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, 2004
                                             -----------------

                                       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 identification no.)
 incorporation or organization)

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


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


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

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

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

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

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

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

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

As of June 30, 2004,  15,945,010  shares of common stock were  outstanding.  The
aggregate  market  value  of the  7,465,975  shares  of  voting  stock  held  by
nonaffiliates of Titanium Metals Corporation as of such date approximated $138.2
million.  There are no shares of non-voting stock  outstanding.  As of March 14,
2005, 15,988,350 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 risks and uncertainties
in those portions  referenced above and those described from time to time in the
Company's  other filings with the  Securities  and Exchange  Commission  ("SEC")
which  include,  but are not  limited  to,  the  cyclicality  of the  commercial
aerospace industry,  the performance of aerospace  manufacturers and the Company
under their long-term  agreements,  the 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,
fluctuations  in the market price of marketable  securities,  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,  the potential for adjustment of the Company's
deferred income tax asset valuation allowance and other risks and uncertainties.
Should one or more of these risks  materialize  (or the  consequences  of such a
development  worsen),  or should the  underlying  assumptions  prove  incorrect,
actual results could differ materially from those forecasted or expected.



<PAGE>


                                     PART I

ITEM 1: BUSINESS

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

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

     TIMET's products include  titanium sponge,  melted products,  mill products
and  industrial  fabrications.  The  titanium  industry is  comprised of several
manufacturers that, like TIMET,  produce a relatively complete range of titanium
products and a  significant  number of producers  worldwide  that  manufacture a
limited  range  of  titanium  mill  products.  Based on the  Company's  industry
experience and information obtained from  publicly-available  external resources
(e.g., United States Geological Survey,  International  Titanium Association and
Japan  Titanium   Society),   the  Company   estimates  that  it  accounted  for
approximately 18% of worldwide  industry  shipments of titanium mill products in
2004  and  2003  and  approximately  10%  and 8% of  worldwide  titanium  sponge
production in 2004 and 2003, respectively.

     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 maintaining a lean cost structure,
managing its raw material  requirements,  improving  the quality of its products
and  processes  and taking other  actions to continue to generate  positive cash
flow and further expand its 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.  Military  aerospace  sector  shipments  are  largely  driven by
government defense spending in North America and Europe.



<PAGE>


     The  following  table  illustrates  the  Company's  estimates  of  titanium
industry mill product shipments during 2004 and 2003:

<TABLE>

                                                                       Year ended December 31,
                                                                  ----------------------------------          %
                                                                       2004               2003             change
                                                                  ----------------    --------------     -----------
                                                                            (metric tons)
<S>                                                                     <C>                 <C>                <C>
Mill product shipments to:
  Commercial aerospace sector                                           20,900              16,000            +31%
  Military aerospace sector                                              4,000               4,100             -2%
                                                                  ----------------    --------------

  Total aerospace industry                                              24,900              20,100            +24%
                                                                  ================    ==============

Aggregate mill product shipments to all industries                      61,800              50,200            +23%
                                                                  ================    ==============
</TABLE>

     The Company's  business is more  dependent on aerospace  demand than is the
overall titanium  industry,  as approximately  70% of the Company's mill product
shipment volume in 2004 was to the aerospace industry (58% commercial  aerospace
and 12% military aerospace),  whereas  approximately 40% of the overall titanium
industry's shipment volume in 2004 was to the aerospace  industry,  as indicated
by the above table.

     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, 1999 and 2002.
Prior to 2004,  demand  for  titanium  reached  its  highest  level in 1997 when
industry  mill  product  shipments  reached  approximately  60,700  metric tons.
However,   since  1997,   industry  mill  product   shipments  have   fluctuated
significantly,  primarily due to a continued  change in demand for titanium from
the commercial  aerospace sector.  The Company estimates that industry shipments
approximated  50,200  metric tons in 2003 and 61,800  metric  tons in 2004.  The
Company  currently  expects total industry mill product  shipments will increase
from 2004 levels to approximately 71,000 metric tons in 2005.

     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 2004
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 602 (including 147 wide bodies) in 2004.
The following  table  summarizes  The Airline  Monitor's  most  recently  issued
forecast (January 2005) for large commercial  aircraft  deliveries over the next
five years:

<TABLE>

                                                                              % increase (decrease)
                                     Forecasted deliveries                     over previous year
                               -----------------------------------    --------------------------------------
            Year                   Total           Wide bodies             Total             Wide bodies
      ------------------       --------------    -----------------    ----------------    ------------------

<S>         <C>                     <C>                <C>                    <C>                 <C>
            2005                    680                172                    13%                 17%
            2006                    720                171                     6%                 (1%)
            2007                    760                200                     6%                 17%
            2008                    805                240                     6%                 20%
            2009                    795                255                    (1%)                 6%
</TABLE>
                                        2

<PAGE>


     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  global  traffic  increased in 2004
compared  to 2003,  persistently  high oil prices  had an adverse  impact on the
commercial  airline  industry.  According to The Airline Monitor,  the worldwide
commercial  airline  industry's  estimated  operating  loss  for  2004  was $5.9
billion, and the projected 2005 operating loss is $2.9 billion. According to ROM
Associates, Inc., a leading aerospace research company, global airline passenger
traffic returned to  pre-September  11, 2001 levels in October 2003. The Company
estimates that industry mill product  shipments  into the  commercial  aerospace
sector will approximate 26,000 metric tons in 2005.

     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.

     Several of today's  active  U.S.  military  programs,  including  the C-17,
F/A-18,  F-16 and F-15 began  during the Cold War and are  forecast  to continue
production  through  the  end  of the  current  decade.  In  addition  to  these
established U.S.  programs,  new U.S.  programs offer growth  opportunities  for
increased  titanium  consumption.  The F/A-22  Raptor is  currently  in low-rate
initial  production,  and the U.S. Air Force currently plans to purchase between
276 and 300 aircraft over the life of the program,  depending on funding levels.
The recent budget proposed by President Bush provides for an overall increase in
spending  compared to current levels,  principally to continue  funding military
ground efforts in Iraq and  Afghanistan.  The current budget proposal also calls
for an end to  procurement of the F/A-22 in 2008,  with total F/A-22  production
capped at 179  aircraft.  However,  final  procurement  decisions  must  receive
Congressional approval.

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

     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, power plants, desalination
plants and pollution  control  equipment.  Rapid growth of the Chinese and other
Southeast    Asian    economies   has   brought    unprecedented    demand   for
titanium-intensive  industrial equipment.  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 the Company
estimates that emerging market demand presently  represents only about 5% of the
2004 total  industry  demand for titanium mill  products,  the Company  believes
emerging market demand, in the aggregate,  could grow at double-digit rates over
the next several years. The Company is actively pursuing these markets.

                                        3
<PAGE>

     The automotive market continues to be an attractive emerging market segment
due to its potential for sustainable long-term growth. For this reason, in 2002,
TIMET established TiMET Automotive, which is focused on developing and marketing
proprietary   alloys  and   processes   specifically   suited   for   automotive
applications.  Titanium is now used in several consumer car applications as well
as in numerous motorcycles.

     At the present  time,  titanium  is  primarily  used for  exhaust  systems,
suspension springs 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.   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.  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.  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 group dedicated to developing the expansion
of titanium use in this market and in other non-aerospace applications.

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

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

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

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

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

                                        4

<PAGE>

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

     Titanium sponge (so called because of its  appearance) is the  commercially
pure,  elemental  form of  titanium  metal.  The first  step in  TIMET's  sponge
production involves the 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 is a cylindrical  solid shape that, in TIMET's case,  weighs
up to 8 metric tons. Titanium slab is a rectangular solid shape that, in TIMET's
case,  weighs  up to 16 metric  tons.  Each  ingot or slab is formed by  melting
titanium  sponge,  scrap or both,  usually  with  various  other  alloys such as
vanadium,  aluminum,   molybdenum,  tin  and  zirconium.  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.

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

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

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

                                        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  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
alloys.  The following  table  summarizes  the Company's 2004 raw material usage
requirements for its melted and mill products:

<TABLE>

                                                                          Percentage of total raw
                                                                           material requirements
                                                                        -----------------------------

<S>                                                                                   <C>
              Internally produced sponge                                              30%
              Purchased sponge                                                        32%
              Titanium scrap                                                          31%
              Alloys                                                                   7%
                                                                        -----------------------------

                                                                                     100%
                                                                        =============================

</TABLE>

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

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

     During  2004,  the  Company  was the only major U.S.  producer  of titanium
sponge and one of only five major worldwide producers (the others are located in
Russia, Kazakhstan and two in Japan). However, 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.  Presently,  TIMET and
certain companies in Japan are the only producers of premium quality sponge that
currently  have  complete  approval  for  all  significant  demanding  aerospace
applications. Over the past few years, sponge producers in Russia and Kazakhstan
have  progressed in their efforts to obtain approval for the use of their sponge
into all  aerospace  applications.  This  qualification  process  is  likely  to
continue for several more years.

                                        6

<PAGE>


     Historically, the Company has purchased sponge predominantly from producers
in Kazakhstan and Japan.  In September  2002, the Company  entered into a sponge
supply  agreement,  effective  from January 1, 2002  through  December 31, 2007,
which requires minimum annual purchases by the Company. The Company has no other
long-term sponge supply  agreements.  Since 2000, the Company has also purchased
sponge from the U.S. Defense Logistics Agency ("DLA")  stockpile;  however,  the
DLA  stockpile is expected to become  fully  depleted  during 2005.  The Company
expects to continue to purchase sponge from a variety of sources during 2005.

     The  Company  utilizes  a  combination  of  internally  produced,  customer
returned and externally purchased titanium scrap at 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 purchased scrap comes from a wide range
of sources, including customers, collectors, processors and brokers. The Company
anticipates  that 50% to 60% of the scrap it will  utilize  during  2005 will be
purchased from external suppliers, as compared to 52% for 2004. The Company also
occasionally  sells  scrap,  usually  in a form or grade it cannot  economically
recycle.

     Market  forces can  significantly  impact the supply or cost of  externally
produced scrap.  The amount of scrap generated in the supply chain varies during
the titanium business cycles.  During the middle of the cycle,  scrap generation
and consumption are in relative equilibrium, minimizing disruptions in supply or
significant changes in 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  phenomenon  normally  results in higher
selling prices for melted and mill products, which tends to offset the increased
material costs,  the Company is somewhat  limited in its ability to raise prices
by the portion of its business that is under long-term pricing agreements.

     All of the Company's major  competitors  utilize scrap as a raw material in
their melt operations.  In addition to use by titanium  manufacturers,  titanium
scrap is used in steel-making  operations during production of interstitial-free
steels,  stainless  steels and  high-strength-low-alloy  steels.  Recent  strong
demand  for  these  steel  products,  especially  from  China,  has  produced  a
significant  increase in demand for titanium scrap at a time when titanium scrap
generation  rates are at low  levels,  partly due to lower  commercial  aircraft
build rates.  These events created a significantly  tightened supply of titanium
scrap  during  2004,  and the Company  expects this trend to continue and worsen
during 2005.  For TIMET,  this will translate to lower  availability  and higher
cost for externally  purchased scrap in the near-term.  The Company's ability to
recover  these  material  costs via higher  selling  prices to its  customers is
uncertain.  The expected  increase in commercial  aircraft  build rates over the
next several years, as previously discussed,  could have the effect of relieving
the shortage of titanium scrap.

                                        7

<PAGE>


     Various  alloys  used in the  production  of  titanium  products  are  also
available from a number of suppliers.  However,  the recent high level of global
demand for steel  products  also has resulted in a  significant  increase in the
prices  for  several  alloys,   such  as  vanadium  and   molybdenum.   Although
availability  is not  expected  to be a problem,  the  Company's  cost for these
alloys during 2005 could be as much as double that of 2004.

     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")).  Most of these LTAs expire from 2005 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. Certain provisions of these
LTAs have been  amended  in the past and may be  amended  in the  future to meet
changing business conditions.

     In certain  events of  nonperformance  by the Company or the customer,  the
LTAs may be terminated  early.  Although it is possible that some portion of the
business would continue on a non-LTA  basis,  the  termination of one or more of
the LTAs could result in a material effect on the Company's business, results of
operations,  financial  position or  liquidity.  The LTAs were designed to limit
selling price volatility to the customer, while providing TIMET with a committed
base of volume  throughout the aerospace  business  cycles.  To varying degrees,
these  LTAs  effectively  obligate  TIMET to bear the  majority  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  paid   Wyman-Gordon  a  total  of  $6.8  million  in  three   quarterly
installments in connection with this termination, which included the termination
of certain favorable  purchase terms. The Company recorded a one-time charge for
the entire $6.8  million as a reduction  to sales in the third  quarter of 2003.
Concurrently,   the  Company  entered  into  new  long-term  purchase  and  sale
agreements with Wyman-Gordon that expire in 2008.

     During 2001, the Company reached a settlement of certain 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 2002 through 2007,  Boeing  advances
TIMET $28.5 million annually less $3.80 per pound of titanium product  purchased
by Boeing  subcontractors  under the  Boeing  LTA  during  the  preceding  year.
Effectively,  the Company  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.  The Boeing  customer  advance is also reduced as the Company  recognizes
income under the  take-or-pay  provisions of the LTA, as described in Note 10 to
the Consolidated  Financial Statements.  Under a separate agreement,  TIMET must
establish  and hold  buffer  stock for Boeing at TIMET's  facilities,  for which
Boeing will be invoiced for an LTA sale by TIMET when such  material is produced
into a mill  product  by  TIMET.  See Item 7 - MD&A for  additional  information
regarding the Boeing LTA.

                                        8

<PAGE>

     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,  TIMET has agreed to
provide  a  certain   percentage  of   VALTIMET's   titanium   requirements   at
formula-determined  selling  prices,  subject  to  certain  conditions.  Certain
provisions  of this contract have been amended in the past and may be amended in
the future to meet changing business conditions.

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

<TABLE>

                                                                                 Year ended December 31,
                                                                     -------------------------------------------------
                                                                         2004              2003              2002
                                                                     --------------    --------------    -------------
                                                                           (Percentage of total sales revenue)
<S>                                                                            <C>               <C>              <C>
Sales revenue to customers within:
  North America                                                                55%               55%              53%
  Europe                                                                       40%               38%              40%
  Other                                                                         5%                7%               7%
                                                                     --------------    --------------    -------------

                                                                              100%              100%             100%
                                                                     ==============    ==============    =============

</TABLE>

     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 Notes 6
and 21 to the Consolidated Financial Statements.

     Substantially  all of the Company's sales and operating  income are derived
from operations  based in the U.S., the U.K.,  France and Italy. As shown in the
below table,  the Company  generates  over  two-thirds of its sales revenue from
sales to the aerospace industry  (commercial and military sectors).  The Company
expects  that a similar  percentage  of its 2005  sales  revenue  will be to the
aerospace industry. As previously noted, the Company has LTAs with certain major
aerospace customers,  including Boeing, Rolls-Royce, UTC and Wyman-Gordon.  This
concentration  of customers may impact the Company's  overall exposure to credit
and other risks, either positively or negatively, in that all of these customers
may be  similarly  affected  by the  same  economic  or  other  conditions.  The
following table provides  supplemental sales revenue  information  regarding the
Company's dependence on certain industries and customer relationships:

                                        9

<PAGE>

<TABLE>

                                                                               Year ended December 31,
                                                                  --------------------------------------------------
                                                                       2004              2003              2002
                                                                  ---------------    --------------    -------------
                                                                         (Percentage of total sales revenue)
<S>                                                                        <C>                <C>              <C>
Sales revenue to:
  Aerospace industry:
     Commercial aerospace sector                                           57%                57%              56%
     Military aerospace sector                                             13%                11%              11%
                                                                  ---------------    -------------    --------------

  Total aerospace industry                                                 70%                68%              67%
                                                                  ===============    =============    ==============

  Customers under LTAs                                                     44%                41%              37%
                                                                  ===============    =============    ==============
  Significant customers under LTAs: (1)
     Rolls-Royce and other Rolls-Royce suppliers (2)                       15%                15%              12%
                                                                  ===============    =============    ==============

  Ten largest customers                                                    48%                44%              43%
                                                                  ===============    =============    ==============
  Significant customers: (1)
     PCC and related entities                                              13%                13%               9%
                                                                  ===============    =============    ==============
--------------------------------------------------------------------------------------------------------------------
<FN>

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


</TABLE>


     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,  General  Electric  Aircraft  Engines,  Pratt & Whitney and
Societe  Nationale  d<180>Etude  et de  Construction  de Moteurs  d<180>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.

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

                                       10

<PAGE>

<TABLE>

                                                                                   At December 31,
                                                                   -------------------------------------------------
                                                                       2004              2003             2002
                                                                   --------------    -------------    --------------

<S>                                                                    <C>               <C>              <C>
Firm order backlog - all planes:
  Airbus                                                               1,500             1,454            1,505
  Boeing                                                               1,089             1,101            1,144
                                                                   --------------    -------------    --------------

                                                                       2,589             2,555            2,649
                                                                   ==============    =============    ==============

Firm order backlog - wide body planes:
  Airbus                                                                 466               471              423
  Boeing                                                                 287               230              286
                                                                   --------------    -------------    --------------

                                                                         753               701              709
                                                                   ==============    =============    ==============

Wide body planes as % of total firm order backlog                         29%               27%              27%
                                                                   ==============    =============    ==============

</TABLE>

     Wide body planes (e.g.,  Boeing 747, 767, 777 and 787 and Airbus A330, A340
and  A380)  tend to use a higher  percentage  of  titanium  in their  airframes,
engines and parts than narrow body planes  (e.g.,  Boeing 737 and 757 and Airbus
A318, A319 and A320), 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 2004, a total of 139 firm orders had been placed for the Airbus
A380  superjumbo  jet, a program  officially  launched in 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. Additionally, at year-end
2004, a total of 56 firm orders have been placed for the Boeing 787  Dreamliner,
a program officially launched in April 2004 with anticipated first deliveries in
2008.  Although  the 787 will contain more  composite  materials  than a typical
Boeing airplane,  the Company's  preliminary estimates are that approximately 91
metric tons of titanium  (80 metric tons for the airframe and 11 metric tons for
the engines) will be purchased  for each 787  manufactured.  However,  the final
titanium  buy  weight is likely to vary  because  the 787 is still in the design
phase.

     Outside of  aerospace  markets,  the Company  manufactures  a wide range of
products for customers in the chemical process, oil and gas, consumer,  sporting
goods, automotive, power generation and armor/armament industries. Approximately
17% of the  Company's  sales  revenue  in 2004,  19% in 2003 and 18% in 2002 was
generated by sales into  industrial  and emerging  markets,  including  sales to
VALTIMET for the production of welded tubing. For the oil and gas industry,  the
Company  provides  seamless pipe for downhole  casing,  risers,  tapered  stress
joints and other offshore oil and gas production equipment, along with firewater
piping  systems.  In armor and armament,  the Company  sells plate  products for
fabrication  into  applique  plate for  protection  of the entire  ground combat
vehicle as well as the primary vehicle structure.

                                       11

<PAGE>


     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 titanium fabrications.  Sales of
these other products represented 13% of the Company's sales revenue in both 2004
and 2003 and 15% in 2002.

     During 2004, the Company  modified its method of calculating its backlog to
include  replenishment  purchase orders placed under consignment  relationships.
The  Company  believes  inclusion  of  these  orders  provides  a more  accurate
reflection of the Company's overall backlog.  Using the modified methodology for
all periods,  the Company's  backlog of unfilled orders was  approximately  $450
million at December 31, 2004,  compared to $205 million at December 31, 2003 and
$185  million at December  31, 2002.  Over 94% of the 2004  year-end  backlog is
scheduled for shipment  during 2005.  The  Company's  order backlog may not be a
reliable indicator of future business activity.

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

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

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

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

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

                                       12

<PAGE>


     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  United  States   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.
During the third quarter of 2004,  President  Bush  approved the petition.  This
action  resulted  in a return to the normal  15%  tariff on imports of  titanium
wrought product from Russia.

     In 2002,  Kazakhstan  filed a  petition  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). Kazakhstan's petition was denied in 2003.

     The  Japanese   government   has  recently   raised  the   elimination   or
harmonization of tariffs on titanium  products,  including  titanium sponge, for
consideration in the next round of multi-lateral trade negotiations  through the
World Trade  Organization  (the so-called  "Doha Round"),  scheduled to start in
late 2005. A U.S.  competitor has recommended the elimination of U.S. tariffs on
titanium  sponge imports for  consideration  in the Doha Round.  The Company has
urged that no change be made to these  tariffs,  either on wrought or  unwrought
products.

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

     Research and development. The Company's research and development activities
are directed  toward  expanding  the use of titanium and titanium  alloys in all
market sectors.  Key research  activities include the development of new alloys,
development  of  technology  required  to  enhance  the  performance  of TIMET's
products in the traditional  industrial and aerospace  markets and  applications
development for automotive and other emerging markets.  The Company conducts the
majority of its research and development  activities at its Henderson  Technical
Laboratory  in  Henderson,  Nevada,  with  additional  activities at its Witton,
England  facility.  The Company incurred  research and development costs of $2.9
million in 2004, $2.8 million in 2003 and $3.3 million in 2002.

                                       13

<PAGE>


     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."  Development work is continuing at
the Henderson  Technical  Laboratory and progress has been made in  establishing
the fundamentals of the process.  While much work remains to be done and success
is not certain,  research into  alternative low cost extraction  technologies is
one of the Company's core research and development  areas.  The Company believes
that a meaningful  reduction in the cost of producing  titanium  metal would not
only make  titanium a more  attractive  material  choice  within  the  aerospace
industry,  but also could  provide  further  opportunities  to use  titanium  in
non-aerospace applications where its current cost might be 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.  These  patents  expire at various times from 2007 through
2013.

     Employees.  The  following  table shows the number of employees at year end
for the past 3 years.  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 increases during 2003
and 2004 reflect the increase in demand for titanium  products during the second
half of 2003 and during 2004, somewhat offset by the Company's continued efforts
to operate at more efficient levels. The Company currently expects employment to
slightly increase throughout 2005 as production continues to increase.

<TABLE>
                                                             Employees at December 31,
                                               -------------------------------------------------------
                                                    2004                2003                2002
                                               ----------------    ----------------    ---------------

<S>                                                   <C>                 <C>                 <C>
             U.S.                                     1,376               1,266               1,184
             Europe                                     851                 789                 772
                                               ----------------    ----------------    ---------------

                                                      2,227               2,055               1,956
                                               ================    ================    ===============
</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 July 2008 and January 2008,  respectively.  Employees at the Company's  other
U.S.   facilities   are  not  covered  by  collective   bargaining   agreements.
Approximately 60% of the salaried and hourly employees at the Company's European
facilities  are  represented  by various  European  labor  unions.  The  Company
currently  has a labor  agreement  in place with the  Company's  U.K.  employees
through 2005. The Company's labor agreement with its French employees is renewed
annually.

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

                                       14

<PAGE>


     Regulatory and environmental matters. The Company's operations are governed
by various Federal,  state,  local and foreign  environmental  and worker safety
laws and regulations.  In the U.S., such laws include the  Occupational,  Safety
and  Health  Act,  the Clean  Air Act,  the  Clean  Water  Act and the  Resource
Conservation  and Recovery  Act. The Company uses and  manufactures  substantial
quantities of substances that are considered  hazardous,  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  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 $5.1 million in 2004, $1.9 million in 2003 and $1.4
million  in  2002.  The  2004  amount  includes  $3.9  million  related  to  the
construction  of a  wastewater  treatment  facility  at  its  Henderson,  Nevada
location.  The Company's  capital budget provides for  approximately $16 million
for  environmental,  health and safety capital  expenditures in 2005,  including
approximately $13 million for completion of the wastewater treatment facility.

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

     Related  parties.  At December 31, 2004,  Valhi,  Inc.  ("Valhi") and other
entities  related  to Harold C.  Simmons  held  approximately  52.9% of  TIMET's
outstanding  common stock and 41.3% of the Company's  Series A Preferred  Stock.
See Notes 1 and 18 to the Consolidated Financial Statements.

     Available  information.  The  Company  maintains  an  Internet  website  at
www.timet.com.  The Company's Annual Reports on Form 10-K,  Quarterly Reports on
Form 10-Q and Current  Reports on Form 8-K, and any amendments  thereto,  are or
will  be  available  free  of  charge  at such  website  as  soon as  reasonably
practicable  after they are filed or  furnished,  as  applicable,  with the SEC.
Additionally,  the Company's (i) Corporate Governance  Guidelines,  (ii) Code of
Business  Conduct and Ethics and (iii) Audit Committee,  Management  Development
and Compensation  Committee and Pension and Employee Benefits Committee charters
are also  available  on the  Company's  website.  Such  documents  will  also be
provided to shareholders  upon request.  Such requests should be directed to the
attention of TIMET's Investor Relations  Department at TIMET's corporate offices
located at 1999 Broadway, Suite 4300, Denver, Colorado 80202.

