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

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

----

|   | · | the                cyclicality of the commercial aerospace industry; |
|--------|--------|----------------------------------------------------------------------|

|   | · | the                performance of aerospace manufacturers and us 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 our ability to reduce                or                increase supply; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                possibility of labor disruptions; |
|--------|--------|------------------------------------------------------|

|   | · | fluctuations                in currency exchange rates; |
|--------|--------|---------------------------------------------------------|

|   | · | fluctuations                in the market price of marketable                securities; |
|--------|--------|------------------------------------------------------------------------------------------|

|   | · | uncertainties                associated with new product or new market                development; |
|--------|--------|----------------------------------------------------------------------------------------------------|

|   | · | the                availability of raw materials and                services; |
|--------|--------|-------------------------------------------------------------------------------|

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

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

|   | · | competitive                products and strategies; and |
|--------|--------|---------------------------------------------------------|

|   | · | other                risks and uncertainties. |
|--------|--------|-----------------------------------------------|

----

**PART      I**

**ITEM      1: BUSINESS**

***General***
**.**

***Titanium      industry.***
** **

----

***Mill      Product Shipments by Industry Sector***

*The      Airline Monitor*
*The      Airline Monitor’s*
* *
* *

|   |   |  Forecasted                deliveries |   | %                increase (decrease)over                previous year |   |
|--------|--------|--------------------------------------------|--------|-----------------------------------------------------------------------|--------|
| Year   |   | Total                                      |   | Twin                aisle                                             |   | Total |   | Twin                aisle |   |
|   |   |                                       |   |                                                                  |   |   |   |   |   |   |   |   |   |
| 2007   |   |                                       | 925    |                                                                  |   | 117 |   |   | 12.8 | % |   | 13.6 | % |
| 2008   |   |                                       | 1,037  |                                                                  |   | 170 |   |   | 12.1 | % |   | 45.3 | % |
| 2009   |   |                                       | 1,086  |                                                                  |   | 200 |   |   | 4.71 | % |   | 17.6 | % |
| 2010   |   |                                       | 1,205  |                                                                  |   | 250 |   |   | 11.0 | % |   | 25.0 | % |
| 2011   |   |                                       | 980    |                                                                  |   | 250 |   |   | (18.7 | )% |   | - |   |

*      The      Airline Monitor*

*The      Airline Monitor*

*The      Teal Group*

**Products      and operations**
***.***

|   | (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, pipe fittings, manifolds, vessels, etc.) that are cut, formed,                welded and assembled from titanium mill                products |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Distribution.***

***Raw      materials.***

|                                      |   | Percentage                of total raw material requirements |   |
|-------------------------------------------|--------|--------------------------------------------------------------|--------|
|                                      |   |                                                         |   |   |
| Internally                produced sponge |   |                                                         | 24     | % |
| Purchased                sponge           |   |                                                         | 29     | % |
| Titanium                scrap             |   |                                                         | 40     | % |
| Alloys                                    |   |                                                         | 7      | % |
|                                      |   |                                                         |   |   |
|                                      |   |                                                         | 100    | % |

***Customer      agreements.***

----

***Markets      and customer base.***

|                                              |   | Year                ended December 31,             |   |
|---------------------------------------------------|--------|----------------------------------------------------|--------|
|                                              |   | 2004                                               |   | 2005 |   | **2006** |   |
|                                              |   | (Percentage                of total sales revenue) |   |
|                                              |   |                                               |   |   |   |   |   |   |   |   |
| Sales                revenue to customers within: |   |                                               |   |   |   |   |   |   |   |   |
| North                America                      |   |                                               | 55     | % |   | 56 | % |   | **59** | **%** |
| Europe                                            |   |                                               | 40     | % |   | 36 | % |   | **32** | **%** |
| Other                                             |   |                                               | 5      | % |   | 8 | % |   | **9** | **%** |
|                                              |   |                                               |   |   |   |   |   |   |   |   |
|                                              |   |                                               | 100    | % |   | 100 | % |   | **100** | **%** |

|                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | Year                ended December 31,             |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 2004                                               |   | 2005 |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | (Percentage                of total sales revenue) |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                               |   |   |   |   |   |   |   |   |
| Ten                largest customers                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                               | 48     | % |   | 44 | % |   | **49** | **%** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                               |   |   |   |   |   |   |   |   |
| Significant                customers:                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                               |   |   |   |   |   |   |   |   |
| PCC                and PCC-related entities (1)                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                               | 13     | % |   | 13 | % |   | **11** | **%** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                               |   |   |   |   |   |   |   |   |
| Customers                under LTAs                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                               | 44     | % |   | 47 | % |   | **39** | **%** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                               |   |   |   |   |   |   |   |   |
| Significant                customer under LTAs:                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                               |   |   |   |   |   |   |   |   |
| Rolls-Royce                (1)                (2)                                                                                                                                                                                                                                                                                                                                                                                                |   |                                               | 15     | % |   | 12 | % |   | **-** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                               |   |   |   |   |   |   |   |   |
| (1) PCC                and PCC-related entities serve as suppliers to Rolls-Royce. Certain                sales                we make directly to PCC and PCC-related entities also count towards,                and                are reflected in, the table above as sales to Rolls-Royce under the                Rolls-Royce LTA.(2) Sales                under the Rolls-Royce LTA were less than 10% in                2006. |

***Competition.***

***Research      and development.***

***Patents      and trademarks.***

***Employees.***

|                                                                         |   | Employees                at December 31, |   |
|------------------------------------------------------------------------------|--------|------------------------------------------|--------|
|                                                                         |   | 2004                                     |   | 2005 |   | **2006** |   |
|                                                                         |   |                                     |   |   |   |   |   |   |   |   |
| U.S.             |   |                                     | 1,355  |   |   | 1,450 |   |   | **1,545** |   |
| Europe                                                                       |   |                                     | 740    |   |   | 790 |   |   | **835** |   |
|                                                                         |   |                                     |   |   |   |   |   |   |   |   |
|                                                                         |   |                                     | 2,095  |   |   | 2,240 |   |   | **2,380** |   |

***Regulatory      and environmental matters.***

***Related      parties.***

***Available      information.***

**ITEM      1A: RISK FACTORS**

***The      cyclical nature of the commercial aerospace industry, which represents a      significant portion of our business, creates uncertainty regarding our future      profitability. In addition, adverse changes to, or interruptions in, our      relationships with our major commercial aerospace customers could reduce our      revenues.***

***The      titanium metals industry is highly competitive, and we may not be able to      compete successfully.***

***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.***

***The      rapid increase in titanium prices may cause our customers to look for      alternatives to titanium in their products.***

***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.***

***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.***

***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.***

**ITEM      1B: UNRESOLVED STAFF COMMENTS**

----

**ITEM      2: PROPERTIES**

|                                                            |   |                                                            |   | **Annual                      Practical****Capacities*****(3)*** |
|-----------------------------------------------------------------|--------|-----------------------------------------------------------------|--------|------------------------------------------------------------------|
|  **Manufacturing                      Location**           |   |  **Products                      Manufactured**            |   | **Melted****Products**                                           |   | **Mill****Products** |
|                                                            |   |                                                            |   | (metric                      tons)                               |
|                                                            |   |                                                            |   |                                                             |   |   |
| 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 |

***United      States production.***

***European      production.***

**ITEM      3: LEGAL PROCEEDINGS**

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

----

**PART      II**

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

| Year                ended December 31, 2005:        |   | High   |   | Low    |   |
|-----------------------------------------------------|--------|--------|--------|--------|--------|
|                                                |   |   |   |   |   |   |   |
| First                quarter                        |   | $      | 5.06   |   | $      | 2.91 |   |
| Second                quarter                       |   | $      | 7.19   |   | $      | 3.87 |   |
| Third                quarter                        |   | $      | 10.60  |   | $      | 6.16 |   |
| Fourth                quarter                       |   | $      | 19.86  |   | $      | 8.56 |   |
|                                                |   |   |   |   |   |   |   |
| Year                ended December 31, 2006:        |   |   |   |   |   |   |   |
| First                quarter                        |   | $      | 25.93  |   | $      | 15.96 |   |
| Second                quarter                       |   | $      | 47.63  |   | $      | 24.50 |   |
| Third                quarter                        |   | $      | 34.88  |   | $      | 22.77 |   |
| Fourth                quarter                       |   | $      | 33.92  |   | $      | 23.20 |   |
|                                                |   |   |   |   |   |   |   |
| January                1, 2007 to February 23, 2007 |   | $      | 38.55  |   | $      | 27.74 |   |

*** ***

***Performance      graph.***

----

***Comparison      of Cumulative Return among Titanium Metals      Corporation,***

***S&P      500 Composite Index and Self-Selected Peer Group***

*The      information contained in the performance graph shall not be deemed “soliciting      material” or “filed” with the SEC, or subject to the liabilities of Section 18      of the Securities Exchange Act, except to the extent we specifically requests      that the material be treated as soliciting material or specifically incorporates      this performance graph by reference into a document filed under the Securities      Act or the Securities Exchange Act.*

----

***Equity      compensation plan information.***

**ITEM      6: SELECTED FINANCIAL DATA**

|                                                                                                      |   | Year                ended December 31,                                                         |   |
|-----------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|--------|
|                                                                                                      |   | 2002                                                                                           |   | 2003 |   | 2004 |   | 2005 |   | 2006 |   |
|                                                                                                      |   | ($                in millions, except per share and average selling price                data) |   |
|                                                                                                      |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| STATEMENT                OF INCOME DATA:                                                                  |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                sales                                                                                  |   | $                                                                                              | 366.5  |   | $ | 385.3 |   | $ | 501.8 |   | $ | 749.8 |   | **$** | **1,183.2** |   |
| Gross                margin                                                                               |   |                                                                                           | 6.2    |   |   | 5.6 |   |   | 63.7 |   |   | 199.4 |   |   | **436.1** |   |
| Operating                income (loss)                                                               |   |                                                                                           | (11.5  | ) |   | (6.0 | ) |   | 43.0 |   |   | 171.1 |   |   | **382.8** |   |
| Interest                expense                                                                           |   |                                                                                           | 17.1   |   |   | 16.4 |   |   | 12.5 |   |   | 4.0 |   |   | **3.4** |   |
| Net                income (loss) attributable to    common                stockholders (1) |   |                                                                                           | (102.2 | ) |   | (24.4 | ) |   | 43.3 |   |   | 143.7 |   |   | **274.5** |   |
| Earnings                (loss) per share:                                                                 |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                (1)                (2)                                                               |   | $                                                                                              | (0.81  | ) | $ | (0.19 | ) | $ | 0.34 |   | $ | 1.10 |   | **$** | **1.77** |   |
| Diluted                (1)                (2)                                                             |   | $                                                                                              | (0.81  | ) | $ | (0.19 | ) | $ | 0.33 |   | $ | 0.86 |   | **$** | **1.53** |   |
|                                                                                                      |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE                SHEET DATA:                                                                        |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                and cash equivalents                                                                  |   | $                                                                                              | 6.4    |   | $ | 37.3 |   | $ | 7.9 |   | $ | 17.8 |   | **$** | **29.5** |   |
| Total                assets (3)                                                                           |   |                                                                                           | 605.0  |   |   | 594.8 |   |   | 700.6 |   |   | 907.3 |   |   | **1,216.9** |   |
| Outstanding                indebtedness (4)                                                               |   |                                                                                           | 29.6   |   |   | 10.3 |   |   | 43.4 |   |   | 51.6 |   |   | **0.7** |   |
| Debt                payable to Capital Trust                                                              |   |                                                                                           | 207.5  |   |   | 207.5 |   |   | 12.0 |   |   | 5.9 |   |   | **-** |   |
| Stockholders’                equity (3)                                                             |   |                                                                                           | 189.7  |   |   | 177.7 |   |   | 406.4 |   |   | 562.2 |   |   | **878.9** |   |
|                                                                                                      |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CASH                FLOW DATA:                                                                            |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                flows provided (used) by:                                                             |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                activities                                                                       |   | $                                                                                              | (13.6  | ) | $ | 65.8 |   | $ | (22.4 | ) | $ | 72.9 |   | **$** | **79.1** |   |
| Investing                activities                                                                       |   |                                                                                           | (7.5   | ) |   | (14.5 | ) |   | (44.5 | ) |   | (61.5 | ) |   | **(26.5** | **)** |
| Financing                activities                                                                       |   |                                                                                           | 3.6    |   |   | (22.1 | ) |   | 38.7 |   |   | - |   |   | **(42.5** | **)** |
| Net                cash provided (used)                                                                   |   | $                                                                                              | (17.5  | ) | $ | 29.2 |   | $ | (28.2 | ) | $ | 11.4 |   | **$** | **10.1** |   |
|                                                                                                      |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Melted                product shipments:                                                                  |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Volume                (metric tons)                                                                       |   |                                                                                           | 2,400  |   |   | 4,725 |   |   | 5,360 |   |   | 5,655 |   |   | **5,900** |   |
| Average                selling price (per kilogram)                                                       |   | $                                                                                              | 14.50  |   | $ | 12.15 |   | $ | 13.45 |   | $ | 19.85 |   | **$** | **38.30** |   |
|                                                                                                      |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mill                product shipments:                                                                    |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Volume                (metric tons)                                                                       |   |                                                                                           | 8,860  |   |   | 8,875 |   |   | 11,365 |   |   | 12,660 |   |   | **14,160** |   |
| Average                selling price (per kilogram)                                                       |   | $                                                                                              | 31.40  |   | $ | 31.50 |   | $ | 32.05 |   | $ | 41.75 |   | **$** | **57.85** |   |
|                                                                                                      |   |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Order                backlog at December 31 (5)                                                           |   | $                                                                                              | 185    |   | $ | 205 |   | $ | 450 |   | $ | 870 |   | **$** | **1,125** |   |
| Capital                expenditures                                                                       |   | $                                                                                              | 7.8    |   | $ | 12.5 |   | $ | 23.6 |   | $ | 61.1 |   | **$** | **100.9** |   |

| (1) | In                2002, we recorded a $27.5 million pre-tax impairment charge to other                non-operating expense related to our investment in Special Metals                Corporation preferred securities. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | All                share and per share disclosures for all periods presented have been                adjusted to give effect of all stock splits to                date. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | We                adopted SFAS 158 effective December 31, 2006. See Note 15 to the                Consolidated Financial Statements. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Outstanding                indebtedness represents notes payable, current and noncurrent debt                and                capital lease obligations. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | 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**

**SUMMARY**

***General      overview.***

|                                                                                                                                                                                                                                                                                                                                                                                       |   | **TIMET**                                 |   | **Titanium                Industry****(1)** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|---------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                       |   | **Mill                product shipments** |   |  **%                of total**         |   | **Mill                product shipments** |   |  **%                of total** |   |
|                                                                                                                                                                                                                                                                                                                                                                                       |   | **(Metric                tons)**          |   |                                        |   | **(Metric                tons)** |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                       |   |                                      |   |                                        |   |   |   |   |   |   |   |   |   |
| Commercial                aerospace                                                                                                                                                                                                                                                                                                                                                        |   |                                      | 8,455  |                                        |   | 59 | % |   | 31,000 |   |   | 41 | % |
| Military                                                                                                                                                                                                                                                                                                                                                                                   |   |                                      | 2,212  |                                        |   | 16 | % |   | 5,400 |   |   | 7 | % |
| Industrial                                                                                                                                                                                                                                                                                                                                                                                 |   |                                      | 2,795  |                                        |   | 20 | % |   | 35,900 |   |   | 48 | % |
| Emerging                markets                                                                                                                                                                                                                                                                                                                                                            |   |                                      | 698    |                                        |   | 5 | % |   | 2,700 |   |   | 4 | % |
|                                                                                                                                                                                                                                                                                                                                                                                       |   |                                      |   |                                        |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                       |   |                                      | 14,160 |                                        |   | 100 | % |   | 75,000 |   |   | 100 | % |
|  (1)                Estimates                based on our titanium industry experience and information obtained                from                publicly-available external                resources (e.g., United States Geological Survey, International                                    Titanium Association and Japan Titanium                Society). |

