SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 2001

                                       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 ___

As of March 18, 2002,  31,861,338 shares of common stock were  outstanding.  The
aggregate  market  value of the 18.7  million  shares  of voting  stock  held by
nonaffiliates of Titanium Metals  Corporation as of such date approximated $94.6
million.

                      Documents incorporated by reference:

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


<PAGE>













Forward-Looking Information

     The  statements  contained  in this  Annual  Report on Form  10-K  ("Annual
Report")  that  are  not  historical  facts,  including,  but  not  limited  to,
statements found in the Notes to Consolidated Financial Statements and in Item 1
-  Business,  Item 2 -  Properties,  Item 3 -  Legal  Proceedings  and  Item 7 -
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations,  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  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 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
war or terrorist  activities  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 integrated producers of titanium sponge,  melted and mill
products.  The  Company is the only  integrated  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 2001 it accounted
for  approximately  24% of worldwide  industry  shipments  of mill  products and
approximately 13% of worldwide sponge production.

     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  40% of aggregate mill product shipments in 2001, 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 (i) titanium  sponge,  the basic form of titanium
metal used in processed  titanium products,  (ii) melted products,  comprised of
titanium 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.  The Company
believes it is among the  lower-cost  producers  of  titanium  sponge and melted
products due in part to its manufacturing expertise and technology. 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 presently the only active titanium sponge producer in the U.S.

     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,  improving the quality of
its products and processes  and taking other actions to return to  profitability
and generate positive cash flow.


                                       1

<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 2001  represented  about 40% of total titanium demand
and slightly over 80% of the Company's annual mill product shipments.  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  gears,  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.  Industry shipments of mill products to the commercial  aerospace
sector in 2001 accounted for  approximately  90% of aerospace  demand and 35% of
aggregate mill product demand.

     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 1980, 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 an estimated 51,000 metric tons in 2001.
The Company expects total industry mill product  shipments will decrease in 2002
by approximately 16% to approximately 43,000 metric tons.

     During the latter part of 2001, an economic  slowdown in the U.S. and other
regions  of the  world  began to  negatively  affect  the  commercial  aerospace
industry as evidenced  by, among other  things,  a decline in airline  passenger
traffic,  reported  operating  losses by a number of airlines and a reduction in
the  forecasted  deliveries  of large  commercial  aircraft from both Boeing and
Airbus.  On September  11, 2001,  the United  States was the target of terrorist
attacks that  exacerbated  these trends and had a significant  adverse impact on
the  global  economy  and the  commercial  aerospace  industry.  The major  U.S.
airlines reported significant financial losses in the fourth quarter of 2001 and
profits for European and Asian  airlines  declined.  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. These events
have  resulted in the major  commercial  airframe  and jet engine  manufacturers
substantially  reducing both their  forecast of jet engine and large  commercial
aircraft deliveries over the next few years and their production levels in 2002.
Although certain recently  reported economic data may indicate some modest level
of  recovery,  the  Company  expects  the  current  slowdown  in the  commercial
aerospace sector to last for about two years.

     The Company believes that mill product demand for the commercial  aerospace
sector could decline by up to 40% in 2002,  primarily  due to a  combination  of
reduced aircraft  production rates and excess inventory  accumulated  throughout
the aerospace  supply chain since September 11, 2001. The aerospace supply chain
is  fragmented  and  decentralized,  making  it  difficult  to  quantify  excess
inventories.  However,  the Company  roughly  estimates  that  excess  inventory
throughout  the supply chain might be in the range of 3,200 to 5,500 metric tons
at the end of 2001,  and  believes  it may take up to two years for such  excess
inventory to be substantially absorbed.

                                       2

<PAGE>

     According to The Airline  Monitor,  a leading  aerospace  publication,  the
worldwide  commercial  airline industry reported an estimated  operating loss of
approximately $13 billion in 2001, compared with operating income of $11 billion
in 2000 and $12  billion  in  1999.  According  to The  Airline  Monitor,  large
commercial  aircraft  deliveries for the 1996 to 2001 period peaked in 1999 with
889  aircraft,  including  254  wide  body  aircraft.  Wide  body  aircraft  use
substantially  more  titanium  than  their  narrow  body   counterparts.   Large
commercial  aircraft deliveries totaled 834 (including 202 wide bodies) in 2001,
and the most recent forecast of aircraft deliveries by The Airline Monitor calls
for 660  deliveries in 2002,  505 deliveries in 2003 and 515 deliveries in 2004.
After 2004,  The Airline  Monitor  calls for a continued  increase  each year in
large commercial aircraft deliveries, with forecasted deliveries of 920 aircraft
in 2008 exceeding 2001 levels. Relative to 2001, these forecasted delivery rates
represent  anticipated  declines of about 20% in 2002 and just under 40% in 2003
and 2004. Additionally,  the Company's discussions with jet engine manufacturers
and related  suppliers  suggest that they are expecting  production  declines in
2002  relative  to 2001 in the  range of 25% to 30%.  The  demand  for  titanium
generally precedes aircraft  deliveries by about one year,  although this varies
considerably by titanium product.  Accordingly, the Company's cycle 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.

     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
performance,  design alternatives,  life cycle value and other factors. Although
emerging market demand presently represents only about 10% 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 few
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.
Titanium is now used in several consumer car  applications  including the Toyota
Alteeza,  Infiniti  Q45,  Corvette  Z06,  Volkswagen  Lupo FSI,  Honda S2000 and
Mercedes S Class.  At the present time,  titanium is primarily  used for exhaust
systems  and  suspension  springs 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
saves  weight and its  combination  of low mass and low  modulus  of  elasticity
allows  the  spring's  height to be reduced  by 20% to 50%  compared  to a steel
spring.

                                       3

<PAGE>

     Titanium  is  also  making  inroads  into  other  automotive  applications,
including turbo charger wheels, brake parts, pistons, valves and internal engine
components. Titanium engine components provide mass-reduction benefits, allowing
a corresponding weight and size reduction in crankshaft  counterbalance  weights
and resultant  improvements  in noise,  vibration and harshness.  The additional
cost  associated  with titanium's use for internal engine parts can be offset by
the  elimination  of  balance  shafts and the  ability to replace  sophisticated
engine mounts with low cost, compact,  simple designs. All of this can translate
into greater styling and structural design freedom for automotive  designers and
engineers.  Titanium is also advantageous  compared to alternative  materials in
that it often can be formed  and  fabricated  on the same  tooling  used for the
steel component it is typically replacing.

     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.

     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,  if the parties are unable to reach agreement on pricing after the
initial  pricing  period  or in  certain  other  circumstances,  the LTAs may be
terminated  early.  These  agreements  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.  These  contracts  and others  represent  the core of the  Company's
long-term aerospace strategy.

     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  from  Boeing.  In addition,
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 will advance  TIMET $28.5  million  annually from
2002 through 2007.  The LTA is structured as a take-or-pay  agreement such that,
beginning in calendar year 2002, Boeing will forfeit a proportionate part of the
$28.5 million annual advance,  or effectively $3.80 per pound, in the event that
its orders for delivery for such calendar year are less than 7.5 million pounds.
Under a separate  agreement,  TIMET will  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 -  Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations  for  additional  information  regarding the
Boeing LTA.

                                       4

<PAGE>

     The Company also has an LTA with VALTIMET SAS ("VALTIMET"),  a manufacturer
of  stainless  steel,  copper,   nickel  and  welded  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  renegotiated in the
past and may be renegotiated in the future to meet changing business conditions.

     Acquisitions and capital  transactions during the past five years. In 1998,
TIMET (i) acquired  Loterios  S.p.A.  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  and  non-marketable  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,  the  Company
determined that 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.  See
Notes 1, 3 and 4 to the Consolidated Financial Statements.

     In 1998, Tremont  Corporation  ("Tremont")  purchased TIMET common stock in
market   transactions.   In  1999,  Tremont  exercised  an  option  to  purchase
approximately  two million shares of the Company's common stock. At December 31,
2001,  Tremont held  approximately 39% of TIMET's  outstanding common stock. See
Note 16 to the Consolidated Financial Statements.

     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,
comprised of titanium  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  principal  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 vacuum in the chamber.  The combination of heat and vacuum boils the
residues from the reactor mass into the condensing  vessel. The titanium mass is
then mechanically pushed out of the original reactor, sheared and crushed, while
the residual magnesium chloride is electrolytically separated and recycled.

                                       5

<PAGE>

     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 is formed by melting  titanium sponge or
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.
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. Ingots and slabs are both sold to customers
and further processed into mill products.

     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 products, including
sponge,  melted  and mill  products.  Testing  may  involve  chemical  analysis,
mechanical  testing,  ultrasonic  and x-ray testing.  The inspection  process is
critical  to  ensuring  that  the  Company's  products  meet  the  high  quality
requirements of 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 sole
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, SA ("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
postion and liquidity in the near term.

     Raw  materials.  The  principal  raw  materials  used in the  production of
titanium  mill  products  are  titanium  sponge,  titanium  scrap  and  alloying
elements.  The Company  processes  rutile ore into  titanium  tetrachloride  and
further processes the titanium  tetrachloride into titanium sponge. During 2001,
approximately  32% of the  Company's  melted  and mill  product  was  made  from
internally  produced sponge,  40% from purchased sponge, 21% from titanium scrap
and 7% from 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.
Titanium-containing  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  is  currently   reorganizing  under  Chapter  11
bankruptcy.  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 alternative  chlorine suppliers or to purchase and successfully  utilize
an  intermediate  product which will allow the Company to bypass the purchase of
chlorine if needed.  Magnesium and petroleum coke are also  generally  available
from a number of suppliers.  Various alloying elements used in the production of
titanium ingot are available from a number of suppliers.

     Should the Company be unable to obtain the  necessary  raw  materials,  the
Company may incur  higher  costs to purchase  sponge which could have a material
adverse  effect on the  Company's  business,  results of  operations,  financial
position and liquidity.

     While the  Company  was one of six major  worldwide  producers  of titanium
sponge in 2001,  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, making TIMET the only active
U.S.  producer of titanium  sponge and reducing  the number of 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,  one additional sponge supplier is presently  undergoing
qualification  tests of its  product  for premium  quality  applications  and is
expected to be qualified for such during 2002.

     Historically, the Company has purchased sponge predominantly from producers
in Japan and  Kazakhstan.  During 2000 and  throughout  2001,  the Company  also
purchased sponge from the U.S. Defense  Logistics Agency ("DLA")  stockpile.  In
2002, the Company expects to continue to purchase sponge from Japan,  Kazakhstan
and the DLA.


                                       7

<PAGE>

     TIMET has a ten-year  LTA for the purchase of titanium  sponge  produced in
Kazakhstan.  The LTA runs through 2007, with firm pricing through 2002,  subject
to certain  possible  adjustments  and possible  early  termination in 2004. The
Company is currently in the process of renegotiating  certain components of this
LTA with the supplier. Although the LTA provides for minimum annual purchases by
the Company of 6,000 metric tons,  the supplier has agreed to reduced  purchases
by TIMET since 1999.  The Company is currently  operating  under an agreement in
principle that provides for significantly  reduced minimum purchases in 2002 and
certain other modified terms.  The Company has no other long-term  sponge supply
agreements.

     Markets and customer  base.  Approximately  50% of the Company's 2001 sales
revenue was generated by sales to customers  within North America,  about 40% to
European  customers and the balance to other regions.  Over 70% of the Company's
sales revenue was generated by sales to the aerospace industry.  Sales under the
Company's LTAs accounted for over 40% of its sales revenue in 2001. Sales to PCC
and its related  entities  approximated  11% of the  Company's  sales revenue in
2001. Sales to Rolls-Royce and other Rolls-Royce suppliers under the Rolls-Royce
LTA  (including  sales  to  certain  of the PCC  related  entities)  represented
approximately  15% of the Company's  sales revenue in 2001. The Company  expects
that  while a  majority  of its  2002  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, 2001,  the  estimated  firm order backlog for Boeing and
Airbus,  as reported by The Airline  Monitor,  was 2,919  planes,  versus  3,224
planes at the end of 2000 and 2,943 planes at the end of 1999.  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.


                                       8

<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 fly  weight)  than narrow body  planes.
"Fly weight" is the empty weight of a finished aircraft with engines but without
fuel or passengers. Titanium represents approximately 9% of the total fly weight
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  2001  was 801  (27% of total  backlog)  compared  to 751 (23% of total
backlog)  at the end of 2000.  At year-end  2001,  a total of 85 firm orders had
been placed for the Airbus A380 superjumbo jet, which was officially launched in
December  2000.  The  Company  estimates  that  approximately  65 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 15% of
the Company's  sales revenue in 2001 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 subsea 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, the Company sells certain products
it collectively  refers to as "Other",  such as sponge which is not suitable for
internal consumption, titanium tetrachloride and fabricated titanium assemblies.
Sales of these other products  represented 12% of the Company's sales revenue in
each of 2001 and 2000, and 14% of sales revenue in 1999.

     The Company's backlog of unfilled orders was approximately  $225 million at
December  31,  2001,  compared  to $245  million at  December  31, 2000 and $195
million at December 31, 1999.  Substantially all of the 2001 year-end backlog is
scheduled to be shipped during 2002.  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 2002.

     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 mill products are located primarily in the United
States,  Japan, France,  Italy,  Russia, China and the United Kingdom.  With the
idling  of  Allegheny  Technologies'  sponge  manufacturing  facility  discussed
previously, the Company is one of four "integrated producers" in the world, with
integrated producers being considered as those that produce at least both sponge
and ingot. There are also a number of non-integrated producers that produce mill
products from purchased sponge, scrap or ingot.

                                       9
<PAGE>

     The  Company's  principal  competitors  in aerospace  markets 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,  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  into the U.S.  of  titanium  products  from  countries
designated by the U.S. government as "most favored nations" are subject to a 15%
tariff (45% for other  countries).  Titanium  products  for tariff  purposes are
broadly classified as either wrought or unwrought. Wrought products include bar,
sheet, strip, plate and tubing.  Unwrought products include sponge,  ingot, slab
and billet.  For most periods since 1993,  imports of titanium  wrought products
from  Russia  were  exempted  from this duty  under the  "generalized  system of
preferences" or "GSP" program  designed to aid developing  economies.  TIMET has
successfully  resisted efforts to date to expand the scope of the GSP program to
eliminate duties on sponge and other unwrought titanium products from Russia and
Kazakhstan.  Antidumping duties on imports of titanium sponge from Japan and the
former Soviet Union were revoked in 1998.  TIMET's appeal of that revocation was
not successful.

     Further reductions in, or the complete  elimination of, all or any 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 business,  results of operations,  financial  position and liquidity of
the  Company.  However,  since 1993,  the  Company has been a large  importer of
foreign titanium sponge and mill products,  particularly sponge from Kazakhstan,
into the U.S. To the extent the Company remains a substantial purchaser of these
products,  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 these products 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  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.


                                       10

<PAGE>

     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,  and key research  activities  center  around the design of new
alloys  and  the  associated   applications   development  focused  by  specific
commercial strategies in the automotive and aerospace markets. In addition,  the
Company continues a focus on enhancing the performance of the Company's existing
products, as applications for TIMET's proprietary alloys, such as TIMETAL(R)834,
TIMETAL  5111 and TIMETAL  LCB,  continue to develop.  The Company  conducts the
majority of its research and development  activities at its Henderson  Technical
Laboratory in Henderson,  Nevada, which is supported by additional activities at
its Witton facility in Birmingham, England.

     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.  However, most of the titanium alloys and manufacturing technology used
by the  Company  do not  benefit  from  patent  or other  intellectual  property
protection.  The Company  believes that the trademarks  TIMET(R) and TIMETAL(R),
which  are  protected  by  registration  in the U.S.  and other  countries,  are
important to its business.

     Employees.  The cyclical nature of the aerospace industry and its impact on
the  Company's  business is the principal  reason that 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 9% increase in
employees  from 2000 to 2001,  and the 6% reduction  in  employees  from 1999 to
2000, were principally in response to changes in market demand for the Company's
products.  During 2002, the Company expects to decrease employment,  principally
in its  manufacturing  operations,  due to the previously  discussed  decline in
demand for titanium products.

<TABLE>
<CAPTION>
                                                                          Employees at December 31,
                                                          -----------------------------------------------------------
                                                                2001                 2000                 1999
                                                          ------------------    ----------------    -----------------
<S>                                                              <C>                  <C>                  <C>
U.S.                                                             1,462                1,333                1,490
Europe                                                             948                  887                  860
                                                          ------------------    ----------------    -----------------
   Total                                                         2,410                2,220                2,350
                                                          ==================    ================    =================
</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 2002 and October 2004, respectively. Employees at the Company's
other U.S.  facilities  are not  covered by  collective  bargaining  agreements.
Approximately 62% of the salaried and hourly employees at the Company's European
facilities are  represented by various  European labor unions,  generally  under
annual agreements.

     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,  upon the expiration of the Toronto,  Ohio labor contract, or
other labor contracts,  that could materially and adversely affect the Company's
business, results of operations, financial position, and liquidity.

                                       11

<PAGE>

     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  or  toxic  under
environmental and worker safety and health laws and regulations. In addition, at
the  Company's  Henderson,  Nevada  facility,  the  Company  produces  and  uses
substantial  quantities  of titanium  tetrachloride,  a material  classified  as
extremely hazardous under Federal  environmental laws. The Company has used 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.

     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  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  $2.4 million in 2001, $2.6
million in 2000 and $4.0 million in 1999. The Company's  capital budget provides
for  approximately  $2.0  million of such  expenditures  in 2002.  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
estimated  to be  required  for such  matters.  See Note 17 to the  Consolidated
Financial Statements - Commitments and contingencies - Environmental matters.

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   30%  of  world   capacity),   and  its  mill  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.


                                       12

<PAGE>

<TABLE>
<CAPTION>
                                                                                             Annual Practical
                                                                                            Capacities (3) (4)
                                                                                     ---------------------------------
                                                                                        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, Wire,
                                                 Extrusions                                 2,450             2,000
Waunarlwydd (Swansea), Wales(1)               Bar, Plate, Sheet                                 -             3,900
Witton, England(2)                            Ingot, Billet, Bar                            8,700             8,000

<FN>
--------------------------------------------------------------------------------
(1)  Owned facilities.
(2)  Leased facilities.
(3)  Practical capacities are variable based on production mix.
(4)  Practical capacities are not additive.
</FN>
</TABLE>

     The Company has operated its major production  facilities at varying levels
of practical  capacity during the past three years. In 2001, the plants operated
at  approximately  75% of practical  capacity,  an increase from 60% in 2000 and
from 55% in 1999. In 2002,  the Company's  plants are expected to operate at 60%
of practical capacity.  However, practical capacity and utilization measures can
vary significantly based upon the mix of products produced. In 1999, the Company
idled its  Kroll-leach  process  sponge  facility  in  Henderson,  Nevada due to
changing market conditions for certain grades of titanium sponge.

