SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 2002
                                             -----------------

                                       OR

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

                         Commission file number 0-28538

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

              Delaware                                   13-5630895
------------------------------------         -----------------------------------
   (State or other jurisdiction of                      (IRS Employer
   incorporation or organization)                    Identification No.)

                1999 Broadway, Suite 4300, Denver, Colorado 80202
               (Address of principal executive offices) (Zip code)


       Registrant's telephone number, including area code: (303) 296-5600
                                                           --------------


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

      Title of each class           Name of Each Exchange on Which Registered
------------------------------    ---------------------------------------------
         Common Stock                        New York Stock Exchange
  ($.01 par value per share)

        Securities registered pursuant to Section 12(g) of the Act: None
                                                                    ----

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

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

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

As of June 30, 2002, 3,186,634 shares of common stock were outstanding (adjusted
for a one-for-ten  reverse stock split which became effective after the close of
trading on February 14,  2003).  The  aggregate  market  value of the  1,728,728
shares of voting stock held by nonaffiliates  of Titanium Metals  Corporation as
of such date approximated $60.5 million. No shares of non-voting stock were held
by nonaffiliates. As of February 26, 2003, 3,180,194 shares of common stock were
outstanding.

                      Documents incorporated by reference:

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


<PAGE>













Forward-Looking Information

     The  statements  contained  in this  Annual  Report on Form  10-K  ("Annual
Report")  that  are  not  historical  facts,  including,  but  not  limited  to,
statements found in the Notes to Consolidated Financial Statements and in Item 1
-  Business,  Item 2 -  Properties,  Item 3 -  Legal  Proceedings  and  Item 7 -
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations ("MD&A"), are forward-looking  statements that represent management's
beliefs   and   assumptions   based   on   currently   available    information.
Forward-looking  statements  can be  identified  by the  use of  words  such  as
"believes," "intends," "may," "will," "looks," "should," "could," "anticipates,"
"expects" or comparable  terminology  or by discussions of strategies or trends.
Although  the  Company  believes  that  the   expectations   reflected  in  such
forward-looking  statements are  reasonable,  it cannot give any assurances that
these  expectations  will prove to be correct.  Such  statements by their nature
involve  substantial risks and  uncertainties  that could  significantly  affect
expected  results.  Actual  future  results could differ  materially  from those
described in such  forward-looking  statements,  and the Company  disclaims  any
intention  or  obligation  to update or revise any  forward-looking  statements,
whether as a result of new  information,  future events or otherwise.  Among the
factors that could cause actual  results to differ  materially are the risks and
uncertainties  discussed  in this Annual  Report,  including  in those  portions
referenced  above and those  described from time to time in the Company's  other
filings with the Securities and Exchange  Commission ("SEC") which include,  but
are not limited to, the cyclicality of the commercial  aerospace  industry,  the
performance  of aerospace  manufacturers  and the Company under their  long-term
agreements,  the renewal of certain  long-term  agreements,  the  difficulty  in
forecasting  demand  for  titanium  products,   global  economic  and  political
conditions,  global productive capacity for titanium, changes in product pricing
and costs, the impact of long-term  contracts with vendors on the ability of the
Company to reduce or increase supply or achieve lower costs,  the possibility of
labor disruptions,  fluctuations in currency exchange rates,  control by certain
stockholders and possible conflicts of interest,  uncertainties  associated with
new product  development,  the supply of raw materials and services,  changes in
raw  material and other  operating  costs  (including  energy  costs),  possible
disruption of business or increases in the cost of doing business resulting from
terrorist  activities  or global  conflicts,  the  Company's  ability to achieve
reductions in its cost structure and other risks and  uncertainties.  Should one
or more of these risks  materialize  (or the  consequences of such a development
worsen),  or should the underlying  assumptions prove incorrect,  actual results
could differ materially from those forecasted or expected.

<PAGE>



                                     PART I

ITEM 1:  BUSINESS

     General.  Titanium  Metals  Corporation  ("TIMET"  or  the  "Company")  was
originally formed in 1950 and was incorporated in Delaware in 1955. TIMET is one
of the world`s leading producers of titanium sponge and titanium melted and mill
products.  The  Company  is the only  producer  with major  titanium  production
facilities in both the United States and Europe,  the world's  principal markets
for titanium.  The Company estimates that in 2002 it accounted for approximately
20% of worldwide industry shipments of titanium mill products,  down from 22% in
2001.  This  decrease is primarily  attributable  to the  Company's  significant
reliance on sales to the commercial  aerospace market, a market that the Company
estimates to have decreased by over 40% from 2001. The Company also estimates it
accounted for approximately 11% of worldwide titanium sponge production in 2002.

     Titanium was first manufactured for commercial use in the 1950s. Titanium's
unique combination of corrosion resistance, elevated-temperature performance and
high  strength-to-weight  ratio  makes  it  particularly  desirable  for  use in
commercial  and military  aerospace  applications  in which these  qualities are
essential  design  requirements for certain critical parts such as wing supports
and jet  engine  components.  While  aerospace  applications  have  historically
accounted  for a substantial  portion of the  worldwide  demand for titanium and
were  approximately  41% of aggregate mill product shipments in 2002, the number
of non-aerospace end-use markets for titanium has expanded substantially. Today,
numerous  industrial uses for titanium exist,  including chemical and industrial
power plants,  desalination  plants and pollution control equipment.  Demand for
titanium  is also  increasing  in emerging  markets  with such  diverse  uses as
offshore oil and gas production installations,  geothermal facilities,  military
armor, automotive and architectural applications.

     TIMET's  products  include  titanium  sponge,   melted  products  and  mill
products. The titanium industry is comprised of several manufacturers that, like
TIMET,   produce  a  relatively  complete  range  of  titanium  products  and  a
significant  number of producers  worldwide that  manufacture a limited range of
titanium mill  products.  The Company is currently the only major U.S.  titanium
sponge producer.

     The  Company's  long-term  strategy  is to  maximize  the value of its core
aerospace  business and develop new markets,  applications  and products to help
reduce its traditional  dependence on the aerospace industry.  In the near-term,
the Company is focused on reducing  its cost  structure,  reducing  inventories,
improving  the quality of its products and processes and taking other actions to
generate positive cash flow and return to profitability.



<PAGE>


     Industry.  The titanium  industry  historically  has derived a  substantial
portion of its business from the aerospace  industry.  Mill product shipments to
the aerospace  industry in 2002  represented  about 41% of total  worldwide mill
product shipment volume.  Aerospace demand for titanium products, which includes
both jet engine components (i.e. blades,  discs, rings and engine cases) and air
frame components (i.e. bulkheads, tail sections, landing gear, wing supports and
fasteners)  can be  broken  down  into  commercial  and  military  sectors.  The
commercial  aerospace sector has a significant  influence on titanium companies,
particularly  mill product  producers  such as TIMET.  In 2002,  the  commercial
aerospace  sector accounted for mill product  shipments of approximately  14,500
metric  tons,  which  represent  approximately  80% of  aerospace  mill  product
shipments and 33% of aggregate mill product shipments. Mill product shipments to
military  aerospace markets in 2002 were  approximately  3,600 metric tons, a 3%
increase from 2001 military aerospace mill product shipments. Military aerospace
shipments  approximated 8% of aggregate mill product  shipments in 2002, up from
6% in 2001.  Military  aerospace  shipments  are  largely  driven by  government
defense  spending in North America and Europe.  As discussed  further below, new
aircraft  programs  generally are in development for several years,  followed by
multi-year  procurement  contracts.  The Company's business is more dependent on
aerospace demand than the overall titanium industry, as approximately 69% of the
Company's  annual  mill  product  shipment  volume in 2002 was to the  aerospace
sector (59% commercial aerospace and 10% military aerospace).

     The cyclical nature of the aerospace industry has been the principal driver
of the historical  fluctuations in the performance of titanium  companies.  Over
the past 20 years,  the titanium  industry  had  cyclical  peaks in mill product
shipments  in 1989,  1997 and 2001 and  cyclical  lows in 1983,  1991 and  1999.
Demand for titanium  reached its highest peak in 1997 when industry mill product
shipments  reached an  estimated  60,000  metric  tons.  Industry  mill  product
shipments  subsequently declined  approximately 5% to an estimated 57,000 metric
tons in 1998.  After  falling 16% from 1998 levels to 48,000 metric tons in 1999
and 2000,  industry  shipments  climbed to 55,000 metric tons in 2001.  However,
primarily due to a decrease in demand for titanium from the commercial aerospace
sector,  total  industry mill product  shipments  fell  approximately  20% to an
estimated  44,000 metric tons in 2002.  The Company  expects total industry mill
product shipments in 2003 will decrease slightly from 2002 levels.

     The economic  slowdown in the United  States and other regions of the world
in the latter part of 2001 and the September 11, 2001 terrorist attacks combined
to  negatively  impact  commercial  air travel in the  United  States and abroad
throughout 2002.  Although airline passenger  traffic showed  improvement in the
months immediately following the terrorist attacks,  current data indicates that
traffic remains below pre-attack  levels. As a result, the U.S. airline industry
is  expected  to record a second  consecutive  year of losses and two major U.S.
airlines  were  forced  to seek  bankruptcy  protection  from  their  creditors.
Airlines  have  announced a number of actions to reduce both costs and  capacity
including,  but not limited to, the early retirement of airplanes,  the deferral
of scheduled deliveries of new aircraft and allowing purchase options to expire.
The Company expects the current  slowdown in the commercial  aerospace sector to
continue through 2005 before beginning a modest upturn in 2006.

                                       2

<PAGE>


     The Company believes that industry mill product shipments to the commercial
aerospace  sector  could  decline  by up to  15%  in  2003,  primarily  due to a
combination  of  reduced   aircraft   production   rates  and  excess  inventory
accumulated throughout the commercial aerospace supply chain since September 11,
2001. The  commercial  aerospace  supply chain is fragmented and  decentralized,
making it  difficult  to  quantify  excess  inventories,  and while the  Company
estimates there was a significant  reduction in excess inventory  throughout the
supply  chain  during  2002,  it still  may take  from one to two  years for the
remainder of such excess  inventory to be  substantially  absorbed,  barring the
impact of terrorist activities or global conflicts.

     According to The Airline  Monitor,  a leading  aerospace  publication,  the
worldwide  commercial  airline industry reported an estimated  operating loss of
approximately $8 billion in 2002, compared with an operating loss of $11 billion
in 2001 and  operating  income  of $11  billion  in 2000.  The  Airline  Monitor
traditionally  issues forecasts for commercial  aircraft deliveries each January
and July. According to The Airline Monitor, large commercial aircraft deliveries
for the 1996 to 2002 period peaked in 1999 with 889 aircraft, including 254 wide
body  aircraft  that use  substantially  more  titanium  than their  narrow body
counterparts.  Large commercial  aircraft  deliveries totaled 673 (including 176
wide bodies) in 2002.  The Airline  Monitor's most recently  issued  forecast of
January 2003 calls for 580  deliveries in 2003,  570  deliveries in 2004 and 560
deliveries in 2005.  Relative to 2002, these forecasted delivery rates represent
anticipated  declines of about 14% in 2003,  15% in 2004 and 17% in 2005.  After
2005,  The Airline  Monitor  calls for a continued  increase  each year in large
commercial aircraft  deliveries through 2010, with forecasted  deliveries of 780
aircraft in 2009 exceeding 2002 levels. Deliveries of titanium generally precede
aircraft  deliveries  by about one year,  although this varies  considerably  by
titanium  product.  This correlates to the Company's cycle,  which  historically
precedes the cycle of the aircraft industry and related deliveries.  The Company
can give no  assurance  as to the extent or duration  of the current  commercial
aerospace  cycle or the extent to which it will affect  demand for the Company's
products.

     The aforementioned  bankruptcy filings,  although harmful to the commercial
aerospace industry in the near term, could ultimately result in a more efficient
and profitable commercial airline industry. The renegotiation of union contracts
and changes to work rules to bring labor costs in line with the current  revenue
environment,  as well as  simplifying  fare  structures in order to attract more
travelers,   may  promote  greater  profitability  for  the  commercial  airline
industry. Further, route restructuring, more point-to-point service and expanded
customer  options could also  contribute to increased  demand for commercial air
travel. On the other hand, future terrorist activities or global conflicts could
result in a  significant  decrease  in demand  for  commercial  air  travel  and
increase the financial troubles of the airline industry.

     Military  aerospace  programs were the first to utilize  titanium's  unique
properties  on a large  scale,  beginning  in the 1950s.  Titanium  shipments to
military  aerospace  markets  reached  a peak in the  1980s  before  falling  to
historical  lows in the early 1990s with the end of the cold war.  However,  the
importance of military  markets to the titanium  industry is expected to rise in
coming  years as defense  spending  budgets  increase in  reaction to  terrorist
activities  or  global   conflicts.   It  is  estimated  that  overall  titanium
consumption  will  increase  in this  market  segment  in 2003 and  beyond,  but
consumption by military applications will offset only a relatively small part of
the decrease in the commercial aerospace sector.

                                       3

<PAGE>

     Several of today's  active  U.S.  military  programs,  including  the C-17,
F/A-18,  F-16 and F-15 began during the cold war and are forecast to continue at
healthy  production  levels for the  foreseeable  future.  In  addition to these
established   programs,   new  programs  in  the  United   States  offer  growth
opportunities for increased titanium consumption. The F/A-22 Raptor is currently
in low-rate  initial  production,  and U.S. Air Force officials have expressed a
need for a minimum of 339 airplanes,  but cost overruns and  development  delays
may result in reduced procurement over the life of the program. In October 2001,
Lockheed-Martin  was awarded what could  eventually  become the largest military
contract ever for the F-35 Joint Strike Fighter ("JSF").  The JSF is expected to
enter low-rate  initial  production in late 2006, and although no specific order
and delivery patterns have been  established,  procurement is expected to extend
over the  next 30 to 40  years  and  include  as many as 3,000 to 4,000  planes.
European  military  programs also have active  aerospace  programs  offering the
possibility for increased  titanium  consumption.  The Saab Gripen,  Eurofighter
Typhoon,  Dassault Rafale and Dassault  Mirage 2000 all have forecast  increased
production levels over the next decade.

     Since titanium's  initial  applications in the aerospace sector, the number
of  end-use  markets  for  titanium  has  significantly  expanded.   Established
industrial uses for titanium include  chemical plants,  industrial power plants,
desalination plants and pollution control equipment.  Titanium continues to gain
acceptance in many emerging market applications,  including automotive, military
armor,  energy,   architecture  and  consumer  products.  Although  titanium  is
generally higher cost than other competing  metals, in many cases customers find
the physical  properties  of titanium to be  attractive  from the  standpoint of
weight,  performance,  design alternatives,  life cycle value and other factors.
Although emerging market demand presently represents only about 15% of the total
industry demand for titanium mill products, the Company believes emerging market
demand, in the aggregate, could grow at healthy double-digit rates over the next
several years. The Company is actively pursuing these markets.

     Although difficult to predict, the most attractive emerging segment appears
to be automotive,  due to its potential for sustainable  long-term  growth.  For
this reason, in 2002 TIMET established a new division, TiMET Automotive, focused
on the development of the automotive, truck and motorcycle markets. The division
is tasked  with  developing  and  marketing  proprietary  alloys  and  processes
specifically  suited for automotive  applications  and  supporting  supply chain
activities  for  automotive  manufacturers  to most  cost  effectively  engineer
titanium  components.  Titanium is now used in several consumer car applications
including the Corvette Z06, Toyota Alteeza,  Infiniti Q45,  Volkswagen Lupo FSI,
Honda S2000 and Mercedes S Class and in numerous motorcycles.

     At the present  time,  titanium  is  primarily  used for  exhaust  systems,
suspension springs and engine valves in consumer  vehicles.  In exhaust systems,
titanium provides for significant weight savings, while its corrosion resistance
provides   life-of-vehicle   durability.   In  suspension  spring  applications,
titanium's low modulus of elasticity allows the spring's height to be reduced by
20% to 40% compared to a steel spring,  which, when combined with the titanium's
low density,  permits 30% to 60% weight  savings  over steel  spring  suspension
systems.  The  lower  spring  height  provides  vehicle  designers  new  styling
alternatives and improved performance opportunities. Titanium suspension springs
and exhaust applications are also attractive compared to alternative lightweight
technologies  because the titanium  component can often be formed and fabricated
on the same tooling used for the steel component it is typically replacing. This
is especially  attractive  for the rapidly  growing niche vehicle market sectors
that often seek the  performance  attributes that titanium  provides,  but where
tooling costs prohibit alternative light-weighting or other improved performance
strategies.

                                       4

<PAGE>


     Titanium  is  also  making  inroads  into  other  automotive  applications,
including turbo charger wheels, brake parts and connecting rods. Titanium engine
components  provide  mass-reduction   benefits  that  directly  improve  vehicle
performance  and  fuel  economy.  In  certain   applications,   titanium  engine
components can provide a cost-effective  alternative to engine balance shafts to
address  noise,   vibration  and  harshness   while   simultaneously   improving
performance.

     The decision to select  titanium  components  for consumer  car,  truck and
motorcycle  components  remains  highly  cost  sensitive;  however,  the Company
believes  titanium's   acceptance  in  consumer  vehicles  will  expand  as  the
automotive industry continues to better understand the benefits it offers.

     Products and operations.  The Company is a vertically  integrated  titanium
manufacturer  whose  products  include (i)  titanium  sponge,  the basic form of
titanium metal used in processed titanium products,  (ii) melted products (ingot
and slab), the result of melting sponge and titanium scrap, either alone or with
various  other  alloying  elements and (iii) mill  products  that are forged and
rolled  from ingot or slab,  including  long  products  (billet  and bar),  flat
products (plate, sheet and strip), pipe and pipe fittings. During the past three
years,  all of TIMET's sales  revenue was generated by the Company's  integrated
titanium operations (its "Titanium melted and mill products" segment),  its only
business  segment.  Business and  geographic  segment  financial  information is
included in Note 2 to the Consolidated Financial Statements.

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

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

                                       5

<PAGE>

     Titanium mill products result from the forging,  rolling,  drawing, welding
and/or  extrusion of titanium ingots or slabs into products of various sizes and
grades.  These mill products include titanium  billet,  bar, rod, plate,  sheet,
strip,  pipe and pipe  fittings.  The Company sends certain  products to outside
vendors for further  processing  before  being  shipped to  customers  or to the
Company's service centers. Many of the Company's customers process the Company's
products for their ultimate end-use or for sale to third parties.

     During  the   production   process  and   following   the   completion   of
manufacturing,  the Company  performs  extensive  testing on its sponge,  melted
products and mill products.  Testing may involve chemical  analysis,  mechanical
testing, ultrasonic testing or x-ray testing. The inspection process is critical
to ensuring that the Company's  products meet the high quality  requirements  of
its customers,  particularly  in aerospace  components  production.  The Company
certifies its products meet customer  specification  at the time of shipment for
substantially all customer orders.

     The Company is reliant on several  outside  processors  to perform  certain
rolling,  finishing and other processing steps in the U.S., and certain melting,
forging and finishing  steps in France.  In the U.S., one of the processors that
performs  these steps in relation to strip  production and another as relates to
plate  finishing are owned by a competitor.  One of the processors as relates to
extrusion is operated by a customer.  These processors are currently the primary
source  for  these  services.   Other  processors  used  in  the  U.S.  are  not
competitors.  In France,  the processor is also a joint  venture  partner in the
Company's 70%-owned  subsidiary,  TIMET Savoie, S.A. ("TIMET Savoie").  Although
the Company believes that there are other metal producers with the capability to
perform these same processing functions,  arranging for alternative  processors,
or possibly acquiring or installing comparable capabilities,  could take several
months or longer,  and any interruption in these functions could have a material
and adverse effect on the Company's business,  results of operations,  financial
position and liquidity in the near term.

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

     Raw  materials.  The  principal  raw  materials  used in the  production of
titanium ingot,  slab and mill products are titanium sponge,  titanium scrap and
alloying  elements.  During 2002,  approximately 36% of the Company's melted and
mill product raw material  requirements were fulfilled with internally  produced
sponge,  29% with purchased sponge, 29% with titanium scrap and 6% with alloying
elements.

                                       6
<PAGE>

     The primary raw materials  used in the  production  of titanium  sponge are
titanium-containing  rutile ore, chlorine,  magnesium and petroleum coke. Rutile
ore is currently  available from a limited number of suppliers around the world,
principally located in Australia,  South Africa,  India and the United States. A
majority  of the  Company's  supply of rutile ore is  currently  purchased  from
Australian  suppliers.  The Company believes the availability of rutile ore will
be adequate for the foreseeable future and does not anticipate any interruptions
of its rutile  supplies,  although  political  or  economic  instability  in the
countries  from which the Company  purchases  its rutile  could  materially  and
adversely   affect   availability.   Although  the  Company  believes  that  the
availability  of  rutile  ore is  adequate  in the  near-term,  there  can be no
assurance that the Company will not experience interruptions.

     Chlorine is currently  obtained  from a single  supplier near the Company's
sponge plant. That supplier emerged from Chapter 11 bankruptcy reorganization in
2002.  While the Company  does not  presently  anticipate  any  chlorine  supply
problems,   there  can  be  no  assurances  the  chlorine  supply  will  not  be
interrupted.  The  Company  has taken  steps to  mitigate  this risk,  including
establishing the feasibility of certain equipment  modifications to enable it to
utilize material from alternative  chlorine suppliers or to purchase and utilize
an  intermediate  product which will allow the Company to eliminate the purchase
of chlorine if needed. Magnesium and petroleum coke are generally available from
a number of suppliers.

     While the Company  was one of five major  worldwide  producers  of titanium
sponge in 2002,  it cannot  supply all of its needs for all  grades of  titanium
sponge  internally  and  is  dependent,   therefore,  on  third  parties  for  a
substantial  portion  of its  sponge  requirements.  Titanium  mill  and  melted
products  require  varying  grades  of  sponge  and/or  scrap  depending  on the
customers' specifications and expected end use. In 2001, Allegheny Technologies,
Inc. idled its titanium sponge  production  facility,  leaving TIMET as the only
active major U.S.  producer of titanium  sponge and reducing the number of major
active worldwide  producers to five.  Presently,  TIMET and certain suppliers in
Japan  are the only  producers  of  premium  quality  sponge  required  for more
demanding aerospace  applications.  However, two additional sponge suppliers are
presently  undergoing  qualification tests of their products for premium quality
applications  and were qualified  during 2002 by some engine  manufacturers  for
certain premium quality  applications.  This qualification  process is likely to
continue for several years.

     Historically, the Company has purchased sponge predominantly from producers
in Japan and Kazakhstan.  Since 2000, the Company has also purchased sponge from
the U.S.  Defense  Logistics  Agency ("DLA")  stockpile.  In September 2002, the
Company  entered into a new sponge supply  agreement,  effective from January 1,
2002 through  December 31, 2007.  This new agreement  replaced and  superceded a
prior 1997 agreement. The new agreement requires minimum annual purchases by the
Company of  approximately  $10 million in 2002 through 2007.  The Company has no
other  long-term  sponge  supply  agreements.  In 2003,  the Company  expects to
continue to purchase sponge from a variety of sources.

     Various  alloying  elements  used  in the  production  of  titanium  melted
products are also available from a number of suppliers.

                                       7

<PAGE>


     Customer  agreements.  The Company has long-term  agreements  ("LTAs") with
certain major  aerospace  customers,  including,  but not limited to, The Boeing
Company  ("Boeing"),   Rolls-Royce  plc  ("Rolls-Royce"),   United  Technologies
Corporation  (Pratt & Whitney and related  companies) and  Wyman-Gordon  Company
("Wyman-Gordon,"  a unit of  Precision  Castparts  Corporation  ("PCC")).  These
agreements  initially  became  effective  in 1998 and 1999  and  expire  in 2007
through 2008, subject to certain conditions.  The LTAs generally provide for (i)
minimum market shares of the  customers'  titanium  requirements  or firm annual
volume commitments and (ii) fixed or formula-determined  prices generally for at
least the first five years.  Generally,  the LTAs require the Company's  service
and product performance to meet specified criteria and contain a number of other
terms and conditions customary in transactions of these types. In certain events
of   nonperformance   by  the  Company,   the  LTAs  may  be  terminated  early.
Additionally,   under  a  group  of  related  LTAs  (which   group   represented
approximately  12% of the Company's  2002 sales  revenue)  which  currently have
fixed prices that convert to  formula-derived  prices in 2004,  the customer may
terminate the agreement as of the end of 2003 if the effect of the initiation of
formula-derived  pricing  would cause such customer  "material  harm." If any of
such  agreements  within the group were to be terminated by the customer on this
basis,  it is possible  that some  portion of the business  represented  by that
group  of  related  LTAs  would  continue  on  a  non-LTA  basis.  However,  the
termination of one or more of the LTAs,  including any of those within the group
of related LTAs,  could result in a material and adverse effect on the Company's
business, results of operations,  financial position or liquidity. The LTAs were
designed to limit selling price  volatility  to the  customer,  while  providing
TIMET with a committed base of volume throughout the aerospace  business cycles.
They also, to varying  degrees,  effectively  obligate TIMET to bear part of the
risks of increases  in raw material and other costs,  but allow TIMET to benefit
in part from decreases in such costs.

     In April 2001, the Company  reached a settlement of the litigation  between
TIMET and Boeing  related to the parties' LTA entered into in 1997.  Pursuant to
the settlement,  the Company received a cash payment of $82 million from Boeing.
Under the terms of the LTA,  as  amended,  in years 2002  through  2007,  Boeing
advances TIMET $28.5 million  annually less $3.80 per pound of titanium  product
purchased by Boeing subcontractors during the preceding year.  Effectively,  the
Company  collects  $3.80 less from Boeing  than the LTA  selling  price for each
pound of  titanium  product  sold  directly  to Boeing and  reduces  the related
customer advance recorded by the Company.  For titanium  products sold to Boeing
subcontractors,  the  Company  collects  the full LTA selling  price,  but gives
Boeing credit by reducing the next year's  annual  advance by $3.80 per pound of
titanium product sold to Boeing  subcontractors.  The Boeing customer advance is
also reduced as take-or-pay  benefits are earned, as described in Note 10 to the
Consolidated  Financial  Statements.  Under a  separate  agreement,  TIMET  must
establish  and hold  buffer  stock for Boeing at TIMET's  facilities,  for which
Boeing  will pay  TIMET  as such  product  is  produced.  See Item 7 (MD&A)  for
additional information regarding the Boeing LTA.

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

                                       8

<PAGE>

     Markets and customer  base.  Approximately  53% of the Company's 2002 sales
revenue was generated by sales to customers within North America, as compared to
about  51% and 55% in 2001  and  2000,  respectively.  Approximately  40% of the
Company's  2002 sales revenue was generated by sales to European  customers,  as
compared to about 39% and 38% in 2001 and 2000, respectively. The balance of the
Company's sales was to other regions throughout the world.  Further  information
regarding the Company's external sales, net income,  long-lived assets and total
assets by segment can be found in the  Company's  Consolidated  Balance  Sheets,
Consolidated  Statements of Operations and Note 2 to the Consolidated  Financial
Statements.

     Over 67% of the  Company's  sales  revenue  was  generated  by sales to the
aerospace  industry in 2002, as compared to 70% in each of 2001 and 2000.  Sales
under the  Company's  LTAs  accounted for over 37% of its sales revenue in 2002.
Sales to PCC and its related  entities  approximated  9% of the Company's  sales
revenue in 2002. Sales to Rolls-Royce and other Rolls-Royce  suppliers under the
Rolls-Royce  LTAs  (including  sales to  certain  of the  PCC-related  entities)
represented  approximately  12% of the  Company's  sales  revenue  in 2002.  The
Company  expects that while a majority of its 2003 sales  revenue will be to the
aerospace  industry,  other  markets will  continue to  represent a  significant
portion of sales.

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

     As of December 31, 2002,  the  estimated  firm order backlog for Boeing and
Airbus,  as reported by The Airline  Monitor,  was 2,649  planes,  versus  2,919
planes at the end of 2001 and 3,224 planes at the end of 2000.  The backlogs for
Boeing and Airbus  reflect  orders for  aircraft to be  delivered  over  several
years.  For example,  the first deliveries of the Airbus A380 are anticipated to
begin  in  2006.  Additionally,  changes  in the  economic  environment  and the
financial  condition of airlines can result in  rescheduling  or cancellation of
contractual  orders.   Accordingly,   aircraft  manufacturer  backlogs  are  not
necessarily  a reliable  indicator of near-term  business  activity,  but may be
indicative of potential business levels over a longer-term horizon.

                                       9

<PAGE>


     The newer wide body  planes,  such as the  Boeing 777 and the Airbus  A330,
A340 and A380,  tend to use a higher  percentage  of titanium  in their  frames,
engines  and parts (as  measured  by total  flyweight)  than  narrow body planes
("flyweight" is the empty weight of a finished aircraft with engines but without
fuel or passengers). Titanium represents approximately 9% of the total flyweight
of a Boeing 777 for example,  compared to between 2% to 3% on the older 737, 747
and 767  models.  The  estimated  firm  order  backlog  for wide body  planes at
year-end  2002  was 709  (27% of total  backlog)  compared  to 801 (27% of total
backlog)  at the end of 2001.  At year-end  2002,  a total of 95 firm orders had
been placed for the Airbus A380  superjumbo  jet,  which program was  officially
launched in December 2000 with anticipated first deliveries in 2006. The Company
estimates  that  approximately  77 metric tons of titanium will be purchased for
each A380 manufactured, the most of any commercial aircraft.

     Outside of  aerospace  markets,  the Company  manufactures  a wide range of
industrial  products,  including sheet,  plate, tube, bar, billet and skelp, for
customers  in the  chemical  process,  oil and gas,  consumer,  sporting  goods,
automotive, power generation and armor/armament industries. Approximately 18% of
the Company's  sales revenue in 2002,  2001 and 2000 was generated by sales into
the  industrial  and  emerging  markets,  including  sales to  VALTIMET  for the
production  of condenser  tubing.  For the oil and gas  industries,  the Company
provides  seamless pipe for downhole casing,  risers,  tapered stress joints and
other  offshore  oil  production  equipment,  including  fabrication  of sub-sea
manifolds.  In  armor  and  armament,  the  Company  sells  plate  products  for
fabrication  into door  hatches on  fighting  vehicles,  as well as  tank/turret
protection.

     In addition to mill and melted products, which are sold into the aerospace,
industrial and emerging  markets,  the Company sells certain other products such
as sponge,  titanium tetrachloride and fabricated titanium assemblies.  Sales of
these other products  represented 15% of the Company's sales revenue in 2002 and
12% in each of 2001 and 2000.

     The Company's backlog of unfilled orders was approximately  $165 million at
December  31,  2002,  compared  to $225  million at  December  31, 2001 and $245
million at December 31, 2000.  Substantially  all the 2002  year-end  backlog is
scheduled for shipment during 2003. However, the Company's order backlog may not
be a reliable indicator of future business  activity.  Since September 11, 2001,
the Company has received a number of deferrals and  cancellations  of previously
scheduled orders and believes such requests will continue into 2003.

     Through various strategic  relationships,  the Company seeks to gain access
to unique process technologies for the manufacture of its products and to expand
existing  markets and create and develop new markets for  titanium.  The Company
has explored and will continue to explore strategic arrangements in the areas of
product development, production and distribution. The Company also will continue
to work with  existing  and  potential  customers to identify and develop new or
improved applications for titanium that take advantage of its unique qualities.

     Competition.  The  titanium  metals  industry  is highly  competitive  on a
worldwide basis.  Producers of melted and mill products are located primarily in
the United States, Japan, France,  Germany,  Italy, Russia, China and the United
Kingdom.  There are  currently  five major  producers of titanium  sponge in the
world. TIMET is currently the only active major U.S. sponge producer.

                                       10

<PAGE>

     The Company's  principal  competitors in the aerospace market are Allegheny
Technologies Inc. and RTI International  Metals,  Inc., both based in the United
States, and Verkhnaya Salda  Metallurgical  Production  Organization  ("VSMPO"),
based in Russia.  These companies,  along with the Japanese  producers and other
companies,  are also principal  competitors in industrial  markets.  The Company
competes primarily on the basis of price, quality of products, technical support
and the availability of products to meet customers' delivery schedules.

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

     Generally,  imports of titanium products into the U.S. are subject to a 15%
"normal trade  relations"  tariff.  For tariff purposes,  titanium  products are
broadly  classified as either wrought (bar, sheet,  strip,  plate and tubing) or
unwrought (sponge,  ingot, slab and billet). Prior antidumping orders on imports
of titanium  sponge from Japan and  countries  of the former  Soviet  Union were
revoked in 1998.

     The U.S.  maintains a trade program referred to as the "generalized  system
of preferences"  or "GSP program"  designed to promote the economies of a number
of  lesser-  developed  countries   (referred  to  as  "beneficiary   developing
countries") by eliminating  duties on a specific list of products  imported from
any of these beneficiary  developing  countries.  Of the key titanium  producing
countries  outside the U.S.,  Russia and  Kazakhstan  are currently  regarded as
beneficiary developing countries under the GSP program.

     For most periods since 1993,  imports of titanium wrought products from any
beneficiary  developing  country  (notably  Russia,  as a  producer  of  wrought
products)  were  exempted  from  U.S.  import  duties  under  the  GSP  program.
Kazakhstan has filed a petition with the Office of the U.S. Trade Representative
seeking  GSP status on imports of titanium  sponge,  which,  if  granted,  would
eliminate the 15% tariff currently  imposed on titanium sponge imported into the
U.S. from any beneficiary developing country (notably Russia and Kazakhstan,  as
producers of titanium sponge).

     TIMET has successfully  resisted,  and will continue to resist,  efforts to
date to expand the scope of the GSP  program to  eliminate  duties on sponge and
other unwrought titanium  products,  although no assurances can be made that the
Company will continue to be successful in these  activities.  No formal decision
on the  treatment of the GSP petition on titanium  sponge has been  announced by
the U.S. Trade  Representative,  although the Company expects that action on the
petition will be taken in 2003.  Antidumping orders permitting duties on imports
of titanium sponge from Japan and the former Soviet Union were revoked in 1998.