***Recent      developments.***

**CRITICAL      ACCOUNTING POLICIES AND ESTIMATES**

***Inventory      valuation.***

***Impairment      of long-lived assets.***

***Valuation      and impairment of securities.***

***Deferred      income tax valuation allowances***
*.*
*Income      taxes”*

***Pension      and OPEB expenses and obligations.***
*Defined      benefit pension plans”*
*Postretirement      benefit plans other than pensions.”*

----

**RESULTS      OF OPERATIONS**

**Comparison      of 2005 to 2006**

***Summarized      financial information***

|                                                                                  |   | For                the year ended December 31,              |     |
|---------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|----------|
|                                                                                  |   |  2005                                                  |     | %                of Total Net Sales |   |  **2006** |   | **%                of Total Net Sales** |   |
|                                                                                  |   | (In                thousands, except product shipment data) |     |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Net                sales:                                                             |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Melted                products                                                        |   | $                                                           | 112,252  |   |   | 15 | % | **$** | **225,970** |   |   | **19** | **%** |
| Mill                products                                                          |   |                                                        | 528,555  |   |   | 70 | % |   | **819,156** |   |   | **69** | **%** |
| Other                products                                                         |   |                                                        | 108,970  |   |   | 15 | % |   | **138,042** |   |   | **12** | **%** |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Total                net sales                                                        |   |                                                        | 749,777  |   |   | 100 | % |   | **1,183,168** |   |   | **100** | **%** |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Cost                of sales                                                          |   |                                                        | (550,415 | ) |   | 73 | % |   | **(747,065** | **)** |   | **63** | **%** |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Gross                margin                                                           |   |                                                        | 199,362  |   |   | 27 | % |   | **436,103** |   |   | **37** | **%** |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Selling,                general, administrative anddevelopment                expense |   |                                                        | (53,646  | ) |   | 7 | % |   | **(67,038** | **)** |   | **6** | **%** |
| Other                operating income and expenses, net                               |   |                                                        | 25,359   |   |   | 3 | % |   | **13,720** |   |   | **1** | **%** |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Operating                income                                                       |   | $                                                           | 171,075  |   |   | 23 | % | **$** | **382,785** |   |   | **32** | **%** |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Melted                product shipments:                                              |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Volume                (metric tons)                                                   |   |                                                        | 5,655    |   |   |   |   |   | **5,900** |   |   |   |   |
| Average                selling price (per kilogram)                                   |   | $                                                           | 19.85    |   |   |   |   | **$** | **38.30** |   |   |   |   |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Mill                product shipments:                                                |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Volume                (metric tons)                                                   |   |                                                        | 12,660   |   |   |   |   |   | **14,160** |   |   |   |   |
| Average                selling price (per kilogram)                                   |   | $                                                           | 41.75    |   |   |   |   | **$** | **57.85** |   |   |   |   |

***Net      sales***

***Cost      of sales***

***Gross      margin***
**.**

***Operating      income***

***Net      other non-operating income and expense***

***Income      taxes***

|   | · | an                income tax benefit of $17.1 million related to the reversal of a                portion                of our deferred income tax asset valuation allowance related to our                capital loss carryforward following the sale of our interest in VALTIMET; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                income tax benefit of $2.4 million from the special manufacturing                deduction created by the American Jobs Creation Act of 2004;                and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                income tax benefit of $1.1 million related to the elimination of                certain                items included in other comprehensive income following the sale of                our                interest in VALTIMET. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                income tax benefit of $50.1 million related to the reversal of our                deferred income tax asset valuation allowance related to the U.S.                and the                U.K.; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                income tax expense of $1.5 million related to the repatriation of                dividends from our European subs;                and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                income tax expense of $4.4 million related to the elimination of                an amount                included in other comprehensive income related to our defined benefit                pension plan in the U.S. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Minority      interest***

***Dividends      on Series A Preferred Stock***

**Comparison      of 2004 to 2005**

***Summarized      financial information***

|                                                                                  |   | Year                ended December 31,                      |     |
|---------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|----------|
|                                                                                  |   |  2004                                                  |     | %                of Total Net Sales |   |  2005 |   | %                of Total Net Sales |   |
|                                                                                  |   | (In                thousands, except product shipment data) |     |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Net                sales:                                                             |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Melted                products                                                        |   | $                                                           | 72,092   |   |   | 14 | % | $ | 112,252 |   |   | 15 | % |
| Mill                products                                                          |   |                                                        | 364,248  |   |   | 73 | % |   | 528,555 |   |   | 70 | % |
| Other                products                                                         |   |                                                        | 65,488   |   |   | 13 | % |   | 108,970 |   |   | 15 | % |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Total                net sales                                                        |   |                                                        | 501,828  |   |   | 100 | % |   | 749,777 |   |   | 100 | % |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Cost                of sales                                                          |   |                                                        | (438,151 | ) |   | 87 | % |   | (550,415 | ) |   | 73 | % |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Gross                margin                                                           |   |                                                        | 63,677   |   |   | 13 | % |   | 199,362 |   |   | 27 | % |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Selling,                general, administrative anddevelopment                expense |   |                                                        | (44,908  | ) |   | 9 | % |   | (53,646 | ) |   | 7 | % |
| Other                operating income and expenses, net                               |   |                                                        | 24,267   |   |   | 5 | % |   | 25,359 |   |   | 3 | % |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Operating                income                                                       |   | $                                                           | 43,036   |   |   | 9 | % | $ | 171,075 |   |   | 23 | % |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Melted                product shipments:                                              |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Volume                (metric tons)                                                   |   |                                                        | 5,360    |   |   |   |   |   | 5,655 |   |   |   |   |
| Average                selling price (per kilogram)                                   |   | $                                                           | 13.45    |   |   |   |   | $ | 19.85 |   |   |   |   |
|                                                                                  |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Mill                product shipments:                                                |   |                                                        |     |   |   |   |   |   |   |   |   |   |   |
| Volume                (metric tons)                                                   |   |                                                        | 11,365   |   |   |   |   |   | 12,660 |   |   |   |   |
| Average                selling price (per kilogram)                                   |   | $                                                           | 32.05    |   |   |   |   | $ | 41.75 |   |   |   |   |

***Net      sales.***

***Cost      of sales.***

***Gross      margin.***

***Operating      income.***

***Interest      expense.***

***Net      other non-operating income and expense***

***Income      taxes.***
* *

|   | · | an                income tax benefit of $50.1 million related to the reversal of our                deferred income tax asset valuation allowance related to the U.S.                and the                U.K.; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                income tax expense of $1.5 million related to the repatriation of                dividends from our European subs;                and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                income tax expense of $4.4 million related to the elimination of                an amount                included in other comprehensive income related to our defined benefit                pension plan in the U.S. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Dividends      on Series A Preferred Stock.***
** **

**European      operations**

**Outlook**

|   | · | In                May 2005, we announced our plans to expand our existing titanium                sponge                facility in Henderson, Nevada, and this expansion will provide the                capacity to produce an additional 4,000 metric tons of sponge annually,                an                increase of approximately 47% over the current sponge production                capacity                levels at our Nevada facility. The expansion project is nearing completion                and is expected to commence commercial production during the second                quarter of 2007. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In                April 2006, we announced our plans for the expansion of our electron                beam                cold hearth melt capacity in Morgantown, Pennsylvania. This expansion,                which we currently expect to complete by early 2008, will have, depending                on product mix, the capacity to produce an additional 8,500 metric                tons of                melted products, an increase of approximately 54% over the current                production capacity levels at our facility. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | As                discussed previously, under our conversion services agreement with                Haynes,                Haynes will provide us dedicated annual rolling capacity of 4,500                metric                tons at their facility, and we have the option of increasing the                output                capacity to 9,000 metric tons. This agreement provides us with a                long-term                secure source for processing flat products, resulting in a significant                increase in our existing mill product conversion capabilities which                allows                us to provide assurance to our customers of our long-term ability                to meet                their needs. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*      The      Airline Monitor*

----

**LIQUIDITY      AND CAPITAL RESOURCES**

|                                                     |   | Year                ended December 31, |    |
|----------------------------------------------------------|--------|----------------------------------------|---------|
|                                                     |   | 2004                                   |    | 2005 |   | **2006** |   |
|                                                     |   | (In                thousands)          |    |
|                                                     |   |                                   |    |   |   |   |   |   |   |   |
| Cash                (used in) provided by:          |   |                                   |    |   |   |   |   |   |   |   |
| Operating                activities                      |   | $                                      | (22,433 | ) | $ | 72,896 |   | **$** | **79,084** |   |
| Investing                activities                      |   |                                   | (44,528 | ) |   | (61,486 | ) |   | **(26,540** | **)** |
| Financing                activities                      |   |                                   | 38,742  |   |   | (28 | ) |   | **(42,472** | **)** |
|                                                     |   |                                   |    |   |   |   |   |   |   |   |
| Net                cash (used in) provided by operating, |   |                                   |    |   |   |   |   |   |   |   |
| investing                and financing activities        |   | $                                      | (28,219 | ) | $ | 11,382 |   | **$** | **10,072** |   |

***Operating      activities.***
* *

|   | · | higher                operating income of $211.7 million in                2006; |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | the                $50.0 million payment made to Haynes in 2006 in return for the dedicated                rolling capacity; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | · | higher                net cash used by changes in receivables, inventories, payables and                accrued                liabilities of $35.2 million in 2006, due primarily to higher accounts                receivable and inventory levels resulting from the increased level                of                business activity; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | higher                net cash paid for income taxes in 2006 (exclusive of the $9.9 million                income tax benefit in 2006 related to the exercise of stock options)                of                $92.2 million due to the utilization of the remainder of our net                operating                loss carryforward in the U.S. and higher taxable profits in our foreign                jurisdictions in 2006; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | higher                aggregate contributions to our defined benefit pension plans in 2006                of                $9.8 million. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | higher                operating income of $128.0 million in                2005; |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | higher                net cash used in 2005 by changes in receivables, inventories, payables                and                accrued liabilities of $46.0 million due primarily to higher accounts                receivable and inventory levels in 2005 resulting from the increased                level                of business activity; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | higher                net cash paid for income taxes in 2005 of $7.9 million due to the                utilization of the remainder of our net operating loss carryforward                in the                U.K. and higher taxable profits in our foreign jurisdictions in 2005; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | lower                cash paid for interest of $27.2 million due primarily to the August                2004                conversion of approximately 3.0 million of our BUCS for shares of                our                Series A Preferred Stock |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Investing      activities***

|   | · | $75.0                million received in 2006 from the sale of our interest in VALTIMET; |
|--------|--------|------------------------------------------------------------------------------------------|

|   | · | $12.0                million received in 2004 from the sale of certain property;                and |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | purchases                of marketable securities (primarily CompX common stock) of $34.5                million                in 2004 and $2.2 million in 2005. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Financing      activities***

|   | · | dividends                paid on our Series A Preferred Stock of $3.3 million in 2004, $12.5                million in 2005 and $7.2 million in                2006; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | dividends                paid to CEZUS of $0.7 million in 2004, $2.2 million in 2005 and $3.0                million in 2006; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|

|   | · | proceeds                from the issuance of our common stock upon exercise of stock options                of                $0.1 million in 2004, $6.4 million in 2005 and $11.3 million in 2006;                and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                income tax benefit of $9.9 million in 2006 related to the exercise                of                stock options. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|

**Future      cash requirements **

***Liquidity***
*.      *

***Capital      expenditures***

----

***Contractual      commitments***
**.**

|                                             |   | Payment                Due Date |    |
|--------------------------------------------------|--------|---------------------------------|---------|
|                                             |   |                            |    | 2008/ |   | 2010/ |   | 2012                & |   |   |   |
|                                             |   | 2007                            |    | 2009 |   | 2011 |   | After |   | Total |   |
|                                             |   | (In                thousands)   |    |
|                                             |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                leases                  |   | $                               | 3,899   |   | $ | 5,718 |   | $ | 4,660 |   | $ | 20,074 |   | $ | 34,351 |   |
|                                             |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchase                obligations:             |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Raw                materials (1)                 |   |                            | 112,285 |   |   | 2,800 |   |   | 2,800 |   |   | 1,400 |   |   | 119,285 |   |
| Other                (2)                         |   |                            | 46,639  |   |   | 23,664 |   |   | 16,969 |   |   | 18,241 |   |   | 105,513 |   |
|                                             |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                contractual obligations (3) |   |                            | 29,919  |   |   | 1,355 |   |   | 64 |   |   | 26 |   |   | 31,364 |   |
|                                             |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   | $                               | 192,742 |   | $ | 33,537 |   | $ | 24,493 |   | $ | 39,741 |   | $ | 290,513 |   |
|                                             |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |

*.      *

*Defined      benefit pension plans”*
*Postretirement      benefit plans other than pensions.”*

***Off-balance      sheet arrangements.***

***Recent      accounting pronouncements.***

***Defined      benefit pension plans.***

|                     | Discount                rates used for:                                                        |
|--------------------------|------------------------------------------------------------------------------------------------|
|                     | Obligation                atDecember                31, 2004and                expense in 2005 |   | Obligation                atDecember                31, 2005and                expense in 2006 |   | Obligation                atDecember                31, 2006and                expense in 2007 |
| U.S.                Plan | 5.65%                                                                                          |   | 5.50% |   | **5.90%** |
| U.K.                Plan | 5.30%                                                                                          |   | 4.75% |   | **5.10%** |

|                     | Long-term                rates of return used for pension expense for the year ended December                31: |
|--------------------------|------------------------------------------------------------------------------------------------------------------|
|                     | 2005                                                                                                             |   | 2006 |   | 2007 |
| U.S.                Plan | 10.00%                                                                                                           |   | 10.00% |   | **10.00%** |
| U.K.                Plan | 7.10%                                                                                                            |   | 6.70% |   | **6.50%** |

***Postretirement      benefit plans other than pensions.***

***Environmental      matters.***
*Regulatory      and environmental matters”*
* *

***Affiliate      transactions.***

**ITEM      7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET      RISK**

***Interest      rates.***

***Foreign      currency exchange rates.***
*European      operations”*

***Commodity      prices.***

***Securities      prices.***

**ITEM      8:**
**FINANCIAL      STATEMENTS AND SUPPLEMENTARY DATA**

----

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

**ITEM      9A:**
**CONTROLS      AND PROCEDURES**

***Remediation      of prior material weaknesses.***

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

|   | (1) | Throughout                  2006 we increased our global accounting and finance staff by adding                  personnel who had an adequate background and experience in financial                  accounting and reporting and provided them with an appropriate                  amount of                  training and supervision in order to have sufficient resources                  to meet our                  rapidly growing needs. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (2) | During                  the first and second quarters of 2006 we implemented a company-wide                  policy                  requiring review and approval of all manual journal entries by                  appropriate                  supervisory personnel independent of those individuals recording                  the                  manual journal entries in order to ensure the accuracy and validity                  of                  those entries. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Throughout                  2006 we (a) either (i) prepared written policies and procedures                  covering                  all significant accounting processes for which such procedures                  did not                  already exist or (ii) reviewed and revised as necessary our existing                  accounting policies and processes, including those related to revenue                  recognition and inventory, (b) ensured that such policies and procedures                  contained an appropriate application of GAAP, (c) distributed those                  policies and procedures to the appropriate individuals in our accounting                  and finance staff and (d) implemented additional review processes                  to                  ensure all accounting procedures were implemented and applied properly                  and                  timely on a consistent basis throughout our company. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Evaluation      of disclosure controls and procedures.***
** **
** **

