RTI INTERNATIONAL METALS INC - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003.

OR

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

For the transition period from ____________ to ____________

Commission file number 001-14437

RTI INTERNATIONAL METALS, INC.
(Exact name of registrant as specified in its charter)

OHIO 52-2115953
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1000 WARREN AVENUE, NILES, OHIO 44446
(Address of principal executive offices)

(330) 544-7700
(Registrant's telephone number, including area code)

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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO ___

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

At November 1, 2003, 20,838,986 shares of common stock of the registrant
were outstanding.

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RTI INTERNATIONAL METALS, INC.

FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
INDEX

PART I -- FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

RTI INTERNATIONAL METALS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)

(DOLLARS IN THOUSANDS)

The accompanying notes are an integral part of these Consolidated Financial
Statements.

2

RTI INTERNATIONAL METALS, INC.

CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(DOLLARS IN THOUSANDS)

The accompanying notes are an integral part of these Consolidated Financial
Statements.

3

RTI INTERNATIONAL METALS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)

The accompanying notes are an integral part of these Consolidated Financial
Statements.

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RTI INTERNATIONAL METALS, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(DOLLARS IN THOUSANDS)

The accompanying notes are an integral part of these Consolidated Financial
Statements.

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RTI INTERNATIONAL METALS, INC.

SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1--BASIS OF PRESENTATION

The consolidated financial statements included herein have been prepared by
RTI International Metals, Inc. (the "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. The
consolidated financial statements include the accounts of RTI International
Metals, Inc. and its majority owned subsidiaries. All significant intercompany
transactions have been eliminated. The financial information presented reflects
all adjustments, consisting only of normal recurring adjustments, which are, in
the opinion of management, necessary for a fair presentation of the results for
the interim periods presented. The financial statements should be read in
conjunction with accounting policies and notes to consolidated financial
statements included in the Company's 2002 Annual Report on Form 10-K. Certain
prior period amounts have been reclassified to conform to the current period
presentation. The results for the interim periods are not necessarily indicative
of the results to be expected for the year.

Beginning with the first quarter of 2003, RTI changed its segment reporting
structure to represent its current method of marketing and selling products.
Segment information for the prior period contained in these financial statements
has been reclassified to conform to the current period presentation.

NOTE 2--ORGANIZATION

RTI International Metals, Inc. is a leading U.S. producer of titanium mill
products and fabricated metal parts for the global market. The Company conducts
business in two segments: the Titanium Group and the Fabrication and
Distribution Group. The Titanium Group melts and produces a complete range of
titanium mill products, which are further processed by its customers for use in
a variety of commercial, aerospace, defense, and industrial applications. The
Fabrication and Distribution Group is comprised of companies that process and
distribute titanium and other specialty metals. Its products, many of which are
engineered parts and assemblies, serve aerospace, oil and gas, power generation,
and chemical process industries, as well as a number of other industrial and
consumer markets.

On September 30, 1998, the shareholders of the Company's now wholly-owned
subsidiary RMI Titanium Company ("RMI") approved a proposal to reorganize into a
holding company structure (the "1998 Reorganization"). Pursuant to this
reorganization, the Company became the parent company of RMI, and shares of RMI
common stock were automatically exchanged on a one-for-one (1:1) basis for
shares of RTI. Shares of RTI began trading on the New York Stock Exchange on
October 1, 1998.

The Company is a successor to entities that have been operating in the
titanium industry since 1951. In 1990, USX Corporation ("USX") and Quantum
Chemical Corporation ("Quantum") transferred their entire ownership interest in
RMI's immediate predecessor, RMI Company, an Ohio general partnership, to the
Company in exchange for shares of the Company's common stock (the "1990
Reorganization"). Quantum sold its shares of common stock to the public while
USX retained ownership of its shares.

In November, 1996, USX completed a public offering of its 6 3/4% notes
(the "Notes") which were exchangeable in February, 2000, for 5,483,600 shares of
RTI common stock owned by USX. On February 1, 2000, the trustee under the note
indenture delivered 5,483,600 of RTI common stock to the note holders in
exchange for the Notes terminating USX's ownership interest in RTI.

NOTE 3--STOCK OPTION AND RESTRICTED STOCK AWARD PLANS

1995 STOCK PLAN

The 1995 Stock Plan, which was approved by a vote of the Company's
shareholders at the 1995 Annual Meeting of Shareholders, replaced both the 1989
Stock Option Incentive Plan and the 1989 Employee Restricted Stock Award Plan.
The Plan permits the grant of any or all of the following types of awards in any

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combination: a) stock options; b) stock appreciation rights; and c) restricted
stock. The plan does not permit the granting of options with exercise prices
that are less than the market value on the date the options are granted. A
committee appointed by the Board of Directors administers the Plan, and
determines the type or types of grants to be made under the Plan and sets forth
in each such Grant the terms, conditions and limitations applicable to it,
including, in certain cases, provisions relating to a possible change in control
of the Company.

During the first quarter of 2003, 207,750 option shares were granted at an
exercise price of $10.22. All option exercise prices were equal to the common
stock's fair market value on the date of the grant. Options are for a term of
ten years from the date of the grant, and vest ratably over the three-year
period beginning with the date of the grant. 207,750 of the option shares
granted in 2003 were outstanding at September 30, 2003.

During the nine months ended September 30, 2003, 93,508 shares of
restricted stock were granted under the 1995 Stock Plan. Compensation expense
equal to the fair market value on the date of the grant is recognized ratably
over the vesting period of each grant which is typically five years.

As permitted by the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123), the Company has elected to measure stock-based
compensation under the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB No. 25), and to adopt the
disclosure-only alternative described in SFAS No. 123. For restricted stock
awards, the Company records deferred stock-based compensation based on the fair
market value of common stock on the date of the award. Such deferred stock-based
compensation is amortized over the vesting period of each individual award.

If compensation expense for the Company's stock options granted had been
determined based on the fair value at the grant date for the awards in
accordance with SFAS No. 123, the effect on the Company's net income and
earnings per share for the quarter and nine months ended September 30, 2003 and
2002 would have been as follows (dollars in thousands):

Included in the Company's income for the quarters ended September 30, 2003
and 2002 is stock-based compensation expense relating to restricted stock grants
amounting to $0.3 million. For the nine months ended September 30, 2003 and
2002, stock-based compensation expense relating to restricted stock grants was
$0.7 million.

