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, 2003
                                             -----------------

                                       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 X
         ---

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

As of June 30,  2003,  3,192,182  shares of common stock were  outstanding.  The
aggregate  market  value  of the  1,479,967  shares  of  voting  stock  held  by
nonaffiliates of Titanium Metals  Corporation as of such date approximated $47.5
million.  No shares of non-voting stock were held by nonaffiliates.  As of March
2, 2004, 3,179,602 shares of common stock were outstanding.

                      Documents incorporated by reference:

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


<PAGE>













Forward-Looking Information

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



<PAGE>



                                     PART I

ITEM 1: BUSINESS

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

     Titanium was first manufactured for commercial use in the 1950s. Titanium's
unique combination of corrosion resistance, elevated-temperature performance and
high  strength-to-weight  ratio  makes  it  particularly  desirable  for  use in
commercial  and  military  aerospace  applications  where  these  qualities  are
essential  design  requirements for certain critical parts such as wing supports
and jet  engine  components.  While  aerospace  applications  have  historically
accounted  for a substantial  portion of the  worldwide  demand for titanium and
represented  approximately  42% of aggregate mill product shipments in 2003, the
number of non-aerospace end-use markets for titanium has expanded substantially.
Today,  numerous  industrial  uses for titanium  exist,  including  chemical and
industrial power plants,  desalination  plants and pollution control  equipment.
Demand for  titanium is also  increasing  in emerging  markets with such diverse
uses as offshore oil and gas production  installations,  geothermal  facilities,
military armor, automotive and architectural applications.

     TIMET's products include  titanium sponge,  melted products,  mill products
and  industrial  fabrications.  The  titanium  industry is  comprised of several
manufacturers that, like TIMET,  produce a relatively complete range of titanium
products and a  significant  number of producers  worldwide  that  manufacture a
limited range of titanium mill products. The Company is currently the only major
U.S.  titanium  sponge  producer.  The Company  estimates  that it accounted for
approximately 18% of worldwide  industry  shipments of titanium mill products in
both 2003 and 2002. The Company also estimates it accounted for approximately 8%
of worldwide titanium sponge production in 2003.

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

     Industry.  The titanium  industry  historically  has derived a  substantial
portion  of its  business  from the  aerospace  industry.  Aerospace  demand for
titanium  products,  which includes both jet engine  components  (e.g.,  blades,
discs, rings and engine cases) and air frame components (e.g.,  bulkheads,  tail
sections,  landing gear,  wing supports and  fasteners)  can be broken down into
commercial  and  military  sectors.   The  commercial  aerospace  sector  has  a
significant influence on titanium companies, particularly mill product producers
such as TIMET.



<PAGE>


     In 2003, the Company  estimates the commercial  aerospace  sector accounted
for mill product  shipments of  approximately  15,700 metric tons, a 7% decrease
from 2002, and represented  approximately 78% of aerospace industry mill product
shipments and 33% of aggregate mill product shipments. Mill product shipments to
the military  aerospace sector in 2003 were  approximately  4,400 metric tons, a
15% increase from 2002, and represented  approximately 22% of aerospace industry
mill product  shipments  and 9% of aggregate  mill product  shipments.  Military
aerospace sector shipments are largely driven by government  defense spending in
North America and Europe.  As discussed  further  below,  new aircraft  programs
generally  are  in  development  for  several  years,   followed  by  multi-year
procurement  contracts.  The Company's  business is more  dependent on aerospace
demand than the overall titanium industry, as approximately 68% of the Company's
mill  product  shipment  volume  in  2003  was to the  aerospace  industry  (57%
commercial aerospace and 11% military aerospace).

     The cyclical nature of the aerospace industry has been the principal driver
of the historical  fluctuations in the  performance of most titanium  companies.
Over the past 20 years, the titanium industry had cyclical peaks in mill product
shipments  in 1989,  1997 and 2001 and  cyclical  lows in 1983,  1991 and  1999.
Demand for titanium reached its highest level in 1997 when industry mill product
shipments reached  approximately  60,000 metric tons. However,  since that peak,
industry mill product shipments have fluctuated significantly,  primarily due to
a continued change in demand for titanium from the commercial  aerospace sector.
In 2002,  industry  shipments  approximated  50,000 metric tons, and in 2003 the
Company  estimates  industry  shipments  approximated  48,000  metric tons.  The
Company  currently  expects total  industry mill product  shipments in 2004 will
increase from 2003 levels to at least 51,000 metric tons.

     The Airline Monitor, a leading aerospace publication,  traditionally issues
forecasts for commercial aircraft deliveries each January and July. According to
The Airline Monitor,  large commercial  aircraft deliveries for the 1996 to 2003
period peaked in 1999 with 889  aircraft,  including 254 wide body aircraft that
use  substantially  more  titanium  than their narrow body  counterparts.  Large
commercial  aircraft deliveries totaled 579 (including 154 wide bodies) in 2003.
The Airline Monitor's most recently issued forecast (January 2004) calls for 575
deliveries in 2004, 540 deliveries in 2005 and 510 deliveries in 2006.  Relative
to 2003, these forecasted delivery rates represent anticipated declines of about
1% in 2004,  7% in 2005 and 12% in 2006.  From 2007  through  2011,  The Airline
Monitor calls for a continued  increase each year in large  commercial  aircraft
deliveries,  with forecasted  deliveries of 620 aircraft in 2008, exceeding 2003
levels.  Deliveries of titanium  generally precede aircraft  deliveries by about
one year, although this varies considerably by titanium product. This correlates
to the Company's cycle,  which  historically  precedes the cycle of the aircraft
industry and related deliveries.

     Although the  commercial  airline  industry  continues to face  significant
challenges, recent economic data show signs of an improving business environment
in that  sector.  According to The Airline  Monitor,  the  worldwide  commercial
airline  industry  reported an estimated  operating loss of  approximately  $3.5
billion in 2003,  compared to a $7.3 billion  loss in 2002 and an $11.7  billion
loss in 2001. The Airline Monitor is currently  forecasting  operating income of
approximately  $6.3  billion  for the  industry  in 2004.  Additionally,  global
airline  passenger traffic returned to pre-September 11, 2001 levels in November
2003. Although these appear to be positive signs, the Company currently believes
that industry mill product  shipments into the commercial  aerospace sector will
be somewhat flat in 2004 and show a modest upturn in 2005.

                                        2

<PAGE>


     Military  aerospace  programs were the first to utilize  titanium's  unique
properties  on a large  scale,  beginning  in the 1950s.  Titanium  shipments to
military  aerospace  markets  reached  a peak in the  1980s  before  falling  to
historical lows in the early 1990s after the end of the Cold War.  However,  the
importance of military  markets to the titanium  industry is expected to rise in
coming  years as defense  spending  budgets  increase in  reaction to  terrorist
activities  and  global  conflicts.   It  is  estimated  that  overall  titanium
consumption  will  increase  in this  market  sector  in 2004  and  beyond,  but
consumption by military applications will offset only a relatively small part of
the decrease seen in the commercial aerospace sector.

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

     Since titanium's  initial  applications in the aerospace sector, the number
of  end-use  markets  for  titanium  has  significantly  expanded.   Established
industrial uses for titanium include  chemical plants,  industrial power plants,
desalination plants and pollution control equipment.  Titanium continues to gain
acceptance in many emerging market applications,  including automotive, military
armor, energy and architecture.  Although titanium is generally higher cost than
other competing metals, in many cases customers find the physical  properties of
titanium to be attractive from the standpoint of weight, performance, longevity,
design  alternatives,  life cycle  value and other  factors.  Although  emerging
market demand  presently  represents  only about 5% of the total industry demand
for titanium mill products today, the Company  believes  emerging market demand,
in the aggregate,  could grow at double-digit rates over the next several years.
The Company is actively pursuing these markets.

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

                                        3

<PAGE>


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

     Titanium  is  also  making  inroads  into  other  automotive  applications,
including turbo charger wheels, brake parts and connecting rods. Titanium engine
components  provide  mass-reduction   benefits  that  directly  improve  vehicle
performance  and  fuel  economy.  In  certain   applications,   titanium  engine
components can provide a cost-effective  alternative to engine balance shafts to
address  noise,   vibration  and  harshness   while   simultaneously   improving
performance.  The decision to select titanium components for consumer car, truck
and motorcycle  components remains highly cost sensitive;  however,  the Company
believes  titanium's   acceptance  in  consumer  vehicles  will  expand  as  the
automotive industry continues to better understand the benefits titanium offers.

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

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

     Products and operations.  The Company is a vertically  integrated  titanium
manufacturer  whose  products  include (i)  titanium  sponge,  the basic form of
titanium metal used in processed titanium products,  (ii) melted products (ingot
and slab), the result of melting sponge and titanium scrap, either alone or with
various other alloying elements,  (iii) mill products that are forged and rolled
from ingot or slab,  including  long  products  (billet and bar),  flat products
(plate,  sheet and strip) and pipe and (iv)  fabrications  that are cut, formed,
welded  and  assembled  from  titanium  mill  products  (spools,   pipefittings,
manifolds,  vessels,  etc.).  During the past three years,  all of TIMET's sales
revenue was  generated by the  Company's  integrated  titanium  operations  (its
"Titanium  melted  and  mill  products"  segment),  its only  business  segment.
Business and geographic segment financial  information is included in Note 21 to
the Consolidated Financial Statements.

                                        4

<PAGE>


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

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

     Titanium mill products result from the forging,  rolling, drawing, welding,
cutting  and/or  extrusion  of titanium  ingot or slab into  products of various
sizes and grades.  These mill products include titanium billet, bar, rod, plate,
sheet, strip and pipe.  Fabrications result from the cutting,  forming,  welding
and  assembling of titanium mill products into various  products such as spools,
pipefittings,  manifolds and vessels.  The Company sends certain products either
to the Company's  service centers or to outside  vendors for further  processing
before being shipped to customers.  The Company's  customers  either process the
Company's products for their ultimate end-use or for sale to third parties.

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

     The Company is reliant on several  outside  processors  to perform  certain
rolling,  finishing and other  processing steps in the U.S., and certain melting
and forging steps in France.  In the U.S.,  one of these  outside  processors is
owned by a competitor,  and another is operated by a customer.  These processors
are currently  TIMET's primary source for these services.  Other processors used
in the U.S. are not competitors or customers. In France, the processor is also a
joint venture partner in the Company's 70%-owned subsidiary,  TIMET Savoie, S.A.
("TIMET  Savoie").  During 2003,  the Company made  significant  strides  toward
reducing the reliance on  competitor-owned  sources for these services,  so that
any interruption in these functions should not have a material adverse effect on
the Company's business, results of operations, financial position and liquidity.

                                        5

<PAGE>


     Distribution.  The Company  sells its products  through its own sales force
based in the U.S.  and Europe and through  independent  agents and  distributors
worldwide.  The Company's  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,  flat-rolled sheet
and strip.  The Company  believes  its  service  centers  provide a  competitive
advantage because of their ability to foster customer  relationships,  customize
products to suit specific customer  requirements and respond quickly to customer
needs.

     Raw  materials.  The  principal  raw  materials  used in the  production of
titanium ingot,  slab and mill products are titanium sponge,  titanium scrap and
alloying  elements.  During 2003,  approximately 36% of the Company's melted and
mill product raw material  requirements were fulfilled with internally  produced
sponge,  28% with purchased sponge, 30% with titanium scrap and 6% with alloying
elements.

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

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

     While the Company  was one of five major  worldwide  producers  of titanium
sponge in 2003,  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  melted  and  mill
products  require  varying  grades  of  sponge  and/or  scrap  depending  on the
customers'  specifications  and expected end use. TIMET is the only active major
U.S.  producer of titanium  sponge.  Presently,  TIMET and certain  companies in
Japan are the only  producers  of premium  quality  sponge that  currently  have
complete approval for all significant demanding aerospace  applications.  During
2003, two other sponge  producers  received  additional  qualification  of their
products for certain critical aerospace applications. This qualification process
is likely to continue for several more years.

     Historically, the Company has purchased sponge predominantly from producers
in Japan and  Kazakhstan.  In September  2002, the Company entered into a sponge
supply  agreement,  effective  from January 1, 2002  through  December 31, 2007,
which requires  minimum  purchases by the Company of  approximately  $10 million
annually through 2007. This agreement replaced a 1997 agreement. The Company has
no other long-term  sponge supply  agreements.  Since 2000, the Company has also
purchased sponge from the U.S. Defense  Logistics Agency ("DLA")  stockpile.  In
2004,  the Company  expects to  continue  to  purchase  sponge from a variety of
sources.

                                        6

<PAGE>


     The  Company  utilizes  a  combination  of  internally  produced,  customer
returned and externally produced titanium scrap at all of its melting locations.
Such scrap  consists  of alloyed  and  commercially  pure  solids and  turnings.
Internally  produced scrap is generated in the Company's  factories  during both
melting and mill product  processing.  Customer returned scrap is generally part
of  a  supply  agreement  with  a  customer,  which  provides  a  "closed  loop"
arrangement resulting in supply and cost stability. Externally produced scrap is
purchased  from  a wide  range  of  sources,  including  customers,  collectors,
processors and brokers. In 2004, the Company anticipates that approximately half
the scrap it will utilize will be purchased from external suppliers. The Company
also sells scrap, usually in a form or grade it cannot economically recycle.

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

     All of the Company's major  competitors  utilize scrap as a raw material in
their melt operations.  In addition to use by titanium  manufacturers,  titanium
scrap is used in steel-making  operations during production of interstitial-free
steels, stainless steels and high-strength-low-alloy  steels. Current demand for
these  steel  products,  especially  from  China,  have  produced a  significant
increase in demand for titanium scrap at a time when titanium  scrap  generation
rates are at low levels  because of the lower  commercial  aircraft build rates.
These  events are  expected to cause a relative  shortage  of titanium  scrap in
2004,  resulting in tight supply and higher prices,  which will directly  impact
the approximate 50% of scrap the Company  purchases from external  sources.  The
Company's  ability to recover these  material costs via higher selling prices to
its customers is uncertain.

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

     Customer  agreements.  The Company has long-term  agreements  ("LTAs") with
certain major aerospace customers,  including,  among others, The Boeing Company
("Boeing"),  Rolls-Royce plc and its German and U.S. affiliates ("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  expire from 2007 through 2008,  subject to certain
conditions,  and  generally  provide  for  (i)  minimum  market  shares  of  the
customers'  titanium  requirements  or firm annual volume  commitments  and (ii)
fixed or  formula-determined  prices  (although  some contain  elements based on
market pricing).  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.

                                        7

<PAGE>


     In  certain  events  of  nonperformance  by the  Company,  the  LTAs may be
terminated  early.  Although it is possible  that some  portion of the  business
would  continue on a non-LTA basis,  the  termination of one or more of the LTAs
could result in a material and adverse effect on the Company's business, results
of operations,  financial position or liquidity. The LTAs were designed to limit
selling price volatility to the customer, while providing TIMET with a committed
base of volume  throughout the aerospace  business  cycles.  To varying degrees,
these  LTAs  effectively  obligate  TIMET  to bear  all or part of the  risks of
increases in raw material and other costs,  but also allow TIMET to benefit from
decreases in such costs.

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

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

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

     Markets and customer  base.  Approximately  55% of the Company's 2003 sales
revenue was generated by sales to customers within North America, as compared to
53% in 2002 and 51% in  2001.  Approximately  38% of the  Company's  2003  sales
revenue was generated by sales to European customers, as compared to 40% in 2002
and 39% in 2001.  The  balance  of the  Company's  sales  was to  other  regions
throughout  the world.  Further  information  regarding the  Company's  external
sales, net income, long-lived assets and total assets by segment can be found in
the Company's Consolidated Balance Sheets, Consolidated Statements of Operations
and Note 21 to the Consolidated Financial Statements.

                                        8

<PAGE>


     Approximately  68% of the Company's sales revenue was generated by sales to
the  aerospace  industry  in 2003,  as  compared to 67% in 2002 and 70% in 2001.
Sales under the  Company's  LTAs  accounted for  approximately  41% of its sales
revenue in 2003. Sales to PCC and its related  entities  approximated 13% of the
Company's  sales revenue in 2003.  Sales to  Rolls-Royce  and other  Rolls-Royce
suppliers under the Rolls-Royce  LTAs (including  direct sales to certain of the
PCC-related  entities  under  the  terms of the  Rolls-Royce  LTAs)  represented
approximately  15% of the Company's  sales revenue in 2003. The Company  expects
that a majority of its 2004 sales revenue will be to the aerospace industry.

     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 (a unit of Boeing) and
Airbus (80% owned by European Aeronautic Defence and Space Company and 20% owned
by BAE Systems). In addition to the airframe  manufacturers,  the following four
manufacturers  of large civil  aircraft  engines are also  significant  titanium
users - Rolls-Royce,  Pratt & Whitney,  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, 2003,  the  estimated  firm order backlog for Boeing and
Airbus,  as reported by The Airline  Monitor,  was 2,555  planes,  versus  2,649
planes at the end of 2002 and 2,919  planes  at the end of 2001.  The  estimated
firm order  backlog for wide body planes at year-end  2003 was 701 (27% of total
backlog)  compared to 709 (27% of total backlog) at the end of 2002 and 801 (27%
of total backlog) at the end of 2001. The backlogs for Boeing and Airbus reflect
orders for aircraft to be delivered over several years.  Changes in the economic
environment  and the financial  condition of airlines can result in rescheduling
or  cancellation  of  contractual  orders.  Accordingly,  aircraft  manufacturer
backlogs  are  not  necessarily  a  reliable  indicator  of  near-term  business
activity,  but may be indicative of potential business levels over a longer-term
horizon.

     Wide body planes  (e.g.,  Boeing 747, 767 and 777 and Airbus A330 and A340)
tend to use a higher  percentage  of  titanium in their  airframes,  engines and
parts than narrow body planes  (e.g.,  Boeing 737 and 757 and Airbus A318,  A319
and  A320),  and  newer  models  of planes  tend to use a higher  percentage  of
titanium  than  older  models.  Additionally,  Boeing  generally  uses a  higher
percentage of titanium in its airframes  than Airbus.  For example,  the Company
estimates that  approximately  58 metric tons, 43 metric tons and 18 metric tons
of titanium are purchased for the  manufacture  of each Boeing 777, 747 and 737,
respectively,  including both the airframes and engines.  The Company  estimates
that approximately 24 metric tons, 17 metric tons and 12 metric tons of titanium
are  purchased  for  the  manufacture  of  each  Airbus  A340,  A330  and  A320,
respectively, including both the airframes and engines.

     At year-end 2003, a total of 129 firm orders had been placed for the Airbus
A380  superjumbo  jet,  a program  officially  launched  in  December  2000 with
anticipated first deliveries in 2006.  Current estimates are that  approximately
77 metric tons of titanium  (50 metric tons for the  airframe and 27 metric tons
for the engines) will be purchased for each A380  manufactured,  the most of any
commercial aircraft. Additionally,  Boeing currently plans a mid-2004 production
launch for its newly announced model, the 7E7 Dreamliner. Although this airplane
will contain more composite  materials than a typical Boeing  airplane,  initial
estimates  are that  approximately  49 metric tons of titanium will be purchased
for each 7E7 airframe  manufactured.  Engine estimates are not yet available for
the 7E7.

                                        9

<PAGE>


     Outside of  aerospace  markets,  the Company  manufactures  a wide range of
products,  including  sheet,  plate,  tube,  bar,  billet,  pipe and skelp,  for
customers  in the  chemical  process,  oil and gas,  consumer,  sporting  goods,
automotive, power generation and armor/armament industries. Approximately 19% of
the  Company's  sales  revenue in 2003 and 18% in 2002 and 2001 was generated by
sales into industrial and emerging markets,  including sales to VALTIMET for the
production  of  condenser  tubing.  For the oil and gas  industry,  the  Company
provides  seamless pipe for downhole casing,  risers,  tapered stress joints and
other  offshore  oil  production  equipment,  including  fabrication  of sub-sea
manifolds.  In  armor  and  armament,  the  Company  sells  plate  products  for
fabrication  into door  hatches on  fighting  vehicles,  as well as  tank/turret
protection.

     In addition to melted and mill products, which are sold into the aerospace,
industrial and emerging  markets,  the Company sells certain other products such
as titanium sponge,  titanium  tetrachloride and fabricated titanium assemblies.
Sales of these other products  represented 13% of the Company's sales revenue in
2003, 15% in 2002 and 12% in 2001.

     The Company's backlog of unfilled orders was approximately  $180 million at
December  31,  2003,  compared  to $165  million at  December  31, 2002 and $225
million at December 31, 2001.  Substantially the entire 2003 year-end backlog is
scheduled for shipment  during 2004.  The  Company's  order backlog may not be a
reliable indicator of future business activity.

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

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

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

     The Company's  principal  competitors in the aerospace market are Allegheny
Technologies  Incorporated 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  certain  Japanese
producers and certain other  companies,  are also  principal  competitors in the
industrial and emerging markets.  The Company competes primarily on the basis of
price,  quality of products,  technical support and the availability of products
to meet customers' delivery schedules.

                                       10

<PAGE>


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

     Generally,  imports of titanium products into the U.S. are subject to a 15%
"normal trade  relations"  tariff.  For tariff purposes,  titanium  products are
broadly  classified as either wrought  (billet,  bar,  sheet,  strip,  plate and
tubing) or unwrought (sponge, ingot and slab).

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

     For most periods since 1993,  imports of titanium wrought products from any
beneficiary  developing  country  (notably  Russia,  as a  producer  of  wrought
products) were exempted from U.S. import duties under the GSP program.  In 2002,
TIMET filed a petition seeking the removal of duty-free  treatment under the GSP
program for imports of titanium  wrought  products  into the U.S.  from  Russia.
Action on the TIMET petition has been deferred,  meaning duty-free  treatment on
imports of titanium wrought products into the U.S. from Russia will continue for
the time being.

     In 2002,  Kazakhstan  filed a petition  with the  Office of the U.S.  Trade
Representative  seeking GSP status on imports of titanium  sponge into the U.S.,
which,  if granted,  would have eliminated the 15% tariff  currently  imposed on
titanium sponge imported into the U.S. from any beneficiary  developing  country
(notably Russia and  Kazakhstan,  as producers of titanium  sponge).  On July 1,
2003, Kazakhstan's petition was denied.

     TIMET has successfully  resisted,  and will continue to resist,  efforts to
eliminate  duties on  sponge  and  unwrought  titanium  products,  and TIMET has
pursued  and will  continue  to pursue the  removal  of GSP status for  titanium
wrought  products,  although no  assurances  can be made that the  Company  will
continue to be successful in these  activities.  Further  reductions  in, or the
complete elimination of, any or all of these tariffs, 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,  ingot and mill  products  and thus the  Company's
business, results of operations, financial position or liquidity.

                                       11

<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.  Key research  activities include the development of new alloys,
development  of  technology  required  to  enhance  the  performance  of TIMET's
products in the traditional  industrial and aerospace  markets and  applications
development in the automotive  division and other emerging markets.  The Company
conducts  the  majority  of  its  research  and  development  activities  at its
Henderson Technical Laboratory in Henderson,  Nevada, with additional activities
at its Witton,  England facility.  The Company incurred research and development
costs of $2.8 million in 2003, $3.3 million in 2002 and $2.6 million in 2001.

     In April  2003,  the  Company was  selected  by the United  States  Defense
Advanced  Research  Projects  Agency  ("DARPA")  to  lead  a  program  aimed  at
commercializing   the  "FFC  Cambridge  Process."  The  FFC  Cambridge  Process,
developed by Professor  Derek Fray,  Dr. Tom Farthing and Dr. George Chen at the
University of Cambridge,  represents a potential breakthrough  technology in the
process of extracting  titanium from  titanium-bearing  ores.  This program will
receive up to  approximately  $12.3 million in government  funding over the next
five years.  As part of the program,  TIMET is leading a team of scientists from
major defense contractors,  including General Electric Aircraft Engines,  United
Defense  Limited  Partners  and Pratt & Whitney,  as well as the  University  of
California at Berkeley and the University of Cambridge. The funding is allocated
among all of the program  partners  (including  TIMET) to cover  program  costs.
Additionally,  TIMET  contributes  unreimbursed  personnel time to assist in the
research.  In connection with the program,  TIMET has negotiated a non-exclusive
development and production license for the FFC Cambridge Process technology from
British  Titanium plc. TIMET is conducting the development work at its Henderson
Technical Laboratory.  While much work must be done and success is by no means a
certainty,  the Company  considers  this a significant  opportunity to achieve a
meaningful reduction in the cost of producing titanium metal. If successful, the
Company  believes this would not only make titanium a more  attractive  material
choice within the aerospace  industry,  but also could provide  opportunities to
use titanium in non-aerospace  applications where its cost might have previously
been an obstacle.

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

     Employees.  The cyclical nature of the aerospace industry and its impact on
the  Company's  business  is  the  principal  reason  the  Company  periodically
implements cost reduction restructurings, reorganizations and other changes that
impact the Company's  employment levels. The following table shows the number of
employees at year end for the past 3 years.  The 19% decrease in employees  from
2001 to 2002 was  principally  in response  to changes in market  demand for the
Company's  products and met the Company's targeted  reductions  announced during
the third  quarter of 2002.  The increase  during 2003  reflects the increase in
demand for titanium products during the second half of 2003,  somewhat offset by
the Company's continued efforts to operate at more efficient levels. The Company
currently expects employment to slightly increase  throughout 2004 as production
continues to increase.

                                       12

<PAGE>

<TABLE>

                                                                          Employees at December 31,
                                                          -----------------------------------------------------------
                                                                2003                 2002                 2001
                                                          ------------------    ----------------    -----------------

<S>                                                              <C>                   <C>                <C>
U.S.                                                             1,266                 1,184              1,462
Europe                                                             789                   772                948
                                                          ------------------    ----------------    -----------------
   Total                                                         2,055                 1,956              2,410
                                                          ==================    ================    =================
</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 under contracts  expiring
in June 2005 and October 2004,  for the respective  locations.  Employees at the
Company's  other  U.S.  facilities  are not  covered  by  collective  bargaining
agreements.  Approximately  60% of the  salaried  and  hourly  employees  at the
Company's European  facilities are represented by various European labor unions.
New labor  agreements were recently  reached with the Company's French employees
for 2004 and with the Company's U.K. employees through 2005.

     While  the  Company  currently  considers  its  employee  relations  to  be
satisfactory,  it is possible that there could be future work stoppages or other
labor  disruptions  that could  materially  and  adversely  affect the Company's
business,  results of operations,  financial position or liquidity.  The Company
will be  negotiating  a new labor  contract  with its  Henderson,  Nevada hourly
workforce in the third quarter of 2004.

     Regulatory and environmental matters. The Company's operations are governed
by various Federal,  state,  local and foreign  environmental  and worker safety
laws and regulations.  In the U.S., such laws include the  Occupational,  Safety
and  Health  Act,  the Clean  Air Act,  the  Clean  Water  Act and the  Resource
Conservation  and Recovery  Act. The Company uses and  manufactures  substantial
quantities of substances that are considered  hazardous,  extremely hazardous or
toxic under environmental and worker safety and health laws and regulations. The
Company has used and manufactured such substances  throughout the history of its
operations.  As a result,  risk of  environmental,  health and safety  issues 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
assurance that some, or all, of the risks  discussed under this heading will not
result in liabilities that would be material to the Company's business,  results
of operations, financial position or liquidity.

     The  Company's  operations  in Europe  are  similarly  subject  to  various
countries'  laws and  regulations  respecting  environmental  and worker  safety
matters.  Such 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.  The  Company  incurred  capital
expenditures  related  to  health,  safety  and  environmental   compliance  and
improvement of approximately $1.9 million in 2003, $1.4 million in 2002 and $2.4
million in 2001. The Company's  capital budget provides for  approximately  $2.9
million of such expenditures in 2004.