***Scope      of management’s report on internal control over financial reporting.***

|   | · | Pertain                to the maintenance of records that in reasonable detail accurately                and                fairly reflect the transactions and dispositions of our                assets; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

***Management’s      report on internal control over financial reporting.***
* *
*Internal      Control - Integrated Framework *

***Changes      in internal control over financial reporting.***

***Certifications.***

**ITEM      9B: **
**OTHER      INFORMATION**

----

**PART      III**

**ITEM      10:**
**DIRECTORS,      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE      REGISTRANT**

**ITEM      11:**
**EXECUTIVE      COMPENSATION**

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

**ITEM      13:**
**CERTAIN      RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR      INDEPENDENCE**

**ITEM      14:**
**PRINCIPAL      ACCOUNTANT FEES AND SERVICES**

----

**PART      IV**

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

| 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,                  2005.                                                                                                                                                                                                                                                                                                                                         |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.1                       |   | 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.                                                                                                                                                                                                                                 |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 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                      |   | 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. |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.3                      |   | 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.                                                                                                                                                                                                                                                                                                                                                                      |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.4*                     |   | 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).                                                                                                                                                                                                                                                                                                                                                               |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.5*                     |   | 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.                                                                                                                                                                                                                                                                                                                            |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.6*                     |   | 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.                                                                                                                                                                                                                                                                                                                                                                       |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.7*                     |   | 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.                                                                                                                                                                                                                                                              |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.8                      |   | 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.                                                                                                                                                                                                                                                                                                     |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.9                      |   | 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.                                                                                                                                                                                                                                                                                        |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.10**                   |   | 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.                                                                                                                                                                  |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.11**                   |   | 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 17,                  2006.                                                                                                                                                                                                                                                                                                                                                            |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.12**                   |   | 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 17,                  2006.                                                                                                                                                                                                                                                                                                                                                        |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.13**                   |   | 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.                                                                                                                                                                                                                                                                                                    |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.14**                   |   | 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.                                                                                                                                                                                                                                                                                                         |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.15**                   |   | 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.                                                                                                                                                                                                                                                                                                        |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.16                     |   | 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.                                                                                                                    |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.17                     |   | 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.                                                                                                                                                                                                     |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.18                     |   | 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.                                                                                                                                                                                                                                                                                                                                                                            |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.19*                    |   | Titanium                  Metals Corporation Amended and Restated 1996 Non-Employee Director                  Compensation Plan, as amended and restated effective May 23, 2006,                  incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly                  Report on Form 10-Q for the quarter ended June 30,                  2006.                                                                                                                                                                                                                                                                                   |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.20*                    |   | Employment                  Agreement between Titanium Hearth Technologies, Inc. and Charles                  H.                  Entrekin, Ph.D., effective January 1, 2007, filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.21                     |   | Access                  and Security Agreement between Titanium Metals Corporation and                  Haynes                  International, Inc. effective November 17, 2006, filed herewith.                   Certain exhibits to this Exhibit 10.21 have not been filed; upon                  request,                  the Reporting Persons will furnish supplementally to the Commission,                  subject to the Reportng Persons' request for confidential treatment                  of                  portions thereof, a copy of any omitted exhibit.                                                                          |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.22**                   |   | Conversion                  Services Agreement between Titanium Metals Corporation and Haynes                  International, Inc. effective November 17, 2006, filed                  herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

----

**SIGNATURES**

|   | TITANIUM                METALS CORPORATION |
|--------|--------------------------------------------|
|   | (Registrant)                               |

|   | By /s/                Steven L. Watson                                                                                                 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
|   | Steven                L. Watson, February 28, 2007Vice                Chairman of the Board and Chief                Executive Officer |

| By /s/                Harold C. Simmons                                                                                          |   | By /s/                Thomas P. Stafford                                                                                                                                       |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Harold                C. Simmons, February 28, 2007Chairman                of the Board                                               |   | Thomas                P. Stafford, February 28, 2007Director                                                                                                                        |
|                                                                                                                                  |   |                                                                                                                                                                                |
| By /s/                Steven L. Watson                                                                                           |   | By /s/                Paul J. Zucconi                                                                                                                                          |
| Steven                L. Watson, February 28, 2007Vice                Chairman of the Board andChief                Executive Officer |   | Paul                J. Zucconi, February 28, 2007Director                                                                                                                           |
|                                                                                                                                  |   |                                                                                                                                                                                |
| By /s/                Keith R. Coogan                                                                                            |   | By /s/                Bobby D. O’Brien                                                                                                                                   |
| Keith                R. Coogan, February 28, 2007Director                                                                             |   | Bobby                D. O’Brien, February 28, 2007Executive                Vice President and ChiefFinancial                OfficerPrincipal                Financial Officer |
|                                                                                                                                  |   |                                                                                                                                                                                |
| By /s/                Norman N. Green                                                                                            |   | By /s/                Scott E. Sullivan                                                                                                                                        |
| Norman                N. Green, February 28, 2007Director                                                                             |   | Scott                E. Sullivan, February 28, 2007Vice                President and ControllerPrincipal                Accounting Officer                                          |
|                                                                                                                                  |   |                                                                                                                                                                                |
| By /s/                Glenn R. Simmons                                                                                           |   |                                                                                                                                                                                |
| Glenn                R. Simmons, February 28, 2007Director                                                                            |   |                                                                                                                                                                                |
|                                                                                                                                  |   |                                                                                                                                                                                |

----

**TITANIUM      METALS CORPORATION**

**ANNUAL      REPORT ON FORM 10-K**

**ITEMS      8, 15(a) and 15(c)**

**INDEX      OF FINANCIAL STATEMENTS**

|                                                                                                                                                     |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                     |   |
| **Financial                Statements**                                                                                                                  |   |
|                                                                                                                                                     |   |
| Report                of Independent Registered Public Accounting                Firm                                                                    |   |
|                                                                                                                                                     |   |
| Consolidated                Balance Sheets - December 31, 2005 and                2006                                                                   |   |
|                                                                                                                                                     |   |
| Consolidated                Statements of Income -Years                ended December 31, 2004, 2005 and 2006                                            |   |
|                                                                                                                                                     |   |
| Consolidated                Statements of Comprehensive Income                -Years                ended December 31, 2004, 2005 and 2006               |   |
|                                                                                                                                                     |   |
| Consolidated                Statements of Cash Flows -Years                ended December 31, 2004, 2005 and 2006                                        |   |
|                                                                                                                                                     |   |
| Consolidated                Statements of Changes in Stockholders’ Equity                -Years                ended December, 2004, 2005 and 2006 |   |
|                                                                                                                                                     |   |
| Notes                to Consolidated Financial                Statements                                                                                 |   |
|                                                                                                                                                     |   |

----

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING      FIRM**

*Internal      Control-Integrated Framework *
*Internal      Control - Integrated Framework*

----

**TITANIUM      METALS CORPORATION**

**CONSOLIDATED      BALANCE SHEETS**

|                                                        |   | **December                31,** |    |
|-------------------------------------------------------------|--------|---------------------------------|---------|
| ASSETS                                                      |   | 2005                            |    | **2006** |   |
|                                                        |   |                            |    |   |   |   |   |
| Current                assets:                              |   |                            |    |   |   |   |   |
| Cash                and cash equivalents                    |   | $                               | 17,605  |   | **$** | **29,360** |   |
| Restricted                cash and cash equivalents         |   |                            | 146     |   |   | **146** |   |
| Accounts                and other receivables, less         |   |                            |    |   |   |   |   |
| allowance                of $1,983 and $1,394, respectively |   |                            | 142,902 |   |   | **213,014** |   |
| Inventories                                                 |   |                            | 365,696 |   |   | **501,507** |   |
| Refundable                income taxes                      |   |                            | 953     |   |   | **-** |   |
| Prepaid                expenses and other                   |   |                            | 3,532   |   |   | **4,444** |   |
| Deferred                income taxes                        |   |                            | 19,436  |   |   | **9,095** |   |
|                                                        |   |                            |    |   |   |   |   |
| Total                current assets                         |   |                            | 550,270 |   |   | **757,566** |   |
|                                                        |   |                            |    |   |   |   |   |
| Marketable                securities                        |   |                            | 46,477  |   |   | **56,826** |   |
| Investment                in joint ventures                 |   |                            | 25,978  |   |   | **724** |   |
| Property                and equipment, net                  |   |                            | 252,990 |   |   | **329,836** |   |
| Pension                asset                                |   |                            | 22,337  |   |   | **17,916** |   |
| Deferred                income taxes                        |   |                            | 8,009   |   |   | **3,500** |   |
| Prepaid                expense and other                    |   |                            | 1,203   |   |   | **50,505** |   |
|                                                        |   |                            |    |   |   |   |   |
| Total                assets                                 |   | $                               | 907,264 |   | **$** | **1,216,873** |   |
|                                                        |   |                            |    |   |   |   |   |

----

**TITANIUM      METALS CORPORATION**

**CONSOLIDATED      BALANCE SHEETS (CONTINUED)**

|                                                                                                                                                                                                             |   | **December                31,** |    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|---------|
| LIABILITIES,                MINORITY INTEREST AND                                                                                                                                                                |   | 2005                            |    | **2006** |   |
| STOCKHOLDERS’                EQUITY                                                                                                                                                                        |   |                            |    |   |   |
|                                                                                                                                                                                                             |   |                            |    |   |   |   |   |
| Current                liabilities:                                                                                                                                                                              |   |                            |    |   |   |   |   |
| Accounts                payable                                                                                                                                                                                  |   | $                               | 62,376  |   | **$** | **87,845** |   |
| Accrued                liabilities                                                                                                                                                                               |   |                            | 75,698  |   |   | **81,840** |   |
| Customer                advances                                                                                                                                                                                 |   |                            | 15,577  |   |   | **18,652** |   |
| Income                taxes payable                                                                                                                                                                              |   |                            | 13,151  |   |   | **21,958** |   |
| Deferred                income taxes                                                                                                                                                                             |   |                            | 29      |   |   | **581** |   |
| Other                                                                                                                                                                                                            |   |                            | 19      |   |   | **255** |   |
|                                                                                                                                                                                                             |   |                            |    |   |   |   |   |
| Total                current liabilities                                                                                                                                                                         |   |                            | 166,850 |   |   | **211,131** |   |
|                                                                                                                                                                                                             |   |                            |    |   |   |   |   |
| Long-term                debt                                                                                                                                                                                    |   |                            | 51,359  |   |   | **-** |   |
| Accrued                OPEB cost                                                                                                                                                                                 |   |                            | 15,580  |   |   | **27,963** |   |
| Accrued                pension cost                                                                                                                                                                              |   |                            | 58,450  |   |   | **52,218** |   |
| Deferred                income taxes                                                                                                                                                                             |   |                            | 27,445  |   |   | **17,773** |   |
| Debt                payable to TIMET Capital Trust I                                                                                                                                                             |   |                            | 5,852   |   |   | **-** |   |
| Other                                                                                                                                                                                                            |   |                            | 6,037   |   |   | **7,592** |   |
|                                                                                                                                                                                                             |   |                            |    |   |   |   |   |
| Total                liabilities                                                                                                                                                                                 |   |                            | 331,573 |   |   | **316,677** |   |
|                                                                                                                                                                                                             |   |                            |    |   |   |   |   |
| Minority                interest                                                                                                                                                                                 |   |                            | 13,523  |   |   | **21,324** |   |
|                                                                                                                                                                                                             |   |                            |    |   |   |   |   |
| Stockholders’                equity:                                                                                                                                                                       |   |                            |    |   |   |   |   |
| Series                A Preferred Stock, $.01 par value; $84,466 liquidationpreference;                4,025 shares authorized, 2,983 and 1,689 shares  issued                and outstanding, respectively |   |                            | 132,493 |   |   | **75,045** |   |
| Common                stock, $.01 par value; 200,000 shares authorized,                                                                                                                                          |   |                            |    |   |   |   |   |
| 141,930                and 161,535 shares issued, respectively                                                                                                                                                   |   |                            | 1,419   |   |   | **1,615** |   |
| Additional                paid-in capital                                                                                                                                                                        |   |                            | 400,348 |   |   | **484,369** |   |
| Retained                earnings                                                                                                                                                                                 |   |                            | 66,179  |   |   | **340,279** |   |
| Accumulated                other comprehensive loss                                                                                                                                                              |   |                            | (38,271 | ) |   | **(22,436** | **)** |
|                                                                                                                                                                                                             |   |                            |    |   |   |   |   |
| Total                stockholders’ equity                                                                                                                                                                  |   |                            | 562,168 |   |   | **878,872** |   |
|                                                                                                                                                                                                             |   |                            |    |   |   |   |   |
| Total                liabilities, minority interest and stockholders’ equity                                                                                                                               |   | $                               | 907,264 |   | **$** | **1,216,873** |   |
|                                                                                                                                                                                                             |   |                            |    |   |   |   |   |
| Commitments                and contingencies (Note 17)                                                                                                                                                           |   |                            |    |   |   |   |   |

----

**TITANIUM      METALS CORPORATION**

**CONSOLIDATED      STATEMENTS OF INCOME**

|                                                                                   |   | **Year                ended December 31,** |    |
|----------------------------------------------------------------------------------------|--------|--------------------------------------------|---------|
|                                                                                   |   | 2004                                       |    | 2005 |   | **2006** |   |
|                                                                                   |   |                                       |    |   |   |   |   |
|                                                                                   |   |                                       |    |   |   |   |   |   |   |   |
| Net                sales                                                               |   | $                                          | 501,828 |   | $ | 749,777 |   | **$** | **1,183,168** |   |
| Cost                of sales                                                           |   |                                       | 438,151 |   |   | 550,415 |   |   | **747,065** |   |
|                                                                                   |   |                                       |    |   |   |   |   |   |   |   |
| Gross                margin                                                            |   |                                       | 63,677  |   |   | 199,362 |   |   | **436,103** |   |
|                                                                                   |   |                                       |    |   |   |   |   |   |   |   |
| Selling,                general, administrative and development                expense |   |                                       | 44,908  |   |   | 53,646 |   |   | **67,038** |   |
| Equity                in earnings of joint ventures                                    |   |                                       | 1,278   |   |   | 5,059 |   |   | **14,116** |   |
| Other                income (expense), net                                             |   |                                       | 22,989  |   |   | 20,300 |   |   | **(396** | **)** |
|                                                                                   |   |                                       |    |   |   |   |   |   |   |   |
| Operating                income                                                        |   |                                       | 43,036  |   |   | 171,075 |   |   | **382,785** |   |
|                                                                                   |   |                                       |    |   |   |   |   |   |   |   |
| Interest                expense                                                        |   |                                       | 12,451  |   |   | 3,963 |   |   | **3,431** |   |
| Other                non-operating income, net                                         |   |                                       | 16,200  |   |   | 18,228 |   |   | **39,049** |   |
|                                                                                   |   |                                       |    |   |   |   |   |   |   |   |
| Income                before income taxes and minority interest                   |   |                                       | 46,785  |   |   | 185,340 |   |   | **418,403** |   |
|                                                                                   |   |                                       |    |   |   |   |   |   |   |   |
| Provision                for income taxes (benefit)                                    |   |                                       | (2,132  | ) |   | 24,496 |   |   | **128,363** |   |
| Minority                interest in after tax earnings                                 |   |                                       | 1,219   |   |   | 4,899 |   |   | **8,763** |   |
|                                                                                   |   |                                       |    |   |   |   |   |   |   |   |
| Net                income                                                              |   |                                       | 47,698  |   |   | 155,945 |   |   | **281,277** |   |
|                                                                                   |   |                                       |    |   |   |   |   |   |   |   |
| Dividends                on Series A Preferred Stock                                   |   |                                       | 4,398   |   |   | 12,244 |   |   | **6,793** |   |
|                                                                                   |   |                                       |    |   |   |   |   |   |   |   |
| Net                income attributable tocommon                stockholders            |   | $                                          | 43,300  |   | $ | 143,701 |   | **$** | **274,484** |   |
|                                                                                   |   |                                       |    |   |   |   |   |   |   |   |
| Earnings                per share attributable to common  stockholders:           |   |                                       |    |   |   |   |   |   |   |   |
| Basic                                                                                  |   | $                                          | 0.34    |   | $ | 1.10 |   | **$** | **1.77** |   |
| Diluted                                                                                |   | $                                          | 0.33    |   | $ | 0.86 |   | **$** | **1.53** |   |
|                                                                                   |   |                                       |    |   |   |   |   |   |   |   |
| Weighted                average shares outstanding:                                    |   |                                       |    |   |   |   |   |   |   |   |
| Basic                                                                                  |   |                                       | 127,050 |   |   | 130,782 |   |   | **154,956** |   |
| Diluted                                                                                |   |                                       | 145,003 |   |   | 181,701 |   |   | **183,812** |   |
|                                                                                   |   |                                       |    |   |   |   |   |   |   |   |