     The Company conducts its operations in Europe primarily  through its wholly
owned  subsidiaries  TIMET UK, Ltd.  ("TIMET  UK"),  70% owned TIMET  Savoie and
wholly owned Loterios S.p.A. ("Loterios"). 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.

     United States production.  The Company's VDP sponge facility is expected to
operate at approximately  95% of its annual  practical  capacity of 8,600 metric
tons during 2002, up slightly from approximately 94% in 2001. VDP sponge is used
principally as a raw material for the Company's  melting  facilities in the U.S.
and Europe. Approximately 1,200 metric tons of VDP production from the Company's
Henderson,  Nevada  facility was used in Europe during 2001,  which  represented
approximately 20% of the sponge consumed in the Company's  European  operations.
The Company expects the consumption of VDP sponge in its European  operations to
be 40% of their  sponge  requirements  in  2002.  The raw  materials  processing
facilities in Morgantown,  Pennsylvania  primarily process scrap used as melting
feedstock, either in combination with sponge or separately.


                                       13

<PAGE>

     The Company's U.S. melting facilities in Henderson,  Nevada and Morgantown,
Pennsylvania,  produce  ingots  and  slabs  both sold to  customers  and used as
feedstock  for its  mill  products  operations.  These  melting  facilities  are
expected to operate at approximately 50% of aggregate capacity in 2002.

     Titanium mill products are produced by TIMET in the U.S. at its forging and
rolling facility in Toronto, Ohio, which receives intermediate titanium products
(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 60% of practical capacity in 2002. Capacity utilization across the
Company's product lines varies.

     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.

     European  production.  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  customers  or into an  intermediate  product  for  further
processing  into bar and  plate at its  facility  in  Waunarlwydd,  Wales.  U.K.
melting  and  mill  products  production  in  2002 is  expected  to  operate  at
approximately 60% and 45%, respectively, of practical capacity.

     The  capacity of 70%-owned  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  2002,  TIMET  Savoie
expects to operate at approximately  60% of the maximum capacity  required to be
provided by CEZUS.

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

     Distribution.  The Company  sells its products  through its own sales force
based in the U.S. and Europe,  and through  independent  agents  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.

     The Company believes that it has a competitive sales advantage arising from
the location of certain of its production plants and service centers,  which are
in close proximity to major customers.

                                       14

<PAGE>

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 17 of
the Consolidated Financial Statements.

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

     No matters were submitted to a vote of security  holders during the quarter
ended December 31, 2001.








                                       15

<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 March 18, 2002, the closing price of TIMET common stock was $5.05 per
share.  The high and low sales  prices for the  Company's  common  stock are set
forth below.

<TABLE>
<CAPTION>

Year ended December 31, 2001:                                                         High                 Low
                                                                                -----------------    -----------------
<S>                                                                             <C>                  <C>

   First quarter                                                                $       10.62        $        6.69
   Second quarter                                                                       14.40                 6.75
   Third quarter                                                                        11.90                 2.35
   Fourth quarter                                                                        4.70                 2.75

Year ended December 31, 2000:
   First quarter                                                                $        5.50        $        4.19
   Second quarter                                                                        5.00                 3.13
   Third quarter                                                                         8.94                 4.50
   Fourth quarter                                                                        8.19                 6.00

</TABLE>

     As of March 18, 2002, there were 313 common  shareholders of record,  which
the Company estimates represents approximately 8,300 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, prohibits the payment of dividends on the Company's common stock and
the repurchase of common shares, except under specified conditions.  The Company
presently has no plans to resume payment of common stock  dividends.  See Note 9
to the Consolidated Financial Statements.

                                       16

<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 - Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results of  Operations
("MD&A").

<TABLE>
<CAPTION>
                                                                     Year Ended December 31,
                                            --------------------------------------------------------------------------
                                                2001            2000           1999           1998            1997
                                            -------------    -----------    -----------    ------------    -----------
                                                    ($ in millions, except per share and selling price data)
<S>                                         <C>              <C>            <C>            <C>             <C>
STATEMENT OF OPERATIONS DATA:
   Net sales                                $    486.9       $    426.8     $    480.0     $    707.7      $    733.6
   Gross margin                                   39.9              3.9           25.5          165.4           179.0
   Operating income (loss) (1)                    64.5            (41.7)         (31.4)          82.7           133.0
   Interest expense                                4.1              7.7            7.1            2.9             2.0
   Net income (loss) (1)                    $    (41.8)      $    (38.9)    $    (31.4)    $     45.8      $     83.0
   Earnings (loss) per share (1):
     Basic                                  $    (1.33)      $    (1.24)    $    (1.00)    $     1.46      $     2.64
     Diluted (2)                            $    (1.33)      $    (1.24)    $    (1.00)    $     1.46      $     2.49
   Cash dividends per share                 $      -         $      -       $      .12     $      .12      $      -

BALANCE SHEET DATA:
   Cash and cash equivalents                $     24.5       $      9.8     $     20.7     $     15.5      $     69.0
   Total assets (1)                              699.4            759.1          883.1          953.2           793.1
   Indebtedness (3)                               12.4             44.9          117.4          105.6             5.0
   Net cash (debt) (4)                            12.1            (35.1)         (96.7)         (90.1)           64.0
   Capital lease obligations                       8.9              8.8           10.1           10.3            11.2
   Minority interest - Convertible
     Preferred Securities                        201.2            201.2          201.2          201.2           201.2
   Stockholders' equity                     $    298.1       $    357.5     $    408.1     $    448.4      $    408.9

OTHER OPERATING DATA:
   Cash flows provided (used):
     Operating activities                   $     62.6       $     63.3     $     19.5     $     76.1      $     72.6
     Investing activities                        (16.1)            (4.2)         (21.7)        (223.2)          (79.8)
     Financing activities                        (31.4)           (70.7)           8.6           92.2            (9.8)
                                            -------------    -----------    -----------    ------------    -----------
       Net provided (used)                  $     15.1       $    (11.6)    $      6.4     $    (54.9)     $    (17.0)

   Mill product shipments (5)                     12.2             11.4           11.4           14.8            15.1
   Average mill product prices (5)          $    29.80       $    28.70     $    33.00     $    35.25      $    35.00
   Melted product shipments (5)                    4.4              3.5            2.5            3.6             7.1
   Average melted product prices (5)        $    14.50       $    13.65     $    14.20     $    18.50      $    15.55
   Active employees at December 31               2,410            2,220          2,350          2,740           3,025
   Order backlog at December 31(6)          $    225.0       $    245.0     $    195.0     $    350.0      $    530.0
   Capital expenditures                     $     16.1       $     11.2     $     24.8     $    115.2      $     66.3

<FN>
--------------------------------------------------------------------------------
(1)  See the notes to the Consolidated Financial Statements and MD&A for special
     items which materially affect the 2001, 2000 and 1999 periods. In 1998, the
     Company recorded a $24.0 million pre-tax restructuring charge.
(2)  Antidilutive in 2001, 2000, 1999, and 1998.
(3)  Indebtedness  represents notes payable and current and noncurrent debt, and
     excludes  capital  lease  obligations  and Minority  interest - Convertible
     Preferred Securities.
(4)  Net cash (debt) represents cash and cash equivalents less indebtedness.
(5)  Shipments in thousands of metric tons;  average  selling  prices stated per
     kilogram.
(6)  Order backlog is defined as unfilled  purchase orders,  which are generally
     subject  to  deferral  or   cancellation  by  the  customer  under  certain
     conditions.
</FN>
</TABLE>


                                       17

<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  demand for titanium mill products in 2001 was derived
from the following  markets:  40% from aerospace;  50% from industrial;  and 10%
from emerging markets.  The commercial  aerospace sector is the principal driver
of  titanium  consumed  in the  aerospace  markets,  representing  about  90% of
aggregate  aerospace demand, or 35% of aggregate  industry demand. The Company's
business is more dependent on the commercial  aerospace  demand than the overall
titanium industry,  as approximately  two-thirds of its sales volume in 2001 was
to this sector.

     During the latter part of 2001, an economic  slowdown in the U.S. and other
regions  of the  world  began to  negatively  affect  the  commercial  aerospace
industry as evidenced  by, among other  things,  a decline in airline  passenger
traffic,  reported  operating  losses by a number of airlines and a reduction in
forecasted  deliveries of large commercial aircraft from both Boeing and Airbus.
On September  11, 2001,  the United  States was the target of terrorist  attacks
that exacerbated these trends and had a significant adverse impact on the global
economy and the commercial aerospace industry.  The major U.S. airlines reported
significant  financial  losses in the  fourth  quarter of 2001 and  profits  for
European and Asian  airlines  declined.  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.

     A number of the  Company's  customers  cancelled  or  deferred  delivery of
previously  scheduled  orders in late 2001,  and the rate of new  orders  slowed
significantly. The Company's order backlog at the end of December 2001 decreased
to approximately $225 million,  compared to $315 million at the end of September
2001 and $245 million at the end of December 2000.

     As a result of recent events,  the Company's  financial  results and trends
during  most of 2001  are not  indicative  of  future  trends  or the  Company's
expectations  for 2002. The Company  anticipates a substantial near term decline
in its business as described in Outlook.

     The following table summarizes  certain components of the Company's results
for the past three years.  The discussion  that follows  regarding the Company's
results frequently refers to segment  information that is presented in Note 2 to
the Consolidated  Financial  Statements,  and should be read in conjunction with
that information. Restructuring and other special items are more fully described
in Note 13 to the Consolidated Financial Statements.  Average selling prices per
kilogram,  as  reported  by the  Company,  reflect the net effects of changes in
selling prices,  currency exchange rates, customer and product mix. Accordingly,
average selling prices are not necessarily  indicative of any one factor. In the
following  discussion,  the  Company has  attempted  to adjust for the effect of
currency fluctuations and changes in mix when referring to the percentage change
in selling prices from period to period.

                                       18

<PAGE>

<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                                ------------------------------------------------------
                                                                     2001               2000                1999
                                                                ---------------    ----------------    ---------------
                                                                                  ($ in thousands)
<S>                                                             <C>                <C>                 <C>
Net sales                                                       $     486,935      $     426,798       $     480,029
Gross margin                                                           39,892              3,881              25,523
Gross margin, excluding special items                                  54,002             10,610              25,523
Operating income (loss)                                                64,480            (41,650)            (31,433)
Operating income (loss), excluding restructuring
   and other special items                                             11,555            (34,116)            (24,599)

Percent of net sales:
   Gross margin                                                            8%                 1%                  5%
   Gross margin, excluding special items                                  11%                 2%                  5%

Percent change in:
   Mill product sales volume                                               +7                 -1                 -23
   Mill product selling prices (1)                                         -                  -9                  -8
   Melted product sales volume                                            +27                +39                 -31
   Melted product selling prices (1)                                       +8                -10                 -17

<FN>
--------------------------------------------------------------------------------
(1)  Change expressed in U.S. dollars.
</FN>
</TABLE>

     2001 operations.  Demand for titanium products for the commercial aerospace
industry  increased  substantially  in 2001.  This  was  principally  driven  by
increased  aircraft  production  rates  and a  substantial  reduction  of excess
inventory  throughout the aerospace supply chain that accumulated  following the
previous cyclical peak.  Generally,  the Company's recurring operations prior to
September 11 were  characterized  by rising selling prices on new non-LTA orders
for  aerospace  quality  titanium  products,  strong  order  demand,  increasing
production  levels  and  capacity  utilization,  and  the  Company's  return  to
profitability in the third quarter of 2001.

     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. Mill product
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  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 selling prices and changes in customer
and product mix.


                                       19

<PAGE>

     Gross  margin  (net  sales  less  cost of  sales)  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,
higher scrap costs, higher energy costs, changes in customer and product mix and
special items. Gross margin,  excluding special items, was 11% of sales in 2001,
compared to 2% for the prior year. Gross margin for 2001 was adversely  impacted
by $10.8 million of equipment  impairment  charges 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.

     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. The Company  continues to investigate
the scope of this problem,  including  identification  of customers who received
material  manufactured  using this silicon and the applications  into which such
material has been placed by such customers.

     At the present time, the Company is aware of six standard grade ingots that
have  been  demonstrated  to  contain  tungsten  inclusions;   however,  further
investigation may identify additional material that has been similarly affected.
Until this investigation is completed, TIMET is unable to determine the ultimate
liability  the  Company  may incur with  respect  to this  matter.  The  Company
currently  believes it is unlikely  that its  insurance  policies  will  provide
coverage for any costs that may be associated  with this matter.  The Company is
continuing  to work with its affected  customers to  determine  the  appropriate
remedial  steps  required  to  satisfy  their  claims.   Based  upon  continuing
assessments of possible losses completed by the Company, the Company recorded an
aggregate  charge to cost of sales of $3.3  million  during  2001 ($1.0  million
expense in the first quarter of 2001, $2.8 million expense in the second quarter
of 2001 and $.5  million  reduction  in expense in the fourth  quarter of 2001).
This amount  represents the Company's best estimate of the most likely amount of
loss to be incurred.  It 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, 2001, $2.7
million remains accrued for potential future claims.  The Company has filed suit
seeking full  recovery  from the 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, 2001.

     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.


                                       20

<PAGE>

     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.  In the second  quarter of
2001, the Company reported approximately $73 million (cash settlement less legal
fees) as other operating income, with partially offsetting operating expenses of
approximately $10.3 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 $62.7 million in the second
quarter of 2001. In the fourth quarter of 2001, the Company reduced its estimate
of employee  incentive  compensation  by $4.1  million as a result of its fourth
quarter and full year  financial  results,  and  recorded  such  reduction  as a
component  of  selling,   general,   administrative  and  development   expense.
Accordingly, the net pre-tax income effect of the Boeing settlement for 2001 was
$66.8 million.

     Selling, general,  administrative and development expenses increased 18% in
2001 compared to 2000 principally due to approximately  $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.

     2000  operations.  Sales of mill products in 2000 declined 13%, from $376.2
million in 1999 to $326.3 million in 2000. This decrease was due to a 9% decline
in mill product selling prices  (expressed in U.S.  dollars using actual foreign
currency exchange rates prevailing during the respective  periods),  a less than
1% decrease in sales volume, and changes in customer and product mix. In billing
currencies,  mill product selling prices  declined 7% from 1999.  Melted product
sales  increased  33% from $35.5 million in 1999 to $47.4 million in 2000 due to
the net effects of a 39% increase in melted product sales volume,  a 10% decline
in melted product selling prices and changes in product mix. The decrease in the
selling prices was principally due to greater price competition in the Company's
non-LTA business.

     Early in  2000,  the  Company  implemented  a plan to  address  market  and
operating  conditions,  which resulted in the  recognition of a net $2.8 million
restructuring charge in 2000. The restructuring charge is principally related to
personnel severance and benefits for the approximately 170 employees  terminated
as part of the  restructuring.  Additionally,  the Company  recorded net special
charges of $4.7  million to  operating  income,  consisting  of $3.5  million of
equipment related impairment charges, $3.3 million of environmental  remediation
charges, a special income item of $2.0 million related to the termination of the
Company's  1990  agreement  to sell  titanium  sponge to Union  Titanium  Sponge
Corporation.

     Gross  margin was 1% of sales for 2000  compared  to 5% in the prior  year,
primarily  reflecting  the net effects of lower  selling  prices,  higher energy
costs, lower raw material costs, changes in customer and product mix and special
items.  Gross margin in 2000 was adversely impacted by $3.5 million of equipment
impairment  charges  and a $3.3  million  charge for  anticipated  environmental
remediation  costs.  Gross margin,  excluding  special items, was 2% in 2000, as
compared to 5% for the year ended December 31, 1999.

                                       21

<PAGE>

     Selling,  general,  administrative and development expenses decreased 9% in
2000 compared to 1999  principally due to the impact of the  restructuring  plan
implemented  in  early  2000,  as  well  as  reduced  expenses  related  to  the
business-enterprise  information system project that was completed in early 1999
and "Year 2000"  computer  systems  expenses which were incurred in 1999 but not
2000.

     Equity in earnings  (losses) of joint ventures of the "Titanium  melted and
mill products"  segment in 2000 decreased by $1.4 million from 1999  principally
due to the decline in earnings of VALTIMET.

     Non-operating income and expense.

<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                                ------------------------------------------------------
                                                                     2001               2000                1999
                                                                ---------------    ----------------    ---------------
                                                                                    (In thousands)
<S>                                                             <C>                <C>                 <C>
Dividends and interest income                                   $       5,460      $       6,154       $       6,034
General corporate income (expense), net:
   SMC impairment charge                                              (61,519)                 -                   -
   Other                                                                  112                 67              (1,246)
Interest expense                                                       (4,060)            (7,704)             (7,093)
                                                                ---------------    ----------------    ---------------
                                                                $     (60,007)     $      (1,483)      $      (2,305)
                                                                ===============    ================    ===============
</TABLE>

     Dividends and interest  income  consisted  principally  of dividends on $80
million  principal  amount of  non-voting  convertible  preferred  securities of
Special  Metals  Corporation.  During the fourth  quarter of 2001,  the  Company
recognized  a $61.5  million  pre-tax  impairment  charge to  general  corporate
expense  for an  other  than  temporary  decline  in the  fair  value  of  these
securities. See Note 4 to the Consolidated Financial Statements.

     The remaining  general corporate income (expense)  consists  principally of
currency transaction gains/losses.  In 2000, net currency losses of $1.1 million
were offset by a $1.2 million gain on the sale of the Company's  castings  joint
venture.

     Interest expense for 2001 decreased 47% compared to 2000,  primarily due to
the paydown of the Company's  revolving  U.S. debt  following  settlement of the
Boeing  related  litigation.  Interest  expense  for 2000  increased  over  1999
primarily  due to the net effects of increased  interest  rates  related to U.S.
credit  facilities   entered  into  in  early  2000,  lower  average  borrowings
outstanding during the year and a lower level of capitalized interest.

     European  operations.  The Company has  substantial  operations  and assets
located  in  Europe,  principally  the  United  Kingdom,  with less  significant
operations in France and Italy. Titanium is a worldwide market, and many factors
influencing the Company's U.S. and European operations are similar.

                                       22

<PAGE>

     Approximately  40% of the Company's  sales revenue  originated in Europe in
2001, of which  approximately  60% was denominated in currencies  other than the
U.S. dollar,  principally the British pound and European  currencies tied to 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  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.