                                       15

<PAGE>


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

ITEM 2: PROPERTIES

     Set forth below is a listing of the Company's major production  facilities.
In addition to its U.S. sponge capacity discussed below, the Company's worldwide
melting  capacity  presently   aggregates   approximately   44,000  metric  tons
(estimated  28% of world  capacity),  and its mill product  capacity  aggregates
approximately  19,000  metric  tons  (estimated  15% of world  apacity).  Of the
Company's  worldwide melting capacity,  36% is represented by electron beam cold
hearth melting ("EB") furnaces, 62% 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) (4)                         Ingot, Billet                                  1,800              1,300
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.
(4)  Practical  capacities  are  based  on the  approximate  maximum  equivalent
     product that CEZUS is contractually obligated to provide.
</FN>


</TABLE>

     The Company has operated its major production  facilities at varying levels
of practical  capacity during the past three years. In 2004, the plants operated
at approximately 73% of practical  capacity,  as compared to 56% in 2003 and 55%
in 2002. In 2005, the Company's  plants are expected to operate at approximately
75% to 80% of practical  capacity.  However,  practical capacity and utilization
measures can vary significantly based upon the mix of products produced.

     United States production.  The Company's VDP sponge facility is expected to
operate at its full annual practical  capacity of 8,600 metric tons during 2005,
which is comparable to 2004.  VDP sponge is used  principally  as a raw material
for the Company's melting  facilities in the U.S. and Europe.  The raw materials
processing facility in Morgantown,  Pennsylvania  primarily processes scrap used
as melting feedstock, either in combination with sponge or separately.

                                       16

<PAGE>


     The Company's U.S.  melting  facilities in Henderson,  Nevada,  Morgantown,
Pennsylvania  and Vallejo,  California  produce ingot and slab, which are either
used as feedstock  for the Company's  mill products  operations or sold to third
parties.  These melting  facilities are expected to operate at approximately 85%
of aggregate annual practical capacity in 2005, up from 76% in 2004.

     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  83% of annual  practical
capacity in 2005, up from 66% in 2004. Capacity utilization across the Company's
individual mill product lines varies.

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

     TIMET UK's  melting  facility in Witton,  England  produces  VAR ingot used
primarily as feedstock for its Witton forging operations. The forging operations
process  the ingot  into  billet  product  for sale to third  parties or into an
intermediate product for further processing into bar or plate at its facility in
Waunarlwydd,  Wales. TIMET UK's melting and mill products  production in 2005 is
expected  to  operate  at  approximately  76% and 59%,  respectively,  of annual
practical capacity, compared to 73% and 54%, respectively, in 2004.

     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 utilized
107% of the maximum annual capacity CEZUS is  contractually  required to provide
and the Company expects this amount to increase to 123% for 2005.

     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 Kazakhstan and Japan.

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, 2004 or through March 14, 2005.

                                       17

<PAGE>


                                     PART II

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

     TIMET's  common  stock is traded on the New York  Stock  Exchange  (symbol:
"TIE"). The high and low sales prices for the Company's common stock during 2003
and 2004 are set forth  below.  All prices  have been  adjusted  to reflect  the
five-for-one  stock split,  which became effective after the close of trading on
August 27, 2004, and the one-for-ten reverse stock split, which became effective
after the close of trading on February 14, 2003.

Year ended December 31, 2004:                  High                 Low
                                         -----------------    -----------------
   First quarter                         $       20.70        $        8.48
   Second quarter                        $       21.58        $       14.35
   Third quarter                         $       24.90        $       18.40
   Fourth quarter                        $       26.60        $       18.51

Year ended December 31, 2003:
   First quarter                         $        4.88        $        3.12
   Second quarter                        $        7.00        $        4.19
   Third quarter                         $        7.68        $        5.83
   Fourth quarter                        $       12.04        $        6.70

     On March 14, 2005,  the closing  price of TIMET common stock was $36.14 per
share.  As of March 14,  2005,  there were 279  shareholders  of record of TIMET
common stock, which the Company estimates  represent  approximately 6,900 actual
shareholders.

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


                                       18

<PAGE>


     In August 2004,  the Company  completed an exchange offer pursuant to which
the Company had offered to exchange all of the 4,024,820 outstanding BUCS issued
by the Capital  Trust for shares of the  Company's  6.75%  Series A  Convertible
Preferred  Stock (the "Series A Preferred  Stock") at the  exchange  rate of one
share of Series A Preferred  Stock for each BUCS.  Based upon the 3,909,103 BUCS
tendered  and  accepted  for exchange as of the close of the offer on August 31,
2004,  the  Company  issued  3,909,103  shares  of Series A  Preferred  Stock in
exchange for such BUCS.  Holders of the Series A Preferred Stock are entitled to
receive  cumulative  cash  dividends  at the rate of 6.75% of the $50 per  share
liquidation  preference per annum per share  (equivalent to $3.375 per annum per
share), when, as and if declared by the Company's board of directors. During the
third  quarter  of  2004,  the  Company  recognized  a $15.5  million  non-cash,
non-operating  gain  related  to the BUCS  exchange.  See Notes 12 and 14 to the
Consolidated Financial Statements.

     The Company's U.S. credit  agreement  prohibits the payment of dividends on
the Company's common stock or the payment of distributions on the BUCS if excess
availability,  as determined under the agreement,  is less than $25 million. See
Note 11 to the Consolidated Financial Statements.

                                       19

<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,
                                              -------------------------------------------------------------------------
                                                 2004           2003           2002           2001            2000
                                              -----------    -----------    -----------    ------------    ------------
                                                      ($ in millions, except per share and selling price data)
<S>                                           <C>            <C>            <C>            <C>             <C>
STATEMENT OF OPERATIONS DATA:
   Net sales                                  $    501.8     $    385.3     $    366.5     $    486.9      $    426.8
   Gross margin                               $     55.9     $     17.0     $     (3.1)    $     39.9      $      3.9
   Operating income (loss) (1)                $     35.3     $      5.4     $    (20.8)    $     64.5      $    (41.7)
   Interest expense                           $     12.5     $     16.4     $     17.1     $     18.3      $     21.5
   Net income (loss) attributable to
     common stockholders(1)                   $     35.5     $    (13.1)    $   (111.5)    $    (41.8)     $    (38.9)
   Earnings (loss) per share:
     Basic (1)(2)                             $     2.24     $    (0.82)    $    (7.06)    $    (2.65)     $    (2.48)
     Diluted (1)(2)                           $     2.20     $    (0.82)    $    (7.06)    $    (2.65)     $    (2.48)

BALANCE SHEET DATA:
   Cash and cash equivalents (3)              $      7.9     $     37.3     $      6.4     $     24.5      $      9.8
   Total assets (1)                           $    665.5     $    567.4     $    570.1     $    705.6      $    765.7
   Bank indebtedness (4)                      $     43.2     $      -       $     19.4     $     12.4      $     44.9
   Capital lease obligations                  $      0.2     $     10.3     $     10.2     $      8.9      $      8.8
   Debt payable to Capital Trust              $     12.0     $    207.5     $    207.5     $    207.5      $    207.5
   Stockholders' equity                       $    379.7     $    158.8     $    159.4     $    298.1      $    357.5

OTHER OPERATING DATA:
   Cash flows provided (used) by:
     Operating activities                     $    (22.4)    $     65.8     $    (13.6)    $     62.6      $     65.4
     Investing activities                          (44.5)         (14.5)          (7.5)         (16.1)           (4.2)
     Financing activities                           38.7          (22.1)           3.6          (31.4)          (72.8)
                                              -----------    -----------    -----------    ------------    ------------
       Net cash (used) provided               $    (28.2)    $     29.2     $    (17.5)    $     15.1      $    (11.6)

   Melted product shipments (5)                      5.4            4.7            2.4            4.4             3.5
   Average melted product prices (5)          $    13.45     $    12.15     $    14.50     $    14.50      $    13.65
   Mill product shipments (5)                       11.4            8.9            8.9           12.2            11.4
   Average mill product prices (5)            $    32.05     $    31.50     $    31.40     $    29.80      $    28.70
   Active employees at December 31                 2,227          2,055          1,956          2,410           2,220
   Order backlog at December 31(6)            $    450.0     $    205.0     $    185.0     $    240.0      $    265.0
   Capital expenditures                       $     23.6     $     12.5     $      7.8     $     16.1      $     11.2

-----------------------------------------------------------------------------------------------------------------------
<FN>
(1)  See the notes to the  Consolidated  Financial  Statements and Item 7 - MD&A
     for items that materially affect the 2004, 2003 and 2002 periods.  In 2001,
     the Company  recorded (i) net other operating income of $73 million related
     to the settlement of litigation between TIMET and The Boeing Company,  (ii)
     a $10.8 million pre-tax equipment impairment charge to cost of sales, (iii)
     a $3.3  million  charge to cost of sales for costs  related  to a  tungsten
     inclusion  matter and (iv) a $61.5  million  pre-tax  impairment  charge to
     other non-operating  expense related to the Company's investment in Special
     Metals Corporation preferred securities.  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.
(2)  Amounts  have been  adjusted to reflect the  Company's  five-for-one  stock
     split, which became effective after the close of trading on August 27, 2004
     and the Company's  one-for-ten  reverse stock split, which became effective
     after the close of trading on February 14, 2003.
(3)  Includes restricted cash and cash equivalents of $0.7 million in 2004, $2.2
     million in 2003 and $0.1 million in each of 2002, 2001 and 2000.
(4)  Bank indebtedness represents notes payable and current and noncurrent debt.
     (5) Shipments in thousands of metric tons.  Average  selling  prices stated
     per kilogram.
(6)  Order backlog is defined as unfilled purchase orders (including those under
     consignment  arrangements)  which are  generally  subject  to  deferral  or
     cancellation by the customer under certain conditions.
</FN>


</TABLE>

                                       20

<PAGE>


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

RESULTS OF OPERATIONS

     Overview.  The  Company  estimates  that  aggregate  shipment  volumes  for
titanium mill products in 2004 was derived from the following markets:

<TABLE>

                                                      TIMET                             Titanium Industry (1)
                                        ----------------------------------        ----------------------------------
                                         Mill product                              Mill product
                                          shipments          % of total             shipments          % of total
                                        ---------------     --------------        ---------------    ---------------
                                        (Metric tons)                             (Metric tons)

<S>                                            <C>                 <C>                   <C>                 <C>
Aerospace:
  Commercial aerospace                         6,575               58%                   20,900              34%
  Military aerospace                           1,395               12%                    4,000               6%
                                        ---------------     --------------        ---------------    ---------------

Total aerospace                                7,970               70%                   24,900              40%
Industrial                                     2,770               24%                   33,900              55%
Emerging                                         625                6%                    3,000               5%
                                        ---------------     --------------        ---------------    ---------------

                                              11,365              100%                   61,800             100%
                                        ===============     ==============        ===============    ===============

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

</TABLE>


     The titanium industry derives a substantial  portion of its demand from the
aerospace  industry,  particularly  the  highly  cyclical  commercial  aerospace
sector.  As shown in the table,  the  Company's  business is more  dependent  on
aerospace demand than is the overall titanium industry,  and the Company's sales
growth during 2004 has benefited from growth in the commercial  aerospace sector
during this same period.

     Increased  sales revenue,  however,  has been somewhat  offset by increased
costs. As a result of higher raw material costs and increasing book  inventories
during 2004, partially offset by increased capacity  utilization,  the Company's
LIFO  inventory  reserve  increased  at the  end of 2004 as  compared  to  2003,
resulting  in a charge to cost of sales of $7.8  million for the full year 2004.
Conversely,  during 2003, the Company's  successful  cost reduction  efforts and
increased  capacity  utilization  provided  for lower unit  costs,  which,  when
coupled with decreasing book  inventories,  reduced the Company's LIFO inventory
reserve  at the end of 2003 as  compared  to the  end of  2002,  resulting  in a
reduction to cost of sales of $11.4 million in 2003.

     In August 2004, the Company completed an exchange offer,  pursuant to which
the Company had offered to exchange all of the 4,024,820 outstanding BUCS issued
by the Capital Trust for shares of the Company's Series A Preferred Stock at the
exchange rate of one share of Series A Preferred Stock for each BUCS. Based upon
the  3,909,103  BUCS  tendered  and accepted for exchange as of the close of the
offer on August  31,  2004,  the  Company  issued  3,909,103  shares of Series A
Preferred Stock in exchange for such BUCS. During the third quarter of 2004, the
Company  recognized a $15.5 million non-cash,  non-operating gain related to the
BUCS exchange. See Note 12 to the Consolidated Financial Statements.

                                       21

<PAGE>


     During 2004,  the Company  recorded $13.6 million ($10.8 million to cost of
sales and $2.8  million to  selling,  general,  administrative  and  development
expense) related to certain employee incentive compensation payments expected to
be made in 2005 for  service  in 2004.  Comparably,  the  Company  accrued  $0.4
million in 2003  related to  incentive  compensation  payments  made in 2004 for
service in 2003.  The  increase in  incentive  compensation  expenses in 2004 is
primarily due to the Company's improved financial performance during the year.

     Summarized  financial  information.  The following table summarizes certain
information  regarding  the Company's  results of operations  for the past three
years.  Average selling prices, as reported by the Company, are a reflection not
just of actual  selling prices  received by the Company,  but also include other
related factors such as currency  exchange rates and customer and product mix in
a given period.  Consequently,  changes in average selling prices from period to
period will be impacted by changes  occurring not just in actual prices,  but by
these other factors as well. The percentage change  information  presented below
represents  changes from the respective prior year. See "Results of Operations -
Outlook" for further discussion of the Company's business expectations for 2005.

<TABLE>

                                                                             Year ended December 31,
                                                              ------------------------------------------------------
                                                                   2004                2003               2002
                                                              ---------------     ---------------    ---------------
                                                                 ($ in thousands, except product shipment data)
<S>                                                           <C>                 <C>                <C>
Net sales:
   Melted products                                            $    72,092         $    57,409        $    34,800
   Mill products                                                  364,248             279,563            278,204
   Other products                                                  65,488              55,132             53,497
   Other (1)                                                            -              (6,800)                 -
                                                              ---------------     ---------------    ---------------

Net sales                                                     $   501,828         $   385,304        $   366,501

Gross margin                                                       55,918              17,030             (3,123)

Gross margin percent of net sales                                      11%                  4%                -1%

Melted products shipments:
   Volume (metric tons)                                             5,360               4,725              2,400
   Average selling prices ($ per kilogram)                    $     13.45         $     12.15        $     14.50

Mill products shipments:
   Volume (metric tons)                                            11,365               8,875              8,860
   Average selling prices ($ per kilogram)                    $     32.05         $     31.50        $     31.40

Percentage change in:
   Sales volume:
     Melted products                                                  +13                 +97                -46
     Mill products                                                    +28                   -                -27

   Average selling prices:
       Melted products                                                +11                 -16                  -
       Mill products                                                   +2                   -                 +5

   Selling prices - excludes changes in product mix:
       Melted products                                                 +7                 -12                 -1
       Mill products in U.S. dollars                                   +6                  -3                 +4
       Mill products in billing currencies (2)                         +2                  -7                 +3

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

</TABLE>

                                       22

<PAGE>


     Based upon the terms of the Company's 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 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,  only 40% of
which may be ingot. 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  1.7 million  pounds  during 2004,  the Company  recognized  $22.1
million of take-or-pay  income for the year ended December 31, 2004. The Company
recognized  $23.1 million and $23.4 million of such income during 2003 and 2002,
respectively.  Had the Company not benefited from such provisions, the Company's
results would have been as follows:

<TABLE>
                                                                            Year ended December 31,
                                                            --------------------------------------------------------
                                                                 2004                2003                2002
                                                            ----------------    ----------------    ----------------


<S>                                                         <C>                 <C>                 <C>
Operating income (loss), as reported                        $     35,277        $      5,432        $    (20,849)
     Less take-or-pay income                                      22,093              23,083              23,408
                                                            ----------------    ----------------    ----------------

Operating income (loss), excluding take-or-pay              $     13,184        $    (17,651)       $    (44,257)
                                                            ================    ================    ================

Net income (loss) attributable to common                    $     35,540        $    (13,057)       $   (111,530)
   stockholders, as reported
     Less take-or-pay income                                      22,093              23,083              23,408
                                                            ----------------    ----------------    ----------------

Net income (loss) attributable to common
  stockholders, excluding take-or-pay                       $     13,447        $    (36,140)       $   (134,938)
                                                            ================    ================    ================
</TABLE>

     2004 operations.  Melted product sales increased 26% and mill product sales
increased  30%  during  2004 as  compared  to 2003,  principally  as a result of
increased  sales volume due to greater  market  demand and/or share gains across
all markets.  More specifically,  large commercial aircraft deliveries increased
from 575 in 2003 to 602 in 2004,  and 2005  deliveries  are  expected  to be 680
aircraft.  As  previously  discussed,  a  substantial  portion of the  Company's
business is tied to the  commercial  aerospace  industry,  and sales of titanium
generally  precede  aircraft  deliveries  by  about  one  year.  Therefore,  the
Company's  2004 net sales have  significantly  benefited  from the  increase  in
production of large commercial aircraft scheduled for delivery in 2005.

     Average  selling  prices use actual  customer  and  product mix and foreign
currency exchange rates prevailing during the respective periods.  The Company's
melted products are generally sold only in U.S. dollars.  Melted product average
selling  prices during 2004, as compared to 2003,  were  positively  affected by
current market  conditions and changes in customer and product mix. Mill product
average  selling  prices  during  2004,  as  compared to 2003,  were  positively
affected by the weakening of the U.S.  dollar compared to both the British pound
sterling and the euro and negatively affected by changes in customer and product
mix.

                                       23

<PAGE>


     Gross  margin  (net  sales  less cost of sales)  increased  during  2004 as
compared to 2003 primarily as a result of improved plant  operating  rates (from
56% during 2003 to 73% during 2004),  partially offset by increased raw material
costs and higher energy costs. Gross margin during 2004 was also impacted by:

     o    A $1.6 million  reduction in cost of sales related to the modification
          of the  Company's  vacation  policy.  On January 1, 2004,  the Company
          modified its vacation policy for its U.S. salaried employees,  whereby
          such   employees  no  longer  accrue  their  entire  year's   vacation
          entitlement  on  January  1, but  rather  accrue  the  current  year's
          vacation entitlement over the course of the year;

     o    A $10.8  million  charge to cost of sales  related  to the  accrual of
          previously discussed employee incentive compensation payments expected
          to be made for 2004; and

     o    A $7.8  million  charge  to cost of sales  related  to the  previously
          discussed increase in the Company's LIFO inventory reserve.

     Comparatively, gross margin during 2003 was impacted by:

     o    An $11.4 million  reduction in cost of sales related to the previously
          discussed decrease in the Company's LIFO inventory reserve;

     o    A $1.7 million reduction in cost of sales related to a revision of the
          Company's  estimate  of probable  loss  associated  with a  previously
          reported tungsten inclusion matter; and

     o    A $6.8 million  reduction  in sales  related to the  termination  of a
          purchase  and sale  agreement  with  Wyman-Gordon.  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.

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

     Equity in earnings of joint  ventures  increased  183%,  from $0.5  million
during 2003 to $1.3  million  during 2004,  due to an increase in the  operating
results of VALTIMET, the Company's minority owned welded tube joint venture.

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

                                       24

<PAGE>


     2003  operations.  Melted  product sales  increased  65%,  principally as a
result of new  customer  relationships,  share  gains and changes in product mix
during 2003 as compared to 2002.  Mill product sales  remained  relatively  flat
during 2003 as compared to 2002,  as average  selling  prices and sales  volumes
were relatively  unchanged.  Mill product average selling prices were positively
affected during 2003 by the weakening of the U.S. dollar compared to the British
pound sterling and the euro.

     Gross  margin  increased  during 2003 as compared  to 2002  primarily  as a
result  of  the  Company's  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's  LIFO
inventory  reserve  decreased at the end of 2003 as compared to the end of 2002,
resulting  in a  reduction  in cost of  sales  of $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 previously discussed $1.7 million reduction in cost of sales related to a
tungsten  inclusion matter.  Gross margin during 2003 was adversely  impacted by
the  previously  discussed  $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.

     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. See
Note 15 to the Consolidated Financial Statements.

     Non-operating income (expense).

<TABLE>
                                                                               Year ended December 31,
                                                                ------------------------------------------------------
                                                                     2004               2003                2002
                                                                ---------------    ----------------    ---------------
                                                                                    (In thousands)

<S>                                                             <C>                <C>                 <C>
Interest expense on bank debt                                   $      (2,649)     $      (2,017)      $      (3,381)
Interest expense on debt payable to the Capital Trust                  (9,802)           (14,402)            (13,763)
                                                                ---------------    ----------------    ---------------

                                                                $     (12,451)     $     (16,419)      $     (17,144)
                                                                ===============    ================    ===============

Dividends and interest income                                   $         687      $         383       $         118
Equity in earnings of common
  securities of the Capital Trust                                         424                432                 413
Gain on BUCS exchange, net                                             15,465                  -                   -
Impairment of investment in Special Metals
  Corporation ("SMC") preferred securities                                  -                  -             (27,500)
Surety bond guarantee credit (expense)                                    221               (449)             (1,575)
Foreign exchange loss, net                                               (477)              (189)               (587)
Other, net                                                               (121)              (471)               (762)
                                                                ---------------    ----------------    ---------------

                                                                $      16,199      $        (294)      $     (29,893)
                                                                ===============    ================    ===============
</TABLE>

                                       25

<PAGE>

     Interest  expense  on bank debt for 2004  increased  31%  compared  to 2003
primarily due to higher average  outstanding  borrowings during 2004 compared to
2003,  which the Company used primarily to support its accumulation of inventory
to meet expected customer demand during 2005.  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.

     Prior to 2004, annual interest expense on the Company's debt payable to the
Capital Trust approximated  $13.7 million,  exclusive of any accrued interest on
deferred interest payments. On September 1, 2004, the Company exchanged 97.1% of
its  outstanding  BUCS for its Series A Preferred  Stock,  resulting  in a $15.5
million  non-cash,  non-operating  gain (see "Liquidity and Capital  Resources -
Other" and Note 12 to the Consolidated Financial  Statements).  Interest expense
related to the  remaining  debt payable to the Capital  Trust ($12.0  million at
December 31,  2004) is  approximately  $0.8  million per year.  Dividends on the
Series A Preferred Stock will  approximate the reduction of interest  expense on
debt payable to the Capital Trust in determining  income  attributable to common
stockholders.

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

     Dividends and interest  income during 2004 consisted of dividends  received
on the Company's investments in marketable securities and interest income earned
on cash and cash equivalents. Dividends and interest income during 2003 and 2002
consisted solely of interest income earned on cash and cash equivalents.

     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. This charge was classified as other  non-operating  expense.
Under the terms of SMC's Second Amended Joint Plan of  Reorganization,  approved
by the  Bankruptcy  Court in 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. Freedom Forge filed for Chapter 11
bankruptcy  protection  in 2001,  and  discontinued  payment  on the  underlying
workers'  compensation  claims.  During 2002,  TIMET  received  notices that the
issuers  of the bonds  were  required  to make  payments  on the first bond with
respect to certain of these claims and were requesting reimbursement from TIMET.
As of December 31, 2004, the Company has made  aggregate  payments under the two
bonds of $1.1 million,  and $0.6 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.

                                       26

<PAGE>


     Income  taxes.  The Company  operates in several tax  jurisdictions  and is
subject to varying income tax rates.  As a result,  the geographic mix of pretax
income or loss can impact the  Company's  overall  effective  tax rate.  For the
years ended  December 31, 2004,  2003 and 2002,  the  Company's  income tax rate
varied from the U.S.  statutory  rate  primarily  due to changes in the deferred
income tax valuation  allowance  related to the Company's  tax  attributes  with
respect to the "more-likely-than-not" recognition criteria during those periods.

     The Company did not recognize a deferred tax benefit related to its 2002 or
2003 U.S.  losses and,  accordingly,  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  recorded 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 2004, the Company's  deferred income tax asset  valuation  allowance
related  to  income  from  continuing  operations  decreased  by  $13.7  million
primarily due to the utilization of the U.S. and U.K. net operating loss ("NOL")
carryforwards,   the   benefit   of   which   had   previously   not   met   the
"more-likely-than-not"  recognition  criteria.  As of  December  31,  2004,  the
Company  had   cumulative   valuation   allowances  in  the  U.S.  and  U.K.  of
approximately $80.8 million offsetting its deferred income tax assets, primarily
related to net operating loss carryforwards, capital loss carryforwards, minimum
pension  liability and other  temporary  differences.  The Company has concluded
that   the   benefit   from   these   items   does   not   currently   meet  the
"more-likely-than-not" recognition criteria, in part because the Company has not
demonstrated a recent pattern of taxable income for a time period  sufficient to
overcome the negative evidence  generated by prior operating losses. The Company
will continue to monitor and evaluate these deferred  income tax asset valuation
allowances in light of all available  evidence,  and it is possible that at some
point in the future  the  Company  will  conclude  that the  weight of  positive
evidence  is  sufficient  to support  reversal  of some or all of its  valuation
allowances.

