  million  related  to KII's  euro 80  million  secured
revolving  credit  facility  ("European  Credit  Facility")  due in  June  2005.
Accordingly,  the Company does not currently expect that a significant amount of
its cash flows from operating  activities generated during 2005 will be required
to be used to repay  indebtedness  during 2005. KII expects to seek a renewal of
its European credit facility during the first half of 2005.

Consolidated cash flows

     The Company's  consolidated cash flows for each of the past three years are
presented below:

                                               Years ended December 31,
                                       ----------------------------------------
                                       2002               2003             2004
                                       ----               ----             ----
                                                     (in millions)

Operating activities                 $ 111.1           $ 107.6          $ 151.0
Investing activities                   (34.6)            (35.4)           (39.8)
Financing activities                   (93.9)            (61.8)          (108.8)
                                     -------           -------          -------

Net cash provided (used) by
  operating, investing and
  financing activities               $ (17.4)          $  10.4          $   2.4
                                     =======           =======          =======

     Operating  cash  flows.  Trends in cash  flows  from  operating  activities
(excluding the impact of significant asset  dispositions and relative changes in
assets  and  liabilities)  are  generally  similar  to trends  in the  Company's
earnings. However, certain items included in the determination of net income are
non-cash,  and therefore  such items have no impact on cash flows from operating
activities.  Non-cash items included in the  determination of net income include
depreciation and  amortization  expense,  non-cash  interest  expense.  Non-cash
interest  expense  relates to amortization of original issue discount or premium
on certain indebtedness and amortization of deferred financing costs.

     Certain other items included in the determination of net income may have an
impact on cash flows from operating activities,  but the impact of such items on
cash  flows from  operating  activities  will  differ  from their  impact on net
income. For example, the amount of periodic defined benefit pension plan expense
and periodic OPEB expense  depends upon a number of factors,  including  certain
actuarial assumptions,  and changes in such actuarial assumptions will result in
a change in the  reported  expense.  In  addition,  the amount of such  periodic
expense  generally  differs from the  outflows of cash  required to be currently
paid for such benefits.

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

     Changes in product pricing,  production volumes and customer demand,  among
other things,  can significantly  affect the liquidity of the Company.  Relative
changes  in  assets  and  liabilities   generally  result  from  the  timing  of
production,  sales, purchases and income tax payments. Such relative changes can
significantly  impact the comparability of cash flow from operations from period
to period, as the income statement impact of such items may occur in a different
period from when the  underlying  cash  transaction  occurs.  For  example,  raw
materials may be purchased in one period, but the payment for such raw materials
may  occur  in a  subsequent  period.  Similarly,  inventory  may be sold in one
period,  but the cash  collection  of the  receivable  may occur in a subsequent
period.  Relative  changes in accounts  receivable  are affected by, among other
things,  the timing of sales and the  collection  of the  resulting  receivable.
Relative changes in inventories,  accounts  payable and accrued  liabilities are
affected by, among other  things,  the timing of raw material  purchases and the
payment  for such  purchases  and the  relative  difference  between  production
volumes and sales volumes.

     Cash flows provided from operating activities increased from $107.7 million
in 2003 to $151.0 million in 2004. This $43.3 million increase was due primarily
to the net  effect of (i) higher  net  income of $227.3  million,  (ii) a larger
deferred income tax benefit of $299.8  million,  (iii) higher  depreciation  and
amortization expense of $4.6 million, (iv) higher net distributions from Kronos'
TiO2  manufacturing  joint venture of $7.7  million,  (v) a higher amount of net
cash used to fund changes in the Company's inventories,  receivables,  payables,
accruals  and accounts  with  affiliates  of $34.9  million and (vi) higher cash
received for income taxes of $25.3 million.

     Cash flows from operating  activities decreased from $111.1 million in 2002
to $107.7 million in 2003.  This $3.4 million  decrease was due primarily to the
effect of (i) higher  net  income of $21.3  million,  (ii)  higher  depreciation
expense  of  $7.3  million,   (iii)  lower  net  distributions   from  the  TiO2
manufacturing  joint  venture of  $875,000 in 2003  compared to $8.0  million in
2002,  (iv) a lower amount of net cash  generated  from relative  changes in the
Company's  inventories,  receivables,  payables and  accruals and accounts  with
affiliates  of $30.7 million in 2003 as compared to 2002 and (v) lower cash paid
for income taxes of $15.8 million.  Relative changes in accounts  receivable are
affected by, among other things,  the timing of sales and the  collection of the
resulting  receivable.  Relative changes in inventories and accounts payable and
accrued  liabilities  are  affected by,  among other  things,  the timing of raw
material  purchases  and  the  payment  for  such  purchases  and  the  relative
difference between production volume and sales volume.

     Investing  cash  flows.  The  Company's  capital  expenditures  were  $32.6
million,  $35.2 million and $39.3 million in 2002, 2003 and 2004,  respectively.
Capital  expenditures  in 2002  included an  aggregate  of $3.1  million for the
rebuilding of the Company's  Leverkusen,  Germany  sulfate  plant.  In addition,
during 2004 the Company purchased additional shares of its majority-owned French
subsidiary for $575,000.

     The Company's capital  expenditures  during the past three years include an
aggregate of  approximately  $18 million ($7 million in 2004) for the  Company's
ongoing  environmental   protection  and  compliance  programs.   The  Company's
estimated 2005 capital expenditures are $41 million and include approximately $7
million in the area of environmental protection and compliance.

     Financing  cash flows.  During 2004,  (i) KII issued an additional  euro 90
million  principal  amount of it Senior Secured Notes at 107% of par (equivalent
to $130 million when issued) and (ii) KII's  operating  subsidiaries  in Germany
and  Belgium  borrowed  an  aggregate  of euro 90  million  ($112  million  when
borrowed) of borrowings  under its European  Credit  Facility,  of which euro 80
million ($100 million when repaid) were subsequently repaid.

     On September 24, 2004, NL completed the acquisition of the shares of common
stock of CompX International Inc.  previously held by Valhi and Valcor,  Inc., a
wholly-owned  subsidiary of Valhi.  The purchase price for these shares was paid
by NL's transfer to Valhi and Valcor of an aggregate $168.6 million of NL's $200
million   long-term  note  receivable  from  Kronos.  In  October  2004,  Valcor
distributed its note receivable from Kronos to Valhi,  and  subsequently  Kronos
prepaid $100.0 million on the note payable to Valhi (including accrued interest)
principally  using  available  cash on hand.  In November  2004,  the  remaining
balances due under these notes were repaid primarily using the funds raised from
the issuance of euro 90 million  principal amount of KII's Senior Secured Notes,
and the notes were cancelled.

     In March 2003, KII's operating subsidiaries in Germany,  Belgium and Norway
borrowed euro 15 million ($16.1 million when  borrowed),  in April 2003,  repaid
NOK 80 million  ($11.0  million when  repaid) and in the third  quarter of 2003,
repaid euro 30.0 million ($33.9  million when repaid) under its European  Credit
Facility.

     In March 2002 the  Company  redeemed  $25 million  principal  amount of its
11.75% Senior  Secured Notes using  available cash on hand, and in June 2002 the
Company  redeemed the  remaining  $169 million  principal  amount of such 11.75%
Senior Secured Notes using a portion of the proceeds from the June 2002 issuance
of the euro 285 million  principal amount of the KII 8.875% Senior Secured Notes
($280 million when issued).  Also in June 2002, KII's operating  subsidiaries in
Germany,  Belgium and Norway  borrowed euro 13 million ($13 million) and NOK 200
million ($26 million)  which,  along with available  cash, was used to repay and
terminate  KII's short term notes payable ($53.2 million when repaid).  In 2002,
the Company  repaid a net  euro-equivalent  12.7  million  ($12.4  million  when
repaid)  and 1.7  million  ($1.6  million  when  repaid),  respectively,  of the
European Credit Facility.

     Deferred  financing costs paid of $10.7 million in 2002 and $2.0 million in
2004  for the  Senior  Secured  Notes,  the  European  Credit  Facility  and the
Company's U.S.  revolving  credit  facility are being amortized over the life of
the  respective  agreements  and are included in other  noncurrent  assets as of
December 31, 2004.

     Cash dividends paid during 2002, 2003 and 2004 totaled $120.1 million, $7.0
million and $48.9  million,  respectively.  On February 17, 2005,  the Company's
Board of Directors  declared a regular  quarterly  dividend of $.25 per share to
stockholders  of record as of March 10, 2005 to be paid on March 25,  2005.  The
declaration and payment of future dividends is discretionary, and the amount, if
any,  will be dependent  upon the  Company's  results of  operations,  financial
condition,  contractual  restrictions  and other factors deemed  relevant by the
Company's Board of Directors.

     Cash flows related to capital  contributions  and other  transactions  with
affiliates  aggregated net cash outflows of $73.7 million in 2002 and a net cash
inflow of $19.7 million in 2003. Such amounts related  principally to loans that
Kronos made to affiliates  (such notes receivable from affiliates being reported
as  reductions  to  Kronos'   stockholders'  equity,  and  therefore  considered
financing cash flows).  Additionally,  settlement of the  above-mentioned  notes
receivable  from   affiliates  was  not  then  currently   contemplated  in  the
foreseeable future. In 2002, Kronos transferred certain of such notes receivable
from affiliates to NL, and as a result,  Kronos will no longer report cash flows
related to certain of such notes receivable from affiliates. Such net cash flows
in 2002 also included $9.2 million related to the Company's  purchase of EWI RE,
Inc. See Note 1 to the Consolidated Financial Statements.

     Provisions  contained in certain of Kronos' credit  agreements could result
in the acceleration of the applicable indebtedness prior to its stated maturity.
For  example,  certain  credit  agreements  allow the lender to  accelerate  the
maturity  of the  indebtedness  upon a change of  control  (as  defined)  of the
borrower.   In  addition,   certain  credit   agreements  could  result  in  the
acceleration of all or a portion of the indebtedness  following a sale of assets
outside the ordinary course of business.  Other than operating lease commitments
disclosed in Note 16 to the Consolidated  Financial  Statements,  the Company is
not party to any material off-balance sheet financing arrangements.

     Cash,  cash  equivalents,  restricted  cash and restricted  marketable debt
securities  and borrowing  availability.  At December 31, 2004,  the Company had
current cash and cash equivalents  aggregating $60.8 million ($21.1 million held
by non-U.S. subsidiaries). At December 31, 2004, the Company's U.S. and non-U.S.
subsidiaries  had  current  restricted  cash  equivalents  of $1.5  million  and
noncurrent  restricted  marketable debt securities of $2.9 million.  At December
31, 2004,  certain of the Company's  subsidiaries had approximately $139 million
available for borrowing with approximately $101 million available under non-U.S.
credit facilities (including approximately $93 million under the European Credit
Facility) and approximately $38 million available under the U.S. Credit Facility
(based on borrowing  availability).  At December 31, 2004, KII had approximately
$49 million available for payment of dividends and other restricted  payments as
defined in the Notes indenture.

     Based upon the Company's expectations for the TiO2 industry and anticipated
demands on the Company's cash resources as discussed herein, the Company expects
to have  sufficient  liquidity  to meet its  obligations  including  operations,
capital  expenditures,  debt service and current dividend policy.  To the extent
that actual developments differ from the Company's  expectations,  the Company's
liquidity could be adversely affected.

     Legal   proceedings  and  environmental   matters.   See  Note  16  to  the
Consolidated   Financial   Statements   for  certain   legal   proceedings   and
environmental matters with respect to the Company.

     Foreign  operations.  As  discussed  above,  the  Company  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 the Company's assets
and liabilities related to its non-U.S.  operations, and therefore the Company's
consolidated net assets,  will fluctuate based upon changes in currency exchange
rates. At December 31, 2004, the Company had substantial net assets  denominated
in the  euro,  Canadian  dollar,  Norwegian  kroner  and  United  Kingdom  pound
sterling.

     Other.  The Company  periodically  evaluates  its  liquidity  requirements,
alternative uses of capital, capital needs and availability of resources in view
of,  among other  things,  its  dividend  policy,  its debt  service and capital
expenditure  requirements and estimated future operating cash flows. As a result
of this process, the Company in the past has sought, and in the future may seek,
to reduce, refinance,  repurchase or restructure indebtedness;  raise additional
capital;  issue additional  securities;  repurchase  shares of its common stock;
modify its dividend policy;  restructure ownership interests;  sell interests in
subsidiaries or other assets; or take a combination of such steps or other steps
to manage its  liquidity  and  capital  resources.  In the normal  course of its
business, the Company may review opportunities for the acquisition, divestiture,
joint  venture  or  other  business  combinations  in  the  chemicals  or  other
industries, as well as the acquisition of interests in related companies. In the
event of any such  transaction,  the Company may consider using  available cash,
issuing equity securities or increasing its indebtedness to the extent permitted
by the  agreements  governing the  Company's  existing  debt.  See Note 8 to the
Consolidated Financial Statements.

Summary of debt and other contractual commitments

     As  more  fully  described  in  the  notes  to the  Consolidated  Financial
Statements,  the Company is a party to various debt,  lease and other agreements
which  contractually  and  unconditionally  commit the  Company  to pay  certain
amounts in the future. See Notes 8, 15, 16 and 18 to the Consolidated  Financial
Statements.  The Company's obligation for the purchase of TiO2 feedstock is more
fully described in Note 16 to the Consolidated Financial Statements and above in
"Business - raw  materials." The following  table  summarizes  such  contractual
commitments  of the Company and its  consolidated  subsidiaries  by the type and
date of payment.


                                                        Payment due date
                                   -----------------------------------------------------------
                                                                          2010 and
   Contractual commitment           2005     2006/2007     2008/2009       after       Total
   ----------------------           ----     ---------     ---------      --------     -----
                                                         (In millions)

                                                                   
Third-party indebtedness(1)       $  13.8     $    .2       $ 519.2       $    -     $  533.2

Interest payments on
   third-party indebtedness          45.0        89.4          44.7            -        179.1

Operating leases                      4.8         6.3           4.5          21.1        36.7

Fixed asset acquisitions              6.7          -             -             -          6.7

Long-term supply contracts
   for the purchase of
   TiO2 feedstock                   165.7       349.2          10.5            -        525.4

Estimated tax obligations            17.5          -             -             -         17.5
                                  -------     -------       -------       -------    --------

                                  $ 253.5     $ 445.1       $ 578.9       $  21.1    $1,298.6
                                  =======     =======       =======       =======    ========


_____________________________

(1)  Primarily relates to KII's Senior Secured Notes. See Item 7A, "Quantitative
     and  Qualitative   Disclosures  about  Market  Risk"  and  Note  8  to  the
     Consolidated Financial Statements.

     The  timing  and  amount  shown for the  Company's  commitments  related to
indebtedness   (principal  and   interest),   operating   leases,   fixed  asset
acquisitions,   long-term   supply  contracts  and  other  are  based  upon  the
contractual   payment  amount  and  the   contractual   payment  date  for  such
commitments.  With respect to revolving credit facilities,  the amount shown for
indebtedness  is based upon the actual amount  outstanding at December 31, 2004,
and the amount shown for interest for any outstanding variable-rate indebtedness
is based  upon the  December  31,  2004  interest  rate and  assumes  that  such
variable-rate  indebtedness  remains  outstanding  until  the  maturity  of  the
facility. The amount shown for income taxes is the consolidated amount of income
taxes  payable at December 31, 2004,  which is assumed to be paid during 2005. A
significant portion of the amount shown for indebtedness relates to KII's Senior
Secured  Notes  ($519.2  million at December 31,  2004).  Such  indebtedness  is
denominated in euro. See Item 7A - "Quantative and Qualitative Disclosures About
Market Risk" and Note 8 to the Consolidated Financial Statements.

     Kronos'  contracts  for  the  purchase  of  TiO2  feedstock  contain  fixed
quantities  that  Kronos is  required  to  purchase,  although  certain of these
contracts allow for an upward or downward  adjustment in the quantity purchased,
generally no more than 10%, based on the Company's feedstock  requirements.  The
pricing under these  agreements  is generally  based on a fixed price with price
escalation clauses primarily based on consumer price indices,  as defined in the
respective contracts.  The timing and amount shown for the Company's commitments
related to the long-term  supply  contracts for TiO2 feedstock is based upon the
Company's current estimate of the quantity of material that will be purchased in
each time  period  shown,  and the  payment  that  would be due based  upon such
estimated  purchased  quantity  and an  estimate  of  the  effect  of the  price
escalation  clause.  The actual  amount of  material  purchased,  and the actual
amount  that  would be  payable  by the  Company,  may vary from such  estimated
amounts.

     The above table does not reflect any amounts that the Company  might pay to
fund its defined  benefit pension plans and OPEB plans, as the timing and amount
of any such future  fundings are unknown and  dependent  on, among other things,
the future  performance of defined  benefit  pension plan assets,  interest rate
assumptions  and actual  future  retiree  medical  costs.  Such defined  benefit
pension plans and OPEB plans are discussed  above in greater  detail.  The table
also does not  reflect any  amounts  that the  Company  might pay related to its
asset  retirement  obligations as the terms and amounts of such future  fundings
are unknown. See Notes 14 and 18 to the Consolidated Financial Statements.

     The above table also does not reflect any amounts the Company  might pay to
acquire TiO2 from its TiO2 manufacturing joint venture, as the timing and amount
of such  purchases are unknown and dependent on, among other things,  the amount
of TiO2  produced  by the joint  venture in the  future and the joint  venture's
future cost of producing  such TiO2.  However,  the table does  include  amounts
related to Kronos' share of the joint  venture's ore  requirements  necessary to
produce TiO2 for Kronos.  See Item 1, "Business" and Note 6 to the  Consolidated
Financial Statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     General.  The  Company is exposed  to market  risk from  changes in foreign
currency exchange rates, interest rates and equity security prices. In the past,
the Company has periodically  entered into currency forward contracts,  interest
rate  swaps or other  types of  contracts  in order to manage a  portion  of its
interest rate market risk. Otherwise,  the Company does not generally enter into
forward or option  contracts to manage such market  risks,  nor does the Company
enter into any such contract or other type of derivative  instrument for trading
or speculative  purposes.  Other than as described  below, the Company was not a
party to any material  forward or derivative  option contract related to foreign
exchange  rates,  interest rates or equity  security prices at December 31, 2003
and 2004. See Notes 1 and 17 to the Consolidated Financial Statements.

     Interest  rates.  The  Company is exposed  to market  risk from  changes in
interest  rates,  primarily  related to  indebtedness.  At December 31, 2003 and
2004, substantially all of the Company's aggregate indebtedness was comprised of
fixed-rate  instruments.  The large  percentage of fixed-rate  debt  instruments
minimizes earnings  volatility that would result from changes in interest rates.
The following table presents  principal  amounts and weighted  average  interest
rates for the Company's aggregate outstanding indebtedness at December 31, 2004.
At December  31, 2003 and 2004,  all  outstanding  fixed-rate  indebtedness  was
denominated  in U.S.  dollars  or the euro  and the  outstanding  variable  rate
borrowings were denominated in euros.  Information  shown below for such foreign
currency denominated  indebtedness is presented in its U.S. dollar equivalent at
December 31, 2004 using  exchange rates of 1.36 U.S.  dollars per euro.  Certain
Norwegian kroner denominated  capital leases totaling $300,000 in 2004 have been
excluded from the table below.


                                              Amount
                                     -----------------------
                                      Carrying        Fair      Interest      Maturity
    Indebtedness                        value         value       rate          date
    ------------                      --------       ------     --------     ----------
                                          (In millions)

Fixed-rate indebtedness -
  euro-denominated KII
                                                                    
   Senior Secured Notes               $ 519.2       $ 549.1       8.9%          2009
                                      =======       =======

Variable rate indebtedness -
    euro-denominated European
    Credit Facility                   $  13.6       $  13.6       3.9%          2005
                                      =======       =======



     At December 31, 2003,  fixed rate  indebtedness  aggregated  $356.1 million
(fair value - $356.1 million) with a weighted-average interest rate of 8.9%. All
of such fixed rate indebtedness was denominated in euros.  Variable indebtedness
at December 31, 2003 was nil.

     Foreign  currency  exchange  rates.  The  Company is exposed to market risk
arising  from  changes  in  foreign  currency  exchange  rates  as a  result  of
manufacturing  and  selling  its  products  worldwide.  Earnings  are  primarily
affected by  fluctuations  in the value of the U.S. dollar relative to the euro,
the Canadian dollar, the Norwegian kroner and the United Kingdom pound sterling.

     As described above, at December 31, 2004, the Company had the equivalent of
$532.8  million  of  outstanding  euro-denominated   indebtedness  (2003  -  the
equivalent of $356.1 million of  euro-denominated  indebtedness).  The potential
increase in the U.S.  dollar  equivalent  of the  principal  amount  outstanding
resulting from a hypothetical  10% adverse change in exchange rates at such date
would  be  approximately  $52.4  million  at  December  31,  2004  (2003 - $35.6
million).

     At December  31, 2003,  the Company had entered into a short-term  currency
forward contract maturing on January 2, 2004 to exchange an aggregate of euro 40
million  into U.S.  dollars at an  exchange  rate of U.S.  $1.25 per euro.  Such
contract  was entered  into in  conjunction  with the January 2004 payment of an
intercompany  dividend  from  one of the  Company's  European  subsidiaries.  At
December  31,  2003,  the  actual  exchange  rate was U.S.  $1.25 per euro.  The
estimated fair value of such foreign  currency forward contract was not material
at December 31, 2003.

