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UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549


FORM 10-K


(Mark One)




|  |                                                                                                                                                                                         
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|þ | Annual report pursuant to
    Section 13 or 15(d) of the Securities Exchange Act of 1934
    for the fiscal year ended December 31, 2005 or                                             
| 
|o | 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.




|                                         |  |                                     
|---------------------------------------- |  | ------------------------------------
|Ohio                                     |  | 52-2115953                          
|(State of Incorporation)                 |  | (I.R.S. Employer Identification No.)
|                                        
|1000 Warren Avenue, Niles, Ohio          |  | 44446                               
|(Address of principal executive offices) |  | (Zip code)                          

Registrants telephone number, including area code:
330-544-7700


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


|                                        |  |                                          
|--------------------------------------- |  | -----------------------------------------
|Title of each class                     |  | Name of each exchange on which registered
|                                        |  |                                          
|Common Stock, par value $0.01 per share |  | New York Stock Exchange                  

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


Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities
Act.     Yes þ No o


Indicate by check mark if the
registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the
Act.     Yes o No þ


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 þ No o


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


12b-2


Large accelerated filer o Accelerated
filer þ Non-accelerated
filer o


Indicate by check mark whether the
registrant is a shell company (as defined in
Rule 12b-2 of the
Exchange Act).     Yes o No þ


12b-2




Documents Incorporated by Reference:












---



##### 










RTI INTERNATIONAL METALS, INC.


AND CONSOLIDATED SUBSIDIARIES







TABLE OF CONTENTS


|           |  |                                                                                                                      |    |      |    | 
|---------- |  | -------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|           |  |                                                                                                                      |    | Page |   
|           |  |                                                                                                                      |    |      |   
|PART I    
|Item 1.    |  | Business                                                                                                             |    |      | 1  | 
|Item 1A.   |  | Risk Factors                                                                                                         |    |      | 8  | 
|Item 1B.   |  | Unresolved Staff Comments                                                                                            |    |      | 10 | 
|Item 2.    |  | Properties                                                                                                           |    |      | 11 | 
|Item 3.    |  | Legal Proceedings                                                                                                    |    |      | 11 | 
|Item 4.    |  | Submission of Matters to a Vote of Security
    Holders                                                              |    |      | 12 | 
|PART II   
|Item 5.    |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |    |      | 13 | 
|Item 6.    |  | Selected Financial Data                                                                                              |    |      | 14 | 
|Item 7.    |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |    |      | 14 | 
|Item 7A.   |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |    |      | 30 | 
|Item 8.    |  | Financial Statements and Supplementary
    Data                                                                      |    |      | 30 | 
|Item 9.    |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |    |      | 64 | 
|Item 9A.   |  | Controls and Procedures                                                                                              |    |      | 64 | 
|Item 9B.   |  | Other Information                                                                                                    |    |      | 67 | 
|PART III  
|Item 10.   |  | Directors and Executive Officers of the
    Registrant                                                               |    |      | 67 | 
|Item 11.   |  | Executive Compensation                                                                                               |    |      | 67 | 
|Item 12.   |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |    |      | 67 | 
|Item 13.   |  | Certain Relationships and Related
    Transactions                                                                   |    |      | 68 | 
|Item 14.   |  | Principal Accountant Fees and Services                                                                               |    |      | 68 | 
|PART IV   
|Item 15.   |  | Exhibits and Financial Statement
    Schedules                                                                       |    |      | 68 | 
|Signatures |  |                                                                                                                      | 71 |     
|EX-4.2    
|EX-10.17  
|EX-21.1   
|EX-23.1   
|EX-24.1   
|EX-31.1   
|EX-31.2   
|EX-32.1   
|EX-32.2   
|EX-99.1   





---



##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | BUSINESS

The Company






Industry Overview


strength-to










| |                     
| | --------------------
| | Commercial Aerospace

Aerospace Market News,


1



---



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Airline Monitor Airline Monitor








| |        
| | -------
| | Defense

A-18, F-15,










| |                        
| | -----------------------
| | Industrial and Consumer











2



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Products and Segments






| |               
| | --------------
| | Titanium Group









| |                                 
| | --------------------------------
| | Fabrication & Distribution Group



cut-to










3



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|                                     |       |      |       |       |      |  |      |       |   |   |       |       |  |   |      |       |   |   |       |       |  |  |      |       |  
|------------------------------------ | ----- | ---- | ----- | ----- | ---- |  | ---- | ----- | - | - | ----- | ----- |  | - | ---- | ----- | - | - | ----- | ----- |  |  | ---- | ----- | -
|                                     |       | 2005 |       |       | 2004 |  |      | 2003  |  
|                                     |       |      |       |       |      |  |      |       |  
|                                     |       | $    |       |       | %    |  |      | $     |   |   | %     |       |  | $ |      |       | % |  
|                                     |       |      |       |       |      |  |      |       |   |   |       |       |  |   |      |       |   |  
|Titanium Group (1)(2)                |       | $    | 130.2 |       |      |  | 37.5 | %     |   | $ | 48.7  |       |  |   | 23.2 | %     |   | $ | 42.0  |       |  |  | 23.3 | %    
|Fabrication & Distribution Group (2) |       |      | 216.7 |       |      |  | 62.5 |       |   |   | 161.0 |       |  |   | 76.8 |       |   |   | 138.3 |       |  |  | 76.7 |      
|                                     |       |      |       |       |      |  |      |       |   |   |       |       |  |   |      |       |   |  
|                                     | Total |      | $     | 346.9 |      |  |      | 100.0 | % |   | $     | 209.7 |  |   |      | 100.0 | % |   | $     | 180.3 |  |  |      | 100.0 | %
|                                     |       |      |       |       |      |  |      |       |   |   |       |       |  |   |      |       |   |  



|                                     |       |      |      |      |      |  |      |       |   |   |       |       |   |   |      |       |   |   |      |      |   |  |       |       |  
|------------------------------------ | ----- | ---- | ---- | ---- | ---- |  | ---- | ----- | - | - | ----- | ----- | - | - | ---- | ----- | - | - | ---- | ---- | - |  | ----- | ----- | -
|                                     |       | 2005 |      |      | 2004 |  |      | 2003  |  
|                                     |       |      |      |      |      |  |      |       |  
|                                     |       | $    |      |      | %    |  |      | $     |   |   | %     |       |   | $ |      |       | % |  
|                                     |       |      |      |      |      |  |      |       |   |   |       |       |   |   |      |       |   |  
|Titanium Group (2)                   |       | $    | 40.8 |      |      |  | 72.8 | %     |   | $ | (11.1 | )     |   |   | 76.0 | %     |   | $ | (3.0 | )    |   |  | 136.4 | %    
|Fabrication & Distribution Group (2) |       |      | 15.3 |      |      |  | 27.2 |       |   |   | (3.5  | )     |   |   | 24.0 |       |   |   | 0.8  |      |   |  | (36.4 | )    
|                                     |       |      |      |      |      |  |      |       |   |   |       |       |   |   |      |       |   |  
|                                     | Total |      | $    | 56.1 |      |  |      | 100.0 | % |   | $     | (14.6 | ) |   |      | 100.0 | % |   | $    | (2.2 | ) |  |       | 100.0 | %
|                                     |       |      |      |      |      |  |      |       |   |   |       |       |   |   |      |       |   |  



|                                 |       |      |       |       |      |   |       |       |  |   |       |       | 
|-------------------------------- | ----- | ---- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                                 |       | 2005 |       |       | 2004 |   |       | 2003  | 
|                                 |       |      |       |       |      |   |       |       | 
|Titanium Group                   |       | $    | 230.5 |       |      | $ | 153.6 |       |  | $ | 163.6 |      
|Fabrication & Distribution Group |       |      | 231.7 |       |      |   | 203.8 |       |  |   | 166.8 |      
|General Corporate (3)            |       |      | 39.6  |       |      |   | 52.0  |       |  |   | 63.4  |      
|                                 |       |      |       |       |      |   |       |       | 
|                                 | Total |      | $     | 501.8 |      |   | $     | 409.4 |  |   | $     | 393.8 | 
|                                 |       |      |       |       |      |   |       |       | 






|    |                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes $205 million, $99 million and
    $91 million of intercompany sales primarily to the
    Fabrication and Distribution Group in 2005, 2004 and 2003,
    respectively.
|   
|(2) | Excludes the effect of Discontinued Operations in both current
    and prior years.                                                                                           
|   
|(3) | Consists primarily of unallocated cash, short term investments
    and deferred tax assets.                                                                                   



| |                    
| | -------------------
| | RTI Sales by Market

|                        |  |      |     |  |      |  |     |      |  |  |     | 
|----------------------- |  | ---- | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                        |  | 2005 |     |  | 2004 |  |     | 2003 | 
|                        |  |      |     |  |      |  |     |      | 
|Commercial Aerospace    |  |      | 42% |  |      |  | 35% |      |  |  | 30% | 
|Defense                 |  |      | 27% |  |      |  | 29% |      |  |  | 31% | 
|Industrial and Consumer |  |      | 31% |  |      |  | 36% |      |  |  | 39% | 

Exports






4



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Backlog




Raw Materials








Competition and Other Market Factors








5



---



##### Table of Contents







Trade and Legislative Factors










Marketing and Distribution




6



---



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Research, Technical and Product Development








Patents and Trademarks




Employees






Executive Officers of the Registrant




|                       |  |     |    |  |       |                                                                                                                        
|---------------------- |  | --- | -- |  | ----- | -----------------------------------------------------------------------------------------------------------------------
|Name                   |  | Age |    |  | Title
|                       |  |     |    |  |      
|Timothy G. Rupert      |  |     | 59 |  |       | President and Chief Executive Officer                                                                                  
|John H. Odle           |  |     | 63 |  |       | Executive Vice President                                                                                               
|Dawne S. Hickton       |  |     | 48 |  |       | Senior Vice President and Chief Administrative Officer, General
    Counsel and Secretary (Principal Financial Officer)
|William T. Hull        |  |     | 48 |  |       | Vice President and Chief Accounting Officer                                                                            
|Gordon L. Berkstresser |  |     | 58 |  |       | Vice President and Controller                                                                                          

7



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Available Information


10-K, 10-Q, 8-K







| |          |             
| | -------- | ------------
| | Item 1A. | RISK FACTORS





| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | The demand for our products and services may be adversely
    affected by demand for our customers products and
    services





| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | A substantial amount of revenue is derived from a single
    industry and a limited number of customers



8



---



##### Table of Contents







| |                                               
| | ----------------------------------------------
| | We may be subject to competitive disadvantages





| |                                                              
| | -------------------------------------------------------------
| | Our business could be harmed by strikes or work
    stoppages





| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | We may experience a lack of supply of raw materials at
    costs that provide us with acceptable margin levels





| |                                                                                                              
| | -------------------------------------------------------------------------------------------------------------
| | We may experience a shortage in the supply of energy or an
    increase in energy costs to operate our plants



9



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| |                                                                     
| | --------------------------------------------------------------------
| | Our business is subject to the risks of international
    operations





| |                                                                                
| | -------------------------------------------------------------------------------
| | We are dependent on services subject to price and
    availability fluctuations





| |                                                                    
| | -------------------------------------------------------------------
| | We may be affected by our ability or inability to obtain
    credit





| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Our success depends largely on our ability to attract and
    retain key personnel





| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | The demand for our products and services may be affected
    by factors outside of our control





| |                                            
| | -------------------------------------------
| | Internal Controls Over Financial Reporting.








|         |                          
|-------- | -------------------------
|Item 1B. | UNRESOLVED STAFF COMMENTS



10



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|        |           
|------- | ----------
|Item 2. | PROPERTIES

Manufacturing Facilities




Manufacturing Facilities


|                                     |  |              |        |  |          |                                                                              |          |  |       | 
|------------------------------------ |  | ------------ | ------ |  | -------- | ---------------------------------------------------------------------------- | -------- |  | ----- | 
|                                     |  |              |        |  |          | Annual Rated                                                                 |         
|Location                             |  | Owned/Leased |        |  | Products |                                                                              | Capacity | 
|                                     |  |              |        |  |          |                                                                              |          | 
|Titanium Group                       |  |              |        |  |          |                                                                              |          |  |       | 
|Niles, OH                            |  |              | Owned  |  |          | Ingot (million pounds)                                                       |          |  | 30.0  | 
|Niles, OH                            |  |              | Owned  |  |          | Mill products (million pounds)                                               |          |  | 22.0  | 
|Salt Lake City, UT                   |  |              | Leased |  |          | Powders (million pounds)                                                     |          |  | 1.5   | 
|Canton, OH                           |  |              | Owned  |  |          | Ferro titanium and specialty alloys (million pounds)                         |          |  | 16.0  | 
|Fabrication & Distribution
    Group |  |              |        |  |          |                                                                              |          |  |       | 
|Washington, MO                       |  |              | Owned  |  |          | Hot-formed and superplastically formed components (thousand
    press hours) |          |  | 50.0  | 
|Sullivan, MO                         |  |              | Leased |  |          | Cut parts (thousand man hours)                                               |          |  | 23.0  | 
|Houston, TX                          |  |              | Leased |  |          | Extruded products (million pounds)                                           |          |  | 1.8   | 
|Houston, TX                          |  |              | Owned  |  |          | Machining & fabrication of oil and gas products
    (thousand man hours)     |          |  | 246.0 | 
|Hermitage, PA                        |  |              | Owned  |  |          | Metal processing (million pounds)                                            |          |  | 3.0   | 
|Birmingham, England                  |  |              | Leased |  |          | Cut parts and components (thousand man hours)                                |          |  | 21.0  | 
|Villette, France                     |  |              | Owned  |  |          | Cut parts and components (thousand man hours)                                |          |  | 9.0   | 
|Los Angeles, CA (2 locations)        |  |              | Leased |  |          | Metal warehousing and distribution                                           |          |  | N/A   | 
|Hartford, CT                         |  |              | Leased |  |          | Metal warehousing and distribution                                           |          |  | N/A   | 
|Indianapolis, IN                     |  |              | Leased |  |          | Metal warehousing and distribution                                           |          |  | N/A   | 
|Houston, TX                          |  |              | Owned  |  |          | Metal warehousing and distribution                                           |          |  | N/A   | 
|Montreal, Canada                     |  |              | Leased |  |          | Machining and assembly of aerospace products (thousand man hours)            |          |  | 250.0 | 








|        |                  
|------- | -----------------
|Item 3. | LEGAL PROCEEDINGS



Environmental






11



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Active Investigative or Cleanup Sites.


Ashtabula River.


Former Ashtabula Extrusion Plant.


Reserve Environmental Services Landfill.







|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



12



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PART II







|        |                                               
|------- | ----------------------------------------------
|Item 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED

STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES


COMMON STOCK DATA:






Range of High and Low Sales Prices of Common Stock for
2005


|        |  |      |       |  |     |   |       | 
|------- |  | ---- | ----- |  | --- | - | ----- | 
|Quarter |  | High |       |  | Low |  
|        |  |      |       |  |     |  
|First   |  | $    | 27.39 |  |     | $ | 18.72 | 
|Second  |  |      | 32.31 |  |     |   | 19.50 | 
|Third   |  |      | 40.31 |  |     |   | 30.76 | 
|Fourth  |  |      | 40.80 |  |     |   | 31.29 | 
|Year    |  | $    | 40.80 |  |     | $ | 18.72 | 

Range of High and Low Sales Prices of Common Stock for
2004


|        |  |      |       |  |     |   |       | 
|------- |  | ---- | ----- |  | --- | - | ----- | 
|Quarter |  | High |       |  | Low |  
|        |  |      |       |  |     |  
|First   |  | $    | 19.12 |  |     | $ | 14.05 | 
|Second  |  |      | 17.19 |  |     |   | 13.09 | 
|Third   |  |      | 19.90 |  |     |   | 13.30 | 
|Fourth  |  |      | 22.49 |  |     |   | 18.47 | 
|Year    |  | $    | 22.49 |  |     | $ | 13.09 | 





13



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|        |                        
|------- | -----------------------
|Item 6. | SELECTED FINANCIAL DATA



|                                                                     |         |                                                  |         |      |      |   |         |       |   |   |         |      |  |      |         |      |  |   |         |      | 
|-------------------------------------------------------------------- | ------- | ------------------------------------------------ | ------- | ---- | ---- | - | ------- | ----- | - | - | ------- | ---- |  | ---- | ------- | ---- |  | - | ------- | ---- | 
|                                                                     |         | Years Ended December 31,                         |        
|                                                                     |         |                                                  |        
|                                                                     |         | 2005                                             |         |      | 2004 |   |         | 2003  |   |   | 2002    |      |  | 2001 |        
|                                                                     |         |                                                  |         |      |      |   |         |       |   |   |         |      |  |      |        
|                                                                     |         | (Dollars in thousands except for per share data) |        
|Income Statement Data (6):                                           |         |                                                  |         |      |      |   |         |       |   |   |         |      |  |      |         |      |  |   |         |     
|Sales                                                                |         | $                                                | 346,906 |      |      | $ | 209,643 |       |   | $ | 180,256 |      |  | $    | 239,966 |      |  | $ | 255,087 |     
|Operating income (loss)                                              |         |                                                  | 56,134  |      |      |   | (14,566 | )     |   |   | (2,215  | )(2) |  |      | 14,178  |      |  |   | 4,990   |     
|Income (loss) before income taxes                                    |         |                                                  | 57,412  |      |      |   | (4,996  | )(1)  |   |   | 6,507   | (3)  |  |      | 23,252  | (4)  |  |   | 15,244  | (5) 
|Net income (loss) from continuing operations                         |         |                                                  | 37,344  |      |      |   | (2,319  | )     |   |   | 4,108   |      |  |      | 14,416  |      |  |   | 9,046   |     
|Net income (loss) from discontinued operationsafter tax             |         |                                                  | 1,591   |      |      |   | (638    | )     |   |   | 606     |      |  |      | 709     |      |  |   | 3,032   |     
|Net income (loss)                                                    |         |                                                  | 38,935  |      |      |   | (2,957  | )     |   |   | 4,714   |      |  |      | 15,125  |      |  |   | 12,078  |     
|Net income (loss) per common share from continuing
    operations:   |         |                                                  |         |      |      |   |         |       |   |   |         |      |  |      |         |      |  |   |         |     
|Basic                                                                |         | $                                                | 1.68    |      |      | $ | (0.11   | )     |   | $ | 0.20    |      |  | $    | 0.69    |      |  | $ | 0.43    |     
|Diluted                                                              |         | $                                                | 1.66    |      |      | $ | (0.11   | )     |   | $ | 0.19    |      |  | $    | 0.69    |      |  | $ | 0.43    |     
|Net income (loss) per common share from discontinued
    operations: |         |                                                  |         |      |      |   |         |       |   |   |         |      |  |      |         |      |  |   |         |     
|Basic                                                                |         | $                                                | 0.07    |      |      | $ | (0.03   | )     |   | $ | 0.03    |      |  | $    | 0.04    |      |  | $ | 0.15    |     
|Diluted                                                              |         | $                                                | 0.07    |      |      | $ | (0.03   | )     |   | $ | 0.03    |      |  | $    | 0.03    |      |  | $ | 0.14    |     
|Net income (loss) per common share:                                  |         |                                                  |         |      |      |   |         |       |   |   |         |      |  |      |         |      |  |   |         |     
|                                                                     | Basic   |                                                  | $       | 1.75 |      |   | $       | (0.14 | ) |   | $       | 0.23 |  |      | $       | 0.73 |  |   | $       | 0.58 | 
|                                                                     | Diluted |                                                  | $       | 1.73 |      |   | $       | (0.14 | ) |   | $       | 0.22 |  |      | $       | 0.72 |  |   | $       | 0.57 | 

|                           |  |                        |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|-------------------------- |  | ---------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ---- | ------- |  |  | - | ------- | 
|                           |  | At December 31,        |        
|                           |  |                        |        
|                           |  | 2005                   |         |  | 2004 |   |         | 2003 |  |   | 2002    |  |  | 2001 |        
|                           |  |                        |         |  |      |   |         |      |  |   |         |  |  |      |        
|                           |  | (Dollars in thousands) |        
|Balance Sheet Data:        |  |                        |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|Working capital            |  | $                      | 282,670 |  |      | $ | 218,444 |      |  | $ | 225,804 |  |  | $    | 215,861 |  |  | $ | 200,825 | 
|Total assets               |  |                        | 501,751 |  |      |   | 409,411 |      |  |   | 393,775 |  |  |      | 379,328 |  |  |   | 389,787 | 
|Long-term debt             |  |                        |        |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        | 
|Total shareholders equity |  |                        | 379,652 |  |      |   | 323,958 |      |  |   | 317,660 |  |  |      | 311,173 |  |  |   | 306,975 | 






|    |                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes the effect of an approximately $9 million gain for
    settlement of a contractual claim.                                                                                                                                                                                              
|   
|(2) | Includes the effect of an approximately $1 million gain
    from the sale of one of the Companys Ashtabula, Ohio
    facilities previously used for storage.                                                                                                                                   
|   
|(3) | Includes the effect of an approximately $8 million gain
    from the settlement of a contractual claim.                                                                                                                                                                                         
|   
|(4) | Includes the effect of an approximately $7 million gain
    from the settlement of a contractual claim and a
    $2.1 million gain resulting from the sale of common stock
    received by the Company in connection with the demutualization
    of one of its insurance carriers.             
|   
|(5) | Includes the effect of an approximately $6 million gain
    from the settlement of a contractual claim and a
    $5.2 million gain related to a stock distribution to the
    Company in connection with the demutualization of one of its
    insurance carriers in which it was a participant.
|   
|(6) | All years presented have been adjusted for the impacts of the
    discontinued operations which occurred in 2005 and 2004 (see
    Note 19 of the Consolidated Financial Statements).                                                                                                           






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS



14



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13a-15(e) 15d-15(e)) 10-K.