     The  Company  periodically  reviews  its  deferred  income  tax  assets  to
determine  if future  realization  is more  likely  than not.  During  the third
quarter of 2004, due to a change in estimate of the Company's ability to utilize
the benefits of its NOL  carryforwards in Germany,  the Company  determined that
its  deferred  income tax asset in Germany now meets the  "more-likely-than-not"
recognition  criteria.  Accordingly,  the  Company  reversed  the  $0.7  million
valuation allowance attributable to such deferred income tax asset.

     During the fourth quarter of 2004, the Company recognized a deferred income
tax benefit  related to a $4.2 million  decrease in the Company's U.S.  deferred
income tax asset valuation allowance  attributable to the Company's recognition,
for U.S.  income tax purposes only, of a capital gain on the fourth quarter sale
of certain  property  located at the Company's  Henderson,  Nevada facility (see
Note 6 to  the  Consolidated  Financial  Statements).  The  Company  expects  to
recognize a corresponding  deferred income tax expense in 2005, when the gain is
recognized under accounting  principles  generally accepted in the United States
of America.

                                       27

<PAGE>


     In October  2004,  the American  Jobs Creation Act of 2004 was enacted into
law.  The new law  provides for a special 85%  deduction  for certain  dividends
received in 2005 from controlled foreign  corporations.  Because certain details
in the new law  lack  clarification,  and the  impact  of the  special  dividend
received  deduction to the Company is dependent,  in part, on the Company's 2005
foreign and domestic taxable income,  the Company has not yet determined whether
it will benefit from the new law. In 2005,  the Company  plans to evaluate  both
clarifying  guidance on the new law from the  Internal  Revenue  Service and its
year-to-date  taxable income activity to determine the level of benefit, if any,
the Company will derive from the special dividend received deduction.

     Beginning in 2005,  the new law also provides for a special  deduction from
U.S.  taxable  income  equal  to a  stipulated  percentage  of a U.S.  company's
qualified income from domestic manufacturing  activities (as defined).  Although
the Company  believes that the majority of its operations meet the definition of
qualified  domestic  manufacturing  activities,  the Company  does not expect to
benefit from the special manufacturing  deduction in 2005, primarily because the
Company  projects  its U.S.  taxable  income in 2005 will be fully offset by its
existing U.S. NOL carryforwards.

     During the first  quarter of 2002,  the Job Creation and Worker  Assistance
Act of 2002 (the "JCWA Act") was signed into law.  The  Company  benefited  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.

     Dividends on Series A Preferred  Stock.  Shares of the  Company's  Series A
Preferred  Stock are  convertible,  at any  time,  at the  option of the  holder
thereof,  into one and two-thirds shares of the Company's common stock,  subject
to adjustment in certain events. The Series A Preferred Stock is not mandatorily
redeemable, but is redeemable at the option of the Company at any time after the
third  anniversary  of the date of  issuance  if,  prior to the  notice  of such
redemption,  the  closing  price  of the  Company's  common  stock  exceeds  the
conversion  price for 30  consecutive  days.  When,  as and if  declared  by the
Company's  board of  directors,  holders  of the  Series A  Preferred  Stock are
entitled to receive  cumulative  cash  dividends at the rate of 6.75% of the $50
per share  liquidation  preference per annum per share (equivalent to $3.375 per
annum per share).  The Company paid  dividends of $3.3 million to holders of the
Series A Preferred  Stock during  2004.  Subsequent  to December  31, 2004,  the
Company's board of directors declared a dividend of $0.84375 per share,  payable
on March 15,  2005 to  holders of record of Series A  Preferred  Stock as of the
close of trading on March 1, 2005.

     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.

                                       28

<PAGE>


     In 2002, the Company completed an impairment assessment of its goodwill and
intangible  assets  upon  its  adoption  of SFAS No.  142,  Goodwill  and  Other
Intangible  Assets,  in  2002.  Management  judgment  was used 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 considered,  among other
things, a combination of fair value  indicators  including quoted market prices,
prices of comparable  businesses and discounted  projected cash flows based upon
Company  forecasts,  which  considered  information  obtained from review of The
Airline Monitor and from discussions with the Company's customers throughout the
first half of 2002, both of which assisted the Company in better  estimating the
impact of the September 11, 2001 terrorist attacks on its business.  As a result
of this  information,  step one of the  impairment  evaluation  completed in the
second quarter of 2002 indicated that the Company's  recorded  goodwill might be
impaired,  which  obligated  the  Company to  complete  the  second  step of the
impairment  test. Based on the results of the second step of the impairment test
completed  during  the third  quarter of 2002,  which  indicated  the  Company's
goodwill  was  impaired,  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.

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

     European  operations.  The Company has  substantial  operations  located in
Europe,  principally in the United Kingdom, France and Italy.  Approximately 43%
of  the  Company's  sales  revenue  originated  in  Europe  in  2004,  of  which
approximately  61% 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  losses  included in results of operations
were $0.5 million in 2004,  $0.2  million in 2003 and $0.6  million in 2002.  At
December 31, 2004, consolidated assets and liabilities denominated in currencies
other than  functional  currencies  were  approximately  $39.7 million and $35.0
million,  respectively,  consisting  primarily  of U.S.  dollar  cash,  accounts
receivable and accounts payable.

     VALTIMET has entered into certain  derivative  financial  instruments  that
qualify  as cash  flow  hedges  under  GAAP.  The  Company's  pro-rata  share of
VALTIMET's  unrealized  net gains on such  derivative  financial  instruments is
included as a component of other comprehensive income.

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

                                       29

<PAGE>


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

     In 2004, TIMET returned to full-year profitability for the first time since
1998. This was primarily achieved due to significant increases in demand for the
Company's  products into all markets,  as well as continued focus on controlling
costs.  The Company is encouraged  by what it expects for the near future,  with
prices for its products  continuing to rise, build rates of commercial  aircraft
forecasted to increase,  and greater potential for increases in several emerging
markets, including military armor, energy and automotive applications.

     Over the past several  quarters,  the Company has seen the  availability of
raw  materials  tighten,  and,  consequently,  the prices for such raw materials
increase.  The Company  currently  expects  that a shortage in raw  materials is
likely  to  continue  throughout  2005 and into  2006,  which  could  limit  the
Company's  ability to produce  enough  titanium  products to fully meet customer
demand. In addition,  TIMET has certain customer long-term agreements that limit
the Company's ability to pass on all of its increased raw material costs.

     The Company currently expects its 2005 net sales revenue to range from $650
million to $680  million,  which is an  increase  of 30% to 36% from 2004.  Mill
product sales volume, which was 11,365 metric tons in 2004, is expected to range
from 13,600 and 14,300  metric tons in 2005,  an increase of 20% to 26%.  Melted
product sales volume,  which was 5,360 metric tons in 2004, is expected to range
from 5,400 and 5,700  metric tons in 2005,  an increase of 1% to 6%. The Company
also expects mill product  average  selling  prices to increase by 10% to 15% in
2005, as compared to 2004, and melted product average selling prices to increase
from 17% to 22% in 2005, as compared to 2004.

     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 and energy costs. Raw material costs,  which include sponge,  scrap
and alloys,  represent the largest portion of the Company's  manufacturing  cost
structure,  and, as previously discussed,  continued cost increases are expected
during 2005. Scrap and certain alloy prices have more than doubled from year ago
prices,  and increased  energy costs also continue to have a negative  impact on
gross  margin.  In addition,  the Company's  cost of sales can be  significantly
affected by adjustments to its LIFO  inventory  reserve,  as was the case during
2004 and 2003. The Company currently expects  production  volumes to continue to
increase in 2005, with overall capacity  utilization expected to approximate 75%
to 80% in  2005  (as  compared  to 73% in  2004).  However,  practical  capacity
utilization  measures  can vary  significantly  based on  product  mix.  Current
expectations are that gross margin during 2005 will range from 11% to 13% of net
sales.

     Selling,  general,  administrative and development  expenses is expected to
increase from $45 million during 2004 to approximately  $48 million during 2005,
or from 7.1% to 7.4% of projected  net sales,  which is a decrease  from 8.9% of
net sales in 2004.

                                       30

<PAGE>


     The Company  anticipates  that Boeing will purchase a significantly  higher
amount of titanium during 2005 as compared to 2004 and,  therefore,  expects the
amount of take-or-pay  income  recognized during 2005 to decrease to between $15
million and $20 million.  The take-or-pay income will continue to be reported as
operating  income,  but will not be included in sales  revenue,  sales volume or
gross margin.

     The Company  presently  expects operating income for 2005 of $50 million to
$65 million, which represents a 42% to 84% increase from operating income earned
in 2004.  Dividends on the Company's Series A Preferred Stock should approximate
$13.2 million in 2005.  The Company  expects net income  attributable  to common
stockholders to range from $35 million to $50 million.

     These net  income  estimates  include a $12.6  million  non-operating  gain
related to the sale of certain  property  adjacent to the  Company's  Henderson,
Nevada plant site to Basic Management,  Inc. and certain  affiliates  ("BMI"), a
32%-owned  subsidiary  of Valhi.  This gain is primarily  comprised of (i) $12.0
million in cash  received  upon closing of the sale (in November  2004) and (ii)
the  anticipated  reversal of a $0.6 million accrual  currently  recorded by the
Company  for  potential  environmental  issues  related to the  property,  which
obligation  will be  assumed  by BMI.  This gain has been  deferred  and will be
recognized when the Company completes its construction of a wastewater treatment
facility on its Henderson plant site and can cease use of certain settling ponds
located  on the  property  sold  to  BMI.  The  Company  currently  expects  the
wastewater  treatment  facility to be completed  and  operational  in the second
quarter of 2005.

     These net income estimates  exclude a net income tax benefit of $35 million
to $40 million  that the Company  may  recognize  during 2005 if a reversal of a
portion of the Company's deferred tax asset valuation  allowance with respect to
its  U.S.  and  U.K.  net  operating  loss  carryforwards  is  determined  to be
appropriate under the more-likely-than-not recognition criteria.

     The Company  currently  expects to  generate  $50 million to $60 million in
cash flow from  operations  during 2005.  Capital  expenditures  during 2005 are
expected to approximate $42 million.  The increased spending over 2004 primarily
reflects the remaining $13 million  related to  construction  of the  wastewater
treatment facility,  as well as additional capacity  improvements as the Company
continues to prepare for increased  demand by certain  customers under long-term
agreements.  Depreciation  and  amortization  should  approximate $32 million in
2005.

     The Company currently expects to make  contributions of approximately  $8.2
million to its defined  benefit  pension plans during 2005, and expects  pension
expense to approximate $8.1 million in 2005.

                                       31

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

     o    The Company  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,
                                                                ------------------------------------------------------
                                                                     2004               2003                2002
                                                                ---------------    ----------------    ---------------
                                                                                    (In thousands)
<S>                                                             <C>                <C>                 <C>
Cash (used) provided by:
   Operating activities                                         $     (22,433)     $      65,821       $     (13,595)
   Investing activities                                               (44,528)           (14,534)             (7,467)
   Financing activities                                                38,742            (22,068)              3,523
                                                                ---------------    ----------------    ---------------

     Net cash (used) provided by operating,
       investing and financing activities                       $     (28,219)     $      29,219       $     (17,539)
                                                                ===============    ================    ===============

</TABLE>

                                       32

<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.

     The Company's bottom line increased from a net loss  attributable to common
stockholders of $13.1 million for the year ended December 31, 2003 to net income
attributable to common stockholders of $35.5 million for the year ended December
31, 2004.

     Accounts receivable increased during 2004 primarily due to increased sales,
as fourth  quarter 2004 net sales,  the primary  source of the year end accounts
receivable balance,  increased 36% over the year ago period. Accounts receivable
decreased  during 2003  primarily  due to improved  collection  efforts with the
Company's  customers,  partially  offset  by the  weakening  of the U.S.  dollar
compared  to the  British  pound  sterling  and the  euro.  Accounts  receivable
decreased  significantly  during 2002  primarily  as a result of reduced  sales,
partially  offset by an  increase  in aging of  accounts  as  certain  customers
extended their payment terms to the Company in response to unfavorable  economic
conditions.

     Inventories  increased  during 2004 as a result of increased  run rates and
related  inventory build in order to meet expected  customer demand during 2005,
as well as the effects of increased raw material  costs.  These  increases  were
partially  offset by a $7.8 million  increase in the  Company's  LIFO reserve at
December  31,  2004.  Inventories  decreased  during 2003  primarily  due to the
Company's  concentrated  focus on inventory  reduction  during  2003,  partially
offset by a decrease in the Company's LIFO  inventory  reserve of $11.4 million.
Inventories decreased during 2002 primarily as a result of reduced production in
the fourth  quarter of 2002,  a $9.3  million  increase  in the  Company's  LIFO
inventory  reserve  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.

                                       33

<PAGE>

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

     Pursuant to an agreement  between TIMET and Boeing,  Boeing  advances TIMET
$28.5  million  annually less $3.80 per pound of titanium  product  purchased by
Boeing  subcontractors  during the preceding year. The Company  received a $27.9
million  advance for 2005 in January 2005, a $27.9  million  advance for 2004 in
January 2004 and a $27.7 million  advance for 2003 in January 2003.  See Note 10
to the Consolidated Financial Statements.

     During the first  quarter of 2002,  the  Company  recorded a $27.5  million
impairment  charge to its  investment in the preferred  securities of SMC, which
reduced  the  carrying  amount  of such  investment  to zero.  See  "Results  of
Operations -  Non-operating  income  (expense)"  for further  discussion  of the
Company's investment in SMC.

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

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

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

     The  Company's  capital  expenditures  were $23.6  million  in 2004,  $12.5
million  in 2003 and  $7.8  million  in 2002,  principally  for  replacement  of
machinery  and equipment and for capacity  maintenance.  Additionally,  the 2004
amount  includes  $3.9  million  related  to  construction  in  progress  on the
wastewater treatment facility.

     See "Results of Operations - Outlook" for  discussion of the $12 million of
proceeds from sale of property in Henderson.

                                       34

<PAGE>


     During  the  fourth  quarter  of 2003,  the  Company  deposited  funds into
certificates  of deposit and other interest  bearing  accounts as collateral for
certain  Company  obligations in lieu of entering into letters of credit.  These
deposits, which are restricted as to the Company's use, provide the Company with
interest  income as opposed to  interest  expense  incurred  through  the use of
letters of credit.  During 2004,  certain of these  deposits were  liquidated in
favor of entering into letters of credit.

     Financing  activities.  Cash provided during 2004 related  primarily to the
Company's net borrowings of $43.2 million,  which the Company  primarily used to
support the accumulation of inventory in order to meet expected  customer demand
for 2005 and also support capital expenditures and the acquisition of marketable
securities.  In addition,  the Company paid  dividends on its Series A Preferred
Stock of $3.3 million and TIMET Savoie made a $0.7 million  dividend  payment to
CEZUS during  2004.  Cash used during 2003  related  primarily to the  Company's
$19.3 million of net repayments on its outstanding borrowings upon the Company's
receipt of a $27.7 million customer advance in January 2003. Additionally, TIMET
Savoie made a $1.9 million  dividend payment to CEZUS during 2003. 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 also 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 were
deferred and are  amortized  over the life of the  agreement,  which  matures in
February 2006. See further  discussion below in "Liquidity and Capital Resources
- Borrowing arrangements."

     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").  During  the first  quarter  of 2004,  the  Company
amended its U.S. credit  facility to, among other things,  allow the Company the
flexibility  to remove the equipment  component  from the  determination  of the
Company's  borrowing  availability  in order to avoid the costs of an appraisal.
The Company took advantage of this flexibility during the first quarter of 2004,
effectively reducing the Company's current borrowing availability in the U.S. by
$12 million.  However, the Company can regain this availability by completing an
updated equipment appraisal.  Interest currently accrues at rates based on LIBOR
plus 2% and bank prime rate plus 0.5%.  The weighted  average  interest  rate on
borrowings  outstanding  as of  December  31,  2004  was  4.3%.  Borrowings  are
collateralized by substantially all of the Company's U.S. assets.

     The U.S. credit agreement prohibits the payment of distributions in respect
of the Capital  Trust's BUCS and dividends on the  Company's  Series A Preferred
Stock  if  "excess  availability"   (defined  as  borrowing   availability  less
outstanding  borrowings and certain  contractual  commitments such as letters of
credit)  is  less  than  $25  million.  Further,  the  credit  agreement  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,  including  a minimum net worth
covenant  and a fixed  charge  ratio  covenant,  and  contains  other  covenants
customary in lending  transactions  of this type.  The Company was in compliance
with all covenants for all periods  during the years ended December 31, 2004 and
2003. As of December 31, 2004, the Company had outstanding  borrowings under the
U.S.  credit   agreement  of  $43.2  million,   and  excess   availability   was
approximately  $48  million.  Under this  agreement,  the Company is required to
maintain a lock box  arrangement  whereby  daily net cash  receipts  are used to
reduce outstanding borrowings.  Accordingly,  any outstanding balances under the
U.S. credit agreement are classified as a current  liability,  regardless of the
maturity date of the agreement.

                                       35

<PAGE>


     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 February 2006. Borrowings under
the U.K. Facilities can be in various currencies including U.S. dollars, British
pounds sterling and euros and are  collateralized  by substantially all of TIMET
UK's  assets.  Interest  generally  accrues at LIBOR plus 1.25% for U.S.  dollar
borrowings  and the  bank's  Base Rate plus  1.25% for  British  pound  sterling
borrowings.

     The U.K. Facilities require the maintenance of certain financial ratios and
amounts,  including  a  consolidated  net worth  covenant  and  other  covenants
customary in lending  transactions of this type. TIMET UK was in compliance with
all covenants for all periods during the years ended December 31, 2004 and 2003.
The U.K. overdraft facility is subject to annual review in December of each year
and was renewed in December 2004.  During the second  quarter of 2003,  TIMET UK
received an  interest-bearing  intercompany  loan from a U.S.  subsidiary of the
Company enabling TIMET UK to reduce its borrowings under the U.K.  Facilities to
zero.  This loan was  repaid in full  during the third  quarter  of 2004.  As of
December 31, 2004, the Company had no borrowings under the U.K. Facilities,  and
unused borrowing availability was approximately $43 million.

     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.  As of  December  31,  2004,  there  were no
outstanding borrowings under these facilities, and unused borrowing availability
was approximately $18 million.

     No dividends  were paid by TIMET on its common  stock during 2004,  2003 or
2002. During the year ended December 31, 2004, the Company paid dividends on its
Series A Preferred Stock in the amount of $3.3 million. In addition,  subsequent
to December 31, 2004,  the Company's  board of directors  declared a dividend of
$0.84375  per share,  payable on March 15, 2005 to holders of record of Series A
Preferred Stock as of the close of trading on March 1, 2005.

                                       36
<PAGE>

     Contractual commitments. As more fully described in Notes 11, 12, 18 and 19
to the  Consolidated  Financial  Statements,  the Company was a party to various
debt, lease and other agreements at December 31, 2004 that contractually commits
the Company to pay certain amounts in the future. The following table summarizes
such  contractual  commitments  that are  enforceable and legally binding on the
Company and that specify all significant terms, including pricing,  quantity and
date of payment:

<TABLE>
                                                                         Payment Due Date
                                            ---------------------------------------------------------------------------
                                                              2006/           2008/          2010 &
                                               2005           2007            2009            After           Total
                                            -----------    ------------    ------------    ------------    ------------
Contractual Commitment                                                    (In thousands)

<S>                                         <C>            <C>             <C>             <C>             <C>
Capital leases (1)                          $       33     $       62      $      62       $        88     $       245

Operating leases                                 2,672          4,855          4,405            22,605          34,537

Notes payable (2)                               43,176              -              -                 -          43,176

Debt payable to Capital Trust (and
  accrued interest thereon at
  December 31, 2004)                                66              -              -            12,010          12,076

Purchase obligations:
  Raw materials (3)                             82,119         40,897              -                 -         123,016
  Other (4)                                     27,190         10,461          4,508             6,243          48,402

Other contractual obligations (5)                4,108            175              -                 -           4,283
                                            -----------    ------------    ------------    ------------    ------------

                                            $  159,364     $   56,450      $   8,975       $    40,946     $   265,735

                                            ===========    ============    ============    ============    ============
-----------------------------------------------------------------------------------------------------------------------
<FN>
(1)  Includes interest payments due under the capital lease agreements.
(2)  The  Company's  U.S.  credit  agreement  matures  in  2006.  However,  this
     agreement  requires  the  Company's  daily net cash  receipts to be used to
     reduce outstanding  borrowings and,  therefore,  the outstanding balance at
     December 31, 2004 is classified as a current liability.
(3)  These  obligations  generally  relate to the  purchase of  titanium  sponge
     pursuant to an LTA that expires on December 31, 2007 (as  described in Item
     1:  Business) and various other open orders for purchase of raw  materials.
     The LTA does not contain automatic renewal provisions; however, the Company
     may enter into a new agreement to replace the current LTA in the future.
(4)  These  obligations  generally relate to contractual  operating fees paid to
     CEZUS  for use of a portion  of its  Ugine,  France  plant  pursuant  to an
     agreement  expiring in 2006 (as  described in Item 2:  Properties),  energy
     purchase obligations with BMI which expire in 2010 (as described in Note 18
     to the Consolidated Financial Statements),  contractual obligations related
     to the construction of the wastewater  treatment  facility (as described in
     "Results of  Operation  -  Outlook"),  an  obligation  to Contran  under an
     intercorporate services agreement ("ISA") for 2005 (as described in Note 18
     to the Consolidated Financial Statements) and various other open orders for
     purchase  of energy and  property  and  equipment.  These  obligations  are
     generally based on an average price and an assumed constant mix of products
     purchased, as appropriate.  The Company and CEZUS have reached an agreement
     in principle to extend their operating  agreement through 2011. The Company
     expects to enter into an ISA annually with Contran  subsequent to 2005. All
     open orders are for delivery in 2005.
(5)  These other  obligations are recorded on the Company's  balance sheet as of
     December 31, 2004 and consist of current income taxes  payable,  a contract
     for  removal of  environmental  waste and  obligations  related to worker's
     compensation   bonds  discussed  in  "Liquidity  and  Capital  Resources  -
     Off-balance sheet arrangements."
</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."

                                       37

<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 expensed only $0.2 million
on the other bond,  although it is potentially  obligated for the remaining $1.3
million.  Additionally,  the  Company  has  entered  into  letters  of credit to
collateralize (i) potential workers'  compensation claims in Ohio and Nevada and
(ii) future usage of electricity in Nevada.  The Company's  excess  availability
under its U.S.  credit  agreement  has been  reduced  by $2.3  million  and $1.3
million, respectively, related to such letters of credit.

     Defined  benefit  pension  plans.  As of  December  31,  2004,  the Company
maintains  three defined  benefit pension plans - one each in the U.S., the U.K.
and France.  Prior to December 31, 2003, the U.S.  maintained  two plans,  which
were merged as of that date. The majority of the discussion below relates to the
U.S.  and U.K.  plans,  as the  French  plan is not  material  to the  Company's
Consolidated  Balance  Sheets,  Statements  of  Operations or Statements of Cash
Flows.

     The Company  recorded  consolidated  pension expense of $7.7 million,  $8.9
million and $4.9 million for the years ended  December 31, 2004,  2003 and 2002,
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, 2004                 December 31, 2003                December 31, 2002
                           and expense in 2005               and expense in 2004              and expense in 2003
                      ------------------------------    ------------------------------     ---------------------------
<S>                                <C>                               <C>                              <C>
U.S. Plan(s)                       5.65%                             6.00%                            6.25%
U.K. Plan                          5.30%                             5.50%                            5.70%

</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, 2004                 December 31, 2003                December 31, 2002
                           and expense in 2005               and expense in 2004              and expense in 2003
                      ------------------------------    ------------------------------     ---------------------------
<S>                               <C>                               <C>                               <C>
U.S. Plan(s)                      10.00%                            10.00%                            8.50%
U.K. Plan                          7.10%                             7.10%                            6.70%

</TABLE>

                                       38

<PAGE>

     Lowering the expected long-term rate of return on the Company's U.S. plans'
assets by 0.5% (from 10.0% to 9.5%) would have increased 2004 pension expense by
approximately  $0.3 million,  and lowering the discount rate assumption by 0.25%
(from 6.0% to 5.75%) would have increased the Company's U.S. plans' 2004 pension
expense by approximately  $0.1 million.  Lowering the expected long-term rate of
return on the  Company's  U.K.  plan's  assets by 0.5% (from 7.1% to 6.6%) would
have increased 2004 pension expense by approximately $0.5 million,  and lowering
the discount rate  assumption by 0.25% (from 5.5% to 5.25%) would have increased
the Company's U.K. plan's 2004 pension expense by approximately $0.8 million.

