SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 2005

                         Commission file number 0-28538

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

             Delaware                                     13-5630895
------------------------------------          ---------------------------------
(State or other jurisdiction of               (IRS employer identification no.)
 incorporation or organization)

                5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240
        -----------------------------------------------------------------
          (Address of principal executive offices, including zip code)

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

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

 Common Stock ($.01 par value)                  New York Stock Exchange
-------------------------------     -------------------------------------------
      (Title of each class)         (Name of each exchange on which registered)

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

          6 3/4% Series A Convertible Preferred Stock ($.01 par value)
       ------------------------------------------------------------------
                                (Title of class)

Indicate by check mark:

If the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes __ No X

If the  Registrant  is not  required to file  reports  pursuant to Section 13 or
Section 15(d) of the Act. Yes __ No X

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

If disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained  herein,  and  will  not be  contained,  to the  best of  Registrant's
knowledge,  in  definitive  proxy  or  information  statements  incorporated  by
reference in Part III of this Form 10-K or any amendment to this Form 10-K __

Whether the registrant is a large  accelerated  filer, an accelerated filer or a
non-accelerated  filer (as defined in Rule 12b-2 of the Act). Large  accelerated
filer __ Accelerated filer X Non-accelerated filer __.

Whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes __ No X

The  aggregate  market  value of the  25,185,912  shares of voting stock held by
nonaffiliates  of Titanium Metals  Corporation as of June 30, 2005  approximated
$357.6 million. There are no shares of non-voting stock outstanding. As of March
10, 2006, 73,725,762 shares of common stock were outstanding.

                      Documents incorporated by reference:

The  information  required by Part III is  incorporated  by  reference  from the
Registrant's definitive proxy statement to be filed with the Commission pursuant
to  Regulation  14A not later  than 120 days  after the end of the  fiscal  year
covered by this report.

<PAGE>





Forward-Looking Information

     The  statements  contained  in this  Annual  Report on Form  10-K  ("Annual
Report")  that  are  not  historical  facts,  including,  but  not  limited  to,
statements found in the Notes to Consolidated Financial Statements and in Item 1
-  Business,  Item  1A - Risk  Factors,  Item  2 -  Properties,  Item 3 -  Legal
Proceedings  and Item 7 -  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  the  Company  believes  that the  expectations
reflected in such forward-looking  statements are reasonable, it cannot give any
assurance that 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 the
Company   disclaims  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 the Company's  other filings with the Securities
and  Exchange  Commission  ("SEC")  which  include,  but are not limited to, the
cyclicality of the commercial  aerospace industry,  the performance of aerospace
manufacturers and the Company under their long-term agreements, the existence or
renewal of certain long-term  agreements,  the difficulty in forecasting  demand
for  titanium  products,  global  economic  and  political  conditions,   global
productive  capacity for  titanium,  changes in product  pricing and costs,  the
impact of  long-term  contracts  with  vendors on the  ability of the Company to
reduce or increase supply, the possibility of labor disruptions, fluctuations in
currency  exchange  rates,  fluctuations  in  the  market  price  of  marketable
securities,  control by certain stockholders and possible conflicts of interest,
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,  the  potential for  adjustment of the Company's  deferred
income tax asset valuation  allowance 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.



<PAGE>


                                     PART I

ITEM 1:  BUSINESS

     General.  Titanium  Metals  Corporation  ("TIMET"  or  the  "Company")  was
originally formed in 1950 and was incorporated in Delaware in 1955. TIMET is one
of the world's  leading  producers  of titanium  melted and mill  products.  The
Company is the only producer with major titanium  production  facilities in both
the United  States and  Europe,  the  world's  principal  markets  for  titanium
consumption.  TIMET is currently the only major producer of titanium  sponge,  a
key raw material, in the United States.

     Titanium was first manufactured for commercial use in the 1950s. Titanium's
unique combination of corrosion resistance, elevated-temperature performance and
high  strength-to-weight  ratio  makes  it  particularly  desirable  for  use in
commercial  and  military  aerospace  applications  where  these  qualities  are
essential  design  requirements for certain critical parts such as wing supports
and jet  engine  components.  While  aerospace  applications  have  historically
accounted for a substantial  portion of the worldwide  demand for titanium,  the
number of non-aerospace end-use markets for titanium has expanded substantially.
Today,  numerous industrial uses for titanium exist,  including chemical plants,
power plants,  desalination  plants and pollution control equipment.  Demand for
titanium  is also  increasing  in emerging  markets  with such  diverse  uses as
offshore oil and gas production installations, automotive, geothermal facilities
and architectural applications.

     TIMET's products include  titanium sponge,  melted products,  mill products
and  industrial  fabrications.  The  titanium  industry is  comprised of several
manufacturers that, like TIMET,  produce a relatively complete range of titanium
products and a  significant  number of producers  worldwide  that  manufacture a
limited range of titanium mill products.

     The  Company's  long-term  strategy  is to  maximize  the value of its core
aerospace business while also developing new markets,  applications and products
to help reduce its historical  dependence on the commercial  aerospace industry.
In the  near-term,  the Company  continues to focus on  maintaining  a lean cost
structure, managing its raw material requirements,  improving the quality of its
products and  processes  and taking other  actions to maximize its cash flow and
profitability.

     Industry.  The Company  develops  certain  industry  estimates based on its
extensive  experience  within  the  titanium  industry  as well  as  information
obtained  from  publicly  available  external  resources  (e.g.,  United  States
Geological  Survey,   International  Titanium  Association  and  Japan  Titanium
Society).  The Company estimates that it accounted for approximately 18% and 19%
of  worldwide  industry  shipments of titanium  mill  products in 2005 and 2004,
respectively,  and  approximately  8%  and  10%  of  worldwide  titanium  sponge
production in 2005 and 2004,  respectively.  The following table illustrates the
Company's estimates of aggregate titanium industry mill product shipments during
2005 and 2004:


<PAGE>



<TABLE>
<CAPTION>
                                                                       Year ended December 31,               %
                                                                  ----------------------------------
                                                                       2005               2004             change
                                                                  ----------------    --------------     -----------
                                                                            (metric tons)
Mill product shipments to:
<S>                                                                     <C>                 <C>                <C>
  Commercial aerospace sector                                           24,000              20,900            +15%
  Military sector                                                        6,200               4,700            +32%
  Industrial sector                                                     35,600              32,300            +10%
  Emerging markets sector                                                2,700               2,300            +17%
                                                                  ----------------    --------------

Aggregate mill product shipments to all sectors                         68,500              60,200            +14%
                                                                  ================    ==============
</TABLE>

     The titanium industry historically has derived a substantial portion of its
business from the  commercial  aerospace  sector.  Demand for titanium  products
within  the  commercial  aerospace  sector  is  derived  from  both  jet  engine
components (e.g., blades, discs, rings and engine cases) and airframe components
(e.g., bulkheads, tail sections, landing gear, wing supports and fasteners). The
commercial  aerospace sector has a significant  influence on titanium companies,
particularly mill product producers such as TIMET.

     The Company's  business is more  dependent on commercial  aerospace  demand
than is the overall titanium  industry,  as  approximately  59% of the Company's
mill product  shipment  volume in 2005 was to the commercial  aerospace  sector,
whereas,  as  indicated  by the above  table,  approximately  35% of the overall
titanium  industry's  shipment  volume in 2005 was to the  commercial  aerospace
sector.

     The  cyclical  nature of the  commercial  aerospace  industry  has been the
principal  driver of the  historical  fluctuations  in the  performance  of most
titanium  companies.  Over the past 20 years, the titanium industry had cyclical
peaks in mill  product  shipments in 1989,  1997 and 2001 and  cyclical  lows in
1983,  1991,  1999 and 2003.  Prior to 2004,  demand for  titanium  reached  its
highest level in 1997 when industry mill product shipments reached approximately
60,700 metric tons.  However,  since 1997,  industry mill product shipments have
fluctuated  significantly,  primarily  due to a  continued  change in demand for
titanium  from the  commercial  aerospace  sector.  The Company  estimates  that
industry  shipments  approximated  60,200  metric tons in 2004 and 68,500 metric
tons in 2005.  The Company  currently  expects 2006 total  industry mill product
shipments to increase by only 5% to 10% as compared to 2005, due to tightness of
raw material supply.

     The Airline Monitor, a leading aerospace publication,  traditionally issues
forecasts for commercial aircraft deliveries each January and July. According to
The Airline Monitor,  large commercial  aircraft deliveries for the 1996 to 2005
period peaked in 1999 with 889  aircraft,  including 254 wide body aircraft that
use  substantially  more  titanium  than their narrow body  counterparts.  Large
commercial  aircraft deliveries totaled 650 (including 152 wide bodies) in 2005.
The following  table  summarizes  The Airline  Monitor's  most  recently  issued
forecast (January 2006) for large commercial  aircraft  deliveries over the next
five years:


<PAGE>



<TABLE>
<CAPTION>
                                                                              % increase (decrease)
                                     Forecasted deliveries                     over previous year
                               -----------------------------------    --------------------------------------
            Year                   Total           Wide bodies             Total             Wide bodies
      ------------------       --------------    -----------------    ----------------    ------------------

            <S>                    <C>                <C>                    <C>                 <C>
            2006                    840                193                    29.2%               27.0%
            2007                    920                217                     9.5%               12.4%
            2008                    985                259                     7.1%               19.4%
            2009                   1,030               294                     4.6%               13.5%
            2010                   1,030               314                     -                   6.8%
</TABLE>

     The  latest  forecast  from The  Airline  Monitor  reflects  a  significant
increase from earlier such forecasts,  in large part due to record levels of new
orders placed for Boeing and Airbus models during 2005. Total order bookings for
Boeing and Airbus in 2005 were 2,109 planes. Expectations are that new orders in
2006 will be significantly lower than 2005; however, the strong bookings in 2005
have  increased  the order backlog for both Boeing and Airbus in support of this
increased forecast.

     Deliveries of titanium  generally precede aircraft  deliveries by about one
year, although this varies considerably by titanium product.  This correlates to
the  Company's  cycle,  which  historically  precedes  the cycle of the aircraft
industry and related deliveries.  Although persistently high oil prices have had
an adverse impact on the commercial airline industry,  global commercial airline
traffic  increased in 2005  compared to 2004.  The Company  estimates  that 2006
industry  mill  product  shipments  into the  commercial  aerospace  sector will
increase 15% to 20%, as compared to 2005.

     Wide body  planes  tend to use a higher  percentage  of  titanium  in their
airframes,  engines and parts than narrow body  planes.  Newer  models of planes
tend to use a higher  percentage of titanium than older models.  Newer wide body
models such as the Airbus A380 and the Boeing 787 Dreamliner are expected to use
an even greater quantity of titanium than previous wide body models. See further
discussion  of  titanium  usage for these new planes in  "Business - Markets and
customer base."

     Titanium   shipments  into  the  military  sector  are  largely  driven  by
government  defense  spending in North  America and Europe.  Military  aerospace
programs  were the first to  utilize  titanium's  unique  properties  on a large
scale,  beginning in the 1950s. Titanium shipments to military aerospace markets
reached a peak in the 1980s before falling to historical lows in the early 1990s
after the end of the Cold War. In recent years,  titanium has become an accepted
use in ground combat vehicles as well as in Naval  applications.  The importance
of military markets to the titanium  industry is expected to continue to rise in
coming  years as defense  spending  budgets  increase in  reaction to  terrorist
activities and global conflicts.

     Several of today's  active  U.S.  military  programs,  including  the C-17,
F/A-18,  F-16 and F-15 are expected to continue in production through the end of
the  current  decade.   However,  a  recent  Quadrennial  Defense  Review  (QDR)
recommends  that the US Air  Force  stop  procurement  of the C-17  with the 180
planes it now has on order,  but this  recommendation  still must go through the
federal budget process.  Without  further orders,  the C-17 production line will
close in 2008.



<PAGE>


     In addition to the  established  C-17,  F/A-18 and F-16 programs,  new U.S.
programs offer growth  opportunities  for increased  titanium  consumption.  The
F/A-22 Raptor was given full-rate  production approval in April 2005.  According
to The Teal Group, a leading  independent  aerospace  publication,  the U.S. Air
Force would like to purchase 381 aircraft,  but the Department of Defense is now
planning for only 179.  However,  additional  F/A-22 Raptors may be manufactured
for sale to foreign nations.

     In October 2001,  Lockheed-Martin  Corporation was awarded the contract for
construction  of the F-35 Joint Strike Fighter  ("JSF").  The JSF is expected to
enter  low-rate  initial  production  in late 2006,  with  delivery of the first
production  aircraft in 2009.  Although no specific  delivery patterns have been
established,  procurement is expected to extend over the next 30 to 40 years and
to include as many as 3,000 to 4,000 planes, including sales to foreign nations.
European  military  programs also have active  aerospace  programs  offering the
possibility for increased titanium  consumption.  Production levels for the Saab
Gripen,  Eurofighter  Typhoon,  Dassault Rafale and Dassault Mirage 2000 are all
forecasted to remain steady through the end of the decade.

     Utilization  of titanium  on  military  ground  combat  vehicles  for armor
applique  and  integrated  armor  or  structural  components  continues  to gain
acceptance within the military market segment. Titanium armor components provide
the necessary  ballistic  performance while achieving a mission critical vehicle
performance objective of reduced weight. In order to counteract increased threat
levels,  titanium is being utilized on vehicle  upgrade  programs in addition to
new  builds.  Based on active  programs,  as well as  programs  currently  under
evaluation,  the Company  believes there will be additional usage of titanium on
ground combat vehicles that will provide continued growth in the military market
sector.  In armor and armament,  the Company sells plate and sheet  products for
fabrication into applique plate for protection  application of the entire ground
combat vehicle as well as the primary vehicle structure.

     Since titanium's  initial  applications,  the number of end-use markets for
titanium has significantly  expanded.  Established  industrial uses for titanium
include chemical plants, power plants, desalination plants and pollution control
equipment.  Rapid growth of the Chinese and other  Southeast Asian economies has
brought unprecedented demand for  titanium-intensive  industrial  equipment.  In
November  2005,  the Company  entered into a joint  venture with XI'AN  BAOTIMET
VALINOX TUBES CO. LTD.  ("BAOTIMET")  to produce welded  titanium  tubing in the
Peoples Republic of China.  BAOTIMET's  production facilities will be located in
Xi'an, China, and production is expected to begin in early 2007.

     Titanium continues to gain acceptance in many emerging market applications,
including automotive, energy (including oil and gas) and architecture.  Although
titanium is generally  higher cost than other  competing  metals,  in many cases
customers  find the physical  properties of titanium to be  attractive  from the
standpoint of weight, performance,  longevity,  design alternatives,  life cycle
value and other factors. The Company continues to explore opportunities in these
emerging  market  applications  through  marketing  initiatives,   research  and
development  and  proprietary  alloys  designed to provide  more cost  effective
alternatives for these markets.



<PAGE>


     Although  the Company  estimates  that  emerging  market  demand  presently
represents  only about 4% of the 2005 total  industry  demand for titanium  mill
products,  the Company believes emerging market demand, in the aggregate,  could
grow at double-digit rates over the next several years. The Company continues to
actively  pursue these  markets and was able to grow its mill product  shipments
into  emerging  markets  by more  than  50%  during  2005 as  compared  to 2004.
Beginning in 2005,  the Company no longer  includes  armor and armament  related
sales as part of its  emerging  markets  sector,  as  titanium  usage has become
widely  accepted  for such  applications.  Accordingly,  all such  sales are now
included  in the  Company's  military  sector  and all prior  periods  have been
restated to conform to this presentation.

     The automotive market continues to be an attractive  emerging market due to
its potential for sustainable  long-term growth.  TiMET Automotive is focused on
developing and marketing  proprietary alloys and processes  specifically  suited
for  automotive  applications.  Titanium  is now used in  several  consumer  car
applications as well as in numerous  motorcycles.  At the present time, titanium
is  primarily  used for exhaust  systems,  suspension  springs,  engine  valves,
connecting rods and  turbocharger  compressor  wheels in consumer and commercial
vehicles. In exhaust systems,  titanium provides for significant weight savings,
while  its  corrosion  resistance  provides   life-of-vehicle   durability.   In
suspension spring applications,  titanium's low modulus of elasticity allows the
spring's  height to be reduced by 20% to 40% compared to a steel spring,  which,
when combined with the titanium's low density, permits 30% to 60% weight savings
over  steel  spring  suspension  systems.  Titanium  engine  components  provide
mass-reduction  benefits  that directly  improve  vehicle  performance  and fuel
economy.  The application of titanium to turbocharger  compressor wheels is part
of a solution to meet U.S. and European Union government-regulated diesel engine
emissions  requirements.  TIMETAL  proprietary  alloys  provide  cost  effective
optimized  performance  for the various  target  applications.  The  decision to
select  titanium  components for consumer car,  truck and motorcycle  components
remains  highly  cost  sensitive;   however,  the  Company  believes  titanium's
acceptance in consumer vehicles will expand as the automotive industry continues
to better understand the benefits titanium offers.

     The oil and gas market  utilizes  titanium  for  down-hole  logging  tools,
critical riser  components,  fire water systems and  saltwater-cooling  systems.
Additionally,  as offshore  development of new oil and gas fields moves into the
ultra   deep-water   depths,   market   demand  for   titanium's   light-weight,
high-strength and corrosion-resistance  properties is creating new opportunities
for the material.  The Company has a group dedicated to developing the expansion
of titanium use in this market and in other non-aerospace applications.

     Products and operations.  The Company is a vertically  integrated  titanium
manufacturer whose products include:

     (i)  titanium  sponge,  the basic form of  titanium  metal used in titanium
          products;

     (ii) melted products  (ingot,  electrodes and slab),  the result of melting
          sponge and titanium scrap, either alone or with various alloys;

     (iii) mill  products  that  are  forged  and  rolled  from  ingot  or slab,
          including long products (billet and bar), flat products (plate,  sheet
          and strip) and pipe; and

     (iv) fabrications (spools, pipefittings, manifolds, vessels, etc.) that are
          cut, formed, welded and assembled from titanium mill products



<PAGE>


     During the past three years, all of TIMET's net sales were generated by the
Company's   integrated  titanium  operations  (its  "Titanium  melted  and  mill
products" segment), its only business segment. Business and geographic financial
information is included in Note 21 to the Consolidated Financial Statements.

     Titanium sponge (so called because of its  appearance) is the  commercially
pure,  elemental  form of  titanium  metal.  The first  step in  TIMET's  sponge
production involves the combination of titanium-containing  rutile ores (derived
from  beach  sand)  with  chlorine  and  petroleum  coke  to  produce   titanium
tetrachloride.   Titanium  tetrachloride  is  purified  and  then  reacted  with
magnesium in a closed system,  producing  titanium sponge and magnesium chloride
as co-products.  The Company's titanium sponge production facility in Henderson,
Nevada  incorporates  vacuum  distillation  process  ("VDP")  technology,  which
removes the magnesium and  magnesium  chloride  residues by applying heat to the
sponge mass while  maintaining a vacuum in the chamber.  The combination of heat
and  vacuum  boils  the  residues  from the  sponge  mass,  and then the mass is
mechanically pushed out of the distillation vessel,  sheared and crushed,  while
the residual magnesium chloride is electrolytically separated and recycled.

     Titanium ingot is a cylindrical  solid shape that, in TIMET's case,  weighs
up to 8 metric tons. Titanium slab is a rectangular solid shape that, in TIMET's
case,  weighs  up to 16 metric  tons.  Each  ingot or slab is formed by  melting
titanium  sponge,  scrap or both,  usually  with  various  other  alloys such as
vanadium, aluminum, molybdenum, tin and zirconium. The melting process for ingot
and slab is closely controlled and monitored  utilizing computer control systems
to maintain product quality and consistency and to meet customer specifications.
In most  cases,  TIMET  uses its ingot  and slab as the  starting  material  for
further processing into mill products.  However, it also sells ingot, electrodes
and slab to  third  parties.  Titanium  scrap is a  by-product  of the  forging,
rolling,  milling and machining operations,  and significant quantities of scrap
are  generated  in the  production  process for finished  titanium  products and
components.

     The Company sends certain products either to the Company's  service centers
or to outside vendors for further  processing before being shipped to customers.
The Company's customers either process the Company's products for their ultimate
end-use or for sale to third parties.

     During  the   production   process  and   following   the   completion   of
manufacturing,  the Company  performs  extensive  testing on its  products.  The
inspection  process is critical to ensuring that the Company's products meet the
high quality requirements of its customers,  particularly in aerospace component
production.  The Company certifies that its products meet customer specification
at the time of shipment for substantially all customer orders.

     The Company  currently  is reliant on several  outside  processors  (one of
which is owned by a competitor) to perform certain rolling,  finishing and other
processing  steps in the U.S., and certain  melting and forging steps in France.
In France,  the  processor  is also a joint  venture  partner  in the  Company's
70%-owned  subsidiary,  TIMET Savoie,  S.A.  ("TIMET  Savoie").  During the past
several years,  the Company has made  significant  strides  toward  reducing the
reliance  on   competitor-owned   sources  for  these  services,   so  that  any
interruption in these functions should not have a material adverse effect on the
Company's business, results of operations, financial position or liquidity.



<PAGE>


     Distribution.  The Company  sells its products  through its own sales force
based in the U.S.  and Europe and through  independent  agents and  distributors
worldwide.  The Company's  distribution system also includes eight Company-owned
service centers (five in the U.S. and three in Europe), which sell the Company's
products on a just-in-time basis. The service centers primarily sell value-added
and customized mill products, including bar, sheet, plate, tubing and strip. The
Company believes its service centers provide a competitive  advantage because of
their  ability to foster  customer  relationships,  customize  products  to suit
specific customer requirements and respond quickly to customer needs.

     Raw  materials.  The  principal  raw  materials  used in the  production of
titanium ingot,  slab and mill products are titanium sponge,  titanium scrap and
alloys.  The following  table  summarizes  the Company's 2005 raw material usage
requirements in the production of its melted and mill products:

<TABLE>
<CAPTION>
                                                                          Percentage of total raw
                                                                           material requirements
                                                                        -----------------------------

              <S>                                                                    <C>
              Internally produced sponge                                              29%
              Purchased sponge                                                        25%
              Titanium scrap                                                          40%
              Alloys                                                                   6%
                                                                        -----------------------------

                                                                                     100%
                                                                        =============================
</TABLE>

     The primary raw materials  used in the  production  of titanium  sponge are
titanium-containing  rutile ore, chlorine,  magnesium and petroleum coke. Rutile
ore is currently  available from a limited number of suppliers around the world,
principally  located in  Australia,  South  Africa and Sri  Lanka.  The  Company
purchases the majority of its supply of rutile ore from  Australia.  The Company
believes the  availability  of rutile ore will be adequate  for the  foreseeable
future  and  does not  anticipate  any  interruptions  of its  rutile  supplies.
However,  there  can be no  assurance  that  the  Company  will  not  experience
interruptions.

     Chlorine is currently  obtained  from a single  supplier near the Company's
sponge  plant in  Henderson,  Nevada.  While  the  Company  does  not  presently
anticipate any chlorine supply problems, there can be no assurances the chlorine
supply will not be interrupted.  In the event of supply disruption,  the Company
has taken steps to mitigate this risk, including establishing the feasibility of
certain   equipment   modifications  to  enable  it  to  utilize  material  from
alternative  chlorine  suppliers  or to  purchase  and  utilize an  intermediate
product  which will allow the Company to  eliminate  the purchase of chlorine if
needed.  Magnesium and petroleum  coke are generally  available from a number of
suppliers.



<PAGE>


     During  2005,  the  Company  was the only major U.S.  producer  of titanium
sponge and one of only six major worldwide  producers (the others are located in
Russia, Kazakhstan, the Ukraine and two in Japan).  Additionally,  there are two
smaller sponge producers  located in China.  However,  the Company cannot supply
all of its needs for all grades of titanium sponge  internally and is dependent,
therefore,   on  third  parties  for  a   substantial   portion  of  its  sponge
requirements. Titanium melted and mill products require varying grades of sponge
and/or scrap  depending on the customers'  specifications  and expected end use.
Presently,  TIMET  and  certain  companies  in Japan are the only  producers  of
premium quality sponge that currently have complete approval for all significant
demanding aerospace  applications.  Over the past few years, sponge producers in
Russia and Kazakhstan  have  progressed in their efforts to obtain  approval for
the use of their  sponge into all  aerospace  applications.  This  qualification
process is likely to continue for several more years. Historically,  the Company
has purchased  sponge  predominantly  from producers in Kazakhstan and Japan. In
September  2002, the Company entered into a sponge supply  agreement,  effective
from January 1, 2002 through  December 31, 2007,  which requires  minimum annual
purchases  by the  Company.  The Company has no other  long-term  sponge  supply
agreements.  Since 2000,  the Company  has also  purchased  sponge from the U.S.
Defense Logistics Agency ("DLA")  stockpile;  however,  the DLA stockpile became
fully depleted  during 2005. The Company  expects to continue to purchase sponge
from a variety of sources during 2006.

     The Company utilizes titanium scrap at its melting locations that is either
generated  internally,  purchased  from certain of its  customers  under various
buyback  arrangements  or purchased  externally  on the open market.  Such scrap
consists  of alloyed  and  commercially  pure  solids and  turnings.  Internally
produced scrap is generated in the Company's  factories  during both melting and
mill product  processing.  Scrap obtained through customer buyback  arrangements
provides  a "closed  loop"  arrangement  resulting  in  greater  supply and cost
stability.  Externally  purchased  scrap  comes  from a wide  range of  sources,
including customers, collectors, processors and brokers. The Company anticipates
that 30% to 35% of the scrap it will utilize  during 2006 will be purchased from
external  suppliers,  as compared to 35% to 40% for 2005,  due to the  Company's
successful  efforts to increase its closed loop  arrangements.  The Company also
occasionally  sells  scrap,  usually  in a form or grade it cannot  economically
recycle.

     Market  forces can  significantly  impact the supply or cost of  externally
produced scrap.  The amount of scrap generated in the supply chain varies during
the titanium business cycles.  During the middle of the cycle,  scrap generation
and consumption are in relative equilibrium, minimizing disruptions in supply or
significant  changes  in the  available  supply  and  market  prices  for scrap.
Increasing or decreasing  cycles tend to cause  significant  changes in both the
supply and market price of scrap.  Early in the titanium cycle,  when the demand
for  titanium  melted  and mill  products  begins  to  increase,  the  Company's
requirements (and those of other titanium manufacturers) precede the increase in
scrap  generation by downstream  customers and the supply chain,  placing upward
pressure on the market price of scrap. The opposite situation occurs when demand
for titanium  melted and mill products  begins to decline,  resulting in greater
availability  of supply and placing  downward  pressure  on the market  price of
scrap.  As a net  purchaser  of  scrap,  the  Company  is  susceptible  to price
increases during periods of increasing demand.  This phenomenon normally results
in higher selling prices for melted and mill products, which tends to offset the
increased material costs.



<PAGE>


     All of the Company's major  competitors  utilize scrap as a raw material in
their melt operations.  In addition to use by titanium  manufacturers,  titanium
scrap is used in steel-making  operations during production of interstitial-free
steels,  stainless  steels and  high-strength-low-alloy  steels.  Recent  strong
demand  for  these  steel  products,  especially  from  China,  has  produced  a
significant  increase in demand for titanium scrap at a time when titanium scrap
generation  rates are at low  levels,  partly due to lower  commercial  aircraft
build  rates  over the past few  years.  These  events  created a  significantly
tightened supply of titanium scrap during 2004 and 2005, and the Company expects
this trend to continue  during  2006.  For TIMET,  this will  translate to lower
availability and higher cost for externally purchased scrap in the near-term.

     In 2005 the Company was somewhat limited in its ability to raise prices for
the portion of its business that is subject to long-term pricing agreements. The
Company's  ability to offset these increased  material costs with higher selling
prices should  improve in 2006, as many of the  Company's  long-term  agreements
("LTAs")  have  either  expired  or have been  renegotiated  for 2006 with price
adjustments that take into account raw material cost fluctuations. Additionally,
the expected  increase in commercial  aircraft build rates over the next several
years, as previously discussed,  could have the effect of lessening the shortage
of titanium scrap.  Further,  several titanium producers,  including TIMET, have
recently   announced  plans  to  expand  their   respective   sponge   producing
capabilities. Although these expansions should help reduce the current imbalance
of global supply and demand for raw materials,  the Company does not believe the
raw material  shortage will be fully relieved at any time in the near future and
therefore  expects  relatively  high prices for raw materials to continue for at
least the near term.

     Various  alloys  used in the  production  of  titanium  products  are  also
available from a number of suppliers.  However,  the recent high level of global
demand for steel  products has also  resulted in a  significant  increase in the
costs for several  alloys,  such as vanadium and  molybdenum.  The cost of these
alloys during 2005 was significantly higher than at any point during the past 10
years.  Vanadium and Molybdenum  costs peaked in the spring of 2005 and finished
the year well below those levels.  Although availability is not expected to be a
concern and the Company has negotiated  certain price and cost  protection  with
suppliers and  customers,  there is no assurance  that such alloy costs will not
continue to fluctuate significantly in the near future.

     Customer  agreements.  The Company has LTAs with certain  major  customers,
including, among others, The Boeing Company ("Boeing"),  Rolls-Royce plc and its
German and U.S.  affiliates  ("Rolls-Royce"),  United  Technologies  Corporation
("UTC," Pratt & Whitney and related companies), Societe Nationale d<180>Etude et
de  Construction  de  Moteurs  d'Aviation   ("Snecma"),   Wyman-Gordon   Company
("Wyman-Gordon," a unit of Precision Castparts Corporation ("PCC")) and VALTIMET
SAS  ("VALTIMET").  These  agreements  expire at various times from 2007 through
2012, are subject to certain  conditions  and generally  provide for (i) minimum
market  shares of the  customers'  titanium  requirements  or firm annual volume
commitments,  (ii)  formula-determined  prices  (although some contain  elements
based on market  pricing) and (iii) price  adjustments  for certain raw material
and energy cost fluctuations.  Generally, the LTAs require the Company's service
and product performance to meet specified criteria and contain a number of other
terms  and  conditions   customary  in  transactions  of  these  types.  Certain
provisions of these LTAs have been amended in the past and may be amended in the
future to meet changing business  conditions.  During 2005, 49% of the Company's
sales revenues were from customers under LTAs.



<PAGE>


     In certain  events of  nonperformance  by the Company or the customer,  the
LTAs may be terminated  early.  Although it is possible that some portion of the
business would continue on a non-LTA  basis,  the  termination of one or more of
the LTAs could result in a material effect on the Company's business, results of
operations,  financial  position or  liquidity.  The LTAs were designed to limit
selling price volatility to the customer, while providing TIMET with a committed
base of volume throughout the aerospace business cycles.

     During the third quarter of 2003,  the Company and  Wyman-Gordon  agreed to
terminate the 1998 purchase and sale agreement  associated with the formation of
the titanium  castings joint venture  previously  owned by the two parties.  The
Company  paid   Wyman-Gordon  a  total  of  $6.8  million  in  three   quarterly
installments in connection with this termination, which included the termination
of certain favorable  purchase terms. The Company recorded a one-time charge for
the entire $6.8  million as a reduction  to sales in the third  quarter of 2003.
Concurrently,   the  Company  entered  into  new  long-term  purchase  and  sale
agreements with Wyman-Gordon that expire in 2008.

     Prior to July 1, 2005,  under the terms of the previous  LTA between  TIMET
and Boeing,  in 2002 through  2007,  Boeing would have been  required to advance
TIMET $28.5 million annually less $3.80 per pound of titanium product  purchased
by Boeing  subcontractors  under the  Boeing  LTA  during  the  preceding  year.
Effectively,  the Company  collected $3.80 less from Boeing than the LTA selling
price for each pound of titanium product sold directly to Boeing and reduced the
related customer advance recorded by the Company.  For titanium products sold to
Boeing  subcontractors,  the Company  collected the full LTA selling price,  but
gave Boeing  credit by  reducing  the next  year's  annual  advance by $3.80 per
pound.  The Boeing customer  advance was also reduced as the Company  recognized
income under the  take-or-pay  provisions of the LTA, as described in Note 10 to
the Consolidated  Financial Statements.  Under a separate agreement,  TIMET must
establish and hold buffer inventory for Boeing at TIMET's facilities,  for which
Boeing will be invoiced by TIMET at LTA pricing when such  material is processed
into a mill product by TIMET.

     Effective July 1, 2005, the Company entered into a new LTA with Boeing. The
new LTA expires on December 31, 2010 and provides for,  among other things,  (i)
mutual annual purchase and supply commitments by both parties, (ii) continuation
of the existing buffer inventory program currently in place for Boeing and (iii)
certain improved product pricing, including certain adjustments for raw material
cost fluctuations.  Beginning in 2006, the new LTA also replaces the take-or-pay
provisions  of the  previous  LTA with an  annual  makeup  payment  early in the
following  year in the  event  Boeing  purchases  less  than its  annual  volume
commitment in any year. See Item 7 - MD&A for additional  information  regarding
the Boeing LTA.

     The Company's LTA with VALTIMET,  a manufacturer of welded  stainless steel
and titanium tubing that is principally  sold into the industrial  markets,  was
entered into in 1997 and expires in 2007.  VALTIMET is a 44%-owned  affiliate of
TIMET.  Under the VALTIMET LTA, TIMET has agreed to provide a certain percentage
of  VALTIMET's  titanium  requirements  at  formula-determined  selling  prices,
subject to certain  conditions.  Certain  provisions  of this contract have been
amended in the past and may be amended in the future to meet  changing  business
conditions.



<PAGE>


     Markets and customer  base.  The following  table  summarizes the Company's
sales revenue by geographical location:

<TABLE>
<CAPTION>
                                                                                 Year ended December 31,
                                                                     -------------------------------------------------
                                                                         2005              2004              2003
                                                                     --------------    --------------    -------------
                                                                           (Percentage of total sales revenue)
Sales revenue to customers within:
<S>                                                                            <C>               <C>              <C>
  North America                                                                56%               55%              55%
  Europe                                                                       36%               40%              38%
  Other                                                                         8%                5%               7%
                                                                     --------------    --------------    -------------

                                                                              100%              100%             100%
                                                                     ==============    ==============    =============
</TABLE>

     Further  information  regarding the Company's  external sales,  net income,
long-lived  assets and total assets can be found in the  Company's  Consolidated
Balance Sheets,  Consolidated Statements of Operations and Notes 6 and 21 to the
Consolidated Financial Statements.

     Substantially  all of the Company's sales and operating  income are derived
from operations  based in the U.S., the U.K.,  France and Italy. As shown in the
below  table,  the Company  generates  more than half of its sales  revenue from
sales to the commercial  aerospace  sector. As previously noted, the Company has
LTAs with certain major aerospace customers, including Boeing, Rolls-Royce, UTC,
Snecma  and  Wyman-Gordon.  This  concentration  of  customers  may  impact  the
Company's  overall  exposure to credit and other  risks,  either  positively  or
negatively, in that all of these customers may be similarly affected by the same
economic or other conditions.  The following table provides  supplemental  sales
revenue  information  regarding  the  Company's  dependence  on  the  commercial
aerospace sector and certain customer relationships:

<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                                  --------------------------------------------------
                                                                       2005              2004              2003
                                                                  ---------------    --------------    -------------
                                                                         (Percentage of total sales revenue)
Sales revenue to:

<S>                                                                        <C>                <C>              <C>
  Commercial aerospace sector                                              57%                57%              57%
                                                                  ===============    =============    ==============

  Customers under LTAs                                                     49%                44%              41%
                                                                  ===============    =============    ==============

  Significant customers under LTAs: (1)
     Rolls-Royce and other Rolls-Royce suppliers (2)                       12%                15%              15%
                                                                  ===============    =============    ==============

  Ten largest customers                                                    45%                48%              44%
                                                                  ===============    =============    ==============

  Significant customers: (1)
     PCC and related entities                                              13%                13%              13%
                                                                  ===============    =============    ==============

--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  Greater than 10% of net sales.
(2)  Includes  direct  sales to certain of the  PCC-related  entities  under the
     terms of the Rolls-Royce LTAs.



<PAGE>


     The primary market for titanium products in the commercial aerospace sector
consists  of two  major  manufacturers  of large  (over  100  seats)  commercial
airframes - Boeing Commercial Airplanes Group (a unit of Boeing) and Airbus (80%
owned by  European  Aeronautic  Defence  and Space  Company and 20% owned by BAE
Systems).  In  addition  to  the  airframe  manufacturers,  the  following  four
manufacturers  of large civil  aircraft  engines are also  significant  titanium
users - Rolls-Royce,  General  Electric  Aircraft  Engines,  Pratt & Whitney and
Snecma. The Company's sales are made both directly to these major  manufacturers
and to companies (including forgers such as Wyman-Gordon) that use the Company's
titanium to produce parts and other materials for such manufacturers.  If any of
the major aerospace  manufacturers were to significantly  reduce aircraft and/or
jet engine build rates from those currently expected,  there could be a material
adverse effect, both directly and indirectly, on the Company's business, results
of operations, financial position and liquidity.

     The  backlogs  for Boeing  and Airbus  reflect  orders for  aircraft  to be
delivered  over  several  years.  Changes in the  economic  environment  and the
financial  condition of airlines can result in  rescheduling  or cancellation of
contractual  orders.   Accordingly,   aircraft  manufacturer  backlogs  are  not
necessarily  a reliable  indicator of near-term  business  activity,  but may be
indicative  of  potential  business  levels  over  a  longer-term  horizon.  The
following  table shows the estimated  firm order backlogs for Boeing and Airbus,
as reported by The Airline Monitor in January 2006:

<TABLE>
<CAPTION>
                                                                                   At December 31,
                                                                   -------------------------------------------------
                                                                       2005              2004             2003
                                                                   --------------    -------------    --------------

Firm order backlog - all planes:
<S>                                                                     <C>               <C>              <C>
  Airbus                                                                2,177             1,500            1,454
  Boeing                                                                1,783             1,089            1,101
                                                                   --------------    -------------    --------------

                                                                        3,960             2,589            2,555
                                                                   ==============    =============    ==============

Firm order backlog - wide body planes:
  Airbus                                                                  500               466              471
  Boeing                                                                  671               287              230
                                                                   --------------    -------------    --------------

                                                                        1,171               753              701
                                                                   ==============    =============    ==============

Wide body planes as % of total firm order backlog                          30%               29%             27%
                                                                   ==============    =============    ==============
</TABLE>

     Wide body planes (e.g.,  Boeing 747, 777 and 787 and Airbus A330, A340, and
A380) tend to use a higher  percentage of titanium in their  airframes,  engines
and parts than  narrow body planes  (e.g.,  Boeing 737 and 757 and Airbus  A318,
A319 and  A320).  Newer  models of  planes  tend to use a higher  percentage  of
titanium  than  older  models.  Additionally,  Boeing  generally  uses a  higher
percentage of titanium in its airframes  than Airbus.  For example,  the Company
estimates that  approximately  59 metric tons, 45 metric tons and 18 metric tons
of titanium are purchased for the  manufacture  of each Boeing 777, 747 and 737,
respectively,  including both the airframes and engines.  The Company  estimates
that approximately 25 metric tons, 18 metric tons and 12 metric tons of titanium
are  purchased  for  the  manufacture  of  each  Airbus  A340,  A330  and  A320,
respectively, including both the airframes and engines.



<PAGE>


     At year-end 2005, a total of 159 firm orders had been placed for the Airbus
A380, a program officially launched in 2000 with anticipated first deliveries in
2006.  Current  estimates are that  approximately 76 metric tons of titanium (50
metric  tons  for the  airframe  and 26  metric  tons for the  engines)  will be
purchased for each A380 manufactured. Additionally, at year-end 2005, a total of
291 firm  orders  have been  placed  for the Boeing  787,  a program  officially
launched in April 2004 with anticipated  first deliveries in 2008.  Although the
787 will contain more composite  materials than a typical Boeing  airplane,  the
Company estimates that  approximately 91 metric tons of titanium (80 metric tons
for the airframe and 11 metric tons for the engines)  will be purchased for each
787 manufactured.  The Company believes significant  additional titanium will be
required  in the early  years of 787  manufacturing  until the  program  reaches
maturity.

     During 2005, Airbus officially launched the A350 program,  which is a major
derivative  of the Airbus A330 with first  deliveries  scheduled for 2010. As of
December 31, 2005, firm booked orders received by Airbus for the A350 totaled 87
airplanes.  These A350s will use composite  materials and new engines similar to
the ones used on the Boeing 787 and are expected to require  significantly  more
titanium as compared  with earlier  Airbus  models.  The  Company's  preliminary
estimates are that approximately 51 metric tons (40 metric tons for the airframe
and  11  metric  tons  for  the  engines)   will  be  purchased  for  each  A350
manufactured.  However,  the final titanium buy weight may change as the A350 is
still in the design phase.

     Outside  of  commercial   aerospace  and  military  sectors,   the  Company
manufactures a wide range of products for customers in the chemical process, oil
and  gas,   consumer,   sporting   goods,   automotive  and  power   generation.
Approximately  15% of the  Company's  sales  revenue in 2005 and 2004 and 16% in
2003 was  generated by sales into  industrial  and emerging  markets,  including
sales to  VALTIMET  for the  production  of welded  tubing.  For the oil and gas
industry,  the Company  provides  seamless  pipe for  downhole  casing,  risers,
tapered stress joints and other offshore oil and gas production equipment, along
with firewater piping systems.

     In addition to melted and mill products, which are sold into the commercial
aerospace,  military, industrial and emerging markets sectors, the Company sells
certain  other  products  such as  titanium  fabrications,  titanium  scrap  and
titanium  tetrachloride.  Sales of these other products  represented  15% of the
Company's sales revenue in 2005 and 13% in each of 2004 and 2003.

     The Company's backlog of unfilled orders was approximately  $870 million at
December  31,  2005,  compared  to $450  million at  December  31, 2004 and $205
million at December 31, 2003. Over 90% of the 2005 year-end backlog is scheduled
for shipment  during 2006.  The  Company's  order  backlog may not be a reliable
indicator of future business activity.

     The  Company  has   explored  and  will   continue  to  explore   strategic
arrangements in the areas of product  development,  production and distribution.
The Company will also continue to work with existing and potential  customers to
identify  and  develop  new or  improved  applications  for  titanium  that take
advantage of its unique qualities.

     Competition.  The  titanium  metals  industry  is highly  competitive  on a
worldwide basis.  Producers of melted and mill products are located primarily in
the United States, Japan, France,  Germany,  Italy, Russia, China and the United
Kingdom.  In  addition,  producers  of other metal  products,  such as steel and
aluminum,  maintain forging, rolling and finishing facilities that could be used
or  modified  without  substantial  capital  expenditures  to  process  titanium
products.