----

**TITANIUM      METALS CORPORATION**

**CONSOLIDATED      STATEMENTS OF COMPREHENSIVE      INCOME**

|                                                                                                                                                                                                                                          |   | **Year                ended December 31,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                                                                                                                                                                                          |   | 2004                                       |   | 2005 |   | **2006** |   |
|                                                                                                                                                                                                                                          |   |                                       |   |   |   |   |   |   |   |   |
| Net                income                                                                                                                                                                                                                     |   | $                                          | 47,698 |   | $ | 155,945 |   | **$** | **281,277** |   |
|                                                                                                                                                                                                                                          |   |                                       |   |   |   |   |   |   |   |   |
| Other                comprehensive income (loss), net of tax:                                                                                                                                                                                 |   |                                       |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                          |   |                                       |   |   |   |   |   |   |   |   |
| Currency                translation adjustment                                                                                                                                                                                                |   |                                       | 6,435  |   |   | (11,880 | ) |   | **12,727** |   |
|                                                                                                                                                                                                                                          |   |                                       |   |   |   |   |   |   |   |   |
| Unrealized                gains (losses) on marketable securities                                                                                                                                                                        |   |                                       | 12,597 |   |   | (3,017 | ) |   | **10,349** |   |
|                                                                                                                                                                                                                                          |   |                                       |   |   |   |   |   |   |   |   |
| TIMET’s                share of VALTIMET SAS’s unrealized net                gains (losses) on derivative financial        instruments                qualifying as cash flow hedges |   |                                       | 97     |   |   | (618 | ) |   | **521** |   |
|                                                                                                                                                                                                                                          |   |                                       |   |   |   |   |   |   |   |   |
| Additional                minimum pension liabilities                                                                                                                                                                                         |   |                                       | (8,892 | ) |   | 17,233 |   |   | **119** |   |
|                                                                                                                                                                                                                                          |   |                                       |   |   |   |   |   |   |   |   |
| Total                other comprehensive income                                                                                                                                                                                               |   |                                       | 10,237 |   |   | 1,718 |   |   | **23,716** |   |
|                                                                                                                                                                                                                                          |   |                                       |   |   |   |   |   |   |   |   |
| Comprehensive                income                                                                                                                                                                                                           |   | $                                          | 57,935 |   | $ | 157,663 |   | **$** | **304,993** |   |

----

**TITANIUM      METALS CORPORATION**

**CONSOLIDATED      STATEMENTS OF COMPREHENSIVE INCOME**

**(CONTINUED)**

|                                                                                                                                                                                      |   | **Year                ended December 31,** |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|---------|
|                                                                                                                                                                                      |   | 2004                                       |    | 2005 |   | **2006** |   |
|                                                                                                                                                                                      |   |                                       |    |   |   |   |   |   |   |   |
| Currency                translation adjustment:                                                                                                                                           |   |                                       |    |   |   |   |   |   |   |   |
| Beginning                of year                                                                                                                                                          |   | $                                          | 10,407  |   | $ | 16,842 |   | **$** | **4,962** |   |
| Change                during year                                                                                                                                                         |   |                                       | 6,435   |   |   | (11,880 | ) |   | **16,294** |   |
| Reclassification                adjustment to eliminate the cumulative                effects of VALTIMET                                                                                 |   |                                       | -       |   |   | - |   |   | **(3,567** | **)** |
| End                of year                                                                                                                                                                |   | $                                          | 16,842  |   | $ | 4,962 |   | **$** | **17,689** |   |
|                                                                                                                                                                                      |   |                                       |    |   |   |   |   |   |   |   |
| Unrealized                gains (losses) on marketable securities:                                                                                                                        |   |                                       |    |   |   |   |   |   |   |   |
| Beginning                of year                                                                                                                                                          |   | $                                          | -       |   | $ | 12,597 |   | **$** | **9,580** |   |
| Change                during year                                                                                                                                                         |   |                                       | 12,597  |   |   | (3,017 | ) |   | **10,349** |   |
| End                of year                                                                                                                                                                |   | $                                          | 12,597  |   | $ | 9,580 |   | **$** | **19,929** |   |
|                                                                                                                                                                                      |   |                                       |    |   |   |   |   |   |   |   |
| TIMET’s                share of VALTIMET SAS’s unrealized netgains                (losses) on derivative financial instruments qualifying                as cash flow hedges: |   |                                       |    |   |   |   |   |   |   |   |
| Beginning                of year                                                                                                                                                          |   | $                                          | -       |   | $ | 97 |   | **$** | **(521** | **)** |
| Change                during year                                                                                                                                                         |   |                                       | 97      |   |   | (618 | ) |   | **(1,107** | **)** |
| Reclassification                adjustment to eliminate the cumulative                effects of VALTIMET                                                                                 |   |                                       | -       |   |   | - |   |   | **1,628** |   |
| End                of year                                                                                                                                                                |   | $                                          | 97      |   | $ | (521 | ) | **$** | **-** |   |
|                                                                                                                                                                                      |   |                                       |    |   |   |   |   |   |   |   |
| Additional                minimum pension liabilities:                                                                                                                                    |   |                                       |    |   |   |   |   |   |   |   |
| Beginning                of year                                                                                                                                                          |   | $                                          | (60,633 | ) | $ | (69,525 | ) | **$** | **(52,292** | **)** |
| Change                during year                                                                                                                                                         |   |                                       | (8,892  | ) |   | 17,233 |   |   | **119** |   |
| Adoption                of SFAS 158                                                                                                                                                       |   |                                       | -       |   |   | - |   |   | **52,173** |   |
| End                of year                                                                                                                                                                |   | $                                          | (69,525 | ) | $ | (52,292 | ) | **$** | **-** |   |
|                                                                                                                                                                                      |   |                                       |    |   |   |   |   |   |   |   |
| Pension                plans:                                                                                                                                                             |   |                                       |    |   |   |   |   |   |   |   |
| Beginning                of year                                                                                                                                                          |   | $                                          | -       |   | $ | - |   | **$** | **-** |   |
| Adoption                of SFAS 158                                                                                                                                                       |   |                                       | -       |   |   | - |   |   | **(53,410** | **)** |
| End                of year                                                                                                                                                                |   | $                                          | -       |   | $ | - |   | **$** | **(53,410** | **)** |
|                                                                                                                                                                                      |   |                                       |    |   |   |   |   |   |   |   |
| OPEB                plan:                                                                                                                                                                 |   |                                       |    |   |   |   |   |   |   |   |
| Beginning                of year                                                                                                                                                          |   | $                                          | -       |   | $ | - |   | **$** | **-** |   |
| Adoption                of SFAS 158                                                                                                                                                       |   |                                       | -       |   |   | - |   |   | **(6,644** | **)** |
| End                of year                                                                                                                                                                |   | $                                          | -       |   | $ | - |   | **$** | **(6,644** | **)** |
|                                                                                                                                                                                      |   |                                       |    |   |   |   |   |   |   |   |
| Total                accumulated other comprehensive income:                                                                                                                              |   |                                       |    |   |   |   |   |   |   |   |
| Beginning                of year                                                                                                                                                          |   | $                                          | (50,226 | ) | $ | (39,989 | ) | **$** | **(38,271** | **)** |
| Comprehensive                income, net of tax                                                                                                                                           |   |                                       | 10,237  |   |   | 1,718 |   |   | **23,716** |   |
| Adoption                of SFAS 158                                                                                                                                                       |   |                                       | -       |   |   | - |   |   | **(7,881** | **)** |
| End                of year                                                                                                                                                                |   | $                                          | (39,989 | ) | $ | (38,271 | ) | **$** | **(22,436** | **)** |
|                                                                                                                                                                                      |   |                                       |    |   |   |   |   |   |   |   |

----

**TITANIUM      METALS CORPORATION**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

|                                                                                                       |   | **Year                ended December 31,** |     |
|------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|----------|
|                                                                                                       |   | 2004                                       |     | 2005 |   | **2006** |   |
|                                                                                                       |   |                                       |     |   |   |   |   |   |   |   |
| Cash                flows from operating activities:                                                       |   |                                       |     |   |   |   |   |   |   |   |
| Net                income                                                                                  |   | $                                          | 47,698   |   | $ | 155,945 |   | **$** | **281,277** |   |
| Depreciation                and amortization                                                               |   |                                       | 32,828   |   |   | 31,532 |   |   | **34,050** |   |
| Loss                (gain) on disposal of property and equipment                                           |   |                                       | 37       |   |   | (12,157 | ) |   | **786** |   |
| Gain                on exchange of BUCS                                                                    |   |                                       | (15,465  | ) |   | - |   |   | **-** |   |
| Gain                on sale of VALTIMET                                                                    |   |                                       | -        |   |   | - |   |   | **(40,945** | **)** |
| Equity                in earnings of joint ventures, net of distributions                                  |   |                                       | 527      |   |   | (5,009 | ) |   | **(10,705** | **)** |
| Deferred                income taxes                                                                       |   |                                       | (5,711   | ) |   | 2,131 |   |   | **10,309** |   |
| Excess                tax benefit on stock option exercises                                                |   |                                       | -        |   |   | - |   |   | **(9,877** | **)** |
| Minority                interest, net of tax                                                               |   |                                       | 1,219    |   |   | 4,899 |   |   | **8,763** |   |
| Other,                net                                                                                  |   |                                       | 463      |   |   | (17 | ) |   | **(16** | **)** |
| Change                in assets and liabilities:                                                           |   |                                       |     |   |   |   |   |   |   |   |
| Receivables                                                                                                |   |                                       | (25,587  | ) |   | (52,599 | ) |   | **(61,252** | **)** |
| Inventories                                                                                                |   |                                       | (68,533  | ) |   | (108,845 | ) |   | **(121,291** | **)** |
| Prepaid                expenses and other                                                                  |   |                                       | (77      | ) |   | (668 | ) |   | **(765** | **)** |
| Prepaid                conversion services                                                                 |   |                                       | -        |   |   | - |   |   | **(50,000** | **)** |
| Accounts                payable and accrued liabilities                                                    |   |                                       | 20,037   |   |   | 30,912 |   |   | **36,261** |   |
| Customer                advances                                                                           |   |                                       | 3,316    |   |   | 9,186 |   |   | **1,914** |   |
| Income                taxes                                                                                |   |                                       | 4,417    |   |   | 14,396 |   |   | **18,217** |   |
| Deferred                revenue                                                                            |   |                                       | (84      | ) |   | 4,534 |   |   | **(7,624** | **)** |
| Pensions                and other postretirement benefit plans                                             |   |                                       | 2,927    |   |   | 652 |   |   | **(9,104** | **)** |
| Accrued                interest on debt payable to TIMET Capital Trust I                                   |   |                                       | (18,936  | ) |   | (33 | ) |   | **(35** | **)** |
| Other,                net                                                                                  |   |                                       | (1,509   | ) |   | (1,963 | ) |   | **(879** | **)** |
| Net                cash (used in) provided by operating activities                                         |   |                                       | (22,433  | ) |   | 72,896 |   |   | **79,084** |   |
|                                                                                                       |   |                                       |     |   |   |   |   |   |   |   |
| Cash                flows from investing activities:                                                       |   |                                       |     |   |   |   |   |   |   |   |
| Capital                expenditures                                                                        |   |                                       | (23,556  | ) |   | (61,128 | ) |   | **(100,880** | **)** |
| Proceeds                from sale of VALTIMET                                                              |   |                                       | -        |   |   | - |   |   | **75,000** |   |
| Purchase                of marketable securities                                                           |   |                                       | (34,472  | ) |   | (2,223 | ) |   | **-** |   |
| Proceeds                from sale of property                                                              |   |                                       | 11,973   |   |   | 1,289 |   |   | **-** |   |
| Other,                net                                                                                  |   |                                       | 1,527    |   |   | 576 |   |   | **(660** | **)** |
| Net                cash used in investing activities                                                       |   |                                       | (44,528  | ) |   | (61,486 | ) |   | **(26,540** | **)** |
|                                                                                                       |   |                                       |     |   |   |   |   |   |   |   |
| Cash                flows from financing activities:                                                       |   |                                       |     |   |   |   |   |   |   |   |
| Indebtedness:                                                                                              |   |                                       |     |   |   |   |   |   |   |   |
| Borrowings                                                                                                 |   |                                       | 160,195  |   |   | 373,369 |   |   | **639,244** |   |
| Repayments                                                                                                 |   |                                       | (117,019 | ) |   | (365,098 | ) |   | **(691,871** | **)** |
| Dividends                paid to minority shareholder                                                      |   |                                       | (691     | ) |   | (2,216 | ) |   | **(2,994** | **)** |
| Dividends                paid on Series A Preferred Stock                                                  |   |                                       | (3,298   | ) |   | (12,506 | ) |   | **(7,177** | **)** |
| Issuance                of common stock                                                                    |   |                                       | 75       |   |   | 6,443 |   |   | **11,282** |   |
| Excess                tax benefits of stock option exercises                                               |   |                                       | -        |   |   | - |   |   | **9,877** |   |
| Other,                net                                                                                  |   |                                       | (520     | ) |   | (20 | ) |   | **(833** | **)** |
| Net                cash provided by (used in) financing activities                                         |   |                                       | 38,742   |   |   | (28 | ) |   | **(42,472** | **)** |
|                                                                                                       |   |                                       |     |   |   |   |   |   |   |   |
| Net                cash (used in) provided by operating, investing and                financing activities |   | $                                          | (28,219  | ) | $ | 11,382 |   | **$** | **10,072** |   |

----

**TITANIUM      METALS CORPORATION**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS (CONTINUED)**

|                                                          |   | **Year                ended December 31,** |    |
|---------------------------------------------------------------|--------|--------------------------------------------|---------|
|                                                          |   | 2004                                       |    | 2005 |   | **2006** |   |
|                                                          |   |                                       |    |   |   |   |   |   |   |   |
| Cash                and cash equivalents:                     |   |                                       |    |   |   |   |   |   |   |   |
| Net                increase (decrease) from:                  |   |                                       |    |   |   |   |   |   |   |   |
| Operating,                investing and financing activities  |   | $                                          | (28,219 | ) | $ | 11,382 |   | **$** | **10,072** |   |
| Effect                of exchange rate changes on cash        |   |                                       | 373     |   |   | (971 | ) |   | **1,683** |   |
|                                                          |   |                                       | (27,846 | ) |   | 10,411 |   |   | **11,755** |   |
| Cash                and cash equivalents at beginning of year |   |                                       | 35,040  |   |   | 7,194 |   |   | **17,605** |   |
|                                                          |   |                                       |    |   |   |   |   |   |   |   |
| Cash                and cash equivalents at end of year       |   | $                                          | 7,194   |   | $ | 17,605 |   | **$** | **29,360** |   |
|                                                          |   |                                       |    |   |   |   |   |   |   |   |
| Supplemental                disclosures:                      |   |                                       |    |   |   |   |   |   |   |   |
| Cash                paid for:                                 |   |                                       |    |   |   |   |   |   |   |   |
| Interest,                net of amounts capitalized           |   | $                                          | 30,624  |   | $ | 3,392 |   | **$** | **3,366** |   |
| Income                taxes, net                              |   | $                                          | -       |   | $ | 7,880 |   | **$** | **100,117** |   |
|                                                          |   |                                       |    |   |   |   |   |   |   |   |