     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 12% of TIMET
common  stock at December  31,  2004;  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, 2004,  Valhi and related  entities or persons  (excluding the CMRT)
held approximately  40.8% of TIMET's  outstanding common stock and approximately
41.3% of the Company's Series A Preferred Stock. Harold C. Simmons,  Chairman of
the Board of Directors  of Valhi and Vice  Chairman of the Board of Directors of
TIMET,  is the sole  trustee  of the  CMRT,  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 17-year
history of the CMRT,  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 18.0% in 2004,  and the CMRT's last 5-year and 10-year  average annual
returns were 12.4% and 12.7%,  respectively.  The CMRT's  annual rates of return
from  inception  through  December  31,  2004 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).

     At December  31, 2004,  the CMRT's  asset mix (based on an aggregate  asset
value of $539 million) was 77.1% U.S.  equity  securities,  7.2% foreign  equity
securities,  14.1% debt  securities and 1.6% 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 and  maintained the
assumption for December 31, 2004 pension obligations and 2005 pension expense.

                                       39

<PAGE>


     Because of market fluctuations and prior funding  strategies,  actual asset
allocation as of December 31, 2004 was 86.9% equity  securities  and 13.1% fixed
income securities for the U.K. plan. During 2003, the trustees for the U.K. plan
selected a new  investment  advisor  (effective  in 2004) for the U.K.  plan and
modified its asset allocation  goals.  The Company's  future expected  long-term
rate of return on plan assets for its U.K. plan is based on an asset  allocation
assumption of 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,  and all current  contributions  to the plan are invested  wholly in fixed
income  securities  in order to  gradually  effect the  shift.  Based on various
factors,  including improved economic and market  conditions,  gains on the plan
assets  during 2003 and projected  asset mix, the Company  increased its assumed
long-term rate of return for December 31, 2003 pension  obligations and for 2004
pension  expense to 7.10% for its U.K. plan and  maintained  the  assumption for
December 31, 2004 pension obligations and for 2005 pension expense.

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

     Based on an  expected  rate of return on plan  assets of 10.0%,  a discount
rate of 5.65% and various other assumptions, the Company estimates that its U.S.
plan will  have  pension  expense  of  approximately  $0.3  million  in 2005 and
approximately  $11,000 in 2006 and pension income of approximately  $0.4 million
in 2007.  A 0.25%  increase  (decrease)  in the  discount  rate  would  decrease
(increase)  projected pension expense by approximately  $0.1 million in 2005 and
2006 and increase  (decease)  projected  pension  income by  approximately  $0.1
million in 2007. A 0.5%  increase  (decrease)  in the  long-term  rate of return
would  decrease  (increase)  projected  pension  expense by  approximately  $0.3
million in 2005 and approximately  $0.4 million in 2006 and increase  (decrease)
projected pension income by approximately $0.4 million in 2007.

     Based on an expected rate of return on plan assets of 7.1%, a discount rate
of  5.3%  and  various  other   assumptions   (including  an  exchange  rate  of
$1.90/(pound)1.00), the Company estimates that pension expense for its U.K. plan
will  approximate $7.8 million in 2005, $7.0 million in 2006 and $6.3 million in
2007. A 0.25% increase (decrease) in the discount rate would decrease (increase)
projected pension expense by approximately $0.8 million in 2005, $0.7 million in
2006 and $0.7 million in 2007. A 0.5% increase  (decrease) in the long-term rate
of return would decrease  (increase)  projected pension expense by approximately
$0.6 million in 2005, $0.7 million in 2006 and $0.9 million in 2007.

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

                                       40

<PAGE>


     The Company made cash  contributions of approximately $1.8 million in 2004,
$4.4  million  in 2003  and $1.2  million  in 2002 to the  U.S.  plans  and cash
contributions  of  approximately  $8.2 million in 2004, $7.3 million in 2003 and
$6.1 million in 2002 to the U.K. plan. Based upon the current underfunded status
of the plans and the  actuarial  assumptions  being used for 2005,  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, and using an exchange
                                                                        rate of$1.90/(pound)1.00 for U.K. plan )
<S>  <C>                                                     <C>                  <C>                  <C>
Year ending December 31,
     2005                                                    $        -           $       8.2          $       8.2
     2006                                                    $      0.2           $       8.5          $       8.7
     2007                                                    $      0.3           $       8.7          $       9.0
     2008                                                    $      3.1           $       9.0          $      12.1
     2009                                                    $        -           $       9.3          $       9.3

</TABLE>

     The U.S. plan(s) paid benefits of approximately  $5.7 million in 2004, $5.6
million in 2003 and $5.4  million in 2002,  and the U.K.  plan paid  benefits of
approximately  $4.7  million in 2004,  $4.3  million in 2003 and $4.1 million in
2002.  Based upon current  projections,  the Company  believes the plans will be
required to pay the following benefits over the next ten years:

<TABLE>

                                                                         Projected retirement benefits
                                                           -----------------------------------------------------------
                                                              U.S. Plan              U.K.Plan              Total
                                                           ----------------     -----------------    -----------------
                                                                       (In millions, and using an exchange
                                                                        rate of$1.90/(pound)1.00 for U.K. plan )
<S>  <C>                                                     <C>                  <C>                  <C>
Year ending December 31,
     2005                                                    $      5.8           $       4.9          $      10.7
     2006                                                    $      5.9           $       5.1          $      11.0
     2007                                                    $      5.9           $       5.2          $      11.1
     2008                                                    $      5.9           $       5.4          $      11.3
     2009                                                    $      5.9           $       5.5          $      11.4
     2010 through 2014                                       $     29.3           $      29.9          $      59.2

</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 $67.2  million,  $60.7  million  and $48.2  million at
December 31, 2004, 2003 and 2002, respectively,  and the U.K. plan's assets were
$121.0  million,  $97.8 million and $69.8 million at December 31, 2004, 2003 and
2002, respectively.

                                       41

<PAGE>


     The combination of actual investment  returns,  changing discount rates and
changes in other  assumptions has a significant  effect on the Company's  funded
plan status (plan assets compared to projected  benefit  obligations).  In 2004,
the effect of positive  investment  returns and cash contributions was more than
offset by the decline in the discount rate and certain  changes in mortality and
other retirement assumptions,  thereby increasing the under-funded status of the
U.S. plan by $1.3 million to $11.4  million at December 31, 2004.  In 2004,  the
effect of positive investment returns in the U.K. plan was also more than offset
by the  decline  in the  discount  rate and  certain  changes in  mortality  and
retirement  assumptions,  as well as the effect of the weakening dollar compared
to the British pound sterling,  thereby increasing the underfunded status of the
U.K.  plan by $8.4 million to $62.0  million at December 31, 2004.  The U.S. and
U.K. plans were underfunded by $10.1 million and $53.6 million, respectively, at
December  31,  2003.  Based upon the  change in the  funded  status of the plans
during 2004, the Company was required to record a net additional minimum pension
liability charge (net of tax) to equity of $8.9 million,  reflecting  additional
comprehensive loss of $2.5 million for the U.S. plan and $6.4 million related to
the U.K. plan.

     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,  of $2.5 million in 2004, $3.1
million in 2003 and $4.6 million in 2002.

     The Company  recorded  consolidated  OPEB  expense of $3.0 million in 2004,
$2.7  million in 2003 and $2.9 million in 2002.  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 6.0% to 5.75%) would have
increased the Company's 2004 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 2004,  the Company  used a beginning
health care trend rate of 10.35%,  which is  projected  to reduce to an ultimate
rate of 4.0% in 2010.  If the health  care trend rate  changed by 1.00% for each
year, OPEB expense would have  increased/decreased by approximately $0.3 million
in 2004.  For 2005,  the Company is using a beginning  health care trend rate of
9.29%, which is projected to reduce to an ultimate rate of 4.0% in 2010.

     Based on a discount  rate of 5.65%,  a health care trend rate as  discussed
above and various other  assumptions,  the Company  estimates  that OPEB expense
will  approximate $3.4 million in 2005, $3.3 million in 2006 and $3.2 million in
2007. A 0.25% increase (decrease) in the discount rate would decrease (increase)
projected OPEB expense by less than $0.1 million in 2005,  2006 and 2007. 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 $0.3 million in 2005, 2006 and 2007.

                                       42
<PAGE>


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

                                                      Projected OPEB
                                                         payments
                                                   ----------------------
                                                       (In millions)
      Year ending December 31,
             2005                                  $           2.8
             2006                                  $           2.9
             2007                                  $           3.0
             2008                                  $           3.1
             2009                                  $           3.3
             2010 through 2014                     $          18.1

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

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

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

                                       43

<PAGE>


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

     During the fourth  quarter of 2004,  the Company  purchased  an  additional
336,700  shares of CompX and as of December 31, 2004, the Company held (directly
and through its  investment in CGI)  approximately  16.8% of the total number of
shares of all  classes of CompX  common  stock  outstanding.  None of the shares
purchased  subsequent  to September  30, 2004 have been,  or are expected to be,
contributed to CGI. Depending upon the Company's  evaluation of the business and
prospects of CompX, and upon future developments (including, but not limited to,
performance  of the  Class  A  Shares  in the  market,  availability  of  funds,
alternative  uses of  funds,  and  money,  stock  market  and  general  economic
conditions),  TIMET may from time to time purchase,  dispose of, or cease buying
or selling Class A Shares.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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

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

                                       44

<PAGE>

     Inventory allowances. The Company values approximately 40% 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 undertakes an evaluation of the assets or asset group.
If this  evaluation  indicates  that the  carrying  amount of the asset or asset
group is not  recoverable,  the  amount of the  impairment  would  typically  be
calculated using discounted  expected future cash flows or appraised values. All
relevant factors are considered in determining  whether an impairment exists. In
2004,  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 the  potential  impairment  of this asset  group was not  considered
necessary,  so only the U.S., U.K. and France asset groups were  evaluated.  The
result  of this  assessment  led the  Company  to  conclude  that  there  was no
impairment  related to the long-lived assets in these 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 upon its adoption of SFAS No. 142 in 2002, which resulted in a
non-cash goodwill impairment charge of $44.3 million. See "Results of Operations
-  Cumulative  effect  of  change  in  accounting  principle"  and Note 7 to the
Consolidated Financial Statements for further discussion.

     Valuation and  impairment of securities.  In accordance  with SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities,  the Company's
marketable   securities  acquired  in  2004,   including  the  shares  of  CompX
contributed by the Company and held by CGI (based upon the Company's  redemption
option), are classified as available-for-sale securities and are carried at fair
value based upon quoted  market  prices,  with  unrealized  gains and/or  losses
included in stockholders'  equity as a component of other comprehensive  income.
The Company evaluates its investments in marketable  securities  whenever events
or  conditions  occur to indicate  that the fair value of such  investments  has
declined below their carrying amounts. If the decline in fair value is judged to
be other than temporary,  the carrying amount of the security is written down to
fair value.  In 2004,  no such  events or  circumstances  indicated  the need to
perform such evaluation. See Note 4 to the Consolidated Financial Statements for
further discussion.

                                       45

<PAGE>


     In the fourth  quarter of 2001 and the first  quarter of 2002,  the Company
undertook assessments of its investment in SMC. 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.  See  "Results  of  Operations  - Income  taxes"  for
discussion  of the  Company's  analysis  of its  deferred  income tax  valuation
allowances.

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

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

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

                                       46

<PAGE>


ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Interest  rates.  The  Company is exposed  to market  risk from  changes in
interest  rates related to  indebtedness.  The Company  typically does not enter
into  interest  rate swaps or other  types of  contracts  in order to manage its
interest  rate market  risk.  At December 31, 2004,  all of the  Company's  bank
indebtedness  was  denominated  in U.S.  dollars  and bore  interest at variable
rates, generally related to spreads over bank prime rates and LIBOR. Because the
Company's bank indebtedness  reprices with changes in market interest rates, the
carrying amount of such debt is believed to approximate  fair value. At December
31, 2003, the Company had no bank  indebtedness.  The following table summarizes
the  Company's  bank  variable rate  indebtedness  and related  maturities as of
December 31, 2004:

<TABLE>

                                                       Contractual maturity date                            Interest
                                  ---------------------------------------------------------------------
                                     2005          2006           2007          2008           2009         rate (1)
                                  -----------    ----------    -----------    ----------    -----------    -----------
                                                                   (In millions)

<S>                               <C>            <C>           <C>            <C>           <C>               <C>
U. S. dollars                     $    43.2      $     -       $     -        $     -       $     -           4.3%
----------------------------------------------------------------------------------------------------------------------
<FN>

(1)  Weighted average.
</FN>

</TABLE>

     The  Subordinated  Debentures  held by the  Capital  Trust  provide a fixed
6.625% coupon and are exposed to market risk from changing  interest rates.  The
BUCS issued by the Capital  Trust are  publicly  traded and may 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,  2004
($16.00 per BUCS),  the fair value of the  outstanding  Subordinated  Debentures
related to the 115,717  outstanding BUCS  approximated  $1.9 million at December
31, 2004.

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

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

     Securities  prices.  During the year ended  December 31, 2004,  the Company
acquired  certain  publicly traded equity  securities that are exposed to market
risk due to  changes in prices of the  securities  as  reported  on the New York
Stock  Exchange.  The  aggregate  market  value of these  equity  securities  at
December  31,  2004 was $47.2  million,  as  compared  to a cost  basis of $34.6
million. The potential change in the aggregate market value of these securities,
assuming a 10% change in prices, would be $4.7 million at December 31, 2004. See
also Note 4 to the Consolidated Financial Statements.

                                       47

<PAGE>


ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

     Not applicable.

ITEM 9A: CONTROLS AND PROCEDURES

     Evaluation of disclosure  controls and procedures.  The Company maintains a
system of disclosure controls and procedures.  The term "disclosure controls and
procedures,"  as defined by  regulations  of the SEC,  means  controls and other
procedures that are designed to ensure that information required to be disclosed
in the reports that the Company files or submits to the SEC under the Securities
Exchange Act of 1934, as amended (the "Exchange  Act"), is recorded,  processed,
summarized  and reported,  within the time periods  specified in the SEC's rules
and forms.  Disclosure  controls and  procedures  include,  without  limitation,
controls  and  procedures  designed  to ensure that  information  required to be
disclosed  by the  Company  in the  reports  that it files or submits to the SEC
under  the  Exchange  Act is  accumulated  and  communicated  to  the  Company's
management,   including  its  principal  executive  officer  and  its  principal
financial officer,  or persons  performing similar functions,  as appropriate to
allow timely  decisions to be made  regarding  required  disclosure.  Each of J.
Landis Martin, the Company's Chief Executive  Officer,  and Bruce P. Inglis, the
Company's Vice  President - Finance,  Corporate  Controller and Treasurer,  have
evaluated the Company's  disclosure  controls and  procedures as of December 31,
2004. 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.

     Scope of management's report on internal control over financial  reporting.
The Company also maintains internal control over financial  reporting.  The term
"internal  control over  financial  reporting," as defined by 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;

     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.

                                       48

<PAGE>


     Section  404  of the  Sarbanes-Oxley  Act of  2002  ("Sarbanes-Oxley  Act")
requires the Company to include annually a management report on internal control
over financial  reporting  starting in the Company's  Annual Report on Form 10-K
for the year ended  December 31, 2004,  and such report is included  below.  The
Company's  independent  registered  public  accounting  firm is also required to
annually attest to the Company's internal control over financial reporting.

     As permitted by the SEC, the Company's  assessment of internal control over
financial  reporting  excludes (i) internal control over financial  reporting of
its equity method  investees and (ii) internal  control over the  preparation of
the Company's financial statement schedules required by Article 12 of Regulation
S-X.  See  Note 5 to the  Consolidated  Financial  Statements  and the  index of
financial  statements and schedules on page F-1 of this Annual Report.  However,
the  Company's  assessment of internal  control over  financial  reporting  with
respect to the Company's  equity method  investees did include its controls over
the recording of amounts related to the Company's  investments that are recorded
in its Consolidated Financial Statements,  including controls over the selection
of accounting methods for the Company's  investments,  the recognition of equity
method earnings and losses and the determination, valuation and recording of the
Company's investment account balances.

     Changes in internal  control over  financial  reporting.  There has been no
change to the Company's  internal  control over financial  reporting  during the
quarter ended December 31, 2004 that has materially  affected,  or is reasonably
likely to materially  affect,  the  Company's  internal  control over  financial
reporting.

     Management's  report on internal  control  over  financial  reporting.  The
Company's  management is responsible for establishing  and maintaining  adequate
internal  control over  financial  reporting.  The  Company's  evaluation of the
effectiveness of its internal control over financial reporting is based upon the
framework  of  the  Committee  of  Sponsoring   Organizations  of  the  Treadway
Commission  (commonly  referred  to as  the  "COSO"  framework).  Based  on  the
Company's  evaluation  under  that  framework,  management  of the  Company  has
concluded  that the  Company's  internal  control over  financial  reporting was
effective as of December 31, 2004. See Scope of Management's  Report on Internal
Control Over Financial Reporting above.

     PricewaterhouseCoopers  LLP, the independent  registered  public accounting
firm that has audited the Company's  Consolidated  Financial Statements included
in this Annual Report, has audited management's  assessment of the effectiveness
of the Company's  internal  control over financial  reporting as of December 31,
2004,  as stated in their report which is included in this Annual Report on Form
10-K.

                                       49

<PAGE>


     Certifications.  The  Company's  chief  executive  officer is  required  to
annually  file a  certification  with  the New  York  Stock  Exchange  ("NYSE"),
certifying  the  Company's  compliance  with the  corporate  governance  listing
standards of the NYSE.  During 2004, the Company's chief executive officer filed
such annual certification with the NYSE, which was not qualified in any respect,
indicating  that he was not aware of any  violations  by the Company of the NYSE
corporate  governance  listing  standards.  The  Company's  principal  executive
officer and  principal  financial  officer  are also  required  to,  among other
things,  quarterly file certifications with the SEC regarding the quality of the
Company's public  disclosures,  as required by Section 302 of the Sarbanes-Oxley
Act. Such certifications for the year ended December 31, 2004 have been filed as
exhibits   31.1  and  31.2  to  this  Annual   Report  on  Form  10-K  and  such
certifications  for the year ended December 31, 2003 were also filed as exhibits
31.1 and 31.2 to the Annual Report on Form 10-K for the year ended  December 31,
2003.

ITEM 9B: OTHER INFORMATION

     Not applicable.

                                       50

<PAGE>

                                    PART III

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

ITEM 11: EXECUTIVE COMPENSATION

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

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

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

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES

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

                                       51

<PAGE>

                                     PART IV

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

(a) and (c) Financial Statements and Schedules

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

(b) Exhibits

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

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

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

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

3.3  Bylaws of Titanium Metals Corporation as Amended and Restated, dated August
     31, 2004,  incorporated  by  reference to Exhibit 99.2 to the  Registrant's
     Current Report on Form 8-K filed with the SEC on September 2, 2004.

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

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

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.

                                       52

<PAGE>


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

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

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

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

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

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

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

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

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

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

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

                                       53

<PAGE>


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

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

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

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

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

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

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

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

10.8 Letter  dated  December  19, 2003 to extend Loan and  Overdraft  Facilities
     between Lloyds TSB Bank plc and TIMET UK Limited dated December 20, 2002.

10.9 Letter  dated  November  22, 2004 to extend Loan and  Overdraft  Facilities
     between Lloyds TSB Bank plc and TIMET UK Limited dated December 20, 2002.

10.10January 19, 2005 Variation Letter to Loan and Overdraft  Facilities between
     Lloyds TSB Bank plc and TIMET UK Limited dated December 20, 2002.

                                       54

<PAGE>


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

10.11* 1996 Long Term Performance Incentive Plan of Titanium Metals Corporation,
     incorporated  by reference to Exhibit 10.19 to the  Registrant's  Amendment
     No. 1 to Registration Statement on Form S-1 (File No. 333-18829).

10.12* 2004 Senior  Executive Cash Incentive  Plan,  effective  January 1, 2004,
     incorporated  by reference to Exhibit  10.2 to the  Registrant's  Quarterly
     Report on Form 10-Q for the quarter ended March 31, 2004.

10.13* 2005 Titanium  Metals  Corporation  Profit Sharing Plan,  incorporated by
     reference to Exhibit 99.1 to the  Registrant's  Current  Report on Form 8-K
     filed with the SEC on February 28, 2005.

10.14* 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.

10.15* 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.

10.16* 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.

10.17* Titanium  Metals  Corporation  Amended  and  Restated  1996  Non-Employee
     Director  Compensation  Plan, as amended and restated  effective October 1,
     2004, incorporated by reference to Exhibit 99.2 to the Registrant's Current
     Report on Form 8-K filed with the SEC on February 28, 2005.

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

10.19* 2005  Amendment  to  Employment  Contract  between  TIMET  Savoie,  S.A.,
     Christian J.M.  Leonhard and Titanium  Metals  Corporation,  executed as of
     November 25, 2003.

10.20Settlement  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.

10.21Intercorporate  Services Agreement among Contran  Corporation,  Tremont LLC
     and  Titanium  Metals  Corporation,   effective  as  of  January  1,  2004,
     incorporated  by  reference  to Exhibit  10.17 to the  Registrant's  Annual
     Report on Form 10-K for the year ended December 31, 2003.

                                       55

<PAGE>


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

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

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

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

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

10.26** Termination  Agreement by and between  Wyman-Gordon Company and Titanium
     Metals  Corporation  effective as of September  28, 2003,  incorporated  by
     reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q
     for the quarter ended June 30, 2004.

10.27Agreement  Regarding  Shared  Insurance by and between CompX  International
     Inc., Contran Corporation,  Keystone Consolidated Industries,  Inc., Kronos
     Worldwide,  Inc., NL Industries,  Inc.,  Titanium  Metals  Corporation  and
     Valhi,  Inc. dated October 30, 2003,  incorporated  by reference to Exhibit
     10.20 to the  Registrant's  Annual  Report on Form 10-K for the year  ended
     December 31, 2003.

10.28Subscription Agreement executed October 5, 2004 but effective as of October
     1, 2004 among NL Industries,  Inc.,  TIMET Finance  Management  Company and
     CompX Group, Inc., incorporated by reference to Exhibit 99.1 to the Current
     Report on Form 8-K of NL Industries,  Inc. filed with the SEC on October 8,
     2004.

10.29Certificate  of  Incorporation  of  CompX  Group,  Inc.,   incorporated  by
     reference  to  Exhibit  99.3  to  the  Current  Report  on  Form  8-K of NL
     Industries, Inc. filed with the SEC on October 8, 2004.

21.1 Subsidiaries of the Registrant.

23.1 Consent of PricewaterhouseCoopers LLP.

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

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

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

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

                                       56

<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 16, 2005
                                                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 16, 2005             Glenn R. Simmons, March 16, 2005
Chairman of the Board, President             Director
  and Chief Executive Officer


/s/ Harold C. Simmons                        /s/ Steven L. Watson
------------------------------------         -----------------------------------
Harold C. Simmons, March 16, 2005            Steven L. Watson, March 16, 2005
Vice Chairman of the Board                   Director


/s/ Norman N. Green                          /s/ Paul J. Zucconi
------------------------------------         -----------------------------------
Norman N. Green, March 16, 2005              Paul J. Zucconi, March 16, 2005
Director                                     Director


/s/ Gary C. Hutchison                        /s/ Bruce P. Inglis
------------------------------------         -----------------------------------
Gary C. Hutchison, March 16, 2005            Bruce P. Inglis, March 16, 2005
Director                                     Vice President - Finance, Corporate
                                                Controller and Treasurer
                                             Principal Financial Officer
                                             Principal Accounting Officer
/s/ Albert W. Niemi, Jr.
------------------------------------
Albert W. Niemi, Jr., March 16, 2005
Director

                                       57

<PAGE>


                           TITANIUM METALS CORPORATION

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

                   INDEX OF FINANCIAL STATEMENTS AND SCHEDULES

                                                                          Page
Financial Statements                                                      ----

   Report of Independent Registered Public Accounting Firm                 F-1

   Consolidated Balance Sheets - December 31, 2004 and 2003                F-3

   Consolidated Statements of Operations -
      Years ended December 31, 2004, 2003 and 2002                         F-5

   Consolidated Statements of Comprehensive Income (Loss) -
      Years ended December 31, 2004, 2003 and 2002                         F-7

   Consolidated Statements of Cash Flows -
      Years ended December 31, 2004, 2003 and 2002                         F-8

   Consolidated Statements of Changes in Stockholders' Equity -
      Years ended December 31, 2004, 2003 and 2002                        F-10

   Notes to Consolidated Financial Statements                             F-11


Financial Statement Schedules

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

   Schedule II - Valuation and Qualifying Accounts                         S-2

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

                                        F

<PAGE>



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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

     We have completed an integrated audit of Titanium Metals Corporation's 2004
consolidated  financial  statements  and of its internal  control over financial
reporting as of December  31, 2004 and audits of its 2003 and 2002  consolidated
financial  statements  in accordance  with the  standards of the Public  Company
Accounting Oversight Board (United States).  Our opinions,  based on our audits,
are presented below.