<PAGE>


     There are currently  six major,  and several  minor,  producers of titanium
sponge  in the  world.  Four of the  major  producers  have  announced  plans to
increase  sponge  production  capacity.  TIMET is currently  the only major U.S.
sponge  producer.  The Company believes that entry as a new producer of titanium
sponge would require a significant capital investment and substantial  technical
expertise.

     The Company's  principal  competitors in the aerospace  titanium market are
Allegheny  Technologies  Incorporated ("ATI") and RTI International Metals, Inc.
("RTI"),  both based in the United  States,  and Verkhnaya  Salda  Metallurgical
Production  Organization  ("VSMPO"),  based in  Russia.  UNITI (a joint  venture
between ATI and VSMPO),  RTI and certain  Japanese  producers  are the Company's
principal  competitors  in the  industrial  and  emerging  markets.  The Company
competes primarily on the basis of price, quality of products, technical support
and the availability of products to meet customers' delivery schedules.

     In the U.S. market,  the increasing  presence of non-U.S.  participants has
become a significant competitive factor. Until 1993, imports of foreign titanium
products into the U.S. had not been significant. This was primarily attributable
to  relative  currency  exchange  rates  and,  with  respect  to Japan,  Russia,
Kazakhstan and Ukraine,  import duties (including antidumping duties).  However,
since 1993,  imports of titanium  sponge,  ingot and mill products,  principally
from  Russia  and  Kazakhstan,   have  increased  and  have  had  a  significant
competitive impact on the U.S. titanium  industry.  To the extent the Company is
able  to take  advantage  of this  situation  by  purchasing  sponge  from  such
countries for use in its own operations, the negative effect of these imports on
the Company can be somewhat mitigated.

     Generally,  imports of titanium products into the U.S. are subject to a 15%
"normal trade  relations"  tariff.  For tariff purposes,  titanium  products are
broadly  classified as either wrought  (billet,  bar,  sheet,  strip,  plate and
tubing) or unwrought (sponge,  ingot and slab). Because a significant portion of
end-use  products  made from  titanium  products are  ultimately  exported,  the
Company,  along with its  principal  competitors  and many  customers,  actively
utilize  the  duty-drawback  mechanism  to recover  most of the  tariff  paid on
imports.

     From  time-to-time,  the U.S.  government  has granted  preferential  trade
status to certain titanium products imported from particular  countries (notably
wrought titanium products from Russia,  which carried no U.S. import duties from
approximately  1993 until 2004).  It is possible that such  preferential  status
could be granted again in the future.

     The Japanese  government  has raised the  elimination or  harmonization  of
tariffs on titanium  products,  including  titanium sponge, for consideration in
multi-lateral  trade  negotiations  through  the World Trade  Organization  (the
so-called  "Doha  Round").  As part of the Doha  Round,  the  United  States has
proposed the staged  elimination of all industrial  tariffs,  including those on
titanium. The Japanese government has specifically asked that titanium in all it
forms be included in the tariff elimination  program. The Company has urged that
no change be made to these tariffs, either on wrought or unwrought products. The
negotiations  are  currently  scheduled  to  conclude  at the  end of  2006  for
implementation beginning in 2007.

     TIMET has successfully  resisted,  and will continue to resist,  efforts to
eliminate  duties  on  sponge  and  unwrought  titanium  products,  although  no
assurances  can be made that the Company will continue to be successful in these
activities. Further reductions in, or the complete elimination of, any or all of
these tariffs could lead to increased imports of foreign sponge,  ingot and mill
products  into the U.S.  and an increase  in the amount of such  products on the
market  generally,  which could  adversely  affect pricing for titanium  sponge,
ingot and mill products and thus the Company's business,  results of operations,
financial position or liquidity.

     Research and development. The Company's research and development activities
are directed  toward  expanding  the use of titanium and titanium  alloys in all
market sectors.  Key research  activities include the development of new alloys,
development  of  technology  required  to  enhance  the  performance  of TIMET's
products in the traditional  industrial and aerospace  markets and  applications
development for automotive and other emerging markets.  The Company conducts the
majority of its research and development  activities at its Henderson  Technical
Laboratory  in  Henderson,  Nevada,  with  additional  activities at its Witton,
England  facility.  The Company incurred  research and development costs of $3.2
million in 2005, $2.9 million in 2004 and $2.8 million in 2003.

     In April  2003,  the  Company was  selected  by the United  States  Defense
Advanced  Research  Projects  Agency  ("DARPA")  to  explore  low cost  titanium
extraction  processes.  Since  2003,  the main  effort  has  focused  on the FFC
Cambridge  process.  As of December 31, 2005,  work to develop and scale up that
process at TIMET has been  discontinued  due to low overall process  efficiency.
TIMET  continues to work in partnership  with DARPA and others to meet the goals
of the DARPA titanium  initiative.  The work with DARPA complements  TIMET's own
programs  exploring new  technologies  and  improvements  to the existing Vacuum
Distilled sponge process.

     Patents  and  trademarks.  The  Company  holds U.S.  and  non-U.S.  patents
applicable to certain of its titanium alloys and manufacturing technology, which
expire at various times from 2007 through 2025.  The Company  continually  seeks
patent  protection  with  respect  to its  technical  base and has  occasionally
entered  into  cross-licensing  arrangements  with third  parties.  The  Company
believes  the  trademarks  TIMET(R)  and  TIMETAL(R),  which  are  protected  by
registration in the U.S. and other countries, are important to its business. The
Company  believes  that  proprietary   alloys  targeting   automotive   exhaust,
turbocharger,  engine valve,  and  suspension  spring  applications  provide the
company competitive  advantages in the automotive market.  Further,  the Company
was recently  granted  patent  protection for an improved  machinability  alloy,
TIMETAL  54M,  for use in forged  and  machined  components  applicable  to both
aerospace and non-aerospace market sectors.  Additionally,  the Company has been
granted  certain  patents  and has certain  other  patent  applications  pending
relating  to  various  aspects of its  manufacturing  technology.  However,  the
majority of the Company's titanium alloys and manufacturing  technologies do not
benefit from patent or other intellectual property protection.

     Employees.  The cyclical nature of the aerospace industry and its impact on
the Company's  business is the principal  reason for significant  changes in the
Company's employment. The increases during 2004 and 2005 reflect the increase in
demand for titanium products during those periods. The Company currently expects
employment to increase  throughout 2006 as production  continues to increase and
its sponge plant expansion project in Henderson,  Nevada nears  completion.  The
following table shows the number of employees at the end of the past 3 years:

<TABLE>
<CAPTION>
                                                 Employees at December 31,
                                   -------------------------------------------------------
                                        2005                2004                2003
                                   ----------------    ----------------    ---------------

 <S>                                      <C>                 <C>                 <C>
 U.S.                                     1,476               1,376               1,266
 Europe                                     893                 851                 789
                                   ----------------    ----------------    ---------------

                                          2,369               2,227               2,055
                                   ================    ================    ===============
</TABLE>

     The Company's  production,  maintenance,  clerical and technical workers in
Toronto,  Ohio, and its production and maintenance workers in Henderson,  Nevada
(approximately 50% of the Company's total U.S. employees) are represented by the
United Steelworkers of America under contracts expiring in July 2008 and January
2008,  respectively.  Employees at the Company's  other U.S.  facilities are not
covered by collective bargaining  agreements.  Approximately 64% of the salaried
and hourly  employees at the Company's  European  facilities are  represented by
various European labor unions. The Company recently extended its labor agreement
with its  U.K.  production  and  maintenance  employees  through  2008,  and the
Company's  labor  agreements  with its French and Italian  employees are renewed
annually.

     The Company currently  considers its employee relations to be satisfactory.
However, it is possible that there could be future work stoppages or other labor
disruptions that could  materially and adversely affect the Company's  business,
results of operations, financial position or liquidity.

     Regulatory and environmental matters. The Company's operations are governed
by various Federal,  state,  local and foreign  environmental  and worker safety
laws and regulations.  In the U.S., such laws include the  Occupational,  Safety
and  Health  Act,  the Clean  Air Act,  the  Clean  Water  Act and the  Resource
Conservation  and Recovery  Act. The Company uses and  manufactures  substantial
quantities of substances that are considered  hazardous,  extremely hazardous or
toxic under environmental and worker safety and health laws and regulations. The
Company has used and manufactured such substances  throughout the history of its
operations.  Although  the  Company  has  substantial  controls  and  procedures
designed to reduce continuing risk of  environmental,  health and safety issues,
the Company could incur substantial  cleanup costs,  fines and civil or criminal
sanctions,  third party property damage or personal injury claims as a result of
violations or liabilities under these laws or non-compliance  with environmental
permits  required  at our  facilities.  In  addition,  government  environmental
requirements or the enforcement thereof may become more stringent in the future.
There can be no assurance that some, or all, of the risks  discussed  under this
heading will not result in  liabilities  that would be material to the Company's
business, results of operations, financial position or liquidity.

     The Company  believes that its operations are in compliance in all material
respects with  applicable  requirements of  environmental  and worker health and
safety  laws.  The  Company's  policy  is  to  continually   strive  to  improve
environmental,  health and safety  performance.  The  Company  incurred  capital
expenditures  related  to  health,  safety  and  environmental   compliance  and
improvement  of  approximately  $25.1 million in 2005,  $5.1 million in 2004 and
$1.9 million in 2003.  Such capital  expenditures  include $24.2 million in 2005
and $3.9 million in 2004  related to the  construction  of a water  conservation
facility at the Company's  Henderson,  Nevada  location.  The Company's  capital
budget provides for  approximately  $4.6 million for  environmental,  health and
safety capital expenditures during 2006.

     From  time to time,  the  Company  may be  subject  to  health,  safety  or
environmental regulatory enforcement under various statutes, resolution of which
typically  involves the  establishment  of  compliance  programs.  Occasionally,
resolution of these matters may result in the payment of penalties. However, the
imposition of more strict standards or requirements under environmental,  health
or safety laws and regulations could result in expenditures in excess of amounts
currently  estimated  to be  required  for  such  matters.  See  Note  19 to the
Consolidated Financial Statements.

     Related  parties.  At December 31, 2005,  Valhi,  Inc.  ("Valhi") and other
entities or persons  related to Harold C.  Simmons held  approximately  52.6% of
TIMET's  outstanding  common stock and 54.1% of the Company's Series A Preferred
Stock. See Notes 1 and 18 to the Consolidated Financial Statements.

     Available  information.  The  Company  maintains  an  Internet  website  at
www.timet.com.  The Company's Annual Reports on Form 10-K,  Quarterly Reports on
Form 10-Q and Current  Reports on Form 8-K, and any amendments  thereto,  are or
will  be  available  free  of  charge  at such  website  as  soon as  reasonably
practicable  after they are filed or  furnished,  as  applicable,  with the SEC.
Additionally,  the Company's (i) Corporate Governance  Guidelines,  (ii) Code of
Business Conduct and Ethics and (iii) Audit Committee and Management Development
and Compensation Committee charters are also available on the Company's website.
Such documents will also be provided to shareholders upon request. Such requests
should be directed to the attention of TIMET's Investor Relations  Department at
TIMET's corporate offices located at 5430 LBJ Freeway,  Suite 1700, Dallas Texas
75240.

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

ITEM 1A:  RISK FACTORS

     Listed below are certain  risk factors  associated  with our  business.  In
addition to the potential effect of these risk factors discussed below, any risk
factor that could result in reduced  earnings,  liquidity  or operating  losses,
could in turn adversely  affect our ability to meet our liabilities or adversely
affect the quoted market prices for our securities.

     The cyclical nature of the industries in which our customers operate causes
such  customers'  demand for our products to be cyclical,  creating  uncertainty
regarding our future profitability.  The titanium industry in general, and TIMET
specifically,  has  historically  derived a substantial  portion of its business
from the commercial aerospace sector.  Consequently,  the cyclical nature of the
commercial  aerospace  sector has been the  principal  driver of the  historical
fluctuations in our performance.  Over the past 25 years, the titanium  industry
had cyclical peaks in mill product shipments in 1989, 1997 and 2001 and cyclical
lows in 1983,  1991, 1999 and 2002.  Prior to 2004,  demand for titanium reached
its  highest  level  in 1997,  when  industry  mill  product  shipments  reached
approximately  60,700  metric  tons.  However,  since that peak,  industry  mill
product  shipments have fluctuated  significantly,  primarily due to a continued
change in demand for titanium from the commercial aerospace sector, but also due
to geopolitical  instability  and the economic  impact of terrorist  threats and
attacks.  Sales of our products to the commercial aerospace sector accounted for
57% of our total  sales  revenue in each of the last three  years.  Events  that
could adversely affect the commercial aerospace sector, such as future terrorist
attacks,  world  health  crises  or  reduced  orders  from  commercial  airlines
resulting from continued  operating losses at the airlines,  could significantly
decrease our results of  operations,  and our business and  financial  condition
could significantly decline.



<PAGE>


     Adverse changes to, or interruptions in, our  relationships  with our major
commercial aerospace customers could reduce our revenues. In 2005, approximately
57% of our revenues were derived from sales to the commercial  aerospace sector.
Sales under LTAs with  certain  customers  in the  commercial  aerospace  sector
account for a  significant  percentage  of our annual sales  revenue.  If we are
unable  to  maintain  our  relationships  with our  major  commercial  aerospace
customers,  including Boeing, Rolls-Royce,  Snecma, UTC and Wyman-Gordon,  under
the LTAs we have with these customers, our sales could decrease substantially.

     Our failure to develop new markets would result in our continued dependence
on the cyclical  commercial  aerospace sector,  and our operating results would,
accordingly,  remain  cyclical.  In  an  effort  to  reduce  dependence  on  the
commercial  aerospace market and to increase  participation in other markets, we
have been devoting  resources to developing new markets and applications for our
products,  principally in automotive, oil and gas and other emerging markets for
titanium.  Developing these emerging market  applications  involves  substantial
risk and  uncertainties  due to the fact that  titanium  must  compete with less
expensive alternative  materials in these potential markets or applications.  We
may  not be  successful  in  developing  new  markets  or  applications  for our
products,  significant time may be required for such development and uncertainty
exists as to the extent to which we will face competition in this regard.

     Our  dependence  upon certain  critical raw  materials  that are subject to
price and availability  fluctuations  could lead to increased costs or delays in
the  manufacture  and  sale of our  products.  We rely on a  limited  number  of
suppliers around the world,  and principally on those located in Australia,  for
our supply of  titanium-containing  rutile ore, one of the primary raw materials
used in the  production  of  titanium  sponge.  While  chlorine,  another of the
primary raw materials  used in the production of titanium  sponge,  is generally
widely  available,  we currently obtain our chlorine from a single supplier near
our sponge plant in Henderson,  Nevada. Also, we cannot supply all our needs for
all grades of titanium sponge and scrap  internally and are therefore  dependent
on third parties for a substantial portion of our raw material requirements. All
of our major competitors utilize sponge and scrap as raw materials in their melt
operations. In addition to use by titanium manufacturers, titanium scrap is used
in certain  steel-making  operations.  Current demand for these steel  products,
especially  from  China,  have  produced a  significant  increase  in demand for
titanium scrap at a time when titanium scrap  generation rates are at low levels
because of the lower commercial  aircraft build rates in recent years.  Purchase
prices and  availability of these critical  materials are subject to volatility.
At any given  time,  we may be unable  to  obtain  an  adequate  supply of these
critical materials on a timely basis, on price and other terms acceptable to us,
or at all.

     We have  experienced  operating  and net  losses in the past and may not be
profitable in the future. We have incurred operating losses during each of 2003,
2002, 2000 and 1999 and incurred net losses in each year from 1999 through 2003.
Our ability to achieve profitability in the future is dependent upon a number of
factors, including the following:

     o    market demand and prices for titanium  products,  particularly  demand
          and pricing in the commercial aerospace sector;

     o    our ability to increase  prices for titanium  products to a level that
          exceeds any increases in materials or production costs;

     o    the  avoidance  of any  material  adverse  developments  either in the
          capacity  utilization  for the  production  of titanium  sponge or the
          availability of titanium scrap; and

     o    favorable general economic conditions throughout the world.

     Reductions  in, or the  complete  elimination  of,  any or all  tariffs  on
imported  titanium  products  into the United  States  could  lead to  increased
imports of foreign sponge, ingot and mill products into the U.S. and an increase
in the amount of such  products on the market  generally,  which could  decrease
pricing for our products.  In the U.S. titanium market, the increasing  presence
of non-U.S.  participants  has become a significant  competitive  factor.  Until
1993,  imports  of  foreign  titanium  products  into  the  U.S.  had  not  been
significant. This was primarily attributable to relative currency exchange rates
and,  with  respect to Japan,  Russia,  Kazakhstan  and Ukraine,  import  duties
(including antidumping duties). However, since 1993, imports of titanium sponge,
ingot and mill products,  principally from Russia and Kazakhstan, have increased
and have had a significant competitive impact on the U.S. titanium industry.

     Generally,  imports of titanium products into the U.S. are subject to a 15%
"normal trade  relations"  tariff.  For tariff purposes,  titanium  products are
broadly  classified as either wrought  (billet,  bar,  sheet,  strip,  plate and
tubing) or  unwrought  (sponge,  ingot and slab).  From  time-to-time,  the U.S.
government has granted  preferential  trade status to certain titanium  products
imported from  particular  countries  (notably  wrought  titanium  products from
Russia, which carried no U.S. import duties from approximately 1993 until 2004).
It is  possible  that such  preferential  status  could be granted  again in the
future, and we may not be successful in resisting efforts to eliminate duties or
tariffs on  titanium  products.  See  discussion  of Doha Round in  "Business  -
Competition."

     We may be unable to reach or maintain  satisfactory  collective  bargaining
agreements with unions representing a significant portion of our employees.  Our
production,  maintenance,  clerical and technical workers in Toronto,  Ohio, and
our production and maintenance workers in Henderson,  Nevada, are represented by
the United  Steelworkers  of America under  contracts  expiring in July 2008 and
January 2008, for the respective  locations.  Approximately  64% of the salaried
and hourly  employees  at our European  facilities  are  represented  by various
European labor unions.  Our labor agreement with our U.K.  employees  expires in
2008,  and the  agreements  with our French and  Italian  employees  are renewed
annually.  A labor  dispute  or work  stoppage  could  materially  decrease  our
operating  results.  We may not  succeed  in  concluding  collective  bargaining
agreements  with the  unions  to  replace  expiring  agreements  or to  maintain
satisfactory relations under existing collective bargaining  agreements.  If our
employees were to engage in a strike, work stoppage or other slowdown,  we could
experience a significant  disruption of our  operations or higher  ongoing labor
costs.

     Because  we are  subject  to  environmental  and  worker  safety  laws  and
regulations,  we may be required to remediate the  environmental  effects of our
operations or take steps to modify our  operations to comply with these laws and
regulations, which could reduce our profitability. Various federal, state, local
and foreign  environmental  and worker  safety laws and  regulations  govern our
operations.  Throughout  the  history  of  our  operations,  we  have  used  and
manufactured,  and  currently  use and  manufacture,  substantial  quantities of
substances  that are considered  hazardous,  extremely  hazardous or toxic under
environmental  and worker  safety and health laws and  regulations.  Although we
have substantial  controls and procedures  designed to reduce continuing risk of
environmental,  health and safety  issues,  we could incur  substantial  cleanup
costs,  fines and civil or criminal  sanctions,  third party property  damage or
personal injury claims as a result of violations or liabilities under these laws
or  non-compliance  with  environmental  permits required at our facilities.  In
addition,  government environmental  requirements or the enforcement thereof may
become more  stringent  in the future.  Some or all of these risks may result in
liabilities that could reduce our profitability.

     The titanium metals industry is highly competitive,  and we may not be able
to  compete  successfully.  The global  markets  in which we operate  are highly
competitive. Competition is based on a number of factors, such as price, product
quality and service.  Some of our  competitors  may be able to drive down prices
for our products because their costs are lower than our costs. In addition, some
of our competitors' financial,  technological and other resources may be greater
than our resources, and such competitors may be better able to withstand changes
in market  conditions.  Our competitors may be able to respond more quickly than
we can to new or emerging  technologies  and  changes in customer  requirements.
Further,  consolidation of our competitors or customers in any of the industries
in which we compete may result in reduced demand for our products.  In addition,
producers  of metal  products,  such as steel and  aluminum,  maintain  forging,
rolling and  finishing  facilities.  Such  facilities  could be used or modified
without substantial  expenditures to process titanium mill products, which could
lead to increased  competition and decreased pricing for our titanium  products.
In addition, many factors,  including the historical presence of excess capacity
in the titanium industry,  work to intensify the price competition for available
business at low points in the business cycle.

ITEM 1B:  UNRESOLVED STAFF COMMENTS

         Not applicable.



<PAGE>


ITEM 2:  PROPERTIES

     Set forth below is a listing of the Company's major production  facilities.
In addition to its U.S. sponge capacity discussed below, the Company's worldwide
melting  capacity  presently   aggregates   approximately   44,650  metric  tons
(estimated  22% of world  capacity),  and its mill product  capacity  aggregates
approximately  22,600  metric tons  (estimated  18% of world  capacity).  Of the
Company's  worldwide melting capacity,  35% is represented by electron beam cold
hearth melting ("EB") furnaces, 63% by vacuum arc remelting ("VAR") furnaces and
2% by a vacuum induction melting ("VIM") furnace.

<TABLE>
<CAPTION>
                                                                                             Annual Practical
                                                                                              Capacities (3)
                                                                                      --------------------------------
                                                                                         Melted              Mill
         Manufacturing Location                      Products Manufactured              Products           Products
------------------------------------------    ------------------------------------    --------------     -------------
                                                                                               (metric tons)

<S>                                           <C>                                           <C>               <C>
Henderson, Nevada (1)                         Sponge, Ingot                                 12,250                  -
Morgantown, Pennsylvania (1)                  Slab, Ingot, Raw materials
                                                 Processing                                 20,000                  -
Toronto, Ohio (1)                             Billet, Bar, Plate, Sheet, Strip                   -             11,000
Vallejo, California (2)                       Ingot (including non-titanium
                                                 superalloys)                                1,600                  -
Ugine, France (2) (4)                         Ingot, Billet                                  2,100              1,500
Waunarlwydd (Swansea), Wales(1)               Bar, Plate, Sheet                                  -              3,100
Witton, England (2)                           Ingot, Billet, Bar                             8,700              7,000

</TABLE>
(1)  Owned facility.
(2)  Leased facility.
(3)  Practical  capacities  are  variable  based  on  product  mix  and  are not
     additive.
(4)  Practical  capacities  are  based  on the  approximate  maximum  equivalent
     product that CEZUS is contractually obligated to provide.

     The Company has operated its major production  facilities at varying levels
of practical  capacity during the past three years.  Overall in 2005, the plants
operated at approximately 80% of practical capacity,  as compared to 73% in 2004
and 56% in 2003.  In 2006,  the  Company's  plants  are  expected  to operate at
approximately  88%  of  practical  capacity.  However,  practical  capacity  and
utilization  measures  can vary  significantly  based  upon the mix of  products
produced.

     United States production.  The Company's VDP sponge facility is expected to
operate at its full annual practical  capacity of 8,600 metric tons during 2006,
which is comparable to 2005.  VDP sponge is used  principally  as a raw material
for the Company's  melting  facilities in the U.S. and Europe.  In May 2005, the
Company  announced  its plans to expand its VDP sponge  facility  in  Henderson,
Nevada.  The Company  currently  expects to complete this expansion by the first
quarter of 2007,  which will provide the capacity to produce an additional 4,000
metric tons of sponge annually,  an increase of  approximately  47% over current
Henderson sponge production capacity levels. The Company currently estimates the
capital cost for the project will  approximate  $38 million.  The raw  materials
processing facility in Morgantown,  Pennsylvania  primarily processes scrap used
as melting feedstock, either in combination with sponge or separately.



<PAGE>


     The Company's U.S.  melting  facilities in Henderson,  Nevada,  Morgantown,
Pennsylvania  and Vallejo,  California  produce ingot and slab, which are either
used as feedstock  for the Company's  mill products  operations or sold to third
parties.  These melting facilities are expected to operate at approximately 82%,
92% and 55%, respectively,  of annual practical capacity in 2006, as compared to
70%, 91% and 59%, respectively, in 2005.

     Titanium mill products are produced by TIMET in the U.S. at its forging and
rolling facility in Toronto, Ohio, which receives ingot or slab principally from
the Company's U.S.  melting  facilities.  The Company's U.S. forging and rolling
facility  is  expected  to  operate  at  approximately  82% of annual  practical
capacity in 2006, up from 68% in 2005. Capacity utilization across the Company's
individual mill product lines varies.

     European  production.   The  Company  conducts  its  operations  in  Europe
primarily through its wholly owned  subsidiaries TIMET UK, Ltd. ("TIMET UK") and
Loterios S.p.A.  ("Loterios") and its 70% owned  subsidiary TIMET Savoie.  TIMET
UK's Witton, England laboratory and manufacturing facilities are leased pursuant
to long-term  operating  leases expiring in 2014 and 2024,  respectively.  TIMET
Savoie has the right to utilize portions of the Ugine, France plant of Compagnie
Europeenne du Zirconium-CEZUS, S.A. ("CEZUS"), the 30% minority partner in TIMET
Savoie, pursuant to an agreement scheduled to expire in 2006. TIMET is currently
finalizing  negotiations  with CEZUS to extend its  agreement  through  2011 and
expand its available capacity in 2006 and beyond.

     TIMET UK's  melting  facility in Witton,  England  produces  VAR ingot used
primarily as feedstock for its Witton forging operations. The forging operations
process  the ingot  into  billet  product  for sale to third  parties or into an
intermediate product for further processing into bar or plate at its facility in
Waunarlwydd,  Wales. TIMET UK's melting and mill products  production in 2006 is
expected  to  operate  at  approximately  91% and 85%,  respectively,  of annual
practical capacity, compared to 73% and 69%, respectively, in 2005.

     The  capacity  of TIMET  Savoie  in Ugine,  France  is to a certain  extent
dependent  upon the level of activity in CEZUS'  zirconium  business,  which may
from time to time  provide  TIMET  Savoie with  capacity in excess of that which
CEZUS is contractually  required to provide.  During 2005, TIMET Savoie utilized
119% of the maximum annual capacity CEZUS was contractually  required to provide
in 2005, and the Company  expects to utilize  approximately  102% of the maximum
annual capacity CEZUS will be expected to provide in 2006 based on the agreement
currently being finalized.

ITEM 3:  LEGAL PROCEEDINGS

     From time to time, the Company is involved in litigation relating to claims
arising out of its  operations in the normal course of business.  See Note 19 to
the Consolidated Financial Statements.



<PAGE>


ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were  submitted to a vote of TIMET  security  holders during the
quarter ended December 31, 2005.  However, in February 2006, the Company's Board
of Directors and the Company's  stockholders holding more than a majority of the
outstanding  shares of common  stock  approved  an  amendment  to the  Company's
Amended and  Restated  Certificate  of  Incorporation  to increase the number of
authorized  shares  of the  Company's  capital  stock  from  100,000,000  shares
(90,000,000  shares of common stock,  $.01 par value,  and 10,000,000  shares of
preferred stock, $.01 par value) to 210,000,000  shares  (200,000,000  shares of
common stock, $.01 par value, and 10,000,000 shares of preferred stock, $.01 par
value).


<PAGE>


                                     PART II

ITEM 5: MARKET FOR REGISTRANT'S  COMMON EQUITY,  RELATED STOCKHOLDER MATTERS AND
        ISSUER PURCHASES OF EQUITY SECURITIES

     TIMET's  common  stock is traded on the New York  Stock  Exchange  (symbol:
"TIE"). The high and low sales prices for the Company's common stock during 2005
and  2004  are set  forth  below.  All  prices  (as  well as all  share  numbers
referenced herein) have been adjusted to reflect (i) the two-for-one stock split
which became effective after the close of trading on February 16, 2006, (ii) the
two-for-one  stock split which  became  effective  after the close of trading on
September 6, 2005 and (iii) the five-for-one  stock split which became effective
after the close of trading on August 27, 2004.

<TABLE>
<CAPTION>
Year ended December 31, 2005:                                                         High                 Low
                                                                                -----------------    -----------------
<S>                                                                             <C>                  <C>
   First quarter                                                                $       10.13        $        5.83
   Second quarter                                                               $       14.38        $        7.76
   Third quarter                                                                $       21.20        $       12.32
   Fourth quarter                                                               $       39.72        $       17.13

Year ended December 31, 2004:
   First quarter                                                                $        5.18        $        2.12
   Second quarter                                                               $        5.40        $        3.59
   Third quarter                                                                $        6.23        $        4.60
   Fourth quarter                                                               $        6.65        $        4.63
</TABLE>

     On March 10, 2006,  the closing  price of TIMET common stock was $41.74 per
share.  As of March 10,  2006,  there were 204  shareholders  of record of TIMET
common stock, which the Company estimates represent  approximately 31,365 actual
shareholders.

     In October 2002, the Company  exercised its right to defer future  interest
payments on TIMET's 6.625% Convertible Junior  Subordinated  Debentures due 2026
("Subordinated  Debentures")  held by the TIMET  Capital  Trust I (the  "Capital
Trust"), effective for the December 1, 2002 scheduled interest payment. Interest
continued  to accrue at the  6.625%  coupon  rate on the  principal  and  unpaid
interest until the Company's Board of Directors approved resumption of scheduled
quarterly  interest payments on the Subordinated  Debentures  beginning with the
payment on June 1,  2004.  The  Company's  Board  also  approved  payment of all
previously deferred interest on the Subordinated Debentures.  On April 15, 2004,
the Company paid the  deferred  interest in the amount of $21.7  million,  $21.0
million  of which  related  to the  6.625%  mandatorily  redeemable  convertible
preferred  securities,  beneficial  unsecured  convertible  securities  ("BUCS")
issued by the Capital Trust.



<PAGE>


     In August 2004,  the Company  completed an exchange offer pursuant to which
the Company had offered to exchange all of the 4,024,820 outstanding BUCS issued
by the Capital  Trust for shares of the  Company's  6.75%  Series A  Convertible
Preferred  Stock (the "Series A Preferred  Stock") at the  exchange  rate of one
share of Series A Preferred  Stock for each BUCS.  Based upon the 3,909,103 BUCS
tendered  and  accepted  for exchange as of the close of the offer on August 31,
2004,  the  Company  issued  3,909,103  shares  of Series A  Preferred  Stock in
exchange for such BUCS.  Holders of the Series A Preferred Stock are entitled to
receive  cumulative  cash  dividends  at the rate of 6.75% of the $50 per  share
liquidation  preference per annum per share  (equivalent to $3.375 per annum per
share), when, as and if declared by the Company's board of directors. During the
third  quarter  of  2004,  the  Company  recognized  a $15.5  million  non-cash,
non-operating  gain  related to the BUCS  exchange.  During the third and fourth
quarters of 2005,  an  aggregate of 926,490  shares of Series A Preferred  Stock
were converted into 6,176,600  shares of TIMET common stock.  As of December 31,
2005, there were 2,982,613  shares of the Series A Preferred Stock  outstanding.
Subsequent  to December  31,  2005 and through  March 10,  2006,  an  additional
346,016 shares of Series A Preferred Stock were converted into 2,306,765  shares
of  TIMET  common  stock.  See  Notes  12 and 14 to the  Consolidated  Financial
Statements.

     The  Company's  new  U.S.  credit  agreement   contains  certain  financial
covenants that may restrict the Company's  ability to make dividend  payments on
both  the  Company's   common  stock  and  Series  A  Preferred  Stock  or  make
distributions  on the  BUCS.  Such  covenants  do  not  currently  restrict  the
Company's ability to pay dividends or make distributions.  See Item 7 - MD&A and
Note 11 to the Consolidated Financial Statements.

     On August 12, 2005, the Company  retired all 180,000 shares of its treasury
stock.  The  retirement of such treasury  stock,  which had a cost basis of $1.2
million, resulted in a $1,800 reduction of common stock, a $990,000 reduction of
additional paid-in capital and a $216,000 decrease in accumulated earnings.



<PAGE>


ITEM 6:  SELECTED FINANCIAL DATA

     The selected  financial  data set forth below should be read in conjunction
with the Company's Consolidated Financial Statements and Item 7 - MD&A.

<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                              -------------------------------------------------------------------------
                                                 2005           2004           2003           2002            2001
                                              -----------    -----------    -----------    ------------    ------------
                                                             (restated)     (restated)      (restated)      (restated)
                                                               ($ in millions, except per share and product data)
STATEMENT OF OPERATIONS DATA:
<S>                                           <C>            <C>            <C>            <C>             <C>
   Net sales                                  $    749.8     $    501.8     $    385.3     $    366.5      $    486.9
   Gross margin (1)                           $    199.4     $     63.7     $      5.6     $      6.2      $     34.9
   Operating income (loss) (1)(2)             $    171.1     $     43.0     $     (6.0)    $    (11.5)     $     59.5
   Interest expense                           $      4.0     $     12.5     $     16.4     $     17.1      $     18.3
   Net income (loss) attributable to
    common stockholders (1)(2)                $    143.7     $     43.3     $    (24.4)    $   (102.2)     $    (46.7)
   Earnings (loss) per share:
     Basic (1)(2)(3)                          $    2.20      $    0.68      $   (0.39)     $   (1.62)      $   (0.74)
     Diluted (1)(2)(3)                        $    1.72      $    0.66      $   (0.39)     $   (1.62)      $   (0.74)

BALANCE SHEET DATA:
   Cash and cash equivalents (4)              $     17.8     $      7.9     $     37.3     $      6.4      $     24.5
   Total assets (2)                           $    907.3     $    700.6     $    594.8     $    605.0      $    726.7
   Bank indebtedness (5)                      $     51.4     $     43.2     $      -       $     19.4      $     12.4
   Capital lease obligations                  $      0.2     $      0.2     $     10.3     $     10.2      $      8.9
   Debt payable to Capital Trust              $      5.9     $     12.0     $    207.5     $    207.5      $    207.5
   Stockholders' equity                       $    562.2     $    406.4     $    177.7     $    189.7      $    319.2

OTHER OPERATING DATA:
   Cash flows provided (used) by:
     Operating activities                     $     72.9     $    (22.4)    $     65.8     $    (13.6)     $     62.6
     Investing activities                          (61.5)         (44.5)         (14.5)          (7.5)          (16.1)
     Financing activities                            -             38.7          (22.1)           3.6           (31.4)
                                              -----------    -----------    -----------    ------------    ------------
       Net cash provided (used)               $     11.4     $    (28.2)    $     29.2     $    (17.5)     $     15.1

   Melted product shipments (6)                   5,655           5,360          4,725          2,400           4,415
   Average melted product prices (6)          $   19.85      $    13.45      $   12.15      $   14.50       $   14.50
   Mill product shipments (6)                    12,660          11,365          8,875          8,860          12,180
   Average mill product prices (6)            $   41.75      $    32.05      $   31.50      $   31.40       $   29.80
   Active employees at December 31                2,369           2,227          2,055          1,956           2,410
   Order backlog at December 31(7)            $   870.0      $    450.0      $   205.0     $    185.0      $    240.0
   Capital expenditures                       $    61.1      $     23.6      $    12.5     $      7.8      $     16.1
</TABLE>

(1)  Effective  January 1, 2005,  the Company  changed its method for  inventory
     determination from the LIFO cost method to the specific identification cost
     method for the  approximate 40% of the Company's  consolidated  inventories
     previously  accounted for under the LIFO cost method.  In  accordance  with
     accounting  principles  generally  accepted in the United States of America
     ("GAAP"),  net income (loss) attributable to common  stockholders,  and the
     related per share  amounts,  for the years ended  December 31, 2004,  2003,
     2002 and 2001, and total assets and stockholders' equity as of December 31,
     2004, 2003, 2002 and 2001, have been retroactively restated for this change
     in  accounting  principle.   See  Note  2  to  the  Consolidated  Financial
     Statements. Net income (loss) attributable to common stockholders,  and the
     related  per  share  amounts,  as  presented  above,  is  higher  than  the
     previously  reported  amount by $9.3  million  ($0.15 per basic and diluted
     share) in 2002 and is lower  than the  previously  reported  amount by $5.0
     million ($0.08 per basic and diluted share) in 2001. Total assets and total
     stockholders'  equity,  as presented  above, are higher than the previously
     reported  amounts by $19.0  million at December 31, 2003,  $30.4 million at
     December 31, 2002 and $21.1 million at December 31, 2001.
(2)  See the notes to the  Consolidated  Financial  Statements and Item 7 - MD&A
     for items that materially affect the 2005, 2004 and 2003 periods.  In 2002,
     the Company  recorded a $27.5 million  pre-tax  impairment  charge to other
     non-operating expense related to the Company's investment in Special Metals
     Corporation  preferred  securities.  In 2001, the Company  recorded (i) net
     other  operating  income  of  $73  million  related  to the  settlement  of
     litigation between TIMET and Boeing, (ii) a $10.8 million pre-tax equipment
     impairment charge to cost of sales,  (iii) a $3.3 million charge to cost of
     sales for costs  related  to a tungsten  inclusion  matter and (iv) a $61.5
     million pre-tax impairment charge to other non-operating expense related to
     the  Company's   investment  in  Special   Metals   Corporation   preferred
     securities.
(3)  Amounts have been adjusted to reflect (i) the Company's  two-for-one  stock
     split which  became  effective  after the close of trading on February  16,
     2006,  (ii) the Company's  two-for-one  stock split which became  effective
     after the close of  trading  on  September  6,  2005,  (iii) the  Company's
     five-for-one  stock split which became effective after the close of trading
     on August 27, 2004 and (iv) the Company's  one-for-ten  reverse stock split
     which became effective after the close of trading on February 14, 2003.
(4)  Includes restricted cash and cash equivalents of $0.1 million in 2005, $0.7
     million in 2004,  $2.2 million in 2003 and $0.1 million in each of 2002 and
     2001.
(5)  Bank indebtedness represents notes payable and current and noncurrent debt.
(6)  Shipments in metric tons. Average selling prices stated per kilogram.
(7)  Order backlog is defined as unfilled purchase orders (including those under
     consignment  arrangements), which are  generally  subject  to  deferral  or
     cancellation by the customer under certain conditions.

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

RESULTS OF OPERATIONS

     Overview. Aggregate shipment volumes for titanium mill products in 2005 was
derived from the following sectors:

<TABLE>
<CAPTION>
                                                      TIMET                             Titanium Industry (1)
                                        ----------------------------------        ----------------------------------
                                         Mill product                              Mill product
                                          shipments          % of total             shipments          % of total
                                        ---------------     --------------        ---------------    ---------------
                                         (Metric tons)                             (Metric tons)

<S>                                            <C>                 <C>                   <C>                 <C>
Commercial aerospace                           7,492               59%                   24,000              35%
Military                                       1,981               16%                    6,200               9%
Industrial                                     2,677               21%                   35,600              52%
Emerging markets                                 510                4%                    2,700               4%
                                        ---------------     --------------        ---------------    ---------------

                                              12,660              100%                   68,500             100%
                                        ===============     ==============        ===============    ===============

--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  Estimates  based  on the  Company's  industry  experience  and  information
     obtained from  publicly-available  external resources (e.g.,  United States
     Geological Survey,  International  Titanium  Association and Japan Titanium
     Society).

     The titanium industry derives a substantial  portion of its demand from the
highly  cyclical  commercial  aerospace  sector.  As  shown  in the  table,  the
Company's business is more dependent on commercial  aerospace demand than is the
overall  titanium  industry,  and the  Company's  sales  growth  during 2005 has
benefited  from growth in this sector.  The Company's 2005 revenue from sales of
melted and mill products to the  commercial  aerospace  sector  increased by 51%
compared to 2004.



<PAGE>


     Effective July 1, 2005, the Company  entered into a new LTA with Boeing for
the purchase and sale of titanium products.  The new LTA expires on December 31,
2010 and provides for, among other things, (i) mutual annual purchase and supply
commitments by both parties,  (ii) continuation of the existing buffer inventory
program  currently  in place for  Boeing  and  (iii)  certain  improved  product
pricing,  including  certain  adjustments  for raw material  cost  fluctuations.
Beginning in 2006, the new LTA also replaces the  take-or-pay  provisions of the
previous LTA with an annual makeup  payment  early in the following  year in the
event Boeing purchases less than its annual volume commitment in any year.

     Effective  January 1, 2005,  the Company  changed its method for  inventory
determination  from the last-in,  first-out ("LIFO") cost method to the specific
identification cost method for the approximate 40% of the Company's consolidated
inventories  previously  accounted for under the LIFO cost method. In accordance
with GAAP, the Company's  consolidated  financial  statements as of December 31,
2004,  and  for  the  years  ended  December  31,  2004  and  2003,   have  been
retroactively restated for this change in accounting principle.  See Notes 2 and
3 to the Consolidated Financial Statements.

     In November 2004, pursuant to an agreement with Basic Management,  Inc. and
certain of its affiliates  ("BMI"),  the Company sold certain  property  located
adjacent  to its  Henderson,  Nevada  plant  site to BMI, a  32%-owned  indirect
subsidiary of Valhi,  and recorded a $12.0 million  deferred gain related to the
cash proceeds  received in November 2004. During the second quarter of 2005, the
Company ceased using the property and,  accordingly,  recognized a $13.9 million
non-operating  gain related to the sale of such property,  which is comprised of
(i) the  previously  reported  $12.0 million cash proceeds  received in November
2004,  (ii) the reversal of $0.6 million  previously  accrued by the Company for
potential  environmental  issues related to the property and (iii) an additional
$1.2 million cash payment received from BMI in June 2005.

     During 2005, the Company reversed $36.9 million of the valuation  allowance
attributable  to its U.S.  deferred  income  tax asset and $13.2  million of the
valuation  allowance  attributable to its U.K.  deferred  income tax asset.  See
"Results of Operations - Income taxes" and Note 16 to the Consolidated Financial
Statements for more information on the Company's income taxes.

     In August 2004, the Company completed an exchange offer,  pursuant to which
the Company had offered to exchange all of the 4,024,820 outstanding BUCS issued
by the Capital Trust for shares of the Company's Series A Preferred Stock at the
exchange rate of one share of Series A Preferred Stock for each BUCS. Based upon
the  3,909,103  BUCS  tendered  and accepted for exchange as of the close of the
offer on August  31,  2004,  the  Company  issued  3,909,103  shares of Series A
Preferred Stock in exchange for such BUCS. During the third quarter of 2004, the
Company  recognized a $15.5 million non-cash,  non-operating gain related to the
BUCS  exchange.  During the third and fourth  quarters of 2005,  an aggregate of
926,490 shares of Series A Preferred Stock were converted into 6,176,600  shares
of TIMET common  stock.  As of December 31, 2005,  there were  2,982,613  shares
outstanding of the Series A Preferred Stock. Subsequent to December 31, 2005 and
through March 10, 2006, an additional 346,016 shares of Series A Preferred Stock
were converted into 2,306,765  shares of TIMET common stock.  See Note 12 to the
Consolidated Financial Statements.



