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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended ~~September~~March 3031, ~~2011~~2012

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

incorporation or organization)

(IRS Employer

Identification No.)

5430 LBJ Freeway, Suite 1700

Dallas, Texas 75240-2697

(Address of principal executive offices)

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~~Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

Number of shares of the Registrant’s common stock outstanding on ~~October~~April 3130, ~~2011~~2012: 2,968.

The Registrant is a wholly -owned subsidiary of Kronos Worldwide, Inc. (File No. 1-31763) 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

		Pagenumber
Part I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets - December 31, 2010; September 30, 2011 (Unaudited)		3
	Condensed Consolidated Balance Sheets — December 31, 2011; March 31, 2012 (unaudited)		3
	Condensed Consolidated Statements of Income (Unaudited) - Three and nine months ended September 30, 2010 and 2011		5
	Condensed Consolidated Statements of Income (unaudited) — Three months ended March 31, 2011 and 2012		5
	Condensed Consolidated Statement of Stockholder’s Equity and Comprehensive Income (Unaudited) - Nine months ended September 30, 2011		6
	Condensed Consolidated Statements of Comprehensive Income (unaudited) — Three months ended March 31, 2011 and 2012		6
	Condensed Consolidated Statements of Cash Flows (Unaudited) - Nine months ended September 30, 2010 and 2011		7
	Condensed Consolidated Statement of Stockholder’s Equity (unaudited) — Three months ended March 31, 2012		7
	Notes to Condensed Consolidated Financial Statements (Unaudited)		8
	Condensed Consolidated Statements of Cash Flows (unaudited) — Three months ended March 31, 2011 and 2012		8
	Notes to Condensed Consolidated Financial Statements (unaudited)		9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3.	Quantitative and Qualitative Disclosure About Market Risk		2522
Item 4.	Controls and Procedures		2523
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings		2724
Item 1A.	Risk Factors		2724
Item 6.	Exhibits		2724

Items 2, 3, 4 and 5 of Part II are omitted because there is no information to report.

- 2 -

KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

	December 31,2010		September 30,2011
	December 31,2011		March 31,2012
			(Unaudited)
			(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4919.89	$	3523.40
Restricted cash		1.9		1.58
Accounts and other receivables		~~161~~180.56		~~229~~293.3
Inventories		~~202~~339.9		~~255~~449.21
Prepaid expenses and other		43.07		5.4.5
Deferred income taxes		.4		.4
Total current assets		546.0		771.7
Total current assets		420.5		527.2
Other assets:
Deferred financing costs, net		42.30		21.57
Deferred income taxes		~~191~~130.6		~~156~~117.26
Other		59.45		89.30
Total other assets		~~201~~142.31		~~167~~128.03
Property and equipment:
Land		4241.4		4342.48
Buildings		~~170~~171.91		~~174~~176.87
Equipment		~~828~~841.53		~~850~~872.59
Mining properties		~~115~~114.9		120.56
Construction in progress		1019.21		2819.97
		1,167.9		1,218.1
		1,187.8		1,232.7
Less accumulated depreciation and amortization		~~766~~773.07		~~807~~808.83
Net property and equipment		~~401~~414.91		~~410~~424.34
Total assets	$	1,~~023~~102.72	$	1,~~104~~324.54

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KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In millions)

	December 31,2010			September 30,2011
	December 31,2011			March 31,2012
				(Unaudited)
				(unaudited)
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Current maturities of long-term debt	$	2.2		$	2.20
Accounts payable and accrued liabilities		~~152~~212.41			~~196~~195.93
Income taxes		613.84			1830.20
Deferred income taxes		46.72			46.83
Total current liabilities		~~166~~233.19			~~222~~233.16
Noncurrent liabilities:
Long-term debt		~~537~~362.49			~~400~~479.75
Deferred income taxes		1411.91			1511.5
Accrued pension cost		~~100~~90.70			9891.83
Other		2426.20			2527.71
Total noncurrent liabilities		~~677~~490.20			~~540~~609.74
Stockholder’s equity:
Common stock		.3			.3
Additional paid-in capital		1,~~976~~983.01			1,~~981~~986.45
Retained deficit		(1,~~385~~155.10	)		(1,~~211~~065.42	)
Notes receivable from affiliates		(~~255~~276.67	)		(~~271~~281.56	)
Accumulated other comprehensive loss		(~~155~~173.24	)		(~~157~~158.16	)
Total stockholder’s equity		~~180~~378.43			~~341~~481.74
Total liabilities and stockholder’s equity	$	1,~~023~~102.72		$	1,~~104~~324.54

Commitments and contingencies (Notes 6 and 9)

See accompanying Notes to Condensed Consolidated Financial Statements.

- 4 -

KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions)

	Three months endedSeptember 30,						Nine months endedSeptember 30,
	Three months endedMarch 31,
	2010			2011			2010			2011
	2011			2012
	(Unaudited)
	(unaudited)
Net sales	$	~~250~~298.47		$	~~399~~383.49		$	~~735.8~~		$	~~1,102.1~~
Cost of sales		~~192~~194.84			~~249~~216.32			~~582.0~~			~~699.6~~
Gross margin		57104.63			~~150~~167.17			~~153.8~~			~~402.5~~
Selling, general and administrative expense		3133.14			3837.73			~~91.9~~			~~112.5~~
Currency transaction gains, net		~~3.2~~—			—.5			~~3.5~~			.2
Other operating income, net		12.94			36.20			~~6.9~~			~~8.1~~
Income from operations		3173.63			~~114~~136.69			~~72.3~~			~~298.3~~
Other income (expense):
Interest income		—.1			.12			.1			.2
Gain (loss) on prepayment of debt, net		—			.1			—			(3.2	)
Loss on prepayment of debt		(3.3	)		—
Interest expense		(8.9.3	)		(86.13	)		~~(28.5~~	)		~~(25.9~~	)
Income before income taxes		2260.78			~~106~~130.78			~~43.9~~			~~269.4~~
Income tax expense (benefit)		7.3			41.9			(20.8	)		95.7
Income tax expense		19.7			41.0
Net income	$	1541.41		$	6489.8		$	~~64.7~~		$	~~173.7~~

See accompanying Notes to Condensed Consolidated Financial Statements.

- 5 -

KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~STOCKHOLDER’S EQUITY AND~~ COMPREHENSIVE INCOME

Nine months ended September 30, 2011

(In millions)

	Commonstock		Additionalpaid-incapital			Retaineddeficit			Notesreceivablefromaffiliates			Accumulatedothercomprehensiveloss			Totalstockholder’sequity			Comprehensiveincome
	Three months endedMarch 31,
	(Unaudited)
	2011		2012
Balance at December 31, 2010	$	.3	$	1,976.0		$	(1,385.1	)	$	(255.6	)	$	(155.2	)	$	180.4
	(unaudited)
Net income	$	—41.1	$	—89.8			~~173.7~~			—			—			~~173.7~~		$	~~173.7~~
Other comprehensive loss, net		—		—			—			—			(1.9	)		(1.9	)		(1.9	)
Other comprehensive income (loss), net of tax:
Intercompany interest – Kronos Worldwide, Inc.		—		5.4			—			(15.9	)		—			(10.5	)		—
Marketable securities adjustment		—		(.7	)
Balance at September 30, 2011	$	.3	$	1,981.4		$	(1,211.4	)	$	(271.5	)	$	(157.1	)	$	341.7
Currency translation adjustment		10.2		14.5
Comprehensive income																		$	171.8
Pension plans		1.1		1.0
Total other comprehensive income		11.3		14.8
Comprehensive income	$	52.4	$	104.6

See accompanying Notes to Condensed Consolidated Financial Statements.

- 6 -

KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENT OF ~~CASH~~STOCKHOLDER’S ~~FLOWS~~EQUITY

Three months ended March 31, 2012

(In millions)

	Nine months endedSeptember 30,
	Commonstock			Additionalpaid-incapital			Retaineddeficit			Notesreceivablefromaffiliates			Accumulatedothercomprehensiveloss			Totalstockholder’sequity
	2010			2011
	(unaudited)
	(Unaudited)
Balance at December 31, 2011	$	.3		$	1,983.1		$	(1,155.0	)	$	(276.7	)	$	(173.4	)	$	378.3
Cash flows from operating activities:
Net income		—			—			89.8			—			—			89.8
Net income	$	64.7		$	173.7
Other comprehensive income, net		—			—			—			—			14.8			14.8
Depreciation and amortization		28.6			30.9
Intercompany interest – Kronos Worldwide, Inc.		—			3.4			—			(4.9	)		—			(1.5	)
Deferred income taxes		(27.0	)		37.9
Balance at March 31, 2012	$	.3		$	1,986.5		$	(1,065.2	)	$	(281.6	)	$	(158.6	)	$	481.4
Loss on prepayment of debt		—			3.2
Call premium paid		—			(2.5	)
Defined benefit pension plan expense greater than cash funding		2.3			.7
Other, net		2.8			4.7
Change in assets and liabilities:
Accounts and other receivables		(50.0	)		(66.9	)
Inventories		5.0			(49.6	)
Prepaid expenses		—			(1.2	)
Accounts payable and accrued liabilities		14.8			17.0
Income taxes		(.4	)		10.1
Accounts with affiliates		(16.2	)		23.3
Other, net		2.4			.2
Net cash provided by operating activities		27.0			181.5
Cash flows from investing activities:
Capital expenditures		(19.2	)		(36.1	)
Change in restricted cash, net		.5			.5
Other, net		—			(5.1	)
Net cash used in investing activities		(18.7	)		(40.7	)
Cash flows from financing activities:
Indebtedness:
Borrowings		41.8			113.3
Principal payments		(51.8	)		(269.2	)
Other, net		—			(.1	)
Net cash used in financing activities		(10.0	)		(156.0	)
Cash and cash equivalents – net change from:
Operating, investing and financing activities		(1.7	)		(15.2	)
Currency translation		(1.6	)		.8
Balance at beginning of period		29.4			49.8
Balance at end of period	$	26.1		$	35.4
Supplemental disclosures:
Cash paid for:
Interest (including call premium paid)	$	18.3		$	22.4
Income taxes		5.8			39.6
Accrual for capital expenditures		1.9			5.9

See accompanying Notes to Condensed Consolidated Financial Statements.