Consolidated financial statements

     In our  opinion,  the  accompanying  consolidated  balance  sheets  and the
related consolidated statement of operations, of comprehensive income (loss), of
changes  in  stockholders'  equity  and of cash  flows  present  fairly,  in all
material respects, the financial position of Titanium Metals Corporation and its
subsidiaries at December 31, 2004 and 2003, and the results of their  operations
and their cash flows for each of the three  years in the period  ended  December
31, 2004 in conformity  with  accounting  principles  generally  accepted in the
United States of America.  These financial  statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements in accordance  with the  standards of the Public  Company  Accounting
Oversight  Board  (United  States).  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material  misstatement.  An audit of financial statements
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

     Effective January 1, 2003, the Company changed its method of accounting for
asset  retirement  obligations.   See  Note  2  to  the  consolidated  financial
statements.  Effective  January  1,  2002,  the  Company  changed  its method of
accounting  for  goodwill  and  other  intangible  assets.  See  Note  7 to  the
consolidated financial statements.

                                       F-1

<PAGE>


Internal control over financial reporting

     Also, in our opinion,  management's  assessment,  included in  Management's
Report on Internal  Control Over Financial  Reporting  appearing  under Item 9A,
that the Company maintained  effective internal control over financial reporting
as  of   December   31,  2004  based  on   criteria   established   in  Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission ("COSO"), is fairly stated, in all material respects,
based on those criteria. Furthermore, in our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of
December 31, 2004, based on criteria established in Internal  Control-Integrated
Framework  issued by the COSO.  The  Company's  management  is  responsible  for
maintaining  effective  internal  control over  financial  reporting and for its
assessment of the  effectiveness of internal  control over financial  reporting.
Our responsibility is to express opinions on management's  assessment and on the
effectiveness of the Company's  internal control over financial  reporting based
on our  audit.  We  conducted  our  audit of  internal  control  over  financial
reporting in  accordance  with the  standards of the Public  Company  Accounting
Oversight  Board  (United  States).  Those  standards  require  that we plan and
perform  the  audit to  obtain  reasonable  assurance  about  whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects.  An  audit of  internal  control  over  financial  reporting  includes
obtaining  an  understanding  of  internal  control  over  financial  reporting,
evaluating  management's  assessment,  testing  and  evaluating  the  design and
operating   effectiveness  of  internal  control,   and  performing  such  other
procedures as we consider  necessary in the  circumstances.  We believe that our
audit provides a reasonable basis for our opinions.

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

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


/s/ PricewaterhouseCoopers LLP


Denver, Colorado
March 16, 2005

                                       F-2

<PAGE>


                           TITANIUM METALS CORPORATION

                           CONSOLIDATED BALANCE SHEETS

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

                                                                                              December 31,
                                                                                   -----------------------------------
ASSETS                                                                                  2004               2003
                                                                                   ----------------   ----------------

<S>                                                                                <C>                <C>
Current assets:
   Cash and cash equivalents                                                       $        7,194     $       35,040
   Restricted cash and cash equivalents                                                       721              2,248
   Accounts and other receivables, less
     allowance of $1,683 and $1,906                                                        96,756             67,432
   Refundable income taxes                                                                      -              2,155
   Inventories                                                                            231,580            165,721
   Prepaid expenses and other                                                               2,400              2,604
   Deferred income taxes                                                                    4,975                778
                                                                                   ----------------   ----------------

       Total current assets                                                               343,626            275,978

Marketable securities                                                                      47,214                  -
Investment in joint ventures                                                               22,591             22,469
Investment in common securities of TIMET Capital Trust I                                    6,259              6,794
Property and equipment, net                                                               228,173            239,182
Intangible assets, net                                                                      5,057              6,294
Deferred income taxes                                                                       1,053                  -
Other                                                                                      11,576             16,692
                                                                                   ----------------   ----------------

       Total assets                                                                $      665,549     $      567,409
                                                                                   ================   ================
</TABLE>

                                       F-3


<PAGE>


                           TITANIUM METALS CORPORATION

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                      (In thousands, except per share data)

<TABLE>

                                                                                              December 31,
                                                                                   -----------------------------------
LIABILITIES, MINORITY INTEREST AND                                                      2004               2003
                                                                                   ----------------   ----------------
STOCKHOLDERS' EQUITY

<S>                                                                                <C>                <C>
Current liabilities:
   Notes payable                                                                   $      43,176      $           -
   Accounts payable                                                                       44,164             29,200
   Accrued liabilities                                                                    53,130             44,471
   Deferred gain on sale of property                                                      12,016                  -
   Customer advances                                                                       6,913              3,356
   Income taxes payable                                                                    2,516                 11
   Other                                                                                     257                775
                                                                                   ----------------   ----------------

       Total current liabilities                                                         162,172             77,813

Capital lease obligations                                                                    175              9,766
Accrued OPEB cost                                                                         14,470             13,661
Accrued pension cost                                                                      77,515             62,366
Accrued environmental cost                                                                 1,985              3,930
Deferred income taxes                                                                         60                637
Accrued interest on debt payable to TIMET Capital Trust I                                      -             19,003
Debt payable to TIMET Capital Trust I                                                     12,010            207,465
Other                                                                                      4,939              2,880
                                                                                   ----------------   ----------------

       Total liabilities                                                                 273,326            397,521
                                                                                   ----------------   ----------------

Minority interest                                                                         12,539             11,131
                                                                                   ----------------   ----------------

Stockholders' equity:

   Series A Preferred Stock, $.01 par value; $195,455 liquidation
     preference;  4,025 shares authorized, 3,909 and 0 shares
     issued, respectively                                                                173,650                  -
   Common stock, $.01 par value; 90,000 shares authorized,
     15,963 and 15,950 shares issued, respectively                                           160                160
   Additional paid-in capital                                                            350,866            350,515
   Accumulated deficit                                                                  (103,788)          (140,428)
   Accumulated other comprehensive loss                                                  (39,989)           (50,226)
   Treasury stock, at cost  (45 shares)                                                   (1,208)            (1,208)
   Deferred compensation                                                                      (7)               (56)
                                                                                   ----------------   ----------------

       Total stockholders' equity                                                        379,684            158,757
                                                                                   ----------------   ----------------

       Total liabilities, minority interest and stockholders' equity               $     665,549      $     567,409
                                                                                   ================   ================
</TABLE>

Commitments and contingencies (Note 19)

          See accompanying notes to consolidated financial statements.
                                       F-4

<PAGE>



                           TITANIUM METALS CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)

<TABLE>
                                                                                Year ended December 31,
                                                                   ---------------------------------------------------
                                                                        2004               2003              2002
                                                                   ----------------    --------------    -------------

<S>                                                                <C>                 <C>               <C>
Net sales                                                          $     501,828       $     385,304     $     366,501
Cost of sales                                                            445,910             368,274           369,624
                                                                   ----------------    --------------    -------------

   Gross margin                                                           55,918              17,030            (3,123)

Selling, general, administrative and
   development expense                                                    44,908              36,438            42,998
Equity in earnings of joint ventures                                       1,278                 451             1,990
Other income (expense), net                                               22,989              24,389            23,282
                                                                   ----------------    --------------    -------------

   Operating income (loss)                                                35,277               5,432           (20,849)

Interest expense                                                          12,451              16,419            17,144
Other non-operating income (expense), net                                 16,199                (294)          (29,893)
                                                                   ----------------    --------------    -------------

   Income (loss) before income taxes, minority
     interest and cumulative effect of change in
     accounting principle                                                 39,025             (11,281)          (67,886)

Income tax (benefit) expense                                              (2,132)              1,207            (1,952)
Minority interest, net of tax                                              1,219                 378             1,286
                                                                   ----------------    --------------    -------------

   Income (loss) before cumulative effect of change
     in accounting principle                                              39,938             (12,866)          (67,220)

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

   Net income (loss)                                                      39,938             (13,057)         (111,530)

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

   Net income (loss) attributable to
     common stockholders                                           $      35,540       $     (13,057)    $    (111,530)
                                                                   ================    ==============    =============
</TABLE>

                                       F-5

<PAGE>


                           TITANIUM METALS CORPORATION

                CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

                      (In thousands, except per share data)

<TABLE>

                                                                               Year ended December 31,
                                                                ------------------------------------------------------
                                                                     2004               2003                2002
                                                                ---------------    ----------------    ---------------

<S>                                                             <C>                <C>                 <C>
Basic earnings (loss) per share attributable to
      common stockholders:
   Before cumulative effect of change
      in accounting principle                                   $       2.24       $      (0.81)       $     (4.26)

   Cumulative effect of change in accounting
      principle                                                            -              (0.01)             (2.80)
                                                                ---------------    ----------------    ---------------

Basic earnings (loss) per share attributable to
   common stockholders                                          $       2.24       $      (0.82)       $     (7.06)
                                                                ===============    ================    ===============

Diluted earnings (loss) per share attributable to
      common stockholders:
   Before cumulative effect of change
      in accounting principle                                   $       2.20       $      (0.81)       $     (4.26)

   Cumulative effect of change in accounting
      principle                                                            -              (0.01)             (2.80)
                                                                ---------------    ----------------    ---------------

Diluted earnings (loss) per share attributable to
      common stockholders                                       $       2.20       $      (0.82)       $     (7.06)
                                                                ===============    ================    ===============


Weighted average shares outstanding:
   Basic                                                              15,881             15,844             15,803
                                                                ===============    ================    ===============
   Diluted                                                            18,125             15,844             15,803
                                                                ===============    ================    ===============


Pro forma amounts assuming Statement of
   Financial Accounting Standards No. 143
   was applied as of January 1, 2002 (Note 2):

   Net income (loss) attributable to common
      stockholders                                              $     35,540       $    (12,866)       $  (111,556)
                                                                ===============    ================    ===============

   Basic earnings (loss) per share attributable to
      common stockholders                                       $       2.24       $      (0.81)       $     (7.06)
                                                                ===============    ================    ===============
   Diluted earnings (loss) per share attributable to
      common stockholders                                       $       2.20       $      (0.81)       $     (7.06)
                                                                ===============    ================    ===============

</TABLE>


          See accompanying notes to consolidated financial statements.
                                       F-6
<PAGE>




                           TITANIUM METALS CORPORATION

             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

                                 (In thousands)
<TABLE>

                                                                                 Year ended December 31,
                                                                   ----------------------------------------------------
                                                                        2004               2003              2002
                                                                   ---------------    ---------------   ---------------
<S>                                                                <C>                <C>               <C>
Net income (loss)                                                  $      39,938      $     (13,057)   $     (111,530)

Other comprehensive income (loss):
   Currency translation adjustment                                         6,435             11,443            13,359
   Unrealized gains on marketable securities                              12,597                  -                 -
   TIMET's share of VALTIMET SAS's unrealized net
     gains on derivative financial instruments
     qualifying as cash flow hedges                                           97                  -                 -
   Pension liabilities adjustment (net of tax
     benefit of $1,588 in 2002)                                           (8,892)             1,068           (40,822)
                                                                   ---------------    ---------------   ---------------

   Total other comprehensive income (loss)                                10,237             12,511           (27,463)
                                                                   ---------------    ---------------   ---------------

   Comprehensive income (loss)                                     $      50,175      $        (546)    $    (138,993)
                                                                   ===============    ===============   ===============



Currency translation adjustment:
   Beginning of year                                               $      10,407      $      (1,036)    $     (14,395)
   Change during year                                                      6,435             11,443            13,359
                                                                   ---------------    ---------------   ---------------
   End of year                                                     $      16,842      $      10,407     $      (1,036)
                                                                   ===============    ===============   ===============

Unrealized gains on marketable securities:
   Beginning of year                                               $           -      $           -     $           -
   Change during year                                                     12,597                  -                 -
                                                                   ---------------    ---------------   ---------------
   End of year                                                     $      12,597      $           -     $           -
                                                                   ===============    ===============   ===============

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

Pension liabilities adjustment:
   Beginning of year                                               $     (60,633)     $     (61,701)    $     (20,879)
   Change during year                                                     (8,892)             1,068           (40,822)
                                                                   ---------------    ---------------   ---------------
   End of year                                                     $     (69,525)     $     (60,663)    $     (61,701)
                                                                   ===============    ===============   ===============

</TABLE>

          See accompanying notes to consolidated financial statements.
                                       F-7

<PAGE>


                           TITANIUM METALS CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>

                                                                                  Year ended December 31,
                                                                     --------------------------------------------------
                                                                           2004              2003            2002
                                                                     ---------------    --------------   --------------
<S>                                                                  <C>                <C>              <C>
Cash flows from operating activities:
   Net income (loss)                                                 $      39,938      $     (13,057)   $    (111,530)
   Depreciation and amortization                                            32,828             36,572           37,098
   Gain on exchange of BUCS                                                (15,465)                 -                -
   Cumulative effect of change in accounting principle                           -                191           44,310
   Noncash impairment of preferred securities                                    -                  -           27,500
   Equity in earnings of joint ventures,
     net of distributions                                                      527                796             (961)
   Equity in earnings of common securities of
     TIMET Capital Trust I, net of distributions                               536               (432)            (104)
   Deferred income taxes                                                    (5,711)              (259)          (3,694)
   Minority interest, net of tax                                             1,219                378            1,286
   Other, net                                                                  (73)               616            1,891
   Change in assets and liabilities:
     Receivables                                                           (25,587)             4,798           24,088
     Inventories                                                           (60,858)            24,462           10,756
     Prepaid expenses and other                                                (77)               461            6,072
     Accounts payable and accrued liabilities                               20,037             (1,029)         (15,806)
     Customer advances                                                       3,316               (207)         (26,386)
     Income taxes                                                            4,417               (256)          (1,863)
     Accrued OPEB and pension costs                                          2,927             (2,007)          (6,998)
     Accrued interest on debt payable to
       TIMET Capital Trust I                                               (18,936)            14,403            3,455
     Other, net                                                             (1,471)               391           (2,709)
                                                                     ---------------    --------------   --------------
       Net cash (used) provided by operating activities                    (22,433)            65,821          (13,595)
                                                                     ---------------    --------------   --------------

Cash flows from investing activities:
   Purchase of marketable securities                                       (34,472)                 -                -
   Capital expenditures                                                    (23,556)           (12,467)          (7,767)
   Proceeds from sale of property, net                                      11,973                  -                -
   Change in restricted cash, net                                            1,527             (2,102)               -
   Other, net                                                                    -                 35              300
                                                                     ---------------    --------------   --------------
       Net cash used by investing activities                               (44,528)           (14,534)          (7,467)
                                                                     ---------------    --------------   --------------

Cash flows from financing activities:
   Indebtedness:
     Borrowings                                                            160,195            127,253          169,933
     Repayments                                                           (117,019)          (146,322)        (162,396)
   Dividends paid to minority interest                                        (691)            (1,892)          (1,115)
   Dividends paid on Series A Preferred Stock                               (3,298)                 -                -
   Other, net                                                                 (445)            (1,107)          (2,899)
                                                                     ---------------    --------------   --------------
       Net cash provided (used) by financing activities                     38,742            (22,068)           3,523
                                                                     ---------------    --------------   --------------

Net cash (used) provided by operating, investing
   and financing activities                                          $     (28,219)     $      29,219    $     (17,539)
                                                                     ===============    ==============   ==============
</TABLE>

                                       F-8

<PAGE>

                           TITANIUM METALS CORPORATION

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                 (In thousands)
<TABLE>

                                                                                 Year ended December 31,
                                                                     -------------------------------------------------
                                                                         2004              2003             2002
                                                                     --------------    --------------   --------------
<S>                                                                  <C>               <C>              <C>
Cash and cash equivalents:
   Net increase (decrease) from:
     Operating, investing and financing activities                   $    (28,219)     $      29,219    $     (17,539)
     Effect of exchange rate changes on cash                                  373               (393)            (747)
                                                                     --------------    --------------   --------------
                                                                          (27,846)            28,826          (18,286)
   Cash and cash equivalents at beginning of year                          35,040              6,214           24,500
                                                                     --------------    --------------   --------------

   Cash and cash equivalents at end of year                          $      7,194      $      35,040    $       6,214
                                                                     ==============    ==============   ==============

Supplemental disclosures:
   Cash paid for:
     Interest, net of amounts capitalized                            $     30,624      $       1,325    $      12,352
     Income taxes, net                                               $          -      $       1,561    $       3,605

Noncash investing and financing activities:
   Capital lease obligations incurred when
     the Company entered into certain leases
     for equipment                                                   $          -      $           -    $         969

</TABLE>


          See accompanying notes to consolidated financial statements.
                                       F-9
<PAGE>

                           TITANIUM METALS CORPORATION

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                  Years ended December 31, 2004, 2003 and 2002
                                 (In thousands)

<TABLE>

                                                                                Accumulated
                                                  Series A Additional Retained    Other
                                   Common  Common Preferred Paid-in   Earnings Comprehensive Treasury Deferred
                                   Shares  Stock   Stock    Capital   (Deficit)Income (Loss) Stock Compensation Total
                                   ------- ------ --------- --------- ---------- --------- --------  -------  ---------

<S>                                <C>     <C>    <C>       <C>       <C>        <C>       <C>       <C>      <C>
Balance at December 31, 2001       15,928  $ 160  $      -  $350,673  $ (15,841) $(35,274) $(1,208)  $ (396)  $298,114
   Comprehensive loss                   -      -         -         -   (111,530)  (27,463)       -        -    138,993)
   Issuance of common stock             -      -         -        21          -         -        -        -         21
   Stock award cancellations           (2)     -         -       (66)         -         -        -       66          -
   Amortization of deferred
    compensation, net of effects of
    stock award cancellations           -      -         -         -          -         -        -      208        208
   Other                                -      -         -       133          -         -        -     (133)         -
                                   ------- ------ --------- --------- ---------- --------- --------  -------  ---------

Balance at December 31, 2002       15,926    160         -   350,761   (127,371)  (62,737)  (1,208)    (255)   159,350
   Comprehensive income (loss)          -      -         -         -    (13,057)   12,511        -        -       (546)
   Issuance of common stock            15      -         -        72          -         -        -        -         72
   Stock award cancellations          (36)     -         -      (318)         -         -        -      318          -
   Amortization of deferred
    compensation, net of effects of
    stock award cancellations           -      -         -         -          -         -        -     (119)      (119)
                                   ------- ------ --------- --------- ---------- --------- --------  -------  ---------

Balance at December 31, 2003       15,905    160         -   350,515   (140,428)  (50,226)  (1,208)     (56)   158,757
   Comprehensive income                 -      -         -         -     39,938    10,237        -        -     50,175
   Issuance of Series A
    Preferred Stock                     -      -   173,650         -          -         -                      173,650
   Dividends declared on Series A
    Preferred Stock                     -      -         -         -     (3,298)                                (3,298)
   Issuance of common stock            23      -         -       422          -         -        -        -        422
   Stock award cancellations          (10)     -         -       (71)         -         -        -       71          -
   Amortization of deferred
    compensation, net of effects of
    stock award cancellations           -      -         -         -          -         -        -      (22)       (22)
                                   ------- ------ --------- --------- ---------- --------- --------  -------  ---------

Balance at December 31, 2004       15,918  $ 160  $173,650  $350,866  $(103,788) $(39,989) $(1,208)  $   (7)  $379,684
                                   ======= ====== ========= ========= ========== ========= ========  =======  =========
</TABLE>


          See accompanying notes to consolidated financial statements.
                                      F-10

<PAGE>

                           TITANIUM METALS CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Organization and basis of presentation

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

     At December 31, 2004, Valhi, Inc. and subsidiaries  ("Valhi") held 40.8% of
TIMET's  outstanding  common  stock  and 0.4% of the  Company's  6.75%  Series A
Convertible  Preferred Stock (the "Series A Preferred  Stock").  At December 31,
2004, 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
12.1% of the  Company's  common  stock.  TIMET's U.S.  pension plans invest in a
portion of the CMRT that does not hold TIMET common stock. At December 31, 2004,
Contran Corporation ("Contran") held, directly or through subsidiaries, 90.5% 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, or
is held by Mr. Simmons or persons or other entities  related to Mr. Simmons.  In
addition,  Mr. Simmons is the sole trustee of the CMRT and a member of the trust
investment  committee for the CMRT. At December 31, 2004,  Mr.  Simmons'  spouse
owned 40.9% of the  outstanding  Series A Preferred  Stock.  Mr.  Simmons may be
deemed to control each of Contran, Valhi and TIMET.

     The Company completed a five-for-one stock split of its common stock, which
was effected in the form of a stock dividend  (whereby an additional four shares
of post-split  stock were distributed for each one share of pre-split stock) and
became  effective  after the close of trading on August 27,  2004.  The  Company
completed a one-for-ten  reverse stock split,  which became  effective after the
close of trading on February 14, 2003. All share and per share  disclosures  for
all periods presented have been adjusted to give effect to these stock splits.

                                      F-11

<PAGE>


Note 2 - Summary of significant accounting policies

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

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

     Restricted cash and cash equivalents.  Restricted cash and cash equivalents
generally consist of certificates of deposit and other interest bearing accounts
collateralizing  certain  Company  obligations.   Such  restricted  amounts  are
generally  classified as either a current or noncurrent  asset  depending on the
classification  of the obligation to which the restricted  amount  relates.  All
restricted amounts are classified as current at December 31, 2004 and 2003.

     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 40% 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.   The  Company's  marketable   securities  acquired  in  2004,
including the shares of CompX International,  Inc. ("CompX")  contributed by the
Company  and  held by CompX  Group,  Inc.  ("CGI")  (based  upon  the  Company's
redemption  option),  are  classified as  available-for-sale  securities and are
carried at fair value based upon quoted market  prices,  with  unrealized  gains
and/or  losses  included  in  stockholders'  equity  as  a  component  of  other
comprehensive  income.  The Company  evaluates  its  investments  in  marketable
securities  whenever events or conditions  occur to indicate that the fair value
of such investments has declined below their carrying amounts. If the decline in
fair  value is judged to be other than  temporary,  the  carrying  amount of the
security is written down to fair value. See further discussion in Note 4.

                                      F-12

<PAGE>


     Investments  in 20% to 50% owned joint  ventures are  accounted  for by the
equity method. Additionally,  TIMET's 100% owned investment in the Capital Trust
is  accounted  for by the  equity  method,  as  further  discussed  in Note  12.
Differences  between  the  Company's   investment  in  joint  ventures  and  its
proportionate  share of the joint ventures'  reported equity are amortized based
upon the respective useful lives of the assets to which the differences  relate,
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.  During  2004,
approximately  $28,000 of interest was capitalized.  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.

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

     Asset retirement obligations.  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.

                                      F-13

<PAGE>


     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,
2004:

<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
Accretion expense (1)                                                                                        23
Currency translation adjustment                                                                              20
                                                                                                --------------------

Asset retirement obligation, 12/31/2004                                                         $           530
                                                                                                ====================

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

</TABLE>

                                      F-14

<PAGE>


     Fair value of  financial  instruments.  Carrying  amounts of certain of the
Company's  financial  instruments   including,   among  others,  cash  and  cash
equivalents  and accounts  receivable  approximate  fair value  because of their
short  maturities.  The  Company's  bank debt  reprices  with  changes in market
interest rates and, accordingly, the carrying amount of such debt is believed to
approximate market value. The Company's 6.625%  convertible junior  subordinated
debentures due 2026 (the  "Subordinated  Debentures")  held by the Capital Trust
were  issued  at a  fixed  rate;  however,  the  6.625%  mandatorily  redeemable
convertible  preferred securities,  beneficial unsecured convertible  securities
("BUCS")  issued by the Capital  Trust are a publicly  traded  security  (ticker
symbol "TMCXP.PK"),  and may 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, 2004 and 2003,  the aggregate  fair value of
the  outstanding  Subordinated  Debentures,  including  any  accrued  and unpaid
interest,  related to the 115,717 outstanding BUCS approximated $1.9 million and
$137 million at December 31, 2004 and 2003, respectively. The Company's Series A
Preferred Stock is also a publicly traded security  (ticker symbol  "TIELP.PK").
Based upon the last  traded  value of the Series A Preferred  Stock  ($55.76 per
share) on or before  December  31, 2004,  the market  value of such  securities,
which the Company  believes  provides a reasonable  estimate of fair value,  was
$218.0 million as of December 31, 2004.

     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 $0.5  million  in 2004,  $0.2  million  in 2003 and $0.6
million in 2002.