     Other. The Company believes there may be a certain amount of incompleteness
in the sensitivity  analyses  presented  above.  For example,  the  hypothetical
effect of changes in exchange rates discussed above ignores the potential effect
on other  variables  which affect the Company's  results of operations  and cash
flows,  such as demand for the  Company's  products,  sales  volumes and selling
prices and operating expenses.  Accordingly, the amounts presented above are not
necessarily  an accurate  reflection of the  potential  losses the Company would
incur  assuming  the  hypothetical  changes in exchange  rates were  actually to
occur.

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

     Non-GAAP  financial  measures.  In an  effort  to  provide  investors  with
additional  information  regarding the Company's  results as determined by GAAP,
Kronos has disclosed  certain  non-GAAP  information  which the Company believes
provides  useful  information  to  investors.  As discussed  above,  the Company
discloses  percentage changes in its average TiO2 prices in billing  currencies,
which excludes the effects of foreign currency  translation.  Such disclosure of
the  percentage  change  in  Kronos'  average  TiO2  selling  price  in  billing
currencies is considered a "non-GAAP" financial measure under regulations of the
SEC. The  disclosure  of the  percentage  change in the  Company's  average TiO2
selling prices using actual foreign currency  exchange rates  prevailing  during
the respective periods is considered the most directly  comparable GAAP measure.
The Company discloses  percentage  changes in its average TiO2 prices in billing
currencies  because  the  Company  believes  such  disclosure   provides  useful
information  to  investors  to allow them to analyze  such  changes  without the
impact of changes in  foreign  currency  exchange  rates,  thereby  facilitating
period-to-period  comparisons of the relative  changes in average selling prices
in the actual various billing currencies. Generally, when the U.S. dollar either
strengthens  or weakens  against  other  currencies,  the  percentage  change in
average  selling  prices  in  billing   currencies  will  be  higher  or  lower,
respectively,   than  such  percentage   changes  using  actual  exchange  rates
prevailing during the respective periods.


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.

ITEM 9A. CONTROLS AND PROCEDURES

     Evaluation of Disclosure  Controls and Procedures.  The Company maintains a
system of disclosure controls and procedures.  The term "disclosure controls and
procedures,"  as defined by  regulations  of the SEC,  means  controls and other
procedures that are designed to ensure that information required to be disclosed
in the reports that the Company files or submits to the SEC under the Securities
Exchange Act of 1934, as amended (the "Act"), is recorded, processed, summarized
and  reported,  within the time periods  specified in the SEC's rules and forms.
Disclosure  controls and procedures include,  without  limitation,  controls and
procedures  designed to ensure that information  required to be disclosed by the
Company  in the  reports  that it files or  submits  to the SEC under the Act is
accumulated  and  communicated  to  the  Company's  management,   including  its
principal  executive  officer and its principal  financial  officer,  or persons
performing  similar  functions,  as appropriate to allow timely  decisions to be
made regarding  required  disclosure.  Each of Harold C. Simmons,  the Company's
Chief Executive Officer, and Gregory M. Swalwell,  the Company's Vice President,
Finance and Chief  Financial  Officer,  have evaluated the Company's  disclosure
controls and  procedures as of December 31, 2004.  Based upon their  evaluation,
these executive officers have concluded that the Company's  disclosure  controls
and procedures are effective as of the date of such evaluation.

     Scope of Management's Report on Internal Control Over Financial  Reporting.
The Company also maintains internal control over financial  reporting.  The term
"internal  control over  financial  reporting," as defined by regulations of the
SEC,  means a process  designed by, or under the  supervision  of, the Company's
principal  executive and principal  financial  officers,  or persons  performing
similar functions, and effected by the Company's board of directors,  management
and other personnel,  to provide reasonable  assurance regarding the reliability
of financial reporting and the preparation of financial  statements for external
purposes in accordance  with GAAP,  and includes  those  policies and procedures
that:

o    Pertain to the maintenance of records that in reasonable  detail accurately
     and fairly reflect the  transactions  and dispositions of the assets of the
     Company,

o    Provide reasonable assurance that transactions are recorded as necessary to
     permit  preparation  of financial  statements in accordance  with GAAP, and
     that  receipts  and  expenditures  of the  Company  are being  made only in
     accordance with  authorizations of management and directors of the Company,
     and

o    Provide reasonable  assurance  regarding  prevention or timely detection of
     unauthorized  acquisition,  use or disposition of the Company's assets that
     could  have a  material  effect  on the  Company's  Consolidated  Financial
     Statements.

     Section  404 of the  Sarbanes-Oxley  Act of 2002  requires  the  Company to
annually  include  a  management  report  on  internal  control  over  financial
reporting  starting  in the  Company's  Annual  Report on Form 10-K for the year
ended December 31, 2004. The Company's independent  registered public accounting
firm is also  required to annually  audit the  Company's  internal  control over
financial reporting.

     As permitted by the SEC, the Company's  assessment of internal control over
financial  reporting  excludes (i) internal control over financial  reporting of
its equity method  investees and (ii) internal  control over the  preparation of
the Company's financial statement schedules required by Article 12 of Regulation
S-X.  See  Note 6 to the  Consolidated  Financial  Statements  and the  index of
financial  statements and schedules on page F-1 of this Annual Report.  However,
our assessment of internal control over financial  reporting with respect to the
Company's equity method investees did include our controls over the recording of
amounts  related  to our  investment  that  are  recorded  in  our  consolidated
financial  statements,  including  controls  over the  selection  of  accounting
methods for our  investments,  the  recognition  of equity  method  earnings and
losses and the determination,  valuation and recording of our investment account
balances.

     Changes in Internal  Control Over  Financial  Reporting.  There has been no
change to the Company's  internal  control over financial  reporting  during the
quarter ended December 31, 2004 that has materially  affected,  or is reasonably
likely to materially  affect,  the  Company's  internal  control over  financial
reporting.

     Management's  Report on Internal  Control  Over  Financial  Reporting.  The
Company's  management is responsible for establishing  and maintaining  adequate
internal control over financial  reporting,  as such term is defined in Exchange
Act  Rule  13a-15(f).  The  Company's  evaluation  of the  effectiveness  of its
internal   control  over  financial   reporting  is  based  upon  the  framework
established in Internal  Control - Integrated  Framework issued by the Committee
of Sponsoring  Organizations of the Treadway Commission (commonly referred to as
the "COSO" framework).  Based on the Company's  evaluation under that framework,
management of the Company has concluded that the Company's internal control over
financial  reporting  was  effective  as of  December  31,  2004.  See  Scope of
Management's Report on Internal Control Over Financial Reporting above.

     PricewaterhouseCoopers  LLP, the independent  registered  public accounting
firm that has audited the Company's  consolidated  financial statements included
in this Annual Report, has audited management's  assessment of the effectiveness
of the Company's  internal  control over financial  reporting as of December 31,
2004,  as stated in their report which is included in this Annual Report on Form
10-K.

     Certifications.  The  Company's  chief  executive  officer is  required  to
annually  file a  certification  with  the New  York  Stock  Exchange  ("NYSE"),
certifying  the  Company's  compliance  with the  corporate  governance  listing
standards of the NYSE.  During 2004, the Company's chief executive officer filed
such annual certification with the NYSE, indicating that he was not aware of any
violations by the Company of the NYSE corporate  governance  listing  standards.
The  Company's  chief  executive  officer and chief  financial  officer are also
required to, among other  things,  quarterly  file  certifications  with the SEC
regarding  the  quality of the  Company's  public  disclosures,  as  required by
Section  302 of the  Sarbanes-Oxley  Act of  2002.  The  certifications  for the
quarter  ended  December  31, 2004 have been filed as exhibits  31.1 and 31.2 to
this Annual Report on Form 10-K.

ITEM 9B. OTHER INFORMATION

     Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The  information  required by this Item is incorporated by reference to the
Company's  definitive  Proxy  Statement  to be filed  with the SEC  pursuant  to
Regulation  14A within 120 days after the end of the fiscal year covered by this
report (the "Kronos Proxy Statement").

ITEM 11. EXECUTIVE COMPENSATION

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

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  information  required by this Item is incorporated by reference to the
Kronos  Proxy  Statement.  See  also  Note  15  to  the  Consolidated  Financial
Statements.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

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


                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)and(d) Financial Statements and Schedules

          The Registrant

          The consolidated  financial statements and schedules of the Registrant
          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, 2004.

          October 12, 2004 - Reported Item 7.01 and Item 9.01.
          October 22, 2004 - Reported Item 7.01 and Item 9.01.
          November 9, 2004 - Reported Item 2.02, Item 7.01 and Item 9.01.
          November 17, 2004 - Reported Item 9.01.
          November 18, 2004 - Reported Item 5.02.
          November 19, 2004 - Reported Item 2.03, Item 7.01 and Item 9.01.
          November 24, 2004 - Reported Item 1.01, Item 2.03 and Item 9.01.

(c)       Exhibits

          Included as exhibits  are the items listed in the Exhibit  Index.  The
          Company will  furnish a copy of any of the exhibits  listed below upon
          payment  of $4.00 per  exhibit  to cover the costs to the  Company  of
          furnishing the exhibits. Pursuant to Item 601(b)(4)(iii) of Regulation
          S-K, any  instrument  defining the rights of holders of long-term debt
          issues  and other  agreements  related  to  indebtedness  which do not
          exceed 10% of  consolidated  total assets as of December 31, 2004 will
          be furnished to the Commission upon request.

          The Company will also furnish,  without charge,  a copy of its Code of
          Business  Conduct and Ethics,  as adopted by the board of directors on
          February 19, 2004,  upon request.  Such requests should be directed to
          the  attention of the Company's  Corporate  Secretary at the Company's
          corporate offices located at 5430 LBJ Freeway,  Suite 1700, Dallas, TX
          75240.

Item No.                            Exhibit Index

2.1       Form of Distribution Agreement between NL Industries,  Inc. and Kronos
          Worldwide,  Inc. -  incorporated  by  reference  to Exhibit 2.1 of the
          Registration  Statement  on  Form  10  of  the  Registrant  (File  No.
          001-31763).

3.1       First  Amended and Restated  Certificate  of  Incorporation  of Kronos
          Worldwide,  Inc. -  incorporated  by  reference  to Exhibit 3.1 of the
          Registration  statement  on  Form  10  of  the  Registrant  (File  No.
          001-31763).

3.2       Amended and Restated Bylaws of Kronos  Worldwide,  Inc. - incorporated
          by reference to Exhibit 3.2 of the  Registration  statement on Form 10
          of the Registrant (File No. 001-31763).

4.1       Indenture  governing the 8.875% Senior Secured Notes due 2009 dated as
          of June 28, 2002, between Kronos  International,  Inc. and The Bank of
          New York, as trustee - incorporated by reference to Exhibit 4.1 to the
          Quarterly  Report on Form 10-Q of NL Industries,  Inc. for the quarter
          ended June 30, 2002.

4.2       Form of  certificate  of 8.875% Senior Secured Note due 2009 (included
          as Exhibit A to Exhibit  4.1) -  incorporated  by reference to Exhibit
          4.1 to the Quarterly Report on Form 10-Q of NL Industries,  Inc. (File
          No. 1-640) for the quarter ended June 30, 2002.

4.3       Form of  certificate  of 8.875% Senior Secured Note due 2009 (included
          as Exhibit B to Exhibit  4.1) -  incorporated  by reference to Exhibit
          4.1 to the Quarterly Report on Form 10-Q of NL Industries,  Inc. (File
          No. 1-640) for the quarter ended June 30, 2002.

4.4       Purchase   Agreement,   dated  as  of  June  19,  2002,  among  Kronos
          International, Inc., Deutsche Bank AG London, Dresdner Bank AG, London
          Branch,   and   Commerzbank   Aktiengesellschaft,   London   Branch  -
          incorporated  by reference to Exhibit 4.4 to the  Quarterly  Report on
          Form 10-Q of NL Industries, Inc. for the quarter ended June 30, 2002.

4.5       Purchase   Agreement   dated   November   18,  2004   between   Kronos
          International,  Inc.  and  Deutsche  Bank AG London  (incorporated  by
          reference  to Exhibit 4.4 to the Current  Report on Form 8-K of Kronos
          International, Inc. (File No. 333-100047) dated November 24, 2004.

4.6       Form of Registration  Rights Agreement,  dated as of November 26, 2004
          between  Kronos  International,  Inc.  and  Deutsche  Bank  AG  London
          (incorporated  by  reference  to Exhibit 4.5 to the Current  Report on
          Form 8-K of Kronos  International,  Inc. (File No.  333-100047)  dated
          November 24, 2004.

4.7       Collateral Agency Agreement, dated as of June 28, 2002, among The Bank
          of New York,  U.S. Bank,  N.A. and Kronos  International,  Inc. (filed
          herewith  only with  respect  to  Sections  2, 5, 6 and 8  thereof)  -
          incorporated  by reference to Exhibit 4.6 to the  Quarterly  Report on
          Form 10-Q of NL Industries, Inc. for the quarter ended June 30, 2002.

4.8       Security Over Shares Agreement (shares of Kronos Limited),  dated June
          28, 2002, between Kronos International, Inc. and The Bank of New York,
          U.S.,  as trustee -  incorporated  by  reference to Exhibit 4.7 to the
          Quarterly  Report on Form 10-Q of NL Industries,  Inc. for the quarter
          ended June 30, 2002.

4.9       Pledge of Shares (shares of Kronos Denmark ApS),  dated June 28, 2002,
          between Kronos International,  Inc. and U.S. Bank, N.A., as collateral
          agent -  incorporated  by  reference  to Exhibit 4.8 to the  Quarterly
          Report on Form 10-Q of NL Industries,  Inc. for the quarter ended June
          30, 2002.

4.10      Pledge Agreement (pledge of shares of Societe  Industrielle du Titane,
          S.A.),  dated June 28, 2002,  between Kronos  International,  Inc. and
          U.S. Bank,  N.A., as collateral  agent - incorporated  by reference to
          Exhibit  4.9 to the  Quarterly  Report on Form 10-Q of NL  Industries,
          Inc. for the quarter ended June 30, 2002.

4.11      Partnership   Interest  Pledge  Agreement  (pledge  of  fixed  capital
          contribution  in Kronos  Titan GmbH & Co.  OHG),  dated June 28, 2002,
          between Kronos International,  Inc. and U.S. Bank, N.A., as collateral
          agent -  incorporated  by reference  to Exhibit 4.10 to the  Quarterly
          Report on Form 10-Q of NL Industries,  Inc. for the quarter ended June
          30, 2002.

10.1      Form of Tax Agreement between Valhi, Inc. and Kronos Worldwide, Inc. -
          incorporated  by  reference  to  Exhibit  10.1  of  the   Registration
          statement on Form 10 of the Registrant (File No. 001-31763).

10.2      Intercorporate  Services Agreement by and between Contran  Corporation
          and  Kronos  Worldwide,  Inc.,  effective  as of  January  1,  2004  -
          incorporated  by reference to Exhibit 10.2 to the Quarterly  Report on
          Form 10-Q of the Registrant (File No. 001-31763) for the quarter ended
          March 31, 2004.

10.3      Promissory Note,  dated September 24, 2004, made by Kronos  Worldwide,
          Inc. in favor of NL Industries,  Inc. -  incorporated  by reference to
          Exhibit 10.2 to a Current  Report on Form 8-K of NL  Industries,  Inc.
          (File No. 1-640) dated September 24, 2004.

10.4      Promissory Note,  dated September 24, 2004, made by Kronos  Worldwide,
          Inc. in favor of Valcor,  Inc. - incorporated  by reference to Exhibit
          99.1 to a Current Report on Form 8-K of NL Industries,  Inc. (File No.
          1-640) dated September 24, 2004.

10.5      Promissory Note,  dated September 24, 2004, made by Kronos  Worldwide,
          Inc. in favor of Valhi,  Inc. -  incorporated  by reference to Exhibit
          99.2 to a Current Report on Form 8-K of NL Industries,  Inc. (File No.
          1-640) dated September 24, 2004.

10.6**    Form  of  Kronos  Worldwide,   Inc.  Long-Term   Incentive  Plan  -
          incorporated  by  reference  to  Exhibit  10.4  of  the   Registration
          statement on Form 10 of the Registrant (File No. 001-31763).

10.7      euro 80,000,000 Facility Agreement,  dated June 25, 2002, among Kronos
          Titan GmbH & Co. OHG,  Kronos Europe  S.A./N.V.,  Kronos Titan A/S and
          Titania A/S, as borrowers,  Kronos Titan GmbH & Co. OHG, Kronos Europe
          S.A./N.V.  and Kronos Norge AS, as guarantors,  Kronos Denmark ApS, as
          security  provider,  Deutsche  Bank AG,  as  mandated  lead  arranger,
          Deutsche Bank Luxembourg  S.A., as agent and security  agent,  and KBC
          Bank NV, as fronting  bank, and the financial  institutions  listed in
          Schedule 1 thereto,  as lenders - incorporated by reference to Exhibit
          10.1 to the Quarterly  Report on Form 10-Q of NL Industries,  Inc. for
          the quarter ended June 30, 2002.

10.8      First  Amendment  Agreement,  dated  September 3, 2004,  Relating to a
          Facility Agreement dated June 25, 2002 among Kronos Titan GmbH, Kronos
          Europe  S.A./N.V.,  Kronos  Titan AS and Titania  A/S,  as  borrowers,
          Kronos Titan GmbH,  Kronos  Europe  S.A./N.V.  and Kronos Norge AS, as
          guarantors,  Kronos Denmark ApS, as security  provider,  with Deutsche
          Bank Luxembourg  S.A.,  acting as agent - incorporated by reference to
          Exhibit 10.1 of the Current Report on Form 8-K of the Registrant dated
          November 17, 2004 (File No. 333-119639).

10.9      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 to the Annual  Report on
          Form 10-K of NL Industries, Inc. for the year ended December 31, 1985.

10.10     Contract on Supplies and  Services,  dated as of June 30, 1995,  among
          Bayer AG, Kronos Titan-GmbH & Co. OHG and Kronos  International,  Inc.
          (English  translation from German language document) - incorporated by
          reference  to  Exhibit  10.1 to  Quarterly  Report  on Form 10-Q of NL
          Industries, Inc. for the quarter ended September 30, 1995.

10.11     Amendment  dated  August 11,  2003 to the  Contract  on  Supplies  and
          Services  among  Bayer AG,  Kronos  Titan-GmbH  & Co.  OHG and  Kronos
          International  (English  translation  of German  language  document) -
          incorporated  by  reference  to  Exhibit  10.32  of  the  Registration
          statement on Form 10 of the Registrant (File No. 001-31763).

10.12     Master Technology  Exchange  Agreement,  dated as of October 18, 1993,
          among Kronos Worldwide,  Inc. (f/k/a Kronos,  Inc.), Kronos Louisiana,
          Inc., Kronos  International,  Inc.,  Tioxide Group Limited and Tioxide
          Group Services  Limited - incorporated by reference to Exhibit 10.8 to
          the  Quarterly  Report on Form  10-Q of NL  Industries,  Inc.  for the
          quarter ended September 30, 1993.

10.13     Form of Assignment  and Assumption  Agreement,  dated as of January 1,
          1999,  between Kronos Inc.  (formerly known as Kronos (USA), Inc.) and
          Kronos International, Inc. - incorporated by reference to Exhibit 10.9
          to Kronos  International,  Inc.'s  Registration  Statement on Form S-4
          (File No. 333-100047).

10.14     Form of Cross  License  Agreement,  effective  as of  January 1, 1999,
          between Kronos Inc.  (formerly known as Kronos (USA), Inc.) and Kronos
          International,  Inc. - incorporated  by reference to Exhibit to Kronos
          International,  Inc.'s  Registration  Statement  on Form S-4 (File No.
          333-100047).

10.15*    Richards  Bay Slag  Sales  Agreement  dated  May 1,  1995,  between
          Richards Bay Iron and Titanium  (Proprietary) Limited and Kronos, Inc.
          -  incorporated  by reference to Exhibit 10.17 to the Annual Report on
          Form 10-K for NL  Industries,  Inc.  for the year ended  December  31,
          1995.

10.16*    Amendment to Richards Bay Slag Sales  Agreement,  dated May 1, 1999,
          between  Richards  Bay Iron and  Titanium  (Proprietary)  Limited  and
          Kronos, Inc. - incorporated by reference to Exhibit 10.4 to the Annual
          Report  on Form  10-K  for NL  Industries,  Inc.  for the  year  ended
          December 31, 1999.

10.17*    Amendment to Richards Bay Slag Sales Agreement,  dated June 1, 2001,
          between  Richards  Bay Iron and  Titanium  (Proprietary)  Limited  and
          Kronos, Inc. - incorporated by reference to Exhibit 10.5 to the Annual
          Report  on Form  10-K  for NL  Industries,  Inc.  for the  year  ended
          December 31, 2001.

10.18*    Amendment to Richards Bay Slag Sales  Agreement  dated  December 20,
          2002 between Richards Bay Iron and Titanium  (Proprietary) Limited and
          Kronos, Inc. - incorporated by reference to Exhibit 10.7 to the Annual
          Report  on Form  10-K  for NL  Industries,  Inc.  for the  year  ended
          December 31, 2002.

10.19*    Amendment to Richards  Bay Slag Sales  Agreement  dated  October 31,
          2003 between Richards Bay Iron and Titanium  (Proprietary) Limited and
          Kronos,  Inc. -  incorporated  by  reference  to Exhibit  10.17 to the
          Annual  Report  on Form  10-K of  Kronos  Worldwide,  Inc.  (File  No.
          001-31763) for the year ended December 31, 2003.

10.20     Agreement  between   Sachtleben  Chemie  GmbH  and  Kronos  Titan-GmbH
          effective  December  30, 1986 -  incorporated  by reference to Exhibit
          10.1 of Kronos International, Inc.'s Quarterly Report on Form 10-Q for
          the quarter ended September 30, 2002.

