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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934 - For the quarterly period ended June 30, 2003

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934

Commission file number 333-100047


KRONOS INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)


Delaware 22-2949593
- ------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)


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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- ------

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

The Registrant is a wholly owned subsidiary of NL Industries, Inc. (File No.
1-640) and meets the conditions set forth in General Instructions H(1)(a) and
H(1)(b) of Form 10-Q for reduced disclosure format.



KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX




Page
----
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Consolidated Balance Sheets - June 30, 2003
and December 31, 2002 3

Consolidated Statements of Income - Three months and
six months ended June 30, 2003 and 2002 5

Consolidated Statements of Comprehensive Income - Three
months and six months ended June 30, 2003 and 2002 6

Consolidated Statement of Common Stockholder's
Equity - Six months ended June 30, 2003 7

Consolidated Statements of Cash Flows - Six
months ended June 30, 2003 and 2002 8

Notes to Consolidated Financial Statements 10

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk 26

Item 4. Controls and Procedures 26


PART II. OTHER INFORMATION

Item 1. Legal Proceedings 27

Item 6. Exhibits and Reports on Form 8-K 27


-2-



KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)





June 30, December 31,
ASSETS 2003 2002
-------- ------------


Current assets:
Cash and cash equivalents ........................ $ 15,797 $ 15,023
Restricted cash equivalents ...................... 956 --
Accounts and notes receivable .................... 119,264 92,493
Receivable from affiliates ....................... 2,253 972
Refundable income taxes .......................... 24,754 1,718
Inventories ...................................... 143,666 143,664
Prepaid expenses ................................. 2,154 5,266
Deferred income taxes ............................ 753 695
-------- --------

Total current assets ......................... 309,597 259,831
-------- --------

Other assets:
Prepaid pension cost ............................. 17,209 17,572
Other ............................................ 13,709 16,135
-------- --------

Total other assets ........................... 30,918 33,707
-------- --------

Property and equipment:
Land ............................................. 28,199 25,487
Buildings ........................................ 125,787 115,812
Machinery and equipment .......................... 578,009 536,835
Mining properties ................................ 63,114 65,296
Construction in progress ......................... 12,025 7,749
-------- --------
807,134 751,179
Less accumulated depreciation and depletion ...... 470,649 433,416
-------- --------

Net property and equipment ................... 336,485 317,763
-------- --------

$677,000 $611,301
======== ========


-3-




KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In thousands, except per share data)




June 30, December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 2003 2002
----------- ------------


Current liabilities:
Current maturities of long-term debt ......... $ 781 $ 1,298
Accounts payable and accrued liabilities ..... 102,407 93,563
Payable to affiliates ........................ 6,479 21,430
Income taxes ................................. 5,570 5,845
Deferred income taxes ........................ 1,711 3,219
----------- -----------

Total current liabilities ................ 116,948 125,355
----------- -----------

Noncurrent liabilities:
Long-term debt ............................... 360,444 324,608
Deferred income taxes ........................ 59,393 49,688
Accrued pension cost ......................... 21,270 21,486
Other ........................................ 13,932 12,933
----------- -----------

Total noncurrent liabilities ............. 455,039 408,715
----------- -----------

Minority interest ................................ 465 383
----------- -----------

Common stockholder's equity:
Common stock - $100 par value; 100,000 shares
authorized; 2,968 shares issued ............ 297 297
Additional paid-in capital ................... 1,944,185 1,944,185
Accumulated deficit .......................... (1,695,423) (1,721,859)
Accumulated other comprehensive loss:
Currency translation adjustment .......... (137,761) (139,025)
Pension liabilities ...................... (6,750) (6,750)
----------- -----------

Total common stockholder's equity ........ 104,548 76,848
----------- -----------

$ 677,000 $ 611,301
=========== ===========


Commitments and contingencies (Notes 10 and 11)


See accompanying notes to consolidated financial statements.
-4-



KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands)



Three months ended Six months ended
June 30, June 30,
--------------------- ----------------------
2003 2002 2003 2002
--------- --------- --------- ---------


Revenues and other income:
Net sales ....................... $ 182,878 $ 146,145 $ 361,075 $ 285,714
Interest income from affiliates . 30 10,262 30 19,157
Other income, net ............... 738 19,135 2,770 18,930
--------- --------- --------- ---------

183,646 175,542 363,875 323,801
--------- --------- --------- ---------

Costs and expenses:
Cost of sales ................... 134,200 113,945 264,970 224,668
Selling, general and
administrative ................ 21,712 16,733 42,207 33,401
Interest ........................ 8,226 997 16,136 1,697
Interest expense to affiliates .. 6 8,925 70 18,699
--------- --------- --------- ---------

164,144 140,600 323,383 278,465

Income before income taxes
and minority interest ..... 19,502 34,942 40,492 45,336

Income tax benefit (expense) ........ 17,199 (5,330) 10,987 (7,732)
--------- --------- --------- ---------

Income before minority
interest .................. 36,701 29,612 51,479 37,604

Minority interest ................... 19 17 43 27
--------- --------- --------- ---------

Net income .................. 36,682 29,595 51,436 37,577

Dividends and accretion applicable to
redeemable preferred stock and
profit participation certificates . -- (3,930) -- (77,372)
--------- --------- --------- ---------

Net income (loss) available to common
stock ............................. $ 36,682 $ 25,665 $ 51,436 $ (39,795)
========= ========= ========= =========

See accompanying notes to consolidated financial statements.
-5-




KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)





Three months ended Six months ended
June 30, June 30,
------------------ -----------------
2003 2002 2003 2002
------- ------- ------- -------


Net income ............................. $36,682 $29,595 $51,436 $37,577
------- ------- ------- -------

Other comprehensive income:

Currency translation adjustment .... 3,291 23,052 1,264 22,654
------- ------- ------- -------

