1
                                                Filed pursuant to Rule 424(B)(2)
                                                File Number 33-52937
 
     THIS PROSPECTUS SUPPLEMENT RELATES TO AN EFFECTIVE REGISTRATION STATEMENT
     UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND IS SUBJECT TO COMPLETION
     OR AMENDMENT.
 
                               SUBJECT TO COMPLETION
                                 NOVEMBER 18, 1996
 
PROSPECTUS SUPPLEMENT
(To Prospectus Dated November 18, 1996)
 
5,000,000 DECSSM
(DEBT EXCHANGEABLE FOR COMMON STOCKSM)
 
USX CORPORATION
         % EXCHANGEABLE NOTES DUE FEBRUARY 1, 2000
(SUBJECT TO EXCHANGE INTO SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, OF
RMI TITANIUM COMPANY)
 
The principal amount of each of the    % Exchangeable Notes Due February 1, 2000
(each, a "DECS"), of USX Corporation, a Delaware corporation ("USX"), being
offered hereby will be $    (the last sale price of the common stock, par value
$.01 per share (the "RMI Common Stock"), of RMI Titanium Company, an Ohio
corporation ("RMI"), on            , 1996, as reported on the New York Stock
Exchange Composite Tape) (the "Initial Price"). The DECS will mature on February
1, 2000. Interest on the DECS, at the rate of   % of the principal amount per
annum, is payable quarterly on            ,            ,            and
           , beginning            , 1997. The DECS are not subject to redemption
or any sinking fund prior to maturity.
 
At maturity (including as a result of acceleration or otherwise), the principal
amount of each DECS will be mandatorily exchanged by USX into a number of shares
of RMI Common Stock (or, at USX's option, the cash equivalent and/or such other
consideration as permitted or required by the terms of the DECS) at the Exchange
Rate (as defined herein). The Exchange Rate is equal to, subject to certain
adjustments, (a) if the Maturity Price (as defined below) is greater than or
equal to $      ,       shares of RMI Common Stock per DECS, (b) if the Maturity
Price is less than $         but is greater than the Initial Price, a fraction
equal to the Initial Price divided by the Maturity Price of one share of RMI
Common Stock per DECS and (c) if the Maturity Price is less than or equal to the
Initial Price, one share of RMI Common Stock per DECS. The "Maturity Price"
means the average Closing Price (as defined herein) per share of RMI Common
Stock for the 20 Trading Days (as defined herein) immediately prior to maturity,
except as otherwise described herein. Accordingly, the value of the RMI Common
Stock to be received by holders of the DECS (or the cash equivalent) at maturity
will not necessarily equal the principal amount thereof. The DECS will be
general unsecured obligations of USX ranking pari passu with all of its other
general unsecured and unsubordinated indebtedness. RMI will have no obligations
with respect to the DECS. See "Description of the DECS."
 
SEE "RISK FACTORS RELATING TO DECS" BEGINNING ON PAGE S-3 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED CAREFULLY BY PROSPECTIVE PURCHASERS.
 
Attached hereto is a prospectus of RMI relating to the shares of RMI Common
Stock that may be received by holders of the DECS at maturity. The RMI Common
Stock is listed on the New York Stock Exchange ("NYSE") under the symbol "RTI."
 
For a discussion of certain United States federal income tax consequences for
holders of DECS, see "Certain United States Federal Income Tax Considerations."
 
"Debt Exchangeable for Common Stock" and "DECS" are service marks of Salomon
Brothers Inc.
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 


- -------------------------------------------------------------------------------------------------------------------
                                                       PRICE TO             UNDERWRITING            PROCEEDS TO
                                                       PUBLIC(1)              DISCOUNT               USX(1)(2)
                                                                                       
Per DECS......................................    $                      $                      $
Total (3).....................................    $                      $                      $
- -------------------------------------------------------------------------------------------------------------------

 
(1) Plus accrued interest, if any, from the issue date.
 
(2) Before deducting expenses payable by USX, estimated to be $         .
 
(3) USX has granted to the Underwriters an option, exercisable within 30 days
    from the date hereof, to purchase up to an additional 483,600 DECS at the
    Price to Public, less the Underwriting Discount, solely for the purpose of
    covering over-allotments, if any. If the Underwriters exercise such option
    in full, the total Price to Public, Underwriting Discount, and Proceeds to
    USX will be $         , $         and $         , respectively. See "Plan of
    Distribution."
 
The DECS are offered subject to receipt and acceptance by the Underwriters, to
prior sales and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the DECS will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of The
Depository Trust Company, on or about            , 1996.
 
SALOMON BROTHERS INC                                             LEHMAN BROTHERS
The date of this Prospectus Supplement is                , 1996.
   2
 
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DECS OR THE RMI
COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE (WITH
RESPECT TO THE RMI COMMON STOCK), IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
                                       S-2
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                         RISK FACTORS RELATING TO DECS
 
     As described in more detail below, the trading price of the DECS may vary
considerably prior to the date of maturity, February 1, 2000 (or earlier by
acceleration or otherwise, "Maturity"), due to, among other things, fluctuations
in the market price of RMI Common Stock and other events that are difficult to
predict and beyond USX's control.
 
COMPARISON TO OTHER DEBT SECURITIES; RELATIONSHIP TO RMI COMMON STOCK
 
     The terms of the DECS differ from those of ordinary debt securities in that
the value of the RMI Common Stock (or cash equivalent thereof) that a holder of
the DECS will receive upon mandatory exchange of the principal amount thereof at
Maturity (the "Amount Receivable at Maturity") is not fixed, but is based on the
market price of the RMI Common Stock as specified in the Exchange Rate (as
defined under "Description of the DECS"). There can be no assurance that the
Amount Receivable at Maturity will be equal to or greater than the principal
amount of the DECS. For example, if the Maturity Price of the RMI Common Stock
is less than the Initial Price, the Amount Receivable at Maturity will be less
than the principal amount paid for the DECS, in which case an investment in DECS
would result in a loss of principal and, if RMI is insolvent or bankrupt, could
result in a total loss of the principal amount. Holders of DECS, therefore, bear
the full risk of a decline in the value of the RMI Common Stock prior to
Maturity.
 
     In addition, the opportunity for equity appreciation afforded by an
investment in the DECS is less than the opportunity for equity appreciation
afforded by an investment in RMI Common Stock because the Amount Receivable at
Maturity will only exceed the principal amount of such DECS if the Maturity
Price exceeds the Threshold Appreciation Price (as defined under "Description of
the DECS"), which represents an appreciation of   % of the Initial Price.
Moreover, holders of the DECS will only be entitled to receive upon exchange at
Maturity   % of any appreciation of the value of RMI Common Stock in excess of
the Threshold Appreciation Price. See "Description of the DECS" for an
illustration of the Amount Receivable at Maturity that a DECS holder would
receive at various Maturity Prices. Because the market price of the RMI Common
Stock is subject to market fluctuations, the Amount Receivable at Maturity may
be more or less than the principal amount of the DECS.
 
     It is impossible to predict whether the price of RMI Common Stock will rise
or fall. Trading prices of RMI Common Stock will be influenced by RMI's results
of operations and by complex and interrelated political, economic, financial and
other factors that can affect the capital markets generally, the stock exchange
on which RMI Common Stock is traded and the market segment of which RMI is a
part. See the prospectus relating to RMI and to RMI Common Stock attached
hereto. Trading prices of RMI Common Stock also may be influenced if USX,
another market participant or another principal shareholder of RMI hereafter
issues securities with terms similar to those of the DECS or sells or otherwise
transfers shares of RMI Common Stock. As of the date hereof, USX held an
aggregate of 5,483,600 shares of RMI Common Stock, all of which, if the
Underwriters' over-allotment option is exercised in full, USX may deliver to
holders of the DECS at Maturity.
 
IMPACT OF THE DECS ON THE MARKET FOR THE RMI COMMON STOCK
 
     It is not possible to predict accurately how or whether the DECS will trade
in the secondary market or whether such market will be liquid. Any market that
develops for the DECS is likely to influence and be influenced by the market for
RMI Common Stock. For example, the price of the RMI Common Stock could become
more volatile and could be depressed by investors' anticipation of the potential
distribution into the market, upon the Maturity of the DECS, of the additional
number of shares of RMI Common Stock held by USX which may be delivered by USX
upon Maturity of the DECS. Such shares currently constitute approximately 27% of
the outstanding RMI Common Stock. See "Relationship between USX Corporation and
RMI Titanium Company." The price of RMI Common Stock could also be affected by
possible sales of RMI Common Stock by investors who
 
                                       S-3
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view the DECS as a more attractive means of equity participation in RMI and by
hedging or arbitrage trading activity that may develop involving the DECS and
the RMI Common Stock.
 
DILUTION OF RMI COMMON STOCK
 
     The Amount Receivable at Maturity is subject to adjustment for certain
events arising from stock splits and combinations, stock dividends, certain
other actions of RMI that modify its capital structure and certain other
transactions involving RMI. See "Description of the DECS--Dilution Adjustments;
Other Adjustment Events." Such Amount Receivable at Maturity will not be
adjusted for other events, such as offerings of RMI Common Stock for cash or in
connection with acquisitions, that may adversely affect the price of RMI Common
Stock and, because of the relationship of such Amount Receivable at Maturity to
the price of RMI Common Stock, such other events may adversely affect the
trading price of the DECS. There can be no assurance that RMI will not make
offerings of RMI Common Stock or take such other action in the future or as to
the amount of such offerings, if any.
 
     In addition, until such time, if any, as USX shall deliver shares of RMI
Common Stock to holders of the DECS at Maturity thereof, holders of the DECS
will not be entitled to any rights with respect to RMI Common Stock (including,
without limitation, voting rights and the rights to receive any dividends or
other distributions in respect thereof).
 
NO OBLIGATION ON THE PART OF RMI WITH RESPECT TO THE DECS
 
     RMI has no obligations with respect to the DECS or the Amount Receivable at
Maturity, including any obligation to take the needs of USX or of holders of the
DECS into consideration for any reason. RMI will not receive any of the proceeds
of the offering of the DECS made hereby and is not responsible for, and has not
participated in, the determination of the time of, prices for or quantities of
DECS to be issued. RMI is not involved with the administration or trading of the
DECS or the determination or calculation of the Amount Receivable at Maturity.
 
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
 
     It is not possible to predict how the DECS will trade in the secondary
market or whether such market will be liquid or illiquid. The DECS are novel and
innovative securities and there is currently no secondary market for the DECS.
The DECS will not be listed or traded on any securities exchange or trading
market. Accordingly, pricing information for the DECS may be difficult to obtain
and the liquidity of the DECS may be limited. The Underwriters currently intend,
but are not obligated, to make a market in the DECS. There can be no assurance
that a secondary market will develop or, if a secondary market does develop,
that it will provide the holders of the DECS with liquidity or that it will
continue for the life of the DECS.
 
UNCERTAINTY OF FEDERAL INCOME TAX CONSEQUENCES
 
     No statutory, judicial or administrative authority directly addresses the
characterization of the DECS or instruments similar to the DECS for U.S. federal
income tax purposes. As a result, significant aspects of the U.S. federal income
tax consequences of an investment in the DECS are not certain. No ruling is
being requested from the Internal Revenue Service with respect to the DECS and
no assurance can be given that the Internal Revenue Service will agree with the
conclusions expressed under "Certain United States Federal Income Tax
Considerations."
 
RISK FACTORS RELATING TO RMI
 
     Investors in the DECS should carefully consider the information in the
prospectus of RMI attached hereto, including the information contained therein
under "Risk Factors" beginning on page 8 of such prospectus.
 
                                       S-4
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                                USX CORPORATION
 
     USX is a diversified company which is principally engaged in the energy
business through its Marathon Group, in the steel business through its U. S.
Steel Group and in the gas gathering and processing business through its Delhi
Group.
 
MARATHON GROUP
 
     The Marathon Group includes Marathon Oil Company and certain other
subsidiaries of USX which are engaged in worldwide exploration, production,
transportation and marketing of crude oil and natural gas; and domestic
refining, marketing and transportation of petroleum products.
 
U. S. STEEL GROUP
 
     The U. S. Steel Group includes U. S. Steel, the largest integrated steel
producer in the United States. The U. S. Steel Group is principally engaged in
the production and sale of steel mill products, coke and taconite pellets. The
U. S. Steel Group also includes the management of mineral resources, domestic
coal mining, engineering and consulting services and technology licensing. Other
businesses that are part of the U. S. Steel Group include real estate
development and management, and leasing and financing activities.
 
DELHI GROUP
 
     The Delhi Group consists of Delhi Gas Pipeline Corporation and certain
other subsidiaries of USX which are engaged in the purchasing, gathering,
processing, transporting and marketing of natural gas.
                               ------------------
 
     For additional information with respect to USX, see the documents specified
under "Incorporation of Certain Documents by Reference" in the Prospectus of USX
accompanying this Prospectus Supplement.
 
     The following is a summary of certain consolidated financial data of USX.
 


                                                 NINE MONTHS
                                              ------------------
                                              ENDED SEPTEMBER 30,      YEAR ENDED DECEMBER 31,
                                              -------------------   -----------------------------
           (MILLIONS OF DOLLARS)               1996       1995       1995       1994       1993
                                              -------    -------    -------    -------    -------
                                                 (UNAUDITED)
                                                                           
Sales......................................   $17,333    $15,576    $20,922    $19,330    $18,057
Operating Income...........................     1,129      1,063        604        861         56
Net Income (Loss)..........................       652        518        214        501       (259)

 
     The above data includes the effects of certain adjustments, transactions
and events which have had a significant impact on the financial results of USX.
This data should be read in conjunction with the consolidated financial
statements and Management's Discussion and Analysis for the indicated periods
which are included in the documents incorporated by reference under
"Incorporation of Certain Documents by Reference" in the Prospectus of USX
accompanying this Prospectus Supplement.
 
                              RMI TITANIUM COMPANY
 
     RMI is a leading U.S. producer of titanium mill and fabricated products for
the global market. RMI's mill products are processed by RMI's customers to
provide products for use in the aerospace industry and other industrial markets,
including, most recently, golf club manufacturing. RMI's fabricated products are
used primarily in the aerospace, oil and gas, geothermal energy production
 
                                       S-5
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and chemical process industries as well as for a number of other industrial
applications. RMI also provides fabrication and conversion services for titanium
and other specialty metals producers.
 
     RMI reported sales of $177.4 million, operating income of $22.5 million and
net income of $21.4 million for the nine month period ended September 30, 1996,
compared to sales of $122.6 million, an operating loss of $8.1 million and a net
loss of $13.3 million for the same period of 1995. RMI's operating loss and net
loss for the nine months ended September 30, 1995 included a $5.0 million asset
impairment charge. Mill product sales to the commercial and military aerospace
industries accounted for approximately 69% and 9%, respectively, of RMI's mill
product sales for the nine month period ended September 30, 1996.
 
     RMI has stated that its strategy is to build on its leading position in the
worldwide titanium industry while maintaining a strong financial condition and
stringent quality, safety and environmental standards. RMI is emphasizing higher
margin products in its traditional markets, while continuing to develop new
markets and products such as seamless tubulars for oil and gas and geothermal
energy production and the use of billet for golf club applications.
                         ------------------------------
 
     For additional information about RMI, including risks associated with an
investment in RMI Common Stock, see the prospectus of RMI attached hereto. RMI
is subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Commission. The
prospectus of RMI attached hereto incorporates its 1995 Annual Report on Form
10-K (as amended by Form 10-K/A filed on April 29, 1996), its Quarterly Reports
on Form 10-Q for the quarters ended March 31, June 30 and September 30, 1996,
the description of the RMI Common Stock contained in RMI's Registration
Statement on Form 8-A filed on September 1, 1989 and all documents filed by RMI
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of such prospectus and prior to the termination of this DECS offering.
Such documents may be inspected and copied at the public reference facilities
maintained by the Commission in Washington, D.C. and at its regional offices and
at the offices of the NYSE on which the RMI Common Stock is listed. Such
documents, without exhibits, also may be obtained by writing to the
Director-Investor Relations of RMI, 1000 Warren Avenue, Niles, Ohio 44446
(telephone number (330) 544-7622). See "Available Information" and
"Incorporation of Certain Documents by Reference" in the prospectus of RMI
attached hereto.
 