                                       13

<PAGE>


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

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

     Related  parties.  At December 31, 2003,  Valhi,  Inc.  ("Valhi") and other
entities  related  to Harold C.  Simmons  held  approximately  49.8% of  TIMET's
outstanding  common  stock  and  40.1%  of the  outstanding  6.625%  mandatorily
redeemable  convertible preferred  securities,  beneficial unsecured convertible
securities ("BUCS") of the TIMET Capital Trust I ("Capital Trust").  See Notes 1
and 18 to the Consolidated Financial Statements.

     Available  information.  The  Company  maintains  an  Internet  website  at
www.timet.com.  The Company's  Annual  Reports for the years ended  December 31,
2003, 2002 and 2001, the Company's Quarterly Reports on Form 10-Q for 2004, 2003
and 2002, any Current  Reports on Form 8-K for 2004 and 2003, and any amendments
thereto,  are or will be  available  free of charge at such  website  as soon as
reasonably  practicable after they are filed or furnished,  as applicable,  with
the SEC. Additionally,  the Company's corporate governance  guidelines,  Code of
Ethics, and Audit Committee,  Nominations  Committee and Management  Development
and  Compensation  Committee  charters  will also be available on the  Company's
website prior to the Company's 2004 Annual Shareholder  Meeting.  Such documents
will also be provided to  shareholders  upon request.  Such  requests  should be
directed to the attention of TIMET's  Corporate  Secretary at TIMET's  corporate
offices located at 1999 Broadway, Suite 4300, Denver, Colorado 80202.

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

                                       14

<PAGE>


ITEM 2: PROPERTIES

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

<TABLE>

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

<S>                                           <C>                                           <C>                 <C>
Henderson, Nevada (1)                         Sponge, Ingot                                 12,250                  -
Morgantown, Pennsylvania (1)                  Slab, Ingot, Raw materials
                                                 processing                                 20,000                  -
Toronto, Ohio (1)                             Billet, Bar, Plate, Sheet, Strip                   -              9,900
Vallejo, California (2)                       Ingot (including non-titanium
                                                 superalloys)                                1,600                  -
Ugine, France (2)                             Ingot, Billet                                  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 facility.
(2)  Leased facility.
(3)  Practical capacities are variable based on production mix and 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 2003, the plants operated
at approximately 56% of practical  capacity,  as compared to 55% in 2002 and 75%
in 2001. In 2004, the Company's  plants are expected to operate at approximately
60% - 65% of practical  capacity.  However,  practical  capacity and utilization
measures can vary significantly based upon the mix of products produced.

     United States production.  The Company's VDP sponge facility is expected to
operate at approximately  92% of its annual  practical  capacity of 8,600 metric
tons  during  2004,  up from  approximately  73% in  2003.  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 were used in Europe during 2003,  which  represented
approximately 32% of the sponge consumed in the Company's  European  operations.
The Company expects the consumption of VDP sponge in its European  operations to
be  approximately  35% - 40% of  their  sponge  requirements  in  2004.  The raw
materials  processing facility in Morgantown,  Pennsylvania  primarily processes
scrap  used  as  melting  feedstock,   either  in  combination  with  sponge  or
separately.

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

                                       15

<PAGE>


     The Company's U.S. melting facilities in Henderson,  Nevada and Morgantown,
Pennsylvania  produce ingot and slab,  which are either sold to third parties or
used as feedstock for the  Company's  mill  products  operations.  These melting
facilities  are expected to operate at  approximately  70% of  aggregate  annual
practical capacity in 2004, up from 58% in 2003.

     Titanium mill products are produced by TIMET in the U.S. at its forging and
rolling facility in Toronto, Ohio, which receives ingot or slab principally from
the Company's U.S.  melting  facilities.  The Company's U.S. forging and rolling
facility  is  expected  to  operate  at  approximately  58% of annual  practical
capacity in 2004, up from 53% in 2003. Capacity utilization across the Company's
individual mill product lines varies.

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

     TIMET UK's  melting  facility in Witton,  England  produces  VAR ingot used
primarily as feedstock for its forging  operations,  also in Witton. The forging
operations  process the ingot  principally into billet product for sale to third
parties or into an intermediate product for further processing into bar or plate
at its facility in  Waunarlwydd,  Wales.  TIMET UK's  melting and mill  products
production  in 2004  is  expected  to  operate  at  approximately  69% and  51%,
respectively,   of  annual  practical   capacity,   compared  to  51%  and  47%,
respectively, in 2003.

     The  capacity  of TIMET  Savoie  in Ugine,  France  is to a certain  extent
dependent  upon the level of activity in CEZUS'  zirconium  business,  which may
from time to time  provide  TIMET  Savoie with  capacity in excess of that which
CEZUS is contractually required to provide. During 2004, TIMET Savoie expects to
operate  at  approximately  61% of the  maximum  annual  capacity  that CEZUS is
contractually required to provide, which is equivalent to the 2003 level.

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

ITEM 3: LEGAL PROCEEDINGS

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

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

     No matters  were  submitted  to a vote of  security  holders of the Company
during the quarter ended December 31, 2003 or through March 2, 2004.

                                       16

<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"). The high and low sales prices for the Company's common stock during 2002
and 2003 are set forth  below.  All prices  have been  adjusted  to reflect  the
one-for-ten  reverse  stock  split,  which became  effective  after the close of
trading on February 14, 2003.

<TABLE>


Year ended December 31, 2003:                                                         High                 Low
                                                                                -----------------    -----------------
<S>                                                                             <C>                  <C>
   First quarter                                                                $       24.40        $       15.60
   Second quarter                                                                       35.00                20.95
   Third quarter                                                                        38.40                29.15
   Fourth quarter                                                                       60.20                33.50

Year ended December 31, 2002:
   First quarter                                                                $       54.00        $       32.50
   Second quarter                                                                       53.00                35.00
   Third quarter                                                                        40.20                16.50
   Fourth quarter                                                                       22.90                 9.10

</TABLE>

     On March 2, 2004,  the closing  price of TIMET  common stock was $83.40 per
share.  As of March 2,  2004,  there  were 327  shareholders  of record of TIMET
common stock, which the Company estimates  represent  approximately 5,000 actual
shareholders.

     In the third quarter of 1999,  the Company  suspended  payment of quarterly
dividends on its common stock. The Company's U.S. credit agreement, entered into
in early 2000 and as amended in 2001 and 2002,  and the  Indenture  pursuant  to
which the Subordinated  Debentures were issued,  permit the payment of dividends
on the  Company's  common  stock  and the  repurchase  of  common  shares  under
specified conditions.  However, in October 2002, the Company exercised its right
to  defer  future  interest  payments  on  TIMET's  6.625%   Convertible  Junior
Subordinated Debentures due 2026 ("Subordinated Debentures") held by the Capital
Trust for a period of up to 20 consecutive quarters. This deferral was effective
beginning with the Company's  December 1, 2002 scheduled  interest payment.  The
Company's  Board of Directors will consider  resuming  interest  payments on the
Subordinated  Debentures once the longer-term outlook for the Company's business
improves  substantially.  The Company is  permitted to resume  current  interest
payments at any time;  however,  payment of all deferred interest is required to
terminate  a deferral  period.  Since the Company  exercised  its right to defer
interest payments on the Subordinated  Debentures,  it is unable under the terms
of these securities to, among other things,  pay dividends on, redeem,  purchase
or make a  liquidation  payment  with  respect to its capital  stock  during the
deferral period.  However,  the Company is permitted to purchase BUCS during the
deferral period, subject to certain U.S. credit facility limitations.  See Notes
11 and 12 to the Consolidated Financial Statements.

                                       17

<PAGE>


ITEM 6: SELECTED FINANCIAL DATA

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

<TABLE>

                                                                      Year ended December 31,
                                              -------------------------------------------------------------------------
                                                 2003           2002           2001           2000            1999
                                              -----------    -----------    -----------    ------------     -----------
                                                      ($ in millions, except per share and selling price data)
<S>                                           <C>            <C>            <C>            <C>              <C>
STATEMENT OF OPERATIONS DATA:
   Net sales                                  $    385.3     $    366.5     $    486.9     $    426.8       $    480.0
   Gross margin                                     17.0           (3.1)          39.9            3.9             25.5
   Operating income (loss) (1)                       5.4          (20.8)          64.5          (41.7)           (31.4)
   Interest expense (7)                             16.4           17.1           18.3           21.5             20.8
   Net income (loss) (1)                      $    (13.1)    $   (111.5)    $    (41.8)    $    (38.9)      $    (31.4)
   Earnings (loss) per share:
     Basic and diluted (1)(2)(6)              $    (4.12)    $   (35.29)    $   (13.26)    $   (12.40)      $   (10.01)
   Cash dividends per share (6)               $        -     $        -     $        -     $        -       $     1.20

BALANCE SHEET DATA:
   Cash and cash equivalents (8)              $     37.3     $      6.4     $     24.5     $      9.8       $     20.7
   Total assets (1)(7)                             567.4          570.1          705.6          765.7            889.4
   Bank indebtedness (3)                               -           19.4           12.4           44.9            117.4
   Capital lease obligations                        10.3           10.2            8.9            8.8             10.1
   Debt payable to TIMET Capital Trust I           207.5          207.5          207.5          207.5            207.5
   Stockholders' equity                       $    158.8     $    159.4     $    298.1     $    357.5       $    408.1

OTHER OPERATING DATA:
   Cash flows provided (used) by:
     Operating activities                     $     65.8     $    (13.6)    $     62.6     $     65.4       $     19.5
     Investing activities                          (14.5)          (7.5)         (16.1)          (4.2)           (21.7)
     Financing activities                          (22.1)           3.6          (31.4)         (72.8)             8.6
                                              -----------    -----------    -----------    ------------     -----------
       Net provided (used)                    $     29.2     $    (17.5)    $     15.1     $    (11.6)      $      6.4

   Mill product shipments (4)                        8.9            8.9           12.2           11.4             11.4
   Average mill product prices (4)            $    31.50     $    31.40     $    29.80     $    28.70       $    33.00
   Melted product shipments (4)                      4.7            2.4            4.4            3.5              2.5
   Average melted product prices (4)          $    12.15     $    14.50     $    14.50     $    13.65       $    14.20
   Active employees at December 31                 2,055          1,956          2,410          2,220            2,350
   Order backlog at December 31(5)            $    180.0     $    165.0     $    225.0     $    245.0       $    195.0
   Capital expenditures                       $     12.5     $      7.8     $     16.1     $     11.2       $     24.8
-----------------------------------------------------------------------------------------------------------------------
<FN>

(1)  See the notes to the  Consolidated  Financial  Statements and Item 7 - MD&A
     for items that materially affect the 2003, 2002 and 2001 periods.  In 2000,
     the Company recorded (i) a $2.0 million gain on the termination of a sponge
     purchase  agreement with Union Titanium Sponge Corporation at the operating
     income  (loss)  level,  (ii) a $1.2  million gain on the sale of a castings
     joint  venture at the  non-operating  income  (loss) level and (iii) a $1.3
     million loss on early  extinguishment of debt at the  non-operating  income
     (loss)  level.  In 1999,  the  Company  recorded  $4.5  million  of pre-tax
     restructuring charges at the operating income (loss) level.
(2)  Antidilutive in all periods.
(3)  Bank indebtedness represents notes payable and current and noncurrent debt.
(4)  Shipments in thousands of metric tons.  Average  selling  prices stated per
     kilogram.
(5)  Order backlog is defined as unfilled  purchase orders,  which are generally
     subject  to  deferral  or   cancellation  by  the  customer  under  certain
     conditions.
(6)  Amounts have been  adjusted to reflect the  Company's  one-for-ten  reverse
     stock split,  which became effective after the close of trading on February
     14, 2003.
(7)  Amounts have been retroactively restated from prior year presentation based
     upon the Company's deconsolidation of the Capital Trust. See Notes 2 and 12
     to the Consolidated Financial Statements.
(8)  Includes restricted cash and cash equivalents.
</FN>

</TABLE>

                                       18

<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 aerospace  industry,  most specifically the highly cyclical  commercial
aerospace sector.  The Company estimates that aggregate industry shipment volume
for titanium mill products in 2003 was derived from the following  markets:  42%
from  aerospace;  53% from  industrial;  and 5% from  emerging.  The  commercial
aerospace sector is the principal  driver of titanium  consumed in the aerospace
markets,  accounting for shipments of approximately  15,700 metric tons in 2003,
which represent about 78% of mill product aerospace industry shipments and about
33% of aggregate mill product industry  shipments.  Mill product  shipments into
the  military  aerospace  sector in 2003 were  approximately  4,400 metric tons,
which represent about 22% of mill product aerospace industry shipments and about
9% of aggregate mill product shipments. The Company's business is more dependent
on aerospace demand than the overall titanium industry,  as approximately 68% of
its mill product sales volume in 2003 was  represented by sales to the aerospace
industry (57% commercial aerospace and 11% military aerospace).

     During the third quarter of 2003,  the Company and  Wyman-Gordon  agreed to
terminate the 1998 purchase and sale agreement  associated with the formation of
the titanium  castings joint venture  previously  owned by the two parties.  The
Company agreed to pay  Wyman-Gordon  a total of $6.8 million in three  quarterly
installments in connection with this termination, which included the termination
of certain favorable  purchase terms. The Company recorded a one-time charge for
the entire $6.8  million as a reduction  to sales in the third  quarter of 2003.
The  Company  paid the  first  two  installments  aggregating  $4.0  million  to
Wyman-Gordon  during 2003 and will pay the  remaining  $2.8 million in the first
quarter of 2004.  Concurrently,  the Company and  Wyman-Gordon  entered into new
long-term  purchase and sale  agreements  covering the sale of TIMET products to
various  Wyman-Gordon  locations  through  2008.  The  Company  expects  the new
agreements to, among other things, improve its future plant operating rates.

     During  2003,  the  Company  focused  on  (i)  vigorously   reducing  costs
throughout the business,  (ii) increasing capacity utilization,  (iii) improving
management of working capital,  especially inventory, and (iv) improving on-time
delivery and customer  service.  Based upon this focus,  the Company was able to
realize  substantial  cost  savings  during  2003,  primarily  in the  areas  of
manufacturing  and  operational  performance,  yield  improvements  and selling,
general  and   administrative   costs.   While  some  of  these   savings   were
non-recurring,  a majority of the savings will  continue and  positively  affect
future results.

     The Company's  successful  cost  reduction  efforts and increased  capacity
utilization,  coupled with increased  melted product sales volume,  provided for
lower unit costs and  decreasing  book  inventories  during 2003,  for which the
Company reduced its LIFO inventory reserve at the end of 2003 as compared to the
end of 2002. As a result,  the Company reduced cost of sales by $11.4 million in
2003. This compared with an increase in the Company's LIFO inventory  reserve at
the end of 2002 as compared to the end of 2001, for which the Company  increased
cost of sales by $9.3 million in 2002, and with a decrease in the Company's LIFO
inventory  reserve at the end of 2001 as compared to the end of 2000,  for which
the Company decreased cost of sales by $5.0 million in 2001.

                                       19

<PAGE>


     In November  1996,  the Capital Trust issued  $201.3  million BUCS and $6.2
million  6.625%  common  securities.  TIMET owns all of the  outstanding  common
securities  of the  Capital  Trust,  and the  Capital  Trust  is a  wholly-owned
subsidiary  of TIMET.  The Capital Trust used the proceeds from such issuance to
purchase from the Company  $207.5  million  principal  amount of TIMET's  6.625%
Subordinated  Debentures.   The  sole  assets  of  the  Capital  Trust  are  the
Subordinated  Debentures.  Based on the  requirements  of  Financial  Accounting
Standards  Board   Interpretation  No.  46  Revised  ("FIN  46R"),  the  Company
deconsolidated   the  Capital   Trust  as  of  December  31,  2003.   Upon  such
deconsolidation,  the Company now  reflects  both its  investment  in the common
securities  of the  Capital  Trust,  as well as its debt  payable to the Capital
Trust,  separately on its Consolidated  Balance Sheets.  Additionally,  interest
payments on the debt are  reflected  as interest  expense and  dividends  on the
common  securities  are  reflected  as equity in earnings of the  unconsolidated
Capital Trust on the  Consolidated  Statements  of  Operations.  Under  previous
accounting  rules,  the  Company  consolidated  the Capital  Trust,  reflected a
minority  interest  related to the BUCS on its  Consolidated  Balance Sheets and
reported minority  interest  dividend expense on its Consolidated  Statements of
Operations.  All periods presented in this Annual Report have been retroactively
restated,  as permitted by FIN 46R, to allow for comparability with the December
31, 2003 presentation.

     Summarized  financial  information.  The  table  below  summarizes  certain
information  regarding  the Company's  results of operations  for the past three
years.  Average selling prices, as reported by the Company, are a reflection not
just of actual  selling prices  received by the Company,  but also include other
related factors such as currency  exchange rates and customer and product mix in
a given period.  Consequently,  changes in average selling prices from period to
period will be impacted by changes  occurring not just in actual prices,  but by
these other factors as well. The percentage change  information  presented below
represents  changes from the respective prior year. See "Results of Operations -
Outlook" for further discussion of the Company's business expectations for 2004.

<TABLE>

                                                                               Year ended December 31,
                                                                ------------------------------------------------------
                                                                     2003               2002                2001
                                                                ---------------    ----------------    ---------------
                                                                                  ($ in thousands)

<S>                                                             <C>                <C>                 <C>
Net sales                                                       $     385,304      $     366,501       $     486,935
Gross margin                                                           17,030             (3,123)             39,893
Operating income (loss)                                                 5,432            (20,849)             64,480

Gross margin percent of net sales                                          4%                -1%                  8%

Percentage change in:
   Sales volume:
     Melted products                                                      +97                -46                 +27
     Mill products                                                          -                -27                  +7

   Average selling prices - includes changes in product mix:
       Melted products                                                    -16                  -                  +6
       Mill products                                                        -                 +5                  +4

   Selling prices - excludes changes in product mix:
       Melted products                                                    -12                 -1                  +8
       Mill products in U.S. dollars                                       -3                 +4                   -
       Mill products in billing currencies (1)                             -7                 +3                  +2
----------------------------------------------------------------------------------------------------------------------
<FN>
(1)  Excludes the effect of changes in foreign currencies.
</FN>

</TABLE>

                                       20

<PAGE>


     Based upon the terms of the Company's amended LTA with Boeing,  the Company
receives an annual $28.5 million (less $3.80 per pound of titanium  product sold
to Boeing  subcontractors in the preceding year) customer advance from Boeing in
January of each year  related to  Boeing's  purchases  from TIMET for that year.
This advance  continues  through 2007. The terms of the amended LTA allow Boeing
to purchase up to 7.5 million  pounds of titanium  product  annually  from TIMET
through  2007,  but limit TIMET's  maximum  quarterly  volume  obligation to 3.0
million  pounds.  The LTA is structured as a  take-or-pay  agreement  such that,
beginning in calendar year 2002,  Boeing forfeits $3.80 per pound of its advance
payment  in the event that its orders  for  delivery  are less than 7.5  million
pounds in any given calendar year. The Company  recognizes  income to the extent
Boeing's  year-to-date orders for delivery plus TIMET's maximum quarterly volume
obligations  for the  remainder of the year total less than 7.5 million  pounds.
This income is recognized as other operating income and is not included in sales
revenue,  sales  volume  or gross  margin.  During  2003 and 2002,  the  Company
recognized  $23.1 million and $23.4 million,  respectively,  of other  operating
income relative to these take-or-pay  provisions.  Had the Company not benefited
from such provisions, the Company's results would have been as follows:

<TABLE>

                                                                                       Year ended December 31,
                                                                                --------------------------------------
                                                                                      2003                 2002
                                                                                -----------------    -----------------
                                                                                           (In thousands)

<S>                                                                             <C>                  <C>
Operating income (loss), as reported                                            $         5,432      $       (20,849)
Less Boeing take-or-pay income                                                           23,083               23,408
                                                                                -----------------    -----------------
Operating loss, excluding Boeing take-or-pay                                    $       (17,651)     $       (44,257)
                                                                                =================    =================

Net loss, as reported                                                           $       (13,057)     $      (111,530)
Less Boeing take-or-pay income                                                           23,083               23,408
                                                                                -----------------    -----------------
Net loss, excluding Boeing take-or-pay                                          $       (36,140)     $      (134,938)
                                                                                =================    =================

</TABLE>

     Because the Boeing  take-or-pay  income  continues  only through 2007,  the
Company is striving to improve its results of  operations  such that the Company
will generate net income  exclusive of any Boeing  take-or-pay  income,  and the
Company analyses its historical results exclusive of such income. Therefore, the
Company  believes that  presenting its operating loss and net loss excluding the
Boeing  take-or-pay  income  better  measures  the  results  of  its  underlying
business.

     2003  operations.  The Company's  melted  product sales  increased 65% from
$34.8 million  during 2002 to $57.4 million  during 2003  primarily due to a 97%
increase in melted product sales volume,  partially  offset by a 16% decrease in
melted product average selling prices. Melted products consist of ingot and slab
and are generally  only sold in U.S.  dollars.  Melted  product sales  increased
principally as a result of new customer  relationships,  share gains and changes
in product mix.  Excluding the effects of changes in product mix, melted product
selling prices decreased 12% during 2003 compared to 2002.

     Mill product sales  increased 1% from $278.2  million during 2002 to $279.6
million during 2003. This increase was  principally  due to slight  increases in
both mill product sales volume and mill product  average selling prices (average
selling  prices use actual  product  mix and  foreign  currency  exchange  rates
prevailing  during the  respective  periods)  and changes in product  mix.  Mill
product average selling prices were positively  affected by the weakening of the
U.S.  dollar  compared to the British pound sterling and the euro.  Mill product
selling prices expressed in U.S. dollars (using actual foreign currency exchange
rates  prevailing  during  the  respective  periods)  decreased  3% during  2003
compared to 2002. In billing  currencies  (which  exclude the effects of foreign
currency  translation),  mill product  selling  prices  decreased 7% during 2003
compared to 2002.

                                       21

<PAGE>


     As  previously  discussed,  net sales  during 2003 were reduced by the $6.8
million one-time charge incurred by the Company to terminate a purchase and sale
agreement between the Company and Wyman-Gordon.

     Gross  margin  (net sales  less cost of sales)  was 4% of net sales  during
2003,  compared to negative 1% during 2002. The  improvement in gross margin was
primarily a result of the Company's  continued cost reduction efforts,  slightly
improved  plant  operating  rates (from 55% during 2002 to 56% during  2003) and
favorable raw material mix. Additionally,  as previously discussed,  the Company
reduced its LIFO inventory  reserve at the end of 2003 as compared to the end of
2002,  resulting in a reduction in cost of sales by $11.4 million in 2003.  This
compared with an increase in the Company's LIFO inventory  reserve at the end of
2002 compared to the end of 2001, for which the Company  increased cost of sales
by $9.3 million in 2002.  Gross margin during 2003 was also positively  impacted
by the Company's  revision of its estimate of probable loss  associated with the
previously  reported  tungsten  inclusion  matter.  Based  upon an  analysis  of
information  pertaining to asserted and unasserted  claims,  the Company reduced
its accrual for pending and future customer claims,  resulting in a $1.7 million
reduction  in  cost of  sales  during  2003.  See  Note  19 to the  Consolidated
Financial  Statements.  Gross margin during 2003 was  adversely  impacted by the
$6.8 million  reduction in sales relating to the termination of the Wyman-Gordon
agreement.

     Selling,  general,  administrative  and development  expenses decreased 15%
from $43.0 million  during 2002 to $36.4 million  during 2003,  principally as a
result of lower  personnel and travel costs,  as well as focused cost control in
other administrative areas.

     Equity in earnings of joint ventures decreased 77% from $2.0 million during
2002 to $0.5 million during 2003, principally due to a decrease in the operating
results of VALTIMET, the Company's minority-owned welded tube joint venture.

     Net other  operating  income  (expense)  increased  5% from income of $23.3
million during 2002 to income of $24.4 million during 2003,  principally  due to
gains of $0.5  million and $0.6  million  related to the  settlement  of certain
litigation  in the first  quarter and fourth  quarters,  respectively,  of 2003.
Based on actual purchases of  approximately  1.4 million pounds during 2003, the
Company  recognized  $23.1 million of other operating income for the 6.1 million
pounds of product  that Boeing did not purchase  under the LTA during 2003.  The
Company  recognized  $23.4 million of other  operating  income  related to these
take-or-pay provisions during 2002.

     2002  operations.  The Company's  melted  product sales  decreased 46% from
$64.1 million  during 2001 to $34.8 million  during 2002  primarily due to a 46%
decrease  in melted  product  sales  volume and changes in product  mix.  Melted
products consist of ingot and slab and are generally only sold in U.S.  dollars.
Melted  product  average  selling  prices did not change during 2002 compared to
2001.  Excluding the effects of changes in product mix,  melted product  selling
prices decreased 1% during 2002 compared to 2001.

     Mill  product  sales  decreased  23% from $363.3  million in 2001 to $278.2
million in 2002.  This  decrease was  principally  due to a 27% decrease in mill
product sales volume and changes in product mix. The Company's  estimated  sales
volume to the commercial aerospace sector declined approximately 37% during 2002
compared to 2001.  Mill product  average selling prices during 2002 increased 5%
compared to 2001. In billing  currencies,  mill product selling prices increased
3% over 2001  levels.  Mill product  selling  prices  expressed in U.S.  dollars
increased 4% during 2002 compared to 2001.

                                       22

<PAGE>


     Gross margin was  negative 1% of net sales  during 2002,  compared to 8% in
2001.  Gross  margin  in 2002 was most  adversely  impacted  by the  decline  in
production  volume and the related impact on  manufacturing  overhead  costs, as
average plant  operating  rates declined from  approximately  75% of capacity in
2001 to approximately  55% in 2002.  Because of higher unit costs and increasing
book inventories  during 2002, the Company  increased its LIFO inventory reserve
at the  end of 2002 as  compared  to the end of  2001,  for  which  the  Company
increased  cost of sales by $9.3 million in 2002.  This compared with a decrease
in the Company's LIFO  inventory  reserve at the end of 2001 compared to the end
of 2000, for which the Company  decreased cost of sales by $5.0 million in 2001.
In addition,  the Company recorded certain provisions for excess and slow moving
inventories  during 2002 that, due to business  conditions  existing during 2002
(including a number of customer order  cancellations)  were  approximately  $5.3
million  greater than in 2001.  The Company  also  incurred  severance  costs of
approximately  $1.7 million related to global  workforce  reductions  undertaken
throughout 2002. Gross margin during 2001 was adversely impacted by $3.3 million
of estimated costs related to the tungsten  inclusion matter described above and
$10.8 million of equipment impairment charges. Gross margin during 2001 was also
adversely  impacted by  goodwill  amortization  of $4.6  million,  as  effective
January 1, 2002 the Company ceased  amortization of its goodwill.  See Note 7 to
the Consolidated Financial Statements.

     Selling,  general,  administrative  and development  expenses decreased 17%
from $51.8 million during 2001 to $43.0 million during 2002,  principally due to
the  inclusion of a one-time  payment of $6.2 million of incentive  compensation
related to the Boeing  settlement in 2001 (discussed in "2001  operations")  and
lower personnel  related costs in 2002,  partially  offset by higher selling and
marketing costs in 2002.

     Equity in earnings of joint ventures decreased 21% from $2.5 million during
2001 to $2.0 million during 2002  principally  due to a decrease in the earnings
of VALTIMET.

     Net other  operating  income  (expense)  decreased 68% from income of $73.6
million during 2001 to income of $23.3 million during 2002. The decrease was due
to the  Company's  settlement  of  litigation  with  Boeing  whereby the Company
recognized  $73.0 million of income during 2001,  partially  offset by the $23.4
million of income the Company recognized under the take-or-pay provisions of its
LTA with Boeing for the 6.2 million  pounds of titanium  product that Boeing did
not  purchase  under  the LTA  during  2002.  See  Note  15 to the  Consolidated
Financial Statements.

     Non-operating income (expense).

