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 MARCH 31, 2004.

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 May 1, 2004, 21,190,997 shares of common stock of the registrant were
outstanding.

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RTI INTERNATIONAL METALS, INC.

FORM 10-Q
QUARTER ENDED MARCH 31, 2004

INDEX

PART I -- FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

RTI INTERNATIONAL METALS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(DOLLARS IN THOUSANDS)

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

2

RTI INTERNATIONAL METALS, INC.

CONSOLIDATED BALANCE SHEET

(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

(DOLLARS IN THOUSANDS)

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

4

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 2003 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. USX terminated its ownership interest in
RTI in 2000.

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
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, determines
the type or types

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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 2004, 184,000 option shares were granted at an
exercise price of $14.96. 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. 184,000 of the option shares
granted in 2004 were outstanding at March 31, 2004.

During the three months ended March 31, 2004, 69,250 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 ended March 31, 2004 and 2003 would have been
as follows (dollars in thousands; except per share amounts):

Included in the Company's income for the quarters ended March 31, 2004 and
2003 is stock-based compensation expense relating to restricted stock grants
amounting to $0.1 and $0.2 million, respectively.

NOTE 4--INCOME TAXES

In the three months ended March 31, 2004, the Company recorded an income
tax expense of $1.4 million, or 34% of pre-tax income compared to an expense of
$2.7 million, or 38% for the three months ended March 31, 2003. The effective
tax rate for the three-month periods ended March 31, 2004 and March 31, 2003 was
34% and 38% respectively. The first quarter 2004 rate of 34% was less than the
federal statutory rate of 35% primarily due to foreign tax credits partially
offset by state income taxes. The first quarter 2003 rate exceeded the federal
statutory rate of 35% primarily as a result of state income taxes.

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NOTE 5--EARNINGS PER SHARE

A reconciliation of the income and weighted average number of outstanding
common shares used in the calculation of basic and diluted earnings per share
for the quarters ended March 31, 2004 and 2003 are as follows (in thousands
except number of shares and per share amounts):

451,618 and 1,095,571 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 March 31, 2004 and 2003, 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 $5.8 million as of March 31, 2004 and $7.5 million as of
December 31, 2003. 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 decrease
reflects the Company fulfilling obligations and recognizing revenue related to
advance payments.

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NOTE 8--OTHER INCOME

For the three months ended March 31, 2004 and 2003, the components of other
operating income and other income are as follows (dollars in millions):

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(1) 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. Boeing has satisfied the final
claim under this agreement.

NOTE 9--PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company provides defined benefit pension plans for certain of its
salaried and represented workforce. Benefits for its salaried participants are
generally based on participant's years of service and compensation. Benefits for
represented pension participants are generally determined based on an amount for
years of service. Other Company employees participate in 401(k) plans whereby
the Company may provide a match of employee contributions. These plans are
generally not significant to the Company. The policy of the Company with respect
to its defined benefit plans is to contribute at least the minimum amounts
required by applicable laws and regulations.

The cost of the Company's retiree health care plans (Other Postretirement
Benefits) is capped at predetermined out-of-pocket spending limits. Retiree
health care is available to participants in the defined benefit pension plans.
Benefit payments are made from company assets. Other Postretirement Benefits are
not funded.

The 2004 and 2003 amounts shown below reflect the defined benefit pension
and other postretirement benefit expense for the three months ended March 31 for
each year for those salaried and hourly covered employees (dollars in
thousands):

RTI International Metals also has a supplemental pension Program
("Program") for certain key employees. The Program is unfunded. The first
quarter net periodic benefit cost related to the Program is $128,983 for 2004
and $106,277 for 2003.

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NOTE 10--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. In our opinion,
the ultimate liability, if any, resulting from these matters will have no
significant effect on our consolidated financial statements. 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 three months ended March 31, 2004, the
Company spent approximately $0.6 million 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 accurately predict 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, and
what the Company believes will be its ultimate share of such costs, provisions
for environmental-related costs have been recorded.