         RELATIONSHIP BETWEEN USX CORPORATION AND RMI TITANIUM COMPANY
 
     USX currently owns 5,483,600 shares of RMI Common Stock, constituting
approximately 27% of the outstanding shares of RMI Common Stock. As a result of
USX's ownership of shares of RMI Common Stock, USX may be able to exercise
effective control over RMI through its representation on the Board of Directors
of RMI and by reason of its substantial voting power with respect to the
election of directors and actions requiring shareholder approval. The issuance
of the DECS will not affect the ability of USX to vote the shares of RMI Common
Stock owned by it. Two executives of USX (one of whom is a director of USX) and
one non-employee director of USX serve on RMI's ten-member Board of Directors.
One of these USX executives also serves as RMI's Chairman. USX is unable to
predict the effect on the relationship between RMI and USX of USX's issuance of
the DECS or any transfer by USX (upon Maturity of the DECS or otherwise) of
shares of RMI Common Stock held by USX. For information concerning positions
held by directors and officers of RMI with USX and the relationship between USX
and RMI, see "Risk Factors--Principal Shareholder" and "--Potential Conflicts of
Interest," "Management" and "Certain Relationships" in the prospectus of RMI
attached hereto.
 
     Pursuant to a Registration Rights Agreement, dated as of August 21, 1996
(the "Registration Rights Agreement"), between USX and RMI, RMI has agreed to
indemnify USX against certain liabilities and expenses (including amounts paid
in any settlement effected with RMI's consent) to
 
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which USX may become subject under the Securities Act, state securities or blue
sky laws, common law or otherwise, in connection with the offering of RMI Common
Stock in connection with the DECS. USX has agreed to indemnify RMI against any
additional federal, state and local taxes incurred as a result of a
determination that an ownership change (as defined in Section 382 of the
Internal Revenue Code) has occurred as a result of the sale by USX of the DECS
(but not the exchange, at Maturity, of the RMI Common Stock for the DECS, if USX
delivers RMI Common Stock), subject to certain limitations. See "Management's
Discussion and Analysis of Results of Operations--Income Tax
Considerations--Section 382 Limitation" in the prospectus of RMI attached
hereto.
 
     RMI has no obligations with respect to the DECS. See "Risk Factors Relating
to DECS--No Obligation on the Part of RMI with Respect to the DECS."
 
                               PRICE RANGE OF RMI
                           COMMON STOCK AND DIVIDENDS
 
     RMI Common Stock is traded on the NYSE under the symbol "RTI". The
following table sets forth, for each of the quarterly periods indicated, the
high and low sales price for RMI Common Stock, as reported on the NYSE Composite
Tape and as adjusted for a 1-for-10 reverse stock split effective March 31,
1994.
 


        1994
                                 QUARTER                            HIGH       LOW
        ---------------------------------------------------------   ----       ----
                                                                         
        First....................................................   $21 1/4    $15
        Second...................................................    17 5/8      2 3/8
        Third....................................................     2 3/4      2
        Fourth...................................................     5 5/8      2 1/2

        1995
        QUARTER
        ---------------------------------------------------------
        First....................................................   $ 5 1/2     $3 1/8
        Second...................................................     9 3/4      3 3/4
        Third....................................................    10 3/8      6 3/4
        Fourth...................................................     9 7/8      6 1/2

        1996
        QUARTER
        ---------------------------------------------------------
        First....................................................   $16 1/2    $ 7 3/8
        Second...................................................    24 3/4     14
        Third....................................................    28 1/2     18 3/4
        Fourth (through November 15, 1996).......................    26 3/4     21 3/8

 
     In June 1994, RMI commenced a rights offering pursuant to which each holder
of RMI Common Stock was entitled to subscribe for shares of RMI Common Stock at
a price of $2 per share. In July 1994, RMI issued approximately 13.8 million
shares of RMI Common Stock in that offering.
 
     As of September 30, 1996, there were 865 holders of record of RMI Common
Stock. As of October 31, 1996, there were 20,246,600 shares of RMI Common Stock
outstanding.
 
     For a recent sales price of the RMI Common Stock, see the cover page of
this Prospectus Supplement.
 
     RMI has not paid dividends on RMI Common Stock since the second quarter of
1991. See "Price Range of Common Stock and Dividends" in the prospectus of RMI
attached hereto. USX
 
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makes no representation as to the amount of dividends, if any, that RMI will pay
in the future. In any event, holders of the DECS will not be entitled to receive
any dividends or other distributions that may be payable on the RMI Common Stock
until such time as USX, if it so elects, delivers shares of RMI Common Stock at
Maturity of the DECS, and then only with respect to dividends or other
distributions having a record date on or after the date of delivery of such
shares of RMI Common Stock. See "Description of the DECS."
 
                                USE OF PROCEEDS
 
     The net proceeds to be received by USX from the offering of the DECS will
be used for general business purposes of the U. S. Steel Group.
 
                            DESCRIPTION OF THE DECS
 
     The following description of the particular terms of the DECS supplements,
and to the extent inconsistent therewith replaces, the description of the
general terms and conditions of Debt Securities set forth under the heading
"Description of the Debt Securities" in the accompanying Prospectus of USX, to
which description reference is hereby made.
 
GENERAL
 
     The DECS are a series of Debt Securities (as defined in the Prospectus of
USX accompanying this Prospectus Supplement), to be issued under an indenture,
dated as of March 15, 1993, as supplemented from time to time (the "Indenture"),
between USX and PNC Bank, National Association, as Trustee (the "Trustee"). In
the event of any disparity between the description of the DECS contained herein
and the description of the Debt Securities contained in the accompanying
Prospectus of USX, and subject to the Indenture, the description of the DECS
contained herein shall be deemed to be controlling. Initially capitalized terms
used herein and not defined herein shall bear the meanings ascribed thereto in
the Indenture as described in the Prospectus of USX accompanying this Prospectus
Supplement.
 
     The DECS will be general unsecured obligations of USX and will rank pari
passu with all other general unsecured and unsubordinated indebtedness of USX.
The DECS constitute a single series of the Debt Securities referred to in the
accompanying Prospectus of USX. The aggregate number of DECS to be issued will
be 5,000,000 plus such additional number of DECS as may be issued pursuant to
the over-allotment option granted by USX to the Underwriters (see "Plan of
Distribution"). The DECS will mature on February 1, 2000 (the "Stated
Maturity"). In the future USX may issue additional Debt Securities or other
securities with terms similar to those of the DECS.
 
     Each DECS, which will be issued with a principal amount of $          ,
will bear interest at the annual rate of   % of the principal amount per annum
(or $          per annum) from the date of original issuance, or from the most
recent Interest Payment Date (as defined below) to which interest has been paid
or provided for, until the principal amount thereof is exchanged at Maturity
pursuant to the terms of the DECS. Interest on the DECS will be payable
quarterly in arrears on             ,             ,             and
  , commencing             , 1997 (each, an "Interest Payment Date"), to the
persons in whose names the DECS are registered at the close of business on the
     day of the calendar month immediately preceding such Interest Payment Date,
provided that interest payable at Maturity shall be payable to the person to
whom the principal is payable. Interest on the DECS will be computed on the
basis of a 360-day year of twelve 30-day months. If an Interest Payment Date
falls on a day that is not, in the City of Pittsburgh or The City of New York, a
Sunday or a legal holiday or a day on which banking institutions are authorized
to close, the interest payment to be made on such Interest Payment Date will be
made on the next succeeding business day with the same force and effect as if
made on such Interest Payment Date, and no additional interest will accrue as a
result of such delayed payment.
 
                                       S-8
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     At Maturity, the principal amount of each DECS will be mandatorily
exchanged by USX into a number of shares of RMI Common Stock (or the equivalent
amount of cash) at the Exchange Rate (as defined below). The "Exchange Rate" is
equal to, (a) if the Maturity Price (as defined below) is greater than or equal
to $          (the "Threshold Appreciation Price"),      shares of RMI Common
Stock per DECS, (b) if the Maturity Price is less than the Threshold
Appreciation Price but is greater than the Initial Price, (i) a fraction equal
to the Initial Price divided by the Maturity Price of (ii) one share of RMI
Common Stock per DECS and (c) if the Maturity Price is less than or equal to the
Initial Price, one share of RMI Common Stock per DECS. The Exchange Rate is
subject to adjustment as provided in "--Dilution Adjustments; Other Adjustment
Events." THE VALUE OF THE RMI COMMON STOCK TO BE RECEIVED BY HOLDERS OF THE DECS
(OR, AS DISCUSSED BELOW, THE CASH EQUIVALENT TO BE RECEIVED IN LIEU OF SUCH
SHARES) AT MATURITY WILL NOT NECESSARILY EQUAL THE PRINCIPAL AMOUNT OF SUCH
DECS. The ratios of shares of RMI Common Stock per DECS specified in clauses
(a), (b) (ii) and (c) above of the Exchange Rate definition are hereinafter
referred to as the "Share Components." Any shares of RMI Common Stock delivered
by USX to the holders of the DECS that are not affiliated with RMI shall be free
of any transfer restrictions and the holders of the DECS will be responsible for
the payment of any and all brokerage costs upon the subsequent sale of such
shares. No fractional shares of RMI Common Stock will be issued at Maturity as
provided under "--Fractional Shares" below. Although it is USX's current
intention to deliver shares of RMI Common Stock at Maturity, USX may at its
option deliver cash, in lieu of delivering such shares of RMI Common Stock,
except where such delivery would violate applicable state law. The amount of
cash deliverable in respect of each DECS shall be equal to the product of the
number of shares of RMI Common Stock otherwise deliverable in respect of such
DECS on the date of Maturity multiplied by the Maturity Price. In the event USX
elects to deliver cash in lieu of shares of RMI Common Stock at Maturity, it
will be obligated pursuant to the Indenture to deliver cash to all holders of
DECS, except those holders with respect to whom it has determined delivery of
cash may violate applicable state law and as to whom it will deliver shares of
RMI Common Stock. On or prior to the fourth Business Day prior to             ,
     , USX will notify the Trustee, which in turn will notify The Depository
Trust Company, and publish a notice in a daily newspaper of national circulation
stating whether the principal amount of each DECS will be exchanged for shares
of RMI Common Stock or cash; provided, however, that if USX intends to deliver
cash, USX shall have the right, as a condition to delivery of such cash, to
require certification as to the domicile and residency of each beneficial holder
of the DECS.
 
     Notwithstanding the foregoing, (i) in the case of certain dilution events,
the Exchange Rate will be subject to adjustment and (ii) in the case of certain
adjustment events, the consideration received by holders of the DECS at Maturity
will be shares of RMI Common Stock, other securities and/or cash. See
"--Dilution Adjustments; Other Adjustment Events" below.
 
     The "Maturity Price" is defined as the average Closing Price per share of
RMI Common Stock for the 20 Trading Days immediately prior to (but not
including) the date of Maturity; provided, however, that if there are not 20
Trading Days for the RMI Common Stock occurring later than the 60th calendar day
immediately prior to, but not including, the date of Maturity, "Maturity Price"
will be defined as the market value per share of RMI Common Stock as of Maturity
as determined by a nationally recognized investment banking firm retained for
such purpose by USX. The Maturity Price is subject to adjustment as provided in
"--Dilution Adjustments; Other Adjustment Events." The "Closing Price" of any
security on any date of determination means (i) the closing sale price (or, if
no closing sale price is reported, the last reported sale price) of such
security (regular way) on the NYSE on such date, (ii) if such security is not
listed for trading on the NYSE on any such date, as reported in the composite
transactions for the principal United States securities exchange on which such
security is so listed, (iii) if such security is not so listed on a United
States national or regional securities exchange, as reported by the NASDAQ Stock
Market, (iv) if such security is not so reported, the last quoted bid price for
such security in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or (v) if such security is not so
quoted, the average of the mid-point of the last bid and ask prices for such
security from each of at least three
 
                                       S-9
   10
 
nationally recognized investment banking firms selected by USX for such purpose.
A "Trading Day" is defined as a day on which the security, the Closing Price of
which is being determined, (A) is not suspended from trading on any national or
regional securities exchange or association or over-the-counter market at the
close of business and (B) has traded at least once on the national or regional
securities exchange or association or over-the-counter market that is the
primary market for the trading of such security. "Business Day" means any day
that is not a Saturday, a Sunday or a day on which the NYSE, banking
institutions or trust companies in The City of New York are authorized or
obligated by law or executive order to close.
 
     For illustrative purposes only, the following chart shows the number of
shares of RMI Common Stock or the amount of cash that a holder of the DECS would
receive for each DECS at various Maturity Prices. The table assumes that there
will be no adjustments to the Exchange Rate described under "--Dilution
Adjustments; Other Adjustment Events" below. There can be no assurance that the
Maturity Price will be within the range set forth below. Given the Initial Price
of $          per DECS and the Threshold Appreciation Price of $          , a
DECS holder would receive at Maturity the following number of shares of RMI
Common Stock or amount of cash (if USX elects to pay the DECS in cash):
 


                                    
             MATURITY PRICE OF    NUMBER OF SHARES OF     AMOUNT OF
             RMI COMMON STOCK      RMI COMMON STOCK         CASH
             -----------------     ----------------       ----------
                                                
                  $                                        $

 
     As the foregoing chart illustrates, if at Maturity, the Maturity Price is
greater than or equal to $          , USX will be obligated to deliver
          shares of RMI Common Stock per DECS, resulting in USX receiving
percent of the appreciation in market value above $          and the DECS holder
receiving   percent of the appreciation in market value above $          . If at
Maturity, the Maturity Price is greater than $          and less than
$          , USX will be obligated to deliver only a fraction of a share of RMI
Common Stock having a market value equal to $          , resulting in USX
retaining all appreciation in the market value of the RMI Common Stock from
$          to $          . If at Maturity, the Maturity Price is less than or
equal to $          , USX will be obligated to deliver one share of RMI Common
Stock per DECS, regardless of the market price of such shares, resulting in the
DECS holder realizing the entire loss on the decline in market value of the RMI
Common Stock.
 
     Interest on the DECS will be payable, and delivery of RMI Common Stock (or,
at the option of USX, its cash equivalent and/or such other consideration as
permitted or required as described below) in exchange for the DECS at Maturity
will be made upon surrender of such DECS, at the office or agency of USX
maintained for such purposes; provided, however, that payment of interest may be
made at the option of USX by check mailed to the persons in whose names the DECS
are registered at the close of business on the      day of the calendar month
immediately preceding the relevant Interest Payment Date. See "--Book-Entry
System." Initially such office will be the principal corporate trust office of
the Trustee, in Pittsburgh, Pennsylvania.
 
     The DECS will be transferrable at any time or from time to time at the
aforementioned office. No service charge will be made to the holder for any such
transfer except for any tax or governmental charge incidental thereto.
 