<TABLE>

                                                                               Year ended December 31,
                                                                ------------------------------------------------------
                                                                     2003               2002                2001
                                                                ---------------    ----------------    ---------------
                                                                                    (In thousands)

<S>                                                             <C>                <C>                 <C>
Interest expense on bank debt                                   $      (2,017)     $      (3,381)      $      (4,060)
Interest expense on debt payable to the Capital Trust                 (14,402)           (13,763)            (14,273)
                                                                ---------------    ----------------    ---------------
                                                                $     (16,419)     $     (17,144)      $     (18,333)
                                                                ===============    ================    ===============

Dividends and interest income                                   $         383      $         118       $       5,460
Equity in earnings of common
   securities of the Capital Trust                                        432                413                 423
SMC impairment charge                                                       -            (27,500)            (61,519)
Surety bond guarantee                                                    (449)            (1,575)                  -
Foreign exchange (loss) gain                                             (189)              (587)                 92
Other income (expense), net                                              (471)              (762)                 18
                                                                ---------------    ----------------    ---------------
                                                                $        (294)     $     (29,893)      $     (55,526)
                                                                ===============    ================    ===============

</TABLE>
                                       23

<PAGE>

     Interest  expense on bank debt for 2003  decreased  40%  compared  to 2002,
primarily due to lower average outstanding borrowings,  as the Company generated
positive cash flow from operations and was able to reduce its bank borrowings to
zero by year-end  2003.  Interest  expense on bank debt for 2002  decreased  17%
compared to 2001 primarily due to lower average outstanding borrowings and lower
interest rates during 2002.

     Annual interest expense on the Company's Subordinated Debentures payable to
the Capital Trust approximates $13.7 million,  exclusive of any accrued interest
on deferred interest payments.  In October 2002, the Company exercised its right
to defer future  interest  payments on this debt  effective  with the  Company's
December 1, 2002 scheduled interest payment. Interest continues to accrue at the
6.625% coupon rate on the principal and unpaid  interest and has been classified
as long-term in the Consolidated  Financial  Statements.  The Company's Board of
Directors  will  consider  resuming  payment of  interest  on this debt once the
longer-term outlook for the Company's business improves substantially.  In April
2000, the Company also exercised its right to defer future interest  payments on
this debt. On June 1, 2001, the Company resumed those interest payments and paid
all  previously  deferred  interest  payments.  See Note 12 to the  Consolidated
Financial Statements.

     Dividends  and interest  income  during 2003 and 2002  consisted  solely of
interest  income  earned on cash and cash  equivalents.  Dividends  and interest
income in 2001 consisted principally of dividends on the Company's investment in
$80 million non-voting  convertible  preferred  securities of SMC. As previously
reported,  the Company assessed its investment in the SMC securities  during the
fourth quarter of 2001 and recorded a $61.5 million  impairment charge to reduce
the  carrying  amount  of  this  investment,  including  accrued  dividends  and
interest,  to an estimated  fair value of $27.5 million as of December 31, 2001.
In March 2002,  SMC and its U.S.  subsidiaries  filed a voluntary  petition  for
reorganization  under Chapter 11 of the U.S.  Bankruptcy Code. As a result,  the
Company  undertook  a further  assessment  of its  investment  and  subsequently
recorded a $27.5  million  impairment  charge  during the first quarter of 2002,
which  reduced  the  Company's  carrying  amount  of its  investment  in the SMC
securities  to zero.  Under  the terms of SMC's  Second  Amended  Joint  Plan of
Reorganization, which was approved by the Bankruptcy Court on November 26, 2003,
the convertible  preferred securities were cancelled.  Although the Company does
have  certain   rights  as  an  unsecured   creditor   under  the  SMC  Plan  of
Reorganization  related to the unpaid  dividends,  the Company  does not believe
that it will recover any material amount from this investment.

     TIMET is the  primary  obligor on two $1.5  million  workers'  compensation
bonds  issued  on  behalf  of a former  subsidiary,  Freedom  Forge  Corporation
("Freedom Forge"),  which TIMET sold in 1989. The bonds were provided as part of
the  conditions  imposed on Freedom Forge in order to  self-insure  its workers'
compensation  obligations.   Freedom  Forge  filed  for  Chapter  11  bankruptcy
protection on July 13, 2001, and discontinued payment on the underlying workers'
compensation  claims in November 2001.  During 2002, TIMET received notices that
the issuers of the bonds were required to make payments on one of the bonds with
respect to certain of these claims and were requesting reimbursement from TIMET.
Based upon loss  projections,  the  Company  accrued  $0.9  million in the third
quarter  of 2002  and  $0.7  million  (including  $0.1  million  in  legal  fees
reimbursable  to the issuer of the bonds) in the fourth quarter of 2002 for this
bond as other  non-operating  expense.  Through  December  31,  2003,  TIMET has
reimbursed  the  issuer  approximately  $0.8  million  under  this bond and $0.8
million remains accrued for future payments.  During 2003, TIMET received notice
that certain claimants had submitted claims under the second bond.  Accordingly,
the Company  accrued  $50,000 for this bond in the third  quarter of 2003 and an
additional  $0.4  million  for this bond in the fourth  quarter of 2003 as other
non-operating  expense.  As of December 31, 2003, payments under the second bond
have been less than $0.1 million,  and $0.4 million  remains  accrued for future
payments.  TIMET may revise its  estimated  liability  under  these bonds in the
future as additional facts become known or claims develop.

                                       24

<PAGE>


     Income taxes.  Based on the Company's  recent history of U.S.  losses,  its
near-term  outlook  and  management's   evaluation  of  available  tax  planning
strategies, in the fourth quarter of 2001 the Company concluded that realization
of its previously recorded U.S. deferred tax assets did not continue to meet the
"more-likely-than-not"  recognition criteria and increased its U.S. deferred tax
valuation allowance by $35.5 million.  Additionally, the Company determined that
it would not  recognize  a deferred  tax benefit  related to either  future U.S.
losses or future increases in U.S. minimum pension liabilities continuing for an
uncertain period of time.  Accordingly,  the Company increased its U.S. deferred
tax valuation allowance by $40.2 million in 2002 and by $0.2 million in 2003.

     During the fourth  quarter of 2002,  the Company  was  required to record a
charge to other  comprehensive  loss to reflect an increase in its U.K.  minimum
pension  liability.  The  related  tax  effect of this  charge  resulted  in the
Company's  shifting from a net deferred tax liability position to a net deferred
tax asset position.  Based on the Company's recent history of U.K.  losses,  its
near-term  outlook  and  management's   evaluation  of  available  tax  planning
strategies, the Company determined that it would not recognize this deferred tax
asset because it did not meet the  "more-likely-than-not"  recognition  criteria
and  recorded a U.K.  deferred  tax asset  valuation  allowance  of $7.2 million
through other comprehensive income. Additionally, the Company determined that it
would not recognize  deferred tax benefits  related either to future U.K. losses
or future increases in U.K. minimum pension  liabilities for an uncertain period
of time.  Accordingly,  the Company  increased  its U.K.  deferred tax valuation
allowance by $5.5 million in 2003.

     During the first  quarter of 2002,  the Job Creation and Worker  Assistance
Act of 2002 (the "JCWA Act") was signed  into law.  The  Company  benefits  from
provisions of the JCWA Act,  which  liberalized  certain net operating  loss and
alternative  minimum tax restrictions.  As a result, the Company recognized $1.8
million of refundable  U.S.  income taxes during the first quarter of 2002.  The
Company  received $0.8 million of this refund in the fourth  quarter of 2002 and
the remaining $1.0 million in the third quarter of 2003.

     See also Note 16 to the Consolidated Financial Statements.

     Minority interest.  Minority interest relates primarily to the 30% interest
in TIMET Savoie held by CEZUS. See Note 13 to
the Consolidated Financial Statements.

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

     On January 1, 2002,  the Company  adopted SFAS No. 142,  Goodwill and Other
Intangible Assets,  and recorded a non-cash goodwill  impairment charge of $44.3
million,  representing the entire balance of the Company's  recorded goodwill at
January 1, 2002.

     See further discussion regarding the Company's adoption of these accounting
principles in Notes 2 and 7 to the Consolidated Financial Statements.

                                       25

<PAGE>


     European  operations.  The Company has  substantial  operations  and assets
located in Europe, principally in the United Kingdom, France and Italy. Titanium
is sold  worldwide,  and many similar  factors  influence the Company's U.S. and
European operations. Approximately 42% of the Company's sales revenue originated
in Europe in 2003, of which  approximately  64% was  denominated  in the British
pound  sterling or the euro.  Certain  purchases of raw  materials,  principally
titanium  sponge  and  alloys,  for  the  Company's   European   operations  are
denominated  in U.S.  dollars,  while  labor  and  other  production  costs  are
primarily  denominated in local  currencies.  The  functional  currencies of the
Company's European subsidiaries are those of their respective countries, and the
European  subsidiaries are subject to exchange rate fluctuations that may impact
reported earnings and may affect the comparability of period-to-period operating
results.  Borrowings of the Company's European operations may be in U.S. dollars
or in  functional  currencies.  The  Company's  export  sales from the U.S.  are
denominated  in U.S.  dollars and as such are not  subject to currency  exchange
rate fluctuations.

     The  Company  does  not  use  currency  contracts  to  hedge  its  currency
exposures.   Net  currency  transaction  gains/losses  included  in  results  of
operations  were losses of $0.2  million in 2003 and $0.6  million in 2002 and a
gain of $0.1  million in 2001.  At December 31,  2003,  consolidated  assets and
liabilities  denominated in currencies  other than  functional  currencies  were
approximately  $26.5  million  and  $41.7  million,   respectively,   consisting
primarily of U.S. dollar cash, accounts receivable and accounts payable.

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

     Supplemental  information.  The Company  completed  a reverse  split of its
common  stock (one share of  post-split  common stock for each  outstanding  ten
shares of  pre-split  common  stock)  effective  after the close of  trading  on
February 14, 2003. All share and per share disclosures for all periods presented
in this MD&A have been adjusted to give effect to the reverse stock split.

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

     The cyclical nature of the aerospace industry has been the principal driver
of the historical  fluctuations in the  performance of most titanium  companies.
Over the past 20 years, the titanium industry had cyclical peaks in mill product
shipments  in 1989,  1997 and 2001 and  cyclical  lows in 1983,  1991 and  1999.
Demand for titanium reached its highest level in 1997 when industry mill product
shipments reached  approximately  60,000 metric tons. However,  since that peak,
industry mill product shipments have fluctuated significantly,  primarily due to
a continued change in demand for titanium from the commercial  aerospace sector.
In 2002,  industry  shipments  approximated  50,000 metric tons, and in 2003 the
Company  estimates  industry  shipments  approximated  48,000  metric tons.  The
Company  currently  expects total  industry mill product  shipments in 2004 will
increase from 2003 levels to at least 51,000 metric tons.

                                       26

<PAGE>


     Although the  commercial  airline  industry  continues to face  significant
challenges, recent economic data show signs of an improving business environment
in that  sector.  According to The Airline  Monitor,  the  worldwide  commercial
airline  industry  reported an estimated  operating loss of  approximately  $3.5
billion in 2003,  compared to a $7.3 billion  loss in 2002 and an $11.7  billion
loss in 2001. The Airline Monitor is currently  forecasting  operating income of
approximately $6.3 billion for the industry in 2004. Furthermore, global airline
passenger traffic returned to pre-September 11, 2001 levels in November of 2003.
Although these appear to be positive signs, the Company currently  believes that
industry mill product  shipments  into the commercial  aerospace  sector will be
somewhat flat in 2004 and show a modest upturn in 2005.

     The Airline Monitor  traditionally issues forecasts for commercial aircraft
deliveries  each  January  and July.  According  to The Airline  Monitor,  large
commercial  aircraft deliveries totaled 579 (including 154 wide bodies) in 2003.
The Airline Monitor's most recently issued forecast (January 2004) calls for 575
deliveries in 2004, 540 deliveries in 2005 and 510 deliveries in 2006.  Relative
to 2003, these forecasted delivery rates represent anticipated declines of about
1% in 2004,  7% in 2005 and 12% in 2006.  From 2007  through  2011,  The Airline
Monitor calls for a continued  increase each year in large  commercial  aircraft
deliveries,  with forecasted  deliveries of 620 aircraft in 2008, exceeding 2003
levels.  Deliveries of titanium  generally precede aircraft  deliveries by about
one year, although this varies considerably by titanium product. This correlates
to the Company's cycle,  which  historically  precedes the cycle of the aircraft
industry and related deliveries.

     Although the current business environment continues to make it difficult to
predict  future  performance,  the  Company  expects  sales  revenue  in 2004 to
increase to between  $425  million and $445  million,  reflecting  the  combined
effects of increases  in sales volume and market share and relative  weakness of
the U.S.  dollar  as  compared  to the  British  pound  sterling  and the  euro,
partially  offset by customer and product mix. Mill product sales volume,  which
was 8,875  metric tons in 2003,  is  expected to increase to between  10,300 and
10,500 metric tons in 2004. Melted product sales volume,  which was 4,725 metric
tons in 2003,  is expected to increase to between 4,800 and 5,000 metric tons in
2004.  The  Company  expects  between  55% and 60% of its 2004  mill and  melted
product sales volume will be derived from the commercial aerospace sector (which
would be a slight decrease from 2003), with the balance from military aerospace,
industrial and emerging  markets.  The expected increase in sales volume in 2004
is principally  driven by an anticipated  increase in sales volume to industrial
and emerging markets.

     Additionally,  the Company's  backlog of unfilled orders was  approximately
$180 million at December 31, 2003, compared to $165 million at December 31, 2002
and $225 million at December 31, 2001.  Substantially  the entire 2003  year-end
backlog is scheduled for shipment  during 2004. The Company's  order backlog may
not be a reliable indicator of future business activity.

     The  Company's  cost of sales is affected by a number of factors  including
customer and product mix,  material yields,  plant operating rates, raw material
costs,  labor costs and energy costs.  Raw material costs  represent the largest
portion of the Company's manufacturing cost structure.  The Company has recently
been experiencing higher raw material prices due to a tightening in raw material
availability,  especially  in the scrap  markets.  The Company  also  expects an
increase in energy costs in 2004.

     The Company  expects to  manufacture a significant  portion of its titanium
sponge  requirements in 2004. The unit cost of titanium  sponge  manufactured at
TIMET's Henderson, Nevada facility is expected to decrease relative to 2003, due
primarily  to higher  sponge  plant  operating  rates as the plant moves to full
capacity by the third quarter of 2004. The Company expects the aggregate cost of
purchased sponge and scrap to increase during 2004.

                                       27

<PAGE>


     The Company  expects  production  volumes to  increase in 2004,  increasing
overall capacity  utilization to between 60% and 65% in 2004 (as compared to 56%
in  2003).   However,   practical   capacity   utilization   measures  can  vary
significantly  based on product mix. The Company continues to identify areas for
potential cost savings, in addition to the savings realized in 2003, and expects
gross margin in 2004 to range from 6% to 8% of net sales.

     Selling,  general,  administrative and development  expenses in 2004 should
approximate $35 million.

     The Company  anticipates  that it will receive orders from Boeing for about
1.5 million pounds of product during 2004. At this  projected  order level,  the
Company expects to recognize about $23 million of operating income in 2004 under
the Boeing LTA's take-or-pay provisions.

     The current outlook is for 2004 operating income of between $14 million and
$24  million,  which  includes  the effect of a $1.9  million  reduction  in the
Company's  vacation accrual for U.S.  employees  effective  January 1, 2004 (see
Note  9  to  the  Consolidated  Financial  Statements).   Excluding  the  Boeing
take-or-pay  income,  the Company currently expects operating results in 2004 to
range between operating income of $1 million and operating loss of $9 million.

     In 2004, interest expense on the Company's Subordinated  Debentures held by
the  Capital  Trust  should  approximate  $15.4  million,  including  additional
interest  costs  related  to  the  deferral  of  the  interest  payments  on the
Subordinated Debentures. The Company's Board of Directors will consider resuming
interest  payments on the Subordinated  Debentures once the longer-term  outlook
for the Company's business improves substantially.

     The Company  currently  expects its 2004 bottom line to range between a net
loss  of  $3  million  and  net  income  of $7  million.  Excluding  the  Boeing
take-or-pay  income, the Company currently expects a net loss in 2004 of between
$16 million and $26 million.

     The Company  expects to  generate  $25 million to $35 million in cash flows
from operations during 2004,  partially driven by the continued  deferral of the
interest payments on the Subordinated  Debentures.  Capital  expenditures during
2004 are expected to  approximate  $16 million.  The increase  over 2003 relates
primarily  to capital  needs  relative to the increase in sponge  production  at
TIMET's  Henderson,  Nevada  facility.   Depreciation  and  amortization  should
approximate  $32  million  in  2004.  The  Company  currently  expects  to  make
contributions  of  approximately  $11.5 million to its defined  benefit  pension
plans during 2004 and expects its pension  expense to  approximate $8 million in
2004.

     The  year-on-year  improvements  in  sales  and  operating  income  reflect
achievements in many areas,  most  specifically with regard to vigorous cost and
inventory reduction efforts, and the Company will continue its focus on reducing
costs in 2004. The Company  remains  cautiously  optimistic  that the commercial
aerospace  industry has begun to improve and feels that with its strong  balance
sheet and improved cost  structure,  the Company is well  positioned to maximize
profitability  during any upturn.  Additionally,  solid growth is expected  from
sales into the industrial  and emerging  markets during 2004, two areas in which
the Company's business is continuing to diversify.

                                       28

<PAGE>


     Non-GAAP  financial  measures.  In an  effort  to  provide  investors  with
information  in addition to the  Company's  results as  determined by accounting
principles  generally  accepted in the United  States of America  ("GAAP"),  the
Company has  provided  the  following  non-GAAP  financial  disclosures  that it
believes may provide useful information to investors:

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

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

     o    The Company  discloses  operating  income and net income excluding the
          impact of the Boeing  take-or-pay  income.  The Company  believes this
          provides  investors  with  useful  information  to better  analyze the
          Company's  business and possible  future earnings during periods after
          December  31, 2007,  at which time the Company will no longer  receive
          the positive effects of the take-or-pay income.

LIQUIDITY AND CAPITAL RESOURCES

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

<TABLE>


                                                                               Year ended December 31,
                                                                ------------------------------------------------------
                                                                     2003               2002                2001
                                                                ---------------    ----------------    ---------------
                                                                                   (In thousands)
<S>                                                             <C>                <C>                 <C>
Cash provided (used) by:
   Operating activities                                         $      65,821      $     (13,595)      $      62,574
   Investing activities                                               (14,534)            (7,467)            (16,093)
   Financing activities                                               (22,068)             3,523             (31,358)
                                                                ---------------    ----------------    ---------------

     Net cash provided (used) by operating,
       investing and financing activities                       $      29,219      $     (17,539)      $      15,123
                                                                ===============    ================    ===============

</TABLE>

                                       29

<PAGE>


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

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

     Net loss  decreased  from $111.5  million for the year ended  December  31,
2002,  to $13.1  million for the year ended  December 31, 2003.  See "Results of
Operations - Cumulative effect of change in accounting  principle" and Note 7 to
the Consolidated  Financial  Statements for discussion of the Company's adoption
of SFAS No. 142 and the related  effect on net loss for the year ended  December
31, 2002. See "Results of Operations - Non-operating  income (expense)" and Note
5 to the  Consolidated  Financial  Statements  for  discussion  of the Company's
impairment of its  investment in SMC  securities  and its effect on net loss for
the years ended December 31, 2002 and 2001.

     Accounts  receivable  decreased  during  2003  primarily  due  to  improved
collection  efforts with the  Company's  customers,  which  resulted in a 13-day
decrease in days sales outstanding ("DSO"),  from 75 days at year-end 2002 to 62
days at year-end  2003,  partially  offset by the  weakening of the U.S.  dollar
compared  to the  British  pound  sterling  and the  euro.  Accounts  receivable
decreased  significantly  during 2002  primarily  as a result of reduced  sales,
partially  offset by an  increase  in DSO as certain  customers  extended  their
payment  terms to the Company in response to  unfavorable  economic  conditions.
Accounts  receivable  increased  in 2001  principally  as a result of  increased
sales.

     Inventories  decreased during 2003 due to the Company's  concentrated focus
on inventory reduction during 2003.  Inventories decreased during 2002 primarily
as a result of reduced  production in the fourth quarter of 2002 and an increase
in the Company's reserves for excess inventories,  which the Company recorded in
response to  decreased  demand for its  products  and other  changes in business
conditions.  Inventories  increased in 2001,  reflecting  material purchases and
production  rates that were based on expected  sales  levels  higher than actual
sales levels  achieved.  Due to the impact of the September  11, 2001  terrorist
attacks,  a number of customer order deferrals and  cancellations  were received
late in 2001, contributing to the inventory increase.

     In April 2001, the Company  reached a settlement of the litigation  between
TIMET and  Boeing.  Pursuant  to the  settlement,  the  Company  received a cash
payment of $82 million  ($73  million  net of legal  fees) and in December  2001
received a $28.5  million  customer  advance from Boeing  related to fiscal 2002
purchases.  This  advance  was  reduced to $0.8  million at the end of 2002 as a
result  of  shipments  and  orders  from  Boeing as well as the  recognition  of
take-or-pay  income.  The Company  received a $27.9 million  advance for 2004 in
January 2004.  Through 2007 the Company will receive a similar annual advance in
January of the year to which the advance is  related.  See Notes 9 and 10 to the
Consolidated Financial Statements.

                                       30

<PAGE>


     Dividends  for  the  period  October  1998  through  December  1999  on the
Company's  investment  in  SMC  6.625%  convertible  preferred  securities  were
deferred by SMC. In April 2000, SMC resumed  current  dividend  payments of $1.3
million each quarter; however,  dividends and interest in arrears were not paid.
On October 11, 2001, the Company was notified by SMC of SMC's intention to again
defer the payment of  dividends  effective  with the dividend due on October 28,
2001.  As previously  discussed,  the Company  recorded an impairment  charge of
$61.5  million  related to these  securities,  including  accrued  dividends and
interest,  in the fourth quarter of 2001 and ceased accruing  dividend income on
these  securities at that time.  Additionally,  the Company recorded a charge of
$27.5  million  related to these  securities  in the first  quarter of 2002 that
reduced  the  carrying  amount of these  securities  to zero.  See Note 5 to the
Consolidated Financial Statements.

     The Company did not record any deferred income tax benefits  related to its
U.S. or U.K. losses during 2003. Deferred income tax benefits recognized in 2003
primarily relate to increases in net deferred income tax assets of the Company's
French and Italian subsidiaries.  The Company did not record any deferred income
tax  benefits  related  to its U.S.  losses  during  2002.  Deferred  income tax
benefits recognized in 2002 primarily relate to increases in net deferred income
tax assets of the Company's European subsidiaries. Deferred income taxes in 2001
were  primarily  due to an increase in the  Company's  U.S.  deferred  tax asset
valuation allowance to offset previously recorded tax benefits that did not meet
the "more-likely-than-not" recognition criteria. See Note 16 to the Consolidated
Financial Statements.

     As more fully  discussed in "Results of Operations -  Non-operating  income
(expense),"  in October  2002 the Company  exercised  its right to defer  future
interest  payments on its  Subordinated  Debentures  held by the Capital  Trust,
effective  beginning  with the  Company's  December 1, 2002  scheduled  interest
payment,  although  interest  continues  to  accrue  at the  coupon  rate on the
principal and unpaid interest.  In April 2000, the Company  similarly  exercised
its right to defer future interest payments,  and in the second quarter of 2001,
as noted  above,  a portion of the Boeing  settlement  funds was used to pay the
previously deferred aggregate interest of $14.3 million and resume the regularly
scheduled interest payments.  Changes in accrued interest payable to the Capital
Trust reflect this activity.

     Investing activities. The Company's capital expenditures were $12.5 million
in 2003,  $7.8  million  in 2002 and  $16.1  million  in 2001,  principally  for
replacement of machinery and equipment and for capacity maintenance.  During the
fourth quarter of 2003, the Company deposited funds into certificates of deposit
and  other  interest   bearing   accounts  as  collateral  for  certain  Company
obligations in lieu of entering into letters of credit.  These  deposits,  which
are restricted as to the Company's use, provide the Company with interest income
as opposed to interest expense incurred through the use of letters of credit.

     Financing  activities.  Cash used  during  2003  related  primarily  to the
Company's $19.3 million of net repayments on its outstanding borrowings upon the
Company's  receipt  of  the  $27.7  million  Boeing  advance  in  January  2003.
Additionally,  TIMET Savoie made a $1.9 million dividend payment to CEZUS during
2003.  Cash  provided  during 2002 related  primarily to net  borrowings of $6.3
million necessary to fulfill the Company's working capital needs.  Additionally,
TIMET Savoie made a $1.1  million  dividend  payment to CEZUS  during 2002.  The
Company  incurred  approximately  $1.1 million in financing costs in conjunction
with the Company's  amendment of its U.S.  revolving  credit  agreement in 2002.
These costs are deferred and  amortized  over the life of the  agreement,  which
matures in February 2006. See further discussion below in "Liquidity and Capital
Resources - Borrowing  arrangements." Cash used during 2001 related primarily to
net  repayments  of $31.7 million of  indebtedness  at the time of the Company's
litigation settlement with Boeing.

                                       31

<PAGE>

     Borrowing  arrangements.  Under the terms of the Company's U.S. asset-based
revolving  credit  agreement,  which matures in February  2006,  borrowings  are
limited to the lesser of $105  million or a  formula-determined  borrowing  base
derived  from  the  value  of  accounts  receivable,   inventory  and  equipment
("borrowing availability"). This facility requires the Company's U.S. daily cash
receipts  to be  used  to  reduce  outstanding  borrowings,  which  may  then be
reborrowed subject to the terms of the agreement.  Interest generally accrues at
rates  that  vary  from  LIBOR  plus  2% to  LIBOR  plus  2.5%.  Borrowings  are
collateralized  by substantially  all of the Company's U.S.  assets.  The credit
agreement  prohibits  the  payment of  distributions  in respect of the  Capital
Trust's  BUCS if "excess  availability,"  as defined,  is less than $25 million,
limits  additional  indebtedness,  prohibits  the  payment of  dividends  on the
Company's common stock if excess availability is less than $40 million, requires
compliance  with  certain  financial  covenants  and  contains  other  covenants
customary in lending transactions of this type. The Company was in compliance in
all material  respects with all covenants for all periods during the years ended
December  31,  2003 and  2002.  Excess  availability  is  defined  as  borrowing
availability  less outstanding  borrowings and certain  contractual  commitments
such as letters  of credit.  At  December  31,  2003,  excess  availability  was
approximately $82 million.  There were no outstanding  borrowings under the U.S.
credit  agreement as of December 31, 2003. The weighted average interest rate on
borrowings  outstanding  under this credit agreement as of December 31, 2002 was
3.7%.

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

     The Company's  subsidiary,  TIMET UK, has a credit  agreement that provides
for   borrowings   limited   to  the   lesser  of   (pound)22.5   million  or  a
formula-determined borrowing base derived from the value of accounts receivable,
inventory and  property,  plant and equipment  ("borrowing  availability").  The
credit  agreement  includes  revolving and term loan facilities and an overdraft
facility (the "U.K.  Facilities") and matures in December 2005. Borrowings under
the U.K. Facilities can be in various currencies including U.S. dollars, British
pounds  sterling and euros.  Borrowings  accrue interest at rates that vary from
LIBOR plus 1% to LIBOR plus 1.25% and are collateralized by substantially all of
TIMET UK's  assets.  The U.K.  Facilities  require  the  maintenance  of certain
financial   ratios  and  amounts  and  other  covenants   customary  in  lending
transactions of this type.  TIMET UK was in compliance in all material  respects
with all covenants for all periods  during the years ended December 31, 2003 and
2002.  The U.K.  overdraft  facility is subject to annual  review in December of
each year.  In the event the  overdraft  facility  is not  renewed,  the Company
believes it could refinance any outstanding  overdraft  borrowings  under either
the  revolving  or term loan  features  of the U.K.  Facilities.  The  overdraft
facility was reviewed and renewed in December 2003. During the second quarter of
2003,  TIMET UK  received  an  interest-bearing  intercompany  loan  from a U.S.
subsidiary of the Company  enabling TIMET UK to reduce its long-term  borrowings
under the U.K. Facilities to zero. Unused borrowing availability at December 31,
2003 under the U.K.  Facilities  was  approximately  $40 million.  There were no
borrowings  outstanding  under the U.K.  Facilities as of December 31, 2003. The
weighted  average  interest  rate  on  borrowings  outstanding  under  the  U.K.
Facilities as of December 31, 2002 was 4.6%.