Given the status of the proceedings at certain of these sites, and the
evolving nature of environmental laws, regulations, and remediation techniques,
the Company's ultimate obligation for investigative and remediation costs cannot
be predicted. It is the Company's policy to recognize environmental costs in its
financial statements when an obligation becomes probable and a reasonable
estimate of exposure can be determined.

At March 31, 2004 and December 31, 2003, the amount accrued for future
environmental-related costs was $1.7 million. Of the total amount accrued at
March 31, 2004, $0.5 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 $1.2 million is recorded in other non-current liabilities.

Based on available information, RMI believes that its share of potential
environmental-related costs, before expected contributions from third parties,
is in a range from $2.6 to $7.9 million in the aggregate. The amount accrued is
net of expected contributions from third parties in a range from $0.2 to $2.3
million, which the Company believes are probable. These third parties include
prior owners of RMI property and prior customers of RMI, that have agreed to
partially reimburse the Company for certain environmental-related costs. 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 sites.

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Former Ashtabula Extrusion Plant

The Company's former extrusion plant in Ashtabula, Ohio was used to extrude
depleted uranium under a contract with the DOE from 1962 through 1990. In
accordance with that agreement, the DOE retained responsibility for the cleanup
of the facility when the facility was no longer needed for processing government
material. Processing ceased in 1990, and in 1993 RMI was chosen as the prime
contractor for the remediation and restoration of the site by the DOE. Since
then, contaminated buildings have been removed and approximately two-thirds of
the site has been free released by the Ohio Department of Health, to RMI, at DOE
expense.

In December, 2003, in accordance with its terms, the Department of Energy
terminated the contract "for convenience." Remaining soil removal is expected to
take approximately 18-24 months. As license holder and owner of the site, RMI is
responsible to the state of Ohio for complying with soil and water regulations.
However, remaining cleanup cost is expected to be borne by the DOE in accordance
with their contractual obligation.

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, 2002, and 2003, ordering 0.9 million pounds, 1.1 million
pounds, 0.9 million pounds, 0.5 million pounds, and 0.4 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 other income 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. The Company recognized other income of approximately $9
million in the first quarter 2004 when Boeing satisfied the final claim under
this contract for amounts not taken in 2003.

Purchase Commitments

The Company has purchase commitments for materials, supplies, and machinery
and equipments as part of the ordinary course of business. A few of these
commitments extend beyond one year. The Company believes these commitments are
not at prices in excess of current market.

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 11--TRANSACTIONS WITH RELATED PARTIES:

In accordance with the purchase agreement of Reamet S.A. located in
Villette, France from December 2000, the Company was obligated to acquire a
residence located on the previously acquired land. The

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owner of the residence and his immediate family have been involved in the
management of the business before and since the acquisition. The residence was
acquired for $581,000 (the fair value as appraised) including closing costs in
February 2004. The Company had previously disclosed that the residence was worth
approximately $500,000 without closing costs.

There were no related party transactions in 2002 and 2001.

NOTE 12--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 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 ended March 31, 2004 and 2003 is as
follows (dollars in thousands):

NOTE 13--NEW ACCOUNTING PRONOUNCEMENTS

The Company adopted SFAS No. 143 Accounting for Asset Retirement
Obligations ("SFAS No. 143"), effective December 31, 2003. SFAS No. 143 requires
that entities record the fair value of an asset retirement obligation in the
period in which it was incurred. 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
adoption did not 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. The Company
adopted SFAS No. 148 which was effective for financial reports containing
financial statements for interim periods beginning after December 15, 2002. See
Note 3 for the disclosure required by this standard.

In May 2003 the FASB issued SFAS No., 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This Statement
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability or an asset in some circumstances. In most cases these
instruments were previously classified as equity. This Statement is effective
for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. The adoption of this standard did not have an impact on the
Company's financial statements.