Total other comprehensive
income ....................... 3,291 23,052 1,264 22,654
------- ------- ------- -------

Comprehensive income ....... $39,973 $52,647 $52,700 $60,231
======= ======= ======= =======


See accompanying notes to consolidated financial statements.
-6-






KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMMON STOCKHOLDER'S EQUITY

Six months ended June 30, 2003

(In thousands)


Accumulated other
comprehensive loss
-------------------------- Total
Additional Currency common
Common paid-in Accumulated translation Pension stockholder's
stock capital deficit adjustment liabilities equity
----------- ----------- ----------- ----------- ----------- -------------



Balance at December 31, 2002 $ 297 $ 1,944,185 $(1,721,859) $ (139,025) $ (6,750) $ 76,848

Net income ................. -- -- 51,436 -- -- 51,436
Dividends .................. -- -- (25,000) -- -- (25,000)
Other comprehensive loss ... -- -- -- 1,264 -- 1,264
----------- ----------- ----------- ----------- ----------- -----------


Balance at June 30, 2003 ... $ 297 $ 1,944,185 $(1,695,423) $ (137,761) $ (6,750) $ 104,548
=========== =========== =========== =========== =========== ===========



See accompanying notes to consolidated financial statements.
-7-





KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended June 30, 2003 and 2002

(In thousands)





2003 2002
-------- --------


Cash flows from operating activities:
Net income ......................................... $ 51,436 $ 37,577
Depreciation, depletion and amortization ........... 16,526 12,837
Noncash currency transaction gain .................. -- (13,121)
Noncash interest income from affiliates ............ -- (18,254)
Noncash interest expense to affiliates ............. -- 5,521
Noncash interest expense ........................... 948 --
Deferred income taxes .............................. 6,826 5,096
Minority interest .................................. 43 27
Net loss (gain) from disposition of property
and equipment amortization ....................... 44 (597)
Pension, net ....................................... (1,954) (2,001)
-------- --------

73,869 27,085

Change in assets and liabilities:
Accounts and notes receivable ...................... (18,136) (13,448)
Insurance receivable ............................... (124) 11,053
Inventories ........................................ 10,855 20,703
Prepaid expenses ................................... 3,359 (759)
Accounts payable and accrued liabilities ........... 2,598 (2,179)
Income taxes ....................................... (23,086) (2,987)
Accounts with affiliates ........................... (16,746) (6,282)
Other, net ......................................... 253 2,590
-------- --------

Net cash provided by operating activities ...... 32,842 35,776
-------- --------

Cash flows from investing activities:
Capital expenditures ............................... (11,948) (10,078)
Change in restricted cash equivalents .............. (1,005) (1,554)
Proceeds from disposition of property and equipment 47 832
-------- --------

Net cash used by investing activities .......... (12,906) (10,800)
-------- --------


-8-



KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Six months ended June 30, 2003 and 2002

(In thousands)




2003 2002
--------- ---------


Cash flows from financing activities:
Indebtedness:
Borrowings ................................... $ 16,106 $ 319,275
Principal payments ........................... (11,615) (53,688)
Deferred financing costs ..................... -- (9,342)
Repayments of loans from affiliates .............. -- (301,432)
Other capital transactions with affiliates, net .. -- 2,925
Distribution to minority interest ................ -- (11)
Dividends paid ................................... (25,000) --
--------- ---------

Net cash used by financing activities ............ (20,509) (42,273)
--------- ---------

Cash and cash equivalents:
Net change from:
Operating, investing and financing activities (573) (17,297)
Currency translation ......................... 1,347 2,965
--------- ---------
774 (14,332)

Balance at beginning of period ................... 15,023 30,343
--------- ---------

Balance at end of period ......................... $ 15,797 $ 16,011
========= =========


Supplemental disclosures - cash paid for:
Interest ......................................... $ 16,321 $ 19,835
Income taxes ..................................... 5,233 5,623




See accompanying notes to consolidated financial statements.
-9-








KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Organization and basis of presentation:

Kronos International, Inc. ("KII") is incorporated in the state of
Delaware, U.S.A., with its seat of management in Leverkusen, Germany. KII is a
wholly owned subsidiary of Kronos, Inc. ("Kronos"), a wholly owned subsidiary of
NL Industries, Inc. ("NL"). NL conducts its titanium dioxide pigments ("TiO2")
operations through Kronos. KII conducts Kronos' European TiO2 operations. At
June 30, 2003, Valhi, Inc., ("Valhi") and its subsidiaries held approximately
85% of NL's outstanding common stock, and Contran Corporation ("Contran") and
its subsidiaries held approximately 90% of Valhi's outstanding common stock.
Substantially all of Contran's outstanding voting stock is held by trusts
established for the benefit of certain children and grandchildren of Harold C.
Simmons, of which Mr. Simmons is sole trustee. Mr. Simmons, the Chairman of the
Board and Chief Executive Officer of NL, the Chief Executive Officer of KII and
the Chairman of the Board of each of Contran and Valhi, may be deemed to control
each of such companies and KII.

KII's operations are conducted primarily through its German, Belgian and
Norwegian subsidiaries with three TiO2 plants in Germany, one TiO2 plant in
Belgium and one TiO2 plant and an ilmenite ore mining operation in Norway. KII
also operates TiO2 sales and distribution facilities in England, France, Denmark
and the Netherlands. Prior to April 30, 2002, KII also conducted operations in
Canada through Kronos Canada, Inc. ("KC"), its wholly owned subsidiary.
Effective April 30, 2002, in anticipation of a proposed debt securities
offering, KII sold 100% of KC's capital stock to Kronos in exchange for a
promissory note receivable in the amount of $217 million bearing interest of
7.87% per annum with a maturity date of April 30, 2012. KII has accounted for
the disposition of KC as a change in accounting entity. Accordingly, KII's
consolidated financial statements have been retroactively restated to exclude
the results of operations and cash flows of KC for all periods presented. KII's
cash dividends received from KC and cash capital contributions to KC prior to
April 30, 2002 are reflected as part of "other capital transactions with
affiliates, net" in the accompanying consolidated statement of cash flows.