                                       11

<PAGE>


     Further reductions in, or the complete  elimination of, any or all of these
tariffs,  including expansion of the GSP program to unwrought titanium products,
could lead to increased imports of foreign sponge,  ingot and mill products into
the U.S. and an increase in the amount of such products on the market generally,
which could  adversely  affect pricing for titanium sponge and mill products and
thus the  Company's  business,  results of  operations,  financial  position  or
liquidity.  However, since 1993 the Company has been a large importer of foreign
titanium sponge,  particularly from Kazakhstan,  into the U.S. To the extent the
Company remains a substantial  purchaser of foreign sponge,  any adverse effects
on product  pricing as a result of any reduction in, or  elimination  of, any of
these  tariffs  would be  partially  ameliorated  by the  decreased  cost to the
Company  for  foreign  sponge to the extent it  currently  bears the cost of the
import duties.

     Producers of other metal  products,  such as steel and  aluminum,  maintain
forging, rolling and finishing facilities that could be used or modified without
substantial  expenditures to process titanium  products.  The Company  believes,
however, that entry as a producer of titanium sponge would require a significant
capital investment and substantial  technical expertise.  Titanium mill products
also compete with stainless steels, nickel alloys, steel, plastics, aluminum and
composites in many applications.

     Research and development. The Company's research and development activities
are directed  toward  expanding  the use of titanium and titanium  alloys in all
market sectors.  Key research  activities include the development of new alloys,
development  of  technology  required  to  enhance  the  performance  of TIMET's
products in the traditional  industrial and aerospace  markets and  applications
development in the automotive  division and other emerging markets.  The Company
conducts  the  majority  of  its  research  and  development  activities  at its
Henderson Technical Laboratory in Henderson,  Nevada, with additional activities
at its Witton,  England facility.  The Company incurred research and development
costs of $3.3 million in 2002 and $2.6 million in both 2001 and 2000.

     Patents  and  trademarks.  The  Company  holds U.S.  and  non-U.S.  patents
applicable to certain of its titanium alloys and manufacturing  technology.  The
Company  continually  seeks patent protection with respect to its technical base
and has  occasionally  entered  into  cross-licensing  arrangements  with  third
parties. The Company believes the trademarks TIMET(R) and TIMETAL(R),  which are
protected by registration in the U.S. and other countries,  are important to its
business.  Further,  TIMET feels its proprietary TIMETAL Exhaust Grade, patented
TIMETAL 62S connecting rod alloy, patented TIMETAL LCB spring alloy and patented
TIMETAL  Ti-1100  engine  valve  alloy  give it  competitive  advantages  in the
automotive  market.  However,  most of the  titanium  alloys  and  manufacturing
technology used by the Company do not benefit from patent or other  intellectual
property protection.

                                       12

<PAGE>

     Employees.  The cyclical nature of the aerospace industry and its impact on
the  Company's  business  is  the  principal  reason  the  Company  periodically
implements cost reduction restructurings, reorganizations and other changes that
impact  the  Company's   employment   levels.  The  following  table  shows  the
fluctuation in the number of employees  over the past 3 years.  The 19% decrease
in  employees  from 2001 to 2002 and the 9% increase in  employees  from 2000 to
2001 were  principally in response to changes in market demand for the Company's
products.  The decrease in 2002 met the Company's targeted reductions  announced
during the third quarter of 2002.  During 2003, the Company  expects to continue
efforts to reduce  employment  in response  to  anticipated  reduced  demand for
titanium products.
<TABLE>

                                                                          Employees at December 31,
                                                          -----------------------------------------------------------
                                                                2002                 2001                 2000
                                                          ------------------    ----------------    -----------------

<S>                                                              <C>                   <C>                <C>
U.S.                                                             1,184                 1,462              1,333
Europe                                                             772                   948                887
                                                          ------------------    ----------------    -----------------
   Total                                                         1,956                 2,410              2,220
                                                          ==================    ================    =================
</TABLE>

     The Company's  production,  maintenance,  clerical and technical workers in
Toronto,  Ohio, and its production and maintenance workers in Henderson,  Nevada
are represented by the United  Steelworkers of America  ("USWA") under contracts
expiring in June 2005 and October 2004, respectively. Employees at the Company's
other U.S.  facilities  are not  covered by  collective  bargaining  agreements.
Approximately 60% of the salaried and hourly employees at the Company's European
facilities are  represented by various  European labor unions,  generally  under
annual agreements. Such agreements are currently being negotiated for 2003.

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

     Regulatory and environmental matters. The Company's operations are governed
by various Federal,  state,  local and foreign  environmental  and worker safety
laws and regulations.  In the U.S., such laws include the  Occupational,  Safety
and  Health  Act,  the Clean  Air Act,  the  Clean  Water  Act and the  Resource
Conservation  and Recovery  Act. The Company uses and  manufactures  substantial
quantities of substances that are considered  hazardous,  extremely hazardous or
toxic under environmental and worker safety and health laws and regulations. The
Company has used and manufactured such substances  throughout the history of its
operations.  As a  result,  risk of  environmental  damage  is  inherent  in the
Company's  operations.  The  Company's  operations  pose a  continuing  risk  of
accidental  releases of, and worker exposure to, hazardous or toxic  substances.
There is also a risk that government environmental requirements,  or enforcement
thereof,  may become more  stringent in the future.  There can be no  assurances
that some, or all, of the risks  discussed under this heading will not result in
liabilities  that  would be  material  to the  Company's  business,  results  of
operations, financial position or liquidity.

     The Company's  operations  in Europe are similarly  subject to foreign laws
and regulations  respecting  environmental and worker safety matters, which laws
have not had, and are not presently  expected to have, a material adverse effect
on  the  Company's  business,  results  of  operations,  financial  position  or
liquidity.

                                       13

<PAGE>


     The Company  believes that its operations are in compliance in all material
respects with  applicable  requirements of  environmental  and worker health and
safety  laws.  The  Company's  policy  is  to  continually   strive  to  improve
environmental, health and safety performance. From time to time, the Company may
be subject to  health,  safety or  environmental  regulatory  enforcement  under
various  statutes,  resolution of which typically  involves the establishment of
compliance programs. Occasionally, resolution of these matters may result in the
payment of penalties.  The Company  incurred  capital  expenditures  for health,
safety and  environmental  compliance  matters of approximately  $1.4 million in
2002,  $2.4  million in 2001 and $2.6  million in 2000.  The  Company's  capital
budget  provides for  approximately  $1.9 million of such  expenditures in 2003.
However,   the  imposition  of  more  strict  standards  or  requirements  under
environmental,   health  or  safety  laws  and   regulations   could  result  in
expenditures  in excess of amounts  currently  estimated to be required for such
matters. See Note 19 to the Consolidated Financial Statements.

     Acquisitions and capital  transactions during the past five years. In 1998,
TIMET (i) acquired Loterios S.p.A.  ("Loterios") to increase its market share in
industrial  markets and provide  increased  geographic sales coverage in Europe,
(ii)  purchased  for  cash  $80  million  of  non-voting  convertible  preferred
securities of Special Metals Corporation ("SMC"), a U.S. manufacturer of wrought
nickel-based  superalloys and special alloy long products and (iii) entered into
a castings  joint venture with  Wyman-Gordon.  In January 2000, the Company sold
its interest in the castings joint venture for $7 million and realized a gain of
$1.2  million  on the  sale.  In  December  2001 and  March  2002,  the  Company
determined  there had been an other than temporary  decline in the fair value of
its  investment in SMC and reduced the carrying  amount of these  securities and
related  dividends and interest to an estimated  fair value of $27.5 million and
zero,  respectively.  See  Notes  1,  4  and  5 to  the  Consolidated  Financial
Statements.

     Related  parties.  At December  31,  2002,  Tremont  Corporation  and other
entities  related  to Harold C.  Simmons  held  approximately  48.4% of  TIMET's
outstanding common stock. See Note 18 to the Consolidated Financial Statements.

     Available  information.  The  Company  maintains  an  Internet  website  at
www.timet.com.  The Company's  Annual  Reports for the years ended  December 31,
2002, 2001 and 2000, the Company's Quarterly Reports on Form 10-Q for 2003, 2002
and 2001, any Current  Reports on Form 8-K for 2003 and 2002, and any amendments
thereto,  are or will be  available  free of charge at such  website  as soon as
reasonably  practicable after they are filed or furnished,  as applicable,  with
the SEC.

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

                                       14

<PAGE>


ITEM 2:  PROPERTIES

     Set forth below is a listing of the Company's major production  facilities.
In addition to its U.S. sponge capacity discussed below, the Company's worldwide
melting  capacity  presently   aggregates   approximately   45,000  metric  tons
(estimated  29% of world  capacity),  and its mill product  capacity  aggregates
approximately   20,000   metric  tons   (estimated   16%  of  world   capacity).
Approximately  35% of TIMET's  worldwide  melting  capacity  is  represented  by
electron beam cold hearth melting ("EB")  furnaces,  63% by vacuum arc remelting
("VAR") furnaces and 2% by a vacuum induction melting ("VIM") furnace.

<TABLE>

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

<S>                                           <C>                                           <C>                 <C>
Henderson, Nevada (1)                         Sponge, Ingot                                 12,250                  -
Morgantown, Pennsylvania (1)                  Slab, Ingot, Raw materials
                                                 processing                                 20,000                  -
Toronto, Ohio (1)                             Billet, Bar, Plate, Sheet, Strip                   -              9,900
Vallejo, California (2)                       Ingot (including non-titanium
                                                 superalloys)                                1,600                  -
Ugine, France (2)                             Ingot, Billet, Bar, Extrusions                 2,450              2,000
Waunarlwydd (Swansea), Wales(1)               Bar, Plate, Sheet                                  -              3,900
Witton, England (2)                           Ingot, Billet, Bar                             8,700              8,000

----------------------------------------------------------------------------------------------------------------------
(1)  Owned facilities.
(2)  Leased facilities.
(3)  Practical capacities are variable based on production mix and are not additive.

</TABLE>

     The Company has operated its major production  facilities at varying levels
of practical  capacity during the past three years. In 2002, the plants operated
at approximately 55% of practical  capacity,  as compared to 75% in 2001 and 60%
in 2000. In 2003, the Company's  plants are expected to operate at approximately
50% of practical capacity.  However, practical capacity and utilization measures
can vary significantly based upon the mix of products produced.

     United States production.  The Company's VDP sponge facility is expected to
operate at approximately  67% of its annual  practical  capacity of 8,600 metric
tons  during  2003,  down from  approximately  87% in 2002.  VDP  sponge is used
principally as a raw material for the Company's  melting  facilities in the U.S.
and Europe. Approximately 1,400 metric tons of VDP production from the Company's
Henderson,  Nevada facility were used in Europe during 2002,  which  represented
approximately 32% of the sponge consumed in the Company's  European  operations.
The Company expects the consumption of VDP sponge in its European  operations to
be  approximately  40% of their sponge  requirements  in 2003. The raw materials
processing facilities in Morgantown,  Pennsylvania  primarily process scrap used
as melting feedstock, either in combination with sponge or separately.

     Sponge for melting  requirements  in the U.S.  that is not  supplied by the
Company's  Henderson,  Nevada plant is purchased  principally  from suppliers in
Japan and Kazakhstan and from the DLA stockpile.

                                       15

<PAGE>

     The Company's U.S. melting facilities in Henderson,  Nevada and Morgantown,
Pennsylvania produce ingots and slabs, which are either sold to third parties or
used as feedstock for the  Company's  mill  products  operations.  These melting
facilities  are expected to operate at  approximately  50% of  aggregate  annual
practical capacity in 2003.

     Titanium mill products are produced by TIMET in the U.S. at its forging and
rolling facility in Toronto,  Ohio,  which receives ingots or slabs  principally
from the Company's  U.S.  melting  facilities.  The Company's  U.S.  forging and
rolling facility is expected to operate at approximately 50% of annual practical
capacity in 2003.  Capacity  utilization  across the Company's  individual  mill
product lines varies.

     European  production.   The  Company  conducts  its  operations  in  Europe
primarily through its wholly-owned  subsidiaries TIMET UK, Ltd. ("TIMET UK") and
Loterios and its 70%-owned subsidiary TIMET Savoie.  TIMET UK's Witton,  England
facilities are leased  pursuant to long-term  capital  leases  expiring in 2026.
TIMET  Savoie has the right to utilize  portions of the Ugine,  France  plant of
Compagnie Europeene du Zirconium-CEZUS, S.A. ("CEZUS"), the 30% minority partner
in TIMET Savoie, pursuant to an agreement expiring in 2006.

     TIMET UK's  melting  facility in Witton,  England  produces VAR ingots used
primarily as feedstock for its forging  operations,  also in Witton. The forging
operations  process the ingots principally into billet product for sale to third
parties or into an intermediate product for further processing into bar or plate
at its facility in  Waunarlwydd,  Wales.  TIMET UK's  melting and mill  products
production in 2003 is expected to operate at approximately 55% and 45% of annual
practical capacity, respectively.

     The  capacity  of TIMET  Savoie  in Ugine,  France  is to a certain  extent
dependent  upon the level of activity in CEZUS'  zirconium  business,  which may
from  time  to time  provide  TIMET  Savoie  with  capacity  in  excess  of that
contractually  required to be  provided  by CEZUS.  During  2003,  TIMET  Savoie
expects to operate at approximately  55% of the maximum annual capacity required
to be provided by CEZUS.

     Sponge for melting  requirements  at both TIMET UK and TIMET Savoie that is
not supplied by the Company's Henderson,  Nevada plant is purchased  principally
from suppliers in Japan and Kazakhstan.

ITEM 3:  LEGAL PROCEEDINGS

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

                                       16

<PAGE>


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

     No matters  were  submitted  to a vote of  security  holders of the Company
during the quarter ended December 31, 2002.

     The Company held a Special  Meeting of Stockholders on February 4, 2003 for
the  purpose  of  voting  on  an  amendment  to  the  Company's  Certificate  of
Incorporation  to (i) effect a reverse stock split of the Company's common stock
at a  ratio  of  one  share  of  post-split  common  stock  for  each  currently
outstanding  eight, nine or ten shares of pre-split common stock, with the final
exchange  ratio to be  selected  by the Board of  Directors  and (ii) reduce the
number of authorized  shares of common stock and preferred  stock of the company
from  99,000,000  shares and 1,000,000  shares,  respectively,  to 9,900,000 and
100,000  shares,  respectively.  The  amendment  passed  based on the  following
results:

         Votes for:                     26,303,935
         Votes against:                    934,703
         Votes abstained:                   33,631

     Subsequently  on  February  4,  2003,  the Board of  Directors  unanimously
approved the reverse stock split on the basis of one share of post-split  common
stock for each  outstanding  ten shares of pre-split  common stock.  The reverse
stock split  became  effective  after the close of trading on February 14, 2003,
and the Company's  common stock began trading on a post-split  basis on February
18, 2003.

                                       17

<PAGE>

                                     PART II

ITEM 5:    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
           MATTERS

     TIMET's  common  stock is traded on the New York  Stock  Exchange  (symbol:
"TIE"). On February 26, 2003, the closing price of TIMET common stock was $19.66
per share.  The high and low sales prices for the Company's common stock are set
forth below.  All prices have been adjusted to reflect the  one-for-ten  reverse
stock split which  became  effective  after the close of trading on February 14,
2003.

<TABLE>


                                                                                         High                 Low
Year ended December 31, 2002:                                                   -----------------    -----------------
<S>                                                                             <C>                  <C>
   First quarter                                                                $       54.00        $       32.50
   Second quarter                                                                       53.00                35.00
   Third quarter                                                                        40.20                16.50
   Fourth quarter                                                                       22.90                 9.10

Year ended December 31, 2001:
   First quarter                                                                $      106.20        $       66.90
   Second quarter                                                                      144.00                67.50
   Third quarter                                                                       119.00                23.50
   Fourth quarter                                                                       47.00                27.50


</TABLE>

     As of February  24,  2003,  there were 306 common  shareholders  of record,
which the Company estimates represent approximately 6,700 actual shareholders.

     In the third quarter of 1999,  the Company  suspended  payment of quarterly
common stock  dividends.  The Company's U.S. credit  agreement,  entered into in
early 2000 and as amended in 2002,  prohibits  the payment of  dividends  on the
Company's  common  stock and the  repurchase  of  common  shares,  except  under
specified conditions.  In October 2002, the Company exercised its right to defer
future dividend payments on its Convertible Preferred Securities for a period of
up to 20 consecutive  quarters.  This deferral was effective  beginning with the
Company's December 1, 2002 scheduled dividend payment. The Company will consider
resuming payment of dividends on the Convertible  Preferred  Securities once the
outlook for the Company's  business  improves  substantially.  Since the Company
exercised  its right to defer  dividend  payments on the  Convertible  Preferred
Securities,  it is unable  under the terms of these  securities  to, among other
things,  pay  dividends  on or reacquire  its capital  stock during the deferral
period. However, the Company is permitted to reacquire the Convertible Preferred
Securities  during the deferral period,  subject to certain U.S. credit facility
limitations. See Note 12 to the Consolidated Financial Statements.

                                       18

<PAGE>


ITEM 6:  SELECTED FINANCIAL DATA

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

<TABLE>

                                                                     Year ended December 31,
                                            --------------------------------------------------------------------------
                                                2002            2001           2000           1999            1998
                                            -------------    -----------    -----------    ------------    -----------
                                                      ($ in millions, except per share and selling price data)
STATEMENT OF OPERATIONS DATA:
<S>                                         <C>              <C>            <C>            <C>             <C>
   Net sales                                $    366.5       $    486.9     $    426.8     $    480.0      $    707.7
   Gross margin                                   (3.1)            39.9            3.9           25.5           165.4
   Operating income (loss) (1)                   (20.8)            64.5          (41.7)         (31.4)           82.7
   Interest expense                                3.4              4.1            7.7            7.1             2.9
   Net income (loss) (1)                    $   (111.5)      $    (41.8)    $    (38.9)    $    (31.4)     $     45.8
   Earnings (loss) per share (1)(7):
     Basic and diluted (2)                  $   (35.29)      $   (13.26)    $   (12.40)    $   (10.01)     $    14.55
   Cash dividends per share (7)             $      -         $      -       $      -       $     1.20      $     1.20

BALANCE SHEET DATA:
   Cash and cash equivalents                $      6.2       $     24.5     $      9.8     $     20.7      $     15.5
   Total assets (1)                              563.8            699.4          759.1          883.1           953.2
   Indebtedness (3)                               19.4             12.4           44.9          117.4           105.6
   Net cash (debt) (4)                           (13.2)            12.1          (35.1)         (96.7)          (90.1)
   Capital lease obligations                      10.2              8.9            8.8           10.1            10.3
   Minority interest - Convertible
     Preferred Securities                        201.2            201.2          201.2          201.2           201.2
   Stockholders' equity                     $    159.4       $    298.1     $    357.5     $    408.1      $    448.4

OTHER OPERATING DATA:
   Cash flows provided (used):
     Operating activities                   $    (13.6)      $     62.6     $     65.4     $     19.5      $     76.1
     Investing activities                         (7.5)           (16.1)          (4.2)         (21.7)         (223.2)
     Financing activities                          3.6            (31.4)         (72.8)           8.6            92.2
                                            -------------    -----------    -----------    ------------    -----------
       Net provided (used)                  $    (17.5)      $     15.1     $    (11.6)    $      6.4      $    (54.9)

   Mill product shipments (5)                      8.9             12.2           11.4           11.4            14.8
   Average mill product prices (5)          $    31.40       $    29.80     $    28.70     $    33.00      $    35.25
   Melted product shipments (5)                    2.4              4.4            3.5            2.5             3.6
   Average melted product prices (5)        $    14.50       $    14.50     $    13.65     $    14.20      $    18.50
   Active employees at December 31               1,956            2,410          2,220          2,350           2,740
   Order backlog at December 31(6)          $    165.0       $    225.0     $    245.0     $    195.0      $    350.0
   Capital expenditures                     $      7.8       $     16.1     $     11.2     $     24.8      $    115.2

(1)  See the notes to the Consolidated  Financial  Statements and MD&A for items
     that  materially  affect  the  2002,  2001 and 2000  periods.  The  Company
     recorded $4.5 million and $24.0 million  pre-tax  restructuring  charges in
     1999 and 1998, respectively.
(2)  Antidilutive in all periods.
(3)  Indebtedness  represents notes payable and current and noncurrent debt, and
     excludes  capital  lease  obligations  and Minority  interest - Convertible
     Preferred Securities (and accrued dividends thereon).
(4)  Net cash (debt) represents cash and cash equivalents less indebtedness.
(5)  Shipments in thousands of metric tons;  average  selling  prices stated per
     kilogram and mix adjusted.
(6)  Order backlog is defined as unfilled  purchase orders,  which are generally
     subject  to  deferral  or   cancellation  by  the  customer  under  certain
     conditions.
(7)  Amounts have been  adjusted to reflect the  Company's  one-for-ten  reverse
     stock split which became  effective  after the close of trading on February
     14, 2003.

</TABLE>


                                       19

<PAGE>


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

RESULTS OF OPERATIONS

     Overview. The titanium industry derives a substantial portion of its demand
from the highly cyclical commercial  aerospace  industry.  The Company estimates
that aggregate  industry  shipment volume for titanium mill products in 2002 was
derived from the following markets: 41% from aerospace; 44% from industrial; and
15% from emerging  markets.  The  commercial  aerospace  sector is the principal
driver of titanium consumed in the aerospace  markets,  accounting for shipments
of  approximately  14,500 metric tons in 2002, which represent about 80% of mill
product  aerospace  shipments and about 33% of aggregate  mill product  industry
shipments.  Mill product  shipments to military  aerospace  markets in 2002 were
approximately  3,600 metric tons,  which  represent  about 8% of aggregate  mill
product  shipments.  The  Company's  business is more  dependent  on  commercial
aerospace demand than the overall titanium industry, as approximately 59% of its
mill product sales volume in 2002 was represented by sales to this sector.

     The economic  slowdown in the United  States and other regions of the world
in the latter part of 2001 and the September 11, 2001 terrorist attacks combined
to  negatively  impact  commercial  air travel in the  United  States and abroad
throughout 2002.  Although airline passenger  traffic showed  improvement in the
months immediately following the terrorist attacks,  current data indicates that
traffic remains below pre-attack  levels. As a result, the U.S. airline industry
is  expected  to record a second  consecutive  year of losses and two major U.S.
airlines  were  forced  to seek  bankruptcy  protection  from  their  creditors.
Airlines  have  announced a number of actions to reduce both costs and  capacity
including,  but not limited to, the early retirement of airplanes,  the deferral
of scheduled deliveries of new aircraft and allowing purchase options to expire.
The Company's order backlog at the end of December 2002 was  approximately  $165
million,  unchanged from the end of September  2002. The Company's order backlog
was  $225  million  at the end of  December  2001.  Substantially  all the  2002
year-end backlog is scheduled for shipment during 2003.  However,  the Company's
order backlog may not be a reliable indicator of future business activity. Since
September  11,  2001,  the  Company  has  received  a number  of  deferrals  and
cancellations  of  previously  scheduled  orders and believes such requests will
continue into 2003. The Company  expects the current  slowdown in the commercial
aerospace  sector to continue  through 2005 before  beginning a modest upturn in
2006.   See  "Outlook"  for  further   discussion  of  the  Company's   business
expectations for 2003.

     The table on the following page summarizes  certain  information  regarding
the Company's  results of operations for the past three years.  Average  selling
prices, as reported by the Company,  are a reflection not just of actual selling
prices  received by the  Company,  but other  related  factors  such as currency
exchange  rates and  customer and product mix in a given  period.  Consequently,
changes in average  selling  prices  from  period to period  will be impacted by
changes occurring not just in actual prices, but by these other factors as well.
In the following discussion, the Company has attempted to adjust for the effects
of  changes in  currency  and mix when  referring  to the  percentage  change in
selling prices from period to period.


                                       20

<PAGE>

<TABLE>


                                                                               Year ended December 31,
                                                                ------------------------------------------------------
                                                                     2002               2001                2000
                                                                ---------------    ----------------    ---------------
                                                                                   ($ in thousands)

<S>                                                             <C>                <C>                 <C>
Net sales                                                       $     366,501      $     486,935       $     426,798
Gross margin                                                           (3,123)            39,893               3,881
Operating (loss) income                                               (20,849)            64,480             (41,650)

Gross margin percent of net sales                                         -1%                 8%                  1%

Percent change in:
   Mill product sales volume                                              -27                 +7                  -1
   Mill product average selling prices (1)                                 +3                 +2                  -7
   Melted product sales volume                                            -46                +27                 +39
   Melted product average selling prices (1)                               -1                 +8                 -10

(1)  Change expressed in billing currencies and adjusted for product mix.

</TABLE>

     2002 operations. The Company's sales of mill products in 2002 decreased 23%
from  $363.3  million  in 2001 to $278.2  million  in 2002.  This  decrease  was
principally  due to a 27% decrease in mill  product  sales volume and changes in
customer and product mix. The Company's estimated sales volume to the commercial
aerospace sector declined  approximately  37% during 2002 compared to 2001. Mill
product average selling prices  (expressed in U.S.  dollars using actual foreign
currency  exchange rates prevailing  during the respective  periods) during 2002
increased  4% compared to 2001  selling  prices.  In billing  currencies  (which
exclude the  effects of foreign  currency  translation),  mill  product  average
selling prices increased 3% over 2001 levels. Melted product sales decreased 46%
from $64.1  million  in 2001 to $34.8  million  in 2002  primarily  due to a 46%
decrease in melted product sales volume and changes in customer and product mix.
Melted  product  average  selling  prices  decreased 1% from 2001 melted product
prices.

     Gross  margin  (net sales less cost of sales) was  negative  1% of sales in
2002,  compared to 8% in the prior year. Gross margin in 2002 was most adversely
impacted  by the  decline  in  production  volume  and  the  related  impact  on
manufacturing  overhead  costs.  As the  Company  reduces  production  volume in
response to reduced requirements,  certain manufacturing overhead costs decrease
at a  slower  rate  and to a  lesser  extent  than  production  volume  changes,
generally resulting in higher costs relative to production levels. Average plant
operating  rates  declined  from  approximately  75%  of  capacity  in  2001  to
approximately 55% in 2002. In addition,  the Company recorded certain provisions
for  excess and slow  moving  inventories  during  2002  that,  due to  business
conditions   existing  during  2002,   including  a  number  of  customer  order
cancellations, were approximately $5.3 million greater than in 2001. The Company
also incurred  severance costs of  approximately  $1.7 million related to global
manufacturing  workforce  reductions  undertaken  throughout  2002. Gross margin
during 2001 was adversely impacted by $3.3 million of estimated costs related to
the tungsten matter  described  below and $10.8 million of equipment  impairment
charges  described  in "2001  operations."  Gross  margin  during  2001 was also
adversely  impacted by  goodwill  amortization  of $4.6  million,  as  effective
January  1, 2002 the  Company no longer  amortized  its  goodwill  on a periodic
basis. See Note 7 to the Consolidated Financial Statements.

                                       21

<PAGE>

     In March  2001,  the Company was  notified by one of its  customers  that a
product the customer  manufactured  from standard grade titanium produced by the
Company  contained  what has been  confirmed  to be a  tungsten  inclusion.  The
Company  believes  that the source of this  tungsten was  contaminated  silicon,
which  is used  as an  alloying  addition  to  titanium  at the  melting  stage,
purchased  from an outside  vendor in 1998. At the present time,  the Company is
aware of six  standard  grade  ingots  that have been  demonstrated  to  contain
tungsten  inclusions.  Based upon the Company's  assessment of possible  losses,
TIMET  recorded  an  aggregate  charge to cost of sales for this  matter of $3.3
million during 2001.  During 2001, the Company charged $0.3 million against this
accrual to write down its remaining  on-hand  inventory and made $0.3 million in
settlement payments, resulting in a $2.7 million accrual as of December 31, 2001
for potential future claims.  During 2002, the Company made settlement  payments
aggregating  $0.3  million and has also  revised its estimate of the most likely
amount of loss to be incurred,  resulting in a credit of $0.2 million to cost of
sales during 2002. As of December 31, 2002,  $2.2 million is accrued for pending
and potential future claims.  This amount represents the Company's best estimate
of the most  likely  amount of loss yet to be  incurred.  This  amount  does not
represent the maximum  possible  loss,  which is not possible for the Company to
estimate  at this time,  and may be  periodically  revised in the future as more
facts become  known.  As of December  31, 2002 the Company has  received  claims
aggregating   approximately   $5  million  and  has  made  settlement   payments
aggregating $0.6 million.  Pending claims are being investigated and negotiated.
The Company believes that certain claims are without merit or can be settled for
less than the  amount of the  original  claim.  There is no  assurance  that all
potential  claims have yet been submitted to the Company.  The Company has filed
suit seeking full  recovery  from its silicon  supplier  for any  liability  the
Company might incur,  although no assurances  can be given that the Company will
ultimately  be able to recover all or any portion of such  amounts.  The Company
has not recorded any recoveries related to this matter as of December 31, 2002.

     Selling, general,  administrative and development expenses decreased 17% in
2002  compared to 2001,  principally  due to the  inclusion  of $6.2  million of
incentive  compensation  related to the Boeing  settlement in 2001 (discussed in
"2001  operations") and lower personnel related costs in 2002,  partially offset
by higher selling and marketing costs.

     Equity in earnings  (losses) of joint  ventures in 2002  decreased 21% from
2001  principally  due to a decrease  in  earnings of  VALTIMET,  the  Company's
44%-owned welded tube joint venture.

     The Company  recognized $23.4 million of income for the year ended December
31, 2002 related to the  take-or-pay  provisions  of the Boeing LTA, as amended.
The terms of the amended  Boeing LTA allow  Boeing to purchase up to 7.5 million
pounds of titanium  product  annually from TIMET through 2007, but limit TIMET's
maximum quarterly volume obligation to 3.0 million pounds. The LTA is structured
as a take-or-pay  agreement such that,  beginning in calendar year 2002,  Boeing
forfeits $3.80 per pound of its advance payment in the event that its orders for
delivery  are less  than 7.5  million  pounds in any given  calendar  year.  The
Company  recognizes  income  to the  extent  Boeing's  year-to-date  orders  for
delivery plus TIMET's maximum quarterly volume  obligations for the remainder of
the year total less than 7.5 million pounds.  This income is recognized as other
operating  income and is not  included in sales  revenue,  sales volume or gross
margin.  Based on actual  purchases of  approximately  1.3 million pounds during
2002, the Company recognized other income for 6.2 million pounds that Boeing did
not purchase under the LTA during 2002.

                                       22

<PAGE>

     2001  operations.  Sales of mill products in 2001 increased 11% from $326.3
million in 2000 to $363.3 million in 2001.  This increase was principally due to
a 7% increase in mill  product  sales volume and changes in customer and product
mix. The Company's estimated shipment volume to the commercial  aerospace sector
increased  approximately  14% during 2001 compared to 2000. Mill product average
selling prices (expressed in U.S. dollars using actual foreign currency exchange
rates prevailing  during the respective  periods) during 2001  approximated 2000
selling  prices.  In billing  currencies  (which  exclude the effects of foreign
currency  translation),  mill product average  selling prices  increased 2% over
2000 levels.  Melted  product sales  increased 35% from $47.4 million in 2000 to
$64.1 million in 2001 due to the net effects of a 27% increase in melted product
sales  volume,  an 8%  increase in melted  product  average  selling  prices and
changes in customer and product mix.

     Gross  margin was 8% of sales in 2001,  compared  to 1% in the prior  year,
primarily reflecting the net effects of higher selling prices,  higher operating
rates at certain plants,  lower sponge costs and changes in customer and product
mix. Gross margin for 2001 was adversely impacted by higher scrap costs,  higher
energy costs, $10.8 million of equipment  impairment charges discussed below and
$3.3 million of estimated  costs related to the tungsten  inclusion  matter.  In
comparison,  gross  margin  in 2000 was  adversely  impacted  by a $3.5  million
equipment   impairment   charge  and  a  $3.3  million  charge  for  anticipated
environmental remediation costs.

     During  the  second  quarter  of  2001,  the  Company  determined  that  an
impairment of the carrying  amount of certain  long-lived  assets located at its
Millbury,  Massachusetts  facility  had  occurred,  as the assets'  undiscounted
future  cash  flows  could  no  longer  support  their  carrying  amount.   This
determination was made after the Company completed studies of the potential uses
of these assets in the foreseeable  future as well as the economic  viability of
those  alternatives.  As a result,  the Company recorded a $10.8 million pre-tax
impairment charge to cost of sales in 2001,  representing the difference between
the assets' previous carrying amounts and their estimated fair values,  based on
a third-party appraisal.

     In April 2001, the Company  reached a settlement of the litigation  between
TIMET and Boeing related to the parties' 1997 LTA.  Pursuant to the  settlement,
the Company  received a cash payment of $82 million and  recorded  approximately
$73 million (cash  settlement less legal fees) as other operating  income,  with
partially  offsetting  operating  expenses  of  approximately  $6.2  million for
employee  incentive  compensation  and other costs  reported  as a component  of
selling,  general,  administrative and development  expense,  resulting in a net
pre-tax income effect of $66.8 million in 2001.

     Selling, general,  administrative and development expenses increased 18% in
2001  compared  to 2000  principally  due to the  approximate  $6.2  million  of
employee incentive compensation discussed above.

     Equity in earnings  (losses) of joint  ventures in 2001  increased  by $3.4
million from 2000  principally due to the increase in earnings of VALTIMET,  the
Company's 44%-owned welded tube joint venture.

     Other operating income (expense), net in 2000 reflected a $2.0 million gain
related to the  termination  of the  Company's  1990  agreement to sell titanium
sponge to Union Titanium Sponge Corporation,  which was offset by a $2.8 million
restructuring  charge  related to the  Company's  plan to  address  then-current
market and operating conditions.