     The Indenture does not contain any restriction on the ability of USX to
sell, pledge or convey all or any portion of the RMI Common Stock held by it or
its subsidiaries, and no such shares of RMI Common Stock will be pledged or
otherwise held in escrow for use at Maturity of the DECS. Consequently, in the
event of a bankruptcy, insolvency or liquidation of USX or its subsidiaries, the
RMI Common Stock, if any, owned by USX or its subsidiaries will be subject to
the claims of the creditors of USX or its subsidiaries, respectively. In
addition, as described herein, USX will have the
 
                                      S-10
   11
 
option, exercisable in its sole discretion, to satisfy its obligations pursuant
to the mandatory exchange for the principal amount of each DECS at Maturity by
delivering to holders of the DECS either the number of shares of RMI Common
Stock specified above or cash in an amount equal to the product of such number
of shares multiplied by the Maturity Price. As a result, there can be no
assurance that USX will elect at Maturity to deliver RMI Common Stock or, if it
so elects, that it will use all or any portion of its holdings of RMI Common
Stock at that time, if any, to make such delivery. Holders of the DECS will not
be entitled to any rights with respect to RMI Common Stock (including, without
limitation, voting rights and rights to receive any dividends or other
distributions in respect thereof) until such time, if any, as USX shall have
delivered shares of RMI Common Stock to holders of the DECS at Maturity thereof
and the applicable record date, if any, for the exercise of such rights occurs
after such date.
 
DILUTION ADJUSTMENTS; OTHER ADJUSTMENT EVENTS
 
     The Exchange Rate is subject to adjustment if RMI shall (i) pay a stock
dividend or make a distribution, in each case, with respect to RMI Common Stock
in shares of RMI Common Stock, (ii) subdivide or split its outstanding shares of
RMI Common Stock, (iii) combine the outstanding shares of RMI Common Stock into
a smaller number of shares, (iv) issue by reclassification (other than a
reclassification pursuant to clause (ii), (iii), (iv) or (v) of the definition
of Adjustment Event below) of its shares of RMI Common Stock any shares of
common stock of RMI, or (v) issue rights or warrants to all holders of RMI
Common Stock entitling them to subscribe for or purchase shares of RMI Common
Stock at a price per share less than the Market Price (as defined below) of the
RMI Common Stock on the Business Day next following the record date for the
determination of holders of RMI Common Stock entitled to receive such rights or
warrants.
 
     In the case of the events referred to in clauses (i), (ii), (iii) and (iv)
above, the Exchange Rate shall be adjusted by adjusting each of the Share
Components of the Exchange Rate in effect immediately prior to such event so
that a holder of any DECS shall be entitled to receive, upon mandatory exchange
of the principal amount of such DECS at Maturity, the number of shares of RMI
Common Stock (or, in the case of a reclassification referred to in clause (iv)
above, the number of other common shares of RMI issued pursuant thereto) which
such holder of such DECS would have owned or been entitled to receive
immediately following such event had such DECS been exchanged immediately prior
to such event or any record date with respect thereto.
 
     In the case of the event referred to in clause (v) above, the Exchange Rate
shall be adjusted by multiplying each of the Share Components of the Exchange
Rate in effect on the record date for the issuance of the rights or warrants
referred to in clause (v) above, by a fraction, of which the numerator shall be
(A) the number of shares of RMI Common Stock outstanding on the record date for
the issuance of such rights or warrants, plus (B) the number of additional
shares of RMI Common Stock offered for subscription or purchase pursuant to such
rights or warrants, and of which the denominator shall be (x) the number of
shares of RMI Common Stock outstanding on the record date for the issuance of
such rights or warrants, plus (y) the number of additional shares of RMI Common
Stock which the aggregate offering price of the total number of shares of RMI
Common Stock so offered for subscription or purchase pursuant to such rights or
warrants would purchase at the Market Price of the RMI Common Stock on the
Business Day next following the record date for the determination of holders of
RMI Common Stock entitled to receive such rights or warrants, which number of
additional shares shall be determined by multiplying such total number of shares
by the exercise price of such rights or warrants and dividing the product so
obtained by such Market Price. To the extent that such rights or warrants expire
prior to the Maturity of the DECS and shares of RMI Common Stock are not
delivered pursuant to such rights or warrants prior to such expiration, the
Exchange Rate shall be readjusted to the Exchange Rate which would then be in
effect had such adjustments for the issuance of such rights or warrants been
made upon the basis of delivery of only the number of shares of RMI Common Stock
actually delivered pursuant to such rights or warrants. Any shares of RMI Common
Stock issuable in payment of a dividend shall be
 
                                      S-11
   12
 
deemed to have been issued immediately prior to the close of business on the
record date for such dividend for purposes of calculating the number of
outstanding shares of RMI Common Stock under this paragraph.
 
     "Market Price" means, as of any date of determination, the average Closing
Price per share of RMI Common Stock for the 20 Trading Days immediately prior to
the date of determination; provided, however, that if there are not 20 Trading
Days for the RMI Common Stock occurring later than the 60th calendar day
immediately prior to, but not including, such date, the Market Price shall be
determined as the market value per share of RMI Common Stock as of such date as
determined by a nationally recognized investment banking firm retained for such
purpose by USX.
 
     All adjustments to the Exchange Rate will be calculated to the nearest
1/10,000th of a share of RMI Common Stock (or, if there is not a nearest
1/10,000th of a share, to the next lower 1/10,000th of a share). No adjustment
in the Exchange Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein; provided, however, that
any adjustments which by reason of the foregoing are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
 
     If an adjustment is made to the Exchange Rate pursuant to clauses (i),
(ii), (iii), (iv) or (v) above, an adjustment shall also be made to the Maturity
Price as such term is used to determine which of clauses (a), (b) or (c) of the
Exchange Rate definition will apply at Maturity and for purposes of calculating
the fraction in sub-clause (b)(i) of the definition of Exchange Rate. The
required adjustment to the Maturity Price shall be made at Maturity by
multiplying the Maturity Price by the cumulative number or fraction determined
pursuant to the Share Component adjustment procedure described above. In the
case of the reclassification of any shares of RMI Common Stock into any common
stock of RMI other than RMI Common Stock, such common stock shall be deemed to
be shares of RMI Common Stock solely to determine the Maturity Price and to
apply the Exchange Rate at Maturity. Each such adjustment to the Exchange Rate
and the Maturity Price shall be made successively.
 
     In the event of (i) any dividend or distribution by RMI to all holders of
RMI Common Stock of evidences of its indebtedness or other assets (excluding 1)
dividends or distributions referred to in clause (i) of the first paragraph
under this caption "--Dilution Adjustments; Other Adjustment Events," 2) any
common shares issued pursuant to a reclassification referred to in clause (iv)
of such paragraph and 3) Ordinary Cash Dividends (as defined below)) or any
issuance by RMI to all holders of RMI Common Stock of rights or warrants (other
than rights or warrants referred to in clause (v) of the first paragraph under
this caption "--Dilution Adjustments; Other Adjustment Events"), (ii) any
consolidation or merger of RMI with or into another entity (other than a merger
or consolidation in which RMI is the continuing corporation and in which the
shares of RMI Common Stock outstanding immediately prior to the merger or
consolidation are not exchanged for cash, securities or other property of RMI or
another corporation), (iii) any sale, transfer, lease or conveyance to another
corporation of the property of RMI as an entirety or substantially as an
entirety, (iv) any statutory exchange of securities of RMI with another
corporation (other than in connection with a merger or acquisition) or (v) any
liquidation, dissolution or winding up of RMI (any such event, an "Adjustment
Event"), each Holder of a DECS will receive at Maturity, in lieu of or (in the
case of an Adjustment Event described in clause (i) above) in addition to,
shares of RMI Common Stock as described above, cash in an amount equal to (A) if
the Maturity Price is greater than or equal to the Threshold Appreciation Price,
     multiplied by the Transaction Value (as defined below), (B) if the Maturity
Price is less than the Threshold Appreciation Price but is greater than the
Initial Price, the product of (x) the Initial Price divided by the Maturity
Price multiplied by (y) the Transaction Value and (C) if the Maturity Price is
less than or equal to the Initial Price, the Transaction Value. Following an
Adjustment Event, the Maturity Price, as such term is used in this paragraph and
throughout the definition of Exchange Rate, shall be deemed to equal (A) the
Maturity Price of the shares of RMI Common Stock, as adjusted pursuant to the
method set forth in the preceding paragraph, plus (B) the Transaction Value.
 
                                      S-12
   13
 
     Notwithstanding the foregoing, with respect to any securities received in
an Adjustment Event that (A) are (i) listed on a United States national
securities exchange, (ii) reported on a United States national securities system
subject to last sale reporting, (iii) traded in the over-the-counter market and
reported on the National Quotation Bureau or similar organization or (iv) for
which bid and ask prices are available from at least three nationally recognized
investment banking firms and (B) are either (x) perpetual equity securities or
(y) non-perpetual equity or debt securities with a stated maturity after the
Stated Maturity of the DECS ("Reported Securities"), USX may, at its option, in
lieu of delivering the amount of cash deliverable in respect of Reported
Securities received in an Adjustment Event, as determined in accordance with the
previous paragraph, deliver a number of such Reported Securities with a value
equal to such cash amount, as determined in accordance with clause (ii) of the
definition of Transaction Value, as applicable; provided, however, that (i) if
such option is exercised, USX shall deliver Reported Securities in respect of
all, but not less than all, cash amounts that would otherwise be deliverable in
respect of Reported Securities received in an Adjustment Event, (ii) USX may not
exercise such option if USX has elected to deliver cash in lieu of shares of RMI
Common Stock, if any, deliverable upon Maturity or if such Reported Securities
have not yet been delivered to the holders entitled thereto following such
Adjustment Event or any record date with respect thereto, and (iii) subject to
clause (ii) of this proviso, USX must exercise such option if USX does not elect
to deliver cash in lieu of shares of RMI Common Stock, if any, deliverable upon
Maturity. If USX elects to deliver Reported Securities, each Holder of a DECS
will be responsible for the payment of any and all brokerage and other
transaction costs upon the sale of such Reported Securities. If, following any
Adjustment Event, any Reported Security ceases to qualify as a Reported
Security, then (x) USX may no longer elect to deliver such Reported Security in
lieu of an equivalent amount of cash and (y) notwithstanding clause (ii) of the
definition of Transaction Value, the Transaction Value of such Reported Security
shall mean the fair market value of such Reported Security on the date such
security ceases to qualify as a Reported Security, as determined by a nationally
recognized investment banking firm retained for this purpose by USX.
 
     The amount of cash and/or the kind and amount of securities into which the
DECS shall be exchangeable after an Adjustment Event shall be subject to
adjustment following such Adjustment Event in the same manner and upon the
occurrence of the same type of events as described under this caption
"--Dilution Adjustments; Other Adjustment Events" with respect to RMI Common
Stock and RMI.
 
     For purposes of the foregoing, the term "Ordinary Cash Dividend" means,
with respect to any consecutive 365-day period, any dividend with respect to RMI
Common Stock paid in cash to the extent that the amount of such dividend,
together with the aggregate amount of all other dividends on RMI Common Stock
paid in cash during such 365-day period, does not exceed on a per share basis
10% of the average of the Closing Prices of RMI Common Stock over such 365-day
period.
 
     The term "Transaction Value" means (i) for any cash received in any
Adjustment Event, the amount of cash received per share of RMI Common Stock,
(ii) for any Reported Securities received in any Adjustment Event, an amount
equal to (x) the average Closing Price per security of such Reported Securities
for the 20 Trading Days immediately prior to Maturity multiplied by (y) the
number of such Reported Securities (as adjusted pursuant to the second preceding
paragraph) received for each share of RMI Common Stock and (iii) for any
property received in any Adjustment Event other than cash or such Reported
Securities, an amount equal to the fair market value of the property received
per share of RMI Common Stock on the date such property is received, as
determined by a nationally recognized investment banking firm retained for this
purpose by USX; provided, however, that in the case of clause (ii), (x) with
respect to securities that are Reported Securities by virtue of only clause
(A)(iv) of the definition of Reported Securities in the third preceding
paragraph, Transaction Value with respect to any such Reported Security means
the average of the mid-point of the last bid and ask prices for such Reported
Security as of Maturity from each of at least three nationally recognized
investment banking firms retained for such purpose by USX multiplied by the
number of such Reported Securities (as adjusted pursuant to the method
 
                                      S-13
   14
 
set forth in the second preceding paragraph) received for each share of RMI
Common Stock and (y) with respect to all other Reported Securities, if there are
not 20 Trading Days for the RMI Common Stock occurring later than the 60th
calendar day immediately prior to, but not including, the date of Maturity,
Transaction Value with respect to such Reported Security means the market value
per security of such Reported Security as of Maturity as determined by a
nationally recognized investment banking firm retained for such purpose by USX
multiplied by the number of such Reported Securities (as adjusted pursuant to
the method set forth in the second preceding paragraph) received for each share
of RMI Common Stock. For purposes of calculating the Transaction Value, any
cash, Reported Securities or other property receivable in any Adjustment Event
shall be deemed to have been received immediately prior to the close of business
on the record date for such Adjustment Event or, if there is no record date for
such Adjustment Event, immediately prior to the close of business on the
effective date of such Adjustment Event.
 
     No adjustments will be made for certain other events, such as offerings of
RMI Common Stock by RMI for cash or in connection with acquisitions.
 
     USX is required, within ten Business Days following the occurrence of an
event that requires an adjustment to the Exchange Rate or the occurrence of an
Adjustment Event (or, in either case, if USX is not aware of such occurrence, as
soon as practicable after becoming so aware), to provide written notice to the
Trustee and to each holder of DECS of the occurrence of such event, including a
statement in reasonable detail setting forth the method by which the adjustment
to the Exchange Rate or change in the consideration to be received by holders of
DECS following the Adjustment Event was determined and setting forth the revised
Exchange Rate or consideration, as the case may be; provided, however that, in
respect of any adjustment to the Maturity Price, such notice will only disclose
the factor by which the Maturity Price is to be multiplied in order to determine
which clause of the Exchange Rate definition will apply at Maturity.
 
FRACTIONAL SHARES
 
     No fractional shares of RMI Common Stock or Reported Securities will be
issued if USX exchanges the DECS for shares of RMI Common Stock. If more than
one DECS is surrendered for exchange at one time by the same holder, the number
of full shares of RMI Common Stock or Reported Securities which shall be
delivered upon exchange, in whole or in part, as the case may be, shall be
computed on the basis of the aggregate number of DECS so surrendered at
Maturity. In lieu of any fractional share or other security otherwise issuable
in respect of all DECS of any holder which are exchanged at Maturity, such
holder shall be entitled to receive an amount in cash equal to the value of such
fractional share or security at the Maturity Price.
 
DELIVERY OF SECURITIES UPON MATURITY
 
     All shares of RMI Common Stock and Reported Securities deliverable to
holders of the DECS upon Maturity will be delivered to such holders, whenever
practicable, in such manner (such as by book-entry transfer) so as to assure
same-day transfer of such securities to such holders and otherwise in the manner
customary at such time for delivery of such securities and securities of the
same type. Notwithstanding the foregoing, it may not be possible under market
practices prevailing at the Maturity of the DECS to transfer RMI Common Stock
and/or Reported Securities so as to assure same-day transfer of such securities
to holders of the DECS. Accordingly, such holders of the DECS may receive all or
a portion of the RMI Common Stock and/or Reported Securities into which such
DECS are exchangeable after the date of Maturity.
 
REDEMPTION
 
     The DECS are not subject to redemption prior to Maturity and do not contain
sinking fund or other mandatory redemption provisions. The DECS are not subject
to payment prior to the date of Maturity at the option of the holder.
 