10.21     Supplementary  Agreement to the Agreement of December 30, 1986 between
          Sachtleben  Chemie  GmbH and  Kronos  Titan-GmbH  dated  May 3, 1996 -
          incorporated  by reference  to Exhibit  10.2 of Kronos  International,
          Inc.'s  Quarterly  Report on Form 10-Q for the quarter ended September
          30, 2002.

10.22     Second  Supplementary  Agreement  to the Contract  dated  December 30,
          1986  between  Sachtleben  Chemie  GmbH and  Kronos  Titan-GmbH  dated
          January 8, 2002 - incorporated  by reference to Exhibit 10.3 of Kronos
          International,  Inc.'s  Quarterly  Report on Form 10-Q for the quarter
          ended September 30, 2002.

10.23     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 to NL  Industries,
          Inc.'s  Quarterly  Report on Form 10-Q for the quarter ended September
          30, 1993.

10.24     Joint Venture  Agreement  dated as of October 18, 1993 between Tioxide
          Americas Inc. and Kronos  Louisiana,  Inc. - incorporated by reference
          to Exhibit 10.3 to NL Industries, Inc.'s Quarterly Report on Form 10-Q
          for the quarter ended September 30, 1993.

10.25     Kronos Offtake  Agreement  dated as of October 18, 1993 between Kronos
          Louisiana,  Inc. and Louisiana Pigment Company, L.P. - incorporated by
          reference to Exhibit 10.4 to NL Industries, Inc.'s Quarterly Report on
          Form 10-Q for the quarter ended September 30, 1993.

10.26     Amendment No. 1 to Kronos Offtake  Agreement  dated as of December 20,
          1995 between Kronos  Louisiana,  Inc. and Louisiana  Pigment  Company,
          L.P. -  incorporated  by reference to Exhibit 10.22 to NL  Industries,
          Inc.'s  Annual  Report on Form 10-K for the year  ended  December  31,
          1995.

10.27     Tioxide  Americas  Offtake  Agreement  dated as of  October  18,  1993
          between Tioxide Americas Inc. and Louisiana  Pigment  Company,  L.P. -
          incorporated  by reference to Exhibit  10.5 to NL  Industries,  Inc.'s
          Quarterly  Report on Form 10-Q for the  quarter  ended  September  30,
          1993.

10.28     Amendment  No. 1 to Tioxide  Americas  Offtake  Agreement  dated as of
          December 20, 1995 between Tioxide Americas Inc. and Louisiana  Pigment
          Company,  L.P. -  incorporated  by  reference  to Exhibit  10.24 to NL
          Industries,  Inc.'s  Annual  Report  on Form  10-K for the year  ended
          December 31, 1995.

10.29     TCI/KCI  Output  Purchase  Agreement  dated  as of  October  18,  1993
          between Tioxide Canada Inc. and Kronos Canada,  Inc. - incorporated by
          reference to Exhibit 10.6 to NL Industries, Inc.'s Quarterly Report on
          Form 10-Q for the quarter ended September 30, 1993.

10.30     TAI/KLA  Output  Purchase  Agreement  dated  as of  October  18,  1993
          between   Tioxide   Americas  Inc.  and  Kronos   Louisiana,   Inc.  -
          incorporated  by reference to Exhibit  10.7 to NL  Industries,  Inc.'s
          Quarterly  Report on Form 10-Q for the  quarter  ended  September  30,
          1993.

10.31     Master  Technology  Exchange  Agreement  dated as of October  18, 1993
          among Kronos Worldwide,  Inc. (f/k/a Kronos,  Inc.), Kronos Louisiana,
          Inc., Kronos  International,  Inc.,  Tioxide Group Limited and Tioxide
          Group Services  Limited - incorporated by reference to Exhibit 10.8 to
          NL Industries,  Inc.'s  Quarterly  Report on Form 10-Q for the quarter
          ended September 30, 1993.

10.32     Parents'  Undertaking  dated  as  of  October  18,  1993  between  ICI
          American Holdings Inc. and Kronos Worldwide, Inc. (f/k/a Kronos, Inc.)
          - incorporated  by reference to Exhibit 10.9 to NL Industries,  Inc.'s
          Quarterly  Report on Form 10-Q for the  quarter  ended  September  30,
          1993.

10.33     Allocation  Agreement  dated as of October  18, 1993  between  Tioxide
          Americas Inc., ICI American  Holdings,  Inc., Kronos  Worldwide,  Inc.
          (f/k/a Kronos,  Inc.) and Kronos  Louisiana,  Inc. -  incorporated  by
          reference to Exhibit 10.10 to NL Industries,  Inc.'s  Quarterly Report
          on Form 10-Q for the quarter ended September 30, 1993.

10.34     Insurance  sharing agreement dated October 30, 2003 by and among CompX
          International  Inc.,  Contran   Corporation,   Keystone   Consolidated
          Industries,  Inc.,  Titanium Metals Corp., Valhi, Inc., NL Industries,
          Inc. and Kronos Worldwide, Inc. - incorporated by reference to Exhibit
          10.48 to NL Industries, Inc.'s Annual Report on Form 10-K for the year
          ended December 31, 2003.

10.35**   Summary of Consulting  Arrangement  beginning on August 1, 2003, as
          amended  between  Lawrence  A.  Wigdor  and Kronos  Worldwide,  Inc. -
          incorporated  by reference to Exhibit 10.2 to the Quarterly  Report on
          Form 10-Q of the Registrant for the quarter ended March 31, 2004.

21.1     Subsidiaries.

23.1     Consent of PricewaterhouseCoopers LLP.

31.1     Certification.

31.2     Certification.

32.1     Certification.
___________________________________


*    Portions  of the  exhibit  have been  omitted  pursuant  to a  request  for
     confidential treatment.

**   Management contract, compensatory plan or arrangement



                                   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.

                                                Kronos Worldwide, Inc.
                                                 (Registrant)


                                                By:/s/ Harold C. Simmons
                                                   --------------------------
                                                   Harold C. Simmons
                                                   March 30, 2005
                                                  (Chairman  of the Board and
                                                   Chief  Executive Officer)


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated:



/s/ Harold C. Simmons                       /s/ Steven L. Watson
- --------------------------------            ------------------------------------
Harold C. Simmons, March 30, 2005           Steven L. Watson, March 30, 2005
(Chairman of the Board and Chief            (Director)
  Executive Officer)


/s/ George E. Poston                        /s/ Glenn R. Simmons
- --------------------------------            ------------------------------------
George E. Poston, March 30, 2005            Glenn R. Simmons, March 30, 2005
(Director)                                  (Director)


/s/ C. H. Moore, Jr.                        /s/ Keith R. Coogan
- --------------------------------            ------------------------------------
C. H. Moore, Jr., March 30, 2005            Keith R. Coogan, March 30, 2005
(Director)                                  (Director)


/s/ R. Gerald Turner                        /s/ Gregory M. Swalwell
- --------------------------------            ------------------------------------
R. Gerald Turner, March 30, 2005            Gregory M. Swalwell, March  30, 2005
(Director)                                  (Vice President, Chief Financial
                                             Officer, Principal Financial
                                             Officer)

                                            /s/ James W. Brown
                                            -----------------------------------
                                            James W. Brown, March 30, 2005
                                            (Vice President, Controller,
                                             Principal Accounting Officer



                             KRONOS WORLDWIDE, INC.

                           Annual Report on Form 10-K

                            Items 8, 15(a) and 15(d)

                   Index of Financial Statements and Schedules


Financial Statements                                                    Page

  Report of Independent Registered Public Accounting Firm               F-2

  Consolidated Balance Sheets - December 31, 2003 and 2004              F-4

  Consolidated Statements of Income -
   Years ended December 31, 2002, 2003 and 2004                         F-6

  Consolidated Statements of Comprehensive Income -
   Years ended December 31, 2002, 2003 and 2004                         F-7

  Consolidated Statements of Stockholders' Equity -
   Years ended December 31, 2002, 2003 and 2004                         F-8

  Consolidated Statements of Cash Flows -
   Years ended December 31, 2002, 2003 and 2004                         F-9

  Notes to Consolidated Financial Statements                            F-11


Financial Statement Schedules


  Report of Independent Registered Public Accounting Firm               S-1

  Schedule I - Condensed Financial Information of Registrant            S-2

  Schedule II - Valuation and Qualifying Accounts                       S-7

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




             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholders and Board of Directors of Kronos Worldwide, Inc.:

     We have  completed an  integrated  audit of Kronos  Worldwide,  Inc.'s 2004
consolidated  financial  statements  and of its internal  control over financial
reporting as of December  31, 2004 and audits of its 2002 and 2003  consolidated
financial  statements  in accordance  with the  standards of the Public  Company
Accounting Oversight Board (United States).  Our opinions,  based on our audits,
are presented below.

Consolidated financial statements

     In  our  opinion,  the  consolidated  financial  statements  listed  in the
accompanying  index  present  fairly,  in all material  respects,  the financial
position of Kronos Worldwide,  Inc and its subsidiaries at December 31, 2003 and
2004,  and the results of their  operations and their cash flows for each of the
three years in the period ended December 31, 2004 in conformity  with accounting
principles  generally accepted in the United States of America.  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 of these  statements in accordance with the
standards of the Public  Company  Accounting  Oversight  Board (United  States).
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 of financial  statements includes  examining,  on a test
basis,  evidence  supporting  the  amounts  and  disclosures  in  the  financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting

     Also, in our opinion,  management's  assessment,  included in  Management's
Report on Internal  Control Over Financial  Reporting  appearing  under Item 9A,
that the Company maintained  effective internal control over financial reporting
as of  December  31, 2004 based on criteria  established  in Internal  Control -
Integrated Framework issued by the Committee of Sponsoring  Organizations of the
Treadway Commission ("COSO"), is fairly stated, in all material respects,  based
on those criteria.  Furthermore,  in our opinion, the Company maintained, in all
material  respects,  effective  internal control over financial  reporting as of
December  31,  2004,  based  on  criteria  established  in  Internal  Control  -
Integrated Framework issued by the COSO. The Company's management is responsible
for maintaining  effective internal control over financial reporting and for its
assessment of the  effectiveness of internal  control over financial  reporting.
Our responsibility is to express opinions on management's  assessment and on the
effectiveness of the Company's  internal control over financial  reporting based
on our  audit.  We  conducted  our  audit of  internal  control  over  financial
reporting in  accordance  with the  standards of the Public  Company  Accounting
Oversight  Board  (United  States).  Those  standards  require  that we plan and
perform  the  audit to  obtain  reasonable  assurance  about  whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects.  An  audit of  internal  control  over  financial  reporting  includes
obtaining  an  understanding  of  internal  control  over  financial  reporting,
evaluating  management's  assessment,  testing  and  evaluating  the  design and
operating   effectiveness  of  internal  control,   and  performing  such  other
procedures as we consider  necessary in the  circumstances.  We believe that our
audit provides a reasonable basis for our opinions.

     A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial  statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial  reporting  includes those policies and procedures that (i) pertain to
the  maintenance  of records that, in reasonable  detail,  accurately and fairly
reflect the  transactions  and  dispositions of the assets of the company,  (ii)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company and (iii)  provide  reasonable  assurance  regarding  prevention  or
timely  detection  of  unauthorized  acquisition,  use,  or  disposition  of the
company's assets that could have a material effect on the financial statements.

     Because  of its  inherent  limitations,  internal  control  over  financial
reporting  may not prevent or detect  misstatements.  Also,  projections  of any
evaluation  of  effectiveness  to future  periods  are  subject to the risk that
controls may become  inadequate  because of changes in  conditions,  or that the
degree of compliance with the policies or procedures may deteriorate.





                                                      PricewaterhouseCoopers LLP
Dallas, Texas
March 30, 2005


                                      KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                                            CONSOLIDATED BALANCE SHEETS

                                            December 31, 2003 and 2004

                                       (In thousands, except per share data)



               ASSETS
                                                              2003                 2004
                                                              ----                 ----
 Current assets:
                                                                        
   Cash and cash equivalents                             $   55,876           $   60,790
   Restricted cash                                            1,313                1,529
   Accounts and other receivables                           156,212              190,319
   Receivables from affiliate                                 1,209                   16
   Refundable income taxes                                   35,336                3,272
   Inventories                                              266,020              233,858
   Prepaid expenses                                           4,456                4,529
   Deferred income taxes                                      2,755                1,205
                                                         ----------           ----------

       Total current assets                                 523,177              495,518
                                                         ----------           ----------

 Other assets:
     Investment in TiO2 manufacturing joint venture         129,011              120,251
     Deferred income taxes                                    6,682              238,284
     Other                                                   28,040               32,340
                                                         ----------           ----------

       Total other assets                                   163,733              390,875
                                                         ----------           ----------

 Property and equipment:
   Land                                                      32,339               35,511
   Buildings                                                179,472              196,983
   Equipment                                                765,231              857,714
   Mining properties                                         63,701               71,980
   Construction in progress                                   9,666               16,753
                                                         ----------           ----------
                                                          1,050,409            1,178,941

   Less accumulated depreciation and amortization           615,442              712,051
                                                         ----------           ----------

       Net property and equipment                           434,967              466,890
                                                         ----------           ----------

                                                         $1,121,877           $1,353,283
                                                         ==========           ==========







                                      KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                                      CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                            December 31, 2003 and 2004

                                       (In thousands, except per share data)




    LIABILITIES AND STOCKHOLDERS' EQUITY
                                                              2003                 2004
                                                              ----                 ----

 Current liabilities:
                                                                        
   Current maturities of long-term debt                  $      288           $   13,792
   Accounts payable and accrued liabilities                 166,664              170,009
   Payable to affiliates                                      8,919                9,231
   Income taxes                                              12,354               17,129
   Deferred income taxes                                      3,436                2,722
                                                         ----------           ----------

       Total current liabilities                            191,661              212,883
                                                         ----------           ----------

 Noncurrent liabilities:
   Long-term debt                                           356,451              519,403
   Deferred income taxes                                    119,825               60,081
   Notes payable to affiliates                              200,000                 -
   Accrued pension cost                                      68,161               61,300
   Accrued postretirement benefits cost                      11,176               11,288
   Other                                                     14,727               17,407
                                                         ----------           ----------

       Total noncurrent liabilities                         770,340              669,479
                                                         ----------           ----------

 Minority interest                                              525                   76
                                                         ----------           ----------

 Stockholders' equity:
   Preferred stock, $.01 par value; 100 shares
    authorized; no shares issued or outstanding                -                  -
   Common stock, $.01 par value; 60,000 shares
    authorized; 48,943 and 48,946 shares issued                 489                  489
   Additional paid-in capital                             1,060,157            1,060,643
   Retained deficit                                        (729,260)            (463,352)
   Accumulated other comprehensive loss:
     Currency translation                                  (133,009)             (88,181)
     Pension liabilities                                    (39,026)             (38,754)
                                                         ----------           ----------

       Total stockholders' equity                           159,351              470,845
                                                         ----------           ----------

                                                         $1,121,877           $1,353,283
                                                         ==========           ==========



Commitments and contingencies (Notes 13 and 16)

          See accompanying notes to consolidated financial statements.


                                      KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                                         CONSOLIDATED STATEMENTS OF INCOME

                                   Years ended December 31, 2002, 2003 and 2004

                                       (In thousands, except per share data)


                                                             2002           2003            2004
                                                             ----           ----            ----


                                                                                  
Net sales                                                  $ 875,188     $1,008,177        $1,128,600
Cost of sales                                                671,830        739,237           866,313
                                                           ---------     ----------        ----------

    Gross margin                                             203,358        268,940           262,287

Selling, general and administrative expense                  107,675        124,446           145,433
Other operating income (expense):
  Currency transaction losses, net                              (547)        (7,743)           (3,949)
  Disposition of property and equipment                         (625)          (480)           (1,120)
  Other income                                                   459            490             6,715
  Corporate expense                                           (3,288)        (4,140)           (3,474)
  Other expense                                                 (172)          (128)              (73)
                                                           ---------     ----------        ----------

    Income from operations                                    91,510        132,493           114,953

Other income (expense):
  Currency transaction gain                                    6,271           -                 -
  Interest income from affiliates                             20,754            723              -
  Trade interest income                                        1,709            771             1,212
  Other interest income                                          702            180               961
  Interest expense to affiliates                             (12,290)        (1,887)          (15,210)
  Other interest expense                                     (16,837)       (33,002)          (37,399)
                                                           ---------     ----------        ----------

    Income before income taxes and minority interest          91,819         99,278            64,517

Provision (benefit) for income taxes                          25,500         11,657          (250,389)
                                                           ---------     ----------        ----------

    Income before minority interest                           66,319         87,621           314,906

Minority interest                                                 55             72                53
                                                           ---------     ----------        ----------

    Net income                                             $  66,264     $   87,549        $  314,853
                                                           =========     ==========        ==========

Net income per basic and diluted share                     $    1.35     $     1.79        $     6.43
                                                           =========     ==========        ==========
Basic and diluted weighted average shares
  used in the calculation of net income per share             48,943         48,943            48,945
                                                           =========     ==========        ==========




                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                  Years ended December 31, 2002, 2003 and 2004

                                 (In thousands)




                                                             2002           2003            2004
                                                             ----           ----            ----


                                                                                
Net income                                                 $  66,264     $   87,549      $  314,853
                                                           ---------     ----------      ----------

Other comprehensive income (loss), net of tax:

  Minimum pension liabilities adjustment                      (7,129)       (25,545)            272

  Currency translation adjustment                             51,803         15,073          44,828
                                                           ---------     ----------      ----------

      Total other comprehensive income (loss)                 44,674        (10,472)         45,100
                                                           ---------     ----------      ----------

          Comprehensive income                             $ 110,938     $   77,077      $  359,953
                                                           =========     ==========      ==========





                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  Years ended December 31, 2002, 2003 and 2004

                                 (In thousands)


                                                                                               Accumulated other
                                                                                                comprehensive
                                                                                Notes            income (loss)
                                                 Additional    Retained      receivable     ------------------------
                                      Common       paid-in      earnings        from         Currency       Pension
                                      stock        capital      (deficit)     affiliates    translation   liabilities     Total
                                    ----------------------------------------------------------------------------------------------
                                    ----------------------------------------------------------------------------------------------

                                                                                                  
Balance at December 31, 2001           $489      $1,060,157   $ 180,048      $(655,918)     $(199,885)    $ (6,352)    $ 378,539

Net income                               -             -         66,264           -              -            -           66,264
Other comprehensive income
   (loss), net of tax                    -             -           -              -            51,803       (7,129)       44,674
Change in notes receivable
    from affiliates                      -             -           -           (55,154)          -            -          (55,154)
Dividends declared:
  Cash                                   -             -       (120,149)          -              -            -         (120,149)
  Noncash                                -             -       (711,072)       711,072           -            -             -
                                       ----      ----------   ---------      ---------      ---------     --------     ---------

Balance at December 31, 2002            489       1,060,157    (584,909)          -          (148,082)     (13,481)      314,174

Net income                               -             -         87,549           -              -            -           87,549
Other comprehensive income (loss),
   net of tax                            -             -           -                           15,073      (25,545)      (10,472)
Dividends declared:
  Cash                                   -             -         (7,000)          -              -            -           (7,000)
  Noncash                                -             -       (224,900)          -              -            -         (224,900)
                                       ----      ----------   ---------      ---------      ---------     --------     ---------

Balance at December 31, 2003            489       1,060,157    (729,260)          -          (133,009)     (39,026)      159,351

Net income                               -             -        314,853           -              -            -          314,853
Other comprehensive income,
   net of tax                            -             -           -              -            44,828          272        45,100
Issuance of common stock                 -               90        -              -              -            -               90
Cash dividends declared                  -             -        (48,945)          -              -            -          (48,945)
Other                                    -              396        -              -              -            -              396
                                       ----      ----------   ---------      ---------      ---------     --------     ---------

Balance at December 31, 2004           $489      $1,060,643   $(463,352)     $    -         $ (88,181)    $(38,754)    $ 470,845
                                       ====      ==========   =========      =========      =========     ========     =========


          See accompanying notes to consolidated financial statements.