                                       23

<PAGE>


         Non-operating income (expense), net.

<TABLE>

                                                                               Year ended December 31,
                                                                ------------------------------------------------------
                                                                     2002               2001                2000
                                                                ---------------    ----------------    ---------------
                                                                                    (In thousands)

<S>                                                             <C>                <C>                 <C>
Dividends and interest income                                   $         118      $       5,460       $       6,154
SMC impairment charge                                                 (27,500)           (61,519)                  -
Surety bond guarantee                                                  (1,575)                 -                   -
Gain on sale of castings joint venture                                      -                  -               1,205
Loss on early extinguishment of debt                                        -                  -              (1,343)
Foreign exchange gain (loss)                                             (587)                92              (1,085)
Interest expense                                                       (3,381)            (4,060)             (7,704)
Other income (expense)                                                   (761)                18                 (53)
                                                                ---------------    ----------------    ---------------
                                                                $     (33,686)     $     (60,009)      $      (2,826)
                                                                ===============    ================    ===============
</TABLE>

     Dividends and interest income during 2000 and 2001 consisted principally of
dividends on the Company's investment in the $80 million non-voting  convertible
preferred securities of SMC. Because of various factors affecting SMC subsequent
to the  terrorist  attacks of  September  11,  2001,  the Company  undertook  an
assessment of its investment in the SMC securities in the fourth quarter of 2001
with the assistance of an external  valuation  specialist.  The SMC  convertible
preferred  securities are not publicly  traded and,  accordingly,  quoted market
prices  are  unavailable.  As  such,  the  assessment  of fair  value  of  these
securities  required  significant  judgment and  considered a number of factors,
including,  but not limited to, the  financial  health and  prospects of SMC and
market yields of comparable  securities.  The  assessment  indicated that it was
unlikely the Company would recover its then existing carrying amount,  including
accrued  dividends  and  interest,  of the  securities  in  accordance  with the
securities'  contractual  terms and that an other than temporary  decline in the
fair value of its investment had occurred.  The Company recorded a $61.5 million
pre-tax  impairment  charge in the fourth quarter of 2001 to reduce the carrying
amount of this  investment,  including  accrued  dividends and  interest,  to an
estimated  fair value of $27.5  million.  At that time the  Company  also ceased
accruing dividend income on these securities.  Subsequently,  on March 27, 2002,
SMC and its U.S.  subsidiaries  filed a voluntary  petition  for  reorganization
under Chapter 11 of the U.S. Bankruptcy Code. As a result, the Company undertook
a further  assessment of its investment in SMC, again with the assistance of the
same external  valuation  specialist,  and recorded an additional  $27.5 million
impairment  charge during the first quarter of 2002 for an other than  temporary
decline  in the  estimated  fair value of its  investment  in SMC.  This  charge
reduced the Company's carrying amount of its investment in SMC to zero. See Note
5 to the Consolidated Financial Statements.

                                       24

<PAGE>

     TIMET is the primary obligor on two workers'  compensation  bonds issued on
behalf of a former  subsidiary,  Freedom Forge  Corporation  ("Freedom  Forge"),
which  TIMET sold in 1989.  The bonds were  provided  as part of the  conditions
imposed on  Freedom  Forge in order to  self-insure  its  workers'  compensation
obligations. Each of the bonds has a maximum obligation of $1.5 million. Freedom
Forge  filed  for  Chapter  11  bankruptcy  protection  on July  13,  2001,  and
discontinued payment on the underlying workers'  compensation claims in November
2001.  During the third quarter of 2002, TIMET received notices that the issuers
of the bonds were  required to make payments on one of the bonds with respect to
certain of these claims and were requesting reimbursement from TIMET. Based upon
current loss projections,  the Company anticipates claims will be incurred up to
the maximum amount payable under the bond and, therefore,  recorded $1.6 million
for this bond (including  $0.1 million in legal fees  reimbursable to the issuer
of the bond) as other non-operating  expense in 2002. Through December 31, 2002,
TIMET has reimbursed the issuer  approximately  $0.4 million under this bond. At
this time the Company understands that no claims have been paid under the second
bond, and no such payments are currently  anticipated.  Accordingly,  no accrual
has been  recorded  for  potential  claims  that could be filed under the second
bond.  TIMET may revise its estimated  liability under these bonds in the future
as additional facts become known or claims develop.

     Interest expense for 2002 decreased 17% compared to 2001,  primarily due to
lower  average  outstanding  borrowings  and lower  interest  rates during 2002.
Interest  expense for 2001  decreased  over 2000 primarily due to the paydown of
the Company's  revolving  U.S. debt  following  settlement of the Boeing related
litigation.

     In 2000, the Company sold its 20% interest in a castings joint venture with
Wyman-Gordon  (the 80% owner) to Wyman-Gordon  for  approximately $7 million and
recorded a gain on the sale of  approximately  $1.2  million.  The Company  also
recorded a $1.3 million pre-tax loss on the early extinguishment of debt related
to  deferred  financing  costs that the  Company  was  required  to write off in
conjunction with the early  termination of a previous bank financing  agreement.
This amount was previously  reflected as an extraordinary item ($0.8 million net
of tax);  however,  based on the  Company's  adoption of  Statement of Financial
Accounting  Standards ("SFAS") No. 145, Rescission of FASB Statements No. 4, 44,
and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections in 2002,
this amount was  reassessed,  whereby the Company  determined  this loss did not
meet the  necessary  "unusual  and  infrequent"  criteria  to be  considered  an
extraordinary  item.  Therefore,  the  Company  was  required  to  retroactively
reclassify  this  amount  to  non-operating  income  (loss).  See  Note 1 to the
Consolidated Financial Statements.

     Income taxes.  Based on the Company's  recent history of U.S.  losses,  its
near-term  outlook  and  management's   evaluation  of  available  tax  planning
strategies, in the fourth quarter of 2001 the Company concluded that realization
of its previously recorded U.S. deferred tax assets did not continue to meet the
"more-likely-than-not"   recognition  criteria.  Accordingly,  during  2001  the
Company increased its U.S. deferred tax valuation  allowance by $35.5 million to
offset deferred tax benefits related to net U.S. deferred tax assets,  primarily
net  operating  loss and minimum  tax credit  carryforwards.  Additionally,  the
Company determined that it would not recognize a deferred tax benefit related to
future U.S.  losses  continuing  for an  uncertain  period of time.  The Company
increased  its U.S.  deferred tax  valuation  allowance by $39.4 million in 2002
based upon  additional  U.S.  losses and increases to the U.S.  minimum  pension
liability. See Note 16 to the Consolidated Financial Statements.

                                       25

<PAGE>

     During the fourth  quarter of 2002,  the Company  was  required to record a
charge to other  comprehensive  loss to reflect an increase in its U.K.  minimum
pension liability. The related tax effect of this charge resulted in the Company
shifting from a net deferred tax liability  position to a net deferred tax asset
position.  Based on the Company's recent history of U.K.  losses,  its near-term
outlook and management's  evaluation of available tax planning  strategies,  the
Company  determined  that it would not recognize this deferred tax asset because
it did not meet the  "more-likely-than-not"  recognition criteria.  Accordingly,
the Company  recorded a U.K.  deferred  tax asset  valuation  allowance  of $7.2
million through other  comprehensive  income in the fourth quarter to offset the
related U.K.  deferred tax asset that arose due to the increase in U.K.  minimum
pension liabilities.  Commencing in the first quarter of 2003 and continuing for
an  uncertain  period of time,  the  Company  will not  recognize  deferred  tax
benefits  related  to either  future  U.K.  losses or future  increases  in U.K.
minimum  pension  liabilities.   See  Note  16  to  the  Consolidated  Financial
Statements.

     During the first  quarter of 2002,  the Job Creation and Worker  Assistance
Act of 2002 (the "JCWA Act") was signed  into law.  The  Company  benefits  from
certain provisions of the JCWA Act, which liberalized certain net operating loss
("NOL") and alternative minimum tax restrictions.  Prior to the law change, NOLs
could be carried back two years and forward 20 years. The JCWA Act increases the
carryback  period  for losses  generated  in 2001 and 2002 to five years with no
change to the  carryforward  period.  In addition,  losses generated in 2001 and
2002 can be carried back and offset  against  100% of a  taxpayer's  alternative
minimum taxable income ("AMTI"). Prior to the law change, an NOL could offset no
more than 90% of a taxpayer's AMTI. The suspension of the 90% limitation is also
applicable to NOLs carried  forward into 2001 and 2002.  Based on these changes,
the Company  recognized  $1.8 million of refundable U.S. income taxes during the
first quarter of 2002.  The Company  received $0.8 million of this refund in the
fourth quarter of 2002.

     Minority interest.  Annual dividend expense related to the Company's 6.625%
Convertible  Preferred  Securities  generally  approximates $13.3 million and is
reported  as minority  interest.  In 2000,  this  expense  was  reported  net of
allocable  income  taxes;  however,  as a result of the  Company's  decision  to
increase its deferred tax valuation  allowance as described above, no income tax
benefit  associated with this expense was recorded and this expense was reported
gross in 2002 and 2001. In addition,  in 2001 the Company  recorded $0.5 million
of pre-tax dividend expense related to dividends in arrears.  In April 2000, the
Company  exercised  its  right  to  defer  future  dividend  payments  on  these
securities.  On June 1, 2001, the Company  resumed payment of dividends on these
securities,  made the scheduled  payment of $3.3 million and paid the previously
deferred  aggregate  dividends of $13.9  million.  In October 2002,  the Company
again exercised its right to defer future dividend payments on these securities,
effective  with the  Company's  December  1, 2002  scheduled  dividend  payment.
Dividends will continue to accrue at the coupon rate on the principal and unpaid
dividends and have been  classified as long-term in the  Consolidated  Financial
Statements.  The Company  will  consider  resuming  payment of  dividends on the
Convertible  Preferred  Securities  once the outlook for the Company's  business
improves substantially.

     Other  minority  interest  relates  primarily  to the 30% interest in TIMET
Savoie held by CEZUS. See Note 12 to the Consolidated Financial Statements.

                                       26

<PAGE>

     Cumulative  effect of change in accounting  principle.  On January 1, 2002,
the Company adopted SFAS No. 142,  Goodwill and Other Intangible  Assets.  Under
SFAS No. 142,  goodwill is no longer  amortized on a periodic basis, but instead
is subject to a two-step  impairment  test to be performed on at least an annual
basis. In order to test for transitional  impairment,  SFAS No. 142 required the
Company to identify its reporting  units and  determine  the carrying  amount of
each reporting unit by assigning its assets and liabilities,  including existing
goodwill and intangible  assets, to those reporting units as of January 1, 2002.
The Company  determined  that it operates one  reporting  unit,  as that term is
defined by SFAS No. 142,  consisting of the Company in total.  The first step of
the  impairment  test  required the Company to  determine  the fair value of its
reporting unit and compare it to that reporting  unit's  carrying  amount.  This
evaluation was completed with the assistance of an external valuation specialist
and considered a combination of fair value  indicators  including  quoted market
prices,   prices  of  comparable  businesses  and  discounted  cash  flows.  The
evaluation,  which was completed  during the second  quarter of 2002,  indicated
that the Company's  recorded goodwill might be impaired and required the Company
to complete the second step of the impairment test.

     The second step of the  impairment  test,  which was  completed  during the
third quarter of 2002, required the Company to compare the implied fair value of
its reporting  unit's goodwill with the carrying  amount of that goodwill.  With
the  assistance of the external  valuation  specialist  utilized in the step one
testing, the Company determined the implied fair value of its goodwill was zero.
Accordingly, the Company recorded a non-cash goodwill impairment charge of $44.3
million,  representing the entire balance of the Company's  recorded goodwill at
January 1, 2002.  There was no income tax benefit  associated  with this charge.
While the goodwill  associated with the Company's U.S.  operations is deductible
for income tax purposes,  the Company does not currently recognize an income tax
benefit  associated with its U.S.  losses.  In addition the goodwill  associated
with  the  Company's  European  operations  is not  deductible  for  income  tax
purposes.  Pursuant to the transition  requirements of SFAS No. 142, this charge
has been  reported in the Company's  Consolidated  Statements of Operations as a
cumulative effect of a change in accounting principle as of January 1, 2002. The
effect of the change in accounting principle on the first quarter of 2002 was to
increase the Company's  first quarter net loss by $44.3  million,  or $14.04 per
share,  to $80.4 million,  or $25.47 per share.  The change had no effect on the
second, third or fourth quarters of 2002.

     European  operations.  The Company has  substantial  operations  and assets
located in Europe,  principally the United Kingdom,  with smaller  operations in
France and Italy.  Titanium is sold worldwide,  and many factors influencing the
Company's  U.S. and European  operations are similar.  Approximately  44% of the
Company's sales revenue originated in Europe in 2002, of which approximately 60%
was  denominated  in  currencies  other than the U.S.  dollar,  principally  the
British  pound  sterling  and the  euro.  Certain  purchases  of raw  materials,
principally  titanium sponge and alloys, for the Company's  European  operations
are  denominated in U.S.  dollars,  while labor and other  production  costs are
primarily  denominated in local  currencies.  The  functional  currencies of the
Company's European subsidiaries are those of their respective  countries;  thus,
the  U.S.  dollar  value  of  these  subsidiaries'  sales  and  costs  that  are
denominated in currencies other than their functional currency,  including sales
and costs denominated in U.S. dollars, are subject to exchange rate fluctuations
which  may  impact  reported  earnings  and  may  affect  the  comparability  of
period-to-period  operating  results.   Borrowings  of  the  Company's  European
operations  may be in U.S.  dollars or in functional  currencies.  The Company's
export sales from the U.S. are  denominated in U.S.  dollars and as such are not
subject to currency exchange rate fluctuations.

                                       27

<PAGE>


     The  Company  does  not  use  currency  contracts  to  hedge  its  currency
exposures.  Net currency  transaction  gains/losses  included in earnings were a
loss of $0.6  million in 2002, a gain of $0.1 million in 2001 and a loss of $1.1
million in 2000.  At December  31,  2002,  consolidated  assets and  liabilities
denominated in currencies  other than functional  currencies were  approximately
$29.8  million and $36.6  million,  respectively,  consisting  primarily of U.S.
dollar cash, accounts receivable, accounts payable and borrowings.

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

     Supplemental information. In July 2002, the Company successfully negotiated
new  three-year  labor  agreements  with its labor unions at its  Toronto,  Ohio
facility.   The  Company's  European   operations  require  annual  labor  union
negotiations, at which all contracts were successfully extended during 2002, and
such negotiations are currently under way for 2003.

     On  February 4, 2003,  the  Company's  stockholders  approved a proposal to
amend TIMET's  Certificate of  Incorporation  to effect a reverse stock split of
the Company's  common stock at a ratio of one share of  post-split  common stock
for each  eight,  nine or ten  shares  of  pre-split  common  stock  issued  and
outstanding,  with the  final  exchange  ratio to be  selected  by the  Board of
Directors.  Subsequently,  the Company's Board of Directors unanimously approved
the reverse stock split on the basis of one share of post-split common stock for
each  outstanding ten shares of pre-split  common stock. The reverse stock split
became  effective after the close of trading on February 14, 2003. All share and
per share  disclosures  for all periods  presented in MD&A have been adjusted to
give effect to the reverse stock split.

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

     As  previously  discussed,  the economic  slowdown in the United States and
other  regions of the world in the latter part of 2001 in  combination  with the
effects  of  the  September  11,  2001  terrorist  attacks  negatively  impacted
commercial air travel in the United States and abroad throughout 2002.  Although
general economic conditions have improved relative to 2001 levels,  current data
indicates that commercial  airline  passenger  traffic remains below  pre-attack
levels, and the Company expects the current slowdown in the commercial aerospace
sector to continue  through 2005 before  beginning a modest  upturn in 2006.  In
addition,  the continuing war on terrorism and potential  global conflicts could
damage an already  fragile  economy,  delay the  recovery  in airline  passenger
traffic  and  exacerbate  the  current  downturn  in  the  commercial  aerospace
industry.  As a result,  demand for titanium in the commercial  aerospace market
remains soft.

                                       28

<PAGE>

     In  response,  airlines  have  announced a number of actions to reduce both
costs and  capacity  including,  but not  limited  to, the early  retirement  of
airplanes,  the  deferral of scheduled  deliveries  of new aircraft and allowing
purchase  options  to  expire.  The major  commercial  airframe  and jet  engine
manufacturers  have  substantially  reduced their production levels in 2003, and
the  forecast  of  engine  and  aircraft  deliveries  over the next few years is
expected to remain at these reduced  levels.  The Company expects that aggregate
industry mill product  shipments  will decrease in 2003 by  approximately  3% to
about 42,500 metric tons. The Company believes that demand for mill products for
the commercial  aerospace  sector could decline by up to 15% in 2003,  primarily
due to a combination of reduced  aircraft  production rates and excess inventory
accumulated  throughout  the  aerospace  supply chain since  September 11, 2001.
Excess  inventory  accumulation  typically  leads to order  demand for  titanium
products falling below actual consumption.

     According to The Airline  Monitor,  a leading  aerospace  publication,  the
worldwide  commercial  airline industry reported an estimated  operating loss of
approximately $8 billion in 2002, compared with an operating loss of $11 billion
in 2001 and  operating  income  of $11  billion  in 2000.  The  Airline  Monitor
traditionally  issues forecasts for commercial  aircraft deliveries each January
and July. According to The Airline Monitor, large commercial aircraft deliveries
for the 1996 to 2002 period peaked in 1999 with 889 aircraft, including 254 wide
body  aircraft  that use  substantially  more  titanium  than their  narrow body
counterparts.  Large commercial  aircraft  deliveries totaled 673 (including 176
wide bodies) in 2002.  The Airline  Monitor's most recently  issued  forecast of
January 2003 calls for 580  deliveries in 2003,  570  deliveries in 2004 and 560
deliveries in 2005.  Relative to 2002, these forecasted delivery rates represent
anticipated  declines of about 14% in 2003,  15% in 2004 and 17% in 2005.  After
2005,  The Airline  Monitor  calls for a continued  increase  each year in large
commercial aircraft  deliveries through 2010, with forecasted  deliveries of 780
aircraft in 2009 exceeding 2002 levels. Deliveries of titanium generally precede
aircraft  deliveries  by about one year,  although this varies  considerably  by
titanium  product.  This correlates to the Company's cycle,  which  historically
precedes the cycle of the aircraft industry and related deliveries.  The Company
can give no  assurance  as to the extent or duration  of the current  commercial
aerospace  cycle or the extent to which it will affect  demand for the Company's
products.

     Although the current business  environment makes it particularly  difficult
to predict  TIMET's future  performance,  the Company  believes sales revenue in
2003 will remain flat  compared to 2002 at  approximately  $360  million to $370
million,  reflecting the combined effects of increases in sales volume offset by
continued softening of market selling prices and changes in customer and product
mix.  Mill product  sales volume is expected to increase  approximately  5% from
2002  levels to about  9,300  metric  tons and melted  product  sales  volume is
expected to increase  approximately 40% relative to 2002, to approximately 3,300
metric  tons.  The Company  expects  approximately  55% of its 2003 mill product
sales volume will be derived from the commercial  aerospace  sector (as compared
to 59% in 2002),  with the  balance  from  military  aerospace,  industrial  and
emerging  markets.  The overall  mill product  sales volume  increase in 2003 is
principally  driven  by  an  anticipated  increase  in  the  Company's  military
aerospace,  military  armor  and  industrial  sales  volume  compared  to  2002,
partially  offset by sales volume  declines in commercial  aerospace and various
emerging markets.

                                       29

<PAGE>

     Market selling prices on new orders for titanium products,  while difficult
to forecast,  are expected to continue to soften throughout 2003. However, about
one-half of the Company's  anticipated  commercial  aerospace  volume in 2003 is
under LTAs that provide the Company with selling price stability on that portion
of its business. The Company may sell substantially similar titanium products to
different  customers at varying selling prices due to the effect of LTAs, timing
of purchase orders and market  fluctuations.  There are also wide differences in
selling  prices across  different  titanium  products  that the Company  offers.
Accordingly,  the mix of customers and products sold affects the average selling
price  realized and has an important  impact on sales  revenue and gross margin.
Average selling prices, as reported by the Company, are a reflection not just of
actual selling prices received by the Company, but other related factors such as
currency  exchange  rates  and  customer  and  product  mix in a  given  period.
Consequently,  changes in average  selling  prices from period to period will be
impacted  by changes  occurring  not just in actual  prices,  but in these other
factors as well.

     The Company's  cost of sales is affected by a number of factors  including,
among others,  customer and product mix, material yields, plant operating rates,
raw material  costs,  labor and energy costs.  Raw material costs  represent the
largest  portion of the  Company's  manufacturing  cost  structure.  The Company
expects to manufacture a significant portion of its titanium sponge requirements
in 2003 and purchase  the balance.  The Company  expects the  aggregate  cost of
purchased  sponge and scrap to remain  relatively  stable in 2003 as compared to
2002. The Company expects its overall capacity  utilization to average about 50%
in 2003,  down  from 55% in 2002;  however,  the  Company's  practical  capacity
utilization measures can vary significantly based on product mix. As the Company
reduces  production  volume  in  response  to  reduced   requirements,   certain
manufacturing  overhead  costs  decrease at a slower rate and to a lesser extent
than production volume changes,  generally resulting in higher costs relative to
production  levels.  During  2002 the  Company  undertook a number of actions to
reduce its costs,  including  reductions in employment  levels,  more  stringent
spending controls and programs to improve  manufacturing  yields.  However,  the
continued softening of market selling prices is expected to substantially offset
the benefits of these actions,  resulting in an expected gross margin in 2003 of
between  negative 2% and break even. The Company expects gross margin to improve
during the year as production volumes begin to increase somewhat.

     Selling,  general,  administrative and development expenses for 2003 should
approximate $40 million. Interest expense in 2003 should approximate $3 million.
Minority  interest on the  Company's  Convertible  Preferred  Securities in 2003
should approximate $14 million,  including  additional dividend costs related to
the deferral of the related dividend payments.

     The Company  anticipates that Boeing will purchase about 0.8 million pounds
of product in 2003.  At this  projected  order  level,  the  Company  expects to
recognize  about $25  million  of  income  under the  Boeing  LTA's  take-or-pay
provisions in 2003. Any such earnings will be reported as operating income,  but
will not be included in sales revenue, sales volume or gross margin.

                                       30

<PAGE>

     The  Company's  effective  consolidated  income tax rate is  expected to be
significantly  below the U.S.  statutory  rate,  as no  income  tax  benefit  is
expected to be recorded on U.S. or U.K.  losses  during 2003.  During the fourth
quarter of 2002,  TIMET UK began to generate net  deferred  tax assets,  and the
Company determined that future realization of its UK deferred tax assets did not
meet the "more-likely-than-not"  recognition criteria.  Therefore, no income tax
benefit is  expected  to be  recorded  on UK losses  during  2003.  The  Company
operates  in several  tax  jurisdictions  and is  subject to varying  income tax
rates.   As  a  result,   the  geographic  mix  of  pre-tax  income  (loss)  can
significantly impact the Company's overall effective tax rate.

     The Company  presently  expects an operating loss in 2003 of $15 million to
$25 million and a net loss of $35 million to $45 million,  before any  potential
restructuring or other special charges or changes in accounting  principle.  The
Company  presently  anticipates  its  results  in the last  half of 2003 will be
improved  compared to the first half due to the improvement in gross margins and
because the  estimated $25 million  expected to be earned under the  take-or-pay
provision of the Boeing LTA will be recognized in the last half of the year.

     The  Company  expects to  generate  $20 million to $30 million in cash flow
from operations during 2003. This is principally driven by reductions in working
capital,  especially  inventory,  and  the  deferral  of  the  dividends  on the
Convertible Preferred Securities. The Company received the 2003 advance of $27.7
million ($28.5 million less $0.8 million for 2002 subcontractor  purchases) from
Boeing in early January 2003.  Capital  expenditures in 2003 should  approximate
$10 million, principally covering capital maintenance,  safety and environmental
programs. Depreciation and amortization should approximate $36 million.

     Bank debt is expected  to  decrease  in 2003 as  compared to year-end  2002
levels.  At December  31,  2002,  the Company had over $130 million of borrowing
availability under its various worldwide credit agreements. The Company believes
its cash, cash flow from operations and borrowing  availability will satisfy its
expected working capital, capital expenditures and other requirements in 2003.

     The Company is not satisfied  with the  projected  results for 2003 and has
undertaken  further  cost  reduction  measures.  The Company is  redoubling  its
efforts to achieve aggressive  spending  reductions,  supplier price concessions
and  manufacturing  process  improvements,  and  additional  salaried  headcount
reductions are expected.  On a longer-term  basis,  the Company is continuing to
evaluate  product  line and  facilities  consolidations  that may  permit  it to
meaningfully  reduce its cost structure in the future while maintaining and even
increasing its market share.  Accordingly,  the Company's  results in 2003 could
include one or more charges for  restructurings,  asset  impairments  or similar
charges that might be  material.  Likewise,  to the extent that cost  reductions
meet or exceed  target  goals,  results  may be somewhat  better than  currently
forecast.

     In 2001, the Financial  Accounting Standards Board ("FASB") issued SFAS No.
143, Accounting for Asset Retirement  Obligations.  Under SFAS No. 143, the fair
value of a liability for an asset retirement  obligation covered under the scope
of SFAS No. 143 is  recognized in the period in which the liability is incurred,
with an  offsetting  increase in the carrying  amount of the related  long-lived
asset.  Over time,  the  liability  is accreted to its  present  value,  and the
capitalized cost is depreciated over the useful life of the related asset.  Upon
settlement of the  liability,  an entity either  settles the  obligation for its
recorded amount or incurs a gain or loss upon settlement. The Company expects to
recognize a cummulative  effect loss of approximately  $0.2 million and an asset
retirement  obligation of  approximately  $0.4 million upon adoption of SFAS No.
143 on January 1, 2003. See Note 1 to the Consolidated Financial Statements.

                                     31

<PAGE>

     In November 2002, the FASB issued FASB  Interpretation  No. 45, Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of  Indebtedness  of Others.  The Company has adopted the  disclosure
requirements of the  Interpretation  as of December 31, 2002. See Note 19 to the
Consolidated  Financial  Statements  related  to  discussion  of  the  Company's
workers'  compensation  surety  bond  guarantees.  The  Company  will  adopt the
recognition  and initial  measurement  provisions  of this  Interpretation  on a
prospective basis for any guarantees issued or modified after December 31, 2002.

     In January 2003, the FASB issued FASB Interpretation No. 46,  Consolidation
of Variable  Interest  Entities.  Except for TIMET Capital Trust I (discussed in
Note 12 to the Consolidated Financial Statements),  the Company does not believe
it has any variable interest entity covered by the scope of FASB  Interpretation
No. 46. The Company has consolidated  TIMET Capital Trust I since its formation,
as the  Company  owns 100% of the trust's  outstanding  voting  securities.  The
Company will adopt this Interpretation no later than the quarter ended September
30, 2003. The adoption of this Interpretation is not expected to have a material
effect on the Company.

LIQUIDITY AND CAPITAL RESOURCES

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

<TABLE>


                                                                               Year ended December 31,
                                                                ------------------------------------------------------
                                                                      2002               2001                2000
                                                                ---------------    ----------------    ---------------
                                                                                    (In thousands)
<S>                                                             <C>                <C>                 <C>
Cash provided (used) by:
   Operating activities:
     Excluding changes in assets and liabilities                $      (4,100)     $      97,908       $      (7,851)
     Changes in assets and liabilities                                 (9,495)           (35,334)             73,313
                                                                ---------------    ----------------    ---------------
                                                                      (13,595)            62,574              65,462
   Investing activities                                                (7,467)           (16,093)             (4,218)
   Financing activities                                                 3,523            (31,358)            (72,812)
                                                                ---------------    ----------------    ---------------

     Net cash (used) provided by operating,
       investing and financing activities                       $     (17,539)     $      15,123       $     (11,568)
                                                                ===============    ================    ===============
</TABLE>

     Operating  activities.   Cash  (used)  provided  by  operating  activities,
excluding  changes  in assets  and  liabilities,  during  the past  three  years
generally  follows  the  trend in  operating  results.  Changes  in  assets  and
liabilities reflect the timing of purchases,  production and sales, and can vary
significantly from period to period.

     Accounts receivable  decreased during 2002 primarily as a result of reduced
sales,  partially  offset by an  increase in days sales  outstanding  as certain
customers  extended  their  payment  terms to the Company.  Accounts  receivable
increased  in  2001,  principally  as a  result  of  increased  sales.  Accounts
receivable  decreased  during 2000,  reflecting  the decrease in sales levels as
well as an  improvement in collections as reflected by a decrease in the average
number of days that receivables were outstanding.  The significant  reduction in
receivables in 2000 was also  attributable  to $16 million of customer  payments
received in the first  quarter of 2000  related to a  bill-and-hold  arrangement
entered  into  near the end of 1999.  See Note 9 to the  Consolidated  Financial
Statements.

                                       32
<PAGE>

     Inventories  decreased  during  2002  primarily  as  a  result  of  reduced
production  in the  fourth  quarter  of 2002 and an  increase  in the  Company's
reserves  for excess  inventories,  which the  Company  recorded  in response to
decreased  demand for its  products  and other  changes in business  conditions.
Inventories  increased in 2001,  reflecting  material  purchases and  production
rates that were based on expected  sales levels  higher than actual sales levels
achieved.  Due to the impact of the  September  11, 2001  terrorist  attacks,  a
number of customer order deferrals and cancellations were received late in 2001,
contributing to the inventory  increase.  The Company reduced inventories during
2000 as excess  raw  materials  and other  inventory  items  were  consumed  and
inventory reduction and control efforts were put in place.

     In April 2001, the Company  reached a settlement of the litigation  between
TIMET and  Boeing.  Pursuant  to the  settlement,  the  Company  received a cash
payment of $82 million  ($73  million  net of legal  fees) and in December  2001
received a $28.5  million  customer  advance from Boeing  related to fiscal 2002
purchases.  This  advance  was  reduced to $0.8  million at the end of 2002 as a
result  of  shipments  and  orders  from  Boeing as well as the  recognition  of
take-or-pay  income.  Through  2007 the Company  will  receive a similar  annual
advance in January of the year to which the advance is related. See Notes 10 and
19 to the Consolidated Financial Statements.

     Net accounts  with related  parties  decreased  during 2002  primarily as a
result of cash  received  from  Tremont  related to an  intercorporate  services
agreement  and from a reduction  in sales to  VALTIMET.  Changes in net accounts
with related  parties  during 2001 and 2000  resulted  primarily  from  relative
changes in receivable  levels with joint  ventures.  Prepaid  expenses and other
current  assets  decreased  during 2002 due to the receipt of raw  materials for
which the Company had made advance payments during 2001 and the ongoing usage of
other prepaid assets.

     Dividends  for  the  period  October  1998  through  December  1999  on the
Company's  investment  in  SMC  6.625%  convertible  preferred  securities  were
deferred by SMC. In April 2000, SMC resumed  current  dividend  payments of $1.3
million each quarter; however,  dividends and interest in arrears were not paid.
On October 11, 2001, the Company was notified by SMC of SMC's intention to again
defer the payment of  dividends  effective  with the dividend due on October 28,
2001. The SMC  convertible  preferred  securities held by TIMET are not publicly
traded and,  accordingly,  quoted market prices are  unavailable.  As more fully
discussed in "Results of Operations - Non-operating income (expense),  net", the
Company recorded a pre-tax  impairment  charge of $61.5 million related to these
securities,  including accrued dividends and interest,  in the fourth quarter of
2001 and  ceased  accruing  dividend  income on these  securities  at that time.
Additionally,  the Company  recorded a charge of $27.5 million  related to these
securities  in the first  quarter of 2002 that  reduced the  carrying  amount of
these  securities to zero.  The ultimate  amount,  if any, which the Company may
realize  from  its  investment  in the  SMC  securities  is  unknown  due to the
uncertainties associated with SMC's bankruptcy proceedings; however, the Company
believes it is unlikely  that it will  recover any amount from this  investment.
See Note 5 to the Consolidated Financial Statements.

     Deferred income tax benefits in 2002 primarily reflect benefits  recognized
related to European  losses,  as the Company did not record any benefits related
to its U.S.  losses.  Beginning  in 2003,  the Company  will also not record any
benefits  related  to its  U.K.  losses.  Deferred  income  taxes  in 2001  were
primarily  due to an  increase in the  Company's  deferred  tax asset  valuation
allowance to offset  previously  recorded  tax  benefits  which did not meet the
"more-likely-than-not"  recognition  criteria.  Deferred  income  taxes  in 2000
primarily reflect net tax refunds of $8 million. See Note 16 to the Consolidated
Financial Statements.

                                       33

<PAGE>

     As more fully discussed in "Results of Operations - Minority  interest," in
October 2002 the Company  exercised its right to defer future dividend  payments
on its Convertible  Preferred  Securities,  although  dividends will continue to
accrue at the coupon rate on the principal and unpaid  dividends.  This deferral
was effective  beginning with the Company's  December 1, 2002 scheduled dividend
payment.  The  Company  will  consider  resuming  payment  of  dividends  on the
Convertible  Preferred  Securities  once the outlook for the Company's  business
improves substantially.  Since the Company exercised its right to defer dividend
payments,  it is unable  under the terms of these  securities  to,  among  other
things,  pay  dividends  on or reacquire  its capital  stock during the deferral
period. However, the Company is permitted to reacquire the Convertible Preferred
Securities  during the deferral period,  subject to certain U.S. credit facility
limitations.  In April 2000, the Company similarly  exercised its right to defer
future dividend payments on its Convertible Preferred Securities.  In the second
quarter of 2001, a portion of the Boeing  settlement,  described above, was used
to pay the previously  deferred aggregate  dividends of $13.9 million and resume
the payment of the regularly scheduled  dividends.  Changes in accrued dividends
on Convertible Preferred Securities reflect this activity.

