­UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549





FORM
10-Q





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





For
      the quarterly period ended September 30,
2009





OR





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





Commission
      file number 1-14368













Titanium
      Metals Corporation(Exact
      name of registrant as specified in its
charter)








Delaware
            
            13-5630895(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)   (Zip
  Code)








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





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days.  YesþNoo





Indicate
by check mark whether the 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 oNo o




*   
The registrant has not yet been phased into the interactive data
requirements




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 by Rule 12b-2 of the Exchange Act).





þ Large accelerated
filer          o Accelerated
filer         o Non-accelerated
filer          o Smaller reporting
company





Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).  Yes o No þ





Number of
shares of common stock outstanding on October 28, 2009:
180,021,134





TITANIUM
      METALS CORPORATION





INDEX








Page


Number





PART
      I.
            FINANCIAL
      INFORMATIONItem
      1.
            Condensed
      Consolidated Financial StatementsCondensed Consolidated Balance Sheets – December 31, 2008;
      September 30, 2009 (unaudited)
            2Condensed Consolidated Statements of Income – Three and nine
      months ended September 30, 2008 and 2009 (unaudited)
            4Condensed Consolidated Statements of Cash Flows – Nine
      months ended September 30, 2008 and 2009 (unaudited)
            5Condensed Consolidated Statement of Changes in Equity and
      Comprehensive Income – Nine months ended September 30, 2009
      (unaudited)
            6Notes to Condensed Consolidated Financial
      Statements
            7Item
      2.
            Management’s Discussion and Analysis of Financial
      Condition and Results of Operations
            16Item
      3.
            Quantitative and Qualitative Disclosures about Market
      Risk
            25Item
      4.
            Controls and Procedures
            25PART
      II.
            OTHER
      INFORMATIONItem
      1.
            Legal Proceedings
            27Item
      1A.
            Risk Factors
            27Item
      2.
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            27Item
      6.
            Exhibits
            28





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


-1-


TITANIUM
METALS CORPORATION


CONDENSED CONSOLIDATED BALANCE SHEETS


(In
millions)








December
      31,
            
            
            September
      30,ASSETS
            
            2008
            
            
            2009(unaudited)Current
      assets:Cash and cash
      equivalents
            
            $
            45.0
            
            
            $
            143.6Accounts and other
      receivables
            
            
            145.4
            
            
            
            134.2Inventories
            
            
            569.7
            
            
            
            512.5Refundable income
      taxes
            
            
            2.3
            
            
            
            4.2Prepaid expenses and
      other
            
            
            4.8
            
            
            
            9.0Deferred income
    taxes
            
            
            21.7
            
            
            
            22.1Total current
    assets
            
            
            788.9
            
            
            
            825.6Marketable
      securities
            
            
            16.4
            
            
            
            17.0Notes
      receivable from affiliates
            
            
            58.4
            
            
            
            59.1Property
      and equipment, net
            
            
            427.1
            
            
            
            420.8Deferred
      income taxes
            
            
            17.8
            
            
            
            21.5Other
            
            
            59.1
            
            
            
            59.3Total assets
            
            $
            1,367.7
            
            
            $
            1,403.3











See
accompanying Notes to Condensed Consolidated Financial Statements.
 Index
 -2-


TITANIUM
METALS CORPORATION


CONDENSEDCONSOLIDATED BALANCE SHEETS (CONTINUED)


(In
millions)








December
      31,
            
            
            September
      30,LIABILITIES
      AND EQUITY
            
            2008
            
            
            2009(unaudited)Current
      liabilities:Accounts payable
            
            $
            58.5
            
            
            $
            35.3Accrued and other current
      liabilities
            
            
            76.1
            
            
            
            71.4Customer advances
            
            
            17.6
            
            
            
            21.1Income taxes
    payable
            
            
            -
            
            
            
            5.2Deferred income
    taxes
            
            
            -
            
            
            
            1.4Total current
      liabilities
            
            
            152.2
            
            
            
            134.4Accrued
      OPEB cost
            
            
            28.5
            
            
            
            29.7Accrued
      pension cost
            
            
            77.5
            
            
            
            80.5Deferred
      income taxes
            
            
            -
            
            
            
            1.5Other
            
            
            9.2
            
            
            
            9.2Total liabilities
            
            
            267.4
            
            
            
            255.3Equity:TIMET stockholders’
      equity:Series A Preferred
      Stock
            
            
            3.2
            
            
            
            3.2Common stock
            
            
            1.8
            
            
            
            1.8Additional paid-in
      capital
            
            
            523.4
            
            
            
            517.8Retained earnings
            
            
            696.7
            
            
            
            726.2Accumulated other comprehensive
      loss
            
            
            (145.5
            )
            
            
            (118.5
            )Total TIMET stockholders’
      equity
            
            
            1,079.6
            
            
            
            1,130.5Noncontrolling interest in
      subsidiary
            
            
            20.7
            
            
            
            17.5Total equity
            
            
            1,100.3
            
            
            
            1,148.0Total liabilities and
      equity
            
            $
            1,367.7
            
            
            $
            1,403.3Commitments
      and contingencies (Note 10)









See
accompanying Notes to Condensed Consolidated Financial
Statements.
 Index
 -3-


TITANIUM
METALS CORPORATION


CONDENSEDCONSOLIDATED STATEMENTS OF INCOME


(In
millions, except per share data)





Three
      months ended
              September
      30,
            
            
            Nine
      months ended
              September
      30,2008
            
            
            2009
            
            
            2008
            
            
            2009(unaudited)Net
      sales
            
            $
            295.4
            
            
            $
            181.4
            
            
            $
            886.3
            
            
            $
            590.5Cost
      of sales
            
            
            222.5
            
            
            
            163.7
            
            
            
            648.0
            
            
            
            501.8Gross margin
            
            
            72.9
            
            
            
            17.7
            
            
            
            238.3
            
            
            
            88.7Selling,
      general, administrative anddevelopment
      expense
            
            
            18.0
            
            
            
            14.2
            
            
            
            51.5
            
            
            
            44.8Other
      (expense) income, net
            
            
            (2.0
            )
            
            
            -
            
            
            
            (2.3
            )
            
            
            1.7Operating income
            
            
            52.9
            
            
            
            3.5
            
            
            
            184.5
            
            
            
            45.6Other
      non-operating income, net
            
            
            4.8
            
            
            
            -
            
            
            
            3.3
            
            
            
            0.5Income before income
      taxes
            
            
            57.7
            
            
            
            3.5
            
            
            
            187.8
            
            
            
            46.1Provision
      for income taxes
            
            
            16.1
            
            
            
            2.4
            
            
            
            54.9
            
            
            
            15.2Net income
            
            
            41.6
            
            
            
            1.1
            
            
            
            132.9
            
            
            
            30.9Noncontrolling
      interest in net income (loss) of subsidiary
            
            
            1.3
            
            
            
            (0.1
            )
            
            
            4.9
            
            
            
            1.3Net income attributable toTIMET
      stockholders
            
            
            40.3
            
            
            
            1.2
            
            
            
            128.0
            
            
            
            29.6Dividends
      on Series A Preferred Stock
            
            
            0.1
            
            
            
            0.1
            
            
            
            0.2
            
            
            
            0.2Net income attributable toTIMET
      common stockholders
            
            $
            40.2
            
            
            $
            1.1
            
            
            $
            127.8
            
            
            $
            29.4Earnings
      per share attributable toTIMET
      common stockholders
            
            $
            0.22
            
            
            $
            0.01
            
            
            $
            0.70
            
            
            $
            0.16Weighted
      average shares outstanding:Basic
            
            
            181.0
            
            
            
            180.6
            
            
            
            181.6
            
            
            
            180.9Diluted
            
            
            182.0
            
            
            
            180.6
            
            
            
            182.6
            
            
            
            180.9Cash
      dividends per common share
            
            $
            0.075
            
            
            $
            -
            
            
            $
            0.225
            
            
            $
            -








See
accompanying Notes to Condensed Consolidated Financial
Statements.
 Index
 -4-


TITANIUM
METALS CORPORATION


CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS


(In
millions)