<PAGE>


     Summarized  financial  information.  The following table summarizes certain
information  regarding  the Company's  results of operations  for the past three
years.  Average selling prices, as reported by the Company, are a reflection not
just of actual  selling prices  received by the Company,  but also include other
related factors such as currency  exchange rates and customer and product mix in
a given period.  Consequently,  changes in average selling prices from period to
period will be impacted by changes  occurring not just in actual prices,  but by
these other factors as well. The percentage change  information  presented below
represents  changes from the respective prior year. See "Results of Operations -
Outlook" for further discussion of the Company's business expectations for 2006.



<PAGE>


<TABLE>
<CAPTION>
                                                                             Year ended December 31,
                                                              ------------------------------------------------------
                                                                   2005                2004               2003
                                                              ---------------     ---------------    ---------------
                                                                 ($ in thousands, except product shipment data)
Net sales:
<S>                                                           <C>                 <C>                <C>
   Melted products                                            $    112,252        $     72,092       $    57,409
   Mill products                                                   528,555             364,248           279,563
   Other products                                                  108,970              65,488            55,132
   Other (1)                                                             -                   -            (6,800)
                                                              ---------------     ---------------    ---------------

Net sales                                                     $    749,777        $    501,828       $   385,304

Gross margin                                                       199,362              63,677             5,644

Gross margin percent of net sales                                       27%                 13%                1%

Melted products shipments:
   Volume (metric tons)                                              5,655               5,360             4,725
   Average selling prices ($ per kilogram)                    $     19.85         $      13.45       $     12.15

Mill products shipments:
   Volume (metric tons)                                             12,660              11,365             8,875
   Average selling prices ($ per kilogram)                    $     41.75         $      32.05       $     31.50

Percentage change in:
   Sales volume:
     Melted products                                                   +6                 +13                +97
     Mill products                                                    +11                 +28                  -

   Average selling prices:
       Melted products                                                +48                 +11                -16
       Mill products                                                  +30                  +2                  -

   Selling prices - excludes changes in product mix:
       Melted products                                                +35                  +7                -12
       Mill products in U.S. dollars                                  +27                  +6                 -3
       Mill products in billing currencies (2)                        +27                  +2                 -7

------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  Represents  the effect of a $6.8 million  reduction to sales related to the
     termination  of a  purchase  and  sale  agreement  with  Wyman-Gordon.  See
     "Results of Operations -- 2004 operations."
(2)  Excludes the effect of changes in foreign currencies.



<PAGE>


     Based upon the terms of the Company's previous LTA with Boeing, the Company
received an annual $28.5 million (less $3.80 per pound of titanium  product sold
to Boeing  subcontractors in the preceding year) customer advance from Boeing in
January of each year  related to  Boeing's  purchases  from TIMET for that year.
Effective July 1, 2005, the Company  entered into a new LTA with Boeing pursuant
to which,  beginning in 2006, these take-or-pay provisions were replaced with an
annual makeup payment early in the following year in the event Boeing  purchases
less than its annual  commitment in any year. The previous LTA was structured as
a  take-or-pay  agreement  such  that  Boeing  forfeited  $3.80 per pound of its
advance  payment in the event that its  orders for  delivery  were less than 7.5
million pounds in any given calendar year. The Company  recognized income to the
extent Boeing's  year-to-date orders for delivery plus TIMET's maximum quarterly
volume  obligations  for the remainder of the year totaled less than 7.5 million
pounds.  This  income  was  recognized  as other  operating  income  and was not
included  in sales  revenue,  sales  volume  or gross  margin.  Based on  actual
purchases  of  approximately   3.0  million  pounds  during  2005,  the  Company
recognized  $17.1 million of take-or-pay  income for the year ended December 31,
2005.  The Company  recognized  $22.1  million and $23.1  million of such income
during 2004 and 2003,  respectively.  Had the Company  not  benefited  from such
provisions, the Company's results would have been as follows:

<TABLE>
<CAPTION>
                                                                            Year ended December 31,
                                                            --------------------------------------------------------
                                                                 2005                2004                2003
                                                            ----------------    ----------------    ----------------
                                                                                (In thousands)

<S>                                                         <C>                 <C>                 <C>
Operating income (loss), as reported                        $     171,075       $     43,036        $     (5,954)
     Less take-or-pay income                                       17,134             22,093              23,083
                                                            ----------------    ----------------    ----------------

Operating income (loss), excluding take-or-pay              $     153,941       $     20,943        $    (29,037)
                                                            ================    ================    ================
</TABLE>

     2005 operations.  Melted product sales increased 56% and mill product sales
increased 45% during 2005 as compared to 2004, principally as a result of higher
average  selling prices and increased  sales volume due to greater market demand
across all markets,  especially commercial aerospace.  Large commercial aircraft
deliveries  increased from 600 in 2004 to 650 in 2005,  and 2006  deliveries are
expected to be 840 aircraft. As previously  discussed,  a substantial portion of
the Company's business is tied to the commercial  aerospace industry,  and sales
of titanium generally precede aircraft deliveries by about one year.  Therefore,
the Company's 2005 net sales have  significantly  benefited from the increase in
production of large commercial aircraft scheduled for delivery in 2006.

     Average  selling  prices use actual  customer  and  product mix and foreign
currency exchange rates prevailing during the respective periods.  The Company's
melted products are generally sold only in U.S. dollars.  Melted product average
selling  prices during 2005, as compared to 2004,  were  positively  affected by
current market  conditions and changes in customer and product mix. Mill product
average  selling  prices  during  2005,  as  compared to 2004,  were  positively
affected by changes in customer and product mix and by the weakening of the U.S.
dollar compared to both the British pound sterling and the euro.



<PAGE>


     Gross  margin  (net  sales  less cost of sales)  increased  during  2005 as
compared to 2004  primarily as a result of the improved  average  selling prices
for both  melted and mill  products as  compared  to 2004,  partially  offset by
increased raw material  costs and higher energy costs.  Gross margin during 2005
includes an additional  $21.1 million from the sale of titanium scrap (which the
Company cannot economically  recycle) and other non-mill products as compared to
2004.  Additionally,  gross  margin was  positively  impacted by improved  plant
operating rates during 2005 (80%) as compared to 2004 (73%). Gross margin during
2004 was favorably impacted by a $1.6 million reduction in cost of sales related
to the modification of the Company's  vacation  policy.  On January 1, 2004, the
Company modified its vacation policy for its U.S.  salaried  employees,  whereby
such  employees no longer accrue their entire  year's  vacation  entitlement  on
January 1, but rather accrue the current year's  vacation  entitlement  over the
course of the year.  Gross  margin  during 2005 was  adversely  impacted by $6.0
million of  additional  costs as  compared  to 2004  related  to the  accrual of
certain  performance-based  employee incentive  compensation payments and a $1.2
million  noncash  impairment  charge  related to the  Company's  abandonment  of
certain manufacturing equipment.

     Selling,  general,  administrative and development  expenses increased 19%,
from $44.9 million  during 2004 to $53.6 million  during 2005,  principally as a
result of (i) $3.7 million of increased  personnel costs (including $1.4 million
of additional  employee incentive  compensation  costs) partially as a result of
headcount  increases  during 2005, (ii) $1.2 million of additional  auditing and
consulting  costs  partially  related  to  the  Company's  compliance  with  the
Sarbanes-Oxley  Act's internal  control  requirements and (iii) increases during
2005 for legal, travel, insurance and other such costs.

     Equity in earnings of joint  ventures  increased  296%,  from $1.3  million
during 2004 to $5.1  million  during 2005,  due to an increase in the  operating
results of VALTIMET,  the Company's  minority  owned welded tube joint  venture.
During 2005,  VALTIMET benefited from both stronger demand and increased pricing
in the industrial tubing market.

     Net other  operating  income  (expense)  decreased 12% from income of $23.0
million during 2004 to income of $20.3 million during 2005, principally due to a
decrease in the amount of previously discussed  take-or-pay income recognized by
the Company during 2005. See Note 15 to the Consolidated Financial Statements.

     2004 operations.  Melted product sales increased 26% and mill product sales
increased  30%  during  2004 as  compared  to 2003,  principally  as a result of
increased  sales volume due to greater  market  demand and/or share gains across
all markets.  More specifically,  large commercial aircraft deliveries increased
from 575 in 2003 to 602 in 2004 and the Company's  2004 net sales  significantly
benefited from the increase in production of large commercial aircraft scheduled
for delivery in 2005.

     Melted  product  average  selling  prices during 2004, as compared to 2003,
were  positively  affected by current market  conditions and changes in customer
and product mix. Mill product average selling prices during 2004, as compared to
2003, were  positively  affected by the weakening of the U.S. dollar compared to
both the British pound sterling and the euro and negatively  affected by changes
in customer and product mix.



<PAGE>


     Gross  margin  increased  during 2004 as compared  to 2003  primarily  as a
result of  improved  plant  operating  rates (from 56% during 2003 to 73% during
2004), partially offset by increased raw material costs and higher energy costs.
The  Company's  gross  margin  during  2004 was also  favorably  impacted by the
previously discussed modification of the Company's vacation policy and adversely
impacted by an additional  $10.5 million  charge to cost of sales related to the
accrual of certain  employee  incentive  compensation  payments,  as compared to
2003. Comparatively, gross margin during 2003 was impacted by (i) a $1.7 million
reduction in cost of sales  related to a revision of the  Company's  estimate of
probable loss associated with a previously  reported  tungsten  inclusion matter
and (ii) a $6.8 million  reduction in sales related to the previously  discussed
termination of a purchase and sale agreement with Wyman-Gordon.

     Selling,  general,  administrative and development  expenses increased 23%,
from $36.4 million  during 2003 to $44.9 million  during 2004,  principally as a
result of (i) a $2.8  million  accrual  related  to certain  employee  incentive
compensation  payments  expected  to be made  in  2005,  (ii)  $2.0  million  of
additional  auditing and consulting  costs relative to the Company's  compliance
with the  Sarbanes-Oxley  Act's  internal  control  requirements  and (iii) $1.0
million of  increased  costs  related  to the  Company's  intercompany  services
agreement with Contran Corporation ("Contran").

     Equity in earnings of joint  ventures  increased  183%,  from $0.5  million
during 2003 to $1.3  million  during 2004,  due to an increase in the  operating
results of VALTIMET.

     Net other  operating  income  (expense)  decreased  6% from income of $24.4
million during 2003 to income of $23.0 million during 2004, principally due to a
decrease in the amount of previously discussed  take-or-pay income recognized by
the Company during 2004. See Note 15 to the Consolidated Financial Statements.

     Non-operating income (expense).

<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                                ------------------------------------------------------
                                                                     2005               2004                2003
                                                                ---------------    ----------------    ---------------
                                                                                    (In thousands)

<S>                                                             <C>                <C>                 <C>
Interest expense on bank debt                                   $      (3,302)     $      (2,649)      $      (2,017)
Interest expense on debt payable to the Capital Trust                    (661)            (9,802)            (14,402)
                                                                ---------------    ----------------    ---------------

                                                                $      (3,963)     $     (12,451)      $     (16,419)
                                                                ===============    ================    ===============

Dividends and interest income                                   $       2,025      $         687       $         383
Equity in earnings of common
   securities of the Capital Trust                                        279                424                 432
Gain on BUCS exchange, net                                                  -             15,465                   -
Gain on sale of property                                               13,881                  -                   -
Foreign exchange gain (loss), net                                       2,288               (477)               (189)
Other, net                                                               (245)               101                (920)
                                                                ---------------    ----------------    ---------------

                                                                $      18,228      $      16,200       $        (294)
                                                                ===============    ================    ===============
</TABLE>



<PAGE>


     Interest  expense  on bank debt in 2005  increased  25%  compared  to 2004,
primarily due to higher average  outstanding  borrowings during 2005 compared to
2004,  which the Company used primarily to support its accumulation of inventory
to meet expected  customer demand during 2006 as well as for the construction of
the water  conservation  facility at the Company's  Henderson,  Nevada location.
Interest expense on bank debt in 2004 increased 31% compared to 2003,  primarily
due to higher average outstanding borrowings during 2004 compared to 2003, which
the Company  used  primarily to support  higher  inventory  levels.  The Company
currently  expects  interest  expense on bank debt in 2006 will approximate 2005
levels.

     Prior to 2004, annual interest expense on the Company's debt payable to the
Capital Trust approximated  $13.7 million,  exclusive of any accrued interest on
deferred interest payments. On September 1, 2004, the Company exchanged 97.1% of
its  outstanding  BUCS for its Series A Preferred  Stock,  resulting  in a $15.5
million non-cash,  non-operating gain. On September 1, 2005, the Company and the
Capital  Trust  agreed to the  cancellation  of 120,907 of the  Capital  Trust's
common  securities  and a  corresponding  cancellation  of $6.0  million  of the
Company's Subordinated Debentures (see "Liquidity and Capital Resources - Other"
and Note 12 to the Consolidated Financial Statements).  Interest expense related
to the remaining debt payable to the Capital Trust ($5.9 million at December 31,
2005) continues to accrue at 6.625% per year.

     During 2002, the Company  exercised its right to defer interest payments on
the  Subordinated  Debentures,  effective  for the  December  1, 2002  scheduled
interest payment.  Interest continued to accrue at the 6.625% coupon rate on the
principal and unpaid  interest until the Company's  Board of Directors  approved
resumption  of  scheduled   quarterly  interest  payments  on  the  Subordinated
Debentures  beginning with the payment on June 1, 2004. The Company's Board also
approved  payment  of all  previously  deferred  interest  on  the  Subordinated
Debentures.  On April 15, 2004,  the Company  paid the deferred  interest in the
amount of $21.7 million, $21.0 million of which related to the BUCS.

     Dividends and interest  income during 2005 and 2004  consisted of dividends
received on the  Company's  investments  in marketable  securities  and interest
income earned on cash and cash equivalents. Dividends and interest income during
2003 consisted solely of interest income earned on cash and cash equivalents.

     During the second quarter of 2005,  the Company  recognized a $13.9 million
non-operating  gain related to the sale of property.  See further  discussion in
"Results of Operations - Overview."

     Income  taxes.  The Company  operates in several tax  jurisdictions  and is
subject to varying income tax rates.  As a result,  the geographic mix of pretax
income or loss can impact the  Company's  overall  effective  tax rate.  For the
years ended  December 31, 2005,  2004 and 2003,  the  Company's  income tax rate
varied from the U.S.  statutory  rate  primarily  due to changes in the deferred
income tax valuation  allowance  related to the Company's  tax  attributes  with
respect to the "more-likely-than-not" recognition criteria during those periods.



<PAGE>


     The  Company  periodically  reviews  its  deferred  income  tax  assets  to
determine  if future  realization  is more  likely  than not.  During  the first
quarter of 2005, based on the Company's recent history of U.S. income,  its near
term outlook and the effect of its change in method of  inventory  determination
from the LIFO cost method to the  specific  identification  cost method for U.S.
federal  income tax purposes  (see Note 2), the Company  changed its estimate of
its ability to utilize the tax benefits of its U.S. net  operating  loss ("NOL")
carryforwards,  alternative  minimum tax ("AMT") credit  carryforwards and other
net deductible  temporary  differences (other than the majority of the Company's
capital loss carryforwards).  Consequently,  the Company determined that its net
deferred  income tax asset  related to such U.S.  tax  attributes  and other net
deductible temporary differences now meet the "more-likely-than-not" recognition
criteria.  Accordingly,  the Company  reversed  $36.9  million of the  valuation
allowance  attributable to such U.S. deferred income tax asset during 2005 ($8.6
million in the fourth quarter).

     During the first quarter of 2005,  based on the Company's recent history of
U.K.  income,  its near term outlook and its historic  U.K.  profitability,  the
Company also  changed its estimate of its ability to utilize its net  deductible
temporary  differences and other tax attributes  related to the U.K.,  primarily
comprised of (i) the future  benefits  associated  with the reversal of its U.K.
minimum pension liability deferred income tax asset and (ii) the benefits of its
U.K.  NOL  carryforward.  Consequently,  the  Company  determined  that  its net
deferred  income  tax asset in the U.K.  now  meets  the  "more-likely-than-not"
recognition  criteria.  Accordingly,  the Company  reversed $13.2 million of the
valuation  allowance  attributable to such deferred income tax asset during 2005
($0.1 million in the fourth quarter).

     During  2004,  due to a change in  estimate  of the  Company's  ability  to
utilize the benefits of its NOL carryforwards in Germany, the Company determined
that its  deferred  income tax asset in Germany  met the  "more-likely-than-not"
recognition  criteria.  Accordingly,  the  Company  reversed  the  $0.7  million
valuation allowance attributable to such deferred income tax asset. In addition,
the Company's  deferred income tax asset valuation  allowance  related to income
from continuing operations decreased by $16.4 million during 2004, primarily due
to the utilization of the U.S. and U.K. NOL carryforwards,  the benefit of which
had previously not met the "more-likely-than-not" recognition criteria.

     During the  second  quarter  of 2005 and the  fourth  quarter of 2004,  the
Company  recognized a deferred  income tax benefit related to a $0.5 million and
$4.2 million,  respectively,  decrease in the Company's U.S. deferred income tax
asset valuation allowance  attributable to the Company's  recognition,  for U.S.
income  tax  purposes  only,  of a capital  gain on the fourth  quarter  sale of
certain property located at the Company's  Henderson,  Nevada facility (see Note
6). The Company recognized a corresponding  deferred income tax expense in 2005,
when the gain was recognized under accounting  principles  generally accepted in
the United States of America. The Company utilized a portion of its U.S. capital
loss  carryforward  to offset the income taxes  generated  from the sale of such
property.



<PAGE>


     In October  2004,  the American  Jobs Creation Act of 2004 was enacted into
law.  The new law  provides for a special 85%  deduction  for certain  dividends
received from controlled foreign  corporations in 2005. In the second quarter of
2005, the Company  completed its evaluation of this new provision and determined
that it would  benefit from the special  dividend  received  deduction,  but the
Company did not  distribute  dividends  under the Act until the third quarter of
2005. In the third quarter of 2005, the Company executed a reinvestment plan and
distributed  $19  million of  earnings  from its  European  subsidiaries,  which
qualified for the special  dividend  received  deduction and, in accordance with
the  requirements of FASB Staff Position No. 109-2,  recognized the $1.0 million
income tax related to such repatriation.  Additionally, in the fourth quarter of
2005, the Company  determined  that an additional  $10 million of  repatriations
would  qualify  for the special  dividend  received  deduction,  and the Company
recognized an additional  $0.5 million  income tax related to the fourth quarter
repatriation.  The Company has not  provided for U.S.  deferred  income taxes or
foreign  withholding  taxes on basis  differences  in its non-U.S.  consolidated
subsidiaries  that result  primarily  from  undistributed  earnings  the Company
intends  to  reinvest  indefinitely.  The new law also  provides  for a  special
deduction  from U.S.  taxable  income equal to a specified  percentage of a U.S.
company's qualified income from domestic manufacturing  activities (as defined).
The Company  believes that the majority of its operations meet the definition of
qualified domestic manufacturing activities. However, the Company did not derive
any  benefit  from the  special  manufacturing  deduction  in 2005,  because the
Company's  existing U.S. NOL  carryforwards  fully offset its 2005 U.S.  taxable
income.

     In June 2005,  the State of Ohio  enacted a new tax law,  which  phases out
Ohio's  existing income tax system over the next five years and replaces it with
a tax based on gross  receipts.  In the second  quarter of 2005,  as a result of
this phase out,  the  Company  reduced  its  deferred  income tax asset  related
primarily to its Ohio NOL  carryforwards by $0.6 million.  In the fourth quarter
of  2005,  due  primarily  to  updated  income   forecasts  and  revised  timing
information on the  recognition of certain  temporary  differences,  the Company
increased  its  deferred  income  tax asset  related  primarily  to its Ohio NOL
carryforwards by $0.3 million.  The net impact of these adjustments for 2005 was
a decrease of $0.3 million.

     The  provision  for income taxes in 2005  includes $4.4 million of deferred
income taxes  resulting from the  elimination of the Company's  minimum  pension
liability equity adjustment  component of accumulated other comprehensive income
related to the Company's U.S.  defined  benefit pension plan. In accordance with
GAAP, the Company did not recognize a deferred  income tax benefit  related to a
portion of the minimum pension equity adjustment previously  recognized,  as the
Company had also  recognized  a deferred  income tax asset  valuation  allowance
related  to its  U.S.  net  operating  loss  carryforward  and  other  U.S.  net
deductible  temporary  differences  during a portion of the periods in which the
minimum pension equity  adjustment had previously been recognized.  A portion of
such valuation  allowance  recognized ($4.4 million) was recognized  through the
pension liability component of other comprehensive income. As discussed,  during
2005 the  Company  concluded  recognition  of such  deferred  income  tax  asset
valuation  allowance  was no longer  required,  and the  reversal of all of such
valuation  allowance  was  recognized  through the  provision  for income  taxes
included in the determination of net income,  including the $4.4 million portion
of the  valuation  allowance  which  was  previously  recognized  through  other
comprehensive  income.  As of  December  31,  2005,  the  Company  was no longer
required to recognize a minimum pension  liability related to its U.S. plan, and
the Company  reversed the minimum  pension  liability  previously  recognized in
other  comprehensive   income.  After  the  reversal  of  such  minimum  pension
liability,  which was recognized on a net-of-tax  basis, the $4.4 million amount
remained in accumulated other  comprehensive  income related to the U.S. minimum
pension  liability,  which is required to be  recognized  in the  provision  for
income  taxes  during the period in which the minimum  pension  liability  is no
longer required to be recognized.

     See also Note 16 to the Consolidated Financial Statements.

     Dividends on Series A Preferred  Stock.  Shares of the  Company's  Series A
Preferred  Stock are  convertible,  at any  time,  at the  option of the  holder
thereof,  into six and two-thirds shares of the Company's common stock,  subject
to adjustment in certain events. The Series A Preferred Stock is not mandatorily
redeemable,  but is  redeemable  at the option of the  Company at any time after
September 1, 2007. When, as and if declared by the Company's board of directors,
holders of the Series A Preferred Stock are entitled to receive  cumulative cash
dividends at the rate of 6.75% of the $50 per share  liquidation  preference per
annum per share  (equivalent  to $3.375 per annum per share).  The Company  paid
dividends of $12.5 million  during 2005 and $3.3 million  during 2004 to holders
of the Series A Preferred Stock.  Subsequent to December 31, 2005, the Company's
board of directors  declared a dividend of $0.84375 per share,  payable on March
15,  2006 to  holders of record of Series A  Preferred  Stock as of the close of
trading on March 1, 2006.  Based on the  2,636,597  shares of Series A Preferred
Stock  outstanding as of March 10, 2006, TIMET would expect to pay approximately
$8.9 million of dividends on these shares during 2006.

     Cumulative  effect of change in accounting  principle.  On January 1, 2003,
the Company adopted  Statement of Financial  Accounting  Standards  ("SFAS") No.
143,  Accounting for Asset Retirement  Obligations,  and recognized (i) an asset
retirement  cost  capitalized  as an  increase  to  the  carrying  value  of its
property,  plant and equipment of approximately  $0.2 million,  (ii) accumulated
depreciation on such capitalized cost of approximately  $0.1 million and (iii) a
liability for the asset retirement obligation of approximately $0.3 million. The
asset retirement obligation recognized relates primarily to landfill closure and
leasehold   restoration  costs.  See  Note  2  to  the  Consolidated   Financial
Statements.

     European  operations.  The Company has  substantial  operations  located in
Europe,  principally in the United Kingdom, France and Italy.  Approximately 39%
of  the  Company's  sales  revenue  originated  in  Europe  in  2005,  of  which
approximately  58% was  denominated  in the British pound  sterling or the euro.
Certain purchases of raw materials,  principally titanium sponge and alloys, for
the Company's European  operations are denominated in U.S. dollars,  while labor
and other production costs are primarily  denominated in local  currencies.  The
functional  currencies of the Company's European subsidiaries are those of their
respective countries, and the European subsidiaries are subject to exchange rate
fluctuations  that may impact reported earnings and may affect the comparability
of  period-to-period  operating  results.  Borrowings of the Company's  European
operations  may be in U.S.  dollars or in functional  currencies.  The Company's
export sales from the U.S. are  denominated in U.S.  dollars and as such are not
subject to currency exchange rate fluctuations.

     The  Company  does  not  use  currency  contracts  to  hedge  its  currency
exposures.  Net  currency  transaction  gains or losses  included  in results of
operations  were a $2.3  million gain in 2005 and losses of $0.5 million in 2004
and $0.2  million  in 2003.  At  December  31,  2005,  consolidated  assets  and
liabilities  denominated in currencies  other than  functional  currencies  were
approximately  $51.2  million  and  $46.4  million,   respectively,   consisting
primarily of U.S. dollar cash, accounts receivable and accounts payable.

     VALTIMET has entered into certain  derivative  financial  instruments  that
qualify as cash flow hedges under accounting  principles  generally  accepted in
the  United  States  of  America  ("GAAP").  The  Company's  pro-rata  share  of
VALTIMET's  unrealized  net gains on such  derivative  financial  instruments is
included as a component of other comprehensive income.

     Related party transactions.  The Company is a party to certain transactions
with related parties. See Note 18 to the Consolidated Financial Statements.

     Outlook.   The  Outlook  section  contains  a  number  of   forward-looking
statements,  all of which are based on  current  expectations  and  exclude  the
effect of potential future charges related to restructurings, asset impairments,
valuation allowances, changes in accounting principles and similar items, unless
otherwise  noted.  Undue reliance should not be placed on these  statements,  as
more fully  discussed  in the  "Forward-Looking  Information"  statement of this
Annual  Report.  Actual  results  may differ  materially.  See also Notes to the
Consolidated  Financial Statements regarding commitments,  contingencies,  legal
matters,  environmental  matters and other  matters,  including  new  accounting
principles, which could materially affect the Company's future business, results
of operations, financial position and liquidity.

     In 2005,  TIMET  achieved all time record  levels for net sales,  operating
income and net income.  These levels were largely driven by increased  demand in
the commercial  aerospace  sector that,  when coupled with the relatively  short
supply of raw materials,  resulted in average selling prices for both melted and
mill products reaching their highest  historical levels at $19.85 and $41.75 per
kilogram,  respectively.  The Company  expects  that the current  up-cycle  will
continue beyond 2006.

     The Company  continues  to see the  availability  of certain raw  materials
tighten,  and,  consequently,  the prices for such raw materials  increase.  The
Company  currently  expects that the shortage in certain raw materials is likely
to continue  throughout 2006, which could limit the Company's ability to produce
enough titanium products to fully meet customer demand.  In addition,  TIMET has
certain  long-term  customer  agreements  that will somewhat limit the Company's
ability to pass on all of its increased raw material costs. However, the Company
expects  that the impact of higher  average  selling  prices for melted and mill
products in 2006 will more than offset such increased raw materials costs.

     As  compared  to 2005,  the  Company  currently  expects its 2006 net sales
revenue to increase by 35% to 50% to between $1.0 billion and $1.1 billion. Mill
product sales volume, which was 12,660 metric tons in 2005, is expected to range
from 14,500 and 15,000  metric tons in 2006,  an increase of 15% to 18%.  Melted
product sales volume, which was 5,655 metric tons in 2005, is expected to remain
relatively unchanged in 2006. Melted product average selling prices are expected
to increase by 75% to 80% and mill product  average  selling prices are expected
increase by 25% to 30%, as compared to 2005.

     The  Company's  cost of sales is affected by a number of factors  including
customer and product mix,  material yields,  plant operating rates, raw material
costs,  labor costs and energy costs. Raw material costs,  which include sponge,
scrap and alloys,  represent the largest portion of the Company's  manufacturing
cost  structure,  and, as previously  discussed,  continued  cost  increases are
expected during 2006. Scrap and certain alloy prices have continued their upward
rise,  and  increased  energy costs also  continue to have a negative  impact on
gross margin.  The Company currently expects  production  volumes to continue to
increase in 2006, with overall capacity  utilization expected to approximate 88%
in 2006 (as compared to 80% in 2005).  However,  practical capacity  utilization
measures can vary significantly based on product mix.

     Selling,  general,  administrative and development expenses are expected to
increase slightly but decrease as a percentage of sales.  Under the terms of the
new Boeing LTA, as previously  discussed,  the Company does not currently expect
Boeing to incur a makeup  payment  for 2006 as Boeing is expected to purchase at
least the minimum specified volumes from the Company.


<PAGE>


     The Company  expects its 2006 operating  income to increase 50% to 65% over
2005, to between $257 million and $282 million.

     Capital  expenditures during 2006 are expected to range from $90 million to
$100 million.  The increased  spending over 2005 primarily  reflects $23 million
related to the expansion of the sponge plant in Henderson, Nevada and additional
capacity  improvements  as the  Company  continues  to respond to the  increased
demand by its customers.  Depreciation and amortization  should  approximate $36
million in 2006.

     Non-GAAP  financial  measures.  In an  effort  to  provide  investors  with
information in addition to the Company's results as determined GAAP, the Company
has provided the following non-GAAP  financial  disclosures that it believes may
provide useful information to investors:

     o    The  Company  discloses  percentage  changes  in its mill  and  melted
          product  selling prices in U.S.  dollars,  which have been adjusted to
          exclude the effects of changes in product  mix.  The Company  believes
          such disclosure  provides useful  information to investors by allowing
          them to analyze such changes  without the impact of changes in product
          mix, thereby facilitating period-to-period comparisons of the relative
          changes in average  selling  prices.  Depending on the  composition of
          changes in  product  mix,  the  percentage  change in  selling  prices
          excluding  the effect of changes in product mix can be higher or lower
          than such  percentage  change  would be using the actual  product  mix
          prevailing during the respective periods;

     o    In  addition  to  disclosing  percentage  changes in its mill  product
          selling  prices  adjusted to exclude the effects of changes in product
          mix, the Company also  discloses  such  percentage  changes in billing
          currencies,  which  also  excludes  the  effects of changes in foreign
          currency exchange rates. The Company believes such disclosure provides
          useful  information  to  investors  by allowing  them to analyze  such
          changes  without  the impact of changes in foreign  currency  exchange
          rates,  thereby  facilitating   period-to-period  comparisons  of  the
          relative  changes  in average  selling  prices in the  various  actual
          billing  currencies.  Generally,  when  the  U.S.  dollar  strengthens
          (weakens) against other  currencies,  the percentage change in selling
          prices  in  billing  currencies  will  be  higher  (lower)  than  such
          percentage  changes would be using actual  exchange  rates  prevailing
          during the respective periods; and

     o    The Company has disclosed operating income excluding the impact of the
          Boeing   take-or-pay   income.  The  Company  believes  this  provides
          investors  with useful  information  to better  analyze the  Company's
          business and possible  future  earnings.  Effective  July 1, 2005, the
          Company entered into a new LTA with Boeing,  replacing the take-or-pay
          provisions  with an annual makeup  payment early in the following year
          in the event Boeing  purchases less than its annual volume  commitment
          in any year. See  "Summarized  Financial  Information"  for additional
          information regarding the Boeing LTA.



<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

     The Company's  consolidated cash flows for each of the past three years are
presented  below. The following should be read in conjunction with the Company's
Consolidated Financial Statements and notes thereto.

<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                                ------------------------------------------------------
                                                                     2005               2004                2003
                                                                ---------------    ----------------    ---------------
                                                                                   (In thousands)
Cash provided (used) by:
<S>                                                             <C>                <C>                 <C>
   Operating activities                                         $      72,896      $     (22,433)      $      65,821
   Investing activities                                               (61,486)           (44,528)            (14,534)
   Financing activities                                                   (28)            38,742             (22,068)
                                                                ---------------    ----------------    ---------------

     Net cash provided (used) by operating,
       investing and financing activities                       $      11,382      $     (28,219)      $      29,219
                                                                ===============    ================    ===============
</TABLE>

     Operating  activities.  The titanium  industry  historically  has derived a
substantial portion of its business from the aerospace  industry.  The aerospace
industry is cyclical,  and changes in economic  conditions  within the aerospace
industry  significantly  impact the Company's earnings and operating cash flows.
Cash flow from operations has been a primary source of the Company's  liquidity.
Changes in titanium pricing,  production volume and customer demand, among other
things, could significantly affect the Company's liquidity.

     Certain items included in the  determination  of net loss have an impact on
cash flows from operating  activities,  but the impact of such items on cash may
differ  from  their  impact  on net  loss.  For  example,  pension  expense  and
postretirement  healthcare  and life insurance  ("OPEB")  expense will generally
differ  from the  outflows of cash for payment of such  benefits.  In  addition,
relative  changes in assets and liabilities  generally result from the timing of
production,  sales and purchases. Such relative changes can significantly impact
the  comparability  of cash flow from operations  from period to period,  as the
income  statement impact of such items may occur in a different period than that
in which the underlying cash transaction occurs. For example,  raw materials may
be purchased  in one period,  but the cash  payment for such raw  materials  may
occur in a subsequent  period.  Similarly,  inventory may be sold in one period,
but the cash collection of the receivable may occur in a subsequent period.

     The  Company's net income  increased  from $47.7 million for the year ended
December 31, 2004 to $155.9 million for the year ended December 31, 2005.

     Accounts receivable increased during 2005 primarily due to increased sales,
as fourth  quarter 2005 net sales,  the primary  source of the year end accounts
receivable balance, increased 61% over the year ago period. Similarly,  accounts
receivable  increased  during  2004  primarily  due to a 36%  increase in fourth
quarter  2004 net sales over the fourth  quarter  of 2003.  Accounts  receivable
decreased  during 2003  primarily  due to improved  collection  efforts with the
Company's  customers,  partially  offset  by the  weakening  of the U.S.  dollar
compared to the British pound sterling and the euro.

     Inventories increased during each of 2005 and 2004 as a result of increased
capacity  utilization  and  related  inventory  build in order to meet  expected
customer demand during the respective  following year, as well as the effects of
increased raw material costs. Inventories decreased during 2003 primarily due to
the Company's concentrated focus on inventory reduction during 2003.

     Changes in accounts payable and accrued  liabilities  reflect,  among other
things,  the timing of payments to suppliers of titanium sponge,  titanium scrap
and other raw material  purchases.  Accrued  liabilities  increased  during 2005
primarily due to a $7.5 million  increase in the Company's  accrual for employee
profit sharing payments to be made in 2006. Accrued liabilities increased during
2004 primarily due to (i) a $12.0 million net increase in the Company's  accrual
for incentive  compensation for potential employee profit sharing payments to be
made in 2005 and (ii) a $1.1 million increase to the Company's accrual for costs
expected  to  be  incurred  for  environmental   remediation  at  the  Company's
Henderson, Nevada facility. These increases were partially offset by (i) payment
of the $2.8  million  final  installment  related  to  termination  of the prior
Wyman-Gordon agreement,  (ii) a $1.9 million reduction of the Company's vacation
accrual related to the Company's modification of its vacation policy for its U.S
salaried  employees and (iii) a $3.5 million  reclassification  of the Company's
U.S.  defined  benefit  pension  liability  from current to  noncurrent,  as the
Company's short-term cash contribution requirements decreased significantly.

     Pursuant to the Company's previous  agreement with Boeing,  Boeing advanced
TIMET $28.5 million annually less $3.80 per pound of titanium product  purchased
by Boeing subcontractors during the preceding year. The Company received a $27.9
million  advance for 2005 in January 2005, a $27.9  million  advance for 2004 in
January 2004 and a $27.7  million  advance for 2003 in January  2003.  Effective
July 1, 2005,  the Company  entered  into a new Boeing LTA,  which  replaced the
previous LTA's take-or-pay provisions with an annual makeup payment early in the
following  year in the  event  Boeing  purchases  less  than its  annual  volume
commitment in any year. See Note 10 to the Consolidated Financial Statements.

     See "Results of Operations - Income taxes" for  discussion of the Company's
income taxes.

     In October 2002, the Company  exercised its right to defer future  interest
payments on its  Subordinated  Debentures  held by the Capital Trust,  effective
beginning  with the  Company's  December  1, 2002  scheduled  interest  payment,
although  interest  continued to accrue at the coupon rate on the  principal and
unpaid interest. On April 15, 2004, the Company paid all previously deferred and
accrued  interest in the amount of $21.7 million ($21.0 million of which related
to the BUCS) and on June 1, 2004,  the Company  resumed its  quarterly  interest
payments on the  Subordinated  Debentures.  Changes in accrued  interest on debt
payable to the Capital Trust reflect this activity.

     Investing  activities.  During 2005 and 2004, the Company purchased 146,900
and  2,549,520  shares of CompX  International,  Inc.  ("CompX")  Class A common
stock, respectively,  for $2.2 million and $32.0 million,  respectively.  During
2004, the Company purchased 222,100 shares of NL Industries,  Inc. ("NL") common
stock for $2.5 million.  See further  discussion  in Note 4 to the  Consolidated
Financial Statements.

     The  Company's  capital  expenditures  were $61.1  million  in 2005,  $23.6
million  in 2004 and $12.5  million in 2003,  principally  for  replacement  and
expansion of machinery  and  equipment  and for capacity  maintenance.  The 2005
amount  includes  $24.2  million  related  to  the  construction  of  the  water
conservation  facility and $11.8 million  related to the Company's  sponge plant
expansion in Henderson, Nevada. The 2004 amount includes $3.9 million related to
construction of the water conservation facility.


     During  the  fourth  quarter  of 2003,  the  Company  deposited  funds into
certificates  of deposit and other interest  bearing  accounts as collateral for
certain  Company  obligations in lieu of entering into letters of credit.  These
deposits, which are restricted as to the Company's use, provide the Company with
interest  income as opposed to  interest  expense  incurred  through  the use of
letters of credit.  During each of 2005 and 2004, certain of these deposits were
liquidated in favor of entering  into letters of credit  because the Company was
primarily a net borrower  during these  periods and the use of this cash reduced
overall borrowing costs.

     Financing activities.  Cash used during 2005 was primarily related to $12.5
million of  dividends  paid on the Series A Preferred  Stock and $2.2 million of
dividends  paid to CEZUS,  partially  offset by the Company's net  borrowings of
$8.3 million and $6.4 million of proceeds from the issuance of common stock upon
exercise  of  options.  Cash  provided  during  2004  related  primarily  to the
Company's net borrowings of $43.2 million,  which the Company  primarily used to
support the accumulation of inventory in order to meet expected  customer demand
for 2005 and also support capital expenditures and the acquisition of marketable
securities.  In addition,  the Company paid  dividends on its Series A Preferred
Stock of $3.3 million and TIMET Savoie made a $0.7 million  dividend  payment to
CEZUS during  2004.  Cash used during 2003  related  primarily to the  Company's
$19.3 million of net repayments on its outstanding borrowings upon the Company's
receipt of a $27.7 million customer advance in January 2003. Additionally, TIMET
Savoie made a $1.9 million  dividend  payment to CEZUS during 2003.  See further
discussion below in "Liquidity and Capital Resources - Borrowing arrangements."

     Borrowing arrangements.  As of December 31, 2005, the Company's outstanding
borrowings  under its U.S.  credit  agreement  were  $40.3  million  and  excess
availability was  approximately  $79 million.  On February 17, 2006, the Company
entered  into a new $175  million  long-term  credit  agreement  (the  "New U.S.
Facility"), replacing its previous U.S credit agreement, which was terminated on
that date.  The New U.S.  Facility is secured  primarily by the  Company's  U.S.
accounts receivable,  inventory,  personal property, intangible assets, a pledge
of 65% of TIMET UK's common stock and a negative  pledge on U.S.  fixed  assets,
and matures in February  2011.  Borrowings  under the New U.S.  Facility  accrue
interest  at the  U.S.  prime  rate or  varying  LIBOR-based  rates  based  on a
quarterly ratio of outstanding  debt to EBITDA as defined by the agreement.  The
New U.S. Facility also provides for the issuance of up to $10 million of letters
of credit.

     The New U.S.  Facility contains certain  restrictive  covenants that, among
other things,  limit or restrict the ability of the Company to incur debt, incur
liens, make  investments,  make capital  expenditures or pay dividends.  The New
U.S.  Facility  also  requires  compliance  with  certain  financial  covenants,
including a minimum  tangible net worth covenant,  a fixed charge coverage ratio
and a  leverage  ratio,  and  contains  other  covenants  customary  in  lending
transactions  of this type including  cross-default  provisions  with respect to
other  debt  and  obligations  of the  Company.  Borrowings  under  the New U.S.
Facility  are  limited  to the lesser of $175  million  or a  formula-determined
amount based upon U.S. accounts receivable,  inventory and fixed assets (subject
to pledging  fixed  assets).  Such  formula-determined  amount  only  applies if
borrowings  exceed 60% of the commitment  amount or the leverage ratio exceeds a
certain  limitation.  At  February  17,  2006,  approximately  $21  million  was
outstanding  under the New U.S.  Facility  and $4.4 million of letters of credit
were issued and  outstanding.  The  Company's  previous  U.S.  credit  agreement
contained  similar  covenant  compliance  requirements,  and the  Company was in
compliance  with all such  covenants  for all  periods  during  the years  ended
December 31, 2005 and 2004.


<PAGE>


     Under the  previous  U.S.  credit  agreement,  the Company was  required to
maintain a lock box  arrangement  whereby  daily net cash  receipts were used to
reduce outstanding borrowings.  Accordingly,  any outstanding balances under the
previous  U.S.  credit  agreement  were  classified  as  a  current   liability,
regardless of the maturity date of the  agreement.  As a result of the Company's
entrance  into  the  New  U.S.  Facility,  which  does  not  contain  a  similar
requirement  regarding the  application of daily net cash  receipts,  borrowings
under the Company's  previous U.S. credit  agreement have been  re-classified to
long-term on the  Company's  balance  sheet as of December  31, 2005.  Under the
Company's  previous U.S. credit  agreement,  interest  accrued at rates based on
LIBOR plus 2% and bank prime rate plus 0.5%. The weighted  average interest rate
on  borrowings  outstanding  was  6.4% as of  December  31,  2005 and 4.3% as of
December 31, 2004.  Borrowings were  collateralized  by substantially all of the
Company's U.S. assets.