- 7 -

KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)


	Three months ended March 31,
	2011			2012
	(unaudited)
Cash flows from operating activities:
Net income	$	41.1		$	89.8
Depreciation and amortization		9.9			10.2
Deferred income taxes		7.7			15.3
Loss on prepayment of debt		3.3			—
Call premium paid		(2.5	)		—
Defined benefit pension plan expense less than cash funding		(1.9	)		(.1	)
Other, net		.2			.4
Change in assets and liabilities:
Accounts and other receivables		(37.6	)		(109.9	)
Inventories		(35.7	)		(96.2	)
Prepaid expenses		(.7	)		(.5	)
Accounts payable and accrued liabilities		8.8			25.2
Income taxes		5.7			15.1
Accounts with affiliates		12.9			(34.6	)
Other, net		(1.1	)		1.4


Net cash provided by (used in) operating activities		10.1			(83.9	)

Cash flows from investing activities:
Capital expenditures		(13.0	)		(20.8	)
Change in restricted cash, net		.6			.5


Net cash used in investing activities		(12.4	)		(20.3	)

Cash flows from financing activities:
Indebtedness:
Borrowings		113.3			107.4
Principal payments		(113.8	)		(.4	)


Net cash provided by (used in) financing activities		(.5	)		107.0

Cash and cash equivalents — net change from:
Operating, investing and financing activities		(2.8	)		2.8
Currency translation		2.6			.3
Balance at beginning of period		49.8			19.9


Balance at end of period	$	49.6		$	23.0

Supplemental disclosures:
Cash paid for:
Interest (including call premium paid)	$	5.8		$	—
Income taxes		6.0			17.2
Accrual for capital expenditures		2.6			1.3

See accompanying Notes to Condensed Consolidated Financial Statements.

- 8 -

KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~September~~March 3031, ~~2011~~2012

(~~Unaudited~~unaudited)

Note 1 – Organization and basis of presentation:

Organization – We are a wholly-owned subsidiary of Kronos Worldwide, Inc. (“Kronos”) (NYSE: KRO). We are incorporated in the state of Delaware, U.S.A., with our seat of management in Leverkusen, Germany. At ~~September~~March 3031, ~~2011~~2012, Valhi, Inc. (NYSE: VHI) held approximately 50% of Kronos’ outstanding common stock and NL Industries, Inc. (NYSE: NL) held an additional 30% of Kronos’ common stock. Valhi owns approximately 83% of NL’s outstanding common stock. Approximately 9495% of Valhi’s outstanding common stock is held by ~~subsidiaries of~~ Contran Corporation and its subsidiaries. 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 (for which Mr. Simmons is sole trustee), or is held directly by Mr. Simmons or other persons or entities related to Mr. Simmons. Consequently, Mr. Simmons may be deemed to control each of ~~these~~Contran, ~~companies~~Valhi and us.

Basis of presentation – The unaudited Condensed Consolidated Financial Statements contained in this Quarterly Report have been prepared on the same basis as the audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, ~~2010~~2011 that we filed with the Securities and Exchange Commission (“SEC”) on March 45, ~~2011~~2012 (the ~~“2010~~2011 Annual Report”). In our opinion, we have made all necessary adjustments (which include only normal recurring adjustments) in order to state fairly, in all material respects, our consolidated financial position, results of operations and cash flows as of the dates and for the periods presented. We have condensed the Consolidated Balance Sheet and Statement of Stockholder’s Equity ~~and Comprehensive Income (Loss)~~ at December 31, ~~2010~~2011 contained in this Quarterly Report as compared to our audited Consolidated Financial Statements at that date, and we have omitted certain information and footnote disclosures (including those related to the Consolidated Balance Sheet at December 31, ~~2010~~2011) normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Our results of operations for the interim ~~periods~~period ended ~~September~~March 3031, ~~2011~~2012 may not be indicative of our operating results for the full year. The Condensed Consolidated Financial Statements contained in this Quarterly Report should be read in conjunction with our ~~2010~~2011 Consolidated Financial Statements contained in our ~~2010~~2011 Annual Report.

Unless otherwise indicated, references in this report to “we,” “us” or “our” refer to Kronos International, Inc. and its subsidiaries taken as a whole.

- 89 -

Note 2 – Accounts and other receivables:

	December 31,2010			September 30,2011
	December 31,2011			March 31,2012
	(In millions)
Trade receivables	$	~~137~~159.9		$	~~206~~261.86
Recoverable VAT and other receivables		2317.01			2024.61
Refundable income taxes		2.90			—2.2
Receivable from affiliate - Kronos Canada		1.9			3.1
Receivable from affiliates:
Allowance for doubtful accounts		(2.2	)		(1.2	)
Kronos Canada, Inc.		2.7			5.3
Total	$	161.5		$	229.3
Kronos (US), Inc.		.1			1.3
Allowance for doubtful accounts		(1.2	)		(1.2	)
Total	$	180.6		$	293.3

Note 3 – Inventories:

	December 31,2010		September 30,2011
	December 31,2011		March 31,2012
	(In millions)
Raw materials	$	4180.56	$	74127.7
Work in process		914.91		917.41
Finished products		~~107~~199.0		~~123~~254.82
Supplies		4446.52		4750.31
Total	$	~~202~~339.9	$	~~255~~449.21

Note 4 – Accounts payable and accrued liabilities:

	December 31,2010		September 30,2011
	December 31,2011		March 31,2012
	(In millions)
Accounts payable	$	8193.16	$	8095.76
Employee benefits		25.03		2826.0
Accrued sales discounts and rebates		9.0		117.38
Payable to affiliates:
Kronos (US), Inc.		1452.08		3133.10
Income taxes, net - Kronos Worldwide, Inc.		—		12.0
Kronos Canada, Inc.		.1		—
Kronos Canada, Inc.		.2		.5
Kronos – income taxes		7.1		—
Accrued interest		75.40		1211.02
Other		1519.72		21.37
Total	$	~~152~~212.41	$	~~196~~195.93

Note 5 – Long-term debt:

	December 31,2010		September 30,2011
	December 31,2011		March 31,2012
	(In millions)
Long-term debt:
6.5% Senior Secured Notes	$	~~532~~360.86	$	~~397~~371.60
Other		6.8		5.3
Revolving credit facility		—		106.4
Total debt		539.6		402.9
Other		4.5		4.1
Less current maturities		2.2		2.2
Total debt		365.1		481.5
Total long-term debt	$	537.4	$	400.7
Less current maturities		2.2		2.0
Total long-term debt	$	362.9	$	479.5

- 9 -

Senior Secured Notes – In March 2011, we redeemed euro 80 million principal amount of our euro 400 million 6.5% Senior Secured Notes at 102.17% of the principal amount for an aggregate of $115.7 million, including a $2.5 million call premium. During the third quarter of 2011, we repurchased in open market transactions an aggregate of euro 30.4 million principal amount of our Senior Secured Notes (including euro 3.0 million for which settlement of the purchase did not occur until October 2011) for an aggregate of euro 30.2 million (including euro 3.0 million for the October 2011 settlement). The aggregate euro 27.4 million principal amount for which settlement occurred in the third quarter of 2011 was the equivalent of $39.3 million when repurchased. Following such partial redemption and repurchases, euro 292.6 million principal amount of the Senior Notes remain outstanding at September 30, 2011 (including the euro 3.0 million principal amount of notes repurchased in late September 2011 for which settlement did not occur until October 2011). In the first quarter of 2011, we recognized a $3.3 million pre-tax interest charge related to the redemption of euro 80 million of the 6.5% Senior Secured Notes consisting of the call premium, the write-off of unamortized deferred financing costs and original issue discount associated with the redeemed Senior Notes. In the third quarter of 2011, we recognized a $.1 million net gain on the euro 30.4 million principal amount of Senior Notes repurchased in open market transactions. We borrowed under our revolving credit facility, as discussed below, in order to fund the redemption in the first quarter 2011, while we used cash on hand to fund the third quarter open market repurchases. In October 2011, we repurchased an additional euro 10.5 million principal amount of Senior Notes for an aggregate of euro 10.4 million.

Revolving credit facility – During the first nine months of 2011, we borrowed euro 80 million ($113.3 million when borrowed) and subsequently repaid euro 80 million ($115.0 million when repaid). As of September 30, 2011, no amounts were outstanding under the credit facility and the equivalent of $109 million was available for borrowing by the subsidiaries.

Restrictions and other – Our credit facility described above requires the borrower to maintain minimum levels of equity, requires the maintenance of certain financial ratios, limits dividends and additional indebtedness and contains other provisions and restrictive covenants customary in lending transactions of this type. We are in compliance with all of our debt covenants at September 30, 2011. We believe we will be able to comply with the financial covenants contained in our credit facility through the maturity of the facility; however if future operating results differ materially from our expectations we may be unable to maintain compliance.

The terms of the indenture governing the 6.5% Senior Secured Notes limit our ability to pay dividends and make other restricted payments. At September 30, 2011, the maximum amount of dividends and other restricted payments that we could make (the “Restricted Payment Basket”) was $190.8 million.

- 10 -

Senior Secured Notes – In March, 2011, we redeemed €80 million of our €400 million 6.5% Senior Secured Notes at 102.17% of the principal amount for an aggregate of $115.7 million, including a $2.5 million call premium. During the third and fourth quarters of 2011, we repurchased in open market transactions an aggregate of €40.8 million principal amount of the Senior Notes for an aggregate of €40.6 million (an aggregate of $57.6 million when repurchased). Following such partial redemption and repurchases, €279.2 million principal amount of Senior Notes remain outstanding. We recognized a $3.3 million pre-tax interest charge related to the prepayment of the Senior Notes in the first quarter of 2011, consisting of the call premium and the write-off of unamortized deferred financing costs and original issue discount associated with the redeemed Senior Notes.

Revolving credit facility —During the first three months of 2012, we borrowed €80 million ($107.4 million when borrowed) under our bank credit facility. The average interest rate on these borrowings at March 31, 2012 was 1.94%.

Restrictions and other – Our credit facility described above requires the borrower to maintain minimum levels of equity, requires the maintenance of certain financial ratios, limits dividends and additional indebtedness and contains other provisions and restrictive covenants customary in lending transactions of this type. We are in compliance with all of our debt covenants at March 31, 2012. We believe that we will be able to comply with the financial covenants contained in our credit facility through its maturity; however if future operating results differ materially from our expectations we may be unable to maintain compliance.