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

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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 did not have a material impact on the Company.

In January 2003, the Financial Accounting Standards Board (FASB) issued
interpretation No. 46 (revised December 2003), "Consolidation of Variable
Interest entities, an interpretation of ARB No. 51," (FIN 46) which addresses
consolidation by business enterprises of variable interest entities that do not
have sufficient equity investment to permit the entity to finance its activities
without additional subordinated financial support from other parties or whose
equity investors lack characteristics of a controlling financial interest. The
Interpretation provides guidance related to identifying variable interest
entities and determining whether such entities should be consolidated. It also
provides guidance related to the initial and subsequent measurement of assets,
liabilities and noncontrolling interests in newly consolidated variable interest
entities and requires disclosures for both the primary beneficiary of a variable
interest entity and other beneficiaries of the entity. FIN 46 must be applied to
all entities subject to this Interpretation as of March 31, 2004. However, prior
to the required application of this Interpretation, FIN 46 must be applied to
those entities that are considered to be special-purpose entities as of December
31, 2003. There was no financial statement impact from the application at March
31, 2004.

In December 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the "Act") was signed into law. The Act incorporates
a plan sponsor subsidy based on a percentage of a beneficiary's annual
prescription drug benefits, within certain limits, and opportunity for a retiree
to obtain prescription drug benefits under Medicare.

Since the Company has had an established cap on its postretirement medical
benefits, any reductions in postretirement benefit costs resulting from the Act
are not expected to be material although the Company will evaluate the effect of
the Act during the two year transitional period provided under the Act. Specific
authoritative guidance on the accounting for federal subsidy is pending and that
guidance, when issued could require plan sponsors to change previously reported
information. Additionally, regulations under the act have not been issued.

In accordance with FASB Staff Position 106-1, the Company has elected to
defer accounting for the effect of the act. Accordingly, the benefit obligation
and net periodic benefit cost do not reflect any potential effects of the Act.

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
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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.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(Dollars in millions)

Net Sales

Sales for the Company's Titanium Group amounted to $37.7 million, including
intercompany sales of $24.6 million, in the three months ended March 31, 2004
compared to $32.7 million, including intercompany sales of $18.5 million, in the
same period of 2003. Titanium Group net sales decreased as a result of lower
flat-rolled product shipments and average prices and reduced sales from the
termination of the previously mentioned DOE contract (see note 10). Offsetting
the reduction in flat-rolled revenue was increased revenue from commercially
pure titanium ("CP") and Ferro Titanium sales. Shipments of titanium mill
products were 1.5 million pounds in the three months ended March 31, 2004,
compared to 1.4 million pounds for the same period in 2003. Included in mill
product shipments are intersegment shipments from the Titanium Group to the
Fabrication & Distribution Group. Average realized prices on mill products for
the three months ended March 31, 2004 decreased to $15.03 per pound from $16.58
per pound in 2003. The decrease in average realized prices for mill products
resulted primarily from a decrease in plate products from the 2003 period
resulting in an unfavorable mix change and a decrease in sheet prices.

Sales for F&D amounted to $45.1 million, including intercompany sales of
$4.1 million, in the three months ended March 31, 2004, compared to $46.0
million, including intercompany sales of $1.8 million, in the same period of
2003. This decrease primarily reflects a decrease in the completion activity of
several energy contracts from the first quarter 2003.

Gross Profit

The reduction in gross profit for 2004 from 2003 was a result of a
reduction in sales in the Fabrication and Distribution Segments Energy Business
Group. In the first quarter of 2003 the Energy Group recognized revenue on
several large gross margin projects compared to reduced recognition activity and
lower gross margin projects in the first quarter of 2004.