     Investing activities.  The Company's capital expenditures were $7.8 million
in 2002,  $16.1 million in 2001 and $11.2 million in 2000.  Capital spending for
2002 and 2001 was  principally  for safety  and  maintaining  capacity.  Capital
spending  for  2000  was   principally   for  capacity   enhancements,   capital
maintenance, and safety and environmental projects.

     Proceeds of $7.0  million  from the sale of the  Company's  castings  joint
venture in 2000 represent the proceeds from the Company's  sale to  Wyman-Gordon
of the  Company's  20% interest in  Wyman-Gordon  Titanium  Castings,  LLC. This
transaction  is more fully  described  in Note 4 to the  Consolidated  Financial
Statements.

     Financing  activities.  Net  borrowings  of $6.3  million  during  2002 are
primarily  attributable  to increases in working  capital  (exclusive  of cash).
TIMET Savoie made a $1.1 million dividend payment to CEZUS in the second quarter
of 2002. The Company incurred  approximately  $1.1 million in financing costs in
conjunction with the Company's  amendment of its U.S. revolving credit agreement
in 2002.  These costs are deferred and amortized over the life of the agreement,
which  matures  in  February   2006.   See  further   discussion  in  "Borrowing
arrangements."  Net repayments of $32 million in 2001 are principally the result
of the  Company's  litigation  settlement  with Boeing.  Net  repayments  of $70
million in 2000 reflect reductions of outstanding  borrowings principally in the
U.S.  resulting from  collection of receivables,  reduction in inventories,  tax
refunds,  proceeds  from the sale of the  Company's  casting  joint  venture and
deferral of dividend payments on the Company's Convertible Preferred Securities.
In addition,  the Company incurred approximately $2.1 million in financing costs
in 2000 in  conjunction  with the Company's  completion of a new U.S.  revolving
credit agreement.

     Borrowing arrangements.  At December 31, 2002, the Company's net debt (cash
and cash equivalents less  indebtedness,  excluding  capital lease  obligations,
Convertible   Preferred   Securities   and  accrued   dividends   thereon)   was
approximately $13.2 million,  consisting of $6.2 million of cash and equivalents
and $19.4 million of debt  (principally  borrowings under the Company's U.S. and
U.K. credit  agreements).  This compares to a net cash position of approximately
$12.1 million as of December 31, 2001. During January 2003, the Company received
approximately  $27.7 million from Boeing under the terms of the parties' amended
LTA, which was used to reduce  outstanding  borrowings  under the Company's U.S.
credit agreement.

                                       34

<PAGE>

     On October 23,  2002,  the Company  amended its existing  U.S.  asset-based
revolving credit agreement,  extending the maturity date to February 2006. Under
the terms of the amendment, borrowings are limited to the lesser of $105 million
or a  formula-determined  borrowing  base  derived  from the  value of  accounts
receivable,  inventory and equipment ("borrowing  availability").  This facility
requires the Company's U.S. daily cash receipts to be used to reduce outstanding
borrowings, which may then be reborrowed, subject to the terms of the agreement.
Interest  generally  accrues at rates that vary from LIBOR plus 2% to LIBOR plus
2.5%.  Borrowings are  collateralized by substantially all of the Company's U.S.
assets.  The credit  agreement  prohibits  the payment of  dividends  on TIMET's
Convertible  Preferred Securities if "excess  availability," as defined, is less
than $25  million,  limits  additional  indebtedness,  prohibits  the payment of
dividends on the Company's common stock if excess  availability is less than $40
million, requires compliance with certain financial covenants and contains other
covenants  customary in lending  transactions  of this type.  The Company was in
compliance in all material  respects  with all covenants for all periods  during
the years ended December 31, 2002 and 2001.  Excess  availability is essentially
unused  borrowing  availability  and is defined as borrowing  availability  less
outstanding  borrowings and certain  contractual  commitments such as letters of
credit.  As of December 31, 2002,  excess  availability  was  approximately  $85
million.  The weighted  average  interest rate on borrowings  outstanding  under
these  credit  agreements  was 3.7% and 5.3% as of  December  31, 2002 and 2001,
respectively.

     The  Company's  U.S.  credit  agreement  allows  the  lender to modify  the
borrowing base formulas at its discretion, subject to certain conditions. During
the second  quarter of 2002,  the  Company's  lender  elected to  exercise  such
discretion and modified the Company's borrowing base formulas, which reduced the
amount that the Company could have borrowed  against its inventory and equipment
by approximately  $7 million.  In the event the lender exercises such discretion
in the future,  such event could have a material adverse impact on the Company's
liquidity.  Borrowings  outstanding under this U.S. facility are classified as a
current liability.

     The Company's  subsidiary,  TIMET UK, has a credit  agreement that provides
for   borrowings   limited   to  the   lesser  of   (pound)22.5   million  or  a
formula-determined borrowing base derived from the value of accounts receivable,
inventory  and  equipment  ("borrowing  availability").   The  credit  agreement
includes a revolving and term loan facility and an overdraft facility (the "U.K.
facilities"). On December 20, 2002, the Company renewed and amended its existing
U.K.  facilities,  extending the maturity date to December 20, 2005 and reducing
the maximum  borrowing base from (pound)30.0  million to (pound)22.5  million to
more appropriately  match TIMET UK's collateral base.  Borrowings under the U.K.
facilities can be in various currencies  including U.S. dollars,  British pounds
sterling  and euros;  accrue  interest  at rates that vary from LIBOR plus 1% to
LIBOR plus 1.25%;  and are  collateralized  by  substantially  all of TIMET UK's
assets. The U.K.  facilities require the maintenance of certain financial ratios
and amounts and other covenants customary in lending  transactions of this type.
TIMET UK was in compliance  in all material  respects with all covenants for all
periods during the years ended  December 31, 2002 and 2001.  The U.K.  overdraft
facility is subject to annual  review in December of each year. In the event the
overdraft  facility is not renewed,  the Company believes it could refinance any
outstanding  overdraft  borrowings  under  either  the  revolving  or term  loan
features of the U.K.  facilities.  Unused borrowing  availability as of December
31, 2002 under the U.K.  facilities was approximately $30 million.  The weighted
average interest rate on borrowings  outstanding  under these credit  agreements
was 4.6% and 3.6% as of December 31, 2002 and 2001, respectively.

                                       35

<PAGE>

     The Company also has  overdraft  and other credit  facilities at certain of
its other European  subsidiaries.  These  facilities  accrue interest at various
rates and are payable on demand.  Unused  borrowing  availability as of December
31, 2002 under these  facilities  was  approximately  $16 million.  The weighted
average interest rate on borrowings  outstanding  under these credit  agreements
was 3.7% and 3.6% as of December 31, 2002 and 2001, respectively.

     Although excess  availability  under TIMET's U.S. credit agreement  remains
above $40 million,  no dividends  were paid by TIMET on its common shares during
2002,  2001 or 2000.  TIMET does not anticipate  paying  dividends on its common
shares  during 2003 and, as previously  discussed,  is not permitted to pay such
dividends  while  deferring  dividend  payments  on  its  Convertible  Preferred
Securities.

     Contractual commitments. As more fully described in Notes 11, 12, 18 and 19
to the  Consolidated  Financial  Statements,  the  Company is a party to various
debt,  lease and other  agreements at December 31, 2002 that  contractually  and
unconditionally  commit the  Company to pay certain  amounts in the future.  The
following table summarizes such contractual  commitments that are  unconditional
both in terms of timing and amount by the type and date of payment.

<TABLE>

                                                                  Unconditional Payment Due Date
                                             --------------------------------------------------------------------------
                                                              2004/           2006/          2008 &
                                               2003           2005            2007            After           Total
                                             ----------    ------------    ------------    ------------    ------------
       Contractual Commitment                                             (In thousands)
-----------------------------------

<S>                                          <C>            <C>             <C>             <C>             <C>
Indebtedness                                 $  12,994      $  6,401        $      -        $        -      $   19,395

Capital leases                                     642           885             411             8,279          10,217

Operating leases                                 3,384         2,336             947               339           7,006

Obligations to Basic Management, Inc.            1,324         1,922           1,063             1,107           5,416

Minimum sponge purchase commitments (1)          9,975        19,950          19,950                 -          49,875

Company-obligated mandatorily
  redeemable preferred securities of
  subsidiary trust holding solely
  subordinated debt securities ("BUCS")              -             -               -           201,241         201,241

Accrued dividends on BUCS (2)                        -             -               -             4,462           4,462
                                             ----------    ------------    ------------    ------------    ------------

                                             $  28,319      $ 31,494        $ 22,371        $  215,428      $  297,612
                                             ==========    ============    ============    ============    ============

-----------------------------------------------------------------------------------------------------------------------
(1) Commitments based on an assumed constant mix of products purchased.

(2)  Represents  total  dividends  accrued  on the BUCS at  December  31,  2002,
     including  dividends  due on December 1, 2002 and deferred as of that date.
     Based on the deferral,  the deferred  dividends are not  contractually  due
     until March 1, 2008.

</TABLE>

                                       36

<PAGE>

     Defined  benefit pension plans.  The Company  maintains two defined benefit
pension  plans in the U.S.,  one in the U.K. and one in France.  The majority of
the discussion  below relates to the U.S. and U.K.  plans, as the French plan is
not  material  to the  Company's  Consolidated  Balance  Sheets,  Statements  of
Operations or Cash Flows.

     The Company  recorded  consolidated  pension expense of $4.9 million,  $1.5
million and $1.4 million for the years ended  December 31, 2002,  2001 and 2000,
respectively.  Pension  expense for these  periods was  calculated  based upon a
number of actuarial assumptions, most significant of which are the discount rate
and the expected long-term rate of return on plan assets.

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

<TABLE>

                                                           Discount rates used for:
                      ------------------------------------------------------------------------------------------------
                              Obligation at                     Obligation at                     Obligation at
                            December 31,2002                  December 31,2001                  December 31, 2000
                           and expense in 2003               and expense in 2002               and expense in 2001
                      ------------------------------    ------------------------------     ---------------------------

<S>                                <C>                               <C>                              <C>
U.S. Plans                         6.25%                             7.00%                            7.25%

U.K. Plan                          5.70%                             6.00%                            6.00%

</TABLE>

     In developing the Company's  expected  long-term rate of return assumption,
the  Company  evaluated  historical  market  rates of return  and input from its
actuaries,  including a review of asset  class  return  expectations  as well as
long-term  inflation  assumptions.  Projected  returns are based on broad equity
(large cap, small cap and  international)  and bond  (corporate and  government)
indices as well as an anticipation  that the plans' active  investment  managers
will generate  premiums  above the standard  market  projections.  The Company's
assumed  rate of return for 2002 was 9.00% for its U.S.  plans and 7.50% for its
U.K. plan based upon these projections.

     Lowering the expected long-term rate of return on the Company's U.S. plans'
assets by 0.25% (from 9.00% to 8.75%) would have increased 2002 pension  expense
by  approximately  $0.1 million,  and lowering the discount  rate  assumption by
0.25% (from 7.00% to 6.75%) would have increased the Company's U.S.  plans' 2002
pension expense by approximately  $0.1 million.  Lowering the expected long-term
rate of return on the  Company's  U.K.  plan's  assets by 0.25%  (from  7.50% to
7.25%) would have increased 2002 pension expense by approximately  $0.2 million,
and lowering the discount  rate  assumption  by 0.25% would have  increased  the
Company's U.K. plan's 2002 pension expense by approximately $0.5 million.

                                       37

<PAGE>

     Based on continued  market  declines  and losses on the plan assets  during
2002,  as well as future  projected  asset mix, the Company  reduced its assumed
long-term  rate of return for 2003 to 8.50% for its U.S. plans and 6.70% for its
U.K. plan. The Company's future expected long-term rate of return on plan assets
for its U.S. and U.K.  plans is based on an asset  allocation  assumption of 50%
equity   securities  and  50%  fixed  income   securities.   Because  of  market
fluctuations  and  prior  funding  strategies,  actual  asset  allocation  as of
December 31, 2002 was 61% equity  securities and 39% fixed income securities for
the U.S. plans and 90% equity securities and 10% fixed income securities for the
U.K. plan. The Company believes, however, that the plans' future long-term asset
allocation on average will  approximate the assumed 50/50  allocation.  Although
the expected rate of return is a long-term measure, the Company will continue to
evaluate its expected rate of return,  at least annually,  and will adjust it as
considered necessary.

     Among other things,  the Company bases its determination of pension expense
for all plans on the fair value of plan assets.  The expected return on the fair
value of the plan assets,  determined  based on the expected  long-term  rate of
return, is a component of pension expense.  This methodology  further recognizes
actual investment gains or losses (i.e. the difference  between the expected and
actual returns based on the market value of assets) in pension  expense  through
amortization in future periods based upon the expected average remaining service
life of the plan participants.

     Based on an  expected  rate of return on plan  assets of 8.50%,  a discount
rate of 6.25% and various other assumptions,  the Company estimates that pension
expense for its U.S. plans will  approximate  $3.2 million in 2003, $2.6 million
in 2004 and $2.0 million in 2005. A 0.25%  increase  (decrease)  in the discount
rate would decrease  (increase)  projected pension expense by approximately $0.1
million in 2003,  2004 and 2005. A 0.25%  increase  (decrease)  in the long-term
rate of return would similarly decrease (increase)  projected pension expense by
approximately  $0.1 million in 2003 and 2004 and by $0.2 million in 2005.  Based
on an expected rate of return on plan assets of 6.70%,  a discount rate of 5.70%
and various other assumptions (including an exchange rate of $1.55/(pound)1.00),
the Company  estimates that pension  expense for its U.K. plan will  approximate
$6.5  million in 2003,  $6.1  million in 2004 and $5.6  million in 2005. A 0.25%
increase  (decrease) in the discount rate would  decrease  (increase)  projected
pension  expense  by  approximately  $0.5  million  in 2003 and in 2004 and $0.6
million in 2005. A 0.25%  increase  (decrease) in the  long-term  rate of return
would  decrease  (increase)  projected  pension  expense by  approximately  $0.2
million in 2003 and 2004 and $0.3 million in 2005. Actual future pension expense
will depend on future actual investment performance,  changes in future discount
rates and various other factors related to the populations  participating in the
Company's pension plans.

     The Company made cash  contributions of approximately  $1.2 million in 2002
and  $2.7  million  in  2001  to  the  U.S.  plans  and  cash  contributions  of
approximately  $6.1 million in 2002 and $3.6  million in 2001 to the U.K.  plan.
Based  upon the  current  underfunded  status  of the  plans  and the  actuarial
assumptions  being used for 2003, the Company  believes that it will be required
to make cash  contributions of approximately  $3.8 million in 2003, $7.0 million
in 2004 and  $4.4  million  in 2005 to the U.S.  plans  and  approximately  $6.5
million in 2003, $6.7 million in 2004 and $6.8 million in 2005 to the U.K. plan.
Certain employee contributions are also required by the U.K. plan.

                                       38

<PAGE>

     The value of the plans'  assets has  decreased  the past three  years based
mainly on poor performance from equity  securities.  The U.S. plans' assets were
$48.2  million,  $56.5 million and $57.2 million at December 31, 2002,  2001 and
2000, respectively, and the U.K. plan's assets were $69.8 million, $79.0 million
and $92.2 million at December 31, 2002, 2001 and 2000, respectively.

     The  combination  of  negative  actual  investment  returns  and  declining
discount rates have increased the Company's underfunded plan status (plan assets
compared to accumulated  benefit  obligations) from $7.7 million at December 31,
2001 to $21.1  million at December  31,  2002 for the U.S.  plans and from $12.2
million at December 31, 2001 to $40.0  million at December 31, 2002 for the U.K.
plan. Because of this underfunded  status, the Company was required to record an
additional  minimum pension liability charge to equity of $13 million related to
the U.S.  plans and $28 million  (net of $1.6  million in taxes)  related to the
U.K. plan in 2002.

     Postretirement  benefit  plans other than  pensions.  The Company  provides
certain  postretirement  healthcare and life insurance  ("OPEB") benefits to the
majority of its U.S.  employees  upon  retirement.  The Company  funds such OPEB
benefits as they are  incurred,  net of any retiree  contributions.  The Company
paid OPEB benefits, net of retiree contributions,  in the amount of $4.6 million
and $4.0 million during 2002 and 2001, respectively.

     The  Company  recorded  consolidated  OPEB  expense of $2.9  million,  $1.8
million and $1.1 million for the years ended  December 31, 2002,  2001 and 2000,
respectively.  OPEB expense for these periods was calculated based upon a number
of actuarial  assumptions,  most  significant of which are the discount rate and
the expected long-term health care trend rate.

     The discount  rate the Company  utilizes for  determining  OPEB expense and
OPEB  obligations is the same as that used for the Company's U.S. pension plans.
Lowering the discount rate  assumption by 0.25% (from 7.00% to 6.75%) would have
increased the Company's 2002 OPEB expense by less than $0.1 million.

     The Company  estimates the expected  long-term health care trend rate based
upon  input  from  specialists  in  this  area,  as  provided  by the  Company's
actuaries.  In  estimating  the health  care trend rate,  the Company  considers
industry  trends,  the  Company's  actual  healthcare  cost  experience  and the
Company's  future  benefit  structure.  For 2002,  the Company  used a beginning
health care trend rate of 11.15%,  which is  projected  to reduce to an ultimate
rate of 5.00% in 2010.  If the health care trend rate  changed by 1.00% for each
year, OPEB expense would have  increased/decreased by approximately $0.3 million
in 2002.

     For 2003,  the  Company  is using a  beginning  health  care  trend rate of
11.35%,  which is projected to reduce to an ultimate rate of 4.25% in 2010.  The
Company  increased  its  beginning  rate based  upon  actual  plan and  industry
experience during 2002.  However,  the Company continues to believe the ultimate
trend rate of 2010 is appropriate at this time.

     Based on a discount  rate of 6.25%,  a health care trend rate as  discussed
above and various other  assumptions,  the Company  estimates  that OPEB expense
will approximate $2.7 million in 2003 and 2004 and $2.6 million in 2005. A 0.25%
increase  (decrease) in the discount rate would  decrease  (increase)  projected
OPEB  expense  by  approximately  $0.1  million in 2003,  2004 and 2005.  A 1.0%
increase  (decrease) in the health care trend rate for each year would  increase
(decrease)  projected OPEB expense by  approximately  $0.3 million in 2003, 2004
and 2005.

                                       39

<PAGE>

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

     Other. On September 9, 2002, Moody's Investor Service lowered its rating on
the  Company's  Convertible  Preferred  Securities  to Caa2 from B3.  Standard &
Poor's Ratings Services ("S&P") lowered its rating on the Company's  Convertible
Preferred  Securities  to CCC- from CCC on September 10, 2002, to C from CCC- on
October 29, 2002 and to D from CCC- on December 2, 2002.  The Company's  ability
to obtain additional capital in the future could be negatively affected by these
rating actions.

     The Company  periodically  evaluates  its liquidity  requirements,  capital
needs  and  availability  of  resources  in view of,  among  other  things,  its
alternative  uses of capital,  debt service  requirements,  the cost of debt and
equity capital and estimated  future  operating cash flows.  As a result of this
process, the Company has in the past, or in light of its current outlook, may in
the future,  seek to raise additional  capital,  modify its common and preferred
dividend  policies,   restructure  ownership  interests,   incur,  refinance  or
restructure  indebtedness,  repurchase  shares  of common  stock or  Convertible
Preferred Securities,  sell assets, or take a combination of such steps or other
steps to increase or manage its liquidity and capital resources.

     In the normal  course of  business,  the Company  investigates,  evaluates,
discusses and engages in acquisition,  joint venture, strategic relationship and
other business  combination  opportunities in the titanium,  specialty metal and
other  industries.  In the  event of any  future  acquisition  or joint  venture
opportunities,  the Company may consider using then-available liquidity, issuing
equity securities or incurring additional indebtedness.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The  Company's  consolidated  financial  statements  have been  prepared in
accordance with accounting principles generally accepted in the United States of
America.  The preparation of these financial  statements requires the Company to
make estimates and judgments,  and select from a range of possible estimates and
assumptions,  that affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements, and the reported amount of revenues and expenses during the reported
period.  On an on-going basis,  the Company  evaluates its estimates,  including
those related to allowances for  uncollectible  accounts  receivable,  inventory
allowances,  impairments of investments in preferred  securities and investments
accounted  for by the equity  method,  the  recoverability  of other  long-lived
assets, including property and equipment,  goodwill and other intangible assets,
pension and other post-retirement benefit obligations and the related underlying
actuarial  assumptions,  the  realization  of deferred  income tax  assets,  and
accruals  for  environmental  remediation,  litigation,  income  tax  and  other
contingencies.  The  Company  bases its  estimates  and  judgments,  to  varying
degrees, on historical  experience,  advice of external  specialists and various
other factors it believes to be prudent under the circumstances.  Actual results
may differ from previously estimated amounts and such estimates, assumptions and
judgments  are  regularly  subject  to  revision.  The  policies  and  estimates
discussed below are considered by management to be critical to an  understanding
of the Company's  financial  statements  because their application  requires the
most significant  judgments from management in estimating  matters for financial
reporting that are inherently uncertain. See Notes to the Consolidated Financial
Statements for additional  information on these policies and estimates,  as well
as discussion of additional accounting policies and estimates.

                                       40
<PAGE>

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

     The Company completed an entity-wide  impairment  assessment under SFAS No.
144,  Accounting for the Impairment or Disposal of Long-Lived  Assets during the
fourth  quarter  of  2002  in  response  to  continued  poor  conditions  in the
commercial  aerospace market. In order to complete this assessment,  the Company
identified  its  lowest  level of  identifiable  cash  flows,  resulting  in the
identification  of four asset groups - U.S.,  U.K.,  France and Italy.  Of these
asset groups, Italy is not reliant on sales into the commercial aerospace market
and  therefore  an  analysis  of its  potential  impairment  was not  considered
necessary.  The result of this assessment led the Company to conclude that there
was no  impairment  related to the  long-lived  assets in the three asset groups
tested,  as the  undiscounted  cash flows exceeded the net carrying value of the
applicable  net assets in each of the three asset  groups.  Although  management
utilizes certain external information sources such as The Airline Monitor as the
basis for aerospace sales volume projections, significant management judgment is
required in  estimating  other  factors  that are  material to future cash flows
including,  but not limited to, customer demand,  the Company's market position,
selling prices,  competitive forces and manufacturing  costs.  Future cash flows
are  inherently  uncertain,  and there can be no assurance that the Company will
achieve the future cash flows reflected in its projections.

     The Company also  completed an  impairment  assessment  of its goodwill and
intangible  assets  under SFAS No. 142,  Goodwill and Other  Intangible  Assets,
during  2002,  as more fully  discussed  in "Results of  Operations - Cumulative
effect of change in accounting  principle."  Management judgment was required in
order to identify the Company's  reporting units,  determine the carrying amount
of each  reporting  unit by  assigning  its  assets and  liabilities,  including
existing goodwill and intangible  assets, to those reporting units as of January
1, 2002, and determine the implied fair value of its goodwill.  This evaluation,
which was completed with the assistance of an external valuation  specialist and
considered  a  combination  of fair value  indicators  including  quoted  market
prices,  prices of comparable  businesses and  discounted  projected cash flows,
indicated  that the Company's  recorded  goodwill might be impaired and required
the Company to complete  the second step of the  impairment  test.  Based on the
results of the  impairment  test,  the  Company  recorded  a  non-cash  goodwill
impairment  charge of $44.3  million,  representing  the  entire  balance of the
Company's recorded goodwill at January 1, 2002.

                                       41

<PAGE>

     Valuation and  impairment of securities.  In accordance  with SFAS No. 115,
Accounting for Certain  Investments in Debt and Equity  Securities,  the Company
evaluates  its  investments  in debt and equity  securities  whenever  events or
conditions  occur  to  indicate  that the fair  value  of such  investments  has
declined below their carrying amounts. If the decline in fair value is judged to
be other than temporary,  the carrying amount of the security is written down to
fair value. In response to certain events previously described in this MD&A, the
Company  undertook  assessments  in the  fourth  quarter  of 2001 and the  first
quarter of 2002 of its  investment  in SMC with the  assistance  of an  external
valuation specialist.  Those assessments indicated that it was unlikely that the
Company would recover its then existing carrying amount of the SMC securities in
accordance  with the  securities'  contractual  terms  and  that an  other  than
temporary decline in the fair value of its investment had occurred. Accordingly,
the Company recorded  impairment  charges of $61.5 million in the fourth quarter
of 2001 and $27.5 million in the first quarter of 2002.

     The  SMC  convertible  preferred  securities  held by the  Company  are not
publicly  traded and,  accordingly,  quoted market prices are  unavailable.  The
estimate of fair value requires  significant judgment and considered a number of
factors including, but not limited to, the financial health and prospects of the
issuer and market yields of comparable securities.  The ultimate amount, if any,
which  the  Company  may  ultimately  realize  from  its  investment  in the SMC
securities is unknown due to the  uncertainties  associated  with its bankruptcy
proceedings;  however,  the Company believes it is unlikely that it will recover
any amount from this investment.

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

     As more fully discussed in "Results of Operations - Income taxes," based on
the Company's recent history of losses,  its near-term  outlook and management's
evaluation of available tax planning  strategies,  in the fourth quarter of 2001
the Company concluded that realization of its previously  recorded U.S. deferred
tax  assets  did not  continue  to meet the  "more-likely-than-not"  recognition
criteria.  Accordingly,  during  2001 the Company  increased  its  deferred  tax
valuation  allowance by $35.5 million to offset deferred tax benefits related to
net U.S.  deferred  tax assets,  primarily  net  operating  loss and minimum tax
credit  carryforwards,  and determined that it would not recognize  deferred tax
benefits  related to future U.S.  losses  continuing for an uncertain  period of
time.

     Additionally,  during the fourth  quarter of 2002,  the Company  determined
that it would not  recognize  a  deferred  tax  asset  related  to its U.K.  net
deferred  tax  assets  because  it  did  not  meet  the   "more-likely-than-not"
recognition  criteria.  Accordingly,  the Company  recorded a deferred tax asset
valuation  allowance of $7.2 million  through  other  comprehensive  loss in the
fourth quarter of 2002 to offset the related U.K.  deferred tax asset that arose
due to an increase in U.K.  minimum  pension  liabilities and determined that it
would not recognize  deferred tax assets related to either future U.K. losses or
future increases in U.K. minimum pension liabilities continuing for an uncertain
period of time.

     Regular reviews of the "more-likely-than-not"  criteria and availability of
tax  planning  strategies  will  continue  to  require  significant   management
judgment.

                                       42

<PAGE>

     Inventory  allowances.  The Company  values  approximately  one-half of its
inventory  using the  last-in,  first-out  ("LIFO")  method  with the  remainder
primarily stated using an average cost method. The Company  periodically reviews
its inventory for estimated  obsolescence or unmarketable  inventory and records
any  write-down  equal to the  difference  between the cost of inventory and its
estimated net realizable value based upon assumptions  about  alternative  uses,
market conditions and other factors.

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

     Revenue recognition. Sales revenue is generally recognized when the Company
has certified that its product meets the related  customer  specifications,  the
product has been shipped,  and title and substantially all the risks and rewards
of ownership  have passed to the customer.  Payments  received from customers in
advance of these  criteria  being met are  recorded as customer  advances  until
earned.  The Company  believes  that its  revenue  recognition  policies  are in
compliance with SEC Staff Accounting  Bulletin No. 101,  Revenue  Recognition in
Financial Statements.

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

                                       43

<PAGE>


ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Interest  rates.  The  Company is exposed  to market  risk from  changes in
interest  rates related to  indebtedness.  The Company  typically does not enter
into  interest  rate swaps or other  types of  contracts  in order to manage its
interest  rate market  risk.  At  December  31,  2002  substantially  all of the
Company's indebtedness was denominated in U.S. dollars,  British pounds sterling
or euros and bore interest at variable rates,  primarily related to spreads over
LIBOR.  Because  the  Company's  indebtedness  reprices  with  changes in market
interest rates, the carrying amount of such debt is believed to approximate fair
value.  The following table  summarizes the Company's  indebtedness  and related
maturities as of December 31, 2002.

<TABLE>

                                                       Contractual maturity date (1)
                                  ---------------------------------------------------------------------    Interest
                                     2003           2004          2005           2006          2007         rate (2)
                                  -----------    ----------    -----------    ----------    -----------    -----------
                                                              (In millions)
<S>                               <C>            <C>           <C>            <C>           <C>               <C>
Variable rate debt:
   U. S. dollars                  $    11.9      $     -       $     2.0      $     -       $     -           3.7%
   British pounds sterling                -            -             4.4            -             -           5.3%
   Euros                                1.0            -               -            -             -           3.7%

(1)  Non-U. S. dollar denominated amounts are translated at year-end rates of exchange.
(2)  Weighted average.

</TABLE>


     The Company's indebtedness as of December 31, 2001 is summarized below.


<TABLE>

                                                     Contractual maturity date (1)
                                  ---------------------------------------------------------------------    Interest
                                     2002           2003          2004           2005          2006         rate (2)
                                  -----------    ----------    -----------    ----------    -----------    -----------
                                                              (In millions)
<S>                               <C>            <C>           <C>            <C>           <C>               <C>
Variable rate debt:
   U. S. dollars                  $       -      $     -       $     8.1      $     -       $     -           3.0%
   British pounds sterling                -            -             2.6            -             -           5.3%
   Euros                                1.7            -               -            -             -           3.9%

(1)  Non-U. S. dollar denominated amounts are translated at year-end rates of exchange.
(2)  Weighted average.

</TABLE>

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

     Commodity  prices.  The  Company  is exposed to market  risk  arising  from
changes in  commodity  prices as a result of its  long-term  purchase and supply
agreements with certain suppliers and customers.  These agreements,  which offer
various fixed or formula-determined  pricing arrangements,  effectively obligate
the Company to bear (i) the risk of  increased  raw  material and other costs to
the  Company  which  cannot  be  passed on to the  Company's  customers  through
increased  titanium  product  prices  (in  whole or in part) or (ii) the risk of
decreasing raw material costs to the Company's suppliers which are not passed on
to the Company in the form of lower raw material prices.

                                       44

<PAGE>

     Other. The Company holds convertible preferred securities of Special Metals
Corporation  with a principal  amount of $80 million and an estimated fair value
of zero.  These  securities are not publicly traded,  and,  accordingly,  quoted
market prices are  unavailable.  These securities are accounted for at estimated
fair value and are considered  "available-for-sale"  securities.  See "Liquidity
and Capital Resources - Operating activities" in Item 7 (MD&A) and Note 5 to the
Consolidated Financial Statements for further discussion.

ITEM 8:    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

     Not applicable.

                                       45

<PAGE>

                                    PART III

ITEM 10:      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

ITEM 11:      EXECUTIVE COMPENSATION

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

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

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

ITEM 13:      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

ITEM 14:      CONTROLS AND PROCEDURES

     The Company maintains a system of disclosure  controls and procedures.  The
term "disclosure controls and procedures," as defined by regulations of the SEC,
means controls and other procedures that are designed to ensure that information
required to be disclosed in the reports that the Company files or submits to the
SEC under the Securities  Exchange Act of 1934, as amended (the "Exchange Act"),
is  recorded,  processed,  summarized  and  reported,  within  the time  periods
specified  in the SEC's  rules and forms.  Disclosure  controls  and  procedures
include,  without  limitation,  controls and procedures  designed to ensure that
information required to be disclosed by the Company in the reports that it files
or submits to the SEC under the Exchange Act is accumulated and  communicated to
the Company's  management,  including its  principal  executive  officer and its
principal financial officer, as appropriate to allow timely decisions to be made
regarding required  disclosure.  Both J. Landis Martin, the Company's  principal
executive  officer,  and JoAnne A. Nadalin,  the Company's  principal  financial
officer, have evaluated the Company's disclosure controls and procedures as of a
date  within  90  days of the  filing  of  this  Form  10-K.  Based  upon  their
evaluation,   these  executive   officers  have  concluded  that  the  Company's
disclosure  controls  and  procedures  are  effective  as of the  date  of  such
evaluation.

                                       46

<PAGE>

     The  Company  also  maintains  a  system  of  internal  controls.  The term
"internal  controls," as defined by the American  Institute of Certified  Public
Accountants'  Codification of Statement on Auditing  Standards,  AU Section 319,
means controls and other  procedures  designed to provide  reasonable  assurance
regarding the  achievement  of objectives  in the  reliability  of the Company's
financial   reporting,   the  effectiveness  and  efficiency  of  the  Company's
operations and the Company's  compliance with  applicable laws and  regulations.
There have been no significant  changes in the Company's internal controls or in
other factors that could  significantly  affect such controls  subsequent to the
date of their last evaluation,  including any corrective  actions with regard to
significant deficiencies and material weaknesses.

                                       47

<PAGE>


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

  (a) and (d)   Financial Statements and Schedules

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

  (b)           Reports on Form 8-K

     Reports on Form 8-K for the  quarter  ended  December  31, 2002 and through
February 27, 2003:


                     Date of Report                Items Reported
                 ------------------------     -----------------------

                 November 4, 2002                     5 and 7
                 November 4, 2002                     5 and 7
                 November 19, 2002                    5 and 7
                 November 19, 2002                    5 and 7
                 December 4, 2002                     5 and 7
                 December 12, 2002                    5 and 7
                 December 23, 2002                    5 and 7
                 December 23, 2002                    5 and 7
                 February 4, 2003                     5 and 7
                 February 5, 2003                     5 and 7
                 February 14, 2003                    5 and 7


  (c)           Exhibits

     Included as exhibits are the items listed in the Exhibit Index.  TIMET will
furnish a copy of any of the  exhibits  listed  below upon  payment of $4.00 per
exhibit  to cover the costs to TIMET of  furnishing  the  exhibits.  Instruments
defining the rights of holders of long-term  debt issues which do not exceed 10%
of consolidated total assets will be furnished to the Commission upon request.