                                      S-14
   15
 
BOOK-ENTRY SYSTEM
 
     It is expected that the DECS will be issued in the form of one or more
global securities (the "Global Securities") deposited with The Depository Trust
Company (the "Depositary") and registered in the name of a nominee of the
Depositary.
 
     The Depositary has advised USX and the Underwriters as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act. The
Depositary was created to hold securities of persons who have accounts with the
Depositary ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of certificates. Such participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the Depositary's book-entry system also is
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
 
     Upon the issuance of a Global Security, the Depositary or its nominee will
credit the respective DECS represented by such Global Security to the accounts
of participants. The accounts to be credited shall be designated by the
Underwriters. Ownership of beneficial interests in the Global Securities will be
limited to participants or persons that may hold interests through participants.
See "Description of the Debt Securities--Book-Entry Securities" in the
Prospectus of USX accompanying this Prospectus Supplement.
 
     Payment of principal of and any interest on the DECS registered in the name
of or held by the Depositary or its nominee will be made to the Depositary or
its nominee, as the case may be, as the registered owner or the holder of the
Global Security. None of USX, the Trustee, any Paying Agent or any securities
registrar for the DECS will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests. See "Description of the
Debt Securities--Book-Entry Securities" in the Prospectus of USX accompanying
this Prospectus Supplement.
 
     A Global Security may not be transferred except as a whole by the
Depositary to a nominee or a successor of the Depositary. If the Depositary is
at any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by USX within ninety days, USX will issue DECS in
definitive registered form in exchange for the Global Security representing such
DECS. In addition, USX may at any time and in its sole discretion determine not
to have any DECS represented by one or more Global Securities and, in such
event, will issue DECS in definitive form in exchange for all of the Global
Securities representing the DECS. Further, if USX so specifies with respect to
the DECS, an owner of a beneficial interest in a Global Security representing
DECS may, on terms acceptable to USX and the Depositary for such Global
Security, receive DECS in definitive form. In any such instance, an owner of a
beneficial interest in a Global Security will be entitled to physical delivery
in definitive form of DECS represented by such Global Security equal in number
to that represented by such beneficial interest and to have such DECS registered
in its name.
 
SAME-DAY FUNDS SETTLEMENT SYSTEM AND PAYMENT
 
     Settlement for the DECS will be made by the Underwriters in immediately
available funds. All payments of principal and interest on the Global Securities
will be made by USX in immediately available funds.
 
     The DECS will trade in the Depositary's Same-Day Funds Settlement System
until Maturity, and secondary market trading activity in the DECS will therefore
be required by the Depositary to settle
 
                                      S-15
   16
 
in immediately available funds. No assurance can be given as to the effect, if
any, of settlement in immediately available funds on trading activity in the
DECS.
 
            CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
 
     The following discussion is based upon the advice of USX's tax counsel,
Miller & Chevalier, Chartered, as to certain of the material U.S. federal income
tax consequences that may be relevant to a citizen or resident of the United
States, a corporation, partnership or other entity created or organized under
the laws of the United States and an estate or trust the income of which is
subject to U.S. federal income taxation regardless of its source (any of the
foregoing, a "U.S. Person") who is the beneficial owner of a DECS (a "U.S.
Holder"). All references to "holders" (including U.S. Holders) are to beneficial
owners of the DECS. This summary is based on U.S. federal income tax laws,
regulations, rulings and decisions in effect as of the date of this Prospectus
Supplement (or in the case of certain Treasury regulations now in proposed
form), all of which are subject to change at any time (possibly with retroactive
effect). Because the law is technical and complex, the discussion below
necessarily represents only a general summary.
 
     This summary addresses the U.S. federal income tax consequences to holders
who are initial holders of the DECS and who will hold the DECS and, if
applicable, the RMI Common Stock as capital assets. This summary does not
address all aspects of federal income taxation that may be relevant to a
particular holder in light of the holder's individual investment circumstances
or to certain types of holders subject to special treatment under the U.S.
federal income tax laws, such as dealers in securities or foreign currency,
financial institutions, insurance companies, tax-exempt organizations and
taxpayers holding the DECS as part of a "straddle," "hedge," "conversion
transaction," "synthetic security," or other integrated investment. Moreover,
the effect of any applicable state, local or foreign tax laws is not discussed.
 
     No statutory, judicial or administrative authority directly addresses the
characterization of the DECS or instruments similar to the DECS for U.S. federal
income tax purposes. As a result, significant aspects of the U.S. federal income
tax consequences of an investment in the DECS are not certain. No ruling is
being requested from the Internal Revenue Service (the "IRS") with respect to
the DECS and no assurance can be given that the IRS will agree with the
conclusions expressed herein. ACCORDINGLY, A PROSPECTIVE INVESTOR (INCLUDING A
TAX-EXEMPT INVESTOR) IN THE DECS SHOULD CONSULT ITS TAX ADVISOR IN DETERMINING
THE TAX CONSEQUENCES OF AN INVESTMENT IN THE DECS, INCLUDING THE APPLICATION OF
STATE, LOCAL OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
 
     Pursuant to the terms of the Indenture, USX and every holder of a DECS will
be obligated (in the absence of an administrative determination or judicial
ruling to the contrary) to characterize a DECS for all tax purposes as a forward
purchase contract to purchase RMI Common Stock at Maturity (including as a
result of acceleration or otherwise). Under the terms of the forward contract:
(a) at the time of issuance of the DECS the holder deposits irrevocably with USX
a fixed amount of cash equal to the purchase price of the DECS to assure the
fulfillment of the holder's purchase obligation described in clause (c) below,
(b) until Maturity USX will be obligated to pay interest on the deposit at a
rate equal to the stated rate of interest on the DECS as compensation to the
holder for USX's use of the cash deposit during the term of the DECS, and (c) at
Maturity the cash deposit unconditionally and irrevocably will be applied by USX
in full satisfaction of the holder's obligation under the forward purchase
contract, and USX will deliver to the holder the number of shares of RMI Common
Stock that the holder is entitled to receive at the time pursuant to the terms
of the DECS (subject to USX's right to deliver cash in lieu of shares of RMI
Common Stock). Consistent with the above characterization, (i) amounts paid to
USX in respect of the original issue of a DECS will be treated as allocable in
their entirety to the amount of the cash deposit attributable to such DECS, and
(ii) amounts denominated as interest that are payable with respect to the DECS
 
                                      S-16
   17
 
will be characterized as interest payable on the amount of such deposit,
includible annually in the income of a U.S. Holder as interest income in
accordance with the holder's method of accounting. (Prospective investors should
note that cash proceeds of this offering will not be segregated by USX during
the term of the DECS, but instead will be commingled with USX's other assets and
applied in a manner consistent with the "Use of Proceeds" discussion above.)
 
     Under the above characterization of the DECS, a holder's tax basis in a
DECS generally will equal the holder's cost for that DECS. Upon the sale or
other taxable disposition of a DECS, a U.S. Holder generally will recognize gain
or loss equal to the difference between the amount realized on the sale or other
taxable disposition and the U.S. Holder's tax basis in the DECS. Such gain or
loss generally will be long-term capital gain or loss if the U.S. Holder has
held the DECS for more than one year at the time of disposition.
 
     Under the above characterization of the DECS, if USX delivers RMI Common
Stock at Maturity, a U.S. Holder will recognize no gain or loss on the purchase
of RMI Common Stock against application of the monies received by USX in respect
of the DECS. A U.S. Holder will have a tax basis in such stock equal to the U.S.
Holder's tax basis in the DECS (less the portion of the tax basis of the DECS
allocable to any fractional share, as described in the next sentence). A U.S.
Holder will recognize gain or loss (which will be short-term capital gain or
loss) with respect to cash received in lieu of fractional shares, in an amount
equal to the difference between the cash received and the portion of the basis
of the DECS allocable to fractional shares (based on the relative number of
fractional shares and full shares delivered to the holder). If at Maturity USX
pays the DECS in cash, a U.S. Holder will recognize capital gain or loss equal
to any difference between the amount of cash received from USX and the U.S.
Holder's tax basis in the DECS at that time. Such gain or loss generally will be
long-term capital gain or loss if the U.S. Holder has held the DECS for more
than one year at Maturity.
 
     Due to the absence of authority as to the proper characterization of the
DECS, no assurance can be given that the IRS will accept, or that a court will
uphold, the characterization and tax treatment described above. In particular,
the IRS could seek to analyze the federal income tax consequences of owning a
DECS under Treasury regulations promulgated in June 1996 governing contingent
payment debt instruments (the "Contingent Payment Regulations"). The Contingent
Payment Regulations apply to debt instruments issued on or after August 13,
1996. The Contingent Payment Regulations are complex, but very generally apply
the original issue discount rules of the Internal Revenue Code to a contingent
payment debt instrument by requiring that original issue discount be accrued
every year at a "comparable yield" for the issuer of the instrument, determined
at the time of issuance of the obligation. In addition, the Contingent Payment
Regulations require that a projected payment schedule, which results in such a
"comparable yield", be determined, and that adjustments to income accruals be
made to account for differences between actual payments and projected amounts.
To the extent that the comparable yield as so determined exceeds the interest
actually paid on a contingent debt instrument, the owner of that instrument
recognizes ordinary interest income in excess of the cash the owner receives. In
addition, any gain realized on the sale, exchange or redemption of a contingent
payment debt instrument is treated as ordinary income. Any loss realized on such
sale, exchange or redemption is treated as an ordinary loss to the extent the
holder's original issue discount inclusions with respect to the obligation
exceed prior reversals of such inclusions required by the adjustment mechanism
described above. Any loss realized in excess of such amount generally is treated
as a capital loss.
 
     USX believes that the Contingent Payment Regulations do not apply to the
DECS, because those Regulations apply only to debt instruments that provide for
contingent payments. The DECS are payable by the delivery of shares of RMI
Common Stock (unless USX exercises its option to deliver cash at Maturity) and
provide economic returns that are indexed to the performance of RMI Common
Stock. The DECS therefore offer no assurance that a holder's investment will be
returned to the holder at Maturity. Accordingly, USX believes that the DECS
properly are characterized for tax purposes, not as debt instruments, but as
forward purchase contracts in respect of which holders
 
                                      S-17
   18
 
have deposited a fixed amount of cash with USX, on which interest is payable at
a fixed rate. If, however, the IRS argued successfully that the Contingent
Payment Regulations applied to the DECS, then, among other matters, (i) gain
realized by a holder on the sale or other taxable disposition of a DECS
(including as a result of payments made at Maturity) generally would be
characterized as ordinary income, rather than as short- or long-term capital
gain (depending on whether the DECS had been held for more than one year at the
time of such disposition), and (ii) a U.S. Holder would recognize ordinary
income, or ordinary or capital loss (as the case may be, under the rules
summarized above) on the receipt of shares of RMI Common Stock, rather than
capital gain or loss upon the ultimate sale of such stock.
 
     Even if the Contingent Payment Regulations do not apply to the DECS, it is
possible that the IRS could seek to characterize the DECS in a manner that
results in tax consequences to initial holders of the DECS different from those
reflected in the Indenture and described above. Under alternative
characterizations of the DECS, it is possible, for example, that a DECS could be
treated as including a forward contract and one or more options.
 
NON-UNITED STATES PERSONS
 
     In the case of a holder of the DECS that is not a U.S. person, payments
made with respect to the DECS should not be subject to U.S. withholding tax,
provided that such holder complies with applicable certification requirements.
Any capital gain realized upon the sale or other disposition of the DECS by a
holder that is not a U.S. person will generally not be subject to U.S. federal
income tax if (i) such gain is not effectively connected with a U.S. trade or
business of such holder and (ii) in the case of an individual, such individual
is not present in the United States for 183 days or more in the taxable year of
the sale or other disposition or the gain is not attributable to a fixed place
of business maintained by such individual in the United States.
 
BACKUP WITHHOLDING AND INFORMATION REPORTING
 
     A holder of the DECS may be subject to information reporting and to backup
withholding at a rate of 31 percent of certain amounts paid to the holder unless
such holder provides proof of an applicable exemption or a correct taxpayer
identification number, and otherwise complies with applicable requirements of
the backup withholding rules. Any amounts withheld under the backup withholding
rules are not an additional tax and may be refunded or credited against the U.S.
Holder's U.S. federal income tax liability, provided the required information is
furnished to the IRS.
 
                                      S-18
   19
 
                              PLAN OF DISTRIBUTION
 
     Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among USX, RMI and the underwriters named below
(the "Underwriters"), USX has agreed to sell to the Underwriters, and the
Underwriters have severally agreed to purchase, the aggregate number of DECS set
forth opposite their names below:
 


                                                                           NUMBER OF
        UNDERWRITERS                                                          DECS
        ------------                                                       ----------
                                                                        
        Salomon Brothers Inc............................................
        Lehman Brothers Inc.............................................
                                                                           ---------
          Total.........................................................   5,000,000
                                                                           =========

 
     In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, that the obligations of
the Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the DECS offered hereby if any
of the DECS are purchased.
 
     USX has been advised by the Underwriters that they propose to offer the
DECS directly to the public initially at the public offering price set forth on
the cover of this Prospectus Supplement and to certain dealers at such prices
less a concession not in excess of $          per DECS. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $
per DECS to other dealers. After the initial public offering, such public
offering price and such concession and reallowance may be changed.
 
     RMI, its directors and executive officers and USX have agreed not to (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, or
announce the offering of, any shares of RMI Common Stock or any securities
convertible into or exercisable or exchangeable for shares of RMI Common Stock
or (ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of shares of RMI
Common Stock, whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of shares of RMI Common Stock or such other
securities, in cash or otherwise, for a period of at least 90 days from the date
of this Prospectus Supplement without the prior written consent of the
Underwriters; provided, however, that (x) RMI may issue, or grant options for,
shares of RMI Common Stock pursuant to any stock plan for employees or
directors, or any qualified employee benefit plan, in effect on the date of this
Prospectus Supplement, or pursuant to any stock options outstanding on the date
of this Prospectus Supplement, and any qualified employee benefit plan in effect
on the date of this Prospectus Supplement may sell shares of RMI Common Stock to
satisfy plan liquidity needs and (y) such executive officers and directors may
sell up to 100,000 shares of RMI Common Stock in the aggregate. If any such
consent is given, it would not necessarily be preceded or followed by a public
announcement thereof.
 
     USX has granted to the Underwriters an option, exercisable for the 30-day
period after the date of this Prospectus Supplement, to purchase up to an
additional 483,600 DECS from USX, at the same price per DECS as the initial DECS
to be purchased by the Underwriters. The Underwriters may exercise such option
only for the purpose of covering over-allotments, if any, incurred in connection
with the sale of DECS offered hereby. To the extent that the Underwriters
exercise such option, each Underwriter will have a firm commitment, subject to
certain conditions, to purchase the same proportion of the DECS as the number of
DECS to be purchased and offered by such Underwriter in the above table bears to
the total number of the initial DECS to be purchased by the Underwriters.
 
                                      S-19
   20
 
     The DECS will be a new issue of securities with no established trading
market. The DECS will not be listed or traded on any securities exchange or
trading market. The Underwriters intend to make a market in the DECS, subject to
applicable laws and regulations. However, the Underwriters are not obligated to
do so and any such market-making may be discontinued at any time at the sole
discretion of the Underwriters without notice. Accordingly, no assurance can be
given as to the liquidity of such market.
 
     The Underwriting Agreement provides that USX and RMI will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or contribute to payments the Underwriters may be required to
make in respect thereof.
 
     In the ordinary course of their respective businesses, the Underwriters and
their respective affiliates have engaged in and may in the future engage in
commercial and investment banking transactions with RMI, USX and their
respective affiliates, for which customary compensation has been received.
 