Adverse mix changes occurred in the Company's plate products and lower
prices on sheet, CP margins and scrap sales were offsetting. The ongoing work
stoppage at the Titanium Group's Niles, Ohio Plant has not affected the segments
profitability as salary labor has maintained operations at costs lower than the
year ago quarter when operations were absent the work stoppage.

Selling, General and Administrative Expenses

The increase for the three months ended March 31, 2004 compared to 2003
resulted from increased employee insurance, an increase in personnel at the
Company's Energy operations and accrued pension expenses.

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Research, Technical and Product Development Expenses

Research, technical and product development expenses for three months ended
March 31, 2004 were slightly reduced from 2003.

Operating (Loss) Income

Operating loss for the three months ended March 31, 2004 was greater than
2003 due to a decrease in operating income from the Titanium Group, from a
$(3.4) million loss in 2003 to a loss of $(4.1) million in 2004. The change
reflects an unfavorable mix and pricing change on flat rolled products. The
decrease is also due to a decrease in operating income in F&D, from $1.8 million
in 2003 to a loss of $(0.9) million in 2004, primarily as a result of a decline
in profitability from energy markets when compared to 2003 principally due to
project delays on long-term orders.

Other Income

Other income for the three months ended March 31, 2004 mostly reflects the
receipt of liquidated damages from the Boeing Airplane Group of $9.1 million in
2004. In 2003, other income reflects a similar receipt of $8.4 million. The
long-term agreement between RTI and Boeing expired December 31, 2003. The
Company receipt of $9.1 million from Boeing for the year 2003 short fall in the
end of the first quarter 2004 represents the last payment under the agreement.
The remainder of the change in other income from 2003 to 2004 consists primarily
of lower losses on disposals of other assets and increases in foreign exchange
gains.

Interest Income (Expense), net

Interest expense for the three months ended March 31, 2004 and 2003 was $.2
million, and primarily consists of fees associated with the unused capacity on
the Company's credit facility. Interest expense was partially offset by interest
income on invested cash balances. Interest income was equal to $.2 million and
$.1 million for the three months ended March 31, 2004 and 2003, respectively.
The Company had no bank debt at March 31, 2004 and December 31, 2003.

Income Taxes

The effective tax rate of 34% for the three months ended March 31, 2004 was
less than the federal statutory rate of 35% primarily due to foreign tax credits
partially offset by state income taxes. The effective tax rate of 38% for the
three months ended March 31, 2003 was greater than the federal statutory rate of
35% primarily due to state income taxes.

16

Net Income

Net income for the three months ended March 31, 2004 was less than the
comparable 2003 period due to items discussed above.

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") had and will 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 million pounds in 1997 to
approximately 34 million pounds in 2003. Shipment levels in 2004 are expected to
be up somewhat from 2003.

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

Commercial Aerospace Markets

Aerospace demand is classified into two sectors: commercial aerospace and
defense programs. Demand from these two sectors comprises approximately 45% of
the worldwide consumption for titanium products and in the U.S. comprises in
excess of 60% of titanium consumption. The events surrounding September 11,
2001, as well as the Middle East conflict and the outbreak of SARS severely
affected the commercial aerospace market. Airline operators experienced a
dramatic drop in travel resulting in significant losses within the airline
industry, necessitating cancellation of and reduced requirements for new
aircraft. The Company's sales to this market represented 27% of total sales in
2003, down from 49% in 2000.

Following the drop in aircraft demand, Boeing and Airbus have continued to
reduce their build rates for aircraft, including an aggregate 13.5% cutback in
2003. Their combined build rate for large commercial aircraft for 2004 is
currently expected to be down slightly at 575 planes. An increase in commercial
aerospace production is not expected before 2006.

Airbus has announced the launch of a large widebody aircraft, the A380, and
Boeing is expected to launch a new aircraft, the 7E7, both of which are expected
to use large quantities of titanium, in the second half of this decade. Longer
term, the commercial aerospace sector is expected to continue to be a very
significant consumer of titanium products due to the expected long-term growth
of worldwide traffic and the need to repair and replace aging commercial fleets
over the next 20 years.