Overview






de-emphasize


15



---



##### Table of Contents



work-in




Discontinued Operations














16



---



##### Table of Contents



Results of Operations


Years Ended December 31, 2005, 2004, and 2003




Net Sales


|                                   |  |      |       |  |      |   |       |      |  |   |       | 
|---------------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|Year Ended December 31,            |  | 2005 |       |  | 2004 |   |       | 2003 | 
|                                   |  |      |       |  |      |   |       |      | 
|Titanium Group                     |  | $    | 130.2 |  |      | $ | 48.6  |      |  | $ | 42.0  | 
|Fabrication and Distribution Group |  |      | 216.7 |  |      |   | 161.0 |      |  |   | 138.3 | 
|                                   |  |      |       |  |      |   |       |      | 
|Net Sales                          |  | $    | 346.9 |  |      | $ | 209.6 |      |  | $ | 180.3 | 
|                                   |  |      |       |  |      |   |       |      | 



| |               
| | --------------
| | Titanium Group







| |                                   
| | ----------------------------------
| | Fabrication and Distribution Group





Gross Profit/(Loss)


|                                 |  |      |       |  |      |   |      |      |  |   |      | 
|-------------------------------- |  | ---- | ----- |  | ---- | - | ---- | ---- |  | - | ---- | 
|Year Ended December 31,          |  | 2005 |       |  | 2004 |   |      | 2003 | 
|                                 |  |      |       |  |      |   |      |      | 
|Titanium Group                   |  | $    | 55.0  |  |      | $ | (1.1 | )    |  | $ | 4.7  | 
|Fabrication & Distribution Group |  |      | 51.6  |  |      |   | 26.2 |      |  |   | 22.0 | 
|                                 |  |      |       |  |      |   |      |      | 
|Total                            |  | $    | 106.6 |  |      | $ | 25.1 |      |  | $ | 26.7 | 
|                                 |  |      |       |  |      |   |      |      | 



| |               
| | --------------
| | Titanium Group





17



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| |                                   
| | ----------------------------------
| | Fabrication and Distribution Group





Selling, General and
Administrative Expenses


|                                 |  |      |      |  |      |   |      |      |  |   |      | 
|-------------------------------- |  | ---- | ---- |  | ---- | - | ---- | ---- |  | - | ---- | 
|Year Ended December 31,          |  | 2005 |      |  | 2004 |   |      | 2003 | 
|                                 |  |      |      |  |      |   |      |      | 
|Titanium Group                   |  | $    | 12.7 |  |      | $ | 9.3  |      |  | $ | 7.4  | 
|Fabrication & Distribution Group |  |      | 36.1 |  |      |   | 29.7 |      |  |   | 21.2 | 
|                                 |  |      |      |  |      |   |      |      | 
|Total                            |  | $    | 48.8 |  |      | $ | 39.0 |      |  | $ | 28.6 | 
|                                 |  |      |      |  |      |   |      |      | 





| |               
| | --------------
| | Titanium Group







| |                                   
| | ----------------------------------
| | Fabrication and Distribution Group



18



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| |                                                     
| | ----------------------------------------------------
| | Research, Technical and Product Development Expenses

|                                 |  |      |     |  |      |   |     |      |  |   |     | 
|-------------------------------- |  | ---- | --- |  | ---- | - | --- | ---- |  | - | --- | 
|Year Ended December 31,          |  | 2005 |     |  | 2004 |   |     | 2003 | 
|                                 |  |      |     |  |      |   |     |      | 
|Titanium Group                   |  | $    | 1.4 |  |      | $ | 1.2 |      |  | $ | 1.2 | 
|Fabrication & Distribution Group |  |      | 0.2 |  |      |   |    |      |  |   | 0.1 | 
|                                 |  |      |     |  |      |   |     |      | 
|Total                            |  | $    | 1.6 |  |      | $ | 1.2 |      |  | $ | 1.3 | 
|                                 |  |      |     |  |      |   |     |      | 



| |               
| | --------------
| | Titanium Group







| |                                   
| | ----------------------------------
| | Fabrication and Distribution Group







| |                       
| | ----------------------
| | Other Operating Income

|                                 |  |      |   |      |  |   |      |  |  |   |     | 
|-------------------------------- |  | ---- | - | ---- |  | - | ---- |  |  | - | --- | 
|Year Ended December 31,          |  | 2005 |   | 2004 |  |   | 2003 | 
|                                 |  |      |   |      |  |   |      | 
|Titanium Group                   |  | $    |  |      |  | $ | 0.5  |  |  | $ | 1.0 | 
|Fabrication & Distribution Group |  |      |  |      |  |   |     |  |  |   |    | 
|                                 |  |      |   |      |  |   |      |  | 
|Total                            |  | $    |  |      |  | $ | 0.5  |  |  | $ | 1.0 | 
|                                 |  |      |   |      |  |   |      |  | 



| |               
| | --------------
| | Titanium Group





19



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| |                                   
| | ----------------------------------
| | Fabrication and Distribution Group





| |                        
| | -----------------------
| | Operating Income (Loss)

|                                 |  |      |      |  |      |   |       |      |  |   |      |  
|-------------------------------- |  | ---- | ---- |  | ---- | - | ----- | ---- |  | - | ---- | -
|Year Ended December 31,          |  | 2005 |      |  | 2004 |   |       | 2003 | 
|                                 |  |      |      |  |      |   |       |      | 
|Titanium Group                   |  | $    | 40.8 |  |      | $ | (11.1 | )    |  | $ | (3.0 | )
|Fabrication & Distribution Group |  |      | 15.3 |  |      |   | (3.5  | )    |  |   | 0.8  |  
|                                 |  |      |      |  |      |   |       |      | 
|Total                            |  | $    | 56.1 |  |      | $ | (14.6 | )    |  | $ | (2.2 | )
|                                 |  |      |      |  |      |   |       |      | 



| |               
| | --------------
| | Titanium Group









| |                                   
| | ----------------------------------
| | Fabrication and Distribution Group







| |             
| | ------------
| | Other Income

|                        |  |      |     |  |      |   |     |      |  |   |     | 
|----------------------- |  | ---- | --- |  | ---- | - | --- | ---- |  | - | --- | 
|Year Ended December 31, |  | 2005 |     |  | 2004 |   |     | 2003 | 
|                        |  |      |     |  |      |   |     |      | 
|Other Income            |  | $    | 0.4 |  |      | $ | 9.4 |      |  | $ | 8.9 | 





20



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| |                               
| | ------------------------------
| | Interest Income (Expense), net

|                               |  |      |     |  |      |   |     |      |  |   |      |  
|------------------------------ |  | ---- | --- |  | ---- | - | --- | ---- |  | - | ---- | -
|Year Ended December 31,        |  | 2005 |     |  | 2004 |   |     | 2003 | 
|                               |  |      |     |  |      |   |     |      | 
|Interest Income (Expense), net |  | $    | 0.9 |  |      | $ | 0.1 |      |  | $ | (0.2 | )







| |                               
| | ------------------------------
| | Income Tax Provision (Benefit)

|                                     |  |      |      |  |      |   |      |      |  |   |     | 
|------------------------------------ |  | ---- | ---- |  | ---- | - | ---- | ---- |  | - | --- | 
|Year Ended December 31,              |  | 2005 |      |  | 2004 |   |      | 2003 | 
|                                     |  |      |      |  |      |   |      |      | 
|Provision (Benefit) for Income Taxes |  | $    | 20.1 |  |      | $ | (2.7 | )    |  | $ | 2.4 | 







| |                                           
| | ------------------------------------------
| | Income (Loss) from Discontinued Operations

|                        |  |      |     |  |      |   |      |      |  |   |     | 
|----------------------- |  | ---- | --- |  | ---- | - | ---- | ---- |  | - | --- | 
|Year Ended December 31, |  | 2005 |     |  | 2004 |   |      | 2003 | 
|                        |  |      |     |  |      |   |      |      | 
|Discontinued operations |  | $    | 1.6 |  |      | $ | (0.6 | )    |  | $ | 0.6 | 





21



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| |                  
| | -----------------
| | Net Income (Loss)

|                        |  |      |      |  |      |   |      |      |  |   |     | 
|----------------------- |  | ---- | ---- |  | ---- | - | ---- | ---- |  | - | --- | 
|Year Ended December 31, |  | 2005 |      |  | 2004 |   |      | 2003 | 
|                        |  |      |      |  |      |   |      |      | 
|Net Income (Loss)       |  | $    | 38.9 |  |      | $ | (3.0 | )    |  | $ | 4.7 | 







| |        
| | -------
| | Backlog

out-of


Liquidity and Capital Resources






| |                                             
| | --------------------------------------------
| | Cash (used) provided by operating activities

|                                             |  |      |       |   |      |   |      |      |  |   |      | 
|-------------------------------------------- |  | ---- | ----- | - | ---- | - | ---- | ---- |  | - | ---- | 
|Year Ended December 31,                      |  | 2005 |       |   | 2004 |   |      | 2003 | 
|                                             |  |      |       |   |      |   |      |      | 
|Cash (used) provided by operating activities |  | $    | (10.7 | ) |      | $ | 20.7 |      |  | $ | 30.8 | 







22



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| |                                  
| | ---------------------------------
| | Cash used in investing activities

|                                  |  |      |      |  |      |   |      |      |  |   |     | 
|--------------------------------- |  | ---- | ---- |  | ---- | - | ---- | ---- |  | - | --- | 
|Year Ended December 31,           |  | 2005 |      |  | 2004 |   |      | 2003 | 
|                                  |  |      |      |  |      |   |      |      | 
|Cash used in investing activities |  | $    | 12.1 |  |      | $ | 29.4 |      |  | $ | 4.0 | 







| |                                      
| | -------------------------------------
| | Cash provided by financing activities

|                                      |  |      |      |  |      |   |     |      |  |   |     | 
|------------------------------------- |  | ---- | ---- |  | ---- | - | --- | ---- |  | - | --- | 
|Year Ended December 31,               |  | 2005 |      |  | 2004 |   |     | 2003 | 
|                                      |  |      |      |  |      |   |     |      | 
|Cash provided by financing activities |  | $    | 13.3 |  |      | $ | 3.4 |      |  | $ | 0.5 | 





Contractual Obligations, Commitments and Other
Post-Retirement Benefits




|                     |                               |                         |       |       |      |   |       |       |  |   |       |       |  |      |       |       |            |   |     |       |  |   |     |     |  |   |       |        | 
|-------------------- | ----------------------------- | ----------------------- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- |  | ---- | ----- | ----- | ---------- | - | --- | ----- |  | - | --- | --- |  | - | ----- | ------ | 
|                     |                               | Contractual Obligations |      
|                     |                               |                         |      
|                     |                               | 2006                    |       |       | 2007 |   |       | 2008  |  |   | 2009  |       |  | 2010 |       |       | Thereafter |   |     | Total | 
|                     |                               |                         |       |       |      |   |       |       |  |   |       |       |  |      |       |       |            |   |     |       | 
|Operating leases (1) |                               | $                       | 3,114 |       |      | $ | 2,713 |       |  | $ | 1,771 |       |  | $    | 1,256 |       |            | $ | 734 |       |  | $ | 362 |     |  | $ | 9,950 |       
|Capital leases (1)   |                               |                         | 80    |       |      |   | 49    |       |  |   | 37    |       |  |      | 28    |       |            |   | 7   |       |  |   |    |     |  |   | 201   |       
|                     |                               |                         |       |       |      |   |       |       |  |   |       |       |  |      |       |       |            |   |     |       | 
|                     | Total contractual obligations |                         | $     | 3,194 |      |   | $     | 2,762 |  |   | $     | 1,808 |  |      | $     | 1,284 |            |   | $   | 741   |  |   | $   | 362 |  |   | $     | 10,151 | 
|                     |                               |                         |       |       |      |   |       |       |  |   |       |       |  |      |       |       |            |   |     |       | 

23



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|                                |                              |                                            |        |         |      |   |        |        |  |   |        |        |  |      |        |        |            |   |        |        |  |   |        |        |  |   |         |         | 
|------------------------------- | ---------------------------- | ------------------------------------------ | ------ | ------- | ---- | - | ------ | ------ |  | - | ------ | ------ |  | ---- | ------ | ------ | ---------- | - | ------ | ------ |  | - | ------ | ------ |  | - | ------- | ------- | 
|                                |                              | Commercial Commitments                     |       
|                                |                              |                                            |       
|                                |                              | Amount of Commitment Expiration per Period |       
|                                |                              |                                            |       
|                                |                              | 2006                                       |        |         | 2007 |   |        | 2008   |  |   | 2009   |        |  | 2010 |        |        | Thereafter |   |        | Total  | 
|                                |                              |                                            |        |         |      |   |        |        |  |   |        |        |  |      |        |        |            |   |        |        | 
|Long-term supply agreements (2) |                              | $                                          | 69,931 |         |      | $ | 16,829 |        |  | $ | 16,829 |        |  | $    | 16,829 |        |            | $ | 16,815 |        |  | $ | 33,327 |        |  | $ | 170,560 |        
|Purchase obligations (3)        |                              |                                            | 43,390 |         |      |   | 15     |        |  |   |       |        |  |      |       |        |            |   |       |        |  |   |       |        |  |   | 43,405  |        
|Standby letters of credit (4)   |                              |                                            | 987    |         |      |   |       |        |  |   |       |        |  |      |       |        |            |   |       |        |  |   |       |        |  |   | 987     |        
|                                |                              |                                            |        |         |      |   |        |        |  |   |        |        |  |      |        |        |            |   |        |        | 
|                                | Total commercial commitments |                                            | $      | 114,308 |      |   | $      | 16,844 |  |   | $      | 16,829 |  |      | $      | 16,829 |            |   | $      | 16,815 |  |   | $      | 33,327 |  |   | $       | 214,952 | 
|                                |                              |                                            |        |         |      |   |        |        |  |   |        |        |  |      |        |        |            |   |        |        | 

|                                   |  |                                |       |  |      |   |       |      |  |   |       |  |  |      |       |  |           |   |       |       |  |   |        |  |  |   |        | 
|---------------------------------- |  | ------------------------------ | ----- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | ---- | ----- |  | --------- | - | ----- | ----- |  | - | ------ |  |  | - | ------ | 
|                                   |  | Other Post-Retirement Benefits |      
|                                   |  |                                |      
|                                   |  | 2006                           |       |  | 2007 |   |       | 2008 |  |   | 2009  |  |  | 2010 |       |  | 2011-2015 |   |       | Total | 
|                                   |  |                                |       |  |      |   |       |      |  |   |       |  |  |      |       |  |           |   |       |       | 
|Other post-retirement benefits (5) |  | $                              | 1,963 |  |      | $ | 1,975 |      |  | $ | 1,989 |  |  | $    | 2,012 |  |           | $ | 2,042 |       |  | $ | 10,650 |  |  | $ | 20,631 | 
|                                   |  |                                |       |  |      |   |       |      |  |   |       |  |  |      |       |  |           |   |       |       | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Note 12 to the Companys consolidated financial
    statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(2) | Amounts represent commitments for which contractual terms exceed
    twelve months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(3) | Amounts primarily represent purchase commitments under purchase
    orders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(4) | Amounts represent standby letters of credit primarily related to
    commercial performance and insurance guarantees.                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(5) | 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 2006
    through 2015 are based on actuarial estimates of expected future
    cash payments, and exclude the impacts of benefits associated
    with the Medicare Part D Act of 2003.

Off-Balance Sheet Arrangements




Credit Agreement








Environmental Matters






24



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##### Table of Contents



96-1,










Active Investigative or Cleanup Sites.


Ashtabula River.


Former Ashtabula Extrusion Plant.


Reserve Environmental Services Landfill.


25



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##### Table of Contents



New Accounting Standards










Acquisitions






26



---



##### Table of Contents









Critical Accounting Policies






Inventories. first-in, lower-of


Goodwill and Intangible Assets.




27



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##### Table of Contents





Long-Lived Assets.


Income Taxes.




Employee Benefit Plans.


Corporate Yield Dedicated
Bond Portfolio




|                                                                  |  |       |     |  |       |    |     | 
|----------------------------------------------------------------- |  | ----- | --- |  | ----- | -- | --- | 
|                                                                  |  | -.25% |     |  | +.25% |   
|                                                                  |  |       |     |  |       |   
|Effect on total projected benefit obligation (PBO) (in millions)  |  | +$    | 3.3 |  |       | -$ | 3.1 | 
|Effect on subsequent years periodic pension expense (in millions) |  | +$    | 0.2 |  |       | -$ | 0.2 | 



28



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|                |                   |       |  |    |      |   |  |    |     |  
|--------------- | ----------------- | ----- |  | -- | ---- | - |  | -- | --- | -
|                |                   | 2005  |  |    | 2004 |  
|                |                   |       |  |    |      |  
|Asset category: |                   |       |  |    |      |   |  |   
|                | Equity securities |       |  | 56 | %    |   |  | 59 | %  
|                | Debt securities   |       |  | 44 | %    |   |  | 40 | %  
|                | Other             |       |  | 0  | %    |   |  | 1  | %  
|                |                   |       |  |    |      |  
|                |                   | Total |  |    | 100  | % |  |    | 100 | %
|                |                   |       |  |    |      |  



|                |                   |       |  |    |     |  
|--------------- | ----------------- | ----- |  | -- | --- | -
|Asset category: |                   |       |  |   
|                | Equity securities |       |  | 56 | %  
|                | Debt securities   |       |  | 42 | %  
|                | Other             |       |  | 2  | %  
|                |                   |       | 
|                |                   | Total |  |    | 100 | %
|                |                   |       | 





|             |  |               |        |                |          |   |                |          |  |   |        | 
|------------ |  | ------------- | ------ | -------------- | -------- | - | -------------- | -------- |  | - | ------ | 
|             |  |               |        | Postretirement |          |   | Postretirement |         
|             |  |               |        | Benefit Plan   |          |   | Benefit Plan   |         
|             |  |               |        | (including     |          |   | (not including |         
|             |  | Pension       |        |                | Plan D   |   |                | Plan D   | 
|             |  | Benefit Plans |        |                | subsidy) |   |                | subsidy) | 
|             |  |               |        |                |          |   |                |          | 
|2006         |  | $             | 7,868  |                |          | $ | 1,662          |          |  | $ | 1,963  | 
|2007         |  |               | 7,889  |                |          |   | 1,661          |          |  |   | 1,975  | 
|2008         |  |               | 7,965  |                |          |   | 1,665          |          |  |   | 1,989  | 
|2009         |  |               | 7,990  |                |          |   | 1,681          |          |  |   | 2,012  | 
|2010         |  |               | 8,072  |                |          |   | 1,706          |          |  |   | 2,042  | 
|2011 to 2015 |  | $             | 42,725 |                |          | $ | 8,943          |          |  | $ | 10,650 | 







29



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Environmental Liabilities.