The consolidated balance sheet of KII and its majority
owned-subsidiaries (collectively, the "Company") at December 31, 2002 has been
condensed from the Company's audited consolidated financial statements at that
date. The consolidated balance sheet at June 30, 2003 and the consolidated
statements of income, comprehensive income, stockholder's equity and cash flows
for the interim periods ended June 30, 2003 and 2002 have been prepared by the
Company without audit. In the opinion of management all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the
consolidated financial position, results of operations and cash flows have been
made. The results of operations for the interim periods are not necessarily
indicative of the operating results for a full year or of future operations.

Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles in the U.S. ("GAAP") have been condensed or omitted. Certain
prior-year amounts have been reclassified to conform to the current year
presentation. The accompanying consolidated financial statements should be read


-10-


in conjunction with the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2002 (the
"2002 Annual Report").

While the Company has not issued any stock options to purchase KII's
common stock, 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 Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," as amended by SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure," and to
account for its stock-based employee compensation related to these NL 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 the fourth quarter of 2002, NL, including the Company,
commenced accounting for its stock options, including options granted to Company
employees, using the variable accounting method, which requires 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) to be accrued as an
expense, with subsequent increases (decreases) in NL's market price resulting in
additional compensation expense (income). Net compensation expense recognized by
the Company in accordance with APBO No. 25 in the second quarter and first half
of 2003 was $.2 million and nil, respectively, and net compensation cost
recognized by the Company in the second quarter and first half of 2002 was nil
for both periods. The Company pays NL when stock options are exercised by
employees of the Company in an amount equal to the intrinsic value of the
options on the date of exercise.

The following table illustrates the effect on net income (loss)
available to common stock if the Company had applied the fair value recognition
provisions of SFAS No. 123 to stock-based employee compensation.



Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
2003 2002 2003 2002
-------- -------- -------- --------
(In thousands)


Net income (loss) available to common
stock - as reported ................. $ 36,682 $ 25,665 $ 51,436 $(39,795)
Add: Stock-based compensation cost,
net of tax, included in reported net
income .............................. 180 -- -- --
Deduct: Stock-based compensation cost,
net of tax, determined under fair
value based method for all awards ... (36) (77) (70) (155)
-------- -------- -------- --------

Net income (loss) available to common
stock - pro forma ................... $ 36,826 $ 25,588 $ 51,366 $(39,950)
======== ======== ======== ========


The Company adopted SFAS No. 143, "Accounting for Asset Retirement
Obligations," effective 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 is accreted to its future value, and the capitalized cost is

-11-


depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity would either settle the obligation for its recorded amount
or incur 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 were measured using information, assumptions
and interest rates all as of January 1, 2003. The amount recognized as the asset
retirement cost was 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, were 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 between the
amounts recognized as described above and the associated amounts recognized in
the Company's balance sheet as of December 31, 2002 was recognized as a
cumulative effect of change in accounting principle as of January 1, 2003. The
effect of adopting SFAS No. 143 as of January 1, 2003, as summarized in the
table below, did not have a material effect on the Company's consolidated
financial position, results of operations or liquidity, 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 liabilities previously accrued
for closure and post closure activities .......................... .3
Asset retirement obligation recognized ................................. (.6)
----

Net impact ..................................................... $--
====


At June 30, 2003, the asset retirement obligation was approximately $.7
million and was included in other noncurrent liabilities. Accretion expense on
the asset retirement obligation during the first six months of 2003, included in
cost of sales, was nil. If the Company had adopted SFAS No. 143 as of January 1,
2002, the asset retirement obligation would have been approximately $.5 million
at January 1, 2002 and $.6 million at June 30, 2002, and the effect on the
Company's reported net income for the six months ended June 30, 2002 would not
have been material.

-12-


Note 2 - Business segment information:

The Company's operations are conducted in one operating business segment
- - activities associated with the production and sale of TiO2.




Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
2003 2002 2003 2002
--------- --------- --------- ---------
(In thousands)


Net sales ............................ $ 182,878 $ 146,145 $ 361,075 $ 285,714
Other income , excluding corporate ... 738 1,008 2,770 3,091
--------- --------- --------- ---------
183,616 147,153 363,845 288,805

Cost of sales ........................ 134,200 113,945 264,970 224,668
Selling, general and administrative,
excluding corporate ................ 21,712 16,733 42,207 33,401
--------- --------- --------- ---------

Operating income ............. 27,704 16,475 56,668 30,736

General corporate income (expense):
Currency transaction loss, net ... -- 18,127 -- 15,839
Interest expense ................. (8,226) (997) (16,136) (1,697)
Interest expense to affiliates ... (6) (8,925) (70) (18,699)
Interest income from affiliates .. 30 10,262 30 19,157
--------- --------- --------- ---------

Income before income taxes and
minority interest .......... $ 19,502 $ 34,942 $ 40,492 $ 45,336
========= ========= ========= =========


Note 3 - Accounts and notes receivable:



June 30, December 31,
2003 2002
--------- ------------
(In thousands)


Trade receivables .............................. $ 114,803 $ 83,929
Insurance claims receivable .................... 436 312
Recoverable VAT and other receivables .......... 5,893 10,159
Allowance for doubtful accounts ................ (1,868) (1,907)
--------- ---------

$ 119,264 $ 92,493
========= =========



-13-


Note 4 - Inventories:



June 30, December 31,
2003 2002
-------- ------------
(In thousands)


Raw materials ............................ $ 28,808 $ 36,960
Work in process .......................... 14,662 14,009
Finished products ........................ 73,120 67,469
Supplies ................................. 27,076 25,226
-------- --------