NOTE 4--INCOME TAXES

In the nine months ended September 30, 2003, the Company recorded an income
tax expense of $1.7 million, or 38% of pre-tax income compared to an expense of
$8.9 million, or 38% for the nine months ended September 30, 2002. The effective
tax rate for the nine-month periods ended September 30, 2003 and

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September 30, 2002 of 38% exceeded the federal statutory rate of 35% primarily
as a result of state income taxes.

NOTE 5--EARNINGS PER SHARE

A reconciliation of the income (loss) and weighted average number of
outstanding common shares used in the calculation of basic and diluted earnings
per share for the quarters and nine months ended September 30, 2003 and 2002 are
as follows (in thousands except number of shares and per share amounts):

957,938 and 913,846 shares of common stock issuable upon exercise of
employee stock options have been excluded from the calculation of diluted
earnings per share for the quarters ended September 30, 2003 and 2002,
respectively; and 1,142,858 and 914,066 have been excluded from the calculation
of diluted earnings per share for the nine months ended September 30, 2003 and
2002, respectively, because the exercise price of the options exceeded the
weighted average market price of the Company's common stock during those
periods.

NOTE 6--INVENTORIES

Inventories consisted of (dollars in thousands):

NOTE 7--BILLINGS IN EXCESS OF COSTS AND ESTIMATED REVENUES

The Company reported a liability for billings in excess of costs and
estimated revenues of $4.6 million as of September 30, 2003 and $2.4 million as
of December 31, 2002. These amounts primarily represent payments, received in
advance from energy market customers and a European distribution customer on
long-term orders, which the Company has not recognized as revenues. The increase
reflects the Company's receipt of cash payments in advance of work completed on
additional long-term orders.

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NOTE 8--OTHER OPERATING INCOME AND OTHER INCOME

For the three and nine months ended September 30, 2003 and 2002, the
components of other operating income and other income are as follows (dollars in
thousands):

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(1) This gain was the result of the sale/leaseback of one of the Company's
Ashtabula, Ohio facilities previously used for storage.

(2) These gains were financial settlements from Boeing Airplane Group relating
to Boeing's failure to meet minimum order requirements under terms of a
long-term agreement between RTI and Boeing.

(3) This gain was due to the receipt of a common stock distribution in
connection with the demutualization of one of the Company's insurance
carriers.

NOTE 9--COMMITMENTS AND CONTINGENCIES

In connection with the 1990 Reorganization, the Company agreed to indemnify
USX and Quantum against liabilities related to their ownership of RMI and its
immediate predecessor, Reactive Metals, Inc., which was formed by USX and
Quantum in 1964.

From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. Given the
critical nature of many of the aerospace end uses for the Company's products,
including specifically their use in critical rotating parts of gas turbine
engines, the Company maintains aircraft products liability insurance of $250
million, which includes grounding liability.

Environmental Matters

The Company is subject to environmental laws and regulations as well as
various health and safety laws and regulations that are subject to frequent
modifications and revisions. During the nine months ended September 30, 2003 and
2002, the Company spent approximately $0.3 million and $0.8 million,
respectively, for environmental remediation, compliance, and related services.
While the costs of compliance for these matters have not had a material adverse
impact on the Company in the past, it is impossible to predict accurately the
ultimate effect these changing laws and regulations may have on the Company in
the future. The Company continues to evaluate its obligations for environmental
related costs on a quarterly basis and makes adjustments in accordance with
provisions of Statement of Position No. 96-1, "Environmental Remediation
Liabilities".

The Company is involved in investigative or cleanup projects under federal
or state environmental laws at a number of waste disposal sites, including the
Fields Brook Superfund Site and the Ashtabula River Area of Concern. Given the
status of the proceedings with respect to these sites, ultimate investigative
and remediation costs cannot presently be accurately predicted, but could, in
the aggregate be material. Based on the information available regarding the
current ranges of estimated remediation costs at currently active sites,

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and what the Company believes will be its ultimate share of such costs,
provisions for environmental-related costs have been recorded.

At September 30, 2003 and December 31, 2002, the amount accrued for future
environmental-related costs was $1.7 million. Of the total amount accrued at
September 30, 2003, $0.3 million is expected to be paid out within one year and
is included in the Other accrued liabilities line of the balance sheet. The
remaining $1.4 million is recorded in Other noncurrent liabilities. Based on
available information, RMI believes its share of potential environmental-related
costs, before expected contributions from third parties, is in a range from $3.0
million to $7.3 million, in the aggregate. RMI has contractual agreements with
third parties (other than insurers) to reimburse RMI for a portion of the
Company's share of certain potential environmental-related costs. The amount
accrued is net of expected contributions from those third parties of
approximately $0.5 to $1.9 million, which the Company believes are probable. The
Company has been receiving contributions from such third parties for a number of
years as partial reimbursement for costs incurred by the Company. As these
proceedings continue toward final resolution, amounts in excess of those already
provided may be necessary to discharge the Company from its obligations for
these projects.

Gain Contingency

As part of Boeing Commercial Airplane Group's long-term supply agreement
with the Company, Boeing was required to order a minimum of 3.25 million pounds
of titanium in each of the five years beginning in 1999. They failed to do so
for 1999, 2000, 2001, and 2002, ordering 0.9 million pounds, 1.1 million pounds,
0.9 million pounds, and 0.5 million pounds, respectively.

The Company made claim against Boeing in accordance with the provisions of
the long-term contract for each of the years in which the minimum was not
achieved. Revenue under the provisions of Statement of Financial Accounting
Standards No. 5 ("SFAS No. 5"), "Accounting for Contingencies" was deemed not
realized until Boeing settled the claims. Accordingly, the claims were treated
as a gain contingency dependent upon realization.

As a result of the application of SFAS No. 5 as to gain contingencies, the
Company recorded revenue of approximately $6 million in 2000 and 2001, and
approximately $7 million in 2002, for each of the preceding years claims upon
receipt of the cash. The Company recognized approximately $8 million in the
first quarter of 2003 when Boeing satisfied the claim for 2002. In all years,
revenue recognized from these cash receipts was presented as Other income in the
financial statements.