Item 7(A).     QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK













|        |                                            
|------- | -------------------------------------------
|Item 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements


|                                                            |                                                                                                                               |      |    |     | 
|----------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------- | ---- | -- | --- | 
|                                                            |                                                                                                                               | Page |   
|                                                            |                                                                                                                               |      |   
|Report of Independent Registered Public
    Accounting Firm |                                                                                                                               |      | 31 |    
|                                                           
|Financial Statements:                                       |                                                                                                                               |      |    |    
|                                                            | Consolidated Statements of Operations for
    the years ended December 31, 2005, 2004, and 2003                               |      |    | 33  | 
|                                                            | Consolidated Balance Sheets at
    December 31, 2005 and 2004 2004                                                            |      |    | 34  | 
|                                                            | Consolidated Statements of Cash Flows for
    the years ended December 31, 2005, 2004, and 2003                               |      |    | 35  | 
|                                                            | Consolidated Statements of Changes in
    Shareholders Equity for the years ended December 31,
    2005, 2004, and 2003 2003 |      |    | 36  | 
|                                                            | Notes to Consolidated Financial
    Statements                                                                                |      |    | 37  | 
|                                                           
|Financial Statement Schedules:                              |                                                                                                                               |      |    |    
|                                                            | Schedule IIValuation and
    Qualifying Accounts                                                                             |      |    | S-1 | 



30



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##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM






Consolidated financial statements and financial statement
schedule




Internal control over financial reporting


Internal Control  Integrated Framework Internal Control 
Integrated Framework




31



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##### Table of Contents














32



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##### Table of Contents



RTI INTERNATIONAL METALS, INC.





CONSOLIDATED STATEMENTS OF OPERATIONS


(Dollars in thousands except per share amounts)


|                                                                                                          |                         |                          |         |      |         |   |         |       |         |   |         |      |         | 
|--------------------------------------------------------------------------------------------------------- | ----------------------- | ------------------------ | ------- | ---- | ------- | - | ------- | ----- | ------- | - | ------- | ---- | ------- | 
|                                                                                                          |                         | Years Ended December 31, |        
|                                                                                                          |                         |                          |        
|                                                                                                          |                         | 2005                     |         |      | 2004    |   |         | 2003  |        
|                                                                                                          |                         |                          |         |      |         |   |         |       |        
|Sales                                                                                                     |                         | $                        | 346,906 |      |         | $ | 209,643 |       |         | $ | 180,256 |     
|Operating costs:                                                                                          |                         |                          |         |      |         |   |         |       |         |   |         |     
|Cost of sales                                                                                             |                         |                          | 240,314 |      |         |   | 184,592 |       |         |   | 153,574 |     
|Selling, general and administrative expenses                                                              |                         |                          | 48,816  |      |         |   | 38,974  |       |         |   | 28,558  |     
|Research, technical and product development expenses
    (Note 2)                                         |                         |                          | 1,642   |      |         |   | 1,181   |       |         |   | 1,306   |     
|                                                                                                          |                         |                          |         |      |         |   |         |       |        
|                                                                                                          |                         | Total operating costs    |         |      | 290,772 |   |         |       | 224,747 |   |         |      | 183,438 | 
|Other operating income (Note 9)                                                                           |                         |                          |        |      |         |   | 538     |       |         |   | 967     |     
|                                                                                                          |                         |                          |         |      |         |   |         |       |        
|Operating income (loss)                                                                                   |                         |                          | 56,134  |      |         |   | (14,566 | )     |         |   | (2,215  | )   
|Other income (Note 9)                                                                                     |                         |                          | 369     |      |         |   | 9,432   |       |         |   | 8,894   |     
|Interest income (expense), net                                                                            |                         |                          | 909     |      |         |   | 138     |       |         |   | (172    | )   
|                                                                                                          |                         |                          |         |      |         |   |         |       |        
|Income (loss) from continuing operations before income taxes                                              |                         |                          | 57,412  |      |         |   | (4,996  | )     |         |   | 6,507   |     
|Provision (benefit) for income taxes (Note 8)                                                             |                         |                          | 20,068  |      |         |   | (2,677  | )     |         |   | 2,399   |     
|                                                                                                          |                         |                          |         |      |         |   |         |       |        
|Net income (loss) from continuing operations                                                              |                         |                          | 37,344  |      |         |   | (2,319  | )     |         |   | 4,108   |     
|Net income (loss) from discontinued operations, net of tax
    effects of $870, $(352) and $358 (Note 19) |                         |                          | 1,591   |      |         |   | (638    | )     |         |   | 606     |     
|                                                                                                          |                         |                          |         |      |         |   |         |       |        
|Net income (loss)                                                                                         |                         | $                        | 38,935  |      |         | $ | (2,957  | )     |         | $ | 4,714   |     
|                                                                                                          |                         |                          |         |      |         |   |         |       |        
|Basic earnings (loss) per common share (Note 4):                                                          |                         |                          |         |      |         |   |         |       |         |   |         |     
|                                                                                                          | Continuing operations   |                          | $       | 1.68 |         |   | $       | (0.11 | )       |   | $       | 0.20 |        
|                                                                                                          | Discontinued operations |                          |         | 0.07 |         |   |         | (0.03 | )       |   |         | 0.03 |        
|                                                                                                          |                         |                          |         |      |         |   |         |       |        
|                                                                                                          | Net income (loss)       |                          | $       | 1.75 |         |   | $       | (0.14 | )       |   | $       | 0.23 |        
|                                                                                                          |                         |                          |         |      |         |   |         |       |        
|Diluted earnings (loss) per common share (Note 4):                                                        |                         |                          |         |      |         |   |         |       |         |   |         |     
|                                                                                                          | Continuing operations   |                          | $       | 1.66 |         |   | $       | (0.11 | )       |   | $       | 0.19 |        
|                                                                                                          | Discontinued operations |                          |         | 0.07 |         |   |         | (0.03 | )       |   |         | 0.03 |        
|                                                                                                          |                         |                          |         |      |         |   |         |       |        
|                                                                                                          | Net income (loss)       |                          | $       | 1.73 |         |   | $       | (0.14 | )       |   | $       | 0.22 |        
|                                                                                                          |                         |                          |         |      |         |   |         |       |        



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RTI INTERNATIONAL METALS, INC.





CONSOLIDATED BALANCE SHEETS


(Dollars in thousands)


|                                                                                                                                                               |                                            |                                      |         |         |      |   |         |         |  | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------ | ------- | ------- | ---- | - | ------- | ------- |  | 
|                                                                                                                                                               |                                            | December 31,                         |        
|                                                                                                                                                               |                                            |                                      |        
|                                                                                                                                                               |                                            | 2005                                 |         |         | 2004 |  
|                                                                                                                                                               |                                            |                                      |         |         |      |  
|ASSETS                                                                                                                                                         |                                            |                                      |         |         |      |   |         |        
|Assets:                                                                                                                                                        |                                            |                                      |         |         |      |   |         |        
|Cash and cash equivalents                                                                                                                                      |                                            | $                                    | 53,353  |         |      | $ | 62,701  |        
|Investments                                                                                                                                                    |                                            |                                      | 2,410   |         |      |   |        |        
|Receivables, less allowance for doubtful accounts of $1,604 and
    $1,486 (Note 5)                                                                            |                                            |                                      | 54,212  |         |      |   | 44,490  |        
|Inventories, net (Note 6)                                                                                                                                      |                                            |                                      | 223,394 |         |      |   | 133,512 |        
|Current deferred income tax asset (Note 8)                                                                                                                     |                                            |                                      | 3,778   |         |      |   | 1,145   |        
|Income tax receivable                                                                                                                                          |                                            |                                      |        |         |      |   | 3,321   |        
|Other current assets (Note 14)                                                                                                                                 |                                            |                                      | 7,407   |         |      |   | 3,597   |        
|                                                                                                                                                               |                                            |                                      |         |         |      |  
|                                                                                                                                                               | Total current assets                       |                                      |         | 344,554 |      |   |         | 248,766 | 
|Property, plant and equipment, net (Note 7)                                                                                                                    |                                            |                                      | 80,056  |         |      |   | 82,593  |        
|Goodwill                                                                                                                                                       |                                            |                                      | 48,646  |         |      |   | 46,618  |        
|Other intangible assets, net (Note 3)                                                                                                                          |                                            |                                      | 16,581  |         |      |   | 16,040  |        
|Noncurrent deferred income tax asset (Note 8)                                                                                                                  |                                            |                                      | 5,451   |         |      |   | 8,930   |        
|Intangible pension asset (Note 11)                                                                                                                             |                                            |                                      | 4,076   |         |      |   | 3,365   |        
|Other noncurrent assets                                                                                                                                        |                                            |                                      | 2,387   |         |      |   | 3,099   |        
|                                                                                                                                                               |                                            |                                      |         |         |      |  
|                                                                                                                                                               | Total assets                               |                                      | $       | 501,751 |      |   | $       | 409,411 | 
|                                                                                                                                                               |                                            |                                      |         |         |      |  
|                                                                                                                                                               |                                            | LIABILITIES AND SHAREHOLDERS EQUITY |         |         |      |   |         |         |  | 
|                                                                                                                                                              
|Liabilities:                                                                                                                                                  
|Accounts payable                                                                                                                                               |                                            | $                                    | 25,620  |         |      | $ | 14,253  |        
|Accrued wages and other employee costs                                                                                                                         |                                            |                                      | 10,953  |         |      |   | 4,863   |        
|Billings in excess of costs and estimated earnings (Note 13)                                                                                                   |                                            |                                      | 13,352  |         |      |   | 4,708   |        
|Income taxes payable                                                                                                                                           |                                            |                                      | 3,367   |         |      |   |        |        
|Current deferred income tax liability (Note 8)                                                                                                                 |                                            |                                      | 3       |         |      |   |        |        
|Other accrued liabilities (Note 17)                                                                                                                            |                                            |                                      | 8,589   |         |      |   | 6,498   |        
|                                                                                                                                                               |                                            |                                      |         |         |      |  
|                                                                                                                                                               | Total current liabilities                  |                                      |         | 61,884  |      |   |         | 30,322  | 
|Long-term debt (Note 10)                                                                                                                                       |                                            |                                      |        |         |      |   |        |        
|Accrued postretirement benefit cost (Note 11)                                                                                                                  |                                            |                                      | 21,070  |         |      |   | 20,811  |        
|Accrued pension cost (Note 11)                                                                                                                                 |                                            |                                      | 25,595  |         |      |   | 21,090  |        
|Noncurrent deferred tax liability (Note 8)                                                                                                                     |                                            |                                      | 6,516   |         |      |   | 5,918   |        
|Other noncurrent liabilities (Note 17)                                                                                                                         |                                            |                                      | 7,034   |         |      |   | 7,312   |        
|                                                                                                                                                               |                                            |                                      |         |         |      |  
|                                                                                                                                                               | Total liabilities                          |                                      |         | 122,099 |      |   |         | 85,453  | 
|                                                                                                                                                               |                                            |                                      |         |         |      |  
|Commitments and contingencies (Note 17)                                                                                                                        |                                            |                                      |         |         |      |   |         |        
|Shareholders equity:                                                                                                                                          |                                            |                                      |         |         |      |   |         |        
|Common stock, $0.01 par value; 50,000,000 shares
    authorized; 23,131,211 and 22,194,344 shares issued; and
    22,687,139 and 21,772,730 shares outstanding |                                            |                                      | 231     |         |      |   | 221     |        
|Additional paid-in capital                                                                                                                                     |                                            |                                      | 278,690 |         |      |   | 258,526 |        
|Deferred compensation                                                                                                                                          |                                            |                                      | (3,078  | )       |      |   | (2,499  | )      
|Treasury stock, at cost; 444,072 and 421,614 shares                                                                                                            |                                            |                                      | (4,389  | )       |      |   | (3,906  | )      
|Accumulated other comprehensive (loss)                                                                                                                         |                                            |                                      | (25,112 | )       |      |   | (22,759 | )      
|Retained earnings                                                                                                                                              |                                            |                                      | 133,310 |         |      |   | 94,375  |        
|                                                                                                                                                               |                                            |                                      |         |         |      |  
|                                                                                                                                                               | Total shareholders equity                 |                                      |         | 379,652 |      |   |         | 323,958 | 
|                                                                                                                                                               |                                            |                                      |         |         |      |  
|                                                                                                                                                               | Total liabilities and shareholders equity |                                      | $       | 501,751 |      |   | $       | 409,411 | 
|                                                                                                                                                               |                                            |                                      |         |         |      |  



34



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##### Table of Contents



RTI INTERNATIONAL METALS, INC.





CONSOLIDATED STATEMENTS OF CASH FLOWS


(Dollars in thousands)


|                                                                               |                                                         |                                                            |        |         |         |   |        |         |         |   |        |        |        |  
|------------------------------------------------------------------------------ | ------------------------------------------------------- | ---------------------------------------------------------- | ------ | ------- | ------- | - | ------ | ------- | ------- | - | ------ | ------ | ------ | -
|                                                                               |                                                         | Years Ended December 31,                                   |       
|                                                                               |                                                         |                                                            |       
|                                                                               |                                                         | 2005                                                       |        |         | 2004    |   |        | 2003    |        
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|Cash flows from operating activities:                                          |                                                         |                                                            |        |         |         |   |        |         |         |   |        |       
|Net income (loss)                                                              |                                                         | $                                                          | 38,935 |         |         | $ | (2,957 | )       |         | $ | 4,714  |       
|Net income from discontinued operations                                        |                                                         |                                                            | (1,660 | )       |         |   | (54    | )       |         |   | (606   | )     
|Loss on disposal of discontinued operations                                    |                                                         |                                                            | 69     |         |         |   | 692    |         |         |   |       |       
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|Net income (loss) from continuing operations                                   |                                                         |                                                            | 37,344 |         |         |   | (2,319 | )       |         |   | 4,108  |       
|Adjustment for non-cash items included in net income:                          |                                                         |                                                            |        |         |         |   |        |         |         |   |        |       
|                                                                               | Depreciation and amortization                           |                                                            |        | 13,263  |         |   |        | 12,448  |         |   |        | 12,023 |       
|                                                                               | Deferred income taxes                                   |                                                            |        | 3,681   |         |   |        | 2,565   |         |   |        | (4,184 | )     
|                                                                               | Stock-based compensation and other                      |                                                            |        | 1,647   |         |   |        | 1,123   |         |   |        | 1,585  |       
|                                                                               | Tax benefits from exercise of stock options             |                                                            |        | 4,592   |         |   |        | 1,336   |         |   |        | 444    |       
|                                                                               | Gain from sale of property, plant and equipment         |                                                            |        | (26     | )       |   |        | (349    | )       |   |        | (967   | )     
|Changes in assets and liabilities (net of effects of businesses
    acquired): |                                                         |                                                            |        |         |         |   |        |         |         |   |        |       
|                                                                               | Receivables                                             |                                                            |        | (11,488 | )       |   |        | (10,742 | )       |   |        | 6,504  |       
|                                                                               | Inventories                                             |                                                            |        | (89,664 | )       |   |        | 19,868  |         |   |        | (3,746 | )     
|                                                                               | Accounts payable                                        |                                                            |        | 12,368  |         |   |        | (839    | )       |   |        | (757   | )     
|                                                                               | Income taxes payable                                    |                                                            |        | 6,055   |         |   |        | (9,623  | )       |   |        | 4,759  |       
|                                                                               | Billings in excess of costs and estimated earnings      |                                                            |        | 8,674   |         |   |        | (2,794  | )       |   |        | 5,114  |       
|                                                                               | Other current liabilities                               |                                                            |        | 8,418   |         |   |        | 4,341   |         |   |        | (499   | )     
|                                                                               | Other assets and liabilities                            |                                                            |        | (7,046  | )       |   |        | 2,180   |         |   |        | (64    | )     
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|                                                                               |                                                         | Cash (used) provided by continuing operating activities    |        |         | (12,182 | ) |        |         | 17,195  |   |        |        | 24,320 |  
|                                                                               |                                                         | Cash provided by discontinued operating activities         |        |         | 1,473   |   |        |         | 3,487   |   |        |        | 6,445  |  
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|                                                                               |                                                         | Cash (used) provided by operating activities               |        |         | (10,709 | ) |        |         | 20,682  |   |        |        | 30,765 |  
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|Cash flows from investing activities:                                          |                                                         |                                                            |        |         |         |   |        |         |         |   |        |       
|                                                                               | Acquisitions, net of cash acquired, and other investing |                                                            |        | (290    | )       |   |        | (24,225 | )       |   |        |       |       
|                                                                               | Proceeds from disposal of property, plant and equipment |                                                            |        | 28      |         |   |        | 595     |         |   |        | 1,437  |       
|                                                                               | Purchase of investments                                 |                                                            |        | (9,150  | )       |   |        |        |         |   |        |       |       
|                                                                               | Proceeds from sale of investments                       |                                                            |        | 6,740   |         |   |        |        |         |   |        |       |       
|                                                                               | Capital expenditures                                    |                                                            |        | (9,486  | )       |   |        | (5,771  | )       |   |        | (5,402 | )     
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|                                                                               |                                                         | Cash used in investing activities of continuing operations |        |         | (12,158 | ) |        |         | (29,401 | ) |        |        | (3,965 | )
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|                                                                               |                                                         | Cash from investing activities of discontinued operations  |        |         | 8       |   |        |         |        |   |        |        |       |  
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|                                                                               |                                                         | Cash used in investing activities                          |        |         | (12,150 | ) |        |         | (29,401 | ) |        |        | (3,965 | )
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|Cash flows from financing activities:                                          |                                                         |                                                            |        |         |         |   |        |         |         |   |        |       
|                                                                               | Proceeds from exercise of employee stock options        |                                                            |        | 13,811  |         |   |        | 4,023   |         |   |        | 1,090  |       
|                                                                               | Purchase of common stock held in treasury               |                                                            |        | (483    | )       |   |        | (288    | )       |   |        | (586   | )     
|                                                                               | Deferred charges related to credit facility             |                                                            |        |        |         |   |        | (285    | )       |   |        |       |       
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|                                                                               |                                                         | Cash provided by financing activities                      |        |         | 13,328  |   |        |         | 3,450   |   |        |        | 504    |  
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|Effect of exchange rate changes on cash and cash equivalents                   |                                                         |                                                            | 183    |         |         |   |       |         |         |   |       |       
|(Decrease) increase in cash and cash equivalents                               |                                                         |                                                            | (9,348 | )       |         |   | (5,269 | )       |         |   | 27,304 |       
|Cash and cash equivalents at beginning of period                               |                                                         |                                                            | 62,701 |         |         |   | 67,970 |         |         |   | 40,666 |       
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|Cash and cash equivalents at end of period                                     |                                                         | $                                                          | 53,353 |         |         | $ | 62,701 |         |         | $ | 67,970 |       
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|Supplemental cash flow information:                                            |                                                         |                                                            |        |         |         |   |        |         |         |   |        |       
|Cash paid for interest (net of amounts capitalized)                            |                                                         | $                                                          | 486    |         |         | $ | 426    |         |         | $ | 443    |       
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|Cash paid for income taxes                                                     |                                                         | $                                                          | 12,791 |         |         | $ | 6,086  |         |         | $ | 3,165  |       
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|Non-cash investing and financing activities:                                   |                                                         |                                                            |        |         |         |   |        |         |         |   |        |       
|Issuance of common stock for restricted stock awards                           |                                                         | $                                                          | 1,771  |         |         | $ | 1,301  |         |         | $ | 955    |       
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|Capital lease obligations incurred                                             |                                                         | $                                                          | 116    |         |         | $ | 6      |         |         | $ | 40     |       
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        
|Common stock issued in acquisition                                             |                                                         | $                                                          |       |         |         | $ | 7,014  |         |         | $ |       |       
|                                                                               |                                                         |                                                            |        |         |         |   |        |         |        



35



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##### Table of Contents



RTI INTERNATIONAL METALS, INC.





CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY


(Dollars in thousands, except share amounts)


|                                                                            |  |             |            |   |        |         |     |         |  |   |              |  |  |             |        |       |          |   |        |               |  |   |         |   |               |               |         |   |  |   |         |   |  |   |        |  
|--------------------------------------------------------------------------- |  | ----------- | ---------- | - | ------ | ------- | --- | ------- |  | - | ------------ |  |  | ----------- | ------ | ----- | -------- | - | ------ | ------------- |  | - | ------- | - | ------------- | ------------- | ------- | - |  | - | ------- | - |  | - | ------ | -
|                                                                            |  |             |            |   |        |         |     |         |  |   |              |  |  | Accumulated |        |       |          |   |       
|                                                                            |  |             |            |   |        | Addtl. |     |         |  |   | Treasury     |  |  |             |        | Other |          |   |        |               | 
|                                                                            |  | Shares      |            |   | Common |         |     | Paid-in |  |   | Deferred     |  |  | Common      |        |       | Retained |   |        | Comprehensive |  |   |         |   | Comprehensive |              
|                                                                            |  | Outstanding |            |   | Stock  |         |     | Capital |  |   | Compensation |  |  | Stock       |        |       | Earnings |   |        | Income (Loss) |  |   | Total   |   |               | Income (Loss) |        
|                                                                            |  |             |            |   |        |         |     |         |  |   |              |  |  |             |        |       |          |   |        |               |  |   |         |   |               |               |        
|Balance at December 31, 2002                                                |  |             | 20,775,983 |   |        | $       | 211 |         |  | $ | 242,373      |  |  | $           | (1,982 | )     |          | $ | (3,032 | )             |  | $ | 92,618  |   |               | $             | (19,015 | ) |  | $ | 311,173 |   |  |   |        |  
|Shares issued for directors compensation                                   |  |             | 18,213     |   |        |         |    |         |  |   | 186          |  |  |             | (186   | )     |          |   |       |               |  |   |        |   |               |               |        |   |  |   |        |   |  |   |        |  
|Shares issued for restricted Stock award plans                              |  |             | 75,220     |   |        |         | 1   |         |  |   | 768          |  |  |             | (769   | )     |          |   |       |               |  |   |        |   |               |               |        |   |  |   |        |   |  |   |        |  
|Compensation expense recognized                                             |  |             |           |   |        |         |    |         |  |   |             |  |  |             | 928    |       |          |   |       |               |  |   |        |   |               |               |        |   |  |   | 928     |   |  |   |        |  
|Treasury common stock purchased                                             |  |             | (57,489    | ) |        |         |    |         |  |   |             |  |  |             |       |       |          |   | (586   | )             |  |   |        |   |               |               |        |   |  |   | (586    | ) |  |   |        |  
|Exercise of employee stock options including tax benefit of
    stock plans |  |             | 122,736    |   |        |         | 1   |         |  |   | 1,533        |  |  |             |       |       |          |   |       |               |  |   |        |   |               |               |        |   |  |   | 1,534   |   |  |   |        |  
|Net income                                                                  |  |             |           |   |        |         |    |         |  |   |             |  |  |             |       |       |          |   |       |               |  |   | 4,714   |   |               |               |        |   |  |   | 4,714   |   |  | $ | 4,714  |  
|Adjustment to excess minimum pension liability (a)                          |  |             |           |   |        |         |    |         |  |   |             |  |  |             |       |       |          |   |       |               |  |   |        |   |               |               | (103    | ) |  |   | (103    | ) |  |   | (103   | )
|                                                                            |  |             |            |   |        |         |     |         |  |   |              |  |  |             |        |       |          |   |        |               |  |   |         |   |               |               |        
|Comprehensive income                                                        |  |             |            |   |        |         |     |         |  |   |              |  |  |             |        |       |          |   |        |               |  |   |         |   |               |               |         |   |  |   |         |   |  | $ | 4,611  |  
|                                                                            |  |             |            |   |        |         |     |         |  |   |              |  |  |             |        |       |          |   |        |               |  |   |         |   |               |               |        
|Balance at December 31, 2003                                                |  |             | 20,934,663 |   |        | $       | 213 |         |  | $ | 244,860      |  |  | $           | (2,009 | )     |          | $ | (3,618 | )             |  | $ | 97,332  |   |               | $             | (19,118 | ) |  | $ | 317,660 |   |  |   |        |  
|Shares issued for directors compensation                                   |  |             | 18,179     |   |        |         |    |         |  |   | 265          |  |  |             | (265   | )     |          |   |       |               |  |   |        |   |               |               |        |   |  |   |        |   |  |   |        |  
|Shares issued for restricted Stock award plans                              |  |             | 69,250     |   |        |         | 1   |         |  |   | 1,035        |  |  |             | (1,036 | )     |          |   |       |               |  |   |        |   |               |               |        |   |  |   |        |   |  |   |        |  
|Compensation expense recognized                                             |  |             |           |   |        |         |    |         |  |   |             |  |  |             | 811    |       |          |   |       |               |  |   |        |   |               |               |        |   |  |   | 811     |   |  |   |        |  
|Treasury common stock purchased                                             |  |             | (19,275    | ) |        |         |    |         |  |   |             |  |  |             |       |       |          |   | (288   | )             |  |   |        |   |               |               |        |   |  |   | (288    | ) |  |   |        |  
|Exercise of employee stock options including tax benefit                    |  |             | 411,005    |   |        |         | 3   |         |  |   | 5,356        |  |  |             |       |       |          |   |       |               |  |   |        |   |               |               |        |   |  |   | 5,359   |   |  |   |        |  
|Net loss                                                                    |  |             |           |   |        |         |    |         |  |   |             |  |  |             |       |       |          |   |       |               |  |   | (2,957  | ) |               |               |        |   |  |   | (2,957  | ) |  | $ | (2,957 | )
|Stock issued in Claro purchase                                              |  |             | 358,908    |   |        |         | 4   |         |  |   | 7,010        |  |  |             |       |       |          |   |       |               |  |   |        |   |               |               |        |   |  |   | 7,014   |   |  |   |        |  
|Adjustment to excess minimum pension liability (a)                          |  |             |           |   |        |         |    |         |  |   |             |  |  |             |       |       |          |   |       |               |  |   |        |   |               |               | (3,794  | ) |  |   | (3,794  | ) |  |   | (3,794 | )
|Foreign currency translation                                                |  |             |           |   |        |         |    |         |  |   |             |  |  |             |       |       |          |   |       |               |  |   |        |   |               |               | 153     |   |  |   | 153     |   |  |   | 153    |  
|                                                                            |  |             |            |   |        |         |     |         |  |   |              |  |  |             |        |       |          |   |        |               |  |   |         |   |               |               |        
|Comprehensive income (loss)                                                 |  |             |            |   |        |         |     |         |  |   |              |  |  |             |        |       |          |   |        |               |  |   |         |   |               |               |         |   |  |   |         |   |  | $ | (6,598 | )
|                                                                            |  |             |            |   |        |         |     |         |  |   |              |  |  |             |        |       |          |   |        |               |  |   |         |   |               |               |        
|Balance at December 31, 2004                                                |  |             | 21,772,730 |   |        | $       | 221 |         |  | $ | 258,526      |  |  | $           | (2,499 | )     |          | $ | (3,906 | )             |  | $ | 94,375  |   |               | $             | (22,759 | ) |  | $ | 323,958 |   |  |   |        |  
|Shares issued for directors compensation                                   |  |             | 12,036     |   |        |         |    |         |  |   | 311          |  |  |             | (311   | )     |          |   |       |               |  |   |        |   |               |               |        |   |  |   |        |   |  |   |        |  
|Shares issued for restricted Stock award plans                              |  |             | 66,000     |   |        |         | 1   |         |  |   | 1,459        |  |  |             | (1,460 | )     |          |   |       |               |  |   |        |   |               |               |        |   |  |   |        |   |  |   |        |  
|Compensation expense recognized                                             |  |             |           |   |        |         |    |         |  |   |             |  |  |             | 1,192  |       |          |   |       |               |  |   |        |   |               |               |        |   |  |   | 1,192   |   |  |   |        |  
|Treasury common stock purchased                                             |  |             | (22,458    | ) |        |         |    |         |  |   |             |  |  |             |       |       |          |   | (483   | )             |  |   |        |   |               |               |        |   |  |   | (483    | ) |  |   |        |  
|Exercise of employee stock options including tax benefit                    |  |             | 858,831    |   |        |         | 9   |         |  |   | 18,394       |  |  |             |       |       |          |   |       |               |  |   |        |   |               |               |        |   |  |   | 18,403  |   |  |   |        |  
|Net income                                                                  |  |             |           |   |        |         |    |         |  |   |             |  |  |             |       |       |          |   |       |               |  |   | 38,935  |   |               |               |        |   |  |   | 38,935  |   |  | $ | 38,935 |  
|Adjustment to excess minimum pension liability (a)                          |  |             |           |   |        |         |    |         |  |   |             |  |  |             |       |       |          |   |       |               |  |   |        |   |               |               | (4,817  | ) |  |   | (4,817  | ) |  |   | (4,817 | )
|Foreign currency translation                                                |  |             |           |   |        |         |    |         |  |   |             |  |  |             |       |       |          |   |       |               |  |   |        |   |               |               | 2,464   |   |  |   | 2,464   |   |  |   | 2,464  |  
|                                                                            |  |             |            |   |        |         |     |         |  |   |              |  |  |             |        |       |          |   |        |               |  |   |         |   |               |               |        
|Comprehensive income                                                        |  |             |            |   |        |         |     |         |  |   |              |  |  |             |        |       |          |   |        |               |  |   |         |   |               |               |         |   |  |   |         |   |  | $ | 36,582 |  
|                                                                            |  |             |            |   |        |         |     |         |  |   |              |  |  |             |        |       |          |   |        |               |  |   |         |   |               |               |        
|Balance at December 31, 2005                                                |  |             | 22,687,139 |   |        | $       | 231 |         |  | $ | 278,690      |  |  | $           | (3,078 | )     |          | $ | (4,389 | )             |  | $ | 133,310 |   |               | $             | (25,112 | ) |  | $ | 379,652 |   |  |   |        |  
|                                                                            |  |             |            |   |        |         |     |         |  |   |              |  |  |             |        |       |          |   |        |               |  |   |         |   |               |               |        






|    |                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Charges to minimum pension liability adjustments in 2005, 2004,
    and 2003 are net of tax benefits of $2,562, $2,042, and $56,
    respectively.



36



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RTI INTERNATIONAL METALS, INC.





Notes to Consolidated Financial Statements


(Dollars in thousands, unless otherwise noted)




|        |                             
|------- | ----------------------------
|NOTE 1 | Organization and Operations:







| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Review of accounting for employee benefit and executive
    compensation arrangements







|        |                                            
|------- | -------------------------------------------
|NOTE 2 | Summary of Significant Accounting Policies:



| |                             
| | ----------------------------
| | Principles of consolidation:





| |                  
| | -----------------
| | Use of estimates:





| |            
| | -----------
| | Fair value:



37



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| |                  
| | -----------------
| | Cash equivalents:





| |             
| | ------------
| | Investments:





| |                     
| | --------------------
| | Accounts receivable:





| |             
| | ------------
| | Inventories:

last-in, first-in, lower-of




| |                                            
| | -------------------------------------------
| | U.S. customs recoveryother current assets:







| |                               
| | ------------------------------
| | Property, plant and equipment:





38



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|                               |  |  |             | 
|------------------------------ |  |  | ----------- | 
|Building and improvements      |  |  | 20-40 years | 
|Machinery and equipment        |  |  | 7-15 years  | 
|Furniture and fixtures         |  |  | 5-10 years  | 
|Computer hardware and software |  |  | 3-10 years  | 











| |                                
| | -------------------------------
| | Goodwill and intangible assets:







39



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| |         
| | --------
| | Goodwill

|                                   |  |              |        |  |            |   |             |            |  |              |      |  |  |   |        | 
|---------------------------------- |  | ------------ | ------ |  | ---------- | - | ----------- | ---------- |  | ------------ | ---- |  |  | - | ------ | 
|                                   |  | December 31, |        |  |            |   | Translation |            |  | December 31, |     
|                                   |  | 2004         |        |  | Adjustment |   |             | Adjustment |  |              | 2005 | 
|                                   |  |              |        |  |            |   |             |            |  |              |      | 
|Titanium Group                     |  | $            | 1,955  |  |            | $ | 636         |            |  | $            |     |  |  | $ | 2,591  | 
|Fabrication and Distribution Group |  |              | 44,663 |  |            |   | 569         |            |  |              | 823  |  |  |   | 46,055 | 
|                                   |  |              |        |  |            |   |             |            |  |              |      | 
|Total                              |  | $            | 46,618 |  |            | $ | 1,205       |            |  | $            | 823  |  |  | $ | 48,646 | 
|                                   |  |              |        |  |            |   |             |            |  |              |      | 





| |            
| | -----------
| | Intangibles



|                                   |  |              |        |  |            |   |      |             |  |   |              |  |  |   |        | 
|---------------------------------- |  | ------------ | ------ |  | ---------- | - | ---- | ----------- |  | - | ------------ |  |  | - | ------ | 
|                                   |  | December 31, |        |  | (Expense)/ |   |      | Translation |  |   | December 31, | 
|                                   |  | 2004         |        |  | Income     |   |      | Adjustment  |  |   | 2005         | 
|                                   |  |              |        |  |            |   |      |             |  |   |              | 
|Titanium Group                     |  | $            |       |  |            | $ |     |             |  | $ |             |  |  | $ |       | 
|Fabrication and Distribution Group |  |              | 16,040 |  |            |   | (804 | )           |  |   | 1,345        |  |  |   | 16,581 | 
|                                   |  |              |        |  |            |   |      |             |  |   |              | 
|Total                              |  | $            | 16,040 |  |            | $ | (804 | )           |  | $ | 1,345        |  |  | $ | 16,581 | 
|                                   |  |              |        |  |            |   |      |             |  |   |              | 



| |                         
| | ------------------------
| | Other long-lived assets:





| |               
| | --------------
| | Environmental:





| |                
| | ---------------
| | Treasury Stock:





| |                              
| | -----------------------------
| | Revenue and cost recognition:



40



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| |                                      
| | -------------------------------------
| | Shipping and handling fees and costs:





| |                          
| | -------------------------
| | Research and development:





| |          
| | ---------
| | Pensions:







| |                               
| | ------------------------------
| | Other postretirement benefits:









| |              
| | -------------
| | Income taxes:



41



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| |                    
| | -------------------
| | Foreign currencies:









| |                                  
| | ---------------------------------
| | Derivative financial instruments:





| |                          
| | -------------------------
| | Stock-based compensation:



42



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|                                                                                                                                               |                     |                                       |        |      |      |   |        |       |   |   |        |      | 
|---------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | ------------------------------------- | ------ | ---- | ---- | - | ------ | ----- | - | - | ------ | ---- | 
|                                                                                                                                               |                     | 2005                                  |        |      | 2004 |   |        | 2003  |  
|                                                                                                                                               |                     |                                       |        |      |      |   |        |       |  
|                                                                                                                                               |                     | (In thousands, except per share data) |       
|Net income (loss), as reported                                                                                                                 |                     | $                                     | 38,935 |      |      | $ | (2,957 | )     |   | $ | 4,714  |     
|Add: Stock-based employee compensation expense included in
    reported net income (loss), net of related tax effects                          |                     |                                       | 775    |      |      |   | 365    |       |   |   | 586    |     
|Deduct: Total stock-based employee compensation expense
    determined under fair value methods for all awards, net of
    related tax effects |                     |                                       | (1,384 | )    |      |   | (761   | )     |   |   | (1,091 | )   
|                                                                                                                                               |                     |                                       |        |      |      |   |        |       |  
|Pro forma net income (loss)                                                                                                                    |                     | $                                     | 38,326 |      |      | $ | (3,353 | )     |   | $ | 4,209  |     
|                                                                                                                                               |                     |                                       |        |      |      |   |        |       |  
|Net income (loss) per share:                                                                                                                   |                     |                                       |        |      |      |   |        |       |   |   |        |     
|                                                                                                                                               | -As reported -basic |                                       | $      | 1.75 |      |   | $      | (0.14 | ) |   | $      | 0.23 | 
|                                                                                                                                               | -diluted            |                                       | $      | 1.73 |      |   | $      | (0.14 | ) |   | $      | 0.23 | 
|                                                                                                                                               | -Pro forma  -basic  |                                       | $      | 1.73 |      |   | $      | (0.16 | ) |   | $      | 0.20 | 
|                                                                                                                                               | -diluted            |                                       | $      | 1.70 |      |   | $      | (0.15 | ) |   | $      | 0.20 | 



|                                                                            |  |      |      |   |      |   |      |      |  |   |      |  
|--------------------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                                                            |  | 2005 |      |   | 2004 |   |      | 2003 | 
|                                                                            |  |      |      |   |      |   |      |      | 
|Expected life (years)                                                       |  |      | 6    |   |      |   | 5    |      |  |   | 5    |  
|Risk-free interest rate                                                     |  |      | 4.0  | % |      |   | 3.3  | %    |  |   | 3.0  | %
|Expected volatility                                                         |  |      | 45.0 | % |      |   | 38.0 | %    |  |   | 40.0 | %
|Expected weighted average fair value of options granted during
    the year |  | $    | 11.1 | 4 |      | $ | 5.2  | 1    |  | $ | 3.6  | 5





| |                          
| | -------------------------
| | New accounting standards:





43



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| |                   
| | ------------------
| | Reclassifications:



NOTE 3Acquisitions








44



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|                                        |                     |                            |        |        |        | 
|--------------------------------------- | ------------------- | -------------------------- | ------ | ------ | ------ | 
|                                        |                     | Allocated                  |       
|                                        |                     | Purchase                   |       
|                                        |                     | Price                      |       
|(In thousands)                          |                     |                            |       
|Acquired assets:                        |                     |                            |        |       
|Accounts receivable                     |                     | $                          | 2,802  |       
|Inventories                             |                     |                            | 4,328  |       
|Other assets                            |                     |                            | 46     |       
|Property, plant & equipment             |                     |                            | 3,836  |       
|Goodwill                                |                     |                            | 11,090 |       
|Intangible assets                       |                     |                            | 16,200 |       
|                                        |                     |                            |       
|                                        | Total assets        |                            |        | 38,302 |       
|Acquired liabilities:                   |                     |                            |        |       
|Accounts payable                        |                     |                            | 1,010  |       
|Income taxes payable                    |                     |                            | 1,543  |       
|Current deferred income taxes liability |                     |                            | 1,145  |       
|Other accrued liabilities               |                     |                            | 160    |       
|Noncurrent deferred income taxes        |                     |                            | 5,414  |       
|                                        |                     |                            |       
|                                        | Total liabilities   |                            |        | 9,272  |       
|                                        |                     |                            |       
|                                        | Net assets acquired |                            | $      | 29,030 |       
|                                        |                     |                            |       
|                                        | Purchase price      |                            |        |        |       
|                                        |                     | Cash, net of cash acquired |        | $      | 22,016 | 
|                                        |                     | RTI common stock           |        |        | 7,014  | 
|                                        |                     |                            |       
|                                        |                     | $                          | 29,030 |       
|                                        |                     |                            |       



|                                                               |         |           |         |       |           |   |         |      | 
|-------------------------------------------------------------- | ------- | --------- | ------- | ----- | --------- | - | ------- | ---- | 
|                                                               |         | Pro Forma |         |       | Pro Forma |  
|(In thousands, except per share data)                          |         | 2004      |         |       | 2003      |  
|(Unaudited)                                                    |         |           |         |       |           |  
|Net sales                                                      |         | $         | 235,999 |       |           | $ | 219,941 |     
|                                                               |         |           |         |       |           |  
|Net income from continuing operations                          |         |           | 434     |       |           |   | 8,338   |     
|Net income (loss) from continuing operations per common share: |         |           |         |       |           |   |         |     
|                                                               | Basic   |           |         | 0.02  |           |   |         | 0.40 | 
|                                                               | Diluted |           |         | 0.02  |           |   |         | 0.40 | 
|Net income (loss)                                              |         | $         | (533    | )     |           | $ | 8,338   |     
|Net income (loss) per common share:                            |         |           |         |       |           |   |         |     
|                                                               | Basic   |           |         | (0.03 | )         |   |         | 0.40 | 
|                                                               | Diluted |           |         | (0.03 | )         |   |         | 0.40 | 

stepped-up


45



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NOTE 4Earnings per Share:




|                                     |                                                |      |   |            |      |  |   |            |   |  |   |            | 
|------------------------------------ | ---------------------------------------------- | ---- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | 
|                                     |                                                | 2005 |   |            | 2004 |  |   | 2003       |  
|                                     |                                                |      |   |            |      |  |   |            |  
|Net income                           |                                                |      |   |            |      |  |   |            |   |  |   |           
|                                     | Net income from continuing operations          |      | $ | 37,344     |      |  | $ | (2,319     | ) |  | $ | 4,108      | 
|                                     | Net income (loss) from discontinued operations |      |   | 1,591      |      |  |   | (638       | ) |  |   | 606        | 
|                                     |                                                |      |   |            |      |  |   |            |  
|                                     | Net income (loss)                              |      | $ | 38,935     |      |  | $ | (2,957     | ) |  | $ | 4,714      | 
|                                     |                                                |      |   |            |      |  |   |            |  
|Weighted-average shares outstanding: |                                                |      |   |            |      |  |   |            |   |  |   |           
|                                     | Basic                                          |      |   | 22,186,966 |      |  |   | 21,309,737 |   |  |   | 20,829,796 | 
|                                     | Effect of dilutive securities                  |      |   | 338,604    |      |  |   |           |   |  |   | 166,498    | 
|                                     |                                                |      |   |            |      |  |   |            |  
|                                     | Diluted                                        |      |   | 22,525,570 |      |  |   | 21,309,737 |   |  |   | 20,996,294 | 
|                                     |                                                |      |   |            |      |  |   |            |  
|Basic earnings per share             |                                                |      |   |            |      |  |   |            |   |  |   |           
|                                     | Continuing operations                          |      | $ | 1.68       |      |  | $ | (0.11      | ) |  | $ | 0.20       | 
|                                     | Discontinued operations                        |      |   | 0.07       |      |  |   | (0.03      | ) |  |   | 0.03       | 
|                                     |                                                |      |   |            |      |  |   |            |  
|                                     | Basic earning per share                        |      | $ | 1.75       |      |  | $ | (0.14      | ) |  | $ | 0.23       | 
|                                     |                                                |      |   |            |      |  |   |            |  
|Diluted earnings per share           |                                                |      |   |            |      |  |   |            |   |  |   |           
|                                     | Continuing operations                          |      | $ | 1.66       |      |  | $ | (0.11      | ) |  | $ | 0.19       | 
|                                     | Discontinued operations                        |      |   | 0.07       |      |  |   | (0.03      | ) |  |   | 0.03       | 
|                                     |                                                |      |   |            |      |  |   |            |  
|                                     | Diluted earnings per share                     |      | $ | 1.73       |      |  | $ | (0.14      | ) |  | $ | 0.22       | 
|                                     |                                                |      |   |            |      |  |   |            |  



NOTE 5Accounts Receivable:


|                                     |  |              |        |   |      |   |        |  
|------------------------------------ |  | ------------ | ------ | - | ---- | - | ------ | -
|                                     |  | December 31, |       
|                                     |  |              |       
|                                     |  | 2005         |        |   | 2004 |  
|                                     |  |              |        |   |      |  
|Trade and commercial customers       |  | $            | 55,661 |   |      | $ | 42,840 |  
|U.S. GovernmentDepartment of Energy |  |              | 155    |   |      |   | 3,136  |  
|                                     |  |              |        |   |      |  
|                                     |  |              | 55,816 |   |      |   | 45,976 |  
|LessAllowance for doubtful accounts |  |              | (1,604 | ) |      |   | (1,486 | )
|                                     |  |              |        |   |      |  
|                                     |  | $            | 54,212 |   |      | $ | 44,490 |  
|                                     |  |              |        |   |      |  

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NOTE 6Inventories:


|                                   |  |              |         |   |      |   |         |  
|---------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                   |  | December 31, |        
|                                   |  |              |        
|                                   |  | 2005         |         |   | 2004 |  
|                                   |  |              |         |   |      |  
|Raw materials and supplies         |  | $            | 66,533  |   |      | $ | 40,459  |  
|Work-in-process and finished goods |  |              | 195,870 |   |      |   | 112,010 |  
|LIFO reserve                       |  |              | (39,009 | ) |      |   | (18,957 | )
|                                   |  |              |         |   |      |  
|                                   |  | $            | 223,394 |   |      | $ | 133,512 |  
|                                   |  |              |         |   |      |  



NOTE 7Property, Plant and Equipment:




|                                                                  |  |              |          |   |      |   |          |  
|----------------------------------------------------------------- |  | ------------ | -------- | - | ---- | - | -------- | -
|                                                                  |  | December 31, |         
|                                                                  |  |              |         
|                                                                  |  | 2005         |          |   | 2004 |  
|                                                                  |  |              |          |   |      |  
|Land                                                              |  | $            | 967      |   |      | $ | 969      |  
|Buildings and improvements                                        |  |              | 46,398   |   |      |   | 44,296   |  
|Machinery and equipment                                           |  |              | 173,410  |   |      |   | 165,008  |  
|Computer hardware and software, furniture and fixtures, and other |  |              | 39,486   |   |      |   | 40,566   |  
|Construction in progress                                          |  |              | 2,431    |   |      |   | 3,750    |  
|                                                                  |  |              |          |   |      |  
|                                                                  |  |              | 262,692  |   |      |   | 254,589  |  
|LessAccumulated depreciation                                     |  |              | (182,636 | ) |      |   | (171,996 | )
|                                                                  |  |              |          |   |      |  
|                                                                  |  | $            | 80,056   |   |      | $ | 82,593   |  
|                                                                  |  |              |          |   |      |  

NOTE 8Income Taxes




|        |       |                   |        |        |                   |   |        |                   |  |   |         |        |  |          |        |        |       |   |       |         |  |   |          |        |   |       |       |       |  |   |      |        |   |   |       |       | 
|------- | ----- | ----------------- | ------ | ------ | ----------------- | - | ------ | ----------------- |  | - | ------- | ------ |  | -------- | ------ | ------ | ----- | - | ----- | ------- |  | - | -------- | ------ | - | ----- | ----- | ----- |  | - | ---- | ------ | - | - | ----- | ----- | 
|        |       | December 31, 2005 |        |        | December 31, 2004 |   |        | December 31, 2003 | 
|        |       |                   |        |        |                   |   |        |                   | 
|        |       | Current           |        |        | Deferred          |   |        | Total             |  |   | Current |        |  | Deferred |        |        | Total |   |       | Current |  |   | Deferred |        |   | Total |      
|        |       |                   |        |        |                   |   |        |                   |  |   |         |        |  |          |        |        |       |   |       |         |  |   |          |        |   |       |      
|Federal |       | $                 | 14,366 |        |                   | $ | 5,800  |                   |  | $ | 20,166  |        |  | $        | (6,201 | )      |       | $ | 3,008 |         |  | $ | (3,193   | )      |   | $     | 2,848 |       |  | $ | (721 | )      |   | $ | 2,127 |      
|State   |       |                   | 723    |        |                   |   | (1,436 | )                 |  |   | (713    | )      |  |          | 116    |        |       |   | (249  | )       |  |   | (133     | )      |   |       | 384   |       |  |   | (141 | )      |   |   | 243   |      
|Foreign |       |                   | 1,298  |        |                   |   | (683   | )                 |  |   | 615     |        |  |          | 630    |        |       |   | 19    |         |  |   | 649      |        |   |       | 418   |       |  |   | (389 | )      |   |   | 29    |      
|        |       |                   |        |        |                   |   |        |                   |  |   |         |        |  |          |        |        |       |   |       |         |  |   |          |        |   |       |      
|        | Total |                   | $      | 16,387 |                   |   | $      | 3,681             |  |   | $       | 20,068 |  |          | $      | (5,455 | )     |   | $     | 2,778   |  |   | $        | (2,677 | ) |       | $     | 3,650 |  |   | $    | (1,251 | ) |   | $     | 2,399 | 
|        |       |                   |        |        |                   |   |        |                   |  |   |         |        |  |          |        |        |       |   |       |         |  |   |          |        |   |       |      



|              |  |                        |        |   |      |   |        |      |  |   |       |  
|------------- |  | ---------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ----- | -
|              |  | Year Ended December 31 |       
|              |  |                        |       
|              |  | 2005                   |        |   | 2004 |   |        | 2003 | 
|              |  |                        |        |   |      |   |        |      | 
|United States |  | $                      | 57,944 |   |      | $ | (4,488 | )    |  | $ | 7,283 |  
|Foreign       |  |                        | (532   | ) |      |   | (508   | )    |  |   | (776  | )
|              |  |                        |        |   |      |   |        |      | 
|              |  | $                      | 57,412 |   |      | $ | (4,996 | )    |  | $ | 6,507 |  
|              |  |                        |        |   |      |   |        |      | 

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|                                                            |                 |              |        |        |      |   |        |        |   |   |       |       | 
|----------------------------------------------------------- | --------------- | ------------ | ------ | ------ | ---- | - | ------ | ------ | - | - | ----- | ----- | 
|                                                            |                 | December 31, |       
|                                                            |                 |              |       
|                                                            |                 | 2005         |        |        | 2004 |   |        | 2003   |  
|                                                            |                 |              |        |        |      |   |        |        |  
|Statutory rate of 35% applied to income before income taxes |                 | $            | 20,094 |        |      | $ | (1,749 | )      |   | $ | 2,277 |      
|State income taxes, net of federal tax effects              |                 |              | (502   | )      |      |   | (127   | )      |   |   | 159   |      
|Adjustments of tax reserves and prior years income taxes   |                 |              | (95    | )      |      |   | (850   | )      |   |   | (123  | )    
|Effects of foreign operations                               |                 |              | 553    |        |      |   | (604   | )      |   |   | 40    |      
|Other                                                       |                 |              | (36    | )      |      |   | 76     |        |   |   | 46    |      
|Valuation allowance                                         |                 |              | 54     |        |      |   | 577    |        |   |   |      |      
|                                                            |                 |              |        |        |      |   |        |        |  
|                                                            | Total provision |              | $      | 20,068 |      |   | $      | (2,677 | ) |   | $     | 2,399 | 
|                                                            |                 |              |        |        |      |   |        |        |  
|Effective tax rate                                          |                 |              | 35     | %      |      |   | 54     | %      |   |   | 37    | %    
|                                                            |                 |              |        |        |      |   |        |        |  







|                         |                                                                               |                                |       |         |         |   |       |         |         |  
|------------------------ | ----------------------------------------------------------------------------- | ------------------------------ | ----- | ------- | ------- | - | ----- | ------- | ------- | -
|                         |                                                                               | December 31,                   |      
|                         |                                                                               |                                |      
|                         |                                                                               | 2005                           |       |         | 2004    |  
|                         |                                                                               |                                |       |         |         |  
|Deferred tax assets      |                                                                               |                                |       |         |         |   |       |        
|                         | Inventories                                                                   |                                | $     | 948     |         |   | $     | 5,575   |        
|                         | Postretirement benefit costs                                                  |                                |       | 7,623   |         |   |       | 8,053   |        
|                         | Employment costs                                                              |                                |       | 2,454   |         |   |       | 1,631   |        
|                         | Foreign tax credits (Expire 2012 through 2015)                                |                                |       | 847     |         |   |       | 150     |        
|                         | Environmental related costs                                                   |                                |       | 1,263   |         |   |       | 621     |        
|                         | Foreign tax loss carryforwards                                                |                                |       | 507     |         |   |       | 450     |        
|                         | Pension costs                                                                 |                                |       | 7,188   |         |   |       | 6,123   |        
|                         | State tax credit & net operating loss carryforwards
    (Expire through 2024) |                                |       | 629     |         |   |       |        |        
|                         | Other                                                                         |                                |       | 1,157   |         |   |       | 1,464   |        
|                         |                                                                               |                                |       |         |         |  
|                         |                                                                               | Gross deferred tax assets      |       |         | 22,616  |   |       |         | 24,067  |  
|                         | Valuation allowance                                                           |                                |       | (631    | )       |   |       | (577    | )      
|                         |                                                                               |                                |       |         |         |  
|                         |                                                                               | Total deferred tax assets      |       |         | 21,985  |   |       |         | 23,490  |  
|Deferred tax liabilities |                                                                               |                                |       |         |         |   |       |        
|                         | Property, plant and equipment                                                 |                                |       | (12,147 | )       |   |       | (12,848 | )      
|                         | Intangible assets                                                             |                                |       | (6,340  | )       |   |       | (6,485  | )      
|                         | Other                                                                         |                                |       | (788    | )       |   |       |        |        
|                         | Unremitted foreign earnings                                                   |                                |       |        |         |   |       |        |        
|                         |                                                                               |                                |       |         |         |  
|                         |                                                                               | Total deferred tax liabilities |       |         | (19,275 | ) |       |         | (19,333 | )
|                         |                                                                               |                                |       |         |         |  
|Net deferred tax asset   |                                                                               | $                              | 2,710 |         |         | $ | 4,157 |        
|                         |                                                                               |                                |       |         |         |  

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|        |                                         
|------- | ----------------------------------------
|NOTE 9 | Other Operating Income and Other Income:



|                                      |  |                         |     |  |      |   |       |      |  |   |       |    
|------------------------------------- |  | ----------------------- | --- |  | ---- | - | ----- | ---- |  | - | ----- | ---
|                                      |  | Year Ended December 31, |    
|                                      |  |                         |    
|                                      |  | 2005                    |     |  | 2004 |   |       | 2003 | 
|                                      |  |                         |     |  |      |   |       |      | 
|Other operating income                |  |                         |     |  |      |   |       |      |  |   |       |    
|Gain on disposal of plant sites       |  | $                       |    |  |      | $ | 441   | (1)  |  | $ | 1,010 | (1)
|Other miscellaneous                   |  |                         |    |  |      |   | 97    |      |  |   | (43   | )  
|                                      |  |                         |     |  |      |   |       |      | 
|Total operating income                |  | $                       |    |  |      | $ | 538   |      |  | $ | 967   |    
|                                      |  |                         |     |  |      |   |       |      | 
|Other Income                          |  |                         |     |  |      |   |       |      |  |   |       |    
|Gain on receipt of liquidated damages |  | $                       |    |  |      | $ | 9,139 | (2)  |  | $ | 8,419 | (2)
|Foreign exchange gains and other      |  |                         | 369 |  |      |   | 293   |      |  |   | 475   |    
|                                      |  |                         |     |  |      |   |       |      | 
|Total other income                    |  | $                       | 369 |  |      | $ | 9,432 |      |  | $ | 8,894 |    
|                                      |  |                         |     |  |      |   |       |      | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Other operating income in 2004 included the gain on the sale of
    the Companys RMI Metals (MICRON) site in Salt Lake
    City, Utah, of $0.4 million and the income from a deferred
    gain on a sale/leaseback of one of the Companys Ashtabula,
    Ohio facilities previously used for storage of
    $0.1 million. In 2003 the Company sold the Ashtabula
    facility and recorded a gain of $1.0 million and deferred
    the gain on the leaseback portion to coincide with the term of
    the lease, which was five years with a five-year renewal option.

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|    |                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | These gains were financial settlements from Boeing Commercial
    Airplane Group relating to Boeings failure to meet minimum
    order requirements under terms of a long-term agreement between
    RTI and Boeing. The long-term agreement between RTI and Boeing
    expired December 31, 2003.