     The  Company  does  not  use  currency  contracts  to  hedge  its  currency
exposures.  Net currency  transaction  gains/losses  included in earnings were a
gain of $.1 million in 2001 and losses of $1.1  million and $1.2 million in 2000
and  1999,   respectively.   At  December  31,  2001,  consolidated  assets  and
liabilities  denominated in currencies  other than  functional  currencies  were
approximately  $31.7  million  and  $41.2  million,   respectively,   consisting
primarily  of U. S.  dollar  cash,  accounts  receivable,  accounts  payable and
borrowings.  Exchange  rates among eleven  European  currencies  (including  the
French franc and Italian lira,  but  excluding  the British  pound) became fixed
relative to each other as a result of the  implementation  of the euro effective
in 1999.

     Income taxes. Based on its recent history of losses, its near term outlook,
and management's  evaluation of available tax planning  strategies,  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   certain   capital   losses   that   did   not   meet   the
"more-likely-than-not" recognition criteria. This included a fourth quarter 2001
charge of $12.3 million to increase the deferred tax asset  valuation  allowance
related to U.S. net deferred tax assets  recorded as of September 30, 2001. This
charge  included  $8.6  million as a  component  of income tax  expense and $3.7
million as a component of Minority interest - Convertible  Preferred Securities.
Additionally,  the Company determined that it would not recognize a deferred tax
benefit  related to U.S.  losses  commencing in the fourth  quarter of 2001, and
continuing for an uncertain period of time. Accordingly,  the Company provided a
deferred tax valuation  allowance of $23.2 million  related to U.S. net deferred
tax assets arising from its fourth quarter 2001 operating  results.  See Note 14
to the Consolidated Financial Statements.

     Minority interest.  Annual dividend expense related to the Company's 6.625%
Convertible  Preferred  Securities  approximates  $13 million and is reported as
minority interest.  In 2000 and 1999, 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,  this expense was reported
pre-tax in 2001. Other minority  interest relates  primarily to the 30% interest
in  TIMET  Savoie  held by  CEZUS.  See  Note 10 to the  Consolidated  Financial
Statements.
                                       23

<PAGE>

     Extraordinary  item.  During 2000, the deferred  financing costs associated
with the Company's  prior U.S. credit facility were written off and reflected as
an extraordinary item of $.9 million after taxes in the Consolidated  Statements
of Operations.

     Related party  transactions The Company is a party to certain  transactions
with related parties. See Note 16 to the Consolidated Financial Statements.

     Outlook.   The  Outlook  section  contains  a  number  of   forward-looking
statements,  all of which are based on current  expectations,  and  exclude  the
potential effect of special and other charges related to  restructurings,  asset
impairments,  valuation  allowances and similar items,  unless  otherwise noted.
Undue  reliance  should  not be placed  on  forward-looking  statements.  Actual
results  may  differ  materially.  See  Note  1 to  the  Consolidated  Financial
Statements  - Summary  of  significant  accounting  policies  and Note 17 to the
Consolidated  Financial  Statements - Commitments  and  contingencies  regarding
commitments,  contingencies,  legal,  environmental and other matters, which may
materially  affect  the  Company's  future  business,   results  of  operations,
financial position and liquidity.

     During the latter part of 2001, an economic  slowdown in the U.S. and other
regions  of the  world  began to  negatively  affect  the  commercial  aerospace
industry as evidenced  by, among other  things,  a decline in airline  passenger
traffic,  reported  operating  losses by a number of airlines and a reduction in
forecasted  deliveries of large commercial aircraft from both Boeing and Airbus.
On September  11, 2001,  the United  States was the target of terrorist  attacks
that exacerbated these trends and had a significant adverse impact on the global
economy and the commercial aerospace industry.  The major U.S. airlines reported
significant  financial  losses in the  fourth  quarter  of 2001 and  profits  of
European and Asian  airlines  declined.  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.

     These events have resulted in the major commercial  airframe and jet engine
manufacturers  substantially  reducing  their  forecast  of engine and  aircraft
deliveries  over the next few  years and their  production  levels in 2002.  The
Company expects that aggregate  industry mill product shipments will decrease in
2002 by approximately 16% to about 43,000 metric tons. The Company believes that
demand for mill products for the commercial aerospace sector could decline by up
to 40% in 2002,  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,  large
commercial  aircraft deliveries totaled 834 (including 202 wide bodies) in 2001,
and the most recent forecast of aircraft deliveries by The Airline Monitor calls
for 660  deliveries in 2002,  505 deliveries in 2003 and 515 deliveries in 2004.
After 2004,  The Airline  Monitor  calls for a continued  increase  each year in
large commercial aircraft deliveries, with forecasted deliveries of 920 aircraft
in 2008 exceeding 2001 levels. Compared to 2001, these forecasted delivery rates
represent  anticipated  declines of about 20% in 2002 and just under 40% in 2003
and 2004. Additionally,  the Company's discussions with jet engine manufacturers
and related  suppliers  suggest that they are expecting  production  declines in
2002  relative  to 2001 in the range of 25% to 30%.  Although  certain  recently
reported  economic data may indicate some modest level of recovery,  the Company
expects the  current  slowdown in the  commercial  aerospace  sector to last for
about two years.

                                       24

<PAGE>

     Although the current business  environment makes it particularly  difficult
to predict the Company's future performance,  the Company believes sales revenue
in 2002 may decline to  approximately  $375  million,  reflecting  the  combined
effects of decreases in sales volume,  softening of market selling  prices,  and
changes in customer  and product mix.  Mill product  sales volume is expected to
decline  approximately  20% from 2001 levels to about 10,000 metric tons. Melted
products volume is expected to decline by almost one-third  relative to 2001, to
approximately  3,000 metric tons. The Company expects  approximately  60% of its
2002 sales volume will be derived from the commercial aerospace sector (compared
to approximately  two-thirds in 2001), with the balance from military aerospace,
industrial and emerging markets. The sales volume decline in 2002 is principally
driven by an anticipated  reduction in the Company's  commercial aerospace sales
volume of  approximately  30%  compared to 2001,  partly  offset by sales volume
growth to other markets.

     Market selling prices on new orders for titanium products,  while difficult
to forecast,  are expected to soften throughout 2002. However, about one-half of
the Company's anticipated commercial aerospace volume in 2002 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 per kilogram, as reported by the Company, reflect the net
effects of changes in selling  prices,  currency  exchange  rates,  customer and
product mix. Accordingly,  average selling prices are not necessarily indicative
of any one factor.

     Under the amended  Boeing  LTA,  Boeing will  advance  TIMET $28.5  million
annually from 2002 through 2007. The Company  received the $28.5 million advance
for  contract  year  2002  in  December  of  2001.  The LTA is  structured  as a
take-or-pay  agreement such that,  beginning in calendar year 2002,  Boeing will
forfeit a proportionate part of the $28.5 million annual advance, or effectively
$3.80 per pound,  in the event that its orders for  delivery  for such  calendar
year  are less  than 7.5  million  pounds.  The  Company  presently  intends  to
recognize  as income  any  forfeitable  portion of the  advance  when it becomes
virtually assured that Boeing's annual orders for delivery will be less than 7.5
million pounds and no other significant uncertainties exist. This will generally
result in any take-or-pay forfeiture being recognized as operating income in the
last half of each year. The Company  anticipates that Boeing will purchase about
3 million pounds of product in 2002. At this projected order level,  the Company
expects  to  recognize  about $17  million  of income  under  the  Boeing  LTA's
take-or-pay  provisions in 2002. Any such earnings will be reported as operating
income, but will not be included in sales revenue, sales volume or gross margin.

                                       25

<PAGE>

     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 2002 and purchase the balance. While the cost of titanium sponge manufactured
at the Company's Henderson,  Nevada facility is expected to be relatively stable
compared to 2001, the Company expects the aggregate cost of purchased sponge and
scrap to trend  downward  in 2002.  The Company  expects  its  overall  capacity
utilization to average about 60% in 2002 compared to about 75% in 2001, however,
the Company's  practical  capacity  utilization  measures can vary significantly
based on product mix. As production volume decreases,  certain manufacturing and
other costs will  decrease at a slower rate and to a lesser  extent than volume,
effectively  resulting  in higher  costs per metric ton. In  combination  with a
softening of market selling prices,  this is expected to result in a significant
reduction of gross margin and gross margin percent in 2002 compared to 2001. The
Company  currently  anticipates that its gross margin as a percent of sales will
decrease over the year and that gross margin will be near  breakeven or less for
the full year.

     In response to the current business climate, the Company is taking a number
of actions in the near term to reduce  costs.  These  actions  include  reducing
plant operating rates and employment  levels as business  declines,  negotiating
improved pricing at lower volume commitments for certain raw materials, reducing
discretionary  spending and negotiating  various concessions from both suppliers
and service  providers.  The Company has reduced  operating rates and employment
levels at its melting  facilities since September 11 and expects similar actions
will occur in the future.  For the longer  term,  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 2002 could
include  one  or  more  special  or  other  charges  for  restructurings,  asset
impairments and similar charges that might be material.

     The  Company's  agreement  with its labor union at its Toronto,  Ohio plant
expires at the end of June 2002.  The Company does not presently  anticipate any
work stoppage or other labor  disruption  at any  facility,  and its outlook for
2002 does not contemplate any such event. However,  should the Company's efforts
to  negotiate  a  mutually  satisfactory  agreement  be  unsuccessful,  any work
stoppage  or  other  labor  disruption  at any  facility  could  materially  and
adversely  affect  the  Company's  business,  results  of  operation,  financial
position and liquidity.

     On October 11, 2001, the Company was notified by Special Metals Corporation
of its intention to again defer the payment of dividends on the SMC  convertible
preferred  securities  held by the Company,  effective  with the dividend due on
October 28, 2001. The Company  believes such dividends are likely to be deferred
indefinitely  and does not expect to recognize  any  dividend  income on its SMC
preferred securities in 2002.

     Selling,  general,  administrative and development expenses for 2002 should
be approximately  $42 million.  Interest  expense in 2002 should  approximate $3
million.  Minority interest on the Company's Convertible Preferred Securities in
2002 should approximate $13 million.

                                       26

<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.  losses  during  2002.  However,  the Company
operates  in several  tax  jurisdictions  and is  subject to varying  income tax
rates. As a result, the geographic mix of pretax income (loss) can significantly
impact the Company's overall effective tax rate.

     The Company  presently  expects an operating loss in 2002 of  approximately
$25 million and a net loss of  approximately  $40 million.  Although the Company
expects  its gross  margin to  decrease  over the year,  the  Company  presently
anticipates  its results in the last half of 2002 will be  improved  compared to
the first half because the estimated $17 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 cash flow from operations to be negative in 2002. This
is  principally  driven by the  expected  net loss and the effect in 2002 of the
$28.5  million  cash advance  payment that was received  from Boeing in December
2001.  This  customer  advance  was  reflected  as a  current  liability  on the
Company's consolidated balance sheet at year-end 2001 and will be reduced during
2002 as  product  shipments  are made or the  Boeing  take-or-pay  benefits  are
earned.  Subsequent  advances will occur early each  calendar year  beginning in
2003. Capital expenditures in 2002 are expected to be approximately $12 million,
principally  covering capital  maintenance,  safety and environmental  programs.
Depreciation and amortization should approximate $40 million.  Effective January
1, 2002,  the Company will adopt  Statement of  Financial  Accounting  Standards
("SFAS") No. 142, Goodwill and Other Intangible Assets. Under SFAS 142, goodwill
will not be amortized on a periodic basis. For the year ended December 31, 2001,
the Company recorded amortization expense of approximately $4.5 million relating
to its goodwill.

     Debt is expected to increase in 2002 as compared to year-end  2001  levels.
At  December  31,  2001,   the  Company  had  over  $150  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 2002.

                                       27

<PAGE>

     Future results of operations and other forward-looking statements contained
in this Outlook  involve a number of substantial  risks and  uncertainties  that
could  significantly  affect  expected  results.  Actual  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. Among the factors that could cause actual results to
differ  materially  are the risks and  uncertainties  discussed  in this  Annual
Report and those described from time to time in the Company's other filings with
the Securities and Exchange  Commission  which include,  but are not limited to,
the  cyclicality  of the  commercial  aerospace  industry,  the  performance  of
aerospace  manufacturers  and the Company  under their LTAs,  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
war or terrorist  activities  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.


                                       28

<PAGE>

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>
<CAPTION>
                                                                               Year ended December 31,
                                                                ------------------------------------------------------
                                                                     2001               2000                1999
                                                                ---------------    ----------------    ---------------
                                                                                   (In thousands)
<S>                                                             <C>                <C>                 <C>
Cash provided (used) by:
   Operating activities:
     Excluding changes in assets and liabilities                $      97,908      $      (4,119)      $      23,958
     Changes in assets and liabilities                                (35,334)            67,447              (4,415)
                                                                ---------------    ----------------    ---------------
                                                                       62,574             63,328              19,543
   Investing activities                                               (16,093)            (4,218)            (21,663)
   Financing activities                                               (31,358)           (70,678)              8,563
                                                                ---------------    ----------------    ---------------

     Net cash provided (used) by operating,
       investing and financing activities                       $      15,123      $     (11,568)      $       6,443
                                                                ===============    ================    ===============
</TABLE>

     Operating   activities.   Cash   provided  by  operating   activities   was
approximately $63 million in 2001 and 2000 and $20 million in 1999.

     Cash  provided by  operating  activities,  excluding  changes in assets and
liabilities,  during the past three years  generally  follows the trend in gross
margin.  Changes  in assets and  liabilities  reflect  the timing of  purchases,
production and sales, and can vary significantly from period to period. Accounts
receivable  increased  in 2001,  principally  as a result  of  increased  sales.
Accounts receivable  provided cash in 2000 and 1999,  reflecting the decrease in
sales levels as well as an improvement,  particularly in 2000, 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 8 to the Consolidated Financial Statements.

     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.  See Note 17 to the
Consolidated Financial Statements.

     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,  the
Company received a number of customer order deferrals and cancellations  late in
2001,  contributing to the inventory  increase.  The Company reduced inventories
during  2000 and 1999 as excess raw  materials  and other  inventory  items were
consumed and inventory reduction and control efforts were put in place.

                                       29

<PAGE>

     Changes in deferred  income taxes in 2001 were primarily due to an increase
in the Company's deferred tax asset valuation allowance, as further described in
Note 14 to the  Consolidated  Financial  Statements.  Changes in income taxes in
2000  primarily  reflect net tax refunds of $8 million.  In 1999,  income  taxes
payable  decreased  as the 1999 losses were carried back to recover a portion of
prior  years' taxes paid.  Changes in accounts  with  related  parties  resulted
primarily  from  relative  changes in receivable  levels with joint  ventures in
2001, 2000 and 1999.

     Changes in restructuring charges represent payments made, primarily related
to personnel  severance and benefits,  in connection with the Company's 2000 and
1999  restructuring  plans, which are described in more detail in Note 13 to the
Consolidated Financial Statements.

     Dividends  for  the  period  October  1998  through  December  1999  on the
Company's investment in SMC 6.625% convertible  preferred stock 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
Company believes that such dividends are likely to be deferred indefinitely.

     The SMC convertible  preferred  securities held by TIMET are not marketable
and, accordingly,  quoted market prices are unavailable.  The Company recorded a
pre-tax  impairment  charge of $61.5 million related to these securities in 2001
that reduced the carrying amount of these  securities to an estimated fair value
of $27.5  million.  See Note 4 to the  Consolidated  Financial  Statements.  The
Company believes SMC has a significant  amount of debt relative to its near term
potential earnings and cash flow and that a refinancing and/or  restructuring of
its capital,  or some portion thereof,  is necessary.  SMC has indicated that it
may violate  certain  bank  covenants  early in 2002 and that it is  considering
strategic and financial options,  including efforts to restructure and/or modify
the terms of certain debt agreements. Such efforts may include negotiations with
the  Company  to modify  the terms of its  preferred  securities  in SMC  and/or
exchange, in whole or in part, such preferred securities for common stock, other
securities or other assets.

     In April 2000,  the Company  exercised  its right to defer future  dividend
payments on its outstanding 6.625% Convertible Preferred Securities for a period
of up to 10  quarters  (subject  to  possible  further  extension  for  up to an
additional 10  quarters),  although  interest  continued to accrue at the coupon
rate on the principal and unpaid dividends.  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 $16.1 million
in 2001, up from $11.2 million in 2000. Capital  expenditures were $24.8 million
in 1999.  Capital  spending for 2001 was  principally for safety and maintaining
capacity.  Capital spending for 2000 was principally for capacity  enhancements,
capital maintenance, and safety and environmental projects. Capital expenditures
in 1999 were  primarily  related to the  expansion  of forging  capacity  at the
Toronto, Ohio facility,  the installation of the  business-enterprise  system in
Europe and various environmental and other projects.

                                       30

<PAGE>

     Proceeds  from sale of joint venture in 2000  represents  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 3 to
the Consolidated Financial Statements.

     Financing activities. 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,  the sale of the  Company's  casting  joint  venture  and  deferral  of
dividend  payments  on  the  Company's  Convertible  Preferred  Securities.  Net
borrowings of $13 million in 1999 were primarily to fund capital expenditures.

     In November  1999,  the Company's  Board of Directors  voted to suspend the
regular  quarterly  dividend on its common stock in view of, among other things,
the continuing  weakness in overall  market demand for titanium metal  products.
The Company's U.S.  credit  agreement  prohibits the payment of dividends on the
Company's  common  stock  and the  repurchase  of  common  shares  except  under
specified  conditions.  The Company  presently has no plans to resume payment of
common stock dividends.

     Borrowing  arrangements.  At December 31, 2001,  the Company's net cash was
approximately  $12.1 million ($24.5 million of cash and equivalents,  less $12.4
million of notes payable and debt,  principally  borrowings  under the Company's
U.S. and U.K.  credit  agreements).  At December 31, 2001,  the Company had over
$150  million of  borrowing  availability  under its  various  worldwide  credit
agreements.

     In 2000,  the  Company  completed  a new  $125  million,  U.S.  asset-based
revolving  credit  agreement  replacing its previous U.S. bank credit  facility.
Borrowings  under this  facility are limited to 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 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.  Excess   availability  is  defined  as  borrowing
availability less certain contractual  commitments such as letters of credit. At
December 31, 2001,  excess  availability  was $115 million.  The Company's  U.S.
credit  agreement allows the lender to modify the borrowing base formulas at its
discretion,  subject to certain  conditions.  In the event the lender  exercised
this  discretion,  such event  could have a  significant  adverse  effect on the
Company's  borrowing  availability.  Unused  borrowing  availability  under this
agreement  at  December  31, 2001 was  approximately  $117  million.  The credit
agreement  expires  in  February  2003;   however,   the  Company  is  currently
negotiating  with its lender to extend the  maturity  date of this  agreement on
substantially similar terms.