                                      KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                                       CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   Years ended December 31, 2002, 2003 and 2004

                                                  (In thousands)



                                                             2002           2003            2004
                                                             ----           ----            ----

Cash flows from operating activities:
                                                                                
  Net income                                               $  66,264     $  87,549       $ 314,853
  Depreciation and amortization                               32,152        39,421          44,053
  Noncash interest income from affiliates                    (20,629)            -               -
  Noncash interest expense                                       932         2,197           2,375
  Deferred income taxes                                       10,755        36,489        (263,314)
  Minority interest                                               55            72              53
  Net loss from disposition of
      property and equipment                                     625           480           1,120
  Pension cost, net                                           (1,866)       (5,792)         (2,986)
  Other postretirement benefits, net                          (1,250)       (1,032)           (151)
  Distributions from TiO2 manufacturing
    joint venture, net                                         7,950           875           8,600
  Other, net                                                   2,304         1,016           2,858
  Change in assets and liabilities:
    Accounts and other receivable                              5,547         1,264         (21,813)
    Inventories                                               42,249       (26,041)         48,237
    Prepaid expenses                                             882         1,494            (478)
    Accounts payable and accrued liabilities                 (27,353)        9,478             862
    Income taxes                                              (2,239)      (38,706)         24,699
    Accounts with affiliates                                  (4,440)        1,920          (5,771)
    Other noncurrent assets                                       74        (3,919)         (1,103)
    Other noncurrent liabilities                                (866)          916          (1,089)
                                                           ---------     ---------       ---------

             Net cash provided by operating activities       111,146       107,681         151,005
                                                           ---------     ---------       ---------

Cash flows from investing activities:
  Capital expenditures                                       (32,571)      (35,245)        (39,295)
  Purchase of interest in subsidiary                            -             -               (575)
    Change in restricted cash equivalents and restricted
       marketable debt securities, net                        (2,891)         (554)            (70)
    Proceeds from disposition of property and equipment          864           381              99
                                                           ---------     ---------       ---------

             Net cash used by investing activities           (34,598)      (35,418)        (39,841)
                                                           ---------     ---------       ---------




                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                  Years ended December 31, 2002, 2003 and 2004

                                 (In thousands)



                                                             2002           2003            2004
                                                             ----           ----            ----


Cash flows from financing activities:
  Indebtedness:
                                                                                
    Borrowings                                             $ 335,768     $  16,106       $ 241,648
    Principal payments                                       (84,814)      (46,006)       (100,073)
    Deferred financing fees                                  (10,706)         -             (1,989)
  Dividends paid                                            (120,149)       (7,000)        (48,945)
  Loans from affiliates:
    Loans                                                     44,600         8,000            -
    Repayments                                              (194,000)      (52,600)       (200,000)
  Other capital transactions with affiliates, net            (64,600)       19,700            -
  Other, net                                                     (11)          (14)            609
                                                           ---------     ---------       ---------

            Net cash used by financing activities            (93,912)      (61,814)       (108,750)
                                                           ---------     ---------       ---------

Cash and cash equivalents - net change from:
  Operating, investing and financing activities              (17,364)       10,449           2,414
  Currency translation                                         3,332         4,742           2,500
                                                           ---------     ---------       ---------

                                                             (14,032)       15,191           4,914

   Balance at beginning of year                               54,717        40,685          55,876
                                                           ---------     ---------       ---------

   Balance at end of year                                  $  40,685     $  55,876       $  60,790
                                                           =========     =========       =========

Supplemental disclosures - cash paid (received) for:
    Interest                                               $  33,169     $  30,152       $  49,206
    Income taxes                                              17,369         1,597         (23,657)



          See accompanying notes to consolidated financial statements.


                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Summary of significant accounting policies:

     Organization  and basis of  presentation.  At December 31, 2004, (i) Valhi,
Inc (NYSE:VHI) directly and through a wholly-owned subsidiary held approximately
57% of Kronos'  outstanding common stock and NL Industries,  Inc. (NYSE:NL) held
an  additional  37% of Kronos'  common  stock,  (ii) Valhi and its  wholly-owned
subsidiary owned  approximately  83% of NL's outstanding  common stock and (iii)
Contran  Corporation  and its  subsidiaries  held  approximately  91% of Valhi's
outstanding  common stock.  Substantially  all of Contran's  outstanding  voting
stock is held by trusts  established  for the  benefit of certain  children  and
grandchildren of Harold C. Simmons,  of which Mr. Simmons is sole trustee, or is
held by Mr.  Simmons  or  persons  or other  entities  related  to Mr.  Simmons.
Consequently, Mr. Simmons may be deemed to control each of such companies.

     Prior to December  2003,  Kronos was a  wholly-owned  subsidiary  of NL. On
December 8, 2003, NL completed a recaptialization and a pro-rata distribution to
its stockholders of approximately 48.8% of Kronos' common stock (including Valhi
and its  wholly-owned  subsidiary).  Stockholders  of NL  received  one share of
Kronos common stock for every two shares of NL held.  Immediately  prior to NL's
distribution of shares of Kronos' common stock,  the Company  distributed a $200
million dividend to NL in the form of a long-term note payable. See Note 10.

     On  September  26,  2003  Kronos  amended  and  restated  its  articles  of
incorporation.  Under the amended and restated articles of incorporation,  among
other things,  (i) Kronos'  authorized  capital stock now consists of 60 million
shares of common  stock and 100,000  shares of preferred  stock,  each par value
$.01 per share,  and (ii) the 1,000 shares of Kronos'  common  stock  previously
outstanding  were  reclassified  into an aggregate of 48.9 million  shares.  The
accompanying   Consolidated   Financial   Statements  have  been   retroactively
reclassified  to  reflect  such  changes in Kronos'  capital  structure  for all
periods  presented.  Earnings per share data for all periods  presented has been
restated to reflect the 48.9  million  shares of Kronos'  common  stock that was
outstanding  following  effectiveness  of the amended and  restated  articles of
incorporation.

     Management's   estimates.   The  preparation  of  financial  statements  in
conformity with accounting principles generally accepted in the United States of
America  ("GAAP")  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. Actual
results may differ from previously-estimated amounts under different assumptions
or conditions.

     Principles of consolidation.  The consolidated financial statements include
the  accounts  of  Kronos  and its  majority-owned  subsidiaries.  All  material
intercompany  accounts  and balances  have been  eliminated.  Minority  interest
relates to the Company's majority-owned subsidiary in France, which conducts the
Company's  marketing  and sales  activities in that  country.  During 2004,  the
Company  increased its  ownership  interest by  approximately  5% to 99% in such
subsidiary by acquiring shares of such subsidiary  previously held by certain of
its other stockholders for an aggregate of $575,000.

     Translation of foreign  currencies.  Assets and liabilities of subsidiaries
whose  functional  currency  is 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 stockholders'  equity as part of accumulated other  comprehensive
income,  net of related  deferred income taxes and minority  interest.  Currency
transaction gains and losses are recognized in income currently.

     In 2002,  a $6.3  million  currency  transaction  gain is  classified  as a
component of other income (expense) in the accompanying  Consolidated  Statement
of Income.  Such gain  related  to the  extinguishment  of certain  intercompany
indebtedness of NL. Prior to June 28, 2002, Kronos International,  Inc. ("KII"),
a wholly-owned subsidiary of the Company which conducts the Company's operations
in Europe, had certain intercompany indebtedness payable to Kronos, a portion of
which was denominated in U.S. dollars, and a portion of which was denominated in
euros. Through June 19, 2002, such intercompany indebtedness was deemed to be of
a long-term  nature for which  settlement  was not planned or anticipated in the
foreseeable   future,   and  in  accordance  with  GAAP,  the  foreign  currency
transaction gains and losses related to such intercompany  indebtedness were not
recognized in net income, but instead were reported as part of accumulated other
comprehensive  income. On June 19, 2002, when the purchase agreement was entered
into in  connection  with KII's 2002  issuance of the KII Senior  Secured  Notes
discussed in Note 8, the expectation that such intercompany  indebtedness was of
a long-term nature was no longer applicable,  as KII had stated that it intended
to use a portion of the net proceeds of such offering to repay such intercompany
indebtedness owed to Kronos. Accordingly,  from the time period of June 19, 2002
(the  date the  purchase  agreement  related  to KII  Senior  Secured  Notes was
executed) until June 28, 2002 (the closing date for the 2002 issuance of the KII
Senior Secured Note offering,  and the date such  intercompany  indebtedness was
repaid),  the  foreign  currency  transaction  gains and losses  related to such
intercompany  indebtedness during such time period,  which aggregated a net gain
of $6.3 million, was recognized in net income in accordance with GAAP.

     Derivatives  and hedging  activities.  Derivatives are recognized as either
assets or liabilities and measured at fair value in accordance with Statement of
Financial  Accounting  Standards  ("SFAS") No. 133,  "Accounting  for Derivative
Instruments and Hedging  Activities",  as amended. The accounting for changes in
fair value of derivatives  depends upon the intended use of the derivative,  and
such changes are recognized either in net income or other comprehensive  income.
As permitted  by the  transition  requirements  of SFAS No. 133, the Company has
exempted from the scope of SFAS No. 133 all host contracts  containing  embedded
derivatives that were issued or acquired prior to January 1, 1999.

     Cash and cash equivalents.  Cash equivalents include bank time deposits and
U.S. Treasury  securities  purchased under short-term  agreements to resell with
original maturities of three months or less.

     Restricted   marketable  debt   securities.   Restricted   marketable  debt
securities  are primarily  invested in corporate  debt  securities,  and include
amounts restricted in accordance with applicable Norwegian law regarding certain
requirements  of the Company's  Norwegian  defined  benefit  pension plans ($2.6
million and $2.9  million at  December  31,  2003 and 2004,  respectively).  The
restricted  marketable  debt  securities  are  generally  classified as either a
current or noncurrent  asset  depending upon the maturity date of each such debt
security and are carried at market which approximates cost.

     Accounts  receivable.  The  Company  provides  an  allowance  for  doubtful
accounts  for  known  and  estimated  potential  losses  arising  from  sales to
customers based on a periodic review of these accounts.

     Investment in TiO2 manufacturing joint venture.  Investments in a 50%-owned
manufacturing joint venture is accounted for by the equity method.

     Property and equipment and depreciation.  Property and equipment are stated
at cost.  The Company has a  governmental  concession  with an unlimited term to
operate an ilmenite mine in Norway.  Mining properties  consist of buildings and
equipment  used in the  Company's  Norwegian  ilmenite  mining  operations.  The
Company  does  not  own  the  ilmenite   reserves   associated  with  the  mine.
Depreciation  of  property  and  equipment  for  financial   reporting  purposes
(including  mining  properties)  is computed  principally  by the  straight-line
method over the  estimated  useful  lives of ten to 40 years for  buildings  and
three to 20 years for equipment.  Accelerated  depreciation methods are used for
income tax  purposes,  as permitted.  Upon sale or  retirement of an asset,  the
related cost and accumulated  depreciation are removed from the accounts and any
gain or loss is recognized in income currently.

     Expenditures  for  maintenance,  repairs and minor  renewals are  expensed;
expenditures  for major  improvements  are  capitalized.  The  Company  performs
planned major  maintenance  activities  during the year.  Repair and maintenance
costs  estimated to be incurred in  connection  with planned  major  maintenance
activities  are  accrued in advance and are  included in cost of sales.  Accrued
repair  and  maintenance  costs,  included  in  other  current  liabilities  and
consisting  primarily  of  materials  and  supplies,  was $6.3  million and $5.4
million at December 31, 2003 and 2004, respectively.

     Interest costs related to major long-term capital projects and renewals are
capitalized as a component of  construction  costs.  Interest costs  capitalized
were not significant in 2002, 2003 or 2004.

     When  events or  changes  in  circumstances  indicate  that  assets  may be
impaired,  an evaluation is performed to determine if an impairment exists. Such
events or changes in circumstances  include, among other things, (i) significant
current  and prior  periods or current  and  projected  periods  with  operating
losses,  (ii) a significant  decrease in the market value of an asset or (iii) a
significant  change  in the  extent  or  manner  in which an asset is used.  All
relevant  factors  are  considered.  The test for  impairment  is  performed  by
comparing the estimated  future  undiscounted  cash flows (exclusive of interest
expense)  associated  with  the  asset  to the  asset's  net  carrying  value to
determine  if a  write-down  to market  value or  discounted  cash flow value is
required.  Effective January 1, 2002, the Company commenced assessing impairment
of property and equipment in accordance  with SFAS No. 144,  "Accounting for the
Impairment or Disposal of Long-Lived  Assets," which among other things provided
certain implementation guidance in relation to prior GAAP. See Note 18.

     Long-term debt.  Long-term debt is stated net of any  unamortized  original
issue  premium or discount.  Amortization  of deferred  financing  costs and any
premium or discount  associated with the issuance of indebtedness,  all included
in interest  expense,  is computed by the  interest  method over the term of the
applicable issue.

     Employee  benefit  plans.  Accounting  and funding  policies for retirement
plans are described in Note 14.

     Income  taxes.   Prior  to  December   2003,   Kronos  and  its  qualifying
subsidiaries  were members of NL's  consolidated  U.S.  federal income tax group
(the "NL Tax Group"), and the NL Tax Group was included in the consolidated U.S.
federal tax return of Contran (the  "Contran Tax Group").  As a member of the NL
Tax  Group,  the  Company  is a party to a tax  sharing  agreement  (the "NL Tax
Agreement").  As a member of the Contran Tax Group, NL was a party to a separate
tax sharing  agreement (the "Contran Tax Agreement").  The Contran Tax Agreement
provides that NL and its  qualifying  subsidiaries,  including  Kronos,  compute
provisions  for U.S.  income  taxes on a  separate-company  basis  using the tax
elections  made by Contran.  Pursuant to the NL Tax  Agreement and using the tax
elections made by Contran,  Kronos made payments to or received payments from NL
in amounts  it would have paid to or  received  from the U.S.  Internal  Revenue
Service had it not been a member of NL's  consolidated tax group but instead was
a separate taxpayer. Refunds are limited to amounts previously paid under the NL
Tax Agreement. The Company made net payments to NL under the terms of the NL Tax
Agreement of $5.3 million in 2002 and $10.7  million in 2003,  and received $1.2
million from NL in 2004. See Note 13.

     Effective  December  2003,  following  NL's  distribution  of  48.8% of the
outstanding  shares of Kronos  common stock to NL  stockholders,  Kronos and its
qualifying subsidiaries ceased being members of the NL Tax Group, but Kronos and
its qualifying subsidiaries remained as members of the Contran Tax Group. Kronos
entered into a new tax sharing agreement with Valhi and Contran,  which contains
similar terms to the NL Tax Agreement. The Company made net payments to Valhi of
$.3 million in 2004 related to such tax  agreement.  Kronos is also  included in
Contran's  consolidated  unitary state income tax returns in certain  qualifying
U.S.  jurisdictions.  The terms of the Contran Tax Agreement also apply to state
tax payments in these jurisdictions.

     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 who are not members of
the Contran Tax Group and undistributed  earnings of foreign  subsidiaries which
are not deemed to be permanently  reinvested.  Earnings of foreign  subsidiaries
deemed to be permanently reinvested aggregated $610 million at December 31, 2003
and $638 million at December 31, 2004.  The Company  periodically  evaluates its
deferred tax assets in the various taxing jurisdictions in which it operates and
adjusts any related  valuation  allowance based on the estimate of the amount of
such  deferred  tax  assets  that  the  Company   believes  does  not  meet  the
"more-likely-than-not" recognition criteria.

     Net sales. Sales are recorded when products are shipped and title and other
risks and rewards of ownership have passed to the customer, or when services are
performed.  Shipping terms of products shipped are generally FOB shipping point,
although in some instances  shipping terms are FOB destination  point (for which
sales are not recognized until the product is received by the customer). Amounts
charged to customers for shipping and handling are included in net sales.  Sales
are stated net of price,  early  payment and  distributor  discounts  and volume
rebates.

     Inventories and cost of sales.  Inventories are stated at the lower of cost
(principally   average  cost)  or  market,  net  of  allowance  for  slow-moving
inventories. Amounts are removed from inventories at average cost. Cost of sales
includes  costs for  materials,  packing and  finishing,  utilities,  salary and
benefits, maintenance and depreciation.

     Selling,  general and administrative expense;  shipping and handling costs.
Selling,  general and administrative expense include costs related to marketing,
sales, distribution, shipping and handling, research and development, legal, and
administrative functions such as accounting,  treasury and finance, and includes
costs for salaries and benefits, travel and entertainment, promotional materials
and  professional  fees.  Shipping and  handling  costs are included in selling,
general and administrative  expense and were $51 million in 2002, $63 million in
2003 and $70 million in 2004.  Advertising  costs are  expensed as incurred  and
were $1  million  in each of 2002,  2003 and  2004.  Research,  development  and
certain sales technical  support costs are expensed as incurred and approximated
$6 million in 2002, $7 million in 2003 and $8 million in 2004.

     Stock  options.  The  Company  has not issued any stock  options.  However,
certain  employees of the Company have been granted options by NL to purchase NL
common stock. The Company has elected the disclosure  alternative  prescribed by
SFAS No. 123,  "Accounting for  Stock-Based  Compensation,"  as amended,  and to
account for its stock-based  employee  compensation  related to stock options in
accordance with Accounting Principles Board Opinion ("APBO") No. 25, "Accounting
for Stock Issued to Employees," and its various interpretations.  Under APBO No.
25, no  compensation  cost is generally  recognized  for fixed stock  options in
which the  exercise  price is not less than the market  price on the grant date.
During 2002, and following NL's cash settlement of options to purchase NL common
stock held by certain  individuals,  NL and the Company commenced accounting for
its stock  options  using the variable  accounting  method  because NL could not
overcome the  presumption  that it would not similarly cash settle its remaining
stock options.  Under the variable accounting method, the intrinsic value of all
unexercised stock options (including those with an exercise price at least equal
to the market  price on the date of grant) are accrued as an expense  over their
vesting  period,  with  subsequent  increases  (decreases)  in NL's market price
resulting in additional  compensation  expense  (income).  Upon exercise of such
options to  purchase  NL common  stock held by  employees  of the  Company,  the
Company  pays NL an amount equal to the  difference  between the market price of
NL's common stock on the date of exercise  and the exercise  price of such stock
option.  Aggregate  compensation  expense  related to NL stock  options  held by
employees of the Company was $2.3 million in 2002, $1.0 million in 2003 and $2.8
million in 2004.

     The following  table presents what the Company's  consolidated  net income,
and related  per share  amounts,  would have been in 2002,  2003 and 2004 if the
Company had applied the fair value-based recognition provisions of SFAS No. 123,
for all awards granted subsequent to January 1, 1995.


                                                         Years ended December 31,
                                                -----------------------------------------
                                                  2002             2003            2004
                                                  ----             ----            ----
                                                          (In millions, except
                                                          per share amounts)

                                                                        
Net income as reported                           $ 66.3          $  87.5         $ 314.9

Adjustments, net of applicable income
 tax effects and minority interest:
  Stock-based employee compensation expense
   determined under APBO No. 25                     1.5               .7             1.8
  Stock-based employee compensation expense
   determined under SFAS No. 123                    (.7)             (.3)            (.1)
                                                 ------          -------         -------

Pro forma net income                             $ 67.1          $  87.9         $ 316.6
                                                 ======          =======         =======

Basic and diluted earnings per share:
  As reported                                    $ 1.35          $  1.79         $  6.43
  Pro forma                                      $ 1.37          $  1.80         $  6.47



Note 2 - Geographic information:

     The Company's  operations  are  associated  with the production and sale of
TiO2.  Titanium  dioxide pigments are used to impart  whiteness,  brightness and
opacity to a wide variety of products, including paints, plastics, paper, fibers
and  ceramics.  At  December  31,  2003 and 2004,  the net  assets  of  non-U.S.
subsidiaries  included in consolidated net assets  approximated $193 million and
$293 million, respectively.

     For  geographic  information,  net  sales  are  attributed  to the place of
manufacture  (point  of  origin)  and the  location  of the  customer  (point of
destination); property and equipment are attributed to their physical location.





                                                         Years ended December 31,
                                                -----------------------------------------
                                                  2002             2003            2004
                                                  ----             ----            ----
                                                              (In thousands)
       Geographic areas

Net sales - point of origin:
                                                                      
    Germany                                    $  404,299      $  510,105      $  576,138
    United States                                 291,823         310,694         449,351
    Canada                                        157,773         173,297         170,309
    Belgium                                       123,760         150,728         186,445
    Norway                                        111,811         131,457         144,492
    Other                                          89,560         110,358         124,784
    Eliminations                                 (303,838)       (378,462)       (522,919)
                                               ----------      ----------      ----------

                                               $  875,188      $1,008,177      $1,128,600
                                               ==========      ==========      ==========

Net sales - point of destination:
    Europe                                     $  456,834      $  567,496      $  666,701
    United States                                 271,865         296,643         315,867
    Canada                                         53,371          53,170          47,643
    Latin America                                  19,970          15,920          24,915
    Asia                                           47,549          49,020          47,261
    Other                                          25,599          25,928          26,213
                                               ----------      ----------      ----------

                                               $  875,188      $1,008,177      $1,128,600
                                               ==========      ==========      ==========



                                                           December 31,
                                                     ------------------------
                                                     2003                2004
                                                     ----                ----
                                                          (In thousands)

Identifiable assets -
  net property and equipment:
                                                                
      Germany                                     $ 252,411           $ 269,922
      Canada                                         63,623              68,048
      Belgium                                        64,895              68,314
      Norway                                         50,811              57,808
      Other                                           3,227               2,798
                                                  ---------           ---------

                                                  $ 434,967           $ 466,890
                                                  =========           =========


Note 3 - Accounts and other receivables:


                                                           December 31,
                                                     ------------------------
                                                     2003                2004
                                                     ----                ----
                                                          (In thousands)

                                                                
Trade receivables                                 $ 146,971           $ 176,332
Insurance claims                                         58                  32
Recoverable VAT and other receivables                12,103              16,332
Allowance for doubtful accounts                      (2,920)             (2,377)
                                                  ---------           ---------

                                                  $ 156,212           $ 190,319
                                                  =========           =========


Note 4 - Inventories


                                                           December 31,
                                                     ------------------------
                                                     2003                2004
                                                     ----                ----
                                                          (In thousands)

                                                                
Raw materials                                     $  61,959           $  45,962
Work in progress                                     19,855              16,612
Finished products                                   147,270             130,385
Supplies                                             36,936              40,899
                                                  ---------           ---------

                                                  $ 266,020           $ 233,858
                                                  =========           =========


Note 5 - Other noncurrent assets:


                                                           December 31,
                                                     ------------------------
                                                     2003                2004
                                                     ----                ----
                                                          (In thousands)

                                                                
Deferred financing costs, net                     $  10,417           $  10,921
Restricted marketable debt securities                 2,586               2,877
Unrecognized net pension obligation                  13,747              13,518
Other                                                 1,290               5,024
                                                  ---------           ---------

                                                  $  28,040           $  32,340
                                                  =========           =========


Note 6 - Investment in TiO2 manufacturing joint venture:

     Kronos Louisiana, Inc. ("KLA"), a wholly-owned subsidiary of Kronos, owns a
50% interest in Louisiana Pigment Company,  L.P. ("LPC"). LPC is a manufacturing
joint venture that is also  50%-owned by Tioxide  Americas Inc.  ("Tioxide"),  a
wholly-owned   subsidiary   of  Huntsman   Holdings   LLC,   which  through  its
subsidiaries,  is wholly-owned by Huntsman Holdings LLC. LPC owns and operates a
chloride-process TiO2 plant in Lake Charles, Louisiana.