NOTE 10 Long-Term Debt:










NOTE 11 Employee Benefit Plans:




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|                                                                 |                                                   |               |         |         |                |   |         |         |   |   |         |        |   |   |         |        |  
|---------------------------------------------------------------- | ------------------------------------------------- | ------------- | ------- | ------- | -------------- | - | ------- | ------- | - | - | ------- | ------ | - | - | ------- | ------ | -
|                                                                 |                                                   | Pension       |         |         | Postretirement |  
|                                                                 |                                                   | Benefit Plans |         |         | Benefit Plan   |  
|                                                                 |                                                   |               |         |         |                |  
|                                                                 |                                                   | 2005          |         |         | 2004           |   |         | 2005    |   |   | 2004    |       
|                                                                 |                                                   |               |         |         |                |   |         |         |   |   |         |       
|Change in projected benefit obligation:                          |                                                   |               |         |         |                |   |         |         |   |   |         |        |   |   |         |       
|                                                                 | Projected benefit obligation at beginning of year |               | $       | 113,989 |                |   | $       | 109,305 |   |   | $       | 29,462 |   |   | $       | 27,996 |  
|                                                                 | Service Cost                                      |               |         | 2,273   |                |   |         | 2,289   |   |   |         | 384    |   |   |         | 381    |  
|                                                                 | Interest Cost                                     |               |         | 6,653   |                |   |         | 6,338   |   |   |         | 1,640  |   |   |         | 1,626  |  
|                                                                 | Actuarial loss (gain)                             |               |         | 6,691   |                |   |         | 3,780   |   |   |         | 549    |   |   |         | 1,539  |  
|                                                                 | Amendment                                         |               |         |        |                |   |         | 794     |   |   |         |       |   |   |         |       |  
|                                                                 | Curtailment                                       |               |         |        |                |   |         | (830    | ) |   |         |       |   |   |         |       |  
|                                                                 | Benefits paid                                     |               |         | (7,916  | )              |   |         | (7,687  | ) |   |         | (2,313 | ) |   |         | (2,080 | )
|                                                                 |                                                   |               |         |         |                |   |         |         |   |   |         |       
|                                                                 | Projected benefit obligation at end of year       |               | $       | 121,690 |                |   | $       | 113,989 |   |   | $       | 29,722 |   |   | $       | 29,462 |  
|                                                                 |                                                   |               |         |         |                |   |         |         |   |   |         |       
|Change in plan assets:                                           |                                                   |               |         |         |                |   |         |         |   |   |         |        |   |   |         |       
|                                                                 | Fair value of plan assets at beginning of year    |               | $       | 88,889  |                |   | $       | 90,930  |   |   | $       |       |   |   | $       |       |  
|                                                                 | Actual return on plan assets                      |               |         | 2,076   |                |   |         | 5,646   |   |   |         |       |   |   |         |       |  
|                                                                 | Employer contributions                            |               |         | 9,000   |                |   |         |        |   |   |         |       |   |   |         |       |  
|                                                                 | Benefits paid                                     |               |         | (7,916  | )              |   |         | (7,687  | ) |   |         |       |   |   |         |       |  
|                                                                 |                                                   |               |         |         |                |   |         |         |   |   |         |       
|                                                                 | Fair value of plan assets at end of year          |               | $       | 92,049  |                |   | $       | 88,889  |   |   | $       |       |   |   | $       |       |  
|                                                                 |                                                   |               |         |         |                |   |         |         |   |   |         |       
|Funded status                                                    |                                                   | $             | (29,642 | )       |                | $ | (25,100 | )       |   | $ | (29,722 | )      |   | $ | (29,462 | )     
|Unrecognized actuarial loss (gain)                               |                                                   |               | 46,709  |         |                |   | 39,293  |         |   |   | 7,602   |        |   |   | 7,426   |       
|Unrecognized prior service cost                                  |                                                   |               | 4,073   |         |                |   | 3,362   |         |   |   | 1,050   |        |   |   | 1,225   |       
|                                                                 |                                                   |               |         |         |                |   |         |         |   |   |         |       
|Net amount recognized                                            |                                                   | $             | 21,140  |         |                | $ | 17,555  |         |   | $ | (21,070 | )      |   | $ | (20,811 | )     
|                                                                 |                                                   |               |         |         |                |   |         |         |   |   |         |       
|Amounts recognized in the consolidated balance sheet consist of: |                                                   |               |         |         |                |   |         |         |   |   |         |        |   |   |         |       
|                                                                 | Intangible asset                                  |               | $       | 4,076   |                |   | $       | 3,365   |   |   | $       |       |   |   | $       |       |  
|Accrued liabilities                                              |                                                   |               | (25,595 | )       |                |   | (21,090 | )       |   |   | (21,070 | )      |   |   | (20,811 | )     
|Accumulated other comprehensive income                           |                                                   |               | 42,659  |         |                |   | 35,280  |         |   |   |        |        |   |   |        |       
|                                                                 |                                                   |               |         |         |                |   |         |         |   |   |         |       
|Net amount recognized                                            |                                                   | $             | 21,140  |         |                | $ | 17,555  |         |   | $ | (21,070 | )      |   | $ | (20,811 | )     
|                                                                 |                                                   |               |         |         |                |   |         |         |   |   |         |       

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|                                                                                                                         |                                          |               |  |          |                      |  |  |          |  |  |      |          |  |  |  |          | 
|------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------- | ------------- |  | -------- | -------------------- |  |  | -------- |  |  | ---- | -------- |  |  |  | -------- | 
|                                                                                                                         |                                          | Pension       |  |          | Other Postretirement | 
|                                                                                                                         |                                          | Benefit Plans |  |          | Benefit Plan         | 
|                                                                                                                         |                                          |               |  |          |                      | 
|                                                                                                                         |                                          | 2005          |  |          | 2004                 |  |  | 2005     |  |  | 2004 |         
|                                                                                                                         |                                          |               |  |          |                      |  |  |          |  |  |      |         
|Weighted average assumptions used to determine benefit
    obligation at December 31:                                    |                                          |               |  |          |                      |  |  |          |  |  |      |          |  |  |  |         
|                                                                                                                         | Discount rate                            |               |  | 5.50%    |                      |  |  | 5.75%    |  |  |      | 5.50%    |  |  |  | 5.75%    | 
|                                                                                                                         | Rate of increase to compensation levels  |               |  | 3.80%    |                      |  |  | 3.80%    |  |  |      | 3.80%    |  |  |  | 3.80%    | 
|                                                                                                                         | Measurement date                         |               |  | 12/31/05 |                      |  |  | 12/31/04 |  |  |      | 12/31/05 |  |  |  | 12/31/04 | 
|Weighted average assumptions used to determine net periodic
    benefit obligation cost for the years ended December 31: |                                          |               |  |          |                      |  |  |          |  |  |      |          |  |  |  |         
|                                                                                                                         | Discount rate                            |               |  | 5.75%    |                      |  |  | 6.00%    |  |  |      | 5.75%    |  |  |  | 6.00%    | 
|                                                                                                                         | Expected long-term return on plan assets |               |  | 8.50%    |                      |  |  | 8.50%    |  |  |      | N/A      |  |  |  | N/A      | 
|                                                                                                                         | Rate of increase to compensation levels  |               |  | 3.80%    |                      |  |  | 4.00%    |  |  |      | 3.80%    |  |  |  | 4.00%    | 
|                                                                                                                         | Measurement date                         |               |  | 12/31/05 |                      |  |  | 12/31/04 |  |  |      | 12/31/05 |  |  |  | 12/31/04 | 





|                                |                           |                       |        |       |                             |   |        |       |  |   |        |       |  |      |       |       |      |   |       |       |  |   |       |       | 
|------------------------------- | ------------------------- | --------------------- | ------ | ----- | --------------------------- | - | ------ | ----- |  | - | ------ | ----- |  | ---- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                                |                           | Pension Benefit Plans |        |       | Postretirement Benefit Plan |  
|                                |                           |                       |        |       |                             |  
|                                |                           | For the Years Ended   |        |       | For the Years Ended         |  
|                                |                           | December 31,          |        |       | December 31,                |  
|                                |                           |                       |        |       |                             |  
|                                |                           | 2005                  |        |       | 2004                        |   |        | 2003  |  |   | 2005   |       |  | 2004 |       |       | 2003 |  
|                                |                           |                       |        |       |                             |   |        |       |  |   |        |       |  |      |       |       |      |  
|Service Cost                    |                           | $                     | 2,273  |       |                             | $ | 2,289  |       |  | $ | 2,307  |       |  | $    | 384   |       |      | $ | 381   |       |  | $ | 400   |      
|Interest Cost                   |                           |                       | 6,653  |       |                             |   | 6,338  |       |  |   | 6,489  |       |  |      | 1,640 |       |      |   | 1,626 |       |  |   | 1,584 |      
|Expected return on plan assets  |                           |                       | (7,682 | )     |                             |   | (8,023 | )     |  |   | (8,190 | )     |  |      |      |       |      |   |      |       |  |   |      |      
|Prior service cost amortization |                           |                       | 956    |       |                             |   | 572    |       |  |   | 577    |       |  |      | 175   |       |      |   | 193   |       |  |   | 175   |      
|Amortization of actuarial loss  |                           |                       | 2,048  |       |                             |   | 1,418  |       |  |   | 808    |       |  |      | 373   |       |      |   | 373   |       |  |   | 101   |      
|                                |                           |                       |        |       |                             |   |        |       |  |   |        |       |  |      |       |       |      |  
|                                | Net periodic benefit cost |                       | $      | 4,248 |                             |   | $      | 2,594 |  |   | $      | 1,991 |  |      | $     | 2,572 |      |   | $     | 2,573 |  |   | $     | 2,260 | 
|                                |                           |                       |        |       |                             |   |        |       |  |   |        |       |  |      |       |       |      |  





|                                                                  |  |       |     |  |       |    |     | 
|----------------------------------------------------------------- |  | ----- | --- |  | ----- | -- | --- | 
|                                                                  |  | -.25% |     |  | +.25% |   
|                                                                  |  |       |     |  |       |   
|Effect on total projected benefit obligation (PBO) (in millions)  |  | +$    | 3.3 |  |       | -$ | 3.1 | 
|Effect on subsequent years periodic pension expense (in millions) |  | +$    | 0.2 |  |       | -$ | 0.2 | 

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|                |                   |       |  |    |      |   |  |    |     |  
|--------------- | ----------------- | ----- |  | -- | ---- | - |  | -- | --- | -
|                |                   | 2005  |  |    | 2004 |  
|                |                   |       |  |    |      |  
|Asset category: |                   |       |  |    |      |   |  |   
|                | Equity securities |       |  | 56 | %    |   |  | 59 | %  
|                | Debt securities   |       |  | 44 | %    |   |  | 40 | %  
|                | Other             |       |  | 0  | %    |   |  | 1  | %  
|                |                   |       |  |    |      |  
|                |                   | Total |  |    | 100  | % |  |    | 100 | %
|                |                   |       |  |    |      |  



|                |                   |       |  |    |     |  
|--------------- | ----------------- | ----- |  | -- | --- | -
|Asset category: |                   |       |  |   
|                | Equity securities |       |  | 56 | %  
|                | Debt securities   |       |  | 42 | %  
|                | Other             |       |  | 2  | %  
|                |                   |       | 
|                |                   | Total |  |    | 100 | %
|                |                   |       | 







Other postretirement benefit plans. out-of


106-2.


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|             |  |               |        |                |          |   |                |          |  |   |        | 
|------------ |  | ------------- | ------ | -------------- | -------- | - | -------------- | -------- |  | - | ------ | 
|             |  |               |        | Postretirement |          |   | Postretirement |         
|             |  |               |        | Benefit Plan   |          |   | Benefit Plan   |         
|             |  |               |        | (including     |          |   | (not including |         
|             |  | Pension       |        |                | Plan D   |   |                | Plan D   | 
|             |  | Benefit Plans |        |                | subsidy) |   |                | subsidy) | 
|             |  |               |        |                |          |   |                |          | 
|2006         |  | $             | 7,868  |                |          | $ | 1,662          |          |  | $ | 1,963  | 
|2007         |  |               | 7,889  |                |          |   | 1,661          |          |  |   | 1,975  | 
|2008         |  |               | 7,965  |                |          |   | 1,665          |          |  |   | 1,989  | 
|2009         |  |               | 7,990  |                |          |   | 1,681          |          |  |   | 2,012  | 
|2010         |  |               | 8,072  |                |          |   | 1,706          |          |  |   | 2,042  | 
|2011 to 2015 |  | $             | 42,725 |                |          | $ | 8,943          |          |  | $ | 10,650 | 



Supplemental pension plan.


Excess pension plan.




Letter agreements.






NOTE 12 Leases:




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|                                               |                      |           |       |       |         |   |     |     | 
|---------------------------------------------- | -------------------- | --------- | ----- | ----- | ------- | - | --- | --- | 
|                                               |                      | Operating |       |       | Capital |  
|                                               |                      |           |       |       |         |  
|2006                                           |                      | $         | 3,114 |       |         | $ | 80  |    
|2007                                           |                      |           | 2,713 |       |         |   | 49  |    
|2008                                           |                      |           | 1,771 |       |         |   | 37  |    
|2009                                           |                      |           | 1,256 |       |         |   | 28  |    
|2010                                           |                      |           | 734   |       |         |   | 7   |    
|Thereafter                                     |                      |           | 362   |       |         |   |    |    
|                                               |                      |           |       |       |         |  
|                                               | Total lease payments |           | $     | 9,950 |         |   |     | 201 | 
|                                               |                      |           |       |       |         |  
|Less interest portion                          |                      |           |       |       |         |   | 36  |    
|                                               |                      |           |       |       |         |  
|Amount recognized as capital lease obligations |                      |           |       |       |         | $ | 165 |    
|                                               |                      |           |       |       |         |  

NOTE 13 Billings in Excess of Costs and Estimated
Earnings:




NOTE 14 Other Current Assets:


|                                                                                                                                             |  |              |       |  |      |   |       | 
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----- |  | ---- | - | ----- | 
|                                                                                                                                             |  | December 31, |      
|                                                                                                                                             |  |              |      
|                                                                                                                                             |  | 2005         |       |  | 2004 |  
|                                                                                                                                             |  |              |       |  |      |  
|                                                                                                                                             |  | (Dollars in  |      
|                                                                                                                                             |  | thousands)   |      
|Receivable from U.S. Customs for recovery of import duties,
    less allowance for uncollectible accounts of $663 and $219,
    respectively |  | $            | 2,254 |  |      | $ | 1,779 | 
|Miscellaneous non-trade receivable                                                                                                           |  |              | 284   |  |      |   | 161   | 
|Prepaid insurance                                                                                                                            |  |              | 815   |  |      |   | 750   | 
|Deposits                                                                                                                                     |  |              | 2,865 |  |      |   |      | 
|Other prepayments                                                                                                                            |  |              | 1,189 |  |      |   | 907   | 
|                                                                                                                                             |  |              |       |  |      |  
|                                                                                                                                             |  | $            | 7,407 |  |      | $ | 3,597 | 
|                                                                                                                                             |  |              |       |  |      |  

NOTE 15 Transactions with Related Parties:








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NOTE 16Segment Reporting:






cut-to just-in






|                                  |                                  |       |   |         |         |  |   |         |         |  |   |         |         | 
|--------------------------------- | -------------------------------- | ----- | - | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                                  |                                  | 2005  |   |         | 2004    |  |   | 2003    |        
|                                  |                                  |       |   |         |         |  |   |         |        
|Total Sales:                      |                                  |       |   |         |         |  |   |         |         |  |   |        
|                                  | Titanium Group                   |       | $ | 334,765 |         |  | $ | 147,719 |         |  | $ | 132,919 |        
|                                  | Fabrication & Distribution Group |       |   | 274,095 |         |  |   | 191,763 |         |  |   | 148,140 |        
|                                  |                                  |       |   |         |         |  |   |         |        
|                                  |                                  | Total |   |         | 608,860 |  |   |         | 339,482 |  |   |         | 281,059 | 
|Inter and intra segment sales     |                                  |       |   |         |         |  |   |         |         |  |   |        
|                                  | Titanium Group                   |       |   | 204,585 |         |  |   | 99,050  |         |  |   | 90,925  |        
|                                  | Fabrication & Distribution Group |       |   | 57,369  |         |  |   | 30,789  |         |  |   | 9,878   |        
|                                  |                                  |       |   |         |         |  |   |         |        
|                                  |                                  | Total |   |         | 261,954 |  |   |         | 129,839 |  |   |         | 100,803 | 
|Total sales to external customers |                                  |       |   |         |         |  |   |         |         |  |   |        
|                                  | Titanium Group                   |       |   | 130,180 |         |  |   | 48,669  |         |  |   | 41,994  |        
|                                  | Fabrication & Distribution Group |       |   | 216,726 |         |  |   | 160,974 |         |  |   | 138,262 |        
|                                  |                                  |       |   |         |         |  |   |         |        
|                                  |                                  | Total |   | $       | 346,906 |  |   | $       | 209,643 |  |   | $       | 180,256 | 
|                                  |                                  |       |   |         |         |  |   |         |        

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|                                                                        |       |      |         |         |      |   |         |         |   |   |        |        |  
|----------------------------------------------------------------------- | ----- | ---- | ------- | ------- | ---- | - | ------- | ------- | - | - | ------ | ------ | -
|                                                                        |       | 2005 |         |         | 2004 |   |         | 2003    |  
|                                                                        |       |      |         |         |      |   |         |         |  
|Operating (Loss) Income:                                                |       |      |         |         |      |   |         |         |   |   |        |       
|Titanium Group                                                          |       | $    | 40,834  |         |      | $ | (11,044 | )       |   | $ | (2,989 | )     
|Fabrication & Distribution Group                                        |       |      | 15,300  |         |      |   | (3,522  | )       |   |   | 774    |       
|                                                                        |       |      |         |         |      |   |         |         |  
|                                                                        | Total |      |         | 56,134  |      |   |         | (14,566 | ) |   |        | (2,215 | )
|                                                                        |       |      |         |         |      |   |         |         |  
|Allocated corporate items included in segment operating
    income (1): |       |      |         |         |      |   |         |         |   |   |        |       
|Titanium Group                                                          |       |      | (8,497  | )       |      |   | (5,227  | )       |   |   | (2,946 | )     
|Fabrication & Distribution Group                                        |       |      | (14,466 | )       |      |   | (12,457 | )       |   |   | (6,712 | )     
|                                                                        |       |      |         |         |      |   |         |         |  
|                                                                        | Total |      | $       | (22,963 | )    |   | $       | (17,684 | ) |   | $      | (9,658 | )
|                                                                        |       |      |         |         |      |   |         |         |  
|Income (Loss) From Continuing Operation Before Income
    Taxes:        |       |      |         |         |      |   |         |         |   |   |        |       
|Titanium Group                                                          |       | $    | 41,521  |         |      | $ | (1,491  | )       |   | $ | 6,891  |       
|Fabrication & Distribution Group                                        |       |      | 15,891  |         |      |   | (3,505  | )       |   |   | (384   | )     
|                                                                        |       |      |         |         |      |   |         |         |  
|                                                                        | Total |      | $       | 57,412  |      |   | $       | (4,996  | ) |   | $      | 6,507  |  
|                                                                        |       |      |         |         |      |   |         |         |  






|    |                                                                             
|--- | ----------------------------------------------------------------------------
|(1) | Allocated on a three factor formula based on sales, assets and
    payrolls.

|                               |                                     |      |         |         |      |   |         |         |  |   |         |         | 
|------------------------------ | ----------------------------------- | ---- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                               |                                     | 2005 |         |         | 2004 |   |         | 2003    | 
|                               |                                     |      |         |         |      |   |         |         | 
|Assets:                        |                                     |      |         |         |      |   |         |         |  |   |         |        
|Titanium                       |                                     | $    | 230,477 |         |      | $ | 153,585 |         |  | $ | 163,594 |        
|Fabrication & Distribution     |                                     |      | 231,658 |         |      |   | 203,804 |         |  |   | 166,784 |        
|General corporate assets       |                                     |      | 39,616  |         |      |   | 52,022  |         |  |   | 63,397  |        
|                               |                                     |      |         |         |      |   |         |         | 
|                               | Total consolidated assets           |      | $       | 501,751 |      |   | $       | 409,411 |  |   | $       | 393,775 | 
|                               |                                     |      |         |         |      |   |         |         | 
|Capital Expenditures:          |                                     |      |         |         |      |   |         |         |  |   |         |        
|Titanium                       |                                     | $    | 7,996   |         |      | $ | 3,555   |         |  | $ | 2,530   |        
|Fabrication & Distribution     |                                     |      | 1,490   |         |      |   | 2,216   |         |  |   | 2,872   |        
|                               |                                     |      |         |         |      |   |         |         | 
|                               | Total capital spending              |      | $       | 9,486   |      |   | $       | 5,771   |  |   | $       | 5,402   | 
|                               |                                     |      |         |         |      |   |         |         | 
|Depreciation and Amortization: |                                     |      |         |         |      |   |         |         |  |   |         |        
|Titanium                       |                                     | $    | 9,203   |         |      | $ | 9,113   |         |  | $ | 9,281   |        
|Fabrication & Distribution     |                                     |      | 4,060   |         |      |   | 3,335   |         |  |   | 2,742   |        
|                               |                                     |      |         |         |      |   |         |         | 
|                               | Total depreciation and amortization |      | $       | 13,263  |      |   | $       | 12,448  |  |   | $       | 12,023  | 
|                               |                                     |      |         |         |      |   |         |         | 
|Carrying value of goodwill:    |                                     |      |         |         |      |   |         |         |  |   |         |        
|Titanium                       |                                     | $    | 2,591   |         |      | $ | 1,955   |         |  | $ | 1,560   |        
|Fabrication & Distribution     |                                     |      | 46,055  |         |      |   | 44,663  |         |  |   | 34,133  |        
|                               |                                     |      |         |         |      |   |         |         | 
|                               | Total carrying value of goodwill    |      | $       | 48,646  |      |   | $       | 46,618  |  |   | $       | 35,693  | 
|                               |                                     |      |         |         |      |   |         |         | 