                                 LEGAL OPINIONS
 
     The validity of the DECS will be passed upon for USX by D.D. Sandman, Esq.,
General Counsel & Senior Vice President--Human Resources and Secretary of USX or
by J.A. Hammerschmidt, Assistant General Counsel and Assistant Secretary of USX.
Certain tax matters with respect to the DECS also will be passed upon for USX by
Miller & Chevalier, Chartered. Messrs. Sandman and Hammerschmidt, in their
capacities as General Counsel & Senior Vice President--Human Resources and
Secretary of USX, and Assistant General Counsel and Assistant Secretary of USX,
respectively, are paid salaries by USX and participate in various employee
benefit plans offered to officers or employees of USX generally. Certain legal
matters will be passed upon for the Underwriters by Simpson Thacher & Bartlett
(a partnership which includes professional corporations), 425 Lexington Avenue,
New York, New York. Simpson Thacher & Bartlett has acted in the past as counsel
in certain matters for a subsidiary of USX.
 
                                      S-20
   21
 
                                  $750,000,000
 
                                USX CORPORATION
 
                                DEBT SECURITIES
                            ------------------------
 
USX CORPORATION ("USX") PROPOSES TO ISSUE AND OFFER FROM TIME TO TIME UNSECURED
DEBT SECURITIES (THE "DEBT SECURITIES") IN AN AGGREGATE PRINCIPAL AMOUNT OR
INITIAL PUBLIC OFFERING PRICE OF UP TO $750,000,000 OR THE EQUIVALENT THEREOF IN
FOREIGN DENOMINATED CURRENCY (OR UNITS BASED ON OR RELATED THERETO), WHICH MAY
BE ISSUED IN ONE OR MORE SEPARATE SERIES ON TERMS TO BE DETERMINED AT THE TIME
OF SALE.
 
THE SPECIFIC TERMS OF THE DEBT SECURITIES, INCLUDING THE DESIGNATION OF EACH
SEPARATE SERIES AND THE AGGREGATE PRINCIPAL AMOUNT, MATURITY, INTEREST RATE, IF
ANY, WHETHER FIXED OR VARIABLE (OR THE MANNER OF CALCULATION THEREOF),
REDEMPTION AND SINKING FUND PROVISIONS OR OTHER REPAYMENT OBLIGATIONS, CURRENCY
IN WHICH DENOMINATED, AMOUNTS DETERMINED BY REFERENCE TO AN INDEX, PURCHASE
PRICE AND ANY LISTING ON A SECURITIES EXCHANGE, IN EACH CASE WITH RESPECT TO
EACH SERIES, WILL BE SET FORTH IN THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
 
THE DEBT SECURITIES MAY BE SOLD BY USX TO OR THROUGH UNDERWRITERS OR DIRECTLY TO
OTHER PURCHASERS OR THROUGH AGENTS OR THROUGH AND TO BROKERS OR DEALERS ACTING
AS UNDERWRITERS WHO WILL BE NAMED IN THE ACCOMPANYING PROSPECTUS SUPPLEMENT
ALONG WITH TERMS OF THE PUBLIC OFFERING, INCLUDING THE OFFERING PRICE, THE
PRINCIPAL AMOUNTS, IF ANY, TO BE PURCHASED BY UNDERWRITERS, THE COMMISSION OR
DISCOUNT TO THE UNDERWRITERS AND THE AMOUNT OF OTHER EXPENSES ATTRIBUTABLE TO
THE ISSUANCE AND DISTRIBUTION OF THE DEBT SECURITIES.
 
                            ------------------------
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
 
                            ------------------------
 
               The date of this Prospectus is November 18, 1996.
   22
 
                             AVAILABLE INFORMATION
 
     USX Corporation ("USX") is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by USX can be inspected and copied at
prescribed rates at the Public Reference Room of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the public
reference facilities maintained by the Commission at Seven World Trade Center,
New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Documents filed by USX can also be inspected at
the offices of the New York Stock Exchange, Inc. (the "NYSE"), The Chicago Stock
Exchange and the Pacific Stock Exchange. The Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including USX.
 
     USX has filed a Registration Statement on Form S-3 (the "Registration
Statement") with the Commission pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Debt Securities. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits thereto, to which reference is hereby made.
Statements contained herein concerning the provisions of certain documents are
not necessarily complete, and in each instance reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
     The following documents heretofore filed by USX with the Commission (file
no. 1-5153) are incorporated herein by reference:
 
          (a) Annual Report on Form 10-K for the year ended December 31, 1995.
 
          (b) Quarterly Reports on Form 10-Q for the periods ended March 31,
     June 30 and September 30, 1996.
 
          (c) Current Reports on Form 8-K dated January 25, September 24 and
     October 23, 1996.
 
     All reports and other documents filed by USX pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering of the Debt Securities shall be
deemed to be incorporated by reference herein. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
 
     USX undertakes to provide without charge to each person to whom a
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the information incorporated by reference in this Prospectus,
other than exhibits to such information (unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be directed to the Office of the
Corporate Secretary, USX Corporation, 600 Grant Street, Pittsburgh, Pennsylvania
15219-4776 (telephone: 412-433-4801).
 
                                        2
   23
 
                                USX CORPORATION
 
     USX is a diversified company which is principally engaged in the energy
business through its Marathon Group, in the steel business through its U. S.
Steel Group and in the gas gathering and processing business through its Delhi
Group.
 
     USX has three classes of common stock, USX--Marathon Group Common Stock
("Marathon Stock"), USX--U. S. Steel Group Common Stock ("Steel Stock") and
USX--Delhi Group Common Stock ("Delhi Stock"). Each class of common stock is
intended to provide the stockholders of such class with a separate security
reflecting the performance of the related group.
 
     The Marathon Group includes Marathon Oil Company and certain other
subsidiaries of USX, which are engaged in worldwide exploration, production,
transportation and marketing of crude oil and natural gas; and domestic
refining, marketing and transportation of petroleum products.
 
     The U. S. Steel Group includes U. S. Steel, the largest integrated steel
producer in the United States, which is primarily engaged in the production and
sale of steel mill products, coke and taconite pellets. The U. S. Steel Group
also includes the management of mineral resources, domestic coal mining,
engineering and consulting services and technology licensing. Other businesses
that are part of the U. S. Steel Group include real estate development and
management and leasing and financing activities.
 
     The Delhi Group consists of Delhi Gas Pipeline Corporation and certain
other subsidiaries of USX which are engaged in the purchasing, gathering,
processing, transporting and marketing of natural gas.
 
GROUP HIGHLIGHTS
 
     The following is a three-year summary of financial highlights for the
groups:
 


                                                                  OPERATING
                                                                    INCOME           ASSETS
                                                     REVENUES     (LOSS)(A)      (AT YEAR-END)
                                                     --------     ----------     --------------
                                                               (DOLLARS IN MILLIONS)
                                                                        
Marathon Group
     1995..........................................  $13,871        $  105          $ 10,109
     1994..........................................   12,757           584            10,951
     1993..........................................   11,962           169            10,822

U. S. Steel Group
     1995..........................................  $ 6,456        $  481          $  6,521
     1994..........................................    6,066           313             6,480
     1993..........................................    5,612          (149)            6,629

Delhi Group
     1995..........................................  $   654        $   18          $    624
     1994..........................................      567           (36)              521
     1993..........................................      535            36               583

Eliminations
     1995..........................................  $   (59)       $   --          $   (511)
     1994..........................................      (60)           --              (435)
     1993..........................................      (52)           --              (620)

Total USX Corporation
     1995..........................................  $20,922        $  604          $ 16,743
     1994..........................................   19,330           861            17,517
     1993..........................................   18,057            56            17,414

 
- ---------
 
(a) Operating income (loss) includes the following: a $342 million charge
     related to the B&LE litigation for the U. S. Steel Group in 1993;
     restructuring charges of $42 million for the U. S. Steel Group in 1993 and
 
                                        3
   24
 
     restructuring charges (credits) of $(6) million and $37 million in 1995 and
     1994, respectively, for the Delhi Group; inventory market valuation charges
     (credits) for the Marathon Group of $(70) million, $(160) million and $241
     million in 1995, 1994 and 1993, respectively; and in 1995, impairment of
     long-lived asset charges of $659 million for the Marathon Group and $16
     million for the U. S. Steel Group.
 
     USX continues to include consolidated financial information in its periodic
reports required by the Exchange Act, in its annual shareholder reports and in
other financial communications. The consolidated financial statements are
supplemented with separate financial statements of the Marathon Group, the U. S.
Steel Group and the Delhi Group, together with the related Management's
Discussion and Analyses, descriptions of business and other financial and
business information to the extent such information is required to be presented
in the report being filed. The financial information of the Marathon Group, the
U. S. Steel Group and the Delhi Group, taken together, includes all accounts
which comprise the corresponding consolidated financial information of USX.
 
     For consolidated financial reporting purposes, USX's reportable industry
segments correspond with its three groups. The attribution of assets,
liabilities (including contingent liabilities) and stockholders' equity among
the Marathon Group, the U. S. Steel Group and the Delhi Group for the purpose of
preparing their respective financial statements does not affect legal title to
such assets or responsibility for such liabilities. Holders of Marathon Stock,
Steel Stock and Delhi Stock are holders of common stock of USX and continue to
be subject to all of the risks associated with an investment in USX and all of
its businesses and liabilities. Financial impacts arising from any of the groups
which affect the overall cost of USX's capital could affect the results of
operations and financial condition of all groups. Accordingly, the USX
consolidated financial information should be read in connection with the
Marathon Group, the U. S. Steel Group and the Delhi Group financial information.
 
     USX was incorporated in 1901 and is a Delaware corporation. Its executive
offices are located at 600 Grant St., Pittsburgh, PA 15219-4776 (tel:
412-433-1121). The terms "USX" and the "Corporation" when used herein refer to
USX Corporation or USX Corporation and its subsidiaries, as required by the
context.
 
                                        4
   25
 
                       RATIO OF EARNINGS TO FIXED CHARGES
                                  (UNAUDITED)
 


                                    NINE MONTHS ENDED
                                      SEPTEMBER 30,               YEAR ENDED DECEMBER 31,
                                      -------------       ----------------------------------------
                                      1996     1995       1995     1994     1993     1992     1991
                                      ----     ----       ----     ----     ----     ----     ----
                                                                         
Ratio of earnings to fixed
  charges..........................   3.53     2.88       1.63     2.08       (a)      (a)      (a)
                                      ====     ====       ====     ====     ====     ====     ====

 
- ---------
 
(a) Earnings did not cover fixed charges by $281 million for 1993, by $197
    million for 1992 and by $681 million for 1991.
 
                                USE OF PROCEEDS
 
     USX intends to use the net proceeds from the sale of the Debt Securities
for general corporate purposes, the refunding of outstanding long-term
indebtedness and other financial obligations, rate management and leveling of
its debt maturity schedule.
 
                       DESCRIPTION OF THE DEBT SECURITIES
 
     The Debt Securities will be general unsecured obligations of USX and will
rank pari passu with the other general unsecured obligations of USX. The Debt
Securities will be issued under an Indenture, dated as of March 15, 1993,
between PNC Bank, National Association (the "Trustee") and USX (the
"Indenture"). A copy of the Indenture is filed as an exhibit to the Registration
Statement. The following summaries of certain provisions of the Indenture do not
purport to be complete and are qualified in their entirety by reference to the
provisions of the Indenture, which are incorporated by reference herein. Certain
capitalized terms used herein are defined in the Indenture. The Section numbers
referred to in the following summaries are references to relevant sections of
the Indenture.
 
GENERAL
 
     The Indenture does not limit the principal amount of Debt Securities or
other indebtedness which may be issued thereunder from time to time by USX.
 
     The Debt Securities of any Series may be issued in definitive form or, if
provided in the Prospectus Supplement relating thereto, may be represented in
whole or in part by a Global Security or Securities, registered in the name of a
Depositary designated by USX. Each Debt Security represented by a Global
Security is referred to herein as a "Book-Entry Security."
 
     Debt Securities may be issued from time to time in an aggregate principal
amount or initial public offering price of up to $750,000,000 or the equivalent
thereof in foreign denominated currency or units based on or relating to foreign
denominated currencies, including European Currency Units ("ECU"), and will be
offered independently or together on terms determined by market conditions at
the time of sale. The Debt Securities may be issued in one or more series with
the same or various maturities and may be sold at par, a premium or an original
issue discount. Debt Securities sold at an original issue discount may bear no
interest or interest at a rate which is below market rates.
 
     Reference is made to the Prospectus Supplement for the specific terms of
the Debt Securities offered hereby, including the following (to the extent
applicable to a particular series of Debt Securities): (i) designation,
aggregate principal amount, purchase price (expressed as a percentage of the
principal amount thereof), and denomination; (ii) date of maturity; (iii) if
other than currency of the United States, the currency or units based on or
relating to currencies for which Debt Securities may be purchased and in which
principal and any premium or interest will or may be payable; (iv) interest rate
or rates (or the manner of calculation thereof), if any; (v) the times at which
any such interest will be payable; (vi) the place or places where principal and
any premium and interest will be payable; (vii) any redemption or sinking fund
provisions or other repayment obligations and any remarketing arrangements
related thereto; (viii) any index used to
 
                                        5
   26
 
determine the amount of payment of principal of and any premium and interest on
the Debt Securities; (ix) the application, if any, of the defeasance provisions
to the Debt Securities; (x) if other than the principal amount thereof, the
portion of the principal amount of the Debt Securities which shall be payable
upon declaration of acceleration of the maturity thereof; (xi) if other than
100% of the principal amount thereof plus accrued interest, the Change in
Control Purchase Price or Prices applicable to purchases of Debt Securities upon
the occurrence of a Change in Control; (xii) whether the Debt Securities will be
issued in whole or in part in the form of one or more Global Securities and, in
such case, the Depositary for such Global Securities; and (xiii) any other
specific terms of the Debt Securities, including any terms which may be required
by or advisable under United States laws or regulations.
 
     Except with respect to Book-Entry Securities, Debt Securities may be
presented for exchange or registration of transfer, in the manner, at the places
and subject to the restrictions set forth in the Debt Securities and the
Prospectus Supplement. Such services will be provided without charge, other than
any tax or other governmental charge payable in connection therewith, but
subject to the limitations provided in the Indenture. For a description of
payments of principal of and any premium and interest on, and transfer of,
Book-Entry Securities, and exchanges of Global Securities representing
Book-Entry Securities, see "Book-Entry Securities" hereunder.
 