OTHER

The Company is also the subject of, or a party to, a number of other
pending or threatened legal actions involving a variety of matters incidental to
its business.

The ultimate resolution of these foregoing contingencies could,
individually or in the aggregate, be material to the consolidated financial
statements. However, management believes that the Company will remain a viable
and competitive enterprise even though it is possible that these matters could
be resolved unfavorably.

NOTE 10--SEGMENT REPORTING

The Company's reportable operating segments are the Titanium Group and the
Fabrication and Distribution Group.

The Titanium Group manufactures and sells a wide range of titanium mill
products to a customer base consisting primarily of manufacturing and
fabrication companies in the aerospace and nonaerospace markets. Titanium mill
products consist of basic mill shapes such as ingot, slab, bloom, billet, bar,
plate and sheet. Titanium mill products are sold primarily to customers such as
metal fabricators, forge shops and, to a lesser extent, metal distribution
companies. Titanium mill products are usually raw or starting material for these
customers, who then form, fabricate or further process mill products into
finished or semi-finished components

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or parts. The Titanium Group includes the activities related to the clean up and
remediation of a former titanium extrusion facility operated by the Company
under a contract from the U.S. Department of Energy.

The Fabrication and Distribution Group is engaged primarily in the
fabrication of titanium, specialty metals and steel products, including pipe and
engineered tubular products, for use in the oil and gas and geo-thermal energy
industries; hot and superplastically formed parts; cut, forged, extruded and
rolled shapes; and commercially pure titanium strip and welded tube for
aerospace and nonaerospace applications. This segment also provides warehousing,
distribution, finishing, cut-to-size and just-in-time delivery services of
titanium, steel and other metal products.

Intersegment sales are accounted for at prices which are generally
established by reference to similar transactions with unaffiliated customers.
Reportable segments are measured based on segment operating income after an
allocation of certain corporate items such as general corporate overhead and
expenses.

On January 1, 2003 the Company realigned its two operating segments to
better reflect its strategy for achieving higher value-added sales. Prior period
information presented herein has been restated to reflect this realignment.
Included in the realignment was the transfer from the Titanium Group to the
Fabrication and Distribution Group of the Company's commercially pure products
business, grinding operations at the Company's Washington, MO., facility and
marketing and sales responsibility for most sheet and plate products.

Segment information for the quarters and nine-month periods ended September
30, 2003 and 2002 is as follows (dollars in thousands):

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NOTE 11--NEW ACCOUNTING PRONOUNCEMENTS

In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 143 ("SFAS No. 143"),
"Accounting for Asset Retirement Obligations." SFAS No. 143 prescribes the
accounting for retirement obligations associated with tangible long-lived
assets, including: (1) the timing of liability recognition; (2) initial
measurement of the liability; (3) allocation of the cost of the obligation to
expense; (4) measurement and recognition of subsequent changes to the liability;
and (5) financial statement disclosures. SFAS No. 143 requires that an asset
retirement cost be capitalized as part of the cost of the related long-lived
asset and subsequently allocated to expense using a systematic and rational
method. The standard is required to be adopted in fiscal years beginning after
June 15, 2002. At adoption, any transition adjustment required will be reported
as a cumulative effect of a change in accounting principle. The Company adopted
this standard in the first quarter of 2003 and it did not result in a material
adjustment to the financial statements.

In June 2002, the FASB issued Statement of Financial Accounting Standards
No. 146 ("SFAS No. 146"), "Accounting for Costs Associated with Exit or Disposal
Activities." SFAS No. 146 addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task
Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." Under EITF Issue 94-3, a liability for an
exit activity was recognized at the date of an entity's commitment to an exit
plan. SFAS No. 146 requires that a liability for a cost associated with an exit
or disposal activity be recognized when the liability is incurred. SFAS No. 146
is effective for exit or disposal activities that are initiated after December
31, 2002. SFAS No. 146 will impact the timing of the recognition of costs
associated with an exit or disposal activity but is not expected to have a
material impact on the Company.

In January 2003, the FASB issued Statement of Financial Accounting
Standards No. 148 ("SFAS No. 148"), "Accounting for Stock-Based
Compensation-Transition and Disclosure." SFAS 148 amends current disclosure
requirements and requires prominent disclosures on both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. This
statement is effective for financial reports containing financial statements for
interim periods beginning after December 15, 2002. See Note 3 for the
disclosures required by this standard.

In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires that upon
issuance of a guarantee, the guarantor must recognize a liability for the fair
value of the obligation it assumes under that guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and annual financial
statements about the obligations associated with guarantees issued. The
disclosure requirements are effective for financial statements of interim or
annual periods ending after December 15, 2002. The recognition and measurement
provisions are effective on a prospective basis to guarantees issued or modified
after December 31, 2002. The adoption of this interpretation did not have a
material impact on the Company.

In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities." FIN 46 provides guidance on the
identification of entities for which control is achieved through means other
than through voting rights, variable interest entities, and how to determine
when and which business enterprises should consolidate variable interest
entities. This interpretation applies immediately to variable interest entities
created after January 31, 2003. In FASB Staff Position 46-6, public entities may
defer the effective date to apply FIN 46 until the first fiscal year or interim
period ending after December 15, 2003, to variable interest entities or
potential variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. The adoption of this
interpretation will not have an impact on the Company.

In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149 ("SFAS No. 149"), "Amendment of Statement 133 on Derivative Instruments
and Hedging Activities." SFAS No. 149 amends and clarifies financial accounting
and reporting for derivative instruments, including certain
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derivative instruments embedded in other contracts, and for hedging activities
under SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 149 is effective for contracts entered into or modified
after September 30, 2003, with some exceptions. The adoption of this standard
will not have a material impact on the Company.