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 were 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 had to supply Boeing and its family
of commercial suppliers with up to 4.5 million pounds of titanium products
annually. The agreement, which began in 1999, had an initial term of five years
and concluded at the end of 2003. Under the accord, Boeing received firm prices
in exchange for RMI receiving a minimum volume commitment of 3.25 million pounds
per year. If volumes fell 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, 2001, 2002 and 2003, 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

17

approximately $8 million. Boeing ordered 0.4 million pounds in 2003, the final
year of the contract, and accordingly, the Company received a payment of $9.1
million in March 2004 when Boeing satisfied the final claim under the contract.
Beginning in January of 2004, business between the companies not covered by
other contracts is being conducted on a non-committed basis, that is, no volume
commitment by Boeing and no commitment of capacity or price by RMI.

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 A380 is expected to utilize more titanium per aircraft than any
commercial plane that has ever been produced. In 2003, Airbus became 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 the
commercial aerospace market is at or near the bottom of this decline. In August,
2003, SpeedNews reported that the International Civil Aviation Organization
(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. Additionally, a number of planes taken out of service by
the airlines during this downturn are likely to be returned. For this reason,
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 28% of the
Company's 2003 revenues and are expected to increase as a percent of total sales
in 2004 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 45% 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

46% of RTI's 2003 revenues were generated in various industrial and
consumer markets where business conditions are expected to be mixed over the
next twelve months.

18

Revenues from oil and gas markets are expected to increase in 2004 and
beyond, due to continued activity 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 a strong pace for the next several
years, at least in part due to increased demand for energy.

In April 2002, RTI Energy Systems was selected by Unocal Corporation to
provide production riser equipment in connection with their West Seno project
off the coast of Indonesia. RTI provided 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 beginning in 2004 and
extending over the next 2-3 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 Company expects little overall change in sales and
profitability from this sector of RTI's business over the next twelve months.

The weak economy in recent years has negatively affected other RTI
industrial and consumer markets, such as chemical processing, power generation
and pulp and paper. However, the Company believes demand from these markets will
improve in 2004 and beyond as economic conditions continue to show improvement.

Backlog

The Company's order backlog for all markets increased to $100.2 million as
of March 31, 2004, from $92.3 million at December 31, 2003, principally in
titanium markets as the general economy appears to be increasing and orders for
inventory replenishment take hold.

LIQUIDITY AND CAPITAL RESOURCES
(Dollars in millions)

The Company believes it will generate sufficient cash flow from operations
to fund operations and capital expenditures in 2004. In addition, RTI has cash
reserves and available borrowing capacity to maintain adequate liquidity. RTI
currently has no debt, and based on the expected strength of 2004 cash flows,
the Company does not believe there are any material near-term risks related to
fluctuations in interest rates.

Cash provided by operating activities

The decrease in net cash flows from operations for the three months ended
March 31, 2004 compared to the three months ended March 31, 2003 primarily
reflects a decrease in net income of $1.6 million due to a decline in business
operating results as mentioned in the "Results of Operations" section of
Management's Discussion and Analysis. The remainder of the decrease is primarily
due to a decrease in cash generated from reductions in working capital and other
balance sheet line items. The decrease in cash generated from working capital
and other balance sheet line items when comparing 2004 to 2003 was caused by a
decrease in other current liabilities and accounts payable. Included in other
current liabilities are the Company's income tax liability and its liability for
billings in excess of costs. The Company substantially reduced its income tax
liability in the quarter ended March 31, 2004 as payment was made and reduced
operating income in the quarter did not necessitate a re-establishment of a
material liability at March 31, 2004. The liability for billings in excess of
costs decreased during the quarter as new work on projects decreased over the
prior period.

The Company generated cash from continued inventory liquidations in the
three months ended March 31, 2004 when compared to the year ago period as
work-in-process and finished goods inventories were reduced in the Titanium
Group Segment.