Nine
      months endedSeptember 30,2008
            
            
            2009(unaudited)Cash
      flows from operating activities:Net
      income
            
            $
            132.9
            
            
            $
            30.9Depreciation
      and amortization
            
            
            35.5
            
            
            
            38.1Deferred income
    taxes
            
            
            (6.5
            )
            
            
            (2.1
            )Other, net
            
            
            1.6
            
            
            
            1.7Change in assets and
      liabilities:Receivables
            
            
            25.5
            
            
            
            14.7Inventories
            
            
            (44.2
            )
            
            
            71.8Accounts payable and accrued
      liabilities
            
            
            (10.6
            )
            
            
            (31.2
            )Income taxes
            
            
            7.3
            
            
            
            3.2Other, net
            
            
            (13.5
            )
            
            
            2.4Net cash provided by operating
      activities
            
            
            128.0
            
            
            
            129.5Cash
      flows from investing activities:Capital
    expenditures
            
            
            (89.3
            )
            
            
            (24.9
            )Purchases of marketable
      securities
            
            
            (26.4
            )
            
            
            (0.7
            )Proceeds from sale of property and
      equipment
            
            
            -
            
            
            
            3.6Principal payments on notes
      receivable from affiliates
            
            
            7.0
            
            
            
            0.5Other, net
            
            
            (2.2
            )
            
            
            (0.4
            )Net cash used in investing
      activities
            
            
            (110.9
            )
            
            
            (21.9
            )Cash
      flows from financing activities:Indebtedness:Borrowings
            
            
            60.7
            
            
            
            -Repayments
            
            
            (47.6
            )
            
            
            -Common stock
      dividends
            
            
            (40.9
            )
            
            
            -Dividends paid to noncontrolling
      interest in subsidiary
            
            
            (5.4
            )
            
            
            (5.5
            )Treasury stock
      purchases
            
            
            (36.5
            )
            
            
            (5.9
            )Other, net
            
            
            0.2
            
            
            
            (0.1
            )Net cash used in financing
      activities
            
            
            (69.5
            )
            
            
            (11.5
            )Net
      cash (used in) provided by operating, investing andfinancing
      activities
            
            
            (52.4
            )
            
            
            96.1Effect of exchange rate changes on
      cash
            
            
            (1.2
            )
            
            
            2.5Net cash (used) provided during
      period
            
            
            (53.6
            )
            
            
            98.6Cash and cash equivalents at
      beginning of period
            
            
            90.0
            
            
            
            45.0Cash and cash equivalents at end
      of period
            
            $
            36.4
            
            
            $
            143.6Supplemental
      disclosures of cash paid for:Interest
            
            $
            1.1
            
            
            $
            0.6Income taxes
            
            $
            54.0
            
            
            $
            14.1









See
accompanying Notes to Condensed Consolidated Financial
Statements.
 Index
 -5-


TITANIUM
METALS CORPORATION


CONDENSEDCONSOLIDATED STATEMENT OF CHANGES IN
EQUITY


AND
COMPREHENSIVE INCOME


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009


(UNAUDITED)


(In
millions)








TIMET
      stockholders’ equitySeries
      A Preferred Stock
            
            
            Common
      stock
            
            
            Additional
      paid-in capital
            
            
            Retained
      earnings
            
            
            Accumulated
      other comprehensive loss
            
            
            Treasury
              stock
            
            
            Non-controlling
      interest
            
            
            Total
            
            
            Comprehensive
      incomeBalance
      at January 1, 2009
            
            $
            3.2
            
            
            $
            1.8
            
            
            $
            523.4
            
            
            $
            696.7
            
            
            $
            (145.5
            )
            
            $
            -
            
            
            $
            20.7
            
            
            $
            1,100.3Net income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            29.6
            
            
            
            -
            
            
            
            -
            
            
            
            1.3
            
            
            
            30.9
            
            
            $
            30.9Other comprehensive
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            27.0
            
            
            
            -
            
            
            
            1.0
            
            
            
            28.0
            
            
            
            28.0Treasury stock
      purchases
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (5.9
            )
            
            
            -
            
            
            
            (5.9
            )
            
            
            -Treasury stock
      retirement
            
            
            -
            
            
            
            -
            
            
            
            (5.9
            )
            
            
            -
            
            
            
            -
            
            
            
            5.9
            
            
            
            -
            
            
            
            -
            
            
            
            -Dividends
      declared to       noncontrollinginterest
            in subsidiary
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (5.5
            )
            
            
            (5.5
            )Other
            
            
            -
            
            
            
            -
            
            
            
            0.3
            
            
            
            (0.1
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            0.2
            
            
            
            -Balance
      at September 30, 2009
            
            $
            3.2
            
            
            $
            1.8
            
            
            $
            517.8
            
            
            $
            726.2
            
            
            $
            (118.5
            )
            
            $
            -
            
            
            $
            17.5
            
            
            $
            1,148.0Comprehensive
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            58.9





See
accompanying Notes to Condensed Consolidated Financial
Statements.
 Index
 -6-


TITANIUM
METALS CORPORATION


NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
30, 2009


(Unaudited)





Note
1 – Basis of presentation and organization





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, 2008 that we filed with the Securities
and Exchange Commission (“SEC”) on February 26, 2009 (“2008 Annual Report”),
except for the application of the presentation and disclosures requirements for
noncontrolling interests beginning January 1, 2009, as discussed
below.  They include the accounts of Titanium Metals Corporation and
its majority owned subsidiaries (collectively referred to as
“TIMET”).  Unless otherwise indicated, references in this report to
“we”, “us” or “our” refer to TIMET and its subsidiaries, taken as a
whole.  All material intercompany transactions and balances with
consolidated subsidiaries have been eliminated.  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 or omitted
certain information and footnote disclosures (including those related to the
Consolidated Balance Sheet at December 31, 2008) 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 period ended September 30, 2009 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 the 2008 Consolidated Financial Statements contained in our
2008 Annual Report.  Our first three fiscal quarters reported are the
approximate 13-week periods ending on the Saturday generally nearest to March
31, June 30 and September 30.  Our fourth fiscal quarter and fiscal
year always end on December 31.  For presentation purposes, our
financial statements and the accompanying notes have been presented as ended on
March 31, June 30, September 30 and December 31, as applicable.  We
evaluated the events occurring after the balance sheet for potential recognition
and disclosure through November 5, 2009, the date the financial statements were
issued.





Organization.  At
September 30, 2009, subsidiaries of Contran Corporation held 27.4% of our
outstanding common stock.  Substantially all of Contran's outstanding
voting stock is held by trusts established for the benefit of certain children
and grandchildren of Harold C. Simmons, of which Mr. Simmons is sole trustee, or
is held by Mr. Simmons or persons or other entities related to Mr.
Simmons.  At September 30, 2009, Mr. Simmons and his spouse owned an
aggregate of 16.5% of our common stock, and the Combined Master Retirement Trust
(“CMRT”), a trust sponsored by Contran to permit the collective investment by
trusts that maintain the assets of certain employee benefit plans adopted by
Contran and certain related companies, held an additional 8.6% of our common
stock.  Mr. Simmons is the sole trustee of the CMRT and a member of
the trust investment committee for the CMRT.  Consequently, Mr.
Simmons may be deemed to control each of Contran and us.





Fair value of
financial instruments.Carrying amounts of
certain of our financial instruments including, among others, cash and cash
equivalents and accounts receivable, approximate fair value because of their
short maturities.  We carry our investments in marketable equity
securities at fair value based upon quoted market prices, and the carrying value
of our notes receivable from affiliates approximates fair value because the
applicable interest rates are variable based upon stated market
indices.