In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150 ("SFAS No. 150"), "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity," which requires that an issuer
classify financial instruments that are within scope of SFAS No. 150 as a
liability. Under prior guidance, these same instruments would be classified as
equity. SFAS No. 150 is effective for all financial instruments entered into or
modified after May 31, 2003. Otherwise, it is effective on July 1, 2003. On
October 29, 2003 the FASB deferred the provisions of paragraph 9 and 10 of SFAS
No. 150 as they apply to mandatorily redeemable non-controlling interests. The
Company does not believe that the adoption of SFAS No. 150 will have a material
effect on its financial position or results of operations.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

The following discussion should be read in connection with the information
contained in the Consolidated Financial Statements and Notes to Consolidated
Financial Statements. The following information contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, and are subject to the safe harbor created by that Act. Such
forward-looking statements may be identified by their use of words like
"expects," "anticipates," "intends," "projects," or other words of similar
meaning. Forward-looking statements are based on expectations and assumptions
regarding future events. In addition to factors discussed throughout this
report, the following factors and risks should also be considered, including,
without limitation, statements regarding the future availability and prices of
raw materials, competition in the titanium industry, demand for the Company's
products, the historic cyclicality of the titanium and aerospace industries,
increased defense spending, the success of new market development, long-term
supply agreements, the outcome of proposed "Buy American" legislation, global
economic conditions, the Company's order backlog and the conversion of that
backlog into revenue, the outcome of ongoing labor contract negotiations and the
impact of the work stoppage that commenced on October 25, 2003 at the Company's
Niles, Ohio facility, the long-term impact of the events of September 11, and
the continuing war on terrorism, and other statements contained herein that are
not historical facts. Because such forward-looking statements involve risks and
uncertainties, there are important factors that could cause actual results to
differ materially from those expressed or implied by such forward-looking
statements. These and other risk factors are set forth below in the "Outlook"
section, as well as in the Company's other filings with the Securities and
Exchange Commission ("SEC") over the last 12 months, copies of which are
available from the SEC or may be obtained upon request from the Company.

Beginning with the first quarter of 2003, RTI changed its segment reporting
structure to represent its current method of marketing and selling products.
Segment information for the prior period has been reclassified to conform to the
current period presentation.

THREE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2002

NET SALES

Net sales decreased to $50.2 million for the three months ended September
30, 2003 compared to net sales of $68.1 million in the corresponding 2002
period. Sales for the Company's Titanium Group amounted to $38.8 million,
including intercompany sales of $24.9 million, in the three months ended
September 30, 2003 compared to $46.8 million, including intercompany sales of
$23.8 million, in the same period of 2002. Titanium Group net sales decreased as
a result of a decrease in mill product shipments, partially offset by higher
average realized prices as product mix shifted to higher value-added flat rolled
products. Shipments of titanium mill products were 1.7 million pounds in the
three months ended September 30, 2003, compared to 2.2 million pounds for the
same period in 2002. Mill product shipments in the three months ended September
30, 2003 were lower than those in 2002 as demand for forged mill products for
commercial aerospace markets declined. Included in mill product shipments are
intersegment shipments from the

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Titanium Group to the Fabrication and Distribution Group (F&D). Shipments to F&D
decreased over the same period last year, reflecting reduced commercial
aerospace activity in the F&D segment and the Company's ongoing effort to reduce
inventory. Average realized prices on mill products for the three months ended
September 30, 2003 increased to $15.51 per pound from $14.35 per pound in 2002.
The increase in average realized prices for mill products resulted primarily
from an increased mix of higher value-added flat rolled mill products when
compared to 2002. Sales for the Company's Fabrication and Distribution Group
amounted to $39.2 million, including intercompany sales of $3.0 million, in the
three months ended September 30, 2003, compared to $48.3 million, including
intercompany sales of $3.3 million, in the same period of 2002. This decrease
primarily reflects reduced demand from commercial aerospace in the United States
and Europe.

GROSS PROFIT

Gross profit amounted to $4.2 million, or 8.4% of sales for the three
months ended September 30, 2003 compared to a gross profit of $12.2 million or
17.9% for the comparable 2002 period. Gross margin was adversely impacted by
reduced revenues in both the Titanium and Fabrication and Distribution groups
due to weak demand from the commercial aerospace market.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses amounted to $8.1 million or
16.2% of sales for the three months ended September 30, 2003, compared to $7.3
million or 10.7% of sales for the same period in 2002. The increase is comprised
primarily of increased pension costs in 2003 of $0.4 million and a change in
classification of $0.2 million in expenses to selling, general and
administrative that were reported as costs of goods sold in 2002.

RESEARCH, TECHNICAL AND PRODUCT DEVELOPMENT EXPENSES

Research, technical and product development expenses amounted to $0.3
million in 2003, compared to $0.3 million in 2002.

OPERATING INCOME

An operating loss for the three months ended September 30, 2003 amounted to
$4.2 million, or 8.4% of sales compared to operating income of $4.6 million, or
6.8% of sales, in the same period of 2002. This decline consists of a decrease
in operating income from the Titanium Group, from $3.0 million of income in 2002
to a loss of $3.6 million in 2003, or $6.6 million primarily due to a decrease
in mill product shipments to the commercial aerospace market. The overall
decrease is also due to a decline in operating income in F&D, from $1.6 million
of income in 2002 to a $0.6 million loss in 2003, or $2.2 million as a result of
weak demand from the commercial aerospace market.

OTHER INCOME

Other income for the three months ended September 30, 2003 and September
30, 2002 amounted to $0.2 and $0.1 million, respectively.

INTEREST EXPENSE

Interest expense for the three months ended September 30, 2003 and
September 30, 2002 amounted to $0.1 million and $0.2 million, respectively.
Interest expense for both periods is primarily the result of fees associated
with the unused capacity on the Company's credit facility. The Company had no
bank debt at September 30, 2003 and 2002.

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INCOME TAXES

In the three months ended September 30, 2003, the Company recorded an
income tax benefit of $1.5 million compared to a $1.5 million expense recorded
in the same period in 2002. The effective tax rate of 38% for the three months
ended September 30, 2003 was greater than the federal statutory rate of 35%
primarily due to state income taxes. The effective tax rate of 34% for the three
months ended September 30, 2002 reflected an adjustment to bring the effective
tax rate for the nine months ended September 30, 2002 from 39% to 38%.

NET INCOME

A net loss for the three months ended September 30, 2003 amounted to $2.5
million or 5.0% of sales, compared to a net income of $3.0 million or 4.4% of
sales in the comparable 2002 period. This decline is the result of the decline
in the Company's operating income.

NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2002

NET SALES

Net sales decreased to $157.8 million for the nine months ended September
30, 2003 compared to net sales of $206.7 million in the corresponding 2002
period. Sales for the Company's Titanium Group amounted to $112.3 million,
including intercompany sales of $70.3 million, in the nine months ended
September 30, 2003 compared to $153.8 million, including intercompany sales of
$85.1 million, in the same period of 2002. Titanium Group net sales decreased as
a result of a decrease in mill product shipments, partially offset by higher
average realized prices as product mix shifted to higher value-added flat rolled
products. Shipments of titanium mill products were 4.5 million pounds in the
nine months ended September 30, 2003, compared to 7.8 million pounds for the
same period in 2002. Mill product shipments in the nine months ended September
30, 2003 were lower than those in 2002 as demand for forged mill products for
commercial aerospace markets declined. Included in mill product shipments are
intersegment shipments from the Titanium Group to the Fabrication and
Distribution Group (F&D). Shipments to F&D decreased over the same period last
year reflecting reduced demand for titanium products through F&D as well as
inventory reductions within certain F&D businesses. Average realized prices on
mill products for the nine months ended September 30, 2003 increased to $16.18
per pound from $14.17 per pound in 2002. The increase in average realized prices
for mill products resulted primarily from an increased mix of higher value-added
flat rolled mill products when compared to 2002. Sales for the Company's
Fabrication and Distribution Group amounted to $123.7 million, including
intercompany sales of $7.9 million, in the nine months ended September 30, 2003,
compared to $148.9 million, including intercompany sales of $10.6 million, in
the same period of 2002. This decrease primarily reflects a decrease in demand
from commercial aerospace in the United States and Europe.

GROSS PROFIT

Gross profit amounted to $19.2 million, or 12.1% of sales for the nine
months ended September 30, 2003 compared to a gross profit of $40.4 million or
19.6% for the comparable 2002 period. Gross margin was adversely impacted by
reduced revenues in both the Titanium and Fabrication and Distribution groups
due to weak demand from the commercial aerospace market.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses amounted to $23.4 million or
14.8% of sales for the nine months ended September 30, 2003, compared to $24.8
million or 12.0% of sales for the same period in 2002. The decrease is comprised
of several items. The most significant of these items was a reduction in energy
market related consulting expenses that related to projects completed in 2002 of
$0.3 million, a $0.4 million decrease in depreciation expense due to the
disposal of assets in prior years and reduced capital spending, and a $0.3
million reduction in bad debt expense as 2002 reflected amounts expensed to
attain an appropriate allowance. The remainder of the decrease reflects the
impact of cost reduction efforts including reductions in

15

personnel and related costs. These decreases were partially offset by a change
in classification of $0.5 million in expenses to selling general and
administrative that were reported as costs of goods sold in 2002.

RESEARCH, TECHNICAL AND PRODUCT DEVELOPMENT EXPENSES

Research, technical and product development expenses amounted to $1.0
million in 2003 and $1.0 million in 2002.

OTHER OPERATING INCOME

Other operating income -- net for the nine months ending September 30, 2003
was $1.0 million. This reflects a $1.0 million gain on the sale of one of the
Company's Ashtabula, Ohio facilities in the second quarter of 2003 that in
recent years had only been used for storage of raw materials.

OPERATING INCOME

An operating loss for the nine months ended September 30, 2003 amounted to
$4.3 million, or 2.7% of sales compared to operating income of $14.7 million, or
7.1% of sales, in the same period of 2002. This decline consists of a decrease
in operating income from the Titanium Group, from $11.7 million of income in
2002 to a loss of $4.8 million in 2003, or $16.5 million primarily due to a
decrease in mill product shipments, partially offset by a $1.0 million gain on
the sale of one of the Company's Ashtabula, Ohio facilities that in recent years
had only been used for storage of raw materials. This decrease is also partially
due to a decrease in operating income in F&D, from $2.9 million in 2002 to $0.5
million in 2003, or $2.4 million as a result of weak demand from the commercial
aerospace market.

OTHER INCOME

Other income for the nine months ended September 30, 2003 and September 30,
2002 amounted to $9.3 and $9.2 million, respectively. In 2003, other income
reflects the receipt of liquidated damages from the Boeing Airplane Group of
$8.4 million. In 2002, other income reflects the receipt of $7.1 million of
liquidated damages from the Boeing Airplane Group and a $2.1 million gain from
the receipt of a common stock distribution in connection with the
demutualization of one of the Company's insurance carriers.

INTEREST EXPENSE

Interest expense for the nine months ended September 30, 2003 and September
30, 2002 amounted to $0.5 million and $0.5 million, respectively. Interest
expense for both periods are primarily the result of fees associated with the
unused capacity on the Company's credit facility. The Company had no bank debt
at September 30, 2003 and 2002.

INCOME TAXES

In the nine months ended September 30, 2003, the Company recorded an income
tax expense of $1.7 million compared to a $8.9 million expense recorded in the
same period in 2002. The effective tax rate of 38% for the nine months ended
September 30, 2003 and 38% for the nine months ended September 30, 2002 was
greater than the federal statutory rate of 35% primarily due to state income
taxes.

NET INCOME

Net income for the nine months ended September 30, 2003 amounted to $2.8
million or 1.8% of sales, compared to $14.5 million or 7.0% of sales in the
comparable 2002 period. This decline is the result of the decline in the
Company's operating income.

16

OUTLOOK

Overview

Weak U.S. and global economies, the terrorist attacks of September 11,
2001, the ongoing conflicts in the Middle East, and the worldwide outbreak of
Severe Acute Respiratory Syndrome ("SARS") all continue to have significant
adverse effects on the overall titanium industry.

According to the U.S. Geological Survey, U.S. shipments of titanium mill
products have declined from a high of approximately 65.6 million pounds in 1997
to approximately 35.7 million pounds in 2002. Shipment levels in 2003 and 2004
are not expected to be significantly better, if at all.

The following is a discussion of what is happening within each of the three
major markets in which RTI participates.