$143,666 $143,664
======== ========


Note 5 - Other noncurrent assets:



June 30, December 31,
2003 2002
-------- ------------
(In thousands)


Deferred financing costs ........................... $ 9,890 $ 9,879
Restricted marketable debt securities .............. 1,968 2,492
Unrecognized net pension obligations ............... 320 292
Other .............................................. 1,531 3,472
------- -------

$13,709 $16,135
======= =======


Note 6 - Accounts payable and accrued liabilities:



June 30, December 31,
2003 2002
-------- ------------
(In thousands)


Accounts payable ........................... $ 50,203 $ 49,630
-------- --------
Accrued liabilities:
Employee benefits ...................... 21,280 20,131
Interest ............................... 228 217
Other .................................. 30,696 23,585
-------- --------

52,204 43,933
-------- --------

$102,407 $ 93,563
======== ========


-14-


Note 7 - Long-term debt:



June 30, December 31,
2003 2002
-------- ------------
(In thousands)


8.875% Senior Secured Notes,(euro)285 million principal amount $325,784 $296,942
Revolving credit facility .................................... 34,293 27,077
Other ........................................................ 1,148 1,887
-------- --------
361,225 325,906
Less current maturities ...................................... 781 1,298
-------- --------

$360,444 $324,608
======== ========


In March 2003 the Company borrowed (euro)15.0 million ($16.1 million
when borrowed) and in April 2003 the Company repaid NOK 80 million ($11.0
million when repaid) under the revolving credit facility.

Note 8 - Other noncurrent liabilities:



June 30, December 31,
2003 2002
-------- ------------
(In thousands)


Insurance claims and expenses .................. $ 540 $ 889
Employee benefits .............................. 4,399 4,025
Environmental costs ............................ 6,298 5,921
Other .......................................... 2,695 2,098
------- -------

$13,932 $12,933
======= =======


Note 9 - Other income (loss), net:



Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
2003 2002 2003 2002
-------- -------- -------- --------
(In thousands)


Currency transactions, net .......... $ (1,105) $ 16,589 $ (1,011) $ 14,921
Royalty income ...................... 1,628 1,603 3,375 2,890
Trade interest income ............... 188 326 338 539
Disposition of property and equipment 18 644 (44) 597
Other, net .......................... 9 (27) 112 (17)
-------- -------- -------- --------

$ 738 $ 19,135 $ 2,770 $ 18,930
======== ======== ======== ========


Included in currency transactions, net in the second quarter and first
half of 2002 are $15.4 million and $13.1 million, respectively, of noncash gains
associated with the Company's dollar-denominated notes payable to affiliates
which were repaid in June 2002.

The Company receives royalty income from KC for use of certain of the
Company's intellectual property.

-15-




Note 10 - Income taxes:

The difference between the provision for income tax expense attributable
to income before income taxes and minority interest and the amount that would be
expected using the U.S. federal statutory income tax rate of 35% is presented
below.



Six months ended
June 30,
--------------------
2003 2002
-------- --------
(In thousands)


Expected tax expense ................................... $ 14,172 $ 15,868
Non-U.S. tax rates ..................................... (478) (677)
Valuation allowance .................................... (106) (1,783)
Refund of prior-year German taxes ...................... (24,564) --
Currency transaction gains for which no income taxes
were provided ........................................ -- (4,592)
Other, net ............................................. (11) (1,084)
-------- --------

Income tax (benefit) expense ................... $(10,987) $ 7,732
======== ========


Certain of the Company's tax returns in various U.S. and non-U.S.
jurisdictions are being examined and tax authorities have proposed or may
propose tax deficiencies, including penalties and interest.

The Company has received preliminary tax assessments for the years 1991
to 1997 from the Belgian tax authorities proposing tax deficiencies, including
related interest, of approximately (euro)10.1 million ($11.6 million at June 30,
2003). The Company has filed protests to the assessments with respect to such
years. The Company is in discussions with the Belgian tax authorities and
believes that a significant portion of the assessments is without merit. In
April 2003 the Company received a notification from the Belgian tax authorities
of their intent to assess a tax deficiency related to 1999. The anticipated
assessment, including interest, is expected to approximate (euro)13.1 million
($15.0 million at June 30, 2003). The Company believes the proposed assessment
related to 1999 is without merit and in April 2003 filed a written response in
opposition to the notification of intent to assess.

In 2002, the Company received a notification from the Norwegian tax
authorities of their intent to assess tax deficiencies of approximately NOK 12.2
million ($1.7 million at June 30, 2003) relating to 1998 through 2000. The
Company has objected to this proposed assessment in a written response to the
Norwegian tax authorities.

In the first quarter of 2003, the Company 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. The Company has filed
certain amended German tax returns and expects to file additional amended German
tax returns claiming such refunds for all years affected by the Court's
decision, which is expected to result in an estimated refund of taxes and
interest of approximately $40 million. Receipt of the German tax refunds is
subject to satisfaction of various procedural requirements, including a review
and acceptance of the amended German tax returns by the German tax authorities.
Certain of these procedural requirements were satisfied in the second quarter of
2003 with respect to a portion of the refund claim, and in July 2003 the German

-16-



tax authorities refunded the Company a portion of the total anticipated refund.
The portion received in July was (euro)21.5 million ($24.6 million using June
30, 2003 exchange rates). The Company has reflected this tax refund in its
second quarter 2003 results of operations. The Company expects to receive the
remaining refunds over the next six to nine months, a portion of which may
result in an additional income tax benefit.

No assurance can be given that the Company's tax matters will be
favorably resolved due to the inherent uncertainties involved in 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 the Company's
consolidated financial position, results of operations or liquidity.