     During the second  quarter of 2005,  the  Company's  subsidiary,  TIMET UK,
terminated its previous credit facility (the "U.K. Facilities") and entered into
a new working capital credit facility (the "New U.K.  Facility") that expires on
April  30,  2008.  Under  the New  U.K.  facility,  TIMET  UK may  borrow  up to
(pound)22.5 million, subject to a formula-determined borrowing base derived from
the value of accounts receivable,  inventory and property,  plant and equipment.
Borrowings under the New U.K. facility can be in various  currencies,  including
U.S.  dollars,  British  pounds  sterling  and euros and are  collateralized  by
substantially  all of TIMET UK's  assets.  Interest  on  outstanding  borrowings
generally  accrues at rates that vary from 1.125% to 1.375%  above the  lender's
published base rate. The New U.K.  facility also contains  financial  ratios and
covenants  customary in lending  transactions of this type,  including a minimum
net  worth  covenant.  TIMET UK was in  compliance  with all  covenants  for all
periods  during the year ended  December 31, 2005. As of December 31, 2005,  the
Company had outstanding borrowings under the New U.K. Facility of $11.1 million,
and excess  availability  was  approximately  $28 million.  The weighted average
interest rate on borrowings  outstanding under the New U.K. facility was 5.6% as
of December 31, 2005.

     The U.K.  Facilities  included  revolving and term loan  facilities  and an
overdraft  facility and required the maintenance of certain financial ratios and
amounts, including a minimum net worth covenant and other covenants customary in
lending transactions of this type. TIMET UK was in compliance with all covenants
for all  periods  during the year ended  December  31,  2004.  During the second
quarter of 2003, TIMET UK received an interest-bearing  intercompany loan from a
U.S.  subsidiary  of the  Company  enabling  TIMET UK to  reduce  its  long-term
borrowings  under the U.K.  Facilities  to zero.  This  loan was  repaid in full
during the third  quarter of 2004.  As of December 31, 2004,  the Company had no
borrowings under the U.K. Facilities.

     The Company also has  overdraft  and other credit  facilities at certain of
its other European  subsidiaries that aggregate the equivalent of $19 million at
December 31, 2005.  These  facilities  accrue  interest at various rates and are
payable on demand. At December 31, 2005,  approximately $2 million of letters of
credit had been issued under these facilities. As of December 31, 2005 and 2004,
there were no outstanding  borrowings under these other  facilities,  and unused
borrowing availability at December 31, 2005 was approximately $17 million.

     No dividends  were paid by TIMET on its common  stock during 2005,  2004 or
2003. The Company paid  dividends on its Series A Preferred  Stock in the amount
of $12.5  million in 2005 and $3.3 million in 2004.  Subsequent  to December 31,
2005,  the  Company's  board of  directors  declared a dividend of $0.84375  per
share,  payable on March 15,  2006 to  holders  of record of Series A  Preferred
Stock as of the close of trading on March 1, 2006.



<PAGE>


     Contractual commitments. As more fully described in Notes 11, 12, 18 and 19
to the  Consolidated  Financial  Statements,  the Company was a party to various
debt, lease and other agreements at December 31, 2005 that contractually commits
the Company to pay certain amounts in the future. The following table summarizes
such  contractual  commitments  that are  enforceable and legally binding on the
Company and that specify all significant terms, including pricing,  quantity and
date of payment:

<TABLE>
<CAPTION>
                                                                         Payment Due Date
                                            ---------------------------------------------------------------------------
                                                              2007/           2009/          2011 &
Contractual Commitment                         2006           2008            2010            After           Total
----------------------                      -----------    ------------    ------------    ------------    ------------
                                                                          (In thousands)

<S>                                         <C>            <C>             <C>             <C>              <C>
Capital leases (1)                          $       28     $       56      $      56       $        50      $      190

Operating leases                                 3,103          6,003          4,479            18,512          32,097

Long-term debt (2)                                   -         11,104              -            40,255          51,359

Debt payable to Capital Trust (and
  accrued interest thereon at
  December 31, 2005)                                33              -              -             5,852           5,885

Purchase obligations:
   Raw materials (3)                           108,643         36,715          2,800             2,800         150,958
   Other (4)                                    30,048         18,515         12,990            24,204          85,757

Other contractual obligations (5)               14,026              -              -                 -          14,026
                                            -----------    ------------    ------------    ------------    ------------

                                            $  155,881      $  72,393      $  20,325        $   91,673      $  340,272
                                            ===========    ============    ============    ============    ============
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  Includes interest payments due under the capital lease agreements.
(2)  Subsequent to December 31, 2005, the Company entered into a new U.S. credit
     agreement, which matures in 2011. See Note 11 to the Consolidated Financial
     Statements.
(3)  These  obligations  generally  relate to the  purchase of  titanium  sponge
     pursuant to an LTA that expires on December 31, 2007 (as  described in Item
     1: Business) and various other open orders or  commitments  for purchase of
     raw  materials.  The LTA does not  contain  automatic  renewal  provisions;
     however,  the Company may enter into a new agreement to replace the current
     LTA in the future.
(4)  These  obligations  generally relate to contractual  operating fees paid to
     CEZUS  for use of a portion  of its  Ugine,  France  plant  pursuant  to an
     agreement  expiring in 2006 (as  described in Item 2:  Properties),  energy
     purchase obligations with BMI which expire in 2010 (as described in Note 18
     to the Consolidated Financial  Statements),  an obligation to Contran under
     an intercorporate services agreement ("ISA") for 2006 (as described in Note
     18 to  the  Consolidated  Financial  Statements),  a  capital  contribution
     obligation  to  BAOTIMET  and  various  other open  orders for  purchase of
     energy,  utilities  and  property  and  equipment.  These  obligations  are
     generally based on an average price and an assumed constant mix of products
     purchased,  as  appropriate.  The  Company  expects  to  enter  into an ISA
     annually with Contran  subsequent to 2006. All open orders are for delivery
     in 2006.
(5)  These other  obligations are recorded on the Company's  balance sheet as of
     December 31, 2005 and consist of current income taxes  payable,  a contract
     for  removal  of  environmental  waste and  obligations  related to workers
     compensation   bonds  discussed  in  "Liquidity  and  Capital  Resources  -
     Off-balance sheet arrangements."

     The Company has excluded any potential commitment for funding of retirement
and postretirement benefit plans from this table. However, such potential future
contributions  are discussed  below, as  appropriate,  in "Liquidity and Capital
Resources - Defined benefit pension plans" and "Liquidity and Capital  Resources
- Postretirement benefit plans other than pensions."



<PAGE>


     Off-balance  sheet  arrangements.  As more fully  discussed  in "Results of
Operations - Non-operating income (expense)," the Company is the primary obligor
on two $1.5  million  workers'  compensation  bonds  issued on behalf of Freedom
Forge.  The Company has fully expensed the  obligation  under the first of these
bonds.  Based upon current claims  analysis,  the Company has expensed only $0.2
million on the second bond and  although  it is  potentially  obligated  for the
remaining  $1.3 million,  the Company does not currently  expect any  additional
claims to be filed on this second  bond.  Additionally,  the Company has entered
into letters of credit to  collateralize  (i)  potential  workers'  compensation
claims in Ohio and Nevada and (ii) future usage of  electricity  in Nevada.  The
Company's excess  availability  under its U.S. credit agreement has been reduced
by $2.3  million  and $2.1  million,  respectively,  related to such  letters of
credit.

     The  Company  has  entered  into  letters  of credit to  collateralize  (i)
potential workers'  compensation  claims in Ohio and Nevada and (i) future usage
of  electricity  in Nevada.  The Company's  excess  availability  under its U.S.
credit   agreement   has  been  reduced  by  $2.3  million  and  $2.1   million,
respectively,  related to such letters of credit. Additionally,  the Company has
entered into a letter of credit to collateralize  various business  obligations,
wich has reduced the  Company's  excess  availability  under its other  European
credit facilities by approximately $2 million.

     Defined  benefit  pension  plans.  As of  December  31,  2005,  the Company
maintains  three defined  benefit pension plans - one each in the U.S., the U.K.
and France.  Prior to December 31, 2003, the U.S.  maintained  two plans,  which
were merged as of that date. The majority of the discussion below relates to the
U.S.  and U.K.  plans,  as the  French  plan is not  material  to the  Company's
Consolidated  Balance  Sheets,  Statements  of  Operations or Statements of Cash
Flows.

     The Company recorded  consolidated pension expense of $7.9 million in 2005,
$7.7  million  in 2004 and $8.9  million  in 2003.  Pension  expense  for  these
periods,  the majority of which related to the U.K. plan,  was calculated  based
upon a number  of  actuarial  assumptions,  most  significant  of which  are the
discount rate and the expected long-term rate of return.

     The discount rate the Company utilizes for determining  pension expense and
pension  obligations  is based on a review  of  long-term  bonds  (10 to 15 year
maturities)  that  receive one of the two highest  ratings  given by  recognized
rating agencies (generally Merrill Lynch, Moody's,  Solomon Smith Barney and UBS
Warburg)  as well as  composite  indices  provided by the  Company's  actuaries.
Changes in the  Company's  discount  rate over the past three years  reflect the
decline in such bond rates during that period.  The Company  establishes  a rate
that is used to determine  obligations  as of the year-end  date and expense for
the subsequent  year. The Company used the following  discount rate  assumptions
for its pension plans:

<TABLE>
<CAPTION>
                                                          Discount rates used for:
                      ------------------------------------------------------------------------------------------------
                              Obligation at                     Obligation at                    Obligation at
                            December 31, 2005                 December 31, 2004                December 31, 2003
                           and expense in 2006               and expense in 2005              and expense in 2004
                      ------------------------------    ------------------------------     ---------------------------
<S>                                <C>                               <C>                              <C>
U.S. Plan                          5.50%                             5.65%                            6.00%
U.K. Plan                          4.75%                             5.30%                            5.50%
</TABLE>

     In developing the Company's expected long-term rate of return  assumptions,
the  Company  evaluates  historical  market  rates of return  and input from its
actuaries,  including a review of asset  class  return  expectations  as well as
long-term  inflation  assumptions.  Projected  returns are based on broad equity
(large cap, small cap and  international)  and bond  (corporate and  government)
indices as well as anticipation that the plans' active investment  managers will
generate  premiums above the standard market  projections.  The Company used the
following long-term rate of return assumptions for its pension plans:


<PAGE>



<TABLE>
<CAPTION>
                                                    Long-term rates of return used for:
                      ------------------------------------------------------------------------------------------------
                              Obligation at                     Obligation at                    Obligation at
                            December 31, 2005                 December 31, 2004                December 31, 2003
                           and expense in 2006               and expense in 2005              and expense in 2004
                      ------------------------------    ------------------------------     ---------------------------
<S>                               <C>                               <C>                               <C>
U.S. Plan                         10.00%                            10.00%                            10.00%
U.K. Plan                          6.70%                             7.10%                            7.10%
</TABLE>

     Lowering the expected long-term rate of return on the Company's U.S. plan's
assets by 0.5% (from 10.00% to 9.50%) would have increased 2005 pension  expense
by  approximately  $0.3 million,  and lowering the discount  rate  assumption by
0.25% (from 5.65% to 5.40%) would have increased the Company's U.S.  plan's 2005
pension expense by approximately  $0.1 million.  Lowering the expected long-term
rate of return on the Company's U.K. plan's assets by 0.5% (from 7.10% to 6.60%)
would have increased 2005 pension  expense by  approximately  $0.6 million,  and
lowering the discount rate  assumption by 0.25% (from 5.30% to 5.05%) would have
increased the Company's U.K. plan's 2005 pension expense by  approximately  $0.7
million.

     During the second quarter of 2003, the Company  transferred all of its U.S.
plan's assets into the Combined Master Retirement Trust ("CMRT").  The CMRT is a
collective  investment  trust  established  by Valhi to  permit  the  collective
investment by certain master trusts which fund certain  employee  benefits plans
sponsored by Valhi and certain related companies. A sub account of the CMRT held
10.8% of TIMET common stock at December 31, 2005;  however,  the Company's  plan
assets  are  invested  only in the  portion of the CMRT that does not hold TIMET
common  stock.  At December  31,  2005,  Valhi and  related  entities or persons
(excluding  the CMRT) held  approximately  41.8% of TIMET's  outstanding  common
stock and approximately  54.1% of the Company's Series A Preferred Stock. Harold
C. Simmons,  Chairman of the Board of Directors of Valhi and TIMET,  is the sole
trustee of the CMRT and a member of the trust investment committee for the CMRT.

     The CMRT's  long-term  investment  objective is to provide a rate of return
exceeding a composite of broad market equity and fixed income indices (including
the S&P 500 and certain Russell indices)  utilizing both third-party  investment
managers  as well as  investments  directed by Mr.  Simmons.  During the 18-year
history of the CMRT through December 31, 2005, the average annual rate of return
earned by the CMRT, as calculated based on the average  percentage change in the
CMRT's  net asset  value per CMRT unit for each  applicable  year,  has been 14%
(with a 36% return for 2005).

     At December  31, 2005,  the CMRT's  asset mix (based on an aggregate  asset
value of $691  million)  was 86%  U.S.  equity  securities,  7%  foreign  equity
securities,  3% debt  securities  and 4% cash and other.  The CMRT`s trustee and
investment  committee  actively  manage the  investments  within the CMRT.  Such
parties have in the past, and may again in the future,  periodically  change the
relative  asset mix based upon,  among other  things,  advice they  receive from
third-party  advisors and their  expectation  as to what asset mix will generate
the greatest  overall return.  Based on the above, the Company set its long-term
rate of  return  assumption  at 10.0% for  December  31,  2005 and 2004  pension
obligations and 2006, 2005 and 2004 pension expense for its U.S. plan.



<PAGE>


     Because of market fluctuations and prior funding  strategies,  actual asset
allocation as of December 31, 2005 was 84.6% equity  securities  and 15.4% fixed
income securities for the U.K. plan. During 2003, the trustees for the U.K. plan
selected a new  investment  advisor  (effective  in 2004) for the U.K.  plan and
modified its asset allocation  goals.  The Company's  future expected  long-term
rate of return on plan assets for its U.K. plan is based on an asset  allocation
assumption  of 60% equity  securities  and 40% fixed income  securities  and all
current contributions to the plan are invested wholly in fixed income securities
in order to  gradually  effect the shift.  Based on various  factors,  including
improved  economic and market  conditions,  gains on the plan assets during 2003
and projected  asset mix, the Company  increased its assumed  long-term  rate of
return for December 31, 2003 pension obligations and for 2004 pension expense to
7.10% for its U.K.  plan and  maintained  the  assumption  for December 31, 2004
pension  obligations  and for 2005 pension  expense.  Because all  contributions
continue to be put into fixed income securities,  the Company expects the plan's
asset mix to continue  moving  closer to the  projected  mix,  which  reflects a
higher percentage of fixed income securities. As such, the Company decreased its
assumed  long-term rate of return for December 31, 2005 pension  obligations and
for 2006 pension expense to 6.70% for its U.K. plan.

     Although the expected  rate of return is a long-term  measure,  the Company
will continue to evaluate its expected rate of return,  at least  annually,  and
will adjust it as considered necessary. The expected return on the fair value of
the plan assets, determined based on the expected long-term rate of return, is a
component  of  pension  expense.  This  methodology  further  recognizes  actual
investment gains or losses (i.e., the difference between the expected and actual
returns  based on the  market  value  of  assets)  in  pension  expense  through
amortization in future periods based upon the expected average remaining service
life of the plan  participants.  Unrealized  gains or losses may  impact  future
periods to the extent the accumulated gains or losses are outside the "corridor"
as defined by SFAS No. 87.

     Based on an expected  rate of return on plan  assets of 10.00%,  a discount
rate of 5.50% and various other assumptions, the Company estimates that its U.S.
plan  will  have  pension  income  of   approximately   $2.8  million  in  2006,
approximately  $3.2  million in 2007 and  approximately  $3.7 million in 2008. A
0.25%  increase  (decrease)  in the  discount  rate  would  increase  (decrease)
projected pension income by approximately $0.1 million in each of 2006, 2007 and
2008. A 0.5% increase  (decrease) in the long-term rate of return would increase
(decrease)  projected  pension income by approximately  $0.4 million in 2006 and
$0.5 million in each of 2007 and 2008.

     Based on an  expected  rate of return on plan  assets of 6.70%,  a discount
rate of 4.75% and various  other  assumptions  (including  an  exchange  rate of
$1.75/(pound)1.00), the Company estimates that pension expense for its U.K. plan
will  approximate $6.4 million in 2006, $6.0 million in 2007 and $5.3 million in
2008. A 0.25% increase (decrease) in the discount rate would decrease (increase)
projected pension expense by approximately  $0.8 million in 2006 and 2007 and by
$0.7 million in 2008. A 0.5% increase (decrease) in the long-term rate of return
would  decrease  (increase)  projected  pension  expense by  approximately  $0.7
million in 2006, $0.8 million in 2007 and $1.0 million in 2008.

     Actual  future  pension  expense  will depend on actual  future  investment
performance,  changes in future discount rates and various other factors related
to the participants in the Company's pension plans.



<PAGE>


     The Company made cash  contributions of approximately  $1.8 million in 2004
and  $4.4  million  in  2003  to  the  U.S.  plans  and  cash  contributions  of
approximately  $9.1  million in 2005,  $8.2  million in 2004 and $7.3 million in
2003 to the U.K. plan. Based upon the current funded status of the plans and the
actuarial  assumptions being used for 2006, the Company believes that it will be
required to make the  following  cash  contributions  (exclusive of any required
employee contributions) over the next five years:

<TABLE>
<CAPTION>
                                                                          Projected cash contributions
                                                           -----------------------------------------------------------
                                                              U.S. Plan             U.K.Plan               Total
                                                           ----------------     -----------------    -----------------
                                                                       (In millions, and using an exchange
                                                                       rate of $1.75/(pound)1.00 for U.K. plan )
Year ending December 31,
     <S>                                                     <C>                  <C>                  <C>
     2006                                                    $      0.4           $       8.1          $       8.5
     2007                                                    $      0.1           $       8.3          $       8.4
     2008                                                    $      -             $       8.6          $       8.6
     2009                                                    $      -             $       8.9          $       8.9
     2010                                                    $      -             $       9.2          $       9.2
</TABLE>

     The U.S. plan(s) paid benefits of approximately  $5.6 million in 2005, $5.7
million in 2004 and $5.6  million in 2003,  and the U.K.  plan paid  benefits of
approximately  $4.3  million in 2005,  $4.7  million in 2004 and $4.3 million in
2003.  Based upon current  projections,  the Company  believes the plans will be
required to pay the following benefits over the next ten years:

<TABLE>
<CAPTION>
                                                                         Projected retirement benefits
                                                           -----------------------------------------------------------
                                                              U.S. Plan             U.K.Plan               Total
                                                           ----------------     -----------------    -----------------
                                                                       (In millions, and using an exchange
                                                                       rate of $1.75/(pound)1.00 for U.K. plan )
Year ending December 31,
<S>  <C>                                                     <C>                  <C>                  <C>
     2006                                                    $      5.9           $       4.3          $      10.2
     2007                                                    $      5.9           $       4.4          $      10.3
     2008                                                    $      5.9           $       4.5          $      10.4
     2009                                                    $      5.9           $       4.6          $      10.5
     2010                                                    $      5.9           $       4.8          $      10.7
     2011 through 2015                                       $     29.4           $      25.8          $      55.2
</TABLE>

     The value of the plans'  assets has increased  significantly  over the past
three years based mainly on  performance  of the plans' equity  securities.  The
U.S.  plan's  assets were $84.7  million,  $67.2  million  and $60.7  million at
December 31, 2005, 2004 and 2003, respectively,  and the U.K. plan's assets were
$138.1 million,  $121.0 million and $97.8 million at December 31, 2005, 2004 and
2003, respectively.



<PAGE>


     The combination of actual investment  returns,  changing discount rates and
changes in other  assumptions has a significant  effect on the Company's  funded
plan status (plan assets compared to projected  benefit  obligations).  In 2005,
the effect of  positive  investment  returns  more than  offset the effects of a
decline in the discount  rate,  thereby moving the U.S. plan into a $5.3 million
over-funded  status at  December  31,  2005.  Whereas,  in 2004,  the  effect of
positive  investment  returns and cash contributions was more than offset by the
effect of a decline in the discount  rate and certain  changes in mortality  and
other retirement assumptions, thereby increasing in the U.S. plan's under-funded
status by $1.3 million to $11.4 million at December 31, 2004. In 2005 the effect
of positive  investment  returns in the U.K.  plan, as well as the effect of the
strengthening  dollar compared to the British pound  sterling,  more than offset
the decline in the discount rate, thereby reducing the U.K. plan's  under-funded
status by $7.2 million to $54.8 million at December 31, 2005.  Whereas, in 2004,
the effect of positive  investment returns was more than offset by the effect of
a decline in the discount rate and certain  changes in mortality and  retirement
assumptions,  as well as the  effect of the  weakening  dollar  compared  to the
British pound sterling,  thereby increasing the under-funded  status of the U.K.
plan by $8.4  million to $62.0  million at  December  31,  2004.  Based upon the
change in the funded  status of the plans during  2005,  the Company was able to
reduce its net  additional  minimum  pension  liability  charge  (net of tax) to
equity by $17.2 million,  reflecting  additional  comprehensive  income of $16.6
million  for the U.S.  plan  (based on  elimination  of the  additional  minimum
pension  liability for this plan) and  additional  comprehensive  income of $0.6
million for the U.K. plan.

     Postretirement  benefit  plans other than  pensions.  The Company  provides
limited OPEB benefits to a portion of its U.S.  employees upon  retirement.  The
Company  funds  such OPEB  benefits  as they are  incurred,  net of any  retiree
contributions.  The Company paid OPEB benefits, net of retiree contributions, of
$2.3 million in 2005, $2.5 million in 2004 and $3.1 million in 2003.

     The Company  recorded  consolidated  OPEB  expense of $2.8 million in 2005,
$3.0  million in 2004 and $2.7 million in 2003.  OPEB expense for these  periods
was calculated based upon a number of actuarial assumptions, most significant of
which are the discount rate and the expected long-term health care trend rate.

     The discount  rate the Company  utilizes for  determining  OPEB expense and
OPEB  obligations is the same as that used for the Company's U.S. pension plans.
Lowering the discount  rate  assumption by 0.25% (from 5.65% to 5.4%) would have
increased the Company's 2005 OPEB expense by less than $0.1 million.

     The Company  estimates the expected  long-term health care trend rate based
upon  input  from  specialists  in  this  area,  as  provided  by the  Company's
actuaries.  In  estimating  the health  care trend rate,  the Company  considers
industry  trends,  the  Company's  actual  healthcare  cost  experience  and the
Company's  future  benefit  structure.  For 2005,  the Company  used a beginning
health  care trend rate of 9.29%,  which is  projected  to reduce to an ultimate
rate of 4.0% in 2010.  If the health  care trend rate  changed by 1.00% for each
year, OPEB expense would have  increased/decreased by approximately $0.2 million
in 2005.  For 2006,  the Company is using a beginning  health care trend rate of
8.23%, which is projected to reduce to an ultimate rate of 4.0% in 2010.



<PAGE>


     Based on a discount  rate of 5.5%,  a health  care trend rate as  discussed
above and various other  assumptions,  the Company  estimates  that OPEB expense
will  approximate $2.8 million in 2006, $2.7 million in 2007 and $2.8 million in
2008. A 0.25% increase (decrease) in the discount rate would decrease (increase)
projected OPEB expense by less than $0.1 million in each of 2006, 2007 and 2008.
A 1.0%  increase  (decrease)  in the health  care trend rate for each year would
increase  (decrease) the projected  service and interest cost components of OPEB
expense by  approximately  $0.2  million in 2006 and by $0.3  million in each of
2007 and 2008.

     Based upon  current  projections,  the Company  will be required to pay the
following OPEB benefits over the next ten years:

<TABLE>
<CAPTION>
                                        Projected            Projected            Projected         Projected net
                                     gross payments           retiree              Part D              payments
                                                           contributions           subsidy
                                     ---------------- -- ------------------    ----------------    -----------------
                                                                     (In millions)
Year ended December 31,

      <S>                             <C>                          <C>                <C>           <C>
      2006                            $        3.8                 (1.4)              (0.2)         $          2.2
      2007                            $        4.0                 (1.5)              (0.4)         $          2.1
      2008                            $        4.3                 (1.6)              (0.4)         $          2.3
      2009                            $        4.6                 (1.7)              (0.5)         $          2.4
      2010                            $        4.8                 (1.8)              (0.5)         $          2.5
      2011 through 2015               $       29.0                (10.8)              (3.0)         $         15.2
</TABLE>

     Environmental   matters.  See  "Business  -  Regulatory  and  environmental
matters" in Item 1 and Note 19 to the  Consolidated  Financial  Statements for a
discussion of environmental matters.

     Other.  The Company  periodically  evaluates  its  liquidity  requirements,
capital needs and availability of resources in view of, among other things,  its
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, the Company has in the past, or in light of its current outlook, may in
the future,  seek to raise additional  capital,  modify its common and preferred
dividend  policies,   restructure  ownership  interests,   incur,  refinance  or
restructure indebtedness,  repurchase shares of common stock, purchase or redeem
BUCS or Series A Preferred  Stock,  sell assets,  or take a combination  of such
steps or other steps to increase or manage its liquidity and capital  resources.
In the normal course of business, the Company investigates, evaluates, discusses
and engages 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,  the Company may consider using then-available liquidity, issuing
equity securities or incurring additional indebtedness.



<PAGE>


     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.  The Company
continuously considers, reviews and evaluates such transactions, and understands
that  Contran,  Valhi and related  entities  consider,  review and evaluate such
transactions.  Depending  upon  the  business,  tax and  other  objectives  then
relevant,  it is possible  that the Company might be a party to one or more such
transactions in the future.

     During the first  nine  months of 2004,  the  Company  purchased  2,212,820
shares of CompX International, Inc ("CompX") Class A common shares, representing
approximately 14.6% of the total number of shares of all classes of CompX common
stock  outstanding at that date. As of September 30, 2004, NL  Industries,  Inc.
("NL"), a subsidiary of Valhi,  held an additional 68.4% of CompX.  Effective on
October  1,  2004,  the  Company  and NL  contributed  100% of their  respective
holdings on that date of all classes of CompX common stock to CompX Group,  Inc.
("CGI") in return for a 17.6% and 82.4% ownership interest in CGI, respectively,
and CGI  became  the owner of the  83.0% of CompX  that the  Company  and NL had
previously  held in the aggregate.  The CompX shares are the sole assets of CGI.
The  Company's  shares of CGI are  redeemable at the option of the Company based
upon the market value of the underlying  CompX stock held by CGI. The fair value
of the  Company's  investment  in CGI  is  based  on  the  market  value  of the
underlying CompX shares.

     As of December  31, 2005 and 2004,  the Company  directly  held 483,600 and
336,700,  respectively,  shares of CompX,  which were  purchased  subsequent  to
October 1, 2004.  The Company has not  contributed  any of the shares  purchased
subsequent to October 1, 2004 to CGI. Depending upon the Company's evaluation of
the business and prospects of CompX,  and upon future  developments  (including,
but  not  limited  to,  performance  of  the  Class  A  Shares  in  the  market,
availability of funds,  alternative uses of funds,  and money,  stock market and
general  economic  conditions),  the  Company  may from  time to time  purchase,
dispose of, or cease buying or selling Class A Shares.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The  Company's  Consolidated  Financial  Statements  have been  prepared in
accordance with accounting principles generally accepted in the United States of
America.  The preparation of these financial  statements requires the Company to
make estimates and judgments,  and select from a range of possible estimates and
assumptions,  that affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements and the reported  amount of revenues and expenses during the reported
period.



<PAGE>


     On an on-going basis, the Company evaluates its estimates,  including those
related  to  allowances  for  uncollectible   accounts   receivable,   inventory
allowances, asset lives, impairments of investments in marketable securities and
investments  accounted for by the equity  method,  the  recoverability  of other
long-lived  assets,  including  property  and  equipment,   goodwill  and  other
intangible assets, pension and other post-retirement benefit obligations and the
related underlying actuarial assumptions, the realization of deferred income tax
assets,   and  accruals   for  asset   retirement   obligations,   environmental
remediation,  litigation, income tax and other contingencies.  The Company bases
its estimates  and  judgments,  to varying  degrees,  on historical  experience,
advice of  external  specialists  and  various  other  factors it believes to be
prudent  under the  circumstances.  Actual  results may differ  from  previously
estimated  amounts and such  estimates,  assumptions and judgments are regularly
subject to revision.

     The policies and estimates  discussed below are considered by management to
be critical to an understanding of the Company's  financial  statements  because
their  application  requires the most  significant  judgments from management in
estimating matters for financial  reporting that are inherently  uncertain.  See
Notes to the  Consolidated  Financial  Statements for additional  information on
these  policies and  estimates,  as well as discussion of additional  accounting
policies and estimates.

     Inventory  allowances.  Prior to January 1, 2005,  approximately 40% of the
Company's  inventories were determined  using the LIFO method,  with the balance
determined  primarily using an average cost method.  Effective  January 1, 2005,
the Company changed its method for inventory costing from the LIFO method to the
specific identification cost method for the inventories previously accounted for
under the LIFO cost method. With the significant volatility seen recently in raw
material prices,  the Company believes this change in accounting method provides
a better matching of revenues and expenses. As required by GAAP, the Company has
restated  its  financial  statements  for  prior  periods.  See  Note  2 to  the
Consolidated   Financial  Statements.   The  Company  periodically  reviews  its
inventory for estimated  obsolescence or unmarketable  inventory and records any
write-down  equal  to the  difference  between  the  cost of  inventory  and its
estimated net realizable value based upon assumptions  about  alternative  uses,
market conditions and other factors.

     Impairment  of  long-lived  assets.  Generally,  when  events or changes in
circumstances indicate that the carrying amount of long-lived assets,  including
property and  equipment  and  intangible  assets,  may not be  recoverable,  the
Company  undertakes  an  evaluation  of the  assets  or  asset  group.  If  this
evaluation indicates that the carrying amount of the asset or asset group is not
recoverable,  the amount of the impairment  would typically be calculated  using
discounted  expected future cash flows or appraised values. All relevant factors
are considered in  determining  whether an impairment  exists.  During 2005, the
Company  determined that certain of its manufacturing  equipment would no longer
be utilized in its  operations,  and,  accordingly,  recognized  a $1.2  million
noncash  abandonment  charge  to cost of  sales.  In  2004,  no such  events  or
circumstances indicated the need to perform such evaluation.



<PAGE>


     Valuation and  impairment of securities.  In accordance  with SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities,  the Company's
marketable securities,  including the shares of CompX contributed by the Company
and held by CGI (based upon the Company's  redemption option), are classified as
available-for-sale  securities  and are  carried at fair value based upon quoted
market prices,  with unrealized  gains and/or losses  included in  stockholders'
equity as a component of other  comprehensive  income. The Company evaluates its
investments  in marketable  securities  whenever  events or conditions  occur to
indicate  that the fair  value of such  investments  has  declined  below  their
carrying  amounts.  If the  decline  in fair  value is judged  to be other  than
temporary, the carrying amount of the security is written down to fair value. In
2005,  no such  events  or  circumstances  indicated  the need to  perform  such
evaluation.  See Note 4 to the  Consolidated  Financial  Statements  for further
discussion.

     Deferred income tax valuation  allowances.  Under SFAS No. 109,  Accounting
for Income  Taxes,  and  related  guidance,  the Company is required to record a
valuation   allowance   if   realization   of   deferred   tax   assets  is  not
"more-likely-than-not."  Substantial  weight must be given to recent  historical
results and near-term  projections,  and management must assess the availability
of tax planning  strategies that might impact either the need for, or amount of,
any  valuation  allowance.  See  "Results  of  Operations  - Income  taxes"  for
discussion  of the  Company's  analysis  of its  deferred  income tax  valuation
allowances.

     Pension and OPEB expenses and obligations.  The Company's  pension and OPEB
expenses and obligations are calculated  based on several  estimates,  including
discount  rates,  expected  rates of returns on plan assets and expected  health
care trend rates.  The Company  reviews these rates annually with the assistance
of its actuaries. See further discussion of the factors considered and potential
effect of these estimates in "Liquidity and Capital  Resources - Defined benefit
pension  plans" and "Liquidity and Capital  Resources -  Postretirement  benefit
plans other than pensions."

     Revenue recognition. Sales revenue is generally recognized when the Company
has certified that its product meets the related  customer  specifications,  the
product has been shipped,  and title and substantially all the risks and rewards
of ownership  have passed to the customer.  Payments  received from customers in
advance of these  criteria  being met are  recorded as customer  advances  until
earned. For inventory  consigned to customers,  sales revenue is recognized when
(i) the terms of the consignment end, (ii) the Company has completed performance
of all  significant  obligations  and (iii) title and  substantially  all of the
risks and rewards of ownership have passed to the customer.  Amounts  charged to
customers for shipping and handling are included in net sales.  Sales revenue is
stated net of price and early payment discounts.

     Other  loss  contingencies.  Accruals  for  estimated  loss  contingencies,
including,  but  not  limited  to,  product-related  liabilities,  environmental
remediation  and  litigation,  are recorded when it is probable that a liability
has been  incurred  and the  amount  of the loss  can be  reasonably  estimated.
Disclosure is made when there is a reasonable  possibility  that a loss may have
been incurred. Contingent liabilities are often resolved over long time periods.
Estimating  probable losses often requires analysis of various  projections that
are dependent upon the future outcome of multiple factors,  including costs, the
findings of investigations and actions by the Company and third parties.



<PAGE>


ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Interest  rates.  The  Company is exposed  to market  risk from  changes in
interest  rates related to  indebtedness.  The Company  typically does not enter
into  interest  rate swaps or other  types of  contracts  in order to manage its
interest  rate market  risk.  At December 31, 2005,  all of the  Company's  bank
indebtedness  was  denominated in U.S.  dollars or British pounds  sterling.  At
December 31, 2004, all of the Company's  bank  indebtedness  was  denominated in
U.S.  dollars.  The  Company's  borrowings  accrue  interest at variable  rates,
generally  related to  spreads  over bank prime  rates and  LIBOR.  Because  the
Company's bank indebtedness  reprices with changes in market interest rates, the
carrying  amount  of such  debt is  believed  to  approximate  fair  value.  The
following  table  summarizes the Company's bank variable rate  indebtedness  and
related maturities as of December 31, 2005:

<TABLE>
<CAPTION>
                                                         Contractual maturity date
                                  ---------------------------------------------------------------------
                                                                                            There-after    Interest
                                     2006          2007           2008          2009                        rate (1)
                                  -----------    ----------    -----------    ----------    -----------    -----------
                                                               (In millions)

<S>                               <C>            <C>           <C>            <C>           <C>               <C>
U. S. dollars (2)                 $     -        $     -       $     -        $     -       $    40.3         6.4%
British pounds sterling           $     -        $     -       $    11.1      $     -       $     -           5.6%
</TABLE>

(1)  Weighted average.
(2)  Subsequent to December 31, 2005, the Company entered into a new U.S. credit
     facility, which matures in 2010.

     The  following   table   summarizes   the  Company's   bank  variable  rate
indebtedness and related maturities as of December 31, 2004:

<TABLE>
<CAPTION>
                                                            Contractual maturity date
                                  ---------------------------------------------------------------------
                                                                                              There-        Interest
                                     2005          2006           2007          2008          after         rate (1)
                                  -----------    ----------    -----------    ----------    -----------    -----------
                                                               (In millions)

<S>                               <C>            <C>           <C>            <C>           <C>               <C>
U. S. dollars (1)                 $    43.2      $     -       $     -        $     -       $     -           4.3%
</TABLE>

(1)  Weighted average.

     The  Subordinated  Debentures  held by the  Capital  Trust  provide a fixed
6.625%  coupon and are  exposed to market  risk from  changing  interest  rates.
During  2005,  the trading  volume of the BUCS was minimal and,  therefore,  the
Company does not believe the last traded value of the BUCS necessarily  provides
a fair value of the underlying Subordinated  Debentures.  The BUCS issued by the
Capital  Trust are  publicly  traded and are  convertible,  at the option of the
holder,  into TIMET common stock at the rate of 2.678 shares of common stock per
BUCS. Based on the last traded value of TIMET common stock ($31.63 per share) on
or before  December  31,  2005,  the "as  converted"  value of the 113,467  BUCS
outstanding  at  December  31,  2005  (which  the  Company  believes  provides a
reasonable  estimate  of fair  value of the  Subordinated  Debentures)  was $9.6
million. Based on the last traded value of the BUCS on December 31, 2004 ($16.00
per BUCS), the fair value of the outstanding  Subordinated Debentures related to
the 115,717 outstanding BUCS approximated $1.9 million at December 31, 2004.

     On March 3,  2005,  the  Company  called  all of the  outstanding  BUCS for
redemption.  The  redemption  price equals  100.6625% of the $50.00  liquidation
amount per BUCS, or $50.3313,  plus accrued  distributions to the March 24, 2006
redemption date on the BUCS of $0.2116 per BUCS.


<PAGE>


     Foreign  currency  exchange  rates.  The  Company is exposed to market risk
arising  from  changes in  foreign  currency  exchange  rates as a result of its
international  operations.  The  Company  does not enter into  currency  forward
contracts  to  manage  its  foreign   exchange   market  risk   associated  with
receivables,  payables or indebtedness  denominated in a currency other than the
functional  currency of the  particular  entity.  See  "Results of  Operations -
European operations" in Item 7 - MD&A for further discussion.

     Commodity  prices.  The  Company  is exposed to market  risk  arising  from
changes in  commodity  prices as a result of its  long-term  purchase and supply
agreements with certain suppliers and customers.  These agreements,  which offer
various fixed or formula-determined  pricing arrangements,  effectively obligate
the Company to bear (i) the risk of  increased  raw  material and other costs to
the  Company  that  cannot  be  passed  on to the  Company's  customers  through
increased  titanium  product  prices  (in  whole or in part) or (ii) the risk of
decreasing raw material costs to the Company's  suppliers that are not passed on
to the Company in the form of lower raw material prices.  However, the Company's
ability to offset  increased  material  costs with higher  selling prices should
increase in 2006, as many of the Company's LTAs have either expired or have been
renegotiated for 2006 with price adjustments that take into account raw material
cost fluctuations.

     Securities  prices.  As of December 31,  2005,  the Company  holds  certain
publicly traded equity securities that are exposed to market risk due to changes
in prices of the  securities  as  reported on the New York Stock  Exchange.  The
aggregate market value of these equity securities at December 31, 2005 was $46.5
million,  as compared to a cost basis of $36.9 million.  The potential change in
the aggregate market value of these securities, assuming a 10% change in prices,
would be $4.6 million at December 31, 2005. See also Note 4 to the  Consolidated
Financial Statements.

ITEM 8:    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information required by this Item is contained in a separate section of
this Annual Report. See Index of Financial Statements and Schedules on page F.

ITEM  9:  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

     Not applicable.



<PAGE>

ITEM 9A:      CONTROLS AND PROCEDURES

     Evaluation of disclosure  controls and procedures.  The Company maintains a
system of disclosure controls and procedures.  The term "disclosure controls and
procedures,"  as defined by 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 the Company files or submits 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 the Company in the reports  that it files or submits to the
SEC under the Exchange Act is  accumulated  and  communicated  to the  Company's
management,   including  its  principal  executive  officer  and  its  principal
financial officer,  or persons  performing similar functions,  as appropriate to
allow timely decisions to be made regarding required disclosure.  Each of Steven
L. Watson,  the Company's  Chief  Executive  Officer,  and Bruce P. Inglis,  the
Company's Vice President - Finance and Corporate Controller,  have evaluated the
Company's disclosure controls and procedures as of December 31, 2005. Based upon
their evaluation,  and as a result of the material  weaknesses  discussed below,
these executive officers have concluded that the Company's  disclosure  controls
and procedures are not effective as of December 31, 2005.

     Scope of management's report on internal control over financial  reporting.
The Company also maintains internal control over financial  reporting.  The term
"internal control over financial reporting," as defined by Rule 13a-15(f) of the
Exchange  Act,  means a process  designed by, or under the  supervision  of, the
Company's  principal  executive and  principal  financial  officers,  or persons
performing similar functions,  and effected by the Company's board of directors,
management and other personnel,  to provide reasonable  assurance  regarding the
reliability of financial  reporting and the preparation of financial  statements
for external  purposes in accordance  with GAAP, and includes those policies and
procedures that:

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

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

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

     Section  404  of the  Sarbanes-Oxley  Act of  2002  ("Sarbanes-Oxley  Act")
requires the Company to include annually a management report on internal control
over  financial  reporting  and such report is  included  below.  The  Company's
independent  registered  public  accounting  firm is also  required  to annually
attest to the Company's internal control over financial reporting.



<PAGE>



     Management's  report on internal  control  over  financial  reporting.  The
Company's  management is responsible for establishing  and maintaining  adequate
internal control over financial  reporting,  as such term is defined in Exchange
Act  Rule  13a-15(f).  The  Company's  evaluation  of the  effectiveness  of its
internal control over financial reporting is based upon the criteria established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO").

     A material  weakness is a control  deficiency,  or a combination of control
deficiencies,  that  results  in more than a remote  likelihood  that a material
misstatement of the annual or interim financial statements will not be prevented
or  detected.  In  connection  with  management's  assessment  of the  Company's
internal  control over financial  reporting,  management has determined that the
following control  deficiencies  constitute material weaknesses in the Company's
internal control over financial reporting as of December 31, 2005:

     (1)  The Company did not maintain a sufficient complement of personnel with
          an appropriate level of accounting knowledge,  experience and training
          commensurate  with the  Company's  financial  reporting  requirements.
          Specifically,   the  Company  did  not  have  accounting  and  finance
          personnel  with  sufficient  depth and  skill to allow  the  Company's
          global   accounting   and  financial   reporting   group  to  function
          effectively.  This control  deficiency  contributed  to the second and
          third control deficiencies discussed below.

     (2)  The Company did not maintain  effective  controls  over the  accuracy,
          authorization and review of recurring and non-recurring manual journal
          entries recorded in the general ledger. Specifically,  the Company did
          not have consistent and comprehensive procedures designed and in place
          to ensure that manual  journal  entries  were  properly  reviewed  and
          approved to ensure the entries recorded were accurate and valid.  This
          control  deficiency  affects  substantially  all  financial  statement
          accounts.  However, this deficiency did not result in an adjustment to
          the Company's 2005 consolidated financial statements.

     (3)  The   Company   did  not   maintain   effective   controls   over  the
          establishment, review and evaluation of the adequacy of its accounting
          policies and  procedures.  Specifically,  the Company did not (a) have
          sufficient  written policies and procedures  insofar as they relate to
          the  appropriate  application of GAAP relating to revenue  recognition
          and inventory,  (b)  consistently  apply existing written policies and
          procedures  throughout the Company or (c) update and  communicate  its
          accounting  policies  and  procedures  in a timely  manner to  reflect
          changes in the Company's business.  This control deficiency  primarily
          affected the Company's  accounting for revenue recognition and several
          components of inventory, including accounting for production variances
          and obsolescence reserves. This control deficiency resulted in certain
          adjustments,  including  audit  adjustments  that were recorded in the
          2005 third  quarter  consolidated  financial  statements  and the 2005
          annual consolidated financial statements.