The terms of the indenture governing the 6.5% Senior Secured Notes limit our ability to pay dividends and make other restricted payments. At March 31, 2012, the maximum amount of dividends and other restricted payments that we could make (the “Restricted Payment Basket”) was $348.0 million.

Note 6 – Income taxes:

	Nine months endedSeptember 30,
	Three months endedMarch 31,
	2010			2011
	2011			2012
	(In millions)
Expected tax expense, at U.S. federal statutory income tax rate of 35%	$	1521.43		$	9445.38
Non-U.S. tax rates		(12.71	)		(95.43	)
Incremental tax on earnings of non-U.S. companies		—			7.6
Other, net		.5			.5
Nondeductible expenses		1.1			2.2
Total	$	19.7		$	41.0
German tax attribute adjustment		(35.2	)		—
Other, net		(.4	)		1.0
Total	$	(20.8	)	$	95.7

~~Our~~Tax ~~provision~~authorities ~~for~~are ~~income~~examining ~~taxes~~certain of our tax returns and have or may propose tax deficiencies, including penalties and interest. Because of the inherent uncertainties involved in the ~~third~~settlement ~~quarter~~initiatives ofand ~~2011~~court ~~includes~~and $7tax proceedings, we cannot guarantee that these tax matters will be resolved in our favor, and therefore our potential exposure, if any, is also uncertain.6 ~~million~~We believe we have adequate accruals for Uadditional taxes and related interest expense which could ultimately result from tax examinations.S. ~~incremental~~We believe the ultimate disposition of tax examinations should not have ~~income~~a ~~taxes~~material adverse effect on ~~current~~our ~~earnings~~consolidated ~~repatriated~~financial ~~from~~position, results of operations or liquidity. We currently estimate that our ~~German~~unrecognized ~~subsidiary~~tax benefits will not change materially during the next twelve months.

Tax authorities are examining certain of our tax returns and have or may propose tax deficiencies, including penalties and interest. Because of the inherent uncertainties involved in the settlement initiatives and court and tax proceedings, we cannot guarantee that these tax matters will be resolved in our favor and therefore our potential exposure, if any, is also uncertain. We believe we have adequate accruals for additional taxes and related interest expense which could ultimately result from tax examinations. We believe the ultimate disposition of tax examinations should not have a material adverse effect on our consolidated financial position, results of operations or liquidity. We currently estimate that our unrecognized tax benefits will not change materially during the next twelve months.

As a consequence of a European Court ruling that resulted in a favorable resolution of certain income tax issues in Germany, during the first quarter of 2010 the German tax authorities agreed to an increase in our German net operating loss carryforwards. Accordingly, we recognized a non-cash income tax benefit of $35.2 million in the first quarter of 2010.

Note 7 – Employee benefit plans:

The components of net periodic defined benefit pension cost are presented in the table below.

	Three months endedSeptember 30,						Nine months endedSeptember 30,
	2010			2011			2010			2011
	(In millions)
Service cost	$	1.9		$	2.0		$	5.8		$	6.1
Interest cost		4.1			4.7			12.9			13.9
Expected return on plan assets		(2.9	)		(3.2	)		(9.0	)		(9.5	)
Amortization of prior service cost		.1			.2			.4			.5
Amortization of net transition obligations		—			.1			.1			.1
Recognized actuarial losses		1.1			1.3			3.4			3.9
Total	$	4.3		$	5.1		$	13.6		$	15.0

- 11 -

~~Contributions~~Note 7 – WeEmployee ~~expect~~benefit ~~our 2011 contributions for our pension~~ plans: ~~to be approximately $22 million.~~

The components of net periodic defined benefit pension cost are presented in the table below.


	Three months ended March 31,
	2011			2012
	(In millions)
Service cost	$	2.0		$	1.7
Interest cost		4.5			4.4
Expected return on plan assets		(3.0	)		(3.0	)
Amortization of prior service cost		.1			.1
Recognized actuarial losses		1.2			1.3


Total	$	4.8		$	4.5

Contributions – We expect our 2012 contributions for our pension plans to be approximately $19 million.

Note 8 – Other noncurrent liabilities:

	December 31,2010		September 30,2011
	December 31,2011		March 31,2012
	(In millions)
Reserve for uncertain tax positions	$	1011.69	$	1112.85
Employee benefits		910.72		910.75
Other		3.9		4.21
Total	$	2426.20	$	2527.71

Note 9 – Commitments and contingencies:

~~Litigation matters –~~ From time-to-time we are involved in various environmental, contractual, product liability, patent (or intellectual property), employment and other claims and disputes incidental to our operations. In certain cases, we have insurance coverage for these items. We currently believe the disposition of all claims and disputes, individually or in the aggregate, should not have a material adverse effect on our consolidated financial position, results of operations or liquidity beyond the accruals we have already provided ~~for~~.

Please refer to our ~~2010~~2011 Annual Report for a discussion of certain other legal proceedings to which we are a party.

Note 10 – Financial instruments:

The following table ~~summarizes~~presents the ~~valuation of our~~ financial instruments ~~recorded~~that onare anot carried at fair value ~~basis~~but which require fair value disclosure as of December 31, ~~2010~~2011 and ~~September~~March 3031, ~~2011:~~2012.

	Fair Value Measurements
	Total		QuotedPrices inActiveMarkets(Level 1)		SignificantOtherObservableInputs(Level 2)		SignificantUnobservableInputs(Level 3)
	(In millions)
December 31, 2010:
Currency forward contracts	$	2.6	$	2.6		—		—
September 30, 2011:
Currency forward contracts		—		—		—		—

Certain of our sales generated by our operations are denominated in U.S. dollars. We periodically use currency forward contracts to manage a very nominal portion of currency exchange rate risk associated with trade receivables denominated in a currency other than the holder's functional currency or similar exchange rate risk associated with future sales. We have not entered into these contracts for trading or speculative purposes in the past, nor do we currently anticipate entering into such contracts for trading or speculative purposes in the future. Derivatives used to hedge forecasted transactions and specific cash flows associated with financial assets and liabilities denominated in currencies other than the U.S. dollar and which meet the criteria for hedge accounting are designated as cash flow hedges.

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Consequently, the effective portion of gains and losses is deferred as a component of accumulated other comprehensive income and is recognized in earnings at the time the hedged item affects earnings. Contracts that do not meet the criteria for hedge accounting are marked-to-market at each balance sheet date with any resulting gain or loss recognized in income currently as part of net currency transactions. The fair value of the currency forward contracts is determined using Level 1 inputs based on the currency spot forward rates quoted by banks. We do not hold any such currency forward contracts at September 30, 2011, and we did not use hedge accounting for any such contracts we previously held in 2010 and 2011.


	December 31, 2011				March 31, 2012
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
Cash, cash equivalents and restricted cash	$	21.8	$	21.8	$	24.8	$	24.8

Notes payable and long-term debt:
Fixed rate with market quotes - 6.5% Senior Secured Notes	$	360.6	$	362.6	$	371.0	$	375.6
Fixed rate with market quotes - 6.5% Senior Secured Notes	$	360.6	$	362.6	$	371.0	$	375.6
European credit facility		—		—		106.4		106.4

~~The~~At ~~following~~December 31, ~~table~~2011 ~~presents~~and March 31, 2012, the ~~financial~~estimated ~~instruments~~market ~~that~~price ~~are~~of ~~not~~the ~~carried~~6.5% atNotes was approximately €1,004 and €1,011 per €1,000 principal amount, respectively. The fair value ~~but~~of our 6.5% Notes is based upon quoted market prices at each balance sheet date; these quoted market prices represent Level 2 inputs because the markets in which ~~require~~the Notes trade are not active. The fair value ~~disclosure~~of asvariable ofinterest ~~December 31~~rate debt is deemed to approximate book value. Due to their near-term maturities, ~~2010~~the carrying amounts of accounts receivable and ~~September 30,~~accounts ~~2011~~payable are considered equivalent to fair value.

	December 31, 2010				September 30, 2011
	CarryingAmount		FairValue		CarryingAmount		FairValue
	(In millions)
Cash, cash equivalents and restricted cash	$	51.7	$	51.7	$	36.9	$	36.9
Notes payable and long-term debt:
Fixed rate with market quotes - 6.5% Senior Secured Notes	$	532.8	$	536.0	$	397.6	$	393.6

At December 31, 2010 and September 30, 2011, the estimated market price of the 6.5% Notes was approximately euro 1,004 and euro 988 per euro 1,000 principal amount, respectively. The fair value of our 6.5% Notes is based upon quoted market prices at each balance sheet date; these quoted market prices represent Level 2 inputs because the markets in which the Notes trade are not active. The fair value of variable interest rate debt is deemed to approximate book value. Due to their near-term maturities, the carrying amounts of accounts receivable and accounts payable are considered equivalent to fair value.

Note 11 – Recent accounting standards:

In ~~May~~June 2011 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) 2011-0405, ~~Amendments~~Presentation toof ~~Achieve~~Comprehensive ~~Common~~Income. ASU ~~Fair~~2011-05 ~~Value~~eliminates ~~Measurements~~the option of presenting comprehensive income as a component of the Consolidated Statement of Stockholders’ Equity and ~~Disclosure~~instead ~~Requirements~~requires comprehensive income to be presented as a component of the Consolidated Statement of Income or in ~~U.S.~~a ~~GAAP~~separate ~~and~~Consolidated ~~IFRSs~~Statement of Comprehensive Income immediately following the Consolidated Statement of Income. In accordance with ASU 2011-0405, ~~contains~~we ~~technical~~now ~~adjustments~~present ~~and~~our comprehensive ~~clarifications~~income in a separate Condensed Consolidated Statement of Comprehensive Income. Additionally, ASU 2011-05 would have required us to ~~more~~present ~~closely~~on ~~align~~the face of our financial statements the ~~U.S.~~effect ~~GAAP~~of ~~and~~reclassifications ~~International~~out ~~Financial~~of accumulative ~~Reporting~~other ~~Standards~~comprehensive income on the components of net income and other comprehensive income. However, in December 2011 the FASB issued ASU 2011-12, Comprehensive Income (~~“IFRS”~~Topic 220): Deferral of the Effective Date for ~~fair~~Amendments ~~value~~to ~~and~~the ~~will~~Presentation of beReclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU 2011-12 defers the effective date for the requirement to present on the face of our ~~first~~financial ~~quarter~~statements ~~2012~~the ~~report. We~~effects of doreclassifications ~~not~~out ~~believe~~of accumulated other comprehensive income on the ~~adoption~~components of ~~this~~net ~~standard~~income ~~will~~and other comprehensive income. Adoption of ASU 2011-05, as amended by ASU 2011-12, did not have a material effect on our Condensed Consolidated Financial Statements.