At June 30, 2003 the Company had the equivalent of approximately $470
million of income tax loss carryforwards in Germany with no expiration date.
However, the Company has provided a deferred tax valuation allowance against
substantially all of these income tax loss carryforwards because the Company
currently believes they do not meet the "more-likely-than-not" recognition
criteria. In 2002, the German federal government proposed certain changes to its
income tax law, including certain changes that would have imposed limitations on
the annual utilization of income tax loss carryforwards. Such proposal, if
enacted, would have significantly affected the Company's 2003 and future income
tax expense and cash tax payments. In April 2003 the German federal government
passed a new tax law which does not contain the provision that would have
restricted the utilization of tax loss carryforwards. Furthermore, the
provisions contained in the new law are not expected to materially impact the
Company's income tax expense or cash tax payments. On August 1, 2003, the German
federal government proposed new tax law amendments that, among other things,
reintroduced the limitations on the annual utilization of income tax loss
carryforwards, to become effective in 2004. There can be no assurance that these
proposed law amendments will be enacted and, if enacted, when they would become
effective. Such proposal, if enacted as proposed, would significantly affect the
Company's future income tax expense and cash tax payments.

At June 30, 2003, the Company had net deferred tax liabilities of $60
million. The Company operates in numerous tax jurisdictions, in certain of which
it has temporary differences that net to deferred tax assets (before valuation
allowance). The Company has provided a deferred tax valuation allowance of $166
million at June 30, 2003, principally related to Germany, partially offsetting
deferred tax assets which the Company believes do not currently meet the
"more-likely-than-not" recognition criteria.

Note 11 - Commitments and contingencies:

Environmental, product liability and litigation matters

The Company's operations are governed by various foreign environmental
laws and regulations. Certain of the Company's businesses are and have been
engaged in the handling, manufacture or use of substances or compounds that may
be considered toxic or hazardous within the meaning of applicable environmental
laws. As with other companies engaged in similar businesses, certain past and
current operations and products of 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 policy of the Company is to maintain compliance with applicable foreign
environmental laws and regulations at all of its facilities and to strive to

-17-



improve its environmental performance. It is possible that future changes in
environmental laws and enforcement policies thereunder could affect the
Company's production, handling, use, storage, transportation, sale or disposal
of such substances as well as adversely affect the Company's consolidated
financial position, results of operations or liquidity.

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

While the laws regulating operations of industrial facilities in Europe
vary from country to country, a common regulatory base is provided by the
European Union (the "EU"). The Company's German and Belgian subsidiaries are
members of the EU and follow its initiatives. Norway, although not a member,
generally patterns its environmental regulatory actions after the EU. The
Company believes that it has all required permits and is in substantial
compliance with applicable EU requirements, including EU Directive 92/112/EEC
regarding establishment of procedures for reduction and eventual elimination of
pollution caused by waste from the TiO2 industry.

At all of the Company's sulfate plant facilities other than Fredrikstad,
Norway, the Company recycles spent acid either through contracts with third
parties or using the Company's own facilities. At its Fredrikstad, Norway plant,
the Company ships its spent acid to a third party location where it is treated
and disposed. The Company has a contract with a third party to treat certain
by-products of its German sulfate-process plants. Either party may terminate the
contract after giving four years advance notice with regard to its Nordenham,
Germany plant. Under certain circumstances, Kronos may terminate the contract
after giving six months notice with respect to treatment of by-products from the
Leverkusen, Germany plant.

The Company landfills waste generated at its Nordenham, Germany and
Langerbrugge, Belgium plants, and mine tailings waste generated at its facility
in Norway. The Company maintains reserves, as required under GAAP, to cover the
anticipated cost of closure of these landfills, which were approximately $.5
million as of June 30, 2003. These requirements for landfills are expected to
increase in the future in view of recently adopted EU requirements.

The Company is responsible for certain closure costs at landfills used
and formerly used by its Leverkusen, Germany TiO2 plants. The Company has a
reserve of approximately $6 million related to such landfills as of June 30,
2003.

The Company's Belgian subsidiary and various of its Belgian employees
are the subject of an investigation by Belgian authorities relating to an
accident resulting in two fatalities that occurred in its Langerbrugge, Belgium
facility in October 2000. The investigation stage, which could ultimately result
in civil and criminal sanctions against the Company, was completed in 2002. In
May 2003 the Belgian authorities referred the proceedings against the Company's
Belgian subsidiary and certain of its Belgian employees to the criminal court
for trial. The matter has been set for trial in October 2003.

The Company is also involved in various other environmental,
contractual, product liability and other claims and disputes incidental to its
business. The Company currently believes the disposition of all claims and

-18-


disputes, individually or in the aggregate, should not have a material adverse
effect on the Company's consolidated financial condition, results of operations
or liquidity.

For descriptions of certain other legal proceedings, environmental,
income tax and other commitments and contingencies related to the Company,
reference is made to (i) the 2002 Annual Report, (ii) the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2003, and (iii) Note 10.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS


RESULTS OF OPERATIONS



Three months ended % Six months ended %
June 30, Change June 30, Change
------------------ --------- ---------------- --------
2003 2002 2003 2002
------ ------ ------ ------
(In millions, except percentages and metric tons)


Net sales and operating
income
Net sales ............... $182.9 $146.1 +25% $361.1 $285.7 +26%
Operating income ........ $ 27.7 $ 16.5 +68% $ 56.7 $ 30.7 +85%
Operating income margin
percentage ............ 15% 11% 16% 11%

TiO2 operating statistics
Percent change in
average selling price
(in billing currencies) +9% +9%
Sales volume (metric tons
in thousands) ......... 78.6 78.5 N/C 158.0 157.7 N/C
Production volume (metric
tons in thousands) .... 79.8 74.3 +7% 158.2 146.5 +8%



The Company's operating income in the second quarter of 2003 was $27.7
million compared with $16.5 million in the second quarter of 2002. The 68%
increase in operating income was primarily due to higher average selling prices
and higher production volume. Compared with the first quarter of 2003, operating
income in the second quarter of 2003 decreased $1.3 million, or 4%.