     Each of the control  deficiencies  described in (1) through (3) above could
result in a misstatement of the Company's  account  balances or disclosures that
would  result in a  material  misstatement  to the  Company's  annual or interim
consolidated financial statements that would not be prevented or detected.

     Management determined that each of these control deficiencies  discussed in
(1) through (3) above constitutes a material weakness.


<PAGE>



     As a result of the material weaknesses  described above,  management of the
Company  has  concluded  that the Company did not  maintain  effective  internal
control over financial  reporting as of December 31, 2005, based on the criteria
in the COSO framework.

     Management's  assessment of the  effectiveness  of the  Company's  internal
control  over  financial  reporting  as of December 31, 2005 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
stated in their report which is included in this Annual Report on Form 10-K.

     Remediation of material weaknesses.  In response to the identified material
weaknesses,  management  of the Company  intends to take the  following  actions
during 2006:

     (1)  The Company  intends to  increase  its global  accounting  and finance
          staff in  order to have  sufficient  resources  to meet the  Company's
          rapidly  growing  needs.  The  Company  currently  expects to hire the
          additional  personnel  in  2006.  This  remediation  will  also  be  a
          significant  component  of the  remediation  of the  second  and third
          material weaknesses described above.

     (2)  The  Company  intends to modify and  expand the  functionality  of its
          computer system (an "IT solution"), where possible, to ensure evidence
          is available to verify that  personnel with the  appropriate  level of
          authority have reviewed and approved  manual journal  entries prior to
          the  entries  being   recorded  in  the  Company's   general   ledger.
          Additionally,   the  Company  will   continue  to  maintain   evidence
          supporting  the   sufficiency   of  the  manual  journal   entries  in
          conjunction  with  the IT  solution.  For  any  location  where  an IT
          solution is not readily available, additional reviews will be required
          by  personnel  independent  of those  personnel  recording  the manual
          journal  entries.  The  Company  currently  expects  to  complete  the
          modification and expansion of the functionality of its computer system
          in 2006, to implement  alternate  controls until such functionality is
          in place and  otherwise  to complete the  remediation  of this control
          deficiency in 2006.

     (3)  The Company intends to (a) prepare and distribute written policies and
          procedures  covering all  significant  accounting  processes for which
          such  procedures  do  not  already  exist,  (b)  implement  additional
          training and review processes to ensure all accounting  procedures are
          implemented  and applied  properly  and timely on a  consistent  basis
          throughout the Company and (c) implement  guidelines  surrounding  the
          contemporaneous  review and  updating  of all  significant  accounting
          procedures when business conditions so indicate.  Although the control
          deficiency  as of December 31, 2005 only related to certain  financial
          statement   accounts,   this   remediation  plan  will  apply  to  all
          significant  financial  statement  accounts.  The  Company has already
          updated  certain  of  its  key  accounting  procedures,  and  it  will
          prioritize the preparation and  distribution of additional  procedures
          and related  training  based on the Company's  risk  assessment of the
          areas that are the most important.

     Changes in internal  control over financial  reporting.  There have been no
changes to the Company's  internal  control over financial  reporting during the
quarter ended December 31, 2005 that has materially  affected,  or is reasonably
likely to materially  affect,  the  Company's  internal  control over  financial
reporting.



<PAGE>



     Certifications.  The  Company's  chief  executive  officer is  required  to
annually  file a  certification  with  the New  York  Stock  Exchange  ("NYSE"),
certifying  the  Company's  compliance  with the  corporate  governance  listing
standards of the NYSE.  During 2005, the Company's chief executive officer filed
such annual certification with the NYSE, which was not qualified in any respect,
indicating  that he was not aware of any  violations  by the Company of the NYSE
corporate  governance  listing  standards.  The  Company's  principal  executive
officer and  principal  financial  officer  are also  required  to,  among other
things, file quarterly  certifications with the SEC regarding the quality of the
Company's public  disclosures,  as required by Section 302 of the Sarbanes-Oxley
Act. Such certifications for the year ended December 31, 2005 have been filed as
exhibits 31.1 and 31.2 to this Annual Report on Form 10-K.


ITEM 9B:      OTHER INFORMATION

     Not  applicable.


<PAGE>


                                    PART III

ITEM 10:      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

ITEM 11:      EXECUTIVE COMPENSATION

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

ITEM 12:      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
              MANAGEMENT AND RELATED STOCKHOLDER MATTERS

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

ITEM 13:      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  information  required by this Item is incorporated by reference to the
TIMET  Proxy  Statement.   See  also  Note  18  to  the  Consolidated  Financial
Statements.

ITEM 14:      PRINCIPAL ACCOUNTANT FEES AND SERVICES

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


<PAGE>


                                     PART IV

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

     (a) and (c) Financial Statements and Schedules

     The  Consolidated   Financial   Statements  and  schedules  listed  by  the
Registrant on the accompanying Index of Financial  Statements and Schedules (see
page F) are filed as part of this Annual Report.

(b)      Exhibits

     The  Exhibit  Index  lists all items  included  as  exhibits to this Annual
Report.  TIMET  will  furnish a copy of any of the  exhibits  listed  below upon
payment  of $4.00 per  exhibit  to cover the  costs to TIMET of  furnishing  the
exhibits.  Instruments  defining the rights of holders of long-term  debt issues
which do not exceed 10% of  consolidated  total  assets will be furnished to the
SEC upon request.

  Item No.                              Exhibit Index
--------------    ------------------------------------------------------------

3.1            Amended and Restated  Certificate  of  Incorporation  of Titanium
               Metals  Corporation,  as amended  effective  February  14,  2003,
               incorporated  by  reference  to Exhibit  3.1 to the  Registrant's
               Annual Report on Form 10-K for the year ended December 31, 2003.

3.2            Certificate  of Amendment of Amended and Restated  Certificate of
               Incorporation of Titanium Metals Corporation, effective August 5,
               2004,   incorporated   by   reference   to  Exhibit  3.1  to  the
               Registrant's  Quarterly Report on Form 10-Q for the quarter ended
               June 30, 2004.

3.3            Certificate  of Amendment of Amended and Restated  Certificate of
               Incorporation of Titanium Metals Corporation,  effective February
               15,  2006,   incorporated   by  reference  to  Exhibit  99.1  the
               Registrant's  Current  Report on Form 8-K  filed  with the SEC on
               February 15, 2006.

3.4            Bylaws of Titanium  Metals  Corporation  as Amended and Restated,
               dated  December  21, 2005,  incorporated  by reference to Exhibit
               3(c) to the  Registrant's  Current  Report on Form 8-K filed with
               the SEC on December 21, 2006.

4.1            Certificate of Trust of TIMET Capital Trust I, dated November 13,
               1996,   incorporated   by   reference   to  Exhibit  4.1  to  the
               Registrant's  Current  Report on Form 8-K  filed  with the SEC on
               December 5, 1996.

4.2            Amended and Restated  Declaration of Trust of TIMET Capital Trust
               I,  dated  as  of  November  20,  1996,   among  Titanium  Metals
               Corporation,  as Sponsor,  the Chase  Manhattan Bank, as Property
               Trustee, Chase Manhattan Bank (Delaware), as Delaware Trustee and
               Joseph S.  Compofelice,  Robert E. Musgraves and Mark A. Wallace,
               as Regular Trustees,  incorporated by reference to Exhibit 4.2 to
               the Registrant's Current Report on Form 8-K filed with the SEC on
               December 5, 1996.


<PAGE>



  Item No.                               Exhibit Index
--------------    -------------------------------------------------------------

4.3            Indenture  for  the  6  5/8%  Convertible   Junior   Subordinated
               Debentures,  dated as of November 20, 1996, among Titanium Metals
               Corporation   and  The  Chase   Manhattan   Bank,   as   Trustee,
               incorporated  by  reference  to Exhibit  4.3 to the  Registrant's
               Current  Report on Form 8-K  filed  with the SEC on  December  5,
               1996.

4.4            Form of 6 5/8%  Convertible  Preferred  Securities  (included  in
               Exhibit 4.2 above),  incorporated  by reference to Exhibit 4.4 to
               the Registrant's Current Report on Form 8-K filed with the SEC on
               December 5, 1996.

4.5            Form  of  6  5/8%  Convertible  Junior  Subordinated   Debentures
               (included  in Exhibit 4.3 above),  incorporated  by  reference to
               Exhibit 4.6 to the Registrant's  Current Report on Form 8-K filed
               with the SEC on December 5, 1996.

4.6            Form of 6 5/8% Trust Common  Securities  (included in Exhibit 4.2
               above),   incorporated   by  reference  to  Exhibit  4.5  to  the
               Registrant's  Current  Report on Form 8-K  filed  with the SEC on
               December 5, 1996.

4.7            Convertible Preferred Securities Guarantee,  dated as of November
               20, 1996, between Titanium Metals Corporation,  as Guarantor, and
               The Chase Manhattan Bank, as Guarantee  Trustee,  incorporated by
               reference to Exhibit 4.7 to the  Registrant's  Current  Report on
               Form 8-K filed with the SEC on December 5, 1996.

4.8            Purchase  Agreement,  dated November 20, 1996,  between  Titanium
               Metals Corporation,  TIMET Capital Trust I, Salomon Brothers Inc,
               Merrill Lynch,  Pierce,  Fenner & Smith  Incorporated  and Morgan
               Stanley & Co. Incorporated,  as Initial Purchasers,  incorporated
               by reference to Exhibit 99.1 to the  Registrant's  Current Report
               on Form 8-K filed with the SEC on December 5, 1996.

4.9            Registration  Agreement,  dated November 20, 1996,  between TIMET
               Capital Trust I and Salomon  Brothers Inc, as  Representative  of
               the Initial Purchasers, incorporated by reference to Exhibit 99.2
               to the Registrant's Current Report on Form 8-K filed with the SEC
               on December 5, 1996.

4.10           Form of Certificate of Designations,  Rights and Preferences of 6
               3/4 % Series  A  Convertible  Preferred  Stock,  incorporated  by
               reference  to  Exhibit  4.1  to  the  Registrant's  Pre-effective
               Amendment No. 1 to  Registration  Statement on Form S-4 (File No.
               333-114218).

9.1            Shareholders' Agreement,  dated February 15, 1996, among Titanium
               Metals  Corporation,  Tremont  Corporation,  IMI plc,  IMI Kynoch
               Ltd.,  and IMI  Americas,  Inc.,  incorporated  by  reference  to
               Exhibit 2.2 to Tremont  Corporation's  Current Report on Form 8-K
               filed with the SEC on March 1, 1996.

9.2            Amendment to Shareholders' Agreement, dated March 29, 1996, among
               Titanium Metals Corporation,  Tremont  Corporation,  IMI plc, IMI
               Kynoch Ltd., and IMI Americas, Inc., incorporated by reference to
               Exhibit 10.30 to Tremont Corporation's Annual Report on Form 10-K
               for the year ended December 31, 1995.


<PAGE>



  Item No.                             Exhibit Index
--------------   --------------------------------------------------------------

9.3            Voting  Agreement  executed  October 5, 2004 but  effective as of
               October  1,  2004  among  NL  Industries,   Inc.,  TIMET  Finance
               Management  Company  and  CompX  Group,  Inc.,   incorporated  by
               reference to Exhibit 99.2 to the Current Report on Form 8-K of NL
               Industries, Inc. filed with the SEC on October 8, 2004.

10.1           Form of Lease  Agreement,  dated  November 12, 2004,  between The
               Prudential  Assurance Company Limited.  and TIMET UK Ltd. related
               to  the  premises  known  as  TIMET  Number  2  Plant,  The  Hub,
               Birmingham, England, incorporated by reference to Exhibit 10.1 to
               the Registrant's Current Report on Form 8-K filed with the SEC on
               November 17, 2004

10.2           Loan and  Security  Agreement  by and  among  Congress  Financial
               Corporation (Southwest) as Lender and Titanium Metals Corporation
               and  Titanium  Hearth  Technologies,  Inc.  as  borrowers,  dated
               February 25, 2000,  incorporated by reference to Exhibit 10.12 to
               the  Registrant's  Annual  Report on Form 10-K for the year ended
               December 31, 1999.

10.3           Amendment  No.  1 to Loan and  Security  Agreement  by and  among
               Congress Financial Corporation (Southwest) as Lender and Titanium
               Metals  Corporation  and Titanium  Hearth  Technologies,  Inc. as
               borrowers,  dated September 7, 2001, incorporated by reference to
               Exhibit 10.3 to the  Registrant's  Quarterly  Report on Form 10-Q
               for the quarter ended September 30, 2001.

10.4           Amendment  No.  2 to Loan and  Security  Agreement  by and  among
               Congress Financial Corporation (Southwest) as Lender and Titanium
               Metals  Corporation  and Titanium  Hearth  Technologies,  Inc. as
               borrowers,  dated October 23, 2002,  incorporated by reference to
               Exhibit 10.1 to the  Registrant's  Quarterly  Report on Form 10-Q
               for the quarter ended September 30, 2002.

10.5           Amendment  No.  3 to Loan and  Security  Agreement  by and  among
               Congress Financial Corporation (Southwest) as Lender and Titanium
               Metals  Corporation  and Titanium  Hearth  Technologies,  Inc. as
               borrowers, dated March 18, 2004, and effective February 12, 2004,
               incorporated  by reference to Exhibit 6 to Amendment No. 4 to the
               statement on Schedule 13D for CompX International,  Inc. filed by
               Valhi,  Inc.  (along with other  reporting  persons) on March 23,
               2004 (File No. 005-54653).

10.6           Amendment  No.  4 to Loan and  Security  Agreement  by and  among
               Congress Financial Corporation (Southwest) as Lender and Titanium
               Metals  Corporation  and Titanium  Hearth  Technologies,  Inc. as
               borrowers,  dated  June 2, 2004,  incorporated  by  reference  to
               Exhibit 10.1 to the Registrant's  Pre-effective Amendment No.1 to
               Registration Statement on Form S-4 (File No. 333-114218).

10.7           Amendment  No.  5 to Loan and  Security  Agreement  by and  among
               Wachovia  Bank,  National  Association,  successor  by  merger to
               Congress Financial Corporation (Southwest) as Lender and Titanium
               Metals  Corporation  and Titanium  Hearth  Technologies,  Inc. as
               borrowers,  dated June 30,  2005,  incorporated  by  reference to
               Exhibit 10.1 to the  Registrant's  Quarterly  Report on Form 10-Q
               for the quarter ended June 30, 2005.


<PAGE>



   Item No.                             Exhibit Index
--------------   --------------------------------------------------------------

10.8           Credit Agreement among U.S. Bank National  Association,  Comerica
               Bank,   Harris  N.A.,  JP  Morgan  Chase  Bank,   N.A.,  The  CIT
               Group/Business   Credit,   Inc.,  and  Wachovia  Bank,   National
               Association  as  lenders  and  Titanium  Metals   Corporation  as
               Borrower and U.S.  Bank  National  Association,  as Agent,  dated
               February 17, 2006,  incorporated  by reference to Exhibit 10.1 to
               the Registrant's Current Report on Form 8-K filed with the SEC on
               February 23, 2006.

10.9           Loan and  Overdraft  Facilities  between  Lloyds TSB Bank plc and
               TIMET  UK  Limited  dated  December  20,  2002,  incorporated  by
               reference to Exhibit 10.23 to the  Registrant's  Annual Report on
               Form 10-K for the year ended December 31, 2002.

10.10          Letter  dated  December  19,  2003 to extend  Loan and  Overdraft
               Facilities between Lloyds TSB Bank plc and TIMET UK Limited dated
               December 20, 2002,  incorporated  by reference to Exhibit 10.8 to
               the  Registrant's  Annual  Report on Form 10-K for the year ended
               December 31, 2004.

10.11          Letter  dated  November  22,  2004 to extend  Loan and  Overdraft
               Facilities between Lloyds TSB Bank plc and TIMET UK Limited dated
               December 20, 2002,  incorporated  by reference to Exhibit 10.9 to
               the  Registrant's  Annual  Report on Form 10-K for the year ended
               December 31, 2004.

10.12          January  19,  2005   Variation   Letter  to  Loan  and  Overdraft
               Facilities between Lloyds TSB Bank plc and TIMET UK Limited dated
               December 20, 2002,  incorporated by reference to Exhibit 10.10 to
               the  Registrant's  Annual  Report on Form 10-K for the year ended
               December 31, 2004.

10.13          Letter dated March 2, 2005 to amend Loan and Overdraft Facilities
               between  Lloyds TSB Bank plc and TIMET UK Limited dated  December
               20,  2002,  incorporated  by  reference  to  Exhibit  10.1 to the
               Registrant's  quarterly Report on Form 10-Q for the quarter ended
               March 31, 2005.

10.14          Bank  of   Scotland   Working   Capital   Facility   of   (pound)
               22,500,000/Payment Systems,  incorporated by reference to exhibit
               10.1 to the  Registrant's  Current  Report on Form 8-K filed with
               the SEC on May 27, 2005.

10.15*         1996 Long Term  Performance  Incentive  Plan of  Titanium  Metals
               Corporation,  incorporated  by reference to Exhibit  10.19 to the
               Registrant's  Amendment No. 1 to  Registration  Statement on Form
               S-1 (File No. 333-18829).

10.16*         2005 Titanium Metals Corporation Profit Sharing Plan (Amended and
               Restated  as of April 6,  2005),  incorporated  by  reference  to
               Appendix A to the  Registrant's  Proxy  Statement  dated April 8,
               2005 filed with the SEC on April 11, 2005.

10.17*         Executive Severance Policy, as amended and restated effective May
               17,  2000,  incorporated  by  reference  to  Exhibit  10.3 to the
               Registrant's  Quarterly Report on Form 10-Q for the quarter ended
               June 30, 2000.






<PAGE>



   Item No.                             Exhibit Index
--------------  ---------------------------------------------------------------

10.18*         Titanium   Metals   Corporation   Amended   and   Restated   1996
               Non-Employee  Director Compensation Plan, as amended and restated
               effective November 15, 2005, incorporated by reference to Exhibit
               10.1 to the Registrant's  Current Report on Form 8-K/A filed with
               the SEC on March 2, 2006.

10.19*         Amendment to Employment  Contract  between  TIMET  Savoie,  S.A.,
               Christian Leonhard and Titanium Metals  Corporation,  executed as
               of November 25, 2003,  incorporated by reference to Exhibit 10.12
               to the Registrant's Annual Report on Form 10-K for the year ended
               December 31, 2003.

10.20*         2005 Amendment to Employment Contract between TIMET Savoie, S.A.,
               Christian J.M. Leonhard and Titanium Metals Corporation, executed
               as of November 25, 2003.

10.21          Settlement  Agreement  and Release of Claims dated April 19, 2001
               between  Titanium  Metals  Corporation  and The  Boeing  Company,
               incorporated  by reference  to Exhibit  10.1 to the  Registrant's
               Quarterly  Report on Form 10-Q for the  quarter  ended  March 31,
               2001.

10.22          Intercorporate  Services  Agreement  among  Contran  Corporation,
               Tremont LLC and  Titanium  Metals  Corporation,  effective  as of
               January 1, 2004,  incorporated  by reference to Exhibit  10.17 to
               the  Registrant's  Annual  Report on Form 10-K for the year ended
               December 31, 2003.

10.23**        Purchase and Sale Agreement (For Titanium  Products)  between The
               Boeing Company,  acting through its division,  Boeing  Commercial
               Airplanes,  and  Titanium  Metals  Corporation  (as  amended  and
               restated effective April 19, 2001),  incorporated by reference to
               Exhibit 10.2 to the  Registrant's  Quarterly  Report on Form 10-Q
               for the quarter ended June 30, 2002.

10.24**        General Terms  Agreement  between The Boeing Company and Titanium
               Metals Corporation,  incorporated by reference to Exhibit 10.2 to
               the Registrant's  Current Report on Form 8-K/A filed with the SEC
               on November 16, 2005.

10.25**        Special  Business  Provisions  between  The  Boeing  Company  and
               Titanium Metals Corporation, incorporated by reference to Exhibit
               10.3 to the Registrant's  Current Report on Form 8-K/A filed with
               the SEC on November 16, 2005.

10.26**        Purchase and Sale Agreement between  Rolls-Royce plc and Titanium
               Metals  Corporation  dated  December  22, 1998,  incorporated  by
               reference to Exhibit 10.3 to the Registrant's Quarterly Report on
               Form 10-Q for the quarter ended June 30, 2002.

10.27**        First   Amendment   to  Purchase  and  Sale   Agreement   between
               Rolls-Royce plc and Titanium Metals Corporation,  incorporated by
               reference to Exhibit 10.1 to the Registrant's Quarterly Report on
               Form 10-Q for the quarter ended June 30, 2004.

10.28**        Second   Amendment  to  Purchase  and  Sale   Agreement   between
               Rolls-Royce plc and Titanium Metals Corporation,  incorporated by
               reference to Exhibit 10.2 to the Registrant's Quarterly Report on
               Form 10-Q for the quarter ended June 30, 2004.

<PAGE>

   Item No.                              Exhibit Index
--------------    -------------------------------------------------------------

10.29          Agreement   Regarding  Shared  Insurance  by  and  between  CompX
               International Inc., Contran  Corporation,  Keystone  Consolidated
               Industries,  Inc., Kronos Worldwide,  Inc., NL Industries,  Inc.,
               Titanium  Metals  Corporation  and Valhi,  Inc. dated October 30,
               2003,   incorporated   by  reference  to  Exhibit  10.20  to  the
               Registrant's  Annual  Report  on Form  10-K  for the  year  ended
               December 31, 2003.

10.30          Subscription  Agreement executed October 5, 2004 but effective as
               of October  1, 2004  among NL  Industries,  Inc.,  TIMET  Finance
               Management  Company  and  CompX  Group,  Inc.,   incorporated  by
               reference to Exhibit 99.1 to the Current Report on Form 8-K of NL
               Industries, Inc. filed with the SEC on October 8, 2004.

10.31          Certificate of Incorporation of CompX Group,  Inc.,  incorporated
               by reference to Exhibit 99.3 to the Current Report on Form 8-K of
               NL Industries, Inc. filed with the SEC on October 8, 2004.

21.1           Subsidiaries of the Registrant.

23.1           Consent of PricewaterhouseCoopers LLP.

31.1           Certification  pursuant to Section 302 of the  Sarbanes-Oxley Act
               of 2002.

31.2           Certification  pursuant to Section 302 of the  Sarbanes-Oxley Act
               of 2002.

32.1           Certification  pursuant to Section 906 of the  Sarbanes-Oxley Act
               of 2002.

*    Management contract, compensatory plan or arrangement.
**   Portions  of the  exhibit  have been  omitted  pursuant  to a  request  for
     confidential treatment.


<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                          TITANIUM METALS CORPORATION
                                  (Registrant)


                                         By /s/ Steven L. Watson
                                            ----------------------------------
                                            Steven L. Watson, March 24, 2006
                                            Vice Chairman of the Board and
                                             Chief Executive Officer


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


<TABLE>
<CAPTION>
<S>                                                             <C>
/s/ Harold C. Simmons                                           /s/ Glenn R. Simmons
-----------------------------------------------------           ------------------------------------------
Harold C. Simmons, March 24, 2006                               Glenn R. Simmons, March 24, 2006
Chairman of the Board                                           Director


/s/ Steven L. Watson                                            /s/ Thomas P. Stafford
-----------------------------------------------------           ------------------------------------------
Steven L. Watson, March 24, 2006                                Thomas P. Stafford, March 24, 2006
Vice Chairman of the Board and                                  Director
  Chief Executive Officer


/s/ Norman N. Green                                             /s/ Paul J. Zucconi
-----------------------------------------------------           -------------------------------------------
Norman N. Green, March 24, 2006                                 Paul J. Zucconi, March 24, 2006
Director                                                        Director


/s/ Gary C. Hutchison                                           /s/ Bruce P. Inglis
-----------------------------------------------------           -------------------------------------------
Gary C. Hutchison, March 24, 2006                               Bruce P. Inglis, March 24, 2006
Director                                                        Vice President - Finance and Corporate
                                                                   Controller
                                                                Principal Financial Officer
/s/ Albert W. Niemi, Jr.                                        Principal Accounting Officer
-----------------------------------------------------
Albert W. Niemi, Jr., March 24, 2006
Director
</TABLE>

<PAGE>

                           TITANIUM METALS CORPORATION

                           ANNUAL REPORT ON FORM 10-K
                            ITEMS 8, 15(a) and 15(c)

                   INDEX OF FINANCIAL STATEMENTS AND SCHEDULES

                                                                        Page
Financial Statements

   Report of Independent Registered Public Accounting Firm              F-1

   Consolidated Balance Sheets - December 31, 2005;
     December 31, 2004 (Restated)                                       F-4

   Consolidated Statements of Operations -
      Years ended December 31, 2005; Years ended
     December 31, 2004 and 2003 (Restated)                              F-6

   Consolidated Statements of Comprehensive Income (Loss) -
      Years ended December 31, 2005; Years ended
     December 31, 2004 and 2003 (Restated)                              F-8

   Consolidated Statements of Cash Flows -
      Years ended December 31, 2005; Years ended
     December 31, 2004 and 2003 (Restated)                              F-9

   Consolidated Statements of Changes in Stockholders' Equity -
      Years ended December 31, 2005; Years ended
     December, 2004 and 2003 (Restated)                                 F-11

   Notes to Consolidated Financial Statements                           F-12


Financial Statement Schedules

   Report of Independent Registered Public Accounting Firm
     on Financial Statement Schedule                                    S-1

   Schedule II - Valuation and Qualifying Accounts                      S-2

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



<PAGE>



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Titanium Metals Corporation:

     We have completed  integrated audits of Titanium Metals  Corporation's 2005
and 2004  consolidated  financial  statements  and of its internal  control over
financial  reporting  as  of  December  31,  2005  and  an  audit  of  its  2003
consolidated financial statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States).  Our opinions,  based on our
audits, are presented below.

Consolidated financial statements

     In our  opinion,  the  accompanying  consolidated  balance  sheets  and the
related consolidated  statements of operations,  of comprehensive income (loss),
of changes in  stockholders'  equity and of cash flows  present  fairly,  in all
material respects, the financial position of Titanium Metals Corporation and its
subsidiaries at December 31, 2005 and 2004, and the results of their  operations
and their cash flows for each of the three  years in the period  ended  December
31, 2005 in conformity  with  accounting  principles  generally  accepted in the
United States of America.  These financial  statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements in accordance  with the  standards of the Public  Company  Accounting
Oversight  Board  (United  States).  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material  misstatement.  An audit of financial statements
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

     Effective January 1, 2005, the Company changed its method of accounting for
part of its inventory from the LIFO method to the specific identification method
and  has  restated  prior  period  financial  statements.  See  Note  2  to  the
consolidated  financial  statements.  Effective  January  1, 2003,  the  Company
changed its method of accounting for asset retirement obligations. See Note 2 to
the consolidated financial statements.

Internal control over financial reporting

     Also, we have audited  management's  assessment,  included in  Management's
Report on Internal  Control over Financial  Reporting  appearing  under Item 9A,
that the Company did not maintain  effective  internal  control  over  financial
reporting  as of December  31, 2005  because the Company did not  maintain (i) a
sufficient  complement  of personnel  with an  appropriate  level of  accounting
knowledge,  experience and training  commensurate  with the Company's  financial
reporting requirements, (ii) effective controls over the accuracy, authorization
and review of recurring and non-recurring manual journal entries recorded in the
general ledger and (iii) effective controls over the  establishment,  review and
evaluation of the adequacy of its accounting  policies and procedures,  based on
criteria  established  in Internal  Control-Integrated  Framework  issued by the
Committee of Sponsoring  Organizations of the Treadway  Commission  (COSO).  The
Company's  management is responsible for maintaining  effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial  reporting.  Our responsibility is to express opinions on
management's  assessment  and on the  effectiveness  of the  Company's  internal
control over financial reporting based on our audit.


<PAGE>



     We  conducted  our audit of internal  control over  financial  reporting in
accordance with the standards of the Public Company  Accounting  Oversight Board
(United States).  Those standards  require that we plan and perform the audit to
obtain  reasonable  assurance  about  whether  effective  internal  control over
financial  reporting  was  maintained  in all  material  respects.  An  audit of
internal control over financial reporting includes obtaining an understanding of
internal control over financial reporting,  evaluating management's  assessment,
testing  and  evaluating  the design and  operating  effectiveness  of  internal
control,  and performing such other  procedures as we consider  necessary in the
circumstances.  We believe that our audit  provides a  reasonable  basis for our
opinions.

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

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

     A material  weakness is a control  deficiency,  or a combination of control
deficiencies,  that  results  in more than a remote  likelihood  that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. The following material weaknesses have been identified and included
in management's assessment as of December 31, 2005:

     (1)  The Company did not maintain a sufficient complement of personnel with
          an appropriate level of accounting knowledge,  experience and training
          commensurate  with the  Company's  financial  reporting  requirements.
          Specifically,   the  Company  did  not  have  accounting  and  finance
          personnel  with  sufficient  depth and  skill to allow  the  Company's
          global   accounting   and  financial   reporting   group  to  function
          effectively.  This control  deficiency  contributed  to the second and
          third control deficiencies discussed below.

     (2)  The Company did not maintain  effective  controls  over the  accuracy,
          authorization and review of recurring and non-recurring manual journal
          entries recorded in the general ledger. Specifically,  the Company did
          not have consistent and comprehensive procedures designed and in place
          to ensure that manual  journal  entries  were  properly  reviewed  and
          approved to ensure the entries recorded were accurate and valid.  This
          control  deficiency  affects  substantially  all  financial  statement
          accounts.  However, this deficiency did not result in an adjustment to
          the Company's 2005 consolidated financial statements.

     (3)  The   Company   did  not   maintain   effective   controls   over  the
          establishment, review and evaluation of the adequacy of its accounting
          policies and  procedures.  Specifically,  the Company did not (a) have
          sufficient  written policies and procedures  insofar as they relate to
          the   appropriate   application  of  generally   accepted   accounting
          principles  relating  to  revenue   recognition  and  inventory,   (b)
          consistently apply existing written policies and procedures throughout
          the Company or (c) update and communicate its accounting  policies and
          procedures  in a timely  manner to reflect  changes  in the  Company's
          business.  This control  deficiency  primarily  affected the Company's
          accounting  for  revenue   recognition   and  several   components  of
          inventory,   including   accounting  for   production   variances  and
          obsolescence  reserves.  This control  deficiency  resulted in certain
          adjustments,  including  audit  adjustments  that were recorded in the
          2005 third  quarter  consolidated  financial  statements  and the 2005
          annual consolidated financial statements.

     Each of these control deficiencies described in (1) through (3) above could
result in a misstatement of the Company's  account  balances or disclosures that
would  result in a  material  misstatement  to the  Company's  annual or interim
consolidated financial statements that would not be prevented or detected.

     The Company determined that each of these control deficiencies discussed in
(1) through (3) above constitute material weaknesses.

     These material weaknesses were considered in determining the nature, timing
and  extent  of audit  tests  applied  in our  audit  of the  2005  consolidated
financial  statements,  and  our  opinion  regarding  the  effectiveness  of the
Company's internal control over financial  reporting does not affect our opinion
on those consolidated financial statements.

     In our opinion,  management's  assessment that Titanium Metals  Corporation
did not  maintain  effective  internal  control over  financial  reporting as of
December 31, 2005 is fairly stated, in all material respects,  based on criteria
established in Internal Control - Integrated Framework issued by the COSO. Also,
in our opinion, because of the effect of the material weaknesses described above
on the  achievement of the objectives of the control  criteria,  the Company did
not maintain effective internal control over financial  reporting as of December
31,  2005,  based on  criteria  established  in  Internal  Control -  Integrated
Framework issued by the COSO.



/s/ PricewaterhouseCoopers LLP


Denver, Colorado
March 24, 2006

<PAGE>


                           TITANIUM METALS CORPORATION

                           CONSOLIDATED BALANCE SHEETS

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                   -----------------------------------
ASSETS                                                                                  2005               2004
                                                                                   ----------------   ----------------
                                                                                                          (restated)
Current assets:
<S>                                                                                <C>                <C>
   Cash and cash equivalents                                                       $       17,605     $        7,194
   Restricted cash and cash equivalents                                                       146                721
   Accounts and other receivables, less
     allowance of $1,983 and $1,683                                                       142,902             96,756
   Inventories, net                                                                       365,696            266,634
   Prepaid expenses and other                                                               4,485              2,400
   Deferred income taxes                                                                   19,436              4,974
                                                                                   ----------------   ----------------

       Total current assets                                                               550,270            378,679

Marketable securities                                                                      46,477             47,214
Investment in joint ventures                                                               25,978             22,591
Investment in common securities of TIMET Capital Trust I                                      180              6,259
Property and equipment, net                                                               252,990            228,173
Intangible assets, net                                                                        683              5,057
Deferred income taxes                                                                       8,009              1,053
Other                                                                                      22,677             11,577
                                                                                   ----------------   ----------------

         Total assets                                                              $      907,264     $      700,603
                                                                                   ================   ================
</TABLE>




<PAGE>
                           TITANIUM METALS CORPORATION

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                   -----------------------------------
LIABILITIES, MINORITY INTEREST AND                                                      2005               2004
                                                                                   ----------------   ----------------
STOCKHOLDERS' EQUITY                                                                                      (restated)

Current liabilities:
<S>                                                                                <C>                <C>
   Notes payable                                                                   $      -           $      43,176
   Accounts payable                                                                       61,457             44,164
   Accrued liabilities                                                                    75,698             61,440
   Deferred gain on sale of property                                                           -             12,016
   Customer advances                                                                      15,577              6,913
   Income taxes payable                                                                   13,151              2,516
   Other                                                                                     967                257
                                                                                   ----------------   ----------------

       Total current liabilities                                                         166,850            170,482

Long-term debt                                                                            51,359                  -
Accrued OPEB cost                                                                         15,580             14,470
Accrued pension cost                                                                      58,450             77,515
Accrued environmental cost                                                                 1,518              1,985
Deferred income taxes                                                                     27,445                 60
Debt payable to TIMET Capital Trust I                                                      5,852             12,010
Other                                                                                      4,519              5,114
                                                                                   ----------------   ----------------

       Total liabilities                                                                 331,573            281,636
                                                                                   ----------------   ----------------

Minority interest                                                                         13,523             12,539
                                                                                   ----------------   ----------------

Stockholders' equity:

   Series A Preferred Stock, $.01 par value; $149,131 liquidation preference;
     3,098 and 4,025 shares authorized, respectively, 2,983 and
     3,909 shares issued and outstanding, respectively                                   132,493            173,650
   Common stock, $.01 par value; 90,000 shares authorized,
     70,965 and 63,853 shares issued, respectively                                           710                637
   Additional paid-in capital                                                            401,057            350,389
   Accumulated earnings (deficit)                                                         66,179            (77,044)
   Accumulated other comprehensive loss                                                  (38,271)           (39,989)
   Treasury stock, at cost  (0 and 180 shares, respectively)                                   -             (1,208)
   Deferred compensation                                                                       -                 (7)
                                                                                   ----------------   ----------------

         Total stockholders' equity                                                      562,168            406,428
                                                                                   ----------------   ----------------

         Total liabilities, minority interest and stockholders' equity             $     907,264      $     700,603
                                                                                   ================   ================
</TABLE>

Commitments and contingencies (Note 19)

          See accompanying notes to consolidated financial statements.
<PAGE>



                           TITANIUM METALS CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                Year ended December 31,
                                                                   ---------------------------------------------------
                                                                        2005               2004              2003
                                                                   ----------------    --------------    -------------
                                                                                         (restated)        (restated)

<S>                                                                <C>                 <C>               <C>
Net sales                                                          $     749,777       $     501,828     $     385,304
Cost of sales                                                            550,415             438,151           379,660
                                                                   ----------------    --------------    -------------

   Gross margin                                                          199,362              63,677             5,644

Selling, general, administrative and
   development expense                                                    53,646              44,908            36,438
Equity in earnings of joint ventures                                       5,059               1,278               451
Other income (expense), net                                               20,300              22,989            24,389
                                                                   ----------------    --------------    -------------

   Operating income (loss)                                               171,075              43,036            (5,954)

Interest expense                                                           3,963              12,451            16,419
Other non-operating income (expense), net                                 18,228              16,200              (294)
                                                                   ----------------    --------------    -------------

   Income (loss) before income taxes, minority
interest and cumulative effect of change in
     accounting principle                                                185,340              46,785           (22,667)

Income tax expense (benefit)                                              24,496              (2,132)            1,207
Minority interest, net of tax                                              4,899               1,219               378
                                                                   ----------------    --------------    -------------

   Income (loss) before cumulative effect of change
     in accounting principle                                             155,945              47,698           (24,252)

Cumulative effect of change in accounting principle                            -                   -              (191)
                                                                   ----------------    --------------    -------------

   Net income (loss)                                                     155,945              47,698           (24,443)

Dividends on Series A Preferred Stock                                     12,244               4,398                 -
                                                                   ----------------    --------------    -------------

   Net income (loss) attributable to
     common stockholders                                           $     143,701       $      43,300     $    (24,443)
                                                                   ================    ==============    =============
</TABLE>


<PAGE>

                           TITANIUM METALS CORPORATION

                CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                                ------------------------------------------------------
                                                                     2005               2004                2003
                                                                ---------------    ----------------    ---------------
                                                                                     (restated)          (restated)

Basic earnings (loss) per share attributable to common stockholders:
   Before cumulative effect of change
<S>                                                             <C>                <C>                 <C>
      in accounting principle                                   $       2.20       $       0.68        $      (0.38)

   Cumulative effect of change in accounting
      principle                                                         -                  -                  (0.01)
                                                                ---------------    ----------------    ---------------

Basic earnings (loss) per share attributable to      common
stockholders                                                    $       2.20       $       0.68        $      (0.39)
                                                                ===============    ================    ===============

Diluted earnings (loss) per share attributable to common stockholders:
   Before cumulative effect of change
      in accounting principle                                   $       1.72       $       0.66        $      (0.38)

   Cumulative effect of change in accounting
      principle                                                         -                  -                  (0.01)
                                                                ---------------    ----------------    ---------------

Diluted earnings (loss) per share attributable to    common
stockholders                                                    $       1.72       $       0.66        $      (0.39)
                                                                ===============    ================    ===============


Weighted average shares outstanding:
   Basic                                                               65,391             63,525              63,374
                                                                ===============    ================    ===============
   Diluted                                                             90,856             72,502              63,374
                                                                ===============    ================    ===============
</TABLE>


          See accompanying notes to consolidated financial statements.


<PAGE>

                           TITANIUM METALS CORPORATION

             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                 Year ended December 31,
                                                                   ----------------------------------------------------
                                                                        2005               2004              2003
                                                                   ---------------    ---------------   ---------------
                                                                                        (restated)        (restated)

<S>                                                                <C>                <C>               <C>
Net income (loss)                                                  $     155,945      $      47,698     $    (24,443)

Other comprehensive income (loss):
   Currency translation adjustment, net of tax                           (11,880)             6,435            11,443
   Unrealized (losses) gains on marketable
    securities, net of tax                                                (3,017)            12,597                 -
   TIMET's share of VALTIMET SAS's unrealized net
     gains on derivative financial instruments
     qualifying as cash flow hedges, net of tax                             (618)                97                 -
   Pension liabilities adjustment , net of tax                            17,233             (8,892)            1,068
                                                                   ---------------    ---------------   ---------------

   Total other comprehensive income                                        1,718             10,237            12,511
                                                                   ---------------    ---------------   ---------------

   Comprehensive income (loss)                                     $     157,663      $      57,935     $     (11,932)
                                                                   ===============    ===============   ===============



Currency translation adjustment:
   Beginning of year                                               $      16,842      $      10,407     $      (1,036)
   Change during year                                                    (11,880)             6,435            11,443
                                                                   ---------------    ---------------   ---------------
   End of year                                                     $       4,962      $      16,842     $      10,407
                                                                   ===============    ===============   ===============

Unrealized (losses) gains on marketable securities:
   Beginning of year                                               $      12,597      $      -          $           -
   Change during year                                                     (3,017)            12,597                 -
                                                                   ---------------    ---------------   ---------------
   End of year                                                     $       9,580      $      12,597     $           -
                                                                   ===============    ===============   ===============

TIMET's share of VALTIMET SAS's unrealized net gains on derivative financial
   instruments qualifying as cash flow hedges:
     Beginning of year                                             $          97      $      -          $           -
     Change during year                                                     (618)                97                 -
                                                                   ---------------    ---------------   ---------------
     End of year                                                   $        (521)     $          97     $           -
                                                                   ===============    ===============   ===============

Pension liabilities adjustment:
   Beginning of year                                               $     (69,525)     $     (60,633)    $     (61,701)
   Change during year                                                     17,233             (8,892)            1,068
                                                                   ---------------    ---------------   ---------------
   End of year                                                     $     (52,292)     $     (69,525)    $     (60,663)
                                                                   ===============    ===============   ===============
</TABLE>

          See accompanying notes to consolidated financial statements.