In ~~June~~December 2011 the FASB issued ASU 2011-~~05,~~11 ~~Presentation~~Disclosures ofabout ~~Comprehensive~~Offsetting ~~Income~~Assets and Liabilities. ASU 2011-0511 ~~will~~requires ~~eliminate~~entities ~~the option~~to ofdisclose ~~presenting~~both ~~comprehensive~~gross ~~income~~information asand anet ~~component~~information ofabout ~~the~~both ~~Consolidated~~instruments ~~Statement of Stockholder’s Equity~~ and ~~will~~transactions ~~instead~~eligible ~~require~~for ~~comprehensive~~offset ~~income to be presented as a component of the Consolidated Statement of Income or~~ in ~~a separate Consolidated Statement of Comprehensive Income immediately following~~ the ~~Consolidated~~balance ~~Statement~~sheet ofand ~~Income.~~instruments ~~Additionally,~~and ~~ASU~~transactions ~~2011-05~~subject ~~will require us~~ to ~~present~~an onagreement ~~the face of our financial statements reclassification adjustments for items that are~~similar ~~reclassified from other comprehensive income~~ to ~~net~~a ~~income~~master ~~where~~netting ~~the components of net income and other comprehensive income are presented~~arrangement. This standard will be effective for annual and interim periods beginning with our first quarter ~~2012~~2013 report. ~~Upon~~We ~~adoption~~do ofnot ~~ASU~~believe ~~2011-05,~~the ~~we intend~~adoption toof ~~present~~this ~~our~~standard ~~comprehensive~~will ~~income~~have in a ~~separate~~material ~~Consolidated~~effect ~~Statement~~on ofour ~~Comprehensive~~Condensed ~~Income~~Consolidated Financial Statements.

- 13 -

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS:

Business overview

We are a leading global producer and marketer of value-added titanium dioxide pigments (“, or TiO2”). TiO2 is used for a variety of manufacturing applications, including plastics, paints, paper and other industrial products. For the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012, approximately three-fourths of our sales volumes were into European markets. Our production facilities are located in Europe.

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

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

•

Our TiO₂ sales and production volumes,

•

TiO₂ selling prices,

•

Currency exchange rates (particularly the exchange rate for the U.S. dollar relative to the euro and the Norwegian krone) and

•

Manufacturing costs, particularly raw materials, maintenance and energy-related expenses.

Our key performance indicators are our TiO2 average selling prices and our ~~level of~~ TiO2 sales and production volumes. TiO2 selling prices generally follow industry trends and prices will increase or decrease generally as a result of competitive market pressures.

In addition, our effective income tax rate in 2010 was impacted by certain favorable developments, as discussed further below.

Executive summary

We reported net income of $6489.8 million in the ~~third~~first quarter of ~~2011~~2012 as compared to net income of $1541.41 million in the ~~third~~first quarter of ~~2010. For the first nine months of~~ 2011~~, we reported net income of $173~~.7 ~~million~~Our ~~compared to~~ net income ~~of $64.7 million~~ in the first ~~nine months of 2010. Our net income for the third~~ quarter ~~and~~2012 ~~first nine months of 2011, as compared to the same periods of 2010,~~ is higher principally due to higher income from operations resulting ~~principally~~ from higher average selling prices ~~in 2011,~~ and higher production volumes in ~~2011~~2012. In addition, our results of operations in 2010 include a first quarter non-cash income tax benefit of $35.2 million related to a European Court ruling that resulted in a favorable resolution of certain income tax issues in Germany.

Forward-looking information

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~~Forward~~ including, but not limited to, statements found in Item 2—“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are forward-looking statements that represent our management’s beliefs and assumptions based on currently available information. In some cases you can identify forward-looking statements by the use of words such as “believes,” “intends,” “may,” “should,” “could,” “anticipates,” “expects” or comparable terminology, or by discussions of strategies or trends. Although we believe the expectations reflected in forward-looking statements are reasonable, we do not know if these expectations will be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results. Actual future results could differ materially from those predicted. The factors that could cause our actual future results to differ materially from those described herein are the risks and uncertainties discussed in this Quarterly Report and those described from time to time in our other filings with the SEC including, but are not limited to, the following:

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Statements in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking in nature and represent management’s beliefs and assumptions based on currently available information. Statements in this report including, but not limited to, statements found in Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are forward-looking statements that represent our management’s beliefs and assumptions based on currently available information. In some cases you can identify forward-looking statements by the use of words such as “believes,” “intends,” “may,” “should,” “could,” “anticipates,” “expects” or comparable terminology, or by discussions of strategies or trends. Although we believe the expectations reflected in forward-looking statements are reasonable, we do not know if these expectations will be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results. Actual future results could differ materially from those predicted. The factors that could cause our actual future results to differ materially from those described herein are the risks and uncertainties discussed in this Quarterly Report and those described from time to time in our other filings with the SEC including, but are not limited to, the following:

•

Future supply and demand for our products

•

The extent of the dependence of certain of our businesses on certain market sectors

• The cyclicality of our ~~businesses~~business

•

Customer inventory levels

•

Changes in raw material and other operating costs (such as energy and ore costs)

• Changes in the availability of raw ~~materials~~material (such as ore)

•

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)

•

Competitive products and substitute products

•

Customer and competitor strategies

•

Potential consolidation of our competitors

•

The impact of pricing and production decisions

•

Competitive technology positions

•

The introduction of trade barriers

• Possible disruption of our business, or increases in ~~the~~our cost of doing business resulting from terrorist activities or global conflicts

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

•

Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime and transportation interruptions)

•

Our ability to renew or refinance credit facilities

•

Our ability to maintain sufficient liquidity

•

The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters

•

Our ability to utilize income tax attributes, the benefits of which have been recognized under the more-likely-than-not recognition criteria

•

Environmental matters (such as those requiring compliance with emission and discharge standards for existing and new facilities)

•

Government laws and regulations and possible changes therein

•

Possible future litigation

- 15 -

• Government laws and regulations and possible changes therein

• The ultimate resolution of pending litigation; and

• 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. We disclaim any intention or obligation to update or revise any forward-looking statement whether as a result of changes in information, future events or otherwise.

Results of operations

Quarter ended ~~September~~March 3031, ~~2010~~2012 compared to the quarter ended March 31, 2011 -

Quarter ended September 30, 2011 -


	Three months ended March 31,
	2011				2012
	(Dollars in millions)
Net sales	$	298.7	100	%	$	383.9		100	%
Cost of sales		194.4	65			216.2		56

Gross margin		104.3	35			167.7		44
Other operating income and expense, net		31.0	10			30.8		8

Income from operations	$	73.3	25	%	$	136.9		36	%


							% Change
TiO₂ operating statistics:
Sales volumes*		84				85		1	%
Production volumes*		90				94		4	%
Percent change in net sales:
TiO₂ product pricing								31	%
TiO₂ sales volumes								1
TiO₂ product mix								—
Changes in currency exchange rates								(3	)

Total								29	%

	Three months endedSeptember 30,
	2010				2011
	(Dollars in millions)
Net sales	$	250.4	100	%	$	399.4		100	%
Cost of sales		192.8	77			249.3		62
Gross margin		57.6	23			150.1		38
Other operating income and expenses, net		26.0	10			35.5		9
Income from operations	$	31.6	13	%	$	114.6		29	%
							% Change
TiO2 operating statistics:
Sales volumes*		89				91		2	%
Production volumes*		91				92		1	%
Percent change in net sales:
TiO2 product pricing								43	%
TiO2 sales volumes								2
TiO2 product mix								—
Changes in currency exchange rates								15
Total								60	%

*	Thousands of metric tons

Current industry conditions – Throughout ~~2010~~2011 and continuing into ~~2011~~2012, ~~global customer demand for~~ our ~~TiO2 products continued to strengthen, and our~~ production facilities operated at ~~near~~ full practical capacity rates. We ~~have~~ also increased TiO2 selling prices throughout ~~2010 and into the first nine months of~~ 2011, resulting in increased profitability and cash flows. ~~Provided~~Selling ~~global~~prices ~~demand~~in ~~for~~the ~~TiO2~~first ~~products~~quarter ~~remains~~2012 ~~strong,~~were we31% ~~expect~~higher as compared to the ~~overall~~first ~~level~~quarter of ~~worldwide TiO2~~2011 ~~inventories~~and toour ~~remain~~average ~~low~~selling ~~for~~prices ~~several~~at ~~years~~the ~~due~~end toof the ~~constraints~~ first quarter of ~~adding~~2012 ~~significant~~were ~~new~~comparable ~~production~~to ~~capacity,~~selling ~~especially~~prices ~~for~~at ~~premium~~the ~~grades~~end of 2011. Global customer demand for our TiO2 products ~~through~~also ~~the~~remained ~~chloride~~strong throughout ~~process~~much of 2011. ~~Given~~Although ~~these~~we ~~current~~did ~~dynamics~~experience a softening of demand in the ~~TiO2 industry,~~fourth asquarter ~~well~~of 2011 as ~~the~~a ~~expectation~~result ~~for~~of ~~increases~~customer destocking, customer demand in ~~our~~the ~~manufacturing~~first ~~costs~~quarter ~~discussed~~of ~~below,~~2012 werebounded ~~anticipate~~from ~~further~~the ~~implementation~~softness ofexperienced ~~TiO2~~in ~~selling~~the ~~price~~fourth ~~increases~~quarter of 2011. ~~Overall,~~We ~~based~~expect ondemand ~~positive~~will ~~market~~continue ~~dynamics~~to in strengthen during the ~~TiO2~~remainder ~~industry,~~of 2012 and we ~~expect~~anticipate ~~our~~we ~~profitability~~will ~~and~~be ~~cash~~able ~~flows~~ to ~~increase~~implement infurther ~~2011~~TiO2 ~~and~~selling ~~the~~price ~~foreseeable future~~increases.