                                       48

<PAGE>


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

3.1       Amended and Restated  Certificate of  Incorporation of Titanium Metals
          Corporation, as amended effective February 14, 2003.

3.2       Bylaws of Titanium Metals  Corporation as Amended and Restated,  dated
          February 4, 2003.

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

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

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

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

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

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

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

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


                                       49

<PAGE>


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

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

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 (No. 1-10126) filed
          with the SEC on March 1, 1996.

9.2       Amendment to the 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  (No.
          1-10126) for the year ended December 31, 1995.

10.1      Lease Agreement,  dated January 1, 1996,  between Holford Estates Ltd.
          and IMI Titanium Ltd. related to the building known as Titanium Number
          2 Plant at Witton, England, incorporated by reference to Exhibit 10.23
          to Tremont  Corporation's Annual Report on Form 10-K (No. 1-10126) for
          the year ended December 31, 1995.

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

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

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

10.5      Investment  Agreement  dated July 9,  1998,  between  Titanium  Metals
          Corporation,  TIMET  Finance  Management  Company and  Special  Metals
          Corporation,   incorporated  by  reference  to  Exhibit  10.1  to  the
          Registrant's Current Report on Form 8-K dated July 9, 1998.

10.6      Amendment to  Investment  Agreement,  dated  October 28,  1998,  among
          Titanium  Metals  Corporation,  TIMET Finance  Management  Company and
          Special Metals Corporation,  incorporated by reference to Exhibit 10.4
          to the  Registrant's  Quarterly  Report on Form  10-Q for the  quarter
          ended September 30, 1998.

                                       50
<PAGE>


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

10.7      Registration  Rights Agreement,  dated October 28, 1998, between TIMET
          Finance   Management   Company   and   Special   Metals   Corporation,
          incorporated  by  reference  to  Exhibit  10.5  to  the   Registrant's
          Quarterly  Report on Form 10-Q for the  quarter  ended  September  30,
          1998.

10.8      Certificate of Designations for the Special Metals  Corporation Series
          A Preferred  Stock,  filed on October 28, 1998,  with the Secretary of
          State of  Delaware,  incorporated  by  reference  to Exhibit  4.5 of a
          Current  Report on Form 8-K dated  October 28, 1998,  filed by Special
          Metals Corporation (No. 000-22029).

10.9*     1996  Long  Term   Performance   Incentive  Plan  of  Titanium  Metals
          Corporation,  incorporated  by reference to Exhibit  10.19 to Titanium
          Metals Corporation's Amendment No. 1 to Registration Statement on Form
          S-1 (No. 333-18829).

10.10*    Senior  Executive Cash Incentive  Plan,  incorporated  by reference to
          Appendix B to Titanium Metals  Corporation's  proxy statement included
          as part of a statement on Schedule 14A dated April 17, 1997.

10.11*    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.

10.12*    Titanium  Metals  Corporation  Executive Stock Ownership Loan Plan, as
          amended and restated  effective  February 28,  2001,  incorporated  by
          reference to Exhibit 10.17 to the  Registrant's  Annual Report on Form
          10-K for the year ended December 31, 2000.

10.13*    Form of Loan and  Pledge  Agreement  by and  between  Titanium  Metals
          Corporation and individual TIMET  executives  under the  Corporation's
          Executive Stock  Ownership Loan Program,  incorporated by reference to
          Exhibit 10.18 to the  Registrant's  Annual Report on Form 10-K for the
          year ended December 31, 2000.

10.14     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.

10.15     Intercorporate  Services Agreement between Titanium Metals Corporation
          and Tremont Corporation, effective as of January 1, 2002, incorporated
          by reference to Exhibit 10.2 to the  Registrant's  Quarterly Report on
          Form 10-Q for the quarter ended March 31, 2002.

10.16     Intercorporate  Services Agreement between Titanium Metals Corporation
          and NL Industries, Inc., effective as of January 1, 2002, incorporated
          by reference to Exhibit 10.3 to the NL  Industries,  Inc.'s  Quarterly
          Report on Form 10-Q for the quarter ended March 31, 2002.


                                       51

<PAGE>

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

10.17*    Titanium  Metals  Corporation  Amended and Restated 1996  Non-Employee
          Director  Compensation  Plan, as amended and restated effective May 7,
          2002,  incorporated  by reference to Exhibit 10.1 to the  Registrant's
          Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.

10.18*    Trust Agreement, effective as of May 22, 2001, by and between Titanium
          Metals Corporation and Robert E. Musgraves,  incorporated by reference
          to Exhibit 10.1 to the Registrant's  Quarterly Report on Form 10-Q for
          the quarter ended September 30, 2001.

10.19*    Agreement to Defer Bonus Payment, effective as of May 22, 2001, by and
          between Titanium Metals Corporation and J. Landis Martin, incorporated
          by reference to Exhibit 10.2 to the  Registrant's  Quarterly Report on
          Form 10-Q for the quarter ended September 30, 2001.

10.20*    Amended and Restated  Employment  Contract between TIMET Savoie,  S.A.
          and Christian  Leonhard,  incorporated by reference to Exhibit 10.1 to
          the  Registrant's  Quarterly Report on Form 10-Q for the quarter ended
          June 30, 2002.

10.21     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.

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

10.23     Loan and Overdraft Facilities between Lloyds TSB Bank plc and TIMET UK
          Limited dated December 20, 2002.

21.1      Subsidiaries of the Registrant.

23.1      Consent of PricewaterhouseCoopers LLP.

99.1      Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2      Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management contract, compensatory plan or arrangement.

                                       52

<PAGE>


                                   SIGNATURES

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


                                     TITANIUM METALS CORPORATION
                                     (Registrant)


                                     By     /s/ J. Landis Martin
                                            ------------------------------------
                                            J. Landis Martin, February 28, 2003
                                            Chairman of the Board, President
                                             and Chief Executive Officer


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



/s/ J. Landis Martin                     /s/ Thomas P. Stafford
---------------------------------------  ---------------------------------------
J. Landis Martin, February 28, 2003      Thomas P. Stafford, February 28, 2003
Chairman of the Board, President         Director
  and Chief Executive Officer


/s/ Norman N. Green                      /s/ Steven L. Watson
---------------------------------------  ---------------------------------------
Norman N. Green, February 28, 2003       Steven L. Watson, February 28, 2003
Director                                 Director


/s/ Albert W. Niemi, Jr.                 /s/ Paul J. Zucconi
---------------------------------------  ---------------------------------------
Albert W. Niemi, Jr., February 28, 2003  Paul J. Zucconi, February 28, 2003
Director                                 Director


/s/ Glenn R. Simmons                     /s/ JoAnne A. Nadalin
---------------------------------------  ---------------------------------------
Glenn R. Simmons, February 28, 2003      JoAnne A. Nadalin, February 28, 2003
Director                                 Vice President and Corporate Controller
                                         Principal Financial Officer
                                         Principal Accounting Officer


                                       53


<PAGE>


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, J.  Landis  Martin,  Chairman  of the Board,  President  and Chief  Executive
Officer of Titanium Metals Corporation, certify that:

     1.   I have  reviewed  this annual  report on Form 10-K of Titanium  Metals
          Corporation;

     2.   Based on my knowledge,  this annual report does not contain any untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this  annual  report,  fairly  present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this annual report;

     4.   The registrant's  other  certifying  officer and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and have:

          a.   designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               annual report is being prepared;

          b.   evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          c.   presented  in  this  annual  report  our  conclusions  about  the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent functions):

          a.   all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

          b.   any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

                                       54

<PAGE>

     6.   The registrant's other certifying officer and I have indicated in this
          annual  report  whether  or not  there  were  significant  changes  in
          internal controls or in other factors that could significantly  affect
          internal   controls   subsequent  to  the  date  of  our  most  recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.



Date:  February 28, 2003


/s/ J. Landis Martin
J. Landis Martin
Chairman of the Board, President
   and Chief Executive Officer

                                       55


<PAGE>


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, JoAnne A. Nadalin,  Vice  President and Corporate  Controller,  and Principal
Financial Officer of Titanium Metals Corporation, certify that:

     1.   I have  reviewed  this annual  report on Form 10-K of Titanium  Metals
          Corporation;

     2.   Based on my knowledge,  this annual report does not contain any untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this  annual  report,  fairly  present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this annual report;

     4.   The registrant's  other  certifying  officer and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and have:

          a.   designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               annual report is being prepared;

          b.   evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          c.   presented  in  this  annual  report  our  conclusions  about  the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent functions):

          a.   all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

          b.   any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

                                       56

<PAGE>

     6.   The registrant's other certifying officer and I have indicated in this
          annual  report  whether  or not  there  were  significant  changes  in
          internal controls or in other factors that could significantly  affect
          internal   controls   subsequent  to  the  date  of  our  most  recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.



Date:  February 28, 2003


/s/ JoAnne A. Nadalin
JoAnne A. Nadalin
Vice President and Corporate Controller
Principal Financial Officer

                                       57
<PAGE>


                           TITANIUM METALS CORPORATION

                           ANNUAL REPORT ON FORM 10-K
                            ITEMS 8, 14(a) and 14(d)

                   INDEX OF FINANCIAL STATEMENTS AND SCHEDULES

                                                                          Page
Financial Statements

   Report of Independent Accountants                                       F-1

   Consolidated Balance Sheets - December 31, 2002 and 2001                F-2

   Consolidated Statements of Operations -
      Years ended December 31, 2002, 2001 and 2000                         F-4

   Consolidated Statements of Comprehensive Income (Loss) -
      Years ended December 31, 2002, 2001 and 2000                         F-5

   Consolidated Statements of Cash Flows -
      Years ended December 31, 2002, 2001 and 2000                         F-6

   Consolidated Statements of Changes in Stockholders' Equity -
      Years ended December 31, 2002, 2001 and 2000                         F-8

   Notes to Consolidated Financial Statements                              F-9


Financial Statement Schedules

   Report of Independent Accountants on Financial Statement Schedule       S-1

   Schedule II - Valuation and Qualifying Accounts                         S-2




                                       F


<PAGE>



                        REPORT OF INDEPENDENT ACCOUNTANTS


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

     In our  opinion,  the  accompanying  consolidated  balance  sheets  and the
related consolidated  statements of operations,  of comprehensive income (loss),
of changes in  stockholders'  equity and of cash flows  present  fairly,  in all
material  respects,  the financial  position of Titanium Metals  Corporation and
Subsidiaries  at December 31, 2002 and  December  31,  2001,  and the results of
their  operations and their cash flows for each of the three years in the period
ended  December 31, 2002 in  conformity  with  accounting  principles  generally
accepted in the United States of America.  These  financial  statements  are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements in  accordance  with  auditing  standards  generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.

     As discussed in Note 1 to the consolidated financial statements,  effective
January 1, 2002 the Company  changed its method of  accounting  for goodwill and
other intangible assets.



/s/ PricewaterhouseCoopers LLP



Denver, Colorado
January 28, 2003, except for Note 22,
   as to which the date is February 14, 2003


                                       F-1


<PAGE>

<TABLE>
<CAPTION>

                           TITANIUM METALS CORPORATION

                           CONSOLIDATED BALANCE SHEETS

                      (In thousands, except per share data)


                                                                                              December 31,
                                                                                   -----------------------------------
ASSETS                                                                                  2002               2001
                                                                                   ----------------   ----------------

<S>                                                                                <C>                <C>
Current assets:
   Cash and cash equivalents                                                       $        6,214     $       24,500
   Accounts and other receivables, less
     allowance of $2,859 and $2,739                                                        66,393             83,075
   Receivable from related parties                                                          2,398              6,179
   Refundable income taxes                                                                  1,703                470
   Inventories                                                                            181,932            185,052
   Prepaid expenses and other                                                               3,077              9,026
   Deferred income taxes                                                                      809                385
                                                                                   ----------------   ----------------
       Total current assets                                                               262,526            308,687
                                                                                   ----------------   ----------------

Investment in joint ventures                                                               22,287             20,585
Preferred securities of Special Metals Corporation ("SMC")                                      -             27,500
Property and equipment, net                                                               254,672            275,308
Goodwill, net                                                                                   -             44,310
Other intangible assets, net                                                                8,442              9,836
Deferred income taxes                                                                           -                 56
Other                                                                                      15,851             13,101
                                                                                   ----------------   ----------------

         Total assets                                                              $      563,778     $      699,383
                                                                                   ================   ================

</TABLE>


                                       F-2


<PAGE>
<TABLE>
<CAPTION>

                           TITANIUM METALS CORPORATION

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                      (In thousands, except per share data)

                                                                                              December 31,
                                                                                   -----------------------------------
LIABILITIES, MINORITY INTEREST AND                                                      2002               2001
                                                                                   ----------------   ----------------
STOCKHOLDERS' EQUITY

<S>                                                                                <C>                <C>
Current liabilities:
   Notes payable                                                                   $      12,994      $        1,522
   Current maturities of long-term debt and capital lease obligations                        642                 512
   Accounts payable                                                                       26,460              42,821
   Accrued liabilities                                                                    46,511              41,799
   Customer advances                                                                       5,416              33,242
   Payable to related parties                                                                602               1,612
   Income taxes                                                                                -                 746
   Deferred income taxes                                                                       -                 106
                                                                                   ----------------   ----------------

       Total current liabilities                                                          92,625             122,360
                                                                                   ----------------   ----------------

Long-term debt                                                                             6,401              10,712
Capital lease obligations                                                                  9,575               8,598
Payable to related parties                                                                   644                 953
Accrued OPEB cost                                                                         13,417              15,980
Accrued pension cost                                                                      61,080              23,690
Accrued environmental cost                                                                 3,531               3,262
Deferred income taxes                                                                      1,036               5,509
Accrued dividends on Convertible Preferred Securities                                      4,462                   -
Other                                                                                          -                 237
                                                                                   ----------------   ----------------
       Total liabilities                                                                 192,771             191,301
                                                                                   ----------------   ----------------

Minority interest - Company-obligated mandatorily redeemable preferred
   securities of subsidiary trust holding solely
   subordinated debt securities ("Convertible Preferred Securities")                     201,241             201,241
Other minority interest                                                                   10,416               8,727

Stockholders' equity:
   Preferred stock $.01 par value; 100 shares authorized,
     none outstanding                                                                          -                   -
   Common stock, $.01 par value; 9,900 shares authorized,
     3,194 and 3,195 shares issued, respectively                                              32                  32
   Additional paid-in capital                                                            350,889             350,801
   Accumulated deficit                                                                  (127,371)            (15,841)
   Accumulated other comprehensive loss                                                  (62,737)            (35,274)
   Treasury stock, at cost  (9 shares)                                                    (1,208)             (1,208)
   Deferred compensation                                                                    (255)               (396)
                                                                                   ----------------   ----------------
         Total stockholders' equity                                                      159,350             298,114
                                                                                   ----------------   ----------------

         Total liabilities and stockholders' equity                                $     563,778      $      699,383
                                                                                   ================   ================

Commitments and contingencies (Note 19)
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       F-3

<PAGE>

<TABLE>
<CAPTION>

                           TITANIUM METALS CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)

                                                                                Year ended December 31,
                                                                  ----------------------------------------------------
                                                                        2002               2001              2000
                                                                  -----------------    --------------    -------------

<S>                                                               <C>                  <C>               <C>
Net sales                                                         $     366,501        $     486,935     $     426,798
Cost of sales                                                           369,624              447,042           422,917
                                                                  -----------------    --------------    -------------

   Gross margin                                                          (3,123)              39,893             3,881

Selling, general, administrative and
  development expense                                                    42,998               51,788            44,017
Equity in earnings (losses) of joint ventures                             1,990                2,515              (865)
Restructuring (income) charge                                                 -                 (220)            2,805
Other income (expense), net                                              23,282               73,640             2,156
                                                                  -----------------    --------------    -------------

  Operating (loss) income                                               (20,849)              64,480           (41,650)

Interest expense                                                          3,381                4,060             7,704
Other non-operating income (expense), net                               (30,305)             (55,949)            4,878
                                                                  -----------------    --------------    -------------

  (Loss) income before income taxes, minority
    interest and cumulative effect of change in
    accounting principle                                                (54,535)               4,471           (44,476)

Income tax (benefit) expense                                             (1,952)              31,112           (15,567)
Minority interest - Convertible Preferred Securities,
   net of tax in 2000                                                    13,351               13,850             8,710
Other minority interest, net of tax                                       1,286                1,275             1,283
                                                                  -----------------    --------------    -------------

  Loss before cumulative effect of change in
    accounting principle                                                (67,220)             (41,766)          (38,902)

Cumulative effect of change in accounting principle                     (44,310)                   -                 -
                                                                  -----------------    --------------    -------------

   Net loss                                                       $    (111,530)       $     (41,766)    $     (38,902)
                                                                  =================    ==============    =============

Basic and diluted loss per share:
   Before cumulative effect of change
      in accounting principle                                     $      (21.27)       $      (13.26)    $      (12.40)

   Cumulative effect of change in accounting
      principle                                                          (14.02)               -                 -
                                                                  -----------------    --------------    -------------

Basic and diluted loss per share                                  $      (35.29)       $      (13.26)    $      (12.40)
                                                                  =================    ==============    =============

Weighted average shares outstanding                                       3,161                3,150             3,137

</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-4

<PAGE>

<TABLE>
<CAPTION>

                           TITANIUM METALS CORPORATION

             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

                                 (In thousands)

                                                                                 Year ended December 31,
                                                                     -------------------------------------------------
                                                                         2002              2001             2000
                                                                     --------------    --------------   --------------

<S>                                                                  <C>               <C>              <C>
Net loss                                                             $    (111,530)    $    (41,766)    $     (38,902)

Other comprehensive income (loss):
   Currency translation adjustment                                          13,359           (3,475)          (10,883)
   Pension liabilities adjustment, net of tax benefit
     of $1,588, $4,834 and $909 in 2002, 2001 and
     2000, respectively                                                    (40,822)         (15,391)           (1,688)
                                                                     --------------    --------------   --------------

                                                                           (27,463)         (18,866)          (12,571)
                                                                     --------------    --------------   --------------

   Comprehensive loss                                                $    (138,993)    $    (60,632)    $     (51,473)
                                                                     ==============    ==============   ==============

</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-5
<PAGE>

<TABLE>
<CAPTION>

                           TITANIUM METALS CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                                                                  Year ended December 31,
                                                                     --------------------------------------------------
                                                                           2002             2001             2000
                                                                     ---------------    --------------   --------------
<S>                                                                  <C>                <C>              <C>
Cash flows from operating activities:
   Net loss                                                          $    (111,530)     $     (41,766)   $     (38,902)
   Depreciation and amortization                                            37,098             40,134           41,942
   Cumulative effect of change in accounting principle                      44,310                  -                -
   Noncash equipment impairment charge                                           -             10,840                -
   Noncash joint venture impairment charge                                       -                  -            3,467
   Noncash impairment of SMC securities                                     27,500             61,519                -
   Gain on sale of castings joint venture                                        -                  -           (1,205)
   Equity in (earnings) losses of joint ventures, net
     of distributions                                                         (961)            (2,040)           1,710
   Deferred income taxes                                                    (3,694)            26,822          (17,715)
   Other minority interest                                                   1,286              1,275            1,283
   Other, net                                                                1,891              1,124            1,569
   Change in assets and liabilities:
     Receivables                                                            20,580             (7,953)          25,273
     Inventories                                                            10,756            (38,631)          37,026
     Prepaid expenses and other                                              6,072             (3,112)            (452)
     Accounts payable and accrued liabilities                              (17,159)             3,895           (1,751)
     Accrued restructuring charges                                            (117)              (592)            (974)
     Customer advances                                                     (26,386)            29,291              (86)
     Income taxes                                                           (1,863)                98           10,386
     Accounts with related parties, net                                      2,194               (743)          (1,247)
     Accrued OPEB and pension costs                                         (6,998)            (4,288)          (4,256)
     Accrued dividends on SMC securities                                         -                  -           (1,606)
     Accrued dividends on Convertible
       Preferred Securities                                                  3,351            (10,043)          10,043
     Other, net                                                                 75             (3,256)             957
                                                                     ---------------    --------------   --------------
        Net cash (used) provided by operating activities                   (13,595)            62,574           65,462
                                                                     ---------------    --------------   --------------

Cash flows from investing activities:
   Capital expenditures                                                     (7,767)           (16,124)         (11,182)
   Proceeds from sale of castings joint venture                                  -                  -            7,000
   Proceeds from sale of fixed assets                                          300                 31               38
   Other, net                                                                    -                  -              (74)
                                                                     ---------------    --------------   --------------
        Net cash used by investing activities                               (7,467)           (16,093)          (4,218)
                                                                     ---------------    --------------   --------------

Cash flows from financing activities:
   Indebtedness:
     Borrowings                                                            420,146            537,884          364,214
     Repayments                                                           (413,842)          (569,569)        (434,257)
   Dividends paid to minority interest                                      (1,115)                 -                -
   Deferred financing costs                                                 (1,050)                 -           (2,134)
   Other, net                                                                 (616)               327             (635)
                                                                     ---------------    --------------   --------------
        Net cash provided (used) by financing activities                     3,523            (31,358)         (72,812)
                                                                     ---------------    --------------   --------------
Net cash (used) provided by operating, investing
   and financing activities                                          $     (17,539)     $      15,123    $     (11,568)
                                                                     ===============    ==============   ==============
</TABLE>

                                       F-6

<PAGE>

<TABLE>
<CAPTION>


                           TITANIUM METALS CORPORATION

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                 (In thousands)

                                                                                 Year ended December 31,
                                                                     -------------------------------------------------
                                                                         2002              2001             2000
                                                                     --------------    --------------   --------------

<S>                                                                  <C>               <C>              <C>
Cash and cash equivalents:
   Net (decrease) increase from:
     Operating, investing and financing activities                   $    (17,539)     $     15,123     $    (11,568)
     Currency translation                                                    (747)             (419)             693
                                                                     --------------    --------------   --------------
                                                                          (18,286)           14,704          (10,875)
   Cash at beginning of year                                               24,500             9,796           20,671
                                                                     --------------    --------------   --------------

   Cash at end of year                                               $      6,214      $     24,500     $      9,796
                                                                     ==============    ==============   ==============

Supplemental disclosures:
   Cash paid for:
     Interest, net of amounts capitalized                            $      2,044      $      3,065     $      7,642
     Convertible Preferred Securities dividends                      $      9,999      $     23,893     $      3,333
     Income taxes, net                                               $      3,605      $      4,192     $          -

   Noncash investing and financing activities:
     Capital lease obligations of $969 and $519 were incurred
     during 2002 and 2001, respectively, when the Company
     entered into certain leases for equipment

</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-7

<PAGE>

<TABLE>
<CAPTION>


                           TITANIUM METALS CORPORATION

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                  Years ended December 31, 2002, 2001 and 2000
                                 (In thousands)

                                                                            Accumulated Other
                                                                           Comprehensive Income (Loss)
                                                  Additional   Retained   ------------------------------
                               Common    Common   Paid-in     Earnings     Currency     Pension   Treasury   Deferred
                               Shares    Stock    Capital     (Deficit)   Translation Liabilities  Stock   Compensation    Total
                              --------  -------  ----------  ----------  -----------  ----------  ---------  ---------  ----------

<S>                            <C>     <C>      <C>         <C>         <C>          <C>         <C>        <C>        <C>
Balance at December 31, 1999    3,137   $   32   $ 348,267   $  64,827   $     (37)   $ (3,800)   $(1,208)   $     -    $ 408,081
   Comprehensive income (loss)      -        -           -     (38,902)    (10,883)     (1,688)         -          -      (51,473)
   Long-term incentive plan
     stock awards, net of          45        -       1,940           -           -           -          -     (1,940)           -
cancellations
   Amortization of deferred
     compensation                   -        -           -           -           -           -          -        749          749
   Other                            -        -         158           -           -           -          -          -          158
                              --------  -------  ----------  ----------  -----------  ----------  ---------  ---------  ----------

Balance at December 31, 2000    3,182       32     350,365      25,925     (10,920)     (5,488)    (1,208)    (1,191)     357,515
   Comprehensive income (loss)      -        -           -     (41,766)     (3,475)    (15,391)         -          -      (60,632)
   Issuance of common stock         8        -         581           -           -           -          -          -          581
   Stock award cancellations       (4)       -        (322)          -           -           -          -        322            -
   Amortization of deferred
     compensation                   -        -           -           -           -           -          -        473          473
   Other                            -        -         177           -           -           -          -          -          177
                              --------  -------  ----------  ----------  -----------  ----------  ---------  ---------  ----------

Balance at December 31, 2001    3,186       32     350,801     (15,841)    (14,395)    (20,879)    (1,208)      (396)     298,114
   Comprehensive income (loss)      -        -           -    (111,530)     13,359     (40,822)         -          -      138,993)
   Issuance of common stock         -        -          21           -           -           -          -          -           21
   Stock award cancellations       (1)       -         (66)          -           -           -          -         66            -
   Amortization of deferred
     compensation                   -        -           -           -           -           -          -        208          208
   Other                            -        -         133           -           -           -          -       (133)           -
                              --------  -------  ----------  ----------  -----------  ----------  ---------  ---------  ----------

Balance at December 31, 2002    3,185   $   32   $ 350,889   $(127,371)  $  (1,036)   $(61,701)   $(1,208)   $  (255)   $ 159,350
                              ========  =======  ==========  ==========  ===========  ==========  =========  =========  ==========

</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-8


<PAGE>


                           TITANIUM METALS CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Summary of significant accounting policies

     Reverse  stock split.  On February 4, 2003,  the  stockholders  of Titanium
Metals Corporation ("TIMET") approved a proposal to amend TIMET's Certificate of
Incorporation to effect a reverse stock split of TIMET's common stock at a ratio
of one share of  post-split  common stock for each eight,  nine or ten shares of
pre-split  common  stock  issued  and  outstanding,  with the final  ratio to be
selected by the Board of  Directors.  Subsequently,  the Board of  Directors  of
TIMET  unanimously  approved a reverse  stock split on the basis of one share of
post-split  common stock for each  outstanding  ten shares of  pre-split  common
stock.  The reverse stock split became  effective  after the close of trading on
February 14, 2003. All share and per share disclosures for all periods presented
in the accompanying Consolidated Financial Statements have been adjusted to give
effect to the reverse stock split.

     Principles  of  consolidation.   The  accompanying  consolidated  financial
statements  include the  accounts of TIMET and its  majority-owned  subsidiaries
(collectively,  the  "Company").  All  material  intercompany  transactions  and
balances have been eliminated.

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

     Inventories  and cost of sales.  Inventories  include  material,  labor and
overhead and are stated at the lower of cost or market.  Approximately  one-half
of inventories are costed using the last-in,  first-out ("LIFO") method with the
balance primarily stated using an average cost method.

     Investments.  The Special Metals Corporation ("SMC") convertible  preferred
securities  held by the  Company are  carried at fair  value,  estimated  by the
Company to be zero as of December 31, 2002.  These  securities  are not publicly
traded and,  accordingly,  quoted market prices are unavailable.  As of December
31,  2001,  the SMC  securities  have been  classified  as  "available-for-sale"
securities with unrealized gains and losses included in stockholders' equity and
unrealized  losses  deemed  to be other  than  temporary  charged  to  earnings.
Investment securities are periodically  reviewed for impairment  considering the
extent to which fair value is below the  carrying  amount,  the  duration of the
decline and the financial health and prospects of the issuer.  Prior to December
31, 2001, the securities were classified as  "held-to-maturity"  and reported at
cost. See Note 5.

     Investments  in 20% to 50%-owned  joint  ventures are  accounted for by the
equity method.  Differences  between the Company's  investment in joint ventures
and its proportionate share of the joint ventures' reported equity are amortized
based upon the  respective  useful lives of the assets to which the  differences
relate, which is generally over not more than 15 years.

                                      F-9


<PAGE>


     Property,  equipment and depreciation.  Property and equipment are recorded
at cost  and  depreciated  principally  on the  straight-line  method  over  the
estimated useful lives of 15 to 40 years for buildings and three to 25 years for
machinery and  equipment.  Capitalized  software  costs are  amortized  over the
software's  estimated useful life,  generally three to five years.  Maintenance,
repairs and minor  renewals  are  expensed as incurred  and  included in cost of
sales.  Major  improvements  are capitalized and depreciated  over the estimated
period  to be  benefited.  Interest  costs of $1.0  million  related  to  major,
long-term capital projects were capitalized as a component of construction costs
during 2000. No interest was capitalized during 2002 or 2001.

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

     During  2001,  the  Company  adopted  Statement  of  Financial   Accounting
Standards ("SFAS") No. 144,  Accounting for Impairment or Disposal of Long-Lived
Assets,  which standard was effective  retroactive to January 1, 2001.  SFAS No.
144, which supercedes SFAS No. 121,  Accounting for the Impairment of Long-Lived
Assets and for  Long-Lived  Assets to be Disposed  of,  retains the  fundamental
provisions with respect to the  recognition and measurement of long-lived  asset
impairment but does not apply to goodwill and other intangible assets.  However,
SFAS No. 144 provides  expanded  guidance with respect to appropriate cash flows
to be used to determine  whether  recognition of any long-lived asset impairment
is required, and if required, how to measure the amount of the impairment.  SFAS
No. 144 also  requires that any net assets to be disposed of by sale be reported
at the lower of carrying  value or fair value less cost to sell, and expands the
reporting of discontinued  operations to include any component of an entity with
operations and cash flows that can be clearly distinguished from the rest of the
entity.  The adoption of SFAS No. 144 had no effect on the Company's  results of
operations, financial position or liquidity.

     Intangible  assets and amortization.  Goodwill,  representing the excess of
cost  over  the  fair  value of  individual  net  assets  acquired  in  business
combinations  accounted  for by the purchase  method,  was  amortized  using the
straight-line method over 15 years and is stated net of accumulated amortization
through December 31, 2001. On January 1, 2002, the Company adopted SFAS No. 142,
Goodwill and Other Intangible Assets.  Under SFAS No. 142, goodwill is no longer
amortized on a periodic basis,  but instead is subject to a two-step  impairment
test to be performed on at least an annual basis.  See Note 7. Patents and other
intangible  assets,  except intangible  pension assets,  are amortized using the
straight-line method over the periods expected to be benefited,  generally seven
to nine years. The Company  periodically  assesses the  amortization  period and
recoverability of the carrying amount of other intangible assets and the effects
of revisions are reflected in the period they are determined to be necessary.

                                      F-10

<PAGE>

     Stock-based   compensation.   The  Company   has  elected  the   disclosure
alternative prescribed by SFAS No. 123, Accounting for Stock-Based Compensation,
as amended by SFAS No. 148, Accounting for Stock-Based Compensation - Transition
and Disclosure, and to account for its stock-based employee compensation related
to stock options in accordance with Accounting  Principles Board Opinion ("APB")
No.  25,   Accounting   for  Stock   Issued  to   Employees   and  its   various
interpretations.  Under APB  Opinion  No.  25,  compensation  cost is  generally
recognized for fixed stock options for which the exercise price is less than the
market price of the Company's common stock on the grant date. Accordingly, since
all of the Company's  stock options have been granted with exercise prices equal
to or in excess of the market price on the date of grant, the Company recognized
no  compensation  cost  for  fixed  stock  options  in 2002,  2001 or 2000.  The
following  table  illustrates  the  effect on net loss and loss per share if the
Company had applied the fair value recognition provisions of SFAS No. 123:

<TABLE>

                                                                              Year ended December 31,
                                                               -------------------------------------------------------
                                                                     2002                2001               2000
                                                               ----------------    ----------------   ----------------
                                                                                    (In thousands)

<S>                                                            <C>                 <C>                <C>
Net loss, as reported                                          $    (111,530)      $      (41,766)    $      (38,902)
Less: total stock option related stock-based
   employee compensation expense,
   net of tax in 2000                                                   (850)              (1,882)            (2,101)
                                                               ----------------    ----------------   ----------------

Pro forma net loss                                             $    (112,380)      $      (43,648)    $      (41,003)
                                                               ================    ================   ================

Basic and diluted loss per share:
  As reported                                                  $      (35.29)      $       (13.26)    $       (12.40)
                                                               ================    ================   ================
  Pro forma                                                    $      (35.56)      $       (13.86)    $       (13.07)
                                                               ================    ================   ================
</TABLE>

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

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

     Research and development.  Research and development expense, which includes
activities  directed toward expanding the use of titanium and titanium alloys in
all  market  sectors,  is  recorded  as  selling,  general,  administrative  and
development expense and totaled $3.3 million in 2002 and $2.6 million in each of
2001 and 2000.  Related  engineering and  experimentation  costs associated with
ongoing commercial production are recorded in cost of sales.

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

                                      F-11

<PAGE>

     Shipping and handling  costs.  Shipping and handling  costs are included in
cost of sales.

     Self insurance.  The Company is self insured for certain losses relating to
workers' compensation claims, employee medical benefits, environmental,  product
and  other  liabilities.  The  Company  maintains  certain  stop  loss and other
insurance to reduce its exposure  and provides  accruals for  estimates of known
liabilities and incurred but not reported claims. See Notes 18 and 19.

     Translation of foreign  currencies.  Assets and liabilities of subsidiaries
whose  functional  currency  is  deemed  to be other  than the U.S.  dollar  are
translated  at  year-end  rates of  exchange,  and  revenues  and  expenses  are
translated  at average  exchange  rates  prevailing  during the year.  Resulting
translation  adjustments are accumulated in the currency translation adjustments
component of other comprehensive  income (loss).  Currency transaction gains and
losses are recognized in income currently and were a net loss of $0.6 million in
2002, a net gain of $0.1 million in 2001 and a net loss of $1.1 million in 2000.

     Revenue recognition. Sales revenue is generally recognized when the Company
has certified that its product meets the related  customer  specifications,  the
product has been shipped,  and title and substantially all the risks and rewards
of ownership  have passed to the customer.  Payments  received from customers in
advance of these  criteria  being met are  recorded as customer  advances  until
earned.  The Company  believes  that its  revenue  recognition  policies  are in
compliance  with the  Securities  and  Exchange  Commission's  Staff  Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements.