Commercial Aerospace Markets

The market most adversely affected by the above-mentioned events is the
commercial aerospace market, which provided approximately 30% of RTI's sales in
2002. Airline operators experienced a dramatic drop in travel immediately
following September 11, 2001, which resulted in significant losses within their
industry causing a reduced demand for new aircraft. The primary builders of
large commercial aircraft, Boeing and Airbus, reduced their 2002 build rates by
approximately 20% to reflect the expected change in demand. The exact magnitude
of the downturn on commercial aerospace remains uncertain for 2003, but it has
been further exacerbated by conflict in the Middle East and the outbreak of SARS
affecting world travel, particularly to and from the Far East. Latest estimates
from Airbus and Boeing indicate that their 2003 build rates may be an additional
15% below 2002 levels.

Titanium mill products that are ordered by the prime aircraft producers and
their subcontractors are generally ordered in advance of final aircraft
production by six to eighteen months. This is due to the time it takes to
produce a final assembly or part that is ready for installation in an airframe
or jet engine. Given reduced activity by aircraft builders, shipments from RTI
to this market sector will be reduced in 2003.

The effect of the reduction in commercial aircraft demand on RTI has been
partially mitigated by the long-term agreement RMI entered into with Boeing on
January 28, 1998. Under this agreement, RMI supplies Boeing and its family of
commercial suppliers with up to 4.5 million pounds of titanium products
annually. The agreement, which began in 1999, has an initial term of five years
and concludes at the end of 2003. Under the accord, Boeing receives firm prices
in exchange for RMI receiving a minimum volume commitment of 3.25 million pounds
per year. If volumes fall short of the minimum commitment, the contract contains
provisions for financial compensation. In accordance with the agreement, and as
a result of volume shortfalls in 1999, 2000, and 2001, Boeing settled claims of
approximately $6 million in both 2000 and 2001 and $7 million in 2002. The claim
for 2002 was settled during the first quarter of 2003 for approximately $8
million. Given the state of the commercial aircraft industry, it is not expected
that Boeing will meet the minimum in 2003, the final year of the contract, and
accordingly, a similar payment will be called for in early 2004. Beginning in
January of 2004, business between the companies not covered by other contracts
will be conducted on a non-committed basis, that is, no volume commitment by
Boeing and no commitment of capacity or price by RMI.

A positive development in this market was that RTI, through its RTI Europe
subsidiary, entered into an agreement with the European Aeronautic Defense and
Space Company ("EADS") in April 2002 to supply value-added titanium products and
parts to the EADS group of companies, including Airbus. The contract is in place
through 2004, subject to extension. The new Airbus A-380 is expected to utilize
more titanium per aircraft than any commercial plane that has ever been
produced. Beginning in 2003, Airbus is expected to become the world's largest
producer of commercial aircraft.

With SARS apparently under control and industry forecasters projecting
increases in future commercial air traffic, the Company is optimistic that
commercial aerospace market is at or near the bottom of this decline. In August,
2003, SpeedNews reported that the International Civil Aviation Organization

17

(ICAO) expected world airline traffic to increase 4.4% in 2004 and 6.3% in 2005.
Traditionally, as traffic increases, airlines become more profitable and order
new airplanes. However, it must be noted that due to production lead times any
improvements in the orders of planes will take some time to be reflected in
shipments of titanium. Despite this, the Company does not anticipate any
significant improvement in this market for the next twelve to eighteen months.

Defense Markets

Shipments to military markets represented approximately 30% of 2002
revenues and are expected to increase as a percent of total sales in 2003 and
beyond as U.S. and other countries' defense budgets increase. This expected
increase is due in part to the events of September 11, 2001 and the ongoing
conflicts in the Middle East. In fact, the latest U.S. Department of Defense
budget figures for Research, Development Testing and Evaluation (RDT&E) and
Procurement reflect an increase of 43% from 2003 through 2009.

RTI believes it is well positioned to supply mill products and fabrications
required for any increase in demand from this market. RTI currently supplies
titanium and other materials to most military aerospace programs, including the
F/A-22, C-17, F/A-18, F-15, F-16, Joint Strike Fighter ("JSF") (F-35) and in
Europe, the Mirage, Rafale and Eurofighter-Typhoon.

A positive development in this market was that the Company was chosen by
BAE Systems RO Defence UK to supply the titanium components for the new XM-777
lightweight 155 mm Howitzer. Delivery began late in 2003 and will continue
through 2010. Initial deliveries will be to the U.S. Marine Corps, followed by
deliveries to the U.S. Army and the Italian and British armed forces. It is
anticipated that over 1,000 guns may be produced. Sales under this contract
could potentially exceed $70 million.

Another positive development in this market was that Lockheed Martin, a
major customer of the Company, was awarded the largest military contract ever on
October 26, 2001, for the military's $200 billion JSF program. The aircraft,
which will be used by all branches of the military, is expected to consume
25,000 to 30,000 pounds of titanium per airplane. Timing and order patterns,
which are likely to extend well into the future for this program, have not been
quantified, but may be as many as 3,000 to 6,000 planes over the next 30 to 40
years. The Company has entered into agreements with Lockheed and its teaming
partner, BAE Systems, to be the supplier of titanium sheet and plate for the
design and development phase of the program over the next five years.

Despite the forecasted increases in the defense market, it is not expected
to completely offset the effects of the downturn in the commercial aerospace
market.

Industrial and Consumer Markets

40% of RTI's 2002 revenues were generated in various industrial and
consumer markets where business conditions are expected to be mixed over the
next twelve to eighteen months.

Revenues from oil and gas markets achieved new highs for RTI in 2002, and
forecasts for 2003 and beyond indicate continued strong demand, due to the
increase in deep water projects predicted over the next several years. Despite
the weak economy, the Company believes that deep-water oil and gas exploration
will continue at an accelerated pace for the next several years, at least in
part due to increased demand for energy production from sources other than the
Middle East.

In April 2002, RTI Energy Systems was selected by Unocal to provide
production riser equipment in connection with their West Seno project off the
coast of Indonesia. RTI provided the high-fatigue riser engineering design, in
addition to the manufactured components using a combination of titanium and
steel. This project, which was completed in the first quarter of 2003, is
expected to lead to other opportunities in Indonesia over the next several
years.

In addition to the growing applications in energy extraction, RTI serves a
number of other industrial and consumer markets through its distribution
businesses. The products sold and applications served are numerous and varied.
The resulting diversity tends to provide sales stability through varying market
conditions, so the

18

Company expects little overall change in sales and profitability from this
sector of RTI's business over the next twelve months.