                                       32

<PAGE>


     The Company also has  overdraft  and other credit  facilities at certain of
its other European  subsidiaries.  These  facilities  accrue interest at various
rates and are payable on demand.  Unused borrowing  availability at December 31,
2003  under  these  facilities  was  approximately  $20  million.  There were no
borrowings  outstanding  under the other European  facilities as of December 31,
2003. The weighted average interest rate on borrowings  outstanding  under these
credit agreements as of December 31, 2002 was 3.7%.

     Although excess  availability  under TIMET's U.S. credit agreement  remains
above $40 million,  no  dividends  were paid by TIMET on its common stock during
2003,  2002 or 2001.  TIMET does not anticipate  paying  dividends on its common
stock during 2004 and, as  previously  discussed,  is not  permitted to pay such
dividends while deferring interest payments on the Subordinated  Debentures held
by the Capital Trust.

     Contractual commitments. As more fully described in Notes 11, 12, 18 and 19
to the  Consolidated  Financial  Statements,  the Company was a party to various
debt,  lease and other  agreements at December 31, 2003 that  contractually  and
unconditionally  commit the  Company to pay certain  amounts in the future.  The
following table summarizes such contractual  commitments that are  unconditional
both in terms of timing and amount by the type and date of payment.

<TABLE>

                                                                  Unconditional Payment Due Date
                                             --------------------------------------------------------------------------
                                                               2005/          2007/           2009 &
                                                2004           2006           2008            After           Total
                                             ----------    ------------    ------------    ------------    ------------
       Contractual Commitment                                             (In thousands)
-----------------------------------
<S>                                          <C>           <C>             <C>             <C>             <C>
Capital leases (1)                           $     524     $      358      $     424       $     8,984     $    10,290

Operating leases                                 2,724          2,720            585               339           6,368

Debt payable to Capital Trust (and
accrued interest thereon) (2)                        -              -         19,003           207,465         226,468

Purchase obligations (3)                        36,843         20,303         10,103                 -          67,249

Other contractual obligations                   10,067         11,088          1,063               576          22,794
                                             ----------    ------------    ------------    ------------    ------------

                                             $  50,158     $   34,469      $  31,178       $   217,364     $   333,169
                                             ==========    ============    ============    ============    ============

-----------------------------------------------------------------------------------------------------------------------
<FN>

(1)  Excludes   interest  payments  due  under  the  capital  lease  agreements.
     Inclusive of these interest payments,  the total contractual  commitment is
     $24.0  million  ($1.5  million in 2004,  $2.2  million in  2005/2006,  $2.2
     million in 2007/2008 and $18.1 million in 2009 and thereafter).

(2)  Represents the Company's  Subordinated  Debentures purchased by the Capital
     Trust from TIMET in  connection  with the Capital  Trust's  issuance of the
     BUCS and total interest accrued on the Subordinated  Debentures at December
     31, 2003. Under the Indenture related to the Subordinated  Debentures,  the
     currently  deferred  interest  payments  may  continue to be  contractually
     deferred until December 1, 2007.

(3)  Based  on an  average  price  and  an  assumed  constant  mix  of  products
     purchased, where appropriate.
</FN>
</TABLE>


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

                                       33

<PAGE>


     Off-balance  sheet  arrangements.  As more fully  discussed  in "Results of
Operations - Non-operating income (expense)," the Company is the primary obligor
on two $1.5  million  workers'  compensation  bonds  issued on behalf of Freedom
Forge. The Company has fully expensed the obligation under one of the bonds, but
based upon current claims  analysis,  the Company has only expensed $0.5 million
on the other bond,  although it is potentially  obligated for the remaining $1.0
million.

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

     The Company  recorded  consolidated  pension expense of $8.9 million,  $4.9
million and $1.4 million for the years ended  December 31, 2003,  2002 and 2001,
respectively.  Pension  expense for these  periods was  calculated  based upon a
number of actuarial assumptions, most significant of which are the discount rate
and the expected long-term rate of return.

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

                                                         Discount rates used for:
                      ------------------------------------------------------------------------------------------------
                              Obligation at                     Obligation at                    Obligation at
                            December 31, 2003                 December 31, 2002                December 31, 2001
                           and expense in 2004               and expense in 2003              and expense in 2002
                      ------------------------------    ------------------------------     ---------------------------
<S>                                <C>                               <C>                              <C>
U.S. Plan(s)                       6.00%                             6.25%                            7.00%
U.K. Plan                          5.50%                             5.70%                            6.00%
</TABLE>

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

                                                    Long-term rates of return used for:
                      ------------------------------------------------------------------------------------------------
                              Obligation at                     Obligation at                    Obligation at
                            December 31, 2003                 December 31, 2002                December 31, 2001
                           and expense in 2004               and expense in 2003              and expense in 2002
                      ------------------------------    ------------------------------     ---------------------------
<S>                               <C>                                <C>                              <C>
U.S. Plan(s)                      10.00%                             8.50%                            9.00%
U.K. Plan                          7.10%                             6.70%                            7.50%

</TABLE>

                                       34

<PAGE>


     Lowering the expected long-term rate of return on the Company's U.S. plans'
assets by 0.25% (from 8.50% to 8.25%) would have increased 2003 pension  expense
by  approximately  $0.1 million,  and lowering the discount  rate  assumption by
0.25% (from 6.25% to 6.00%) would  similarly  have  increased the Company's U.S.
plans' 2003 pension expense by approximately $0.1 million. Lowering the expected
long-term  rate of return on the  Company's  U.K.  plan's  assets by 0.25% (from
7.10% to 6.85%) would have increased 2003 pension expense by approximately  $0.5
million,  and  lowering  the discount  rate  assumption  by 0.25% (from 5.70% to
5.45%) would have  increased the Company's U.K.  plan's 2003 pension  expense by
approximately $0.2 million.

     Based on continued  market  declines  and losses on the plan assets  during
2002,  as well as future  projected  asset mix, the Company  reduced its assumed
long-term  rate of return for 2003 to 8.50% for its U.S. plans and 6.70% for its
U.K. plan. The Company's future expected long-term rate of return on plan assets
for its  U.S.  and  U.K.  plans  at  December  31,  2002  was  based on an asset
allocation  assumption of 50% equity securities and 50% fixed income securities.
However,  because of market  fluctuations and prior funding  strategies,  actual
asset  allocation as of December 31, 2002 was 40% equity  securities,  57% fixed
income securities and 3% cash for the U.S. plans and 85% equity securities,  12%
fixed income securities and 3% cash for the U.K. plan.

     During the second quarter of 2003, the Company  transferred all of its U.S.
plans' assets into the Combined Master Retirement Trust ("CMRT").  The CMRT is a
collective  investment  trust  established  by Valhi to  permit  the  collective
investment by certain master trusts which fund certain  employee  benefits plans
sponsored by Valhi and certain  related  companies.  The CMRT held 9.0% of TIMET
common  stock at December  31,  2003;  however,  the  Company's  plan assets are
invested only in a portion of the CMRT that does not hold TIMET common stock. At
December 31,  2003,  Valhi and related  entities or persons  held  approximately
49.8% of TIMET's outstanding common stock and approximately 40.1% of the Capital
Trust's outstanding BUCS (which are convertible into TIMET common stock). Harold
C. Simmons, Chairman of the Board of Directors for Valhi, is the sole trustee of
the CMRT and a member of the trust investment committee for the CMRT.

     The CMRT's  long-term  investment  objective is to provide a rate of return
exceeding a composite of broad market equity and fixed income indices (including
the S&P 500 and certain Russell indices)  utilizing both third-party  investment
managers  as well as  investments  directed by Mr.  Simmons.  During the 16-year
history of the CMRT from  inception  (in 1987)  through  December 31, 2003,  the
average  annual rate of return earned by the CMRT,  as  calculated  based on the
average  percentage  change in the CMRT's net asset value per CMRT unit for each
applicable  year, was 12.7%.  The CMRT earned an annual return of 38.4% in 2003,
and the CMRT's last 5-year and 10-year  average  annual  returns  were 10.1% and
11.1%,  respectively.  The CMRT's annual rates of return from inception  through
December  31, 2003 have varied from a high of a 42.2%  return (in 1998) to a low
of a 20.7% loss (in 1990).  During that same period,  the S&P 500's annual rates
of return  have  varied  from a high of a 34.1%  return  (in 1995) to a low of a
23.4% loss (in 2002). The Company believes that such historical  volatility is a
reasonable  indicator  of future  levels of  volatility,  and a higher  level of
volatility  is  consistent  with a higher  level of risk in the  asset mix and a
higher level of expected return over the long-term.

                                       35

<PAGE>


     At December  31, 2003,  the CMRT's  asset mix (based on an aggregate  asset
value of $502 million) was 62.6% U.S.  equity  securities,  6.8% foreign  equity
securities,  23.6% debt  securities and 7.0% cash and other.  The CMRT`s trustee
and investment  committee  actively manage the investments within the CMRT. Such
parties have in the past, and may again in the future,  periodically  change the
relative  asset mix based upon,  among other  things,  advice they  receive from
third-party  advisors and their  expectation  as to what asset mix will generate
the greatest  overall  return.  Based on the above,  the Company  increased  its
long-term  rate of return  assumption  to 10.0% for  December  31, 2003  pension
obligations and for 2004 pension expense for its U.S. plan.

     Based  on  various  factors,   including   improved   economic  and  market
conditions,  gains on the plan assets during 2003 and  projected  asset mix, the
Company  increased  its assumed  long-term  rate of return for December 31, 2003
pension  obligations  and for 2004 pension  expense to 7.10% for its U.K.  plan.
Because  of market  fluctuations  and prior  funding  strategies,  actual  asset
allocation as of December 31, 2003 was 92% equity securities and 8% fixed income
securities  for the U.K.  plan.  During 2003,  the  trustees  for the U.K.  plan
selected a new  investment  advisor  (effective  in 2004) for the U.K.  plan and
modified its asset  allocation  goals.  As such, the Company's  future  expected
long-term  rate of return on plan assets for its U.K.  plan is based on an asset
allocation  assumption of 80% equity  securities and 20% fixed income securities
by the end of 2005 and 60% equity  securities and 40% fixed income securities by
the end of 2007. The Company believes that the plans' long-term asset allocation
on average  will  approximate  the ultimate  assumed  60/40  allocation,  as all
current contributions to the plan are invested wholly in fixed income securities
in order to gradually effect the shift.

     Although the expected  rate of return is a long-term  measure,  the Company
will continue to evaluate its expected rate of return,  at least  annually,  and
will adjust it as considered necessary.

     Among other things,  the Company bases its determination of pension expense
for all plans on the fair value of plan assets.  The expected return on the fair
value of the plan assets,  determined  based on the expected  long-term  rate of
return, is a component of pension expense.  This methodology  further recognizes
actual investment gains or losses (i.e., the difference between the expected and
actual returns based on the market value of assets) in pension  expense  through
amortization in future periods based upon the expected average remaining service
life of the plan  participants.  Unrealized  gains or losses may  impact  future
periods to the extent the accumulated gains or losses are outside the "corridor"
as defined by SFAS No. 87.

     Based on an expected  rate of return on plan  assets of 10.00%,  a discount
rate of 6.00% and various other assumptions, the Company estimates that its U.S.
plan will have pension expense of approximately $0.3 million in 2004 and pension
income of  approximately  $0.3 million in 2005 and $0.6 million in 2006. A 0.25%
increase  (decrease) in the discount rate would  decrease  (increase)  projected
pension  expense by  approximately  $0.1 million in 2004 and increase  (decease)
projected pension income by approximately  $0.1 million in 2005 and 2006. A 0.5%
increase  (decrease) in the long-term rate of return would  decrease  (increase)
projected  pension  expense by  approximately  $0.3 million in 2004 and increase
(decrease)  projected  pension income by approximately  $0.3 million in 2005 and
approximately $0.4 million in 2006.

                                       36

<PAGE>


     Based on an  expected  rate of return on plan  assets of 7.10%,  a discount
rate of 5.50% and various  other  assumptions  (including  an  exchange  rate of
$1.75/(pound)1.00), the Company estimates that pension expense for its U.K. plan
will  approximate $7.5 million in 2004, $6.9 million in 2005 and $6.4 million in
2006. A 0.25% increase (decrease) in the discount rate would decrease (increase)
projected pension expense by approximately $0.8 million in 2004 and $0.7 million
in 2005 and 2006. A 0.25%  increase  (decrease) in the long-term  rate of return
would  decrease  (increase)  projected  pension  expense by  approximately  $0.2
million in 2004, $0.3 million in 2005 and $0.4 million in 2006.

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

     The Company made cash  contributions of approximately $4.4 million in 2003,
$1.2  million  in 2002  and $2.7  million  in 2001 to the  U.S.  plans  and cash
contributions  of  approximately  $7.3 million in 2003, $6.1 million in 2002 and
$3.6 million in 2001 to the U.K. plan. Based upon the current underfunded status
of the plans and the  actuarial  assumptions  being used for 2004,  the  Company
believes  that it will be  required  to make the  following  cash  contributions
(exclusive of any required employee contributions) over the next five years:

<TABLE>

                                                                          Projected cash contributions
                                                           -----------------------------------------------------------
                                                              U.S. Plan            U.K. Plan              Total
                                                           ----------------     -----------------    -----------------
                                                                                  (In millions)
<S>  <C>                                                     <C>                  <C>                  <C>
Year ending December 31,
     2004                                                    $      4.1           $       7.4          $      11.5
     2005                                                    $      3.2           $       7.7          $      10.9
     2006                                                    $      1.8           $       7.9          $       9.7
     2007                                                    $      0.6           $       8.2          $       8.8
     2008                                                    $      0.1           $       8.4          $       8.5
</TABLE>

     The value of the plans' assets has  fluctuated  dramatically  over the past
three years based mainly on  performance  of the plans' equity  securities.  The
U.S.  plans'  assets were $60.7  million,  $48.2  million  and $56.5  million at
December 31, 2003, 2002 and 2001, respectively,  and the U.K. plan's assets were
$97.8  million,  $69.8 million and $79.0 million at December 31, 2003,  2002 and
2001, respectively.

     The combination of actual  investment  returns and changing  discount rates
has a  significant  effect on the  Company's  funded  plan status  (plan  assets
compared to  projected  benefit  obligations).  In 2003,  the effect of positive
investment  returns was only  partially  offset by the  decline in the  discount
rate,  thereby reducing the underfunded status of the U.S. plan to $10.1 million
at December 31, 2003. In 2003, the effect of positive  investment returns in the
U.K.  plan was more than  offset by the  decline  in the  discount  rate and the
effect of the weakening  dollar compared to the British pound sterling,  thereby
increasing the underfunded  status of the U.K. plan to $53.6 million at December
31, 2003.  The U.S. and U.K.  plans were  underfunded by $21.3 million and $46.7
million, respectively, at December 31, 2002. Based upon the change in the funded
status of the plans  during  2003,  the  Company  was  required  to record a net
additional  minimum  pension  liability  credit  (net of tax) to  equity of $1.1
million, reflecting additional comprehensive income of $8.4 million for the U.S.
plan and additional comprehensive loss of $7.3 million related to the U.K. plan.

                                       37

<PAGE>


     Postretirement  benefit  plans other than  pensions.  The Company  provides
limited  postretirement  healthcare  and life insurance  ("OPEB")  benefits to a
portion of its U.S.  employees  upon  retirement.  The  Company  funds such OPEB
benefits as they are  incurred,  net of any retiree  contributions.  The Company
paid OPEB benefits, net of retiree contributions, in the amount of $3.1 million,
$4.6 million and $4.0 million during 2003, 2002 and 2001, respectively.

     The  Company  recorded  consolidated  OPEB  expense of $2.7  million,  $2.9
million and $1.8 million for the years ended  December 31, 2003,  2002 and 2001,
respectively.  OPEB expense for these periods was calculated based upon a number
of actuarial  assumptions,  most  significant of which are the discount rate and
the expected long-term health care trend rate.

     The discount  rate the Company  utilizes for  determining  OPEB expense and
OPEB  obligations is the same as that used for the Company's U.S. pension plans.
Lowering the discount rate  assumption by 0.25% (from 6.25% to 6.00%) would have
increased the Company's 2003 OPEB expense by less than $0.1 million.

     The Company  estimates the expected  long-term health care trend rate based
upon  input  from  specialists  in  this  area,  as  provided  by the  Company's
actuaries.  In  estimating  the health  care trend rate,  the Company  considers
industry  trends,  the  Company's  actual  healthcare  cost  experience  and the
Company's  future  benefit  structure.  For 2003,  the Company  used a beginning
health care trend rate of 11.35%,  which is  projected  to reduce to an ultimate
rate of 4.25% in 2010.  If the health care trend rate  changed by 1.00% for each
year, OPEB expense would have  increased/decreased by approximately $0.3 million
in 2003.

     For 2004,  the  Company  is using a  beginning  health  care  trend rate of
10.35%, which is projected to reduce to an ultimate rate of 4.00% in 2010.

     Based on a discount  rate of 6.00%,  a health care trend rate as  discussed
above and various other  assumptions,  the Company  estimates  that OPEB expense
will  approximate $2.6 million in 2004, $2.4 million in 2005 and $2.3 million in
2006. A 0.25% increase (decrease) in the discount rate would decrease (increase)
projected OPEB expense by less than $0.1 million in 2004,  2005 and 2006. A 1.0%
increase  (decrease) in the health care trend rate for each year would  increase
(decrease) the projected service and interest cost components of OPEB expense by
approximately $0.2 million in 2004, 2005 and 2006.

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

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

                                       38

<PAGE>

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

     As of March 2, 2004,  the Company had  acquired  1,140,900  shares of CompX
International,  Inc.  ("CompX")  Class A common  stock  (the  "Class A  Shares,"
representing  approximately  22.3% of the outstanding  Class A Shares) for $11.1
million in open market or  privately-negotiated  transactions  with unaffiliated
parties.  Persons or entities related to Harold C. Simmons other than TIMET hold
an  additional  476,300  of the  Class  A  Shares  and  100%  of the  10,000,000
outstanding  shares of CompX Class B common  stock (the  "Class B  Shares").  As
reported in the Schedule 13D filed with the SEC on March 2, 2004, depending upon
the Company's evaluation of the business and prospects of CompX, and upon future
developments  (including,  but not limited to, performance of the Class A Shares
in the market,  availability  of funds,  alternative  uses of funds,  and money,
stock  market  and  general  economic  conditions),  TIMET may from time to time
purchase,  dispose of, or cease  buying or selling  Class A Shares.  The Class A
Shares held by TIMET, as of March 2, 2004, represented approximately 7.5% of the
aggregate number of outstanding Class A Shares and Class B Shares.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

                                       39

<PAGE>


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

     Inventory  allowances.  The Company  values  approximately  one-half of its
inventory  using the LIFO method with the remainder  stated  primarily  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.

     Impairment  of  long-lived  assets.  Generally,  when  events or changes in
circumstances indicate that the carrying amount of long-lived assets,  including
property  and  equipment,  goodwill  and  other  intangible  assets,  may not be
recoverable, the Company prepares an evaluation of the assets or asset group. If
this  evaluation  indicates that the carrying amount of the asset or asset group
is not  recoverable,  the amount of the impairment would typically be calculated
using discounted  expected future cash flows or appraised  values.  All relevant
factors are considered in determining  whether an impairment exists. In 2003, no
such events or circumstances indicated the need to perform such evaluation.

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

     The Company also  completed an  impairment  assessment  of its goodwill and
intangible  assets under SFAS No. 142,  during 2002, as discussed in "Results of
Operations - Cumulative effect of change in accounting  principle" and Note 7 to
the Consolidated Financial Statements. Management judgment was required in order
to identify the Company's reporting units, determine the carrying amount of each
reporting  unit by  assigning  its assets and  liabilities,  including  existing
goodwill and intangible  assets, to those reporting units as of January 1, 2002,
and determine the implied fair value of its goodwill. This evaluation, which was
completed with the assistance of an external valuation specialist and considered
a combination of fair value indicators including quoted market prices, prices of
comparable  businesses and discounted  projected cash flows,  indicated that the
Company's  recorded  goodwill  might be  impaired  and  required  the Company to
complete  the second step of the  impairment  test.  Based on the results of the
impairment test, the Company recorded a non-cash  goodwill  impairment charge of
$44.3  million,  representing  the  entire  balance  of the  Company's  recorded
goodwill at January 1, 2002.

                                       40

<PAGE>


     Valuation and  impairment of securities.  In accordance  with SFAS No. 115,
Accounting for Certain  Investments in Debt and Equity  Securities,  the Company
evaluates  its  investments  in debt and equity  securities  whenever  events or
conditions  occur  to  indicate  that the fair  value  of such  investments  has
declined below their carrying amounts. If the decline in fair value is judged to
be other than temporary,  the carrying amount of the security is written down to
fair value.

     In  response  to certain  events  previously  described  in this MD&A,  the
Company  undertook  assessments  in the  fourth  quarter  of 2001 and the  first
quarter of 2002 of its  investment  in SMC with the  assistance  of an  external
valuation specialist.  Those assessments indicated that it was unlikely that the
Company would recover its then existing carrying amount of the SMC securities in
accordance  with the  securities'  contractual  terms  and  that an  other  than
temporary decline in the fair value of its investment had occurred. Accordingly,
the Company recorded  impairment  charges of $61.5 million in the fourth quarter
of 2001 and $27.5 million in the first quarter of 2002. The securities  were not
publicly traded and,  accordingly,  quoted market prices were  unavailable.  The
estimate of fair value required  significant judgment and considered a number of
factors including, but not limited to, the financial health and prospects of SMC
and market yields of comparable securities.

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

     As more fully  discussed  in "Results of  Operations  - Income  taxes," the
Company has concluded that realization of its previously  recorded U.S. and U.K.
deferred  tax  assets  does  not  meet  the  "more-likely-than-not"  recognition
criteria.  Additionally,  the Company has determined  that it will not recognize
deferred tax benefits  related to future U.S. or U.K. losses or future increases
in the U.S. or U.K.  minimum  pension  liabilities  continuing  for an uncertain
period of time.  Accordingly,  the Company  increased its deferred tax valuation
allowance in 2001 through  2003 to offset  deferred tax benefits  related to net
U.S.  deferred  tax assets and in 2002 and 2003 to offset  deferred tax benefits
related to net U.K. deferred tax assets.

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

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

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

                                       41

<PAGE>


     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.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Interest  rates.  The  Company is exposed  to market  risk from  changes in
interest  rates related to  indebtedness.  The Company  typically does not enter
into  interest  rate swaps or other  types of  contracts  in order to manage its
interest  rate  market  risk.  At  December  31,  2003,  the Company had no bank
indebtedness.  At December 31, 2002 all of the Company's bank  indebtedness  was
denominated in U.S. dollars,  British pounds sterling or euros and bore interest
at  variable  rates,  primarily  related  to spreads  over  LIBOR.  Because  the
Company's bank indebtedness  reprices with changes in market interest rates, the
carrying  amount  of such  debt is  believed  to  approximate  fair  value.  The
following  table   summarizes  the  Company's  bank   indebtedness  and  related
maturities as of December 31, 2002:

<TABLE>


                                                     Contractual maturity date (1)
                                  ---------------------------------------------------------------------    Interest
                                     2003          2004           2005          2006           2007         rate (2)
                                  -----------    ----------    -----------    ----------    -----------    -----------
                                                              (In millions)
<S>                               <C>            <C>           <C>            <C>           <C>               <C>
Variable rate debt:
   U. S. dollars                  $    11.9      $     -       $     2.0      $     -       $     -           3.7%
   British pounds sterling                -            -             4.4            -             -           5.3%
   Euros                                1.1            -               -            -             -           3.7%
-----------------------------------------------------------------------------------------------------------------------
<FN>

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

</TABLE>


     The  $207.5  million  Subordinated  Debentures  held by the  Capital  Trust
provide a fixed  6.625%  coupon  and are  exposed to market  risk from  changing
interest  rates.  At  December  31,  2003,  accrued  but unpaid  interest on the
Subordinated  Debentures was $19.0 million. The BUCS issued by the Capital Trust
are publicly  traded,  and the Company  believes they provide the best available
proxy for the fair value of the underlying Subordinated  Debentures.  Based upon
the last traded value of the BUCS on or before December 31, 2003, the fair value
of the  Subordinated  Debentures,  including  the accrued  and unpaid  interest,
approximated $137 million at December 31, 2003.

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

                                       42

<PAGE>


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

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.

ITEM 9A: CONTROLS AND PROCEDURES

     The Company maintains a system of disclosure  controls and procedures.  The
term "disclosure controls and procedures," as defined by regulations of the SEC,
means  controls and other  procedures of the Company that are designed to ensure
that information  required to be disclosed in the reports that the Company files
or submits to the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange  Act"), is recorded,  processed,  summarized and reported,  within the
time  periods  specified in the SEC's rules and forms.  Disclosure  controls and
procedures  include,  without  limitation,  controls and procedures  designed to
ensure that  information  required to be disclosed by the Company in the reports
that it files or submits to the SEC under the  Exchange Act is  accumulated  and
communicated  to the Company's  management,  including  its principal  executive
officer and its  principal  financial  officer,  or persons  performing  similar
functions,   as  appropriate  to  allow  timely  decisions   regarding  required
disclosure.  Both J. Landis Martin, the Company's Chief Executive  Officer,  and
Bruce  P.  Inglis,   the  Company's  Vice  President  -  Finance  and  Corporate
Controller,  have evaluated the Company's  disclosure controls and procedures as
of December 31, 2003. Based upon their evaluation, these executive officers have
concluded that the Company's disclosure controls and procedures are effective as
of the date of such evaluation.

     The Company also  maintains a system of internal  controls  over  financial
reporting.  The term "internal control over financial  reporting," as defined by
regulations  of the SEC, means a process  designed by, or under the  supervision
of, the  Company's  principal  executive and principal  financial  officers,  or
persons  performing  similar  functions,  and effected by the Company's board of
directors,  management  and other  personnel,  to provide  reasonable  assurance
regarding  the  reliability  of  financial  reporting  and  the  preparation  of
financial statements for external purposes in accordance with GAAP, and includes
those policies and procedures that:

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

                                       43

<PAGE>


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

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

     There has been no change to the Company's  system of internal  control over
financial  reporting  during  the  quarter  ended  December  31,  2003  that has
materially affected, or is reasonably likely to materially affect, the Company's
system of internal controls over financial reporting.


                                    PART III

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

ITEM 11: EXECUTIVE COMPENSATION

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

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

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

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES

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

                                       44

<PAGE>


                                     PART IV

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

(a)  and (d) Financial Statements and Schedules

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

(b)  Reports on Form 8-K

     Reports on Form 8-K for the  quarter  ended  December  31, 2003 and through
March 2, 2004:

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

           October 6, 2003                            5 and 7
           October 14, 2003                           5 and 7
           October 14, 2003                              9
           October 22, 2003                           5 and 7
           October 23, 2003                           7 and 12
           January 28, 2004                           7 and 12
           January 29, 2004                           7 and 9
           February 26, 2004                          5 and 7

(c)  Exhibits

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

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

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

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

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

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

                                       45

<PAGE>


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

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

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

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

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

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

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

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

9.1  Shareholders'  Agreement,  dated February 15, 1996,  among Titanium  Metals
     Corporation,  Tremont  Corporation,  IMI  plc,  IMI  Kynoch  Ltd.,  and IMI
     Americas,  Inc.,  incorporated  by  reference  to  Exhibit  2.2 to  Tremont
     Corporation's  Current Report on Form 8-K (No.  1-10126) filed with the SEC
     on March 1, 1996.