                                       31

<PAGE>

     The Company's subsidiary,  TIMET UK, has a credit agreement that includes a
revolving  and  term  loan  facility  and  an  overdraft   facility  (the  "U.K.
facilities").   During  2000,   aggregate  borrowing  capacity  under  the  U.K.
facilities was increased from (pound)18 million to (pound)30 million. Borrowings
under the U.K. facilities can be in various currencies,  including U.S. dollars,
British pounds 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.
The U.K. overdraft facility is subject to annual review in February of each year
and was extended in February 2002. The U.K.  facilities expire in February 2005.
As of December 31, 2001,  the  outstanding  balance of the U.K.  facilities  was
approximately  $11 million with unused  borrowing  availability of approximately
$31 million.

     Environmental matters. See Item 1 - Business - Regulatory and environmental
matters and Note 17 to the Consolidated Financial Statements for a discussion of
environmental matters.

     Other.  The Company  periodically  evaluates  its  liquidity  requirements,
capital needs and availability of resources in view of, among other things,  its
alternative uses of capital, its 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 and, 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 capital stock, sell assets, or
take a  combination  of such  steps or other  steps to  increase  or manage  its
liquidity and capital resources.

     In the normal  course of  business,  the Company  investigates,  evaluates,
discusses and engages in acquisition,  joint venture, strategic relationship and
other business  combination  opportunities in the titanium,  specialty metal and
related  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.

                                       32

<PAGE>

     Contractual commitments.  As more fully described in Notes 9, 10, 16 and 17
to the  Consolidated  Financial  Statements,  the  Company is a party to various
debt,  lease and other  agreements at December 31, 2001 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>
<CAPTION>
                                                                 Unconditional Payment Due Date
                                           ----------------------------------------------------------------------------
                                                              2003/           2005/          2007 &
                                              2002            2004            2006            After           Total
                                           -----------     ------------    ------------    ------------    ------------
                                                                          (In thousands)
<S>                                        <C>             <C>             <C>             <C>             <C>
       Contractual Commitment
-----------------------------------

Indebtedness                               $   1,694       $   10,712      $      -        $      -        $   12,406

Capital leases                                   340              679             397           7,522           8,938

Operating leases                               4,253            4,079             967             348           9,647

Obligations to Basic Management, Inc.          1,324            2,648           1,129           1,638           6,739

Minimum sponge purchase commitments            9,975           19,950          19,950           9,975          59,850

Company-obligated manditorily
   redeemable preferred securities of
   subsidiary trust holding solely
   subordinated debt securities                   -                -               -          201,241         201,241
                                           -----------     ------------    ------------    ------------    ------------

                                           $  17,586       $   38,068      $   22,443      $  220,724      $  298,821
                                           ===========     ============    ============    ============    ============
</TABLE>


                                       33

<PAGE>

CRITICAL ACCOUNTING POLICIES

     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  underlying
actuarial  assumptions  related thereto,  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 outside experts, and various other
factors that 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  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.

o    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  comparing  the
     carrying  amount of the assets to the  undiscounted  expected  future  cash
     flows of the assets or asset group. If this  comparison  indicates that 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.

     The  Company  completed  an  impairment  assessment  under  SFAS  No.  144,
     Accounting  for the  Impairment  or  Disposal  of  Long-Lived  Assets,  and
     Accounting  Principles  Board ("APB")  Opinion No. 17,  Intangible  Assets,
     during the fourth quarter of 2001 in response to certain  events  described
     in Note 1 to the Consolidated  Financial Statements.  Future cash flows are
     inherently   uncertain.   Although  management  utilizes  certain  external
     information  sources  such as The  Airline  Monitor  as the basis for sales
     volume  projections,   significant   management  judgment  is  required  in
     estimating  other  factors  that  are  significant  to  future  cash  flows
     including,  but not limited  to,  customer  demand,  the  Company's  market
     position,  selling prices,  competitive forces and manufacturing costs. The
     result of this  assessment  led the Company to  conclude  that there was no
     impairment related to the long-lived assets in the asset groups tested.

                                       34

<PAGE>

o    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
     described in Notes 1 and 4 to the Consolidated  Financial  Statements,  the
     Company  undertook an  assessment in the fourth  quarter of 2001,  with the
     assistance of an outside expert,  of its investment in SMC. That assessment
     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 an  impairment  charge of $61.5  million in the fourth  quarter of
     2001.

     The  SMC  convertible  preferred  securities  held by the  Company  are not
     marketable  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
     amount the Company ultimately  recovers from its investment in SMC, if any,
     could vary  significantly  from estimated fair value.  See Notes 1 and 4 to
     the Consolidated Financial Statements.

o    Deferred income tax valuation  allowances.  Under SFAS 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.

     Based  on  its  recent  history  of  losses,  its  near  term  outlook  and
     management's  evaluation of available tax planning strategies,  the Company
     concluded that an increase in its valuation  allowance against its U.S. net
     deferred  tax assets was  required.  Accordingly,  the  Company  recorded a
     charge of $12.3  million in the  fourth  quarter  of 2001 to  increase  its
     deferred  tax asset  valuation  allowance  related to  previously  recorded
     deferred tax assets. Additionally, the Company determined that it would not
     recognize a deferred tax benefit related to U.S.  losses  commencing in the
     fourth quarter of 2001,  and  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. See Notes 1 and 14 to the Consolidated Financial Statements.

o    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.  See Note 17 to the  Consolidated  Financial
     Statements.

                                       35

<PAGE>

o    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.

     Other  significant  accounting  policies  and  the  use  of  estimates  are
described in the Notes to the Consolidated Financial Statements.


                                       36

<PAGE>

ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     General.  The  Company is exposed  to market  risk from  changes in foreign
currency  exchange  rates,  interest  rates and  commodity  prices.  The Company
typically does not enter into interest rate swaps or other types of contracts in
order to manage its interest rate market risk and 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.

     Interest  rates.  The  Company is exposed  to market  risk from  changes in
interest rates related to indebtedness.  At December 31, 2001  substantially all
of the Company's indebtedness was denominated in U.S. dollars, the British pound
sterling or the euro and bore interest at variable rates,  primarily  related to
spreads over LIBOR, as summarized below.

<TABLE>
<CAPTION>
                                                     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      $     -       $     -           4.6%
   British pounds                       -              -             2.6            -             -           5.9%
   Euro                                 1.7            -             -              -             -           4.9%

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

     At December 31, 2000,  substantially  all of the Company's $44.9 million in
outstanding indebtedness consisted of U.S. dollar-denominated variable rate debt
at a weighted average interest rate of 8.2%.

     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.  See Item 7 -Management's  Discussion and Analysis of
Financial Condition and Results of Operations - Results of Operations - European
operations.

     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 pricing arrangements, effectively obligate the Company to bear (i)
part of the risks of  increased  raw  material  and other costs 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 which
are not  passed  on to the  Company  by its  suppliers  in the form of lower raw
material prices.

     Other. The Company holds convertible preferred securities of Special Metals
Corporation  (NASDAQ:  SMCX)  with a  principal  amount  of $80  million  and an
estimated  fair  value  of $27.5  million  that 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 Item 7 -  Management's  Discussion  and  Analysis of  Financial
Condition  and  Results of  Operations  -  Liquidity  and  Capital  Resources  -
Investing activities and Note 4 to the Consolidated Financial Statements.

                                       37

<PAGE>

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.


                                       38

<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 Securities and Exchange
Commission  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

     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  16  to  the  Consolidated  Financial
Statements.

                                       39

<PAGE>

                                     PART IV

ITEM 14:  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, 2001 and the months
of January and February 2002:

<TABLE>
<CAPTION>
              Date of Report                            Items Reported
     ---------------------------------           -----------------------------
     <S>                                                   <C>
     October 5, 2001                                       5 and 7
     October 5, 2001                                       5 and 7
     October 23, 2001                                      5 and 7
     October 23, 2001                                      5 and 7
     October 23, 2001                                      5 and 7
     December 18, 2001                                     5 and 7
     January 4, 2002                                       5 and 7
     February 8, 2002                                      5 and 7

</TABLE>

  (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.

                                       40

<PAGE>

<TABLE>
<CAPTION>

  Item No.                                                    Exhibit Index
--------------    ------------------------------------------------------------------------------------------------------
<S>               <C>

3.1               Amended and Restated  Certificate of  Incorporation  of Titanium Metals  Corporation,  incorporated by
                  reference  to Exhibit 3.1 to Titanium  Metals  Corporation's  Registration  Statement on Form S-1 (No.
                  333-2940).

3.2               Bylaws of Titanium Metals Corporation as Amended and Restated,  dated February 23, 1999,  incorporated
                  by reference to Exhibit 3.2 to Titanium Metals  Corporation's Annual Report on Form 10-K (No. 1-14368)
                  for the year ended December 31, 1998.

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 Commission 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 Commission 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 Commission 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 Commission 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
                  Commission 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 Commission 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 Commission on
                  December 5, 1996.

</TABLE>

                                       41

<PAGE>

<TABLE>
<CAPTION>

  Item No.                                                    Exhibit Index
--------------    ------------------------------------------------------------------------------------------------------
<S>               <C>

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 Commission on December 5, 1996.

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

10.4              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.

10.5              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.
</TABLE>

                                       42
<PAGE>

<TABLE>
<CAPTION>

  Item No.                                                    Exhibit Index
--------------    ------------------------------------------------------------------------------------------------------
<S>               <C>

10.6              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).

10.7*             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).

10.8*             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.

10.9*             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.

10.10*            Executive  Agreement dated as of September 27, 1996,  between Titanium Hearth  Technologies,  Inc. and
                  Charles H. Entrekin, Jr., incorporated by reference to Exhibit 10.22 to the Registrant's Annual Report
                  on Form 10-K for the year ended December 31, 1999.

10.11*            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.

10.12*            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.

10.13             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.

10.14             Intercorporate  Services  Agreement  between  Titanium  Metals  Corporation  and Tremont  Corporation,
                  effective  as of  January 1, 2001,  incorporated  by  reference  to Exhibit  10.1 to the  Registrant's
                  Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.

10.15             Intercorporate  Services  Agreement  between  Titanium  Metals  Corporation  and NL Industries,  Inc.,
                  effective  as of  January 1, 2001,  incorporated  by  reference  to Exhibit  10.2 to the  Registrant's
                  Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.
</TABLE>

                                       43
<PAGE>

<TABLE>
<CAPTION>

  Item No.                                                    Exhibit Index
--------------    ------------------------------------------------------------------------------------------------------
<S>               <C>

10.16*            Titanium Metals  Corporation  Amended and Restated 1996 Non-Employee  Director  Compensation  Plan, as
                  amended  and  restated  effective  June 8, 2001,  incorporated  by  reference  to Exhibit  10.3 to the
                  Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.

10.17*            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.

10.18*            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.

10.19             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.

21.1              Subsidiaries of the Registrant.

23.1              Consent of PricewaterhouseCoopers LLP.


<FN>

* Management contract, compensatory plan or arrangement.

</FN>
</TABLE>

                                       44

<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, March 20, 2002
                                            (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/ Steven L. Watson
------------------------------------------    ----------------------------------
J. Landis Martin, March 20, 2002              Steven L. Watson, March 20, 2002
(Chairman of the Board, President             (Director)
and Chief Executive Officer)


/s/ Edward C. Hutcheson, Jr.                  /s/ Thomas P. Stafford
------------------------------------------    ----------------------------------
Edward C. Hutcheson, Jr., March 20, 2002      Thomas P. Stafford, March 20, 2002
(Director)                                    (Director)


/s/ Glenn R. Simmons                          /s/ Patrick M. Murray
------------------------------------------    ----------------------------------
Glenn R. Simmons, March 20, 2002              Patrick M. Murray, March 20, 2002
(Director)                                    (Director)


/s/ Albert W. Niemi, Jr.                      /s/ Mark A. Wallace
------------------------------------------    ----------------------------------
Albert W. Niemi, Jr., March 20, 2002          Mark A. Wallace, March 20, 2002
(Director)                                    (Executive Vice President and
                                              Chief Financial Officer)

/s/ JoAnne A. Nadalin
------------------------------------------
JoAnne A. Nadalin, March 20, 2002
(Vice President, Corporate Controller and
Principal Accounting Officer)

                                       45



<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, 2001 and 2000                  F-2

  Consolidated Statements of Operations - Years ended
    December 31, 2001, 2000 and 1999                                        F-4

  Consolidated Statements of Comprehensive Income (Loss) - Years ended
    December 31, 2001, 2000 and 1999                                        F-5

  Consolidated Statements of Cash Flows - Years ended
    December 31, 2001, 2000 and 1999                                        F-6

  Consolidated Statements of Changes in Stockholders' Equity - Years ended
    December 31, 2001, 2000 and 1999                                        F-8

  Notes to Consolidated Financial Statements                                F-9


Financial Statement Schedules

   Report of Independent Accountants                                        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  as of  December  31,  2001  and  2000  and the  results  of  their
operations  and their cash flows for each of the three years in the period ended
December 31, 2001 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 the opinion expressed above.




/s/PricewaterhouseCoopers LLP



Denver, Colorado
February 4, 2002




                                      F-1

<PAGE>

                           TITANIUM METALS CORPORATION

                           CONSOLIDATED BALANCE SHEETS

                           December 31, 2001 and 2000
                      (In thousands, except per share data)

<TABLE>
<CAPTION>

ASSETS                                                                                   2001               2000
                                                                                   ----------------   ----------------
<S>                                                                                <C>                <C>
Current assets:
   Cash and cash equivalents                                                       $      24,500      $       9,796
   Accounts and other receivables, less
     allowance of $2,739 and $2,927                                                       83,347             75,913
   Receivable from related parties                                                         5,907              5,029
   Refundable income taxes                                                                   470                637
   Inventories                                                                           185,052            148,384
   Prepaid expenses and other                                                              9,026              8,049
   Deferred income taxes                                                                     385                397
                                                                                   ----------------   ----------------
       Total current assets                                                              308,687            248,205
                                                                                   ----------------   ----------------

Investment in joint ventures                                                              20,585             18,136
Preferred securities of Special Metals Corporation ("SMC")                                27,500             88,136
Property and equipment, net                                                              275,308            302,130
Goodwill, net                                                                             44,310             49,305
Other intangible assets, net                                                               9,836             13,258
Deferred income taxes                                                                         56             27,820
Other                                                                                     13,101             12,156
                                                                                   ----------------   ----------------

                                                                                   $     699,383      $     759,146
                                                                                   ================   ================
</TABLE>


                                      F-2

<PAGE>

                           TITANIUM METALS CORPORATION

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                           December 31, 2001 and 2000
                      (In thousands, except per share data)
<TABLE>
<CAPTION>

LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY
                                                                                         2001               2000
                                                                                   ----------------   ----------------
<S>                                                                                <C>                <C>
Current liabilities:
   Notes payable                                                                   $       1,522      $      24,112
   Current maturities of long-term debt and capital lease obligations                        512              2,011
   Accounts payable                                                                       42,821             48,680
   Accrued liabilities                                                                    41,799             34,005
   Customer advance payments                                                              33,242              3,951
   Payable to related parties                                                              1,612              1,099
   Income taxes                                                                              746                852
   Deferred income taxes                                                                     106              1,132
                                                                                   ----------------   ----------------
       Total current liabilities                                                         122,360            115,842
                                                                                   ----------------   ----------------
Long-term debt                                                                            10,712             18,953
Capital lease obligations                                                                  8,598              8,642
Payable to related parties                                                                   953              1,332
Accrued OPEB cost                                                                         15,980             18,219
Accrued pension cost                                                                      23,690              5,361
Accrued environmental cost                                                                 3,262              3,262
Deferred income taxes                                                                      5,509              9,655
Accrued dividends on Convertible Preferred Securities                                       -                11,154
Other                                                                                        237                117
                                                                                   ----------------   ----------------
       Total liabilities                                                                 191,301            192,537
                                                                                   ----------------   ----------------

Minority interest - Company-obligated mandatorily redeemable preferred
   securities of subsidiary trust holding solely
   subordinated debt securities ("Convertible Preferred Securities")                     201,241            201,250
Other minority interest                                                                    8,727              7,844

Stockholders' equity:
   Preferred stock $.01 par value; 1,000 shares authorized,
     none outstanding                                                                       -                  -
   Common stock, $.01 par value; 99,000 shares authorized,
     31,946 and 31,907 shares issued, respectively                                           319                319
   Additional paid-in capital                                                            350,514            350,078
   Retained (deficit) earnings                                                           (15,841)            25,925
   Accumulated other comprehensive income (loss)                                         (35,274)           (16,408)
   Treasury stock, at cost  (90 shares)                                                   (1,208)            (1,208)
   Deferred compensation                                                                    (396)            (1,191)
                                                                                   ----------------   ----------------
        Total stockholders' equity                                                       298,114            357,515
                                                                                   ----------------   ----------------
                                                                                   $     699,383      $     759,146
                                                                                   ================   ================
<FN>

Commitments and contingencies (Note 17)
</FN>
</TABLE>

          See accompanying notes to consolidated financial statements.
                                      F-3

<PAGE>

                           TITANIUM METALS CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                  Years ended December 31, 2001, 2000 and 1999
                      (In thousands, except per share data)
<TABLE>
<CAPTION>
                                                                          2001              2000              1999
                                                                     --------------    --------------    -------------
<S>                                                                  <C>               <C>               <C>
Revenues and other income:
   Net sales                                                         $    486,935      $    426,798      $    480,029
   Equity in earnings (losses) of joint ventures                            2,515              (865)           (1,709)
   Other                                                                   79,210             8,377             4,952
                                                                     --------------    --------------    -------------
                                                                          568,660           434,310           483,272
                                                                     --------------    --------------    -------------

Costs and expenses:
   Cost of sales                                                          447,042           422,917           454,506
   Selling, general, administrative and development                        51,788            44,017            48,577
   Restructuring (income) charge                                             (220)            2,805             4,506
   Interest                                                                 4,060             7,704             7,093
   Other                                                                   61,519              -                2,328
                                                                     --------------    --------------    -------------
                                                                          564,189           477,443           517,010
                                                                     --------------    --------------    -------------
   Income (loss) before income taxes, minority
     interest and extraordinary item                                        4,471           (43,133)          (33,738)