----

**TITANIUM      METALS CORPORATION**

**CONSOLIDATED      STATEMENTS OF CHANGES IN STOCKHOLDERS’EQUITY**

|                                                                                                                                        |   |   Common                Shares |        |   Common                Stock |   |  Series                APreferred                Stock |   |  Additional                Paid-in Capital |       |   Retained                Earnings |   | Accumulated                Other Comprehensive Loss |   |  Treasury                Stock and Other |        |    Total |   |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|-------------|-----------------------------------------|--------|-------------------------------------------------------------|--------|-------------------------------------------------|------------|----------------------------------------------|--------|-----------------------------------------------------|--------|-----------------------------------------------|-------------|-------------------------|--------|
|                                                                                                                                        |   |                                     |        |                                    |   |                                                        |   |                                            |       |                                         |   |                                                |   |                                          |        |                    |   |   |   |   |   |   |   |   |   |
| Balance                at January 1, 2004                                                                                                   |   |                                     | 127,230     |                                    | $      | 1,272                                                       |   | $                                               | -          |                                         | $      | 349,403                                             |   | $                                             | (121,443    | )                       | $      | (50,226 | ) | $ | (1,264 | ) | $ | 177,742 |   |
| Net                income                                                                                                                   |   |                                     | -           |                                    |   | -                                                           |   |                                            | -          |                                         |   | -                                                   |   |                                          | 47,698      |                    |   | - |   |   | - |   |   | 47,698 |   |
| Other                comprehensive income                                                                                                   |   |                                     | -           |                                    |   | -                                                           |   |                                            | -          |                                         |   | -                                                   |   |                                          | -           |                    |   | 10,237 |   |   | - |   |   | 10,237 |   |
| Issuance                of Series A Preferred Stock                                                                                         |   |                                     | -           |                                    |   | -                                                           |   |                                            | 173,650    |                                         |   | -                                                   |   |                                          | -           |                    |   | - |   |   | - |   |   | 173,650 |   |
| Dividends                declared on Series A Preferred                Stock                                                                |   |                                     | -           |                                    |   | -                                                           |   |                                            | -          |                                         |   | -                                                   |   |                                          | (3,299      | )                       |   | - |   |   | - |   |   | (3,299 | ) |
| Issuance                of common stock                                                                                                     |   |                                     | 194         |                                    |   | 2                                                           |   |                                            | -          |                                         |   | 420                                                 |   |                                          | -           |                    |   | - |   |   | - |   |   | 422 |   |
| Stock                award cancellations                                                                                                    |   |                                     | (78         | )                                       |   | (1                                                          | )      |                                            | -          |                                         |   | (70                                                 | )      |                                          | -           |                    |   | - |   |   | 71 |   |   | - |   |
| Amortization                of deferred compensation, net                                                                                   |   |                                     | -           |                                    |   | -                                                           |   |                                            | -          |                                         |   | -                                                   |   |                                          | -           |                    |   | - |   |   | (22 | ) |   | (22 | ) |
|                                                                                                                                        |   |                                     |        |                                    |   |                                                        |   |                                            |       |                                         |   |                                                |   |                                          |        |                    |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2004                                                                                                 |   |                                     | 127,346     |                                    |   | 1,273                                                       |   |                                            | 173,650    |                                         |   | 349,753                                             |   |                                          | (77,044     | )                       |   | (39,989 | ) |   | (1,215 | ) |   | 406,428 |   |
| Net                income                                                                                                                   |   |                                     | -           |                                    |   | -                                                           |   |                                            | -          |                                         |   | -                                                   |   |                                          | 155,945     |                    |   | - |   |   | - |   |   | 155,945 |   |
| Other                comprehensive income                                                                                                   |   |                                     | -           |                                    |   | -                                                           |   |                                            | -          |                                         |   | -                                                   |   |                                          | -           |                    |   | 1,718 |   |   | - |   |   | 1,718 |   |
| Issuance                of common stock                                                                                                     |   |                                     | 2,220       |                                    |   | 24                                                          |   |                                            | -          |                                         |   | 6,559                                               |   |                                          | -           |                    |   | - |   |   | - |   |   | 6,583 |   |
| Conversion                of Series A Preferred Stock and BUCS                                                                              |   |                                     | 12,364      |                                    |   | 126                                                         |   |                                            | (41,157    | )                                            |   | 41,145                                              |   |                                          | -           |                    |   | - |   |   | - |   |   | 114 |   |
| Treasury                stock retirement                                                                                                    |   |                                     | -           |                                    |   | (4                                                          | )      |                                            | -          |                                         |   | (988                                                | )      |                                          | (216        | )                       |   | - |   |   | 1,208 |   |   | - |   |
| Tax                benefit of stock options exercised and restricted                        stock vested |   |                                     | -           |                                    |   | -                                                           |   |                                            | -          |                                         |   | 3,879                                               |   |                                          | -           |                    |   | - |   |   | - |   |   | 3,879 |   |
| Dividends                declared on Series A Preferred Stock                                                                               |   |                                     | -           |                                    |   | -                                                           |   |                                            | -          |                                         |   | -                                                   |   |                                          | (12,506     | )                       |   | - |   |   | - |   |   | (12,506 | ) |
| Amortization                of deferred compensation, net                                                                                   |   |                                     | -           |                                    |   | -                                                           |   |                                            | -          |                                         |   | -                                                   |   |                                          | -           |                    |   | - |   |   | 7 |   |   | 7 |   |
|                                                                                                                                        |   |                                     |        |                                    |   |                                                        |   |                                            |       |                                         |   |                                                |   |                                          |        |                    |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2005                                                                                                 |   |                                     | 141,930     |                                    | $      | 1,419                                                       |   | $                                               | 132,493    |                                         | $      | 400,348                                             |   | $                                             | 66,179      |                    | $      | (38,271 | ) | $ | - |   | $ | 562,168 |   |
| Net                income                                                                                                                   |   |                                     | -           |                                    |   | -                                                           |   |                                            | -          |                                         |   | -                                                   |   |                                          | 281,277     |                    |   | - |   |   | - |   |   | 281,277 |   |
|     Other                comprehensive income                                                                           |   |                                     | -           |                                    |   | -                                                           |   |                                            | -          |                                         |   | -                                                   |   |                                          | -           |                    |   | 23,716 |   |   | - |   |   | 23,716 |   |
|                     Issuance of common stock                                                                            |   |                                     | 2,361       |                                    |   | 24                                                          |   |                                            | -          |                                         |   | 11,197                                              |   |                                          | -           |                    |   | - |   |   | - |   |   | 11,221 |   |
| Conversion                of Series A Preferred Stock and BUCS                                                                              |   |                                     | 17,244      |                                    |   | 172                                                         |   |                                            | (57,448    | )                                            |   | 62,947                                              |   |                                          | -           |                    |   | - |   |   | - |   |   | 5,671 |   |
| Tax                benefit of stock options exercised                                                                                       |   |                                     | -           |                                    |   | -                                                           |   |                                            | -          |                                         |   | 9,877                                               |   |                                          | -           |                    |   | - |   |   | - |   |   | 9,877 |   |
| Adoption                of SFAS 158                                                                                                         |   |                                     | -           |                                    |   | -                                                           |   |                                            | -          |                                         |   | -                                                   |   |                                          | -           |                    |   | (7,881 | ) |   | - |   |   | (7,881 | ) |
| Dividends                declared on Series A Preferred Stock                                                                               |   |                                     | -           |                                    |   | -                                                           |   |                                            | -          |                                         |   | -                                                   |   |                                          | (7,177      | )                       |   | - |   |   | - |   |   | (7,177 | ) |
| Balance                at December 31, 2006                                                                                                 |   |                                     | **161,535** |                                    | **$**  | **1,615**                                                   |   | **$**                                           | **75,045** |                                         | **$**  | **484,369**                                         |   | **$**                                         | **340,279** |                    | **$**  | **(22,436** | **)** | **$** | **-** |   | **$** | **878,872** |   |

----

**TITANIUM      METALS CORPORATION**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**Note      1 - Basis of presentation and organization**

***Basis      of presentation***

***Organization***

***Stock      splits***

----

**Note      2 - Summary of significant accounting policies**

***Use      of estimates.***
* *

***Cash      and cash equivalents.***
* *

***Restricted      cash and cash equivalents.***

***Accounts      receivable.***

***Inventories      and cost of sales.***
* *

***Investments.***

***Property,      equipment and depreciation.***
* *

***Impairment      of long-lived assets***

----

***Fair      value of financial instruments.***
* *

***Translation      of foreign currencies.***
* *

***Employee      benefit plans.***
* *

***Revenue      recognition.***
* *

***Research      and development.***
* *

***Self-insurance***
**.**

***Income      taxes.***
* *

***Recent      accounting pronouncements.***
*Inventory      Costs, an amendment of ARB 43, Chapter 4, *

*Share-Based      Payment*
*Accounting      for Stock Issued to Employees*
*Accounting      for Stock-Based Compensation*
*Accounting      for Stock-Based Compensation Transition and Disclosure*

*Employers’      Accounting for Defined Benefit Pension and Other Postretirement      Plans*

*Accounting      for Uncertain Tax Positions*
*Accounting      for Income Taxes*

*Fair      Value Measurements*

*The      Fair Value Option for Financial Assets and Financial      Liabilities*

**Note      3 - Inventories**

|                                            |   | December                31,   |    |
|-------------------------------------------------|--------|-------------------------------|---------|
|                                            |   | 2005                          |    | **2006** |   |
|                                            |   | (In                thousands) |    |
|                                            |   |                          |    |   |   |   |   |
| Raw                materials                    |   | $                             | 89,956  |   | **$** | **134,018** |   |
| Work-in-process                                 |   |                          | 169,856 |   |   | **239,396** |   |
| Finished                products                |   |                          | 73,395  |   |   | **90,283** |   |
| Inventory                consigned to customers |   |                          | 20,000  |   |   | **20,099** |   |
| Supplies                                        |   |                          | 12,489  |   |   | **17,711** |   |
|                                            |   |                          |    |   |   |   |   |
| Total                inventories                |   | $                             | 365,696 |   | **$** | **501,507** |   |

----

**Note      4 - Marketable securities**

|  Marketable                security                                                                                                                                                                                                                                                                   |   |  Shares |          |  Market                value     |   |  Cost                basis |   | Unrealized                gains (losses) |       |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|---------------|---------------------------------------|--------|---------------------------------|--------|------------------------------------------|------------|
|                                                                                                                                                                                                                                                                                                       |   |         |          | (Dollars                in thousands) |   |
|                                                                                                                                                                                                                                                                                                       |   |         |          |                                  |   |                            |   |                                     |       |   |   |   |   |
| As                of December 31, 2005:                                                                                                                                                                                                                                                                    |   |         |          |                                  |   |                            |   |                                     |       |   |   |   |   |
| CompX                (1)                                                                                                                                                                                                                                                                                   |   |         | 2,696,420     |                                  | $      | 43,197                          |   | $                                        | 34,234     |   | $ | 8,963 |   |
| NL                                                                                                                                                                                                                                                                                                         |   |         | 222,100       |                                  |   | 3,129                           |   |                                     | 2,461      |   |   | 668 |   |
| Kronos                                                                                                                                                                                                                                                                                                     |   |         | 5,203         |                                  |   | 151                             |   |                                     | 202        |   |   | (51 | ) |
|                                                                                                                                                                                                                                                                                                       |   |         |          |                                  |   |                            |   |                                     |       |   |   |   |   |
| Total                marketable securities                                                                                                                                                                                                                                                                 |   |         |          |                                  | $      | 46,477                          |   | $                                        | 36,897     |   | $ | 9,580 |   |
|                                                                                                                                                                                                                                                                                                       |   |         |          |                                  |   |                            |   |                                     |       |   |   |   |   |
| **As                of December 31, 2006:**                                                                                                                                                                                                                                                                |   |         |          |                                  |   |                            |   |                                     |       |   |   |   |   |
| **CompX****(1)**                                                                                                                                                                                                                                                                                           |   |         | **2,696,420** |                                  | **$**  | **54,360**                      |   | **$**                                    | **34,234** |   | **$** | **20,126** |   |
| **NL**                                                                                                                                                                                                                                                                                                     |   |         | **222,100**   |                                  |   | **2,297**                       |   |                                     | **2,461**  |   |   | **(164** | **)** |
| **Kronos**                                                                                                                                                                                                                                                                                                 |   |         | **5,203**     |                                  |   | **169**                         |   |                                     | **202**    |   |   | **(33** | **)** |
|                                                                                                                                                                                                                                                                                                       |   |         |          |                                  |   |                            |   |                                     |       |   |   |   |   |
| Total                marketable securities                                                                                                                                                                                                                                                                 |   |         |          |                                  | **$**  | **56,826**                      |   | **$**                                    | **36,897** |   | **$** | **19,929** |   |
|                                                                                                                                                                                                                                                                                                       |   |         |          |                                  |   |                            |   |                                     |       |   |   |   |   |
| (1)                We directly held 483,600 shares of CompX as of December 31, 2005                and 2006.                The remaining 2,212,820 shares as ofDecember                31, 2005 and 2006 were held by CompX Group, Inc. (“CGI”). See further                discussion below. |

----

**Note      5 - Investment in joint ventures**

|                                                                          |   | December                31,   |   |
|-------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                          |   | 2005                          |   | **2006** |   |
|                                                                          |   | (In                thousands) |   |
|                                                                          |   |                          |   |   |   |   |   |
| VALTIMET                SAS (“VALTIMET”)                          |   | $                             | 25,911 |   | **$** | **-** |   |
| XI'AN                BAOTIMET VALINOX TUBES CO. LTD. (“BAOTIMET”) |   |                          | -      |   |   | **660** |   |
| Other                                                                         |   |                          | 67     |   |   | **64** |   |
|                                                                          |   |                          |   |   |   |   |   |
| Total                investments in joint ventures                            |   | $                             | 25,978 |   | **$** | **724** |   |

**Note      6 - Property and equipment**

|                                             |   | December                31,   |    |
|--------------------------------------------------|--------|-------------------------------|---------|
|                                             |   | 2005                          |    | **2006** |   |
|                                             |   | (In                thousands) |    |
|                                             |   |                          |    |   |   |   |   |
| Land                and improvements             |   | $                             | 8,922   |   | **$** | **9,328** |   |
| Buildings                and improvements        |   |                          | 37,259  |   |   | **41,551** |   |
| Information                technology systems    |   |                          | 61,175  |   |   | **66,048** |   |
| Manufacturing                equipment and other |   |                          | 348,080 |   |   | **376,165** |   |
| Construction                in progress          |   |                          | 31,488  |   |   | **103,444** |   |
|                                             |   |                          |    |   |   |   |   |
| Total                property and equipment      |   |                          | 486,924 |   |   | **596,536** |   |
|                                             |   |                          |    |   |   |   |   |
| Less                accumulated depreciation     |   |                          | 233,934 |   |   | **266,700** |   |
|                                             |   |                          |    |   |   |   |   |
| Total                property and equipment, net |   | $                             | 252,990 |   | **$** | **329,836** |   |