9.2  Amendment  to the  Shareholders'  Agreement,  dated March 29,  1996,  among
     Titanium Metals Corporation, Tremont Corporation, IMI plc, IMI Kynoch Ltd.,
     and IMI  Americas,  Inc.,  incorporated  by reference  to Exhibit  10.30 to
     Tremont Corporation's Annual Report on Form 10-K (No. 1-10126) for the year
     ended December 31, 1995.

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

                                       46

<PAGE>



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

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

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

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

10.5 Loan and  Overdraft  Facilities  between  Lloyds  TSB Bank plc and TIMET UK
     Limited dated December 19, 2003.

10.6*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).

10.7*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.

10.8*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.

10.9*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.

10.10* 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.

10.11* Titanium  Metals  Corporation  Amended  and  Restated  1996  Non-Employee
     Director Compensation Plan, as amended and restated effective May 20, 2003,
     incorporated  by reference to Exhibit  10.4 to the  Registrant's  Quarterly
     Report on Form 10-Q for the quarter ended June 30, 2003.

                                       47

<PAGE>


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

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

10.13Settlement  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.

10.14Intercorporate  Services Agreement among Contran  Corporation,  Tremont LLC
     and Titanium Metals Corporation, effective as of January 1, 2004.

10.15Purchase and Sale  Agreement  (For  Titanium  Products)  between The Boeing
     Company,  acting through its division,  Boeing  Commercial  Airplanes,  and
     Titanium Metals  Corporation  (as amended and restated  effective April 19,
     2001),  incorporated  by  reference  to  Exhibit  10.2 to the  Registrant's
     Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.

10.16Purchase and Sale Agreement  between  Rolls-Royce  plc and Titanium  Metals
     Corporation  dated December 22, 1998,  incorporated by reference to Exhibit
     10.3 to the  Registrant's  Quarterly  Report on Form  10-Q for the  quarter
     ended June 30, 2002.

10.17First Amendment to Purchase and Sale Agreement between  Rolls-Royce plc and
     Titanium Metals Corporation.

10.18Second  Amendment to Purchase and Sale Agreement  between  Rolls-Royce  plc
     and Titanium Metals Corporation.

10.19Termination  Agreement  by and between  Wyman-Gordon  Company and  Titanium
     Metals  Corporation  effective as of September  28, 2003,  incorporated  by
     reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q
     for the quarter ended September 30, 2003.

10.20Agreement  Regarding  Shared  Insurance by and between CompX  International
     Inc., Contran Corporation,  Keystone Consolidated Industries,  Inc., Kronos
     Worldwide,  Inc., NL Industries,  Inc.,  Titanium  Metals  Corporation  and
     Valhi, Inc. dated October 30, 2003.

21.1 Subsidiaries of the Registrant.

23.1 Consent of PricewaterhouseCoopers LLP.

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

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

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

* Management contract, compensatory plan or arrangement.

                                       48

<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 4, 2004
                                                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/ Glenn R. Simmons
------------------------------------            --------------------------------
J. Landis Martin, March 4, 2004                 Glenn R. Simmons, March 4, 2004
Chairman of the Board, President                Director
  and Chief Executive Officer


/s/ Norman N. Green                             /s/ Steven L. Watson
------------------------------------           --------------------------------
Norman N. Green, March 4, 2004                  Steven L. Watson, March 4, 2004
Director                                        Director


/s/ Gary C. Hutchison                           /s/ Paul J. Zucconi
------------------------------------           --------------------------------
Gary C. Hutchison, March 4, 2004                Paul J. Zucconi, March 4, 2004
Director                                        Director


/s/ Albert W. Niemi, Jr.                        /s/ Bruce P. Inglis
------------------------------------            --------------------------------
Albert W. Niemi, Jr., March 4, 2004             Bruce P. Inglis, March 4, 2004
Director                                        Vice President - Finance and
                                                  Corporate Controller
                                                Principal Financial Officer
                                                Principal Accounting Officer


                                       49

<PAGE>


                           TITANIUM METALS CORPORATION

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

                   INDEX OF FINANCIAL STATEMENTS AND SCHEDULES

                                                                           Page
Financial Statements

   Report of Independent Auditors                                           F-1

   Consolidated Balance Sheets - December 31, 2003 and 2002                 F-2

   Consolidated Statements of Operations -
      Years ended December 31, 2003, 2002 and 2001                          F-4

   Consolidated Statements of Comprehensive Loss -
      Years ended December 31, 2003, 2002 and 2001                          F-6

   Consolidated Statements of Cash Flows -
      Years ended December 31, 2003, 2002 and 2001                          F-7

   Consolidated Statements of Changes in Stockholders' Equity -
      Years ended December 31, 2003, 2002 and 2001                          F-9

   Notes to Consolidated Financial Statements                              F-10


Financial Statement Schedules

   Report of Independent Auditors on Financial Statement Schedule           S-1

   Schedule II - Valuation and Qualifying Accounts                          S-2

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


                                        F


<PAGE>






                         REPORT OF INDEPENDENT AUDITORS


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 loss, of changes
in  stockholders'  equity  and of cash flows  present  fairly,  in all  material
respects, the financial position of Titanium Metals Corporation and Subsidiaries
at December  31, 2003 and 2002,  and the results of their  operations  and their
cash flows for each of the three years in the period ended  December 31, 2003 in
conformity with accounting principles generally accepted in the United States of
America.  These  financial  statements are the  responsibility  of the Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  based on our audits.  We conducted our audits of these statements in
accordance with auditing  standards  generally  accepted in the United States of
America,  which require that we plan and perform the audit to obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

     As discussed in Note 2 to the consolidated financial statements,  effective
December  31,  2003  the  Company  changed  its  method  of  accounting  for its
investment  in  a  wholly-owned  trust  holding   subordinated   debentures  and
retroactively  restated  all  periods,  effective  January  1, 2003 the  Company
changed its method of accounting for asset retirement obligations, and effective
January 1, 2002 the Company  changed its method of  accounting  for goodwill and
other intangible assets.



/s/ PricewaterhouseCoopers LLP



Denver, Colorado
March 2, 2004

                                       F-1

<PAGE>


                           TITANIUM METALS CORPORATION

                           CONSOLIDATED BALANCE SHEETS

                      (In thousands, except per share data)

<TABLE>

                                                                                              December 31,
                                                                                   -----------------------------------
ASSETS                                                                                  2003               2002
                                                                                   ----------------   ----------------

<S>                                                                                <C>                <C>
Current assets:
   Cash and cash equivalents                                                       $       35,040     $        6,214
   Restricted cash and cash equivalents                                                     2,248                146
   Accounts and other receivables, less
     allowance of $2,347 and $2,859                                                        67,432             68,791
   Refundable income taxes                                                                  2,155              1,703
   Inventories                                                                            165,721            181,932
   Prepaid expenses and other                                                               2,604              3,077
   Deferred income taxes                                                                      778                809
                                                                                   ----------------   ----------------
       Total current assets                                                               275,978            262,672
                                                                                   ----------------   ----------------

Investment in joint ventures                                                               22,469             22,287
Investment in common securities of TIMET Capital Trust I                                    6,794              6,362
Property and equipment, net                                                               239,182            254,672
Intangible assets, net                                                                      6,294              8,442
Other                                                                                      16,692             15,705
                                                                                   ----------------   ----------------
       Total assets                                                                $      567,409     $      570,140
                                                                                   ================   ================

</TABLE>

                                       F-2

<PAGE>

                           TITANIUM METALS CORPORATION

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                      (In thousands, except per share data)

<TABLE>
                                                                                              December 31,
                                                                                   -----------------------------------
LIABILITIES, MINORITY INTEREST AND                                                      2003               2002
STOCKHOLDERS' EQUITY                                                               ----------------   ----------------

<S>                                                                                <C>                <C>
Current liabilities:
   Notes payable                                                                   $           -      $      12,994
   Current maturities of capital lease obligations                                           524                642
   Accounts payable                                                                       29,200             26,460
   Accrued liabilities                                                                    45,163             46,511
   Customer advances                                                                       3,356              5,416
   Other                                                                                     262                602
                                                                                   ----------------   ----------------
       Total current liabilities                                                          78,505             92,625
                                                                                   ----------------   ----------------

Long-term debt                                                                                 -              6,401
Capital lease obligations                                                                  9,766              9,575
Accrued OPEB cost                                                                         13,661             13,417
Accrued pension cost                                                                      62,366             61,080
Accrued environmental cost                                                                 3,930              3,531
Deferred income taxes                                                                        637              1,036
Accrued interest on debt payable to TIMET Capital Trust I                                 19,003              4,600
Debt payable to TIMET Capital Trust I                                                    207,465            207,465
Other                                                                                      2,188                644
                                                                                   ----------------   ----------------
       Total liabilities                                                                 397,521            400,374
                                                                                   ----------------   ----------------

Minority interest                                                                         11,131             10,416
                                                                                   ----------------   ----------------

Stockholders' equity:
   Preferred stock $.01 par value; 100 shares authorized,
     none outstanding                                                                          -                  -
   Common stock, $.01 par value; 9,900 shares authorized,
     3,190 and 3,194 shares issued, respectively                                              32                 32
   Additional paid-in capital                                                            350,643            350,889
   Accumulated deficit                                                                  (140,428)          (127,371)
   Accumulated other comprehensive loss                                                  (50,226)           (62,737)
   Treasury stock, at cost  (9 shares)                                                    (1,208)            (1,208)
   Deferred compensation                                                                     (56)              (255)
                                                                                   ----------------   ----------------
       Total stockholders' equity                                                        158,757            159,350
                                                                                   ----------------   ----------------

       Total liabilities and stockholders' equity                                  $     567,409      $     570,140
                                                                                   ================   ================
</TABLE>

Commitments and contingencies (Note 19)


          See accompanying notes to consolidated financial statements.
                                       F-3

<PAGE>


                           TITANIUM METALS CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)
<TABLE>

                                                                                Year ended December 31,
                                                                   ---------------------------------------------------
                                                                        2003                2002             2001
                                                                   ----------------    --------------    -------------

<S>                                                                <C>                 <C>               <C>
Net sales                                                          $     385,304       $     366,501     $    486,935
Cost of sales                                                            368,274             369,624          447,042
                                                                   ----------------    --------------    -------------

   Gross margin                                                           17,030              (3,123)          39,893

Selling, general, administrative and
   development expense                                                    36,438              42,998           51,788
Equity in earnings of joint ventures                                         451               1,990            2,515
Other income (expense), net                                               24,389              23,282           73,420
                                                                   ----------------    --------------    -------------

   Operating income (loss)                                                 5,432             (20,849)          64,480

Interest expense                                                          16,419              17,144           18,333
Other non-operating income (expense), net                                   (294)            (29,893)         (55,526)
                                                                   ----------------    --------------    -------------

   Loss before income taxes, minority interest
     and cumulative effect of change in
     accounting principle                                                (11,281)            (67,886)          (9,379)

Income tax expense (benefit)                                               1,207              (1,952)          31,112
Minority interest, net of tax                                                378               1,286            1,275
                                                                   ----------------    --------------    -------------

   Loss before cumulative effect of change in
     accounting principle                                                (12,866)            (67,220)         (41,766)

Cumulative effect of change in accounting principle                         (191)            (44,310)               -
                                                                   ----------------    --------------    -------------

   Net loss                                                        $     (13,057)      $    (111,530)    $    (41,766)
                                                                   ================    ==============    =============

</TABLE>

          See accompanying notes to consolidated financial statements.
                                       F-4
<PAGE>


                           TITANIUM METALS CORPORATION

                CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

                      (In thousands, except per share data)
<TABLE>

                                                                                 Year ended December 31,
                                                                   ---------------------------------------------------
                                                                        2003               2002              2001
                                                                   ----------------    --------------    -------------

<S>                                                                <C>                 <C>               <C>
Basic and diluted loss per share:
   Before cumulative effect of change
      in accounting principle                                      $      (4.06)       $     (21.27)     $    (13.26)

   Cumulative effect of change in accounting
      principle                                                           (0.06)             (14.02)               -
                                                                   ----------------    --------------    -------------

Basic and diluted loss per share                                   $      (4.12)       $     (35.29)     $    (13.26)
                                                                   ================    ==============    =============

Weighted average shares outstanding                                       3,169               3,161            3,150
                                                                   ================    ==============    =============

Pro forma amounts assuming Statement of Financial
   Accounting Standards No. 143 was applied as of
   January 1, 2001 (Note 2):

   Net loss                                                        $    (12,866)       $   (111,556)     $   (41,791)
                                                                   ================    ==============    =============

   Basic and diluted loss per share                                $      (4.06)       $     (35.30)     $    (13.27)
                                                                   ================    ==============    =============

</TABLE>

          See accompanying notes to consolidated financial statements.
                                       F-5

<PAGE>


                           TITANIUM METALS CORPORATION

                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

                                 (In thousands)
<TABLE>

                                                                                 Year ended December 31,
                                                                     -------------------------------------------------
                                                                          2003              2002             2001
                                                                     --------------    --------------   --------------

<S>                                                                  <C>               <C>              <C>
Net loss                                                             $     (13,057)    $    (111,530)   $    (41,766)
                                                                     --------------    --------------   --------------

Other comprehensive income (loss):
   Currency translation adjustment                                          11,443            13,359          (3,475)
   Pension liabilities adjustment, net of tax benefit
     of $0, $1,588 and $4,834                                                1,068           (40,822)        (15,391)
                                                                     --------------    --------------   --------------

                                                                            12,511           (27,463)        (18,866)
                                                                     --------------    --------------   --------------

   Comprehensive loss                                                $        (546)    $    (138,993)   $    (60,632)
                                                                     ==============    ==============   ==============

</TABLE>

          See accompanying notes to consolidated financial statements.
                                       F-6

<PAGE>


                           TITANIUM METALS CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
                                                                                  Year ended December 31,
                                                                     --------------------------------------------------
                                                                           2003             2002             2001
                                                                     ---------------    --------------   --------------
<S>                                                                         <C>                <C>              <C>
Cash flows from operating activities:
   Net loss                                                          $     (13,057)     $    (111,530)   $     (41,766)
   Depreciation and amortization                                            36,572             37,098           40,134
   Cumulative effect of change in accounting principle                         191             44,310                -
   Loss on disposal of fixed assets                                            655                  -                -
   Noncash equipment impairment charge                                           -                  -           10,840
   Noncash impairment of Special Metals Corporation
     preferred securities                                                        -             27,500           61,519
   Equity in earnings of joint ventures, net of
     distributions                                                             796               (961)          (2,040)
   Equity in earnings of common securities of
     TIMET Capital Trust I, net of distributions                              (432)              (104)             316
   Deferred income taxes                                                      (259)            (3,694)          26,822
   Minority interest                                                           378              1,286            1,275
   Other, net                                                                  (39)             1,891            1,115
   Change in assets and liabilities:
     Receivables                                                             4,798             24,088           (8,830)
     Inventories                                                            24,462             10,756          (38,631)
     Prepaid expenses and other                                                461              6,072           (3,112)
     Accounts payable and accrued liabilities                               (1,014)           (17,159)           3,895
     Customer advances                                                        (207)           (26,386)          29,291
     Income taxes                                                             (256)            (1,863)              98
     Accrued OPEB and pension costs                                         (2,007)            (6,998)          (4,288)
     Accrued interest on debt payable to
       TIMET Capital Trust I                                                14,403              3,455          (10,350)
     Other, net                                                                376             (1,356)          (3,714)
                                                                     ---------------    --------------   --------------
       Net cash provided (used) by operating activities                     65,821            (13,595)          62,574
                                                                     ---------------    --------------   --------------

Cash flows from investing activities:
   Capital expenditures                                                    (12,467)            (7,767)         (16,124)
   Change in restricted cash, net                                           (2,102)                 -                -
   Other, net                                                                   35                300               31
                                                                     ---------------    --------------   --------------
       Net cash used by investing activities                               (14,534)            (7,467)         (16,093)
                                                                     ---------------    --------------   --------------

Cash flows from financing activities:
   Indebtedness:
     Borrowings                                                            449,789            420,146          537,884
     Repayments                                                           (469,042)          (413,842)        (569,569)
   Dividends paid to minority interest                                      (1,892)            (1,115)               -
   Deferred financing costs                                                      -             (1,050)               -
   Other, net                                                                 (923)              (616)             327
                                                                     ---------------    --------------   --------------
       Net cash (used) provided by financing activities                    (22,068)             3,523          (31,358)
                                                                     ---------------    --------------   --------------

Net cash provided (used) by operating, investing
   and financing activities                                          $      29,219      $     (17,539)   $      15,123
                                                                     ===============    ==============   ==============
</TABLE>

                                       F-7

<PAGE>

                           TITANIUM METALS CORPORATION

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                 (In thousands)
<TABLE>

                                                                                 Year ended December 31,
                                                                     -------------------------------------------------
                                                                         2003              2002             2001
                                                                     --------------    --------------   --------------
<S>                                                                  <C>               <C>              <C>
Cash and cash equivalents:
   Net increase (decrease) from:
     Operating, investing and financing activities                   $     29,219      $    (17,539)    $     15,123
     Effect of exchange rate changes on cash                                 (393)             (747)            (419)
                                                                     --------------    --------------   --------------
                                                                           28,826           (18,286)          14,704
   Cash and cash equivalents at beginning of year                           6,214            24,500            9,796
                                                                     --------------    --------------   --------------

   Cash and cash equivalents at end of year                          $     35,040      $      6,214     $     24,500
                                                                     ==============    ==============   ==============

Supplemental disclosures:
   Cash paid for:
     Interest, net of amounts capitalized                            $      1,325      $     12,352     $     27,697
     Income taxes, net                                               $      1,561      $      3,605     $      4,192

Noncash investing and financing activities:
   Capital lease obligations incurred when
     the Company entered into certain leases
     for equipment                                                   $          -      $        969     $        519
   Issuance of common stock upon conversion
     of preferred securities issued by
     TIMET Capital Trust I                                           $          -      $          -     $          9

</TABLE>

          See accompanying notes to consolidated financial statements.
                                       F-8

<PAGE>


                           TITANIUM METALS CORPORATION

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                  Years ended December 31, 2003, 2002 and 2001
                                 (In thousands)

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

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

Balance at December 31, 2002         3,185      32     350,889    (127,371)    (1,036)    (61,701)    (1,208)      (255)    159,350
  Comprehensive income (loss)            -       -           -     (13,057)    11,443       1,068          -          -        (546)
  Issuance of common stock               3       -          72           -          -           -          -          -          72
  Stock award cancellations             (7)      -        (318)          -          -           -          -        318           -
  Amortization of deferred
   compensation, net of effects of
   stock award cancellations             -       -           -           -          -           -          -       (119)       (119)
                                    -------  ------  ----------  ----------  ---------  ----------  ---------  ---------  ----------

Balance at December 31, 2003         3,181   $  32   $ 350,643   $(140,428)  $ 10,407   $ (60,633)  $ (1,208)  $    (56)  $ 158,757
                                    =======  ======  ==========  ==========  =========  ==========  =========  =========  ==========
</TABLE>

          See accompanying notes to consolidated financial statements.
                                       F-9

<PAGE>

                           TITANIUM METALS CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Organization and basis of presentation

     Titanium Metals Corporation  ("TIMET") is a vertically  integrated producer
of  titanium  sponge,  melted  products  and a  variety  of  mill  products  for
aerospace,  industrial and other  applications.  The  accompanying  Consolidated
Financial Statements include the accounts of TIMET and all of its majority-owned
subsidiaries (collectively, the "Company") except the TIMET Capital Trust I (the
"Capital Trust"), a wholly-owned subsidiary which was deconsolidated at December
31,  2003 and for which all prior  periods  were  retroactively  restated.  Such
retroactive  restatement did not impact net loss,  stockholders'  equity or cash
flow from  operations for any prior periods.  See further  discussion in Notes 2
and 12. All material  intercompany  transactions and balances with  consolidated
subsidiaries  have been  eliminated,  and certain  prior year  amounts have been
reclassified to conform to the current year presentation.

     At  December  31,  2003,  Valhi,  Inc.  and  subsidiaries   ("Valhi")  held
approximately  40.8% of TIMET's  outstanding common stock and approximately 0.4%
of the Capital Trust's  outstanding  6.625% mandatorily  redeemable  convertible
preferred securities,  beneficial unsecured convertible  securities ("BUCS"). At
December 31, 2003, the Combined Master Retirement Trust ("CMRT"), a trust formed
by Valhi to permit the collective  investment by trusts that maintain the assets
of  certain  employee  benefit  plans  adopted  by  Valhi  and  certain  related
companies, held approximately 9.0% of TIMET's common stock. TIMET's U.S. pension
plan began  investing in the CMRT in the second  quarter of 2003;  however,  the
plan  invests  only in a portion  of the CMRT that  does not hold  TIMET  common
stock. At December 31, 2003,  Contran  Corporation  ("Contran") held directly an
additional 39.8% of the Capital Trust's  outstanding BUCS and held,  directly or
through  subsidiaries,  approximately 90% of Valhi's  outstanding  common stock.
Substantially  all of  Contran's  outstanding  voting  stock  is held by  trusts
established for the benefit of certain  children and  grandchildren of Harold C.
Simmons, of which Mr. Simmons is sole trustee.  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 and TIMET.

Note 2 - Summary of significant accounting policies

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

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

                                      F-10

<PAGE>


     Restricted cash and cash equivalents.  Restricted cash and cash equivalents
generally consist of certificates of deposit and other interest bearing accounts
collateralizing  certain  Company  obligations.   Such  restricted  amounts  are
generally  classified as either a current or noncurrent  asset  depending on the
classification  of the obligation to which the restricted  amount  relates.  All
restricted amounts are classified as current at December 31, 2003 and 2002.

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

     Inventories  and cost of sales.  Inventories  include  material,  labor and
overhead and are stated at the lower of cost or market,  net of an allowance for
slow-moving inventories.  Approximately one-half of inventories are costed using
the last-in,  first-out  ("LIFO") method with the balance stated primarily using
an average cost method. Cost of sales includes costs for materials,  packing and
finishing, utilities,  maintenance and depreciation,  shipping and handling, and
salaries and benefits.

     Investments.  Investments in 20% to 50%-owned  joint ventures are accounted
for by the equity method.  Additionally,  TIMET's  100%-owned  investment in the
Capital  Trust is accounted for by the equity method as of December 31, 2003, as
further discussed below in the "Recently adopted accounting  principles" section
of this Note. 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.

     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
(including planned major  maintenance),  repairs and minor renewals are expensed
as incurred and included in cost of sales.  Major  improvements  are capitalized
and  depreciated  over the  estimated  period to be  benefited.  No interest was
capitalized during 2003 or 2002.

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

                                      F-11

<PAGE>


     Intangible  assets and amortization.  Goodwill,  representing the excess of
cost  over  the  fair  value of  individual  net  assets  acquired  in  business
combinations  accounted  for by the purchase  method,  was  amortized  using the
straight-line   method  over  15  years  and  was  stated  net  of   accumulated
amortization  through December 31, 2001. On January 1, 2002, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other
Intangible  Assets, and recorded an impairment charge for its remaining goodwill
balance.  See Note 7. Patents and other  intangible  assets,  except  intangible
pension assets,  are amortized using the  straight-line  method over the periods
expected to be benefited,  generally seven to nine years.  The Company  assesses
the amortization period and recoverability of the carrying amount of patents and
other  intangible  assets at least  annually  or when  events  or  circumstances
require,  and the  effects of  revisions  are  reflected  in the period they are
determined to be necessary.

     Translation of foreign  currencies.  Assets and liabilities of subsidiaries
whose  functional  currency  is  deemed  to be other  than the U.S.  dollar  are
translated  at  year-end  rates of  exchange,  and  revenues  and  expenses  are
translated  at average  exchange  rates  prevailing  during the year.  Resulting
translation  adjustments are accumulated in the currency translation adjustments
component of other comprehensive  income (loss).  Currency transaction gains and
losses are recognized in income currently.  The Company  recognized net currency
transaction  losses of $0.2  million in 2003 and $0.6  million in 2002 and a net
currency transaction gain of $0.1 million in 2001.

     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 Company's $207.5 million Subordinated  Debentures held by the Capital
Trust were issued at a fixed rate and at December 31, 2003 had $19.0  million of
accrued but unpaid interest outstanding. However, the BUCS issued by the Capital
Trust are  publicly  traded,  and the  Company  believes  they  provide the best
available  proxy for the fair value of the underlying  Subordinated  Debentures.
Based upon the last traded value of the BUCS on or before December 31, 2003, the
fair value of the  Subordinated  Debentures,  including  the  accrued and unpaid
interest, approximated $137 million at December 31, 2003.

     Stock-based   compensation.   The  Company   has  elected  the   disclosure
alternative prescribed by SFAS No. 123, Accounting for Stock-Based Compensation,
as amended by SFAS No. 148, Accounting for Stock-Based Compensation - Transition
and  Disclosure,  and  has  chosen  to  account  for  its  stock-based  employee
compensation  related to stock options in accordance with Accounting  Principles
Board Opinion ("APB") No. 25, Accounting for Stock Issued to Employees,  and its
various  interpretations.  Under APB No. 25,  compensation  expense is generally
recognized for fixed stock options for which the exercise price is less than the
market price of the  underlying  stock on the grant date.  All of the  Company's
stock  options have been granted with  exercise  prices equal to or in excess of
the  market  price  on  the  date  of  grant,  and  the  Company  recognized  no
compensation  expense  for  fixed  stock  options  in 2003,  2002 or  2001.  The
following  table  illustrates  the  effect on net loss and loss per share if the
Company had applied the fair value recognition provisions of SFAS No. 123 to all
options granted since January 1, 1995:

                                      F-12

<PAGE>

<TABLE>


                                                                              Year ended December 31,
                                                               -------------------------------------------------------
                                                                    2003                2002               2001
                                                               ----------------    ----------------   ----------------
                                                                                    (In thousands)

<S>                                                            <C>                 <C>                <C>
Net loss, as reported                                          $     (13,057)      $    (111,530)     $      (41,766)
Less stock option related stock-based
   employee compensation expense determined
   under SFAS No. 123                                                   (253)               (782)             (1,711)
                                                               ----------------    ----------------   ----------------

Pro forma net loss                                             $     (13,311)      $    (112,312)     $      (43,477)
                                                               ================    ================   ================

Basic and diluted loss per share:
  As reported                                                  $       (4.12)      $      (35.29)     $       (13.26)
                                                               ================    ================   ================
  Pro forma                                                    $       (4.20)      $      (35.53)     $       (13.80)
                                                               ================    ================   ================
</TABLE>

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

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

     Research and development.  Research and development expense, which includes
activities  directed toward expanding the use of titanium and titanium alloys in
all  market  sectors,  is  recorded  as  selling,  general,  administrative  and
development  expense and totaled $2.8 million in 2003,  $3.3 million in 2002 and
$2.6 million 2001. Related engineering and experimentation costs associated with
ongoing commercial production are recorded in cost of sales.

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

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

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

                                      F-13

<PAGE>


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

     Under the transition provisions of SFAS No. 143, the Company recognized (i)
an asset retirement cost capitalized as an increase to the carrying value of its
property,  plant and equipment of approximately  $0.2 million,  (ii) accumulated
depreciation on such capitalized cost of approximately $0.1 million and (iii) an
other noncurrent liability for the asset retirement  obligation of approximately
$0.3 million.  Amounts  resulting  from the initial  application of SFAS No. 143
were  measured  using  information,  assumptions  and  interest  rates all as of
January 1, 2003. The amount recognized as the asset retirement cost was measured
as of  the  date  the  asset  retirement  obligation  was  incurred.  Cumulative
accretion on the asset retirement obligation and accumulated depreciation on the
asset  retirement  cost were  recognized  for the time  period from the date the
asset  retirement  cost  and  liability  would  have  been  recognized  had  the
provisions  of SFAS  No.  143 been in  effect  at the  date  the  liability  was
incurred, through January 1, 2003.