Operating income in the first half of 2003 increased 85% to $56.7
million compared with $30.7 million in the first half of 2002 primarily due to
9% higher average selling prices in billing currencies (which excludes the
effects of foreign currency translation) and 8% higher production volume.

The Company's average selling price in billing currencies during the
second quarter of 2003 was 9% higher than the second quarter of 2002 and
comparable to the first quarter of 2003. The average selling price in billing
currencies in June 2003 was comparable to the average selling price in billing
currencies for the second quarter of 2003. The Company expects higher average
selling prices in billing currencies for full-year 2003 compared to full-year
2002. The Company discloses percentage changes in its average TiO2 selling
prices in billing currencies so that such changes can be analyzed without the

-19-


impact of changes in foreign currency exchange rates, thereby facilitating
period-to-period comparisons. Generally, when the U.S. dollar 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. When translated from billing currencies to U.S. dollars
using currency exchange rates prevailing during the respective periods, the
Company's second-quarter 2003 average selling price in U.S. dollars was 28%
higher than in the second quarter of 2002 and 3% higher than the first quarter
of 2003. The average selling price expressed in U.S. dollars in June 2003 was 4%
higher than the average selling price for the second quarter of 2003. The
average selling price expressed in U.S. dollars for the first half of 2003 was
27% higher than the first half of 2002.


The Company's second quarter 2003 sales volume of 78,600 metric tons was
comparable to the second quarter of 2002 and decreased 1% from the first quarter
of 2003. Sales volume in the first half of 2003 of 158,000 metric tons was
comparable to the first half of 2002. The Company expects sales volume in the
second half of 2003 to be lower than the first half of 2003. The Company's sales
volume for full-year 2003 should be comparable to full-year 2002.

The Company's second quarter 2003 production volume of 79,800 metric
tons was 7% higher than the second quarter of 2002 and 2% higher than the first
quarter of 2003, respectively. Operating rates in the second quarter of 2003
were at near full capacity compared with 95% of capacity in the second quarter
of 2002 and near full capacity in the first quarter of 2003. Production volume
in the first half of 2003 was 158,200 metric tons. The Company anticipates its
production volume for full-year 2003 will be higher than that of full-year 2002.
Finished goods inventory levels at the end of the second quarter of 2003
increased 3% from March 2003 levels and represented under two months of sales.

The Company expects its TiO2 operating income in 2003 will be higher
than 2002, primarily due to higher average TiO2 selling prices in billing
currencies and higher production volume. The Company's TiO2 production volume in
2003 is expected to be higher than the Company's 2003 TiO2 sales volume with
finished goods inventories rising modestly. The Company's expectations as to the
future prospects of the Company 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 the Company's expectations, the Company's results of
operations could be unfavorably affected.

Compared to the year-earlier periods, cost of sales as a percentage of
net sales decreased in the second quarter and first half of 2003 primarily due
to higher average selling prices in billing currencies and higher production
volume. Excluding the effects of foreign currency translation, which increased
the Company's expenses in the second quarter and first half of 2003 compared to
year-earlier periods, the Company's selling, general and administrative
expenses, excluding corporate expenses, in the second quarter and first half of
2003 were comparable to the second quarter and first half of 2002.

A significant amount of the Company's sales and operating costs are
denominated in currencies other than the U.S. dollar. Fluctuations in the value
of the U.S. dollar relative to other currencies, primarily a weaker U.S. dollar
compared to the euro in the second quarter and first half of 2003 versus the
year-earlier periods increased the dollar value of sales in the second quarter
of 2003 by a net $27.3 million and $53.5 million, respectively, when compared to
the year-earlier periods. The effect of the weaker U.S. dollar on the Company's

-20-


operating costs that are not denominated in U.S. dollars increased operating
costs in the second quarter and first half of 2003 compared to the year-earlier
periods. In addition, sales to export markets are typically denominated in U.S.
dollars and a weaker U.S. dollar decreases margins on these sales at the
Company's non-U.S. subsidiaries. In addition, the Company revalued certain
export trade receivables and certain monetary assets held by its subsidiaries
whose functional currency is not the U.S. dollar and based on the weaker U.S.
dollar reported a revaluation loss in the second quarter and first half of 2003.
The net impact of currency exchange rate fluctuations increased operating income
by $2.5 million in both the second quarter and first half of 2003 when compared
to the year-earlier periods.

General corporate

The following table sets forth certain information regarding general
corporate income (expense).



Three months ended Six months ended
June 30, Difference June 30, Difference
------------------- ----------- ------------------- ----------
2003 2002 2003 2002
------- ------- ------- -------
(In millions)


Currency transaction
gain, net ........ $-- $ 18.1 $ (18.1) $-- $ 15.8 $ (15.8)
Interest expense ... (8.2) (1.0) (7.2) (16.1) (1.7) (14.4)
Interest expense to
affiliates ....... -- (9.0) 9.0 (0.1) (18.7) 18.6
Interest income from
affiliates ....... -- 10.3 (10.3) -- 19.2 (19.2)
------- ------- ------- ------- ------- -------

$ (8.2) $ 18.4 $ (26.6) $ (16.2) $ 14.6 $ (30.8)
======= ======= ======= ======= ======= =======


Net corporate currency transaction gains in the second quarter and first
half of 2002 related primarily to the Company's dollar-denominated, 11.75%
Second-tier Senior Mirror Note payable to Kronos, Inc., which was repaid in June
2002 using a portion of the proceeds from the Notes offering. As a result of the
repayment of this loan from affiliate, the Company does not expect any corporate
currency transaction gains or losses in 2003.