Income tax expense (benefit)                                               31,112           (15,097)          (12,021)
Minority interest - Convertible Preferred Securities,
   net of tax in 2000 and 1999                                             13,850             8,710             8,667
Other minority interest, net of tax                                         1,275             1,283             1,006
                                                                     --------------    --------------    -------------

   Loss before extraordinary item                                         (41,766)          (38,029)          (31,390)

Extraordinary item, net of tax                                               -                 (873)             -
                                                                     --------------    --------------    -------------

   Net loss                                                          $    (41,766)     $    (38,902)     $    (31,390)
                                                                     ==============    ==============    =============

Basic and diluted loss per share:
   Before extraordinary item                                         $      (1.33)      $     (1.21)      $     (1.00)
   Extraordinary item                                                        -                 (.03)             -
                                                                     --------------    --------------    -------------

                                                                     $      (1.33)      $     (1.24)      $     (1.00)
                                                                     ==============    ==============    =============


Weighted average shares outstanding                                        31,496            31,373            31,371
                                                                     ==============    ==============    =============
</TABLE>

          See accompanying notes to consolidated financial statements.
                                      F-4

<PAGE>

                           TITANIUM METALS CORPORATION

             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

                  Years ended December 31, 2001, 2000 and 1999
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                          2001              2000             1999
                                                                     --------------    --------------   --------------
<S>                                                                  <C>               <C>              <C>
Net loss                                                             $    (41,766)     $    (38,902)    $    (31,390)

Other comprehensive (loss) income:
   Currency translation adjustment                                         (3,475)          (10,883)          (5,637)
   Pension liabilities adjustment, net of tax benefit
     (expense) of $4,834, $909, and $(260) in 2001,
     2000 and 1999, respectively                                          (15,391)           (1,688)             483
                                                                     --------------    --------------   --------------

                                                                          (18,866)          (12,571)          (5,154)
                                                                     --------------    --------------   --------------

   Comprehensive loss                                                $    (60,632)     $    (51,473)    $    (36,544)
                                                                     ==============    ==============   ==============
</TABLE>


          See accompanying notes to consolidated financial statements.
                                      F-5

<PAGE>

                           TITANIUM METALS CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2001, 2000 and 1999
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                           2001             2000             1999
                                                                     --------------    --------------   --------------
<S>                                                                  <C>               <C>              <C>
Cash flows from operating activities:
   Net loss                                                          $    (41,766)     $    (38,902)    $    (31,390)
   Depreciation and amortization                                           40,134            41,942           42,693
   Noncash impairment charges:
     Equipment and joint ventures                                          10,840             3,467            2,328
     SMC convertible preferred securities                                  61,519              -                -
   Gain on sale of castings joint venture                                    -               (1,205)            -
   Extraordinary loss on early extinguishment
     of debt, net                                                            -                  873             -
   Equity in (earnings) losses of joint ventures, net of
     distributions                                                         (2,040)            1,710            3,730
   Deferred income taxes                                                   26,822           (17,245)            (464)
   Other minority interest                                                  1,275             1,283            1,006
   Other, net                                                               1,124               696            6,055
   Change in assets and liabilities:
     Receivables                                                           (7,953)           25,273           17,406
     Inventories                                                          (38,631)           37,026           23,598
     Prepaid expenses and other                                            (3,112)             (452)           3,137
     Accounts payable and accrued liabilities                               3,895            (1,751)         (24,919)
     Accrued restructuring charges                                           (592)             (974)          (5,042)
     Customer advance payments                                             29,291               (86)             768
     Income taxes                                                              98            10,386          (16,220)
     Accounts with related parties, net                                      (743)           (1,247)           2,409
     Accrued OPEB and pension costs                                        (4,288)           (4,256)            (411)
     Accrued dividends on SMC securities                                     -               (1,606)          (5,640)
     Accrued dividends on Convertible
       Preferred Securities                                               (10,043)           10,043             -
     Other, net                                                            (3,256)           (1,647)             499
                                                                     --------------    --------------   --------------
         Net cash provided by operating activities                         62,574            63,328           19,543
                                                                     --------------    --------------   --------------

Cash flows from investing activities:
   Capital expenditures                                                   (16,124)          (11,182)         (24,772)
   Proceeds from sale of castings joint venture                              -                7,000             -
   Proceeds from sale of fixed assets                                          31                38            2,900
   Other, net                                                                -                  (74)             209
                                                                     --------------    --------------   --------------
         Net cash used by investing activities                            (16,093)           (4,218)         (21,663)
                                                                     --------------    --------------   --------------

Cash flows from financing activities:
   Indebtedness:
     Borrowings                                                           537,884           364,214          111,900
     Repayments                                                          (569,569)         (434,257)         (99,284)
   Dividends paid                                                            -                 -              (3,764)
   Other, net                                                                 327              (635)            (289)
                                                                     --------------    --------------   --------------
         Net cash (used) provided by financing activities                 (31,358)          (70,678)           8,563
                                                                     --------------    --------------   --------------

         Net cash provided (used)                                    $     15,123      $    (11,568)    $      6,443
                                                                     ==============    ==============   ==============
</TABLE>


                                       F-6

<PAGE>

                           TITANIUM METALS CORPORATION

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                  Years ended December 31, 2001, 2000 and 1999
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                          2001              2000             1999
                                                                     --------------    --------------   --------------
<S>                                                                  <C>               <C>              <C>
Cash and cash equivalents:
   Net increase (decrease) from:
     Operating, investing and financing activities                   $     15,123      $    (11,568)    $      6,443
     Currency translation                                                    (419)              693           (1,236)
                                                                     --------------    --------------   --------------
                                                                           14,704           (10,875)           5,207
   Cash at beginning of year                                                9,796            20,671           15,464
                                                                     --------------    --------------   --------------

   Cash at end of year                                               $     24,500      $      9,796     $     20,671
                                                                     ==============    ==============   ==============

Supplemental disclosures:
   Cash paid for:
     Interest, net of amounts capitalized                            $      3,065      $      7,642     $      6,669
     Convertible Preferred Securities dividends                      $     23,893      $      3,333     $     13,332
     Income taxes, net                                               $      4,192      $       -        $        148

   Noncash investing and financing activities:
     Capital lease obligations of $517 were incurred
     during 2001 related to equipment

</TABLE>


          See accompanying notes to consolidated financial statements.
                                       F-7

<PAGE>

                           TITANIUM METALS CORPORATION

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                  Years ended December 31, 2001, 2000 and 1999
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                          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, 1998     31,369  $  315  $ 347,972  $ 99,981  $    5,600  $     (4,283) $(1,208) $      -     $ 448,377
  Comprehensive income (loss)      -        -         -      (31,390)     (5,637)          483     -            -       (36,544)
  Dividends paid ($.12 per share)  -        -         -       (3,764)       -             -        -            -        (3,764)
  Other, net                          2     -           12      -           -             -        -            -            12
                                 ------- ------- ---------- --------- ----------- ------------- -------- ------------ ----------

Balance at December 31, 1999     31,371     315    347,984    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 cancellations    444       4      1,936      -           -             -        -          (1,940)      -
  Amortization of deferred
    compensation                   -        -         -         -           -             -        -             749        749
  Other                               2     -          158      -           -             -        -            -           158
                                 ------- ------- ---------- --------- ----------- ------------- -------- ------------ ----------

Balance at December 31, 2000     31,817     319    350,078    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           80       1        580      -           -             -        -            -           581
  Stock award cancellations         (41)     (1)      (321)     -           -             -        -             322       -
  Amortization of deferred
    compensation                   -        -         -         -           -             -        -             473        473
  Other                            -        -          177      -           -             -        -            -           177
                                 ------- ------- ---------- --------- ----------- ------------- -------- ------------ ----------

Balance at December 31, 2001     31,856  $  319  $ 350,514  $(15,841) $  (14,395) $    (20,879) $(1,208) $      (396) $ 298,114
                                 ======= ======= ========== ========= =========== ============= ======== ============ ==========

</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

     Principles  of  consolidation.   The  accompanying  consolidated  financial
statements include the accounts of Titanium Metals Corporation ("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  estimated  fair  value.  These
securities  are not  marketable  and,  accordingly,  quoted  market  prices  are
unavailable.  The amount the Company ultimately  recovers from its investment in
SMC,  if any,  could vary  significantly  from  estimated  fair  value.  The SMC
securities  are presently  classified as  "available-for-sale"  securities  with
unrealized  gains  and  losses  included  in  stockholders'  equity,  unless  an
unrealized loss is deemed to be other than  temporary,  in which case it will be
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 4.

     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.

     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,  is  amortized  using the
straight-line method over 15 years and is stated net of accumulated amortization
of $24.2 million and $19.7 million at December 31, 2001 and 2000,  respectively.
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 goodwill and
other intangible assets and the effects of revisions are reflected in the period
they are determined to be necessary.

                                      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  related to major,  long-term  capital
projects  are  capitalized  as a component of  construction  costs and were $1.0
million in 2000 and $1.3  million in 1999.  No interest was  capitalized  during
2001.

     Generally,  when  events or  changes  in  circumstances  indicate  that 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  that 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 is 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 material  effect on the  Company's
results of operations, consolidated financial position or liquidity.

     Stock-based   compensation.   The  Company   has  elected  the   disclosure
alternative prescribed by SFAS No. 123, Accounting for Stock-Based Compensation,
and to account for the Company's stock-based employee compensation in accordance
with Accounting  Principles  Board Opinion ("APB") No. 25,  Accounting for Stock
Issued to  Employees  and its  various  interpretations.  Under  APB No.  25, no
compensation cost is generally  recognized for fixed stock options for which the
exercise  price is not less than the market price of the Company's  common stock
on the grant date.

     Employee  benefit  plans.  Accounting  and funding  policies for retirement
plans and postretirement  benefits other than pensions ("OPEB") are described in
Note 15.

     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  $2.6 million in each of 2001 and 2000 and $2.5
million in 1999. Related engineering and  experimentation  costs associated with
ongoing commercial production are recorded as cost of sales.

                                      F-10

<PAGE>

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

     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 Note 17.

     Income taxes. Deferred income tax assets and liabilities are recognized for
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
14.

     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 gain of $.1 million in
2001 and net losses of $1.1 million in 2000 and $1.2 million in 1999.

     Revenue recognition. Sales revenue is generally recognized when the Company
has  certified  that its  product  meets the  related  customer  specifications,
products  have  been  shipped,  and title  and  substantially  all the risks and
rewards of ownership pass to the customer. 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
2001 or at December 31,  2001,  and the adoption of SFAS No. 133 had no material
effect on the Company's results of operations,  consolidated  financial position
or liquidity.

                                      F-11

<PAGE>

     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
marketable and, accordingly,  quoted market prices are unavailable.  The Company
has  estimated  the fair value of these  securities  to be  approximately  $27.5
million at  December  31,  2001.  However,  the amount  the  Company  ultimately
realizes from this  investment  could vary  significantly  from  estimated  fair
value. See Note 4.

     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.

     Accounting  principles  not  yet  adopted.  In  July  2001,  the  Financial
Accounting  Standards  Board  ("FASB")  issued SFAS No. 142,  Goodwill and Other
Intangible  Assets.  The Company will adopt SFAS 142 effective  January 1, 2002.
Under SFAS 142,  goodwill will not be amortized on a periodic basis, but instead
will be subject to a two-step  impairment  test to be  performed  on at least an
annual basis. The Company anticipates  adoption of this standard will reduce its
amortization expense commencing on January 1, 2002; however,  impairment reviews
may also result in future  periodic  write-downs.  The Company will complete its
initial  goodwill  impairment  analysis under the new standard during 2002, with
the  completion of the first step by June 30, 2002.  If any goodwill  impairment
under  the new  standard  is  determined  to  exist,  such  impairment  would be
recognized as a cumulative  effect of a change in accounting  principle no later
than December 31, 2002, as provided by the transition  requirements  of SFAS No.
142. For the year ended  December 31, 2001,  the Company  recorded  amortization
expense of approximately $4.5 million relating to its goodwill.  The Company, at
this time,  cannot  reasonably  estimate the impact of SFAS 142 on its financial
statements.  However,  it  is  possible  that  SFAS  142  could  result  in  the
determination  that goodwill or other intangible  assets are impaired and result
in a material charge in 2002.

                                      F-12

<PAGE>

     In 2001,  the 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  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.  The  Company is still  studying  this
standard to determine,  among other things,  whether it has any asset retirement
obligations that are covered under the scope of SFAS No. 143, and the effect, if
any, to the Company of adopting this standard has not yet been  determined.  The
Company will implement SFAS No. 143 no later than January 1, 2003.

     Impact of recent  events  including  September  11, 2001.  On September 11,
2001,  the  United  States  was the  target  of  terrorist  attacks  that  had a
significant  adverse  effect on the  global  economy  and  commercial  aerospace
industry.  The Company  estimates  that  approximately  two-thirds  of its sales
revenue in 2001 was  derived  from this  sector  and,  accordingly,  the Company
expects to see a substantial near-term decline in its business.

     The Company also understands that a significant  portion of SMC's sales are
to the  commercial  aerospace  industry and,  therefore,  SMC's  business may be
adversely impacted by the terrorist attacks. SMC notified the Company in October
2001 of its intention to again defer payment of dividends on the SMC convertible
preferred  securities  held by the Company  effective  with the  dividend due on
October 28, 2001. The Company  believes such dividends are likely to be deferred
indefinitely. The Company believes SMC has a significant amount of debt relative
to its near term potential  earnings and cash flow and that a refinancing and/or
restructuring  of its capital,  or some portion thereof,  is necessary.  SMC has
indicated that it may violate  certain bank covenants  early in 2002 and that it
is considering strategic and financial options, including efforts to restructure
and/or  modify  the  terms  of  its  debt   agreements.   Such  efforts  include
negotiations  with the  Company  to  modify  the  terms  of the SMC  convertible
preferred  securities held by the Company and/or exchange,  in whole or in part,
such preferred securities for common stock, other securities or other assets.

     Accordingly,  during the fourth quarter of 2001,  the Company  undertook an
assessment of the impact of these events and any potential charges that might be
appropriate for asset impairments,  increases in valuation  allowances and other
similar items. As a result of such  assessment,  the Company  recorded a pre-tax
impairment charge related to its investment in SMC of $61.5 million (see Note 4)
and  increased  its  deferred  tax  valuation  allowance  related to  previously
recorded  U.S. net deferred  tax assets  resulting in a charge of $12.3  million
(see Note 14). The  Company's  assessment  identified  no other  impairments  at
December 31, 2001,  however,  see  discussion  of SFAS No. 142 under  Accounting
principles not yet adopted.

                                      F-13

<PAGE>

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
products  it  collectively  refers to as  "Other",  such as sponge  which is not
suitable  for  internal  consumption,   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,  the Company's only segment in 2001
and 2000,  and its  principal  segment in 1999.  In 1999,  the  "Other"  segment
consisted of the Company's  investment in  nonintegrated  joint ventures,  which
have been either sold or charged off due to an asset impairment.

     Sales, gross margin, operating income (loss), inventory and receivables are
the key management measures used to evaluate segment performance, both including
and excluding the effect of special items.  Segment  operating  income (loss) is
defined as income (loss) before income taxes and minority interest, exclusive of
interest expense and certain general corporate income and expense items.

                                      F-14

<PAGE>

<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
                                                               -------------------------------------------------------
                                                                    2001                2000               1999
                                                               ----------------    ---------------    ----------------
                                                                    ($ in thousands, except selling price data)
<S>                                                            <C>                 <C>                <C>
Operating Segments:
  Net sales:
    Titanium melted and mill products:
      Mill product net sales                                   $     363,257       $    326,319       $     376,200
      Melted product net sales                                        64,063             47,366              35,500
      Other                                                           59,615             53,113              68,329
                                                               ----------------    ---------------    ----------------
                                                               $     486,935       $    426,798       $     480,029
                                                               ================    ===============    ================
  Gross margin:
    Titanium melted and mill products                          $      39,892       $      3,881       $      25,523
    Other                                                               -                  -                   -
                                                               ----------------    ---------------    ----------------
                                                               $      39,892       $      3,881       $      25,523
                                                               ================    ===============    ================
  Operating income (loss):
    Titanium melted and mill products                          $      64,480       $    (41,715)      $     (27,746)
    Other                                                                 -                  65              (3,687)
                                                               ----------------    ---------------    ----------------
                                                                      64,480            (41,650)            (31,433)
  Dividends and interest income                                        5,460              6,154               6,034
  General corporate income (expense), net                            (61,409)                67              (1,246)
  Interest expense                                                    (4,060)            (7,704)             (7,093)
                                                               ----------------    ---------------    ----------------
  Income (loss) before income taxes, minority
    Interest and extraordinary item                            $       4,471       $    (43,133)      $     (33,738)
                                                               ================    ===============    ================
  Mill product shipments:
    Volume (metric tons)                                              12,180             11,370              11,400
    Average price ($ per Kilogram)                             $       29.80       $      28.70       $       33.00

  Melted product shipments:
    Volume (metric tons)                                               4,415              3,470               2,500
    Average price ($ per Kilogram)                             $       14.50       $      13.65       $       14.20

</TABLE>
                                      F-15

<PAGE>

<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                               -------------------------------------------------------
                                                                     2001                2000               1999
                                                               ----------------    ---------------    ----------------
                                                                                   (In thousands)
<S>                                                            <C>                 <C>                <C>
Depreciation and amortization:
  Titanium melted and mill products                            $      40,134       $     41,942       $      42,693
                                                               ================    ===============    ================
Capital expenditures:
  Titanium melted and mill products                            $      16,124       $     11,182       $      24,771
  Other                                                                 -                  -                      1
                                                               ----------------    ---------------    ----------------
                                                               $      16,124       $     11,182       $      24,772
                                                               ================    ===============    ================
Equity in earnings (losses) of joint ventures:
  Titanium melted and mill products                            $       2,515       $       (865)      $         549
  Other                                                                 -                  -                 (2,258)
                                                               ----------------    ---------------    ----------------
                                                               $       2,515       $       (865)      $      (1,709)
                                                               ================    ===============    ================
Accounts receivable:
  Titanium melted and mill products                            $      83,347       $     75,913       $     105,654
  Other                                                                 -                  -                    550
                                                               ----------------    ---------------    ----------------
                                                               $      83,347       $     75,913       $     106,204
                                                               ================    ===============    ================
Inventories:
  Titanium melted and mill products                            $     185,052       $    148,384       $     191,599
  Eliminations                                                          -                  -                    (64)
                                                               ----------------    ---------------    ----------------
                                                               $     185,052       $    148,384       $     191,535
                                                               ================    ===============    ================
Investment in joint ventures:
  Titanium melted and mill products                            $      20,585       $     18,136       $      21,143
  Other                                                                 -                  -                  5,795
                                                               ----------------    ---------------    ----------------
                                                               $      20,585       $     18,136       $      26,938
                                                               ================    ===============    ================
Total assets:
  Titanium melted and mill products                            $     699,383       $    759,146       $     876,760
  Other                                                                 -                  -                  6,345
                                                               ----------------    ---------------    ----------------
                                                               $     699,383       $    759,146       $     883,105
                                                               ================    ===============    ================
</TABLE>


                                      F-16

<PAGE>

<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                               -------------------------------------------------------
                                                                    2001                2000               1999
                                                               ----------------    ---------------    ----------------
                                                                                   (In thousands)
<S>                                                            <C>                 <C>                <C>
Geographic segments:
  Net sales - point of origin:
    United States                                              $    399,708        $    345,370       $    365,652
    United Kingdom                                                  139,210             139,599            160,765
    Other Europe                                                     70,079              74,432             89,433
    Eliminations                                                   (122,062)           (132,603)          (135,821)
                                                               ----------------    ---------------    ----------------
                                                               $    486,935        $    426,798       $    480,029
                                                               ================    ===============    ================
  Net sales - point of destination:
    United States                                              $    247,410        $    234,350       $    239,797
    Europe                                                          188,729             163,661            203,858
    Other                                                            50,796              28,787             36,374
                                                               ----------------    ---------------    ----------------
                                                               $    486,935        $    426,798       $    480,029
                                                               ================    ===============    ================
  Long-lived assets - property and equipment, net:
    United States                                              $    208,069        $    227,994       $    246,744
    United Kingdom                                                   62,463              69,212             81,607
    Other Europe                                                      4,776               4,924              5,414
                                                               ----------------    ---------------    ----------------
                                                               $    275,308        $    302,130       $    333,765
                                                               ================    ===============    ================
</TABLE>

     Export sales from U.S. based  operations  approximated $37 million in 2001,
$24 million in 2000 and $35 million in 1999.