Index
 -7-


Recent accounting
pronouncements.Noncontrolling interest - On
January 1, 2009, we adopted the accounting and disclosure requirements of
Statement of Financial Accounting Standard (“SFAS”) No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an Amendment of ARB No.51, which is
now included with Accounting Standards Codification (“ASC”) Topic 810 Consolidation.This
principle establishes a single method of accounting for changes in a parent’s
ownership interest in a subsidiary that do not result in
deconsolidation.  On a prospective basis, any changes in ownership
will be accounted for as equity transactions with no gain or loss recognized on
the transactions unless there is a change in control.  Previously,
such changes in ownership would generally result either in the recognition of
additional goodwill (for an increase in ownership) or a gain or loss included in
the determination of net income (for a decrease in ownership).  This
principle also standardizes the presentation of noncontrolling interest as a
component of equity on the balance sheet and on a net income basis in the
statement of income and requires expanded disclosures in the consolidated
financial statements that clearly identify and distinguish between the interests
of the parent and the interests of the noncontrolling owners of a
subsidiary.  Upon applying the accounting and disclosure guidance, we
reclassified our condensed consolidated balance sheet and statement of income to
conform to the new presentation requirements for the noncontrolling interest in
our 70%-owned French subsidiary.  Subsequently, if our ownership of a
less than wholly owned subsidiary increases for an amount of consideration that
exceeds the then-carrying value of the noncontrolling interest related to the
increased ownership, the amount of equity attributable to our shareholders will
be reduced.





Fair value disclosures - As
of June 30, 2009, we adopted Financial Accounting Standards Board (“FASB”) Staff
Position (“FSP”) FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments, which is now included with ASC Topic 825 Financial Instruments and
requires us to disclose the fair value of all financial instruments for which it
is practicable to estimate that value, whether recognized or not recognized in
the statement of financial position for interim as well as annual
periods.  Prior to the adoption of this principle, we were only
required to disclose this information annually.  We have included
these required disclosures.





Other-than-temporary
impairments - As of June 30, 2009, we adopted FSP FAS 115-2 and FAS
124-2, Recognition and
Presentation of Other-Than-Temporary Impairments, which is now included
with ASC Topic 320 Investments
- Debt and Equity Securities and amends existing guidance for the
recognition and measurement of other-than-temporary impairments for debt
securities classified as available-for-sale and held-to-maturity and expands the
disclosure requirements for interim and annual periods for available-for-sale
and held-to-maturity debt and equity securities to include additional
information about investments in an unrealized loss position for which an
other-than-temporary impairment has or has not been recognized.  We
have included these additional disclosures in Note 3.





Subsequent events – Beginning
with the Quarterly Report for the period ending June 30, 2009, we adopted SFAS
No. 165, Subsequent
Events, which is now included with ASC Topic 855 Subsequent
Events.  This principle establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued, which are referred to as subsequent
events.  The principle clarifies existing guidance on subsequent
events, including a requirement that a public entity should evaluate subsequent
events through the issue date of the financial statements, the determination of
when the effects of subsequent events should be recognized in the financial
statements and disclosures regarding all subsequent events.  The
principle also requires a public entity to disclose the date through which the
public entity has evaluated subsequent events but did not have a material effect
on our Condensed Consolidated Financial Statements.





Index
 -8-


Benefit plan asset
disclosures - During the fourth quarter of 2008, the FASB issued FSP FAS
132 (R)-1, Employers’
Disclosures about Postretirement Benefit Plan Assets, which is now
included with ASC Subtopic 715-20 Compensation – Retirement Benefits –
Defined Benefit Plans, which amends SFAS No. 87, 88 and 106 to require
expanded disclosures about employers’ pension plan assets.  This
principle will be effective for us beginning with our 2009 annual report, and we
will provide the expanded disclosures about our pension plan assets at that
time.


Multiple-Deliverable Revenue
Arrangements Revenue Recognition –
Multiple-Element Arrangements




Other. From time to
time, companies related to Contran will have loans and advances outstanding
between them and various related parties pursuant to term and demand
notes.  These loans and advances are generally entered into for cash
management purposes, in which the lender is generally able to earn a higher rate
of return on the loan than would have been earned if the lender invested the
funds in other investments, and the borrower is able to pay a lower rate of
interest than would be paid if the borrower had incurred third-party
indebtedness.  While certain of these loans may be of a lesser credit
quality than cash equivalent instruments otherwise available to the lender, the
lender will evaluate the credit risks involved and appropriately reflect those
credit risks in the terms of the applicable loan.  In this regard, on
November 4, 2009 we entered into an unsecured revolving credit facility pursuant
to which Contran may borrow up to $30 million from us.  Our loans to
Contran will bear interest at the prime rate minus 1.5% for the first $15
million borrowed, and the prime rate for any amounts borrowed in excess of $15
million, with all principal due on demand (and in any event no later than
December 31, 2010).  The amount of our outstanding loans we have to
Contran at any time is solely at our discretion.  On November 4, 2009,
Contran borrowed and aggregate $20.1 million pursuant to this
facility.





Note
2 – Inventories





December
      31,
              2008
            
            
            September
      30,
              2009(In
      millions)Raw
      materials
            
            $
            138.0
            
            
            $
            130.4Work-in-process
            
            
            264.1
            
            
            
            224.2Finished
      products
            
            
            119.8
            
            
            
            108.1Inventory
      consigned to customers
            
            
            19.2
            
            
            
            17.5Supplies
            
            
            28.6
            
            
            
            32.3Total
    inventories
            
            $
            569.7
            
            
            $
            512.5








Index
 -9-




Note
3 – Marketable securities
 Our
marketable securities consist of investments in the publicly traded shares of
related parties.  NL Industries, Inc., Kronos Worldwide, Inc. and
Valhi, Inc. are each majority owned subsidiaries of Contran.  All of our
marketable securities are classified as available-for-sale, which are carried at
fair value using quoted market prices for each marketable security, representing
inputs from the highest level (level 1) within the fair value
hierarchy.


The
following table summarizes our marketable securities:


Marketable
      security
            
            Fair
      value measurement level
            
            
            Market
      value
            
            
            Cost
      basis
            
            
            Unrealized
      gains (losses)(In
      millions)As
      of December 31, 2008:Valhi
            
            
            1
            
            
            $
            13.4
            
            
            $
            26.4
            
            
            $
            (13.0
            )NL
            
            
            1
            
            
            
            3.0
            
            
            
            2.5
            
            
            
            0.5Kronos
            
            
            1
            
            
            
            -
            
            
            
            0.2
            
            
            
            (0.2
            )Total
            
            
            
            
            
            $
            16.4
            
            
            $
            29.1
            
            
            $
            (12.7
            )As
      of September 30, 2009:Valhi
            
            
            1
            
            
            $
            14.8
            
            
            $
            26.6
            
            
            $
            (11.8
            )NL
            
            
            1
            
            
            
            1.5
            
            
            
            2.5
            
            
            
            (1.0
            )Kronos
            
            
            1
            
            
            
            0.7
            
            
            
            0.7
            
            
            
            -Total
            
            
            
            
            
            $
            17.0
            
            
            $
            29.8
            
            
            $
            (12.8
            )





During
2008 and the first nine months of 2009, we purchased 1.3 million shares of Valhi
common stock in market transactions for an aggregate of $26.6 million, and we
held approximately 1.1% of Valhi common stock at September 30,
2009.  Additionally, we held approximately 0.5% of NL’s outstanding
common stock and 0.2% of Kronos’ outstanding common stock at September 30,
2009.  Valhi and NL held an aggregate of approximately 95.2% of
Kronos’ outstanding common stock at September 30, 2009.





Because
we have classified all of our marketable securities as available-for-sale, any
unrealized gains or losses on the securities are recognized through other
comprehensive income.  With respect to our investment in Valhi common
stock, we considered the decline in market price for Valhi common stock to be
temporary at September 30, 2009.  We considered all available evidence
in reaching this conclusion.  While our investment in Valhi common
stock has been in a continuous unrealized loss position since August 2008, the
positive evidence we considered to conclude the decline was temporary at
September 30, 2009 includes (i) our ability and intent to hold the investment in
Valhi common stock for a reasonable period of time sufficient for the recovery
of fair value (as evidenced by the amount of liquidity we currently have with
cash on hand and our borrowing availability) and (ii) the significant partial
recovery of fair value as the quoted market price for Valhi common stock
increased as much as 88% during the third quarter 2009 as compared to the 63%
decline in Valhi’s quoted market price during the period from August 2008
through June 2009.  For our other investment in marketable securities
that currently has a cost basis in excess of its market value, we currently
believe the decline in market price of this security to be temporary in nature
as a result of recent market volatility.