Interest expense to third parties in the second quarter and first half
of 2003 increased $7.2 million and $14.4 million, respectively, from the second
quarter and first half of 2002 primarily due to higher levels of outstanding
debt and associated currency effects. Interest expense to affiliates decreased
$9.0 million and $18.6 million, respectively, from the second quarter and first
half of 2002 due to the repayment of loans from affiliates in June 2002 using
proceeds from the Company's (euro)285 million Senior Secured Notes offering (the
"Notes"). The Company expects its aggregate interest expense for full-year 2003
to be higher than full-year 2002 due to higher levels of outstanding
indebtedness, offset in part by the effect of lower average rates on outstanding
borrowings. As a result of the repayment of the loans from affiliates in June
2002, the Company does not expect a material amount of interest expense to
affiliates in 2003.

Interest income from affiliates decreased $10.3 million and $19.2
million, respectively, from the second quarter and first half of 2002 due to the
redemption and extinguishment of all notes receivable from affiliates in July

-21-


2002. As a result of the redemption and extinguishment of affiliate notes
receivable, the Company does not expect a material amount of interest income
from affiliates in 2003.

Provision for income taxes

The Company recognized a $24.6 million income tax benefit in the second
quarter of 2003 related to the previously reported favorable German court ruling
concerning the Company's claim for refund suit. Based on amended German tax
returns filed by the Company in the second quarter of 2003, the German tax
authorities refunded to the Company (euro)21.5 million ($24.6 million at June
30, 2003 exchange rates) in early July 2003. The Company's provision for income
taxes for the first half of 2002 differs from the normally expected statutory
rate due principally to the utilization of certain tax attributes that
previously did not meet the "more-likely-not" recognition criteria, currency
transaction gains, net, on which no income taxes were provided and adjustment to
certain other deferred tax liabilities. See Note 10 to the Consolidated
Financial Statements.

Recently adopted accounting principles

As described in Note 1 in the Consolidated Financial Statements, the
Company adopted Statement of Financial Accounting Standards No. 143, "Accounting
for Asset Retirement Obligations," effective January 1, 2003.

LIQUIDITY AND CAPITAL RESOURCES

The Company's consolidated cash flows from operating, investing and
financing activities for the six months ended June 30, 2003 and 2002 are
presented below.



Six months ended
June 30,
----------------
2003 2002
------- -------
(In millions)


Net cash provided (used) by:
Operating activities:
Before changes in assets and liabilities ...................... $ 73.9 $ 27.1
Changes in assets and liabilities ............................. (41.1) 8.7
------- -------
32.8 35.8
Investing activities .............................................. (12.9) (10.8)
Financing activities .............................................. (20.5) (42.3)
------- -------

Net cash used by operating, investing, and financing activities $ (.6) $ (17.3)
======= =======

-22-


Operating activities

The TiO2 industry is cyclical and changes in economic conditions within
the industry significantly affect the earnings and operating cash flows of the
Company. Cash flow from operations is considered the primary source of liquidity
for the Company. Changes in TiO2 pricing, production volume and customer demand,
among other things, could significantly affect the liquidity of the Company.
Cash flow from operations, before changes in assets and liabilities, in the
first half of 2003 increased from the comparable period in 2002 primarily due to
$25.9 million of higher operating income and $20.4 million of higher current
income tax benefits, net (see Note 10 to the Consolidated Financial Statements).
Changes to the Company's assets and liabilities, excluding the effect of
currency translation, in the first half of 2003 compared with the first half of
2002, were negatively affected primarily by $20.1 million of higher refundable
income taxes and $11.2 million of lower insurance proceeds collected. The net
cash used to fund changes in the Company's inventories, receivables, payables
and accounts with affiliates (excluding the effect of currency translation) in
the first half of 2003 was significantly higher than the first half of 2002 due
to higher inventory balances, increases in accounts and notes receivable and
decreases in accounts with affiliates in the first half of 2003. Decreases in
accounts with affiliates in first half of 2003 compared with first half of 2002
was due primarily to payments for raw materials purchases.

Investing activities

Capital expenditures were $11.9 million and $10.1 million in the first
six months of 2003 and 2002, respectively. Capital expenditures in the first
half of 2002 included approximately $2.2 million related to reconstruction of
the Company's Leverkusen, Germany sulfate plant damaged in the March 2001 fire.

Financing activities

In March 2003 the Company borrowed (euro)15.0 million ($16.1 million
when borrowed) and in April 2003 the Company repaid NOK 80 million ($11.0
million when repaid) under the revolving credit facility.

In June 2003 the Company paid a $25.0 million dividend to Kronos . No
dividends were paid in the first quarter of 2003.

In March 2002 the Company repaid $25 million in principal amount of
affiliate indebtedness to Kronos. In June 2002 the Company repaid $169 million
principal amount, plus accrued interest of affiliate indebtedness to Kronos with
proceeds from the notes offering discussed below. Further, in June 2002, the
Company repaid (euro)113.8 million ($111.8 million), including interest, of the
euro-denominated note payable to Kronos with proceeds from the notes offering
discussed below.

In June 2002 the Company issued (euro)285 million ($280 million when
issued and $283 million at June 30, 2002) principal amount of Notes due 2009.
The Notes are collateralized by first priority liens on 65% of the common stock
or other equity interests of certain of our first-tier subsidiaries. The Notes
were 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, merge or consolidate with, or sell or
transfer all or substantially all of their assets to, another entity. The
indenture further restricts the ability of KII to pay dividends under certain
conditions.


-23-



In June 2002 the Company's operating subsidiaries in Germany, Belgium
and Norway, entered into a three-year (euro)80 million secured revolving credit
facility ("Credit Facility"). The Credit Facility is available in multiple
currencies, including U.S. dollars, euros and Norwegian kroner. As of June 30,
2002, (euro)13 million ($13 million) and NOK 200 million ($26 million) was
borrowed at closing, and along with available cash, was used to repay and
terminate KII's short-term notes payable ($53.2 million when repaid).