     KLA and Tioxide are both required to purchase one-half of the TiO2 produced
by LPC. LPC operates on a break-even basis and, accordingly, the Company reports
no equity in earnings of LPC. Each owner's  acquisition  transfer  price for its
share  of the  TiO2  produced  is equal  to its  share  of the  joint  venture's
production  costs and interest  expense,  if any.  Kronos' share of net costs is
reported  as cost of  sales  as the  related  TiO2  acquired  from  LPC is sold.
Distributions  from LPC, which generally  relate to excess cash generated by LPC
from its non-cash  production  costs, and  contributions to LPC, which generally
relate to cash required by LPC when it builds working  capital,  are reported as
part of cash  generated by operating  activities in the  Company's  Consolidated
Statements  of  Cash  Flows.   Such   distributions  are  reported  net  of  any
contributions made to LPC during the periods.  Net distributions of $8.0 million
in 2002,  $.9  million  in 2003  and $8.6  million  in 2004  are  stated  net of
contributions  of $14.2 million in 2002, $13.1 million in 2003 and $15.6 million
in 2004.

     LPC made net cash  distributions  of $15.9 million in 2002, $1.8 million in
2003 and $17.2 million in 2004, equally split between the partners.

Summary balance sheets of LPC are shown below:


                                                           December 31,
                                                     ------------------------
                                                     2003                2004
                                                     ----                ----
                                                          (In thousands)
           ASSETS
                                                                
Current assets                                    $  57,028           $  58,121
Property and equipment, net                         226,971             211,721
                                                  ---------           ---------

                                                  $ 283,999           $ 269,842
                                                  =========           =========

   LIABILITIES AND PARTNERS' EQUITY

Other liabilities, primarily current              $  23,229           $  26,590
Partners' equity                                    260,770             243,252
                                                  ---------           ---------

                                                  $ 283,999           $ 269,842
                                                  =========           =========


     Summary income statements of LPC are shown below:


                                                         Years ended December 31,
                                                -----------------------------------------
                                                  2002             2003            2004
                                                  ----             ----            ----
                                                              (In thousands)

Revenues and other income:
                                                                      
  Kronos                                       $   92,428      $  101,293      $  104,849
  Tioxide                                          93,833         101,619         105,543
  Interest                                             53              73              54
                                               ----------      ----------      ----------

                                                  186,314         202,985         210,446
                                               ----------      ----------      ----------
Cost and expenses:
  Cost of sales                                   185,946         201,947         209,983
  General and administrative                          368             398             463
                                               ----------      ----------      ----------

                                                  186,314         202,345         210,446
                                               ----------      ----------      ----------
Net income from continuing operations                -                640            -
Cumulative effect of change in
  accounting principles                              -               (640)           -
                                               ----------      ----------      ----------

    Net income                                 $     -         $     -         $     -
                                               ==========      ==========      ==========


Note 7 -       Accounts payable and accrued liabilities:


                                                           December 31,
                                                     ------------------------
                                                     2003                2004
                                                     ----                ----
                                                          (In thousands)

                                                                
     Accounts payable                             $  97,446           $  91,713
     Employee benefits                               31,732              36,861
     Other                                           37,486              41,435
                                                  ---------           ---------

                                                  $ 166,664           $ 170,009
                                                  =========           =========



Note 8 - Long-term debt:


                                                           December 31,
                                                     ------------------------
                                                     2003                2004
                                                     ----                ----
                                                          (In thousands)


 Kronos International, Inc. and subsidiaries:
                                                                
   8.875% Senior Secured Notes                    $  356,136          $ 519,225
   Bank credit facility                                    -             13,622
   Other                                                 603                348
                                                  ---------           ---------

                                                    356,739             533,195
   Less current maturities                              288              13,792
                                                  ---------           ---------

                                                  $ 356,451           $ 519,403
                                                  =========           =========


     In June 2002,  KII issued at par value euro 285  million  principal  amount
($280 million when issued) of its 8.875% Senior  Secured Notes due 2009,  and in
November 2004 KII issued at 107% of par an additional euro 90 million  principal
amount ($130 million when issued) of the KII Senior Secured Notes  (collectively
the  "Notes").  The Notes are  collateralized  by a pledge of 65% of the  common
stock or other  ownership  interests  of certain of KII's  first-tier  operating
subsidiaries.  The Notes are issued  pursuant to an indenture  which  contains a
number of covenants and restrictions  which,  among other things,  restricts the
ability of KII and its subsidiaries to incur debt, incur liens, pay dividends or
merge or consolidate with, or sell or transfer all or substantially all of their
assets to, another  entity.  The Notes are  redeemable,  at KII's option,  on or
after  December  30, 2005 at  redemption  prices  ranging  from  104.437% of the
principal amount,  declining to 100% on or after December 30, 2008. In addition,
on or before June 30,  2005,  KII may redeem up to 35% of the Notes with the net
proceeds  of a qualified  public  equity  offering at 108.875% of the  principal
amount.  In the event of a change of control of KII,  as  defined,  KII would be
required to make an offer to purchase its Notes at 101% of the principal amount.
KII would also be required  to make an offer to purchase a specified  portion of
its  Notes at par  value in the event  KII  generates  a  certain  amount of net
proceeds from the sale of assets  outside the ordinary  course of business,  and
such net  proceeds  are not  otherwise  used  for  specified  purposes  within a
specified time period.  At December 31, 2004, the estimated  market price of the
Notes was approximately  euro 1,075 per euro 1,000 principal amount (2003 - euro
1,000 per euro 1,000  principal  amount).  At December  31,  2004,  the carrying
amount of the Notes  includes  euro 6.2 million  ($8.4  million) of  unamortized
premium associated with the November 2004 issuance.

     Also in June 2002,  KII's operating  subsidiaries  in Germany,  Belgium and
Norway  (collectively,  the "Borrowers")  entered into a euro 80 million secured
revolving  bank credit  facility  that  matures in June 2005  ("European  Credit
Facility").  Borrowings may be denominated in euros,  Norwegian  kroners or U.S.
dollars,  and bear interest at the applicable  interbank market rate plus 1.75%.
The  facility  also  provides for the issuance of letters of credit up to euro 5
million.  The  European  Credit  Facility  is  collateralized  by  the  accounts
receivable and inventories of the borrowers, plus a limited pledge of all of the
other assets of the Belgian  borrower.  The European  Credit  Facility  contains
certain restrictive  covenants which, among other things,  restricts the ability
of the  Borrowers  to  incur  debt,  incur  liens,  pay  dividends  or  merge or
consolidate  with, or sell or transfer all or substantially  all of their assets
to, another entity. In addition, the European Credit Facility contains customary
cross-default  provisions  with  respect  to other debt and  obligations  of the
Borrowers, KII and its other subsidiaries. At December 31, 2004, euro 10 million
($13.6  million)  was  outstanding  under the  European  Credit  Facility  at an
interest  rate of 3.85%,  and the  equivalent of $92.6 million was available for
additional borrowing by the subsidiaries.

     In September 2002, certain of the Company's U.S.  subsidiaries entered into
a $50 million  revolving  credit facility (nil outstanding at December 31, 2004)
that  matures in  September  2005  ("U.S.  Credit  Facility").  The  facility is
collateralized by the accounts receivable,  inventories and certain fixed assets
of the  borrowers.  Borrowings  under this facility are limited to the lesser of
$45 million or a  formula-determined  amount based upon the accounts  receivable
and  inventories of the borrowers.  Borrowings bear interest at either the prime
rate or rates based upon the  eurodollar  rate.  The facility  contains  certain
restrictive covenants which, among other things,  restricts the abilities of the
borrowers to incur debt,  incur liens,  pay dividends in certain  circumstances,
sell  assets or enter into  mergers.  At  December  31,  2004,  no amounts  were
outstanding and $38 million was available for borrowing under the facility.

     In January 2004,  Kronos' Canadian  subsidiary  entered into a new Cdn. $30
million  revolving credit facility that matures in January 2009. The facility is
collateralized  by the accounts  receivable  and  inventories  of the  borrower.
Borrowings  under this facility are limited to the lesser of Cdn. $26 million or
a  formula-determined  amount based upon the accounts receivable and inventories
of the  borrower.  Borrowings  bear  interest  at rates  based  upon  either the
Canadian prime rate, the U.S. prime rate or LIBOR. The facility contains certain
restrictive  covenants which,  among other things,  restricts the ability of the
borrower to incur debt,  incur liens,  pay  dividends in certain  circumstances,
sell  assets or enter into  mergers.  At  December  31,  2004,  no amounts  were
outstanding  and the equivalent of $8 million was available for borrowing  under
the facility.

     Under  the  cross-default  provisions  of  the  Notes,  the  Notes  may  be
accelerated  prior to their stated maturity if KII or any of KII's  subsidiaries
default under any other  indebtedness  in excess of $20 million due to a failure
to pay such  other  indebtedness  at its due date  (including  any due date that
arises  prior to the stated  maturity as a result of a default  under such other
indebtedness).  Under  the  cross-default  provisions  of  the  European  Credit
Facility,  any outstanding  borrowings under the European Credit Facility may be
accelerated prior to their stated maturity if the Borrowers or KII default under
any other  indebtedness in excess of euro 5 million due to a failure to pay such
other  indebtedness at its due date (including any due date that arises prior to
the stated  maturity  as a result of a default  under such other  indebtedness).
Under the cross-default  provisions of the U.S. Credit Facility, any outstanding
borrowing under such facility may be accelerated  prior to their stated maturity
in the event of the bankruptcy of Kronos. The Canadian revolving credit facility
contains no cross-default provisions.  The European, U.S. and Canadian revolving
credit  facilities  each contain  provisions that allow the lender to accelerate
the maturity of the applicable  facility in the event of a change of control, as
defined, of the applicable borrower.  In the event any of these cross-default or
change-of-control   provisions  become  applicable,  and  such  indebtedness  is
accelerated,  Kronos would be required to repay such indebtedness prior to their
stated maturity.

     Aggregate  maturities  of long-term  debt at December 31, 2004 are shown in
the table below.


 Years ending December 31,                    Amount
 -------------------------                --------------
                                          (In thousands)

                                         
   2005                                     $  13,792
   2006                                           159
   2007                                            19
   2008                                             -
   2009                                       519,225
   20010 and thereafter                          -
                                            ---------

                                            $ 533,195
                                            =========


     Restrictions.  Certain of the credit facilities described above require the
respective   borrower  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, 2004,  the  restricted  net
assets of consolidated  subsidiaries  approximated $158 million. At December 31,
2004, there were no restrictions on the Company's ability to pay dividends.

Note 9 - Other noncurrent liabilities:


                                                           December 31,
                                                     ------------------------
                                                     2003                2004
                                                     ----                ----
                                                          (In thousands)

                                                                
 Insurance claims and expenses                    $   1,673           $   1,927
 Employee benefits                                    4,849               5,107
 Asset retirement obligations                           766                 958
 Other                                                7,439               9,415
                                                  ---------           ---------

                                                  $  14,727           $  17,407
                                                  =========           =========


     The asset retirement obligations are discussed in Note 18.

Note 10 - Notes and payable to affiliates:

     Notes payable to affiliates.  In December 2003,  immediately  prior to NL's
distribution of approximately  48.8% of the outstanding shares of Kronos' common
stock to NL stockholders,  the Company distributed a $200 million dividend to NL
in the form of a long-term note payable. The $200 million long-term note payable
to NL was  unsecured and bore  interest at 9% per annum,  with interest  payable
quarterly and all principal due in 2010.

     On September 24, 2004, NL completed the acquisition of the shares of common
stock of CompX International,  Inc. previously held by Valhi and Valcor, Inc., a
wholly-owned  subsidiary of Valhi.  The purchase price for these shares was paid
by NL's transfer to Valhi and Valcor of an aggregate $168.6 million of NL's $200
million   long-term  note  receivable  from  Kronos.  In  October  2004,  Valcor
distributed its note receivable from Kronos to Valhi,  and  subsequently  Kronos
prepaid $100.0 million on the note payable to Valhi  principally using available
cash on hand.  In December  2004 all  remaining  balances  due to NL,  Valhi and
Valcor were prepaid and the related notes were canceled.

     In 2003,  the Company repaid all amounts  outstanding  under the terms of a
prior $55 million  revolving  credit facility with NL  Environmental  Management
Services,  Inc.  ("EMS"),  a  majority-owned  subsidiary of NL and the revolving
credit agreement with EMS was terminated on June 30, 2003.

Note 11 - Common stock and notes receivable from affiliates:

     NL common stock options held by employees of the Company. Certain employees
of the  Company  have been  granted  nonqualified  options to purchase NL common
stock under the terms of certain option plans  sponsored by NL.  Generally,  the
stock options are granted at a price equal to or greater than 100% of the market
price of NL's common  stock at the date of grant,  vest over a five-year  period
and expire  ten years from the date of grant.  Following  NL's  distribution  of
approximately  48.8% of the  outstanding  shares of Kronos'  common  stock to NL
stockholders,  the  exercise  prices for all options to purchase NL common stock
were adjusted.

     Changes in  outstanding  options to  purchase  NL common  stock  granted to
certain employees of the Company are summarized in the table below.





                                                                           Amount      Weighted-
                                                           Exercise       payable      average
                                                          price per         upon       exercise
                                                Shares      share         exercise      price
                                                ------    ----------      --------    ----------
                                                     (In thousands, except per share amounts)

                                                                              
Outstanding at December 31, 2001                  851   $ 5.00-21.97       $13,893     $ 16.33

Exercised                                        (192)    5.00-15.19        (2,715)      14.16
                                                 ----   ------------       -------

Outstanding at December 31, 2002                  659     8.69-21.97        11,178       16.96

Exercised                                         (20)   11.28-11.88          (226)      11.55
Canceled                                          (69)   11.28-20.11        (1,150)      16.67
Adjusted for Kronos common
  stock distribution                               -      8.69-21.97        (4,913)       8.63
                                                 ----   ------------       -------

Outstanding at December 31, 2003                  570     0.06-13.34         4,889        8.58

Exercised                                        (276)    0.06-11.49        (2,222)       8.04
Canceled                                          (61)    3.56-08.63          (370)       6.14
                                                 ----   ------------       -------

Outstanding at December 31, 2004                  233   $ 2.66-13.34       $ 2,297     $  9.86
                                                 ====   ============       =======



     At December 31, 2002,  2003 and 2004 options to purchase  240,400,  351,900
and 117,500  shares,  respectively,  were  exercisable,  and options to purchase
75,200 shares become exercisable in 2005. Of the exercisable options, options to
purchase  117,500 shares at December 31, 2004 had exercise prices less than NL's
December 31, 2004 quoted market price of $22.10 per share.  Outstanding  options
at December 31, 2004 expire at various dates through 2011.

     The following table  summarizes NL's stock options  outstanding and held by
certain employees of the Company, and those which are exercisable as of December
31, 2004 by price range.


                         Options outstanding                                 Options exercisable
- ---------------------------------------------------------------------   ----------------------------
                                             Weighted-
                                              average       Weighted-                    Weighted-
                            Outstanding      remaining       average     Exercisable      average
        Range of                at          contractual     exercise         at          exercise
     exercise prices         12/31/04          life           price       12/31/04        price
  ---------------------     -----------     ------------   ----------    -----------    -----------

                                                                        
   $ 2.66  -   $ 3.25           8,550            3.8         $  2.74         8,550        $  2.74
          5.63                 60,350            5.0            5.63        25,550           5.63
     9.34  -    13.34         164,200            5.4           11.78        83,400          12.07
                             --------                                     --------

                              233,100            5.4         $  9.86       117,500        $  9.99
                             ========                                     ========


     Long-term  incentive  compensation  plan. Kronos has a long-term  incentive
compensation  plan that  provides  for the  discretionary  grant of, among other
things,   qualified   incentive  stock  options,   nonqualified  stock  options,
restricted  common  stock,  stock awards and stock  appreciation  rights.  Up to
150,000 shares of Kronos common stock may be issued pursuant to this plan. As of
December  31,  2004,  no options had been  granted  pursuant  to this plan,  and
147,000 shares were available for future grants.  During the year ended December
31,  2004,  an  aggregate  of 3,000  shares of Kronos  common stock were awarded
pursuant to this plan to members of the Company's board of directors.

     Dividends.  Subsequent  to the December 8, 2003  distribution,  See Note 1,
Kronos paid four quarterly dividends aggregating $1.00 per share in 2004.

     Notes  receivable from affiliates - contra equity.  Certain prior long-term
notes  receivable  from  affiliates  were  included as a component  of equity in
accordance with GAAP, as settlement of the affiliate notes  receivable  balances
were not currently  contemplated within the foreseeable future. In July 2002 the
Company distributed its affiliate notes receivable to NL totaling $711.1 million
in the form of a noncash dividend.

     During  2003,  NL repaid all amounts  outstanding  under a prior  revolving
credit facility with the Company and such facility was terminated in June 2003.

     The Company  periodically  converted interest receivable from affiliates to
notes  receivable  from  affiliates.  For the  year  ended  2002,  the  interest
transferred to notes  receivable from affiliates  totaled $20.6 million and were
nil in 2003 and 2004.

     Cash flows  related to such loans  made to  affiliates  included  in contra
equity are reflected in "Other capital transactions with affiliates, net" in the
accompanying Consolidated Statements of Cash Flows.

     Other capital  transactions.  In December  2004, NL sold certain  shares of
Kronos  common  stock in market  transactions.  Earlier in 2004,  and within six
months of such sales by NL,  Valhi  purchased  shares of Kronos  common stock in
market transactions. Pursuant to Section 16(b) of the Securities Exchange Act of
1934,  Valhi remitted the short swing profit  resulting from these purchases and
sales of approximately  $600,000 to the Company, which amount, net of taxes, has
been recorded by the Company as a capital contribution.

Note 12 - Other income:


                                                Years ended December 31,
                                       -----------------------------------------
                                         2002             2003            2004
                                         ----             ----            ----
                                                     (In thousands)


                                                                
 Contract dispute settlement            $   -            $   -           $6,289
 Other income                              459              490             426
                                        ------           ------          ------

                                        $  459           $  490          $6,715
                                        ======           ======          ======


     The contract dispute settlement relates to the Company's  settlement with a
customer. As part of the settlement, the customer agreed to make payments to the
Company through 2007 aggregating $7.3 million.  The $6.3 million gain recognized
in 2004  represents  the present value of the future  payments to be paid by the
customer to the Company.  Of such $7.3 million,  $1.5 million was paid to Kronos
in the  second  quarter  of 2004,  $1.75  million  is due in each of the  second
quarter of 2005 and 2006 and $2.25 million is due in the second quarter of 2007.
At December 31, 2004, the present value of the remaining  amounts due to be paid
to Kronos  aggregated  approximately  $5.1  million,  of which  $1.7  million is
included in accounts and other receivables and $3.4 million is included in other
noncurrent assets.



Note 13 - Income taxes:


                                                Years ended December 31,
                                       -----------------------------------------
                                         2002             2003            2004
                                         ----             ----            ----
                                                     (In millions)
 Pre-tax income:
                                                               
   U.S.                                 $ 24.3           $ 13.2         $   3.3
   Non-U.S.                               67.5             86.1            61.2
                                        ------           ------         -------

                                        $ 91.8           $ 99.3         $  64.5
                                        ======           ======         =======

 Expected tax expense, at U.S.
  federal statutory income
  tax rate of 35%                       $ 32.1           $ 34.8         $  22.6
 Non-U.S. tax rates                       (6.7)            (1.1)             .2
 Incremental U.S. tax and rate
  differences on equity in earnings
  of non-tax group companies                .5              1.9             (.1)
 Change in deferred income tax
  valuation allowance, net                (1.8)            (6.7)         (280.7)
 Nondeductible expenses                    2.9              2.8             4.3
 Change in Belgian income tax law         (2.3)              -               -
 U.S. state income taxes, net               -                -               .2
 NL tax contingency reserve
  adjustment, net                           .2             14.8            (3.1)
 Refund of prior year income taxes          -             (38.0)           (2.5)
 Adjustment of prior year taxes             -                -              (.1)
 Other, net                                 .6              3.2             8.8
                                        ------           ------         -------

                                        $ 25.5           $ 11.7         $(250.4)
                                        ======           ======         =======





                                                Years ended December 31,
                                       -----------------------------------------
                                         2002             2003            2004
                                         ----             ----            ----
                                                     (In millions)

 Components of income tax expense
  (benefit):
   Currently payable (refundable):
                                                               
     U.S. federal and state             $  4.3           $ 10.5         $    .8
     Non-U.S.                             10.4            (35.3)           12.1
                                        ------           ------         -------
                                          14.7            (24.8)           12.9
                                        ------           ------         -------
   Deferred income taxes (benefit):
     U.S. federal and state                5.2             (1.0)           11.4
     Non-U.S.                              5.6             37.5          (274.7)
                                        ------           ------         -------
                                          10.8             36.5          (263.3)
                                        ------           ------         -------

 Comprehensive provision for
  income taxes allocable to:
   Net income                           $ 25.5           $ 11.7         $(250.4)
   Paid in capital                        -                -                 .2
   Other comprehensive income -
     pension liabilities                  (2.9)           (11.3)           (8.3)
                                        ------           ------         -------

                                        $ 22.6           $   .4         $(258.5)
                                        ======           ======         =======


     The  components  of the net deferred tax liability at December 31, 2003 and
2004, and changes in the deferred income tax valuation allowance during the past
three years,  are  summarized  in the  following  tables.  At December 31, 2003,
substantially  all  of the  deferred  tax  valuation  allowance  related  to tax
jurisdictions in Germany.