     The difference between the amounts to be recognized as previously described
and any  associated  amounts  recognized  in the  Company's  balance sheet as of
December  31,  2002  was  recognized  as a  cumulative  effect  of a  change  in
accounting  principle  as of January 1, 2003.  The asset  retirement  obligation
recognized  as a result of adopting  SFAS No. 143 relates  primarily to landfill
closure and leasehold restoration costs.

     The following table shows pro forma amounts relating to the Company's asset
retirement  obligations  as if SFAS No. 143 were applied on January 1, 2002,  as
well as a roll forward of the asset retirement  obligation  through December 31,
2003:

<TABLE>
                                                                                                    Amount
                                                                                                --------------
                                                                                                (In thousands)

<S>                                                                                                 <C>
Asset retirement obligation, 1/1/2002                                                               $    312
Accretion expense                                                                                         15
                                                                                                --------------

Asset retirement obligation, 12/31/2002                                                                  327
New obligations                                                                                          160
Revisions to cash flow estimates                                                                         (48)
Accretion expense (1)                                                                                     14
Currency translation adjustment                                                                           34
                                                                                                --------------

Asset retirement obligation, 12/31/2003                                                             $    487
                                                                                                ==============

--------------------------------------------------------------------------------------------------------------
<FN>
(1)  Reported as a component of other operating expense.
</FN>
</TABLE>

     The   Financial   Accounting   Standards   Board   ("FASB")   issued   FASB
Interpretation  No. 46 ("FIN 46"),  Consolidation of Variable  Interest Entities
(an  interpretation  of Accounting  Research  Bulletin No. 51), in January 2003.
Subsequently,  in December  2003,  FIN 46 was revised and  superseded  when FASB
Interpretation  No. 46 Revised  ("FIN 46R") was issued.  Both FIN 46 and FIN 46R
address  consolidation  and/or  disclosure  by business  enterprises  of certain
entities, defined as a variable interest entity ("VIE").

                                      F-14
<PAGE>


     Under the  transition  requirements  of FIN 46R, TIMET is required to adopt
FIN 46R no later than March 31, 2004. However, with respect to any interest in a
special  purpose entity ("SPE"),  as defined,  TIMET must adopt either FIN 46 or
FIN 46R no later than  December 31, 2003.  TIMET has elected to adopt FIN 46R as
of December 31, 2003, retroactive to January 1, 2001.

     If a company has an interest in an entity  deemed to be a VIE, then FIN 46R
is  applied to  determine  if  consolidation  is  appropriate.  Under FIN 46R, a
company  consolidates  a  VIE  if  the  company  is  deemed  to be  the  primary
beneficiary,  as defined, of that VIE. If a company has an interest in an entity
not deemed to be a VIE, then the SFAS No. 94 model under which  consolidation is
based  upon  control  (generally  defined  as  ownership  of more than 50% of an
entity) is applied.  Entities that were previously  consolidated  under the SFAS
No. 94 model must still be  evaluated  to  determine if they are a VIE (in which
case FIN 46R would be followed, not SFAS No. 94).

     Upon  the  issuance  of  FIN  46R,  the  Company  completed  a  review  for
applicability  to TIMET  relative to (i) the Capital  Trust,  (ii) TIMET's joint
venture  investments in VALTIMET SAS ("VALTIMET") and MZI, LLC ("MZI") and (iii)
TIMET's presently consolidated subsidiaries.  The Company believes these are the
only entities possibly covered by the scope of FIN 46R as of December 31, 2003.

     Based upon  guidance  in FIN 46R,  the Company  concluded  that the Capital
Trust is considered to be both an SPE and a VIE. Accordingly,  TIMET must comply
with either the guidance in FIN 46 or FIN 46R at December  31,  2003.  TIMET has
concluded it is not the primary  beneficiary of the Capital Trust, and therefore
TIMET is required to  deconsolidate  the Capital  Trust as of December 31, 2003.
Upon  deconsolidation,  the Company now  reflects its  investment  in the common
securities  issued by the Capital Trust as an asset  accounted for by the equity
method and the  Subordinated  Debentures  held by the Capital Trust as long-term
debt. Additionally,  interest expense incurred on the Subordinated Debentures is
reported as interest  expense,  while dividends earned on the common  securities
are reported  through  equity in earnings of the  unconsolidated  Capital Trust.
Previously, the Company reflected a minority interest related to the BUCS on its
Consolidated  Balance  Sheets  and  minority  interest  dividend  expense in its
Consolidated  Statements  of  Operations.  All periods  presented in this Annual
Report have been retroactively  restated,  as permitted by FIN 46R, to allow for
comparability  with  the  December  31,  2003  presentation.   Such  retroactive
restatement  did not  impact  net loss,  stockholders'  equity or cash flow from
operations  for any  prior  periods.  Additionally,  all  disclosures  have been
updated to reflect this new presentation.

     VALTIMET and MZI are exempted  from the scope of FIN 46R, and the Company's
presently consolidated subsidiaries are not considered to be VIEs under FIN 46R.
Therefore, the current SFAS No. 94 consolidation model continues to apply to all
of these entities.

     In December 2003, the FASB issued SFAS No. 132 (revised  2003),  Employers'
Disclosures about Pensions and Other Postretirement  Benefits ("SFAS No. 132R").
SFAS No. 132R  revises  employers'  disclosures  about  pension  plans and other
postretirement  benefit plans but does not change the measurement or recognition
of such plans.  SFAS No. 132R retains the  disclosure  requirements  obtained in
SFAS No. 132,  Employers'  Disclosures  about Pensions and Other  Postretirement
Benefits,  which it  replaces.  SFAS No. 132R  requires  additional  disclosures
regarding  assets,  obligations,  cash flows and net periodic  benefit  costs of
defined benefit pension plans and other defined  benefit  postretirement  plans.
See Note 17, which complies with these new disclosure requirements.

                                      F-15

<PAGE>


Note 3 - Inventories

<TABLE>
                                                                                             December 31,
                                                                                --------------------------------------
                                                                                      2003                 2002
                                                                                -----------------    -----------------
                                                                                           (In thousands)

<S>                                                                             <C>                  <C>
Raw materials                                                                   $        33,198      $        53,830
Work-in-process                                                                          76,573               81,185
Finished products                                                                        62,687               63,458
Supplies                                                                                 12,248               13,829
                                                                                -----------------    -----------------
                                                                                        184,706              212,302
Less adjustment of certain inventories to LIFO basis                                     18,985               30,370
                                                                                -----------------    -----------------

                                                                                $       165,721      $       181,932
                                                                                =================    =================
</TABLE>

Note 4 - Investment in joint ventures

<TABLE>

                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      2003                 2002
                                                                                -----------------    -----------------
                                                                                           (In thousands)
<S>                                                                             <C>                  <C>
Joint ventures:
   VALTIMET                                                                     $        22,252      $        22,017
   MZI                                                                                      217                  270
                                                                                -----------------    -----------------

                                                                                $        22,469      $        22,287
                                                                                =================    =================
</TABLE>

     VALTIMET is a manufacturer  of welded  stainless  steel and titanium tubing
with  operations in the United States,  France and China.  At December 31, 2003,
VALTIMET  was  owned  43.7%  by  TIMET,   51.3%  by  Valinox  Welded,  a  French
manufacturer of welded tubing, and 5.0% by Sumitomo Metals  Industries,  Ltd., a
Japanese manufacturer of steel products.

     At December 31, 2003, 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 $4.3 million,  and is principally  attributable to the
difference  between the carrying amount and fair value of fixed assets initially
contributed  by TIMET.  This  difference  is being  amortized  over 15 years and
reduces the amount of equity in earnings  or  increases  the amount of equity in
losses that the Company reports related to its investment in VALTIMET.

     The consolidated  financial  statements of VALTIMET reflected the following
summarized financial information:

<TABLE>

                                                                            Year ended December 31,
                                                           -----------------------------------------------------------
                                                                2003                  2002                 2001
                                                           ----------------     -----------------    -----------------
                                                                                 (In thousands)

<S>                                                         <C>                  <C>                  <C>
Net sales                                                   $     89,274         $     90,318         $      80,800
Gross margin                                                $     15,860         $     18,911         $      19,017
Net income                                                  $      1,014         $      4,523         $       4,251


</TABLE>


                                      F-16
<PAGE>

<TABLE>


                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      2003                 2002
                                                                                -----------------    -----------------
                                                                                           (In thousands)

<S>                                                                              <C>                  <C>
Current assets                                                                   $       53,965       $       51,806
Noncurrent assets                                                                $       19,778       $       19,945
Current liabilities                                                              $       26,790       $       25,010
Noncurrent liabilities                                                           $        1,703       $        3,966
Minority interest                                                                $        2,848       $        2,235

</TABLE>

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

Note 5 - Preferred securities of Special Metals Corporation ("SMC")

     In 1998,  the  Company  purchased  $80  million in  non-voting  convertible
preferred  securities  (which accrued dividends at the annual rate of 6.625%) of
SMC, a U.S.  manufacturer of wrought nickel-based  superalloys and special alloy
long products.  As previously  reported,  the Company assessed its investment in
the SMC  securities  during  the  fourth  quarter  of 2001 and  recorded a $61.5
million  impairment  charge to reduce the  carrying  amount of this  investment,
including  accrued  dividends and interest,  to an estimated fair value of $27.5
million as of December 31, 2001.  In March 2002,  SMC and its U.S.  subsidiaries
filed a  voluntary  petition  for  reorganization  under  Chapter 11 of the U.S.
Bankruptcy Code. As a result,  the Company undertook a further assessment of its
investment in SMC and subsequently  recorded a $27.5 million  impairment  charge
during the first quarter of 2002, which reduced the Company's carrying amount of
its  investment  in the SMC  securities  to  zero.  Both of these  charges  were
classified  as other  non-operating  expenses.  Under the terms of SMC's  Second
Amended Joint Plan of Reorganization, which was effected by the Bankruptcy Court
on November 26, 2003,  the  convertible  preferred  securities  were  cancelled.
Although the Company does have certain rights as an unsecured creditor under the
SMC Plan of Reorganization related to the unpaid dividends, the Company does not
believe that it will recover any material amount from this investment.

Note 6 - Property and equipment

<TABLE>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2003                  2002
                                                                               ------------------    -----------------
                                                                                           (In thousands)

<S>                                                                            <C>                   <C>
Land                                                                           $         6,358       $         6,224
Buildings                                                                               41,700                38,874
Information technology systems                                                          59,782                58,217
Manufacturing and other                                                                318,364               312,163
Construction in progress                                                                 6,754                 3,493
                                                                               ------------------    -----------------
                                                                                       432,958               418,971
Less accumulated depreciation                                                          193,776               164,299
                                                                               ------------------    -----------------
                                                                               $       239,182       $       254,672
                                                                               ==================    =================
</TABLE>

                                      F-17

<PAGE>


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

Note 7 - Intangible assets

     On January 1, 2002,  the Company  adopted SFAS No. 142. Under SFAS No. 142,
goodwill is no longer amortized on a periodic basis, but instead is subject to a
two-step  impairment  test to be  performed  on at least an annual  basis.  As a
result of the adoption of SFAS No. 142, the Company recorded a non-cash goodwill
impairment  charge of $44.3  million,  representing  the  entire  balance of the
Company's  recorded  goodwill  at January 1, 2002.  Pursuant  to the  transition
requirements  of SFAS No. 142,  this charge has been  reported in the  Company's
Consolidated  Statements  of  Operations  as a cumulative  effect of a change in
accounting principle as of January 1, 2002.

     The Company has  evaluated  the  remaining  useful lives of its  intangible
assets with definite  lives,  comprised of patents and covenants not to compete.
Based on this  evaluation,  the Company's  patents will continue to be amortized
over their weighted average  remaining  amortization  periods of two years as of
December 31, 2003. The Company's covenants not to compete became fully amortized
during the first half of 2003. The carrying amount and accumulated  amortization
of the Company's intangible assets are as follows:

<TABLE>

                                                         December 31, 2003                    December 31, 2002
                                                 ----------------------------------    --------------------------------
                                                    Carrying         Accumulated          Carrying        Accumulated
                                                     Amount          Amortization          Amount         Amortization
                                                 --------------     ---------------    --------------    --------------
                                                                            (In thousands)
<S>                                              <C>                <C>                <C>               <C>
Intangible assets:
  Definite lives, subject to amortization:
     Patents                                     $     14,475       $       11,322     $     13,903      $       9,375
     Covenants not to compete                               -                    -            3,967              3,769
  Other intangible asset - pension asset (1)            3,141                    -            3,716                  -
                                                 --------------     ---------------    --------------    --------------

                                                 $     17,616       $       11,322     $     21,586      $      13,144
                                                 ==============     ===============    ==============    ==============
-----------------------------------------------------------------------------------------------------------------------
<FN>

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

</TABLE>

                                      F-18

<PAGE>


     The Company's  amortization  expense relating to its intangible  assets was
$1.7  million  in 2003,  $2.1  million  in 2002 and $2.8  million  in 2001.  The
estimated  aggregate annual  amortization  expense for the Company's patents for
the next five fiscal years is summarized in the table below:

<TABLE>
                                                                                            Estimated Annual
                                                                                          Amortization Expense
                                                                                    ----------------------------------
                                                                                             (In thousands)
<S>                                                                                               <C>
Year ending December 31,
  2004                                                                                            $ 1,511
  2005                                                                                            $   963
  2006                                                                                            $   679
  2007                                                                                            $     -
  2008                                                                                            $     -
</TABLE>

Note 8 - Other noncurrent assets
<TABLE>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2003                  2002
                                                                               ------------------    -----------------
                                                                                           (In thousands)

   <S>                                                                         <C>                   <C>
   Deferred financing costs                                                    $         7,563       $         8,244
   Prepaid pension cost                                                                  8,981                 7,295
   Notes receivable from officers                                                          145                   163
   Other                                                                                     3                     3
                                                                               ------------------    -----------------

                                                                               $        16,692       $        15,705
                                                                               ==================    =================
</TABLE>

Note 9 - Accrued liabilities
<TABLE>

                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      2003                 2002
                                                                                -----------------    -----------------
                                                                                           (In thousands)

<S>                                                                             <C>                  <C>
OPEB cost                                                                       $         3,135      $         3,818
Pension cost                                                                              8,466                7,969
Payroll and vacation                                                                      6,891                6,007
Incentive compensation                                                                      579                1,326
Other employee benefits                                                                   9,731               11,141
Deferred income                                                                           1,664                1,679
Environmental costs                                                                         301                  803
Accrued tungsten costs                                                                       85                2,190
Taxes, other than income                                                                  4,408                3,519
Wyman-Gordon installment                                                                  2,800                    -
Other                                                                                     7,103                8,059
                                                                                -----------------    -----------------

                                                                                $        45,163      $        46,511
                                                                                =================    =================

</TABLE>

                                      F-19


<PAGE>


     During the third quarter of 2003,  the Company and  Wyman-Gordon  agreed to
terminate the 1998 purchase and sale agreement  associated with the formation of
the titanium  castings joint venture  previously  owned by the two parties.  The
Company agreed to pay  Wyman-Gordon  a total of $6.8 million in three  quarterly
installments in connection with this termination, which included the termination
of certain favorable  purchase terms. The Company recorded a one-time charge for
the entire $6.8  million as a reduction  to sales in the third  quarter of 2003.
The  Company  paid the  first  two  installments  aggregating  $4.0  million  to
Wyman-Gordon  during 2003 and will pay the  remaining  $2.8 million in the first
quarter of 2004.

     During 2003, the Company  reduced its accrual for potential  claims related
to the tungsten inclusion matter. See further discussion in Note 19.

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

     In April 2001, the Company  reached a settlement of the litigation  between
TIMET and The  Boeing  Company  ("Boeing")  related  to the  parties'  long-term
agreement  ("LTA")  entered into in 1997.  Under the terms of an agreement  with
Boeing entered into in conjunction  with the  litigation  settlement,  Boeing is
required to purchase  from the Company a buffer  inventory of titanium  products
for use by the Company in the production of titanium  products ordered by Boeing
in the future. As the buffer inventory is completed,  Boeing is billed and takes
title to the inventory, although the Company may retain an obligation to further
process the material as directed by Boeing.  Accordingly,  the revenue and costs
of sales on the buffer inventory is deferred and subsequently  recognized at the
time the final  product is  delivered to Boeing.  As of December 31, 2003,  $1.6
million of deferred revenue related to the Boeing buffer inventory.

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

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

                                      F-20

<PAGE>


Note 10 - Boeing advance

     Under the terms of the  amended  Boeing LTA,  in years 2002  through  2007,
Boeing is required to advance TIMET $28.5 million  annually less $3.80 per pound
of titanium  product  purchased by Boeing  subcontractors  during the  preceding
year. The advance  relates to Boeing's  take-or-pay  obligations  under the LTA.
Effectively,  the Company  collects  $3.80 less from Boeing than the LTA selling
price for each pound of titanium product sold directly to Boeing and reduces the
related customer advance recorded by the Company.  For titanium products sold to
Boeing  subcontractors,  the Company  collects the full LTA selling  price,  but
gives  Boeing  credit by reducing  the next year's  annual  advance by $3.80 per
pound of titanium  product sold to Boeing  subcontractors.  The Boeing  customer
advance is also reduced as take-or-pay benefits are earned, as described in Note
15. As of December 31, 2003,  $0.6 million of customer  advances  related to the
Company's  LTA with Boeing and  represented  amounts to be credited  against the
2004 advance for 2003 subcontractor purchases.

Note 11 - Bank debt and capital lease obligations

<TABLE>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2003                  2002
                                                                               ------------------    -----------------
                                                                                           (In thousands)
<S>                                                                            <C>                   <C>
Notes payable:
   U.S. credit agreement                                                       $             -       $        11,944
   European credit agreements                                                                -                 1,050
                                                                               ------------------    -----------------
                                                                               $             -       $        12,994
                                                                               ==================    =================
Long-term debt:
   Bank credit agreement - U.K.                                                $             -       $         6,401
                                                                               ==================    =================

Capital lease obligations                                                      $        10,290       $        10,217
   Less current maturities                                                                 524                   642
                                                                               ------------------    -----------------
                                                                               $         9,766       $         9,575
                                                                               ==================    =================
</TABLE>

     Long-term bank credit agreements.  On October 23, 2002, the Company amended
its existing U.S. asset-based revolving credit agreement, extending the maturity
date to February 2006. Under the terms of the amendment,  borrowings are limited
to the lesser of $105  million or a  formula-determined  borrowing  base derived
from the value of  accounts  receivable,  inventory  and  equipment  ("borrowing
availability"). This facility requires the Company's U.S. daily cash receipts to
be used to reduce outstanding borrowings, which may then be reborrowed,  subject
to the terms of the  agreement.  Interest  generally  accrues at rates that vary
from  LIBOR  plus 2% to  LIBOR  plus  2.5%.  Borrowings  are  collateralized  by
substantially all of the Company's U.S. assets.  The credit agreement  prohibits
the  payment  of   distributions   on  the  Capital   Trust's  BUCS  if  "excess
availability,"  as  defined,  is  less  than  $25  million,   limits  additional
indebtedness,  prohibits the payment of dividends on the Company's  common stock
if  excess  availability  is less than $40  million,  requires  compliance  with
certain  financial  covenants and contains other covenants  customary in lending
transactions  of this  type.  The  Company  was in  compliance  in all  material
respects with all covenants for all periods  during the years ended December 31,
2003 and 2002.  Excess  availability is defined as borrowing  availability  less
outstanding  borrowings and certain  contractual  commitments such as letters of
credit.  As of December 31, 2003,  excess  availability  was  approximately  $82
million. There were no outstanding borrowings under the U.S. credit agreement as
of  December  31,  2003.  The  weighted  average  interest  rate  on  borrowings
outstanding under this credit agreement as of December 31, 2002 was 3.7%.

                                      F-21

<PAGE>


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

     The Company's  subsidiary,  TIMET UK, has a credit  agreement that provides
for   borrowings   limited   to  the   lesser  of   (pound)22.5   million  or  a
formula-determined borrowing base derived from the value of accounts receivable,
inventory and  property,  plant and equipment  ("borrowing  availability").  The
credit  agreement  includes  revolving and term loan facilities and an overdraft
facility (the "U.K.  Facilities") and matures in December 2005. Borrowings under
the U.K. Facilities can be in various currencies including U.S. dollars, British
pounds  sterling and euros.  Borrowings  accrue interest at rates that vary from
LIBOR plus 1% to LIBOR plus 1.25% and are collateralized by substantially all of
TIMET UK's  assets.  The U.K.  Facilities  require  the  maintenance  of certain
financial   ratios  and  amounts  and  other  covenants   customary  in  lending
transactions of this type.  TIMET UK was in compliance in all material  respects
with all covenants for all periods  during the years ended December 31, 2003 and
2002.  The U.K.  overdraft  facility is subject to annual  review in December of
each year.  In the event the  overdraft  facility  is not  renewed,  the Company
believes it could refinance any outstanding  overdraft  borrowings  under either
the  revolving  or term loan  features  of the U.K.  Facilities.  The  overdraft
facility was reviewed and renewed in December 2003. During the second quarter of
2003,  TIMET UK  received  an  interest-bearing  intercompany  loan  from a U.S.
subsidiary of the Company  enabling TIMET UK to reduce its long-term  borrowings
under the U.K. Facilities to zero. Unused borrowing  availability as of December
31, 2003 under the U.K. Facilities was approximately $40 million.  There were no
outstanding  borrowings  under the U.K.  Facilities as of December 31, 2003. The
weighted  average  interest  rate  on  borrowings  outstanding  under  the  U.K.
Facilities as of December 31, 2002 was 4.6%.

     The Company also has  overdraft  and other credit  facilities at certain of
its other European  subsidiaries.  These  facilities  accrue interest at various
rates and are payable on demand.  Unused  borrowing  availability as of December
31, 2003 under these  facilities was  approximately  $20 million.  There were no
outstanding  borrowings  under the other European  facilities as of December 31,
2003. The weighted average interest rate on borrowings  outstanding  under these
credit agreements as of December 31, 2002 was 3.7%.

     Capital  lease  obligations.  Certain  of  the  Company's  U.K.  production
facilities  are under thirty year leases  expiring in 2026.  The rents under the
U.K.  leases are  subject  to  adjustment  every five years  based on changes in
certain  published price indices.  TIMET has guaranteed  TIMET UK's  obligations
under its leases.  Through  December 31, 2002,  the Company's  70%-owned  French
subsidiary,  TIMET Savoie,  S.A. ("TIMET Savoie"),  leased 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. In the first
quarter of 2003,  TIMET Savoie purchased the machinery and equipment from CEZUS,
thus terminating the agreement.

     At December 31, 2003, certain of the Company's U.S. equipment is held under
three year leases expiring at various times during 2004 and 2005.  Capital lease
obligations  relating to this  equipment  approximated  $0.4 million in 2004 and
less than five thousand dollars in 2005. In January 2004, the Company  purchased
substantially all of the U.S. equipment held under these capital leases for $0.7
million.

                                      F-22

<PAGE>

     Assets held under capital  leases  included in buildings were $10.4 million
and $9.4 million,  and assets  included in equipment  were $1.9 million and $2.6
million,  at December  31, 2003 and 2002,  respectively.  The related  aggregate
accumulated  depreciation  for both buildings and equipment was $4.1 million and
$3.5 million at December 31, 2003 and 2002, respectively.

     Aggregate  maturities of capital lease  obligations as of December 31, 2003
are reflected in the following table:

<TABLE>

                                                                                       Amount
                                                                                ----------------------
                                                                                   (In thousands)
         <S>                                                                    <C>
         Year ending December 31,
            2004                                                                $           1,476
            2005                                                                            1,095
            2006                                                                            1,089
            2007                                                                            1,089
            2008                                                                            1,089
            2009 and thereafter                                                            18,126
                                                                                ----------------------
                                                                                           23,964
            Less amounts representing interest                                             13,674
                                                                                ----------------------

                                                                                $          10,290
                                                                                ======================
</TABLE>

Note 12 - Capital Trust

     In November  1996,  the Capital Trust issued  $201.3  million BUCS and $6.2
million  6.625%  common  securities.  TIMET owns all of the  outstanding  common
securities  of the  Capital  Trust,  and the  Capital  Trust  is a  wholly-owned
subsidiary  of TIMET.  The Capital Trust used the proceeds from such issuance to
purchase from the Company  $207.5  million  principal  amount of TIMET's  6.625%
convertible   junior   subordinated   debentures  due  2026  (the  "Subordinated
Debentures").  The Subordinated  Debentures and accrued interest  receivable are
the sole assets of the Capital Trust at December 31, 2003.

     Prior to December 31, 2003,  the Company  consolidated  the Capital  Trust.
Based on the  requirements  of FIN 46R, as  previously  discussed in Note 2, the
Company deconsolidated the Capital Trust as of December 31, 2003, retroactive to
January 1, 2001. Upon such deconsolidation,  the Company reflects its investment
in the common  securities of the Capital Trust as an asset  accounted for by the
equity method, and the Company reflects its debt payable to the Capital Trust as
a  long-term  liability.  All  interest  payments on the debt are  reflected  as
interest  expense,  while dividends earned on the common securities are reported
through equity in earnings of the unconsolidated Capital Trust. Previously,  the
Company  reflected a minority  interest  related to the BUCS on its Consolidated
Balance  Sheets and  minority  interest  dividend  expense  in its  Consolidated
Statements of Operations.

                                      F-23

<PAGE>


     TIMET's  guarantee  of  payment of the BUCS (in  accordance  with the terms
thereof) and its obligations  under the Capital Trust documents  constitute,  in
the aggregate, a full and unconditional  guarantee by the Company of the Capital
Trust's  obligations  under the BUCS.  The BUCS represent  undivided  beneficial
ownership  interests in the Capital Trust, are entitled to cumulative  preferred
distributions from the Capital Trust of 6.625% per annum,  compounded quarterly,
and are convertible, at the option of the holder, into TIMET common stock at the
rate of 0.1339 shares of common stock per BUCS (an  equivalent  price of $373.40
per share), for an aggregate of approximately 0.5 million common shares if fully
converted.  Based on limited trading data, the fair value of the BUCS, including
the accrued and unpaid dividends,  was  approximately  $132.8 million based upon
the last quoted trade on or before December 31, 2003.

     The BUCS, which mature December 2026, do not require principal amortization
and are redeemable at the Company's  option.  The redemption price  approximates
102% of the  principal  amount as of December 1, 2003 and  declines  annually to
100% on December 1, 2006.  The Company's  U.S.  credit  agreement  prohibits the
payment of distributions on the BUCS if excess availability, as determined under
the agreement,  is less than $25 million. The Subordinated  Debentures allow the
Company  the  right  to  defer  interest  payments  for  a  period  of  up to 20
consecutive  quarters,  although interest continues to accrue at the coupon rate
on the principal and unpaid interest.  Similarly, the Capital Trust is permitted
by the terms of the BUCS to defer its  quarterly  dividend  payments on the BUCS
when TIMET defers  interest  payment on the  Subordinated  Debentures.  In April
2000, the Company  exercised its right to defer future interest  payments on the
Subordinated Debentures.  On June 1, 2001, the Company resumed interest payments
on the Subordinated  Debentures,  made the scheduled payment of $3.4 million and
paid the previously  deferred  aggregate  interest of $14.3 million.  In October
2002, the Company again exercised its right to defer future interest payments on
the Subordinated Debentures,  effective beginning with the Company's December 1,
2002 scheduled interest payment.  The Company's Board of Directors will consider
resuming interest  payments on the Subordinated  Debentures once the longer-term
outlook  for the  Company's  business  improves  substantially.  The  Company is
permitted to resume current interest payments at any time;  however,  payment of
all deferred interest is required to terminate a deferral period.