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|                                 |              |                 |   |          |         |  |   |          |         |  |   |         |         | 
|-------------------------------- | ------------ | --------------- | - | -------- | ------- |  | - | -------- | ------- |  | - | ------- | ------- | 
|                                 |              | 2005            |   |          | 2004    |  |   | 2003     |        
|                                 |              |                 |   |          |         |  |   |          |        
|Revenue by Market Information:   |              |                 |   |          |         |  |   |          |         |  |   |        
|Titanium Group                   |              |                 |   |          |         |  |   |          |         |  |   |        
|                                 | Aerospace    |                 | $ | 149,950  |         |  | $ | 95,818   |         |  | $ | 93,071  |        
|                                 | Nonaerospace |                 |   | 184,815  |         |  |   | 51,901   |         |  |   | 39,848  |        
|                                 |              |                 |   |          |         |  |   |          |        
|                                 |              | Total           |   |          | 334,765 |  |   |          | 147,719 |  |   |         | 132,919 | 
|Fabrication & Distribution Group |              |                 |   |          |         |  |   |          |         |  |   |        
|                                 | Aerospace    |                 |   | 202,460  |         |  |   | 110,316  |         |  |   | 101,534 |        
|                                 | Nonaerospace |                 |   | 71,635   |         |  |   | 81,447   |         |  |   | 46,606  |        
|                                 |              |                 |   |          |         |  |   |          |        
|                                 |              | Total           |   |          | 274,095 |  |   |          | 191,763 |  |   |         | 148,140 | 
|Eliminations                     |              |                 |   |          |         |  |   |          |         |  |   |        
|                                 | Aerospace    |                 |   | (126,736 | )       |  |   | (105,689 | )       |  |   | (86,478 | )      
|                                 | Nonaerospace |                 |   | (135,218 | )       |  |   | (24,150  | )       |  |   | (14,325 | )      
|                                 |              |                 |   |          |         |  |   |          |        
|                                 |              | Total net sales |   | $        | 346,906 |  |   | $        | 209,643 |  |   | $       | 180,256 | 
|                                 |              |                 |   |          |         |  |   |          |        



|                                     |                          |                                   |   |          |         |  |   |          |         |  |   |          |         | 
|------------------------------------ | ------------------------ | --------------------------------- | - | -------- | ------- |  | - | -------- | ------- |  | - | -------- | ------- | 
|                                     |                          | 2005                              |   |          | 2004    |  |   | 2003     |        
|                                     |                          |                                   |   |          |         |  |   |          |        
|Geographic location of trade sales:  |                          |                                   |   |          |         |  |   |          |         |  |   |         
|                                     | United States            |                                   | $ | 279,703  |         |  | $ | 166,377  |         |  | $ | 136,902  |        
|                                     | England                  |                                   |   | 18,666   |         |  |   | 11,726   |         |  |   | 9,065    |        
|                                     | France                   |                                   |   | 14,805   |         |  |   | 13,099   |         |  |   | 12,216   |        
|                                     | Canada                   |                                   |   | 18,978   |         |  |   | 6,854    |         |  |   |         |        
|                                     | Germany                  |                                   |   | 4,658    |         |  |   | 3,158    |         |  |   |         |        
|                                     | Korea                    |                                   |   | 503      |         |  |   |         |         |  |   | 7,819    |        
|                                     | Rest of world            |                                   |   | 9,593    |         |  |   | 8,429    |         |  |   | 14,254   |        
|                                     |                          |                                   |   |          |         |  |   |          |        
|                                     |                          | Total                             |   | $        | 346,906 |  |   | $        | 209,643 |  |   | $        | 180,256 | 
|                                     |                          |                                   |   |          |         |  |   |          |        
|Gross property, plant and equipment: |                          |                                   |   |          |         |  |   |          |         |  |   |         
|                                     | United States            |                                   | $ | 248,298  |         |  | $ | 241,813  |         |  | $ | 239,082  |        
|                                     | England                  |                                   |   | 2,997    |         |  |   | 2,200    |         |  |   | 2,318    |        
|                                     | France                   |                                   |   | 839      |         |  |   | 800      |         |  |   | 261      |        
|                                     | Canada                   |                                   |   | 10,558   |         |  |   | 9,776    |         |  |   |         |        
|                                     | Accumulated depreciation |                                   |   | (182,636 | )       |  |   | (171,996 | )       |  |   | (156,156 | )      
|                                     |                          |                                   |   |          |         |  |   |          |        
|                                     |                          | Net property, plant and equipment |   | $        | 80,056  |  |   | $        | 82,593  |  |   | $        | 85,505  | 
|                                     |                          |                                   |   |          |         |  |   |          |        





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NOTE 17Commitments and Contingencies:






| |                      
| | ---------------------
| | Environmental Matters













Active Investigative or Cleanup Sites.


Ashtabula River.


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Former Ashtabula Extrusion Plant.


Reserve Environmental Services Landfill.


Gain Contingency










| |      
| | -----
| | Other



NOTE 18Stock Option and Restricted Stock Award
Plans:


2004 Stock Plan






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|                          |  |        |           |                  |                |   |       | 
|------------------------- |  | ------ | --------- | ---------------- | -------------- | - | ----- | 
|                          |  |        |           | Weighted Average |               
|                          |  | Shares |           |                  | Exercise Price |  
|                          |  |        |           |                  |                |  
|Balance December 31, 2002 |  |        | 1,637,603 |                  |                | $ | 13.95 | 
|Granted                   |  |        | 207,750   |                  |                | $ | 10.22 | 
|Exercised                 |  |        | (122,736  | )                |                | $ | 8.86  | 
|Forfeited or Expired      |  |        |          |                  |                |   |      | 
|                          |  |        |           |                  |                |  
|Balance December 31, 2003 |  |        | 1,722,617 |                  |                | $ | 13.87 | 
|Granted                   |  |        | 184,000   |                  |                | $ | 14.96 | 
|Exercised                 |  |        | (411,005  | )                |                | $ | 9.78  | 
|Forfeited or Expired      |  |        | (3,900    | )                |                | $ | 13.38 | 
|                          |  |        |           |                  |                |  
|Balance December 31, 2004 |  |        | 1,491,712 |                  |                | $ | 15.15 | 
|Granted                   |  |        | 94,500    |                  |                | $ | 22.92 | 
|Exercised                 |  |        | (858,831  | )                |                | $ | 16.08 | 
|Forfeited or Expired      |  |        | (133,197  | )                |                | $ | 16.73 | 
|                          |  |        |           |                  |                |  
|Balance December 31, 2005 |  |        | 594,184   |                  |                | $ | 15.04 | 
|                          |  |        |           |                  |                |  



|                    |  |        |         |                  |                |  |                  |                |  |   |       | 
|------------------- |  | ------ | ------- | ---------------- | -------------- |  | ---------------- | -------------- |  | - | ----- | 
|Options Outstanding | 
|                    | 
|Range of            |  |        |         | Weighted-Average |                |  | Weighted-Average |               
|Exercise Price      |  | Number |         |                  | Remaining Life |  |                  | Exercise Price | 
|                    |  |        |         |                  |                |  |                  |                | 
|$7.31  $10.22      |  |        | 224,084 |                  |                |  | 6.45             |                |  | $ | 9.86  | 
|$12.50  $15.78     |  |        | 218,063 |                  |                |  | 1.85             |                |  | $ | 14.69 | 
|$20.19  $25.56     |  |        | 142,037 |                  |                |  | 5.87             |                |  | $ | 22.34 | 
|$34.90              |  |        | 10,000  |                  |                |  | 10.00            |                |  | $ | 34.90 | 
|                    |  |        |         |                  |                |  |                  |                | 
|                    |  |        | 594,184 |                  |                |  | 6.49             |                |  | $ | 15.04 | 
|                    |  |        |         |                  |                |  |                  |                | 

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|                    |  |        |         |                  |                |  |                  |                |  |   |       | 
|------------------- |  | ------ | ------- | ---------------- | -------------- |  | ---------------- | -------------- |  | - | ----- | 
|Options Exercisable | 
|                    | 
|Range of            |  |        |         | Weighted-Average |                |  | Weighted-Average |               
|Exercise Price      |  | Number |         |                  | Remaining Life |  |                  | Exercise Price | 
|                    |  |        |         |                  |                |  |                  |                | 
|$7.31  $10.22      |  |        | 176,427 |                  |                |  | 6.28             |                |  | $ | 9.77  | 
|$12.50  $15.78     |  |        | 116,590 |                  |                |  | 2.58             |                |  | $ | 14.46 | 
|$20.19  $25.56     |  |        | 57,737  |                  |                |  | 1.25             |                |  | $ | 23.56 | 
|                    |  |        |         |                  |                |  |                  |                | 
|                    |  |        | 350,754 |                  |                |  | 5.25             |                |  | $ | 13.60 | 
|                    |  |        |         |                  |                |  |                  |                | 

NOTE 19Discontinued Operations:












|                                                   |  |                |       |   |      |   |        |      |  |   |        | 
|-------------------------------------------------- |  | -------------- | ----- | - | ---- | - | ------ | ---- |  | - | ------ | 
|                                                   |  | 2005           |       |   | 2004 |   |        | 2003 | 
|                                                   |  |                |       |   |      |   |        |      | 
|                                                   |  | (In thousands) |      
|Net sales                                          |  | $              | 3,129 |   |      | $ | 19,375 |      |  | $ | 25,271 | 
|                                                   |  |                |       |   |      |   |        |      | 
|Income before income taxes                         |  |                | 2,567 |   |      |   | 74     |      |  |   | 964    | 
|Provision for income taxes                         |  |                | 907   |   |      |   | 20     |      |  |   | 358    | 
|                                                   |  |                |       |   |      |   |        |      | 
|Net income from discontinued operations            |  |                | 1,660 |   |      |   | 54     |      |  | $ | 606    | 
|Loss on disposal                                   |  |                | (106  | ) |      |   | (1,064 | )    |  |   |       | 
|Benefit for income taxes                           |  |                | (37   | ) |      |   | (372   | )    |  |   |       | 
|                                                   |  |                |       |   |      |   |        |      | 
|Gain (loss) on discontinued operations, net of tax |  | $              | 1,591 |   |      | $ | (638   | )    |  | $ | 606    | 
|                                                   |  |                |       |   |      |   |        |      | 

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NOTE 20Selected Quarterly Financial Information
(Unaudited):




|                                                    |         |         |        |      |         |   |        |         |  |   |         |      |  |   |        |      | 
|--------------------------------------------------- | ------- | ------- | ------ | ---- | ------- | - | ------ | ------- |  | - | ------- | ---- |  | - | ------ | ---- | 
|                                                    |         | 1st     |        |      | 2nd     |   |        | 3rd     |  |   | 4th     |     
|2005                                                |         | Quarter |        |      | Quarter |   |        | Quarter |  |   | Quarter |     
|                                                    |         |         |        |      |         |   |        |         |  |   |         |     
|Sales                                               |         | $       | 72,612 |      |         | $ | 94,120 |         |  | $ | 80,324  |      |  | $ | 99,850 |     
|Gross profit                                        |         |         | 24,397 |      |         |   | 25,767 |         |  |   | 26,643  |      |  |   | 29,785 |     
|Operating income                                    |         |         | 12,992 |      |         |   | 15,000 |         |  |   | 13,537  |      |  |   | 14,605 |     
|Net income from continuing operations               |         |         | 8,383  |      |         |   | 10,545 |         |  |   | 8,626   |      |  |   | 9,790  |     
|Net income from discontinued operations, net of tax |         |         | 16     |      |         |   | 35     |         |  |   | 36      |      |  |   | 1,504  |     
|Net income                                          |         |         | 8,399  |      |         |   | 10,580 |         |  |   | 8,662   |      |  |   | 11,294 |     
|Net income from continuing operations per share     |         |         |        |      |         |   |        |         |  |   |         |      |  |   |        |     
|                                                    | Basic   |         | $      | 0.38 |         |   | $      | 0.47    |  |   | $       | 0.38 |  |   | $      | 0.43 | 
|                                                    | Diluted |         | $      | 0.37 |         |   | $      | 0.47    |  |   | $       | 0.38 |  |   | $      | 0.43 | 
|Net income from discontinued operations per share   |         |         |        |      |         |   |        |         |  |   |         |      |  |   |        |     
|                                                    | Basic   |         | $      |     |         |   | $      | 0.01    |  |   | $       |     |  |   | $      | 0.07 | 
|                                                    | Diluted |         | $      |     |         |   | $      |        |  |   | $       |     |  |   | $      | 0.07 | 
|Net income per share                                |         |         |        |      |         |   |        |         |  |   |         |      |  |   |        |     
|                                                    | Basic   |         | $      | 0.38 |         |   | $      | 0.48    |  |   | $       | 0.38 |  |   | $      | 0.50 | 
|                                                    | Diluted |         | $      | 0.37 |         |   | $      | 0.47    |  |   | $       | 0.38 |  |   | $      | 0.50 | 

|                                                           |         |            |        |      |         |   |        |         |  |   |         |       |   |   |        |       |  
|---------------------------------------------------------- | ------- | ---------- | ------ | ---- | ------- | - | ------ | ------- |  | - | ------- | ----- | - | - | ------ | ----- | -
|                                                           |         | 1st        |        |      | 2nd     |   |        | 3rd     |  |   | 4th     |      
|2004                                                       |         | Quarter(1) |        |      | Quarter |   |        | Quarter |  |   | Quarter |      
|                                                           |         |            |        |      |         |   |        |         |  |   |         |      
|Sales                                                      |         | $          | 48,851 |      |         | $ | 50,859 |         |  | $ | 49,723  |       |   | $ | 60,210 |      
|Gross profit                                               |         |            | 2,988  |      |         |   | 7,433  |         |  |   | 7,407   |       |   |   | 7,223  |      
|Operating (loss)                                           |         |            | (5,144 | )    |         |   | (583   | )       |  |   | (2,357  | )     |   |   | (6,482 | )    
|Net income (loss) from continuing operations               |         |            | 2,684  |      |         |   | 279    |         |  |   | (2,161  | )     |   |   | (3,121 | )    
|Net income (loss) from discontinued operations, net of tax |         |            | 91     |      |         |   | 154    |         |  |   | (6      | )     |   |   | (877   | )    
|Net income (loss)                                          |         |            | 2,775  |      |         |   | 433    |         |  |   | (2,167  | )     |   |   | (3,998 | )    
|Net income (loss) from continuing operations per share     |         |            |        |      |         |   |        |         |  |   |         |       |   |   |        |      
|                                                           | Basic   |            | $      | 0.13 |         |   | $      | 0.01    |  |   | $       | (0.10 | ) |   | $      | (0.14 | )
|                                                           | Diluted |            | $      | 0.13 |         |   | $      | 0.01    |  |   | $       | (0.10 | ) |   | $      | (0.14 | )
|Net income (loss) from discontinued operations per share   |         |            |        |      |         |   |        |         |  |   |         |       |   |   |        |      
|                                                           | Basic   |            | $      |     |         |   | $      | 0.01    |  |   | $       |      |   |   | $      | (0.04 | )
|                                                           | Diluted |            | $      |     |         |   | $      | 0.01    |  |   | $       |      |   |   | $      | (0.04 | )
|Net income (loss) per share                                |         |            |        |      |         |   |        |         |  |   |         |       |   |   |        |      
|                                                           | Basic   |            | $      | 0.13 |         |   | $      | 0.02    |  |   | $       | (0.10 | ) |   | $      | (0.18 | )
|                                                           | Diluted |            | $      | 0.13 |         |   | $      | 0.02    |  |   | $       | (0.10 | ) |   | $      | (0.18 | )






|    |                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net income from continuing operations included the favorable
    effect of $5.9 million, net of tax in 2004 in liquidated
    damages from Boeing. The liquidated damages were a result of
    Boeings failure to meet minimum order requirements under a
    long-term purchase agreement that expired on December 31,
    2003. The first quarter 2004 payment was the final payment under
    the agreement.

63



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##### Table of Contents








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
    AND FINANCIAL DISCLOSURE






Item 9A.     CONTROLS AND
PROCEDURES


Disclosure Controls and Procedures


10-K/A,


Managements Report on Internal Control Over Financial
Reporting


13a-15(f).


Internal Control Integrated Framework




Changes in Internal Control Over Financial Reporting




Remediation of Previously Reported Material Weaknesses




64



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##### Table of Contents







| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | The Company previously reported that it did not maintain a
    sufficient complement of personnel with an appropriate level of
    accounting knowledge, experience and training in the application
    of generally accepted accounting principles commensurate with
    the Companys financial reporting requirements which
    contributed to the following additional individual material
    weaknesses. The Company did not maintain effective control over:
    (a) account reconciliations or journal entries;
    (b) the selection and application of generally accepted
    accounting principles (GAAP); (c) consolidation
    and elimination adjustments; (d) segregation of duties;
    (e) the timely and accurate preparation and review of its
    financial statements in accordance with GAAP; (f) certain
    spreadsheets; and (g) accounting for income taxes.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In the second quarter 2005, the accounting and finance group was
    reorganized to report to the newly created position of Senior
    Vice President and Chief Administrative Officer. The Company
    appointed to this position the Companys General Counsel,
    an experienced Company officer, and appointed her with
    responsibility for chairing a Sarbanes-Oxley (SOX)
    Steering Committee comprised of executive management to work on
    the SOX compliance challenges facing the Company.
|
| |  | The Chief Administrative Officer and the Steering Committee
    instituted the following additional actions:                                                                                                                                                                                                                                                                                                                                                                                                   



| |   |                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Hired a Chief Accounting Officer with experience in public
    company reporting, SEC compliance, GAAP application and SOX
    requirements. William Hull, CPA, was elected an Officer of the
    Company in July, 2005.                                                                                                                                                                       
|
| |  | Hired a Director of Taxation in August of 2005 with experience
    in the tax area with a major publicly held company, including
    reviewing the provisions in tax and SEC filings, and in
    preparing the tax related disclosures and footnotes in financial
    reporting filings.                                                                                                       
|
| |  | Employed five additional certified public accountants throughout
    2005, all with public company accounting experience and/or
    national accounting and auditing experience, and one individual
    who is a Chartered Accountant and has experience in a
    multinational publicly traded company.                                                                                       
|
| |  | In the third quarter 2005, the Chief Accounting Officer
    established internal quarterly review meetings to ensure the
    timely receipt, collection, and review of supporting information
    relating to financial reporting to ensure the completeness and
    accuracy of footnote disclosures and to ensure that balances in
    the financial statements agreed to supporting details.
|
| |  | In the fourth quarter 2005, the Chief Accounting Officer
    established an internal quarterly review plan to review
    significant accounting areas requiring judgments and estimates
    in financial reporting.                                                                                                                                                                            
|
| |  | In the fourth quarter 2005, the Company developed additional
    analytical procedures to be performed for each of the
    Companys business units.                                                                                                                                                                                                                                           
|
| |  | In the fourth quarter 2005, the Chief Accounting Officer
    instituted steps to ensure the dissemination of important
    information throughout the organization related to new
    accounting developments and current SEC discussions, positions
    and concerns.                                                                                                                         
|
| |  | A company-wide annual controllers conference was
    instituted with the initial conference held in November of 2005,
    to train on financial reporting, proper financial analysis and
    current reporting requirements. This conference included the
    Companys outside SEC counsel and presenters from a
    national public accounting firm to discuss SOX requirements.            
|
| |  | The Company placed on retainer a national law firm with SEC
    legal counsel experience to assist the Company in matters
    relating to periodic securities compliance, including the review
    of the Companys
    Form 10-Ks,
    Form 10-Qs
    and
    Form 8-Ks,
    press releases, the Annual Proxy                                                                              

65



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##### Table of Contents



| |   |                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | Statement, Board charters and governance documents, and the
    Companys Code of Business Ethics and other matters
    relating to the Companys public reporting and SOX
    compliance.                                                                                                                                    
|
| |  | The Company also added various resources and tools to research
    accounting issues and the proper accounting applications and
    disclosures. The Companys finance and accounting managers
    also attended accounting, internal controls, and SEC seminars to
    stay current in recent and upcoming rule requirements.