The weak economy has negatively affected other RTI industrial and consumer
markets, such as chemical processing, power generation and pulp and paper.
However, the Company believes the industry is at or near the trough of weak
demand from many of these markets, and as economic conditions improve, so will
RTI's revenues from these markets.

BACKLOG

The Company's order backlog for all markets increased to $101.3 million as
of September 30, 2003, from $100.0 million at December 31, 2002, principally due
to an increase in energy related orders partially offset by a reduction in
demand for titanium mill products from commercial aerospace markets. The backlog
increased almost 5% since June 30, 2003 primarily due to energy-related orders.

LIQUIDITY AND CAPITAL RESOURCES

Net cash flows from operating activities totaled $20.0 million for the nine
months ended September 30, 2003, and $23.4 million for the same period in 2002.
Net cash flows from operations for the nine months ended September 30, 2003,
when compared to the nine months ended September 30, 2002, reflect $11.7 million
less net income partially offset by reductions in working capital and other
balance sheet line items of $9.1 million. At September 30, 2003, working capital
and other balance sheet line items had decreased $7.6 million from December 31,
2002 balances, compared to the same period in 2002 which reflected an increase
of $1.4 million. The Company's working capital ratio was 9.4 to 1 at September
30, 2003 and December 31, 2002.

The Company used $3.2 million of cash in investing and financing activities
in the nine months ended September 30, 2003 compared to $5.8 million in 2002.
Gross capital expenditures for the nine months ended September 30, 2003 amounted
to $4.1 million compared to $4.7 million in 2002. In both periods, capital
spending primarily reflected equipment additions and improvements as well as
information systems projects. Partially offsetting the capital expenditures in
2003 were proceeds of $1.4 million relating to the sale of one of the Company's
Ashtabula, Ohio facilities. The cash used in 2002 also reflects $0.7 million
related to administrative fees the Company incurred when it entered into its
revolving credit facility in April of 2002.

During the quarters ended September 30, 2003 and 2002, the Company's cash
flow requirements for capital expenditures were funded with cash provided by
operations. The Company anticipates that its capital expenditures for 2003 will
total approximately $6.0 million and will be funded with cash generated by
operations.

At September 30, 2003, the Company had a borrowing capacity equal to $64.9
million.

On September 9, 1999, RTI filed a universal shelf registration with the
Securities and Exchange Commission. This registration permits RTI to issue up to
$100 million of debt and/or equity securities at an unspecified future date. The
proceeds of any such issuance could be utilized to finance acquisitions, capital
investments or other general purposes; however, RTI has not issued any
securities to date and has no immediate plans to do so.

While there is no guarantee that the Company will be able to generate
sufficient cash flow from operations to fund its operations and capital
expenditures in 2003, the Company believes it can maintain adequate liquidity
through a combination of cash reserves and available borrowing capacity. Also,
as RTI currently has no debt, and based on the expected strength of 2003 cash
flows, the Company does not believe there is any material near-term risks
relating to fluctuations in interest rates.

19

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

Following is a summary of the Company's contractual obligations and other
commercial commitments as of September 30, 2003 (dollars in thousands):

The Company's other commercial commitments at September 30, 2003 represent
standby letters of credit primarily related to commercial performance and
insurance guarantees.

CREDIT AGREEMENT

At September 30, 2003, the Company maintained a credit agreement entered
into on April 26, 2002, which provides a $100 million three-year unsecured
revolving credit facility. This agreement replaced the previously existing $100
million five-year unsecured revolving credit facility entered into September 30,
1998. The Company can borrow up to the lesser of $100 million or a borrowing
base equal to the sum of 85% of qualifying accounts receivable and 60% of
qualifying inventory.

Under the terms of the facility, the Company, at its option, will be able
to borrow at (a) a base rate (which is the higher of PNC Bank's prime rate or
the Federal Funds Effective Rate plus 0.5% per annum), or (b) LIBOR plus a
spread (ranging from 1.0% to 2.25%) determined by the ratio of the Company's
consolidated total indebtedness to consolidated earnings before interest, taxes,
depreciation and amortization. The credit agreement contains restrictions, among
others, on the minimum shareholders' equity required, the minimum cash flow
required, and the maximum leverage ratio permitted. At September 30, 2003, there
was $2.5 million of standby letters of credit outstanding under the facility,
the Company was in compliance with all covenants, and had a borrowing capacity
equal to $64.9 million.

ENVIRONMENTAL MATTERS

The Company is subject to environmental laws and regulations as well as
various health and safety laws and regulations that are subject to frequent
modifications and revisions. During the nine months ended September 30, 2003 and
2002, the Company spent approximately $0.3 million and $0.8 million,
respectively, for environmental remediation, compliance, and related services.
While the costs of compliance for these matters have not had a material adverse
impact on the Company in the past, it is impossible to predict accurately the
ultimate effect these changing laws and regulations may have on the Company in
the future. The Company continues to evaluate its obligations for environmental
related costs on a quarterly basis and makes adjustments in accordance with
provisions of Statement of Position No. 96-1, "Environmental Remediation
Liabilities".

The Company is involved in investigative or cleanup projects under federal
or state environmental laws at a number of waste disposal sites, including the
Fields Brook Superfund Site and the Ashtabula River Area of Concern. Given the
status of the proceedings with respect to these sites, ultimate investigative
and remediation costs cannot presently be accurately predicted, but could, in
the aggregate be material. Based on

20

the information available regarding the current ranges of estimated remediation
costs at currently active sites, and what the Company believes will be its
ultimate share of such costs, provisions for environmental-related costs have
been recorded.

At September 30, 2003 and December 31, 2002, the amount accrued for future
environmental-related costs was $1.7 million. Of the total amount accrued at
September 30, 2003, $0.3 million is expected to be paid out within one year and
is included in the Other accrued liabilities line of the balance sheet. The
remaining $1.4 million is recorded in Other noncurrent liabilities. Based on
available information, RMI believes its share of potential environmental-related
costs, before expected contributions from third parties, is in a range from $3.0
million to $7.3 million, in the aggregate. RMI has contractual agreements with
third parties (other than insurers) to reimburse RMI for a portion of the
Company's share of certain potential environmental-related costs. The amount
accrued is net of expected contributions from those third parties of
approximately $0.5 to $1.9 million, which the Company believes are probable. The
Company has been receiving contributions from such third parties for a number of
years as partial reimbursement for costs incurred by the Company. As these
proceedings continue toward final resolution, amounts in excess of those already
provided may be necessary to discharge the Company from its obligations for
these projects.