     Based on the deferral,  accrued interest on the Subordinated  Debentures is
reflected as a long-term liability in the Consolidated  Balance Sheet.  Interest
on the  Subordinated  Debentures  is  recorded as  interest  expense.  Since the
Company exercised its right to defer interest  payments,  it is unable under the
terms of these securities to, among other things,  pay dividends on or reacquire
its capital stock during the deferral period.  However, the Company is permitted
to  purchase  the BUCS  during the  deferral  period  provided  the  Company has
satisfied  certain   conditions  under  its  U.S.  credit  facility,   including
maintenance of the Company's excess  availability of at least $25 million before
and after such purchase.

Note 13 - Minority interest

     Minority  interest  relates  principally to the Company's  70%-owned French
subsidiary,  TIMET Savoie. The Company has the right to purchase from CEZUS, the
holder of the remaining 30% interest, CEZUS' interest in TIMET Savoie for 30% of
TIMET Savoie's equity  determined under French accounting  principles,  or $11.2
million as of December 31,  2003.  CEZUS has the right to require the Company to
purchase  its  interest  in TIMET  Savoie for 30% of TIMET  Savoie's  registered
capital,  or $3.2 million as of December 31,  2003.  TIMET Savoie made  dividend
payments  to CEZUS  of $1.9  million  and $1.1  million  during  2003 and  2002,
respectively.

                                      F-24

<PAGE>


Note 14 - Stockholders' equity

     Preferred  stock. At December 31, 2003, the Company was authorized to issue
100,000 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. At December 31, 2003, the Company was authorized to issue 9.9
million shares of common stock. The Company's U.S. credit agreement, as amended,
and the Indenture  pursuant to which the  Subordinated  Debentures  were issued,
limit the payment of common stock dividends. See Notes 11 and 12.

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

     During 2000, the Company awarded 46,750 shares of TIMET  restricted  common
stock under the Incentive Plan to certain  officers and employees.  No shares or
options have been awarded since 2000. 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
2003, 2002 and 2001,  respectively,  2,400, 6,560 and 3,370 shares of restricted
stock  were  forfeited.  The market  value of the  restricted  stock  awards was
approximately  $2.0  million on the date of grant  ($43.75 per share),  and this
amount has been  recorded  as deferred  compensation,  a separate  component  of
stockholders'  equity. The Company amortizes deferred compensation to expense on
a straight-line basis for each tranche of the award over the period during which
the restrictions lapse.  Compensation  expense recognized by the Company related
to  restricted  stock awards was $0.1 million in 2003,  $0.2 million in 2002 and
$0.5 million in 2001.

     Additionally,  the Company offers a separate plan to eligible  non-employee
directors (the "Director  Plan"). In 2003, the Director Plan provided for annual
grants of between 500 and 2,000 shares of the Company's  common stock (dependent
upon the closing  price per share of the common  stock on the date of the grant)
as  partial  payment of  director  fees.  In 2002 and 2001,  the  Director  Plan
provided  for (i)  annual  grants  of  options  to  purchase  500  shares of the
Company's common stock at a price equal to the market price on the date of grant
and (ii)  annual  grants of 100  shares of common  stock as  partial  payment of
director fees. 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 was 4.5 years at
December 31, 2003 and 4.8 years at December 31, 2002. At December 31, 2003, 2002
and 2001, options to purchase 94,674,  105,386 and 89,594 shares,  respectively,
were  exercisable at average  exercise  prices of $194.20,  $217.70 and $237.80,
respectively. Options to purchase 10,476 shares become exercisable in 2004 based
on the options  outstanding at December 31, 2003. In February 2001, the Director
Plan was amended to  authorize an  additional  20,000  shares for future  grants
under such  plan.  At  December  31,  2003,  156,882  shares and 17,626  shares,
respectively,  were  available for future grant under the Incentive Plan and the
Director Plan.

                                      F-25

<PAGE>


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

<TABLE>

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

<S>                                     <C>          <C>                <C>               <C>             <C>
Outstanding at December 31, 2000        165,150      $39.40-353.10      $    32,022       $   193.90
  Granted - at market                     3,000       36.00-142.10              362           120.70      $    81.10
  Canceled                              (12,840)      79.70-353.10           (2,427)          163.50
                                      -----------    --------------     --------------    -----------

Outstanding at December 31, 2001        155,310       36.00-353.10           29,957           195.40
  Granted - at market                     3,000        16.60-38.60              105            34.90      $    23.00
  Canceled                              (18,568)      79.70-353.10           (3,385)          182.30
                                      -----------    --------------     --------------    -----------

Outstanding at December 31, 2002        139,742       16.60-353.10           26,677           190.90
  Canceled                              (29,592)      38.60-353.10           (6,962)          235.30
                                      -----------    --------------     --------------    -----------

Outstanding at December 31, 2003        110,150      $16.60-353.10      $    19,715       $   179.00
                                      ===========    ==============     ==============    ===========

</TABLE>

         The following table summarizes the Company's options outstanding and
exercisable as of December 31, 2003 by price range:

<TABLE>
                                        Options Outstanding                               Options Exercisable
                     ----------------------------------------------------------    -----------------------------------

                                             Weighted
                                              average
                                             remaining            Weighted                                Weighted
 Range of exercise    Outstanding at        contractual           average           Exercisable           average
      prices             12/31/03         life (in years)      exercise price       at 12/31/03        exercise price
-------------------- -----------------    ----------------    -----------------    ---------------     ---------------

<S>                        <C>                   <C>            <C>                      <C>            <C>
$    16.60-35.30               500               9.0            $     16.60                 500         $     16.60
     35.31-70.62            13,000               6.6                  62.70               9,000               59.40
    70.63-105.93            38,770               5.3                  86.20              29,294               85.80
   105.94-141.25             5,000               6.1                 110.00               3,000              110.00
   141.26-176.56             1,000               7.4                 142.10               1,000              142.10
   211.88-247.18             9,180               2.3                 230.00               9,180              230.00
   247.19-282.50            11,332               2.9                 274.70              11,332              274.70
   282.51-317.81            21,968               3.5                 293.70              21,968              293.70
   317.82-353.10             9,400               3.8                 338.70               9,400              338.70
                     -----------------    ----------------    -----------------    ---------------     ---------------

                           110,150               4.5            $    179.00              94,674         $    194.20
                     =================    ================    =================    ===============     ===============
</TABLE>

     Weighted  average fair values of options at grant date were estimated using
the  Black-Scholes  model and  assumptions  listed  below (there were no options
granted during 2003):

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

</TABLE>

                                      F-26
<PAGE>


Note 15 - Other income (expense)
<TABLE>

                                                                              Year ended December 31,
                                                                ----------------------------------------------------
                                                                     2003              2002               2001
                                                                --------------     --------------    ---------------
                                                                                  (In thousands)
<S>                                                             <C>                <C>               <C>         <C>
Other operating income (expense):
  Boeing settlement, net                                        $          -       $           -     $    73,000 (1)
  Boeing take-or-pay                                                  23,083              23,408               -
  Litigation settlements                                               1,113                   -               -
  Other, net                                                             193                (126)            420
                                                                --------------     --------------    ---------------

                                                                $     24,389       $      23,282     $    73,420
                                                                ==============     ==============    ===============

Other non-operating income (expense):
  Dividends and interest                                        $        383       $         118     $     5,460
  Equity in earnings of common securities
    of TIMET Capital Trust I                                             432                 413             423
  Surety bond guarantee                                                 (449)             (1,575)              -
  Impairment of investment in SMC
    preferred securities                                                   -             (27,500)        (61,519)
  Foreign exchange (loss) gain                                          (189)               (587)             92
  Other, net                                                            (471)               (762)             18
                                                                --------------     --------------    ---------------

                                                                $       (294)      $     (29,893)    $   (55,526)
                                                                ==============     ==============    ===============
--------------------------------------------------------------------------------------------------------------------
<FN>

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

     The terms of the  amended  Boeing LTA allow  Boeing to  purchase  up to 7.5
million pounds of titanium  product  annually from TIMET through 2007, but limit
TIMET's maximum  quarterly volume  obligation to 3.0 million pounds.  The LTA is
structured  as a  take-or-pay  agreement  such that,  beginning in calendar year
2002,  Boeing  forfeits $3.80 per pound of its advance payment in the event that
its orders for delivery are less than 7.5 million  pounds in any given  calendar
year. The Company recognizes income to the extent Boeing's  year-to-date  orders
for delivery plus TIMET's maximum quarterly volume obligations for the remainder
of the year total less than 7.5 million  pounds.  This income is  recognized  as
other  operating  income and is not included in sales  revenue,  sales volume or
gross margin.  Based on actual  purchases of  approximately  1.4 million  pounds
during 2003 and 1.3 million  pounds during 2002,  the Company  recognized  $23.1
million and $23.4  million of income for the years ended  December  31, 2003 and
2002,  respectively.  Recognition of the  take-or-pay  income reduces the Boeing
customer advance as described in Note 10.

     The  Company  received  $0.5  million  and  $0.6  million  related  to  its
settlement  of certain  litigation  claims in the first and fourth  quarters  of
2003,  respectively.  Both of these settlements were recorded as other operating
income for the year ended December 31, 2003.

                                      F-27

<PAGE>


Note 16 - Income taxes

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

                                                                              Year ended December 31,
                                                               -------------------------------------------------------
                                                                    2003                2002               2001
                                                               ----------------    ----------------   ----------------
                                                                                   (In thousands)
<S>                                                            <C>                 <C>                <C>
Pre-tax income (loss):
  U.S.                                                         $    (3,431)        $   (64,705)       $   (20,569)
  Non-U.S.                                                          (7,850)             (3,181)            11,190
                                                               ----------------    ----------------   ----------------

                                                               $   (11,281)        $   (67,886)       $    (9,379)
                                                               ================    ================   ================

Expected income tax expense (benefit), at 35%                  $    (3,948)        $   (23,760)       $    (3,283)
Non-U.S. tax rates                                                     696                 175                521
U.S. state income taxes, net                                        (1,050)             (1,650)               307
Dividends received deduction                                          (312)               (241)            (1,110)
Extraterritorial income exclusion                                     (140)               (373)              (462)
Change in valuation allowance:
  Effect of change in tax law                                            -              (1,797)                 -
  Adjustment of deferred tax valuation allowance                     6,196              25,470             34,950
Other, net                                                            (235)                224                189
                                                               ----------------    ----------------   ----------------

                                                               $     1,207         $    (1,952)       $    31,112
                                                               ================    ================   ================

Income tax expense (benefit):
  Current income taxes (benefit):
     U.S.                                                      $        30         $    (1,688)       $       787
     Non-U.S.                                                        1,436               3,430              3,503
                                                               ----------------    ----------------   ----------------
                                                                     1,466               1,742              4,290
                                                               ----------------    ----------------   ----------------

  Deferred income taxes (benefit):
     U.S.                                                                -                   -             26,061
     Non-U.S.                                                         (259)             (3,694)               761
                                                               ----------------    ----------------   ----------------
                                                                      (259)             (3,694)            26,822
                                                               ----------------    ----------------   ----------------

                                                               $     1,207         $    (1,952)       $    31,112
                                                               ================    ================   ================

Comprehensive tax provision (benefit) allocable to:
  Pre-tax income (loss)                                        $     1,207         $    (1,952)       $    31,112
  Stockholders' equity, including amounts allocated
     to other comprehensive income                                       -              (1,588)            (4,834)
                                                               ----------------    ----------------   ----------------

                                                               $     1,207         $    (3,540)       $    26,278
                                                               ================    ================   ================
</TABLE>

                                      F-28

<PAGE>


     The  following  table  summarizes  the  Company's  deferred  tax assets and
deferred tax liabilities as of December 31, 2003 and 2002:
<TABLE>

                                                                                  December 31,
                                                           -----------------------------------------------------------
                                                                      2003                            2002
                                                           ----------------------------    ---------------------------
                                                             Assets        Liabilities        Assets      Liabilities
                                                           ------------    ------------    -----------    ------------
                                                                                  (In millions)
<S>                                                        <C>             <C>             <C>            <C>
Temporary differences relating to net assets:
  Inventories                                              $     1.4       $       -       $     0.3      $       -
  Property and equipment, including software                       -           (36.7)              -          (39.6)
  Goodwill                                                       8.8               -            10.0              -
  Accrued OPEB cost                                              6.1               -             6.2              -
  Accrued liabilities and other deductible differences          36.6               -            59.7              -
  Other taxable differences                                        -            (9.9)              -           (3.0)
Tax loss and credit carryforwards                               85.5               -            51.0              -
Valuation allowance                                            (91.6)              -           (84.8)             -
                                                           ------------    ------------    -----------    ------------
Gross deferred tax assets (liabilities)                         46.8           (46.6)           42.4          (42.6)
Netting                                                        (46.0)           46.0           (41.6)          41.6
                                                           ------------    ------------    -----------    ------------
Total deferred taxes                                             0.8            (0.6)            0.8           (1.0)
Less current deferred taxes                                      0.8               -             0.8              -
                                                           ------------    ------------    -----------    ------------

Net noncurrent deferred taxes                              $       -       $    (0.6)      $       -      $    (1.0)
                                                           ============    ============    ===========    ============
</TABLE>

     The Company has concluded that realization of its previously  recorded U.S.
and U.K. deferred tax assets do not meet the "more-likely-than-not"  recognition
criteria.  Additionally, the Company has determined that it will not recognize a
deferred tax benefit related to future U.S. or U.K.  losses or future  increases
in the U.S. or U.K.  minimum  pension  liabilities  continuing  for an uncertain
period of time. The Company increased its U.S. deferred tax valuation  allowance
by $0.2 million in 2003, due to additional U.S. losses,  and by $40.2 million in
2002, due to additional  U.S.  losses and increases to the U.S.  minimum pension
liability.  The Company increased its U.K.  deferred tax valuation  allowance by
$5.5  million in 2003 and by $7.2 million in 2002 due to  additional  losses and
increases in the U.K. minimum pension liabilities.

     The  following  table  summarizes  the  components  of  the  change  in the
Company's deferred tax asset valuation allowance in 2003, 2002 and 2001:
<TABLE>

                                                                                Year ended December 31,
                                                               -------------------------------------------------------
                                                                    2003                2002               2001
                                                               ----------------    ----------------   ----------------
                                                                                   (In thousands)

<S>                                                            <C>                 <C>                <C>
Income before income taxes                                     $      6,196        $     23,673       $     34,950
Cumulative effect of change in accounting principle                      60              11,761                  -
Accumulated other comprehensive loss                                   (533)             11,966                554
Currency translation adjustment                                       1,122                   -                  -
                                                               ----------------    ----------------   ----------------

                                                               $      6,845        $     47,400       $     35,504
                                                               ================    ================   ================
</TABLE>

     During the first  quarter of 2002,  the Job Creation and Worker  Assistance
Act of 2002 (the "JCWA Act") was signed  into law.  The  Company  benefits  from
provisions of the JCWA Act, which liberalized certain net operating loss ("NOL")
and  alternative  minimum tax  ("AMT")  restrictions.  As a result,  the Company
recognized $1.8 million of refundable U.S. income taxes during the first quarter
of 2002. The Company  received $0.8 million of this refund in the fourth quarter
of 2002 and the remaining $1.0 million in the third quarter of 2003.

                                      F-29

<PAGE>


     At December 31, 2003 the Company had, for U.S. federal income tax purposes,
NOL  carryforwards  of $114 million,  which will expire in 2020 through 2023. At
December 31, 2003,  the Company had, for U.S.  federal  income tax  purposes,  a
capital loss carryforward of $89 million, which will expire in 2008. At December
31, 2003, the Company had AMT credit  carryforwards of $4 million,  which can be
utilized to offset regular income taxes payable in future years.  The AMT credit
carryforward has an indefinite  carryforward  period.  At December 31, 2003, the
Company  had the  equivalent  of a $30 million  NOL  carryforward  in the United
Kingdom  and a $2  million  NOL  carryforward  in  Germany,  both of which  have
indefinite  carryforward  periods.  At December  31,  2003,  the Company had the
equivalent  of a $0.3 million NOL  carryforward  in Italy,  which will expire in
2008.

Note 17 - Employee benefit plans

     Variable  compensation  plans.  The  majority  of the  Company's  worldwide
employees,  including  a  significant  portion  of its  U.S.  hourly  employees,
participate in compensation  programs providing for variable  compensation based
upon the financial performance of the Company and, in certain circumstances, the
individual   performance   of  the  employee.   The  cost  of  these  plans  was
approximately  $0.5  million in 2003,  $1.3  million in 2002 and $7.2 million in
2001.

     Defined  contribution  plans.  Approximately 40% of the Company's worldwide
employees at December 31, 2003  participate  in a defined  contribution  pension
plan with employer contributions based upon a fixed percentage of the employee's
eligible earnings.  All of the Company's U.S. hourly and salaried employees (60%
of worldwide employees at December 31, 2003) are also eligible to participate in
contributory  savings  plans  with  partial  matching  employer   contributions,
although the Company  suspended making such partial matching  contributions  for
certain  employees  effective April 1, 2003. The Company will consider  resuming
such partial matching  contributions for those affected employees in the future.
For  approximately  80% of these  participants,  the  Company  makes  additional
matching  contributions  based on higher  levels  of  Company  annual  financial
performance.  The cost of these  pension and  savings  plans  approximated  $1.9
million in 2003, $2.4 million in 2002 and $2.8 million in 2001.

     Defined  benefit  pension plans.  The Company  maintains  contributory  and
noncontributory  defined  benefit  pension  plans  covering  the majority of its
European  employees  and a  minority  of its  U.S.  workforce.  Defined  pension
benefits  are  generally  based on years of service  and  compensation,  and the
related expense is based upon independent  actuarial  valuations.  The Company's
funding policy for U.S. plans is to annually  contribute  amounts satisfying the
funding  requirements of the Employee Retirement Income Security Act of 1974, as
amended.  The Company's  European  defined  benefit  pension plans are funded in
accordance with applicable  statutory  requirements.  Between 1989 and 1995, the
U.S.  defined  benefit  pension plans were closed to new  participants  and have
remained closed.  Additionally,  in some cases, benefit levels have been frozen.
As of December  31,  2003,  the U.S.  plans were merged into one plan.  The U.K.
defined benefit plan was closed to new participants in 1996; however,  employees
participating  in the plan  continue  to  accrue  additional  benefits  based on
increases in compensation and service.

                                      F-30

<PAGE>


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

                                                                                      Year ended December 31,
                                                                               ---------------------------------------
                                                                                     2003                  2002
                                                                               ------------------    -----------------
                                                                                           (In thousands)
<S>                                                                            <C>                   <C>
Change in projected benefit obligations:
  Balance at beginning of year                                                 $      186,609        $       161,668
  Service cost                                                                          3,855                  3,960
  Interest cost                                                                        11,087                 10,410
  Plan amendments                                                                           -                     48
  Actuarial loss                                                                       16,314                  8,825
  Benefits paid                                                                        (9,922)                (9,486)
  Change in currency exchange rates                                                    15,148                 11,184
                                                                               ------------------    -----------------

       Balance at end of year                                                  $      223,091        $       186,609
                                                                               ==================    =================

Change in plan assets:
  Fair value at beginning of year                                              $      118,280        $       135,762
  Actual return on plan assets                                                         28,053                (22,436)
  Employer contributions                                                               11,817                  7,357
  Plan participants' contributions                                                        997                    716
  Benefits paid                                                                        (9,922)                (9,486)
  Change in currency exchange rates                                                     9,698                  7,290
  Other                                                                                     -                   (923)
                                                                               ------------------    -----------------

       Fair value at end of year                                               $      158,923        $       118,280
                                                                               ==================    =================

Funded status:
  Plan assets under projected benefit obligations                              $      (64,168)       $       (68,329)
   Unrecognized:
     Actuarial loss                                                                    79,347                 79,382
     Prior service cost                                                                 3,141                  3,716
                                                                               ------------------    -----------------

       Total prepaid pension cost                                              $       18,320        $        14,769
                                                                               ==================    =================

Amounts recognized in balance sheets:
  Intangible pension asset                                                     $        3,141        $         3,716
  Noncurrent prepaid pension cost                                                       8,981                  7,295
  Current pension liability                                                            (8,466)                (7,969)
  Noncurrent pension liability                                                        (62,366)               (61,080)
  Accumulated other comprehensive loss                                                 77,030                 72,807
                                                                               ------------------    -----------------

                                                                               $       18,320        $        14,769
                                                                               ==================    =================
</TABLE>

     As of December  31, 2003 and 2002,  all of the  Company's  defined  benefit
pension plans have  accumulated  benefit  obligations in excess of fair value of
plan assets. The accumulated  benefit obligations were $220.1 million and $179.6
million at December 31, 2003 and 2002, respectively.

                                      F-31

<PAGE>


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

<TABLE>

                                                                              Year ended December 31,
                                                               -------------------------------------------------------
                                                                    2003                2002               2001
                                                               ----------------    ----------------   ----------------
                                                                                    (In thousands)

<S>                                                            <C>                 <C>                <C>
Service cost                                                   $        2,858      $        3,410     $        2,919
Interest cost                                                          11,087              10,410              9,534
Expected return on plan assets                                         (9,504)            (11,035)           (11,737)
Amortization of unrecognized prior service cost                           576                 479                491
Amortization of net losses                                              3,875               1,598                241
                                                               ----------------    ----------------   ----------------

  Net pension expense                                          $        8,892      $        4,862     $        1,448
                                                               ================    ================   ================
</TABLE>

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

                                      Significant assumptions used to calculate projected and accumulated
                                                      benefit obligations at December 31,
                           -------------------------------------------------------------------------------------------
                                               2003                                           2002
                           ---------------------------------------------    ------------------------------------------
                              Discount                   Salary increase       Discount                      Salary
                                rate           LTRR                              rate          LTRR         increase
                           -------------- ------------- ----------------    ------------- -------------- -------------
<S>                             <C>          <C>              <C>               <C>            <C>           <C>
U.S. plans                      6.00%        10.00%           2.00%             6.25%          8.50%         2.00%
U.K. plan                       5.50%         7.10%           3.25%             5.70%          6.70%         3.00%
Savoie plan                     5.50%         5.25%           2.50%             5.70%          6.00%         2.00%

</TABLE>

<TABLE>

                                     Significant assumptions used to calculate net periodic pension expense
                                                        for the year ended December 31,
                           -------------------------------------------------------------------------------------------
                                      2003                            2002                           2001
                           ----------------------------    ---------------------------    ----------------------------
                              Discount                        Discount                       Discount
                                rate           LTRR             rate          LTRR             rate           LTRR
                           -------------- -------------    -------------- ------------    -------------- -------------
<S>                             <C>           <C>               <C>           <C>              <C>           <C>
U.S. plans                      6.25%         8.50%             7.00%         9.00%            7.25%         9.00%
U.K. plan                       5.70%         6.70%             6.00%         7.50%            6.00%         6.00%
Savoie plan                     5.70%         6.00%             6.00%         6.00%            6.00%         6.00%

</TABLE>

     The Company currently  expects to make cash  contributions of approximately
$11.5 million to its defined benefit pension plans during 2004.

                                      F-32

<PAGE>


     The assets of the defined benefit pension plans are invested as follows:
<TABLE>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2003                  2002
                                                                               ------------------    -----------------
<S>                                                                                   <C>                   <C>
US plan(s):
   Equity securities                                                                   69.4%                 39.5%
   Debt securities                                                                     23.6%                 57.8%
   Cash and other                                                                       7.0%                  2.7%
                                                                               ------------------    -----------------

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

European plans:
   Equity securities                                                                   91.9%                 84.7%
   Debt securities                                                                      7.3%                 12.6%
   Cash and other                                                                       0.8%                  2.7%
                                                                               ------------------    -----------------

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


     During the second quarter of 2003, the Company  transferred all of its U.S.
plans' assets into the CMRT; however,  the assets are invested only in a portion
of the  CMRT  that  does not hold  TIMET  common  stock.  The  CMRT's  long-term
investment  objective  is to provide a rate of return  exceeding a composite  of
broad market equity and fixed income indices  (including the S&P 500 and certain
Russell  indices)  utilizing  both  third-party  investment  managers as well as
investments directed by Mr. Harold C. Simmons. During the 16-year history of the
CMRT from inception (in 1987) through December 31, 2003, the average annual rate
of return  earned by the CMRT,  as  calculated  based on the average  percentage
change in the CMRT's net asset value per CMRT unit for each applicable year, was
12.7%.  The CMRT earned an annual  return of 38.4% in 2003,  and the CMRT's last
5-year and 10-year  average annual  returns were 10.1% and 11.1%,  respectively.
The CMRT`s  trustee and investment  committee  actively  manage the  investments
within the CMRT.  Such  parties  have in the past,  and may again in the future,
periodically  change the  relative  asset mix based upon,  among  other  things,
advice they receive from third-party  advisors and their  expectation as to what
asset mix will generate the greatest  overall  return.  Based on the above,  the
Company  increased its long-term rate of return assumption to 10.0% for December
31, 2003 pension obligations and for 2004 pension expense for its U.S. plan. The
Company  believes that such historical  volatility is a reasonable  indicator of
future levels of volatility, and a higher level of volatility is consistent with
a higher  level of risk in the asset mix and a higher  level of expected  return
over the long-term.

     Based  on  various  factors,   including   improved   economic  and  market
conditions,  gains on the plan assets during 2003 and  projected  asset mix, the
Company increased its assumed long-term rate of return to 7.10% for December 31,
2003 pension  obligations and for 2004 pension expense for its U.K. plan. During
2003 the Company  switched  trustees/investment  advisors for the U.K.  plan and
modified its asset allocation  goals.  The Company's  future expected  long-term
rate of return on plan assets for its U.K. plan is based on an asset  allocation
assumption of 80% equity  securities and 20% fixed income  securities by the end
of 2005 and 60% equity  securities and 40% fixed income securities by the end of
2007. The Company  believes that the U.K. plan's  long-term asset  allocation on
average will approximate the ultimate assumed 60/40  allocation,  as all current
contributions  to the plan are  invested  wholly in fixed income  securities  in
order to gradually effect the shift.

                                      F-33

<PAGE>


     Postretirement  benefits other than pensions.  The Company provides certain
postretirement  health care and life insurance  benefits on a cost-sharing basis
to its U.S. bargaining unit employees upon attaining  eligibility for retirement
based on previously  negotiated  agreements.  The Company also provides  certain
postretirement health care benefits on a cost-sharing basis to a closed group of
salaried  employees  who  reached  age 60 by January 1, 2004,  and  subsequently
become eligible for retirement  from active service.  Health care coverage under
the  plans  terminates  once  the  retiree  (or  eligible   dependent)   becomes
Medicare-eligible,  effectively  limiting coverage for most participants to less
than five years.  The Company funds such  benefits as they are incurred,  net of
any contributions by the retirees.