     Derivatives  and  hedging  activities.  The Company  adopted  SFAS No. 133,
Accounting  for  Derivative  Instruments  and  Hedging  Activities,  as amended,
effective  January 1, 2001.  SFAS No. 133 establishes  accounting  standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other contracts, and for hedging activities. Under SFAS No. 133, all derivatives
are recognized as either assets or  liabilities  and are measured at fair value.
The  accounting  for  changes  in fair  value of  derivatives  depends  upon the
intended use of the  derivative,  and such changes are recognized  either in net
income  or  other   comprehensive   income.   As  permitted  by  the  transition
requirements  of SFAS No.  133, as amended,  the Company has  exempted  from the
scope of SFAS No. 133 all host contracts  containing  embedded  derivatives that
were issued or acquired prior to January 1, 1999. The Company was not a party to
any significant  derivative or hedging instrument covered by SFAS No. 133 during
2002 or 2001,  and the  adoption of SFAS No. 133 had no  material  effect on the
Company's results of operations, financial position or liquidity.

     Fair value of  financial  instruments.  Carrying  amounts of certain of the
Company's  financial  instruments   including,   among  others,  cash  and  cash
equivalents,  accounts  receivable,  accrued  compensation,  and  other  accrued
liabilities  approximate  fair value  because  of their  short  maturities.  The
Company's  bank debt  reprices  with  changes  in  market  interest  rates  and,
accordingly,  the carrying amount of such debt is believed to approximate market
value.

     The  convertible  preferred  securities  of SMC held by the Company are not
publicly  traded and,  accordingly,  quoted market prices are  unavailable.  The
Company has estimated the fair value of these  securities to be zero at December
31, 2002 and $27.5 million at December 31, 2001. See Note 5.

                                      F-12

<PAGE>

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

     Reclassification.  Certain  prior year  amounts have been  reclassified  to
conform to the current year presentation.

     Recently adopted accounting  principles.  The Company adopted SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No.
13, and Technical  Corrections,  effective  April 1, 2002.  SFAS No. 145,  among
other things,  eliminated the prior  requirement  that all gains and losses from
the early extinguishment of debt were to be classified as an extraordinary item.
Upon adoption of SFAS No. 145, gains and losses from the early extinguishment of
debt are classified as an extraordinary  item only if they meet the "unusual and
infrequent" criteria contained in APB Opinion No. 30. In addition, upon adoption
of SFAS No. 145, all gains and losses from the early extinguishment of debt that
had previously been classified as an extraordinary  item are to be reassessed to
determine if they would have met the "unusual  and  infrequent"  criteria of APB
Opinion  No. 30.  Any such gain or loss that would not have met the APB  Opinion
No. 30 criteria is  retroactively  reclassified  and  reported as a component of
income before extraordinary items. The Company has concluded that its previously
recognized loss from the early  extinguishment of debt that occurred during 2000
(approximately  $0.8  million net of tax) would not have met the APB Opinion No.
30 criteria for classification as an extraordinary item and,  accordingly,  such
loss has been  retroactively  reclassified and reported as a component of income
before  extraordinary  items for the year ended December 31, 2000.  There was no
impact on net income (loss) from adopting SFAS No. 145.

     Accounting principles not yet adopted. The Company will adopt SFAS No. 143,
Accounting for Asset Retirement  Obligations,  as of January 1, 2003. Under SFAS
No.  143,  the fair  value of a  liability  for an asset  retirement  obligation
covered  under the scope of SFAS No.  143 would be  recognized  in the period in
which the  liability is incurred,  with an  offsetting  increase in the carrying
amount of the  related  long-lived  asset.  Over time,  the  liability  would be
accreted to its present  value,  and the  capitalized  cost would be depreciated
over the useful life of the related asset. Upon settlement of the liability,  an
entity would either  settle the  obligation  for its recorded  amount or incur a
gain or loss upon settlement.

                                      F-13

<PAGE>


     Under the  transition  provisions  of SFAS No. 143, at the date of adoption
the Company  will  recognize  (i) an asset  retirement  cost  capitalized  as an
increase  to the  carrying  value of its  property,  plant and  equipment,  (ii)
accumulated  depreciation on such capitalized cost and (iii) a liability for the
asset retirement  obligation.  Amounts resulting from the initial application of
SFAS No. 143 are measured using information,  assumptions and interest rates all
as of January 1, 2003.  The amount  recognized as the asset  retirement  cost is
measured as of the date the asset retirement obligation was incurred. Cumulative
accretion on the asset retirement  obligation,  and accumulated  depreciation on
the asset  retirement  cost, is recognized for the time period from the date the
asset  retirement  cost  and  liability  would  have  been  recognized  had  the
provisions  of SFAS  No.  143 been in  effect  at the  date  the  liability  was
incurred,  through  January 1, 2003.  The  difference  between the amounts to be
recognized  as described  above and any  associated  amounts  recognized  in the
Company's  balance  sheet as of December 31, 2002 is  recognized as a cumulative
effect of a change  in  accounting  principle  as of the date of  adoption.  The
Company  expects to recognize a cummulative  effect loss of  approximately  $0.2
million and an asset retirement  obligation of  approximately  $0.4 million upon
adoption of SFAS No. 143.

     In November 2002, the Financial  Accounting Standards Board ("FASB") issued
FASB Interpretation No. 45, Guarantor's  Accounting and Disclosure  Requirements
for Guarantees,  Including  Indirect  Guarantees of Indebtedness of Others.  The
Company has adopted the  disclosure  requirements  of the  Interpretation  as of
December 31, 2002.  See Note 19 related to discussion of the Company's  workers'
compensation surety bond guarantees.  The Company will adopt the recognition and
initial measurement provisions of this Interpretation on a prospective basis for
any guarantees issued or modified after December 31, 2002.

     In January 2003, the FASB issued FASB Interpretation No. 46,  Consolidation
of Variable  Interest  Entities.  Except for TIMET Capital Trust I (discussed in
Note 12),  the Company  does not believe it has  involvement  with any  variable
interest entity covered by the scope of FASB  Interpretation No. 46. The Company
has consolidated TIMET Capital Trust I since its formation,  as the Company owns
100% of the trust's  outstanding voting securities.  The Company will adopt this
Interpretation  no later than the quarter ended September 30, 2003. The adoption
of this Interpretation is not expected to have a material effect on the Company.

Note 2 - Segment information

     The Company is a vertically  integrated producer of titanium sponge, melted
products and a variety of mill  products  for  aerospace,  industrial  and other
applications. In addition to mill and melted products, the Company sells certain
other products,  such as titanium sponge,  titanium tetrachloride and fabricated
titanium assemblies. The Company's production facilities are located principally
in the United  States,  United  Kingdom and France,  and its  products  are sold
throughout  the  world.  These  worldwide  integrated  activities  comprise  the
"Titanium  melted and mill  products"  segment,  currently  the  Company's  only
segment.  Prior to 2000, the Company  operated an additional  segment,  "Other,"
consisting of the Company's  investment in nonintegrated  joint ventures.  These
investments  have been either sold or charged  off due to an  impairment  of the
value of the investment and generated  operating income during 2000 of less than
$0.1 million.

                                      F-14

<PAGE>

     Sales, gross margin, operating income (loss), inventory and receivables are
the key management measures used to evaluate segment performance.  The following
table provides  supplemental  segment information to the Company's  Consolidated
Balance Sheets and Consolidated Statements of Operations:

<TABLE>

                                                                              Year ended December 31,
                                                               -------------------------------------------------------
                                                                    2002                2001               2000
                                                               ----------------    ---------------    ----------------
                                                                    ($ in thousands, except selling price data)

<S>                                                            <C>                 <C>                <C>
Net sales - Titanium melted and mill products:
    Mill product net sales                                     $     278,204       $     363,257      $      326,319

    Melted product net sales                                          34,800              64,063              47,366
    Other                                                             53,497              59,615              53,113
                                                               ----------------    ---------------    ----------------
                                                               $     366,501       $     486,935      $      426,798
                                                               ================    ===============    ================
Mill product shipments:
    Volume (metric tons)                                               8,860              12,180              11,370
    Average price ($ per kilogram)                             $       31.40       $       29.80      $        28.70

Melted product shipments:
    Volume (metric tons)                                               2,400               4,415               3,470
    Average price ($ per kilogram)                             $       14.50       $       14.50      $        13.65

Geographic segments:
   Net sales - point of origin:
     United States                                             $     311,194       $     399,708      $      345,370
     United Kingdom                                                   91,467             139,210             139,599
     Other Europe                                                     68,487              70,079              74,432
     Eliminations                                                   (104,647)           (122,062)           (132,603)
                                                               ----------------    ---------------    ----------------
                                                               $     366,501       $     486,935      $      426,798
                                                               ================    ===============    ================

   Net sales - point of destination:
     United States                                             $     193,740       $     247,410      $      234,350
     Europe                                                          145,118             188,729             163,661
     Other                                                            27,643              50,796              28,787
                                                               ----------------    ---------------    ----------------
                                                               $     366,501       $     486,935      $      426,798
                                                               ================    ===============    ================

   Long-lived assets - property and equipment, net:
     United States                                             $     186,777       $     208,069      $      227,994
     United Kingdom                                                   62,369              62,463              69,212
     Other Europe                                                      5,526               4,776               4,924
                                                               ----------------    ---------------    ----------------
                                                               $     254,672       $     275,308      $      302,130
                                                               ================    ===============    ================

</TABLE>

     Export sales from U.S. based  operations  approximated $18 million in 2002,
$37 million in 2001 and $24 million in 2000.

                                      F-15

<PAGE>


Note 3 - Inventories

<TABLE>
                                                                                            December 31,
                                                                                --------------------------------------
                                                                                       2002                 2001
                                                                                -----------------    -----------------
                                                                                           (In thousands)

<S>                                                                             <C>                  <C>
Raw materials                                                                   $        53,830      $        43,863
Work-in-process                                                                          81,185               94,709
Finished products                                                                        63,458               54,074
Supplies                                                                                 13,829               13,476
                                                                                -----------------    -----------------
                                                                                        212,302              206,122
Less adjustment of certain inventories to LIFO basis                                     30,370               21,070
                                                                                -----------------    -----------------

                                                                                $       181,932      $       185,052
                                                                                =================    =================
</TABLE>

Note 4 - Investment in joint ventures

<TABLE>
                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      2002                 2001
                                                                                -----------------    -----------------
                                                                                           (In thousands)
<S>                                                                             <C>                  <C>
Joint ventures:
   VALTIMET                                                                     $        22,017      $        20,214
   Other                                                                                    270                  371
                                                                                -----------------    -----------------

                                                                                $        22,287      $        20,585
                                                                                =================    =================
</TABLE>

     VALTIMET SAS  ("VALTIMET") is a manufacturer of welded  stainless steel and
titanium  tubing with  operations  in the United  States,  France and China.  At
December 31, 2002, VALTIMET was owned 43.7% by TIMET, 51.3% by Valinox Welded, a
French  manufacturer of welded tubing,  and 5.0% by Sumitomo Metals  Industries,
Ltd., a Japanese  manufacturer  of steel  products.  At December  31, 2002,  the
unamortized  net  difference  between  the  Company's  carrying  amount  of  its
investment in VALTIMET and its proportionate  share of VALTIMET's net assets was
approximately  $4.8 million,  and is principally  attributable to the difference
between the carrying amount and fair value of fixed assets initially contributed
by TIMET.  This  difference  is being  amortized  over 15 years and  reduces the
amount of equity in  earnings or  increases  the amount of equity in losses that
the Company  reports  related to its  investment in VALTIMET.  The  consolidated
financial  statements of VALTIMET reflected the following  summarized  financial
information:

<TABLE>

                                                                            Year ended December 31,
                                                           -----------------------------------------------------------
                                                                2002                  2001                 2000
                                                           ----------------     -----------------    -----------------
                                                                                 (In thousands)

<S>                                                         <C>                  <C>                  <C>
Net sales                                                   $     90,318         $      80,800        $      67,970
Gross margin                                                $     18,911         $      19,017        $      12,908
Net income (loss)                                           $      4,523         $       4,251        $        (238)

</TABLE>

                                      F-16

<PAGE>


<TABLE>
                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      2002                 2001
                                                                                -----------------    -----------------
                                                                                           (In thousands)

<S>                                                                              <C>                  <C>
Current assets                                                                   $       52,021       $       46,537
Noncurrent assets                                                                $       19,730       $       15,409
Current liabilities                                                              $       25,972       $       21,687
Noncurrent liabilities                                                           $        3,004       $        2,616
Minority interest                                                                $        2,235       $        2,096

</TABLE>


     In 1998,  the Company  completed a series of  strategic  transactions  with
Wyman-Gordon Company ("Wyman-Gordon") in which (i) the Company exchanged certain
of its  titanium  castings  assets  and $5  million  in cash for  Wyman-Gordon's
Millbury, Massachusetts vacuum arc re-melting equipment, which produced titanium
ingot,  (ii)  Wyman-Gordon and the Company  combined their  respective  titanium
castings  businesses into a new joint venture,  Wyman-Gordon  Titanium  Castings
LLC, 80% owned by Wyman-Gordon  and 20% by the Company and (iii) the Company and
Wyman-Gordon entered into a contract pursuant to which the Company expects to be
the principal  supplier of titanium  material to Wyman-Gordon  through 2007. The
Company accounted for the castings business/melting facility transaction at fair
value,  which  approximated  the $18  million net  carrying  value of the assets
exchanged, and, accordingly,  recognized no gain on the transaction. The Company
accounted for its interest in the castings  joint venture by the equity  method.
Early in 2000,  the Company sold its interest in the castings  joint  venture to
Wyman-Gordon  for  approximately  $7  million  and  recorded  a pre-tax  gain of
approximately $1.2 million.

     Other joint  ventures in 2002 and 2001 consist  primarily of investments in
outside providers of certain testing services.

Note 5 - Preferred securities of Special Metals Corporation

     In 1998,  the  Company  purchased  $80  million in  non-voting  convertible
preferred  securities  of  SMC,  a U.S.  manufacturer  of  wrought  nickel-based
superalloys  and  special  alloy  long  products.   The  convertible   preferred
securities  accrue  dividends  at the  annual  rate of 6.625%,  are  mandatorily
redeemable in April 2006 and are convertible into SMC common stock at $16.50 per
share.  SMC's common  stock is traded on the NASDAQ under the symbol  "SMCXQ.OB"
and had a quoted  market  price on December  31,  2002 of $0.07 per share.  From
October 1998 through  December  1999,  SMC deferred  payment of dividends on the
preferred  securities.  In April  2000,  SMC  resumed  dividend  payments on the
securities;  however, dividends and interest in arrears due the Company were not
paid.  On October 11, 2001,  SMC notified the Company of its  intention to again
defer dividend payments effective with the dividend due on October 28, 2001, and
the Company  believes  such  dividends  are likely to be deferred  indefinitely.
Subsequently, on March 27, 2002, SMC and its U.S. subsidiaries filed a voluntary
petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

                                      F-17

<PAGE>

     Because  of various  factors  affecting  SMC  subsequent  to the  terrorist
attacks of  September  11, 2001,  the Company  undertook  an  assessment  of its
investment  in the  SMC  securities  in the  fourth  quarter  of 2001  with  the
assistance of an external valuation  specialist.  The SMC convertible  preferred
securities are not publicly  traded and,  accordingly,  quoted market prices are
unavailable.  As such, the assessment of fair value of these securities required
significant  judgment  and  considered a number of factors,  including,  but not
limited  to, the  financial  health and  prospects  of SMC and market  yields of
comparable securities. The assessment indicated that it was unlikely the Company
would recover its then existing carrying amount, including accrued dividends and
interest, of the securities in accordance with the securities' contractual terms
and that an other than temporary decline in the fair value of its investment had
occurred.  The Company recorded a $61.5 million pre-tax impairment charge in the
fourth  quarter  of 2001 to  reduce  the  carrying  amount  of this  investment,
including  accrued  dividends and interest,  to an estimated fair value of $27.5
million.  At that time the  Company  also  ceased  accruing  for any  additional
dividends due on these  securities.  As a result of the SMC bankruptcy filing in
March 2002, the Company undertook a further assessment of its investment in SMC,
again  with  the  assistance  of the same  external  valuation  specialist,  and
recorded an additional $27.5 million  impairment charge during the first quarter
of 2002 for an other than  temporary  decline in the estimated fair value of its
investment in SMC.  This charge  reduced the  Company's  carrying  amount of its
investment in the SMC  securities  to zero. As of December 31, 2002,  unrecorded
dividends and interest due the Company  approximated $15.8 million. The ultimate
amount,  if any,  which the Company may realize from its  investment  in the SMC
securities is unknown due to the uncertainties  associated with SMC's bankruptcy
proceedings;  however,  the Company believes it is unlikely that it will recover
any amount from this investment.

Note 6 - Property and equipment

<TABLE>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2002                  2001
                                                                               ------------------    -----------------
                                                                                           (In thousands)

<S>                                                                            <C>                   <C>
Land                                                                           $         6,224       $         6,138
Buildings                                                                               38,874                36,574
Information technology systems                                                          58,217                55,112
Manufacturing and other                                                                312,163               300,315
Construction in progress                                                                 3,493                11,631
                                                                               ------------------    -----------------
                                                                                       418,971               409,770
Less accumulated depreciation                                                          164,299               134,462
                                                                               ------------------    -----------------
                                                                               $       254,672       $       275,308
                                                                               ==================    =================
</TABLE>

     In 2001,  the Company  recorded a $10.8 million charge to cost of sales for
the impairment of the melting equipment  acquired from Wyman-Gordon in 1998. The
Company  completed  studies  of the  potential  uses  of this  equipment  in the
foreseeable  future as well as the  economic  viability  of those  alternatives,
resulting in the  determination  that the equipment's  undiscounted  future cash
flows  could no  longer  support  its  carrying  value.  The loss on  impairment
represented  the difference  between the  equipment's  estimated fair value,  as
determined through a third-party appraisal, and its previous carrying amount. In
2000,  the  Company  recorded  a $3.5  million  charge  to cost of sales for the
impairment of certain other equipment.

                                      F-18

<PAGE>


Note 7 - Goodwill and intangible assets

     The Company's goodwill, arising from several previous business combinations
accounted  for  under  the  purchase  method,  was  stated  net  of  accumulated
amortization  recognized  through  December  31, 2001.  On January 1, 2002,  the
Company adopted SFAS No. 142, Goodwill and Other Intangible  Assets.  Under SFAS
No. 142,  goodwill is no longer  amortized on a periodic  basis,  but instead is
subject  to a two-step  impairment  test to be  performed  on at least an annual
basis.

     In order to test for  transitional  impairment,  SFAS No. 142  required the
Company to identify its reporting  units and  determine  the carrying  amount of
each reporting unit by assigning its assets and liabilities,  including existing
goodwill and intangible  assets, to those reporting units as of January 1, 2002.
The Company  determined  that it operates one  reporting  unit,  as that term is
defined by SFAS No. 142,  consisting of the Company in total.  The first step of
the  impairment  test  required the Company to  determine  the fair value of its
reporting unit and compare it to that reporting  unit's  carrying  amount.  This
evaluation was completed with the assistance of an external valuation specialist
and considered a combination of fair value  indicators  including  quoted market
prices,   prices  of  comparable  businesses  and  discounted  cash  flows.  The
evaluation,  which was completed  during the second  quarter of 2002,  indicated
that the Company's  recorded goodwill might be impaired and required the Company
to complete the second step of the impairment test.

     The second step of the  impairment  test,  which was  completed  during the
third quarter of 2002, required the Company to compare the implied fair value of
its reporting  unit's goodwill with the carrying  amount of that goodwill.  With
the  assistance of the external  valuation  specialist  utilized in the step one
testing, the Company determined the implied fair value of its goodwill was zero.
Accordingly, the Company recorded a non-cash goodwill impairment charge of $44.3
million,  representing the entire balance of the Company's  recorded goodwill at
January  1,  2002.  No  income  tax  benefit  associated  with this  charge  was
recognized.  While the goodwill associated with the Company's U.S. operations is
deductible for income tax purposes,  the Company does not currently recognize an
income tax benefit  associated  with its U.S.  losses.  In addition the goodwill
associated with the Company's  European  operations is not deductible for income
tax  purposes.  Pursuant to the  transition  requirements  of SFAS No. 142, this
charge has been reported in the Company's Consolidated  Statements of Operations
as a  cumulative  effect of a change in  accounting  principle  as of January 1,
2002.

                                      F-19

<PAGE>


     The following table reflects what the Company's  reported  consolidated net
loss before the cumulative  effect of the change in accounting  principle  would
have  been in 2001  and  2000  had the  goodwill  amortization  included  in the
Company's reported consolidated net loss not been recognized:

<TABLE>

                                                                         Year ended December 31,
                                                          ------------------------------------------------------
                                                               2002               2001                2000
                                                          ---------------    --------------     ----------------
                                                                   (In thousands, except per share data)

<S>                                                       <C>                <C>                <C>
Net loss before cumulative effect of change in
   accounting principle, as reported                      $     (67,220)     $   (41,766)       $     (38,902)
Adjustments for:
  Goodwill amortization                                               -            4,604                4,775
  Tax provision on amortization                                       -                -               (1,229)
                                                          ---------------    --------------     ----------------

Adjusted net loss before cumulative effect of
   change in accounting principle                               (67,220)         (37,162)             (35,356)

Cumulative effect of change in
   accounting principle                                         (44,310)               -                    -
                                                          ---------------    --------------    ----------------

Adjusted net loss                                         $    (111,530)     $   (37,162)       $     (35,356)
                                                          ===============    ==============     ================

Net loss per basic and diluted share before
   cumulative effect of change in
   accounting principle, as reported                      $      (21.27)     $    (13.26)       $      (12.40)
Adjustments for:
   Goodwill amortization                                              -             1.46                 1.52
   Tax provision on amortization                                      -                -                 (.39)
                                                          ---------------    ---------------    ----------------

Adjusted net loss per basic and diluted share
   before cumulative effect of change in
   accounting principle                                          (21.27)          (11.80)              (11.27)

Cumulative effect of change in
   accounting principle                                          (14.02)               -                    -
                                                          ---------------    ---------------    ----------------

Adjusted net loss per basic and diluted share             $      (35.29)     $    (11.80)       $      (11.27)
                                                          ===============    ===============    ================
</TABLE>

                                      F-20

<PAGE>


     As required by SFAS No. 142, the Company has evaluated the remaining useful
lives of its  intangible  assets with definite  lives,  comprised of patents and
covenants not to compete.  Based on this evaluation,  the Company's patents will
continue to be amortized  over their  weighted  average  remaining  amortization
periods  of just  over  three  years as of  December  31,  2002.  The  Company's
covenants  not to compete will become fully  amortized  during the first half of
2003.  The  carrying  amount  and  accumulated  amortization  of  the  Company's
intangible assets are as follows:

<TABLE>

                                                         December 31, 2002                   December 31, 2001
                                                 ----------------------------------    -------------------------------
                                                    Carrying         Accumulated         Carrying        Accumulated
                                                     Amount          Amortization         Amount         Amortization
                                                 -------------    -----------------    ------------     --------------
                                                                            (In thousands)
<S>                                              <C>              <C>                  <C>              <C>
Intangible assets:
  Definite lives, subject to amortization:
     Patents                                     $     13,903     $         9,375      $    13,405      $      7,606
     Covenants not to compete                           3,967               3,769            8,353             7,514
   Other intangible asset - pension asset (1)           3,716                   -            3,198                 -
                                                 -------------    -----------------    ------------     --------------

                                                 $     21,586     $        13,144      $    24,956      $     15,120
                                                 =============    =================    ============     ==============
<FN>
(1) Not covered by the scope of SFAS No. 142.
</FN>

</TABLE>

     The Company's  amortization  expense relating to its intangible  assets was
$2.1  million  in 2002,  $2.8  million  in 2001 and $3.1  million  in 2000.  The
estimated  aggregate annual  amortization  expense for the Company's patents and
covenants  not to compete for the next five fiscal  years is  summarized  in the
table below:

<TABLE>
                                                                                            Estimated Annual
                                                                                          Amortization Expense
                                                                                    ----------------------------------
                                                                                             (In thousands)
<S>                                                                                                <C>
Year ending December 31,
  2003                                                                                             $1,655
  2004                                                                                             $1,456
  2005                                                                                             $  937
  2006                                                                                             $  678
  2007                                                                                             $    -

</TABLE>

Note 8 - Other noncurrent assets

<TABLE>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2002                  2001
                                                                               ------------------    -----------------
                                                                                           (In thousands)

<S>                                                                            <C>                   <C>
   Deferred financing costs                                                    $         8,244       $         8,212
   Notes receivable from officers                                                          163                   163
   Prepaid pension cost                                                                  7,295                 4,006
   Other                                                                                   149                   720
                                                                               ------------------    -----------------

                                                                               $        15,851       $        13,101
                                                                               ==================    =================
</TABLE>

                                      F-21

<PAGE>


Note 9 - Accrued liabilities
<TABLE>

                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      2002                 2001
                                                                                -----------------    -----------------
                                                                                           (In thousands)

<S>                                                                             <C>                  <C>
OPEB cost                                                                       $         3,818      $         2,969
Pension cost                                                                              7,969                  555
Incentive compensation                                                                    1,326                6,077
Severance benefits                                                                        1,195                    -
Other employee benefits                                                                  15,953               14,616
Deferred income                                                                           1,679                  325
Environmental costs                                                                         803                  654
Accrued tungsten costs                                                                    2,190                2,743
Taxes, other than income                                                                  3,519                4,867
Dividends on Convertible Preferred Securities (Note 12)                                       -                1,111
Other                                                                                     8,059                7,882
                                                                                -----------------    -----------------

                                                                                $        46,511      $        41,799
                                                                                =================    =================
</TABLE>

     During the third  quarter of 2002,  the  Company  implemented  a program to
reduce global  employment levels by approximately 300 employees or approximately
13% of the workforce.  Severance  costs  aggregating  $2.4 million were recorded
during the third and fourth quarter of 2002 for actual and probable terminations
based upon benefit  agreements  and/or  arrangements  applicable to the affected
salaried and hourly positions. Depending upon the terminated employees' years of
service  and  payroll   classification,   severance   benefits   could   include
continuation of pay as well as continuation of certain health and life insurance
benefits.  During the fourth  quarter of 2002 the Company made  payments of $1.2
million to terminated employees, and as of December 31, 2002, severance benefits
of $1.2 million remain accrued and are expected to be paid during 2003.

     In April 2001, the Company  reached a settlement of the litigation  between
TIMET and The  Boeing  Company  ("Boeing")  related  to the  parties'  long-term
agreement  ("LTA") entered into in 1997. Under the terms of the LTA, as amended,
Boeing is required to purchase  from the Company a buffer  inventory of titanium
products for use by the Company in the production of titanium  products  ordered
by Boeing in the future. As the buffer inventory is completed,  Boeing is billed
and takes title to the inventory,  although the Company may retain an obligation
to further process the material as directed by Boeing. Accordingly,  the revenue
and  costs  of  sales on the  buffer  inventory  is  deferred  and  subsequently
recognized at the time the final product is delivered to Boeing.  As of December
31, 2002,  approximately  $1.6 million of deferred revenue related to the Boeing
buffer inventory.

     In 1999, the Company had customer orders for  approximately  $16 million of
titanium  ingot for which the  customer  had not yet  determined  the final mill
product specifications.  At the customer's request, the Company manufactured the
ingots and stored the material at the Company's  facilities.  As agreed with the
customer,  the  customer  was  billed  for and took title to the ingots in 1999;
however,  the  Company  retained an  obligation  to convert the ingots into mill
products in the future. Accordingly,  the revenue (and related cost of sales) on
this product was deferred and subsequently recognized during 2002, 2001 and 2000
in the amounts of $0.1 million, $2.5 million and $13.4 million, respectively.

                                      F-22

<PAGE>


Note 10 - Boeing advance

     Under the terms of the  amended  Boeing LTA,  in years 2002  through  2007,
Boeing is required to advance TIMET $28.5 million  annually less $3.80 per pound
of titanium  product  purchased by Boeing  subcontractors  during the  preceding
year.  Effectively,  the  Company  collects  $3.80 less from Boeing than the LTA
selling  price for each pound of titanium  product  sold  directly to Boeing and
reduces the related  customer  advance  recorded by the  Company.  For  titanium
products  sold to  Boeing  subcontractors,  the  Company  collects  the full LTA
selling  price,  but gives  Boeing  credit by reducing  the next  year's  annual
advance by $3.80 per pound of titanium  product  sold to Boeing  subcontractors.
The Boeing customer advance is also reduced as take-or-pay  benefits are earned,
as described in Note 14. As of December 31, 2002,  approximately $0.8 million of
customer  advances  related to the  Company's  LTA with  Boeing and  represented
amounts  to  be  credited  against  the  2003  advance  for  2002  subcontractor
purchases.

Note 11 - Notes payable, long-term debt and capital lease obligations
<TABLE>

                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                      2002                  2001
                                                                               ------------------    -----------------
                                                                                            (In thousands)
<S>                                                                            <C>                   <C>
Notes payable:
   U.S. credit agreement                                                       $        11,944       $            30
   European credit agreements                                                            1,050                 1,492
                                                                               ------------------    -----------------
                                                                               $        12,994       $         1,522
                                                                               ==================    =================
Long-term debt:
   Bank credit agreement - U.K.                                                $         6,401       $        10,712
   Other                                                                                     -                   172
                                                                               ------------------    -----------------
                                                                                         6,401                10,884
   Less current maturities                                                                   -                   172
                                                                               ------------------    -----------------
                                                                               $         6,401       $        10,712
                                                                               ==================    =================

Capital lease obligations                                                      $        10,217       $         8,938
   Less current maturities                                                                 642                   340
                                                                               ------------------    -----------------
                                                                               $         9,575       $         8,598
                                                                               ==================    =================
</TABLE>

                                      F-23

<PAGE>

     Long-term bank credit agreements.  On October 23, 2002, the Company amended
its existing U.S. asset-based revolving credit agreement, extending the maturity
date to February 2006. Under the terms of the amendment,  borrowings are limited
to the lesser of $105  million or a  formula-determined  borrowing  base derived
from the value of  accounts  receivable,  inventory  and  equipment  ("borrowing
availability"). This facility requires the Company's U.S. daily cash receipts to
be used to reduce outstanding borrowings, which may then be reborrowed,  subject
to the terms of the  agreement.  Interest  generally  accrues at rates that vary
from  LIBOR  plus 2% to  LIBOR  plus  2.5%.  Borrowings  are  collateralized  by
substantially all of the Company's U.S. assets.  The credit agreement  prohibits
the payment of dividends on TIMET's Convertible  Preferred Securities if "excess
availability,"  as  defined,  is  less  than  $25  million,   limits  additional
indebtedness,  prohibits the payment of dividends on the Company's  common stock
if  excess  availability  is less than $40  million,  requires  compliance  with
certain  financial  covenants and contains other covenants  customary in lending
transactions  of this  type.  The  Company  was in  compliance  in all  material
respects with all covenants for all periods  during the years ended December 31,
2002 and 2001. Excess availability is essentially unused borrowing  availability
and is defined as borrowing availability less outstanding borrowings and certain
contractual  commitments  such as letters of credit.  As of  December  31,  2002
excess availability was approximately $85 million. The weighted average interest
rate on borrowings  outstanding  under these credit agreements was 3.7% and 5.3%
as of December 31, 2002 and 2001, respectively.

     The  Company's  U.S.  credit  agreement  allows  the  lender to modify  the
borrowing base formulas at its discretion, subject to certain conditions. During
the second  quarter of 2002,  the  Company's  lender  elected to  exercise  such
discretion and modified the Company's borrowing base formulas, which reduced the
amount that the Company could have borrowed  against its inventory and equipment
by approximately  $7 million.  In the event the lender exercises such discretion
in the future,  such event could have a material adverse impact on the Company's
liquidity.  Borrowings  outstanding under this U.S. facility are classified as a
current liability.

     The Company's  subsidiary,  TIMET UK, has a credit  agreement that provides
for   borrowings   limited   to  the   lesser  of   (pound)22.5   million  or  a
formula-determined borrowing base derived from the value of accounts receivable,
inventory  and  equipment  ("borrowing  availability").   The  credit  agreement
includes a revolving and term loan facility and an overdraft facility (the "U.K.
facilities"). On December 20, 2002, the Company renewed and amended its existing
U.K.  facilities,  extending the maturity date to December 20, 2005 and reducing
the maximum  borrowing base from (pound)30.0  million to (pound)22.5  million to
more appropriately  match TIMET UK's collateral base.  Borrowings under the U.K.
facilities can be in various currencies  including U.S. dollars,  British pounds
sterling  and euros;  accrue  interest  at rates that vary from LIBOR plus 1% to
LIBOR plus 1.25%;  and are  collateralized  by  substantially  all of TIMET UK's
assets. The U.K.  facilities require the maintenance of certain financial ratios
and amounts and other covenants customary in lending  transactions of this type.
TIMET UK was in compliance  in all material  respects with all covenants for all
periods during the years ended  December 31, 2002 and 2001.  The U.K.  overdraft
facility is subject to annual  review in December of each year. In the event the
overdraft  facility is not renewed,  the Company believes it could refinance any
outstanding  overdraft  borrowings  under  either  the  revolving  or term  loan
features of the U.K.  facilities.  Unused borrowing  availability as of December
31, 2002 under the U.K.  facilities was approximately $30 million.  The weighted
average interest rate on borrowings  outstanding  under these credit  agreements
was 4.6% and 3.6% as of December 31, 2002 and 2001, respectively.

                                      F-24

<PAGE>


     The Company also has  overdraft  and other credit  facilities at certain of
its other European  subsidiaries.  These  facilities  accrue interest at various
rates and are payable on demand.  Unused  borrowing  availability as of December
31, 2002 under these  facilities  was  approximately  $16 million.  The weighted
average interest rate on borrowings  outstanding  under these credit  agreements
was 3.7% and 3.5% as of December 31, 2002 and 2001, respectively.