     Stock-based  compensation.  The Company  currently  follows the  disclosure
alternative prescribed by SFAS No. 123, Accounting for Stock-Based Compensation,
as amended by SFAS No. 148, Accounting for Stock-Based Compensation - Transition
and  Disclosure,  and  has  chosen  to  account  for  its  stock-based  employee
compensation  related to stock options in accordance with Accounting  Principles
Board Opinion ("APB") No. 25, Accounting for Stock Issued to Employees,  and its
various  interpretations.  Under APB No. 25,  compensation  expense is generally
recognized for fixed stock options for which the exercise price is less than the
market price of the  underlying  stock on the grant date.  All of the  Company's
stock  options 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 stock  options in 2004,  2003 or 2002.  The  following
table  illustrates  the effect on net income  (loss) and income (loss) per share
attributable  to common  stockholders  if the Company had applied the fair value
recognition  provisions of SFAS No. 123 to all options  granted since January 1,
1995:

                                      F-15

<PAGE>


<TABLE>
                                                                              Year ended December 31,
                                                               -------------------------------------------------------
                                                                    2004                2003               2002
                                                               ----------------    ----------------   ----------------
                                                                                   (In thousands)

<S>                                                            <C>                 <C>                <C>
Net income (loss) attributable to
   common stockholders, as reported                            $      35,540       $     (13,057)     $    (111,530)
Less stock option related stock-based
   employee compensation expense
   determined under SFAS No. 123                                         (65)               (215)              (598)
                                                               ----------------    ----------------   ----------------

Pro forma net income (loss) attributable
   to common stockholders                                      $      35,475       $     (13,272)     $    (112,128)
                                                               ================    ================   ================

Basic earnings (loss) per share attributable
   to common stockholders:
   As reported                                                 $        2.24       $       (0.82)     $       (7.06)
                                                               ================    ================   ================
   Pro forma                                                   $        2.23       $       (0.84)     $       (7.10)
                                                               ================    ================   ================

Diluted earnings (loss) per share attributable
   to common stockholders:
   As reported                                                 $        2.20       $       (0.82)     $       (7.06)
                                                               ================    ================   ================
   Pro forma                                                   $        2.20       $       (0.84)     $       (7.10)
                                                               ================    ================   ================

</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 $2.9 million in 2004,  $2.8 million in 2003 and
$3.3 million in 2002. Related engineering and  experimentation  costs associated
with ongoing commercial production are recorded in cost of sales.

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

                                      F-16

<PAGE>


     Self-insurance.  The Company is self insured for certain exposures relating
to employee and retiree medical benefits and workers'  compensation  claims. The
Company purchases insurance from third-party providers, which limits its maximum
exposure to $150,000 per occurrence for employee  medical  benefits and $500,000
per occurrence for workers'  compensation claims. The Company paid $17.1 million
during 2004,  $14.0 million during 2003 and $18.0 million during 2002 related to
employee  medical  benefits and $170,000  during 2004,  $42,000  during 2003 and
$408,000 during 2002 related to workers  compensation  claims.  The Company also
maintains  insurance  from  third-party  providers  for  automobile,   property,
product,  fiduciary  and  other  liabilities,   which  are  subject  to  various
deductibles and policy limits typical to these types of insurance policies.  See
Note 18 for discussion of policies provided by related parties.

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

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

     In December 2004, the FASB issued SFAS No. 123 (revised 2004),  Share-Based
Payment  ("SFAS No.  123R"),  which replaces SFAS No. 123 and supersedes APB No.
25. SFAS No. 123R requires the measurement of all employee  share-based payments
to employees,  including  grants of employee stock options,  to be recognized in
the financial  statements  based on their fair values.  Under SFAS No. 123R, the
pro forma disclosures  previously permitted under SFAS No. 123 will no longer be
an alternative to financial statement  recognition.  The Company will adopt SFAS
No. 123R as of July 1, 2005 and does not  believe the  adoption of SFAS No. 123R
will have a material  effect on the Company's  financial  position or results of
operations, as all of TIMET's outstanding options will be fully vested as of the
adoption date.

     See also Note 17.
                                      F-17

<PAGE>


Note 3 - Inventories

<TABLE>
                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      2004                 2003
                                                                                -----------------    -----------------
                                                                                           (In thousands)

<S>                                                                             <C>                  <C>
Raw materials                                                                   $        71,067      $        33,198
Work-in-process                                                                          97,848               76,573
Finished products                                                                        77,012               62,687
Supplies                                                                                 12,397               12,248
                                                                                -----------------    -----------------
                                                                                        258,324              184,706
Less adjustment of certain inventories to LIFO basis                                     26,744               18,985
                                                                                -----------------    -----------------

                                                                                $       231,580      $       165,721
                                                                                =================    =================
</TABLE>

Note 4 - Marketable securities

     The following table  summarizes the Company's  marketable  securities as of
December 31, 2004, which were acquired during the year then ended:
<TABLE>

                                                                                                          Unrealized
           Marketable security                   Shares          Market value          Cost basis           gains
------------------------------------------     ------------    ------------------    ---------------    ---------------
                                                                                    ($ in thousands)

<S>                                              <C>             <C>                   <C>                <C>
CompX (1)                                        2,549,520       $      42,144         $    32,011        $    10,133
NL Industries, Inc. ("NL")                         222,100               4,908               2,461              2,447
Kronos Worldwide, Inc. ("Kronos")                    3,985                 162                 145                 17
                                                               ------------------    ---------------    ---------------

                                                                 $      47,214         $    34,617        $    12,597
                                                               ==================    ===============    ===============
-----------------------------------------------------------------------------------------------------------------------
<FN>
(1)  The Company directly holds 336,700 shares of CompX. CGI holds the remaining
     2,212,820 shares. See further discussion below.
</FN>
</TABLE>


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

     During the fourth  quarter of 2004,  the Company  purchased  an  additional
336,700 shares of CompX,  and as of December 31, 2004 the Company held (directly
and through its  investment in CGI)  approximately  16.8% of the total number of
shares of all  classes of CompX  common  stock  outstanding.  None of the shares
purchased  subsequent to September  30, 2004 have been,  nor are expected to be,
contributed to CGI.

                                      F-18

<PAGE>


     At  December  31,  2004,  the  Company  held  approximately  0.5%  of  NL's
outstanding  common stock, and Valhi and a wholly owned subsidiary of Valhi held
an additional 83.3% in the aggregate.

     During the year ended  December 31, 2004,  NL paid  dividends on its common
stock in the form of shares of Kronos  common stock.  At December 31, 2004,  the
Company held less than 0.1% of Kronos'  outstanding  common  stock and Valhi,  a
wholly owned subsidiary of Valhi and NL hold an additional 94% in the aggregate.

Note 5 - Investment in joint ventures

<TABLE>

                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      2004                 2003
                                                                                -----------------    -----------------
                                                                                           (In thousands)
<S>                                                                             <C>                  <C>
Joint ventures:
   VALTIMET SAS ("VALTIMET")                                                    $         22,466     $        22,252
   MZI, LLC ("MZI")                                                                          125                 217
                                                                                -----------------    -----------------

                                                                                $         22,591     $        22,469
                                                                                =================    =================
</TABLE>

     VALTIMET is a manufacturer  of welded  stainless  steel and titanium tubing
with operations in the United States, France, South Korea and China. At December
31, 2004,  VALTIMET was owned 43.7% by TIMET,  51.3% by Valinox Welded, a French
manufacturer of welded tubing, and 5.0% by Sumitomo Metals  Industries,  Ltd., a
Japanese manufacturer of steel products.

     At December 31, 2004, the unamortized net difference  between the Company's
carrying  amount of its  investment in VALTIMET and its  proportionate  share of
VALTIMET's net assets was $3.8 million,  and is principally  attributable to the
difference  between the carrying amount and fair value of fixed assets initially
contributed  by TIMET.  This  difference  is being  amortized  over 15 years and
reduces the amount of equity in earnings  or  increases  the amount of equity in
losses that the Company reports related to its investment in VALTIMET.


     MZI provides  certain testing services and is 33.3% owned by TIMET with the
remainder owned by another titanium manufacturer.  VALTIMET and MZI are exempted
from the scope of FASB  Interpretation  No.  46 ("FIN  46R"),  Consolidation  of
Variable  Interest Entities (an  interpretation of Accounting  Research Bulletin
No. 51). Therefore,  the current SFAS No. 94 model, under which consolidation is
based  upon  control  (generally  defined  as  ownership  of more than 50% of an
entity), continues to apply to these entities.

                                      F-19

<PAGE>


Note 6 - Property and equipment
<TABLE>

                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2004                  2003
                                                                               ------------------    -----------------
                                                                                           (In thousands)

<S>                                                                            <C>                   <C>
Land and improvements                                                          $         8,703       $         8,634
Buildings and improvements                                                              31,780                41,700
Information technology systems                                                          63,609                59,782
Manufacturing equipment and other                                                      333,031               316,088
Construction in progress                                                                14,819                 6,754
                                                                               ------------------    -----------------
                                                                                       451,942               432,958
Less accumulated depreciation                                                          223,769               193,776
                                                                               ------------------    -----------------
                                                                               $       228,173       $       239,182
                                                                               ==================    =================
</TABLE>

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

     In November 2004, pursuant to an agreement with Basic Management,  Inc. and
certain of its affiliates  ("BMI"),  the Company sold certain  property  located
adjacent to its Henderson,  Nevada plant site.  However,  BMI has leased back to
the Company the use of certain  settling ponds located on the property until the
Company  completes  construction  of a  wastewater  treatment  facility  on  its
Henderson  plant site.  The Company has recorded a $12 million  deferred gain on
its Consolidated  Balance Sheet related to cash proceeds  received on this sale.
This deferred gain will be recognized when the Company completes construction of
the wastewater  treatment  facility and can cease use of the settling ponds. The
Company currently expects the wastewater  treatment facility to be completed and
operational in the second quarter of 2005. See  "Environmental  matters" in Note
19 for further  discussion of this  transaction,  including BMI's  assumption of
certain environmental  obligations related to the property,  which will directly
affect the gain recognized during 2005.

Note 7 - Intangible assets

     On January 1, 2002, the Company  adopted SFAS No. 142, under which 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.  During  the
Company's 2002 impairment  assessment,  management judgment was used 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 considered,  among other
things, a combination of fair value  indicators  including quoted market prices,
prices of comparable  businesses and discounted  projected cash flows based upon
Company  forecasts,  which  considered  information  obtained from review of The
Airline Monitor and from discussions with the Company's customers throughout the
first half of 2002, both of which assisted the Company in better  estimating the
impact of the September 11, 2001 terrorist attacks on its business.

                                      F-20

<PAGE>


     As a result  of this  information,  step one of the  impairment  evaluation
completed in the second quarter of 2002  indicated  that the Company's  recorded
goodwill might be impaired,  which  obligated the Company to complete the second
step of the  impairment  test.  Based on the  results of the second  step of the
impairment test completed  during the third quarter of 2002, which indicated the
Company's  goodwill  was  impaired,  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.

     As of December  31, 2004 and 2003,  the  Company's  intangible  assets with
definite lives are solely comprised of patents. In accordance with SFAS No. 142,
the Company has  evaluated  the  remaining  useful lives of its patents and will
continue  to  amortize  such  patents  over  their  weighted  average  remaining
amortization  periods of 1.1 years as of December 31, 2004. The carrying  amount
and accumulated amortization of the Company's intangible assets are as follows:

<TABLE>

                                                         December 31, 2004                    December 31, 2003
                                                 ----------------------------------    --------------------------------
                                                   Carrying           Accumulated        Carrying         Accumulated
                                                    Amount            Amortization        Amount         Amortization
                                                 --------------     ---------------    --------------    --------------
                                                                            (In thousands)
<S>                                              <C>                <C>                <C>               <C>
Intangible assets:
  Definite lives, subject to amortization:
     Patents                                     $     14,874       $       13,224     $     14,475      $      11,322
  Other intangible asset - pension asset (1)            3,407                    -            3,141                  -
                                                 --------------     ---------------    --------------    --------------

                                                 $     18,281       $       13,224     $     17,616      $      11,322
                                                 ==============     ===============    ==============    ==============
-----------------------------------------------------------------------------------------------------------------------
<FN>
(1)  Not covered by the scope of SFAS No. 142.
</FN>

</TABLE>


     The Company's  amortization  expense relating to its intangible  assets was
$1.5  million  in 2004,  $1.7  million  in 2003 and $2.1  million  in 2002.  The
Company's  patents will become fully  amortized in 2006,  with aggregate  annual
amortization  expense  expected to be $1.0 million  during 2005 and $0.7 million
during 2006.

Note 8 - Other noncurrent assets
<TABLE>

                                                                                           December 31,
                                                                              ---------------------------------------
                                                                                    2004                  2003
                                                                              ------------------    -----------------
                                                                                          (In thousands)

   <S>                                                                        <C>                   <C>
   Deferred financing costs                                                   $           786       $         7,563
   Prepaid pension cost                                                                10,531                 8,981
   Notes receivable from officers                                                          49                   145
   Other                                                                                  210                     3
                                                                              ------------------    -----------------

                                                                              $        11,576       $        16,692
                                                                              ==================    =================
</TABLE>

     The Company's  deferred financing costs relate to the Company's U.S. credit
facility and the issuance of the BUCS and are amortized on a straight-line basis
through 2006 and 2026,  respectively.  See Note 12 for further discussion of the
BUCS deferred financing costs.

                                      F-21

<PAGE>


Note 9 - Accrued liabilities

<TABLE>
                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      2004                 2003
                                                                                -----------------    -----------------
                                                                                           (In thousands)

<S>                                                                             <C>                  <C>
OPEB cost                                                                       $         2,777      $         3,135
Pension cost                                                                              5,285                8,466
Payroll and vacation                                                                      5,810                6,891
Incentive compensation                                                                   12,570                  579
Other employee benefits                                                                   9,721                9,731
Deferred income                                                                           1,736                1,663
Environmental costs                                                                       2,530                  301
Taxes, other than income                                                                  4,166                4,408
Wyman-Gordon Company ("Wyman-Gordon") installment                                             -                2,800
Other                                                                                     8,535                6,497
                                                                                -----------------    -----------------

                                                                                $        53,130      $        44,471
                                                                                =================    =================
</TABLE>

     See Note 19 with regard to environmental costs.

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

     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 paid the remaining  $2.8 million  during the first
quarter of 2004.

     Under the  terms of the  Company's  long-term  agreement  ("LTA")  with The
Boeing  Company  ("Boeing"),  Boeing is required to purchase  from the Company a
buffer  inventory of titanium  products for use by the Company in the production
of titanium products ordered by Boeing in the future. As the buffer inventory is
completed,  Boeing is billed  and takes  title to the  inventory,  although  the
Company 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  mill  product is
delivered  to Boeing.  As of  December  31, 2004 and 2003,  $1.6  million of the
Company's deferred income related to the buffer inventory.

                                      F-22

<PAGE>


Note 10 - Customer advances

     Under the terms of the Boeing LTA, in 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, 2004,  $0.7 million of customer  advances  related to the Company's
LTA with Boeing and represented  amounts to be credited against the 2005 advance
for 2004 subcontractor purchases.

Note 11 - Bank debt and capital lease obligations

<TABLE>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2004                  2003
                                                                               ------------------    -----------------
                                                                                           (In thousands)

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

Capital lease obligations                                                      $           197       $        10,290
   Less current maturities                                                                  22                   524
                                                                               ------------------    -----------------

                                                                               $           175       $         9,766
                                                                               ==================    =================
</TABLE>

     Long-term  bank credit  agreements.  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").  During the first  quarter of 2004,  the
Company  amended its U.S.  credit  facility  to, among other  things,  allow the
Company the flexibility to remove the equipment component from the determination
of the  Company's  borrowing  availability  in order to  avoid  the  costs of an
appraisal.  The Company  took  advantage  of this  flexibility  during the first
quarter  of  2004,   effectively   reducing  the  Company's   current  borrowing
availability  in the U.S. by $12 million.  However,  the Company can regain this
availability by completing an updated equipment  appraisal.  Interest  currently
accrues at rates  based on LIBOR  plus 2% and bank  prime  rate plus  0.5%.  The
weighted average interest rate on borrowings outstanding as of December 31, 2004
was 4.3%.  Borrowings are  collateralized  by substantially all of the Company's
U.S. assets.

                                      F-23

<PAGE>


     The U.S. credit agreement prohibits the payment of distributions in respect
of the Capital  Trust's BUCS and dividends on the  Company's  Series A Preferred
Stock  if  "excess  availability"   (defined  as  borrowing   availability  less
outstanding  borrowings and certain  contractual  commitments such as letters of
credit) is less than $25  million,  prohibits  the payment of  dividends  on the
Company's common stock if excess  availability is less than $40 million,  limits
additional  indebtedness,  requires compliance with certain financial covenants,
including a minimum net worth  covenant and a fixed charge ratio  covenant,  and
contains other  covenants  customary in lending  transactions  of this type. The
Company was in compliance  with all  covenants for all periods  during the years
ended  December  31, 2004 and 2003.  As of December  31,  2004,  the Company had
outstanding  borrowings  under the U.S. credit  agreement of $43.2 million,  and
excess  availability was  approximately $48 million.  Under this agreement,  the
Company is required to maintain a lock box  arrangement  whereby  daily net cash
receipts are used to reduce outstanding borrowings. Accordingly, any outstanding
balances under the U.S. credit agreement are classified as a current  liability,
regardless of the maturity date of the agreement.

     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 February 2006. Borrowings under
the U.K. Facilities can be in various currencies including U.S. dollars, British
pounds sterling and euros and are  collateralized  by substantially all of TIMET
UK's  assets.  Interest  generally  accrues at LIBOR plus 1.25% for U.S.  dollar
borrowings  and the  bank's  Base Rate plus  1.25% for  British  pound  sterling
borrowings.

     The U.K. Facilities require the maintenance of certain financial ratios and
amounts, including a minimum net worth covenant and other covenants customary in
lending transactions of this type. TIMET UK was in compliance with all covenants
for all periods  during the years  ended  December  31, 2004 and 2003.  The U.K.
overdraft  facility is subject to annual review in December of each year and was
renewed in December 2004.  During the second quarter of 2003,  TIMET UK received
an  interest-bearing  intercompany  loan from a U.S.  subsidiary  of the Company
enabling TIMET UK to reduce its long-term  borrowings under the U.K.  Facilities
to zero.  This loan was repaid in full during the third  quarter of 2004.  As of
December 31, 2004, the Company had no borrowings under the U.K. Facilities,  and
unused borrowing availability was approximately $43 million.

     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.  As of  December  31,  2004,  there  were no
outstanding borrowings under these facilities, and unused borrowing availability
was approximately $18 million.

     Capital lease  obligations.  At December 31, 2003, certain of the Company's
U.S.  equipment  were held under  three year leases  expiring  at various  times
during 2004 and 2005. In January 2004, the Company  purchased  substantially all
of the U.S. equipment held under these capital leases for $0.7 million.

                                      F-24

<PAGE>


     At December 31, 2003, certain of the Company's U.K.  production  facilities
were under three thirty-year  leases expiring in 2026. During the fourth quarter
of 2004,  the Company and the lessor  amended these lease  agreements  such that
they no longer meet the criteria for capital lease  treatment under SFAS No. 13,
Accounting  for  Leases,   and  are  now  accounted  for  as  operating  leases.
Accordingly,  the Company reduced its capital lease  obligations and related net
property  and  equipment  by  $10.3  million  and  $7.8  million,  respectively,
resulting in a $2.5 million  deferred gain that the Company will  recognize on a
straight-line basis over the term of the amended lease agreements,  one of which
expires  in 2014 and two of which  expire  in 2024.  The  Company's  first  rent
payment  under the amended lease  agreements is not due until October 2006,  and
the Company is  recognizing  rent  expense  with  respect to the  amended  lease
agreements  based on the  aggregate  contractual  rent  payments  allocated on a
straight-line basis over the terms of the amended lease agreements.

     As of December  31,  2003,  assets held under  capital  leases  included in
buildings  were $10.4  million.  There were no assets held under capital  leases
included in buildings as of December 31, 2004. Assets included in equipment were
$0.3 million and $1.5 million at December 31, 2004 and 2003,  respectively.  The
related aggregate accumulated  depreciation for both buildings and equipment was
$0.1 million and $3.7 million at December 31, 2004 and 2003, respectively.

     Aggregate  maturities of capital lease  obligations as of December 31, 2004
are reflected in the following table:

<TABLE>
                                                                                       Amount
                                                                                ----------------------
                                                                                   (In thousands)
         <S>                                                                    <C>
         Year ending December 31,
            2005                                                                $              33
            2006                                                                               31
            2007                                                                               31
            2008                                                                               31
            2009 and thereafter                                                               119
                                                                                ----------------------
                                                                                              245
            Less amounts representing interest                                                 48
                                                                                ----------------------

                                                                                $             197
                                                                                ======================
</TABLE>

Note 12 - Capital Trust

     In November  1996,  the Capital Trust issued  $201.3  million BUCS and $6.2
million  6.625%  common  securities.  TIMET owns all of the  outstanding  common
securities of the Capital Trust, and the Capital Trust is a wholly owned finance
subsidiary  of TIMET.  The Capital Trust used the proceeds from such issuance to
purchase from the Company $207.5 million  principal  amount of the  Subordinated
Debentures.  The Subordinated Debentures and accrued interest receivable are the
sole assets of the Capital Trust at December 31, 2004.

                                      F-25

<PAGE>


     Prior to December 31, 2003,  the Company  consolidated  the Capital  Trust.
Based upon guidance in FIN 46R, the Company  concluded that the Capital Trust is
considered to be both a special purpose entity and a variable  interest  entity.
TIMET has concluded it is not the primary  beneficiary of the Capital Trust, and
therefore TIMET was 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,  where
applicable.  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 presentation.

     In August 2004, the Company completed an exchange offer,  pursuant to which
the Company had offered to exchange all of the 4,024,820 outstanding BUCS issued
by the Capital Trust for shares of the Company's Series A Preferred Stock at the
exchange rate of one share of Series A Preferred  Stock for each BUCS. On August
31, 2004, the Company  issued  3,909,103  shares of Series A Preferred  Stock in
exchange for the BUCS  tendered.  During the third quarter of 2004,  the Company
recognized  a $15.5  million  non-cash  non-operating  gain  related to the BUCS
exchange,  reflecting the  difference  between the carrying value of the related
Subordinated  Debentures  ($195.5  million)  and the fair  value of the Series A
Preferred Stock issued ($173.7  million,  based on the closing price of the BUCS
on August 31, 2004 according to NASDAQ's website of $45.25 per share,  less $3.2
million  attributable  to accrued and unpaid  dividends),  less $6.3  million of
unamortized deferred financing costs related to the exchanged BUCS. See Note 14.

     The BUCS, which mature December 2026, do not require principal amortization
and are redeemable at the Company's  option.  The redemption price  approximates
101% of the  principal  amount as of December 1, 2004 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.  During 2002,
the Company  exercised its right to defer interest  payments on the Subordinated
Debentures,  effective  for the  December 1, 2002  scheduled  interest  payment.
Interest  continued  to accrue at the 6.625%  coupon rate on the  principal  and
unpaid  interest until the Company's Board of Directors  approved  resumption of
scheduled quarterly interest payments on the Subordinated  Debentures  beginning
with the payment on June 1, 2004. The Company's  Board also approved  payment of
all previously  deferred interest on the Subordinated  Debentures.  On April 15,
2004,  the Company  paid the deferred  interest in the amount of $21.7  million,
$21.0 million of which related to the BUCS.

                                      F-26

<PAGE>


     TIMET's  guarantee  of  payment  of  the  remaining  outstanding  BUCS  (in
accordance with the terms thereof) and its  obligations  under the Capital Trust
documents constitute,  in the aggregate,  a full and unconditional  guarantee by
the  Company  of the  Capital  Trust's  obligations  under  the  BUCS.  The BUCS
represent  undivided  beneficial  ownership  interests in the Capital Trust, are
entitled to cumulative preferred  distributions from the Capital Trust of 6.625%
per  annum,  compounded  quarterly,  and are  convertible,  at the option of the
holder, into TIMET common stock at the rate of 0.6695 shares of common stock per
BUCS (an  equivalent  price of $74.68 per share),  for an aggregate of less than
0.1 million common shares if the 115,717 remaining BUCS are fully converted.

Note 13 - Minority interest

     Minority  interest  relates  principally to the Company's  70%-owned French
subsidiary,  TIMET Savoie,  S.A. ("TIMET Savoie").  The Company has the right to
purchase from  Compagnie  Europeenne du  Zirconium-CEZUS,  S.A.  ("CEZUS"),  the
holder of the remaining 30% interest, CEZUS' interest in TIMET Savoie for 30% of
TIMET Savoie's equity  determined under French accounting  principles,  or $12.4
million as of December 31,  2004.  CEZUS has the right to require the Company to
purchase  its  interest  in TIMET  Savoie for 30% of TIMET  Savoie's  registered
capital,  or $3.4 million as of December 31,  2004.  TIMET Savoie made  dividend
payments to CEZUS of $0.7 million in 2004 and $1.9 million in 2003.

Note 14 - Stockholders' equity

     Preferred  stock. At December 31, 2004, the Company was authorized to issue
10 million  shares of preferred  stock.  The Board of Directors  determines  the
rights of preferred  stock as to, among other  things,  dividends,  liquidation,
redemption, conversions and voting rights.