EMPLOYEES

As of September 30, 2003, the Company and its subsidiaries employed 1,133
persons, 409 of whom were classified as administrative and sales personnel. 687
of the total number of employees were in the Titanium Group, while 446 were
employed in the Fabrication and Distribution Group.

The United Steelworkers of America represents 361 of the hourly clerical
and technical employees at RMI's plant in Niles, Ohio and 15 hourly employees at
RMI Environmental Services in Ashtabula, Ohio. No other Company employees are
represented by a union.

In 1999 the Niles, Ohio plant and the United Steel Workers of America,
after a strike, agreed to a forty-two month contract which expired on October
15, 2003. The contract was extended twice as local management and the union
negotiated the terms of a new contract. On October 25, 2003 union members voted
to reject management's final proposal and a work stoppage commenced. The plant
will be operated by non-represented employees until an agreement can be reached.
The contract for the hourly employees at the facilities in Ashtabula expires in
January, 2006.

NEW ACCOUNTING STANDARDS

In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 143 ("SFAS No. 143"),
"Accounting for Asset Retirement Obligations." SFAS No. 143 prescribes the
accounting for retirement obligations associated with tangible long-lived
assets, including: (1) the timing of liability recognition; (2) initial
measurement of the liability; (3) allocation of the cost of the obligation to
expense; (4) measurement and recognition of subsequent changes to the liability;
and (5) financial statement disclosures. SFAS No. 143 requires that an asset
retirement cost be capitalized as part of the cost of the related long-lived
asset and subsequently allocated to expense using a systematic and rational
method. The standard is required to be adopted in fiscal years beginning after
June 15, 2002. At adoption, any transition adjustment required will be reported
as a cumulative effect of a change in accounting principle. The Company adopted
this standard in the first quarter of 2003 and it did not result in a material
adjustment to the financial statements.

In June 2002, the FASB issued Statement of Financial Accounting Standards
No. 146 ("SFAS No. 146"), "Accounting for Costs Associated with Exit or Disposal
Activities." SFAS No. 146 addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task
Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." Under EITF Issue 94-3, a liability for an
exit activity was recognized at the date of an entity's commitment to an exit
plan. SFAS No. 146 requires that a liability for a cost associated with an exit
or disposal activity be recognized when the liability is incurred. SFAS No. 146
is effective for exit or disposal activities that are initiated after
21

December 31, 2002. SFAS No. 146 will impact the timing of the recognition of
costs associated with an exit or disposal activity but is not expected to have a
material impact on the Company.

In January 2003, the FASB issued Statement of Financial Accounting
Standards No. 148 ("SFAS No. 148"), "Accounting for Stock-Based
Compensation-Transition and Disclosure." SFAS 148 amends current disclosure
requirements and requires prominent disclosures on both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. This
statement is effective for financial reports containing financial statements for
interim periods beginning after December 15, 2002. See Note 3 for the
disclosures required by this standard.

In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires that upon
issuance of a guarantee, the guarantor must recognize a liability for the fair
value of the obligation it assumes under that guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and annual financial
statements about the obligations associated with guarantees issued. The
disclosure requirements are effective for financial statements of interim or
annual periods ending after December 15, 2002. The recognition and measurement
provisions are effective on a prospective basis to guarantees issued or modified
after December 31, 2002. The adoption of this interpretation did not have a
material impact on the Company.

In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities." FIN 46 provides guidance on the
identification of entities for which control is achieved through means other
than through voting rights, variable interest entities, and how to determine
when and which business enterprises should consolidate variable interest
entities. This interpretation applies immediately to variable interest entities
created after January 31, 2003. In FASB Staff Position 46-6, public entities may
defer the effective date to apply FIN 46 until the first fiscal year or interim
period ending after December 15, 2003, to variable interest entities or
potential variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. The adoption of this
interpretation will not have an impact on the Company.

In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149 ("SFAS No. 149"), "Amendment of Statement 133 on Derivative Instruments
and Hedging Activities." SFAS No. 149 amends and clarifies financial accounting
and reporting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 149 is effective for contracts entered into or modified after September 30,
2003, with some exceptions. The adoption of this standard will not have a
material impact on the Company.

In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150 ("SFAS No. 150"), "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity," which requires that an issuer
classify financial instruments that are within scope of SFAS No. 150 as a
liability. Under prior guidance, these same instruments would be classified as
equity. SFAS No. 150 is effective for all financial instruments entered into or
modified after May 31, 2003. Otherwise, it is effective on July 1, 2003. On
October 29, 2003 the FASB deferred the provisions of paragraph 9 and 10 of SFAS
No. 150 as they apply to mandatorily redeemable non-controlling interests. The
Company does not believe that the adoption of SFAS No. 150 will have a material
effect on its financial position or results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes to the Company's exposure to market
risk since the Company filed its Form 10-K on March 12, 2003.

22

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period, the Chief Executive Officer and Chief
Financial Officer evaluated the Company's disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14 and 15d-14. They have concluded that the
Company's disclosure controls and procedures are effective in ensuring that all
material information required to be filed in this quarterly report has been made
known to them in a timely fashion. In addition, there have been no significant
changes in the Company's internal controls or in other factors that could
significantly affect those internal controls, including any corrective actions
with regard to significant differences and material weaknesses, subsequent to
the Evaluation Date.

23

PART II--OTHER INFORMATION

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

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

(b) Reports on Form 8-K

On July 22, 2003, the Company filed a Current Report on Form 8-K reporting
pursuant to Item 12 to disclose the financial results of the Company for the
quarter ended June 30, 2003.

24

SIGNATURES

Pursuant to the requirements 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.

RTI INTERNATIONAL METALS, INC.

--------------------------------------
(Registrant)

Date: November 12, 2003

By: /s/ L. W. JACOBS
------------------------------------
L. W. Jacobs
Vice President & Chief Financial
Officer

25