                                                                     December 31,
                                                  --------------------------------------------------
                                                            2003                      2004
                                                  ------------------------   -----------------------
                                                   Assets      Liabilities   Assets      Liabilities
                                                  -------     ------------   ------      -----------
                                                                      (In millions)
 Tax effect of temporary differences
  related to:
                                                                              
   Inventories                                    $  1.5       $  (4.1)       $  2.0      $  (5.4)
   Property and equipment                           46.0         (62.7)         37.7        (62.4)
   Accrued Postretirement benefits
     other than pension ("OPEB") costs               4.3            -            4.2           -
   Accrued (prepaid) pension cost                   15.9         (33.5)         22.4        (40.4)
   Other accrued liabilities and
     deductible differences                         19.8            -           52.9           -
   Other taxable differences                          -          (71.3)           -         (49.8)
 Investments in subsidiaries and
   affiliates not members of
   the Contran Tax Group                              -             -            1.9           -
 Tax on unremitted earnings of
   non-U.S. subsidiaries                              -           (4.3)           -          (4.5)
 Tax loss and tax credit carryforwards             137.3            -          218.1           -
 Valuation allowance                              (162.7)           -             -            -
                                                  ------       -------        ------      -------
   Adjusted gross deferred tax assets
     (liabilities)                                  62.1        (175.9)        339.2       (162.5)
 Netting of items by tax jurisdiction              (52.7)         52.7         (99.7)        99.7
                                                  ------       -------        ------      -------
                                                     9.4        (123.2)        239.5        (62.8)
 Less net current deferred tax
   asset (liability)                                 2.8          (3.4)          1.2         (2.7)
                                                  ------       -------        ------      -------

     Net noncurrent deferred tax asset
      (liability)                                 $  6.6       $(119.8)       $238.3      $ (60.1)
                                                  ======       =======        ======      =======



                                                             Years ended December 31,
                                                    -----------------------------------------
                                                     2002             2003            2004
                                                     ----             ----            ----
                                                                 (In millions)

Increase (decrease) in valuation allowance:
  Recognition of certain deductible tax
   attributes for which the benefit had not
   previously been recognized under the
                                                                           
   "more-likely-than-not" recognition criteria      $(1.8)         $  (6.7)         $(280.7)
  Foreign currency translation                       21.6             28.2             (3.0)
  Offset to the change in gross deferred
   income tax assets due principally to
   redeterminations of certain tax attributes
   and implementation of certain tax
   planning strategies                               12.2            (12.5)           121.0
                                                    -----          -------          -------

                                                    $32.0          $   9.0          $(162.7)
                                                    =====          =======          =======


     A reduction  in the Belgian  income tax rate from 40% to 34% was enacted in
December  2002 and became  effective  in January  2003.  This  reduction  in the
Belgian  income tax rate  resulted in a $2.3 million  decrease in the  Company's
income tax expense in 2002 because the Company had  previously  recognized a net
deferred income tax liability with respect to Belgian temporary differences.

     In the first quarter of 2003, KII was notified by the German Federal Fiscal
Court (the "Court") that the Court had ruled in the Company's favor concerning a
claim for refund  suit in which the Company  sought  refunds of prior taxes paid
during the periods 1990 through  1997.  KII and the Company's  German  operating
subsidiary  were  required  to file  amended  tax  returns  with the  German tax
authorities  in order to receive its  refunds  for such  years,  and all of such
amended  returns  were filed  during 2003.  Such  amended  returns  reflected an
aggregate  refund of taxes and related  interest to KII and its German operating
subsidiary of euro 26.9 million ($32.1 million),  and the Company recognized the
benefit  for these net funds in its 2003  results  of  operations.  For the year
ended December 31, 2004, the Company recognized a net refund of euro 2.5 million
($3.1  million)  related to  additional  net  interest  which has accrued on the
outstanding  refund amount.  Through December 2004, KII and its German operating
subsidiary  had received net refunds of euro 35.6  million  ($44.7  million when
received).  All refunds  relating to the periods  1990 to 1997 were  received by
December 31, 2004. In addition to the refunds for the 1990 to 1997 periods,  the
court ruling also  resulted in a refund of 1999 income taxes and  interest,  and
the Company received euro 21.5 million ($24.6 million) in 2003.

     Certain of the Company's  U.S. and non-U.S.  tax returns are being examined
and tax authorities have or may propose tax deficiencies,  including  non-income
related items and interest. For example:

o    The Company has received a preliminary tax assessment  related to 1993 from
     the Belgian tax authorities proposing tax deficiencies, including interest,
     of  approximately  euro 6 million ($8 million at December  31,  2004).  The
     Company  has  filed  a  protest  to this  assessment  and  believes  that a
     significant  portion of the  assessment is without  merit.  The Belgian tax
     authorities have filed a lien on the fixed assets of the Company's  Belgian
     TiO2  operations in connection  with this  assessment.  In April 2003,  the
     Company  received a notification  from the Belgian tax authorities of their
     intent to assess a tax deficiency related to 1999 that, including interest,
     is expected to be approximately  euro 9 million ($13 million).  The Company
     believes the proposed  assessment is  substantially  without merit, and the
     Company has filed a written response.

o    The Norwegian tax authorities  have notified the Company of their intent to
     assess tax deficiencies of  approximately  kroner 12 million ($2 million at
     December  31,  2004)  relating  to the years 1998 to 2000.  The Company has
     objected to this proposed assessment.

o    The Company has received a preliminary tax assessment from the Canadian tax
     authorities  related to the years 1998 and 1999 proposing tax  deficiencies
     of Cdn.  $11.4  million  ($7.7  million).  The Company is in the process of
     filing a protest and believes a  significant  portion of the  assessment is
     without merit.

     No  assurance  can be given that these tax matters  will be resolved in the
Company's  favor in view of the inherent  uncertainties  involved in  settlement
initiatives,  court  and  tax  proceedings.  The  Company  believes  that it has
provided  adequate  accruals for additional  taxes and related  interest expense
which may  ultimately  result from all such  examinations  and believes that the
ultimate  disposition of such  examinations  should not have a material  adverse
effect  on  its  consolidated  financial  position,  results  of  operations  or
liquidity.

     At December 31, 2003, Kronos had a significant amount of net operating loss
carryforwards for German corporate and trade tax purposes,  all of which have no
expiration date. These net operating loss  carryforwards  were generated by KII,
principally  during  the 1990's  when KII had a  significantly  higher  level of
outstanding indebtedness than is currently outstanding.  For financial reporting
purposes,  however, the benefit of such net operating loss carryforwards had not
previously  been  recognized  because  Kronos  did  not  believe  they  met  the
"more-likely-than-not"  recognition  criteria,  and  accordingly  Kronos  had  a
deferred income tax asset valuation allowance offsetting the benefit of such net
operating loss  carryforwards  and Kronos' other tax attributes in Germany.  KII
had generated  positive  taxable income in Germany for both German corporate and
trade tax purposes  since 2000, and starting with the quarter ended December 31,
2002 and for each  quarter  thereafter,  KII had  cumulative  taxable  income in
Germany for the most recent twelve quarters.  However,  offsetting this positive
evidence was the fact that prior to the end of 2003,  Kronos  believed there was
significant uncertainty regarding its ability to utilize such net operating loss
carryforwards  under German tax law and,  principally because of the uncertainty
caused by this  negative  evidence,  Kronos had concluded the benefit of the net
operating loss carryforwards did not meet the  "more-likely-than-not"  criteria.
By the end of 2003, and primarily as a result of a favorable German court ruling
in 2003 and the procedures  Kronos had completed during 2003 with respect to the
filing of certain  amended German tax returns (as discussed  below),  Kronos had
concluded that the significant uncertainty regarding its ability to utilize such
net  operating  loss  carryforwards  under  German tax law had been  eliminated.
However, at the end of 2003, Kronos believed at that time that it would generate
a taxable loss in Germany during 2004. Such expectation was based primarily upon
then-current   levels  of  prices  for  TiO2,  and  the  fact  that  Kronos  was
experiencing a downward trend in its TiO2 selling prices and Kronos did not have
any positive evidence to indicate that the downward trend would improve.  If the
price trend continued  downward  throughout all of 2004 (which was a possibility
given  Kronos'  prior  experience),  Kronos  would likely have a taxable loss in
Germany  for 2004.  If the  downward  trend in prices  had  abated,  ceased,  or
reversed at some point during 2004, then Kronos would likely have taxable income
in Germany during 2004. Accordingly,  Kronos continued to conclude at the end of
2003 that the benefit of the German net  operating  loss  carryforwards  did not
meet the "more-likely-than-not" criteria and that it would not be appropriate to
reverse the deferred income tax asset valuation allowance,  given the likelihood
that  Kronos  would  generate  a  taxable  loss  in  Germany  during  2004.  The
expectation for a taxable loss in Germany continued through the end of the first
quarter of 2004. By the end of the second quarter of 2004, however, Kronos' TiO2
selling prices had started to increase,  and Kronos  believed its selling prices
would  continue to increase  during the second half of 2004 after Kronos and its
major  competitors  announced an additional round of price  increases.  The fact
that Kronos'  selling  prices  started to increase  during the second quarter of
2004,  combined  with the fact that  Kronos and its  competitors  had  announced
additional price increases  (which based on past experience  indicated to Kronos
that some portion of the  additional  price  increases  would be realized in the
marketplace),  provided  additional  positive  evidence  that was not present at
December 31, 2003.  Consequently,  Kronos'  revised  projections  now  reflected
taxable  income for Germany in 2004 as well as 2005.  Accordingly,  based on all
available  evidence,  including  the fact  that (i) KII had  generated  positive
taxable  income in Germany  since 2000,  and  starting  with the  quarter  ended
December 31, 2002 and for each quarter  thereafter,  KII had cumulative  taxable
income in Germany  for the most  recent  twelve  quarters,  (ii)  Kronos was now
projecting  positive  taxable  income in Germany for 2004 and 2005 and (iii) the
German  net  operating  loss  carryforwards  have  no  expiration  date,  Kronos
concluded  that the benefit of the net operating  loss  carryforwards  and other
German tax attributes now met the  "more-likely-than-not"  recognition criteria,
and that reversal of the deferred income tax asset valuation  allowance  related
to Germany was appropriate. Given the magnitude of the German net operating loss
carryforwards  and the fact that  current  provisions  of  German  law limit the
annual  utilization of net operating loss carryforwards to 60% of taxable income
after the first euro 1 million of taxable  income,  Kronos believes it will take
several years to fully utilize the benefit of such loss carryforwards.  However,
given the number of years for which Kronos has now  generated  positive  taxable
income  in  Germany,  combined  with  the  fact  that  the  net  operating  loss
carryforwards  were generated during a time when KII had a significantly  higher
level of outstanding  indebtednesss  than it currently has outstanding,  and the
fact that the net operating loss  carryforwards  have no expiration date, Kronos
concluded  it was now  appropriate  to reverse  all of the  valuation  allowance
related to the net  operating  loss  carryforwards  because  the benefit of such
operating loss  carryforwards  now meet the  "more-likely-than-not"  recognition
criteria.  Under  applicable  GAAP  related to  accounting  from income taxes at
interim  periods,  a change in  estimate  at an interim  period  resulting  in a
decrease in the  valuation  allowance is  segregated  into two  components,  the
portion  related to the  remaining  interim  periods of the current year and the
portion  related to all future  years.  The portion of the  valuation  allowance
reversal related to the former is recognized over the remaining  interim periods
of the current year, and the portion of the valuation  allowance  related to the
latter is  recognized  at the time the change in estimate is made.  Accordingly,
Kronos has recognized a $280.7 million income tax benefit in 2004 related to the
complete  reversal  of  such  deferred  income  tax  asset  valuation  allowance
attributable  to Kronos' income tax attributes in Germany  (principally  the net
operating loss carryforwards).  Of such $280.7 million, (i) $8.7 million relates
primarily to the  utilization  of the German net  operating  loss  carryforwards
during the first six months of 2004, the benefit of which had previously not met
the "more-likely-than-not"  recognition criteria, (ii) $268.6 million relates to
the valuation  allowance reversal  recognized as of June 30, 2004 and (iii) $3.4
million relates to the valuation  allowance reversal  recognized during the last
six months of 2004.

     At December 31, 2004,  Kronos had the  equivalent  of $671 million and $232
million of net operating loss  carryforwards  for German corporate and trade tax
purposes, respectively, all of which have no expiration date.

     In October  2004,  the American  Jobs Creation Act of 2004 was enacted into
law.  The new law  contains  several  provisions  that could impact the Company.
These provisions  provide for, among other things, a special deduction from U.S.
taxable  income  equal to a  stipulated  percentage  of  qualified  income  from
domestic production activities (as defined) beginning in 2005, and a special 85%
dividends  received  deduction for certain  dividends  received from  controlled
foreign  corporations.  Both of these  provisions  are  complex  and  subject to
numerous  limitations.  The Company is still studying the new law, including the
technical  provisions  related to the two complex  provisions  noted above.  The
effect on the Company of the new law, if any,  has not yet been  determined,  in
part because the Company has not definitively  determined whether its operations
qualify for the special  deduction or whether it would  benefit from the special
dividends  received  deduction.  If the Company  determines it qualifies for the
special deduction, the tax benefit of such special deduction would be recognized
in the period earned.  With respect to the special dividends  received deduction
for certain dividends received from controlled foreign corporations, the Company
will likely not be able to complete its  evaluation  of whether it would benefit
from the special  dividends  received  deduction  until  sometime after the U.S.
government  has issued  clarifying  regulations  regarding this provision of the
Act, the timing for the issuance of which is not known.  The aggregate amount of
unremitted  earnings  that  is  potentially  subject  to the  special  dividends
received  deduction is  approximately  $638  million at December  31, 2004.  The
Company is unable to  reasonably  estimate a range of income tax effects if such
unremitted  earnings  would be repatriated  and become  eligible for the special
dividends received deduction, as the calculation would be extremely complex.

Note 14 - Employee benefit plans:

     Defined  benefit  plans.  The Company  maintains  various  defined  benefit
pension  plans.  Non-U.S.  employees  are  covered by plans in their  respective
countries  and a majority of U.S.  employees  are eligible to  participate  in a
contributory  savings plan. Variances from actuarially assumed rates will result
in increases or decreases in accumulated  pension  obligations,  pension expense
and funding  requirements in future  periods.  At December 31, 2004, the Company
currently  expects to contribute the equivalent of  approximately  $9 million to
all of its defined benefit pension plans during 2005.

     The funded status of the  Company's  defined  benefit  pension  plans,  the
components of net periodic  defined  benefit  pension cost and the rates used in
determining the actuarial present value of benefit  obligations are presented in
the tables below.  The Company uses a September  30th  measurement  date for its
defined benefit pension plans.





                                                                Years ended December 31,
                                                               -------------------------
                                                                 2003              2004
                                                                 ----              ----
                                                                     (In thousands)
 Change in projected benefit obligations ("PBO"):
                                                                         
   Benefit obligations at beginning of the year               $ 254,459        $ 325,960
   Service cost                                                   5,127            6,758
   Interest cost                                                 15,373           17,403
   Participant contributions                                      1,346            1,409
   Plan amendments                                                3,200                -
   Actuarial losses                                              21,919            5,176
   Change in foreign exchange rates                              42,770           30,163
   Benefits paid                                                (18,234)         (18,006)
                                                              ---------        ---------

       Benefit obligations at end of the year                 $ 325,960        $ 368,863
                                                              =========        =========

 Change in plan assets:
   Fair value of plan assets at beginning of the year         $ 189,936        $ 203,284
   Actual return on plan assets                                 (10,249)          19,126
   Employer contributions                                        13,586           17,089
   Participant contributions                                      1,346            1,409
   Change in foreign exchange rates                              26,899           19,571
   Benefits paid                                                (18,234)         (18,006)
                                                              ---------        ---------

       Fair value of plan assets at end of year               $ 203,284        $ 242,473
                                                              =========        =========

 Funded status at end of the year:
   Plan assets less than PBO                                  $(122,676)       $(126,390)
   Unrecognized actuarial losses                                115,807          125,221
   Unrecognized prior service cost                                8,566            8,757
   Unrecognized net transition obligations                        5,275            5,019
                                                              ---------        ---------

                                                               $  6,972        $  12,607
                                                              =========        =========
 Amounts recognized in the balance sheet:
   Unrecognized net pension obligations                        $ 13,747        $  13,518
   Accrued pension costs:
     Current                                                     (7,987)          (8,696)
     Noncurrent                                                 (68,161)         (61,375)
   Accumulated other comprehensive income                        69,373           69,160
                                                              ---------        ---------

                                                               $  6,972        $  12,607
                                                              =========        =========



                                                            Years ended December 31,
                                                   -----------------------------------------
                                                     2002             2003            2004
                                                     ----             ----            ----
                                                                (In thousands)

 Net periodic pension cost:
                                                                          
   Service cost benefits                          $  4,278         $  5,127        $  6,758
   Interest cost on PBO                             13,641           15,373          17,403
   Expected return on plan assets                  (12,778)         (14,529)        (15,240)
   Amortization of prior service cost                  307              354             569
   Amortization of net transition obligations          570              793             657
   Recognized actuarial losses                       1,126            1,245           3,015
                                                  --------         --------        --------

                                                  $  7,144         $  8,363        $ 13,162
                                                  ========         ========        ========


     The  weighted-average  rate  assumptions  used in determining the actuarial
present  value of  benefit  obligations  as of  December  31,  2003 and 2004 are
presented in the table below. Such weighted-average  rates were determined using
the projected benefit obligations at each date.





                                                                  December 31,
                                                           ------------------------
                                                           2003                2004
                                                           ----                ----

                                                                         
Discount rate                                              5.5%                5.2%
Increase in future compensation levels                     2.8%                2.8%


     The weighted-average  rate assumptions used in determining the net periodic
pension  cost for 2002,  2003 and 2004 are  presented  in the table  below.  The
weighted-average  discount  rate and the  weighted-average  increase  in  future
compensation  levels were determined using the projected benefit  obligations as
of the beginning of each year, and the weighted-average long-term return on plan
assets was determined using the fair value of plan assets as of the beginning of
each year.


                                                                   December 31,
                                                     ----------------------------------------
                                                     2002              2003              2004
                                                     ----              ----              ----

                                                                                
Discount rate                                        6.2%              5.9%              5.5%
Increase in future compensation levels               2.8%              2.6%              2.8%
Long-term return on plan assets                      7.5%              7.2%              7.1%


     As of December  31,  2004,  the  accumulated  benefit  obligations  for all
defined  benefit  pension  plans was  approximately  $317  million  (2003 - $290
million).  At December 31,  2004,  the  projected  benefit  obligations  for all
defined benefit pension plans was comprised of $14 million related to U.S. plans
and $355 million related to non-U.S. plans (2003 - $13 million and $313 million,
respectively).

     At December 31, 2004, the fair value of plan assets for all defined benefit
pension  plans was  comprised  of $13  million  related  to U.S.  plans and $230
million  related  to  non-U.S.  plans  (2003 - $11  million  and  $192  million,
respectively).

     Selected information related to the Company's defined benefit pension plans
that have accumulated benefit obligations in excess of fair value of plan assets
is presented below. At December 31, 2003 and 2004, 96% and 95%, respectively, of
the projected benefit obligations of such plans relate to non-U.S. plans.


                                                                  December 31,
                                                           ------------------------
                                                           2003                2004
                                                           ----                ----
                                                                (In thousands)

                                                                       
   Projected benefit obligation                          $325,960            $368,863
   Accumulated benefit obligation                         290,287             316,602
   Fair value of plan assets:
     U.S. plans                                            10,866              12,694
     Non U.S. plans                                       192,418             229,779


     In  determining  the  expected  long-term  rate of  return  on  plan  asset
assumptions,  the Company  considers  the long-term  asset mix (e.g.  equity vs.
fixed  income) for the assets for each of its plans and the  expected  long-term
rates of return for such asset  components.  In addition,  the Company  receives
advice  about   appropriate   long-term  rates  of  return  from  the  Company's
third-party actuaries. Such assumed asset mixes are summarized below:

o    In Germany,  the composition of the Company's plan assets is established to
     satisfy the requirements of the German insurance commissioner.  The current
     plan asset allocation at December 31, 2004 was 23% to equity managers,  48%
     to fixed income managers and 29% to real estate.

o    In Canada,  the Company currently has a plan asset target allocation of 65%
     to equity  managers  and 35% to fixed  income  managers,  with an  expected
     long-term rate of return for such investments to average  approximately 125
     basis points above the applicable equity or fixed income index. The current
     plan asset  allocation at December 31, 2004 was 60% to equity  managers and
     40% to fixed income managers.

o    In Norway,  the Company currently has a plan asset target allocation of 14%
     to  equity  managers,  62% to  fixed  income  managers  and  the  remainder
     primarily  to  liquid  investments  such as  money  markets.  The  expected
     long-term rate of return for such investments is approximately  8%, 4.5% to
     6.5% and 2.5%, respectively.  The current plan asset allocation at December
     31, 2004 was 16% to equity  managers,  64% to fixed income managers and the
     remainder primarily to cash and liquid investments.

     The Company  regularly  reviews its actual asset allocation for each of its
plans,  and will  periodically  rebalance the  investments  in each plan to more
accurately reflect the targeted allocation when considered appropriate.