19

The Company's working capital ratio was 11.1 and 7.8 to 1 at March 31, 2004
and December 31, 2003, respectively.

Cash used in investing activities

Gross capital expenditures for the three months ended March 31, 2004
amounted to $1.9 million compared to $1.3 million in 2003. In all periods,
capital spending primarily reflected equipment additions and improvements as
well as information systems projects.

During the three months ended December 31, 2004 and 2003, the Company's
cash flow requirements for capital expenditures were funded with cash provided
by operations. The Company anticipates that its capital expenditures for 2004
will total approximately $8.0 million and will be funded with cash generated by
operations.

At March 31, 2004 and December 31, 2003, the Company had a borrowing
capacity equal to $46.0 and $59.4 million, respectively.

Cash provided by (used in) financing activities

The favorable change in cash flows from financing activities for the three
months ended March 31, 2004 compared to the three months ended March 31, 2003
primarily reflects an increase in proceeds from the exercise of employee stock
options of $2.4 million in 2004.

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.

CONTRACTUAL OBLIGATIONS, COMMITMENTS, AND POST-RETIREMENT BENEFITS

Following is a summary of the Company's contractual obligations and other
commercial commitments as of March 31, 2004 (dollars in thousands):

- ---------------

(1) Amounts represent commitments for which contractual terms exceed twelve
months.

(2) Amounts primarily represent purchase commitments under purchase orders.

(3) Amounts represent standby letters of credit primarily related to commercial
performance and insurance guarantees.

(4) The Company does not fund its other post-retirement employee benefits
obligation but instead pays amounts when incurred. However, these estimates
are based on current benefit plan coverage and are not contractual
commitments in as much as the Company retains the right to modify, reduce,
or terminate any such coverage in the future. Amounts shown in the years
2004 through 2008 are based on actuarial estimates of expected future cash
payments. The Company is not forecasting or required to make a pension
contribution in 2004. As in past years, the Company may make voluntary
contributions when there is an economic advantage to contribute to the fund.
Future contributions to the fund, if required, will be provided based on
actuarial evaluation.

CREDIT AGREEMENT

At March 31, 2004, 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 March 31, 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 March 31, 2004, there was
$4.4 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 $46.0 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 three months ended March 31, 2004, the
Company spent approximately $0.6 million 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 accurately predict the ultimate effect these changing laws and
regulations may have on the Company in the future. The Company continues to
evaluate its obligations for
21

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

Given the status of the proceedings at certain of these sites, and the
evolving nature of environmental laws, regulations, and remediation techniques,
the Company's ultimate obligation for investigative and remediation costs cannot
be predicted. It is the Company's policy to recognize environmental costs in its
financial statements when an obligation becomes probable and a reasonable
estimate of exposure can be determined.

At March 31, 2004 and December 31, 2003, the amount accrued for future
environmental-related costs was $1.7 million. Of the total amount accrued at
March 31, 2004, $0.5 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 $1.2 million is recorded in other non-current liabilities.

Based on available information, RMI believes that its share of potential
environmental-related costs, before expected contributions from third parties,
is in a range from $2.6 to $7.9 million in the aggregate. The amount accrued is
net of expected contributions from third parties in a range from $0.2 to $2.3
million, which the Company believes are probable. These third parties include
prior owners of RMI property and prior customers of RMI, that have agreed to
partially reimburse the Company for certain environmental-related costs. 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 sites.

Former Ashtabula Extrusion Plant

The Company's former extrusion plant in Ashtabula, Ohio was used to extrude
depleted uranium under a contract with the DOE from 1962 through 1990. In
accordance with that agreement, the DOE retained responsibility for the cleanup
of the facility when the facility was no longer needed for processing government
material. Processing ceased in 1990, and in 1993 RMI was chosen as the prime
contractor for the remediation and restoration of the site by the DOE. Since
then, contaminated buildings have been removed and approximately two-thirds of
the site has been free released by the Ohio Department of Health, to RMI, at DOE
expense.