     Upon  completion  of the BUCS  exchange  offer  discussed  in Note 12,  the
Company issued 3,909,103  shares of Series A Preferred Stock.  Each share of the
Series A  Preferred  Stock is  convertible,  at any time,  at the  option of the
holder  thereof,  at a  conversion  price of $30.00  per share of the  Company's
common stock  (equivalent to a conversion  rate of one and two-thirds  shares of
common  stock for each  share of Series A  Preferred  Stock),  with any  partial
shares paid in cash.  The  conversion  rate is subject to  adjustment if certain
events occur,  including,  but not limited to, a stock dividend on the Company's
common stock,  subdivisions or certain reclassifications of the Company's common
stock or the issuance of warrants to holders of the Company's common stock.

     The  Series  A  Preferred  Stock  is  not  mandatorily  redeemable,  but is
redeemable at the option of the Company at any time after the third  anniversary
of the date of issuance if, prior to the notice of such redemption,  the closing
price  of the  Company's  common  stock  exceeds  the  conversion  price  for 30
consecutive  days.  Holders  of the Series A  Preferred  Stock are  entitled  to
receive  cumulative  cash  dividends  at the rate of 6.75% of the $50 per  share
liquidation  preference per annum per share  (equivalent to $3.375 per annum per
share),  when,  as and if  declared by the  Company's  board of  directors.  The
Company paid $3.3 million of such  dividends in 2004.  Whether or not  declared,
cumulative dividends on Series A Preferred Stock are deducted from net income to
arrive at net income  attributable  to common  stockholders.  As of December 31,
2004,  net income  attributable  to common  stockholders  included  $1.1 million
($0.28 per outstanding  share) of undeclared  dividends.  Subsequent to December
31, 2004, the Company's  board of directors  declared a dividend of $0.84375 per
share,  payable on March 15,  2005 to  holders  of record of Series A  Preferred
Stock as of the close of trading on March 1, 2005.

                                      F-27

<PAGE>


     Common stock.  At December 31, 2004, the Company was authorized to issue 90
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  under certain  circumstances.  See
also 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.
No  restricted  stock or options have been issued since 2000 under the Incentive
Plan.

     Eligible  non-employee  directors  are  covered  by a  plan  that  includes
stock-based grants as an element of director compensation (the "Director Plan").
In 2004  and  2003,  the  Director  Plan  provided  for  annual  grants  to each
non-employee  director 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,  the Director
Plan provided for (i) annual  grants of options to purchase  2,500 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 500  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  fair value at grant  date of the 3,500,  3,000 and 5,000
total  shares  issued  to  non-employee   directors  in  2004,  2003  and  2002,
respectively, was $68,835 in 2004, $14,340 in 2003 and $38,600 in 2002.

     The  weighted  average  remaining  life of  options  outstanding  under the
Incentive  Plan and the Director Plan was 3.6 years at December 31, 2004 and 4.5
years at December 31, 2003.  At December  31,  2004,  2003 and 2002,  options to
purchase 509,040, 473,370 and 450,610 shares, respectively,  were exercisable at
average exercise prices of $36.75, $38.84 and $42.42,  respectively.  Options to
purchase  25,000  shares  become  exercisable  in  2005  based  on  the  options
outstanding  at December 31, 2004.  At December  31,  2004,  878,270  shares and
45,430 shares, respectively, were available for future grant under the Incentive
Plan and the Director Plan.

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

<TABLE>

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

<S>                                     <C>          <C>             <C>               <C>             <C>
Outstanding at December 31, 2001        643,660      $  7.20-70.63   $    23,985       $     37.26
  Granted - at market                    15,000      $   3.32-7.72           105       $      6.99     $    4.60
  Canceled                              (42,810)     $ 15.94-70.63        (1,489)      $     34.76
                                      -----------                    --------------

Outstanding at December 31, 2002        615,850      $  3.32-70.63        22,601       $     36.70

  Canceled                              (65,100)     $  7.72-70.63        (2,886)      $     44.33
                                      -----------                    --------------

Outstanding at December 31, 2003        550,750      $  3.32-70.63        19,715       $     35.80
  Exercised                              (5,050)     $       15.94           (80)      $     15.94
  Canceled                              (11,660)     $ 15.94-58.63          (496)      $     42.49
                                      -----------                    --------------

Outstanding at December 31, 2004        534,040      $  3.32-70.63   $    19,139       $     35.84
                                      ===========                    ==============
</TABLE>

                                      F-28
<PAGE>


     The following  table  summarizes  the  Company's  options  outstanding  and
exercisable as of December 31, 2004 by price range:

<TABLE>

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

                                             Weighted
                                              average
                                             remaining            Weighted                                Weighted
     Range of         Outstanding at        contractual           average           Exercisable           average
  exercise prices        12/31/04         life (in years)      exercise price       at 12/31/04        exercise price
-------------------- -----------------   -------------------- ----------------    -----------------    ---------------

<S>                        <C>                   <C>            <C>                     <C>             <C>
$   3.32-7.06                2,500               8.0            $      3.32               2,500         $      3.32
$  7.07-14.12               65,000               5.6            $     12.54              55,000         $     12.27
$ 14.13-21.19              185,140               4.4            $     17.29             175,140         $     17.25
$ 21.20-28.25               25,000               5.1            $     22.00              20,000         $     22.00
$ 28.26-35.31                5,000               6.4            $     28.42               5,000         $     28.42
$ 42.39-49.44               43,900               1.4            $     46.00              43,900         $     46.00
$ 49.44-56.50               55,560               1.9            $     54.92              55,560         $     54.92
$ 56.51-63.56              104,940               2.5            $     58.77             104,940         $     58.77
$ 63.57-70.63               47,000               2.8            $     67.74              47,000         $     67.74
                     -----------------                                            -----------------

                           534,040               3.6            $     35.84             509,040         $     36.75
                     =================                                            =================

</TABLE>

     Weighted average fair values of options at grant date for options issued in
2002 under the Director Plan were estimated using the Black-Scholes  model based
on assumptions listed below:

           Assumptions at date of grant:
             Expected life (years)                                        6
             Risk-free interest rate                                   2.01%
             Volatility                                                  74%
             Dividend yield                                               0%

     During 2000, the Company awarded 233,750 shares of TIMET restricted  common
stock under the  Incentive  Plan to certain  officers and  employees.  The stock
grant  restrictions  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 2004, 2003 and 2002, respectively,  2,650, 17,900
and 32,800 shares of restricted  stock were  forfeited.  The market value of the
restricted stock awards was approximately  $2.0 million ($8.75 per share) on the
date of grant,  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.

                                      F-29

<PAGE>


Note 15 - Other income (expense)

<TABLE>
                                                                              Year ended December 31,
                                                                ----------------------------------------------------
                                                                    2004               2003               2002
                                                                --------------     --------------    ---------------
                                                                                  (In thousands)
<S>                                                             <C>                <C>               <C>
Other operating income (expense):
  Boeing take-or-pay                                            $     22,093       $     23,083      $     23,408
  Litigation settlements                                                   -              1,113                 -
  Insurance claim settlement                                             648                  -                 -
  Other, net                                                             248                193              (126)
                                                                --------------     --------------    ---------------

                                                                $     22,989       $     24,389      $     23,282
                                                                ==============     ==============    ===============

Other non-operating income (expense):
  Dividends and interest                                        $        687       $        383      $        118
  Equity in earnings of common securities
     of the Capital Trust                                                424                432               413
  Surety bond guarantee credit (expense)                                 221               (449)           (1,575)
  Foreign exchange loss, net                                            (477)              (189)             (587)
  Gain on BUCS exchange, net (Note 12)                                15,465                  -                 -
  Impairment of investment in SMC
     preferred securities                                                  -                  -           (27,500)
  Other, net                                                            (121)              (471)             (762)
                                                                --------------     --------------    ---------------

                                                                $     16,199       $       (294)     $    (29,893)
                                                                ==============     ==============    ===============
</TABLE>

     The terms of the  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, only 40% of which may
be ingot. 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  1.7 million  pounds  during 2004,  the Company  recognized  $22.1
million of income for the year ended December 31, 2004.  The Company  recognized
$23.1   million  and  $23.4  million  of  such  income  during  2003  and  2002,
respectively.  Recognition of the take-or-pay income reduces the Boeing customer
advance as described in Note 10.

                                      F-30

<PAGE>


     In 1998,  the  Company  purchased  $80  million in  non-voting  convertible
preferred securities of Special Metals Corporation ("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,  approved  by the  Bankruptcy  Court  in 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 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,
                                                                 -----------------------------------------------------
                                                                      2004               2003              2002
                                                                 ---------------    ---------------   ----------------
                                                                                    (In thousands)
<S>                                                              <C>                <C>               <C>
Pre-tax income (loss):
  U.S.                                                           $    21,876        $    (3,431)      $   (64,705)
  Non-U.S.                                                            17,149             (7,850)           (3,181)
                                                                 ---------------    ---------------   ----------------

                                                                 $    39,025        $   (11,281)      $   (67,886)
                                                                 ===============    ===============   ================

Expected income tax expense (benefit), at 35%                    $    13,659        $    (3,948)      $   (23,760)
Non-U.S. tax rates                                                      (451)               535               591
Incremental tax on earnings of non-U.S. group affiliates                 106                131                49
U.S. state income taxes, net                                             297             (1,050)           (1,650)
Dividends received deduction                                             (93)              (312)             (241)
Nontaxable income                                                        (98)              (123)             (373)
Revision of estimated tax liability                                     (551)              (241)             (194)
Change in valuation allowance:
  Effect of change in tax law                                              -                  -            (1,797)
  Adjustment of deferred income tax asset
    valuation allowance                                              (14,433)             6,196            25,470
Other, net                                                              (568)                19               (47)
                                                                 ---------------    ---------------   ----------------

                                                                 $    (2,132)       $     1,207       $    (1,952)
                                                                 ===============    ===============   ================
</TABLE>

                                      F-31

<PAGE>


<TABLE>

                                                                               Year ended December 31,
                                                                 -----------------------------------------------------
                                                                      2004               2003              2002
                                                                 ---------------    ---------------   ----------------
                                                                                    (In thousands)
<S>                                                              <C>                <C>               <C>
Income tax expense (benefit):
  Current income taxes (benefit):
     U.S.                                                        $       648        $        30       $    (1,688)
     Non-U.S.                                                          2,931              1,436             3,430
                                                                 ---------------    ---------------   ----------------
                                                                       3,579              1,466             1,742
                                                                 ---------------    ---------------   ----------------

  Deferred income taxes (benefit):
     U.S.                                                             (4,202)                 -                 -
     Non-U.S.                                                         (1,509)              (259)           (3,694)
                                                                 ---------------    ---------------   ----------------
                                                                      (5,711)              (259)           (3,694)
                                                                 ---------------    ---------------   ----------------

                                                                 $    (2,132)       $     1,207       $    (1,952)
                                                                 ===============    ===============   ================

Comprehensive tax provision (benefit) allocable to:
  Pre-tax income (loss)                                          $    (2,132)       $     1,207       $    (1,952)
  Stockholders' equity, including amounts allocated
     to other comprehensive income                                         -                  -            (1,588)
                                                                 ---------------    ---------------   ----------------

                                                                 $    (2,132)       $     1,207       $    (3,540)
                                                                 ===============    ===============   ================
</TABLE>

     The  following  table  summarizes  the  Company's  deferred  tax assets and
deferred tax liabilities as of December 31, 2004 and 2003:

<TABLE>

                                                                                  December 31,
                                                           -----------------------------------------------------------
                                                                      2004                            2003
                                                           ----------------------------    ---------------------------
                                                             Assets        Liabilities       Assets       Liabilities
                                                           ------------    ------------    -----------    ------------
                                                                                 (In millions)
<S>                                                        <C>             <C>             <C>            <C>
Temporary differences relating to net assets:
  Inventories                                              $        -      $     (3.8)     $      1.4     $        -
  Property and equipment, including software                        -           (29.9)              -          (36.7)
  Goodwill                                                        7.7               -             8.8              -
  Accrued pension cost                                           21.1                            20.6
  Accrued OPEB cost                                               6.2               -             6.1              -
  Accrued liabilities and other deductible differences           22.6               -            16.0              -
  Other taxable differences                                       -              (7.3)              -           (9.9)
Tax loss and credit carryforwards                                70.9               -            85.5              -
Valuation allowance                                             (81.5)              -           (91.6)             -
                                                           ------------    ------------    -----------    ------------
Gross deferred tax assets (liabilities)                          47.0           (41.0)           46.8          (46.6)
Netting                                                         (41.0)           41.0           (46.0)          46.0
                                                           ------------    ------------    -----------    ------------
Total deferred taxes                                              6.0               -             0.8           (0.6)
Less current deferred taxes                                       5.0               -             0.8              -
                                                           ------------    ------------    -----------    ------------

Net noncurrent deferred taxes                              $      1.0      $        -      $        -     $     (0.6)
                                                           ============    ============    ===========    ============

</TABLE>

                                      F-32

<PAGE>


     The  Company  periodically  reviews  its  deferred  income  tax  assets  to
determine  if future  realization  is more  likely  than not.  During  the third
quarter of 2004, due to a change in estimate of the Company's ability to utilize
the benefits of its net operating  loss ("NOL")  carryforwards  in Germany,  the
Company  determined  that its  deferred  income  tax  asset in  Germany  met the
"more-likely-than-not"  recognition criteria.  Accordingly, the Company reversed
the $0.7 million  valuation  allowance  attributable to such deferred income tax
asset. In addition,  the Company's deferred income tax asset valuation allowance
related to income from continuing  operations  decreased by $13.7 million during
2004,  primarily due to the utilization of the U.S. and U.K. NOL  carryforwards,
the  benefit  of  which  had  previously  not  met  the   "more-likely-than-not"
recognition criteria.

     During the fourth quarter of 2004, the Company recognized a deferred income
tax benefit  related to a $4.2 million  decrease in the Company's U.S.  deferred
income tax asset valuation allowance  attributable to the Company's recognition,
for U.S.  income tax purposes only, of a capital gain on the fourth quarter sale
of certain  property  located at the Company's  Henderson,  Nevada facility (see
Note 6). The Company  expects to recognize a  corresponding  deferred income tax
expense  in 2005,  when  the  gain is  recognized  under  accounting  principles
generally accepted in the United States of America.

     The  following  table  summarizes  the  components  of  the  change  in the
Company's deferred tax asset valuation allowance in 2004, 2003 and 2002:

<TABLE>

                                                                                 Year ended December 31,
                                                                ------------------------------------------------------
                                                                     2004                2003               2002
                                                                ----------------    ---------------   ----------------
                                                                                   (In thousands)
<S>                                                             <C>                 <C>               <C>
Effect of:
  (Income) loss before income taxes                             $    (14,433)       $      6,196      $     23,673
  Cumulative effect of change in accounting principle                      -                  60            11,761
  Accumulated other comprehensive (income) loss                       (1,582)               (533)           11,966
  Offset to the change in net deferred income tax
     assets due principally to revision of estimated
     tax liability                                                     5,077                   -                 -
  Currency translation adjustment                                        787               1,122                 -
                                                                ----------------    ---------------   ----------------

                                                                $    (10,151)       $      6,845      $     47,400
                                                                ================    ===============   ================
</TABLE>

     At  December  31,  2004,  the  Company  had,  for U.S.  federal  income tax
purposes,  (i) NOL  carryforwards  of $101  million  that expire in 2020 through
2023,  (ii) a capital loss  carryforward of $74 million that expires in 2008 and
(iii) alternative minimum tax ("AMT") credit carryforwards of $4 million,  which
can be utilized to offset regular income taxes payable in future years,  with an
indefinite  carryforward period. In addition,  at December 31, 2004, the Company
had the  equivalent  of an $11 million  NOL  carryforward  in the U.K.  and a $2
million NOL carryforward in Germany, both of which have indefinite  carryforward
periods.

     In October  2004,  the American  Jobs Creation Act of 2004 was enacted into
law.  The new law  provides for a special 85%  deduction  for certain  dividends
received in 2005 from controlled foreign  corporations.  Because certain details
in the new law  lack  clarification,  and the  impact  of the  special  dividend
received  deduction to the Company is dependent,  in part, on the Company's 2005
foreign and domestic taxable income,  the Company has not yet determined whether
it will benefit from the new law. In 2005,  the Company  plans to evaluate  both
clarifying  guidance on the new law from the  Internal  Revenue  Service and its
year-to-date  taxable income activity to determine the level of benefit, if any,
the Company will derive from the special dividend received deduction.

                                      F-33

<PAGE>


     Beginning in 2005,  the new law also provides for a special  deduction from
U.S.  taxable  income  equal  to a  stipulated  percentage  of a U.S.  company's
qualified income from domestic manufacturing  activities (as defined).  Although
the Company  believes that the majority of its operations meet the definition of
qualified  domestic  manufacturing  activities,  the Company  does not expect to
benefit from the special manufacturing  deduction in 2005, primarily because the
Company  projects  its U.S.  taxable  income in 2005 will be fully offset by its
existing U.S. NOL carryforwards.

     During the first  quarter of 2002,  the Job Creation and Worker  Assistance
Act of 2002 (the "JCWA Act") was signed into law.  The  Company  benefited  from
provisions of the JCWA Act, which liberalized  certain NOL and 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.

Note 17 - Employee benefit plans

     Variable  compensation  plans.  The  majority  of the  Company's  worldwide
employees   participate  in   compensation   programs   providing  for  variable
compensation  based primarily on the financial  performance of the Company.  The
cost of these plans was  approximately  $12.1  million in 2004,  $0.4 million in
2003 and $1.3 million in 2002.

     Defined  contribution  plans.  Approximately 66% of the Company's worldwide
employees at December 31, 2004 participate in defined contribution pension plans
with employer  contributions  based upon a fixed  percentage  of the  employee's
eligible  earnings.  All of the  Company's  U.S.  employees  (62%  of  worldwide
employees at December 31, 2004) are also eligible to participate in contributory
savings plans with partial matching employer contributions, although the Company
suspended making such partial matching  contributions for certain employees from
April 1, 2003 through April 3, 2004. The cost of these pension and savings plans
approximated  $3.3  million in 2004,  $1.9  million in 2003 and $2.4  million in
2002.

     Defined benefit pension plans. The Company maintains  contributory  defined
benefit  pension  plans  covering a majority  of its  European  employees  and a
noncontributory  defined  benefit  pension plan  covering a minority of its U.S.
employees. The Company's funding policy is to annually contribute, at a minimum,
amounts satisfying the applicable statutory funding  requirements.  Between 1989
and 1995, the U.S. defined benefit pension plans were closed to new participants
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-34

<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,
                                                                               ---------------------------------------
                                                                                     2004                  2003
                                                                               ------------------    -----------------
                                                                                           (In thousands)
<S>                                                                            <C>                   <C>
Change in projected benefit obligations:
  Balance at beginning of year                                                 $      223,091        $      186,609
  Service cost                                                                          4,439                 3,855
  Interest cost                                                                        12,646                11,087
  Plan amendments                                                                         756                     -
  Actuarial loss                                                                       20,238                16,314
  Benefits paid                                                                       (10,413)               (9,922)
  Change in currency exchange rates                                                    11,723                15,148
                                                                               ------------------    -----------------

       Balance at end of year                                                  $      262,480        $      223,091
                                                                               ==================    =================

Change in plan assets:
  Fair value at beginning of year                                              $      158,923        $      118,280
  Actual return on plan assets                                                         21,291                28,053
  Employer contributions                                                               10,027                11,817
  Participants' contributions                                                           1,132                   997
  Benefits paid                                                                       (10,413)               (9,922)
  Change in currency exchange rates                                                     7,699                 9,698
                                                                               ------------------    -----------------

       Fair value at end of year                                               $      188,659        $      158,923
                                                                               ==================    =================

Funded status:
  Plan assets under projected benefit obligations                              $      (73,821)       $      (64,168)
   Unrecognized:
     Actuarial loss                                                                    91,682                79,347
     Prior service cost                                                                 3,407                 3,141
                                                                               ------------------    -----------------

       Total prepaid pension cost                                              $       21,268        $       18,320
                                                                               ==================    =================

Amounts recognized in balance sheets:
  Intangible pension asset                                                     $        3,407        $        3,141
  Noncurrent prepaid pension cost                                                      10,531                 8,981
  Current pension liability                                                            (5,285)               (8,466)
  Noncurrent pension liability                                                        (77,515)              (62,366)
  Accumulated other comprehensive loss                                                 90,130                77,030
                                                                               ------------------    -----------------

                                                                               $       21,268        $       18,320
                                                                               ==================    =================
</TABLE>

     As of December  31, 2004 and 2003,  all of the  Company's  defined  benefit
pension plans have  accumulated  benefit  obligations in excess of fair value of
plan assets.  The accumulated  benefit obligation was $260.3 million at December
31, 2004 and $220.1 million at December 31, 2003.

                                      F-35

<PAGE>


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

<TABLE>

                                                                              Year ended December 31,
                                                               -------------------------------------------------------
                                                                    2004                2003               2002
                                                               ----------------    ----------------   ----------------
                                                                                   (In thousands)

<S>                                                            <C>                 <C>                <C>
Service cost                                                   $        3,308      $        2,858     $        3,410
Interest cost                                                          12,646              11,087             10,410
Expected return on plan assets                                        (13,098)             (9,504)           (11,035)
Amortization of unrecognized prior service cost                           489                 576                479
Amortization of net losses                                              4,357               3,875              1,598
                                                               ----------------    ----------------   ----------------

  Net pension expense                                          $        7,702      $        8,892     $        4,862
                                                               ================    ================   ================
</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,
                           -------------------------------------------------------------------------------------------
                                               2004                                           2003
                           ---------------------------------------------    ------------------------------------------
                              Discount                       Salary           Discount                      Salary
                                rate           LTRR         increase            rate          LTRR         increase
                           -------------- ------------- ----------------    ------------- -------------- -------------

<S>                             <C>           <C>             <C>               <C>           <C>            <C>
U.S. plans                      5.65%         10.00%          3.00%             6.00%         10.00%         2.00%
U.K. plan                       5.30%          7.10%          3.25%             5.50%          7.10%         3.25%
Savoie plan                     5.30%          5.25%          2.50%             5.50%          5.25%         2.50%

</TABLE>

<TABLE>

                                     Significant assumptions used to calculate net periodic pension expense
                                                        for the year ended December 31,
                           -------------------------------------------------------------------------------------------
                                      2004                            2003                           2002
                           ----------------------------    ---------------------------    ----------------------------
                              Discount                        Discount                       Discount
                                rate           LTRR             rate          LTRR             rate           LTRR
                           -------------- -------------    -------------- ------------    -------------- -------------

<S>                             <C>           <C>               <C>           <C>              <C>           <C>
U.S. plans                      6.00%         10.00%            6.25%         8.50%            7.00%         9.00%
U.K. plan                       5.50%          7.10%            5.70%         6.70%            6.00%         7.50%
Savoie plan                     5.50%          5.25%            5.70%         6.00%            6.00%         6.00%

</TABLE>

     The Company currently  expects to make cash  contributions of approximately
$8.2 million to its defined  benefit  pension  plans  during 2005,  all of which
related to the U.K. plan.

     The U.S. plan(s) paid benefits of approximately  $5.7 million in 2004, $5.6
million in 2003 and $5.4  million in 2002,  and the U.K.  plan paid  benefits of
approximately  $4.7  million in 2004,  $4.3  million in 2003 and $4.1 million in
2002.  Benefits  paid under the Savoie plan were less than $0.1 million for each
of 2004, 2003 and 2002. Based upon current projections, the Company believes the
plans will be required to pay the following benefits over the next ten years:

                                      F-36

<PAGE>


<TABLE>

                                                                         Projected retirement benefits
                                                           -----------------------------------------------------------
                                                              U.S. Plan             U.K.Plan               Total
                                                           ----------------     -----------------    -----------------
                                                                                  (In thousands)
<S>                                                          <C>                  <C>                  <C>
Year ending December 31,
     2005                                                    $     5,818          $     4,940          $    10,758
     2006                                                    $     5,852          $     5,077          $    10,929
     2007                                                    $     5,876          $     5,216          $    11,092
     2008                                                    $     5,884          $     5,358          $    11,242
     2009                                                    $     5,876          $     5,506          $    11,382
     2010 through 2014                                       $    29,265          $    29,889          $    59,154
</TABLE>

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

<TABLE>
                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2004                  2003
                                                                               ------------------    -----------------
<S>                                                                                   <C>                   <C>
US plan(s):
   Equity securities                                                                   84.3%                 69.4%
   Debt securities                                                                     14.1%                 23.6%
   Cash and other                                                                       1.6%                  7.0%
                                                                               ------------------    -----------------

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

European plans:
   Equity securities                                                                   86.9%                 91.9%
   Debt securities                                                                     13.1%                  7.3%
   Cash and other                                                                         -                   0.8%
                                                                               ------------------    -----------------

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

     During the second quarter of 2003, the Company  transferred all of its U.S.
plans' assets into the CMRT;  however,  the  Company's  plan assets are invested
only in 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. Simmons.  During the 17-year history of the
CMRT, 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 18.0% in
2004,  and the CMRT's last 5-year and 10-year  average annual returns were 12.4%
and 12.7%,  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 and maintained the assumption for December 31,
2004 pension obligations and 2005 pension expense.