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

<TABLE>
                                                                                             December 31,
                                                                               ---------------------------------------
                                                                                      2003                  2002
                                                                               ------------------    -----------------
                                                                                           (In thousands)
<S>                                                                            <C>                   <C>
Actuarial present value of accumulated OPEB obligations:
  Balance at beginning of year                                                 $        27,116       $        23,245
  Service cost                                                                             487                   565
  Interest cost                                                                          1,722                 1,799
  Amendments                                                                            (2,940)                  731
  Actuarial loss                                                                         5,339                 5,383
  Benefits paid, net of participant contributions                                       (3,140)               (4,607)
                                                                               ------------------    -----------------
  Balance at end of year                                                                28,584                27,116
Unrecognized net actuarial loss                                                        (14,679)              (10,471)
Unrecognized prior service cost                                                          2,891                   590
                                                                               ------------------    -----------------
Total accrued OPEB cost                                                                 16,796                17,235
Less current portion                                                                     3,135                 3,818
                                                                               ------------------    -----------------

  Noncurrent accrued OPEB cost                                                 $        13,661       $        13,417
                                                                               ==================    =================
</TABLE>

<TABLE>
                                                                                 Year ended December 31,
                                                                     -------------------------------------------------
                                                                         2003              2002              2001
                                                                     --------------    --------------    -------------
                                                                                      (In thousands)

<S>                                                                  <C>               <C>               <C>
Service cost                                                         $       487       $       565       $       271
Interest cost                                                              1,722             1,799             1,686
Amortization of unrecognized prior service cost                             (464)             (376)             (425)
Amortization of net losses                                                   956               905               222
                                                                     --------------    --------------    -------------

  Net OPEB expense                                                   $     2,701       $     2,893       $     1,754
                                                                     ==============    ==============    =============

</TABLE>

                                      F-34

<PAGE>


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

                                                                Significant assumptions used to calculate
                                                               accumulated OPEB obligation at December 31,
                                                      ----------------------------------------------------------------
                                                                 2003                                 2002
                                                      ----------------------------       -----------------------------

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

</TABLE>

<TABLE>
                                                   Significant assumptions used to calculate net periodic
                                                        OPEB expense for the year ended December 31,
                                        ------------------------------------------------------------------------------
                                                  2003                       2002                       2001
                                        -----------------------     -----------------------     ----------------------

<S>                                              <C>                       <C>                          <C>
Discount rate                                     6.25%                     7.00%                       7.25%
Beginning HCCTR                                  11.35%                    11.15%                       8.90%
Ultimate HCCTR                                    4.25%                     5.00%                       6.00%
Ultimate year                                     2010                      2010                        2010

</TABLE>

     If the health care cost trend rate were increased by one  percentage  point
for each year, the aggregate of the service and interest cost components of OPEB
expense  would  have  increased  approximately  $0.3  million  in 2003,  and the
actuarial  present value of  accumulated  OPEB  obligations at December 31, 2003
would have increased  approximately $3.3 million.  If the health care cost trend
rate were decreased by one percentage  point for each year, the aggregate of the
service and  interest  cost  components  of OPEB  expense  would have  decreased
approximately  $0.3  million  in  2003,  and  the  actuarial  present  value  of
accumulated   OPEB  obligations  at  December  31,  2003  would  have  decreased
approximately $3.6 million.

     In  December  2003,  the  Medicare   Prescription  Drug,   Improvement  and
Modernization Act of 2003 (the "Medicare Act of 2003") was enacted. The Medicare
Act of 2003 introduced a prescription drug benefit under Medicare Part D as well
as a federal  subsidy to sponsors  of retiree  health  care  benefit  plans that
provide a benefit  that is at least  equivalent  to  Medicare  Part D.  Detailed
regulations  necessary  to  implement  the  Medicare  Act of 2003  have not been
issued,  including  those that would  specify the manner in which plan  sponsors
could  demonstrate  their  eligibility  to receive  the  subsidy.  Additionally,
certain  accounting issues raised by the Medicare Act of 2003,  including how to
account  for the  federal  subsidy,  are not  explicitly  addressed  by  current
existing authoritative  guidance. In accordance with FASB Staff Position FAS No.
106-1,  the  Company  has  elected to defer  accounting  for the  effects of the
Medicare  Act of 2003 until  authoritative  guidance  on how to account  for the
federal  subsidiary  has been issued.  Consequently,  the Company's  accumulated
postretirement benefit obligation and net periodic  postretirement benefit cost,
as reflected  in the  accompanying  Consolidated  Financial  Statements,  do not
reflect any effect of the Medicare Act of 2003. Specific  authoritative guidance
on the accounting for the federal  subsidy is pending,  and that guidance,  when
issued,  could  require  the  Company to change  previously  reported  financial
information, depending on the transition provisions of such guidance.

                                      F-35

<PAGE>


Note 18 - Related party transactions

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

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

     In 2003, the Company had an ISA with Tremont LLC, a wholly-owned subsidiary
of  Valhi,  to  provide  certain  management,  financial,  environmental,  human
resources  and other  services to Tremont LLC,  under which Tremont LLC paid the
Company  approximately $0.2 million.  The Company had a similar ISA with Tremont
Corporation,  Tremont  LLC's  predecessor,  in each of 2002 and 2001 pursuant to
which Tremont Corporation paid the Company approximately $0.4 million per year.

     The Company had an ISA with NL Industries,  Inc.  ("NL"),  a majority-owned
subsidiary of Valhi, whereby NL provided certain financial and other services to
TIMET at a cost to TIMET of approximately $0.3 million in each of 2002 and 2001.
The Company renewed this agreement for 2003 at a  substantially  reduced fee, as
the Company now performs a majority of these services  internally.  During 2003,
TIMET paid NL approximately $15,000 related to this agreement.

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

     In 2004,  the  Company,  Tremont  LLC and  Contran  agreed to enter  into a
single,  combined ISA covering the provision of services by Contran to TIMET and
the provision of services by TIMET to Tremont LLC.  Under the 2004 combined ISA,
TIMET will pay Contran approximately $1.2 million,  representing the net cost of
the Contran services to TIMET less the TIMET services to Tremont LLC.

                                      F-36

<PAGE>


     The  Company  previously  extended  market-rate  loans to certain  officers
pursuant to a  Board-approved  program to facilitate  the officers'  purchase of
Company  stock and BUCS and to pay  applicable  taxes on  shares  of  restricted
Company stock as such shares vested.  The loans were  generally  payable in five
annual installments beginning six years from date of loan and bore interest at a
rate tied to the Company's  borrowing rate, payable  quarterly.  At December 31,
2003, approximately $0.2 million of officer notes receivable remain outstanding.
The  Company  terminated  this  program  effective  July 30,  2002,  subject  to
continuing  only those loans  outstanding at that time in accordance  with their
then-current terms.

     Tall Pines Insurance  Company ("Tall  Pines"),  Valmont  Insurance  Company
("Valmont")  and EWI RE, Inc.  ("EWI")  provide for or broker certain  insurance
policies for Contran and certain of its subsidiaries  and affiliates,  including
the Company. Tall Pines and Valmont are wholly-owned  subsidiaries of Valhi, and
EWI is a  wholly-owned  subsidiary  of NL.  Prior to  January  2002,  an  entity
controlled by one of Harold C. Simmons'  daughters  owned a majority of EWI, and
Contran  owned the  remainder of EWI. In January 2002, NL purchased EWI from its
previous  owners  for an  aggregate  cash  purchase  price of  approximately  $9
million.  The  purchase  was  approved by a special  committee  of NL's board of
directors consisting of two of its independent directors, and the purchase price
was negotiated by the special committee based upon its consideration of relevant
factors,  including  but not limited to due diligence  performed by  independent
consultants  and an appraisal of EWI  conducted  by an  independent  third party
selected by the special committee. Consistent with insurance industry practices,
Tall  Pines,  Valmont  and  EWI  receive  commissions  from  the  insurance  and
reinsurance  underwriters  for the  policies  that they  provide or broker.  The
Company's  aggregate  premiums for such policies were approximately $3.8 million
in 2003, $3.4 million in 2002 and $2.8 million in 2001. The Company expects that
these relationships with Tall Pines, Valmont and EWI will continue in 2004.

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

     TIMET supplies titanium strip to VALTIMET under a long-term  contract.  The
LTA was entered  into in 1997 and expires in 2007.  Under the LTA,  VALTIMET has
agreed to purchase a certain percentage of its titanium  requirements from TIMET
at  formula-determined  selling prices,  subject to certain conditions.  Certain
provisions  of this contract have been amended in the past and may be amended in
the future to meet  changing  business  conditions.  Sales to  VALTIMET  were $9
million in 2003, $20 million in 2002 and $22 million in 2001.

                                      F-37

<PAGE>


     Tremont LLC owns 32% of Basic Management, Inc. ("BMI"). Among other things,
BMI provides utility services  (primarily water  distribution,  maintenance of a
common  electrical  facility and sewage disposal  monitoring) to the Company and
other manufacturers  within an industrial complex located in Henderson,  Nevada.
Power  transmission  and sewer  services  are  provided on a cost  reimbursement
basis,  similar to a cooperative,  while water delivery is currently provided at
the same rates as are charged by BMI to an unrelated  third party.  Amounts paid
by the Company to BMI for these utility  services were $1.7 million  during 2003
and  $1.6  million  during  each of 2002  and  2001.  The  Company  paid  BMI an
electrical  facilities usage fee of $1.3 million in each of 2003, 2002 and 2001.
This usage fee  continues  at $1.3 million per year through 2004 and declines to
$0.6 million for 2005,  to $0.5 million  annually  for 2006  through  2009,  and
terminates completely after January 2010.

     Based on the previous  agreements and  relationships,  receivables from and
payables to related  parties  included  in the  Company's  Consolidated  Balance
Sheets are summarized in the following table:

<TABLE>
                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      2003                 2002
                                                                                -----------------    -----------------
                                                                                           (In thousands)
<S>                                                                             <C>                  <C>
Receivables from related parties:
   VALTIMET                                                                     $         891        $       2,398
   Notes receivable from officers                                                         163                  163
                                                                                -----------------    -----------------

                                                                                $       1,054        $       2,561
                                                                                =================    =================

Payables to related parties:
   VALTIMET                                                                     $         819        $       1,246
   Contran                                                                                 71                    -
   NL                                                                                       3                    -
                                                                                -----------------    -----------------

                                                                                $         893        $       1,246
                                                                                =================    =================
</TABLE>

Note 19 - Commitments and contingencies

     Long-term  agreements.  The Company has LTAs with certain  major  aerospace
customers,  including,  among others, Boeing, Rolls-Royce plc and its German and
U.S. affiliates ("Rolls-Royce"), United Technologies Corporation ("UTC", Pratt &
Whitney and related  companies) and Wyman-Gordon (a unit of Precision  Castparts
Corporation ("PCC")). These agreements expire from 2007 through 2008, subject to
certain  conditions,  and generally provide for (i) minimum market shares of the
customers'  titanium  requirements  or firm annual volume  commitments  and (ii)
fixed or  formula-determined  prices  (although  some contain  elements based on
market pricing).  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.  Although it is
possible that some portion of the business  would  continue on a non-LTA  basis,
the  termination  of one or more of the LTAs  could  result  in a  material  and
adverse  effect on the  Company's  business,  results of  operations,  financial
position or liquidity.

                                      F-38

<PAGE>


     During 2001,  the Company  recorded a charge of $3.0 million  relating to a
titanium sponge  supplier's  agreement to renegotiate  certain  components of an
agreement entered into in 1997,  including minimum purchase commitments for 1999
through 2001.  As of December 31, 2003 and 2002,  $1.1 million and $1.7 million,
respectively, of this amount remained accrued and unpaid. In September 2002, the
Company entered into a new agreement with this supplier,  effective from January
1,  2002  through  December  31,  2007.  This new  agreement  replaced  the 1997
agreement. The new agreement requires minimum annual purchases by the Company of
approximately $10 million in 2002 through 2007.

     In April 2001, the Company  reached a settlement of the litigation  between
TIMET and Boeing related to the parties' LTA entered into in 1997. In connection
with the settlement,  TIMET and Boeing entered into an amended LTA. See Notes 9,
10 and 15.

     TIMET supplies titanium strip to VALTIMET under a long-term agreement.  See
Note 18.

     Concentration of credit and other risks. Substantially all of the Company's
sales and operating income (loss) are derived from operations based in the U.S.,
the U.K.,  France and Italy.  Approximately  68% of the Company's 2003 net sales
was generated from 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 and other long-term  agreements  accounted for approximately  41%, 37% and
43% of sales  revenue  in 2003,  2002 and 2001,  respectively.  Sales to PCC and
related entities  approximated 13% of the Company's sales revenue in 2003. Sales
to  Rolls-Royce  and other  Rolls-Royce  suppliers  under the  Rolls-Royce  LTAs
(including  direct sales to certain of the PCC-related  entities under the terms
of the Rolls-Royce  LTAs)  represented  approximately 15% of the Company's sales
revenue in 2003. The Company's ten largest customers accounted for approximately
38% of sales  revenue  in 2003,  40% of sales  revenue  in 2002 and 50% of sales
revenue in 2001.  Such  concentration  of  customers  may  impact the  Company's
overall exposure to credit and other risks, either positively or negatively,  in
that such customers may be similarly affected by economic or other conditions.

     Operating  leases.  The Company  leases  certain  manufacturing  and office
facilities and various  equipment.  Most of the leases contain  purchase  and/or
various   term  renewal   options  at  fair  market  and  fair  rental   values,
respectively.  In most cases  management  expects that leases will be renewed or
replaced by other leases in the normal course of business.  Net rent expense was
$4.0 million in 2003, $5.0 million in 2002 and $6.1 million in 2001.

     At  December  31,  2003,  future  minimum  payments  under   noncancellable
operating  leases having an initial or remaining term in excess of one year were
as follows:
<TABLE>

                                                                                                         Amount
                                                                                                   -------------------
                                                                                                     (In thousands)
<S>                                                                                                  <C>
Year ending December 31,
  2004                                                                                               $        2,724
  2005                                                                                                        1,497
  2006                                                                                                        1,223
  2007                                                                                                          380
  2008                                                                                                          205
  2009 and thereafter                                                                                           339
                                                                                                   -------------------

                                                                                                     $        6,368
                                                                                                   ===================
</TABLE>

                                      F-39

<PAGE>


     Environmental  matters.  TIMET and BMI entered  into an  agreement  in 1999
providing  that upon payment by BMI of the cost to design,  purchase and install
the technology and equipment  necessary to allow the Company to stop discharging
liquid and solid  effluents  and  co-products  into  settling  ponds  located on
certain lands owned by the Company adjacent to its Henderson,  Nevada plant site
(the "TIMET Pond Property"), the Company would convey the TIMET Pond Property to
BMI, at no additional cost. Under this agreement, BMI will pay 100% of the first
$15.9 million of the cost for this  project,  and TIMET will pay 50% of the cost
in excess of $15.9 million, up to a maximum payment by TIMET of $2 million.  The
Company  presently  expects  that the total cost of this project will not exceed
$15.9 million. The Company and BMI are continuing discussions about this project
and also continuing  investigation with respect to certain  environmental issues
associated with the TIMET Pond Property, including possible groundwater issues.

     Under  certain  circumstances  (not  presently  in  effect),  TIMET  may be
required to restore some portion of the TIMET Pond  Property to the condition it
was in prior to  TIMET's  use of the  property,  before  returning  title of the
affected  property to BMI. The Company  currently  believes any liability it may
have  under  this  obligation  to  be  remote.  The  Company  is  continuing  to
investigate  this potential  liability,  and is presently unable to estimate the
magnitude of such potential liability.

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

     At December 31, 2003, the Company had accrued an aggregate of approximately
$4.2 million for  environmental  matters,  including those discussed  above. The
Company records  liabilities  related to environmental  remediation  obligations
when estimated future costs are probable and reasonably estimable. Such accruals
are adjusted as further information  becomes available or circumstances  change.
Estimated  future costs are not  discounted  to their present  value.  It is not
possible to estimate the range of costs for certain  sites.  The  imposition  of
more  stringent   standards  or  requirements   under   environmental   laws  or
regulations,  the  results of future  testing  and  analysis  undertaken  by the
Company at its  operating  facilities,  or a  determination  that the Company is
potentially  responsible for the release of hazardous substances at other sites,
could  result in costs in excess of amounts  currently  estimated to be required
for such  matters.  No assurance  can be given that actual costs will not exceed
accrued  amounts or that costs will not be incurred  with respect to sites as to
which no problem is currently  known or where no estimate can presently be made.
Further,  there can be no assurance that additional  environmental  matters will
not arise in the future.

     Legal  proceedings.  At  December  31,  2003,  the  Company  had accrued an
aggregate  of  $0.4  million  for  expected   costs  related  to  various  legal
proceedings.  The Company records  liabilities related to legal proceedings when
estimated  costs are  probable  and  reasonably  estimable.  Such  accruals  are
adjusted as further  information  becomes  available  or  circumstances  change.
Estimated  future costs are not  discounted  to their present  value.  It is not
possible to estimate the range of costs for certain matters. No assurance can be
given that actual costs will not exceed  accrued  amounts or that costs will not
be incurred with respect to matters as to which no problem is currently known or
where no estimate can presently be made. Further, there can be no assurance that
additional legal proceedings will not arise in the future.

                                      F-40

<PAGE>


     Other.   TIMET  is  the  primary  obligor  on  two  $1.5  million  workers'
compensation  bonds  issued  on  behalf of a former  subsidiary,  Freedom  Forge
Corporation ("Freedom Forge"), which TIMET sold in 1989. The bonds were provided
as part of the conditions  imposed on Freedom Forge in order to self-insure  its
workers' compensation obligations. Freedom Forge filed for Chapter 11 bankruptcy
protection on July 13, 2001, and discontinued payment on the underlying workers'
compensation  claims in November 2001.  During 2002, TIMET received notices that
the issuers of the bonds were required to make payments on one of the bonds with
respect to certain of these claims and were requesting reimbursement from TIMET.
Based upon loss  projections,  the  Company  accrued  $0.9  million in the third
quarter  of 2002  and  $0.7  million  (including  $0.1  million  in  legal  fees
reimbursable  to the issuer of the bonds) in the fourth quarter of 2002 for this
bond as other  non-operating  expense.  Through  December  31,  2003,  TIMET has
reimbursed  the  issuer  approximately  $0.8  million  under  this bond and $0.8
million remains accrued for future payments.  During 2003, TIMET received notice
that certain claimants had submitted claims under the second bond.  Accordingly,
the Company  accrued  $50,000 for this bond in the third  quarter of 2003 and an
additional  $0.4  million  for this bond in the fourth  quarter of 2003 as other
non-operating  expense.  As of December 31, 2003, payments under the second bond
have been less than $0.1 million,  and $0.4 million  remains  accrued for future
payments.  TIMET may revise its  estimated  liability  under  these bonds in the
future as additional facts become known or claims develop.

     As of December 31, 2003,  the Company has $0.1 million  accrued for pending
customer claims  associated with certain standard grade material produced by the
Company  which was found (in March  2001) to contain  tungsten  inclusions  as a
result of tungsten  contaminated  silicon  sold to the Company by a  third-party
supplier.  Based upon an  analysis of  information  pertaining  to asserted  and
unasserted  claims  during the third  quarter of 2003,  the Company  revised its
estimate  of  probable  loss and  reduced  its  accrual  for  pending and future
customer claims,  resulting in a $1.7 million  reduction in cost of sales during
the third quarter of 2003.  The Company has paid $1.1 million in claims  related
to this matter since  initial  identification  through  December  31, 2003.  All
pending claims have been investigated,  and subsequent to December 31, 2003, the
final  pending  claim was  resolved for less than the accrued  amount.  However,
there is no  assurance  that all  potential  claims have been  submitted  to the
Company.  The  Company has filed suit  seeking  full  recovery  from its silicon
supplier for any liability the Company has incurred or might incur,  although no
assurance  can be given that the Company will  ultimately be able to recover all
or any portion of such amounts.  In April 2003, the Company received notice that
this silicon supplier had filed a voluntary  petition for  reorganization  under
Chapter 11 of the U.S.  Bankruptcy  Code.  TIMET's  motion  for relief  from the
automatic  stay in  bankruptcy  was granted in the fourth  quarter of 2003.  The
Company has not  recorded any  recoveries  related to this matter as of December
31, 2003.

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

                                      F-41

<PAGE>


Note 20 - Earnings per share

     Basic earnings (loss) per share is based on the weighted  average number of
unrestricted common shares outstanding during each year. Diluted earnings (loss)
per share reflect the dilutive effect of common stock options,  restricted stock
and the  assumed  conversion  of the BUCS,  if  applicable.  Basic  and  diluted
earnings  (loss)  per  share  amounts  for  all  periods   presented  have  been
retroactively  adjusted  for the effects of the  Company's  one-for-ten  reverse
stock  split,  which was  effective  after the close of trading on February  14,
2003. The assumed  conversion of the BUCS was omitted from the diluted  earnings
(loss) per share  calculation  for 2003,  2002 and 2001  because  the effect was
antidilutive. Had the BUCS not been antidilutive, diluted losses would have been
decreased by $14.0  million in 2003,  $13.4 million in 2002 and $13.9 million in
2001.   Diluted  average  shares   outstanding  would  have  been  increased  by
approximately  540,000  shares  for  each of  these  periods  from  the  assumed
conversion of the BUCS.  Stock options and restricted  shares  excluded from the
calculation because they were antidilutive were 119,337 in 2003, 140,798 in 2002
and 162,764 in 2001.

Note 21 - Segment information

     The  Company's  production  facilities  are  located in the United  States,
United  Kingdom,  France and Italy,  and its  products are sold  throughout  the
world. The Company's worldwide  integrated  activities are conducted through its
"Titanium  melted and mill  products"  segment,  currently  the  Company's  only
segment. Sales, gross margin, operating income (loss), inventory and receivables
are the key  management  measures  used to  evaluate  segment  performance.  The
following  table  provides  supplemental  segment  information  to the Company's
Consolidated Financial Statements:

<TABLE>
                                                                              Year ended December 31,
                                                               -------------------------------------------------------
                                                                     2003               2002                2001
                                                               ----------------    ---------------    ----------------
                                                                    ($ in thousands, except selling price data)
<S>                                                            <C>                 <C>                <C>
Titanium melted and mill products:
    Mill product net sales                                     $     279,563       $     278,204      $     363,257
    Melted product net sales                                          57,409              34,800             64,063
    Other product sales                                               55,132              53,497             59,615
    Other (1)                                                         (6,800)                  -                  -
                                                               ----------------    ---------------    ----------------
                                                               $     385,304       $     366,501      $     486,935
                                                               ================    ===============    ================
Mill product shipments:
    Volume (metric tons)                                               8,875               8,860             12,180
    Average price ($ per kilogram)                             $       31.50       $       31.40      $       29.80

Melted product shipments:
    Volume (metric tons)                                               4,725               2,400              4,415
    Average price ($ per kilogram)                             $       12.15       $       14.50      $       14.50

</TABLE>

                                      F-42

<PAGE>



<TABLE>
                                                                                Year ended December 31,
                                                               -------------------------------------------------------
                                                                    2003                2002               2001
                                                               ----------------    ---------------    ----------------
                                                                                    (In thousands)
<S>                                                            <C>                 <C>                <C>
Geographic segments:
   Net sales - point of origin:
     United States                                             $     340,616       $     311,194      $     399,708
     United Kingdom                                                  111,313              91,467            139,210
     Other Europe                                                     75,443              68,487             70,079
     Other (1)                                                        (6,800)                  -                  -
     Eliminations                                                   (135,268)           (104,647)          (122,062)
                                                               ----------------    ---------------    ----------------
                                                               $     385,304       $     366,501      $     486,935
                                                               ================    ===============    ================

   Net sales - point of destination:
     United States                                             $     217,653       $     193,740      $     247,410
     Europe                                                          149,424             145,118            188,729
     Other locations                                                  25,027              27,643             50,796
     Other (1)                                                        (6,800)                  -                  -
                                                               ----------------    ---------------    ----------------
                                                               $     385,304       $     366,501      $     486,935
                                                               ================    ===============    ================

   Long-lived assets - property and equipment, net:
     United States                                             $     170,400       $     186,777      $     208,069
     United Kingdom                                                   62,287              62,369             62,463
     Other Europe                                                      6,495               5,526              4,776
                                                               ----------------    ---------------    ----------------
                                                               $     239,182       $     254,672      $     275,308
                                                               ================    ===============    ================
----------------------------------------------------------------------------------------------------------------------
<FN>

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

</TABLE>

     Export sales from U.S.-based  operations  approximated $16 million in 2003,
$18 million in 2002 and $37 million in 2001.

                                      F-43

<PAGE>


Note 22 - Quarterly results of operations (unaudited)

<TABLE>

                                                                           For the quarter ended
                                                      ----------------------------------------------------------------
                                                        March 31          June 30         Sept. 30         Dec. 31
                                                      -------------    --------------   -------------    -------------
                                                                   (In millions, except per share data)
<S>                                                   <C>              <C>              <C>              <C>
Year ended December 31, 2003:

  Net sales                                           $     99.3       $    101.8       $     83.6       $    100.6
  Gross margin(1)                                            1.0              4.4                -             11.7
  Operating (loss) income                                   (8.1)            (2.1)             1.3             14.3
  (Loss) income before cumulative effect of
     change in accounting principle                        (13.4)            (6.4)            (3.0)             9.9
  Net (loss) income                                   $    (13.6)      $     (6.4)      $     (3.0)      $      9.9

  Basic and diluted loss per share:
     Before cumulative effect of change in
        accounting principle                          $    (4.23)      $    (2.00)      $    (0.94)      $     3.11
     Basic and diluted loss per share                 $    (4.29)      $    (2.00)      $    (0.94)      $     3.11

Year ended December 31, 2002:

  Net sales                                           $    104.4       $     94.3       $     82.8       $     85.0
  Gross margin                                               5.1              1.4             (4.9)            (4.7)
  Operating loss (1)                                        (4.7)            (7.0)            (4.4)            (4.8)
  Loss before cumulative effect of change in
     accounting principle (1) (4)                          (36.1)           (12.3)            (9.1)            (9.6)
  Net loss (1) (2) (4)                                $    (80.4)      $    (12.3)      $     (9.1)      $     (9.6)

  Basic and diluted loss per share (2) (3) (4):
     Before cumulative effect of change in
        accounting principle                          $   (11.43)      $    (3.91)      $    (2.89)      $    (3.05)
     Basic and diluted loss per share
                                                      $   (25.47)      $    (3.91)      $    (2.89)      $    (3.05)
----------------------------------------------------------------------------------------------------------------------
<FN>
(1)  The sum of  quarterly  amounts do not agree to the full year results due to
     rounding.
(2)  As compared to amounts previously  reported on Form 10-Q, net loss and loss
     per share for the quarter ended March 31, 2002 were  increased by the $44.3
     million  ($14.04  per  share)  cumulative  effect of  change in  accounting
     principle recorded for the Company's goodwill  impairment charge determined
     during the third quarter of 2002.
(3)  The sum of quarterly  amounts may not agree to the full year results due to
     rounding and the timing of potential conversion of options to common stock,
     which would have an antidilutive  effect on the calculation.  All per share
     amounts have been  adjusted to reflect the  Company's  one-for-ten  reverse
     stock split,  which became effective after the close of trading on February
     14, 2003.
(4)  The first quarter 2002 results included a $27.5 million  impairment  charge
     related to the impairment of the Company's investment in SMC securities, as
     discussed in Note 5.
</FN>

</TABLE>

                                      F-44

<PAGE>



                         REPORT OF INDEPENDENT AUDITORS
                         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 March 2, 2004  appearing in this 2003 Annual Report on Form 10-K of
Titanium Metals  Corporation  also included an audit of the financial  statement
schedule  listed in the Index on page F of this Form 10-K. In our opinion,  this
financial  statement  schedule  presents fairly, in all material  respects,  the
information  set  forth  therein  when  read in  conjunction  with  the  related
consolidated financial statements.



/s/ PricewaterhouseCoopers LLP


Denver, Colorado
March 2, 2004

                                       S-1

<PAGE>


                           TITANIUM METALS CORPORATION

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                 (In thousands)
<TABLE>

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

<S>                                     <C>             <C>              <C>      <C>    <C>        <C>   <C>
Year ended December 31, 2003:

   Allowance for doubtful
     accounts                           $    2,859      $       623      $    144 (1)    $   (1,279 (2)   $    2,347
                                        =============   =============    ============    =============    ============
   Allowance for excess and
     slow moving inventories            $   15,090      $     2,324      $  1,125 (1)    $   (1,816)      $   16,723
                                        =============   =============    ============    =============    ============
   Reserve for business
     restructuring                      $       80      $         -      $      -        $      (80)(3)   $        -
                                        =============   =============    ============    =============    ============

Year ended December 31, 2002:

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

Year ended December 31, 2001:

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

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

                                       S-2