<PAGE>
                           TITANIUM METALS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                  Year ended December 31,
                                                                     --------------------------------------------------
                                                                           2005              2004            2003
                                                                     ---------------    --------------   --------------
Cash flows from operating activities:                                                     (restated)       (restated)

<S>                                                                  <C>                <C>              <C>
   Net income (loss)                                                 $     155,945      $      47,698    $     (24,443)
   Depreciation and amortization                                            31,532             32,828           36,572
   Noncash impairment of equipment                                           1,251                  -                -
   (Gain) loss on disposal of fixed assets                                 (13,408)                37              655
   Gain on exchange of BUCS                                                      -            (15,465)               -
   Equity in earnings of joint ventures,
     net of distributions                                                   (5,009)               527              796
   Equity in earnings of common securities of
     TIMET Capital Trust I, net of distributions                                33                536             (432)
   Deferred income taxes                                                     2,131             (5,711)            (259)
   Minority interest, net of tax                                             4,899              1,219              378
   Other, net                                                                  (50)               (73)             616
   Change in assets and liabilities:
     Receivables                                                           (52,599)           (25,587)           4,798
     Inventories                                                          (108,845)           (68,533)          31,983
     Prepaid expenses and other                                               (668)               (77)             461
     Accounts payable and accrued liabilities                               30,912             20,037           (1,029)
     Customer advances                                                       9,186              3,316             (207)
     Income taxes                                                           14,396              4,417             (256)
     Deferred revenue                                                        4,534                (84)           3,865
     Accrued OPEB and pension costs                                            652              2,927           (2,007)
     Accrued interest on debt payable to
       TIMET Capital Trust I                                                   (33)           (18,936)          14,403
     Other, net                                                             (1,963)            (1,509)             (73)
                                                                     ---------------    --------------   --------------
       Net cash provided (used) by operating activities                     72,896            (22,433)          65,821
                                                                     ---------------    --------------   --------------

Cash flows from investing activities:
   Capital expenditures                                                    (61,128)           (23,556)         (12,467)
   Purchase of marketable securities                                        (2,223)           (34,472)               -
   Proceeds from sale of property                                            1,289             11,973                -
   Change in restricted cash, net                                              576              1,527           (2,102)
   Other, net                                                                    -                  -               35
                                                                     ---------------    --------------   --------------
       Net cash used by investing activities                               (61,486)           (44,528)         (14,534)
                                                                     ---------------    --------------   --------------

Cash flows from financing activities:
   Indebtedness:
     Borrowings                                                            373,369            160,195          127,253
     Repayments                                                           (365,098)          (117,019)        (146,322)
   Dividends paid to minority interest                                      (2,216)              (691)          (1,892)
   Dividends paid on Series A Preferred Stock                              (12,506)            (3,298)               -
   Issuance of common stock                                                  6,443                 75                -
   Other, net                                                                  (20)              (520)          (1,107)
                                                                     ---------------    --------------   --------------
       Net cash (used) provided by financing activities                        (28)            38,742          (22,068)
                                                                     ---------------    --------------   --------------

Net cash provided (used) by operating, investing
   and financing activities                                          $      11,382      $     (28,219)   $      29,219
                                                                     ===============    ==============   ==============
</TABLE>


<PAGE>

                           TITANIUM METALS CORPORATION

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                 Year ended December 31,
                                                                     -------------------------------------------------
                                                                         2005              2004             2003
                                                                     --------------    --------------   --------------
                                                                                        (restated)        (restated)
Cash and cash equivalents:
   Net increase (decrease) from:
<S>                                                                  <C>               <C>              <C>
     Operating, investing and financing activities                   $     11,382      $    (28,219)    $      29,219
     Effect of exchange rate changes on cash                                 (971)              373              (393)
                                                                     --------------    --------------   --------------
                                                                           10,411           (27,846)           28,826
   Cash and cash equivalents at beginning of year                           7,194            35,040             6,214
                                                                     --------------    --------------   --------------

   Cash and cash equivalents at end of year                          $     17,605      $      7,194     $      35,040
                                                                     ==============    ==============   ==============

Supplemental disclosures:
   Cash paid for:
     Interest, net of amounts capitalized                            $      3,392      $     30,624     $       1,325
     Income taxes, net                                               $      7,880      $     -          $       1,561
</TABLE>






          See accompanying notes to consolidated financial statements.

<PAGE>

                           TITANIUM METALS CORPORATION

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                  Years ended December 31, 2005, 2004 and 2003
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                       Series A       Additional       Retained
                                          Common        Common         Preferred       Paid-in         Earnings
                                          Shares         Stock           Stock         Capital         (Deficit)
                                         ----------    ----------     ------------   -------------    ------------
                                                                                                      (restated)

<S>                                         <C>        <C>            <C>            <C>              <C>
   Balance at December 31, 2002             63,701     $     637      $    -         $   350,285      $   (97,000)
      Comprehensive income (loss)                -             -                -              -          (24,443)
      Issuance of common stock                  60             -                -             71                -
      Stock award cancellations               (146)           (1)               -           (317)               -
      Amortization of deferred
       compensation, net of effects of
       stock award cancellations                 -             -                -              -                -
                                         ----------    ----------     ------------   -------------    ------------

   Balance at December 31, 2003             63,615           636                -        350,039         (121,443)
      Comprehensive income                       -             -                -              -           47,698
      Issuance of Preferred Stock ("PS")         -             -          173,650              -                -
      Dividends declared on PS                   -             -                -              -           (3,299)
      Issuance of common stock                  97             1                -            421                -
      Stock award cancellations                (39)            -                -            (71)               -
      Amortization of deferred
       compensation, net                         -             -                -              -                -
                                         ----------    ----------     ------------   -------------    ------------

   Balance at December 31, 2004             63,673           637          173,650        350,389          (77,044)
      Comprehensive income                       -        -               -               -               155,945
      Issuance of common stock               1,110            12          -                6,571                -
      Conversion of PS and BUCS              6,182            63         (41,157)         41,208                -
      Treasury stock retirement                  -            (2)         -                 (990)            (216)
      Tax benefit of stock options
       exercised and restricted
       stock vested                              -        -               -                3,879                -
      Dividends declared on PS                   -        -               -               -               (12,506)
      Amortization of deferred
       compensation, net                         -        -               -               -                     -
                                         ----------    ----------    -------------   -------------    ------------

   Balance at December 31, 2005             70,965     $     710     $   132,493     $   401,057      $    66,179
                                         ==========    ==========    =============   =============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.
<PAGE>

                           TITANIUM METALS CORPORATION

       CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONT'D)
                  Years ended December 31, 2005, 2004 and 2003
                                 (In thousands)

<TABLE>
<CAPTION>
                                            Accumulated
                                               Other
                                           Comprehensive       Treasury        Deferred
                                           Income (Loss)         Stock       Compensation         Total
                                           ---------------     ----------    --------------    ------------
                                                                                               (restated)

<S>                                        <C>                 <C>           <C>               <C>
   Balance at December 31, 2002            $     (62,737)      $  (1,208)    $       (255)     $   189,722
      Comprehensive income (loss)                 12,511               -                -          (11,932)
      Issuance of common stock                         -               -                -               71
      Stock award cancellations                        -               -              318                -
      Amortization of deferred
       compensation, net of effects of
       stock award cancellations                       -               -             (119)            (119)
                                           ---------------     ----------    --------------    ------------

   Balance at December 31, 2003                  (50,226)         (1,208)             (56)         177,742
      Comprehensive income                        10,237               -                -           57,935
      Issuance of Preferred Stock ("PS")               -               -                -          173,650
      Dividends declared on PS                         -               -                -           (3,299)
      Issuance of common stock                         -               -                -              422
      Stock award cancellations                        -               -               71                -
      Amortization of deferred
       compensation, net                               -               -              (22)             (22)
                                           ---------------     ----------    --------------    ------------

   Balance at December 31, 2004                  (39,989)         (1,208)              (7)         406,428
      Comprehensive income                         1,718          -                -               157,663
      Issuance of common stock                    -               -                -                 6,583
      Conversion of PS and BUCS                   -               -                -                   114
      Treasury stock retirement                   -                1,208           -                     -
      Tax benefit of stock options
       exercised and restricted
       stock vested                               -               -                -                 3,879
      Dividends declared on PS                    -               -                -               (12,506)
      Amortization of deferred
       compensation, net                          -               -                     7                7
                                           ---------------     ----------    --------------    ------------

   Balance at December 31, 2005            $     (38,271)      $  -          $     -           $   562,168
                                           ===============     ==========    ==============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.

<PAGE>


                           TITANIUM METALS CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Organization and basis of presentation

     Titanium Metals Corporation  ("TIMET") is a vertically  integrated producer
of  titanium  sponge,  melted  products  and a  variety  of  mill  products  for
aerospace,  industrial and other  applications.  The  accompanying  Consolidated
Financial Statements include the accounts of TIMET and all of its majority-owned
subsidiaries (collectively, the "Company") except the TIMET Capital Trust I (the
"Capital Trust"), a wholly-owned  finance subsidiary.  See further discussion in
Note 12. All material  intercompany  transactions and balances with consolidated
subsidiaries  have been  eliminated,  and certain  prior year  amounts have been
reclassified to conform to the current year presentation.

     At December 31, 2005, Valhi, Inc. and subsidiaries  ("Valhi") held 39.5% of
TIMET's  outstanding  common  stock  and 0.5% of the  Company's  6.75%  Series A
Convertible  Preferred Stock (the "Series A Preferred  Stock").  At December 31,
2004, Contran Corporation  ("Contran") held,  directly or through  subsidiaries,
92% of Valhi's  outstanding  common  stock.  At December 31, 2005,  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 10.8% of
the Company's common stock.  TIMET's U.S. pension plans invest in the portion of
the CMRT that does not hold TIMET 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.  In  addition,  Mr.  Simmons is the sole trustee of the CMRT and a
member of the trust investment committee for the CMRT. At December 31, 2005, Mr.
Simmons directly owned 2.0% of TIMET's outstanding common stock and Mr. Simmons'
spouse owned 0.3% of TIMET's outstanding common stock and 53.6% of the Company's
outstanding Series A Preferred Stock. Consequently, Mr. Simmons may be deemed to
control each of Contran,  Valhi and TIMET.  Subsequent  to December 31, 2005 and
through March 10, 2006,  Mr. Simmons  purchased an additional  527,700 shares of
TIMET common stock in open market transactions.

     The Company  completed a two-for-one  split of its common stock,  which was
effected in the form of a stock  dividend  (whereby an  additional  one share of
post-split  stock was distributed for each share of pre-split  stock) and became
effective  after the close of trading on February  16,  2006.  The Company  also
completed a two-for-one  split of its common stock  effective after the close of
trading on September 6, 2005 and a five-for-one  stock split of its common stock
effective after the close of trading on August 26, 2004. The Company completed a
one-for-ten  reverse  stock  split  which  became  effective  after the close of
trading  on  February  14,  2003.  All share and per share  disclosures  for all
periods  presented  have been  adjusted  to give  effect  to all of these  stock
splits.



<PAGE>


Note 2 - Summary of significant accounting policies

     Use of estimates.  The  preparation  of financial  statements in conformity
with accounting  principles  generally  accepted in the United States of America
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the date of the financial statements,  and the reported amount of
revenues  and  expenses  during  the  reporting  period.  Estimates  are used in
accounting  for,  among other things,  allowances  for  uncollectible  accounts,
inventory allowances,  environmental accruals, self insurance accruals, deferred
tax  valuation  allowances,   loss  contingencies,   fair  values  of  financial
instruments,  the  determination  of  discount  and other rate  assumptions  for
pension and postretirement  employee benefit costs,  asset  impairments,  useful
lives of property and equipment,  asset  retirement  obligations,  restructuring
accruals and other special items. Actual results may, in some instances,  differ
from  previously  estimated  amounts.  Estimates  and  assumptions  are reviewed
periodically,  and the effects of revisions are reflected in the period they are
determined to be necessary.

     Cash  and  cash  equivalents.   Cash  equivalents   include  highly  liquid
investments with original maturities of three months or less.

     Restricted cash and cash equivalents.  Restricted cash and cash equivalents
generally consist of certificates of deposit and other interest bearing accounts
collateralizing  certain  Company  obligations.   Such  restricted  amounts  are
generally  classified as either a current or noncurrent  asset  depending on the
classification  of the obligation to which the restricted  amount  relates.  All
restricted amounts are classified as current at December 31, 2005 and 2004.

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

     Inventories  and  cost of  sales;  restatement  for  change  in  accounting
principle.  Inventories  include material,  labor and overhead and are stated at
the lower of cost or market, net of an allowance for slow-moving  inventories of
$13.2 million at December 31, 2005 and $17.0 million at December 31, 2004. Prior
to  January  1,  2005,  approximately  40% of  the  Company's  inventories  were
determined  using the  last-in,  first-out  ("LIFO")  method,  with the  balance
determined  primarily using an average cost method.  Effective  January 1, 2005,
the Company changed its method for inventory costing from the LIFO method to the
specific identification cost method for the inventories previously accounted for
under the LIFO cost method. With the significant volatility seen recently in raw
material prices,  the Company believes this change in accounting method provides
a better matching of revenues and expenses. As required by accounting principles
generally  accepted in the United  States of America  ("GAAP"),  the Company has
restated its financial  statements for prior periods. As a result, the Company's
net  inventory  balance as of December 31, 2004  increased by $26.7 million from
the previously  reported amount,  with  corresponding  decrease to the Company's
accumulated  deficit.  There  was no  impact  on the  Company's  cash  flow from
operations for 2004 or 2003 related to this accounting change. The effect of the
accounting  change on income  for 2004 was to (i)  reduce  cost of sales  with a
corresponding increase in net income attributable to common stockholders by $7.8
million,  (ii)  increase  earnings  per basic share by $0.12 and (iii)  increase
earnings  per diluted  share by $0.11.  The effect of the  accounting  change on
income for 2003 was to (i) increase cost of sales with a corresponding  decrease
in net income  attributable  to common  stockholders  by $11.4  million and (ii)
decrease earnings per basic and diluted share by $0.18. See Note 3.

     Cost  of  sales  includes  costs  for  materials,  packing  and  finishing,
utilities, maintenance and depreciation, shipping and handling, and salaries and
benefits.

     Investments.  The Company's marketable securities,  including the shares of
CompX International, Inc. ("CompX") contributed by the Company and held by CompX
Group, Inc. ("CGI") (based upon the Company's redemption option), are classified
as available-for-sale securities and are carried at fair value based upon quoted
market prices,  with unrealized  gains and/or losses  included in  stockholders'
equity as a component of other  comprehensive  income. The Company evaluates its
investments  in marketable  securities  whenever  events or conditions  occur to
indicate  that the fair  value of such  investments  has  declined  below  their
carrying  amounts.  If the  decline  in fair  value is judged  to be other  than
temporary,  the  carrying  amount of the security is written down to fair value.
See further discussion in Note 4.

     Investments  in 20% to 50% owned joint  ventures are  accounted  for by the
equity method. Additionally,  TIMET's 100% owned investment in the Capital Trust
is  accounted  for by the  equity  method,  as  further  discussed  in Note  12.
Differences  between  the  Company's   investment  in  joint  ventures  and  its
proportionate  share of the joint ventures'  reported equity are amortized based
upon the respective useful lives of the assets to which the differences relate.

     Property,  equipment and depreciation.  Property and equipment are recorded
at cost  and  depreciated  principally  on the  straight-line  method  over  the
estimated  useful lives of 15 to 40 years for  buildings and two to 25 years for
machinery and  equipment.  Capitalized  software  costs are  amortized  over the
software's  estimated  useful life,  generally three to five years.  Maintenance
(including planned major  maintenance),  repairs and minor renewals are expensed
as incurred and included in cost of sales.  Major  improvements  are capitalized
and depreciated over the estimated  period to be benefited.  The Company's total
interest  cost  incurred on bank debt during 2005 and 2004 was $3.9  million and
$2.7  million,  respectively,  of which  approximately  $648,000 and $28,000 was
capitalized  during 2005 and 2004,  respectively.  No interest  was  capitalized
during 2003.

     Generally,  when events or changes in  circumstances  indicate the carrying
amount of  long-lived  assets,  including  property  and  equipment,  may not be
recoverable, the Company prepares an evaluation comparing the carrying amount of
the assets to the undiscounted expected future cash flows of the assets or asset
group. If this comparison indicates the carrying amount is not recoverable,  the
amount of the impairment would typically be calculated using discounted expected
future cash flows or appraised  values.  All relevant  factors are considered in
determining whether an impairment exists.

     Intangible  assets and amortization.  Patents and other intangible  assets,
except intangible  pension assets,  are recorded at cost and amortized using the
straight-line  method over the estimated  period of benefit,  generally seven to
nine years. The Company assesses the amortization  period and  recoverability of
the carrying amount of patents and other intangible  assets at least annually or
when events or circumstances require, and the effects of revisions are reflected
in the period they are determined to be necessary.



<PAGE>


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

     Under  the  transition  provisions  of SFAS No.  143,  in 2003 the  Company
recognized  (i) an asset  retirement  cost  capitalized  as an  increase  to the
carrying  value of its  property,  plant and  equipment  of  approximately  $0.2
million, (ii) accumulated depreciation on such capitalized cost of approximately
$0.1 million and (iii) an other  noncurrent  liability for the asset  retirement
obligation of approximately $0.3 million.  The difference between the amounts to
be recognized as previously  described and any associated  amounts recognized in
the  Company's  balance  sheet  as of  December  31,  2002 was  recognized  as a
cumulative effect of a change in accounting principle as of January 1, 2003. The
Company has recorded asset retirement obligations of $0.5 million as of December
31, 2005 and 2004.

     The Company's asset  retirement  obligations  relate  primarily to landfill
closure and leasehold restoration costs.  Additionally,  the Company is aware of
the existence of asbestos at its facility in Toronto, Ohio. Currently,  there is
no legal  obligation to remove or remediate  this asbestos.  However,  if in the
future the Company decides, among other things, to undergo a major renovation or
demolish  the  property  containing  the  asbestos,  the  Company  may  have  an
obligation  to remove and dispose of or remediate  such  asbestos in  accordance
with  the  applicable  environmental   regulations.   In  accordance  with  FASB
Interpretation No. 47, Accounting for Conditional Asset Retirement  Obligations,
as of December  31, 2005,  the Company has not  recorded a liability  related to
this  potential  obligation  because the settlement  date of such  obligation is
indeterminate and,  therefore,  the Company cannot reasonably  estimate the fair
value of such liability.

     Fair value of  financial  instruments.  Carrying  amounts of certain of the
Company's  financial  instruments   including,   among  others,  cash  and  cash
equivalents  and accounts  receivable,  approximate  fair value because of their
short  maturities.  The  Company's  bank debt  reprices  with  changes in market
interest rates and, accordingly, the carrying amount of such debt is believed to
approximate  market  value.  The  Company's  Series A Preferred  Stock is also a
publicly traded security (ticker symbol "TIELP.PK").  Based upon the last traded
value of the Series A Preferred  Stock  ($217.37  per share) as of December  31,
2005, the market value of such securities, which the Company believes provides a
reasonable  estimate of fair value,  was $648.3 million as of December 31, 2005.
As of December  31,  2004,  the fair value of the Series A  Preferred  Stock was
$218.0 million.



<PAGE>


     The Company's 6.625%  convertible junior  subordinated  debentures due 2026
(the "Subordinated Debentures") held by the Capital Trust were issued at a fixed
rate;  however,  the  6.625%  mandatorily   redeemable   convertible   preferred
securities,  beneficial unsecured convertible  securities ("BUCS") issued by the
Capital Trust are a publicly traded security (ticker symbol  "TMCXP.PK").  Based
on the last traded value of the BUCS as of December 31, 2004, the aggregate fair
value  of  the  outstanding  Subordinated  Debentures  related  to  the  115,717
outstanding BUCS approximated  $1.9 million.  During 2005, the trading volume of
the BUCS was  minimal  and,  therefore,  the  Company  does not believe the last
traded  value of the BUCS  necessarily  provides a fair value of the  underlying
Subordinated Debentures. The BUCS are convertible,  at the option of the holder,
into TIMET common stock at the rate of 2.678 shares of common stock per BUCS, an
equivalent  price of $18.67 per share.  Based on the last traded  value of TIMET
common stock ($31.63 per share) on December 31, 2005, the "as  converted"  value
of the 113,467 BUCS outstanding at December 31, 2005 (which the Company believes
provides a reasonable estimate of the fair value of the Subordinated Debentures)
was $9.6 million.

     Translation of foreign  currencies.  Assets and liabilities of subsidiaries
whose  functional  currency  is  deemed  to be other  than the U.S.  dollar  are
translated  at  year-end  rates of  exchange,  and  revenues  and  expenses  are
translated  at average  exchange  rates  prevailing  during the year.  Resulting
translation  adjustments are accumulated in the currency translation adjustments
component of other comprehensive  income (loss).  Currency transaction gains and
losses are recognized in income currently.  The Company  recognized net currency
transaction gains of $2.3 million in 2005 and net currency transaction losses of
$0.5 million in 2004 and $0.2 million in 2003.

     Derivative  transactions.  VALTIMET,  the Company's  43.7% owned  affiliate
accounted  for by  the  equity  method,  has  entered  into  certain  derivative
financial instruments that qualify as cash flow hedges under GAAP. The Company's
pro-rata share of VALTIMET's  unrealized  net gains (losses) on such  derivative
financial  instruments is included as a component of other comprehensive income.
The Company has no other derivative instruments.

     Stock-based  compensation.  The Company  currently  follows the  disclosure
alternative prescribed by SFAS No. 123, Accounting for Stock-Based Compensation,
as amended by SFAS No. 148, Accounting for Stock-Based Compensation - Transition
and  Disclosure,  and  has  chosen  to  account  for  its  stock-based  employee
compensation  related to stock options in accordance with Accounting  Principles
Board Opinion ("APB") No. 25, Accounting for Stock Issued to Employees,  and its
various  interpretations.  Under APB No. 25,  compensation  expense is generally
recognized for fixed stock options for which the exercise price is less than the
market price of the  underlying  stock on the grant date.  All of the  Company's
stock  options were granted  with  exercise  prices equal to or in excess of the
market price on the date of grant,  and the Company  recognized no  compensation
expense for stock options in 2005, 2004 or 2003. The following table illustrates
the effect on net income  (loss) and  income  (loss) per share  attributable  to
common  stockholders  if the  Company  had  applied  the fair value  recognition
provisions of SFAS No. 123 to all options granted since January 1, 1995:


<PAGE>



<TABLE>
<CAPTION>
                                                                              Year ended December 31,
                                                               -------------------------------------------------------
                                                                                         2004                2003
                                                                    2005              (restated)          (restated)
                                                               ----------------    ----------------   ----------------
                                                                       (In thousands, except per share data)
Net income (loss) attributable to
<S>                                                            <C>                 <C>                <C>
   common stockholders, as reported                            $     143,701       $      43,300      $     (24,443)
Less stock option related stock-based
   employee compensation expense
   determined under SFAS No. 123                                          (5)                (65)              (215)
                                                               ----------------    ----------------   ----------------

Pro forma net income (loss) attributable
  to common stockholders                                       $     143,696       $      43,235      $     (24,658)
                                                               ================    ================   ================

Basic earnings (loss) per share attributable to common stockholders:
         As reported                                           $       2.20        $       0.68       $       (0.39)
                                                               ================    ================   ================
         Pro forma                                             $       2.20        $       0.68       $       (0.39)
                                                               ================    ================   ================

Diluted earnings (loss) per share attributable to common stockholders:
         As reported                                           $       1.72        $       0.66       $       (0.39)
                                                               ================    ================   ================
         Pro forma                                             $       1.72        $       0.66       $       (0.39)
                                                               ================    ================   ================
</TABLE>

     Employee  benefit  plans.  Accounting  and funding  policies for retirement
plans and postretirement  benefits other than pensions ("OPEB") are described in
Note 17.

     Revenue recognition. Sales revenue is generally recognized when the Company
has certified that its product meets the related  customer  specifications,  the
product has been shipped,  and title and substantially all the risks and rewards
of ownership  have passed to the customer.  Payments  received from customers in
advance of these  criteria  being met are  recorded as customer  advances  until
earned. For inventory  consigned to customers,  sales revenue is recognized when
(i) the terms of the consignment end, (ii) the Company has completed performance
of all  significant  obligations  and (iii) title and  substantially  all of the
risks and rewards of ownership have passed to the customer.  Amounts  charged to
customers for shipping and handling are included in net sales.  Sales revenue is
stated net of price and early payment discounts.

     Research and development.  Research and development expense, which includes
activities  directed toward expanding the use of titanium and titanium alloys in
all  market  sectors,  is  recorded  as  selling,  general,  administrative  and
development  expense as incurred and totaled $3.2 million in 2005,  $2.9 million
in 2004 and $2.8 million in 2003. Related engineering and experimentation  costs
associated with ongoing commercial production are recorded in cost of sales.

     Advertising  costs.  Advertising  costs,  which  are not  significant,  are
expensed as incurred.



<PAGE>


     Self-insurance.  The Company is self insured for certain exposures relating
to employee and retiree medical benefits and workers'  compensation  claims. The
Company purchases insurance from third-party providers, which limits its maximum
exposure to $150,000 per occurrence for employee  medical  benefits and $500,000
per occurrence for workers'  compensation claims. The Company paid $12.7 million
during 2005,  $14.9 million during 2004 and $11.9 million during 2003 related to
employee  medical  benefits and $403,000  during 2005,  $334,000 during 2004 and
$139,000 during 2003 related to workers'  compensation  claims. The Company also
maintains  insurance  from  third-party  providers  for  automobile,   property,
product,  fiduciary  and  other  liabilities,   which  are  subject  to  various
deductibles and policy limits typical to these types of insurance policies.  See
Note 18 for discussion of policies provided by related parties.

     Income taxes.  Deferred  income tax assets and  liabilities  are recognized
based on the expected future tax consequences of temporary  differences  between
the  income  tax  and  financial   reporting  carrying  amounts  of  assets  and
liabilities,  including  investments  in  subsidiaries  not  included in TIMET's
consolidated U.S. tax group. The Company  periodically  reviews its deferred tax
assets to  determine  if future  realization  is  "more-likely-than-not,"  and a
change in the valuation  allowance is recorded in the period it is determined to
be necessary. See Note 16.

     Accounting  principles  not yet adopted.  In November  2004,  the Financial
Accounting  Standards  Board ("FASB") issued SFAS No. 151,  Inventory  Costs, an
amendment  of ARB No. 43,  Chapter 4,  which  clarifies  the types of costs that
should be expensed  rather than  capitalized  as inventory.  This statement also
clarifies the  circumstances  under which fixed overhead costs  associated  with
operating facilities involved in inventory processing should be capitalized. The
guidance is effective for inventory costs incurred during fiscal years beginning
after June 15,  2005,  and the Company  will adopt SFAS No. 151 as of January 1,
2006.  The Company does not expect that the adoption of SFAS No. 151 will have a
material impact on its consolidated financial position or results of operations.

     In  September  2005,  the  Emerging  Issues Task Force  ("EITF")  reached a
consensus on Issue 04-13,  Accounting  for Purchases and Sales of Inventory with
the Same  Counterparty  ("EITF  04-13").  The FASB  Task  Force  concluded  that
inventory  purchases and sales transactions with the same counterparty should be
combined for accounting  purposes if they were entered into in  contemplation of
each other.  The EITF  provided  indicators  to be  considered  for  purposes of
determining  whether such transactions are entered into in contemplation of each
other.  Guidance was also provided on the circumstances  under which nonmonetary
exchanges of inventory  within the same line of business should be recognized at
fair value.  EITF 04-13 will be effective in reporting  periods  beginning after
March 15,  2006.  The Company has not yet  determined  the impact,  if any,  the
adoption  of EITF  04-13 will have on its  consolidated  financial  position  or
results of operations.



<PAGE>


     In December 2004, the FASB issued SFAS No. 123 (revised 2004),  Share-Based
Payment  ("SFAS No.  123R"),  which replaces SFAS No. 123 and supersedes APB No.
25. SFAS No. 123R requires the measurement of all employee  share-based payments
to employees,  including  grants of employee stock options,  to be recognized in
the financial  statements  based on their fair values.  Under SFAS No. 123R, the
pro forma disclosures  previously permitted under SFAS No. 123 will no longer be
an  alternative  to  financial  statement  recognition.   Under  the  transition
alternatives  permitted  under SFAS No.  123R,  the  Company  will apply the new
standard  to any new  awards  granted on or after  January  1, 2006,  and to all
awards  existing  as of  December  31,  2005  which are  subsequently  modified,
repurchased or cancelled.  If the Company were to grant a significant  number of
options or modify,  repurchase  or cancel  existing  options in the future,  the
Company could recognize  material  amounts of compensation  cost related to such
options in its consolidated financial statements. As permitted by regulations of
the SEC, the Company will adopt SFAS No. 123R as of January 1, 2006 and does not
believe  the  adoption  of SFAS No.  123R  will  have a  material  effect on the
Company's  financial  position  or  results  of  operations,  as all of  TIMET's
outstanding  options will be fully vested as of the adoption date. SFAS No. 123R
requires certain expanded disclosures regarding the Company's stock options, and
such expanded disclosures have been provided in Note 14.

Note 3 - Inventories

<TABLE>
<CAPTION>
                                                                                        December 31,
                                                                         -------------------------------------------
                                                                                                         2004
                                                                               2005                   (restated)
                                                                         ------------------     --------------------
                                                                                       (In thousands)

<S>                                                                      <C>                    <C>
Raw materials                                                            $         89,956       $          71,067
Work-in-process                                                                   169,856                  97,470
Finished products                                                                  73,395                  67,756
Inventory consigned to customers                                                   20,000                  17,944
Supplies                                                                           12,489                  12,397
                                                                         ------------------     --------------------

                                                                         $        365,696       $         266,634
                                                                         ==================     ====================
</TABLE>

     Effective  January 1, 2005,  the Company  changed its method for  inventory
determination  from the LIFO cost  method to the  specific  identification  cost
method  for  the  approximate  40% of  the  Company's  consolidated  inventories
previously  accounted  for  under  the LIFO cost  method.  With the  significant
volatility  seen  recently in raw material  prices,  the Company  believes  this
change in accounting method provides a better matching of revenues and expenses.
As required by GAAP, the Company has restated its financial statements for prior
periods.  As a result of the  accounting  change,  the  Company's  net inventory
balance as of December 31, 2004  increased by $26.7 million from the  previously
reported amount  (representing  the elimination of the Company's LIFO reserve at
such date), with a corresponding decrease to the Company's accumulated deficit.



<PAGE>


     The following  table  provides the effect of the  accounting  change on the
Company's results of operations for 2005, 2004 and 2003:

<TABLE>
<CAPTION>
                                                                                 Year ended December 31,
                                                                ----------------------------------------------------------
                                                                      2005                 2004                2003
                                                                -----------------    -----------------    ----------------
                                                                                     (In thousands)
Net income (loss) attributable to common stockholders:

<S>                                                             <C>                  <C>                  <C>
   Prior to change in accounting method                         $       122,521      $      35,541 (1)    $     (13,057) (1)
   Decrease (increase) in cost of sales
    related to change in accounting method, net of
    applicable income taxes                                              21,180              7,759              (11,386)
                                                                -----------------    -----------------    ----------------

   After change in accounting method                            $       143,701      $      43,300        $     (24,443)
                                                                =================    =================    ================

Basic earnings (loss) per share attributable to common stockholders:

   Prior to change in accounting method                         $         1.88       $        0.56 (1)    $      (0.21) (1)
   Increase (decrease) related to change in
    accounting method                                                     0.32                0.12               (0.18)
                                                                -----------------    -----------------    ----------------

   After change in accounting method                            $         2.20       $        0.68        $      (0.39)
                                                                =================    =================    ================

Diluted earnings (loss) per share attributable to common stockholders:

   Prior to change in accounting method                         $         1.49       $        0.55 (1)    $      (0.21) (1)
   Increase (decrease) related to change in
    accounting method                                                     0.23                0.11               (0.18)
                                                                -----------------    -----------------    ----------------

   After change in accounting method                            $         1.72       $        0.66        $      (0.39)
                                                                =================    =================    ================

--------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) As previously reported.



<PAGE>


Note 4 - Marketable securities

     The following table  summarizes the Company's  marketable  securities as of
December 31, 2005:

<TABLE>
<CAPTION>
                                                                                                            Unrealized
            Marketable security                     Shares          Market value         Cost basis       gains (losses)
--------------------------------------------     -------------    -----------------    ---------------    ---------------
                                                                                     ($ in thousands)
As of December 31, 2005:
<S>                                                <C>            <C>                  <C>                <C>
   CompX (1)                                       2,696,420      $        43,197      $      34,234      $       8,963
   NL Industries, Inc. ("NL")                        222,100                3,129              2,461                668
   Kronos Worldwide, Inc. ("Kronos")                   5,203                  151                202                (51)
                                                                  -----------------    ---------------    ---------------

                                                                  $        46,477      $      36,897      $       9,580
                                                                  =================    ===============    ===============

As of December 31, 2004:
   CompX (1)                                       2,549,520      $        42,144      $      32,011      $      10,133
   NL Industries, Inc. ("NL")                        222,100                4,908              2,461              2,447
   Kronos Worldwide, Inc. ("Kronos")                   3,985                  162                145                 17
                                                                  -----------------    ---------------    ---------------

                                                                  $        47,214      $      34,617      $      12,597
                                                                  =================    ===============    ===============

-------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  The  Company  directly  held  483,600  and  336,700  shares  of CompX as of
     December 31, 2005 and 2004, respectively. The remaining 2,212,820 shares as
     of  December  31, 2005 and 2004 were held by CGI.  See  further  discussion
     below.

     During the first  nine  months of 2004,  the  Company  purchased  2,212,820
shares of CompX Class A common shares,  representing  approximately 14.6% of the
total number of shares of all classes of CompX common stock  outstanding at that
date. At September 30, 2004, NL, a subsidiary of Valhi, held an additional 68.4%
of CompX.  Effective on October 1, 2004, the Company and NL contributed  100% of
their  respective  holdings on that date of all classes of CompX common stock to
CGI in return for a 17.6% and 82.4% ownership interest in CGI, respectively, and
CGI  became  the  holder  of the  83.0% of CompX  that  the  Company  and NL had
previously  held in the aggregate.  The CompX shares are the sole assets of CGI.
The  Company's  shares of CGI are  redeemable at the option of the Company based
upon the market  value of the  underlying  CompX  stock held by CGI,  and if the
Company so elects to redeem its shares of CGI,  the  Company  can require CGI to
pay the  redemption  price  for its CGI  shares  in the form of  shares of CompX
common  stock,  with the number of CompX shares  received  equal to the pro-rata
portion of the number of shares of CompX the Company  originally  contributed to
CGI  at  CGI's  formation,  based  on the  number  of CGI  shares  so  redeemed.
Accordingly,   the  Company   accounts   for  its   investment   in  CGI  as  an
available-for-sale  marketable  security carried at fair value based on the fair
value of the underlying CompX shares held by CGI.

     As of December  31, 2005 and 2004,  the Company  directly  held 483,600 and
336,700  respectively,  shares of CompX,  which  were  purchased  subsequent  to
October 1, 2004.  The Company has not  contributed  any of the shares  purchased
subsequent to October 1, 2004 to CGI.

     At December 31, 2005 and 2004, the Company held  approximately 0.5% of NL's
outstanding  common stock, and Valhi and a wholly owned subsidiary of Valhi held
an additional 83% in the aggregate.

     During 2005 and 2004, NL paid  dividends on its common stock in the form of
(i) cash and (ii) shares of Kronos common stock.  At December 31, 2005 and 2004,
the Company  held less than 0.1% of Kronos'  outstanding  common stock and Valhi
and NL held an additional  93% in the aggregate.  During 2005,  CompX and Kronos
each paid cash dividends on their respective common stock.
<PAGE>

Note 5 - Investment in joint ventures

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      2005                 2004
                                                                                -----------------    -----------------
                                                                                           (In thousands)

<S>                                                                             <C>                  <C>
VALTIMET SAS ("VALTIMET")                                                       $         25,911     $         22,466
MZI, LLC ("MZI")                                                                              67                  125
                                                                                -----------------    -----------------

                                                                                $         25,978     $         22,591
                                                                                =================    =================
</TABLE>

     VALTIMET is a manufacturer  of welded  stainless  steel and titanium tubing
with operations in the United States, France, South Korea and China. At December
31, 2005,  VALTIMET was owned 43.7% by TIMET,  51.3% by Valinox Welded, a French
manufacturer of welded tubing, and 5.0% by Sumitomo Metals  Industries,  Ltd., a
Japanese  manufacturer of steel products.  At December 31, 2004, the unamortized
net  difference  between the  Company's  carrying  amount of its  investment  in
VALTIMET and its proportionate  share of VALTIMET's net assets was $3.3 million,
and is principally  attributable  to the difference  between the carrying amount
and fair value of fixed assets initially  contributed by TIMET.  This difference
is being amortized over 15 years and reduces the amount of equity in earnings or
increases the amount of equity in losses that the Company reports related to its
investment  in VALTIMET.  The Company  received  dividends  related to 2004 from
VALTIMET of $1.1 million in February 2006,  which were declared  during 2005 and
accrued on the Company's  financial  statements as of December 31, 2005.  During
2004,  the  Company  received  dividends  related to 2003 from  VALTIMET of $1.7
million.

     MZI provides  certain testing services and is 33.3% owned by TIMET with the
remainder owned by another titanium manufacturer.

     In November  2005,  the Company  entered  into a joint  venture  with XI'AN
BAOTIMET  VALINOX TUBES CO. LTD.  ("BAOTIMET") to produce welded titanium tubing
in the Peoples Republic of China. As of December 31, 2005, the Company,  through
a wholly owned  subsidiary,  held an 11% direct  interest in BAOTIMET,  although
none of the  joint  venture  partners  had  contributed  any  funds to the joint
venture as of such date. The remaining  ownership  interests in BAOTIMET are (i)
40% held by Baoji Titanium Industry Co. Ltd., one of China's principal producers
of titanium products,  (ii) 20% held by VALTIMET and (iii) 29% held by Changzhou
Valinox Great Wall Welded Tube Co. Ltd. (a 66%-owned subsidiary of VALTIMET). At
December 31, 2005, TIMET had an obligation to contribute a total of $0.7 million
to the joint venture, which was contributed in the first quarter of 2006.

     VALTIMET and MZI are exempted from the scope of FASB  Interpretation No. 46
("FIN 46R"),  Consolidation of Variable Interest Entities (an  interpretation of
Accounting Research Bulletin No. 51). Therefore,  the current SFAS No. 94 model,
under which  consolidation is based upon control (generally defined as ownership
of more than 50% of an entity), continues to apply to these entities.



<PAGE>


Note 6 - Property and equipment

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2005                  2004
                                                                               ------------------    -----------------
                                                                                           (In thousands)

<S>                                                                            <C>                   <C>
Land and improvements                                                          $         8,922       $         8,703
Buildings and improvements                                                              37,259                31,780
Information technology systems                                                          61,175                63,609
Manufacturing equipment and other                                                      348,080               333,031
Construction in progress                                                                31,488                14,819
                                                                               ------------------    -----------------
                                                                                       486,924               451,942
Less accumulated depreciation                                                          233,934               223,769
                                                                               ------------------    -----------------

                                                                               $       252,990       $       228,173
                                                                               ==================    =================
</TABLE>

     See Note 11 with respect to the Company's property and equipment held under
capital leases.

     During the first quarter of 2005,  the Company  determined  that certain of
its manufacturing equipment would no longer be utilized in its operations,  and,
accordingly,  recognized a $1.2 million  noncash  abandonment  charge to cost of
sales during the period.

     In November 2004, pursuant to an agreement with Basic Management,  Inc. and
certain of its affiliates  ("BMI"),  the Company sold certain  property  located
adjacent  to its  Henderson,  Nevada  plant  site to BMI, a  32%-owned  indirect
subsidiary of Valhi,  and recorded a $12.0 million  deferred gain related to the
cash proceeds  received in November 2004. During the second quarter of 2005, the
Company ceased using the property and,  accordingly,  recognized a $13.9 million
non-operating  gain related to the sale of such property,  which is comprised of
(i) the  previously  reported  $12.0 million cash proceeds  received in November
2004,  (ii) the reversal of $0.6 million  previously  accrued by the Company for
potential  environmental  issues related to the property and (iii) an additional
$1.2 million cash payment received from BMI in June 2005. See Note 19.

Note 7 - Intangible assets

     As of December  31, 2005 and 2004,  the  Company's  intangible  assets with
definite lives are solely comprised of patents. In accordance with SFAS No. 142,
Goodwill and Other  Intangible  Assets,  the Company has evaluated the remaining
useful lives of its patents,  which will become fully amortized during 2006. The
carrying amount and accumulated  amortization of the Company's intangible assets
are as follows:


<PAGE>



<TABLE>
<CAPTION>
                                                         December 31, 2005                    December 31, 2004
                                                 ----------------------------------    --------------------------------
                                                   Carrying           Accumulated        Carrying         Accumulated
                                                    Amount            Amortization        Amount         Amortization
                                                 --------------     ---------------    --------------    --------------
                                                                            (In thousands)
Intangible assets:
  Definite lives, subject to amortization:
<S>                                              <C>                <C>                <C>               <C>
     Patents                                     $      8,789       $        8,106     $     14,874      $      13,224
   Other intangible asset - pension asset (1)               -                     -           3,407                  -
                                                 --------------     ---------------    --------------    --------------

                                                 $      8,789       $        8,106     $     18,281      $      13,224
                                                 ==============     ===============    ==============    ==============

-----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Not covered by the scope of SFAS No. 142.

     The Company's  amortization  expense relating to its intangible  assets was
$1.0 million in 2005, $1.5 million in 2004 and $1.7 million in 2003. The Company
expects its aggregate  amortization  expense during 2006 will  approximate  $0.7
million.

Note 8 - Other noncurrent assets

<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                              ---------------------------------------
                                                                                    2005                  2004
                                                                              ------------------    -----------------
                                                                                          (In thousands)

<S>                                                                           <C>                   <C>
   Deferred financing costs                                                   $           177       $           786
   Prepaid pension cost                                                                22,337                10,531
   Notes receivable from officers                                                           -                    49
   Other                                                                                  163                   211
                                                                              ------------------    -----------------

                                                                              $        22,677       $        11,577
                                                                              ==================    =================
</TABLE>

     The  Company's  deferred  financing  costs  relate to the  issuance  of the
Company's BUCS and are amortized on a straight-line basis through 2026. See Note
12 for further  discussion of the BUCS deferred financing costs. See Note 17 for
further discussion of the prepaid pension cost.



<PAGE>


Note 9 - Accrued liabilities

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      2005                 2004
                                                                                -----------------    -----------------
                                                                                           (In thousands)

<S>                                                                             <C>                  <C>
OPEB cost                                                                       $         2,181      $         2,777
Pension cost                                                                              5,353                5,285
Payroll and vacation                                                                      6,227                5,810
Incentive compensation                                                                   20,091               12,570
Other employee benefits                                                                   9,938                9,721
Deferred revenue                                                                         14,525               10,046
Environmental costs                                                                       1,718                2,530
Taxes, other than income                                                                  5,318                4,166
Other                                                                                    10,347                8,535
                                                                                -----------------    -----------------

                                                                                $        75,698      $        61,440
                                                                                =================    =================
</TABLE>

     See Note 19 with regard to environmental costs.

     Effective January 1, 2004, the Company modified the vacation policy for its
U.S.  salaried  employees,  whereby such employees no longer accrue their entire
year's  vacation  entitlement on January 1, but rather accrue the current year's
vacation  entitlement over the course of the year. As a result,  in January 2004
the Company  reduced its $1.9 million  vacation  accrual as of December 31, 2003
for these employees to zero.

     Under the  terms of the  Company's  long-term  agreement  ("LTA")  with The
Boeing  Company  ("Boeing"),  Boeing is required to purchase  from the Company a
buffer  inventory of titanium  products for use by the Company in the production
of titanium products ordered by Boeing in the future. As the buffer inventory is
completed,  Boeing is billed  and takes  title to the  inventory,  although  the
Company could retain an  obligation to further  process the material as directed
by Boeing.  Accordingly,  the revenue and costs of sales on the buffer inventory
is deferred and  subsequently  recognized  at the time the final mill product is
delivered  to Boeing.  As of December  31, 2005 and 2004,  $9.0 million and $9.9
million of the  Company's  deferred  revenue  related  to the buffer  inventory,
respectively.