We experienced increased costs for our raw materials such as ore and petroleum coke in 2011 and in the first quarter 2012. We expect further increases in raw material costs throughout 2012, as discussed below.

- 16 -

~~Net sales – Net sales in the third quarter of 2011 increased 60%~~Overall, orbased ~~$149.0~~on ~~million,~~positive ~~compared to the third quarter of 2010 primarily due to a 43% increase in average TiO2 selling prices. TiO2 selling prices will increase or decrease generally as a result of competitive~~ market ~~pressures,~~dynamics ~~changes~~ in the ~~relative level of supply and demand as well as changes in raw material and other manufacturing costs. Based on current conditions in the~~ TiO2 industry, ~~as well as the expectation for increases in our manufacturing costs discussed below,~~ we ~~currently~~ expect ~~average~~our ~~selling~~profitability ~~prices~~and ~~for~~cash ~~the~~flows ~~fourth quarter of 2011~~ to ~~continue~~increase toin be2012 and ~~significantly higher than~~ the ~~comparable~~foreseeable ~~periods in 2010~~future.

~~Our~~Net 2%sales ~~increase~~– inNet sales ~~volumes~~ in the ~~third~~first quarter of 2012 increased 29%, or $85.2 million, compared to the first quarter of 2011 isprimarily due to ~~increased~~a ~~availability~~31% increase in average TiO2 selling prices. TiO2 selling prices will increase or decrease generally as a result of ~~product~~competitive ~~through~~market ~~higher~~pressures, changes in the relative level of supply and demand as well as changes in raw material and other ~~production~~manufacturing ~~volumes~~costs. WeBased ~~expect~~on ~~overall~~current ~~demand~~conditions ~~will~~in ~~continue~~the toTiO2 industry, ~~remain~~as ~~high~~well as the expectation for increases in our manufacturing costs discussed below, we currently expect average selling prices in the remainder of 2012 to continue to be higher than the ~~year~~comparable periods in 2011.

InOur ~~addition~~sales volumes increased 1% in the first quarter of 2012 as compared to the first quarter of 2011 as higher sales volumes in the ~~factors~~export ~~discussed~~markets ~~above~~were offset by lower sales volumes in Europe. Our sales volumes in the first quarter of 2012 set a new record for a first quarter. In addition, we estimate the ~~favorable~~unfavorable effect of changes in currency exchange rates ~~increased~~decreased our net sales by approximately $389 million, or 153%, as compared to the ~~third~~first quarter of ~~2010~~2011.

Cost of sales – Cost of sales increased $5621.58 million or 2911% in the ~~third~~first quarter of ~~2011~~2012 compared to ~~2010~~ 2011 primarily due to the net impact of ana 1% increase in sales volumes, a 4% increase in TiO2 production volumes, higher raw material costs of approximately $~~14.5~~18 million (primarily feedstock ore and petroleum coke)~~, an increase in maintenance costs of $3.5 million (consistent with the increase in production volumes)~~ and currency fluctuations (primarily the euro). Cost of sales as a percentage of net sales decreased to 6256% in the ~~third~~first quarter of ~~2011~~2012 compared to 7765% in the ~~third~~first quarter of ~~2010~~2011 primarily due to the ~~effects of~~ higher selling prices and ~~the benefit of~~ higher production volumes in ~~2011~~ the first quarter of 2012. Our ~~TiO2~~ production volumes in the ~~third~~first quarter of ~~2011~~ ~~were~~2012 set a new ~~quarterly~~ record for usa first quarter. We expect further increases in our manufacturing costs during the remainder of 2012, as discussed below.

Income from operations – Income from operations increased by $8363.0 6 million from $3173.63 million in the ~~third~~first quarter of ~~2010~~2011 to $~~114~~136.69 million in the ~~third~~first quarter of ~~2011~~2012. Income from operations as a percentage of net sales increased to 2936% in the ~~third~~first quarter of ~~2011~~2012 from 1325% in the same period ~~for~~of ~~2010~~2011. This increase was driven by the improvement in gross margin, which increased to 3844% for the ~~third~~first quarter of ~~2011~~2012 compared to 2335% for the ~~third~~first quarter of ~~2010~~2011. Our gross margin has increased primarily because of ~~the effect of~~ higher selling prices, ~~and the~~higher ~~benefit~~sales ofvolumes and higher production volumes, ~~both~~all of which more than offset the impact of higher manufacturing costs (primarily raw materials ~~and maintenance~~). Additionally, changes in currency exchange rates have ~~positively~~negatively affected our gross margin and income from operations. We estimate that changes in currency exchange rates ~~increased~~ decreased income from operations by approximately $71 million in the ~~third~~first quarter of ~~2011~~2012 as compared to the same period in ~~2010~~2011.

Other non-operating income (expense)—On –March 24, ~~Interest~~2011, ~~expense~~we ~~decreased~~redeemed ~~$.8~~ €80 million ~~from~~of ~~$8.9~~our €400 million 6.5% inSenior ~~the~~Secured ~~third~~Notes ~~quarter~~and ofborrowed ~~2010 to~~under ~~$8.1~~our ~~million~~revolving incredit ~~the~~facility. ~~third~~As ~~quarter~~a ofresult, ~~2011~~we ~~due~~recognized toa ~~the~~$3.3 ~~net~~million ~~effects~~pre-tax ofinterest ~~the~~charge ~~prepayments~~related ~~and~~to ~~open~~the ~~market~~prepayment ~~repurchases~~ of ~~a portion of~~ the 6.5% Senior Secured Notes ~~which occurred~~ in the first ~~and~~quarter ~~third~~of ~~quarters~~2011, consisting of ~~2011~~the call premium and ~~changes~~the inwrite-off ~~currency~~of ~~exchange rates.~~unamortized ~~See~~deferred ~~Note~~financing 5costs toand ~~our~~original ~~Condensed~~issue ~~Consolidated~~discount ~~Financial~~associated ~~Statements.~~with ~~The~~the ~~interest~~redeemed ~~expense~~Senior weNotes. ~~recognize~~See ~~will~~Note ~~vary~~5 ~~with~~to ~~fluctuations~~our inCondensed ~~the~~Consolidated ~~euro~~Financial ~~exchange rate~~Statements.

~~Income~~Interest ~~tax~~expense ~~provision~~decreased –$3.0 ~~Our~~million ~~income~~from ~~tax provision was~~ $~~41.~~9.3 million in the ~~third~~first quarter of 2011 ~~compared~~ to $76.3 million in the ~~same~~first ~~period~~quarter ~~last~~of ~~year. This~~2012 ~~increase in provision for income~~due ~~taxes~~to ~~was~~the ~~primarily~~net ~~due~~effects toof ~~improved~~the ~~income~~prepayment ~~from~~and ~~operations~~open inmarket ~~the~~purchases ~~third quarter~~ of ~~2011~~a ~~compared~~portion toof the ~~third~~6.5% ~~quarter~~Senior ofSecured ~~2010~~Notes ~~and~~made ain ~~$7.6~~the ~~million~~ third ~~quarter~~and ~~2011~~fourth ~~provision~~quarters ~~for~~of U2011.S. ~~incremental~~The ~~income~~interest ~~taxes~~expense onwe ~~current~~recognize ~~earnings~~will ~~repatriated~~vary ~~from~~with ~~our Germany~~fluctuations ~~subsidiary.~~in ~~See~~the ~~Note~~euro 6exchange ~~to our Condensed Consolidated Financial Statements~~rate.

- 17 -

WeIncome ~~have substantial net operating loss carryforwards in Germany (the equivalent of $952 million for German corporate purposes and $349 million for German trade~~ tax ~~purposes~~expense at– ~~December 31,~~Our ~~2010). At September 30, 2011, we have concluded that no deferred~~ income tax ~~asset~~provision ~~valuation~~was ~~allowance~~$41.0 ismillion ~~required~~in tothe ~~be recognized with~~first ~~respect~~quarter ~~to such carryforwards, principally because (i) such carryforwards have an indefinite carryforward period, (ii) we have utilized a portion~~ of ~~such~~2012 ~~carryforwards~~compared ~~during the most recent three-year period and (iii) we currently expect~~ to ~~utilize the remainder of such carryforwards over the long term~~$19.7 ~~However,~~million ~~prior~~in to the ~~complete~~same ~~utilization~~period oflast ~~such~~year. ~~carryforwards,~~This ~~particularly~~increase ifis ~~economic~~primarily ~~conditions~~due ~~for~~to our ~~German~~increased ~~operations~~earnings. See ~~were~~Note to6 ~~become unfavorable for an extended period of time, or if we were~~ to ~~generate~~our ~~losses~~Condensed atConsolidated ~~our~~Financial ~~German~~Statements ~~operations~~ for ana ~~extended~~tabular ~~period~~reconciliation of ~~time,~~our itstatutory ~~is possible that we might conclude the benefit of such carryforwards would no longer meet the more-likely-than-not recognition criteria, at~~income ~~which~~tax ~~point~~provision ~~we would be required~~ to ~~recognize~~our aactual ~~valuation allowance against some or all of the then-remaining~~ tax ~~benefit associated with the carryforwards~~provision.

~~Nine~~We ~~months~~have ~~ended~~substantial ~~September~~net operating loss carryforwards in Germany (the equivalent of $799 million and $188 million for German corporate and trade tax purposes, respectively, at December 3031, ~~2010~~2011). ~~compared~~At March 31, 2012, we have concluded that no deferred income tax asset valuation allowance is required to be recognized with respect to such carryforwards, principally because (i) such carryforwards have an indefinite carryforward period, (ii) we have utilized a portion of such carryforwards during the most recent three-year period and (iii) we currently expect to utilize the remainder of such carryforwards over the long term. However, prior to the complete utilization of such carryforwards, particularly if the economic recovery were to be short-lived or we were to generate losses in our German operations for an extended period of time, it is possible that we might conclude the benefit of such carryforwards would no longer meet the more-likely-than-not recognition criteria, at which point we would be required to recognize a valuation allowance against some or all of the then-remaining tax benefit associated with the carryforwards.