CERTAIN COVENANTS OF USX
 
  Creation of Certain Liens
 
     If USX or any Subsidiary of USX shall mortgage, pledge, encumber or subject
to a lien, (hereinafter to "Mortgage" or a "Mortgage," as the context may
require) as security for any indebtedness for money borrowed (i) any blast
furnace facility or raw steel producing facility, or rolling mills which are a
part of a plant which includes such a facility, or (ii) any property capable of
producing oil or gas; and which, in either case, is located in the United States
and is determined to be a principal property by the Board of Directors of USX in
its discretion, USX will secure or will cause such Subsidiary to secure each
Series of the Debt Securities equally and ratably with all indebtedness or
obligations secured by the Mortgage then being given and with any other
indebtedness of USX or such Subsidiary then entitled thereto; provided, however,
that this covenant shall not apply in the case of: (a) any Mortgage existing on
the date of the Indenture (whether or not such Mortgage includes an
after-acquired property provision); (b) any Mortgage, including a purchase money
Mortgage, incurred in connection with the acquisition of any property (any
Mortgage incurred within 180 days after such acquisition or the completion of
construction shall be deemed to be in connection with such acquisition), the
assumption of any Mortgage previously existing on such acquired property or any
Mortgage existing on the property of any corporation when it becomes a
Subsidiary of USX; (c) any Mortgage on such property in favor of the United
States, or any State, or instrumentality of either, to secure partial, progress
or advance payments to USX or any Subsidiary of USX pursuant to the provisions
of any contract or any statute; (d) any Mortgage on such property in favor of
the United States, any State, or instrumentality of either, to secure borrowings
for the purchase or construction of the property Mortgaged; (e) any Mortgage in
connection with a sale or other transfer of oil or gas in place for a period of
time or in an amount such that the purchaser will realize therefrom a specified
amount of money or specified amount of minerals or any interest in property of
the character commonly referred to as an "oil payment" or "production payment";
(f) any Mortgage on any property arising in connection with or to secure all or
any part of the cost of the repair, construction, improvement, alteration,
exploration, development or drilling of such property or any portion thereof;
(g) any Mortgage on any pipeline, gathering system, pumping or compressor
station, pipeline storage facility, other pipeline facility, drilling equipment,
drilling platform, drilling barge, any movable railway, marine or automotive
equipment, gas plant, office building, storage tank, or warehouse facility, any
of which is located on any property included under clause (ii) above; (h) any
Mortgage on any equipment or other personal property used in connection with any
property included under clause (ii) above; (i) any Mortgage on any property
included under clause (ii) above arising in connection with the sale of accounts
receivable resulting from the sale of oil or gas at the wellhead; or (j) any
renewal of or substitution for any Mortgage permitted under the preceding
clauses. Notwithstanding the foregoing, USX may and may permit its Subsidiaries
to grant Mortgages or incur liens on property covered by the restriction
described above so long as
 
                                        6
   27
 
the net book value of the property so encumbered, together with all property
subject to the restriction on certain sale and leasebacks described below, does
not at the time such Mortgage or lien is granted exceed five percent (5%) of
Consolidated Net Tangible Assets, (as such term is defined in the Indenture).
(Section 4.03)
 
     "Consolidated Net Tangible Assets" means the aggregate value of all assets
of USX and its subsidiaries after deducting therefrom (a) all current
liabilities (excluding all long-term debt due within one year), (b) all
investments in unconsolidated subsidiaries and all investments accounted for on
the equity basis and (c) all goodwill, patent and trademarks, unamortized debt
discount and other similar intangibles (all determined in conformity with
generally accepted accounting principles and calculated on a basis consistent
with USX's most recent audited consolidated financial statements). (Section
1.01)
 
     As of the date of this Prospectus, neither USX nor any subsidiary of USX
has any property referred to in either clause (i) or (ii) above and under
"Limitations on Certain Sales and Leasebacks" below, that has been determined by
the Board of Directors of USX to be a principal property.
 
  Limitations on Certain Sale and Leasebacks
 
     USX will not, nor will it permit any Subsidiary to, sell or transfer (i)
any blast furnace facility or raw steel producing facility, or rolling mills
which are a part of a plant which includes such a facility or (ii) any property
capable of producing oil or gas; and which, in either case, is located in the
United States and is determined to be a principal property by the Board of
Directors of USX in its discretion with the intention of taking back a lease,
thereof; provided, however, this covenant shall not apply if (a) the lease is to
a Subsidiary (or to USX in the case of a Subsidiary); (b) the lease is for a
temporary period by the end of which it is intended that the use of the property
by the lessee will be discontinued; (c) USX or a Subsidiary could, in accordance
with Section 4.03, described above, Mortgage such property without equally and
ratably securing the Debt Securities; (d) the transfer is incident to or
necessary to effect any operating, farm out, farm in, unitization, acreage
exchange, acreage contributions, bottom hole or dry hole arrangements or pooling
agreement or any other agreement of the same general nature relating to the
acquisition, exploration, maintenance, development and operation of oil and gas
properties in the ordinary course of business or as required by regulatory
agencies having jurisdiction over the property; or (e) USX promptly informs the
Trustee of such sale, the net proceeds of such sale are at least equal to the
fair value (as determined by resolution adopted by the Board of Directors of
USX) of such property and USX within 180 days after such sale applies an amount
equal to such net proceeds (subject to reduction by reason of credits to which
USX is entitled, under the conditions specified in the Indenture) to the
retirement or in substance defeasance of funded debt of USX or a Subsidiary.
(Section 4.04)
 
  Merger and Consolidation
 
     USX will not merge or consolidate with any other corporation or sell or
convey all or substantially all of its assets to any person, firm or
corporation, except that USX may merge or consolidate with, or sell or convey
all or substantially all of its assets to, any other corporation, provided that
(i) USX shall be the continuing corporation or the successor corporation (if
other than USX, as the case may be) shall be a corporation organized and
existing under the laws of the United States of America or a State thereof and
such corporation shall expressly assume the due and punctual payment of the
principal of and any premium and interest on all the Debt Securities, according
to their tenor, and the due and punctual performance and observance of all of
the covenants and conditions of the Indenture to be performed by USX and (ii)
USX or such successor corporation, as the case may be, shall not, immediately
after such merger, consolidation, sale or conveyance, be in default in the
performance of any such covenant or condition and no event which with the lapse
of time, the giving of notice or both would constitute an Event of Default shall
have occurred and be continuing. (Section 11.01)
 
     If upon any consolidation or merger of USX with or into any other
corporation, or upon any sale or conveyance of substantially all of the
properties of USX, or upon any acquisition by USX of all or any part of the
property of another corporation, any property owned immediately prior thereto
would thereupon become subject to any mortgage, lien, pledge, charge or
encumbrance, USX, prior to such event, will secure the Debt
 
                                        7
   28
 
Securities (equally and ratably with any other indebtedness of USX secured
thereby) by a lien on all of such property of USX, prior to all liens, charges
and encumbrances other than any theretofore existing thereon. (Section 11.03)
 
PURCHASE OF DEBT SECURITIES UPON A CHANGE IN CONTROL
 
     In the event of any Change in Control (as defined below) of USX, each
holder of Debt Securities will have the right, at that holder's option, subject
to the terms and conditions of the Indenture, to require USX to become obligated
to purchase all of that holder's Debt Securities on the date that is 35 Business
Days after the occurrence of such Change in Control (the "Change in Control
Purchase Date") at a cash price equal to (i) unless otherwise specified in the
terms of such Debt Securities, 100% of the principal amount thereof, together
with accrued interest to such Change in Control Purchase Date (except that
interest installments due prior to such Change in Control Purchase Date will be
payable to the holders of such Debt Securities of record at the close of
business on the relevant record dates according to their terms and the
provisions of the Indenture), or (ii) such other price or prices as may be
specified in the terms of such Debt Securities (the "Change in Control Purchase
Prices"). (Section 4.07)
 
     Within 15 Business Days after a Change in Control, USX is obligated to mail
to the Trustee and to all holders of Debt Securities of any Series at their
addresses shown in the Debt Security register (and to beneficial owners as
required by applicable law) a notice regarding the Change in Control, stating,
among other things: (i) the last date on which the Change in Control purchase
right may be exercised, (ii) the Change in Control Purchase Price, (iii) the
Change in Control Purchase Date, (iv) the name and address of the Paying Agent,
and (v) the procedures that holders must follow to exercise these rights. USX
will cause a copy of such notice to be published in a daily newspaper of
national circulation. (Section 4.07)
 
     To exercise this right, a holder of Debt Securities of any Series must
deliver a Change in Control Purchase Notice to the Paying Agent for that Series
at its address set forth in USX's notice regarding the Change in Control at any
time prior to the close of business on the Change in Control Purchase Date. The
Change in Control Purchase Notice shall state (i) the certificate numbers of the
Debt Securities to be delivered by the holder thereof for purchase by USX and
(ii) that such Debt Securities are to be purchased by USX pursuant to the
applicable provisions of the Debt Securities and USX's notice regarding the
Change in Control. (Section 4.07)
 
     Upon receipt by USX of the Change in Control Purchase Notice, the holder of
the Debt Security in respect of which such notice was given shall (unless such
notice is withdrawn as specified in the Indenture) thereafter be entitled to
receive solely the Change in Control Purchase Price with respect to such Debt
Security. Any Change in Control Purchase Notice may be withdrawn by the holder
of Debt Securities of any Series by a written notice of withdrawal delivered to
the Paying Agent for that Series at any time prior to the close of business on
the Change in Control Purchase Date. The notice of withdrawal shall state the
certificate numbers of the Debt Securities as to which the withdrawal notice
relates. (Section 4.08)
 
     Payment of the Change in Control Purchase Price for a Debt Security of any
Series for which a Change in Control Purchase Notice has been delivered and not
withdrawn is conditioned upon delivery of such Debt Security (together with
necessary endorsements) to the Paying Agent for that Series at its address set
forth in USX's notice regarding the Change in Control, at any time (whether
prior to, on or after the Change in Control Purchase Date) after the delivery of
such Change in Control Purchase Notice. (Section 4.07) Payment of the Change in
Control Purchase Price for such Debt Security will be made promptly following
the later of the Change in Control Purchase Date or the time of delivery of such
Debt Security. (Section 4.08)
 
     Under the Indenture, a "Change in Control" of USX is deemed to have
occurred at such time as (i) any "person" or "group" of persons (excluding USX,
any Subsidiary, any employee stock ownership plan or any other employee benefit
plan of USX) shall have acquired "beneficial ownership" (within the meaning of
Section 13(d) or 14(d) of the Exchange Act and the applicable rules and
regulations thereunder) of shares of Voting Stock representing at least 35% of
the outstanding Voting Power of USX, (ii) during any period of twenty-five
consecutive months, commencing before or after the date of the Indenture,
individuals who at the beginning of such twenty-five month period were directors
of USX (together with any replacement or
 
                                        8
   29
 
additional directors whose election was recommended by incumbent management of
USX or who were elected by a majority of directors then in office) cease to
constitute a majority of the Board of Directors of USX, or (iii) any person or
group of related persons shall acquire all or substantially all of the assets of
USX; provided, that a Change in Control shall not be deemed to have occurred
pursuant to clause (iii) above if USX shall have merged or consolidated with or
transferred all or substantially all of its assets to another corporation in
compliance with the provisions of Section 11.01 of the Indenture (relating to
when USX may merge or transfer assets) and the surviving or successor or
transferee corporation is no more leveraged than was USX immediately prior to
such event. For purposes of this definition, the term "leveraged" when used with
respect to any corporation shall mean the percentage represented by the total
assets of that corporation divided by its stockholders' equity, in each case
determined and as would be shown in a consolidated balance sheet of such
corporation prepared in accordance with generally accepted accounting principles
in the United States of America. The term "substantially all" in clause (iii)
above has not been quantified for purposes of defining Change in Control and,
depending upon the factual circumstances, there may be uncertainty as to when a
Change in Control has occurred for purposes of determining the rights of holders
of Debt Securities pursuant to this provision.
 
     Notwithstanding the foregoing, a Change in Control will not be deemed to
have occurred by virtue of (i) USX, any Subsidiary of USX, any employee stock
ownership plan or any other employee benefit plan of USX or any such Subsidiary,
or any Person holding Voting Stock for or pursuant to the terms of any such
employee benefit plan, acquiring beneficial ownership of shares of Voting Stock,
whether representing 35% or more of the outstanding Voting Power of USX or
otherwise or (ii) any Person whose ownership of shares of Voting Stock
representing 35% or more of the outstanding Voting Power of USX results solely
from USX's calculation from time to time of the relative voting rights of
Marathon Stock, Steel Stock and Delhi Stock.
 
     "Voting Stock" means stock of USX of any class or classes (however
designated) having ordinary voting power for the election of the directors of
USX, other than stock having such power only by reason of the happening of a
contingency. "Voting Power" means the total voting power represented by all
outstanding shares of all classes of Voting Stock. (Section 4.07)
 
     In the event a Change in Control occurs, USX intends to comply with any
applicable securities laws or regulations, including any applicable requirements
of Rule 14e-1 under the Exchange Act. The Change in Control purchase feature of
the Debt Securities may in certain circumstances make more difficult or
discourage a takeover of USX. The Change in Control purchase feature, however,
is not the result of management's knowledge of any specific effort to accumulate
shares of Common Stock or to obtain control of USX by means of a merger, tender
offer, solicitation or otherwise, or part of a plan by management to adopt a
series of anti-takeover provisions. The Change in Control purchase feature is
similar to that contained in other debt offerings of USX as a result of
negotiations between USX and the underwriters thereof.
 
     Except as described above, the Change in Control purchase feature does not
afford holders of the Debt Securities protection against possible adverse
effects of a reorganization, restructuring, merger or similar transaction
involving USX.
 
     Although USX's existing indebtedness does not limit USX's ability to
purchase Debt Securities, USX's ability to purchase Debt Securities in the
future may be limited by the terms of any then existing borrowing arrangements
and by its financial resources.
 
EVENTS OF DEFAULT
 
     An Event of Default with respect to Debt Securities of any Series is
defined in the Indenture as being: (i) default in the payment of the principal
of or premium, if any, on any of the Debt Securities of such Series when due and
payable; (ii) default in the payment of interest on the Debt Securities of such
Series when due, continuing for 30 days; (iii) default in the payment of the
Change in Control Purchase Price of any of the Debt Securities of such Series as
and when the same shall become due and payable; (iv) default in the deposit of
any sinking fund payment with respect to any Debt Security of such Series when
due; (v) failure by USX in the performance of any other covenant or agreement in
the Debt Securities of such Series or in the Indenture continued for a period of
90 days after notice of such failure as provided in the Indenture; (vi) certain
events
 
                                        9
   30
 
of bankruptcy, insolvency, or reorganization with respect to USX; or (vii) any
other Event of Default provided with respect to Debt Securities of that Series.
(Section 6.01)
 
     USX is required annually to deliver to the Trustee officers' certificates
stating whether or not the signers have any knowledge of any default in the
performance by USX of certain covenants. (Section 4.06)
 
     In case an Event of Default shall occur and be continuing with respect to
any Series, the Trustee or the holders of not less than 25% in principal amount
of the Debt Securities of such Series then outstanding may declare the Debt
Securities of such Series to be due and payable. (Section 6.01) The Trustee is
required to give holders of the Debt Securities of any Series written notice of
a default with respect to such Series as and to the extent provided by the Trust
Indenture Act. (Section 6.07)
 
     If, however, at any time after the Debt Securities of such Series have been
declared due and payable, and before any judgment or decree for the moneys due
has been obtained or entered, USX shall pay or deposit with the Trustee amounts
sufficient to pay all matured installments of interest upon the Debt Securities
of such Series and the principal of all Debt Securities of such Series which
shall have become due, otherwise than by acceleration, together with interest on
such principal and, to the extent legally enforceable, on such overdue
installments of interest and all other amounts due under the Indenture shall
have been paid, and any and all defaults with respect to such Series under the
Indenture shall have been remedied, then the holders of a majority in aggregate
principal amount of the Debt Securities of such Series then outstanding, by
written notice to USX and the Trustee, may waive all defaults with respect to
such Series and rescind and annul the declaration that the Debt Securities of
such Series are due and payable. (Section 6.01) In addition, prior to any such
declaration that the Debt Securities of such Series are due and payable, the
holders of a majority in aggregate principal amount of the Debt Securities of
such Series may waive any past default and its consequences with respect to such
Series, except a default in the payment of the principal of or any premium or
interest on any Debt Securities of such Series. (Section 6.06)
 
     The Trustee is under no obligation to exercise any of the rights or powers
under the Indenture at the request, order or direction of any of the holders of
Debt Securities, unless such holders shall have offered to the Trustee
reasonable security or indemnity. (Section 7.02) Subject to such provisions for
the indemnification of the Trustee and certain limitations contained in the
Indenture, the holders of a majority in aggregate principal amount of the Debt
Securities of each Series at the time outstanding shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of such Series. (Section 6.06)
 