     During the past three years, the Company recorded pre-tax restructuring and
other special charges (income) to segment operating income (loss). See Note 13.

                                      F-17

<PAGE>


Note 3 - Investment in joint ventures

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                                --------------------------------------
                                                                                      2001                 2000
                                                                                -----------------    -----------------
                                                                                           (In thousands)
<S>                                                                             <C>                  <C>

Joint ventures:
   VALTIMET                                                                     $      20,214        $      17,719
   Other                                                                                  371                  417
                                                                                -----------------    -----------------

                                                                                $      20,585        $      18,136
                                                                                =================    =================
</TABLE>

     VALTIMET SAS  ("VALTIMET")  is a manufacturer  of welded  stainless  steel,
copper,  nickel and titanium tubing with operations in the United States, France
and China.  At December  31, 2001,  VALTIMET was owned 43.7% by TIMET,  51.3% by
Valinox  Welded,  a French  manufacturer  of welded  tubing,  and 5% by Sumitomo
Metals  Industries,  Ltd., a Japanese  manufacturer of steel  products.  For the
years  ended  December  31,  2001,  2000 and 1999,  VALTIMET  reported  sales of
approximately $80 million,  $67 million and $71 million,  respectively,  and net
income of $4.3 million, a net loss of $.2 million and net income of $.5 million,
respectively.  As of year-end 2001 and 2000,  VALTIMET  reported total assets of
$62.0 million and $66.9 million,  respectively,  and equity of $35.5 million and
$28.8 million, respectively. At December 31, 2001 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 $5.3 million, and
is principally  attributable  to the difference  between the carrying amount and
fair value of fixed assets  initially  contributed by TIMET.  This difference is
being  amortized over 15 years and reduces  (increases)  the amount of equity in
earnings  (losses)  that  the  Company  reports  related  to its  investment  in
VALTIMET.

     In 1998,  the Company  completed a series of  strategic  transactions  with
Wyman-Gordon  Company  ("Wyman-Gordon").  The principal  components were (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 facility, 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 pretax gain of approximately $1.2 million.

     TIMET's  strategy  for  developing  new markets and uses for  titanium  has
included  providing funds to third parties to potentially prove out new uses for
titanium. Other joint ventures in 2001 and 2000 consist primarily of investments
in outside providers of certain testing services.  In 1999, the Company recorded
a $2.3 million special charge to earnings associated with the write-downs of the
Company's investment in certain of these start-up joint ventures.


                                      F-18

<PAGE>

Note 4 - Preferred securities of Special Metals Corporation

     The Company has invested $80 million in  non-voting  convertible  preferred
securities  of  Special  Metals  Corporation,  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 NASDAQ  under the symbol
"SMCX" and had a quoted  market  price on December  31, 2001 of $2.58 per share.
From October 1998 through December 1999,  dividends on the 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 due the
Company were not paid. As of December 31, 2000,  accrued  dividends and interest
due the Company  were  approximately  $8.1  million.  On October 11,  2001,  the
Company  was  notified  by SMC of its  intention  to again  defer the payment of
dividends effective with the dividend due on October 28, 2001.

     The  SMC   convertible   preferred   securities  are  not  marketable  and,
accordingly,  quoted market prices are unavailable. The Company understands that
a significant  portion of SMC's sales are to the commercial  aerospace industry,
and,  therefore,  SMC's  business  may be  adversely  impacted by the  terrorist
attacks of  September  11, 2001.  The Company  believes  SMC's  dividends on its
convertible  preferred  securities are likely to be deferred  indefinitely.  The
Company believes SMC has a significant  amount of debt relative to its near term
potential earnings and cash flow and that a refinancing and/or  restructuring of
its capital,  or some portion thereof,  is necessary.  SMC has indicated that it
may violate  certain  bank  covenants  early in 2002 and that it is  considering
strategic and financial options,  including efforts to restructure and/or modify
the terms of certain debt agreements. Such efforts include negotiations with the
Company to modify the terms of the SMC convertible  preferred securities held by
the Company and/or  exchange,  in whole or in part, such  convertible  preferred
securities for common stock, other securities or other assets.

     Because of these and other factors,  the Company undertook an assessment in
the fourth  quarter of 2001,  with the assistance of an outside  expert,  of its
investment  in SMC.  That  assessment  indicated  that it was unlikely  that the
Company would  recover its then  existing  carrying  amount,  including  accrued
dividends and interest,  of the SMC preferred  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 estimate of fair value of these
securities  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 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.  The  amount  the  Company  ultimately
recovers  from its  investment  in SMC, if any,  could vary  significantly  from
estimated fair value.

                                      F-19

<PAGE>

Note 5 - Inventories

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                                --------------------------------------
                                                                                      2001                 2000
                                                                                -----------------    -----------------
                                                                                           (In thousands)
<S>                                                                             <C>                  <C>
Raw materials                                                                   $     43,863         $     31,127
Work-in-process                                                                       94,709               74,631
Finished products                                                                     54,074               53,685
Supplies                                                                              13,476               14,991
                                                                                -----------------    -----------------
                                                                                     206,122              174,434
Less adjustment of certain
  inventories to LIFO basis                                                           21,070               26,050
                                                                                -----------------    -----------------

                                                                                $    185,052         $    148,384
                                                                                =================    =================
</TABLE>

Note 6 - Intangible and other noncurrent assets

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                               ---------------------------------------
                                                                                     2001                  2000
                                                                               ------------------    -----------------
                                                                                           (In thousands)

<S>                                                                            <C>                   <C>
Intangible assets:
  Patents                                                                      $      13,405         $      13,521
  Covenants not to compete                                                             8,353                 8,500
                                                                               ------------------    -----------------
                                                                                      21,758                22,021
  Less accumulated amortization                                                       15,120                12,452
                                                                               ------------------    -----------------
                                                                                       6,638                 9,569
  Intangible pension assets                                                            3,198                 3,689
                                                                               ------------------    -----------------
                                                                               $       9,836         $      13,258
                                                                               ==================    =================
Other noncurrent assets:
  Deferred financing costs                                                     $       8,212         $       9,194
  Notes receivable from officers                                                         163                   544
  Prepaid pension cost                                                                 4,006                 1,359
  Other                                                                                  720                 1,059
                                                                               ------------------    -----------------
                                                                               $      13,101         $      12,156
                                                                               ==================    =================
</TABLE>


                                      F-20

<PAGE>

Note 7 - Property and equipment, net

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                               ---------------------------------------
                                                                                       2001                  2000
                                                                               ------------------    -----------------
                                                                                           (In thousands)
<S>                                                                            <C>                   <C>
Land                                                                           $       6,138         $       6,158
Buildings                                                                             36,574                37,593
Information technology systems                                                        55,112                54,426
Manufacturing and other                                                              300,315               305,856
Construction in progress                                                              11,631                 8,811
                                                                               ------------------    -----------------
                                                                                     409,770               412,844
Accumulated depreciation                                                            (134,462)             (110,714)
                                                                               ------------------ -- -----------------
                                                                               $     275,308         $     302,130
                                                                               ==================    =================
</TABLE>

     In 2001, the Company  recorded $10.8 million in special  charges to cost of
sales  for  the   impairment   of  certain   equipment   located  in   Millbury,
Massachusetts,  which  was  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  represents  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 $3.5 million in special  charges to cost of
sales for the impairment of certain equipment.

Note 8 - Accrued liabilities

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                                --------------------------------------
                                                                                      2001                 2000
                                                                                -----------------    -----------------
                                                                                           (In thousands)
<S>                                                                            <C>                   <C>
OPEB cost                                                                       $       2,969        $       3,129
Pension cost                                                                              555                1,251
Accrued profit sharing                                                                  6,077                  980
Other employee benefits                                                                14,616               14,140
Deferred income                                                                           325                2,558
Environmental costs                                                                       654                  818
Restructuring costs                                                                       198                1,012
Accrued tungsten costs                                                                  2,743                 -
Taxes, other than income                                                                4,867                3,593
Accrued dividends on Convertible Preferred Securities                                   1,111                 -
Other                                                                                   7,684                6,524
                                                                                -----------------    -----------------

                                                                                $      41,799        $      34,005
                                                                                =================    =================
</TABLE>

                                      F-21

<PAGE>

     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 cost of sales on this
product  were not  recognized  in 1999.  Approximately  $2.5  million  and $13.4
million  of  this  deferred   income  was  recognized   during  2001  and  2000,
respectively.  As of December  31,  2001,  pretax  income of  approximately  $.1
million from the remaining material stored at the Company's  facilities has been
deferred until the related sale is recorded.

Note 9 - Notes payable, long-term debt and capital lease obligations

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2001                  2000
                                                                               ------------------    -----------------
                                                                                           (In thousands)
<S>                                                                            <C>                   <C>
Notes payable:
  U.S. credit agreement                                                        $          30         $      19,893
  European credit agreements                                                           1,492                 4,219
                                                                               ------------------    -----------------
                                                                               $       1,522         $      24,112
                                                                               ==================    =================
Long-term debt:
  Bank credit agreement - U.K.                                                 $      10,712         $      20,263
  Other                                                                                  172                   514
                                                                               ------------------    -----------------
                                                                                      10,884                20,777
  Less current maturities                                                                172                 1,824
                                                                               ------------------    -----------------
                                                                               $      10,712         $      18,953
                                                                               ==================    =================

Capital lease obligations                                                      $       8,938         $       8,829
  Less current maturities                                                                340                   187
                                                                               ------------------    -----------------
                                                                               $       8,598         $       8,642
                                                                               ==================    =================
</TABLE>

                                      F-22

<PAGE>

     Long-term bank credit agreements. In 2000, the Company completed a new $125
million, U.S. asset-based revolving credit agreement replacing its previous U.S.
bank  credit  facility.   Borrowings  under  this  facility  are  limited  to  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  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. Excess  availability is defined
as borrowing  availability less certain contractual  commitments such as letters
of credit.  At December 31, 2001,  excess  availability  was $115  million.  The
Company's U.S. credit  agreement  allows the lender to modify the borrowing base
formulas  at its  discretion,  subject to certain  conditions.  In the event the
lender  exercised this discretion,  such event could have a significant  adverse
effect on the Company's  borrowing  availability.  Borrowings  outstanding under
this U.S.  facility are  classified  as a current  liability.  Unused  borrowing
availability  under this agreement at December 31, 2001 was  approximately  $117
million.  The credit agreement expires in February 2003; however, the Company is
currently  negotiating  with its  lender to  extend  the  maturity  date of this
agreement on substantially similar terms.

     The Company's subsidiary,  TIMET UK, has a credit agreement that includes a
revolving  and  term  loan  facility  and  an  overdraft   facility  (the  "U.K.
facilities").   During  2000,   aggregate  borrowing  capacity  under  the  U.K.
facilities was increased from (pound)18 million to (pound)30 million. Borrowings
under the U.K.  facilities can be in various currencies  including U.S. dollars,
British pounds 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.
The U.K. overdraft facility is subject to annual review in February of each year
and was extended in February 2002. The U.K.  facilities expire in February 2005.
As of December 31, 2001,  the  outstanding  balance of the U.K.  facilities  was
approximately  $11 million with unused  borrowing  availability of approximately
$31 million.

     The Company also has  overdraft  and other credit  facilities at certain of
its other European  subsidiaries.  These  facilities  accrue interest at various
rates,  are  payable on demand and have a combined  outstanding  balance of $1.5
million as of December 31, 2001.  Unused  borrowing  availability as of December
31, 2001 under these facilities was approximately $14 million.

     Borrowings  under the above U.S. and U.K.  credit  agreements  in 2000 were
used to repay the $58 million in then-outstanding borrowings under the Company's
prior  U.S.  credit  agreement,  which was  terminated.  In 2000,  the  deferred
financing costs associated with the previous U.S.  facility were written off and
reflected  as an  extraordinary  item of $.9 million  after  taxes,  or $.03 per
share.

     The weighted  average interest rate on borrowings  outstanding  under U.S.,
U.K. and other European credit agreements at December 31, 2001 was 5.25%,  3.56%
and 3.54%, respectively.

                                      F-23

<PAGE>

     Capital  lease  obligations.  Certain  of  the  Company's  U.K.  production
facilities are under thirty year leases  expiring in 2026. The U.K.  rentals 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  French  subsidiary,   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. Assets held
under capital  leases  included in buildings were $8.5 million and $8.7 million,
and assets  included in equipment were $1.5 million and $1.0 million at December
31, 2001 and 2000, respectively.  The related aggregate accumulated depreciation
was $2.4 million and $1.9 million at December 31, 2001 and 2000, respectively.

     Aggregate maturities of long-term debt and capital lease obligations:

<TABLE>
<CAPTION>
                                                                                    Capital             Long-term
                                                                                     Leases                Debt
                                                                                -----------------    -----------------
                                                                                           (In thousands)
<S>                                                                             <C>                  <C>
Years ending December 31,
   2002                                                                         $       1,174        $         172
   2003                                                                                 1,156                 -
   2004                                                                                 1,085               10,712
   2005                                                                                   953                 -
   2006                                                                                   914                 -
   2007 and thereafter                                                                 16,348                 -
   Less amounts representing interest                                                 (12,692)                -
                                                                                -----------------    -----------------

                                                                                $       8,938        $      10,884
                                                                                =================    =================
</TABLE>

Note 10 - 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 1.339  shares of
common stock per Convertible  Preferred  Security (an equivalent price of $37.34
per share), for an aggregate of approximately 5.4 million common shares if fully
converted.

                                      F-24

<PAGE>

     The  Convertible  Preferred  Securities  mature  December  2026  and do not
require  principal  amortization.   The  Convertible  Preferred  Securities  are
redeemable  at the  Company's  option,  currently at  approximately  104% of the
principal  amount  declining to 100%  subsequent to December 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. In April 2000, the Company exercised its right to defer future dividend
payments  on the  Convertible  Preferred  Securities  for a  period  of up to 10
quarters  (subject to possible  further  extension  for up to an  additional  10
quarters),  although  interest  continued  to accrue at the  coupon  rate on the
principal and unpaid  dividends.  During the second quarter of 2001, the Company
resumed payment of dividends on these securities and made the scheduled  payment
of $3.3  million  due on June 1,  2001.  The  Company  also paid the  previously
deferred  aggregate  dividends of $13.9  million on that date.  Based on limited
trading  data,  the  fair  value of the  Convertible  Preferred  Securities  was
approximately $70 million at December 31, 2001.

     Dividends  on the  Convertible  Preferred  Securities  are  reported in the
Consolidated  Statements of Operations  as minority  interest,  net of allocable
income tax  benefits in 2000 and 1999.  In 2001,  such  dividends  also  reflect
changes in related  valuation  allowances.  Accrued dividends on the Convertible
Preferred  Securities are reflected as current  liabilities in the  consolidated
balance sheet at December 31, 2001.

     Other.  Other minority interest relates  principally to TIMET Savoie, a 70%
owned  consolidated  French  subsidiary.  This amount is  reflected  as minority
interest on the Company's  Consolidated Balance Sheet. The Company has the right
to purchase from Compagnie  Europeene du Zirconium-CEZUS,  S.A.  ("CEZUS"),  the
holder of the remaining 30% interest, CEZUS' interest in TIMET Savoie for 30% of
TIMET  Savoie's  equity  determined  under  French  accounting  principles,   or
approximately  $8.9 million as of December 31, 2001. CEZUS has the right to sell
its interest in TIMET Savoie to the Company for 30% of TIMET Savoie's registered
capital, or approximately $.7 million as of December 31, 2001.

Note 11 - Stockholders' equity

     Preferred  stock.  The Company is authorized to issue one million shares of
preferred stock. The Board of Directors determines the rights of preferred stock
as to, among other things, dividends, liquidation,  redemption, conversions, and
voting rights.

     Common stock. The Company's U.S. credit  agreement,  as amended,  prohibits
the payment of common stock  dividends,  except under specified  conditions (see
Note 9).

     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.

                                      F-25

<PAGE>

     During 2000, the Company awarded 467,500 shares of TIMET restricted  common
stock,  under the Incentive Plan, to certain  officers and employees.  No shares
were awarded during 2001. 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 2001,  41,000
shares of restricted  stock were  forfeited.  The market value of the restricted
stock awards was  approximately  $2.0  million on the date of grant  ($4.375 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 $.5 million in 2001 and $.7
million in 2000.

     Additionally,  a separate plan (the  "Director  Plan")  provides for annual
grants to eligible non-employee directors of options to purchase 5,000 shares of
the Company's  common stock (1,500 prior to 1999) 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 1,000  shares  of common  stock  (500  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).