Index
 -10-





We will
continue to monitor the quoted market prices for these securities.  If
we conclude in the future that the decline in value of one or more of these
securities was other than temporary, we would recognize an impairment through an
income statement charge at that time.  Such income statement
impairment charge would be offset in other comprehensive income by the reversal
of the previously recognized unrealized losses to the extent they were
previously recognized in accumulated other comprehensive
income.




Note
4 – Property and equipment





December
      31,2008
            
            
            September
      30,
              2009(In
      millions)Land
      and improvements
            
            $
            12.5
            
            
            $
            13.6Buildings
      and improvements
            
            
            57.8
            
            
            
            70.8Information
      technology systems
            
            
            71.0
            
            
            
            73.1Manufacturing
      equipment and other
            
            
            481.1
            
            
            
            557.7Construction
      in progress
            
            
            109.3
            
            
            
            40.6Total
      property and equipment
            
            
            731.7
            
            
            
            755.8Less
      accumulated depreciation
            
            
            304.6
            
            
            
            335.0Total property and equipment,
      net
            
            $
            427.1
            
            
            $
            420.8





Note
5 – Other noncurrent assets





December
      31,2008
            
            
            September
      30,
              2009(In
      millions)Prepaid
      conversion services
            
            $
            44.7
            
            
            $
            42.8Other
            
            
            14.4
            
            
            
            16.5Total other noncurrent
      assets
            
            $
            59.1
            
            
            $
            59.3





Note
6 – Accrued and other current liabilities





December
      31,
              2008
            
            
            September
      30,
              2009(In
      millions)Employee
      related
            
            $
            38.3
            
            
            $
            21.3Deferred
      revenue
            
            
            18.5
            
            
            
            33.2Other
            
            
            19.3
            
            
            
            16.9Total accrued and other current
      liabilities
            
            $
            76.1
            
            
            $
            71.4








Index
 -11-


Note 7 – Equity
 
 During
2007, our board of directors authorized the repurchase of up to $100 million of
our common stock in open market transactions or in privately negotiated
transactions, with the intention that any repurchased shares will be retired and
cancelled.  During the first nine months of 2009, we purchased 0.6
million shares of our common stock for an aggregate purchase price of $5.9
million, which were cancelled prior to September 30, 2009.  At
September 30, 2009, we could purchase an additional $57.6 million of our common
stock under our board of directors’ authorization.





Note
8 – Employee benefits


Defined
benefit pension plans.  The components
of the net periodic pension expense are set forth below:





Three
      months ended
              September
      30,
            
            
            Nine
      months ended
              September
      30,2008
            
            
            2009
            
            
            2008
            
            
            2009(In
      millions)Service
      cost
            
            $
            1.2
            
            
            $
            0.9
            
            
            $
            3.6
            
            
            $
            2.4Interest
      cost
            
            
            4.3
            
            
            
            3.9
            
            
            
            13.1
            
            
            
            11.0Expected
      return on plan assets
            
            
            (5.7
            )
            
            
            (3.4
            )
            
            
            (17.2
            )
            
            
            (9.6
            )Amortization
      of prior service cost
            
            
            0.1
            
            
            
            0.1
            
            
            
            0.3
            
            
            
            0.4Amortization
      of net losses
            
            
            0.6
            
            
            
            2.6
            
            
            
            1.9
            
            
            
            7.3Total pension
      expense
            
            $
            0.5
            
            
            $
            4.1
            
            
            $
            1.7
            
            
            $
            11.5





Postretirement
benefits other than pensions (“OPEB”).  The components
of net periodic OPEB expense are set forth below:





Three
      months ended
              September
      30,
            
            
            Nine
      months ended
              September
      30,2008
            
            
            2009
            
            
            2008
            
            
            2009(In
      millions)Service
      cost
            
            $
            0.3
            
            
            $
            0.4
            
            
            $
            0.8
            
            
            $
            0.9Interest
      cost
            
            
            0.4
            
            
            
            0.3
            
            
            
            1.2
            
            
            
            1.2Amortization
      of prior service credit
            
            
            (0.1
            )
            
            
            -
            
            
            
            (0.2
            )
            
            
            (0.1
            )Amortization
      of net losses
            
            
            0.1
            
            
            
            -
            
            
            
            0.4
            
            
            
            0.3Total OPEB
    expense
            
            $
            0.7
            
            
            $
            0.7
            
            
            $
            2.2
            
            
            $
            2.3










Index
 -12-





Note
9 – Income taxes
 
 Nine
      months endedSeptember 30,2008
              
              
              2009(In
      millions)Expected
      income tax expense, at 35%
              
              $
              65.7
              
              
              $
              16.1Non-U.S.
      tax rates
              
              
              (1.3
              )
              
              
              0.7U.S.
      state income taxes, net
              
              
              3.7
              
              
              
              1.1Nontaxable
      income
              
              
              (11.2
              )
              
              
              (5.1
              )Domestic
      manufacturing credit
              
              
              (4.0
              )
              
              
              (0.9
              )Uncertain
      tax positions
              
              
              2.1
              
              
              
              2.1Other,
      net
              
              
              (0.1
              )
              
              
              1.2Total income tax
      expense
              
              $
              54.9
              
              
              $
              15.2





Note
10 – Commitments and contingencies





Environmental
matters.  As a result of Environmental Protection Agency
(“EPA”) inspections, in April 2009 the EPA issued a Notice of Violation
(“Notice”) to us alleging that we violated certain provisions of the Resource
Conservation and Recovery Act and the Toxic Substances Control Act at our
Henderson plant.  We have submitted our response to the Notice to the
EPA, including an outline of our actions already taken to address the issues
raised by the EPA during the inspections and in the Notice and our planned
actions to address any remaining allegations of non-compliance.  The
EPA has not replied to our response.





As part of our continuing environmental
assessment with respect to our plant site in Henderson, Nevada, during 2008 we
completed and submitted to the Nevada Department of Environmental Protection
(“NDEP”) a Remedial Alternative Study (“RAS”) with respect to the groundwater
located beneath the plant site.  The RAS, which was submitted pursuant
to an existing agreement between the NDEP and us, addressed the presence of
certain contaminants in the plant site groundwater that require
remediation.  The NDEP completed its review of the RAS and our
proposed remedial alternatives during 2008, and the NDEP issued its record of
decision in February 2009, which selected our preferred groundwater remedial
alternative action plan.  We anticipate commencing the work to
implement the plan in the first quarter of 2010.





As of September 30, 2009, we have $3.1
million accrued for remediation activities anticipated at our Henderson plant
site, including amounts accrued at the lower end of the range of estimated costs
for the groundwater remedial action plan selected by the NDEP in its record of
decision.  We will continue evaluating alternative methods and timing
for all of our remediation activities, and if necessary, we may revise our
estimated costs in the future.  We estimate the upper end of the range
of reasonably possible costs related to all of our environmental matters,
including the current accrual, to be approximately $5.5 million.  We
expect these estimated costs to be incurred over a remediation period of at
least five years.





Index
 -13-





We accrue liabilities related to
environmental remediation obligations when estimated future costs are probable
and estimable.  We evaluate and adjust our estimates as additional
information becomes available or as circumstances change.  We
generally do not discount estimated future expenditures to their present value
due to the uncertainty of the timing of the future payments.  In the
future, if the standards or requirements under environmental laws or regulations
become more stringent, if our testing and analysis at our operating facilities
identify additional environmental remediation, or if we determine that we are
responsible for the remediation of hazardous substance contamination at other
sites, then we may incur additional costs in excess of our current
estimates.  We do not know if actual costs will exceed our current
estimates, if additional sites or matters will be identified which require
remediation or if the estimated costs associated with previously identified
sites requiring environmental remediation will become estimable in the
future. Legal
proceedings.  From
time to time, we are involved in various employment, environmental, contractual,
intellectual property, product liability, general liability and other claims,
disputes and litigation relating to our business.  In certain
instances, we have insurance coverage for these items to eliminate or reduce our
risk of loss (other than standard deductibles, which are generally $1 million or
less).  We currently believe that the outcome of these matters,
individually or in the aggregate, will not have a material adverse effect on our
financial position, results of operations or liquidity.  However, all
such matters are subject to inherent uncertainties, and were an unfavorable
outcome to occur with respect to several of these matters in a given period, it
is possible that it could have a material adverse impact on our results of
operations or cash flows in that particular period.