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | With respect to control weaknesses related to spreadsheets, the
    Company took the following steps:



| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | Reviewed the effectiveness of the design of internal controls
    over footnote and disclosure spreadsheets.
|
| |  | Established procedures for tracking changes and password and
    formula protection.                        



| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | With respect to the control weaknesses over the segregation of
    duties, the company took the following steps:



| |   |                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company conducted an examination of control design for
    segregation of duties and access at all significant locations
    for 2005.                                                                                                                                                                                                                                  
|
| |  | In the fourth quarter 2005, the Company enhanced the design of
    the information technology general security controls in
    connection with user access conflicts and segregation of duties
    related to certain applications and business processes to ensure
    there is appropriate authorization and execution of restricting
    access to data and applications.
|
| |  | The Company reduced the number of individuals with unrestricted
    systems access.                                                                                                                                                                                                                                                                                         



| |   |                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In addition to the above actions, the Companys internal
    audit team enhanced its review of critical transactions and
    balances to ensure their accuracy, and re-tested certain
    internal controls to assess their effectiveness at
    December 31, 2005.



| |     |                                                                                                                                                                                 
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | The Company previously reported that it did not maintain
    effective controls over two third-party service providers.
    During 2005, the Company took the following actions:



| |   |                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Changed the third-party service providers for payroll processing
    and benefit plan processing to those that have issued
    Type II SAS 70 reports in prior years.
|
| |  | Received Type II SAS 70 reports within a timely
    fashion as needed for 2005 reporting requirements.                                                               



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (3) | The Company previously reported that it did not maintain
    effective controls over the accounting for property, plant and
    equipment. During 2005, the Company implemented a new
    standardized fixed asset reporting system using a well-known and
    established software program.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (4) | The Company previously reported that it did not maintain an
    effective control environment based on criteria established in
    Internal Control Integrated Frameworkissued by the COSO. The Company believes that the actions
    taken to remediate all of the above identified material
    weaknesses, including organizational changes and the hiring of
    additional, experienced accounting personnel, and training and
    resource enhancements, were effective in remediating this
    material weakness. In addition, all management employees in all
    U.S. locations, including all financial and accounting
    employees, and foreign division managers, were trained in
    ethics, SEC reporting requirements, conflicts of interest,
    export compliance, fraud reporting, and other legal matters of
    significance to the Company. All employees were advised as part
    of the training that ethical behavior, as well as accuracy and
    integrity in financial reporting, is expected of the entire
    organization.



66



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##### Table of Contents








|         |                  
|-------- | -----------------
|Item 9B. | OTHER INFORMATION

10-K





PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT














|         |                       
|-------- | ----------------------
|Item 11. | EXECUTIVE COMPENSATION








|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT



Equity Compensation Plan Information


|                                                                                          |  |                      |         |  |                      |                      |                     |                         |  |  |           | 
|----------------------------------------------------------------------------------------- |  | -------------------- | ------- |  | -------------------- | -------------------- | ------------------- | ----------------------- |  |  | --------- | 
|                                                                                          |  |                      |         |  |                      | (c) Number of        |                    
|                                                                                          |  |                      |         |  |                      | securities remaining |                    
|                                                                                          |  |                      |         |  |                      | available for future |                    
|                                                                                          |  | (a) Number of        |         |  |                      |                      | issuance under      |                        
|                                                                                          |  | securities to be     |         |  |                      |                      | equity compensation |                        
|                                                                                          |  | issued upon exercise |         |  | (b) Weighted-average |                      |                     | plans (excluding        | 
|                                                                                          |  | of outstanding       |         |  | exercise price of    |                      |                     | securities reflected in | 
|Plan Category                                                                             |  | options              |         |  | outstanding options  |                      |                     | column(a))              | 
|                                                                                          |  |                      |         |  |                      |                      |                     |                         | 
|Equity compensation plans approved by security holders (see
    Note(i)) (see Note (iii)) |  |                      | 546,184 |  |                      | $                    | 15.49               |                         |  |  | 3,360,994 | 
|Equity compensation plans not approved by security holders (see
    Note(ii))             |  |                      | 48,000  |  |                      | $                    | 9.90                |                         |  |  | -0-       | 
|                                                                                          |  |                      |         |  |                      |                      |                     |                         | 
|                                                                                          |  |                      | 594,184 |  |                      | $                    | 15.04               |                         |  |  | 3,360,994 | 
|                                                                                          |  |                      |         |  |                      |                      |                     |                         | 



|          |                                                                                                                                                                                                           
|--------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note (i): | The numbers in columns (a) and (c) reflect all shares
    that could potentially be issued under the
    RTI International Metals Inc., 2004 Stock Plan as of
    December 31, 2005. For more information,

67



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##### Table of Contents



| |                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | see Note 18 to the Financial Statements. The Companys
    2004 Stock Plan replaces the prior plans and provides for grants
    of 2,500,000 over its
    10-year term as
    determined by the plan administrator. The 2004 Stock Plan was
    approved by shareholder vote on April 30, 2004. In 2005 and
    2004, 78,036 and 18,179 shares, respectively, were awarded
    under the plan.



|            |                                                                                                                                                                                                                                                                                                                                                         
|----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note (ii):  | Prior to December 31, 2004, RTI International Metals
    Inc., had one plan that had not been approved by security
    holders called the 2002 Non-employee Director Stock Option Plan.
    This plan has since been terminated and replaced by the 2004
    Stock Plan. See above Note (i).                                                            
|           
|Note (iii): | The 2004 Stock Plan permits grants of stock options, stock
    appreciation rights, restricted stock and other stock based
    awards that may include awards of restricted stock units. There
    were a total of 2,500,000 shares available for issue under
    the plan, but only 1,250,000 shares may be issued in the
    form of restricted stock.






|         |                                               
|-------- | ----------------------------------------------
|Item 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS








|         |                                       
|-------- | --------------------------------------
|Item 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES






PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES





| |                                                                             
| | ----------------------------------------------------------------------------
| | 1. The financial statements contained in Item 8 hereof;                     
|
| | 2. The financial statement schedule following the
    signatures hereto; and
|
| | 3. The following Exhibits:                                                  

68



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##### Table of Contents



Exhibits




|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 2  | .1          |  | Amended and Restated Reorganization Agreement, incorporated by
    reference to Exhibit 2.1 to the Companys Registration
    Statement on Form S-1 No. 33-30667 Amendment No. 1                                                                                                                                                                                                  
|        | 2  | .2          |  | Claro purchase agreement, incorporated by reference to
    Exhibit 2.1 to the Companys Quarterly Report on
    Form 10-Q for the quarter ended 9/30/04.                                                                                                                                                                                                                          
|        | 3  | .1          |  | Amended and Restated Articles of Incorporation of the Company,
    effective April 29, 1999, incorporated by reference to
    Exhibit 3.1 to the Companys Quarterly Report on
    Form 10-Q for the quarter ended March 31, 1999                                                                                                                                                 
|        | 3  | .2          |  | Amended Code of Regulations of the Company, incorporated by
    reference to Exhibit 3.3 to the Companys Registration
    Statement on Form S-4 No. 333-61935                                                                                                                                                                                                                    
|        | 3  | .3          |  | RTI International Metals, Inc., Code of Ethical Business
    Conduct, incorporated by reference to the Companys Annual
    Report on Form 10-K for the year ended December 31,
    2003.                                                                                                                                                                                         
|        | 4  | .1          |  | Credit Agreement between RTI International Metals, Inc. and
    PNC Bank, National Association, as agent; U.S. Bank,
    National City Bank of Pennsylvania and Lasalle Bank, National
    Association as co-agents, dated as of April 12, 2002,
    incorporated by reference to the Companys Quarterly Report
    on Form 10-Q for the quarterly period ended June 30,
    2002
|        | 4  | .2          |  | First Amendment to Revolving Credit and Letter of Credit
    Issuance Agreement by and among RTI International Metals,
    Inc., as borrower and PNC Bank, National Association as
    administrative agent; National City Bank of Pennsylvania and
    Comerica Bank as documentation co-agents, dated June 4,
    2004, filed herewith                                          
|        | 10 | .1*         |  | RTI International Metals, Inc. Supplemental Pension Plan
    effective August 1, 1987, amended January 28, 2000 and
    further amended January 30, 2004, incorporated by reference
    to Exhibit 10.12 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2003                                                                                     
|        | 10 | .2*         |  | RTI International Metals, Inc. Excess Benefits Plan
    effective July 18, 1991, as amended January 28, 2000,
    incorporated by reference to Exhibit 10.6 to the
    Companys Annual Report on Form 10-K for the year
    ended December 31, 2000                                                                                                                              
|        | 10 | .3*         |  | RTI International Metals, Inc., 1995 Stock Plan
    incorporated by reference to Exhibit 10.11 to the
    Companys Annual Report on Form 10-K for the year
    ended December 31, 1995                                                                                                                                                                                           
|        | 10 | .4*         |  | Employment agreement, dated August 1, 1999, between the
    Company and John H. Odle, incorporated by reference to
    Exhibit 10.10 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 1999                                                                                                                                                         
|        | 10 | .5*         |  | Employment agreement, dated August 1, 1999, between the
    Company and T. G. Rupert, incorporated by reference to
    Exhibit 10.11 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 1999                                                                                                                                                         
|        | 10 | .6*         |  | Employment agreement, dated August 1, 1999 between the
    Company and Dawne S. Hickton, incorporated by reference to
    Exhibit 10.12 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 1999                                                                                                                                                      
|        | 10 | .7*         |  | Employment agreement, dated August 1, 1999 between the
    Company and Lawrence W. Jacobs, incorporated by reference
    to Exhibit 10.13 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 1999                                                                                                                                                    
|        | 10 | .8*         |  | Employment agreement, dated November 1, 1999, between the
    Company and Gordon L. Berkstresser, incorporated by
    reference to Exhibit 10.14 to the Companys Annual
    Report on Form 10-K for the year ended December 31,
    1999                                                                                                                                         
|        | 10 | .9*         |  | Employee agreement, dated July 29, 2005, between the
    Company and William T. Hull, incorporated by reference to
    Exhibit 99.3 to the Companys Current Report on
    Form 8-K for the event dated July 29, 2005                                                                                                                                                             
|        | 10 | .10*        |  | Letter Agreement, dated December 3, 2003, between the
    Company and T.G. Rupert, with respect to retirement
    benefits, incorporated by reference to the Companys Annual
    Report on Form 10-K for the year ended December 31,
    2003.                                                                                                                                   

69



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                   
|------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 10 | .11*        |  | RTI International Metals, Inc., 2004 Stock Plan effective
    January 28, 2005, incorporated by reference to
    Exhibit 10.13 to the Companys Registration Statement
    on Form S-8 No. 333-122357 dated January 28, 2005      
|        | 10 | .12*        |  | Form of Non-Qualified Stock Option Grant under the
    RTI International Metals, Inc. 2004 Stock Plan,
    incorporated by reference to Exhibit 10.13 to the
    Companys Annual Report on Form 10-K filed on
    April 14, 2005 
|        | 10 | .13*        |  | Form of Restricted Stock Grant under the RTI International
    Metals, Inc. 2004 Stock Plan, incorporated by reference to
    Exhibit 10.14 to the Companys Annual Report on
    Form 10-K filed on April 14, 2005               
|        | 10 | .14*        |  | RTI International Metals, Inc., Board of Directors
    Compensation Program, as amended, incorporated by reference to
    Exhibit 99.1 to the Companys Current Report of
    Form 8-K for the event dated July 29, 2005          
|        | 10 | .15         |  | Form of indemnification agreement, incorporated by reference to
    Exhibit 10.1 to the Companys Quarterly Report on
    Form 10-Q for the period ended 9/30/2005.                                                               
|        | 10 | .16         |  | Pay philosophy and guiding principles covering officer
    compensation incorporated by reference to the Companys
    Quarterly Report on Form 10-Q for the period ended
    9/30/2005.                                          
|        | 10 | .17         |  | 2005 Settlement with U.S. Department of Energy, filed herewith.                                                                                                                                                                   
|        | 21 | .1          |  | Subsidiaries of the Company, filed herewith                                                                                                                                                                                       
|        | 23 | .1          |  | Consent of independent public accounting firm, filed herewith                                                                                                                                                                     
|        | 24 | .1          |  | Powers of Attorney, filed herewith                                                                                                                                                                                                
|        | 31 | .1          |  | Certification of Chief Executive Officer required by
    Item 307 of Regulation S-K as promulgated by the
    Securities and Exchange Commission and pursuant to
    Section 302 of Sarbanes-Oxley Act of 2002, filed herewith    
|        | 31 | .2          |  | Certification of Principal Financial Officer required by
    Item 307 of Regulation S-K as promulgated by the
    Securities and Exchange Commission and pursuant to
    Section 302 of Sarbanes-Oxley Act of 2002, filed herewith
|        | 32 | .1          |  | Certification of Chief Executive Officer Pursuant to
    18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002, filed
    herewith                                                     
|        | 32 | .2          |  | Certification of Chief Financial Officer Pursuant to
    18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002, filed
    herewith                                                     
|        | 99 | .1          |  | Press release dated March 16, 2006, filed herewith.                                                                                                                                                                               




|  |                                                                              
|- | -----------------------------------------------------------------------------
|* | Denotes management contract or compensatory plan, contract or
    arrangement

70



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##### Table of Contents






SIGNATURES






| |                                   
| | ----------------------------------
| | RTI INTERNATIONAL METALS,
    INC.



| |    |                    
| | -- | -------------------
| | By | /s/ William T. Hull

| |                             
| | ----------------------------
| |                             
| | Vice President              
| | and Chief Accounting Officer





|                                                                                                                                                                     |  |               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|Signature and Title                                                                                                                                                  |  | Date          
|                                                                                                                                                                     |  |               
|CRAIG R. ANDERSSON, Director;                                                                                                                                        |  |               
|                                                                                                                                                                    
|NEIL A. ARMSTRONG, Director;                                                                                                                                         |  |               
|                                                                                                                                                                    
|DANIEL I. BOOKER, Director;                                                                                                                                          |  |               
|                                                                                                                                                                    
|DONALD P. FUSILLI, Director,                                                                                                                                         |  |               
|                                                                                                                                                                    
|RONALD L. GALLATIN, Director;                                                                                                                                        |  |               
|                                                                                                                                                                    
|CHARLES C. GEDEON, Director;                                                                                                                                         |  |               
|                                                                                                                                                                    
|ROBERT M. HERNANDEZ, Director;                                                                                                                                       |  |               
|                                                                                                                                                                    
|EDITH E. HOLIDAY, Director;                                                                                                                                          |  |               
|                                                                                                                                                                    
|JOHN H. ODLE, Director;                                                                                                                                              |  |               
|                                                                                                                                                                    
|JAMES A. WILLIAMS, Director;                                                                                                                                         |  |               
|/s/ Timothy G. RupertT. G. Rupert
    Attorney-in-Fact                                                                                                               |  | March 16, 2006
|                                                                                                                                                                    
|/s/ Timothy G. RupertT. G. Rupert
    Director and President and Chief Executive Officer
    (Principal Executive Officer)                                           |  | March 16, 2006
|                                                                                                                                                                    
|/s/ Dawne S. HicktonDawne S. Hickton
    Senior Vice President and Chief Administrative Officer,
    General Counsel and Secretary
    (Principal Financial Officer) |  | March 16, 2006
|                                                                                                                                                                    
|/s/ William T. HullWilliam T. Hull
    Vice President and Chief Accounting Officer                                                                                   |  | March 16, 2006

71



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RTI International Metals, Inc.





SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS


(In thousands)


|                              |                                               |            |   |           |             |  |   |           |   |  |       |     |         |         |   |    |   |  |   |        |  
|----------------------------- | --------------------------------------------- | ---------- | - | --------- | ----------- |  | - | --------- | - |  | ----- | --- | ------- | ------- | - | -- | - |  | - | ------ | -
|                              |                                               |            |   | (Charged) |             |  |   |           |   |  |      
|                              |                                               | Balance at |   |           | credited to |  |   | Writeoffs |   |  |       |     | Balance |        
|                              |                                               | beginning  |   |           | costs and   |  |   | against   |   |  |       |     | at end  |        
|Description                   |                                               | of Year    |   |           | expenses    |  |   | allowance |   |  | Other |     |         | of Year |  
|                              |                                               |            |   |           |             |  |   |           |   |  |       |     |         |         |  
|Year ended December 31, 2005: |                                               |            |   |           |             |  |   |           |   |  |       |     |         |         |   |    |   |  |   |       
|                              | Allowance for doubtful accounts               |            | $ | (1,486    | )           |  | $ | (544      | ) |  | $     | 426 |         |         | $ |   |   |  | $ | (1,604 | )
|                              |                                               |            |   |           |             |  |   |           |   |  |       |     |         |         |  
|                              | Valuation allowance for deferred income taxes |            | $ | (577      | )           |  | $ | (54       | ) |  | $     |    |         |         | $ |   |   |  | $ | (631   | )
|                              |                                               |            |   |           |             |  |   |           |   |  |       |     |         |         |  
|                              | Allowance for U.S. Customs on Duty Drawback   |            | $ | (219      | )           |  | $ | (444      | ) |  | $     |    |         |         | $ |   |   |  | $ | (663   | )
|                              |                                               |            |   |           |             |  |   |           |   |  |       |     |         |         |  
|Year ended December 31, 2004: |                                               |            |   |           |             |  |   |           |   |  |       |     |         |         |   |    |   |  |   |       
|                              | Allowance for doubtful accounts               |            | $ | (1,378    | )           |  | $ | (518      | ) |  | $     | 419 |         |         | $ | (9 | ) |  | $ | (1,486 | )
|                              |                                               |            |   |           |             |  |   |           |   |  |       |     |         |         |  
|                              | Valuation allowance for deferred income taxes |            | $ |          |             |  | $ | (577      | ) |  | $     |    |         |         | $ |   |   |  | $ | (577   | )
|                              |                                               |            |   |           |             |  |   |           |   |  |       |     |         |         |  
|                              | Allowance for U.S. Customs on Duty Drawback   |            | $ | (381      | )           |  | $ | 162       |   |  | $     |    |         |         | $ |   |   |  | $ | (219   | )
|                              |                                               |            |   |           |             |  |   |           |   |  |       |     |         |         |  
|Year ended December 31, 2003: |                                               |            |   |           |             |  |   |           |   |  |       |     |         |         |   |    |   |  |   |       
|                              | Allowance for doubtful accounts               |            | $ | (1,205    | )           |  | $ | (601      | ) |  | $     | 428 |         |         | $ |   |   |  | $ | (1,378 | )
|                              |                                               |            |   |           |             |  |   |           |   |  |       |     |         |         |  
|                              | Valuation allowance for deferred income taxes |            | $ |          |             |  | $ |          |   |  | $     |    |         |         | $ |   |   |  | $ |       |  
|                              |                                               |            |   |           |             |  |   |           |   |  |       |     |         |         |  
|                              | Allowance for U.S. Customs on Duty Drawback   |            | $ |          |             |  | $ | (381      | ) |  | $     |    |         |         | $ |   |   |  | $ | (381   | )
|                              |                                               |            |   |           |             |  |   |           |   |  |       |     |         |         |  

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