                                      F-37

<PAGE>


     During  2003,  the  trustees for the U.K.  plan  selected a new  investment
advisor  (effective in 2004) for the U.K. plan and modified its asset allocation
goals. 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, and all
current contributions to the plan are invested wholly in fixed income securities
in order to  gradually  effect the shift.  Based on various  factors,  including
improved  economic  and market  conditions  and gains on the plan assets  during
2003,  the Company  increased its assumed  long-term rate of return for December
31, 2003 pension  obligations and for 2004 pension expense to 7.10% for its U.K.
plan and maintained the assumption for December 31, 2004 pension obligations and
for 2005 pension expense.

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

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

<TABLE>

                                                                                            December 31,
                                                                               ---------------------------------------
                                                                                     2004                  2003
                                                                               ------------------    -----------------
                                                                                           (In thousands)
<S>                                                                            <C>                   <C>
Actuarial present value of accumulated OPEB obligations:
  Balance at beginning of year                                                 $        28,584       $        27,116
  Service cost                                                                             540                   487
  Interest cost                                                                          1,780                 1,722
  Amendments                                                                                 -                (2,940)
  Actuarial loss                                                                         6,062                 5,339
  Benefits paid, net of participant contributions                                       (2,525)               (3,140)
                                                                               ------------------    -----------------
  Balance at end of year                                                                34,441                28,584
Unrecognized net actuarial loss                                                        (19,621)              (14,679)
Unrecognized prior service cost                                                          2,427                 2,891
                                                                               ------------------    -----------------
Total accrued OPEB cost                                                                 17,247                16,796
Less current portion                                                                     2,777                 3,135
                                                                               ------------------    -----------------

  Noncurrent accrued OPEB cost                                                 $        14,470       $        13,661
                                                                               ==================    =================

</TABLE>

                                      F-38

<PAGE>


<TABLE>

                                                                                 Year ended December 31,
                                                                     -------------------------------------------------
                                                                         2004              2003              2002
                                                                     --------------    --------------    -------------
                                                                                      (In thousands)

<S>                                                                  <C>               <C>               <C>
Service cost                                                         $       540       $       487       $       565
Interest cost                                                              1,780             1,722             1,799
Amortization of unrecognized prior service cost                             (464)             (464)             (376)
Amortization of net losses                                                 1,120               956               905
                                                                     --------------    --------------    -------------

  Net OPEB expense                                                   $     2,976       $     2,701       $     2,893
                                                                     ==============    ==============    =============
</TABLE>

     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,
                                                      ----------------------------------------------------------------
                                                                 2004                                 2003
                                                      ----------------------------       -----------------------------

<S>                                                              <C>                               <C>
Discount rate                                                    5.65%                              6.00%
Beginning HCCTR                                                  9.29%                             10.35%
Ultimate HCCTR                                                   4.00%                              4.00%
Ultimate year                                                    2010                                2010

</TABLE>

<TABLE>

                                                   Significant assumptions used to calculate net periodic
                                                        OPEB expense for the year ended December 31,
                                        ------------------------------------------------------------------------------
                                                  2004                       2003                       2002
                                        -----------------------     -----------------------     ----------------------

<S>                                              <C>                         <C>                       <C>
Discount rate                                     6.00%                       6.25%                     7.00%
Beginning HCCTR                                  10.35%                      11.35%                    11.15%
Ultimate HCCTR                                    4.00%                       4.25%                     5.00%
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 2004,  and the
actuarial  present value of  accumulated  OPEB  obligations at December 31, 2004
would have increased  approximately $3.7 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  2004,  and  the  actuarial  present  value  of
accumulated   OPEB  obligations  at  December  31,  2004  would  have  decreased
approximately $4.1 million.


                                      F-39

<PAGE>


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

<TABLE>

                                                                                Projected OPEB
                                                                                   payments
                                                                             ----------------------
                                                                                (In thousands)
               <S>                                                             <C>
               Year ending December 31,
                      2005                                                     $           2,777
                      2006                                                     $           2,856
                      2007                                                     $           2,970
                      2008                                                     $           3,113
                      2009                                                     $           3,250
                      2010 through 2014                                        $          18,072

</TABLE>

     The Medicare  Prescription Drug,  Improvement and Modernization Act of 2003
(the  "Medicare  Act  of  2003"),   enacted  in  December  2003,   introduced  a
prescription drug benefit under Medicare  (Medicare Part D) as well as a federal
subsidy to sponsors of retiree  health care benefit plans that provide a benefit
that is at least actuarially equivalent to Medicare Part D. Detailed regulations
necessary to implement the Medicare Act of 2003 were not issued upon  enactment,
including  those that would  specify the manner in which  actuarial  equivalency
would be determined,  the evidence required to demonstrate actuarial equivalence
and  the  documentation  requirements  necessary  to  receive  the  subsidy.  In
accordance  with FASB Staff Position  ("FSP") No. 106-1,  the Company elected to
defer accounting for the effects of the Medicare Act of 2003 until authoritative
guidance on how to account for such effects was issued.

     In May 2004, the FASB issued FSP No. 106-2,  which superceded FSP No. 106-1
and is  applicable to the Company  beginning in the quarter ended  September 30,
2004. FSP No. 106-2  provides  guidance on (i) accounting for the effects of the
Medicare Act of 2003 once the Company is able to determine actuarial equivalency
and (ii) various required disclosures.  Actuarial equivalence will be determined
under  regulations  issued by the Centers for  Medicare  and  Medicaid  Services
("CMMS").  Based on CMMS guidance issued to date and the Company's understanding
of the  Medicare  Act of 2003,  the  Company  is  currently  in the  process  of
determining   whether  the  benefits  provided  by  its  plans  are  actuarially
equivalent.   Accordingly,  the  Company's  accumulated  postretirement  benefit
obligation  and  net  periodic  OPEB  cost,  as  reflected  in the  accompanying
consolidated  financial  statements,  do not  reflect  any effect of the federal
subsidy.  The Company expects to be able to determine  actuarial  equivalency no
later than during the quarter  ending June 30,  2005,  at which time the Company
will  prospectively  account for the effect of the federal  subsidy,  if any, as
permitted by and in accordance with FSP No. 106-2.

                                      F-40

<PAGE>


Note 18 - Related party transactions

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

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

     In 2004, the Company,  Tremont LLC (a wholly-owned subsidiary of Valhi) and
Contran  agreed to enter into a single,  combined ISA covering the  provision of
services by Contran to TIMET and the  provision  of services by TIMET to Tremont
LLC and NL. Under the 2004  combined ISA,  TIMET paid Contran $1.3 million,  and
Tremont  and NL paid  TIMET $0.1  million  in the  aggregate.  The  Company  has
extended this agreement through 2005 and expects to pay Contran $1.5 million and
receive a combined $0.1 million from Tremont and NL under this agreement  during
2005.

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

     The  Company  had an ISA with NL, a  majority-owned  subsidiary  of  Valhi,
whereby NL provided  certain  financial and other services to TIMET at a cost to
TIMET of approximately  $0.3 million in 2002. 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 2004,  the ISA with NL was combined with the ISA
with Contran.

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

                                      F-41

<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  Company  terminated  this  program
effective July 30, 2002,  subject to continuing only those loans  outstanding at
that time in accordance with their then-current  terms. The loans were generally
payable in five annual  installments  beginning  six years from date of loan and
bore interest at a rate tied to the Company's borrowing rate, payable quarterly.
At December 31, 2004, the Company has a note receivable from one officer with an
outstanding balance of less than $50,000.

     Tall Pines  Insurance  Company  ("Tall  Pines")  (including  a  predecessor
company,  Valmont  Insurance  Company) and EWI RE, Inc.  ("EWI")  provide for or
broker  insurance  policies  for  Contran and  certain of its  subsidiaries  and
affiliates,  including the Company.  Tall Pines is a wholly owned  subsidiary of
Valhi,  and EWI is a wholly owned  subsidiary of NL.  Consistent  with insurance
industry  practices,  Tall Pines and EWI receive  commissions from the insurance
and reinsurance  underwriters for the policies that they provide or broker.  The
Company's  aggregate  premiums for such policies were approximately $2.3 million
in 2004 and 2003 and $2.4  million  in 2002.  The  Company  expects  that  these
relationships with Tall Pines and EWI will continue in 2005.

     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,  TIMET has
agreed to provide a certain  percentage of VALTIMET's  titanium  requirements at
formula-determined  selling  prices,  subject  to  certain  conditions.  Certain
provisions  of this contract have been amended in the past and may be amended in
the future to meet  changing  business  conditions.  Sales to VALTIMET  were $21
million  in 2004,  $9 million  in 2003 and $20  million  in 2002.  Additionally,
VALTIMET converts  TIMET-owned material into welded tube for TIMET on a purchase
order  basis.  Payments  by TIMET to VALTIMET  for such  services  totaled  $1.7
million in 2004, $2.1 million in 2003 and $2.3 million in 2002.

     Tremont  LLC owns 32% of BMI.  Among other  things,  BMI  provides  utility
services  (primarily  water  distribution,  maintenance  of a common  electrical
facility and sewage disposal  monitoring) to the Company and other manufacturers
within an industrial  complex located in Henderson,  Nevada.  Power transmission
and sewer  services are  provided on a cost  reimbursement  basis,  similar to a
cooperative, while water delivery is currently provided at the same rates as are
charged by BMI to an unrelated  third party.  Amounts paid by the Company to BMI
for these utility  services were $1.3 million  during 2004,  $1.2 million during
2003 and $1.0  million  during  2002.  The Company  also paid BMI an  electrical
facilities  upgrade fee of $1.3 million in each of 2004, 2003 and 2002. This fee
declines  to  $0.8  million  annually  for  2005  through  2009  and  terminates
completely after January 2010.

                                      F-42
<PAGE>


     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,
                                                                                --------------------------------------
                                                                                      2004                 2003
                                                                                -----------------    -----------------
                                                                                           (In thousands)
<S>                                                                             <C>                  <C>
Receivables from related parties:
   VALTIMET                                                                     $         2,264      $          891
   Notes receivable from officers                                                            49                 163
                                                                                -----------------    -----------------

                                                                                $         2,313      $        1,054
                                                                                =================    =================

Payables to related parties:
   VALTIMET                                                                     $           863      $          819
   Kronos                                                                                    15                   -
   Contran                                                                                    -                  24
   NL                                                                                         -                  50
                                                                                -----------------    -----------------

                                                                                $           878      $          893
                                                                                =================    =================
</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 2005 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 or the customer, the LTAs may be terminated early.
Although it is possible  that some portion of the business  would  continue on a
non-LTA  basis,  the  termination  of one or more of the LTAs could  result in a
material  effect on the Company's  business,  results of  operations,  financial
position or liquidity.  The LTAs were designed to limit selling price volatility
to  the  customer,  while  providing  TIMET  with a  committed  base  of  volume
throughout  the  aerospace  business  cycles.  To  varying  degrees,  these LTAs
effectively obligate TIMET to bear the majority of the risks of increases in raw
material and other costs, but also allow TIMET to benefit from decreases in such
costs.

     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, 2004 and 2003,  $0.6 million and $1.1 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 $24 million in 2005, $28 million in 2006 and $13 million in 2007.

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

                                      F-43

<PAGE>


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

<TABLE>

                                                                               Year ended December 31,
                                                                  --------------------------------------------------
                                                                       2004              2003              2002
                                                                  ---------------    --------------    -------------
                                                                         (Percentage of total sales revenue)
<S>                                                                     <C>                <C>              <C>
Sales revenue to:
  Aerospace industry:
     Commercial aerospace sector                                        57%                57%              56%
     Military aerospace sector                                          13%                11%              11%
                                                                  ---------------    -------------    --------------

  Total aerospace industry                                              70%                68%              67%
                                                                  ===============    =============    ==============

  Customers under LTAs                                                  44%                41%              37%
                                                                  ===============    =============    ==============
  Significant customers under LTAs (1):
     Rolls-Royce and other Rolls-Royce suppliers (2)                    15%                15%              12%
                                                                  ===============    =============    ==============

  Ten largest customers                                                 48%                44%              43%
                                                                  ===============    =============    ==============
  Significant customers (1):
     PCC and related entities                                           13%                13%               9%
                                                                  ===============    =============    ==============
--------------------------------------------------------------------------------------------------------------------
<FN>
(1)  Greater than 10% of net sales.
(2)  Includes  direct  sales to certain of the  PCC-related  entities  under the
     terms of the Rolls-Royce LTAs.
</FN>
</TABLE>


     The availability of certain of the Company's raw materials (titanium sponge
and  titanium  scrap) has  tightened  during  the past  several  quarters,  and,
consequently,  the prices for such raw materials have  increased.  To the extent
that this trend  continues,  the  Company  could be  limited  in its  ability to
produce enough titanium products to fully meet customer demand. In addition, the
Company's  LTAs limit the Company's  ability to pass on all of its increased raw
material costs.

     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
$3.9 million in 2004, $4.0 million in 2003 and $5.0 million in 2002.

                                      F-44

<PAGE>


     At  December  31,  2004,  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,
  2005                                                                                            $        2,672
  2006                                                                                                     2,264
  2007                                                                                                     2,591
  2008                                                                                                     2,325
  2009                                                                                                     2,080
  2010 and thereafter                                                                                     22,604
                                                                                                --------------------

                                                                                                  $       34,536
                                                                                                ====================
</TABLE>

     Environmental  matters.  TIMET and BMI entered  into an  agreement  in 1999
which  provided  that upon  payment by BMI of the cost to design,  purchase  and
install the  technology  and  equipment  necessary  to allow the Company to stop
discharging  liquid and solid  effluents and  co-products  into  settling  ponds
located on certain lands owned by the Company adjacent to its Henderson,  Nevada
plant site (the "TIMET Pond Property"),  the Company would convey the TIMET Pond
Property to BMI, at no additional  cost. In November  2004,  the Company and BMI
entered into several agreements that superceded the 1999 agreement.  Under these
new agreements,  the Company conveyed the TIMET Pond Property to BMI in exchange
for (i) $12 million  cash,  (ii) BMI's  assumption  of the liability for certain
environmental issues associated with the TIMET Pond Property,  including certain
possible  groundwater  issues for which the Company  currently  has $0.6 million
accrued,  and (iii) other  consideration.  TIMET will continue to use certain of
the settling ponds located on the TIMET Pond Property  pursuant to a lease until
a  wastewater  treatment  facility is  operational.  Construction  is  currently
expected to be completed during the second quarter of 2005.

     The  Company is also  continuing  assessment  work with  respect to its own
active plant site in Henderson,  Nevada.  The Company currently has $4.3 million
accrued  based on the  undiscounted  cost  estimates of the  probable  costs for
remediation  of these sites,  which  includes an increase in the accrual of $1.1
million  during  2004  (charged  to cost of sales)  related to  specific  future
remediation costs which the Company now considers probable.  The Company expects
these accrued expenses to be paid over a period of up to thirty years.

     At December 31, 2004, the Company had accrued an aggregate of approximately
$4.5 million for  environmental  matters,  including those discussed  above. The
upper end of the range of reasonably  possible costs to remediate  these matters
is  approximately  $7.0  million.  The Company  records  liabilities  related to
environmental  remediation  obligations when estimated future costs are probable
and  reasonably  estimable.  Such  accruals are adjusted as further  information
becomes  available  or  circumstances  change.  Estimated  future  costs are not
discounted to their present  value.  It is not possible to estimate the range of
costs  for  certain  sites.  The  imposition  of  more  stringent  standards  or
requirements  under  environmental  laws or  regulations,  the results of future
testing and analysis undertaken by the Company at its operating facilities, or a
determination  that the Company is  potentially  responsible  for the release of
hazardous  substances at other sites, could result in costs in excess of amounts
currently  estimated to be required for such matters.  No assurance can be given
that  actual  costs  will not exceed  accrued  amounts or that costs will not be
incurred  with  respect to sites as to which no problem  is  currently  known or
where no estimate can presently be made. Further, there can be no assurance that
additional environmental matters will not arise in the future.

                                      F-45

<PAGE>


     Legal  proceedings.  At  December  31,  2004,  the  Company  had accrued an
aggregate of $0.5 million for expected settlement 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.

     Other. The Company has entered into letters of credit to collateralize  (i)
potential workers'  compensation claims in Ohio and Nevada and (ii) future usage
of electricity in Nevada.  As of December 31, 2004, the outstanding  amounts for
such letters of credit,  which reduce the Company' excess availability under its
U.S. credit agreement, were $2.3 million and $1.3 million, respectively.

     TIMET is the  primary  obligor on two $1.5  million  workers'  compensation
bonds  issued  on  behalf  of a former  subsidiary,  Freedom  Forge  Corporation
("Freedom Forge"),  which TIMET sold in 1989. Freedom Forge filed for Chapter 11
bankruptcy  protection  on  July  13,  2001,  and  discontinued  payment  on the
underlying  workers'  compensation  claims in November 2001.  During 2002, TIMET
received notices that the issuers of the bonds were required to make payments on
the first  bond with  respect to  certain  of these  claims and were  requesting
reimbursement  from  TIMET.  As of  December  31,  2004,  the  Company  has made
aggregate payments under the two bonds of $1.1 million, and $0.6 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.

     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 with respect to
several of these matters in a given period,  it is possible that it could have a
material  adverse  impact on the  results  of  operations  or cash flows in that
particular period.

                                      F-46

<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 period.  Diluted  earnings
(loss) per share  attributable  to common  stockholders  reflects  the  dilutive
effect of common stock options,  restricted stock and the assumed  conversion of
the BUCS and the Series A Preferred Stock, if applicable.  A  reconciliation  of
the  numerator  and  denominator  used in the  calculation  of basic and diluted
earnings (loss) per share is presented below.

<TABLE>

                                                                             Year ended December 31,
                                                               -----------------------------------------------------
                                                                   2004               2003               2002
                                                               --------------     --------------    ----------------
                                                                                  (In thousands)
<S>                                                            <C>                <C>               <C>
Numerator:
  Net income (loss) attributable to
     common stockholders                                       $     35,540       $    (13,057)     $    (111,530)
  Dividends on Series A Preferred Stock                               4,398                  -                  -
                                                               --------------     --------------    ----------------

  Diluted net income (loss) attributable
     to common stockholders                                    $     39,938       $    (13,057)     $    (111,530)
                                                               ==============     ==============    ================

Denominator:
  Average common shares outstanding                                  15,881             15,854             15,803
  Average dilutive stock options and
     restricted stock                                                    66                  -                  -
  Series A Preferred Stock                                            2,178                  -                  -
                                                               --------------     --------------    ----------------

Diluted shares                                                       18,125             15,854             15,803
                                                               ==============     ==============    ================

</TABLE>

     For the years ended December 31, 2004, 2003 and 2002, the conversion of the
BUCS was antidilutive.  Stock options to purchase 313,100 shares of common stock
during 2004,  548,250  shares  during 2003 and 615,890  shares  during 2002 were
excluded from the  calculation of diluted  earnings (loss) per share because the
exercise price for such options was greater than the average market price of the
common shares and such options were therefore antidilutive during the respective
period.  An additional  45,935  incremental  stock options and restricted shares
were excluded from the 2003 calculation,  and an additional  88,099  incremental
stock options and  restricted  shares were  excluded from the 2002  calculation,
because they were antidilutive due to the losses in those respective years.

Note 21 - Business segment information

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

                                      F-47
<PAGE>

<TABLE>
                                                                          Year ended December 31,
                                                         -----------------------------------------------------------
                                                               2004                  2003                2002
                                                         -----------------     -----------------    ----------------
                                                                (In thousands, except product shipment data)
<S>                                                      <C>                   <C>                  <C>
Titanium melted and mill products:
    Melted product net sales                             $      72,092         $      57,409        $      34,800
    Mill product net sales                                     364,248               279,563              278,204
    Other product sales                                         65,488                55,132               53,497
    Other (1)                                                        -                (6,800)                   -
                                                         -----------------     -----------------    ----------------
                                                         $     501,828         $     385,304        $     366,501
                                                         =================     =================    ================

Melted product shipments:
    Volume (metric tons)                                         5,360                 4,725                2,400
    Average price ($ per kilogram)                       $       13.45         $       12.15        $       14.50

Mill product shipments:
    Volume (metric tons)                                        11,365                 8,875                8,860
    Average price ($ per kilogram)                       $       32.05         $       31.50        $       31.40


Geographic segments:
    Net sales - point of origin:
     United States                                       $     373,100         $     340,616        $     311,194
     United Kingdom                                            154,535               111,313               91,467
     Other Europe                                               87,686                75,443               68,487
     Other (1)                                                       -                (6,800)                   -
     Eliminations                                             (113,493)             (135,268)            (104,647)
                                                         -----------------     -----------------    ---------------
                                                         $     501,828         $     385,304        $     366,501
                                                         =================     =================    ===============

   Net sales - point of destination:
     United States                                       $     277,317         $     217,653        $     193,740
     Europe                                                    200,453               149,424              145,118
     Other locations                                            24,058                25,027               27,643
     Other (1)                                                       -                (6,800)                   -
                                                         -----------------     -----------------    ---------------
                                                         $     501,828         $     385,304        $     366,501
                                                         =================     =================    ===============

   Long-lived assets - property and
       equipment, net:
     United States                                       $     165,661         $     170,400        $     186,777
     United Kingdom                                             56,255                62,287               62,369
     Other Europe                                                6,257                 6,495                5,526
                                                         -----------------     -----------------    ---------------
                                                         $     228,173         $     239,182        $     254,672
                                                         =================     =================    ===============

-------------------------------------------------------------------------------------------------------------------
<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 2004
and 2003 and $18 million in 2002.

                                      F-48

<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, 2004:

  Net sales                                           $    120.5       $     124.1       $    120.2       $    137.0
  Gross margin                                              12.4              15.5             13.7             14.4
  Operating income (loss)                                    2.8               7.0             12.4             13.1
  Net (loss) income attributable to
     common stockholders                              $     (1.7)      $       1.9       $     25.2       $     11.2

  Basic (loss) earnings per share attributable to
     common stockholders                              $    (0.10)      $      0.12       $     1.52       $     0.70
  Diluted (loss) earning per share attributable to
     common stockholders                              $    (0.10)      $      0.12       $     1.37       $     0.64

Year ended December 31, 2003:

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

  Basic and diluted (loss) earnings per share
     attributable to common stockholders:
     Before cumulative effect of change in
        accounting principle                          $    (0.85)      $     (0.40)      $    (0.19)      $     0.62
     Basic and diluted (loss) earnings per share
        attributable to common stockholders           $    (0.86)      $     (0.40)      $    (0.19)      $     0.62
----------------------------------------------------------------------------------------------------------------------
<FN>
Note - The sum of  quarterly  amounts may not agree to the full year results due
     to rounding.
</FN>
</TABLE>

                                      F-49

<PAGE>



                     REPORT OF INDEPENDENT REGISTERED PUBLIC
                 ACCOUNTING FIRM ON FINANCIAL STATEMENT SCHEDULE



To the Board of Directors of Titanium Metals Corporation:

     Our  audits  of the  consolidated  financial  statements,  of  management's
assessment of the effectiveness of internal control over financial reporting and
of the effectiveness of internal control over financial reporting referred to in
our report  dated March 16, 2005  appearing  in this Annual  Report on Form 10-K
also included an audit of the financial  statement  schedule listed in the index
on page F of this Form 10-K. In our opinion,  this financial  statement schedule
presents  fairly,  in all material  respects,  the information set forth therein
when read in conjunction with the related consolidated financial statements.



/s/ PricewaterhouseCoopers LLP


Denver, Colorado
March 16, 2005

                                       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, 2004:

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

   Allowance for excess and
     slow moving inventories             $   16,723     $     1,079      $    807 (1)    $   (1,980)      $   16,629
                                         ============   =============    ============    =============    ============

Year ended December 31, 2003:

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

   Allowance for excess and
     slow moving inventories             $   15,090     $     2,324      $  1,125 (1)    $   (1,816)      $   16,723
                                         ============   =============    ============    =============    ============

   Reserve for restructuring             $       80     $     -          $      -        $      (80)(3)   $        -
                                         ============   =============    ============    =============    ============

Year ended December 31, 2002:

   Allowance for doubtful accounts       $    2,388     $       878      $    152 (1)    $   (1,032)(2)   $    2,386
                                         ============   =============    ============    =============    ============

   Allowance for excess and
     slow moving inventories             $   13,621     $     3,757      $    901 (1)    $   (3,189)      $   15,090
                                         ============   =============    ============    =============    ============

   Reserve for restructuring             $      198     $         -      $      -        $     (118)(3)   $       80
                                         ============   =============    ============    =============    ============
----------------------------------------------------------------------------------------------------------------------
<FN>
(1)  Amounts represent foreign currency translation  adjustments for the related
     account.
(2)  Amounts written off 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