----

**Note      7 - Prepaid and other noncurrent assets**

|                                                     |   | December                31,   |   |
|----------------------------------------------------------|--------|-------------------------------|--------|
|                                                     |   | 2005                          |   | **2006** |   |
|                                                     |   | (In                thousands) |   |
|                                                     |   |                          |   |   |   |   |   |
| Prepaid                conversion services               |   | $                             | -      |   | **$** | **49,687** |   |
| Other                                                    |   |                          | 1,203  |   |   | **818** |   |
|                                                     |   |                          |   |   |   |   |   |
| Total                prepaid and other noncurrent assets |   | $                             | 1,203  |   | **$** | **50,505** |   |

**Note      8 - Accrued liabilities**

|                                     |   | December                31,   |   |
|------------------------------------------|--------|-------------------------------|--------|
|                                     |   | 2005                          |   | **2006** |   |
|                                     |   | (In                thousands) |   |
|                                     |   |                          |   |   |   |   |   |
| Employee                related          |   | $                             | 43,790 |   | **$** | **46,358** |   |
| Deferred                revenue          |   |                          | 14,525 |   |   | **6,922** |   |
| Scrap                purchases           |   |                          | 1,255  |   |   | **8,935** |   |
| Taxes,                other than income  |   |                          | 5,318  |   |   | **6,734** |   |
| Other                                    |   |                          | 10,810 |   |   | **12,891** |   |
|                                     |   |                          |   |   |   |   |   |
| Total                accrued liabilities |   | $                             | 75,698 |   | **$** | **81,840** |   |

----

**Note      9 - Bank debt **

|                                            |   | December                31,   |   |
|-------------------------------------------------|--------|-------------------------------|--------|
|                                            |   | 2005                          |   | **2006** |   |
|                                            |   | (In                thousands) |   |
|                                            |   |                          |   |   |   |   |   |
| Long-term                debt:                  |   |                          |   |   |   |   |   |
| U.S.                credit facility             |   | $                             | 40,255 |   | **$** | **-** |   |
|   U.K.                credit facility |   |                          | 11,104 |   |   | **-** |   |
|                                            |   |                          |   |   |   |   |   |
| Total                long-term debt             |   | $                             | 51,359 |   | **$** | **-** |   |

**Note      10 - Capital Trust**

** **

**Note      11 - Minority interest**

**Note      12 - Stockholders’ equity**

***Preferred      stock.***
* *
* *

*** ***

***Common      stock***
**.**

***Treasury      stock.***

***Restricted      stock and common stock options.***

|                                                |   |    |           |                          |   | Amount                payable |   |                          |        |
|-----------------------------------------------------|--------|---------|----------------|-------------------------------|--------|-------------------------------|--------|-------------------------------|-------------|
|                                                |   |    |           | Exercise                price |   | upon                exercise  |   | Weighted-average              |        |
|                                                |   | Options |           | per                option     |   | (in                thousands) |   | exercise                price |        |
|                                                |   |    |           |                          |   |                          |   |                          |        |   |   |   |   |
| Outstanding                at December 31, 2003     |   |    | 4,435,760      |                          | $      | 0.42-8.83                     |   | $                             | 19,881      |   | $ | 4.48 |   |
| Exercised                                           |   |    | (40,400        | )                             | $      | 2.00                          |   |                          | (81         | ) | $ | 2.00 |   |
| Canceled                                            |   |    | (93,280        | )                             | $      | 2.00-7.33                     |   |                          | (495        | ) | $ | 5.31 |   |
|                                                |   |    |           |                          |   |                          |   |                          |        |   |   |   |   |
| Outstanding                at December 31, 2004     |   |    | 4,302,080      |                          | $      | 0.42-8.83                     |   |                          | 19,305      |   | $ | 4.49 |   |
| Exercised                                           |   |    | (2,191,200     | )                             | $      | 0.90-7.33                     |   |                          | (6,443      | ) | $ | 2.94 |   |
| Canceled                                            |   |    | (34,160        | )                             | $      | 2.00-7.33                     |   |                          | (198        | ) | $ | 5.79 |   |
|                                                |   |    |           |                          |   |                          |   |                          |        |   |   |   |   |
| Outstanding                at December 31, 2005     |   |    | 2,076,720      |                          | $      | 0.42-8.83                     |   | $                             | 12,664      |   | $ | 6.10 |   |
| **Exercised**                                       |   |    | **(1,750,520** | **)**                         | **$**  | **0.42-8.83**                 |   |                          | **(11,283** | **)** | **$** | **6.45** |   |
|                                                |   |    |           |                          |   |                          |   |                          |        |   |   |   |   |
| **Outstanding                at December 31, 2006** |   |    | **326,200**    |                          | **$**  | **0.97-7.33**                 |   | **$**                         | **1,381**   |   | **$** | **4.24** |   |

----

**Note      13 - Other income and expense**

|                                                 |   | Year                ended December 31, |   |
|------------------------------------------------------|--------|----------------------------------------|--------|
|                                                 |   | 2004                                   |   | 2005 |   | **2006** |   |
| (In                thousands)                        |   |                                   |
| Other                operating income (expense):     |   |                                   |   |   |   |   |   |   |   |   |
| Boeing                take-or-pay                    |   | $                                      | 22,093 |   | $ | 17,134 |   | **$** | **-** |   |
| Settlement                of customer claim          |   |                                   | -      |   |   | 1,800 |   |   | **-** |   |
| Other,                net                            |   |                                   | 896    |   |   | 1,366 |   |   | **(396** | **)** |
|                                                 |   |                                   |   |   |   |   |   |   |   |   |
| Total                other operating income, net     |   | $                                      | 22,989 |   | $ | 20,300 |   | **$** | **(396** | **)** |
|                                                 |   |                                   |   |   |   |   |   |   |   |   |
| Other                non-operating income (expense): |   |                                   |   |   |   |   |   |   |   |   |
| Dividends                and interest                |   | $                                      | 687    |   | $ | 2,025 |   | **$** | **3,594** |   |
| Foreign                exchange gain (loss), net     |   |                                   | (477   | ) |   | 2,288 |   |   | **(3,977** | **)** |
| Gain                on sale of VALTIMET (Note 5)     |   |                                   | -      |   |   | - |   |   | **40,945** |   |
| Gain                on sale of property              |   |                                   | -      |   |   | 13,881 |   |   | **-** |   |
| Gain                on BUCS exchange, net (Note 10)  |   |                                   | 15,465 |   |   | - |   |   | **-** |   |
| Other,                net                            |   |                                   | 525    |   |   | 34 |   |   | **(1,513** | **)** |
|                                                 |   |                                   |   |   |   |   |   |   |   |   |
| Total                other non-operating income, net |   | $                                      | 16,200 |   | $ | 18,228 |   | **$** | **39,049** |   |

----

**Note      14 - Income taxes**

|                                                                    |   | Year                ended December 31, |    |
|-------------------------------------------------------------------------|--------|----------------------------------------|---------|
|                                                                    |   | 2004                                   |    | 2005 |   | **2006** |   |
|                                                                    |   | (In                thousands)          |    |
|                                                                    |   |                                   |    |   |   |   |   |   |   |   |
| Income                before income taxes and minority interest:        |   |                                   |    |   |   |   |   |   |   |   |
| U.S.                                                                    |   | $                                      | 29,636  |   | $ | 119,799 |   | **$** | **307,496** |   |
| Non-U.S.                                                                |   |                                   | 17,149  |   |   | 65,541 |   |   | **110,907** |   |
|                                                                    |   |                                   |    |   |   |   |   |   |   |   |
| Total                                                                   |   | $                                      | 46,785  |   | $ | 185,340 |   | **$** | **418,403** |   |
|                                                                    |   |                                   |    |   |   |   |   |   |   |   |
| Expected                income tax expense, at 35%                      |   | $                                      | 16,375  |   | $ | 64,869 |   | **$** | **146,440** |   |
| Non-U.S.                tax rates                                       |   |                                   | (451    | ) |   | (1,134 | ) |   | **(2,063** | **)** |
| Incremental                tax on earnings of non-U.S. group affiliates |   |                                   | 106     |   |   | 455 |   |   | **(511** | **)** |
| U.S.                state income taxes, net                             |   |                                   | 297     |   |   | 3,954 |   |   | **7,091** |   |
| Dividends                received deduction                             |   |                                   | (93     | ) |   | (331 | ) |   | **(330** | **)** |
| Nontaxable                income                                        |   |                                   | (98     | ) |   | (279 | ) |   | **(893** | **)** |
| Revision                of estimated tax liability                      |   |                                   | (551    | ) |   | - |   |   | **-** |   |
| Elimination                of equity adjustment components              |   |                                   | -       |   |   | 4,405 |   |   | **(1,049** | **)** |
| Tax                on repatriation of foreign earnings                  |   |                                   | -       |   |   | 1,523 |   |   | **-** |   |
| Adjustment                of deferred income tax valuation allowance    |   |                                   | (17,106 | ) |   | (50,096 | ) |   | **(17,139** | **)** |
| Domestic                manufacturing credit                            |   |                                   | -       |   |   | - |   |   | **(2,387** | **)** |
| Other,                net                                               |   |                                   | (611    | ) |   | 1,130 |   |   | **(796** | **)** |
|                                                                    |   |                                   |    |   |   |   |   |   |   |   |
| Provision                for income taxes (benefit)                     |   | $                                      | (2,132  | ) | $ | 24,496 |   | **$** | **128,363** |   |
|                                                                    |   |                                   |    |   |   |   |   |   |   |   |
| Provision                for income taxes (benefit):                    |   |                                   |    |   |   |   |   |   |   |   |
|                                                                    |   |                                   |    |   |   |   |   |   |   |   |
| U.S.                current income tax expense                          |   | $                                      | 648     |   | $ | 5,120 |   | **$** | **88,316** |   |
| Non-U.S.                current income tax expense                      |   |                                   | 2,931   |   |   | 17,245 |   |   | **29,738** |   |
|                                                                    |   |                                   |    |   |   |   |   |   |   |   |
| Total                current income tax expense                         |   |                                   | 3,579   |   |   | 22,365 |   |   | **118,054** |   |
|                                                                    |   |                                   |    |   |   |   |   |   |   |   |
| U.S.                deferred income tax (benefit) expense               |   |                                   | (4,202  | ) |   | 10,638 |   |   | **3,352** |   |
| Non-U.S.                deferred income tax (benefit) expense           |   |                                   | (1,509  | ) |   | (8,507 | ) |   | **6,957** |   |
|                                                                    |   |                                   |    |   |   |   |   |   |   |   |
| Total                deferred income tax (benefit) expense              |   |                                   | (5,711  | ) |   | 2,131 |   |   | **10,309** |   |
|                                                                    |   |                                   |    |   |   |   |   |   |   |   |
| Provision                for income taxes (benefit)                     |   | $                                      | (2,132  | ) | $ | 24,496 |   | **$** | **128,363** |   |

----

|                                                                                                                                                   |   | Year                ended December 31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|--------|
|                                                                                                                                                   |   | 2004                                   |   | 2005 |   | **2006** |   |
|                                                                                                                                                   |   | (In                thousands)          |   |
|                                                                                                                                                   |   |                                   |   |   |   |   |   |   |   |   |
| Comprehensive                tax (benefit) provision allocable to:                                                                                     |   |                                   |   |   |   |   |   |   |   |   |
| Income                before income taxes and minority interest                                                                                        |   | $                                      | (2,132 | ) | $ | 24,496 |   | **$** | **128,363** |   |
| Additional                paid in capital                                                                                                              |   |                                   | -      |   |   | (3,878 | ) |   | **(9,877** | **)** |
| Other                comprehensive income:                                                                                                             |   |                                   |   |   |   |   |   |   |   |   |
| Currency                translation adjustment                                                                                                         |   |                                   | -      |   |   | (48 | ) |   | **4,375** |   |
| VALTIMET                unrealized net gains on derivative   financial                instruments qualifying as cash flow   hedges |   |                                   | -      |   |   | (268 | ) |   | **268** |   |
| OPEB                adjustment                                                                                                                         |   |                                   | -      |   |   | - |   |   | **(3,988** | **)** |
| Pensions                adjustment                                                                                                                     |   |                                   | -      |   |   | 2,949 |   |   | **(3,536** | **)** |
|                                                                                                                                                   |   |                                   |   |   |   |   |   |   |   |   |
|                                                                                                                                                   |   | $                                      | (2,132 | ) | $ | 23,251 |   | **$** | **115,605** |   |

|                                                                |   | December                31,  |   |
|---------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                |   | 2005                         |   | **2006** |   |
|                                                                |   | Assets                       |   | Liabilities |   | **Assets** |   | **Liabilities** |   |
|                                                                |   | (In                millions) |   |
|                                                                |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Temporary                differences relating to net assets:        |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Inventories                                                         |   | $                            | -      |   | $ | (8.7 | ) | **$** | **-** |   | **$** | **(0.8** | **)** |
| Property                and equipment, including software           |   |                         | -      |   |   | (34.8 | ) |   | **-** |   |   | **(37.9** | **)** |
| Goodwill                                                            |   |                         | 6.6    |   |   | - |   |   | **5.4** |   |   | **-** |   |
| Accrued                pension cost                                 |   |                         | 16.0   |   |   | - |   |   | **22.9** |   |   | **-** |   |
| Pension                asset                                        |   |                         | -      |   |   | (4.2 | ) |   |   |   |   | **(6.3** | **)** |
| Accrued                OPEB cost                                    |   |                         | 6.9    |   |   | - |   |   | **10.8** |   |   | **-** |   |
| Accrued                liabilities and other deductible differences |   |                         | 10.4   |   |   | - |   |   | **8.2** |   |   | **-** |   |
| Other                taxable differences                            |   |                         | -      |   |   | (10.2 | ) |   | **-** |   |   | **(15.8** | **)** |
| Tax                loss and credit carryforwards                    |   |                         | 40.2   |   |   | - |   |   | **9.1** |   |   | **-** |   |
| Valuation                allowance                                  |   |                         | (22.2  | ) |   | - |   |   | **(1.4** | **)** |   | **-** |   |
|                                                                |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Gross                deferred tax assets (liabilities)              |   |                         | 57.9   |   |   | (57.9 | ) |   | **55.0** |   |   | **(60.8** | **)** |
| Netting                by tax jurisdiction                          |   |                         | (30.5  | ) |   | 30.5 |   |   | **(42.4** | **)** |   | **42.4** |   |
|                                                                |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Total                deferred taxes                                 |   |                         | 27.4   |   |   | (27.4 | ) |   | **12.6** |   |   | **(18.4** | **)** |
| Less                current deferred taxes                          |   |                         | 19.4   |   |   | - |   |   | **9.1** |   |   | **0.6** |   |
|                                                                |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Net                noncurrent deferred taxes                        |   | $                            | 8.0    |   | $ | (27.4 | ) | **$** | **3.5** |   | **$** | **(17.8** | **)** |

|                                                                                                                                                                  |   | Year                ended December 31, |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|---------|
|                                                                                                                                                                  |   | 2004                                   |    | 2005 |   | **2006** |   |
|                                                                                                                                                                  |   | (In                thousands)          |    |
|                                                                                                                                                                  |   |                                   |    |   |   |   |   |   |   |   |
| Effect                of:                                                                                                                                             |   |                                   |    |   |   |   |   |   |   |   |
| Income                before income taxes and minority interest                                                                                                       |   | $                                      | (17,106 | ) | $ | (50,096 | ) | **$** | **(17,139** | **)** |
| Accumulated                other comprehensive (income) loss                                                                                                          |   |                                   | (1,582  | ) |   | 1,055 |   |   | **(3,622** | **)** |
| Offset                to the change in net deferred income tax   assets                due principally to revision of estimatedtax                liability |   |                                   | 4,651   |   |   | - |   |   | **(35** | **)** |
| Currency                translation adjustment                                                                                                                        |   |                                   | 787     |   |   | (232 | ) |   | **-** |   |
|                                                                                                                                                                  |   |                                   |    |   |   |   |   |   |   |   |
| Change                in deferred tax valuation allowance                                                                                                             |   | $                                      | (13,250 | ) | $ | (49,273 | ) | **$** | **(20,796** | **)** |