MODIFICATION OF THE INDENTURE
 
     The Indenture contains provisions permitting USX and the Trustee to modify
the Indenture or enter into or modify any supplemental indenture without the
consent of the holders of the Debt Securities in regard to matters as shall not
adversely affect the interests of the holders of the Debt Securities, including,
without limitation, the following: (a) to evidence the succession of another
corporation to USX; (b) to add to the covenants of USX further covenants,
restrictions, conditions or provisions for the benefit or protection of the
holders of any or all Series of Debt Securities or to surrender any right or
power conferred upon USX by the Indenture; (c) to cure any ambiguity or to
correct or supplement any provision of the Indenture (or supplements) which may
be defective or inconsistent with any other provision in the Indenture (or
supplements); to convey, transfer, assign, mortgage or pledge any property to or
with the Trustee; or to make such other provisions in regard to matters or
questions arising under the Indenture as shall not adversely affect the
interests of the holders of the Debt Securities then outstanding; (d) to add to,
change or eliminate any of the provisions of the Indenture in respect of one or
more Series of Debt Securities thereunder, under certain conditions specified
therein; (e) to evidence the appointment of a successor trustee and to add to or
change provisions of the Indenture necessary to provide for or facilitate the
administration of the trusts under the Indenture by more than one trustee; (f)
to set forth the form and any terms of any Series of Debt Securities which USX
and the Trustee deem necessary or desirable to include in a supplemental
indenture; and (g) to add to or change any of the provisions of the Indenture to
such extent as shall be necessary or desirable to permit or facilitate the
issuance of Debt Securities in bearer form, registrable or not registrable as to
principal,
 
                                       10
   31
 
and with or without interest coupons. USX and the Trustee may otherwise modify
the Indenture or any supplemental indenture with the consent of the holders of
not less than 66 2/3% in aggregate principal amount of each Series of Debt
Securities affected thereby at the time outstanding, except that no such
modifications shall (i) extend the fixed maturity of any Debt Securities, or
reduce the principal amount thereof or reduce the rate or extend the time of
payment of any premium or interest thereon, or change the currency in which the
Debt Securities are payable, without the consent of the holder of each Debt
Security so affected, or (ii) reduce the aforesaid percentage of Debt Securities
of any Series, the consent of the holders of which is required for any such
modifications or supplemental indenture, without the consent of the holders of
all Debt Securities affected thereby then outstanding. (Article Ten)
 
SATISFACTION AND DISCHARGE; DEFEASANCE AND COVENANT DEFEASANCE
 
     The Indenture shall be satisfied and discharged if (i) USX shall deliver to
the Trustee all Debt Securities then outstanding for cancellation or (ii) all
Debt Securities shall have become due and payable or are to become due and
payable within one year and USX shall deposit an amount sufficient to pay the
principal, premium, if any, and interest to the date of maturity, provided that
in either case USX shall have paid all other sums payable under the Indenture.
(Section 12.01)
 
     The Indenture provides, if such provision is made applicable to the Debt
Securities of a Series, that USX may elect either (A) to defease and be
discharged from any and all obligations with respect to any Debt Security of
such Series (except for the obligations to register the transfer or exchange of
such Debt Security, to replace temporary or mutilated, destroyed, lost or stolen
Debt Securities, to maintain an office or agency in respect of the Debt
Securities and to hold moneys for payment in trust) ("defeasance") or (B) to be
released from its obligations with respect to such Debt Security under Sections
4.03, 4.04, 4.07, 4.09, 11.01 and 11.03 of the Indenture (being the restrictions
described above under "Certain Covenants of USX" and USX's obligations described
under "Purchase of Debt Securities upon a Change in Control") and (ii) that
Sections 6.01(d), 6.01(e) (as to Sections 4.03, 4.04, 4.07, 4.09, 11.01 and
11.03) and 6.01(h), as described in clauses (iv), (v) and (vii) under "Events of
Default" above, shall not be deemed to be Events of Default under the Indenture
with respect to such Series ("covenant defeasance"), upon the deposit with the
Trustee (or other qualifying trustee), in trust for such purpose, of money
and/or Government Obligations (as defined) which through the payment of
principal and interest in accordance with their terms will provide money, in an
amount sufficient to pay the principal of (and premium, if any) and interest on
such Debt Security, on the scheduled due dates therefor. In the case of
defeasance, the holders of such Debt Securities are entitled to receive payments
in respect of such Debt Securities solely from such Trust. Such a trust may only
be established if, among other things, USX has delivered to the Trustee an
Opinion of Counsel (as specified in the Indenture) to the effect that the
holders of the Debt Securities affected thereby will not recognize income, gain
or loss for Federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance or covenant defeasance had not occurred. Such Opinion of
Counsel, in the case of defeasance under clause (A) above, must refer to and be
based upon a ruling of the Internal Revenue Service or a change in applicable
Federal income tax law occurring after the date of the Indenture. (Section
12.02)
 
RECORD DATES
 
     The Indenture provides that in certain circumstances USX or the Trustee may
establish a record date for determining the holders of outstanding Debt
Securities of a Series entitled to join in the giving of notice or the taking of
other action under the Indenture by the holders of the Debt Securities of such
Series.
 
BOOK-ENTRY SECURITIES
 
     The following description of Book-Entry Securities will apply to any Series
of Debt Securities issued in whole or in part in the form of a Global Security
or Securities except as otherwise provided in the Prospectus Supplement relating
thereto.
 
                                       11
   32
 
     Upon issuance, all Book-Entry Securities of like tenor and having the same
date of original issue will be represented by a single Global Security. Each
Global Security representing Book-Entry Securities will be deposited with, or on
behalf of, the Depositary, which will be a clearing agent registered under the
Exchange Act. The Global Security will be registered in the name of the
Depositary or a nominee of the Depositary.
 
     Ownership of beneficial interest in a Global Security representing
Book-Entry Securities will be limited to institutions that have accounts with
the Depositary or its nominee ("participants") or persons that may hold
interests through participants. In addition, ownership of beneficial interests
by participants in such a Global Security will only be evidenced by, and the
transfer of that ownership interest will only be effected through, records
maintained by the Depositary or its nominee for such Global Security. Ownership
of beneficial interest in such a Global Security by persons that hold through
participants will only be evidenced by, and the transfer of that ownership
interest within such participant will only be effected through, records
maintained by such participant. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such laws may impair this ability to transfer beneficial
interests in such a Global Security.
 
     Payment of principal of and any premium and interest on Book-Entry
Securities represented by any Global Security registered in the name of or held
by the Depositary or its nominee will be made to the Depositary or its nominee,
as the case may be, as the registered owners and holder of the Global Security
representing such Book-Entry Securities. None of USX, the Trustee or any agent
of USX or the Trustee will have any responsibility or liability for any aspect
of the Depositary's records or any participant's records relating to or payments
made on account of beneficial ownership interests in a Global Security
representing such Book-Entry Securities or for maintaining, supervising or
reviewing any of the Depositary's records or any participant's records relating
to such beneficial ownership interests. Payments by participants to owners of
beneficial interests in a Global Security held through such participants will be
governed by the Depositary's procedures, as is now the case with securities held
for the accounts of customers registered in "street name," and will be the sole
responsibility of such participants.
 
     No Global Security may be transferred except as a whole by the Depositary
for such Global Security to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary.
 
     A Global Security representing Book-Entry Securities of any Series is
exchangeable for definitive Debt Securities of such Series in registered form,
of like tenor and of an equal aggregate principal amount, only if (a) the
Depositary notifies USX that it is unwilling or unable to continue as Depositary
for such Global Security or the Depositary ceases to be a clearing agency
registered under the Exchange Act, (b) USX in its sole discretion determines
that such Global Security shall be exchangeable for definitive Debt Securities
in registered form, or (c) there shall have occurred and be continuing an Event
of Default with respect to the Debt Securities of that Series. Any Global
Security that is exchangeable pursuant to the preceding sentence shall be
exchangeable in whole for definitive Debt Securities in registered form, of like
tenor and of an equal aggregate principal amount, and in the authorized
denominations for that Series. Such definitive Debt Securities shall be
registered in the name or names of such person or persons as the Depositary
shall instruct the Trustee. It is expected that such instructions may be based
upon directions received by the Depositary from its participants with respect to
ownership of beneficial interests in such Global Security.
 
     Except as provided above, owners of beneficial interests in such Global
Security will not be entitled to receive physical delivery of Debt Securities in
definitive form and will not be considered the holders thereof for any purpose
under the Indenture, and no Global Security representing Book-Entry Securities
shall be exchangeable, except for another Global Security of like denomination
and tenor to be registered in the name of the Depositary or its nominee.
Accordingly, each person owning a beneficial interest in such Global Security
must rely on the procedures of the Depositary and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a holder under the Indenture. USX
understands that under existing industry practices, in the event that USX
requests any action of holders or an owner of a beneficial interest in such
Global Security desires to give or take any action that a holder is entitled to
give or take under the Indenture, the Depositary would authorize the
 
                                       12
   33
 
participants holding the relevant beneficial interests to give or take such
action, and such participants would authorize beneficial owners owning through
such participant to give or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
 
CONCERNING THE TRUSTEE
 
     PNC Bank, National Association is also trustee for Marathon Oil Company's
7% Monthly Interest Guaranteed Notes Due 2002, which are guaranteed by USX, for
eighteen series of obligations issued by various governmental authorities
relating to environmental projects at various USX facilities, for an aggregate
principal amount of $1.5 billion of debt securities issued by USX under an
Indenture between USX and the Trustee dated July 1, 1991 and for $900 million of
Debt Securities which have heretofore been issued by USX under the Indenture.
USX and its subsidiaries maintain ordinary banking relationships, including
loans and deposit accounts, with PNC Bank, National Association and anticipate
that they will continue to do so.
 
                              PLAN OF DISTRIBUTION
 
     USX may sell the Debt Securities to or through underwriters or directly to
purchasers, agents or dealers or through brokers.
 
     Offers to purchase Debt Securities may be solicited directly by USX or
brokers or dealers designated by USX from time to time. Any such broker or
dealer may be deemed to be an underwriter as that term is defined in the
Securities Act, and will be named in the Prospectus Supplement, together with
the compensation payable thereto by USX in connection with the sale of the Debt
Securities.
 
     Underwriters, agents, brokers and dealers may be entitled under agreements
which may be entered into with USX to indemnification by USX against certain
civil liabilities, including liabilities under the Securities Act. Such
underwriters, agents, brokers and dealers may engage in transactions with, or
perform services for, USX in the ordinary course of business.
 
     The place and time of delivery for the Debt Securities in respect of which
this Prospectus is delivered will be set forth in the accompanying Prospectus
Supplement.
 
                             VALIDITY OF SECURITIES
 
     The validity of the issuance of the Debt Securities will be passed upon for
USX by D. D. Sandman, Esq., General Counsel & Senior Vice President--Human
Resources and Secretary of USX or by J.A. Hammerschmidt, Assistant General
Counsel and Assistant Secretary of USX. Messrs. Sandman and Hammerschmidt, in
their capacities as General Counsel & Senior Vice President--Human Resources and
Secretary and Assistant General Counsel and Assistant Secretary, are paid
salaries by USX and participate in various employee benefit plans offered to
officers of USX generally.
 
                                    EXPERTS
 
     The consolidated financial statements of USX, the financial statements of
the Marathon Group, the financial statements of the U.S. Steel Group and the
financial statements of the Delhi Group as of December 31, 1995 and 1994 and for
each of the three years in the period ended December 31, 1995, incorporated in
this Prospectus by reference to the Annual Report on Form 10-K for the year
ended December 31, 1995, have been so incorporated in reliance on the reports of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
 
                                       13
   34
 
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED
HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY USX OR ANY UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF USX SINCE THE DATES AS OF WHICH INFORMATION IS
GIVEN IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
 
                            ------------------------
 
                               TABLE OF CONTENTS
 


                                        PAGE
                                        ----
                                     
        PROSPECTUS SUPPLEMENT
Risk Factors Relating to DECS........   S-3
USX Corporation......................   S-5
RMI Titanium Company.................   S-5
Relationship Between USX Corporation
  and RMI Titanium Company...........   S-6
Price Range of RMI Common Stock and
  Dividends..........................   S-7
Use of Proceeds......................   S-8
Description of the DECS..............   S-8
Certain United States Federal Income
  Tax Considerations.................   S-16
Plan of Distribution.................   S-19
Legal Opinions.......................   S-20

                PROSPECTUS

Available Information................     2
Incorporation of Certain Documents by
  Reference..........................     2
USX Corporation......................     3
Ratio of Earnings to Fixed Charges...     5
Use of Proceeds......................     5
Description of the Debt Securities...     5
Plan of Distribution.................    13
Validity of Securities...............    13
Experts..............................    13

 

5,000,000 DECSSM
(DEBT EXCHANGEABLE FOR
COMMON STOCKSM)
 
USX CORPORATION
 
    % EXCHANGEABLE NOTES
DUE FEBRUARY 1, 2000



SALOMON BROTHERS INC
 
LEHMAN BROTHERS


PROSPECTUS SUPPLEMENT

DATED , 1996
   35
 




 
                         [Attached Prospectus Follows]
   36
 





 
                      [This page intentionally left blank]
   37
 
     INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
     REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
     SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
     MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
     REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
     CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
     NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
     OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
     QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
 
                             SUBJECT TO COMPLETION
 
                               NOVEMBER 18, 1996
PROSPECTUS

5,000,000 SHARES                                                     [RMI LOGO]

RMI TITANIUM COMPANY

COMMON STOCK
($.01 PAR VALUE)
 
This Prospectus relates to 5,000,000 shares of common stock, par value $.01 per
share (the "Common Stock") of RMI Titanium Company (the "Company" or "RMI")
which may be delivered by USX Corporation ("USX"), at its option, pursuant to
the terms of USX's   % Exchangeable Notes due February 1, 2000 (the "Debt
Exchangeable for Common Stock(sm)" or "DECS(sm)"). This Prospectus accompanies a
prospectus and prospectus supplement of USX (the "DECS Prospectus") relating to
the sale by USX of 5,000,000 DECS (the "DECS Offering"). The DECS Prospectus
does not constitute a part of this Prospectus nor is it incorporated by
reference herein.
 
USX has granted the Underwriters of the DECS a 30-day option to purchase up to
an additional 483,600 DECS, which may be exchanged at their maturity for
additional shares of Common Stock. Such option has been granted solely to cover
over-allotments, if any. To the extent that the over-allotment option is not
exercised by the Underwriters in full, USX may, subject to certain limitations,
sell up to 483,600 shares of Common Stock pursuant to this Prospectus. See "Plan
of Distribution." RMI will not receive any of the proceeds from the offering
contemplated hereby.
 
The Common Stock is traded on the New York Stock Exchange, Inc. ("NYSE") under
the symbol "RTI." On November 15, 1996, the last reported sale price of the
Common Stock on the NYSE Composite Tape was $23.375 per share. See "Price Range
of Common Stock and Dividends."
 
"Debt Exchangeable for Common Stock" and "DECS" are service marks of Salomon
Brothers Inc.
 