     At December 31, 2003 and 2004, all of the assets attributable to U.S. plans
were invested in The Combined Master  Retirement  Trust  ("CMRT"),  a collective
investment  trust  established by Valhi to permit the  collective  investment by
certain  master trusts which fund certain  employee  benefit plans  sponsored by
Contran and certain of its affiliates.

     At  December  31,  2004,  the asset mix of the CMRT was 77% in U.S.  equity
securities,  14% in U.S. fixed income  securities,  7% in  international  equity
securities and 2% in cash and other investments. At December 31, 2003, the asset
mix of  CMRT  was 63% in  U.S.  equity  securities,  24% in  U.S.  fixed  income
securities,  7% in  international  equity  securities  and 6% in cash and  other
investments.

     The CMRT's  long-term  investment  objective is to provide a rate of return
exceeding a composite of broad market equity and fixed income indices (including
the S&P 500 and certain Russell indices)  utilizing both third-party  investment
managers as well as  investments  directed by Mr. Harold C. Simmons.  Mr. Harold
Simmons is the sole trustee of the CMRT. The trustee of the CMRT, along with the
CMRT's investment committee,  of which Mr. Simmons is a member,  actively manage
the  investments  of the CMRT.  Such  parties  have in the past,  and may in the
future,  periodically  change the asset mix of the CMRT based upon,  among other
things,  advice they receive from third-party advisors and their expectations as
to what asset mix will generate the greatest overall return.  For the year ended
December 31, 2004, the assumed long-term rate of return for plan assets invested
in the CMRT was 10%. In determining the  appropriateness  of such long-term rate
of return assumption, the Company considered, among other things, the historical
rates of return for the CMRT,  the current and  projected  asset mix of the CMRT
and the investment objectives of the CMRT's managers. During the 17-year history
of the CMRT from its  inception in 1987 through  December 31, 2004,  the average
annual rate of return has been 13%.

     The Company  expects future  benefits paid from all defined benefit pension
plans are as follows:


                                                          Amount
 Years ending December 31,                            (In thousands)
 -------------------------                            --------------

                                                   
     2005                                                $ 18,232
     2006                                                  19,718
     2007                                                  18,842
     2008                                                  20,766
     2009                                                  19,667
     2010 to 2014                                         109,731



     Defined   contribution   plans.  The  Company   maintains  various  defined
contribution pension plans with Company contributions based on matching or other
formulas.  Defined  contribution plan expense  approximated $.4 million in 2002,
$.5 million in 2003 and $.4 million in 2004.

     Postretirement  benefits  other than  pensions.  In addition  to  providing
pension benefits,  the Company  currently  provides certain health care and life
insurance  benefits for eligible  retired  employees.  Certain of the  Company's
Canadian employees may become eligible for such  postretirement  health care and
life  insurance  benefits  if they reach  retirement  age while  working for the
Company.  In 1989 the Company  began  phasing out such  benefits for active U.S.
employees over a ten-year period and U.S.  employees retiring after 1998 are not
entitled to any such  benefits.  The  majority of all  retirees  are required to
contribute  a portion of the cost of their  benefits  and  certain  current  and
future  retirees are eligible  for reduced  health care  benefits at age 65. The
Company's  policy is to fund  medical  claims as they are  incurred,  net of any
contributions by the retiree.

     The components of the periodic OPEB cost and accumulated  OPEB  obligations
and the  rates  used in  determining  the  actuarial  present  value of  benefit
obligations    are   presented   in   the   tables   below.    Variances    from
actuarially-assumed  rates will result in  additional  increases or decreases in
accumulated OPEB obligations, net periodic OPEB cost and funding requirements in
future  periods.  At December 31, 2004,  the expected rate of increase in future
healthcare  costs is 8% to 9% in 2005,  declining to 5.5% in 2009 and thereafter
for U.S. plans and declining to 5% in 2008 and  thereafter  for Canadian  plans.
(In 2003, the expected rate of increase in future  healthcare  costs ranged from
8% to 10% in 2004 declining to 5.5% in 2009 and  thereafter.)  If the healthcare
cost trend rate was increased (decreased) by one percentage point for each year,
OPEB expense would have  increased by $.1 million  (decreased by $.1 million) in
2004,  and the  actuarial  present  value of  accumulated  OPEB  obligations  at
December  31,  2004 would  have  increased  by $1.1  million  (decreased  by $.9
million).  At December 31, 2004, the Company currently expects to contribute the
equivalent of  approximately  $800,000 to all of its OPEB plans during 2005, and
aggregate  benefit  payments to OPEB plan  participants  are  expected to be the
equivalent of approximately $800,000 in 2005, $700,000 in each of 2006, 2007 and
2008, $600,000 in 2009 and $2.6 million during 2010 through 2014.






                                                                Years ended December 31,
                                                               -------------------------
                                                                 2003              2004
                                                                 ----              ----
                                                                     (In thousands)

 Change in accumulated OPEB obligations:
                                                                          
   Obligations at beginning of the year                        $  10,533        $  12,661
   Service cost                                                      152              232
   Interest cost                                                     684              724
   Actuarial losses (gains)                                        1,434           (1,215)
   Plan amendments                                                     -           (1,318)
   Change in foreign exchange rates                                  772              411
   Benefits paid - Company funds                                    (914)            (975)
                                                               ---------        ---------

   Obligations at end of the year                              $  12,661        $  10,520
                                                               =========        =========

 Change in plan assets:
   Employer contributions                                      $     914        $     975
   Benefits paid                                                    (914)            (975)
                                                               ---------        ---------

   Fair value of plan assets at end of the year                $    -           $    -
                                                               =========        =========

 Funded status at end of the year:
   Plan assets less than benefit obligations                   $ (12,661)       $ (10,520)
   Unrecognized net actuarial losses                               1,356              143
   Unrecognized prior service credit                              (1,170)          (1,850)
                                                               ---------        ---------

                                                               $ (12,475)       $ (12,227)
                                                               =========        =========

 Accrued OPEB costs recognized in the balance sheet:
   Current                                                     $   1,299        $     939
   Noncurrent                                                     11,176           11,288
                                                               ---------        ---------

                                                               $  12,475        $  12,227
                                                               =========        =========




                                                            Years ended December 31,
                                                   -----------------------------------------
                                                     2002             2003            2004
                                                     ----             ----            ----
                                                                (In thousands)

 Net periodic OPEB cost (credit):
                                                                          
   Service cost                                    $   103          $   152        $   232
   Interest cost                                       660              684            724
   Amortization of prior service credit             (1,055)          (1,055)          (638)
   Recognized actuarial losses                          27               86            137
                                                   -------          -------        -------

                                                   $  (265)         $  (133)       $   455
                                                   =======          =======        =======




     The  weighted  average  discount  rate used in  determining  the  actuarial
present  value of benefit  obligations  as of December 31, 2004 was 5.7% (2003 -
5.9%).  Such weighted  average rate was determined  using the projected  benefit
obligation  as of  such  dates.  The  impact  of  assumed  increases  in  future
compensation  levels does not have a material  effect on the  actuarial  present
value of the benefit  obligation as  substantially  all of such benefits  relate
solely to eligible retirees, for which compensation is not applicable.

     The weighted  average  discount rate used in  determining  the net periodic
OPEB cost for 2004 was 5.9% (2003 - 6.5%;  2002 - 7.0%).  Such weighted  average
rate was determined using the projected  benefit  obligation as of the beginning
of each year. The impact of assumed increases in future compensation levels does
not have a material effect on the net periodic OPEB cost as substantially all of
such benefits relate solely to eligible retirees,  for which compensation is not
applicable.  The impact of assumed  rate of return on plan  assets also does not
have a  material  affect on the net  periodic  OPEB  cost as there  were no plan
assets as of December 31, 2003 or 2004.

     As of December 31, 2004,  the  accumulated  OPEB  obligations  for all OPEB
plans was  approximately  $10.5 million (2003 - $12.7 million).  At December 31,
2004, the accumulated  OPEB obligations for all OPEB plans was comprised of $5.1
million related to U.S. plans and $5.4 million related to the Company's Canadian
plans (2003 - $7.1 million and $5.6 million,  respectively).  The Company uses a
September 30th measurement date for their OPEB plans.

     The Medicare  Prescription Drug,  Improvement and Modernization Act of 2003
(the "Medicare 2003 Act") introduced a prescription  drug benefit under Medicare
(Medicare  Part D) as well as a federal  subsidy to sponsors  of retiree  health
care  benefit  plans  that  provide  a  benefit  that  is at  least  actuarially
equivalent  to Medicare  Part D. During the third  quarter of 2004,  the Company
determined that benefits provided by its plan are actuarially  equivalent to the
Medicare  Part D benefit and  therefore  the Company is eligible for the federal
subsidy provided for by the Medicare 2003 Act. The effect of such subsidy, which
is  accounted  for  prospectively  from  the  date  actuarial   equivalence  was
determined,  as  permitted  by and in  accordance  with FASB Staff  Position No.
106-2, did not have a material impact on the accumulated  postretirement benefit
obligation,  and will not have a material  impact on the net periodic  OPEB cost
going forward.

Note 15 - 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 other than as set forth in these financial  statements,  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.

     Current  receivables  from and payables to affiliates are summarized in the
table below.





                                                                       December 31,
                                                               -------------------------
                                                                 2003              2004
                                                                 ----              ----
                                                                     (In thousands)
 Current receivables from affiliate:
   NL:
                                                                          
    Income taxes                                               $ 1,209          $  -
    Other                                                         -                  16
                                                               -------          -------

                                                               $ 1,209          $    16
                                                               =======          =======

 Current payables to affiliates:
     NL                                                        $   359          $  -
     Income taxes payable to Valhi                                   -              387
     LPC                                                         8,560            8,844
                                                               -------          -------

                                                               $ 8,919          $ 9,231
                                                               =======          =======


     Amounts  payable to LPC are generally for the purchase of TiO2 (see Note 6)
and amounts payable to NL principally  related to accrued  interest on affiliate
loans.  Purchases of TiO2 from LPC were $92.4 million in 2002, $101.3 million in
2003 and $104.8 million in 2004.

     From time to time,  loans and  advances  are made  between  the Company and
various  related  parties  pursuant  to term and demand  notes.  These loans and
advances are entered into  principally  for cash management  purposes.  When the
Company loans funds to related  parties,  the lender is generally able to earn a
higher  rate of return on the loan than the lender  would earn if the funds were
invested in other  instruments.  While  certain of such loans may be of a lesser
credit  quality  than cash  equivalent  instruments  otherwise  available to the
Company,  the Company  believes that it has evaluated the credit risks involved,
and that those risks are reasonable and reflected in the terms of the applicable
loans. When the Company borrows from related parties,  the borrower is generally
able to pay a lower rate of interest than the borrower  would pay if it borrowed
from other parties.  In addition,  certain loans to and from affiliates not made
for cash management purposes are discussed in Notes 10 and 11.

     Interest  income  on  all  loans  to  related  parties,  including  amounts
discussed in Notes 10 and 11, was $20.8  million in 2002 and $.7 million in 2003
and nil in 2004.  Interest expense on all loans from related parties,  including
amounts  discussed in Note 10, was $12.3  million in 2002,  $1.9 million in 2003
and $15.2 million in 2004.

     Under the terms of  various  intercorporate  services  agreements  ("ISAs")
entered into between the Company and various related  parties,  employees of one
company  will  provide   certain   management,   tax  planning,   financial  and
administrative  services to the other  company on a fee basis.  Such charges are
based upon estimates of the time devoted by the employees of the provider of the
services to the affairs of the recipient,  and the  compensation  and associated
expenses of such  persons.  Because of the large number of companies  affiliated
with  Contran and NL, the Company  believes  it benefits  from cost  savings and
economies  of scale  gained by not  having  certain  management,  financial  and
administrative   staffs  duplicated  at  each  entity,   thus  allowing  certain
individuals to provide services to multiple companies but only be compensated by
one entity.  The net ISA fee charged to the Company was $3.7  million in each of
2002 and 2003 and $4.4 million in 2004.

     Tall Pines Insurance Company,  Valmont Insurance Company (which merged into
Tall Pines in December 2004,  with Tall Pines  surviving the merger) and EWI RE,
Inc. provide for or broker certain insurance policies for Contran and certain of
its  subsidiaries  and  affiliates,   including  the  Company.   Tall  Pines  is
wholly-owned by a subsidiary of Valhi,  and EWI is a wholly-owned  subsidiary of
NL. Consistent with insurance industry  practices,  Tall Pines,  Valmont and EWI
receive  commissions  from the insurance and  reinsurance  underwriters  for the
policies that they provide or broker. The aggregate premiums paid to Tall Pines,
Valmont and EWI by the Company and its joint venture were $10.1 million in 2002,
$7.2  million  in 2003  and $7.7  million  in 2004.  These  amounts  principally
included payments for insurance and reinsurance  premiums paid to third parties,
but also included  commissions paid to Tall Pines,  Valmont and EWI. The Company
expects that these relationships with Tall Pines and EWI will continue in 2005.

     Contran and  certain of its  subsidiaries  and  affiliates,  including  the
Company, purchase certain of their insurance policies as a group, with the costs
of  the  jointly-owned   policies  being  apportioned  among  the  participating
companies.  With  respect to  certain  of such  policies,  it is  possible  that
unusually  large losses  incurred by one or more insureds  during a given policy
period could leave the other  participating  companies without adequate coverage
under that policy for the balance of the policy period. As a result, Contran and
certain of its subsidiaries and affiliates,  including the Company, have entered
into a loss sharing  agreement under which any uninsured loss is shared by those
entities  who have  submitted  claims  under the  relevant  policy.  The Company
believes  the  benefits in the form of reduced  premiums  and  broader  coverage
associated  with  the  group  coverage  for  such  policies  justifies  the risk
associated with the potential for any uninsured loss.

     During  2002,  NL and an officer of both the Company and NL entered into an
agreement  whereby stock options held by the officer to purchase an aggregate of
160,400 shares of NL's common stock were  exercised or canceled for value.  On a
net basis, NL made aggregate cash payments to the officer of  approximately  $.7
million,  and NL charged the Company an equivalent amount for stock compensation
expense. See Note 1.

     In January 2002, the Company  acquired EWI for an aggregate  purchase price
of $9.2  million.  An entity  contolled by one of Harold C.  Simmons'  daughters
owned a majority of EWI,  and a  wholly-owned  subsidiary  of Contran  owned the
remainder of EWI. In June 2003 the Company  distributed EWI to NL in the form of
a noncash dividend. The Company accounted for the distribution of EWI to NL as a
change  in  accounting  entity,  and  accordingly  the  Company's   consolidated
financial  statements  have been  retroactively  restated to exclude the assets,
liabilities,  results  of  operations  and  cash  flows  of EWI for all  periods
presented since the January 2002 acquisiton. Reflected as part of "other capital
transactions with affiliates,  net" in the accompanying  Consolidated Statements
of Cash Flows is such $9.2 million purchase price.

Note 16 - Commitments and contingencies:

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

     Litigation matters. Kronos' Belgian subsidiary and certain of its employees
are the subject of civil and criminal  proceedings  relating to an accident that
resulted in two  fatalities  at the Company's  Belgian  facility in 2000. In May
2004,  the court ruled and,  among other things,  imposed a fine of euro 200,000
against  Kronos and fines  aggregating  less than euro  40,000  against  various
Kronos employees. Kronos and the individual employees have appealed the ruling.

     In  addition  to the  litigation  described  above,  the  Company  and  its
affiliates  are also  involved  in  various  other  environmental,  contractual,
product  liability,  patent (or  intellectual  property),  employment  and other
claims and disputes incidental to its present and former businesses.

     Kronos  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 condition, results of operations or liquidity.

     Concentrations of credit risk. Sales of TiO2 accounted for more than 90% of
net sales from continuing  operations  during each of the past three years.  The
remaining  sales result from the mining and sale of ilmenite ore (a raw material
used in the sulfate pigment production process), and the manufacture and sale of
iron-based  water treatment  chemicals and certain  titanium  chemical  products
(derived from co-products of the TiO2 production  processes).  TiO2 is generally
sold to the paint,  plastics and paper  industries.  Such markets are  generally
considered  "quality-of-life" markets whose demand for TiO2 is influenced by the
relative economic well-being of the various geographic regions.  TiO2 is sold to
over 4,000 customers,  with the top ten customers approximating 25% of net sales
in each of the last  three  years.  By  volume,  approximately  one-half  of the
Company's  TiO2  sales  were to  Europe  in each of the  past  three  years  and
approximately  39% of  sales  in  2002,  40%  in  2003  and  38%  in  2004  were
attributable to North America.

     At December 31, 2004,  consolidated  cash, cash  equivalents and restricted
cash includes $38.1 million invested in U.S. Treasury securities purchased under
short-term agreements to resell (2003 - $13.7 million).

     Capital  expenditures.  At December 31, 2004 the estimated cost to complete
capital projects in process approximated $6.7 million.

     Long-term  contracts.  The  Company has  long-term  supply  contracts  that
provide  for  the  Company's  TiO2  feedstock  requirements  through  2009.  The
agreements  require  the  Company to  purchase  certain  minimum  quantities  of
feedstock  with minimum  purchase  commitments  aggregating  approximately  $525
million at December 31, 2004.

     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.  Rent  for  the  Leverkusen  facility  is  periodically
established  by agreement with the lessor for periods of at least two years at a
time.  Under a separate  supplies and services  agreement  expiring in 2011, the
lessor  provides  some raw  materials,  auxiliary  and  operating  materials and
utilities services necessary to operate the Leverkusen facility.  Both the lease
and the supplies  and  services  agreements  restrict  ownership  and use of the
Leverkusen facility.

     The  Company  also  leases  various  other  manufacturing   facilities  and
equipment.  Some of the leases  contain  purchase  and/or  various  term renewal
options at fair market and fair rental values,  respectively.  In most cases the
Company  expects  that,  in the normal  course of business,  such leases will be
renewed or replaced by other leases.  Net rent expense  approximated $10 million
in 2002,  $12 million in 2003 and $11 million in 2004.  At  December  31,  2004,
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,                                Amount
 -------------------------                            --------------
                                                      (In thousands)

   2005                                                  $ 4,759
   2006                                                    3,359
   2007                                                    2,968
   2008                                                    2,524
   2009                                                    1,961
   2010 and thereafter                                    21,133
                                                         -------

                                                         $36,704
                                                         =======

     Approximately  $25.3 million of the $36.7 million  aggregate future minimum
rental  commitments  at December  31, 2004 relates to the  Company's  Leverkusen
facility lease discussed  above. The minimum  commitment  amounts for such lease
included in the table above for each year  through  the 2050  expiration  of the
lease are based upon the current annual rental rate as of December 31, 2004.

Note 17 - Financial instruments:

     Summarized below is the estimated fair value and related net carrying value
of the Company's financial instruments.


                                                     December 31,                December 31,
                                                         2003                        2004
                                              --------------------------   -------------------------
                                                Carrying        Fair         Carrying       Fair
                                                 amount        value          amount        value
                                               ----------    ----------     ----------   ----------
                                                                  (In millions)
Cash, cash equivalents, restricted
   cash and noncurrent restricted
                                                                              
   marketable debt securities                   $  59.8       $   59.8        $ 65.2      $   65.2

Notes payable and long-term debt:
  Fixed rate with market quotes -
    8.875% Senior Secured Notes                 $ 356.1       $  356.1        $519.2      $  549.1
  Variable rate debt                            $   -         $     -         $ 13.6      $   13.6
  Other fixed rate debt                         $    .6       $     .6        $   .4      $     .4
  Note payable to affiliate                     $ 200.0            *          $   -       $     -
Common stockholders' equity                     $ 159.4       $1,086.5        $470.8      $1,994.6


____________________________________

*    Due to the related party nature of the Company's  long-term note payable to
     NL, it is not practicable,  without incurring substantial cost, to estimate
     the fair value of such indebtedness.

     Fair value of the Company's  restricted  marketable  debt  securities,  the
Notes and the fair value of the Company's common stockholders' equity, are based
upon quoted market prices at each balance sheet date.

     At December  31, 2003,  the Company had entered into a short-term  currency
forward  contract  maturing  January 2, 2004 to exchange an aggregate of euro 40
million for an  equivalent  amount of U.S.  dollars at an exchange  rate of U.S.
$1.25 per euro.  Such contract was entered into in conjunction  with the January
2004 payment of an  intercompany  dividend  from one of the  Company's  European
subsidiaries.  At December 31, 2003, the actual exchange rate was U.S. $1.25 per
euro.  The  estimated  fair  value of such  foreign  currency  contract  was not
material at December 31, 2003. The Company held no other significant  derivative
financial instruments at December 31, 2003 or 2004. See Note 1.

Note 18 - Accounting principles newly adopted in 2002, 2003 and 2004:

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

     Asset retirement obligations. The Company adopted SFAS No. 143, "Accounting
for Asset  Retirement  Obligations," on January 1, 2003. Under SFAS No. 143, the
fair value of a liability for an asset retirement  obligation  covered under the
scope of SFAS No.  143 is  recognized  in the period in which the  liability  is
incurred,  with an  offsetting  increase in the  carrying  amount of the related
long-lived  asset.  Over time,  the  liability  would be  accreted to its future
value,  and the  capitalized  cost is  depreciated  over the useful  life of the
related asset.  Upon  settlement of the liability,  an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement.