**Note      15 - Employee benefit plans**

***Variable      compensation plans.***
* *

***Adoption      of SFAS 158.***

|                                                                                                          |   | Before                Application of SFAS 158 |      | Adjustments |   | After                Application of SFAS 158 |   |
|---------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|-----------|-------------|--------|----------------------------------------------|--------|
|                                                                                                          |   | (In                thousands)                 |      |
|                                                                                                          |   |                                          |      |        |   |                                         |   |   |   |   |
| Assets:                                                                                                       |   |                                          |      |        |   |                                         |   |   |   |   |
| Current                deferred income tax asset                                                              |   | $                                             | 10,976    |        |   | (1,881                                       | )      | **$** | **9,095** |   |
| Pension                asset                                                                                  |   | $                                             | 39,007    |        |   | (21,091                                      | )      | **$** | **17,916** |   |
| Noncurrent                deferred income tax asset                                                           |   | $                                             | -         |        |   | 3,500                                        |   | **$** | **3,500** |   |
|                                                                                                          |   |                                          |      |        |   |                                         |   |   |   |   |
| Liabilities:                                                                                                  |   |                                          |      |        |   |                                         |   |   |   |   |
| Current                accrued pension cost                                                                   |   | $                                             | 6,097     |        |   | (6,081                                       | )      | **$** | **16** |   |
| Current                accrued OPEB cost                                                                      |   | $                                             | 2,258     |        |   | (64                                          | )      | **$** | **2,194** |   |
| Noncurrent                accrued pension cost                                                                |   | $                                             | 65,840    |        |   | (13,622                                      | )      | **$** | **52,218** |   |
| Noncurrent                accrued OPEB cost                                                                   |   | $                                             | 17,268    |        |   | 10,695                                       |   | **$** | **27,963** |   |
| Noncurrent                deferred income tax liability                                                       |   | $                                             | 20,292    |        |   | (2,519                                       | )      | **$** | **17,773** |   |
|                                                                                                          |   |                                          |      |        |   |                                         |   |   |   |   |
| Accumulated                other comprehensive loss:                                                          |   |                                          |      |        |   |                                         |   |   |   |   |
| Pension                benefit plans                                                                          |   | $                                             | (52,173   | )           |   | (1,237                                       | )      | **$** | **(53,410** | **)** |
| OPEB                plan                                                                                      |   | $                                             | -         |        |   | (6,644                                       | )      | **$** | **(6,644** | **)** |
|                                                                                                          |   |                                          |      |        |   |                                         |   |   |   |   |
|                                                                                                          |   |                                          |      |        |   |                                         |   |   |   |   |
| Total                assets                                                                                   |   | $                                             | 1,236,345 |        |   | (19,472                                      | )      | **$** | **1,216,873** |   |
| Total                current liabilities                                                                      |   | $                                             | 217,276   |        |   | (6,145                                       | )      | **$** | **211,131** |   |
| Total                liabilities                                                                              |   | $                                             | 328,268   |        |   | (11,591                                      | )      | **$** | **316,677** |   |
| Total                accumulated other  comprehensive                loss                                |   | $                                             | (14,555   | )           |   | (7,881                                       | )      | **$** | **(22,436** | **)** |
| Total                stockholders’ equity                                                               |   | $                                             | 886,753   |        |   | (7,881                                       | )      | **$** | **878,872** |   |
| Total                liabilities, minority interest and   stockholders’                equity |   | $                                             | 1,236,345 |        |   | (19,472                                      | )      | **$** | **1,216,873** |   |

***Defined      benefit pension plans.***
* *

----

|                                                                                                 |   | Year                ended December 31, |    |
|------------------------------------------------------------------------------------------------------|--------|----------------------------------------|---------|
|                                                                                                 |   | 2005                                   |    | **2006** |   |
|                                                                                                 |   | (In                thousands)          |    |
|                                                                                                 |   |                                   |    |   |   |   |   |
| Change                in projected benefit obligations:                                              |   |                                   |    |   |   |   |   |
| Balance                at beginning of year                                                          |   | $                                      | 262,480 |   | **$** | **273,160** |   |
| Service                cost                                                                          |   |                                   | 3,728   |   |   | **4,686** |   |
| Participants’                contributions                                                     |   |                                   | 1,308   |   |   | **1,397** |   |
| Interest                cost                                                                         |   |                                   | 13,656  |   |   | **14,006** |   |
| Actuarial                loss                                                                        |   |                                   | 21,941  |   |   | **7,992** |   |
| Benefits                paid                                                                         |   |                                   | (10,024 | ) |   | **(10,829** | **)** |
| Change                in currency exchange rates                                                     |   |                                   | (19,931 | ) |   | **27,157** |   |
|                                                                                                 |   |                                   |    |   |   |   |   |
| Balance                at end of year                                                                |   | $                                      | 273,158 |   | **$** | **317,569** |   |
|                                                                                                 |   |                                   |    |   |   |   |   |
| Change                in plan assets:                                                                |   |                                   |    |   |   |   |   |
| Fair                value at beginning of year                                                       |   | $                                      | 188,659 |   | **$** | **223,241** |   |
| Actual                return on plan assets                                                          |   |                                   | 47,951  |   |   | **30,531** |   |
| Employer                contributions                                                                |   |                                   | 9,136   |   |   | **18,568** |   |
| Participants’                contributions                                                     |   |                                   | 1,308   |   |   | **1,397** |   |
| Benefits                paid                                                                         |   |                                   | (10,024 | ) |   | **(10,829** | **)** |
| Change                in currency exchange rates                                                     |   |                                   | (13,788 | ) |   | **20,343** |   |
|                                                                                                 |   |                                   |    |   |   |   |   |
| Fair                value at end of year                                                             |   | $                                      | 223,242 |   | **$** | **283,251** |   |
|                                                                                                 |   |                                   |    |   |   |   |   |
| Funded                status:                                                                        |   |                                   |    |   |   |   |   |
| Plan                assets under projected benefit obligations                                       |   | $                                      | (49,916 | ) | **$** | **(34,318** | **)** |
| Unrecognized:                                                                                        |   |                                   |    |   |   |   |   |
| Actuarial                loss                                                                        |   |                                   | 68,559  |   |   | **69,860** |   |
| Prior                service cost                                                                    |   |                                   | 2,852   |   |   | **2,296** |   |
|                                                                                                 |   |                                   |    |   |   |   |   |
| Total                                                                                                |   | $                                      | 21,495  |   | **$** | **37,838** |   |
|                                                                                                 |   |                                   |    |   |   |   |   |
| Accumulated                benefit obligation                                                        |   | $                                      | 270,120 |   | **$** | **313,188** |   |
|                                                                                                 |   |                                   |    |   |   |   |   |
| Amounts                recognized in balance sheets:                                                 |   |                                   |    |   |   |   |   |
| Pension                asset             |   | $                                      | 22,337  |   | **$** | **17,916** |   |
| Current                accrued pension cost                                                          |   |                                   | (5,353  | ) |   | **(16** | **)** |
| Noncurrent                accrued pension cost                                                       |   |                                   | (58,450 | ) |   | **(52,218** | **)** |
| Accumulated                other comprehensive loss                                                  |   |                                   | 62,961  |   |   | **72,156** |   |
|                                                                                                 |   |                                   |    |   |   |   |   |
| Total                                                                                                |   | $                                      | 21,495  |   | **$** | **37,838** |   |

|                                              |   | Year                ended December 31, |    |
|---------------------------------------------------|--------|----------------------------------------|---------|
|                                              |   | 2004                                   |    | 2005 |   | **2006** |   |
|                                              |   | (In                thousands)          |    |
|                                              |   |                                   |    |   |   |   |   |   |   |   |
| Service                cost                       |   | $                                      | 3,308   |   | $ | 3,728 |   | **$** | **4,686** |   |
| Interest                cost                      |   |                                   | 12,646  |   |   | 13,656 |   |   | **14,006** |   |
| Expected                return on plan assets     |   |                                   | (13,098 | ) |   | (14,833 | ) |   | **(18,478** | **)** |
| Amortization                of prior service cost |   |                                   | 489     |   |   | 556 |   |   | **556** |   |
| Amortization                of net losses         |   |                                   | 4,357   |   |   | 4,796 |   |   | **3,303** |   |
|                                              |   |                                   |    |   |   |   |   |   |   |   |
| Net                pension expense                |   | $                                      | 7,702   |   | $ | 7,903 |   | **$** | **4,073** |   |

|                     | Significant                assumptions used to calculate projected and accumulated benefit                obligations at December 31, |
|--------------------------|---------------------------------------------------------------------------------------------------------------------------------------|
|                     | 2005                                                                                                                                  |   | **2006** |
|                     | Discountrate                                                                                                                          |   | Salary                increase |   | **Discount****rate** |   | **Salary                increase** |
|                     |                                                                                                                                  |   |   |   |   |   |   |
| U.S.                plan | 5.50%                                                                                                                                 |   | n/a |   | **5.90%** |   | **n/a** |
| U.K.                plan | 4.75%                                                                                                                                 |   | 3.25% |   | **5.10%** |   | **3.50%** |

----

|                         | Significant                assumptions used to calculate net periodic pension expense for the                year                ended December 31, |
|------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
|                         | Year                                                                                                                                                |   | Discount                rate |   | LTRR |   | Salary                Increase |
|                         |                                                                                                                                                |   |   |   |   |   |   |
| U.S.                plan     | 2004                                                                                                                                                |   | 6.00% |   | 10.00% |   | n/a |
| U.K.                plan     | 2004                                                                                                                                                |   | 5.50% |   | 7.10% |   | 3.25% |
|                         |                                                                                                                                                |   |   |   |   |   |   |
| U.S.                plan     | 2005                                                                                                                                                |   | 5.65% |   | 10.00% |   | n/a |
| U.K.                plan     | 2005                                                                                                                                                |   | 5.30% |   | 7.10% |   | 3.25% |
|                         |                                                                                                                                                |   |   |   |   |   |   |
| **U.S.                plan** | **2006**                                                                                                                                            |   | **5.50%** |   | **10.00%** |   | **n/a** |
| **U.K.                plan** | **2006**                                                                                                                                            |   | **4.75%** |   | **6.70%** |   | **3.25%** |

|                                    |   | Projected                retirement benefits |   |
|-----------------------------------------|--------|----------------------------------------------|--------|
|                                    |   | U.S.                Plan                     |   | U.K.                Plan |   | Total |   |
|                                    |   | (In                thousands)                |   |
|                                    |   |                                         |   |   |   |   |   |   |   |   |
| Year                ending December 31, |   |                                         |   |   |   |   |   |   |   |   |
| 2007                                    |   | $                                            | 5,907  |   |   | 5,838 |   | $ | 11,745 |   |
| 2008                                    |   | $                                            | 5,908  |   |   | 6,014 |   | $ | 11,922 |   |
| 2009                                    |   | $                                            | 5,914  |   |   | 6,193 |   | $ | 12,107 |   |
| 2010                                    |   | $                                            | 5,879  |   |   | 6,380 |   | $ | 12,259 |   |
| 2011                                    |   | $                                            | 5,882  |   |   | 6,572 |   | $ | 12,454 |   |
| 2012                through 2016        |   | $                                            | 29,498 |   |   | 35,935 |   | $ | 65,433 |   |

|                             |   | December                31, |   |
|----------------------------------|--------|-----------------------------|--------|
|                             |   | 2005                        |   | **2006** |   |
|                             |   |                        |   |   |   |   |   |
| U.S.                plan:        |   |                        |   |   |   |   |   |
| Equity                securities |   |                        | 93.2   | % |   | **93.9** | **%** |
| Debt                securities   |   |                        | 3.5    | % |   | **3.6** | **%** |
| Cash                and other    |   |                        | 3.3    | % |   | **2.5** | **%** |
|                             |   |                        |   |   |   |   |   |
|                             |   |                        | 100.0  | % |   | **100.0** | **%** |
|                             |   |                        |   |   |   |   |   |
| U.K.                plan:        |   |                        |   |   |   |   |   |
| Equity                securities |   |                        | 84.6   | % |   | **79.0** | **%** |
| Debt                securities   |   |                        | 15.4   | % |   | **21.0** | **%** |
|                             |   |                        |   |   |   |   |   |
|                             |   |                        | 100.0  | % |   | **100.0** | **%** |

***Postretirement      benefits other than pensions.***

----

|                                                                    |   | December                31,   |    |
|-------------------------------------------------------------------------|--------|-------------------------------|---------|
|                                                                    |   | 2005                          |    | **2006** |   |
|                                                                    |   | (In                thousands) |    |
|                                                                    |   |                          |    |   |   |   |   |
| Actuarial                present value of accumulated OPEB obligations: |   |                          |    |   |   |   |   |
| Balance                at beginning of year                             |   | $                             | 34,441  |   | **$** | **30,825** |   |
| Service                cost                                             |   |                          | 661     |   |   | **852** |   |
| Interest                cost                                            |   |                          | 1,652   |   |   | **1,798** |   |
| Actuarial                (gain) loss                                    |   |                          | (3,614  | ) |   | **(1,483** | **)** |
| Participant                contributions                                |   |                          | 1,131   |   |   | **1,033** |   |
| Benefits                paid                                            |   |                          | (3,446  | ) |   | **(2,868** | **)** |
|                                                                    |   |                          |    |   |   |   |   |
| Balance                at end of year                                   |   | $                             | 30,825  |   | **$** | **30,157** |   |
|                                                                    |   |                          |    |   |   |   |   |
| Funded                status:                                           |   |                          |    |   |   |   |   |
| Projected                benefit obligations                            |   | $                             | (30,825 | ) | **$** | **(30,157** | **)** |
| Unrecognized:                                                           |   |                          |    |   |   |   |   |
| Net                actuarial loss                                       |   |                          | 15,027  |   |   | **12,130** |   |
| Prior                service credit                                     |   |                          | (1,963  | ) |   | **(1,435** | **)** |
|                                                                    |   |                          |    |   |   |   |   |
| Total                                                                   |   | $                             | (17,761 | ) | **$** | **(19,462** | **)** |
|                                                                    |   |                          |    |   |   |   |   |
| Amounts                recognized in balance sheets:                    |   |                          |    |   |   |   |   |
| Current                accrued OPEB cost                                |   | $                             | (2,181  | ) | **$** | **(2,194** | **)** |
| Noncurrent                accrued OPEB cost                             |   |                          | (15,580 | ) |   | **(27,963** | **)** |
| Accumulated                other comprehensive loss                     |   |                          | -       |   |   | **10,695** |   |
|                                                                    |   |                          |    |   |   |   |   |
| Total                                                                   |   | $                             | (17,761 | ) | **$** | **(19,462** | **)** |