~~Nine~~Effects ~~months~~of ~~ended September 30,~~Currency ~~2011~~Exchange - Rates

	Nine months endedSeptember 30,
	2010				2011
	(Dollars in millions)
Net sales	$	735.8	100	%	$	1,102.1		100	%
Cost of sales		582.0	79			699.6		63
Gross margin		153.8	21			402.5		37
Other operating income and expenses, net		81.5	11			104.2		10
Income from operations	$	72.3	10	%	$	298.3		27	%
							% Change
TiO2 operating statistics:
Sales volumes*		269				277		3	%
Production volumes*		263				277		5	%
Percent change in net sales:
TiO2 product pricing								41	%
TiO2 sales volumes								3
TiO2 product mix								(3	)
Changes in currency exchange rates								9
Total								50%

We have substantial operations and assets located outside the United States (primarily in Germany, Belgium and Norway). The majority of our sales are denominated in currencies other than the U.S. dollar, principally the euro and other major European currencies. A portion of our sales are denominated in the U.S. dollar. Certain raw materials used worldwide, primarily titanium-containing feedstocks, are purchased in U.S. dollars, while labor and other production costs are purchased primarily in local currencies. Consequently, the translated U.S. dollar value of our 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. In addition to the impact of the translation of sales and expenses over time, our operations also generate currency transaction gains and losses which primarily relate to the difference between the currency exchange rates in effect when non-local currency sales or operating costs are initially accrued and when such amounts are settled with the non-local currency.

*Overall, ~~Thousands~~we estimate that fluctuations in currency exchange rates had the following effects on our sales and income from operations for the first quarter of ~~metric~~2012 ~~tons~~as compared to the first quarter of 2011.

Net sales – Net sales increased 50%, or $366.3 million, compared to the nine months ended September 30, 2010 primarily due to a 41% increase in average TiO2 selling prices. TiO2 selling prices will increase or decrease generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs.


Impact of changes in currency exchange rates Three months ended March 31, 2012 vs. March 31, 2011
	Transaction gains recognized						Translation loss- impact of rate changes			Total currency impact 2012 vs. 2011
	2011		2012		Change		Translation loss- impact of rate changes			Total currency impact 2012 vs. 2011
	(In millions)
Impact on:
Net sales	$	—	$	—	$	—	$	(9	)	$	(9	)
Income from operations		—		1		1		(2	)		(1	)

Our 3% increase in sales volumes in the first nine months of 2011 is due to increased availability of product through higher production volumes. We expect overall demand will continue to remain high for the remainder of the year. Our TiO2 sales volumes in the first nine months of 2011 were a new first nine months of the year record for us.

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In addition to the factors discussed above, we estimate the favorable effect of changes in currency exchange rates increased our net sales by approximately $67 million, or 9%, as compared to the first nine months of 2010, while relative changes in mix of our various grades of our products sold decreased our net sales by approximately $22 million, or 3%.

Cost of sales – Cost of sales increased $117.6 million or 20% in the nine months ended September 30, 2011 compared to the same period in 2010 due to the net impact of an 5% increase in TiO2 production volumes, higher raw material costs of $40.2 million (primarily feedstock ore and petroleum coke), an increase in maintenance costs of $9.9 million (consistent with the increase in production volumes) and currency fluctuations (primarily the euro). Cost of sales as a percentage of net sales decreased to 63% in the first nine months of 2011 compared to 79% in the same period in 2010 primarily due to the effects of higher selling prices and the benefit of higher production volumes in 2011. Our TiO2 production volumes in the first nine months of 2011 established a new record for us for a first nine month production period.

Income from operations – Income from operations increased by $226.0 million from $72.3 million in the first nine months of 2010 to $298.3 million in the first nine months of 2011. Income from operations as a percentage of net sales increased to 27% in the first nine months of 2011 from 10% in the same period for 2010. This increase was driven by the improvement in gross margin, which increased to 37% for the first nine months of 2011 compared to 21% for the same period in 2010. Our gross margin has increased primarily because of the effects of higher selling prices and the benefit of higher production volumes, both of which more than offset the impact of higher manufacturing costs (primarily raw materials and maintenance). Additionally, changes in currency exchange rates have positively affected our gross margin and income from operations. We estimate that changes in currency exchange rates increased income from operations by approximately $6 million in the first nine months of 2011 as compared to the same period in 2010.

Other non-operating income (expense) – In March 2011, we redeemed euro 80 million of our 6.5% Senior Secured Notes and borrowed under our European revolving credit facility in order to fund the redemption. During the third quarter of 2011, we repurchased in open market transactions an aggregate euro 30.4 million principal amount of our Senior Secured Notes (including euro 3.0 million for which settlement did not occur until October 2011). In the first quarter of 2011, we recognized a $3.3 million pre-tax interest charge related to the redemption of euro 80 million of the 6.5% Senior Secured Notes, consisting of the call premium, the write-off of unamortized deferred financing costs and original issue discount associated with the redeemed Senior Notes. In the third quarter of 2011, we recognized a $.1 million net gain on the euro 30.4 million principal amount of Senior Notes repurchased in open market transactions. See Note 5 to our Condensed Consolidated Financial Statements.

Interest expense decreased $2.6 million from $28.5 million in the nine months ended September 30, 2010 to $25.9 million in the nine months ended September 30, 2011 due to the net effects of the prepayment and open market purchases of a portion of the 6.5% Senior Secured Notes as discussed above, and changes in currency exchange rates. See Note 5 to our Condensed Consolidated Financial Statements. The interest expense we recognize will vary with fluctuations in the euro exchange rate.

Income tax provision (benefit) – Our income tax provision was $95.7 million in the first nine months of 2011 compared to an income tax benefit of $20.8 million in the same period last year. This increase in provision for income taxes was primarily due to improved income from operations in the first nine months of 2011 compared to the same period in 2010 and a $7.6 million third quarter 2011 provision for U.S. incremental income taxes on current earnings

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repatriated from our German subsidiary. In addition, our income tax benefit in 2010 includes a first quarter income tax benefit of $35.2 million related to a European Court ruling that resulted in the favorable resolution of certain income tax issues in Germany and an increase in the amount of our German corporate and trade tax net operating loss carryforwards. See Note 6 to our Condensed Consolidated Financial Statements.

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Effects of Currency Exchange Rates

Our operations and assets are located outside the United States (primarily in Germany, Belgium and Norway). The majority of our sales are denominated in currencies other than the U.S. dollar, principally the euro and other major European currencies. A portion of our sales are denominated in the U.S. dollar. Certain raw materials used worldwide, primarily titanium-containing feedstocks, are purchased in U.S. dollars, while labor and other production costs are purchased primarily in local currencies. Consequently, the translated U.S. dollar value of our 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. In addition to the impact of the translation of sales and expenses over time, our operations also generate currency transaction gains and losses which primarily relate to the difference between the currency exchange rates in effect when non-local currency sales or operating costs are initially accrued and when such amounts are settled with the non-local currency.

Overall, we estimate that fluctuations in currency exchange rates had the following effects on our sales and income from operations for the periods indicated.

Impact of changes in currency exchange rates Three months ended September 30, 2010 vs. September 30, 2011
	Transaction gains/(losses)recognized							Translationgain/loss- impact ofrate changes		Totalcurrencyimpact2010 vs. 2011
	2010		2011		Change
	(In millions)
Impact on:
Net sales	$	—	$	—	$	—		$	38	$	38
Income from operations		3		—		(3	)		10		7

Impact of changes in currency exchange rates Nine months ended September, 2010 vs. September 30, 2011
	Transaction gains/(losses)recognized							Translationgain/loss- impact ofrate changes		Totalcurrencyimpact2010 vs. 2011
	2010		2011		Change
	(In millions)
Impact on:
Net sales	$	—	$	—	$	—		$	67	$	67
Income from operations		4		—		(4	)		10		6

Outlook

During the first ~~nine~~quarter ~~months~~ of ~~2011~~2012 we operated our production facilities at ~~near~~ full practical capacity levels, consistent with our operating rates throughout ~~2010. We currently expect to continue to operate our facilities at near full practical capacity levels throughout the remainder of~~ 2011. While we will continue to work on debottlenecking projects ~~throughout the remainder of 2011~~ in ~~order~~2012 to increase our production capacity, we believe such debottlenecking projects will produce relatively nominal increases in our capacity. ~~and~~We ascurrently aexpect ~~result our overall production volumes for 2011 will not be increased significantly as compared~~ to ~~2010.~~operate ~~Given~~ our ~~expectations~~facilities ~~for~~in ~~the~~2012 ~~level~~at ofproduction ~~our increased~~levels ~~production~~consistent ~~capacity~~with inor ~~2011~~slightly ~~discussed~~lower ~~above,~~than ~~we similarly expect our sales volumes in~~ 2011 ~~will not increase significantly as compared to 2010~~.

-The 21overall -strengthening global demand for TiO2 we experienced in the first quarter of 2012 is expected to continue through the remainder of the year. We currently expect our sales volumes to increase in 2012 as compared to 2011, and our 2012 sales volumes to exceed our 2012 production volumes.

~~Table~~We implemented significant increases in TiO2 selling prices throughout 2011 and raised prices in certain markets in the first quarter of ~~Contents~~2012. Our average TiO2 selling prices were 31% higher in the first quarter of 2012 as compared to the first quarter of 2011, and our average selling prices at the end of the first quarter of 2012 were 2% lower than prices at the end of 2011. Based on product demand levels and increases in our manufacturing costs discussed below, we anticipate our average selling prices will increase during the remainder of 2012, including increases to offset the impact of our expected higher manufacturing costs.