     The weighted average remaining life of options  outstanding at December 31,
2001 was 6.1 years (2000 - 7.2  years).  At December  31,  2001,  2000 and 1999,
options  to  purchase  approximately   896,000,   662,000  and  431,000  shares,
respectively,  were exercisable at average exercise prices of $23.80, $25.75 and
$25.85,  respectively.  Options to purchase 294,000 shares become exercisable in
2002. In February 2001, the Director Plan was amended to authorize an additional
200,000  shares  for  future  grants  under such plan.  At  December  31,  2001,
approximately 1.2 million shares and .2 million shares were available for future
grant under the Incentive Plan and the Director Plan, respectively.

                                      F-26

<PAGE>

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

<TABLE>
<CAPTION>
                                                                          Amount
                                                                          payable          Weighted        Weighted
                                                        Exercise           upon           average        average fair
                                                        price per         exercise         exercise        value at
                                         Shares           share         (thousands)         price         grant date
                                     -------------    -------------    -------------    -------------    -------------
<S>                                    <C>            <C>              <C>              <C>              <C>
Outstanding at December 31, 1998       1,217,700      $23.00-35.31     $   34,686       $    28.48

Granted:
  At market                              433,000         7.38-7.97          3,445             7.96       $     3.98
  Above market                           206,000         8.97-9.97          1,951             9.47             3.59
Canceled                                (118,500)       7.97-35.31         (3,023)           25.51
                                     -------------    -------------    -------------    -------------

Outstanding at December 31, 1999       1,738,200       $7.38-35.31     $   37,059       $    21.32

Granted:
  At market                               25,000              3.94             98             3.94       $     1.99
  Above market                           250,000        7.00-11.00          2,150             8.60             1.53
Canceled                                (361,700)       7.97-35.31         (7,285)           20.14
                                     -------------    -------------    -------------    -------------

Outstanding at December 31, 2000       1,651,500      $3.94-$35.31     $   32,022       $     9.39

Granted:
  At market                               30,000        3.60-14.21            362            12.07       $     8.11
  Above market                              -               -                -                -
Canceled                                (148,402)       7.97-35.31         (2,427)           16.35
                                     -------------    -------------    -------------    -------------

Outstanding at December 31, 2001       1,553,098       $3.60-35.31     $   29,957       $    19.54
                                     =============    =============    =============    =============
</TABLE>

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

<TABLE>
<CAPTION>
                                                                    2001                2000               1999
                                                               ----------------    ----------------   ----------------
<S>                                                                  <C>                 <C>                <C>
Assumptions at date of grant:
  Expected life (years)                                                 7                   6                  6
  Risk-free interest rate                                            3.44%               4.95%              5.14%
  Volatility                                                           68%                 45%                45%
  Dividend yield                                                        0%                  0%                 0%

</TABLE>

     Had stock-based  compensation  cost been determined  based on the estimated
fair values of options granted and recognized as  compensation  expense over the
vesting period of the grants in accordance  with SFAS No. 123, the Company's net
loss and loss per share would have been  increased  in 2001 by $1.9  million and
$.06 per  share,  respectively,  in 2000 by $2.0  million  and  $.06 per  share,
respectively, and in 1999 by $3.1 million and $.10 per share, respectively.

                                      F-27

<PAGE>

Note 12 - Other income and other expense

<TABLE>
<CAPTION>
                                                                                   Years Ended December 31,
                                                                         ----------------------------------------------
                                                           Reference         2001            2000             1999
                                                         ------------    -------------    ------------    -------------
                                                                                         (In thousands)
<S>                                                        <C>           <C>              <C>             <C>
Other income:
  Dividends and interest income                                          $    5,460       $    6,154      $    6,034
  Boeing settlement, net                                   Note 17           73,000 (1)         -               -
  Gain on sale of castings joint venture                   Note 3              -               1,205            -
  Foreign exchange gain (loss)                                                   92           (1,085)         (1,235)
  Gain on termination of UTSC agreement                    Note 16             -               2,000            -
  Other                                                                         658              103             153
                                                                         -------------    ------------    -------------

                                                                         $   79,210       $    8,377      $    4,952
                                                                         =============    ============    =============

Other expense:
  Impairment of investment in SMC                          Note 4        $   61,519       $     -         $     -
  Impairment of investment in joint ventures               Note 3              -                -              2,328
                                                                         -------------    ------------    -------------

                                                                         $   61,519       $     -         $    2,328
                                                                         =============    ============    =============
<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>

Note 13 - Restructuring and special charges

     In 2000 and  1999,  the  Company  implemented  plans  designed  to  address
then-current market and operating conditions, which resulted in recognizing $2.8
million  and  $4.5   million  of   restructuring   charges  in  2000  and  1999,
respectively.  During 2000,  the Company  terminated  approximately  170 people,
primarily in its manufacturing  operations,  as part of its restructuring plans.
The 1999 plan  included  the  disposition  of one plant  and  termination  of an
aggregate of 100 people,  or  approximately  4% of TIMET's  worldwide  workforce
prior  to  the  1999  restructuring.   The  components  of  the  2000  and  1999
restructuring charges are summarized in the following table.

<TABLE>
                                                          2000 Plan                           1999 Plan
                                              ----------------------------------   ---------------------------------
                                                           Segment                             Segment
                                              ----------------------------------   ---------------------------------
                                                 Titanium                             Titanium
                                                  Melted                               Melted
                                                 and Mill                             And Mill
                                                 Products            Other            Products            Other
                                              ---------------    ---------------   ---------------    --------------
                                                                          (In millions)
<S>                                           <C>                <C>               <C>                <C>
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                -
Other exit costs, principally
  related to leased facilities                    (0.2)               -                 -                 (0.2)
                                              ---------------    ---------------   ---------------    --------------

                                              $    2.8           $    -            $    4.7           $   (0.2)
                                              ===============    ===============   ===============    ==============
</TABLE>

                                      F-28

<PAGE>

     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 of employees terminated and
curtailment of pension and OPEB liabilities.

     Payments  applied  against the accrued  costs related to the 2000 plan were
$.5  million  and $2.6  million  during  2001 and 2000,  respectively.  Payments
applied  against the accrued costs related to the 1999 plan were $.1 million and
$.7 million during 2001 and 2000, respectively.

     At December 31, 2001, the remaining balance of accrued  restructuring costs
related to the 2000 and 1999 plans was $.2 million,  consisting of approximately
$.1 million  under each plan  related to  personnel  severance  and benefits for
terminated  employees.  The Company expects to pay the remaining  balance of the
accrued costs under the 2000 and 1999 restructuring plans by mid-2002.

     In 2001,  the Company  recorded  income of $.2 million  related to the 2000
plan for  revisions  to estimates of the  previously  established  restructuring
accruals.

     The following table summarizes  pre-tax  restructuring  and special charges
(income) recorded by the Company during the past three years:

<TABLE>
<CAPTION>
                                                                                   Year ended December 31,
                                                                        -----------------------------------------------
                                                          Reference          2001             2000             1999
                                                        ------------    -------------    -------------    -------------
                                                                                        (In thousands)
<S>                                                      <C>            <C>              <C>              <C>
Restructuring items                                                     $     (220)      $    2,805       $     4,506
Special items:
  Boeing settlement, net                                 Note 17           (66,818) (1)        -                 -
  Impairment charges:
    Property and equipment                               Note 7             10,840            3,467              -
    Joint ventures                                       Note 3               -                -                2,328
  Environmental remediation charge                       Note 17              -               3,262              -
  Tungsten inclusion charge                              Note 17             3,269             -                 -
  Termination of UTSC agreement                          Note 16              -              (2,000)             -
                                                                        -------------    -------------    -------------

Net total - operating income                                               (52,929)           7,534             6,834

Impairment of investment in SMC                          Note 4             61,519             -                 -
Gain on sale of castings joint venture                   Note 3               -              (1,205)             -
                                                                        -------------    -------------    -------------

Net total - other expense (income)                                          61,519           (1,205)             -
                                                                        -------------    -------------    -------------

Net total - pre-tax charges                                             $    8,590       $    6,329       $     6,834
                                                                        =============    =============    =============
<FN>
--------------------------------------------------------------------------------
(1)  The Boeing  settlement  includes cash received from Boeing at settlement of
     $82.0  million  less  legal  fees  of $9.0  million  and  related  employee
     incentive compensation of $6.2 million.
</FN>
</TABLE>

                                      F-29
<PAGE>

Note 14 - Income taxes

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

<TABLE>
<CAPTION>
                                                                              Year ended December 31,
                                                               -------------------------------------------------------
                                                                    2001                2000               1999
                                                               ----------------    ----------------   ----------------
                                                                                   (In thousands)
<S>                                                            <C>                 <C>                <C>
Pre-tax income (loss):
  U.S.                                                         $    (6,719)        $   (42,830)       $   (30,485)
  Non-U.S.                                                          11,190                (303)            (3,253)
                                                               ----------------    ----------------   ----------------

                                                               $     4,471         $   (43,133)       $   (33,738)
                                                               ================    ================   ================

Expected income tax expense (benefit), at 35%                  $     1,565         $   (15,097)       $   (11,809)
Non-U.S. tax rates                                                     521               1,121                893
U.S. state income taxes, net                                           307                   8             (1,705)
Dividends received deduction                                        (1,110)             (1,367)            (1,382)
Export sales credit                                                   (462)               -                  -
Adjustment of deferred tax valuation allowance                      30,102                  49              1,869
Other, net                                                             189                 189                113
                                                               ----------------    ----------------   ----------------

                                                               $    31,112         $   (15,097)       $   (12,021)
                                                               ================    ================   ================
Income tax expense (benefit):
  Current income taxes (benefit):
     U.S.                                                      $       787         $      (548)       $   (11,225)
     Non-U.S.                                                        3,503               2,696               (332)
                                                               ----------------    ----------------   ----------------
                                                                     4,290               2,148            (11,557)
                                                               ----------------    ----------------   ----------------
  Deferred income taxes (benefit):
     U.S.                                                           26,061             (15,612)            (1,850)
     Non-U.S.                                                          761              (1,633)             1,386
                                                               ----------------    ----------------   ----------------
                                                                    26,822             (17,245)              (464)
                                                               ----------------    ----------------   ----------------

                                                               $    31,112         $   (15,097)       $   (12,021)
                                                               ================    ================   ================
Comprehensive tax provision (benefit) allocable to:
  Pre-tax income (loss)                                        $    31,112         $   (15,097)       $   (12,021)
  Minority interest - Convertible Preferred Securities                -                 (4,675)            (4,666)
  Extraordinary item                                                  -                   (470)              -
  Stockholders' equity, including amounts allocated
     to other comprehensive income                                  (4,834)             (1,057)               205
                                                               ----------------    ----------------   ----------------

                                                               $    26,278         $   (21,299)       $   (16,482)
                                                               ================    ================   ================
</TABLE>

                                      F-30

<PAGE>

<TABLE>
<CAPTION>
                                                                                  December 31,
                                                           -----------------------------------------------------------
                                                                      2001                            2000
                                                           ----------------------------    ---------------------------
                                                             Assets        Liabilities       Assets       Liabilities
                                                           ------------    ------------    -----------    ------------
                                                                                 (In millions)
<S>                                                        <C>             <C>             <C>            <C>
Temporary differences relating to net assets:
  Inventories                                              $     0.3       $    (6.6)      $     0.4      $    (5.2)
  Property and equipment, including software                     -             (25.6)            -            (30.0)
  Accrued OPEB cost                                              9.0             -               9.7            -
  Accrued liabilities and other deductible differences          33.1             -              12.3            -
  Other taxable differences                                      -              (9.5)            -             (8.2)
Tax loss and credit carryforwards                               31.5             -              40.4            -
Valuation allowance                                            (37.4)            -              (1.9)           -
                                                           ------------    ------------    -----------    ------------
Gross deferred tax assets (liabilities)                         36.5           (41.7)           60.9          (43.4)
Netting                                                        (36.1)           36.1           (32.7)          32.7
                                                           ------------    ------------    -----------    ------------
Total deferred taxes                                             0.4            (5.6)           28.2          (10.7)
Less current deferred taxes                                      0.4            (0.1)            0.4           (1.1)
                                                           ------------    ------------    -----------    ------------
Net noncurrent deferred taxes                              $     -         $    (5.5)      $    27.8      $    (9.6)
                                                           ============    ============    ===========    ============
</TABLE>

     The Company  periodically  reviews its  deferred tax assets to determine if
future realization is  more-likely-than-not.  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 certain  capital  losses that did not
meet the  "more-likely-than-not"  recognition  criteria.  This included a fourth
quarter  2001  charge  of $12.3  million  to  increase  the  deferred  tax asset
valuation  allowance  related to U.S.  net  deferred  tax assets  recorded as of
September 30, 2001.  This charge  included $8.6 million as a component of income
tax expense and $3.7 million as a component of Minority  interest -  Convertible
Preferred  Securities.  Additionally,  the Company  determined that it would not
recognize a deferred tax benefit related to U.S. losses commencing in the fourth
quarter of 2001, and continuing  for an uncertain  period of time.  Accordingly,
the Company provided a deferred tax valuation allowance of $23.2 million related
to U.S. net deferred tax assets  arising from its fourth  quarter 2001 operating
results.  There were no material increases to the Company's  valuation allowance
during 2000.

     At  December  31,  2001,  the  Company  had,  for U.S.  federal  income tax
purposes,  net  operating  loss ("NOL")  carryforwards  of  approximately  $64.5
million that expire in 2020. At December 31, 2001,  the Company had  alternative
minimum tax ("AMT") credit  carryforwards of approximately  $5.6 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, 2001,
the Company had the equivalent of a $6.6 million NOL  carryforward in the United
Kingdom and a $2.1  million  NOL  carryforward  in  Germany,  both of which have
indefinite carryforward periods.

                                      F-31

<PAGE>

Note 15 - Employee benefit plans

     Variable  compensation plans. The majority of the Company's total worldwide
employees,  including a significant  portion of its domestic  hourly  employees,
participate in  compensation  programs  which provide for variable  compensation
based  upon  the   financial   performance   of  the  Company  and,  in  certain
circumstances,  the individual performance of the employee. In 2002, the Company
authorized  an employee  incentive  compensation  payment for 2001.  The cost of
these plans was $7.2  million,  $.9 million and $1.0  million in 2001,  2000 and
1999, respectively.

     Defined  contribution  plans.  All of the  Company's  domestic  hourly  and
salaried  employees  (60% of  worldwide  employees  at  December  31,  2001) are
eligible to  participate  in  contributory  savings plans with partial  matching
employer  contributions.  In addition,  the Company makes matching contributions
based on the Company's annual return on equity for approximately 80% of eligible
employees.  Approximately  42% of the Company's  total employees at December 31,
2001 also  participate  in a defined  contribution  pension  plan with  employer
contributions based upon a fixed percentage of the employee's eligible earnings.
The cost of these pension and savings plans  approximated  $2.8 million for 2001
and $2.0 million for each of 2000 and 1999.

     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 domestic  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.  Non-U.S.  defined  benefit pension plans are funded in accordance with
applicable statutory  requirements.  The U.S. defined benefit pension plans were
closed to new  participants  prior to 1996, and benefit levels have been frozen.
The U.K.  defined  benefit  plan was  closed to new  participants  in 1996,  and
benefit levels have been frozen.

     The rates  used in  determining  the  actuarial  present  value of  benefit
obligations at December 31, 2001 were (i) discount rates - 6.0% to 7.0% (6.0% to
7.25% at December  31,  2000),  (ii) rates of  increase  in future  compensation
levels - 2.0% to 3.0% (2.0% to 3.0% at  December  31,  2000) and (iii)  expected
long-term rates of return on assets - 6.0% to 9.0% (6.0% to 9.0% at December 31,
2000).  The benefit  obligations  are  sensitive  to changes in these  estimated
rates,  and actual  results  may differ from the  obligations  noted  below.  At
December 31, 2001, the assets of the plans are primarily comprised of government
obligations,  corporate  stocks and bonds.  The funded  status of the  Company's
defined benefit pension plans is set forth in the following table.

                                      F-32

<PAGE>

<TABLE>
<CAPTION>
                                                                                      Year ended December 31,
                                                                               ---------------------------------------
                                                                                     2001                  2000
                                                                               ------------------    -----------------
                                                                                           (In thousands)
<S>                                                                            <C>                   <C>
Change in projected benefit obligations:
  Balance at beginning of year                                                 $     153,280         $     148,688
  Service cost                                                                         3,657                 3,768
  Interest cost                                                                        9,534                 9,182
  Plan amendments                                                                       -                      917
  Curtailment gain                                                                      -                      (38)
  Actuarial loss                                                                       6,050                 6,700
  Benefits paid                                                                       (8,743)               (8,528)
  Change in currency exchange rates                                                   (2,110)               (7,409)
                                                                               ------------------    -----------------

       Balance at end of year                                                  $     161,668         $     153,280
                                                                               ==================    =================

Change in plan assets:
  Fair value at beginning of year                                              $     149,687         $     156,636
  Actual return on plan assets                                                        (9,830)                3,099
  Employer contribution                                                                6,267                 5,936
  Plan participants' contributions                                                       737                   759
  Benefits paid                                                                       (8,743)               (8,528)
  Change in currency exchange rates                                                   (2,356)               (8,215)
                                                                               ------------------    -----------------

       Fair value at end of year                                               $     135,762         $     149,687
                                                                               ==================    =================

Funded status:
  Plan assets under projected benefit obligations                              $     (25,906)        $      (3,593)
   Unrecognized:
     Actuarial loss                                                                   34,407                 6,777
     Prior service cost                                                                3,198                 3,689
                                                                               ------------------    -----------------

       Total prepaid pension cost                                              $      11,699         $       6,873
                                                                               ==================    =================

Amounts recognized in balance sheets:
  Intangible pension asset                                                     $       3,198         $       3,689
  Noncurrent prepaid pension cost                                                      4,006                 1,359
  Current pension liability                                                             (555)               (1,251)
  Noncurrent pension liability                                                       (23,690)               (5,361)
  Accumulated other comprehensive income                                              28,740                 8,437
                                                                               ------------------    -----------------
                                                                               $      11,699         $       6,873
                                                                               ==================    =================
</TABLE>

     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>
<CAPTION>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2001                  2000
                                                                               ------------------    -----------------
                                                                                           (In thousands)
<S>                                                                            <C>                   <C>
Projected benefit obligation                                                   $     161,668         $      63,611
Accumulated benefit obligation                                                 $     156,001         $      63,361
Fair value of plan assets                                                      $     135,762         $      57,242

</TABLE>

                                      F-33

<PAGE>

     The  components of the net periodic  defined  benefit  pension cost are set
forth below.