     Capital  lease  obligations.  Certain  of  the  Company's  U.K.  production
facilities  are under thirty year leases  expiring in 2026.  The rents under the
U.K.  leases are  subject  to  adjustment  every five years  based on changes in
certain  published price indices.  TIMET has guaranteed  TIMET UK's  obligations
under its leases. The Company's 70%-owned French subsidiary,  TIMET Savoie, S.A.
("TIMET  Savoie"),   leases  certain  machinery  and  equipment  from  Compagnie
Europeenne du  Zirconium-CEZUS,  S.A. ("CEZUS"),  the 30% minority  shareholder,
under a ten year  agreement  expiring  in 2006.  Certain of the  Company's  U.S.
equipment is under three year leases expiring at various times during 2003, 2004
and 2005.  Assets held under  capital  leases  included in  buildings  were $9.4
million and $8.5 million, and assets included in equipment were $2.6 million and
$1.5 million at December 31, 2002 and 2001, respectively.  The related aggregate
accumulated  depreciation was $3.5 million and $2.4 million at December 31, 2002
and 2001, respectively.

     Aggregate  maturities of long-term debt and capital lease  obligations  are
reflected in the following table:
<TABLE>

                                                                                     Capital             Long-term
                                                                                     Leases                Debt
                                                                                -----------------    -----------------
                                                                                           (In thousands)
<S>                                                                             <C>                  <C>
Year ending December 31,
   2003                                                                         $         1,570      $            -
   2004                                                                                   1,496                   -
   2005                                                                                   1,095               6,401
   2006                                                                                   1,043                   -
   2007                                                                                     979                   -
   2008 and thereafter                                                                   17,278                   -
                                                                                -----------------    -----------------
                                                                                         23,461               6,401
   Less amounts representing interest                                                    13,244                   -
                                                                                -----------------    -----------------

                                                                                $        10,217      $        6,401
                                                                                =================    =================
</TABLE>

                                      F-25

<PAGE>


Note 12 - Minority interest

     Convertible Preferred  Securities.  In November 1996, TIMET Capital Trust I
(the "Trust"), a wholly-owned subsidiary of TIMET, issued $201 million of 6.625%
Company-obligated mandatorily redeemable convertible preferred securities and $6
million  of  common  securities.  TIMET  holds  all  of the  outstanding  common
securities  of the Trust.  The Trust used the  proceeds  from such  issuance  to
purchase  from the  Company  $207  million  principal  amount of TIMET's  6.625%
convertible   junior   subordinated   debentures  due  2026  (the  "Subordinated
Debentures").   TIMET's  guarantee  of  payment  of  the  Convertible  Preferred
Securities (in accordance with the terms thereof) and its obligations  under the
Trust documents constitute, in the aggregate, a full and unconditional guarantee
by the  Company  of the  Trust's  obligations  under the  Convertible  Preferred
Securities.  The sole assets of the Trust are the Subordinated  Debentures.  The
Convertible   Preferred  Securities  represent  undivided  beneficial  ownership
interests in the Trust, are entitled to cumulative preferred  distributions from
the Trust of 6.625% per annum, compounded quarterly, and are convertible, at the
option of the holder,  into TIMET common  stock at the rate of 0.1339  shares of
common stock per Convertible  Preferred Security (an equivalent price of $373.40
per share), for an aggregate of approximately 0.5 million common shares if fully
converted.  Based on limited  trading  data,  the fair value of the  Convertible
Preferred Securities was approximately $56.6 million at December 31, 2002.

     The Convertible  Preferred  Securities mature December 2026, do not require
principal   amortization  and  are  redeemable  at  the  Company's  option.  The
redemption  price  approximates  103% of the principal  amount as of December 1,
2002 and  declines  annually  to 100% on December 1, 2006.  The  Company's  U.S.
credit  agreement  prohibits  the payment of  dividends on these  securities  if
excess  availability,  as  determined  under  the  agreement,  is less  than $25
million.  The Convertible  Preferred  Securities  allow the Company the right to
defer dividend payments for a period of up to 20 consecutive quarters,  although
interest  continues  to accrue at the coupon  rate on the  principal  and unpaid
dividends.  In April  2000,  the  Company  exercised  its right to defer  future
dividend  payments on these  securities.  On June 1, 2001,  the Company  resumed
payment of dividends on these  securities,  made the  scheduled  payment of $3.3
million and paid the previously  deferred aggregate  dividends of $13.9 million.
In October 2002, the Company again  exercised its right to defer future dividend
payments on these securities, effective beginning with the Company's December 1,
2002 scheduled  dividend payment.  The Company will consider resuming payment of
dividends  on the  Convertible  Preferred  Securities  once the  outlook for the
Company's business improves substantially.

     Based on the  deferral,  accrued  dividends  on the  Convertible  Preferred
Securities are reflected as long-term  liabilities in the  Consolidated  Balance
Sheet at December 31, 2002.  Dividends on the Convertible  Preferred  Securities
are reported in the Consolidated  Statements of Operations as minority interest,
which is  recorded  net of  allocable  income tax  benefits  in 2000.  Since the
Company exercised its right to defer dividend  payments,  it is unable under the
terms of these securities to, among other things,  pay dividends on or reacquire
its capital stock during the deferral period.  However, the Company is permitted
to reacquire the  Convertible  Preferred  Securities  during the deferral period
provided the Company has  satisfied  certain  conditions  under its U.S.  credit
facility,  including  maintenance of the Company's excess availability above $25
million before and after such reacquisition.

                                      F-26

<PAGE>

     Other.  Other  minority  interest  relates  principally  to  the  Company's
70%-owned French subsidiary, TIMET Savoie. The Company has the right to purchase
from CEZUS,  the holder of the remaining 30% interest,  CEZUS' interest in TIMET
Savoie for 30% of TIMET  Savoie's  equity  determined  under  French  accounting
principles,  or  approximately  $10.5 million as of December 31, 2002. CEZUS has
the right to require the Company to purchase  its  interest in TIMET  Savoie for
30% of TIMET Savoie's  registered  capital,  or approximately $2.6 million as of
December  31,  2002.  During the second  quarter of 2002,  TIMET  Savoie  made a
dividend payment of $1.1 million to CEZUS.

Note 13 - Stockholders' equity

     Preferred  stock. At December 31, 2002, the Company was authorized to issue
one million  shares of  preferred  stock.  In  conjunction  with the  previously
discussed  one-for-ten  reverse stock split,  the  Company's  Board of Directors
(based upon prior  shareholder  approval)  also  reduced the number of preferred
shares  authorized  for  issuance  to  100,000  shares.  The Board of  Directors
determines the rights of preferred  stock as to, among other things,  dividends,
liquidation, redemption, conversions and voting rights.

     Common stock.  At December 31, 2002, the Company was authorized to issue 99
million  shares of common stock.  In conjunction  with the previously  discussed
one-for-ten  reverse  stock split of its common stock,  the  Company's  Board of
Directors  (based upon prior  shareholder  approval)  also reduced the number of
common shares authorized for issuance to 9.9 million shares.  The Company's U.S.
credit agreement, as amended, limits the payment of common stock dividends.  See
Note 11.

     Restricted  stock and common stock  options.  The Company's  1996 Long-Term
Performance Incentive Plan (the "Incentive Plan") provides for the discretionary
grant of restricted common stock, stock options,  stock appreciation  rights and
other incentive compensation to officers and other key employees of the Company.
Options generally vest over five years and expire ten years from date of grant.

     During 2000, the Company awarded 46,750 shares of TIMET  restricted  common
stock under the Incentive Plan to certain officers and employees. No shares were
awarded during 2001 or 2002. The  restrictions on the stock grants lapse ratably
on an annual basis over a five-year  period.  Since holders of restricted  stock
have all of the  rights of other  common  stockholders,  subject  to  forfeiture
unless  certain  periods  of  employment  are  completed,  all  such  shares  of
restricted stock are considered to be currently  issued and outstanding.  During
2002 and 2001,  6,560  and 3,370  shares of  restricted  stock  were  forfeited,
respectively.  The market value of the restricted stock awards was approximately
$2.0 million on the date of grant  ($43.75 per share),  and this amount has been
recorded as deferred compensation, a separate component of stockholders' equity.
The Company amortizes deferred  compensation to expense on a straight-line basis
for each  tranche  of the award over the period  during  which the  restrictions
lapse.  Compensation  expense  recognized  by the Company  related to restricted
stock awards was $0.2 million in 2002,  $0.5 million in 2001 and $0.7 million in
2000.

     Additionally,  a separate plan (the  "Director  Plan")  provides for annual
grants to eligible  non-employee  directors of options to purchase 500 shares of
the  Company's  common stock at a price equal to the market price on the date of
grant and to receive,  as partial payment of director fees, annual grants of 100
shares of common  stock (50 shares prior to 2001).  Options  granted to eligible
directors  vest in one year and expire  ten years from date of grant  (five year
expiration  for grants prior to 1998).

                                      F-27

<PAGE>

     The weighted average remaining life of options  outstanding at December 31,
2002 was 4.8 years (2001 - 6.1  years).  At December  31,  2002,  2001 and 2000,
options  to  purchase  105,386,  89,594 and 66,175  shares,  respectively,  were
exercisable  at  average  exercise  prices  of  $217.74,  $237.79  and  $257.54,
respectively.  Options to purchase 18,300 shares become  exercisable in 2003. In
February 2001,  the Director Plan was amended to authorize an additional  20,000
shares for future grants under such plan. At December 31, 2002,  128,679  shares
and 16,475 shares were  available for future grant under the Incentive  Plan and
the Director Plan, respectively.

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

<TABLE>

                                                                            Amount
                                                                            payable        Weighted         Weighted
                                                         Exercise            upon           average       average fair
                                                         price per         exercise        exercise         value at
                                         Options          option          (thousands)        price         grant date
                                       -----------    --------------     ------------    ------------    -------------

<S>                                      <C>          <C>                <C>              <C>              <C>
Outstanding at December 31, 1999         173,820      $ 73.80-353.10     $   37,059       $   213.20


Granted:
  At market                                2,500               39.40             98            39.40       $   19.90
  Above market                            25,000        70.00-110.00          2,150            86.00           15.30
Canceled                                 (36,170)       79.70-353.10         (7,285)          201.40
                                       -----------    --------------     ------------    ------------

Outstanding at December 31, 2000         165,150        39.40-353.10         32,022           193.90

Granted:
  At market                                3,000        36.00-142.10            362           120.70       $   81.10
Canceled                                 (12,840)       79.70-353.10         (2,427)          163.50
                                       -----------    --------------     ------------    ------------

Outstanding at December 31, 2001         155,310        36.00-353.10         29,957           195.40

Granted:
  At market                                3,000         16.60-38.60            105            34.90       $   23.00
Canceled                                 (18,568)       79.70-353.10         (3,385)          182.30
                                       -----------    --------------     ------------    ------------

Outstanding at December 31, 2002         139,742      $ 16.60-353.10     $   26,677       $   190.90
                                       ===========    ==============     ============    ============
</TABLE>

                                      F-28

<PAGE>

     The following  table  summarizes  the  Company's  options  outstanding  and
exercisable as of December 31, 2002 by price range:

<TABLE>


                             Options Outstanding                                          Options Exercisable
-------------------------------------------------------------------------------   -----------------------------------

                                              Weighted
                                              average
                                             remaining           Weighted                                Weighted
     Range of          Outstanding at       contractual          average            Exercisable          average
  exercise prices         12/31/02             life            exercise price       at 12/31/02       exercise price
--------------------------------------    ---------------    -----------------    ---------------     ---------------

<S>       <C>               <C>                 <C>             <C>                      <C>            <C>
$    16.60-35.30               500              10.0            $     16.60                   -         $         -
     35.31-70.62            13,500               7.6                  61.79               5,000               63.54
    70.63-105.93            44,176               5.8                  85.71              26,096               85.16
   105.94-141.25             5,000               7.1                 110.00               2,000              110.00
   141.26-176.56             1,500               8.4                 142.10               1,500              142.10
   211.88-247.18            15,260               3.0                 230.00              15,260              230.00
   247.19-282.50            17,116               3.3                 274.64              17,116              274.64
   282.51-317.81            30,810               3.9                 293.77              27,854              293.84
   317.82-353.10            11,880               3.4                 338.76              10,560              338.84
                     -----------------    ---------------    -----------------    ---------------     ---------------

                           139,742               4.8            $    190.90             105,386         $    217.74
                     =================    ===============    =================    ===============     ===============

</TABLE>

     Weighted  average fair values of options at grant date were estimated using
the Black-Scholes model and assumptions listed below:

<TABLE>


                                                                    2002                2001               2000
                                                               ----------------    ----------------   ----------------
<S>                                                                   <C>                 <C>                <C>
Assumptions at date of grant:
  Expected life (years)                                                  6                   7                  6
  Risk-free interest rate                                             2.01%               3.44%              4.95%
  Volatility                                                            74%                 68%                45%
  Dividend yield                                                         0%                  0%                 0%


</TABLE>

                                      F-29

<PAGE>

Note 14 - Other income (expense)

<TABLE>
                                                                                Year ended December 31,
                                                                  ----------------------------------------------------
                                                                       2002              2001               2000
                                                                  ---------------    --------------     --------------
                                                                                    (In thousands)
<S>                                                               <C>                <C>         <C>    <C>
Other operating income (expense):
  Boeing settlement, net                                          $         -        $    73,000 (1)    $         -
  Boeing take-or-pay income                                            23,408                  -                  -
  Gain on termination of UTSC agreement                                     -                  -              2,000
  Other income (expense)                                                 (126)               640                156
                                                                  ---------------    --------------     --------------

                                                                  $    23,282        $    73,640        $     2,156
                                                                  ===============    ==============     ==============

Other non-operating income (expense):
  Dividends and interest income                                   $       118        $     5,460        $     6,154
  Surety bond guarantee                                                (1,575)                 -                  -
  Impairment of investment in SMC                                     (27,500)           (61,519)                 -
  Gain on sale of castings joint venture                                    -                  -              1,205
  Loss on early extinguishment of debt                                      -                  -             (1,343)
  Foreign exchange gain (loss)                                           (587)                92             (1,085)
  Other income (expense)                                                 (761)                18                (53)
                                                                  ---------------    --------------     --------------

                                                                  $   (30,305)       $   (55,949)       $     4,878
                                                                  ===============    ==============     ==============

<FN>
(1)  The Boeing  settlement  includes cash received from Boeing at settlement of
     $82.0 million less legal fees of $9.0 million.  Additionally,  $6.2 million
     in related employee  incentive  compensation was recorded as a component of
     selling, general administrative and development expense.
</FN>


</TABLE>

     The terms of the  amended  Boeing LTA allow  Boeing to  purchase  up to 7.5
million pounds of titanium  product  annually from TIMET through 2007, but limit
TIMET's maximum  quarterly volume  obligation to 3.0 million pounds.  The LTA is
structured  as a  take-or-pay  agreement  such that,  beginning in calendar year
2002,  Boeing  forfeits $3.80 per pound of its advance payment in the event that
its orders for delivery are less than 7.5 million  pounds in any given  calendar
year. The Company recognizes income to the extent Boeing's  year-to-date  orders
for delivery plus TIMET's maximum quarterly volume obligations for the remainder
of the year total less than 7.5 million  pounds.  This income is  recognized  as
other  operating  income and is not included in sales  revenue,  sales volume or
gross margin.  Based on actual  purchases of  approximately  1.3 million  pounds
during 2002, the Company  recognized  $23.4 million of income for the year ended
December 31, 2002 related to the  take-or-pay  provisions for 6.2 million pounds
that  Boeing did not  purchase  under the LTA during  2002.  Recognition  of the
take-or-pay income reduces the Boeing customer advance as described in Note 10.

                                      F-30

<PAGE>


Note 15 - Restructuring charges

     In 2000 and 1999, the Company  implemented  restructuring plans designed to
address then-current market and operating conditions. The 2000 plan included the
termination   of   approximately   170  people,   primarily  in  the   Company's
manufacturing  operations.  The 1999 plan included the  disposition of one plant
and  termination  of an aggregate of 100 people.  The components of the 2000 and
1999 restructuring plan charges are summarized in the following table:

<TABLE>


                                                                          2000 Plan           1999 Plan
                                                                        ---------------     ---------------
                                                                                  (In millions)

<S>                                                                     <C>                 <C>
Titanium Melted and Mill Products Segment:
   Property and equipment                                               $      0.3          $      0.3
   Disposition of German subsidiary                                            0.1                 2.0
   Pension and OPEB costs, net                                                   -                (0.1)
   Personnel severance and benefits                                            2.6                 2.5
                                                                        ---------------     ---------------

                                                                        $      3.0          $      4.7
                                                                        ===============     ===============
</TABLE>

     Substantially  all of the property and  equipment  charges  relate to items
sold, scrapped or abandoned. Depreciation of equipment temporarily idled but not
impaired  was not  suspended.  The  disposition  of the  German  subsidiary  was
completed  in the second  quarter of 2000.  The pension and OPEB costs relate to
actuarial  valuations of accelerated  defined benefits for employees  terminated
and curtailment of pension and OPEB liabilities.

     During each of 2001,  2000 and 1999,  the Company  recorded  income of $0.2
million   related  to  revisions  to   estimates   of   previously   established
restructuring   accruals.   The  1999  credit  was  related  to  the   Company's
previously-operated  "Other" segment. Total net restructuring charges recognized
in the Company's  results of operations  for 2000 and 1999 were $2.8 million and
$4.5 million, respectively.

     Payments  applied  against the accrued  costs related to the 2000 plan were
$0.1 million and $0.5 million during 2002 and 2001,  respectively.  There was no
remaining balance related to the 2000 plan as of December 31, 2002.

     Payments  applied  against the accrued  costs related to the 1999 plan were
zero and $0.1  million  during 2002 and 2001,  respectively.  As of December 31,
2002, the remaining balance of accrued  restructuring  costs related to the 1999
plan was $0.1 million related to personnel severance and benefits for terminated
employees. The Company expects to pay the remaining balance of the accrued costs
under the 1999 restructuring plan during 2003.

                                      F-31

<PAGE>


Note 16 - Income taxes

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

<TABLE>


                                                                              Year ended December 31,
                                                               -------------------------------------------------------
                                                                     2002                2001               2000
                                                               ----------------    ----------------   ----------------
                                                                                    (In thousands)
<S>                                                            <C>                 <C>                <C>
Pre-tax income (loss):
  U.S.                                                         $   (51,354)        $    (6,719)       $   (44,173)
  Non-U.S.                                                          (3,181)             11,190               (303)
                                                               ----------------    ----------------   ----------------

                                                               $   (54,535)        $     4,471        $   (44,476)
                                                               ================    ================   ================

Expected income tax expense (benefit), at 35%                  $   (19,087)        $     1,565        $   (15,567)
Non-U.S. tax rates                                                     950                 521              1,121
U.S. state income taxes, net                                        (1,650)                307                  8
Dividends received deduction                                          (241)             (1,110)            (1,367)
Extraterritorial income exclusion                                     (373)               (462)                 -
Change in valuation allowance:
  Effect of change in tax law                                       (1,797)                  -                  -
  Adjustment of deferred tax valuation allowance                    20,022              30,102                 49
Other, net                                                             224                 189                189
                                                               ----------------    ----------------   ----------------

                                                               $    (1,952)        $    31,112        $   (15,567)
                                                               ================    ================   ================

Income tax expense (benefit):
  Current income taxes (benefit):
     U.S.                                                      $    (1,688)        $       787        $      (548)
     Non-U.S.                                                        3,430               3,503              2,696
                                                               ----------------    ----------------   ----------------
                                                                     1,742               4,290              2,148
                                                               ----------------    ----------------   ----------------

  Deferred income taxes (benefit):
     U.S.                                                                -              26,061            (16,082)
     Non-U.S.                                                       (3,694)                761             (1,633)
                                                                    (3,694)             26,822            (17,715)
                                                               ----------------    ----------------   ----------------

                                                               $    (1,952)        $    31,112        $   (15,567)
                                                               ================    ================   ================

Comprehensive tax provision (benefit) allocable to:
  Pre-tax income (loss)                                        $    (1,952)        $    31,112        $   (15,567)
  Minority interest - Convertible Preferred Securities              -                   -                  (4,675)
  Stockholders' equity, including amounts allocated
     to other comprehensive income                                  (1,588)             (4,834)            (1,057)
                                                               ----------------    ----------------   ----------------

                                                               $    (3,540)        $    26,278        $   (21,299)
                                                               ================    ================   ================
</TABLE>

                                      F-32

<PAGE>


     The  following  table  summarizes  the  Company's  deferred  tax assets and
deferred tax liabilities as of December 31, 2002 and 2001:

<TABLE>

                                                                                  December 31,
                                                           -----------------------------------------------------------
                                                                      2002                            2001
                                                           ----------------------------    ---------------------------
                                                              Assets        Liabilities       Assets       Liabilities
                                                           ------------    ------------    -----------    ------------
                                                                                 (In millions)
<S>                                                        <C>             <C>             <C>            <C>
Temporary differences relating to net assets:
  Inventories                                              $     0.3       $       -       $     0.3      $    (6.6)
  Property and equipment, including software                       -           (39.6)              -          (25.0)
  Goodwill                                                      10.0               -               -           (0.6)
  Accrued OPEB cost                                              6.2               -             9.0              -
  Accrued liabilities and other deductible differences          58.9               -            33.1              -
  Other taxable differences                                        -            (3.0)              -           (9.5)
Tax loss and credit carryforwards                               51.0               -            31.5              -
Valuation allowance                                            (84.0)              -           (37.4)             -
                                                           ------------    ------------    -----------    ------------
Gross deferred tax assets (liabilities)                         42.4           (42.6)           36.5          (41.7)
Netting                                                        (41.6)           41.6           (36.1)          36.1
                                                           ------------    ------------    -----------    ------------
Total deferred taxes                                             0.8            (1.0)            0.4           (5.6)
Less current deferred taxes                                      0.8               -             0.4           (0.1)
                                                           ------------    ------------    -----------    ------------
Net noncurrent deferred taxes                              $       -       $    (1.0)      $       -      $    (5.5)
                                                           ============    ============    ===========    ============

</TABLE>

     Based on the Company's recent history of U.S. losses, its near-term outlook
and management's evaluation of available tax planning strategies,  in the fourth
quarter  of 2001  the  Company  concluded  that  realization  of its  previously
recorded   U.S.   deferred   tax   assets   did  not   continue   to  meet   the
"more-likely-than-not"   recognition  criteria.  Accordingly,  during  2001  the
Company increased its U.S. deferred tax valuation  allowance by $35.5 million to
offset deferred tax benefits related to net U.S. deferred tax assets,  primarily
net  operating  loss and minimum  tax credit  carryforwards.  Additionally,  the
Company determined that it would not recognize a deferred tax benefit related to
future U.S.  losses  continuing  for an  uncertain  period of time.  The Company
increased  its U.S.  deferred tax  valuation  allowance by $39.4 million in 2002
based upon  additional  U.S.  losses and increases to the U.S.  minimum  pension
liability.

     During the fourth  quarter of 2002,  the Company  was  required to record a
charge to other  comprehensive  loss to reflect an increase in its U.K.  minimum
pension liability. The related tax effect of this charge resulted in the Company
changing from a net deferred tax liability  position to a net deferred tax asset
position.  Based on the Company's recent history of U.K.  losses,  its near-term
outlook and management's  evaluation of available tax planning  strategies,  the
Company  determined  that it would not recognize this deferred tax asset because
it did not meet the  "more-likely-than-not"  recognition criteria.  Accordingly,
the Company  recorded a U.K.  deferred  tax asset  valuation  allowance  of $7.2
million through other  comprehensive  income in the fourth quarter to offset the
related U.K.  deferred tax asset that arose due to the increase in U.K.  minimum
pension liabilities.  Commencing in the first quarter of 2003 and continuing for
an  uncertain  period of time,  the  Company  will not  recognize  deferred  tax
benefits  related  to either  future  U.K.  losses or future  increases  in U.K.
minimum pension liabilities.

                                      F-33

<PAGE>

     The  following  table  summarizes  the  components  of  the  change  in the
Company's deferred tax asset valuation allowance in 2002, 2001 and 2000:

<TABLE>

                                                                                Year ended December 31,
                                                               -------------------------------------------------------
                                                                    2002                2001               2000
                                                               ----------------    ----------------   ----------------
                                                                                   (In thousands)

<S>                                                            <C>                 <C>                <C>
Income (loss) before income taxes                              $     18,225        $     30,102       $         49
Minority interest - Convertible Preferred Securities                  4,673               4,848                  -
Cumulative effect of change in accounting principle                  11,761                   -                  -
Accumulated other comprehensive loss                                 11,966                 554                  -
                                                               ----------------    ----------------   ----------------

                                                               $     46,625        $     35,504       $         49
                                                               ================    ================   ================
</TABLE>

     During the first  quarter of 2002,  the Job Creation and Worker  Assistance
Act of 2002 (the "JCWA Act") was signed  into law.  The  Company  benefits  from
certain provisions of the JCWA Act, which liberalized certain net operating loss
("NOL")  and  alternative  minimum tax  ("AMT")  restrictions.  Prior to the law
change,  NOLs could be carried back two years and forward 20 years. The JCWA Act
increases  the  carryback  period for losses  generated in 2001 and 2002 to five
years with no change to the carryforward  period. In addition,  losses generated
in 2001 and 2002 can be carried  back and offset  against  100% of a  taxpayer's
alternative  minimum taxable income  ("AMTI").  Prior to the law change,  an NOL
could offset no more than 90% of a taxpayer's  AMTI.  The  suspension of the 90%
limitation is also applicable to NOLs carried forward into 2001 and 2002.  Based
on these changes,  the Company recognized $1.8 million of refundable U.S. income
taxes during the first  quarter of 2002.  The Company  received  $0.8 million of
this refund in the fourth quarter of 2002.

     At December 31, 2002 the Company had, for U.S. federal income tax purposes,
NOL  carryforwards  of  approximately  $115  million,  which will expire in 2020
through 2022. At December 31, 2002, the Company had AMT credit  carryforwards of
approximately  $4 million,  which can be utilized to offset regular income taxes
payable  in  future  years.  The  AMT  credit  carryforward  has  an  indefinite
carryforward  period.  At December 31, 2002, the Company had the equivalent of a
$19  million  NOL  carryforward  in the  United  Kingdom  and a $2  million  NOL
carryforward in Germany, both of which have indefinite carryforward periods. The
German government has proposed certain changes to its income tax laws that would
limit the annual utilization of NOL carryforwards. However, because the deferred
tax benefit  associated  with the German NOL  carryforward  is fully offset by a
deferred tax valuation allowance,  the anticipated enactment of these changes is
not expected to materially  affect the Company's  deferred  income tax assets or
liabilities.

Note 17 - Employee benefit plans

     Variable  compensation plans. The majority of the Company's total worldwide
employees,  including  a  significant  portion  of its  U.S.  hourly  employees,
participate in compensation  programs providing for variable  compensation based
upon the financial performance of the Company and, in certain circumstances, the
individual  performance  of the  employee.  The  cost of  these  plans  was $1.3
million, $7.2 million and $0.9 million in 2002, 2001 and 2000, respectively.

                                      F-34

<PAGE>

     Defined  contribution  plans.  Approximately 38% of the Company's worldwide
employees at December 31, 2002  participate  in a defined  contribution  pension
plan with employer contributions based upon a fixed percentage of the employee's
eligible earnings.  All of the Company's U.S. hourly and salaried employees (60%
of worldwide employees at December 31, 2002) are also eligible to participate in
contributory  savings plans with partial matching  employer  contributions.  For
approximately 80% of these  participants,  the Company makes additional matching
contributions  based on higher levels of Company annual  financial  performance.
The cost of these pension and savings plans  approximated  $2.4 million in 2002,
$2.8 million in 2001 and $2.0 million in 2000.

     Defined  benefit  pension plans.  The Company  maintains  contributory  and
noncontributory  defined  benefit  pension  plans  covering  the majority of its
European  employees  and a  minority  of its  U.S.  workforce.  Defined  pension
benefits  are  generally  based on years of service  and  compensation,  and the
related expense is based upon independent  actuarial  valuations.  The Company's
funding policy for U.S. plans is to annually  contribute  amounts satisfying the
funding  requirements of the Employee Retirement Income Security Act of 1974, as
amended.  The Company's  European  defined  benefit  pension plans are funded in
accordance with applicable  statutory  requirements.  Between 1989 and 1995, the
U.S.  defined  benefit  pension plans were closed to new  participants  and have
remained closed.  Additionally,  in some cases, benefit levels have been frozen.
The U.K. defined benefit plan was closed to new  participants in 1996;  however,
employees  participating  in the plan continue to earn benefits based on current
compensation and service.

     The key rate assumptions used in determining the actuarial present value of
the Company's benefit obligations at December 31, 2002 were (i) discount rates -
6.25% for the U.S. plans,  5.70% for the U.K. plan and 5.70% for the Savoie plan
(7.0%,  6.0% and 6.0% at December  31,  2001),  (ii) rates of increase in future
compensation  levels - 2.0% for the U.S. plans,  3.0% for the U.K. plan and 2.0%
for the  Savoie  plan  (3.0%,  3.0% and 2.0% at  December  31,  2001)  and (iii)
expected long-term rates of return on assets - 8.5% for the U.S. plans, 6.7% for
the U.K. plan and 6.0% for the Savoie plan (9.0%,  7.5% and 6.0% at December 31,
2001).  The benefit  obligations  are  sensitive  to changes in these  estimated
rates,  and  actual  results  may  differ  from  the  obligations  noted  below.
Information  concerning the Company's defined benefit pension plans is set forth
in the following table:

                                      F-35

<PAGE>


<TABLE>
                                                                                      Year ended December 31,
                                                                               ---------------------------------------
                                                                                     2002                  2001
                                                                               ------------------    -----------------
                                                                                           (In thousands)
<S>                                                                            <C>                   <C>
Change in projected benefit obligations:
  Balance at beginning of year                                                 $     161,668         $     153,280
  Service cost                                                                         3,960                 3,657
  Interest cost                                                                       10,410                 9,534
  Plan amendments                                                                         48                     -
  Actuarial loss                                                                       8,825                 6,050
  Benefits paid                                                                       (9,486)               (8,743)
  Change in currency exchange rates                                                   11,184                (2,110)
                                                                               ------------------    -----------------

       Balance at end of year                                                  $     186,609         $     161,668
                                                                               ==================    =================

Change in plan assets:
  Fair value at beginning of year                                              $     135,762         $     149,687
  Actual return on plan assets                                                       (22,436)               (9,830)
  Employer contribution                                                                7,357                 6,267
  Plan participants' contributions                                                       716                   737
  Benefits paid                                                                       (9,486)               (8,743)
  Change in currency exchange rates                                                    7,290                (2,356)
  Other                                                                                 (923)                    -
                                                                               ------------------    -----------------

       Fair value at end of year                                               $     118,280         $     135,762
                                                                               ==================    =================

Funded status:
  Plan assets under projected benefit obligations                              $     (68,329)        $     (25,906)
   Unrecognized:
     Actuarial loss                                                                   79,382                34,407
     Prior service cost                                                                3,716                 3,198
                                                                               ------------------    -----------------

       Total prepaid pension cost                                              $      14,769         $      11,699
                                                                               ==================    =================

Amounts recognized in balance sheets:
  Intangible pension asset                                                     $       3,716         $       3,198
  Noncurrent prepaid pension cost                                                      7,295                 4,006
  Current pension liability                                                           (7,969)                 (555)
  Noncurrent pension liability                                                       (61,080)              (23,690)
  Accumulated other comprehensive loss                                                72,807                28,740
                                                                               ------------------    -----------------
                                                                               $      14,769         $      11,699
                                                                               ==================    =================

</TABLE>

                                      F-36

<PAGE>


     At December 31, 2002,  the assets of the plans are  primarily  comprised of
government obligations, corporate stocks and bonds. Selected information related
to the Company's  defined  benefit pension plans that have  accumulated  benefit
obligations in excess of fair value of plan assets are presented below:

<TABLE>

                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2002                  2001
                                                                               ------------------    -----------------
                                                                                           (In thousands)

<S>                                                                            <C>                   <C>
Projected benefit obligation                                                   $        186,609      $       161,668
Accumulated benefit obligation                                                 $        179,586      $       156,001
Fair value of plan assets                                                      $        118,280      $       135,762

</TABLE>

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

<TABLE>
                                                                              Year ended December 31,
                                                               -------------------------------------------------------
                                                                    2002                2001               2000
                                                               ----------------    ----------------   ----------------
                                                                                   (In thousands)

<S>                                                            <C>                 <C>                <C>
Service cost benefits earned                                   $        3,410      $        2,919     $        3,768
Interest cost on projected benefit obligations                         10,410               9,534              9,182
Expected return on plan assets                                        (11,035)            (11,737)           (11,907)
Net amortization                                                        2,077                 732                342
                                                               ----------------    ----------------   ----------------

  Net pension expense                                          $        4,862      $        1,448     $        1,385
                                                               ================    ================   ================
</TABLE>

     Postretirement  benefits other than pensions.  The Company provides certain
postretirement  health care and life insurance  benefits on a cost-sharing basis
to certain of its U.S. employees upon retirement. Health care coverage under the
plans   terminates   once  the   retiree   (or   eligible   dependent)   becomes
Medicare-eligible,  effectively  limiting coverage for most participants to less
than five years.  The Company funds such  benefits as they are incurred,  net of
any  contributions by the retirees.  Under plans currently in effect, a majority
of TIMET's  active U.S.  employees  would become  eligible for these benefits if
they reach normal retirement age while working for TIMET.