Deferred financing costs of $9.3 million for the Notes and the Credit
Facility are being amortized over the life of the respective agreements and are
included in other noncurrent assets.

Cash flows related to capital contributions and other transactions with
affiliates aggregated a net cash inflow of $2.9 million for the first six months
of 2002. Such amounts relate principally to cash flows related to dividends or
loans KII received from, or capital contributions or loans KII made to
affiliates (such notes receivable from affiliates having previously been
reported as a reduction of the Company's stockholder's equity, and therefore
considered financing cash flows). As discussed in Note 1 of the Consolidated
Financial Statements, KII transferred its Canadian operations to Kronos in April
2002, and accordingly KII no longer reports such capital transaction cash flows
related to such Canadian operations subsequent to April 2002.

Cash, cash equivalents, restricted cash and noncurrent restricted marketable
debt securities and borrowing availability

At June 30, 2003, the Company had cash and cash equivalents aggregating
$15.8 million and an additional $2.9 million of restricted cash and noncurrent
restricted marketable debt securities, of which $2.0 million was classified as
noncurrent. Based upon expectations for the TiO2 industry and anticipated
demands on cash resources as discussed herein, the Company expects to have
sufficient liquidity to meet near-term obligations including operations, capital
expenditures and debt service. To the extent that actual developments differ
from expectations, liquidity could be adversely affected.

Certain of the Company's subsidiaries had approximately $55 million
available for borrowing at June 30, 2003 under the Credit Facility. At June 30,
2003, the Company had approximately $50 million available for payments of
dividends and other restricted payments as defined in the Notes indenture. At
June 30, 2003, the Company had complied with all financial covenants governing
its debt agreements.

Income tax contingencies

See Note 10 to the Consolidated Financial Statements.

Redeemable preferred stock, profit participation certificates and notes
receivable from affiliates

In July 2002 KII and Kronos agreed to a recapitalization of the Company
as contemplated in the Notes offering. In connection with the recapitalization
agreement, KII converted the Series A (738 shares) and Series B (647 shares)
redeemable preferred stock (including liquidation and redemption preferences and
accrued and unpaid dividends) held by Kronos into 1,385 shares of KII, $100 par
value, common stock. As a result of the conversion, the Series A and B
redeemable preferred stock certificates were canceled. Further, KII redeemed its


-24-


profit participation certificates held by Kronos in exchange for various notes
receivable from NL. As a result of the redemption, the profit participation
certificates were canceled. Finally, KII redeemed 1,613 shares of KII common
stock held by Kronos in exchange for its remaining notes receivable from NL and
Kronos.

Foreign operations

The Company's operations are 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 (and income and expenses) 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 June 30, 2003, the
Company had substantial net assets denominated in the euro, Norwegian kroner and
United Kingdom pound sterling.

Environmental, product liability and litigation matters

See Note 11 to the Consolidated Financial Statements.

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 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;
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, and loans to, related companies. In the event of any acquisition
or joint venture 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.

Disclosure regarding forward-looking statements

The statements contained in these Consolidated Financial Statements
relating to matters that are not historical facts, including, but not limited
to, statements found under the captions "Results of Operations" and "Liquidity
and Capital Resources" above, 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," "will," "should," "could," "anticipates,"
"expects," or comparable terminology or by discussions of strategy 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 risks and uncertainties, including, but not limited to, the cyclicality
of the titanium dioxide industry, global economic and political conditions,
changes in global productive capacity, changes in customer inventory levels,
changes in product pricing, changes in product costing, changes in foreign
currency exchange rates, competitive technology positions, operating
interruptions (including, but not limited to, labor disputes, leaks, fires,
explosions, unscheduled downtime, transportation interruptions, war and
terrorist activities), the ultimate resolution of NL's pending or possible


-25-


future lead pigment litigation and legislative developments related to the lead
pigment litigation, the outcome of other litigation and tax controversies, and
other risks and uncertainties included in this Quarterly Report and in the 2002
Annual Report, and the uncertainties set forth from time to time in the
Company's and NL's filings with the Securities and Exchange Commission. 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 and NL disclaim any intention or obligation to update publicly or revise
such statements whether as a result of new information, future events or
otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of the Company's market risks, refer to the caption
"Quantitative and Qualitative Disclosures About Market Risk" in the 2002 Annual
Report. There have been no material changes to the information provided that
would require additional information with respect to the quarter ended June 30,
2003.

ITEM 4. 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
Securities and Exchange Commission ("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 Robert D. Hardy, the Company's Chief Financial
Officer, have evaluated the Company's disclosure controls and procedures as of
June 30, 2003. 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.

The Company also maintains a system of internal controls 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 accounting
principles generally accepted in the United States of America ("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

-26-




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.

There has been no change to the Company's system of internal controls over
financial reporting during the quarter ended June 30, 2003 that has materially
affected, or is reasonably likely to materially affect, the Company's system of
internal controls over financial reporting.


PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Reference is made to Note 11 to the Consolidated Financial
Statements, and for descriptions of previously reported legal proceedings,
reference is made to the 2002 Annual Report and the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 2003.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

The Company has retained a signed original of any exhibit
listed below that contains signatures, and the Company
will provide any such exhibit to the SEC or its staff upon
request.

31.1 Certification.
31.2 Certification.
32.1 Certification.

(b) Reports on Form 8-K

Reports on Form 8-K filed during the quarter ended June
30, 2003 and through the date of this report:

May 6, 2003 - Reported Items 7 and 9.

-27-



SIGNATURES
----------


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.





KRONOS INTERNATIONAL, INC.
----------------------------
(Registrant)



Date: August 6, 2003 By /s/ Robert D. Hardy
- --------------------- --------------------------------------
Robert D. Hardy
Principal Financial and Accounting
Officer

-28-