In December, 2003, in accordance with its terms, the Department of Energy
terminated the contract "for convenience." Remaining soil removal is expected to
take approximately 18-24 months. As license holder and owner of the site, RMI is
responsible to the state of Ohio for complying with soil and water regulations.
However, remaining cleanup cost is expected to be borne by the DOE in accordance
with their contractual obligation.

EMPLOYEES

As of March 31, 2004, the Company and its subsidiaries employed 1,097
persons, 414 of whom were classified as administrative and sales personnel. 629
of the total number of employees were in the Titanium Group, while 452 were
employed in the Fabrication & Distribution Group.

22

The United Steelworkers of America represents 357 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.

NEW ACCOUNTING STANDARDS

The Company adopted SFAS No. 143 Accounting for Asset Retirement
Obligations ("SFAS No. 143"), effective December 31, 2003. SFAS No. 143 requires
that entities record the fair value of an asset retirement obligation in the
period in which it was incurred. 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
adoption did not 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. The Company
adopted SFAS No. 148 which was effective for financial reports containing
financial statements for interim periods beginning after December 15, 2002. See
Note 3 for the disclosure required by this standard.

In May 2003 the FASB issued SFAS No. 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This Statement
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability or an asset in some circumstances. In most cases these
instruments were previously classified as equity. This Statement is effective
for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. The adoption of this standard did not have an impact on the
Company's financial statements.

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 did not have a material impact on the
Company.

In December 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the "Act") was signed into law. The Act incorporates
a plan sponsor subsidy based on a percentage of a beneficiary's annual
prescription drug benefits, within certain limits, and opportunity for a retiree
to obtain prescription drug benefits under Medicare.

Since the Company has had an established cap on its postretirement medical
benefits, any reductions in postretirement benefit costs resulting from the Act
are not expected to be material although the Company will evaluate the effect of
the Act during the two year transitional period provided under the Act. Specific
authoritative guidance on the accounting for federal subsidy is pending and that
guidance, when issued could require plan sponsors to change previously reported
information. Additionally, regulations under the act have not been issued.

23

In accordance with FASB Staff Position 106-1, the Company has elected to
defer accounting for the effect of the act. Accordingly, the benefit obligation
and net periodic benefit cost do not reflect any potential effects of the Act.

In January 2003, the Financial Accounting Standards Board (FASB) issued
interpretation No. 46 (revised December 2003), "Consolidation of Variable
Interest entities, an interpretation of ARB No. 51," (FIN 46) which addresses
consolidation by business enterprises of variable interest entities that do not
have sufficient equity investment to permit the entity to finance its activities
without additional subordinated financial support from other parties or whose
equity investors lack characteristics of a controlling financial interest. The
Interpretation provides guidance related to identifying variable interest
entities and determining whether such entities should be consolidated. It also
provides guidance related to the initial and subsequent measurement of assets,
liabilities and noncontrolling interests in newly consolidated variable interest
entities and requires disclosures for both the primary beneficiary of a variable
interest entity and other beneficiaries of the entity. FIN 46 must be applied to
all entities subject to this Interpretation as of March 31, 2004. However, prior
to the required application of this Interpretation, FIN 46 must be applied to
those entities that are considered to be special-purpose entities as of December
31, 2003. There was no financial statement impact from the application at March
31, 2004.

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 8, 2004.

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.

24

PART II--OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES.

Issuer Purchases of Equity Securities:

RTI International Metals, Inc. share repurchase program was approved by
RTI's Board of Directors on April 30, 1999. The program authorizes the
repurchase of up to 15 million dollars of RTI common stock from time to time.

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 January 27, 2004, 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 year ended December 31, 2003.

25

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: May 7, 2004

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

26