WeDuring ~~implemented~~2012, ~~significant~~we ~~increases~~expect into ~~TiO2~~see ~~selling~~significantly ~~prices~~higher ~~throughout~~feedstock ~~2010~~ore costs driven by tight ore supplies and ~~the~~higher-than-historical ~~first~~increases ~~nine~~in ~~months~~petroleum ofcoke ~~2011~~and energy costs. ~~Our~~Overall, we currently expect ~~average~~our ~~TiO2~~per ~~selling~~metric ~~prices~~ton ~~were~~cost ~~43%~~of ~~higher~~TiO2 we produce in ~~the~~2012 ~~third~~will ~~quarter~~increase ofapproximately ~~2011~~50% to 60% as compared to ~~the~~2011, ~~third~~primarily ~~quarter~~due ofto ~~2010,~~higher ~~and~~feedstock ~~our~~ore ~~average~~costs. ~~selling~~Our ~~prices~~cost atof ~~the~~sales ~~end~~per metric ton of ~~the~~TiO2 ~~third~~sold ~~quarter~~in ofcalendar ~~2011~~2012 ~~were~~is ~~10%~~consequently expected to be significantly higher as compared to ~~the~~calendar ~~end~~2011. However, our cost of sales per metric ton of TiO2 sold in the ~~second~~first quarter of 2012 ~~2011~~is ~~and~~significantly ~~32%~~lower ~~higher~~ as compared to our expected cost of sales per metric ton of TiO2 sold in the ~~end~~remainder of ~~2010.~~2012, Asas a substantial portion of the ~~result,~~TiO2 ~~and~~products ~~based~~we onsold ~~expected~~in ~~continuation~~the first quarter of ~~strong~~2012 ~~demand~~was produced ~~levels~~with ~~and~~lower-cost ~~increases~~feedstock inore. ~~our~~Given ~~manufacturing~~the ~~costs~~current ~~discussed~~conditions ~~below~~in the TiO2 industry, weif ~~anticipate~~our costs of production exceed our ~~average~~current ~~selling~~expectations ~~prices~~in ~~will~~2012 ~~continue~~and todemand ~~increase~~for ~~during~~TiO2 ~~the~~remains ~~remainder~~strong, ofwe ~~2011~~believe we could recoup such higher costs through additional selling price increases.

Throughout 2011, we have seen, and expect to continue to see, significantly higher feedstock ore costs driven by tight ore supplies and higher-than-historical increases in petroleum coke, energy and freight costs which are being driven in part by escalating worldwide fuel prices. Overall, we ~~currently~~ expect ~~our~~income ~~per~~from ~~metric~~operations ~~ton cost of TiO2 we produce~~ will ~~increase~~be ~~approximately~~higher ~~10% to 15%~~ in ~~2011~~2012 as compared to ~~2010.~~ ~~Given~~2011, ~~the~~as ~~current conditions for~~ the ~~TiO2~~favorable ~~industry discussed~~effects ~~above,~~of wehigher ~~were~~selling ~~able to,~~ prices and ~~expect~~sales tovolumes ~~continue~~will tomore bethan ~~able~~offset ~~to,~~the ~~recoup~~impact ~~such~~of higher ~~costs~~production ~~through additional selling price increases~~costs.

~~Overall,~~Our weexpectations ~~expect~~as ~~income~~to ~~from~~the future ~~operations~~of ~~will~~the ~~continue~~TiO2 toindustry beare ~~significantly~~based ~~higher~~upon ina ~~the~~number ~~remainder~~of factors beyond our control, including worldwide growth of ~~2011~~gross asdomestic ~~compared~~product, tocompetition in the ~~same~~marketplace, ~~periods~~continued operation of ~~2010~~competitors, asunexpected ~~the~~or ~~favorable~~earlier-than-expected ~~effect~~capacity ofadditions ~~higher~~or ~~selling~~reductions ~~prices~~and ~~will~~technological advances. If ~~more~~actual ~~than~~developments ~~offset~~differ ~~the~~from ~~impact~~our expectations, our results of ~~higher~~operations ~~production~~could ~~costs~~be unfavorably affected.

Our expectations as to the future of the TiO2 industry are based upon a number of factors beyond our control, including worldwide growth of gross domestic product, competition in the marketplace, continued operation of competitors, unexpected or earlier than expected capacity additions or reductions and technological advances. If actual developments differ from our expectations, our results of operations could be unfavorably affected.

LIQUIDITY AND CAPITAL RESOURCES

Consolidated cash flows

Operating activities

Trends in cash flows as a result of our operating activities (excluding the impact of significant asset dispositions and relative changes in assets and liabilities) are generally similar to trends in our earnings.

~~Our~~- ~~cash~~19 ~~provided by operating activities was $181.5 million in the first nine months of 2011, compared to $27.0~~- ~~million of cash provided by operating activities in the first nine months of 2010. This $154.5 million increase was primarily due to the net effects of the following:~~

• Higher income from operations in 2011 of $226.0 million;

• Higher net cash used from relative changes in our inventories, receivables, payables and accruals of $35.6 million;

• Higher cash paid for income taxes in 2011 of $33.8 million due to our improved earnings; and

• Higher cash paid for interest in 2011 of $4.1 million, primarily due to the $2.5 million call premium associated with the redemption of euro 80 million of our 6.5% Senior Secured Notes, as well as the interest on the Senior Notes paid at redemption.

- 22 -

Our cash used by operating activities was $83.9 million in the first three months of 2012 compared to cash provided by operating activities of $10.1 million in the first three months of 2011. This $94.0 million decrease in the amount of cash provided was primarily due to the net effects of the following:

•

Higher income from operations in 2012 of $63.6 million;

•

Higher net cash used from relative changes in our inventories, receivables, payables and accruals in 2012 of $163.7 million, primarily due to the relative increases in our inventories and receivables, as discussed below;

•

Higher cash paid for income taxes in 2012 of $11.2 million due to our improved earnings; and

•

Lower cash paid for interest in 2012 of $5.8 million, principally due to the $2.5 million call premium associated with the redemption of €80 million of our 6.5% Senior Secured Notes in 2011, as well as the interest on the Senior Notes paid at redemption.

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

• Our average days sales outstanding, (“or DSO”), ~~decreased~~increased from December 31, ~~2010~~2011 to ~~September~~March 3031, ~~2011~~2012 due to higher sales volumes and selling prices we achieved in the first quarter of 2012; and

• Our average days sales in inventory, (“or DSI”), ~~decreased~~increased from December 31, ~~2010~~2011 to ~~September~~March 3031, 2012 principally due to the higher cost of our inventories resulting primarily from higher feedstock ore costs. Strong production from 2011 continued into the first quarter of 2012 resulting in higher inventory levels in advance of spring painting season.

For comparative purposes, we have also provided comparable prior years numbers below:

December 31,

September 30,

December 31,

September 30,

December 31,2010

March 31,2011

December 31,2011

March 31,2012

2009

2010

2011

DSO

54 days

62 days

52 days

67 days

DSO

55 days

64 days

54 days

51 days

DSI

50 days

62 days

101 days

106 days

DSI

46 days

42 days

50 days

45 days

Investing activities

Our capital expenditures of $1913.20 million and $3620.18 million in the ~~nine~~three months ended ~~September~~March 3031, ~~2010~~2011 and ~~2011~~2012, respectively, were primarily ~~for~~to ~~improvements~~maintain and ~~upgrades~~improve tothe cost-effectiveness of our existing manufacturing facilities.

Financing activities

During the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012, we: borrowed €80 million ($107.4 million when borrowed) on our European credit facility.

• redeemed 80 million principal amount of our euro 400 million 6.5% Senior Secured Notes at 102.17% of the face value for an aggregate of $115.7 million, including a $2.5 million call premium on March 24, 2011;

• borrowed euro 80 million ($113.3 million when borrowed) under our European credit facility in order to fund the euro 80 million redemption of our Senior Secured Notes and subsequently repaid euro 80 million ($115.0 million when repaid); and

• repurchased euro 27.4 million principal amount of our 6.5% Senior Secured Notes in open market transactions for an aggregate of euro 27.2 million ($39.3 million).

In addition, during September 2011, we repurchased an additional euro 3.0 million principal amount of our Senior Secured Notes for which settlement did not occur until October 2011. In October 2011, we repurchased an additional euro 10.5 million principal amount of Senior Notes for an aggregate of euro 10.4 million.

Outstanding debt obligations

At ~~September~~March 3031, ~~2011~~2012, our consolidated debt ~~was~~ comprised of:

• ~~euro 292~~€279.62 million principal amount of our 6.5% Senior Secured Notes ($~~397~~371.60 million) due in ~~2013~~April ~~(including the euro 3.0 million principal amount of notes repurchased in late September 2011 for which settlement did not occur until October 2011)~~2013; and

• ~~approximately~~€80 million ($5106.34 million) ofunder ~~other~~our ~~indebtedness.~~revolving credit facility which matures in October 2013; and

~~Our~~• ~~revolving~~approximately ~~credit~~$4.1 ~~facility~~million ~~described above contains provisions which could result in the acceleration~~ of ~~indebtedness prior to their stated maturity for reasons~~ other ~~than defaults for failure to comply with applicable covenants. For example, certain credit agreements allow the lender to accelerate the maturity of the~~ indebtedness ~~upon a change of control (as~~ .

- 2320 -

~~defined~~With inrespect to the ~~agreement)~~€279.2 million ofprincipal ~~the~~amount ~~borrower.~~outstanding Inat ~~addition~~March 31, 2012 ~~certain~~of ~~credit~~our ~~agreements~~Senior ~~could~~Secured ~~result~~Notes due in ~~the~~April ~~acceleration~~2013, ofwe ~~all~~have orcommenced aefforts ~~portion~~to ofrefinance the ~~indebtedness~~Senior ~~following~~Notes, and have engaged a ~~sale~~financial advisor to assist us in these efforts. The definitive terms of ~~assets~~any ~~outside~~such ~~the~~refinancing have not yet been ~~ordinary~~determined, ~~course~~and ofwhile ~~business.~~there Wecan ~~are~~be inno ~~compliance~~assurance ~~with~~that ~~all~~we ofwould ~~our~~be ~~debt~~able ~~covenants~~to atcomplete ~~September 30~~a refinancing on terms acceptable to us, ~~2011.~~we ~~See~~believe ~~Note~~we 5will be able to ~~our~~refinance ~~Consolidated~~the ~~Financial~~remaining ~~Statements~~Senior Notes before their maturity date.