<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                               -------------------------------------------------------
                                                                    2001                2000               1999
                                                               ----------------    ----------------   ----------------
                                                                                   (In thousands)
<S>                                                            <C>                 <C>                <C>
Service cost benefits earned                                   $       2,919       $       3,768      $       4,053
Interest cost on projected benefit obligations                         9,534               9,182              8,939
Expected return on plan assets                                       (11,737)            (11,907)           (10,650)
Net amortization                                                         732                 342                120
                                                               ----------------    ----------------   ----------------

  Net pension expense                                          $       1,448       $       1,385      $       2,462
                                                               ================    ================   ================
</TABLE>

     Postretirement  benefits other than pensions.  The Company provides certain
postretirement  health  care and  life  insurance  benefits  to  certain  of its
domestic employees upon retirement.  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  domestic  employees would become eligible
for these benefits if they reach normal  retirement age while working for TIMET.
These plans have been revised to discontinue  employer-paid health care coverage
for future retirees once they become Medicare-eligible.

     The components of the periodic OPEB cost and change in the accumulated OPEB
obligations are set forth below.  The plan is unfunded and  contributions to the
plan during the year equal  benefits  paid.  The rates used in  determining  the
actuarial present value of the accumulated OPEB obligations at December 31, 2001
were (i) discount  rate - 7.00% (2000 - 7.25%),  (ii) rate of increase in health
care costs for the  following  period - 11.15% (2000 - 8.9%) and (iii)  ultimate
health care trend rate  (achieved in 2010) - 5.25% (2000 - 6.0 %). If the health
care cost trend rate were increased by one percentage  point for each year, OPEB
expense  would  have  increased  approximately  $.2  million  in  2001,  and the
actuarial  present value of  accumulated  OPEB  obligations at December 31, 2001
would have increased approximately $2.5 million. A one-percentage point decrease
would have a similar,  but opposite,  effect. The accrued OPEB cost is sensitive
to  changes in these  estimated  rates and actual  results  may differ  from the
obligations noted below.

                                      F-34

<PAGE>

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2001                  2000
                                                                               ------------------    -----------------
                                                                                           (In thousands)
<S>                                                                            <C>                   <C>
Actuarial present value of accumulated OPEB obligations:
  Balance at beginning of year                                                 $      22,757         $      24,186
  Service cost                                                                           271                   176
  Interest cost                                                                        1,686                 1,709
  Amendments                                                                            -                      364
  Actuarial loss                                                                       2,499                   402
  Curtailment gain                                                                      -                     (443)
  Benefits paid, net of participant contributions                                     (3,968)               (3,637)
                                                                               ------------------    -----------------
  Balance at end of year                                                              23,245                22,757
Unrecognized net actuarial loss                                                       (5,518)               (3,056)
Unrecognized prior service credits                                                     1,222                 1,647
                                                                               ------------------    -----------------
Total accrued OPEB cost                                                               18,949                21,348
Less current portion                                                                   2,969                 3,129
                                                                               ------------------    -----------------

  Noncurrent accrued OPEB cost                                                 $      15,980         $      18,219
                                                                               ==================    =================
</TABLE>

<TABLE>
<CAPTION>
                                                                                 Year ended December 31,
                                                                     -------------------------------------------------
                                                                         2001              2000              1999
                                                                     --------------    --------------    -------------
                                                                                      (In thousands)
<S>                                                                  <C>               <C>               <C>
Service cost benefits earned                                         $        271      $        176      $        252
Interest cost on accumulated OPEB obligations                               1,686             1,709             1,577
Curtailment gain                                                             -                 (443)             (115)
Net amortization and deferrals                                               (203)             (324)             (364)
                                                                     --------------    --------------    -------------

  Net OPEB expense                                                   $      1,754      $      1,118      $      1,350
                                                                     ==============    ==============    =============
</TABLE>

Note 16 - Related party transactions

     During  1999,  Tremont  Corporation  ("Tremont")  exercised  an  option  to
purchase approximately two million shares of TIMET common stock, and at December
31, 2001,  Tremont held  approximately 39% of TIMET's  outstanding common stock.
During 1999, 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,   purchased   shares  of  TIMET   common  stock  in  market
transactions;  however,  as of December 31, 2001, the CMRT had fully divested of
all TIMET common  stock.  At December 31,  2001,  subsidiaries  of Valhi held an
aggregate  of  approximately  80% of Tremont's  outstanding  common  stock,  and
Contran  Corporation   ("Contran")  held,  directly  or  through   subsidiaries,
approximately 94% of Valhi's outstanding common stock.  Between February 7, 2002
and March 1, 2002,  the CMRT  purchased  844,600 shares of TIMET common stock in
open market  transactions.  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 is the sole trustee of the CMRT and a member of the trust
investment  committee for the CMRT. Mr. Simmons may be deemed to control each of
Contran, Valhi, Tremont and TIMET.

                                      F-35

<PAGE>

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

     Receivables  from and  payables to related  parties are  summarized  in the
table below.

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      2001                 2000
                                                                                -----------------    -----------------
                                                                                           (In thousands)
<S>                                                                             <C>                  <C>
Receivables from related parties:
  Tremont                                                                       $       1,281        $       1,248
  VALTIMET                                                                              4,626                3,781
                                                                                -----------------    -----------------
                                                                                $       5,907        $       5,029
                                                                                =================    =================
Payables to related parties:
  Tremont                                                                       $       1,261        $       1,640
  NL Industries, Inc.                                                                     379                 -
  VALTIMET                                                                                925                  791
                                                                                -----------------    -----------------
                                                                                $       2,565        $       2,431
                                                                                =================    =================
</TABLE>

     Under the terms of  various  intercorporate  services  agreements  ("ISAs")
entered into between the Company and various related  parties,  employees of one
company  will  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 ISA  agreements  are reviewed and approved by the  applicable  independent
directors of the companies that are parties to the agreements.

     The Company has an ISA with Tremont  whereby the Company  provides  certain
management,  financial  and other  services  to Tremont  for  approximately  $.4
million, $.3 million and $.2 million in 2001, 2000 and 1999, respectively.  This
agreement is expected to be renewed for 2002.

     The Company has an ISA with NL Industries,  Inc.  ("NL"),  a majority-owned
subsidiary  of Valhi.  Under the terms of the  agreement,  NL  provides  certain
financial and other services to TIMET for  approximately  $.3 million in each of
2001, 2000 and 1999. This agreement is expected to be renewed for 2002.

                                      F-36

<PAGE>

     The Company extends  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 are generally payable in
five annual installments beginning six years from date of loan and bear interest
at a rate tied to the Company's  borrowing rate, payable quarterly.  At December
31, 2001, the outstanding  balance of officer notes receivable was approximately
$.2 million.

     EWI RE, Inc.  ("EWI")  arranges  for and brokers  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, 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 $2.8 million, $2.4 million and $2.0 million in 2001,
2000 and 1999,  respectively.  The Company expects that these relationships with
EWI will continue in 2002.


     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 $22 million in 2001 and
2000. Sales to VALTIMET and Wyman-Gordon  Titanium  Castings were $19 million in
1999.  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.


                                      F-37

<PAGE>

     Tremont 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 2001,  $1.6
million in 2000 and $1.0  million in 1999.  The  Company  paid BMI a  facilities
usage fee of $1.3 million in each of 2001 and 2000 and $.8 million in 1999.  The
$1.3 million annual  facilities usage fee continues through 2005. The facilities
usage fee declines to $.5 million  annually for 2006 through 2010, at which time
the facilities usage fee expires.

Note 17 - Commitments and contingencies

     Long-term  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)  ("UTC") 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,  if the parties are unable to reach agreement on pricing after the
initial  pricing  period  or in  certain  other  circumstances,  the LTAs may be
terminated  early.  These  agreements  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.  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-38

<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 advances
TIMET $28.5  million  annually for 2002  through  2007.  The annual  advance for
contract year 2002 was made in December 2001, with subsequent advances occurring
early  each  calendar  year  beginning  in  2003.  The  LTA is  structured  as a
take-or-pay  agreement such that,  beginning in calendar year 2002,  Boeing will
forfeit 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
will establish and hold buffer stock for Boeing at TIMET's facilities, for which
Boeing will pay TIMET as such stock is produced.

     The  Company  entered  into an LTA in 1997  for the  purchase  of  titanium
sponge.  The sponge LTA runs  through  2007,  with firm  pricing  through  2002,
subject to certain possible  adjustments and possible early termination in 2004.
The Company is currently in the process of renegotiating  certain  components of
this LTA with the  supplier.  Although the LTA provides for annual  purchases by
the  Company of a minimum  of 6,000  metric  tons,  the  supplier  has agreed to
reduced purchases by TIMET since 1999. The Company is currently  operating under
an agreement in  principle  that  provides  for  significantly  reduced  minimum
purchases in 2002 and certain other  modified  terms.  During 2001,  the Company
recorded a charge of $3.0 million relating to the sponge suppliers' agreement to
renegotiate certain components of this LTA from time to time. As of December 31,
2001, $2.0 million of this amount remained  accrued and unpaid.  The Company has
no other long-term supply agreements.

     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 70% 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  43% and 35% of sales revenue
in 2001 and 2000, respectively.  During 1999 and 2000, PCC acquired Wyman-Gordon
and a forging company in the U.K. Sales to PCC and related entities approximated
11% of the  Company's  sales  revenue in 2001.  Sales to  Rolls-Royce  and other
Rolls-Royce  suppliers under the Rolls-Royce LTA (including  sales to certain of
the PCC related entities)  represented  approximately 15% of the Company's sales
revenue  in 2001.  The  Company's  ten  largest  customers  accounted  for about
one-half  of sales  revenue  in 2001 and 2000 and about 30% of sales  revenue in
1999. 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, in the normal course of
business,  leases will be renewed or replaced by other leases.  Net rent expense
was approximately $6.1 million in 2001, $6.6 million in 2000 and $5.9 million in
1999.

                                      F-39

<PAGE>

     At  December  31,  2001,  future  minimum  payments  under   noncancellable
operating  leases having an initial or remaining term in excess of one year were
as follows:

<TABLE>
<CAPTION>
                                                                                        Amount
                                                                                  -------------------
                                                                                    (In thousands)
<S>                                                                               <C>
Years ending December 31,
  2002                                                                            $         4,253
  2003                                                                                      2,734
  2004                                                                                      1,345
  2005                                                                                        522
  2006                                                                                        445
  2007 and thereafter                                                                         348
                                                                                  -------------------

                                                                                  $         9,647
                                                                                  ===================
</TABLE>

     Environmental matters.

     BMI Complex.  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 (which payment
was charged against accrued  liabilities).  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 onto
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).  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  continuing  assessment  work with respect to its own active
plant  site.   During  2000,  a  preliminary  study  was  completed  of  certain
groundwater  remediation issues at the Company's Henderson  operations and other
Company  sites  within the BMI  Complex  (which  sites do not  include the above
discussed TIMET Pond  Property).  The Company accrued $3.3 million in 2000 based
on the  undiscounted  cost estimates set forth in the study.  These expenses are
expected to be paid over a period of up to thirty years.

     Henderson  facility.  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-40

<PAGE>

     At December 31, 2001, the Company had accrued an aggregate of approximately
$4 million primarily for environmental matters, including those discussed above.
The Company records liabilities related to environmental remediation obligations
when estimated future expenditures are probable and reasonably  estimable.  Such
accruals are adjusted as further  information becomes available or circumstances
change. Estimated future expenditures 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  expenditures  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 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.  The Company intends to
vigorously  defend this action,  but in any event does not presently  anticipate
that any adverse outcome in this case would be material to the Company's results
of operations, consolidated financial position or liquidity.

     Other. 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. The Company  continues to investigate
the scope of this problem,  including  identification  of customers who received
material  manufactured  using this silicon and the applications  into which such
material has been placed by such customers.

     At the present time, the Company is aware of six standard grade ingots that
have  been  demonstrated  to  contain  tungsten  inclusions;   however,  further
investigation  may identify  other  material that has been  similarly  affected.
Until this  investigation  is completed,  the Company is unable to determine the
ultimate  liability  it may incur  with  respect  to this  matter.  The  Company
currently  believes that it is unlikely that its insurance policies will provide
coverage for any costs that may be associated  with this matter.  The Company is
continuing  to work with its affected  customers to  determine  the  appropriate
remedial  steps  required  to  satisfy  their  claims.   Based  upon  continuing
assessments of possible losses completed by the Company, the Company recorded an
aggregate  charge to cost of sales for this matter of $3.3 million  during 2001.
This amount  represents the Company's best estimate of the most likely amount of
loss to be incurred.  It 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, 2001, $2.7
million remains accrued for potential future claims.  The Company has filed suit
seeking full  recovery  from the 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, 2001.

                                      F-41

<PAGE>

     The  Company is  involved  in  various  other  environmental,  contractual,
product  liability and other claims,  disputes and litigation  incidental to its
business.

     The Company currently  believes the disposition of all claims and disputes,
individually or in the aggregate,  should not have a material  adverse effect on
the Company's business,  results of operations,  consolidated financial position
or liquidity.

Note 18 - Quarterly results of operations (unaudited)

<TABLE>
<CAPTION>
                                                                           For the quarter ended
                                                      ----------------------------------------------------------------
                                                        March 31          June 30         Sept. 30         Dec. 31
                                                      -------------    --------------   -------------    -------------
                                                                   (In millions, except per share data)
<S>                                                   <C>              <C>              <C>              <C>
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 (2):
     Basic                                            $     (.12)      $      .94       $      .14       $    (2.28)
     Diluted                                          $     (.12)      $      .86       $      .14       $    (2.28)

Year ended December 31, 2000:

  Net sales                                           $    104.7       $    108.8       $    106.8       $    106.5
  Gross margin                                              (3.3)             1.2              3.7              2.3
  Operating loss (1)                                       (18.4)            (9.5)            (7.7)            (6.2)
  Net loss                                                 (15.1)            (9.5)            (7.9)            (6.4)

  Basic and diluted loss per share (2):
     Before extraordinary item                        $     (.45)      $     (.30)      $     (.25)      $     (.20)
     Extraordinary item                                     (.03)            -                -                -
                                                      -------------    --------------   -------------    -------------
                                                      $     (.48)      $     (.30)      $     (.25)      $     (.20)
                                                      =============    ==============   =============    =============
<FN>
--------------------------------------------------------------------------------
(1)  The sum of  quarterly  amounts do not agree to the full year results due to
     rounding.
(2)  The sum of quarterly  amounts may not agree to the full year results due to
     rounding  and the timing of potential  conversion  to common  stock,  which
     would have an antidilutive effect on the calculation.

</FN>
</TABLE>

     See also  discussion of significant  fourth quarter items in Notes 1, 4, 14
and 17.

Note 19 - Earnings per share

     In 2001,  2000 and  1999,  the  effect  of the  assumed  conversion  of the
Convertible Preferred Securities was antidilutive. Had the Convertible Preferred
Securities  not been  antidilutive,  diluted losses would have been decreased by
$13.9  million in 2001 and $8.7  million in each of 2000 and 1999,  and  diluted
shares would have been increased by the 5.4 million shares in each of 2001, 2000
and 1999 issuable  upon  conversion.  Dilutive  stock options of 18,000 in 2001,
88,000 in 2000 and 22,000 in 1999 were excluded from the  calculation of diluted
earnings per share because their effect would have been  antidilutive due to the
losses in those  years.  Stock  options and  restricted  stock  omitted from the
denominator because they were antidilutive approximated 1.9 million in 2001, 2.1
million in 2000 and 1.7 million in 1999.


                                      F-42

<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 February 4, 2002, appearing in this 2001 Annual Report on Form 10-K
also included an audit of the financial  statement  schedule listed in the Index
on page F of this Form 10-K. In our opinion,  this financial  statement schedule
presents  fairly,  in all material  respects,  the information set forth therein
when read in conjunction with the related consolidated financial statements.




/s/ PricewaterhouseCoopers LLP



Denver, Colorado
February 4, 2002


                                      S-1

<PAGE>

                           TITANIUM METALS CORPORATION

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                 (In thousands)

<TABLE>
<CAPTION>
                                                          Additions
                                                           charged
                                        Balance at      (credited) to                                        Balance
                                         beginning        costs and                                          at end
            Description                   of year         expenses          Deductions         Other         of year
------------------------------------    ------------    --------------     -------------     -----------    ----------
<S>                                     <C>             <C>                <C>               <C>            <C>
Year ended December 31, 2001:

  Allowance for doubtful
    accounts                            $   2,927       $        4         $     (170) (1)   $     (22)     $   2,739
                                        ============    ==============     =============     ===========    ==========
  Valuation allowance for
    deferred income taxes               $   1,918       $   35,504                           $     (45)     $  37,377
                                        ============    ==============     =============     ===========    ==========
  Allowance for excess and
    slow moving inventories             $  14,414       $    1,755         $   (2,762)       $     214      $  13,621
                                        ============    ==============     =============     ===========    ==========
  Reserve for business
    restructuring                       $   1,012       $     (227)        $     (587)       $    -         $     198
                                        ============    ==============     =============     ===========    ==========
Year ended December 31, 2000:

  Allowance for doubtful
    accounts                            $   3,330       $      185         $     (365) (1)   $    (223)     $   2,927
                                        ============    ==============     =============     ===========    ==========
  Valuation allowance for
    deferred income taxes               $   1,869       $       49         $     -           $    -         $   1,918
                                        ============    ==============     =============     ===========    ==========
  Allowance for excess and
    slow moving inventories             $  14,518       $    2,305         $   (1,635)       $    -         $  14,414
                                        ============    ==============     =============     ===========    ==========
  Reserve for business
    restructuring                       $   1,490       $    3,219         $   (3,697)       $    -         $   1,012
                                        ============    ==============     =============     ===========    ==========
Year ended December 31, 1999:

  Allowance for doubtful
    accounts                            $   1,932       $    1,628         $     (230) (1)   $    -         $   3,330
                                        ============    ==============     =============     ===========    ==========
  Valuation allowance for
    deferred  income taxes              $    -          $    1,869         $     -           $    -         $   1,869
                                        ============    ==============     =============     ===========    ==========
  Allowance for excess and
    slow moving inventories             $   6,520       $    5,077         $     (406)       $   3,327 (2)  $  14,518
                                        ============    ==============     =============     ===========    ==========
  Reserve for business
    restructuring                       $   6,727       $    4,506         $   (9,743)       $    -         $   1,490
                                        ============    ==============     =============     ===========    ==========
<FN>
--------------------------------------------------------------------------------
(1)  Amounts written off, less recoveries.
(2)  Adjustment for slow moving inventory previously carried at zero value.

</FN>
</TABLE>


                                      S-2