Note
11 – Earnings per share





Basic earnings per share is based on
the weighted average number of unrestricted common shares outstanding during
each period.  Diluted earnings per share attributable to common
stockholders reflects the dilutive effect of common stock options and the
assumed conversion of our Series A Preferred Stock.  A reconciliation
of the numerator and denominator used in the calculation of basic and diluted
earnings per share is presented in the following table:





Three
      months ended
              September
      30,
            
            
            Nine
      months ended
              September
      30,2008
            
            
            2009
            
            
            2008
            
            
            2009(In
      millions)Numerator:Net income attributable toTIMET
      common stockholders
            
            $
            40.2
            
            
            $
            1.1
            
            
            $
            127.8
            
            
            $
            29.4Dividends on Series
      A Preferred Stock (1)
            
            
            0.1
            
            
            
            -
            
            
            
            0.2
            
            
            
            -Diluted net income attributable
      toTIMET
      common stockholders
            
            $
            40.3
            
            
            $
            1.1
            
            
            $
            128.0
            
            
            $
            29.4Denominator:Average common shares
      outstanding
            
            
            181.0
            
            
            
            180.6
            
            
            
            181.6
            
            
            
            180.9Series A Preferred Stock (1)
            
            
            1.0
            
            
            
            -
            
            
            
            1.0
            
            
            
            -Diluted shares
            
            
            182.0
            
            
            
            180.6
            
            
            
            182.6
            
            
            
            180.9(1)
      Excludes the anti-dilutive effects from conversion of the outstanding
      Series A Preferred Stock in both 2009 periods.


Index
 -14-


Note
12 – Business segment information





Our production facilities are located
in the United States, United Kingdom, France and Italy, and our products are
sold throughout the world.  Our President functions as our chief
operating decision maker (“CODM”), and the CODM receives consolidated financial
information about us.  He makes decisions concerning resource
utilization and performance analysis on a consolidated and global
basis.  We have one reportable segment, our worldwide “Titanium melted
and mill products” segment.  The following table provides supplemental
information to our Condensed Consolidated Financial Statements:





Three
      months ended September 30,
            
            
            Nine
      months ended
              September
      30,2008
            
            
            2009
            
            
            2008
            
            
            2009(In
      millions, except product shipment data)Titanium
      melted and mill products:Melted product net
      sales
            
            $
            33.3
            
            
            $
            16.1
            
            
            $
            94.6
            
            
            $
            51.0Mill product net
      sales
            
            
            228.4
            
            
            
            149.2
            
            
            
            693.5
            
            
            
            486.1Other titanium product
      sales
            
            
            33.7
            
            
            
            16.1
            
            
            
            98.2
            
            
            
            53.4Total net sales
            
            $
            295.4
            
            
            $
            181.4
            
            
            $
            886.3
            
            
            $
            590.5Melted
      product shipments:Volume (metric
      tons)
            
            
            1,115
            
            
            
            675
            
            
            
            3,060
            
            
            
            1,915Average selling price (per
      kilogram)
            
            $
            29.85
            
            
            $
            23.90
            
            
            $
            30.90
            
            
            $
            26.65Mill
      product shipments:Volume (metric
      tons)
            
            
            3,845
            
            
            
            2,665
            
            
            
            11,195
            
            
            
            8,775Average selling price (per
      kilogram)
            
            $
            59.40
            
            
            $
            56.00
            
            
            $
            61.95
            
            
            $
            55.40




Index
 -15-


Item
2.                 MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS





The statements contained in this
Quarterly Report on Form 10-Q (“Quarterly Report”) that are not historical
facts, including, but not limited to, statements found in the Notes to Condensed
Consolidated Financial Statements and Management’s Discussion and Analysis of
Financial Condition and Results of Operations (“MD&A”), are forward-looking
statements that represent management’s beliefs and assumptions based on
currently available information.  Forward-looking statements can
generally be identified by the use of words such as “believes,” “intends,”
“may,” “will,” “looks,” “should,” “could,” “anticipates,” “expects” or
comparable terminology or by discussions of strategies or
trends.  Although we believe that the expectations reflected in such
forward-looking statements are reasonable, we do not know if these expectations
will prove to be correct.  Such statements by their nature involve
substantial risks and uncertainties that could significantly affect expected
results.  Actual future results could differ materially from those
described in such forward-looking statements, and we disclaim any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.  Among the
factors that could cause actual results to differ materially are the risks and
uncertainties discussed in this Quarterly Report, including risks and
uncertainties in those portions referenced above and those described from time
to time in our other filings with the SEC which include, but are not limited
to:





·
            the cyclicality of the
      commercial aerospace
industry;


·
            the performance of aerospace
      manufacturers and us under our long-term
  agreements;


·
            the existence or renewal of
      certain long-term
agreements;


·
            the difficulty in forecasting
      demand for titanium
products;


·
            global economic, financial and
      political conditions;


·
            global production capacity for
      titanium;


·
            changes in product pricing and
      costs;


·
            the impact of long-term
      contracts with vendors on our ability to reduce or increase
      supply;


·
            the possibility of labor
      disruptions;


·
            fluctuations in currency
      exchange rates;


·
            fluctuations in the market
      price of marketable
securities;


·
            uncertainties associated with
      new product or new market
development;


·
            the availability of raw
      materials and services;


·
            changes in raw material prices
      and other operating costs (including energy
  costs);


·
            possible disruption of
      business or increases in the cost of doing business resulting from
      terrorist activities or global
conflicts;


·
            competitive products and
      strategies; and


·
            other risks and
      uncertainties.





Should one or more of these risks
materialize (or the consequences of such a development worsen), or should the
underlying assumptions prove incorrect, actual results could differ materially
from those forecasted or expected.





The
following discussion and analysis should be read in conjunction with our
Condensed Consolidated Financial Statements and related notes included elsewhere
in this Quarterly Report and with our Consolidated Financial Statements and the
information under the heading “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” which are included in our 2008 Annual
Report.





Index
 -16-


SUMMARY





General
overview.We are a vertically
integrated producer of titanium sponge, melted products and a variety of mill
products for commercial aerospace, military, industrial and other
applications.  We are one of the world’s leading producers of titanium
melted products (ingot, electrodes and slab) and mill products (billet, bar,
plate, sheet and strip).  We are the only producer with major titanium
production facilities in both the United States and Europe, the world’s
principal markets for titanium.





RESULTS
OF OPERATIONS





Quarter
ended September 30, 2009 compared to quarter ended September 30,
2008





Summarized
financial information.  The following table summarizes certain
information regarding our results of operations for the three months ended
September 30, 2008 and 2009.  Our reported average selling prices are
a reflection of actual selling prices after the effects of currency exchange
rates, customer and product mix and other related factors throughout the periods
presented.





Three
      months ended September 30,2008
            
            
            %
      of totalnet sales
            
            
            2009
            
            
            %
      of totalnet sales(In
      millions, except product shipment data)Net
      sales:Melted products
            
            $
            33.3
            
            
            
            11
            %
            
            $
            16.1
            
            
            
            9
            %Mill products
            
            
            228.4
            
            
            
            77
            %
            
            
            149.2
            
            
            
            82
            %Other titanium
      products
            
            
            33.7
            
            
            
            12
            %
            
            
            16.1
            
            
            
            9
            %Total net sales
            
            
            295.4
            
            
            
            100
            %
            
            
            181.4
            
            
            
            100
            %Cost
      of sales
            
            
            222.5
            
            
            
            75
            %
            
            
            163.7
            
            
            
            90
            %Gross
      margin
            
            
            72.9
            
            
            
            25
            %
            
            
            17.7
            
            
            
            10
            %Selling,
      general, administrative anddevelopment
      expense
            
            
            18.0
            
            
            
            6
            %
            
            
            14.2
            
            
            
            8
            %Other
      (expense) income, net
            
            
            (2.0
            )
            
            
            1
            %
            
            
            -
            
            
            
            -Operating
      income
            
            $
            52.9
            
            
            
            18
            %
            
            $
            3.5
            
            
            