     Under the transition provisions of SFAS No. 143, at the date of adoption on
January 1, 2003 the Company  recognized (i) an asset retirement cost capitalized
as an increase to the carrying value of its property, plant and equipment,  (ii)
accumulated  depreciation on such capitalized cost and (iii) a liability for the
asset retirement  obligation.  Amounts resulting from the initial application of
SFAS No. 143 are measured using information,  assumptions and interest rates all
as of January 1, 2003.  The amount  recognized as the asset  retirement  cost is
measured as of the date the asset retirement obligation was incurred. Cumulative
accretion on the asset retirement  obligation,  and accumulated  depreciation on
the asset  retirement  cost, is recognized for the time period from the date the
asset  retirement  cost  and  liability  would  have  been  recognized  had  the
provisions  of SFAS  No.  143 been in  effect  at the  date  the  liability  was
incurred,  through January 1, 2003. The difference,  if any, between the amounts
to be recognized as described above and any associated amounts recognized in the
Company's  balance  sheet as of December 31, 2002 is  recognized as a cumulative
effect of a change in  accounting  principles  as of the date of  adoption.  The
effect of  adopting  SFAS No.  143 as of January  1, 2003 was not  material,  as
summarized  in  the  table  below,  and  is  not  separately  recognized  in the
accompanying Statement of Income.





                                                                              Amount
                                                                             --------
                                                                           (in millions)

Increase in carrying value of net property, plant and equipment:
                                                                           
  Cost                                                                        $  .4
  Accumulated depreciation                                                      (.1)
Decrease in carrying value of previously-accrued closure and
 post-closure activities                                                         .3
Asset retirement obligation recognized                                          (.6)
                                                                              -----

  Net impact                                                                  $  -
                                                                              =====


     The  increase  in the asset  retirement  obligations  from  January 1, 2003
($600,000) to December 31, 2003 ($800,000) and to December 31, 2004 ($1 million)
is due primarily to accretion  expense and the effects of currency  translation.
Accretion  expense,  which is reported  as a  component  of cost of sales in the
accompanying  Consolidated Statements of Income,  approximated $100,000 for each
of the years ended December 31, 2003 and 2004.

     Estimates of the ultimate cost to be incurred to settle the Company's asset
retirement obligations require a number of assumptions, are inherently difficult
to develop  and the  ultimate  outcome  may differ from  current  estimates.  As
additional  information  becomes  available,  cost estimates will be adjusted as
necessary.  It  is  possible  that  technological,   regulatory  or  enforcement
developments,  the results of studies or other  factors  could  necessitate  the
recording of additional liabilities.

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

     Variable  interest  entities.  The Company complied with the  consolidation
requirements of FASB Interpretation ("FIN") No. 46R,  "Consolidation of Variable
Interest Entities, an interpretation of ARB No. 51," as amended, as of March 31,
2004.  The Company  does not have any  involvement  with any  variable  interest
entity (as that term is defined in FIN No. 46R)  covered by the scope of FIN No.
46R that would require the Company to consolidate  such entity under FIN No. 46R
which had not  already  been  consolidated  under  prior  applicable  GAAP,  and
therefore the impact to the Company of adopting the  consolidation  requirements
of FIN No. 46R was not material.




Note 19 -         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, 2003
                                                                                  
   Net sales                                   $253.0          $ 266.6        $242.9          $245.7
   Cost of sales                                188.4            197.6         177.4           175.8
     Net income                                $ 16.7          $  41.8        $ 15.9          $ 13.1

 Basic and diluted earnings
   per common share                            $  .34          $   .85        $  .33          $  .27

 Year ended December 31, 2004
   Net sales                                   $263.3          $ 295.8        $286.0          $283.5
   Cost of sales                                202.2            227.5         219.4           217.2
     Net income                                $  9.8          $ 284.8        $ 10.1          $ 10.2

 Basic and diluted earnings per common share   $  .20          $  5.82        $  .21          $  .21


     The sum of the  quarterly  per share  amounts  may not equal the annual per
share amounts due to relative  changes in the weighted  average number of shares
used in the per share computations.

     During the fourth quarter of 2004,  Kronos  determined  that it should have
recognized an additional  $17.3 million net deferred  income tax benefit  during
the second  quarter of 2004,  primarily  related to the amount of the  valuation
allowance  related to Kronos' German operations which should have been reversed.
While the additional tax benefit is not material to the Company's second quarter
2004 results,  the quarterly results of operations for 2004, as presented above,
reflects this  additional  tax benefit.  Accordingly,  net income for the second
quarter of 2004 of $284.8 million ($5.82 per basic share),  as reflected  above,
differs from the $267.5 million ($5.47 per basic share),  previously reported by
the Company due to such $17.3 million deferred income tax benefit.

Note 20- Accounting principles not yet adopted:

     Inventory costs. The Company will adopt SFAS No. 151,  "Inventory Costs, an
amendment of ARB No. 43,  Chapter 4," for inventory  costs  incurred on or after
January 1, 2006.  SFAS No. 151 requires that the allocation of fixed  production
overhead costs to inventory shall be based on normal  capacity.  Normal capacity
is not defined as a fixed amount;  rather,  normal capacity refers to a range of
production  levels expected to be achieved over a number of periods under normal
circumstances,  taking into account the loss of capacity  resulting from planned
maintenance  shutdowns.  The amount of fixed overhead  allocated to each unit of
production is not increased as a consequence of idle plant or production  levels
below the low end of normal  capacity,  but instead a portion of fixed  overhead
costs  are  charged  to  expense  as  incurred.  Alternatively,  in  periods  of
production above the high end of normal  capacity,  the amount of fixed overhead
costs allocated to each unit of production is decreased so that  inventories are
not measured above cost.  SFAS No. 151 also  clarifies  existing GAAP to require
that  abnormal  freight and wasted  materials  (spoilage)  are to be expensed as
incurred.  The Company believes its production cost accounting  already complies
with the  requirements of SFAS No. 151, and the Company does not expect adoption
of SFAS No.  151 will  have a  material  effect  on its  consolidated  financial
statements.

     Stock options. The Company will adopt SFAS No. 123R, "Share-Based Payment",
as of  July  1,  2005.  SFAS  No.  123R,  among  other  things,  eliminates  the
alternative in existing GAAP to use the intrinsic value method of accounting for
stock-based  employee  compensation under APBO No. 25. Upon adoption of SFAS No.
123R,  the Company will  generally be required to recognize the cost of employee
services  received in exchange for an award of equity  instruments  based on the
grant-date  fair value of the award,  with the cost  recognized  over the period
during  which an employee is  required to provide  services in exchange  for the
award (generally, the vesting period of the award). No compensation cost will be
recognized in the aggregate for equity  instruments  for which the employee does
not render the requisite service (generally,  the instrument is forfeited before
it has vested). The grant-date fair value will be estimated using option-pricing
models  (e.g.   Black-Scholes   or  a  lattice  model).   Under  the  transition
alternatives  permitted  under SFAS No.  123R,  the  Company  will apply the new
standard to all new awards  granted on or after July 1, 2005,  and to all awards
existing as of June 30, 2005 which are  subsequently  modified,  repurchased  or
cancelled.  Additionally,  as of July 1, 2005,  the Company  will be required to
recognize  compensation cost for the portion of any non-vested award existing as
of June 30, 2005 over the remaining vesting period.  Because the Company has not
granted any options to purchase  its common  stock and is not  expected to grant
any options prior to July 1, 2005,  and because the number of non-vested  awards
as of June 30, 2005 with  respect to options  granted by NL to  employees of the
Company is not expected to be material,  the effect of adopting SFAS No. 123R is
not  expected  to be  significant  in so far as it  relates  to  existing  stock
options.  Should the Company,  however, grant a significant number of options in
the future, the effect on the Company's  Consolidated Financial Statements could
be material.



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                        ON FINANCIAL STATEMENT SCHEDULES



To the Board of Directors of Kronos Worldwide, Inc.:

     Our  audits  of the  consolidated  financial  statements,  of  management's
assessment of the effectiveness of internal control over financial reporting and
the  effectiveness of internal control over financial  reporting  referred to in
our report  dated March 30, 2005  appearing  in this Annual  Report on Form 10-K
also  included  an audit of the  financial  statement  schedules  listed in Item
15(a)(2) of this Form 10-K. In our opinion,  these financial statement schedules
present fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements.




                                                      PricewaterhouseCoopers LLP


Dallas, Texas
March 30, 2005





                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                            Condensed Balance Sheets

                           December 31, 2003 and 2004

                                 (In thousands)


                                                             2003                 2004
                                                             ----                 ----

Current assets:
                                                                        
  Cash and cash equivalents                              $    3,073           $    7,734
  Receivables from affiliates                                 1,209                2,776
  Prepaid expenses                                             -                     337
                                                         ----------           ----------

      Total current assets                                    4,282               10,847
                                                         ----------           ----------

Other assets:
  Notes receivable from subsidiaries
   and affiliates                                            50,250               51,250
  Investment in subsidiaries                                303,808              638,821
  Deferred income taxes                                       4,018                 -
                                                         ----------           ----------

      Total other assets                                    358,076              690,071
                                                         ----------           ----------

                                                         $  362,358           $  700,918
                                                         ==========           ==========

Current liabilities:
  Accounts payable and accrued liabilities               $       16           $        4
  Payable to affiliates                                       2,991                  742
  Deferred income taxes                                        -                       2
                                                         ----------           ----------

      Total current liabilities                               3,007                  748
                                                         ----------           ----------

Noncurrent liabilities:
  Notes payable to subsidiaries and affiliates              200,000              222,168
  Deferred income taxes                                        -                   7,157
                                                         ----------           ----------

      Total noncurrent liabilities                          200,000              229,325
                                                         ----------           ----------


Stockholders' equity                                        159,351              470,845
                                                         ----------           ----------

                                                         $  362,358           $  700,918
                                                         ==========           ==========



Contingencies (Note 4)



                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

     SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

                         Condensed Statements of Income

                  Years ended December 31, 2002, 2003 and 2004

                                 (In thousands)


                                                  2002             2003             2004
                                                  ----             ----             ----

Revenues and other income:
                                                                          
  Equity in earnings of subsidiaries            $ 60,943         $ 92,051          $336,922
  Interest income from affiliates                 23,776            3,009             2,678
  Interest and dividends                             483               29               382
  Other income                                     3,555                8              -
                                                --------         --------          --------

                                                  88,757           95,097           339,982
                                                --------         --------          --------
Costs and expenses:
  General and administrative                        (102)             269             1,601
  Intercompany interest and other                 17,421            1,917            17,973
  Other expense                                     -                -                  130
                                                --------         --------          --------

                                                  17,319            2,186            19,704
                                                --------         --------          --------

  Income before income taxes                      71,438           92,911           320,278

Provision for income taxes                         5,174            5,362             5,425
                                                --------         --------          --------

  Net income                                    $ 66,264         $ 87,549          $314,853
                                                ========         ========          ========








                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

     SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

                       Condensed Statements of Cash Flows

                  Years ended December 31, 2002, 2003 and 2004

                                 (In thousands)


                                                  2002             2003             2004
                                                  ----             ----             ----

Cash flows from operating activities:
                                                                          
   Net income                                   $ 66,264         $ 87,549          $314,853
   Cash distributions from subsidiaries           48,900             -               60,000
   Noncash interest income, net                     (302)            -                 -
   Deferred income taxes                             (21)            (538)           10,831
   Equity in earnings of subsidiaries            (60,943)         (92,051)         (336,922)
   Other, net                                       -                 -                  90
  Net change in assets and liabilities            (4,490)           1,295            (4,379)
                                                --------         --------          --------

            Net cash provided (used)
              by operating activities             49,408           (3,745)           44,473
                                                --------         --------          --------

Cash flows from investing activities:
     Loans to affiliates                         (83,200)         (16,550)           (8,000)
     Collections of loans to affiliates          295,182           46,404             7,000
     Investments in subsidiaries                  (9,149)            -                 -
                                                --------         --------          --------

        Net cash provided (used) by
          investing activities                   202,833           29,854            (1,000)
                                                --------         --------          --------

Cash flows from financing activities:
     Loans from affiliates                        46,675            8,000           209,524
     Repayments of loans from affiliates        (194,000)         (52,600)         (200,000)
     Dividends paid                             (111,000)          18,000           (48,945)
     Capital contributions                          -                -                  609
                                                --------         --------          --------

            Net cash used by financing
              activities:                       (258,325)         (26,600)          (38,812)
                                                --------         --------          --------

Net change during the year from operating,
   investing and financing activities             (6,084)            (491)            4,661

Balance at beginning of year                       9,648            3,564             3,073
                                                --------         --------          --------

Balance at end of year                          $  3,564         $  3,073          $  7,734
                                                ========         ========          ========



                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

     SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

                    Notes to Condensed Financial Information


Note 1 - Basis of presentation:

     The accompanying  financial  statements of Kronos  Worldwide,  Inc. reflect
Kronos' investment in its majority-owned  subsidiaries on the equity method. The
Consolidated Financial Statements of Kronos and its majority-owned  subsidiaries
(the "Company") and the related Notes to Consolidated  Financial  Statements are
incorporated herein by reference.

Note 2 - Net receivable from (payable to) subsidiaries and affiliates:


                                                                       December 31,
                                                               -------------------------
                                                                 2003              2004
                                                                 ----              ----
                                                                     (In thousands)

Current:
    Receivable from:
                                                                           
        NL - income taxes                                    $   1,209           $    -
        Kronos Louisiana, Inc. ("KLA")                            -                  2,681
        Kronos International, Inc. ("KII")                        -                     95
                                                             ---------           ---------

                                                             $   1,209           $   2,776
                                                             =========           =========
       Payable to:
            Kronos (US), Inc. ("KUS")                        $     200           $     204
            NL - income taxes                                    2,291                -
            Valhi - income taxes                                  -                    387
            Kronos Cananda, Inc. ("KC")                            500                  56
            Other                                                 -                     95
                                                             ---------           ---------

                                                             $   2,991           $     742
                                                             =========           =========

Noncurrent:
       Receivable from KUS                                   $  50,250           $  51,250
                                                             =========           =========

       Payable to:
            NL                                               $ 200,000           $    -
            KII                                                   -                222,168
                                                             ---------           ---------

                                                             $ 200,000           $ 222,168
                                                             =========           =========


     During  2004,  KII loaned the  Company the  equivalent  of  $222,168.  Such
amounts are eliminated upon consolidation.  See also Note 10 of the Consolidated
Financial Statements for a description of noncurrent receivables and payables.




Note 3 - Investment in subsidiaries:


                                                                       December 31,
                                                               -------------------------
                                                                 2003              2004
                                                                 ----              ----
                                                                     (In thousands)

Investment in:
                                                                          
     KLA                                                      $  110,336        $  136,749
     KC                                                           81,910            86,066
     KII                                                         111,562           416,006
                                                              ----------        ----------

                                                              $  303,808        $  638,821
                                                              ==========        ==========




                                                    2002             2003              2004
                                                    ----             ----              ----

Equity in income from continuing
  operations of subsidiaries:
                                                                           
   KLA                                            $  8,904         $  6,086         $ 12,969
   KC                                               11,288            2,192           (2,302)
   KII                                              40,751           83,773          326,255
                                                  --------         --------         --------

                                                  $ 60,943         $ 92,051         $336,922
                                                  ========         ========         ========


Note 4 - Contingencies:

     See Note 16 to the Consolidated Financial Statements.



                     KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                 (In thousands)



                                                         Additions
                                          Balance at     charged to                                                  Balance
                                           beginning      costs and         Net         Currency                     at end
            Description                    of year        expenses      deductions     translation       Other       of year
- ----------------------------------        ----------     ----------     ----------     -----------      -------     --------

 Year ended December 31, 2002:
                                                                                                   
   Allowance for doubtful accounts          $ 2,239        $   481        $  (414)      $   299         $   -        $ 2,605
                                            =======        =======        =======       =======         =======      =======

   Accrual for planned major
     maintenance activities                 $ 3,389        $ 3,848        $(3,746)      $   495         $   -        $ 3,986
                                            =======        =======        =======       =======         =======      =======

 Year ended December 31, 2003:
   Allowance for doubtful accounts          $ 2,605        $   367        $  (439)      $   387         $   -        $ 2,920
                                            =======        =======        =======       =======         =======      =======

   Accrual for planned major
     maintenance activities                 $ 3,986        $ 5,337        $(3,896)      $   900         $   -        $ 6,327
                                            =======        =======        =======       =======         =======      =======

 Year ended December 31, 2004:
   Allowance for doubtful accounts          $ 2,920        $  (125)       $  (577)      $   159         $   -        $ 2,377
                                            =======        =======        =======       =======         =======      =======

   Accrual for planned major
     maintenance activities                 $ 6,327        $ 6,602        $(8,001)      $   425         $   -        $ 5,353
                                            =======        =======        =======       =======         =======      =======



Note - Certain  information  has been omitted from this  Schedule  because it is
       disclosed in the Notes to the Consolidated Financial Statements.


                                                                    EXHIBIT 21.1




                         SUBSIDIARIES OF THE REGISTRANT


                                             Jurisdiction of          % of Voting
                                              incorporation        Securities Held at
       NAME OF CORPORATION                   or organization      December 31, 2004(a)
       -------------------                  ----------------      --------------------


                                                                       
  Kronos Canada, Inc.                            Canada                   100
  Kronos International, Inc.                     Delaware                 100
    Kronos Titan GmbH                            Germany                  100
      Unterstutzungskasse Kronos Titan-GmbH      Germany                  100
    Kronos Chemie-GmbH                           Germany                  100
    Kronos World Services S.A./N.V.              Belgium                  100
    Societe Industrielle du Titane, S.A.         France                    99
    Kronos Limited                               United Kingdom           100
    Kronos Denmark ApS                           Denmark                  100
      Kronos Europe S.A./N.V.                    Belgium                  100
        Kronos B.V.                              Holland                  100
    Kronos Norge A/S                             Norway                   100
      Kronos Titan A/S                           Norway                   100
      Titania A/S                                Norway                   100
        The Jossingfjord Manufacturing
          Company A/S                            Norway                   100
    Kronos Invest A/S                            Norway                   100
  Kronos Louisiana, Inc.                         Delaware                 100
    Kronos (US) Inc.                             Delaware                 100
    Louisiana Pigment Company, L.P.              Delaware                  50




(a)   Held by the Registrant or the indicated subsidiary of the Registrant


                                                                EXHIBIT 23.1





            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


We hereby consent to the incorporation by reference in Kronos Worldwide,  Inc.'s
(i)  Registration  Statement No.  333-113425  on Form S-8 and (ii)  Registration
Statement  No.  333-122249  on Form S-3 of our  reports  dated  March  30,  2005
relating  to  the  consolidated   financial   statements,   financial  statement
schedules, management's assessment of the effectiveness of internal control over
financial  reporting and the  effectiveness  of internal  control over financial
reporting, which appear in this Form 10-K.





                                                     PricewaterhouseCoopers LLP



Dallas, Texas
March 30, 2005



                                                                    Exhibit 31.1


                                  CERTIFICATION

I, Harold C. Simmons,  the Chief Executive  Officer of Kronos  Worldwide,  Inc.,
certify that:

1)   I have reviewed this annual report on Form 10-K of Kronos Worldwide, Inc.;

2)   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3)   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4)   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules  13a-15(e) and 15d-15(e))  and internal  control over
     financial  reporting  (as  defined  in  Exchange  Act Rules  13a-15(f)  and
     15d-15(f)) for the registrant and we have:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     b)   Designed such internal  control over  financial  reporting,  or caused
          such internal  control over  financial  reporting to be designed under
          our  supervision,   to  provide  reasonable  assurance  regarding  the
          reliability  of financial  reporting and the  preparation of financial
          statements for external purposes in accordance with generally accepted
          accounting principles;

     c)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     d)   Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

5)   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's  auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent function):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.

Date:  March 30, 2005


/s/  Harold C. Simmons
- -------------------------------
     Harold C. Simmons
       Chief Executive Officer



                                                                    Exhibit 31.2

                                  CERTIFICATION

I, Gregory M. Swalwell,  the Chief Financial Officer of Kronos Worldwide,  Inc.,
certify that:

1)   I have reviewed this annual report on Form 10-K of Kronos Worldwide, Inc.;

2)   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3)   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4)   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules  13a-15(e) and 15d-15(e))  and internal  control over
     financial  reporting  (as  defined  in  Exchange  Act Rules  13a-15(f)  and
     15d-15(f)) for the registrant and we have:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     b)   Designed such internal  control over  financial  reporting,  or caused
          such internal  control over  financial  reporting to be designed under
          our  supervision,   to  provide  reasonable  assurance  regarding  the
          reliability  of financial  reporting and the  preparation of financial
          statements for external purposes in accordance with generally accepted
          accounting principles;

     c)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     d)   Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

5)   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's  auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent function):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.

Date:  March 30, 2005

/s/  Gregory M. Swalwell
- -------------------------------
     Gregory M. Swalwell
       Chief Financial Officer

                                                                  Exhibit 32.1


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of Kronos Worldwide,  Inc. (the Company) on
Form 10-K for the period ended  December  31, 2004 as filed with the  Securities
and Exchange  Commission on the date hereof (the Report),  I, Harold C. Simmons,
Chief  Executive  Officer of the  Company,  and I,  Gregory M.  Swalwell,  Chief
Financial Officer of the Company,  certify,  pursuant to 18 U.S.C. section 1350,
as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the  requirements  of section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

(2)  The information  contained in the Report fairly  presents,  in all material
     respects, the financial condition and results of operations of the Company.




/s/ Harold C. Simmons
- -------------------------------
Harold C. Simmons
   Chief Executive Officer


/s/ Gregory M. Swalwell
- -------------------------------
Gregory M. Swalwell
   Chief Financial Officer


March 30, 2005


Note: The certification  the registrant  furnishes in this exhibit is not deemed
"filed" for purposes of Section 18 of the  Securities  Exchange Act of 1934,  as
amended,  or otherwise subject to the liabilities of that Section.  Registration
Statements or other documents filed with the Securities and Exchange  Commission
shall not incorporate this exhibit by reference,  except as otherwise  expressly
stated in such filing.