----

|                                              |   | Year                ended December 31, |   |
|---------------------------------------------------|--------|----------------------------------------|--------|
|                                              |   | 2004                                   |   | 2005 |   | **2006** |   |
|                                              |   | (In                thousands)          |   |
|                                              |   |                                   |   |   |   |   |   |   |   |   |
| Service                cost                       |   | $                                      | 540    |   | $ | 661 |   | **$** | **852** |   |
| Interest                cost                      |   |                                   | 1,780  |   |   | 1,652 |   |   | **1,798** |   |
| Amortization                of prior service cost |   |                                   | (464   | ) |   | (464 | ) |   | **(464** | **)** |
| Amortization                of net losses         |   |                                   | 1,120  |   |   | 980 |   |   | **1,415** |   |
|                                              |   |                                   |   |   |   |   |   |   |   |   |
| Net                OPEB expense                   |   | $                                      | 2,976  |   | $ | 2,829 |   | **$** | **3,601** |   |

|                           |   | Significant                assumptions used to calculate accumulated OPEB obligation at December                31, |   |
|--------------------------------|--------|---------------------------------------------------------------------------------------------------------------------|--------|
|                           |   | 2005                                                                                                                |   | **2006** |   |
|                           |   |                                                                                                                |   |   |   |   |   |
| Discount                rate   |   |                                                                                                                | 5.50   | % |   | **5.90** | **%** |
| Beginning                HCCTR |   |                                                                                                                | 8.23   | % |   | **7.17** | **%** |
| Ultimate                HCCTR  |   |                                                                                                                | 4.00   | % |   | **4.00** | **%** |
| Ultimate                year   |   |                                                                                                                | 2010   |   |   | **2010** |   |

|                           |   | Significant                assumptions used to calculate net periodicOPEB                expense for the year ended December 31, |   |
|--------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------|--------|
|                           |   | 2004                                                                                                                             |   | 2005 |   | **2006** |   |
|                           |   |                                                                                                                             |   |   |   |   |   |   |   |   |
| Discount                rate   |   |                                                                                                                             | 6.00   | % |   | 5.65 | % |   | **5.50** | **%** |
| Beginning                HCCTR |   |                                                                                                                             | 10.35  | % |   | 9.29 | % |   | **8.23** | **%** |
| Ultimate                HCCTR  |   |                                                                                                                             | 4.00   | % |   | 4.00 | % |   | **4.00** | **%** |
| Ultimate                year   |   |                                                                                                                             | 2010   |   |   | 2010 |   |   | **2010** |   |

*Medicare      Prescription Drug, Improvement and Modernization Act of 2003*

|                                         |   | Projected                gross payments |   | Projected                retiree contributions |   | ProjectedPart                D subsidy |   | Projected                net payments |   |
|----------------------------------------------|--------|-----------------------------------------|--------|------------------------------------------------|--------|----------------------------------------|--------|---------------------------------------|--------|
|                                         |   | (In                thousands)           |   |
|                                         |   |                                    |   |                                           |   |                                   |   |                                  |   |   |   |   |   |
| Year                ended December 31,       |   |                                    |   |                                           |   |                                   |   |                                  |   |   |   |   |   |
|   2007                             |   | $                                       | 4,021  |                                           |   | (1,460                                 | )      |                                  | (303   | ) | $ | 2,258 |   |
|   2008                             |   | $                                       | 4,345  |                                           |   | (1,550                                 | )      |                                  | (467   | ) | $ | 2,328 |   |
|   2009                             |   | $                                       | 4,681  |                                           |   | (1,653                                 | )      |                                  | (512   | ) | $ | 2,516 |   |
|   2010                             |   | $                                       | 4,916  |                                           |   | (1,721                                 | )      |                                  | (552   | ) | $ | 2,643 |   |
|   2011                             |   | $                                       | 5,119  |                                           |   | (1,787                                 | )      |                                  | (582   | ) | $ | 2,750 |   |
|   2012                through 2016 |   | $                                       | 28,841 |                                           |   | (9,949                                 | )      |                                  | (3,347 | ) | $ | 15,545 |   |

**Note      16 - Related party transactions**

**Note      17 - Commitments and contingencies**

***Long-term      agreements.***

----

***Concentration      of credit and other risks.***
* *

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | Year                ended December 31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 2004                                   |   | 2005 |   | **2006** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                   |   |   |   |   |   |   |   |   |
| Significant                customer receivable balances as apercentage                of total receivables:                                                                                                                                                                                                                                                                                                                                                                |   |                                   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                   |   |   |   |   |   |   |   |   |
| VALTIMET                (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                   | -      |   |   | - |   |   | **11** | **%** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                   |   |   |   |   |   |   |   |   |
| Significant                sales revenue as a percentage of totalsales                revenue:                                                                                                                                                                                                                                                                                                                                                                             |   |                                   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                   |   |   |   |   |   |   |   |   |
| Ten                largest customers                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                   | 48     | % |   | 44 | % |   | **49** | **%** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                   |   |   |   |   |   |   |   |   |
| Significant                customers:                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                   |   |   |   |   |   |   |   |   |
| PCC                and PCC-related entities (2)                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                   | 13     | % |   | 13 | % |   | **11** | **%** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                   |   |   |   |   |   |   |   |   |
| Commercial                aerospace sector                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                   | 57     | % |   | 57 | % |   | **57** | **%** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                   |   |   |   |   |   |   |   |   |
| Customers                under LTAs                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                   | 44     | % |   | 47 | % |   | **39** | **%** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                   |   |   |   |   |   |   |   |   |
| Significant                customers under LTAs:                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                   |   |   |   |   |   |   |   |   |
| Rolls-Royce                (1)                (2)                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                   | 15     | % |   | 12 | % |   | **-** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                   |   |   |   |   |   |   |   |   |
| (1)  Amounts                excluded for periods when the concentration does not exceed                10%.(2)  PCC                and PCC-related entities serve as a supplier to Rolls-Royce. Certain                sales                we make directly to PCC and PCC-related entities also count towards,                and                are reflected in, the table above as sales to Rolls-Royce under the                Rolls-Royce LTA. |

----

***Operating      leases.***
* *

|                                    |   | Amount                        |   |
|-----------------------------------------|--------|-------------------------------|--------|
|                                    |   | (In                thousands) |   |
|                                    |   |                          |   |   |
| Year                ending December 31, |   |                          |   |   |
| 2007                                    |   | $                             | 3,899  |   |
| 2008                                    |   |                          | 3,146  |   |
| 2009                                    |   |                          | 2,572  |   |
| 2010                                    |   |                          | 2,523  |   |
| 2011                                    |   |                          | 2,137  |   |
| 2012                and thereafter      |   |                          | 20,074 |   |
|                                    |   |                          |   |   |
|                                    |   | $                             | 34,351 |   |

***Purchase      agreements***
**.**

***Environmental      matters.***

***Legal      proceedings.***

----

**Note      18 - Earnings per share **

|                                                                                  |   | Year                ended December 31, |    |
|---------------------------------------------------------------------------------------|--------|----------------------------------------|---------|
|                                                                                  |   | 2004                                   |    | 2005 |   | **2006** |   |
|                                                                                  |   | (In                thousands)          |    |
|                                                                                  |   |                                   |    |   |   |   |   |   |   |   |
| Numerator:                                                                            |   |                                   |    |   |   |   |   |   |   |   |
| Net                income attributable to common stockholders (1)                     |   | $                                      | 43,300  |   | $ | 143,701 |   | **$** | **274,484** |   |
| Dividends                on Series A Preferred Stock                                  |   |                                   | 4,398   |   |   | 12,244 |   |   | **6,793** |   |
| Interest                expense on BUCS, net of tax (3)                               |   |                                   | -       |   |   | 310 |   |   | **46** |   |
|                                                                                  |   |                                   |    |   |   |   |   |   |   |   |
| Diluted                net income attributable to common                stockholders  |   | $                                      | 47,698  |   | $ | 156,255 |   | **$** | **281,323** |   |
|                                                                                  |   |                                   |    |   |   |   |   |   |   |   |
| Denominator:                                                                          |   |                                   |    |   |   |   |   |   |   |   |
| Average                common shares outstanding                                      |   |                                   | 127,050 |   |   | 130,782 |   |   | **154,956** |   |
| Average                dilutive stock options and restricted                stock (2) |   |                                   | 532     |   |   | 720 |   |   | **351** |   |
| Series                A Preferred Stock                                               |   |                                   | 17,421  |   |   | 49,580 |   |   | **28,438** |   |
| BUCS                (3)                                                               |   |                                   | -       |   |   | 619 |   |   | **67** |   |
|                                                                                  |   |                                   |    |   |   |   |   |   |   |   |
| Diluted                shares                                                         |   |                                   | 145,003 |   |   | 181,701 |   |   | **183,812** |   |
|                                                                                  |   |                                   |    |   |   |   |   |   |   |   |

----

**Note      19 - Business segment information**

|                                                                                                                                                                                         |   | Year                ended December 31,                      |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|---------|
|                                                                                                                                                                                         |   | 2004                                                        |    | 2005 |   | **2006** |   |
|                                                                                                                                                                                         |   | (In                thousands, except product shipment data) |    |
|                                                                                                                                                                                         |   |                                                        |    |   |   |   |   |   |   |   |
| Titanium                melted and mill products:                                                                                                                                            |   |                                                        |    |   |   |   |   |   |   |   |
| Melted                product net sales                                                                                                                                                      |   | $                                                           | 72,092  |   | $ | 112,252 |   | **$** | **225,970** |   |
| Mill                product net sales                                                                                                                                                        |   |                                                        | 364,248 |   |   | 528,555 |   |   | **819,156** |   |
| Other                product sales                                                                                                                                                           |   |                                                        | 65,488  |   |   | 108,970 |   |   | **138,042** |   |
| Total                net sales                                                                                                                                                               |   | $                                                           | 501,828 |   | $ | 749,777 |   | **$** | **1,183,168** |   |
|                                                                                                                                                                                         |   |                                                        |    |   |   |   |   |   |   |   |
| Melted                product shipments:                                                                                                                                                     |   |                                                        |    |   |   |   |   |   |   |   |
| Volume                (metric tons)                                                                                                                                                          |   |                                                        | 5,360   |   |   | 5,655 |   |   | **5,900** |   |
| Average                selling price (per kilogram)                                                                                                                                          |   | $                                                           | 13.45   |   | $ | 19.85 |   | **$** | **38.30** |   |
|                                                                                                                                                                                         |   |                                                        |    |   |   |   |   |   |   |   |
| Mill                product shipments:                                                                                                                                                       |   |                                                        |    |   |   |   |   |   |   |   |
| Volume                (metric tons)                                                                                                                                                          |   |                                                        | 11,365  |   |   | 12,660 |   |   | **14,160** |   |
| Average                selling price (per kilogram)                                                                                                                                          |   | $                                                           | 32.05   |   | $ | 41.75 |   | **$** | **57.85** |   |
|                                                                                                                                                                                         |   |                                                        |    |   |   |   |   |   |   |   |
| *Geographic                segments:*                                                                                                                                                        |   |                                                        |    |   |   |   |   |   |   |   |
| Net                sales - point of origin:                                                                                                                                                  |   |                                                        |    |   |   |   |   |   |   |   |
| United                States (1)                                                                                                                                                             |   | $                                                           | 325,857 |   | $ | 512,313 |   | **$** | **865,284** |   |
| United                Kingdom                                                                                                                                                                |   |                                                        | 154,535 |   |   | 201,936 |   |   | **263,584** |   |
| France                                                                                                                                                                                       |   |                                                        | 57,942  |   |   | 91,610 |   |   | **131,361** |   |
| Italy                                                                                                                                                                                        |   |                                                        | 29,656  |   |   | 45,248 |   |   | **62,774** |   |
| Germany                                                                                                                                                                                      |   |                                                        | 88      |   |   | 1,277 |   |   | **393** |   |
| Eliminations                                                                                                                                                                                 |   |                                                        | (66,250 | ) |   | (102,607 | ) |   | **(140,228** | **)** |
|                                                                                                                                                                                         |   | $                                                           | 501,828 |   | $ | 749,777 |   | **$** | **1,183,168** |   |
| Net                sales - point of destination:                                                                                                                                             |   |                                                        |    |   |   |   |   |   |   |   |
| United                States                                                                                                                                                                 |   | $                                                           | 277,317 |   | $ | 422,143 |   | **$** | **704,531** |   |
| United                Kingdom                                                                                                                                                                |   |                                                        | 100,081 |   |   | 136,638 |   |   | **158,356** |   |
| France                                                                                                                                                                                       |   |                                                        | 55,959  |   |   | 87,811 |   |   | **146,428** |   |
| Other                locations                                                                                                                                                               |   |                                                        | 68,471  |   |   | 103,185 |   |   | **173,853** |   |
|                                                                                                                                                                                         |   | $                                                           | 501,828 |   | $ | 749,777 |   | **$** | **1,183,168** |   |
| Long-lived                assets - property and                                                                                                                                              |   |                                                        |    |   |   |   |   |   |   |   |
| equipment,                net:                                                                                                                                                               |   |                                                        |    |   |   |   |   |   |   |   |
| United                States                                                                                                                                                                 |   | $                                                           | 165,661 |   | $ | 193,623 |   | **$** | **251,015** |   |
| United                Kingdom                                                                                                                                                                |   |                                                        | 56,255  |   |   | 53,576 |   |   | **71,741** |   |
| Other                Europe                                                                                                                                                                  |   |                                                        | 6,257   |   |   | 5,791 |   |   | **7,080** |   |
|                                                                                                                                                                                         |   | $                                                           | 228,173 |   | $ | 252,990 |   | **$** | **329,836** |   |
|                                                                                                                                                                                         |   |                                                        |    |   |   |   |   |   |   |   |
| (1)                Export sales from U.S.-based operations approximated $16.0 million                in                2004, $54.0 million in 2005 and $96.1 million in                2006. |

----

**Note      20 - Quarterly results of operations (unaudited)**

|                                                                                                                                                                                                                                                                                                                                                                                                                               |   | For                the quarter ended                |      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                               |   | March                31                             |      | June                30 |   | Sept.                30 |   | Dec.                31 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                               |   | (In                millions, except per share data) |      |
|                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                |      |   |   |   |   |   |   |   |   |   |   |
| *Year                ended December 31, 2005:* (1)                                                                                                                                                                                                                                                                                                                                                                            |   |                                                |      |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                |      |   |   |   |   |   |   |   |   |   |   |
| 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                                                                                                                                                                                                                                                                                                                                    |   | $                                                   | 0.30      |   | $ | 0.26 |   | $ | 0.26 |   | $ | 0.28 |   |
| Diluted                earnings per share attributable to common                stockholders                                                                                                                                                                                                                                                                                                                                  |   | $                                                   | 0.23      |   | $ | 0.20 |   | $ | 0.20 |   | $ | 0.23 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                |      |   |   |   |   |   |   |   |   |   |   |
| *Year                ended December 31, 2006:*(1)                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                |      |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                |      |   |   |   |   |   |   |   |   |   |   |
| Net                sales                                                                                                                                                                                                                                                                                                                                                                                                           |   | **$**                                               | **286.9** |   | **$** | **300.9** |   | **$** | **271.8** |   | **$** | **323.5** |   |
| Gross                margin                                                                                                                                                                                                                                                                                                                                                                                                        |   | **$**                                               | **108.3** |   | **$** | **106.3** |   | **$** | **97.8** |   | **$** | **123.7** |   |
| Operating                income                                                                                                                                                                                                                                                                                                                                                                                                    |   | **$**                                               | **95.1**  |   | **$** | **93.6** |   | **$** | **84.6** |   | **$** | **109.5** |   |
| Net                income attributable to common                stockholders (2)                                                                                                                                                                                                                                                                                                                                                   |   | **$**                                               | **56.8**  |   | **$** | **54.3** |   | **$** | **52.7** |   | **$** | **110.6** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                |      |   |   |   |   |   |   |   |   |   |   |
| Basic                earnings per share attributable to common                stockholders                                                                                                                                                                                                                                                                                                                                    |   | **$**                                               | **0.39**  |   | **$** | **0.36** |   | **$** | **0.33** |   | **$** | **0.69** |   |
| Diluted                earnings per share attributable to common                stockholders                                                                                                                                                                                                                                                                                                                                  |   | **$**                                               | **0.32**  |   | **$** | **0.31** |   | **$** | **0.29** |   | **$** | **0.61** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                |      |   |   |   |   |   |   |   |   |   |   |
| (1)                The sum of quarterly amounts may not agree to the full year results                due to                rounding.(2)                Quarter ending December 31, 2006 includes $40.9 million gain related                to                the sale of our 43.7% interest in VALTIMET ($0.24                per diluted share, including a net income tax benefit of $3.9 million).                See Note 14. |