            2
            %Melted
      product shipments:Volume (metric
    tons)
            
            
            1,115
            
            
            
            
            
            
            
            675Average selling price (per
      kilogram)
            
            $
            29.85
            
            
            
            
            
            
            $
            23.90Mill
      product shipments:Volume (metric
    tons)
            
            
            3,845
            
            
            
            
            
            
            
            2,665Average selling price (per
      kilogram)
            
            $
            59.40
            
            
            
            
            
            
            $
            56.00





Index
 -17-


Net
sales.  Our net sales were $181.4 million for the third quarter
of 2009 compared to net sales of $295.4 million for the third quarter of
2008.  The 39% decrease in net sales was principally the result of
reduced volumes and, to a lesser extent, lower average selling prices in the
third quarter of 2009 compared to the same period in 2008.  Product
shipment volumes decreased 39% for melted products and 31% for mill products
from the third quarter of 2008 to the third quarter of 2009, as overall titanium
demand remains low due to the weak global economy and production delays within
the commercial aerospace sector.  Additionally, as a result of these
production delays, we believe many of our customers have implemented strategies
to reduce excess inventories and to maximize operating cash
flows.  Average selling prices decreased 20% for melted products and
6% for mill products over these same periods due to competitive pricing
pressures resulting from lower demand for titanium products and a decline in raw
material costs, primarily titanium scrap.  The decline in raw material
costs has contributed to lower selling prices for certain products under
long-term customer agreements, in part due to raw material indexed pricing
adjustments included in certain of these agreements.





Gross
margin.  For the third
quarter of 2009, our gross margin was $17.7 million as compared to $72.9 million
for the third quarter of 2008, primarily reflecting the effects of lower volumes
and average selling prices for our melted and mill products.  Due to
low utilization of our production capacity, the favorable impacts on our gross
margin from declining raw material costs, primarily titanium scrap, were largely
offset by higher per-unit overhead costs.  In addition, abnormally low
production throughout our major manufacturing operations resulted in unabsorbed
overhead of $9.4 million for the third quarter of 2009.





Operating
income.  Our operating income for the third quarter of 2009 was
$3.5 million compared to $52.9 million for the same period of 2008, primarily
reflecting the decline in gross margin.





Income
taxes.Our effective income tax rate increased to 69% for the
third quarter of 2009 compared to 28% for the third quarter of 2008 primarily
due to the net effects of lower earnings, changes in foreign tax law that caused
us to revise our judgments regarding our ability to utilize certain foreign tax
attributes and incremental taxes on foreign earnings.  We operate in
multiple tax jurisdictions, and as a result, the geographic mix of our pre-tax
income or loss can impact our overall effective tax rate.  Our
effective income tax rate in the 2008 period was lower than the U.S. statutory
rate due to the implementation of an internal corporate reorganization prior to
2008.  See Note 9 to the condensed consolidated financial statements
for a tabular reconciliation of our statutory income tax expense to our actual
tax expense.





Index
 -18-


Nine
months ended September 30, 2009 compared to nine months ended September 30,
2008





Summarized
financial information.  The following table summarizes certain
information regarding our results of operations for the nine months ended
September 30, 2008 and 2009.  Our reported average selling prices are
a reflection of actual selling prices after the effects of currency exchange
rates, customer and product mix and other related factors throughout the periods
presented.





Nine
      months ended September 30,2008
            
            
            %
      of totalnet sales
            
            
            2009
            
            
            %
      of totalnet sales(In
      millions, except product shipment data)Net
      sales:Melted products
            
            $
            94.6
            
            
            
            11
            %
            
            $
            51.0
            
            
            
            9
            %Mill products
            
            
            693.5
            
            
            
            78
            %
            
            
            486.1
            
            
            
            82
            %Other titanium
      products
            
            
            98.2
            
            
            
            11
            %
            
            
            53.4
            
            
            
            9
            %Total net sales
            
            
            886.3
            
            
            
            100
            %
            
            
            590.5
            
            
            
            100
            %Cost
      of sales
            
            
            648.0
            
            
            
            73
            %
            
            
            501.8
            
            
            
            85
            %Gross
      margin
            
            
            238.3
            
            
            
            27
            %
            
            
            88.7
            
            
            
            15
            %Selling,
      general, administrative anddevelopment
      expense
            
            
            51.5
            
            
            
            6
            %
            
            
            44.8
            
            
            
            7
            %Other
      (expense) income, net
            
            
            (2.3
            )
            
            
            -
            
            
            
            1.7
            
            
            
            -Operating
      income
            
            $
            184.5
            
            
            
            21
            %
            
            $
            45.6
            
            
            
            8
            %Melted
      product shipments:Volume (metric
    tons)
            
            
            3,060
            
            
            
            
            
            
            
            1,915Average selling price (per
      kilogram)
            
            $
            30.90
            
            
            
            
            
            
            $
            26.65Mill
      product shipments:Volume (metric
    tons)
            
            
            11,195
            
            
            
            
            
            
            
            8,775Average selling price (per
      kilogram)
            
            $
            61.95
            
            
            
            
            
            
            $
            55.40





Net
sales.  Our net sales were $590.5 million for the first nine
months of 2009 compared to net sales of $886.3 million for the first nine months
of 2008.  The 33% decrease in net sales was principally the result of
reduced volumes and, to a lesser extent, lower average selling prices in the
first nine months of 2009 compared to the same period in
2008.  Product shipment volumes decreased 37% for melted products and
22% for mill products from the first nine months of 2008 to the same period of
2009, as overall titanium demand remains low due to the weak global economy and
production delays within the commercial aerospace
sector.  Additionally, as a result of these production delays, we
believe many of our customers have implemented strategies to reduce excess
inventories and to maximize operating cash flows.  Average selling
prices decreased 14% for melted products and 11% for mill products over these
same periods due to competitive pricing pressures resulting from lower demand
for titanium products and a decline in raw material costs, primarily titanium
scrap.  The decline in raw material costs has contributed to lower
selling prices for certain products under long-term customer agreements, in part
due to raw material indexed pricing adjustments included in certain of these
agreements.





Index
 -19-


Gross
margin.  For the first
nine months of 2009, our gross margin was $88.7 million as compared to $238.3
million for the first nine months of 2008, primarily reflecting the effects of
lower volumes and average selling prices for our melted and mill
products.  Due to low utilization of our production capacity, the
favorable impacts on our gross margin from declining raw material costs,
primarily titanium scrap, were largely offset by higher per-unit overhead
costs.  In addition, abnormally low production throughout our major
manufacturing operations resulted in unabsorbed overhead of $15.7 million for
the first nine months of 2009.





Operating
income.  Our operating income for the first nine months of 2009
was $45.6 million compared to $184.5 million for the same period of 2008,
primarily reflecting the decline in gross margin.





Income
taxes.Our effective income tax rate was 33% for the first
nine months of 2009 compared to 29% for the first nine months of
2008.  We operate in multiple tax jurisdictions, and as a result, the
geographic mix of our pre-tax income or loss can impact our overall effective
tax rate.  Our effective income tax rates in both periods were lower
than the U.S. statutory rate due to the implementation of an internal corporate
reorganization prior to 2008.  See Note 9 to the Condensed
Consolidated Financial Statements for a tabular reconciliation of our statutory
income tax expense to our actual tax expense.





European
operations





We have substantial operations located
in the United Kingdom, France and Italy.  Approximately 35% of our
sales originated in Europe for the nine months ended September 30, 2009, a
portion of which were denominated in foreign currency, principally the British
pound sterling or the euro.  Certain raw material costs, principally
purchases of titanium sponge and alloys for our European operations, are
denominated in U.S. dollars, while labor and other production costs are
primarily denominated in local currencies.  The functional currencies
of our European subsidiaries are those of their respective countries, and our
European subsidiaries are subject to exchange rate fluctuations that may impact
reported earnings and may affect the comparability of period-to-period operating
results.  Our European operations may incur borrowings denominated in
U.S. dollars or in their respective functional currencies.  Our export
sales from the U.S. are denominated in U.S. dollars and are not subject to
currency exchange rate fluctuations.  We do not use currency contracts
to hedge our currency exposures.