Our ~~assets~~revolving ~~consist~~credit ~~primarily~~facility ofdescribed ~~investments~~above incontains ~~operating~~provisions ~~subsidiaries,~~which ~~and~~could ~~our~~result ~~ability~~in tothe ~~service~~acceleration ~~parent~~of ~~level~~indebtedness ~~obligations,~~prior ~~including~~to ~~the~~their stated ~~Senior~~maturity ~~Secured~~for ~~Notes,~~reasons ~~depends~~other inthan ~~large~~defaults ~~part~~for ~~upon~~failure ~~the~~to ~~distribution of~~comply ~~earnings~~with ofapplicable ~~our~~covenants. ~~subsidiaries~~For example, ~~whether~~certain incredit ~~the~~agreements ~~form~~allow ofthe ~~dividends,~~lender ~~advances~~to oraccelerate ~~payments~~the onmaturity ~~account~~ of ~~intercompany~~the ~~obligations~~indebtedness orupon ~~otherwise.~~a ~~None~~change of ~~our~~control ~~subsidiaries~~(as ~~have~~defined ~~guaranteed~~in the agreement) ~~Senior~~of ~~Secured~~the ~~Notes,~~borrower. weIn ~~have~~addition, ~~pledged~~certain ~~65%~~credit ofagreements ~~the~~could ~~common~~result ~~stock or~~in ~~other~~the ~~ownership~~acceleration ~~interests~~ of ~~certain~~all ofor ~~our~~a ~~first-tier~~portion ~~operating~~of ~~subsidiaries as collateral for~~ the ~~Senior~~indebtedness ~~Secured~~following ~~Notes.~~a ~~The~~sale ~~terms~~ of ~~the~~assets ~~indenture~~outside ~~governing~~ the ~~Senior~~ordinary ~~Secured~~course ~~Notes~~of ~~limits~~business. ~~KII’s~~We ~~ability~~are toin ~~pay~~compliance ~~dividends~~with ~~and~~all ~~make~~of ~~other~~our debt ~~restricted~~covenants ~~payments. At~~at ~~September~~March 3031, ~~2011,~~2012. ~~the~~See ~~maximum~~Note ~~amount~~5 ofto ~~dividends~~our ~~and~~Condensed ~~other~~Consolidated ~~restricted~~Financial ~~payments that we could make (the “Restricted Payment Basket”) was approximately $190~~Statements.8 ~~million.~~

Our assets consist primarily of investments in operating subsidiaries, and our ability to service parent level obligations, including the Senior Secured Notes, depends in large part upon the distribution of earnings of our subsidiaries, whether in the form of dividends, advances or payments on account of intercompany obligations or otherwise. None of our subsidiaries have guaranteed the Senior Secured Notes, we have pledged 65% of the common stock or other ownership interests of certain of our first-tier operating subsidiaries as collateral for the Senior Secured Notes. The terms of the indenture governing the Senior Secured Notes limits our ability to pay dividends and make other restricted payments. At March 31, 2012, the maximum amount of dividends and other restricted payments that we could make (the “Restricted Payment Basket”) was approximately $348.0 million.

Future cash requirements

Liquidity

Our primary source of liquidity on an ongoing basis is cash flows from operating activities which is generally used to (i) fund working capital expenditures, (ii) repay any short-term indebtedness incurred for working capital purposes and (iii) provide for the payment of dividends. From time-to-time we 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. We will also from time-to-time sell assets outside the ordinary course of business and use the proceeds to (i) repay existing indebtedness, (ii) make investments in marketable and other securities, (iii) fund major capital expenditures or the acquisition of other assets outside the ordinary course of business or (iv) pay dividends.

Pricing within the TiO₂ industry is cyclical, and changes in industry economic conditions significantly impact earnings and operating cash flows. Changes in TiO₂ pricing, production volumes and customer demand, among other things, could significantly affect our liquidity.

We routinely evaluate our liquidity requirements, alternative uses of capital, capital needs and availability of resources in view of, among other things, our dividend policy, our debt service and capital expenditure requirements and estimated future operating cash flows. As a result of this process, we have in the past and may in the future seek to reduce, refinance, repurchase or restructure indebtedness, raise additional capital, repurchase shares of our common stock, modify our dividend policy, restructure ownership interests, sell interests in our subsidiaries or other assets, or take a combination of these steps or other steps to manage our liquidity and capital resources. Such activities have in the past and may in the future involve related companies. In the normal course of our business, we may investigate, evaluate, discuss and engage in acquisition, joint venture, strategic relationship and other business combination opportunities in the TiO2 industry. In the event of any future acquisition or joint venture opportunity, we may consider using then-available liquidity, issuing our equity securities or incurring additional indebtedness.

At- ~~September 30,~~21 ~~2011, we had aggregate cash, cash equivalents and restricted cash of $36.9 million, and we had approximately $109 million available for borrowing under our existing revolving credit~~- ~~facility. Based upon our expectation for the TiO2 industry and anticipated demands on cash~~

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~~resources~~interests, wesell ~~expect~~interests toin ~~have~~our ~~sufficient~~subsidiaries ~~liquidity~~or other assets, or take a combination of these steps or other steps to ~~meet~~manage our ~~short~~liquidity ~~term~~and ~~obligations~~capital ~~(defined~~resources. asSuch activities have in the ~~twelve-month~~past and ~~period~~may ~~ending~~in ~~September 30,~~the ~~2012)~~future ~~and~~involve related companies. In the normal course of our ~~long-term~~business, ~~obligations~~we ~~(defined~~may ~~as the~~investigate, ~~five-year~~evaluate, ~~period~~discuss ~~ending~~and ~~September 30~~engage in acquisition, ~~2016~~joint venture, ~~our~~strategic ~~time~~relationship ~~period~~and ~~for~~other ~~long-term~~business ~~budgeting)~~combination opportunities in the TiO2 industry. IfIn ~~actual~~the ~~developments~~event ~~differ~~of ~~from~~any ~~our~~future ~~expectations~~acquisition or joint venture opportunity, ~~our~~we may consider using then-available liquidity, ~~could~~issuing beour ~~adversely~~equity ~~affected~~securities or incurring additional indebtedness.

At March 31, 2012, we had aggregate cash, cash equivalents and restricted cash on hand of $24.8 million. At March 31, 2012, we had borrowed the full €80 million under our European credit facility. Based upon our expectation for the TiO₂industry and anticipated demands on cash resources, we expect to have sufficient liquidity to meet our short-term obligations (defined as the twelve-month period ending March 31, 2013) and our long-term obligations (defined as the five-year period ending March 31, 2017, our time period for long-term budgeting). If actual developments differ from our expectations, our liquidity could be adversely affected.

Capital expenditures

We currently estimate that we will invest approximately $7064 million in capital expenditures ~~for~~to ~~major~~maintain ~~improvements~~ and ~~upgrades~~improve to our existing facilities during ~~2011~~2012, including the $3620.18 million we have spent through ~~September~~ March 3031, ~~2011~~2012.

Off-balance sheet financing

We do not have any off-balance sheet financing agreements other than the operating leases discussed in our ~~2010~~2011 Annual Report.

Commitments and contingencies

See Notes 6 and 9 to the Condensed Consolidated Financial Statements for a description of certain income tax examinations currently underway and legal proceedings.

Recent accounting pronouncements

See Note 11 to ~~the~~our Condensed Consolidated Financial Statements.

Critical accounting policies

For a discussion of our critical accounting policies, refer to Part I, Item 7 - —“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2010~~2011 Annual Report. There have been no changes in our critical accounting policies during the first ~~nine~~three months of ~~2011~~2012.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are exposed to market risk, including currency exchange rates, interest rates and raw material prices. ~~There~~For ~~have~~a ~~been~~discussion noof ~~material~~such ~~changes in these~~ market ~~risks~~risk ~~since we filed our 2010 annual report~~items, ~~and~~ refer ~~you~~ to Part I, Item 7A. - —“Quantitative and Qualitative Disclosure About Market Risk” in our ~~2010~~2011 Annual Report. There have been no material changes in these market risks during the first three months of 2012.

Our operations are located outside the United States and our functional currency is not the U.S. dollar. As a result, the reported amounts of our assets and liabilities related to our operations, and therefore our consolidated net assets, will fluctuate based upon changes in currency exchange rates.

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ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures. The term “disclosure controls and procedures,” as defined by ~~regulations~~Exchange ofAct ~~the~~Rule ~~SEC~~13a–15(e), means controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit to the SEC under the ~~Securities~~ Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports we file or submit to the SEC under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions to be made regarding required disclosure. Each of Steven L. Watson, our Chief Executive Officer, and Gregory M. Swalwell, our Vice President, Finance and Chief Financial Officer, have evaluated the design and operating effectiveness of our disclosure controls and procedures as of March 31, 2012. Based upon their evaluation, these executive officers have concluded that our disclosure controls and procedures are effective as of March 31, 2012.

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ensure that information we are required to disclose in the reports we file or submit to the SEC under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions to be made regarding required disclosure. Each of Steven L. Watson, our Chief Executive Officer, and Gregory M. Swalwell, our Vice President, Finance and Chief Financial Officer, have evaluated the design and operating effectiveness of our disclosure controls and procedures as of September 30, 2011. Based upon their evaluation, these executive officers have concluded that our disclosure controls and procedures are effective as of September 30, 2011.

Internal Control over Financial Reporting

We also maintain internal control over financial reporting. The term “internal control over financial reporting,” as defined by ~~regulations~~Exchange ofAct ~~the~~Rule ~~SEC~~13a–15(f), means a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our board of 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:

•

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

•

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

•

Provide reasonable assurance regarding prevention or timely detection of an unauthorized acquisition, use or disposition of our assets that could have a material effect on our Condensed Consolidated Financial Statements.

As permitted by the SEC, our assessment of internal control over financial reporting excludes (i) internal control over financial reporting of our equity method investees and (ii) internal control over the preparation of our financial statement schedules required by Article 12 of Regulation S-X.

Changes in Internal Control over Financial Reporting

There has been no change to our internal control over financial reporting during the quarter ended ~~September~~March 3031, ~~2011~~2012 that has ~~materially~~ materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Refer to Note 9 of the Condensed Consolidated Financial Statements and to our ~~2010~~2011 Annual Report for descriptions of certain legal proceedings.

Item 1A. Risk Factors

For a discussion of the risk factors related to our businesses, refer to Part I, Item 1A., “Risk Factors,” in our ~~2010~~2011 Annual report. There have been no material changes to such risk factors during the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~ 2012.

Item 6. Exhibits


31.1		Certification

31.2		Certification

32.1		Certification

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

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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: November 2, 2011		/s/ Gregory M. Swalwell
Date: May 8, 2012		/s/ Gregory M. Swalwell
		Gregory M. Swalwell
		Vice President, Finance and Chief Financial Officer (Principal Financial Officer)
Date: November 2, 2011		/s/ Tim C. Hafer
Date: May 8, 2012		/s/ Tim C. Hafer
		Tim C. Hafer
		Vice President and Controller (Principal Accounting Officer)

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