Note 10 - Customer advances

     Under the terms of the Company's  previous LTA with Boeing, in 2002 through
2007,  Boeing would have been required to advance  TIMET $28.5 million  annually
less $3.80 per pound of titanium product purchased by Boeing subcontractors from
TIMET during the preceding  year.  The advance  related to Boeing's  take-or-pay
obligations  under the previous LTA.  Effectively,  the Company  collected $3.80
less from Boeing than the LTA selling  price for each pound of titanium  product
sold directly to Boeing and reduced the related customer advance recorded by the
Company.  For  titanium  products  sold to Boeing  subcontractors,  the  Company
collected  the full LTA selling  price,  but gave Boeing  credit by reducing the
next year's annual advance by $3.80 per pound of titanium product sold to Boeing
subcontractors.  The Boeing  customer  advance was also  reduced as  take-or-pay
benefits  were earned.  As of December 31, 2005,  approximately  $0.7 million of
customer advances related to the Company's  previous LTA with Boeing,  which was
refunded to Boeing in 2006.



<PAGE>


     Effective July 1, 2005, the Company  entered into a new LTA with Boeing for
the purchase and sale of titanium products.  The new LTA expires on December 31,
2010 and provides for, among other things, (i) mutual annual purchase and supply
commitments by both parties,  (ii) continuation of the existing buffer inventory
program  currently  in place for  Boeing  and  (iii)  certain  improved  product
pricing. Beginning in 2006, the new LTA also replaces the take-or-pay provisions
of the previous LTA with an annual makeup payment early in the following year in
the event Boeing  purchases less than its annual volume  commitment in any year.
See Note 15.

Note 11 - Bank debt and capital lease obligations

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2005                  2004
                                                                               ------------------    -----------------
                                                                                           (In thousands)

<S>                                                                            <C>                   <C>
Notes payable - U.S. credit facility                                           $        -            $        43,176
                                                                               ==================    =================

Long-term debt:
   U.S. credit facility                                                        $        40,255       $        -
   U.K. credit facility                                                                 11,104                -
                                                                               ------------------    -----------------

                                                                               $        51,359       $        -
                                                                               ==================    =================

Capital lease obligations                                                      $           157       $           197
   Less current maturities                                                                  19                    22
                                                                               ------------------    -----------------

                                                                               $           138       $           175
                                                                               ==================    =================
</TABLE>

     Long-term  bank credit  agreements.  As of December 31, 2005, the Company's
outstanding  borrowings  under its U.S. credit  agreement were $40.3 million and
excess  availability was  approximately  $79 million.  On February 17, 2006, the
Company  entered into a new $175 million  long-term  credit  agreement (the "New
U.S.  Facility"),  replacing  its  previous  U.S  credit  agreement,  which  was
terminated  on that date.  The New U.S.  Facility  is secured  primarily  by the
Company's U.S. accounts  receivable,  inventory,  personal property,  intangible
assets, a pledge of 65% of TIMET UK's common stock and a negative pledge on U.S.
fixed  assets,  and  matures in  February  2011.  Borrowings  under the New U.S.
Facility  accrue  interest at the U.S. prime rate or varying  LIBOR-based  rates
based on a  quarterly  ratio of  outstanding  debt to EBITDA as  defined  by the
agreement.  The New U.S.  Facility  also  provides for the issuance of up to $10
million of letters of credit.




<PAGE>


     The New U.S. Facility contains certain restrictive  covenants,  that, among
other things,  limit or restrict the ability of the Company to incur debt, incur
liens, make  investments,  make capital  expenditures or pay dividends.  The New
U.S.  Facility  also  requires  compliance  with  certain  financial  covenants,
including  minimum  tangible  net worth,  a fixed  charge  coverage  ratio and a
leverage ratio, and contains other covenants  customary in lending  transactions
of this type including  cross-default  provisions with respect to other debt and
obligations of the Company.  Borrowings under the New U.S.  Facility are limited
to the lesser of $175  million or a  formula-determined  amount  based upon U.S.
accounts  receivable,  inventory  and fixed  assets  (subject to pledging  fixed
assets). Such formula-determined amount only applies if borrowings exceed 60% of
the  commitment  amount or the leverage ratio exceeds a certain  limitation.  At
February 17, 2006,  approximately $21 million was outstanding under the New U.S.
Facility and $4.4 million of letters of credit were issued and outstanding.  The
Company's previous U.S. credit agreement  contained similar covenant  compliance
requirements,  and the Company was in compliance with all such covenants for all
periods during the years ended December 31, 2005 and 2004.

     Under the  previous  U.S.  credit  agreement,  the Company was  required to
maintain a lock box  arrangement  whereby  daily net cash  receipts were used to
reduce outstanding borrowings.  Accordingly,  any outstanding balances under the
previous  U.S.  credit  agreement  were  classified  as  a  current   liability,
regardless of the maturity date of the  agreement.  As a result of the Company's
entrance  into  the  New  U.S.  Facility,  which  does  not  contain  a  similar
requirement regarding  application of daily net cash receipts,  borrowings under
the  Company's  previous  U.S.  credit  agreement  have  been  re-classified  to
long-term on the  Company's  balance  sheet as of December  31, 2005.  Under the
Company's  previous U.S. credit  agreement,  interest  accrued at rates based on
LIBOR plus 2% and bank prime rate plus 0.5%. The weighted  average interest rate
on  borrowings  outstanding  was  6.4% as of  December  31,  2005 and 4.3% as of
December 31, 2004.  Borrowings were  collateralized  by substantially all of the
Company's U.S. assets.

     During the second  quarter of 2005,  the  Company's  subsidiary,  TIMET UK,
terminated its previous credit facility (the "U.K. Facilities") and entered into
a new working capital credit facility (the "New U.K.  Facility") that expires on
April  30,  2008.  Under  the New  U.K.  facility,  TIMET  UK may  borrow  up to
(pound)22.5 million, subject to a formula-determined borrowing base derived from
the value of accounts receivable,  inventory and property,  plant and equipment.
Borrowings under the New U.K. facility can be in various  currencies,  including
U.S.  dollars,  British  pounds  sterling  and euros and are  collateralized  by
substantially  all of TIMET UK's  assets.  Interest  on  outstanding  borrowings
generally  accrues at rates that vary from 1.125% to 1.375%  above the  lender's
published base rate. The New U.K.  facility also contains  financial  ratios and
covenants  customary in lending  transactions of this type,  including a minimum
net  worth  covenant.  TIMET UK was in  compliance  with all  covenants  for all
periods  during the year ended  December 31, 2005. As of December 31, 2005,  the
Company's outstanding borrowings, which are due on April 30, 2008, under the New
U.K. Facility were $11.1 million,  and excess availability was approximately $28
million. The weighted average interest rate on borrowings  outstanding under the
New U.K. facility was 5.6% as of December 31, 2005.



<PAGE>


     The U.K.  Facilities  provided  for  borrowings  limited  to the  lesser of
(pound)22.5  million or a  formula-determined  borrowing  base  derived from the
value of accounts receivable,  inventory and property,  plant and equipment. The
credit  agreement  included  revolving and term loan facilities and an overdraft
facility and required the maintenance of certain  financial  ratios and amounts,
including a minimum net worth covenant and other covenants  customary in lending
transactions of this type. TIMET UK was in compliance with all covenants for all
periods during the year ended December 31, 2004. The U.K. overdraft facility was
subject to annual  review in  December  of each year and was renewed in December
2004.  During the second quarter of 2003, TIMET UK received an  interest-bearing
intercompany  loan from a U.S.  subsidiary of the Company  enabling  TIMET UK to
reduce its long-term borrowings under the U.K. Facilities to zero. This loan was
repaid in full during the third  quarter of 2004.  As of December 31, 2004,  the
Company had no borrowings under the U.K. Facilities.

     The Company also has  overdraft  and other credit  facilities at certain of
its other European  subsidiaries that aggregate the equivalent of $19 million at
December 31, 2005.  These  facilities  accrue  interest at various rates and are
payable on demand. At December 31, 2005,  approximately $2 million of letters of
credit had been issued under these facilities. As of December 31, 2005 and 2004,
there  were  no  outstanding  borrowings  under  these  facilities,  and  unused
borrowing availability at December 31, 2005 was approximately $17 million.

     Capital lease obligations.  In January 2004, the Company purchased for $0.7
million substantially all of the U.S. equipment held under capital leases, which
were due to expire at  various  times  during  2004 and 2005.  During the fourth
quarter of 2004,  three of the Company's U.K. lease agreements were amended such
that they no longer meet the criteria for capital lease treatment under SFAS No.
13,  Accounting  for Leases,  and are now  accounted  for as  operating  leases.
Accordingly,  the Company reduced its capital lease  obligations and related net
property  and  equipment  by  $10.3  million  and  $7.8  million,  respectively,
resulting in a $2.5 million  deferred gain that the Company will  recognize on a
straight-line basis over the term of the amended lease agreements,  one of which
expires  in 2014 and two of which  expire  in 2024.  The  Company's  first  rent
payment  under the amended lease  agreements is not due until October 2006,  and
the Company is  recognizing  rent  expense  with  respect to the  amended  lease
agreements  based on the  aggregate  contractual  rent  payments  allocated on a
straight-line basis over the terms of the amended lease agreements.

     At December 31, 2005 and 2004,  the Company held  equipment  under  capital
leases of $0.2 million and $0.3  million,  respectively.  The related  aggregate
accumulated depreciation was approximately $0.1 million at December 31, 2005 and
2004.



<PAGE>


     Aggregate  maturities of capital lease  obligations as of December 31, 2005
are reflected in the following table:

<TABLE>
<CAPTION>
                                                                                       Amount
                                                                                ----------------------
                                                                                   (In thousands)
         Year ending December 31,
            <S>                                                                 <C>
            2006                                                                $              28
            2007                                                                               28
            2008                                                                               28
            2009                                                                               28
            2010 and thereafter                                                                78
                                                                                ----------------------
                                                                                              190
            Less amounts representing interest                                                 33
                                                                                ----------------------

                                                                                $             157
                                                                                ======================
</TABLE>

Note 12 - Capital Trust

     In November  1996,  the Capital Trust issued  $201.3  million BUCS and $6.2
million  6.625%  common  securities.  TIMET owns all of the  outstanding  common
securities of the Capital Trust, and the Capital Trust is a wholly owned finance
subsidiary  of TIMET.  The Capital Trust used the proceeds from such issuance to
purchase from the Company $207.5 million  principal  amount of the  Subordinated
Debentures.  The Subordinated Debentures and accrued interest receivable are the
sole assets of the Capital Trust at December 31, 2005.

     In August 2004, the Company completed an exchange offer,  pursuant to which
the Company had offered to  exchange  any and all of the  4,024,820  outstanding
BUCS issued by the Capital Trust for shares of the Company's  Series A Preferred
Stock at the  exchange  rate of one share of Series A  Preferred  Stock for each
BUCS. Based upon the 3,909,103 BUCS tendered and accepted for exchange as of the
close of the offer on August 31, 2004,  the Company issued  3,909,103  shares of
Series A Preferred Stock in exchange for such BUCS.  During the third quarter of
2004, the Company recognized a $15.5 million non-cash non-operating gain related
to the BUCS exchange,  reflecting  the difference  between the carrying value of
the related  Subordinated  Debentures ($195.5 million) and the fair value of the
Series A Preferred Stock issued ($173.7  million,  based on the closing price of
the BUCS on August 31, 2004  according to NASDAQ's  website of $45.25 per share,
less $3.2  million  attributable  to accrued  and unpaid  dividends),  less $6.3
million of unamortized deferred financing costs related to the exchanged BUCS.



<PAGE>


     The BUCS, which mature December 2026, do not require principal amortization
and are redeemable at the Company's  option.  The redemption price  approximates
101% of the  principal  amount as of  December  1, 2005 and  declines to 100% on
December 1, 2006. The New U.S.  Facility  contains certain  financial  covenants
that may restrict the Company's  ability to make  distributions on the BUCS. The
Subordinated  Debentures allow the Company the right to defer interest  payments
for a period of up to 20 consecutive  quarters,  although interest  continues to
accrue at the coupon rate on the principal and unpaid interest.  Similarly,  the
Capital  Trust is  permitted  by the  terms of the BUCS to defer  its  quarterly
dividend  payments  on the  BUCS  when  TIMET  defers  interest  payment  on the
Subordinated  Debentures.  During 2002, the Company exercised its right to defer
interest payments on the Subordinated Debentures,  effective for the December 1,
2002  scheduled  interest  payment.  Interest  continued to accrue at the 6.625%
coupon rate on the principal and unpaid  interest  until the Company's  Board of
Directors  approved  resumption of scheduled  quarterly interest payments on the
Subordinated  Debentures  beginning  with  the  payment  on  June 1,  2004.  The
Company's Board also approved payment of all previously deferred interest on the
Subordinated  Debentures.  On April 15,  2004,  the  Company  paid the  deferred
interest in the amount of $21.7  million,  $21.0 million of which related to the
BUCS.

     TIMET's  guarantee  of  payment  of  the  remaining  outstanding  BUCS  (in
accordance with the terms thereof) and its  obligations  under the Capital Trust
documents constitute,  in the aggregate,  a full and unconditional  guarantee by
the  Company  of the  Capital  Trust's  obligations  under  the  BUCS.  The BUCS
represent  undivided  beneficial  ownership  interests in the Capital Trust, are
entitled to cumulative preferred  distributions from the Capital Trust of 6.625%
per  annum,  compounded  quarterly,  and are  convertible,  at the option of the
holder,  into TIMET common stock at the rate of 2.678 shares of common stock per
BUCS (an equivalent price of $18.67 per share),  for an aggregate of 0.3 million
common shares if the 113,467 remaining BUCS are fully converted.

     On  September  1, 2005,  the Company and the  Capital  Trust  agreed to the
cancellation  of  120,907  of  the  Capital  Trust's  common  securities  and  a
corresponding  cancellation  of  $6.0  million  of  the  Company's  Subordinated
Debentures.  There  was no net  effect  of  this  transaction  on the  Company's
consolidated  financial  position  or results of  operations,  as the  Company's
carrying value of the common securities of the Capital Trust that were cancelled
equaled  the  carrying  value of the  Subordinated  Debentures  that  were  also
cancelled.

     On March 3,  2006,  the  Company  called  all of the  outstanding  BUCS for
redemption.  The  redemption  price equals  100.6625% of the $50.00  liquidation
amount per BUCS, or $50.3313,  plus accrued  distributions to the March 24, 2006
redemption date on the BUCS of $0.2116 per BUCS. The Company expects to report a
nominal pre-tax loss related to the call of the BUCS.

Note 13 - Minority interest

     Minority  interest  relates  principally to the Company's  70%-owned French
subsidiary,  TIMET Savoie,  S.A. ("TIMET Savoie").  The Company has the right to
purchase from  Compagnie  Europeenne du  Zirconium-CEZUS,  S.A.  ("CEZUS"),  the
holder of the remaining 30% interest, CEZUS' interest in TIMET Savoie for 30% of
TIMET Savoie's equity  determined under French accounting  principles,  or $13.3
million as of December 31,  2005.  CEZUS has the right to require the Company to
purchase  its  interest  in TIMET  Savoie for 30% of TIMET  Savoie's  registered
capital,  or $3.0 million as of December 31,  2005.  TIMET Savoie made  dividend
payments to CEZUS of $2.2 million in 2005 and $0.7 million in 2004.



<PAGE>


Note 14 - Stockholders' equity

     Preferred  stock. At December 31, 2005, the Company was authorized to issue
10 million  shares of preferred  stock.  The Board of Directors  determines  the
rights of preferred  stock as to, among other  things,  dividends,  liquidation,
redemption, conversions and voting rights.

     Upon  completion  of the BUCS  exchange  offer  discussed  in Note 12,  the
Company issued 3,909,103  shares of Series A Preferred Stock.  Each share of the
Series A  Preferred  Stock is  convertible,  at any time,  at the  option of the
holder thereof, at a conversion price of $7.50 per share of the Company's common
stock  (equivalent to a conversion  rate of six and two-thirds  shares of common
stock for each share of Series A Preferred Stock),  with any partial shares paid
in cash. The  conversion  rate is subject to adjustment if certain events occur,
including,  but not limited to, a stock dividend on the Company's  common stock,
subdivisions or certain  reclassifications  of the Company's common stock or the
issuance of warrants to holders of the Company's common stock.

     The  Series  A  Preferred  Stock  is  not  mandatorily  redeemable,  but is
redeemable  at the option of the  Company at any time after  September  1, 2007.
Holders of the Series A Preferred Stock are entitled to receive  cumulative cash
dividends at the rate of 6.75% of the $50 per share  liquidation  preference per
annum per share  (equivalent  to $3.375 per annum per  share),  when,  as and if
declared by the Company's board of directors.  The Company paid $12.5 million in
2005  and $3.3  million  in 2004 of such  dividends.  Whether  or not  declared,
cumulative dividends on Series A Preferred Stock are deducted from net income to
arrive at net income attributable to common stockholders. The Company's new U.S.
credit  agreement  contains  certain  financial  covenants that may restrict the
Company's  ability to make dividend payments on the Series A Preferred Stock. As
of December 31, 2005, net income  attributable to common  stockholders  included
$0.8 million ($0.28 per outstanding share) of undeclared  dividends.  Subsequent
to December 31, 2005,  the Company's  board of directors  declared a dividend of
$0.84375  per share,  payable on March 15, 2006 to holders of record of Series A
Preferred Stock as of the close of trading on March 1, 2006.

     During 2005,  an aggregate  of 926,490  shares of Series A Preferred  Stock
were converted into 6,176,600  shares of TIMET common stock.  As of December 31,
2005, there were 2,982,613  shares  outstanding of the Series A Preferred Stock.
Subsequent  to December  31,  2005 and through  March 10,  2006,  an  additional
346,016 shares of Series A Preferred Stock were converted into 2,306,765  shares
of TIMET common stock.

     Common stock.  At December 31, 2005, the Company was authorized to issue 90
million shares of common stock. On February 15, 2006, the Company's  certificate
of  incorporation  was amended to increase  the number of  authorized  shares of
common stock to 200 million.  The Company's new U.S. credit  agreement,  and the
Indenture pursuant to which the Subordinated  Debentures were issued,  limit the
payment of common stock dividends under certain circumstances. See also Note 12.

     Treasury  stock. On August 12, 2005, the Company retired all 180,000 shares
of its treasury stock.  The retirement of such treasury stock,  which had a cost
basis of $1.2  million,  resulted  in a $1,800  reduction  of  common  stock,  a
$990,000  reduction of  additional  paid-in  capital and a $216,000  decrease in
accumulated earnings.



<PAGE>


     Restricted  stock and common stock  options.  The Company's  1996 Long-Term
Performance Incentive Plan (the "Incentive Plan") provides for the discretionary
grant of restricted common stock, stock options,  stock appreciation  rights and
other incentive compensation to officers and other key employees of the Company.
Options  generally vest over five years and expire ten years from date of grant.
No  restricted  stock or options have been issued since 2000 under the Incentive
Plan.

     Eligible  non-employee  directors  are  covered  by a  plan  that  includes
stock-based grants as an element of director compensation (the "Director Plan").
In 2005,  2004 and 2003,  the Director  Plan  provided for annual grants to each
non-employee  director of 500 shares of the  Company's  common  stock as partial
payment of director  fees.  Options  previously  granted to  eligible  directors
vested in one year and expire ten years from date of grant (five year expiration
for grants prior to 1998).  The weighted average fair value at grant date of the
14,000, 70,000 and 60,000 total shares issued to non-employee directors in 2005,
2004 and 2003, respectively,  was $139,825 in 2005, $343,055 in 2004 and $71,730
in 2003.

     The  weighted  average  remaining  life of  options  outstanding  under the
Incentive  Plan and the Director Plan was 1.8 years at December 31, 2005 and 3.6
years at December 31, 2004.  At December  31,  2005,  2004 and 2003,  options to
purchase  1,038,360,   2,051,040  and  1,908,040  shares,   respectively,   were
exercisable at average exercise prices of $12.20, $9.20 and $9.72, respectively.
As of December 31, 2005, the amount payable upon exercise of options outstanding
was $12.7  million and the related  aggregate  intrinsic  value  (defined as the
excess of the market price of TIMET's common stock over the exercise  price) was
$20.2  million.  At December  31,  2005,  3,515,280  shares and 352,520  shares,
respectively,  were  available for future grant under the Incentive Plan and the
Director Plan. Shares issued under these plans are newly issued shares.

     The  following  table  summarizes  information  about the  Company's  stock
options:

<TABLE>
<CAPTION>
                                                                            Amount payable
                                                       Exercise price        upon exercise         Weighted-average
                                        Options          per option          (in thousands)         exercise price
                                      ------------    -----------------    -------------------    -------------------

<S>                                    <C>            <C>                           <C>           <C>
Outstanding at December 31, 2002       2,465,000      $ 0.83-17.66         $        22,607        $          9.17
  Canceled                              (247,120)     $ 1.93-17.66                  (2,726)       $         11.03
                                      ------------                         -------------------

Outstanding at December 31, 2003       2,217,880      $ 0.83-17.66                   19,881        $         8.96
  Exercised                              (20,200)     $ 3.99                            (81)       $         3.99
  Canceled                               (46,640)     $ 3.99-14.66                     (495)       $        10.62
                                      ------------                         -------------------

Outstanding at December 31, 2004       2,151,040      $ 0.83-17.66                   19,305        $         8.97
  Exercised                           (1,095,600)     $ 1.80-14.66                   (6,443)       $         5.88
  Canceled                               (17,080)     $ 3.99-14.66                     (198)       $        11.58
                                      ------------                         -------------------

Outstanding at December 31, 2005       1,038,360      $ 0.83-17.66         $         12,664        $        12.20
                                      ============                         ===================
</TABLE>

     The intrinsic value of the Company's  options  exercised  aggregated  $10.0
million in 2005 and $35  thousand in 2004,  and the  related  income tax benefit
from such exercises was $3.8 million in 2005 and $13,000 in 2004.

     As of December 31, 2004,  2,151,040 of the  Company's  outstanding  options
were   exercisable.   The  following  table  summarizes  the  Company's  options
outstanding,  all of which were  exercisable,  as of December  31, 2005 by price
range:



<PAGE>


<TABLE>
<CAPTION>
                                                     Options Outstanding and Exercisable
                                 -----------------------------------------------------------------------------
                                                                  Weighted average
                                                                       remaining
              Range of                                            contractual life        Weighted average
           exercise prices         Outstanding at 12/31/05           (in years)            exercise price
      -------------------------- ----------------------------- ---------------------   -------------------------

      <S>                                      <C>                         <C>             <C>
      $ 0.83-1.77                               10,000                      7.0            $         0.83
      $ 1.78-3.53                               30,000                      5.7            $         1.94
      $ 3.54-5.30                              176,200                      3.1            $         4.13
      $ 7.07-8.83                               10,000                      5.4            $         7.11
      $ 10.59-12.36                            126,800                      0.4            $        11.50
      $ 12.37-14.13                            181,200                      0.9            $        13.74
      $ 14.14-15.89                            316,160                      1.6            $        14.76
      $ 15.90-17.66                            188,000                      1.8            $        16.93
                                 -----------------------------

                                             1,038,360                      1.8            $        12.20
                                 =============================
</TABLE>

     Subsequent  to  December  31,  2005 and  through  March 10,I 2006,  453,960
options were exercised.

     During 2000, the Company awarded 935,000 shares of TIMET restricted  common
stock under the  Incentive  Plan to certain  officers and  employees.  The stock
grant  restrictions  lapsed ratably on an annual basis over a five-year  period.
Since  holders  of  restricted  stock  have all of the  rights  of other  common
stockholders,  subject to forfeiture  unless  certain  periods of employment are
completed,  all such shares of restricted stock were considered currently issued
and outstanding. During 2004 and 2003, respectively, 10,600 and 71,600 shares of
restricted stock were forfeited. The market value of the restricted stock awards
was approximately  $2.0 million ($2.19 per share) on the date of grant, and this
amount  was  recorded  as  deferred   compensation,   a  separate  component  of
stockholders' equity.

     The Company amortizes  deferred  compensation to expense on a straight-line
basis  for  each  tranche  of  the  award  over  the  period  during  which  the
restrictions lapse. During 2005, 2004 and 2003, respectively, 80,200, 88,400 and
101,400  shares of restricted  stock vested,  with an aggregate  market value of
$0.6 million,  $0.4 million and $0.1 million,  respectively.  Compensation cost,
net of  income  tax  benefits,  related  to  such  shares  of  restricted  stock
recognized for GAAP financial  reporting  purposes was less than $0.1 million in
each of 2005,  2004 and 2003.  During February 2005, all of such shares of TIMET
restricted stock became fully vested.



<PAGE>


Note 15 - Other income (expense)

<TABLE>
<CAPTION>
                                                                              Year ended December 31,
                                                                ----------------------------------------------------
                                                                    2005               2004               2003
                                                                --------------     --------------    ---------------
                                                                                  (In thousands)
Other operating income (expense):
<S>                                                             <C>                <C>               <C>
  Boeing take-or-pay                                            $     17,134       $     22,093      $     23,083
  Litigation settlements                                                   -                  -             1,113
  Insurance claim settlement                                               -                648                 -
  Settlement of customer claim                                         1,800                  -                 -
  Other, net                                                           1,366                248               193
                                                                --------------     --------------    ---------------

                                                                $     20,300       $     22,989      $     24,389
                                                                ==============     ==============    ===============

Other non-operating income (expense):
  Dividends and interest                                        $      2,025       $        687      $        383
  Equity in earnings of common securities
     of the Capital Trust                                                279                424               432
  Foreign exchange gain (loss), net                                    2,288               (477)             (189)
  Gain on sale of property (Note 6)                                   13,881                  -                 -
  Gain on BUCS exchange, net (Note 12)                                     -             15,465                 -
  Other, net                                                            (245)               101              (920)
                                                                --------------     --------------    ---------------

                                                                $     18,228       $     16,200      $       (294)
                                                                ==============     ==============    ===============
</TABLE>

     Based upon the terms of the Company's previous LTA with Boeing, the Company
received an annual $28.5 million (less $3.80 per pound of titanium  product sold
to Boeing  subcontractors in the preceding year) customer advance from Boeing in
January of each year  related to  Boeing's  purchases  from TIMET for that year.
Effective July 1, 2005, the Company  entered into a new LTA with Boeing pursuant
to which,  beginning in 2006, these take-or-pay provisions were replaced with an
annual makeup payment early in the following year in the event Boeing  purchases
less than its annual  commitment in any year. The previous LTA was structured as
a  take-or-pay  agreement  such  that  Boeing  forfeited  $3.80 per pound of its
advance  payment in the event that its  orders for  delivery  were less than 7.5
million pounds in any given calendar year. The Company  recognized income to the
extent Boeing's  year-to-date orders for delivery plus TIMET's maximum quarterly
volume  obligations  for the remainder of the year totaled less than 7.5 million
pounds.  This  income  was  recognized  as other  operating  income  and was not
included  in sales  revenue,  sales  volume  or gross  margin.  Based on  actual
purchases  of  approximately   3.0  million  pounds  during  2005,  the  Company
recognized  $17.1 million of take-or-pay  income for the year ended December 31,
2005.  The Company  recognized  $22.1  million and $23.1  million of such income
during  2004 and  2003,  respectively.  Recognition  of the  take-or-pay  income
reduced the Boeing customer advance as described in Note 10.

     During the first quarter of 2005, the Company received $1.8 million related
to its settlement of a customer claim regarding prior order  cancellations  from
such customer.



<PAGE>


Note 16 - Income taxes

     Summarized in the following  table are (i) the  components of income (loss)
before income taxes and minority  interest  ("pre-tax income (loss)"),  (ii) the
difference  between the income tax  expense  (benefit)  attributable  to pre-tax
income  (loss) and the  amounts  that would be expected  using the U.S.  federal
statutory income tax rate of 35%, (iii) the components of the income tax expense
(benefit)  attributable  to pre-tax income (loss) and (iv) the components of the
comprehensive tax provision (benefit):

<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                                 -----------------------------------------------------
                                                                                         2004               2003
                                                                      2005            (restated)         (restated)
                                                                 ---------------    ---------------   ----------------
                                                                                    (In thousands)
Pre-tax income (loss):
<S>                                                              <C>                <C>               <C>
  U.S.                                                           $    119,799       $     29,636      $    (14,817)
  Non-U.S.                                                             65,541             17,149            (7,850)
                                                                 ---------------    ---------------   ----------------

                                                                 $    185,340       $     46,785      $    (22,667)
                                                                 ===============    ===============   ================

Expected income tax expense (benefit), at 35%                    $     64,869       $     16,375      $     (7,933)
Non-U.S. tax rates                                                     (1,134)              (451)              535
Incremental tax on earnings of non-U.S. group affiliates                  455                106               131
U.S. state income taxes, net                                            3,954                297            (1,050)
Dividends received deduction                                             (331)               (93)             (312)
Nontaxable income                                                        (279)               (98)             (123)
Change in state rate                                                      325                  -                 -
Revision of estimated tax liability                                         -               (551)             (241)
Elimination of minimum pension liability equity
adjustment component                                                    4,405                  -                 -
Tax on repatriation of foreign earnings                                 1,523                  -                 -
Change in Valuation Allowance                                         (50,096)           (17,106)           10,076
Other, net                                                                805               (611)              124
                                                                 ---------------    ---------------   ----------------

                                                                 $     24,496       $     (2,132)     $      1,207
                                                                 ===============    ===============   ================
</TABLE>



<PAGE>



<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                                 -----------------------------------------------------
                                                                                         2004              2003
                                                                      2005            (restated)         (restated)
                                                                 ---------------    ---------------   ----------------
                                                                                    (In thousands)
Income tax expense (benefit):
  Current income taxes:
<S>                                                              <C>                <C>               <C>
     U.S.                                                        $      5,120       $        648      $         30
     Non-U.S.                                                          17,245              2,931             1,436
                                                                 ---------------    ---------------   ----------------
                                                                       22,365              3,579             1,466
                                                                 ---------------    ---------------   ----------------

  Deferred income taxes (benefit):
     U.S.                                                              10,638             (4,202)           -
     Non-U.S.                                                          (8,507)            (1,509)             (259)
                                                                 ---------------    ---------------   ----------------
                                                                        2,131             (5,711)             (259)
                                                                 ---------------    ---------------   ----------------

                                                                 $     24,496       $     (2,132)     $      1,207
                                                                 ===============    ===============   ================

Comprehensive tax provision (benefit) allocable to:
  Pre-tax income (loss)                                          $     24,496       $     (2,132)     $      1,207
  Additional paid in capital                                           (3,878)                 -                 -
   Other comprehensive income:
     Currency translation adjustment                                      (48)                 -                 -
     VALTIMET's unrealized net gains on derivative
      financial instruments qualifying as cash flow
      hedges                                                             (268)                 -                 -
     Pension liabilities adjustment                                     2,949                  -                 -
                                                                 ---------------    ---------------   ----------------

                                                                 $     23,251       $     (2,132)     $      1,207
                                                                 ===============    ===============   ================
</TABLE>

     The  following  table  summarizes  the  Company's  deferred  tax assets and
deferred tax liabilities as of December 31, 2005 and 2004:

<TABLE>
<CAPTION>
                                                                                  December 31,
                                                           -----------------------------------------------------------
                                                                      2005                            2004
                                                           ----------------------------    ---------------------------
                                                                                           Assets         Liabilities
                                                             Assets        Liabilities     (restated)     (restated)
                                                           ------------    ------------    -----------    ------------
                                                                                 (In millions)
Temporary differences relating to net assets:
<S>                                                        <C>             <C>             <C>            <C>
  Inventories                                              $      -        $     (8.7)     $      -       $    (13.2)
  Property and equipment, including software                      -             (34.8)            -            (29.9)
  Goodwill                                                        6.6             -               7.7            -
  Accrued pension cost                                           11.8             -              21.1
  Accrued OPEB cost                                               6.9             -               6.2            -
  Accrued liabilities and other deductible differences           10.4             -              22.6            -
  Other taxable differences                                       -             (10.2)            -             (8.0)
Tax loss and credit carryforwards                                40.2             -              70.9            -
Valuation allowance                                             (22.2)            -             (71.4)           -
                                                           ------------    ------------    -----------    ------------
Gross deferred tax assets (liabilities)                          53.7           (53.7)           57.1          (51.1)
Netting                                                         (53.7)           53.7           (51.1)          51.1
                                                           ------------    ------------    -----------    ------------
Total deferred taxes                                              -               -               6.0            -
Less current deferred taxes                                      19.4             -               5.0            -
                                                           ------------    ------------    -----------    ------------

Net noncurrent deferred taxes                              $    (19.4)     $      -        $      1.0     $      -
                                                           ============    ============    ===========    ============
</TABLE>



<PAGE>


     The  Company  periodically  reviews  its  deferred  income  tax  assets  to
determine  if future  realization  is more  likely  than not.  During  the first
quarter of 2005, based on the Company's recent history of U.S. income,  its near
term outlook and the effect of its change in method of  inventory  determination
from the LIFO cost method to the  specific  identification  cost method for U.S.
federal  income tax purposes  (see Note 2), the Company  changed its estimate of
its ability to utilize the tax benefits of its U.S. net  operating  loss ("NOL")
carryforwards,  alternative  minimum tax ("AMT") credit  carryforwards and other
net deductible  temporary  differences (other than the majority of the Company's
capital loss carryforwards).  Consequently,  the Company determined that its net
deferred  income tax asset  related to such U.S.  tax  attributes  and other net
deductible temporary differences now meet the "more-likely-than-not" recognition
criteria.  Accordingly,  the Company  reversed  $36.9  million of the  valuation
allowance  attributable to such U.S. deferred income tax asset during 2005 ($8.6
million in the fourth quarter).

     During the first quarter of 2005,  based on the Company's recent history of
U.K.  income,  its near term outlook and its historic  U.K.  profitability,  the
Company also  changed its estimate of its ability to utilize its net  deductible
temporary  differences and other tax attributes  related to the U.K.,  primarily
comprised of (i) the future  benefits  associated  with the reversal of its U.K.
minimum pension liability deferred income tax asset and (ii) the benefits of its
U.K.  NOL  carryforward.  Consequently,  the  Company  determined  that  its net
deferred  income  tax asset in the U.K.  now  meets  the  "more-likely-than-not"
recognition  criteria.  Accordingly,  the Company  reversed $13.2 million of the
valuation  allowance  attributable to such deferred income tax asset during 2005
($0.1 million in the fourth quarter).

     During  2004,  due to a change in  estimate  of the  Company's  ability  to
utilize the benefits of its NOL carryforwards in Germany, the Company determined
that its  deferred  income tax asset in Germany  met the  "more-likely-than-not"
recognition  criteria.  Accordingly,  the  Company  reversed  the  $0.7  million
valuation allowance attributable to such deferred income tax asset. In addition,
the Company's  deferred income tax asset valuation  allowance  related to income
from continuing operations decreased by $16.4 million during 2004, primarily due
to the utilization of the U.S. and U.K. NOL carryforwards,  the benefit of which
had previously not met the "more-likely-than-not" recognition criteria.

     During the  second  quarter  of 2005 and the  fourth  quarter of 2004,  the
Company  recognized a deferred  income tax benefit related to a $0.5 million and
$4.2 million,  respectively,  decrease in the Company's U.S. deferred income tax
asset valuation allowance  attributable to the Company's  recognition,  for U.S.
income  tax  purposes  only,  of a capital  gain on the fourth  quarter  sale of
certain property located at the Company's  Henderson,  Nevada facility (see Note
6). The Company recognized a corresponding  deferred income tax expense in 2005,
when the gain was recognized under accounting  principles  generally accepted in
the United States of America. The Company utilized a portion of its U.S. capital
loss  carryforward  to offset the income taxes  generated  from the sale of such
property.






<PAGE>


     The  following  table  summarizes  the  components  of  the  change  in the
Company's deferred tax asset valuation allowance in 2005, 2004 and 2003:

<TABLE>
<CAPTION>
                                                                                 Year ended December 31,
                                                                ------------------------------------------------------
                                                                                         2004               2003
                                                                     2005             (restated)         (restated)
                                                                ----------------    ---------------    ---------------
                                                                                   (In thousands)
Effect of:
<S>                                                             <C>                 <C>               <C>
  (Income) loss before income taxes                             $    (50,096)       $    (17,106)     $     10,076
  Cumulative effect of change in accounting method                         -                   -                60
  Accumulated other comprehensive (income) loss                        1,055              (1,582)             (533)
  Offset to the change in net deferred income tax
   assets due principally to revision of estimated
   tax liability                                                           -               4,651                 -
  Currency translation adjustment                                       (232)                787             1,122
                                                                ----------------    ---------------   ----------------

                                                                $    (49,273)       $    (13,250)     $     10,725
                                                                ================    ===============   ================
</TABLE>

     At  December  31,  2005,  the  Company  had,  for U.S.  federal  income tax
purposes,  (i) NOL  carryforwards  of $21 million  that expire in 2022 and 2023,
(ii) a capital loss  carryforward  of $73 million that expires in 2008 and (iii)
AMT credit carryforwards of $4 million,  which can be utilized to offset regular
income taxes payable in future years, with an indefinite carryforward period.

     In October  2004,  the American  Jobs Creation Act of 2004 was enacted into
law.  The new law  provides for a special 85%  deduction  for certain  dividends
received from controlled foreign  corporations in 2005. In the second quarter of
2005, the Company  completed its evaluation of this new provision and determined
that it would  benefit from the special  dividend  received  deduction,  but the
Company did not  distribute  dividends  under the Act until the third quarter of
2005. In the third quarter of 2005, the Company executed a reinvestment plan and
distributed  $19  million of  earnings  from its  European  subsidiaries,  which
qualified for the special  dividend  received  deduction and, in accordance with
the  requirements of FASB Staff Position No. 109-2,  recognized the $1.0 million
income tax related to such repatriation.  Additionally, in the fourth quarter of
2005, the Company  determined  that an additional  $10 million of  repatriations
would  qualify  for the special  dividend  received  deduction,  and the Company
recognized an additional  $0.5 million  income tax related to the fourth quarter
repatriation.  The Company has not  provided for U.S.  deferred  income taxes or
foreign  withholding  taxes on basis  differences  in its non-U.S.  consolidated
subsidiaries  that result  primarily  from  undistributed  earnings  the Company
intends  to  reinvest  indefinitely.  The new law also  provides  for a  special
deduction  from U.S.  taxable  income equal to a specified  percentage of a U.S.
company's qualified income from domestic manufacturing  activities (as defined).
The Company  believes that the majority of its operations meet the definition of
qualified domestic manufacturing activities. However, the Company did not derive
any  benefit  from the  special  manufacturing  deduction  in 2005,  because the
Company's  existing U.S. NOL  carryforwards  fully offset its 2005 U.S.  taxable
income.

     In June 2005,  the State of Ohio  enacted a new tax law,  which  phases out
Ohio's  existing income tax system over the next five years and replaces it with
a tax based on gross  receipts.  In the second  quarter of 2005,  as a result of
this phase out,  the  Company  reduced  its  deferred  income tax asset  related
primarily to its Ohio NOL  carryforwards by $0.6 million.  In the fourth quarter
of  2005,  due  primarily  to  updated  income   forecasts  and  revised  timing
information on the  recognition of certain  temporary  differences,  the Company
increased  its  deferred  income  tax asset  related  primarily  to its Ohio NOL
carryforwards by $0.3 million.  The net impact of these adjustments for 2005 was
a decrease of $0.3 million. The provision for income taxes in 2005 includes $4.4
million of deferred income taxes resulting from the elimination of the Company's
minimum  pension  liability  equity  adjustment  component of accumulated  other
comprehensive income related to the Company's U.S. defined benefit pension plan.
In accordance  with GAAP,  the Company did not  recognize a deferred  income tax
benefit related to a portion of the minimum pension equity adjustment previously
recognized,  as the  Company  had also  recognized  a deferred  income tax asset
valuation related to its U.S. net operating loss carryforward and other U.S. net
deductible  temporary  differences  during a portion of the periods in which the
minimum pension equity adjustment had previously been recognized.  In accordance
with GAAP, a portion of such valuation  allowance  recognized ($4.4 million) was
recognized  through  the  pension  liability  component  of other  comprehensive
income.  As discussed,  during 2005 the Company  concluded  recognition  of such
deferred income tax asset  valuation  allowance was no longer  required,  and in
accordance  with  GAAP  the  reversal  of all of such  valuation  allowance  was
recognized  through the provision for income taxes included in the determination
of net income,  including the $4.4 million  portion of the  valuation  allowance
which was  previously  recognized  through  other  comprehensive  income.  As of
December  31,  2005,  the Company was no longer  required to recognize a minimum
pension liability related to its U.S. plan, and the Company reversed the minimum
pension liability previously recognized in other comprehensive income. After the
reversal of such minimum  pension  liability,  which in accordance with GAAP was
recognized  on  a  net-of-tax   basis,  the  $4.4  million  amount  remained  in
accumulated  other  comprehensive  income  related to the U.S.  minimum  pension
liability,  which in  accordance  with GAAP is required to be  recognized in the
provision  for  income  taxes  during the  period in which the  minimum  pension
liability is no longer required to be recognized.

Note 17 - Employee benefit plans

     Variable  compensation  plans.  The  majority  of the  Company's  worldwide
employees   participate  in   compensation   programs   providing  for  variable
compensation  based primarily on the financial  performance of the Company.  The
cost of these plans was  approximately  $18.8 million in 2005,  $12.1 million in
2004 and $0.4 million in 2003.

     Defined  contribution  plans.  Approximately 56% of the Company's worldwide
employees at December 31, 2005 participate in defined contribution pension plans
with employer  contributions  based upon a fixed  percentage  of the  employee's
eligible  earnings.  All of the  Company's  U.S.  employees  (62%  of  worldwide
employees at December 31, 2005) are also eligible to participate in contributory
savings plans with partial matching employer contributions, although the Company
suspended making such partial matching  contributions for certain employees from
April 1, 2003 through April 3, 2004. The cost of these pension and savings plans
approximated  $4.1  million in 2005,  $3.3  million in 2004 and $1.9  million in
2003.

     Defined benefit pension plans. The Company maintains  contributory  defined
benefit  pension  plans  covering a majority  of its  European  employees  and a
noncontributory  defined  benefit  pension plan  covering a minority of its U.S.
employees. The Company's funding policy is to annually contribute, at a minimum,
amounts satisfying the applicable statutory funding  requirements.  Between 1989
and  1995,  the  U.S.   defined   benefit  pension  plans  were  closed  to  new
participants.  Additionally,  in some cases, benefit levels have been frozen. As
of December 31, 2003, the U.S. plans were merged into one plan. The U.K. defined
benefit  plan  was  closed  to new  participants  in  1996;  however,  employees
participating  in the plan  continue  to  accrue  additional  benefits  based on
increases in compensation and service.