The translated U.S. dollar value of our
foreign sales and operating results are subject to currency exchange rate
fluctuations which may favorably or adversely impact reported earnings and may
affect the comparability of period-to-period operating results.  By
applying the exchange rates prevailing during the prior year period to our local
currency results of operations for the current year period, the translation
impact of currency rate fluctuations can be calculated.





Index
 -20-


As the U.S. dollar strengthened versus
the euro and the British pound in the 2009 period compared to the 2008 period,
fluctuations in foreign currency exchange rates had the following effects on our
sales and operating income in the first three and nine months of 2009 as
compared to the corresponding periods of 2008:





Three
      monthsended Sept 30,2009 vs. 2008
            
            
            Nine
      monthsended Sept 30,2009 vs. 2008(In
      millions)Increase
      (decrease) in:Net sales
            
            $
            (7.6
            )
            
            $
            (44.9
            )Operating income
            
            
            1.9
            
            
            
            0.7





Outlook





Shipments
of our titanium mill products for the first nine months of 2009 were 22% lower
than shipments in the same period of 2008, which reflects the continuing
softness in demand, particularly within the commercial aerospace
sector.  In addition to the ongoing weak global economy, circumstances
within the commercial aerospace market continue to contribute to weak demand and
lower prices for titanium products.  Reduced passenger traffic and
reduced financing available to commercial airlines and aircraft leasing
companies have contributed to reduced production schedules for commercial
aircraft.  Further, excess supply chain inventories, particularly as a
result of adjustments to production schedules for Boeing and Airbus, including
delays in the completion of development and testing of the Boeing 787, continue
to suppress customer demand for titanium products.  Customer demand
for our products is expected to remain soft until these factors begin to be
resolved and inventory levels begin to stabilize.





Although
we have long-term agreements with a majority of our major customers, many of
which specify annual pricing mechanisms and minimum purchase commitments, we
anticipate that overall sales volumes and average selling prices for the
remainder of 2009 will remain consistent with levels achieved during the first
nine months of 2009.  Boeing recently announced an expected first test
flight for the Boeing 787 in the fourth quarter of 2009 and first deliveries in
the fourth quarter of 2010.  If Boeing achieves this timeline, we
anticipate production rates throughout the commercial aerospace supply chain
will accelerate over the next two to three years, which should increase customer
demand for our products and positively affect our sales.  We continue
to adjust our production rates, global workforce and cost structures in response
to changes in demand for our products.  Although per-unit costs for
both melted and mill products have been favorably impacted by declining raw
material costs, primarily titanium scrap, such cost reductions are currently
being offset by higher per-unit production and overhead costs resulting from
allocation of such costs over lower production volumes.





Through
careful management of production rates and costs, as well as conservative
capital investment, we continue to maintain positive cash flows and a strong
balance sheet, including $143.6 million of cash, borrowing availability under
our bank credit agreements of approximately $217.1 million and no bank debt as
of September 30, 2009.  While we will continue to adjust our cost
structure and production rates as necessary to promote operating cash flow and
preserve our financial strength, earnings for the remainder of the year are
expected to be at or near earnings achieved in the third quarter of 2009 based
on current volume expectations.





Index
 -21-


Despite
current challenges, we believe the overall industry outlook supports a long-term
favorable trend in demand for titanium products for the foreseeable
future.  This trend is driven in part by the long-term demand in the
commercial aerospace industry for a new generation of more fuel-efficient
aircraft that require a significantly higher percentage of titanium than earlier
models.  In July 2009, The Airline Monitor, a
leading aerospace publication, issued its semi-annual forecast for commercial
aircraft deliveries.  Aggregate annual deliveries for both Boeing and
Airbus are expected to reach record numbers of aircraft during each year from
2009 through 2013 (totaling at least 960 aircraft deliveries each year during
the period).  Although forecasted deliveries for twin-aisle aircraft
through 2013 have declined 4% from 1,450 to 1,390 since The Airline Monitor’s January
2009 forecast primarily due to production delays on the Boeing 787, changes to
production schedules for certain other commercial aircraft and global economic
factors, The Airline
Monitor’s July 2009 forecast reflects a 22% increase in deliveries of
Boeing and Airbus single-aisle aircraft through 2013, which has created a net
increase to the expected titanium consumption over the next five years compared
to The Airline
Monitor’s January 2009 forecast.  Beyond 2013, projected
aircraft deliveries remain strong as fuel efficiency and expansion of the global
fleet in developing areas, such as Asia, provide key drivers of long-term
demand.  Although the duration of the current global recession may
impact the timing of the demand recovery, this updated forecast supports our
belief that long-term industry-wide demand trends will remain strong for the
foreseeable future.





We
continue to pursue our strategic plans to improve our production capabilities,
with a focus on opportunities to improve our operating flexibility, efficiency
and cost structure, to meet our customers’ long-term needs.  In
particular, we continue to enhance our ability to meet our current and
prospective customers’ needs and strengthen our position as a reliable supplier
in markets where technical ability and precision are critical.  We
have been successful over the last several years in establishing significant
flexibility and cost advantages in our entire manufacturing
process.  We believe our efficient manufacturing processes and strong
balance sheet have kept us well-positioned in the current economic environment,
and we believe our financial strength will allow us to continue to invest in our
business, fully serve our current and prospective customers and pursue strategic
opportunities when appropriate.





LIQUIDITY
AND CAPITAL RESOURCES





Our
consolidated cash flows for the nine months ended September 30, 2008 and 2009
are presented below.  The following should be read in conjunction with
our Condensed Consolidated Financial Statements and notes thereto.





Nine
      months ended September 30,2008
            
            
            2009(In
      millions)Cash
      provided by (used in):Operating
    activities
            
            $
            128.0
            
            
            $
            129.5Investing
    activities
            
            
            (110.9
            )
            
            
            (21.9
            )Financing
    activities
            
            
            (69.5
            )
            
            
            (11.5
            )Net cash (used in) provided by operating, investingand financing
      activities
            
            $
            (52.4
            )
            
            $
            96.1





Operating
activities.Cash flow from
operations is considered a primary source of our liquidity.  Changes
in pricing, production volume and customer demand, among other things, could
significantly affect our liquidity.  Cash provided by operating
activities was $128.0 million for the first nine months of 2008 and $129.5
million for the first nine months of 2009.  The net effects of the
following significant items contributed to the cash provided by operating
activities:





Index
 -22-


·
            lower
      operating income of $138.9 million in
2009;




·
            higher
      net cash provided by operations resulting from changes in receivables,
      inventories, payables and accrued liabilities of $84.6 million in 2009 in
      response to changing working capital requirements primarily resulting from
      declining inventory levels and other affects from overall reduced demand
      for our products; and




·
            lower
      net cash paid for income taxes in 2009 of $39.9 million primarily due to
      the lower earnings in 2009.





Investing
activities.  Cash flows used in our investing activities
decreased from $110.9 million in the first nine months of 2008 to $21.9 million
in the first nine months of 2009.  Our capital expenditures were $89.3
million during the first nine months of 2008 compared to $24.9 million in
2009.  Capital projects and other significant investing activities
include the following:





·
            During
      2008, we had construction underway for the first and second phases of our
      EB melt capacity expansion at our facility in Morgantown and other
      capacity expansion projects in the U.S. and
  Europe.




·
            Most
      of our capacity expansion projects are now substantially complete, and
      2009 capital spending is limited to those required to properly maintain
      our equipment and facilities or complete active projects, such as the
      ongoing construction of a melt furnace at our Morgantown
      facility.




·
            We
      purchased $26.4 million in marketable equity securities during the first
      nine months of 2008 and $0.7 million during the first nine months of
      2009.





Financing
activities.  We had the following significant items included in
our cash flows from financing activities:





·
            We
      received cash from net borrowings of $13.1 million in the first nine
      months of 2008.




·
            We
      paid dividends on our common stock of $40.9 million in the first nine
      months of 2008.




·
            We
      purchased $36.5 million of treasury stock during the first nine months of
      2008 and $5.9 million during the first nine months of
  2009.





In
February 2009, our board of directors suspended our quarterly common stock
dividend after considering the current economic and financial
environment.