     The components of the periodic OPEB cost and change in the accumulated OPEB
obligations  are set forth in the  following  table.  The plan is  unfunded  and
contributions  to the plan  during the year equal  benefits  paid.  The key rate
assumptions  used in determining the actuarial  present value of the accumulated
OPEB  obligations  at December 31, 2002 were (i) discount  rate - 6.25% (7.0% at
December 31, 2001), (ii) rate of increase in health care costs for the following
period - 11.35%  (11.15% at December  31, 2001) and (iii)  ultimate  health care
trend rate (achieved in 2010) - 4.25% (5.00% at December 31, 2001).  The accrued
OPEB cost is sensitive to changes in these  estimated  rates and actual  results
may differ from the obligations noted.

                                      F-37

<PAGE>


<TABLE>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2002                  2001
                                                                               ------------------    -----------------
                                                                                           (In thousands)
<S>                                                                            <C>                   <C>
Actuarial present value of accumulated OPEB obligations:
  Balance at beginning of year                                                 $        23,245       $        22,757
  Service cost                                                                             565                   271
  Interest cost                                                                          1,799                 1,686
  Amendments                                                                               731                     -
  Actuarial loss                                                                         5,383                 2,499
  Benefits paid, net of participant contributions                                       (4,607)               (3,968)
                                                                               ------------------    -----------------
  Balance at end of year                                                                27,116                23,245
Unrecognized net actuarial loss                                                        (10,471)               (5,518)
Unrecognized prior service credits                                                         590                 1,222
                                                                               ------------------    -----------------
Total accrued OPEB cost                                                                 17,235                18,949
Less current portion                                                                     3,818                 2,969
                                                                               ------------------    -----------------

  Noncurrent accrued OPEB cost                                                 $        13,417       $        15,980
                                                                               ==================    =================

</TABLE>


<TABLE>
                                                                                 Year ended December 31,
                                                                     -------------------------------------------------
                                                                         2002              2001              2000
                                                                     --------------    --------------    -------------
                                                                                      (In thousands)

<S>                                                                  <C>               <C>               <C>
Service cost benefits earned                                         $       565       $       271       $       176
Interest cost on accumulated OPEB obligations                              1,799             1,686             1,709
Curtailment gain                                                               -                 -              (443)
Net amortization and deferrals                                               529              (203)             (324)
                                                                     --------------    --------------    -------------

  Net OPEB expense                                                   $     2,893       $     1,754       $     1,118
                                                                     ==============    ==============    =============
</TABLE>

     If the health care cost trend rate were increased by one  percentage  point
for each year, OPEB expense would have increased  approximately  $0.3 million in
2002,  and the  actuarial  present  value of  accumulated  OPEB  obligations  at
December  31,  2002  would  have  increased   approximately   $3.0  million.   A
one-percentage point decrease would have a similar, but opposite, effect.

                                      F-38

<PAGE>


Note 18 - Related party transactions

     During 2002,  Tremont  Corporation  ("Tremont")  purchased 26,450 shares of
TIMET common  stock in market  transactions,  and at December 31, 2002,  Tremont
held approximately  39.4% of TIMET's  outstanding common stock. During 2002, the
Combined  Master  Retirement  Trust  ("CMRT"),  a trust  formed by  Valhi,  Inc.
("Valhi") to permit the collective investment by trusts that maintain the assets
of  certain  employee  benefit  plans  adopted  by Valhi and  related  companies
(excluding   TIMET),   purchased   shares  of  TIMET   common  stock  in  market
transactions,  and at  December  31,  2002,  the CMRT held  approximately  9% of
TIMET's  common  stock.  At December  31,  2002,  subsidiaries  of Valhi held an
aggregate  of  approximately  80% of  Tremont's  outstanding  common  stock.  On
February 7, 2003, Valhi completed a merger with Tremont whereby,  in a series of
transactions,  Tremont was merged into Tremont LLC, a wholly-owned subsidiary of
Valhi.  Between January 1, 2003 and February 26, 2003, Tremont, or its successor
Tremont LLC,  purchased 7,400 additional  shares of TIMET common stock in market
transactions.  At December  31,  2002,  Contran  Corporation  ("Contran")  held,
directly  or through  subsidiaries,  approximately  93% of  Valhi's  outstanding
common stock,  which was reduced to 89% as of February 26, 2003,  primarily as a
result of shares issued by Valhi to transact the Tremont  merger.  Substantially
all of Contran's  outstanding voting stock is held by trusts established for the
benefit of certain children and grandchildren of Harold C. Simmons, of which Mr.
Simmons is sole  trustee.  In addition,  Mr.  Simmons,  Chairman of the Board of
Contran and Valhi,  is the sole trustee of the CMRT and is a member of the trust
investment  committee for the CMRT. Mr. Simmons may be deemed to control each of
Contran, Valhi and TIMET.

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

                                      F-39

<PAGE>

     Receivables  from and  payables to related  parties are  summarized  in the
following table:

<TABLE>
                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      2002                 2001
                                                                                -----------------    -----------------
                                                                                           (In thousands)
<S>                                                                             <C>                  <C>
Receivables from related parties:
   Tremont                                                                      $           -        $       1,281
   VALTIMET                                                                             2,398                4,898
                                                                                -----------------    -----------------
                                                                                $       2,398        $       6,179
                                                                                =================    =================

Payables to related parties:
   Tremont                                                                      $           -        $       1,261
   NL Industries, Inc.                                                                      -                  379
   VALTIMET                                                                             1,246                  925
                                                                                -----------------    -----------------
                                                                                $       1,246        $       2,565
                                                                                =================    =================
</TABLE>

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

     The Company had an ISA with Tremont  whereby the Company  provided  certain
management,  financial  and other  services  to Tremont for  approximately  $0.4
million  in 2002 and 2001 and $0.3  million  in 2000.  The  Company  anticipates
entering  into an ISA with Contran in 2003 to replace the Tremont ISA.  Payments
under a Contran  ISA will  likely be less than those under the Tremont ISA since
Contran will now perform certain of the functions previously performed on behalf
of  Tremont  by TIMET.  Additionally,  Contran  may  provide  certain  financial
services to TIMET during 2003.

     The Company had an ISA with NL Industries,  Inc.  ("NL"),  a majority-owned
subsidiary  of Valhi.  Under the terms of the  agreement,  NL  provided  certain
financial and other services to TIMET for approximately  $0.3 million in each of
2002,  2001 and 2000. The Company  expects to renew this agreement for 2003 at a
reduced  amount,  as the Company now performs a portion of these  financial  and
other services internally.

     The  Company  previously  extended  market-rate  loans to certain  officers
pursuant to a Board-approved program to facilitate the purchase of Company stock
and its Convertible  Preferred  Securities and to pay applicable taxes on shares
of  restricted  Company  stock as such  shares  vest.  The loans were  generally
payable in five annual  installments  beginning  six years from date of loan and
bore interest at a rate tied to the Company's borrowing rate, payable quarterly.
At December 31, 2002,  approximately  $0.2 million of officer  notes  receivable
remain outstanding. The Company terminated this program effective July 30, 2002,
subject to continuing  only those loans  outstanding  at that time in accordance
with their then-current terms.

                                      F-40

<PAGE>


     EWI RE,  Inc.  ("EWI")  acts  as a  broker  for  certain  of the  Company's
insurance  policies.  At December 31, 2001, parties related to Contran owned all
of the  outstanding  common stock of EWI. On January 7, 2002,  NL purchased  EWI
from its previous owners and EWI became a wholly-owned subsidiary of NL. Through
December 31, 2000, a son-in-law of Harold C. Simmons  managed the  operations of
EWI.  Subsequent  to December 31, 2000,  and pursuant to an agreement  that,  as
amended, is effective until terminated by either party with 90 days notice, such
son-in-law  provides  advisory  services to EWI as requested by EWI. The Company
generally does not compensate EWI directly for insurance,  but understands that,
consistent with insurance industry practices, EWI receives a commission from the
insurance  underwriters  for the  policies  that it  arranges  or  brokers.  The
Company's  aggregate  premiums for such policies were approximately $3.4 million
in 2002, $2.8 million in 2001 and $2.4 million in 2000. The Company expects that
these relationships with EWI will continue in 2003.

     TIMET, together with other companies within the Contran group of companies,
purchase certain of their insurance  coverages as a group, with the costs of the
jointly-owned policies being apportioned among the participating companies. With
respect to certain of these policies, it is possible that unusually large losses
incurred by one or more  insureds  during a given policy  period could leave the
other  participating  companies  without adequate coverage under that policy for
the  balance of such policy  period,  which could  dictate  that such  companies
purchase  replacement  coverage or could  result in the need to negotiate a loss
sharing agreement.

     TIMET  supplies  titanium  strip  product  to  VALTIMET  under a  long-term
contract as the  preferred  supplier and  previously  supplied  casting ingot to
Wyman-Gordon  Titanium Castings.  Sales to VALTIMET were $17 million in 2002 and
$22  million in 2001 and 2000.  Early in 2000,  TIMET sold its  interest  in the
castings joint venture at a pre-tax gain of $1.2 million.

     In  connection  with the  construction  and  financing  of  TIMET's  vacuum
distillation  process  ("VDP")  titanium  sponge plant,  Union  Titanium  Sponge
Corporation  ("UTSC")  licensed certain  technology to TIMET in exchange for the
right to acquire up to 20% of TIMET's annual  production  capacity of VDP sponge
at agreed-upon  prices through early 1997 and higher  formula-determined  prices
thereafter  through  2008.  The  agreement  also  obligated  UTSC to pay certain
amounts in the event that UTSC purchases were below contractual volume minimums.
In the fourth quarter of 2000, UTSC paid TIMET $2.0 million,  which was included
in other operating income, in connection with the termination of this agreement.

     Tremont LLC owns 32% of Basic Management, Inc. ("BMI"). Among other things,
BMI provides utility services  (primarily water  distribution,  maintenance of a
common  electrical  facility and sewage disposal  monitoring) to the Company and
other manufacturers  within an industrial complex located in Henderson,  Nevada.
Power  transmission  and sewer  services  are  provided on a cost  reimbursement
basis,  similar to a cooperative,  while water delivery is currently provided at
the same rates as are charged by BMI to an unrelated  third party.  Amounts paid
by the Company to BMI for these  utility  services were $1.5 million in 2002 and
2001 and $1.6  million in 2000.  The Company paid BMI an  electrical  facilities
usage  fee of $1.3  million  in each of 2002,  2001 and  2000.  This  usage  fee
continues at $1.3 million per year through 2004 and declines to $0.6 million for
2005, to $0.5 million annually for 2006 through 2009, and terminates  completely
after January 2010.

                                      F-41

<PAGE>


Note 19 - Commitments and contingencies

     Long-term  agreements.  The Company has LTAs with certain  major  aerospace
customers,   including,   but  not   limited   to,   Boeing,   Rolls-Royce   plc
("Rolls-Royce"),  United Technologies  Corporation  ("UTC",  Pratt & Whitney and
related  companies)  and  Wyman-Gordon  Company (a unit of  Precision  Castparts
Corporation  ("PCC")).  These agreements  initially became effective in 1998 and
1999 and expire in 2007 through 2008,  subject to certain  conditions.  The LTAs
generally  provide  for (i) minimum  market  shares of the  customers'  titanium
requirements   or  firm   annual   volume   commitments   and   (ii)   fixed  or
formula-determined   prices  generally  for  at  least  the  first  five  years.
Generally,  the LTAs require the Company's  service and product  performance  to
meet  specified  criteria  and  contain a number of other  terms and  conditions
customary in transactions of these types. In certain events of nonperformance by
the Company,  the LTAs may be terminated early.  Additionally,  under a group of
related LTAs (which group  represents  approximately  12% of the Company's  2002
sales revenue) which currently have fixed prices that convert to formula-derived
prices in 2004,  the customer may  terminate the agreement as of the end of 2003
if the effect of the  initiation  of  formula-derived  pricing  would cause such
customer  "material harm." If any of such agreements within the group were to be
terminated  by the customer on this basis,  it is possible  that some portion of
the  business  represented  by that group of related  LTAs would  continue  on a
non-LTA basis.  However,  the termination of one or more of the LTAs,  including
any of those  within the group of related  LTAs,  could result in a material and
adverse  effect on the  Company's  business,  results of  operations,  financial
position or liquidity.

     During 2001,  the Company  recorded a charge of $3.0 million  relating to a
titanium sponge  supplier's  agreement to renegotiate  certain  components of an
agreement entered into in 1997,  including minimum purchase commitments for 1999
through 2001. As of December 31, 2002 and 2001, $1.7 million and $2.0 million of
this amount remained  accrued and unpaid,  respectively.  In September 2002, the
Company entered into a new agreement with this supplier,  effective from January
1, 2002 through  December 31, 2007.  This new agreement  replaced and superceded
the 1997 agreement.  The new agreement  requires minimum annual purchases by the
Company of approximately $10 million in 2002 through 2007.

     In April 2001, the Company  reached a settlement of the litigation  between
TIMET and Boeing  related to the parties' LTA entered into in 1997.  Pursuant to
the  settlement,  the  Company  received  a cash  payment  of $82  million.  The
Company's 2001 results reflect  approximately  $73 million (cash settlement less
legal fees) as other  operating  income,  with  partially  offsetting  operating
expenses of approximately $6.2 million for employee  incentive  compensation and
other costs  reported as a component  of selling,  general,  administrative  and
development  expense,  resulting in a net pre-tax income effect of $66.8 million
in 2001.

                                      F-42

<PAGE>

     In connection  with the  settlement,  TIMET and Boeing also entered into an
amended  LTA that,  among  other  things,  allows  Boeing to  purchase up to 7.5
million pounds of titanium product annually from TIMET through 2007,  subject to
certain  maximum  quarterly  volume  levels.  Under the amended  LTA,  Boeing is
required to advance  TIMET $28.5  million  annually for 2002 through  2007.  The
annual  advance for contract  years 2002 and 2003 were made in December 2001 and
January  2003,  respectively,  with  subsequent  advances  scheduled to occur in
January  of  each  calendar  year  through  2007.  The  LTA is  structured  as a
take-or-pay  agreement  such that,  beginning  in  calendar  year  2002,  Boeing
forfeits  a  proportionate  part  of  the  $28.5  million  annual  advance,   or
effectively  $3.80 per pound,  in the event that its annual  orders for delivery
for such  calendar  year are less  than 7.5  million  pounds.  Under a  separate
agreement  TIMET  must  establish  and hold  buffer  stock for Boeing at TIMET's
facilities,  for which Boeing pays TIMET as such stock is produced. See Notes 10
and 14.

     Concentration of credit and other risks. Substantially all of the Company's
sales and operating income (loss) are derived from operations based in the U.S.,
the U.K. and France.  Over 67% of the  Company's  sales  revenue is generated by
sales to  customers in the  aerospace  industry  (including  airframe and engine
construction).  As described previously, the Company has LTAs with certain major
aerospace customers, including Boeing, Rolls-Royce, UTC and Wyman-Gordon.  These
agreements  and others  accounted  for  approximately  37%, 43% and 35% of sales
revenue in 2002, 2001 and 2000, respectively.  Sales to PCC and related entities
approximated 9% of the Company's sales revenue in 2002. Sales to Rolls-Royce and
other  Rolls-Royce  suppliers  under the Rolls-Royce  LTAs  (including  sales to
certain  of  the  PCC-related  entities)  represented  approximately  12% of the
Company's sales revenue in 2002. The Company's ten largest  customers  accounted
for about 40% of sales  revenue  in 2002 and about 50% of sales  revenue in 2001
and 2000.  Such  concentration  of customers  may impact the  Company's  overall
exposure to credit and other risks,  either  positively or  negatively,  in that
such customers may be similarly affected by economic or other conditions.

     Operating  leases.  The Company  leases  certain  manufacturing  and office
facilities and various  equipment.  Most of the leases contain  purchase  and/or
various   term  renewal   options  at  fair  market  and  fair  rental   values,
respectively.  In most cases  management  expects that leases will be renewed or
replaced by other leases in the normal course of business.  Net rent expense was
approximately  $5.0  million in 2002,  $6.1  million in 2001 and $6.6 million in
2000.

     At  December  31,  2002,  future  minimum  payments  under   noncancellable
operating  leases having an initial or remaining term in excess of one year were
as follows:

<TABLE>
                                                                                                         Amount
                                                                                                   -------------------
                                                                                                     (In thousands)
<S>                                                                                                  <C>
Year ending December 31,
  2003                                                                                               $        3,384
  2004                                                                                                        1,579
  2005                                                                                                          757
  2006                                                                                                          629
  2007                                                                                                          318
  2008 and thereafter                                                                                           339
                                                                                                   -------------------

                                                                                                     $        7,006
                                                                                                   ===================
</TABLE>

                                      F-43

<PAGE>

     Environmental  matters.  In 1999,  TIMET and certain other  companies  (the
"Steering  Committee  Companies") that currently have or formerly had operations
within a Henderson, Nevada industrial complex (the "BMI Complex") entered into a
series of agreements with BMI and certain related  companies  pursuant to which,
among  other  things,  BMI  assumed  responsibility  for the  conduct  of  soils
remediation activities on the properties described, including the responsibility
to complete all outstanding  requirements  pertaining to such  activities  under
existing   consent   agreements  with  the  Nevada  Division  of   Environmental
Protection.   The  Company   contributed  $2.8  million  to  the  cost  of  this
remediation.  The Company also agreed to convey to BMI, at no  additional  cost,
certain  lands owned by the Company  adjacent to its plant site (the "TIMET Pond
Property") upon payment by BMI of the cost to design,  purchase, and install the
technology  and  equipment  necessary  to allow the Company to stop  discharging
liquid and solid  effluents and  co-products  into settling ponds located on the
TIMET Pond Property.  BMI will pay 100% of the first $15.9 million cost for this
project,  and  TIMET  agreed  to  contribute  50% of the cost in excess of $15.9
million, up to a maximum payment by TIMET of $2 million.  Preliminary  estimates
indicate that one possible design of such a system may cost up to  approximately
$20  million;  however,  the Company and BMI are  continuing  to review  various
design  alternatives  in order to minimize the ultimate  project  costs,  and no
design has yet been  selected.  The  Company  has not  accrued  any amount  with
respect to the  potential  liability  to fund 50% of the cost of the  project in
excess of $15.9  million  (subject  to the $2  million  cap)  because  it is not
probable  such  excess cost will be  incurred.  The  Company,  BMI and the other
Steering  Committee  Companies  are  continuing  investigation  with  respect to
certain  additional  issues  associated  with the  properties  described  above,
including any possible  groundwater issues at the BMI Complex and the TIMET Pond
Property.

     The  Company is also  continuing  assessment  work with  respect to its own
active plant site in Henderson,  Nevada.  During 2000, a  preliminary  study was
completed of certain groundwater  remediation issues at the Company's plant site
and other Company-owned  sites within the BMI Complex.  The Company accrued $3.3
million in 2000 based on the undiscounted cost estimates set forth in the study.
During  2002,  the Company  updated  this study and accrued an  additional  $0.3
million based on revised cost estimates.  These expenses are expected to be paid
over a period of up to thirty years.

     In February  2002, the Company  fulfilled all of its remaining  obligations
under  the  2000  Settlement  Agreement  of the U. S.  Environmental  Protection
Agency's 1998 civil action  against TIMET (United  States of America v. Titanium
Metals  Corporation;  Civil Action No.  CV-S-98-682-HDM  (RLH),  U. S.  District
Court, District of Nevada).

                                      F-44

<PAGE>

     At December 31, 2002, the Company had accrued an aggregate of approximately
$4.3 million for  environmental  matters,  including those discussed  above. The
Company records  liabilities  related to environmental  remediation  obligations
when estimated future costs are probable and reasonably estimable. Such accruals
are adjusted as further information  becomes available or circumstances  change.
Estimated  future costs are not  discounted  to their present  value.  It is not
possible to estimate the range of costs for certain  sites.  The  imposition  of
more  stringent   standards  or  requirements   under   environmental   laws  or
regulations,  the  results of future  testing  and  analysis  undertaken  by the
Company at its  operating  facilities,  or a  determination  that the Company is
potentially  responsible for the release of hazardous substances at other sites,
could  result in costs in excess of amounts  currently  estimated to be required
for such  matters.  No assurance  can be given that actual costs will not exceed
accrued  amounts or that costs will not be incurred  with respect to sites as to
which no problem is currently  known or where no estimate can presently be made.
Further,  there can be no assurance that additional  environmental  matters will
not arise in the future.

     Legal  proceedings.  In September  2000, the Company was named in an action
filed by the U.S. Equal Employment  Opportunity  Commission  ("EEOC") in Federal
District  Court  in  Las  Vegas,  Nevada  (U.S.  Equal  Employment   Opportunity
Commission v. Titanium Metals Corporation,  CV-S-00-1172DWH-RJJ). The complaint,
as amended,  alleges that several female  employees at the Company's  Henderson,
Nevada plant were the subject of sexual  harassment and  retaliation.  In August
2002, TIMET filed a motion for summary judgment as to all claims of one employee
who had intervened as a separate  party,  and as to all other claims involved in
the EEOC's complaint. In December 2002, TIMET's motion was granted in part as to
the  individual  employee's  state law claims,  but denied as to the Federal law
claims of the individual employee and of the EEOC. The court also denied TIMET's
motion  to stay and  compel  arbitration  of one  employee's  claims.  TIMET has
appealed this ruling.  TIMET subsequently filed a motion to stay all proceedings
until its appeal is concluded, on which the court has not yet ruled. The Company
continues to vigorously defend this action. No trial date has been set.

     At December 31, 2002,  the Company had accrued an aggregate of $0.6 million
for  expected  costs  related  to  various  legal  proceedings,   including  the
proceeding  discussed  above. The Company records  liabilities  related to legal
proceedings when estimated costs,  including  estimated legal fees, are probable
and  reasonably  estimable.  Such  accruals are adjusted as further  information
becomes  available  or  circumstances  change.  Estimated  future  costs are not
discounted to their present  value.  It is not possible to estimate the range of
costs for certain matters.  No assurance can be given that actual costs will not
exceed  accrued  amounts  or that  costs will not be  incurred  with  respect to
matters as to which no  problem  is  currently  known or where no  estimate  can
presently be made.  Further,  there can be no assurance  that  additional  legal
proceedings will not arise in the future.

                                      F-45

<PAGE>


     Other.  TIMET is the primary  obligor on two  workers'  compensation  bonds
issued on behalf of a former  subsidiary,  Freedom Forge  Corporation  ("Freedom
Forge"),  which  TIMET  sold in 1989.  The bonds  were  provided  as part of the
conditions  imposed  on  Freedom  Forge  in order to  self-insure  its  workers'
compensation  obligations.  Each of the bonds has a maximum  obligation  of $1.5
million.  Freedom Forge filed for Chapter 11  bankruptcy  protection on July 13,
2001, and discontinued payment on the underlying workers' compensation claims in
November 2001. During the third quarter of 2002, TIMET received notices that the
issuers of the bonds were  required  to make  payments  on one of the bonds with
respect to certain of these claims and were requesting reimbursement from TIMET.
Based upon  current loss  projections,  the Company  anticipates  claims will be
incurred  up to the  maximum  amount  payable  under  the bond  and,  therefore,
recorded  $1.6  million  for this bond  (including  $0.1  million  in legal fees
reimbursable to the issuer of the bonds) as other non-operating expense in 2002.
Through  December 31, 2002, TIMET has reimbursed the issuer  approximately  $0.4
million under this bond and $1.2 million remains accrued for future payments. At
this time the Company understands that no claims have been paid under the second
bond, and no such payments are currently  anticipated.  Accordingly,  no accrual
has been  recorded  for  potential  claims  that could be filed under the second
bond.  TIMET may revise its estimated  liability under these bonds in the future
as additional facts become known or claims develop.

     In March  2001,  the Company was  notified by one of its  customers  that a
product the customer  manufactured  from standard grade titanium produced by the
Company  contained  what has been confirmed to be a tungsten  inclusion.  At the
present time,  the Company is aware of six standard  grade ingots that have been
demonstrated to contain tungsten inclusions. Based upon the Company's assessment
of possible losses, TIMET recorded an aggregate charge to cost of sales for this
matter of $3.3  million  during  2001.  During  2001,  the Company  charged $0.3
million against this accrual to write down its remaining  on-hand  inventory and
made $0.3 million in settlement payments, resulting in a $2.7 million accrual as
of December 31, 2001 for potential future claims.  During 2002, the Company made
settlement  payments  aggregating $0.3 million and has also revised its estimate
of the most likely amount of loss to be incurred,  resulting in a credit of $0.2
million to cost of sales during 2002.  As of December 31, 2002,  $2.2 million is
accrued for pending and potential  future  claims.  This amount  represents  the
Company's  best estimate of the most likely amount of loss to be incurred.  This
amount does not represent the maximum  possible loss,  which is not possible for
the  Company to estimate at this time,  and may be  periodically  revised in the
future as more facts become  known.  As of December  31,  2002,  the Company has
received  claims  aggregating  approximately  $5 million and has made settlement
payments  aggregating  $0.6 million.  Pending claims are being  investigated and
negotiated. The Company believes that certain claims are without merit or can be
settled for less than the amount of the  original  claim.  There is no assurance
that all potential  claims have yet been  submitted to the Company.  The Company
has filed suit seeking full recovery from its silicon supplier for any liability
the Company might incur,  although no  assurances  can be given that the Company
will  ultimately  be able to recover  all or any  portion of such  amounts.  The
Company has not  recorded any  recoveries  related to this matter as of December
31, 2002.

                                      F-46

<PAGE>

     The Company is involved in various employment, environmental,  contractual,
product  liability and other claims,  disputes and litigation  incidental to its
business including those discussed above.  While management,  including internal
counsel, currently believes that the outcome of these matters,  individually and
in the  aggregate,  will not have a  material  adverse  effect on the  Company's
financial  position,  liquidity or overall trends in results of operations,  all
such matters are subject to inherent uncertainties.  Were an unfavorable outcome
to occur in any given  period,  it is  possible  that it could  have a  material
adverse  impact on the results of  operations  or cash flows in that  particular
period.

Note 20 - Earnings per share

     Basic earnings (loss) per share is based on the weighted  average number of
unrestricted common shares outstanding during each year. Diluted earnings (loss)
per share reflect the dilutive effect of common stock options,  restricted stock
and  the  assumed  conversion  of  the  Convertible  Preferred  Securities,   if
applicable.  Basic and diluted earnings (loss) per share amounts for all periods
presented  have been  retroactively  adjusted  for the effects of the  Company's
one-for-ten  reverse stock split, which was effective after the close of trading
on February  14,  2003.  The assumed  conversion  of the  Convertible  Preferred
Securities was omitted from the diluted  earnings  (loss) per share  calculation
for 2002, 2001 and 2000 because the effect was antidilutive. Had the Convertible
Preferred  Securities  not been  antidilutive,  diluted  losses  would have been
decreased by $13.4  million in 2002,  $13.9  million in 2001 and $8.7 million in
2000.   Diluted  average  shares   outstanding  would  have  been  increased  by
approximately  540,000  shares  for each of these  periods.  Stock  options  and
restricted  shares omitted from the calculation  because they were  antidilutive
approximated  158,000  in 2002,  185,000 in 2001 and  213,000 in 2000.  Dilutive
stock options of 10 in 2002,  1,800 in 2001 and 8,800 in 2000 were excluded from
the  calculation  of diluted  earnings per share because their effect would have
been antidilutive due to the losses in those years.

                                      F-47

<PAGE>


Note 21 - Quarterly results of operations (unaudited)

<TABLE>
                                                                           For the quarter ended
                                                      ----------------------------------------------------------------
                                                        March 31          June 30         Sept. 30         Dec. 31
                                                      -------------    --------------   -------------    -------------
                                                                   (In millions, except per share data)
<S>                                                   <C>              <C>              <C>              <C>
Year ended December 31, 2002:

  Net sales                                           $    104.4       $     94.3       $     82.8       $     85.0
  Gross margin                                               5.1              1.4             (4.9)            (4.7)
  Operating loss (1)                                        (4.7)            (7.0)            (4.4)            (4.8)
  Loss before cumulative effect of change in
     accounting principle (1)                              (36.1)           (12.3)            (9.1)            (9.6)
  Net loss (1) (2)                                         (80.4)           (12.3)            (9.1)            (9.6)

  Basic and diluted loss per share (2) (3):
     Before cumulative effect of change in
        accounting principle                          $   (11.43)      $    (3.91)      $    (2.89)      $    (3.05)
     Basic and diluted loss per share$
                                                      $   (25.47)      $    (3.91)      $    (2.89)      $    (3.05)

Year ended December 31, 2001:

  Net sales                                           $    124.0       $    120.0       $    126.4       $    116.5
  Gross margin                                               7.3             (3.5)            20.8             15.3
  Operating (loss) income                                   (1.8)            48.6             10.0              7.7
  Net (loss) income (1)                                     (3.6)            29.6              4.3            (72.0)

  (Loss) earnings per share (3):
     Basic                                            $    (1.15)      $     9.38       $     1.38       $   (22.85)
     Diluted                                          $    (1.15)      $     8.62       $     1.37       $   (22.85)

<FN>

(1)  The sum of  quarterly  amounts do not agree to the full year results due to
     rounding.
(2)  As compared to amounts previously  reported on Form 10-Q, net loss and loss
     per share for the quarter ended March 31, 2002 were  increased by the $44.3
     million  ($14.04  per  share)  cumulative  effect of  change in  accounting
     principle recorded for the Company's goodwill  impairment charge determined
     during the third quarter of 2002.
(3)  The sum of quarterly  amounts may not agree to the full year results due to
     rounding and the timing of potential conversion of options to common stock,
     which would have an antidilutive  effect on the calculation.  All per share
     amounts have been  adjusted to reflect the  Company's  one-for-ten  reverse
     stock split which became  effective  after the close of trading on February
     14, 2003.
</FN>

</TABLE>

     The first quarter 2002 results included a $27.5 million  impairment  charge
related to the  impairment of the Company's  investment  in SMC  securities,  as
discussed in Note 5. The fourth  quarter 2001 results  included a $61.5  million
pre-tax impairment charge related to the impairment of the Company's  investment
in SMC securities,  as discussed in Note 5, and a $35.5 million  increase in the
Company's deferred tax asset valuation  allowance,  as discussed in Note 16. The
second quarter 2001 operating  results included $73.0 million of income from the
Boeing  settlement,  with  partially  offsetting  expenses of $10.2  million for
employee incentive  compensation (which was subsequently reduced by $4.1 million
in the fourth quarter of 2001), as discussed in Note 14.

                                      F-48

<PAGE>


Note 22 - Subsequent event

     As  previously  discussed  in Note 1, on  February 4, 2003,  the  Company's
stockholders  approved a proposal to amend TIMET's  Certificate of Incorporation
to effect a reverse stock split of TIMET's  common stock at a ratio of one share
of  post-split  common  stock for each  eight,  nine or ten shares of  pre-split
common stock issued and outstanding,  with the final ratio to be selected by the
Board of Directors.  Subsequently,  the Board of Directors of TIMET  unanimously
approved a reverse  stock split on the basis of one share of  post-split  common
stock for each  outstanding  ten shares of pre-split  common stock.  The reverse
stock split  became  effective  after the close of trading on February 14, 2003.
All  share  and  per  share   disclosures  for  all  periods  presented  in  the
accompanying Consolidated Financial Statements have been adjusted to give effect
to the reverse stock split.

                                      F-49

<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS
                         ON FINANCIAL STATEMENT SCHEDULE



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

     Our audits of the  consolidated  financial  statements  referred  to in our
report  dated  January  28,  2003,  except  for Note 22 as to which  the date is
February 14, 2003, appearing in this 2002 Annual Report on Form 10-K of Titanium
Metals  Corporation also included an audit of the financial  statement  schedule
listed in the Index on page F of this Form 10-K. In our opinion,  this financial
statement  schedule presents fairly, in all material  respects,  the information
set  forth  therein  when  read in  conjunction  with the  related  consolidated
financial statements.




/s/ PricewaterhouseCoopers LLP



Denver, Colorado
January 28, 2003, except for Note 22,
   as to which the date is February 14, 2003


                                       S-1

<PAGE>

<TABLE>
<CAPTION>

                           TITANIUM METALS CORPORATION

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                 (In thousands)

                                                                  Additions
                                                        -----------------------------

                                          Balance         Charged
                                             at              to            Charged                          Balance
                                         beginning       costs and        to other                          at end
            Description                   of year         expenses        accounts        Deductions        of year
------------------------------------    -------------   -------------    ------------    -------------    ------------

<S>                                     <C>             <C>              <C>      <C>    <C>         <C>  <C>
Year ended December 31, 2002:

   Allowance for doubtful
     accounts                           $    2,739      $     1,000      $    152 (1)    $   (1,032) (2)  $    2,859
                                        =============   =============    ============    =============    ============
   Allowance for excess and
     slow moving inventories            $   13,621      $     3,757      $    901 (1)    $   (3,189)      $   15,090
                                        =============   =============    ============    =============    ============
   Reserve for business
     restructuring                      $      198      $         -      $  -            $     (118) (3)  $       80
                                        =============   =============    ============    =============    ============

Year ended December 31, 2001:

   Allowance for doubtful
     accounts                           $    2,927      $         4      $    (22) (1)   $     (170) (2)  $    2,739
                                        =============   =============    ============    =============    ============
   Allowance for excess and
     slow moving inventories            $   14,846      $     1,755      $   (218) (1)   $   (2,762)      $   13,621
                                        =============   =============    ============    =============    ============
   Reserve for business
     restructuring                      $    1,012      $      (227)     $  -            $     (587) (3)  $      198
                                        =============   =============    ============    =============    ============

Year ended December 31, 2000:

   Allowance for doubtful
     accounts                           $    3,330      $       185      $   (223) (1)   $     (365) (2)  $    2,927
                                        =============   =============    ============    =============    ============
   Allowance for excess and
     slow moving inventories            $   14,764      $     2,707      $   (774) (1)   $   (1,851)      $   14,846
                                        =============   =============    ============    =============    ============
   Reserve for business
     restructuring                      $    1,490      $     3,219      $  -            $   (3,697) (3)  $    1,012
                                        =============   =============    ============    =============    ============

<FN>

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

</TABLE>

                                       S-2