<PAGE>


     Information  concerning the Company's defined benefit pension plans,  based
on a December 31 measurement date, is set forth in the following tables:

<TABLE>
<CAPTION>
                                                                                      Year ended December 31,
                                                                               ---------------------------------------
                                                                                     2005                  2004
                                                                               ------------------    -----------------
                                                                                           (In thousands)
Change in projected benefit obligations:
<S>                                                                            <C>                   <C>
  Balance at beginning of year                                                 $      262,480        $      223,091
  Service cost                                                                          3,728                 3,308
  Participants' contributions                                                           1,308                 1,132
  Interest cost                                                                        13,656                12,646
  Plan amendments                                                                           -                   756
  Actuarial loss                                                                       21,941                20,238
  Benefits paid                                                                       (10,024)              (10,413)
  Change in currency exchange rates                                                   (19,931)               11,722
                                                                               ------------------    -----------------

       Balance at end of year                                                  $      273,158        $      262,480
                                                                               ==================    =================

Change in plan assets:
  Fair value at beginning of year                                              $      188,659        $      158,923
  Actual return on plan assets                                                         47,951                21,291
  Employer contributions                                                                9,136                10,027
  Participants' contributions                                                           1,308                 1,132
  Benefits paid                                                                       (10,024)              (10,413)
  Change in currency exchange rates                                                   (13,788)                7,699
                                                                               ------------------    -----------------

       Fair value at end of year                                               $      223,242        $      188,659
                                                                               ==================    =================

Funded status:
  Plan assets under projected benefit obligations                              $      (49,916)       $      (73,821)
   Unrecognized:
     Actuarial loss                                                                    68,559                91,682
     Prior service cost                                                                 2,852                 3,407
                                                                               ------------------    -----------------

       Total prepaid pension cost                                              $       21,495        $       21,268
                                                                               ==================    =================

Accumulated benefit obligation                                                 $      270,120        $      260,273
                                                                               ==================    =================

Amounts recognized in balance sheets:
  Intangible pension asset                                                     $       -             $        3,407
  Noncurrent prepaid pension cost                                                      22,337                10,531
  Current pension liability                                                            (5,353)               (5,285)
  Noncurrent pension liability                                                        (58,450)              (77,515)
  Accumulated other comprehensive loss                                                 62,961                90,130
                                                                               ------------------    -----------------

                                                                               $       21,495        $       21,268
                                                                               ==================    =================
</TABLE>



<PAGE>


     As of December 31, 2005, the Company's  European  defined  benefit  pension
plans have accumulated benefit obligations totaling $190.7 million, which are in
excess of fair value of plan assets of $138.5 million.  As of December 31, 2004,
all of the Company's  defined  benefit  pension plans have  accumulated  benefit
obligations in excess of fair value of plan assets.

     The components of the net periodic pension expense are set forth below:

<TABLE>
<CAPTION>
                                                                              Year ended December 31,
                                                               -------------------------------------------------------
                                                                    2005                2004               2003
                                                               ----------------    ----------------   ----------------
                                                                                   (In thousands)

<S>                                                            <C>                 <C>                <C>
Service cost                                                   $        3,728      $        3,308     $        2,858
Interest cost                                                          13,656              12,646             11,087
Expected return on plan assets                                        (14,833)            (13,098)            (9,504)
Amortization of unrecognized prior service cost                           556                 489                576
Amortization of net losses                                              4,796               4,357              3,875
                                                               ----------------    ----------------   ----------------

  Net pension expense                                          $        7,903      $        7,702     $        8,892
                                                               ================    ================   ================
</TABLE>

     The Company used the  following  discount  rate,  long-term  rate of return
("LTRR") and salary rate increase weighted-average  assumptions to arrive at the
aforementioned benefit obligations and net periodic expense:

<TABLE>
<CAPTION>
                                      Significant assumptions used to calculate projected and accumulated
                                                      benefit obligations at December 31,
                           -------------------------------------------------------------------------------------------
                                               2005                                           2004
                           ---------------------------------------------    ------------------------------------------
                              Discount                   Salary increase       Discount                      Salary
                                rate           LTRR                              rate          LTRR         increase
                           -------------- ------------- ----------------    ------------- -------------- -------------

<S>                             <C>           <C>             <C>               <C>           <C>            <C>
U.S. plan                       5.50%         10.00%           n/a              5.65%         10.00%          n/a
U.K. plan                       4.75%          6.70%          3.25%             5.30%          7.10%         3.25%
Savoie plan                     5.25%          3.47%           2.50%            5.30%          5.25%         2.50%
</TABLE>

<TABLE>
<CAPTION>
                                     Significant assumptions used to calculate net periodic pension expense
                                                        for the year ended December 31,
                           -------------------------------------------------------------------------------------------
                                      2005                            2004                           2003
                           ----------------------------    ---------------------------    ----------------------------
                              Discount                        Discount                       Discount
                                rate           LTRR             rate          LTRR             rate           LTRR
                           -------------- -------------    -------------- ------------    -------------- -------------

<S>                             <C>           <C>               <C>           <C>              <C>           <C>
U.S. plans                      5.65%         10.00%            6.00%         10.00%           6.25%         8.50%
U.K. plan                       5.30%          7.10%            5.50%          7.10%           5.70%         6.70%
Savoie plan                     5.30%          5.25%            5.50%          5.25%           5.70%         6.00%
</TABLE>

     The Company currently  expects to make cash  contributions of approximately
$8.5  million,  principally  in the U.K., to its defined  benefit  pension plans
during 2006.



<PAGE>


     The U.S. plan(s) paid benefits of approximately  $5.6 million in 2005, $5.7
million in 2004 and $5.6  million in 2003,  and the U.K.  plan paid  benefits of
approximately  $4.3  million in 2005,  $4.7  million in 2004 and $4.3 million in
2003.  Benefits  paid under the Savoie plan were less than $0.1 million for each
of 2005, 2004 and 2003. Based upon current projections, the Company believes the
plans will be required to pay the following benefits over the next ten years:

<TABLE>
<CAPTION>
                                                                         Projected retirement benefits
                                                           -----------------------------------------------------------
                                                              U.S. Plan             U.K.Plan               Total
                                                           ----------------     -----------------    -----------------
                                                                                  (In thousands)
Year ending December 31,
<S>  <C>                                                     <C>                        <C>            <C>
     2006                                                    $     5,872                4,270          $    10,142
     2007                                                    $     5,902                4,387          $    10,289
     2008                                                    $     5,910                4,508          $    10,418
     2009                                                    $     5,902                4,632          $    10,534
     2010                                                    $     5,877                4,760          $    10,637
     2011 through 2015                                       $    29,397               25,839          $    55,236
</TABLE>

     The assets of the defined benefit pension plans are invested as follows:

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2005                  2004
                                                                               ------------------    -----------------
US plan:
<S>                                                                                    <C>                   <C>
   Equity securities                                                                   93.2%                 84.3%
   Debt securities                                                                      3.5%                 14.1%
   Cash and other                                                                       3.3%                  1.6%
                                                                               ------------------    -----------------

                                                                                      100.0%                100.0%
                                                                               ==================    =================

European plans:
   Equity securities                                                                   84.6%                 86.9%
   Debt securities                                                                     15.4%                 13.1%
                                                                               ------------------    -----------------

                                                                                      100.0%                100.0%
                                                                               ==================    =================
</TABLE>

     During the second quarter of 2003, the Company  transferred all of its U.S.
plans' assets into the CMRT;  however,  the  Company's  plan assets are invested
only in the  portion  of the CMRT that does not hold  TIMET  common  stock.  The
CMRT's long-term investment objective is to provide a rate of return exceeding a
composite of broad market equity and fixed income indices (including the S&P 500
and certain Russell indices) utilizing both third-party  investment  managers as
well as investments  directed by Mr. Simmons.  During the 18-year history of the
CMRT through  December 31, 2005, the average annual rate of return earned by the
CMRT, as  calculated  based on the average  percentage  change in the CMRT's net
asset  value per CMRT unit for each  applicable  year,  has been 14% (with a 36%
return for 2005).  Such parties  have in the past,  and may again in the future,
periodically  change the  relative  asset mix based upon,  among  other  things,
advice they receive from third-party  advisors and their  expectation as to what
asset mix will generate the greatest overall return.



<PAGE>


     During  2003,  the  trustees for the U.K.  plan  selected a new  investment
advisor  (effective in 2004) for the U.K. plan and modified its asset allocation
goals. The Company's future expected long-term rate of return on plan assets for
its  U.K.  plan  is  based  on an  asset  allocation  assumption  of 80%  equity
securities  and 20% fixed  income  securities  by the end of 2006 and 75% equity
securities  and 25% fixed income  securities by the end of 2007, and all current
contributions  to the plan, net of benefits  paid, are invested  wholly in fixed
income securities in order to gradually effect the shift.

     Postretirement  benefits other than pensions.  The Company provides certain
health care and life insurance  benefits on a  cost-sharing  basis to certain of
its U.S. retirees and certain of its active U.S. employees upon retirement,  for
whom health care  coverage  generally  terminates  once the retiree (or eligible
dependent) becomes  Medicare-eligible  or reaches age 65,  effectively  limiting
coverage for these  participants to less than ten years based on TIMET's minimum
retirement age. The Company also provides certain postretirement health care and
life  insurance  benefits on a cost sharing basis to closed groups of certain of
its U.S.  retirees,  for whom health care  coverage  generally  reduces once the
retiree (or eligible  dependent) becomes  Medicare-eligible,  but whose coverage
continues until death. The Company funds such benefits as they are incurred, net
of any contributions by the retirees.

     The  plan  under  which  these  benefits  are  provided  is  unfunded,  and
contributions to the plan during the year equal benefits paid. The components of
accumulated  OPEB  obligations  and periodic  OPEB cost,  based on a December 31
measurement date, are set forth in the following tables:

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2005                  2004
                                                                               ------------------    -----------------
                                                                                           (In thousands)
Actuarial present value of accumulated OPEB obligations:
<S>                                                                            <C>                   <C>
  Balance at beginning of year                                                 $        34,441       $        28,584
  Service cost                                                                             661                   540
  Interest cost                                                                          1,652                 1,780
  Actuarial (gain) loss                                                                 (3,614)                6,062
  Participant contributions                                                              1,131                 1,266
  Benefits paid                                                                         (3,446)               (3,791)
                                                                               ------------------    -----------------
  Balance at end of year                                                                30,825                34,441
Unrecognized net actuarial loss                                                        (15,027)              (19,621)
Unrecognized prior service cost                                                          1,963                 2,427
                                                                               ------------------    -----------------
Total accrued OPEB cost                                                                 17,761                17,247
Less current portion                                                                     2,181                 2,777
                                                                               ------------------    -----------------

  Noncurrent accrued OPEB cost                                                 $        15,580       $        14,470
                                                                               ==================    =================
</TABLE>

<TABLE>
<CAPTION>
                                                                                 Year ended December 31,
                                                                     -------------------------------------------------
                                                                         2005              2004              2003
                                                                     --------------    --------------    -------------
                                                                                      (In thousands)

<S>                                                                  <C>               <C>               <C>
Service cost                                                         $       661       $       540       $       487
Interest cost                                                              1,652             1,780             1,722
Amortization of unrecognized prior service cost                             (464)             (464)             (464)
Amortization of net losses                                                   980             1,120               956
                                                                     --------------    --------------    -------------

  Net OPEB expense                                                   $     2,829       $     2,976       $     2,701
                                                                     ==============    ==============    =============
</TABLE>


<PAGE>


     The Company used the  following  weighted-average  discount rate and health
care cost  trend  rate  ("HCCTR")  assumptions  to arrive at the  aforementioned
benefit obligations and net periodic expense:

<TABLE>
<CAPTION>
                                                                 Significant assumptions used to calculate
                                                                 accumulated OPEB obligation at December 31,
                                                      ----------------------------------------------------------------
                                                                 2005                                2004
                                                      ----------------------------       -----------------------------

<S>                                                              <C>                                <C>
Discount rate                                                    5.50%                              5.65%
Beginning HCCTR                                                  8.23%                              9.29%
Ultimate HCCTR                                                   4.00%                              4.00%
Ultimate year                                                    2010                                2010
</TABLE>

<TABLE>
<CAPTION>
                                                   Significant assumptions used to calculate net periodic
                                                        OPEB expense for the year ended December 31,
                                        ------------------------------------------------------------------------------
                                                  2005                       2004                       2003
                                        -----------------------     -----------------------     ----------------------

<S>                                               <C>                         <C>                         <C>
Discount rate                                     5.65%                       6.00%                       6.25%
Beginning HCCTR                                   9.29%                      10.35%                      11.35%
Ultimate HCCTR                                    4.00%                       4.00%                       4.25%
Ultimate year                                     2010                        2010                       2010
</TABLE>

     If the HCCTR were  increased  by one  percentage  point for each year,  the
aggregate of the service and interest cost components of OPEB expense would have
increased approximately $0.3 million in 2005, and the actuarial present value of
accumulated   OPEB  obligations  at  December  31,  2005  would  have  increased
approximately $3.2 million.  If the HCCTR were decreased by one percentage point
for each year, the aggregate of the service and interest cost components of OPEB
expense  would  have  decreased  approximately  $0.3  million  in 2005,  and the
actuarial  present value of  accumulated  OPEB  obligations at December 31, 2005
would have decreased approximately $3.5 million.

     Based upon  current  projections,  the Company  will be required to pay the
following OPEB benefits over the next ten years:

<TABLE>
<CAPTION>
                                        Projected            Projected            Projected         Projected net
                                     gross payments           retiree              Part D              payments
                                                           contributions           subsidy
                                     ----------------    ------------------    ----------------    -----------------
                                                                     (In thousands)
Year ended December 31,
      <S>                             <C>                        <C>                  <C>           <C>
      2006                            $      3,767               (1,394)              (199)         $        2,174
      2007                            $      4,001               (1,481)              (410)         $        2,110
      2008                            $      4,270               (1,577)              (439)         $        2,254
      2009                            $      4,570               (1,693)              (471)         $        2,406
      2010                            $      4.821               (1,785)              (501)         $        2,535
      2011 through 2015               $     28,983              (10,784)            (3,012)         $       15,187
</TABLE>



<PAGE>


     The Medicare  Prescription Drug,  Improvement and Modernization Act of 2003
(the  "Medicare  Act of 2003")  introduced a  prescription  drug  benefit  under
Medicare  (Medicare Part D) as well as a federal  subsidy to sponsors of retiree
health care benefit  plans that  provide a benefit that is at least  actuarially
equivalent to Medicare Part D. In May 2004, the Financial  Accounting  Standards
Board ("FASB")  issued FSP No. 106-2 which  provides  guidance on (i) accounting
for  the  effects  of the  Medicare  Act of 2003  once  the  Company  is able to
determine actuarial equivalency and (ii) various required disclosures.

     During 2005, the Company  determined that the benefits provided by its U.S.
health and  welfare  plan are  actuarially  equivalent  to the  Medicare  Part D
benefit and therefore the Company is eligible for the federal  subsidy  provided
for by the Medicare  2003 Act. The effect of such  subsidy,  which was accounted
for  prospectively  from  the  date  actuarial  equivalence  was  determined  in
accordance  with FASB Staff  Position No. 106-2,  resulted in a reduction in the
Company's  actuarial  present value of its  accumulated  OPEB obligation of $5.4
million at December 31, 2005 related to benefits  attributed to past service and
a reduction in net periodic OPEB cost of $0.7 million in 2005 (reflecting a $0.1
million reduction in service cost, a $0.3 million reduction in interest cost and
a $0.3 million reduction in amortization of net losses).

Note 18 - Related party 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.  The Company
continuously considers, reviews and evaluates such transactions, and understands
that  Contran,  Valhi and related  entities  consider,  review and evaluate such
transactions.  Depending  upon  the  business,  tax and  other  objectives  then
relevant,  it is possible  that the Company might be a party to one or more such
transactions in the future.

     Under the terms of various intercorporate services agreements ("ISAs") that
the  Company  has  historically  entered  into  with  various  related  parties,
employees of one company provide certain  management,  tax planning,  financial,
risk management,  environmental,  administrative,  facility or other services to
the other company on a fee basis.  Such charges are based upon  estimates of the
time devoted by the  employees of the provider of the services to the affairs of
the recipient and the  compensation of such persons,  or the cost of facilities,
equipment  or supplies  provided.  These ISAs are  reviewed  and approved by the
independent directors of the companies that are parties to the agreements.

     In 2004, the Company,  Tremont LLC (a wholly-owned subsidiary of Valhi) and
Contran  agreed to enter into a single,  combined ISA covering the  provision of
services by Contran to TIMET and the  provision  of services by TIMET to Tremont
LLC and NL.  Under the  combined  ISA,  TIMET paid a net amount of $1.4  million
during  2005 and $1.2  million  during  2004.  The  Company  has  extended  this
agreement  through 2006.  Because Contran employees will in 2006 perform certain
executive  and  management  functions  previously  performed by employees of the
Company,  the Company  expects to pay a net amount of $3.2 million under the ISA
during 2006.

     In  2003,  the  Company  had an ISA with  Tremont  LLC to  provide  certain
management,  financial,  environmental,  human  resources and other  services to
Tremont  LLC,  under  which  Tremont  LLC paid the  Company  approximately  $0.2
million.

     During 2003, the Company had an ISA with NL, a majority-owned subsidiary of
Valhi,  whereby NL provided  certain  financial and other services to TIMET at a
cost to TIMET of  approximately  $15,000.  In 2004, the ISA with NL was combined
with the ISA with Contran.

     In 2003,  the Company  entered  into an ISA with  Contran  whereby  Contran
provided certain business,  financial and other services to TIMET.  During 2003,
TIMET paid Contran approximately $0.3 million related to this agreement.

     The  Company  previously  extended  market-rate  loans to certain  officers
pursuant to a  Board-approved  program to facilitate  the officers'  purchase of
Company  stock and BUCS and to pay  applicable  taxes on  shares  of  restricted
Company  stock as such  shares  vested.  The  Company  terminated  this  program
effective July 30, 2002,  subject to continuing only those loans  outstanding at
that time in accordance with their then-current  terms. The loans were generally
payable in five annual  installments  beginning  six years from date of loan and
bore interest at a rate tied to the Company's borrowing rate, payable quarterly.
At December 31, 2005, all officer loans had been repaid to the Company in full.

     In  2004,  the  Company  entered  into  an  agreement  with  Waste  Control
Specialists LLC ("WCS"),  a wholly owned subsidiary of Valhi, for the removal of
certain waste materials from the Company's  Henderson  plant site.  During 2005,
TIMET paid $1.3  million to WCS for the  removal  of such  materials,  and TIMET
currently  expects  to pay an  additional  $0.7  million  to  WCS  in  2006  for
completion  of  this  removal,   which  is  accrued  in  the  Company's  current
environmental obligations.

     Tall Pines  Insurance  Company  ("Tall  Pines")  (including  a  predecessor
company,  Valmont  Insurance  Company) and EWI RE, Inc.  ("EWI")  provide for or
broker  insurance  policies  for  Contran and  certain of its  subsidiaries  and
affiliates,  including the Company.  Tall Pines is a wholly owned  subsidiary of
Valhi,  and EWI is a wholly owned  subsidiary of NL.  Consistent  with insurance
industry  practices,  Tall Pines and EWI receive  commissions from the insurance
and  reinsurance  underwriters  and/or  assess fees for the  policies  that they
provide or broker.  The  Company's  aggregate  premiums for such  policies  were
approximately $4.7 million in 2005 and $2.3 million in 2004 and 2003. Tall Pines
purchases  reinsurance for  substantially  all of the risks it underwrites.  The
Company expects that these  relationships  with Tall Pines and EWI will continue
in 2006.

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



<PAGE>


     TIMET supplies titanium strip to VALTIMET under a long-term  contract.  The
LTA was  entered  into in 1997 and  expires  in 2007.  Under the LTA,  TIMET has
agreed to provide a certain  percentage of VALTIMET's  titanium  requirements at
formula-determined  selling  prices,  subject  to  certain  conditions.  Certain
provisions  of this contract have been amended in the past and may be amended in
the future to meet  changing  business  conditions.  Sales to VALTIMET  were $30
million in 2005,  $21  million  in 2004 and $9  million  in 2003.  Additionally,
VALTIMET converts  TIMET-owned material into welded tube for TIMET on a purchase
order  basis.  Payments  by TIMET to VALTIMET  for such  services  totaled  $1.8
million in 2005, $1.7 million in 2004, and $2.1 million in 2003.

     Tremont  LLC owns 32% of BMI.  Among other  things,  BMI  provides  utility
services  (primarily  water  distribution,  maintenance  of a common  electrical
facility and sewage disposal  monitoring) to the Company and other manufacturers
within an industrial  complex located in Henderson,  Nevada.  Power transmission
and sewer  services are  provided on a cost  reimbursement  basis,  similar to a
cooperative, while water delivery is currently provided at the same rates as are
charged by BMI to an unrelated  third party.  Amounts paid by the Company to BMI
for these utility  services were $1.4 million  during 2005,  $1.3 million during
2004 and $1.2  million  during  2003.  The Company  also paid BMI an  electrical
facilities upgrade fee of $0.8 million in 2005, and $1.3 million in each of 2004
and 2003. This fee continues at $0.8 million  annually for 2006 through 2009 and
terminates completely after January 2010.

     Based on the previous  agreements and  relationships,  receivables from and
payables to related  parties  (aggregated in accounts and other  receivables and
other current liabilities,  respectively) included in the Company's Consolidated
Balance Sheets are summarized in the following table:

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      2005                 2004
                                                                                -----------------    -----------------
                                                                                           (In thousands)
Receivables from related parties:
<S>                                                                             <C>                  <C>
   VALTIMET                                                                     $         7,080      $         2,264
   Notes receivable from officers                                                             -                   49
                                                                                -----------------    -----------------

                                                                                $         7,080      $         2,313
                                                                                =================    =================

Payables to related parties:
   VALTIMET                                                                     $         1,556      $           863
   Kronos                                                                                     7                   15
                                                                                -----------------    -----------------

                                                                                $         1,563      $           878
                                                                                =================    =================
</TABLE>



<PAGE>


Note 19 - Commitments and contingencies

     Long-term  agreements.  The Company has LTAs with certain major  customers,
including,  among  others,  Boeing,  Rolls-Royce  plc and its  German  and  U.S.
affiliates  ("Rolls-Royce"),  United Technologies  Corporation  ("UTC",  Pratt &
Whitney and related companies),  Societe Nationale d'Etude et de Construction de
Moteurs  d'Aviation  ("Snecma"),  Wyman-Gordon  (a unit of  Precision  Castparts
Corporation  ("PCC")) and VALTIMET.  These  agreements  expire from 2007 through
2012, are subject to certain  conditions,  and generally provide for (i) minimum
market  shares of the  customers'  titanium  requirements  or firm annual volume
commitments,  (ii)  formula-determined  prices  (although some contain  elements
based on market  pricing) and (iii) price  adjustments  for certain raw material
and energy cost fluctuations.  Generally, the LTAs require the Company's service
and product performance to meet specified criteria and contain a number of other
terms and conditions customary in transactions of these types. In certain events
of  nonperformance  by the Company or the  customer,  the LTAs may be terminated
early.  Although it is possible that some portion of the business would continue
on a non-LTA basis, the termination of one or more of the LTAs could result in a
material  effect on the Company's  business,  results of  operations,  financial
position or liquidity.  The LTAs were designed to limit selling price volatility
to  the  customer,  while  providing  TIMET  with a  committed  base  of  volume
throughout the aerospace business cycles.

     During 2001,  the Company  recorded a charge of $3.0 million  relating to a
titanium sponge  supplier's  agreement to renegotiate  certain  components of an
agreement entered into in 1997,  including minimum purchase commitments for 1999
through  2001.  The $0.6 million  accrued and unpaid  balance as of December 31,
2004 was paid during 2005.  In September  2002,  the Company  entered into a new
agreement  with this supplier,  effective from January 1, 2002 through  December
31, 2007.  This new  agreement  replaced the 1997  agreement.  The new agreement
requires minimum annual purchases by the Company of approximately $38 million in
2006 and $34 million in 2007.

     Concentration of credit and other risks. Substantially all of the Company's
sales and operating income (loss) are derived from operations based in the U.S.,
the U.K.,  France and Italy. As shown in the below table, the Company  generates
over half of its sales revenue from sales to the commercial aerospace sector. As
described  previously,  the  Company  has  LTAs  with  certain  major  aerospace
customers,  including Boeing,  Rolls-Royce,  UTC, Snecma and Wyman-Gordon.  This
concentration  of customers may impact the Company's  overall exposure to credit
and other risks, either positively or negatively, in that all of these customers
may be  similarly  affected  by the  same  economic  or  other  conditions.  The
following table provides  supplemental sales revenue  information  regarding the
Company's  dependence on the commercial  aerospace  sector and certain  customer
relationships:


<PAGE>



<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                                  --------------------------------------------------
                                                                       2005              2004              2003
                                                                  ---------------    --------------    -------------
                                                                         (Percentage of total sales revenue)
Sales revenue to:

<S>                                                                       <C>               <C>              <C>
  Commercial aerospace sector                                             57%               57%              57%
                                                                  ===============    =============    ==============

  Customers under LTAs                                                    49%               44%              41%
                                                                  ===============    =============    ==============

  Significant customers under LTAs (1):
     Rolls-Royce and other Rolls-Royce suppliers (2)                      12%               15%              15%
                                                                  ===============    =============    ==============

  Ten largest customers                                                   45%               48%              44%
                                                                  ===============    =============    ==============

  Significant customers (1):
     PCC and related entities                                             13%               13%              13%
                                                                  ===============    =============    ==============

--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Greater than 10% of net sales.
(2)  Includes  direct  sales to certain of the  PCC-related  entities  under the
     terms of the Rolls-Royce LTAs.

     The availability of certain of the Company's raw materials (titanium sponge
and  titanium  scrap) has  tightened  during  the past  several  quarters,  and,
consequently,  the prices for such raw materials have  increased.  To the extent
that this trend  continues,  the  Company  could be  limited  in its  ability to
produce enough  titanium  products to fully meet customer  demand.  In addition,
during 2005, certain of the Company's LTAs limited the Company's ability to pass
on all of its increased raw material costs.  However,  the Company's  ability to
offset  increased  material costs with higher selling prices should  increase in
2006,  as  many  of  the  Company's  LTAs  have  either  expired  or  have  been
renegotiated for 2006 with price adjustments that take into account raw material
cost fluctuations.

     Operating  leases.  The Company  leases  certain  manufacturing  and office
facilities and various  equipment.  Most of the leases contain  purchase  and/or
various   term  renewal   options  at  fair  market  and  fair  rental   values,
respectively.  In most cases  management  expects that leases will be renewed or
replaced by other leases in the normal course of business.  Net rent expense was
$5.1 million in 2005, $3.9 million in 2004 and $4.0 million in 2003.

     At  December  31,  2005,  future  minimum  payments  under   noncancellable
operating  leases having an initial or remaining term in excess of one year were
as follows:

<TABLE>
<CAPTION>
                                                                                                      Amount
                                                                                                --------------------
                                                                                                  (In thousands)
Year ending December 31,
<S>                                                                                               <C>
  2006                                                                                            $        3,103
  2007                                                                                                     3,363
  2008                                                                                                     2,640
  2009                                                                                                     2,260
  2010                                                                                                     2,219
  2011 and thereafter                                                                                     18,512
                                                                                                --------------------

                                                                                                  $       32,097
                                                                                                ====================
</TABLE>



<PAGE>


     Environmental  matters.  TIMET and BMI entered  into an  agreement  in 1999
which  provided  that upon  payment by BMI of the cost to design,  purchase  and
install the  technology  and  equipment  necessary  to allow the Company to stop
discharging  liquid and solid  effluents and  co-products  into  settling  ponds
located on certain lands owned by the Company adjacent to its Henderson,  Nevada
plant site (the "TIMET Pond Property"),  the Company would convey the TIMET Pond
Property to BMI, at no additional  cost. In November  2004,  the Company and BMI
entered into several agreements that superceded the 1999 agreement.  Under these
new agreements,  the Company conveyed the TIMET Pond Property to BMI in exchange
for (i) $12 million  cash,  (ii) BMI's  assumption  of the liability for certain
environmental issues associated with the TIMET Pond Property,  including certain
possible  groundwater  issues for which the Company  currently  has $0.6 million
accrued,  and (iii) an additional $1.2 million cash payment received from BMI in
June 2005.

     The  Company is also  continuing  assessment  work with  respect to its own
active plant site in Henderson,  Nevada.  The Company currently has $2.5 million
accrued  based on the  undiscounted  cost  estimates of the  probable  costs for
remediation  of these sites,  which  includes an increase in the accrual of $0.5
million  during 2005  related to  specific  future  remediation  costs which the
Company now considers probable. The Company expects these accrued expenses to be
paid over a period of up to thirty years.

     At December 31, 2005, the Company had accrued an aggregate of approximately
$3.2 million for  environmental  matters,  including those discussed  above. The
upper end of the range of reasonably  possible costs to remediate  these matters
is  approximately  $5.4  million.  The Company  records  liabilities  related to
environmental  remediation  obligations when estimated future costs are probable
and  reasonably  estimable.  Such  accruals are adjusted as further  information
becomes  available  or  circumstances  change.  Estimated  future  costs are not
discounted to their present  value.  It is not possible to estimate the range of
costs  for  certain  sites.  The  imposition  of  more  stringent  standards  or
requirements  under  environmental  laws or  regulations,  the results of future
testing and analysis undertaken by the Company at its operating facilities, or a
determination  that the Company is  potentially  responsible  for the release of
hazardous  substances at other sites, could result in costs in excess of amounts
currently  estimated to be required for such matters.  No assurance can be given
that  actual  costs  will not exceed  accrued  amounts or that costs will not be
incurred  with  respect to sites as to which no problem  is  currently  known or
where no estimate can presently be made. Further, there can be no assurance that
additional environmental matters will not arise in the future.

     Legal proceedings.  At December 31, 2005, the Company had accrued less than
$0.1  million  for  expected  legal   settlement   costs.  The  Company  records
liabilities  related to legal  proceedings when estimated costs are probable and
reasonably estimable.  Such accruals are adjusted as further information becomes
available or circumstances change.  Estimated future costs are not discounted to
their  present  value.  It is not  possible to  estimate  the range of costs for
certain  matters.  No  assurance  can be given that actual costs will not exceed
accrued amounts or that costs will not be incurred with respect to matters as to
which no problem is currently  known or where no estimate can presently be made.
Further,  there can be no assurance that additional  legal  proceedings will not
arise in the future.

     Other. The Company has entered into letters of credit to collateralize  (i)
potential workers'  compensation claims in Ohio and Nevada and (ii) future usage
of electricity in Nevada.  As of December 31, 2005, the outstanding  amounts for
such letters of credit,  which reduce the Company' excess availability under its
U.S. credit agreement, were $2.3 million and $2.1 million, respectively.

     TIMET is the  primary  obligor on two $1.5  million  workers'  compensation
bonds  issued  on  behalf  of a former  subsidiary,  Freedom  Forge  Corporation
("Freedom Forge"),  which TIMET sold in 1989. Freedom Forge filed for Chapter 11
bankruptcy  protection  on  July  13,  2001,  and  discontinued  payment  on the
underlying  workers'  compensation  claims in November 2001.  During 2002, TIMET
received notices that the issuers of the bonds were required to make payments on
the first  bond with  respect to  certain  of these  claims and were  requesting
reimbursement  from  TIMET.  As of  December  31,  2005,  the  Company  has made
aggregate payments under the two bonds of $1.5 million, and $0.2 million remains
accrued for future  payments.  TIMET may revise its  estimated  liability  under
these bonds in the future as additional facts become known or claims develop.
<PAGE>

     The Company is involved in various employment, environmental,  contractual,
product liability,  general liability and other claims,  disputes and litigation
incidental  to  its  business   including  those  discussed  above.  In  several
instances,  the Company believes it has insurance coverage to eliminate any risk
of loss  (other  than  standard  deductibles,  which  generally  are less tha $1
million).  The Company  currently  believes  that the outcome of these  matters,
individually  and in the aggregate,  will not have a material  adverse effect on
the  Company's  financial  position,  liquidity or overall  trends in results of
operations. 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
the results of  operations  or cash flows in that  particular  period.  In cases
where these employment,  environmental,  contractual, product liability, general
liability  and other clams,  disputes and  litigation  involve  matters that the
Company has concluded the risk of loss is not probable, but is more than remote,
the  Company  believes  the range of loss,  to the extent the Company is able to
reasonably  estimate  a range of loss,  would be  limited at the high end to the
Company's standard insurance deductibles.

Note 20 - Earnings per share

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

<TABLE>
<CAPTION>
                                                                             Year ended December 31,
                                                               -----------------------------------------------------
                                                                                      2004                2003
                                                                   2005            (restated)           (restated)
                                                               --------------     --------------    ----------------
                                                                                  (In thousands)
Numerator:
  Net income (loss) attributable to
<S>                                                            <C>                <C>               <C>
     common stockholders                                       $    143,701       $     43,300      $    (24,443)
  Interest expense on BUCS (net of tax)                                 310                 --                 -
  Dividends on Series A Preferred Stock                              12,244              4,398                 -
                                                               --------------     --------------    ----------------

  Diluted net income (loss) attributable
     to common stockholders                                    $    156,255       $     47,698      $    (24,443)
                                                               ==============     ==============    ================

Denominator:
  Average common shares outstanding                                  65,391             63,525            63,374
  Average dilutive stock options and
     restricted stock                                                   365                266                 -
  BUCS                                                                  310                  -                 -
  Series A Preferred Stock                                           24,790              8,711                 -
                                                               --------------     --------------    ----------------

Diluted shares                                                       90,856             72,502            63,374
                                                               ==============     ==============    ================
</TABLE>



<PAGE>


     For the years ended  December 31, 2004 and 2003, the conversion of the BUCS
was  antidilutive.  Stock  options to purchase  244,000  shares of common  stock
during 2005,  1,252,400 shares during 2004 and 2,193,000 shares during 2003 were
excluded from the  calculation of diluted  earnings (loss) per share because the
exercise price for such options was greater than the average market price of the
common shares and such options were therefore antidilutive during the respective
period.  An additional  183,740  incremental stock options and restricted shares
were excluded from the 2003  calculation  because they were  antidilutive due to
the loss for that year.

Note 21 - Business segment information

     The  Company's  production  facilities  are  located in the United  States,
United  Kingdom,  France and Italy,  and its  products are sold  throughout  the
world.  The Company's Chief  Executive  Officer is the Company's chief operating
decision  maker  ("CODM") as that term is defined in SFAS No.  131,  Disclosures
about  Segments of an  Enterprise  and Related  Information.  The CODM  receives
financial  information  about  TIMET  from which he makes  decisions  concerning
resource  utilization  and performance  analysis only on a global,  consolidated
basis. Based upon this level of  decision-making,  the Company currently has one
segment, its worldwide "Titanium melted and mill products" segment. Sales, gross
margin,   operating  income  (loss),  inventory  and  receivables  are  the  key
management  measures used to evaluate segment  performance.  The following table
provides  segment  information   supplemental  to  the  Company's   Consolidated
Financial Statements:


<PAGE>



<TABLE>
<CAPTION>
                                                                          Year ended December 31,
                                                         -----------------------------------------------------------
                                                               2005                  2004                2003
                                                         -----------------     -----------------    ----------------
                                                                (In thousands, except product shipment data)
Titanium melted and mill products:
<S>                                                      <C>                   <C>                  <C>
    Melted product net sales                             $     112,252         $      72,092        $      57,409
    Mill product net sales                                     528,555               364,248              279,563
    Other product sales                                        108,970                65,488               55,132
    Other (1)                                                        -                     -               (6,800)
                                                         -----------------     -----------------    ----------------
                                                         $     749,777         $     501,828        $     385,304
                                                         =================     =================    ================

Melted product shipments:
    Volume (metric tons)                                         5,655                 5,360                4,725
    Average price ($ per kilogram)                       $       19.85         $       13.45        $       12.15

Mill product shipments:
    Volume (metric tons)                                        12,660                11,365                8,875
    Average price ($ per kilogram)                       $       41.75         $       32.05        $       31.50

Geographic segments:
   Net sales - point of origin:
     United States                                       $     512,313         $     325,857        $     277,947
     United Kingdom                                            201,936               154,535              111,313
     France                                                     91,610                57,942               44,877
     Other Europe                                               46,525                29,744               30,566
     Other (1)                                                       -                     -               (6,800)
     Eliminations                                             (102,607)              (66,250)             (72,599)
                                                         -----------------     -----------------    ---------------
                                                         $     749,777         $     501,828        $     385,304
                                                         =================     =================    ===============

   Net sales - point of destination:
     United States                                       $     422,143         $     277,317        $     217,653
     United Kingdom                                            136,638               100,081               76,086
     France                                                     87,811                55,959               43,410
     Other locations                                           103,185                68,471               54,955
     Other (1)                                                       -                     -               (6,800)
                                                         -----------------     -----------------    ---------------
                                                         $     749,777         $     501,828        $     385,304
                                                         =================     =================    ===============

   Long-lived assets - property and equipment, net:
     United States                                       $     193,623         $     165,661        $     170,400
     United Kingdom                                             53,576                56,255               62,287
     Other Europe                                                5,791                 6,257                6,495
                                                         -----------------     -----------------    ---------------
                                                         $     252,990         $     228,173        $     239,182
                                                         =================     =================    ===============

-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  Represents  the effect of a $6.8  million  reduction  to sales  during 2003
     related to termination of a purchase and sale agreement with  Wyman-Gordon.
     See further discussion in Note 9.

     Export sales from U.S.-based  operations  approximated  $54 million in 2005
and $16 million in each of 2004 and 2003.



<PAGE>


Note 22 - Quarterly results of operations (unaudited)

<TABLE>
<CAPTION>
                                                                           For the quarter ended
                                                      ----------------------------------------------------------------
                                                        March 31          June 30         Sept. 30         Dec. 31
                                                      -------------    --------------   -------------    -------------
                                                                   (In millions, except per share data)
Year ended December 31, 2005:

<S>                                                   <C>              <C>              <C>              <C>
  Net sales                                           $    155.2       $    183.7       $    190.0       $    220.8
  Gross margin                                        $     29.0       $     47.9       $     55.7       $     66.8
  Operating income                                    $     19.4       $     36.9       $     51.7       $     63.0
  Net income attributable to
     common stockholders                              $     38.1       $     33.6       $     33.4       $     38.6

   Basic earnings per share attributable to
    common stockholders                               $     0.60       $     0.53       $     0.51       $     0.56
   Diluted earnings per share attributable to
    common stockholders                               $     0.46       $     0.41       $     0.40       $     0.45

Year ended December 31, 2004 (restated):

  Net sales                                           $    120.5       $    124.1       $    120.2       $    137.0
  Gross margin                                        $     12.8       $     17.0       $     14.7       $     19.2
  Operating (loss) income                             $      3.3       $      8.5       $     13.5       $     17.8
  Net (loss) income attributable to
     common stockholders                              $     (1.2)      $      3.4       $     25.2       $     15.9

   Basic (loss) earnings per share attributable to
    common stockholders                               $    (0.02)      $     0.05       $     0.40       $     0.25
   Diluted (loss) earnings per share attributable to
    common stockholders                               $    (0.02)      $     0.05        $     0.36      $     0.21

-------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 1 -  The sum of  quarterly  amounts may not agree to the full year  results
          due to rounding.
Note 2 -  The quarter  ended  December 31, 2004 has been restated for the change
          in accounting from LIFO to specific identification.

Note 23 - Subsequent event

     In  January  2006,  the  Company   announced  its  plans  to  relocate  and
consolidate the corporate functions  currently performed in Denver,  Colorado to
Dallas,  Texas  or its  operating  facility  in  Morgantown,  Pennsylvania.  The
Company's  estimate  of  the  cost  of  this  relocation,  consisting  of  lease
termination and employee severance costs, is approximately $3.4 million and will
be recognized during 2006.





<PAGE>




                     REPORT OF INDEPENDENT REGISTERED PUBLIC
                 ACCOUNTING FIRM ON FINANCIAL STATEMENT SCHEDULE



To the Board of Directors of Titanium Metals Corporation:

     Our  audits  of the  consolidated  financial  statements,  of  management's
assessment of the effectiveness of internal control over financial reporting and
of the effectiveness of internal control over financial reporting referred to in
our report  dated March 24, 2006  appearing  in this Annual  Report on Form 10-K
also included an audit of the financial  statement  schedule listed in the index
on page F of this Form 10-K. In our opinion,  this financial  statement schedule
presents  fairly,  in all material  respects,  the information set forth therein
when read in conjunction with the related consolidated financial statements.



/s/ PricewaterhouseCoopers LLP


Denver, Colorado
March 24, 2006


<PAGE>




                           TITANIUM METALS CORPORATION

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                 Additions
                                                        -----------------------------
                                           Balance        Charged
                                             at              to            Charged                          Balance
                                          beginning      costs and        to other                          at end
            Description                    of year        expenses        accounts        Deductions        of year
-------------------------------------    ------------   -------------    ------------    -------------    ------------

Year ended December 31, 2005:

<S>                                      <C>            <C>              <C>             <C>              <C>
   Allowance for doubtful accounts       $    1,683     $       923      $    (61) (1)   $     (562) (2)  $    1,983
                                         ============   =============    ============    =============    ============

   Allowance for excess and
     slow moving inventories             $   16,989     $    (2,770)     $ (1,006) (1)   $   -            $   13,213
                                         ============   =============    ============    =============    ============

Year ended December 31, 2004:

   Allowance for doubtful accounts       $    1,906     $       250      $     65(1)     $     (538)(2)   $    1,683
                                         ============   =============    ============    =============    ============

   Allowance for excess and
     slow moving inventories             $   16,723     $      (456)     $    722(1)     $   -            $   16,989
                                         ============   =============    ============    =============    ============

Year ended December 31, 2003:

   Allowance for doubtful accounts       $    2,386     $       623      $    144 (1)    $   (1,247) (2)  $    1,906
                                         ============   =============    ============    =============    ============

   Allowance for excess and
     slow moving inventories             $   15,090     $       508      $  1,125 (1)    $   -            $   16,723
                                         ============   =============    ============    =============    ============

   Reserve for restructuring             $       80     $     -          $  -            $      (80) (3)  $    -
                                         ============   =============    ============    =============    ============
----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Amounts represent foreign currency translation  adjustments for the related
     account.
(2)  Amounts written off and reductions in reserve, less recoveries.
(3)  Amount represents cash payments for restructuring severance obligations and
     credits to reduce the initial restructuring charge.