Future
cash requirements





Liquidity.Our primary
source of liquidity on an ongoing basis is our cash flows from operating
activities and borrowings under various credit facilities.  We
generally use these amounts to (i) fund capital expenditures, (ii) repay
indebtedness incurred primarily 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, (iii) make investments in marketable and other
securities (including the acquisition of securities issued by our subsidiaries
and affiliates) or (iv) fund major capital expenditures or the acquisition of
other assets outside the ordinary course of business.





Index
 -23-


We
routinely evaluate our liquidity requirements, capital needs and availability of
resources in view of, among other things, our alternative uses of capital, debt
service requirements, the cost of debt and equity capital and estimated future
operating cash flows.  As a result of this process, we have in the
past, or in light of our current outlook, may in the future, seek to raise
additional capital, modify our common and preferred dividend policies,
restructure ownership interests, incur, refinance or restructure indebtedness,
repurchase shares of common stock, sell assets, or take a combination of such
steps or other steps to increase or manage our liquidity and capital
resources.  In the normal course of business, we investigate,
evaluate, discuss and engage in acquisition, joint venture, strategic
relationship and other business combination opportunities in the titanium,
specialty metal and other industries.  In the event of any future
acquisition or joint venture opportunities, we may consider using then-available
liquidity, issuing equity securities or incurring additional
indebtedness.





At
September 30, 2009, we had aggregate borrowing availability under our existing
U.S. and European credit facilities of $217.1 million, and we had an aggregate
of $143.6 million of cash and cash equivalents.  Our U.S. credit
facility matures in February 2011, and our U.K. revolving credit facility was
recently extended and now matures in August 2012.  Based upon our
expectations of our operating performance, anticipated demands on our cash
resources, borrowing availability under our existing credit facilities and
anticipated borrowing capacity after the maturity of these credit facilities, we
expect to have sufficient liquidity to meet our short-term (defined as the next
twelve-month period) and long-term obligations, including the completion of our
ongoing capacity expansion projects, some of which are discussed
below.  If actual developments differ from our expectations, our
liquidity could be adversely affected.





Repurchases of
common stock.  At October 28, 2009, we had approximately $52.6
million available for repurchase of our common stock under the authorizations
described in Note 7 to our Condensed Consolidated Financial
Statements.





Capital
expenditures.We currently estimate we will invest a total of
approximately $30 million to $40 million for capital expenditures during
2009.  In response to current economic conditions, our planned capital
expenditures are limited to those required to properly maintain our equipment
and facilities or complete active projects.  Capital spending for 2009
is expected to be funded by cash flows from operating activities or existing
cash resources and available credit facilities.





While our
planned capital expenditures will be primarily to maintain our current
production levels, we continue to evaluate additional opportunities to improve
or replace productive assets including capital projects, acquisitions or other
investments which, if consummated, any required funding would be provided by
borrowings under our U.S. or European credit facilities.


Contractual commitments.  Other than fixed asset and raw
material purchase orders entered into in the normal course of business, there
have been no material changes to our contractual commitments discussed in our
2008 Annual Report.





Off-balance sheet
arrangements.  There have been no material changes to our
off-balance sheet arrangements discussed in our 2008 Annual Report.





Recent accounting
pronouncements.  See Note 1 to our Condensed Consolidated
Financial Statements.





Index
 -24-


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 - Critical Accounting Policies and
Estimates” in our 2008 Annual Report.  There have been no
changes in our critical accounting policies during the first nine months of
2009.





Affiliate
transactions.  Corporations that may be deemed to be controlled
by or affiliated with Mr. Simmons sometimes engage in (i) intercorporate
transactions such as guarantees, management and expense sharing arrangements,
shared fee arrangements, joint ventures, partnerships, loans, options, advances
of funds on open account, and sales, leases and exchanges of assets, including
securities issued by both related and unrelated parties, and (ii) common
investment and acquisition strategies, business combinations, reorganizations,
recapitalizations, securities repurchases, and purchases and sales (and other
acquisitions and dispositions) of subsidiaries, divisions or other business
units, which transactions have involved both related and unrelated parties and
have included transactions which resulted in the acquisition by one related
party of a publicly-held minority equity interest in another related
party.  We continuously consider, review and evaluate such
transactions, and understand that Contran and related entities consider, review
and evaluate such transactions.  Depending upon the business, tax and
other objectives then relevant, it is possible that we might be a party to one
or more such transactions in the future.  See Note 3 to our Condensed
Consolidated Financial Statements.





Item
3.              QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





We are exposed to market risk,
including foreign currency exchange rates, commodity prices and security
prices.  There have been no material changes in these market risks
since we filed our 2008 Annual Report, and we refer you to the report for a
complete description of these risks.





Item
4.              CONTROLSAND 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 Rule 13a-15(e) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), 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 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 required to be disclosed by us in the reports that 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 James W. Brown, our Chief
Financial Officer, have evaluated the design and operating effectiveness of our
disclosure controls and procedures as of September 30, 2009.  Based
upon their evaluation, these executive officers have concluded that our
disclosure controls and procedures were effective as of September 30,
2009.





Index
 -25-


Scope of
management’s report on internal control over financial reporting.  We also maintain
internal control over financial reporting.  The term "internal control
over financial reporting," as defined by rule 13a-15(f) of the Exchange Act,
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 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
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on our Consolidated Financial
  Statements.





Changes in
internal control over financial reporting.There have been
no changes to our internal control over financial reporting during the quarter
ended September 30, 2009 that have materially affected our internal control over
financial reporting.





Index
 -26-


PART
II. – OTHER INFORMATION





Item
1.              LEGALPROCEEDINGS





Refer to Note 10 of the Condensed
Consolidated Financial Statements and to our 2008 Annual Report for descriptions
of certain previously reported legal proceedings.





Item
1A.           RISKFACTORS


There have been no material changes in the first nine months of 2009 with
respect to our risk factors presented in Item 1A in our 2008 Annual Report on
Form 10-K.





Item
2.              UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





On
November 12, 2007, our board of directors authorized the repurchase of up to
$100 million of our common stock in open market transactions, including block
purchases, or in privately negotiated transactions, which may include
transactions with our affiliates.  We may repurchase our common stock
from time to time as market conditions permit.  The stock repurchase
program does not include specific price targets or timetables and may be
suspended at any time.  Depending on market conditions, we may
terminate the program prior to its completion.  Repurchased shares
will be retired and cancelled.  See Note 7 to the Condensed
Consolidated Financial Statements.





The
following table discloses certain information regarding the shares of our common
stock we purchased during the third quarter of 2009 (we made no purchases during
September 2009).  All of these purchases were made under the
repurchase program in open market transactions.





Period
            
            Total
      number of shares purchased
            
            
            Average
      price paid per share
            
            
            Total
      number of shares purchased as part of the publicly announced
      plan
            
            
            Maximum
      dollar value that may yet be purchased under the publicly announced
      plan(In
      millions)July
      1, 2009 to July 31, 2009
            
            
            125,000
            
            
            $
            8.16
            
            
            
            125,000
            
            
            $
            58.1August
      1, 2009 to August 31, 2009
            
            
            60,250
            
            
            $
            8.34
            
            
            
            60,250
            
            
            $
            57.6





Index
 -27-





Item
6.              EXHIBITS


10.1
            
            Unsecured
      Revolving Demand Promissory Note as of November 4, 2009 made by Contran
      Corporation payable to TIMET Finance Management Company, filed
      herewith.31.1
            
            Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  200231.2
            
            Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  200232.1
            
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002





Note:
            We
      have retained a signed original of any exhibit listed above that contains
      signatures, and we will provide any such exhibit to the SEC or its staff
      upon request.  Such request should be directed to the attention
      of our Corporate Secretary at our corporate offices located at 5430 LBJ
      Freeway, Suite 1700, Dallas, Texas
75240.


Index
 -28-


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.








TITANIUM
      METALS CORPORATIONDate:
      November 5, 2009
            By
            /s/
      James W. BrownJames
      W. BrownVice
      President and Chief Financial OfficerDate:
      November 5, 2009
            By
            /s/
      Scott E. SullivanScott
      E. SullivanVice
      President and Controller
              Principal
      Accounting Officer





-29-