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED CAREFULLY BY PROSPECTIVE INVESTORS.
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
 
The date of this Prospectus is             , 1996.
   38
 
     THE COMPANY HAS BEEN ADVISED THAT, IN CONNECTION WITH THE OFFERING BY USX
OF THE DECS, THE UNDERWRITERS OF THE DECS MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DECS OR THE COMMON STOCK AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NYSE (WITH RESPECT TO THE COMMON STOCK
ONLY), IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
                             AVAILABLE INFORMATION
 
     RMI is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy and information
statements and other information filed by RMI may be inspected and copied at
prescribed rates at the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the public
reference facilities maintained by the Commission at Seven World Trade Center,
New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. The Common Stock is listed on the NYSE, and such
reports, proxy statements and other information can also be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005. The Commission
maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission, including RMI.
 
     RMI has filed a Registration Statement on Form S-3 (the "Registration
Statement") with the Commission pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits thereto, to which reference is
hereby made. Statements contained herein concerning the provisions of certain
documents are not necessarily complete, and in each instance reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
     The following documents heretofore filed by RMI with the Commission (file
no. 1-10319) are incorporated herein by reference:
 
     (a) Annual Report on Form 10-K for the year ended December 31, 1995, as
         amended by Form 10-K/A filed on April 29, 1996.
 
     (b) Quarterly Reports on Form 10-Q for the periods ended March 31, June 30
         and September 30, 1996.
 
     (c) The description of the Registrant's Common Stock contained in the
         Registration Statement of RMI on Form 8-A filed on September 1, 1989.
 
     All documents filed by RMI pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Common Stock offered hereby shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the respective dates of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
 
     RMI undertakes to provide without charge, to each person, including any
beneficial owner, to whom a Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the information incorporated by
reference in this Prospectus, other than exhibits to such information (unless
such exhibits are specifically incorporated by reference into the information
that this Prospectus incorporates). Requests for such copies should be directed
to the Director-Investor Relations, RMI Titanium Company, 1000 Warren Avenue,
Niles, Ohio 44446. The telephone number is (330) 544-7622.
 
                                        2
   39
 
                                    SUMMARY
 
     The following summary is qualified in its entirety by reference to the
detailed information set forth elsewhere or incorporated by reference in this
Prospectus. As used in this Prospectus, the terms "RMI" and "Company" mean RMI
Titanium Company, its predecessors and consolidated subsidiaries, taken as a
whole, unless the context indicates otherwise.
 
                                  THE COMPANY
 
     RMI is a leading U.S. producer of titanium mill and fabricated products for
the global market. The Company's mill products, which include ingot, slab,
bloom, billet, bar, plate, sheet, strip and welded tube, are processed by RMI's
customers to provide products for use in the aerospace industry and other
industrial markets, including, most recently, golf club manufacturing. The
Company's fabricated products, which include pipe, tube and cut shapes, are used
primarily in the aerospace, oil and gas, geothermal energy production and
chemical process industries as well as for a number of other industrial
applications. Sales to the commercial and military aerospace industries
accounted for approximately 53% and 15%, respectively, of RMI's 1995 sales. In
1995, RMI reported sales of $171.2 million, an operating loss of $5.2 million
(including a $5.0 million asset impairment charge) and a net loss of $4.6
million (which reflects a $7.2 million tax benefit and such asset impairment
charge). RMI has reported operating income and net income for each fiscal
quarter subsequent to the third quarter of 1995 and, for the nine months ended
September 30, 1996, reported sales of $177.4 million, operating income of $22.5
million and net income of $21.4 million. The foregoing interim data is
unaudited.
 
     Titanium is one of the newest specialty metals. Its physical
characteristics include high strength-to-weight ratio, high temperature
performance and superior corrosion and erosion resistance. Titanium is extracted
from ore through a chemical reduction process to form titanium sponge, a porous
metallic material which is purchased by RMI and melted, along with titanium
scrap and various alloying agents, to form ingots. Ingots are then converted
into various mill product shapes and fabricated products.
 
     Historically, commercial and military aerospace have been the major markets
for RMI as sophisticated aircraft have required high performance metals such as
titanium for use in bulkheads, tail sections, wing supports and various engine
components and other sub-assemblies. Based on data of the U.S. Geological Survey
(including its predecessor agency, the U.S. Bureau of Mines, the "USGS"), total
domestic titanium industry mill product shipments declined from 55 million
pounds in 1989 to 34 million pounds in 1991. Such shipments only recovered
modestly during the years 1991 through 1994. This pattern reflected a sharp
decline in military aerospace consumption and a decline in commercial aircraft
build rates. Beginning in 1995, military build rates have stabilized at the
reduced level and commercial aircraft build rates have improved. See
"Business--Industry Overview."
 
     In 1995, most major U.S. airline carriers reported stronger operating
profits and, in the second half of 1995 and through the first nine months of
1996, aircraft manufacturers increased aircraft build rates. The firm order
backlog for Boeing, McDonnell Douglas and Airbus Industrie, as reported by The
Airline Monitor, increased to 2,299 planes at September 30, 1996 from 1,869
planes at year end 1995 and 1,742 planes at year end 1994. This backlog includes
a significant number of wide body designs which have higher titanium
requirements. RMI sells titanium products to each of such aircraft manufacturers
and to subcontractors in the commercial aerospace industry. No single customer
of RMI accounted for more than 10% of RMI's sales in any of its last three
fiscal years.
 
     The use of titanium in golf clubs emerged in 1995 as an important
nonaerospace market for the titanium industry. Management believes this market
accounted for approximately 8% of U.S. titanium industry mill product shipments
in 1995. Almost every major golf club manufacturer, including Callaway,
Cleveland, Cobra, Lynx, Taylor Made, Titleist and Tommy Armour, is currently
marketing a titanium driver, and several of the major manufacturers are using
titanium in club heads for other clubs, including woods, irons and putters.
Certain golf club manufacturing companies have introduced full sets of titanium
golf clubs. In response to this market demand, a number of golf club head
casting companies have announced expansions of
 
                                        3
   40
 
their titanium golf club head production facilities. The Company sells titanium
mill products directly to golf club head casting companies who, in turn, sell
their products to major golf club manufacturers. Sales to the emerging golf club
market increased to 7% of RMI's sales in the first nine months of 1996 from less
than 1% of RMI's sales in 1995 and 1994. In addition to the direct benefit of
increased sales, demand from the golf club market also benefits RMI indirectly
by increasing utilization in the titanium mill products industry, resulting in
increased prices for titanium mill products industry-wide.
 
     The increase in commercial aircraft build rates and the recent emergence of
the golf club market have resulted in increased demand for titanium mill
products. Based on USGS data, U.S. industry mill product shipments in the first
six months of 1996 (the latest figures available) were 29 million pounds
compared with 20 million pounds in the first six months of 1995, 44 million
pounds in 1995 and 35 million pounds in 1994. RMI estimates that U.S. industry
mill product shipments to the commercial aerospace market in 1995 were
approximately 20 million pounds, 18% higher compared to 1994, and that 1995 U.S.
industry mill product shipments to the golf club market were approximately 3.5
million pounds. See "Risk Factors--Dependence on Cyclical Aerospace Markets" and
"--No Assurances as to New Product and Market Development."
 
     RMI's shipments of titanium mill products in the first nine months of 1996
were 13.4 million pounds compared with 10.6 million pounds in the first nine
months of 1995, 14.4 million pounds in 1995 and 11.4 million pounds in 1994.
RMI's average realized mill product sales price increased to $11.71 per pound in
the first nine months of 1996 from $10.14 in the comparable period in 1995,
$10.23 per pound in 1995 and $9.63 per pound in 1994 as demand from the
commercial aerospace and golf club markets continued to strengthen. Reflecting
these trends, RMI's order backlog increased to $327 million at September 30,
1996 from $134 million at year-end 1995 and $67 million at year-end 1994. As of
September 30, 1996, orders for over 84% of RMI's anticipated 1997 shipments had
been booked. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Outlook."
 
     RMI's strategy is to build on its leading position in the worldwide
titanium industry while maintaining a strong financial condition and stringent
quality, safety and environmental standards. RMI is emphasizing higher margin
products in its traditional markets, while continuing to develop new markets and
products such as seamless tubulars for oil and gas and geothermal energy
production and the use of billet for golf club applications as described above.
RMI completed delivery in 1995 of the world's first titanium drilling riser for
the Conoco Heidrun project (one of the world's largest floating, deep-water oil
and gas production platforms) in the North Sea. The Company has also entered
into a contract to supply seamless titanium pipe for a number of geothermal
energy production facilities in California. In addition, RMI has entered into
several cooperative ventures to encourage and develop titanium products for use
in the oil and gas industry, including a teaming arrangement to market,
engineer, fabricate and install titanium production risers, flow lines and other
titanium subsea systems. Sales to the oil and gas and geothermal energy
production industries were 1% of RMI's sales in the first nine months of 1996,
3% of RMI's sales in 1995 and 9% of RMI's sales in 1994, the last year RMI
recognized significant revenues under the Conoco Heidrun drilling riser contract
referred to above. See "Risk Factors--No Assurances as to New Product and Market
Development."
 
     RMI's principal manufacturing plant is located in Niles, Ohio. Other
manufacturing operations are located in Ashtabula, Ohio; Hermitage,
Pennsylvania; Sullivan and Washington, Missouri; and Salt Lake City, Utah. RMI's
equipment, facilities and its products meet the most stringent quality
standards, including ISO-9002. RMI's products are marketed worldwide through its
own sales organization and a network of independent distributors.
 
     RMI's principal executive offices are located at 1000 Warren Avenue, Niles,
Ohio 44446, and its telephone number is (330) 544-7604.
 
                                        4
   41
 
                            THE OFFERING OF THE DECS
 
     The DECS are being offered by USX pursuant to the DECS Prospectus. Pursuant
to the terms of the DECS, USX may deliver shares of Common Stock to the holders
of the DECS at maturity thereof. This Prospectus relates to the delivery by USX
pursuant to the DECS of up to 5,000,000 shares of Common Stock, plus up to an
additional 483,600 shares of Common Stock with respect to DECS that are the
subject of an over-allotment option granted by USX to the Underwriters in the
DECS Offering solely to cover over-allotments, if any. To the extent that the
over-allotment option is not exercised by the Underwriters in full, USX may,
subject to certain limitations, sell up to 483,600 shares of Common Stock
pursuant to this Prospectus. See "Plan of Distribution." USX currently owns
5,483,600 shares of RMI Common Stock. For a description of the relationship
between USX and RMI see "Risk Factors--Principal Shareholder," "--Potential
Conflicts of Interest," "Management" and "Certain Relationships."
 
                                  RISK FACTORS
 
     See "Risk Factors" for a discussion of certain factors that should be
considered carefully by prospective investors.
 
                                        5
   42
 
                     SUMMARY SELECTED FINANCIAL INFORMATION
 
    The following summary selected financial information has been derived from
the Consolidated Financial Statements of RMI for each of the five years during
the period ended December 31, 1995. The summary selected financial information
for the nine month periods ended September 30, 1996 and 1995 has been derived
from the unaudited Consolidated Financial Statements of RMI, which, in the
opinion of the Company, reflect all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation. The information set
forth below should be read in connection with the Consolidated Financial
Statements included elsewhere herein and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
 


                                    NINE MONTHS ENDED
                                      SEPTEMBER 30,                            YEAR ENDED DECEMBER 31,
                                 -----------------------     ------------------------------------------------------------
                                   1996           1995         1995         1994         1993         1992         1991
                                 --------       --------     --------     --------     --------     --------     --------
                                                (DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE AND PRICE DATA)
                                                                                            
STATEMENT OF OPERATIONS DATA:
Sales:
  Commercial aerospace.........  $106,092       $ 65,876     $ 91,117     $ 54,366     $ 56,059     $ 68,872     $ 87,187
  Military aerospace...........    23,728         19,405       26,174       23,869       24,238       25,629       30,099
  Nonaerospace.................    47,566         37,355       53,875       65,157       47,100       41,106       48,282
                                 --------       --------     --------     --------     --------     --------     --------
      Total sales..............   177,386        122,636      171,166      143,392      127,397      135,607      165,568
Operating income (loss)........    22,502         (8,100)      (5,220)      (7,971)     (10,764)     (11,387)     (52,712)
  Operating income (loss)
    includes:
    Asset impairment charge....        --          5,031        5,031           --           --           --           --
    Plant closure costs........        --             --           --           --           --           --       37,123
Income (loss) before cumulative
  effect of change in
  accounting principle.........    21,375(1)     (13,339)(1)   (4,608)(1)  (11,562)     (11,955)     (14,062)     (57,085)
Cumulative effect of change in
  accounting principle.........        --             --           --       (1,202)(2)  (16,938)(3)       --           --
Net income (loss)..............    21,375(1)     (13,339)(1)   (4,608)(1)  (12,764)     (28,893)     (14,062)     (57,085)
Net income (loss) per common
  share before cumulative
  effect of change in
  accounting principle.........  $   1.19       $  (0.87)    $  (0.30)    $  (1.45)    $  (8.14)    $  (9.66)    $ (39.17)
Net income (loss) per common
  share........................      1.19          (0.87)       (0.30)       (1.60)      (19.67)       (9.66)      (39.17)
Cash dividends per common
  share........................        --             --           --           --           --           --          .75
Weighted average shares
  outstanding (in thousands)...    17,930         15,289       15,302        7,958        1,469        1,456        1,458

BALANCE SHEET DATA:
  (at end of period)
Working capital................  $115,938       $ 84,916     $ 86,738     $ 74,694     $ 66,319     $ 72,229     $ 79,820
Total assets...................   205,999        160,614      171,559      160,810      152,471      153,257      173,888
Long-term debt.................     6,630         67,950       64,020       54,740       66,660       62,280       58,800
Total shareholders' equity.....   140,662(4)      29,806       36,889       42,596       27,861       63,302       77,705

OPERATING AND OTHER FINANCIAL DATA:
Sales:
  Mill products................  $144,773       $100,475     $138,077     $103,790     $ 96,453     $110,509     $128,803
  Fabricated products and other
    services...................    25,428         17,589       26,904       31,134       20,512       16,745       17,260
  Other(5).....................     7,185          4,572        6,185        8,468       10,432        8,353       19,505
                                 --------       --------     --------     --------     --------     --------     --------
      Total sales..............  $177,386       $122,636     $171,166     $143,392     $127,397     $135,607     $165,568
Mill product shipments
  (thousands of pounds):
  Aerospace....................    10,273          7,944       10,526        8,109        7,619        8,699        9,379
  Nonaerospace.................     3,137          2,691        3,884        3,370        3,406        2,585        1,938
                                 --------       --------     --------     --------     --------     --------     --------
      Total shipments..........    13,410         10,635       14,410       11,479       11,025       11,284       11,317
Average realized mill product
  sales price (per pound)......  $  11.71       $  10.14     $  10.23     $   9.63     $   9.60     $  10.20     $  11.69
EBITDA (6).....................  $ 26,457       $ (4,914)    $  4,632     $ (2,122)    $ (2,912)    $ (4,703)    $ (5,535)
Cash flows (used in) provided
  from:
  Operating activities.........  $(22,311)      $(11,590)    $ (7,725)    $(13,217)    $ (4,229)    $ (2,562)    $ 15,049
  Investing activities.........    (2,392)        (1,009)      (1,422)      (1,115)        (106)      (2,444)      (8,799)
  Financing activities.........    24,917         13,210        9,271       14,424        4,358        3,398       (4,818)
                                 --------       --------     --------     --------     --------     --------     --------
      Total....................  $    214       $    611     $    124     $     92     $     23     $ (1,608)    $  1,432
Order backlog at period
  end(7).......................  $327,000       $110,000     $134,000     $ 67,000     $ 70,000     $ 53,000     $ 82,000
Active employees at period
  end..........................       902            832          844          817          782          843        1,172

 
                                                   (footnotes on following page)
 
                                        6
   43
 
- ---------
 
(1) Includes a $0.6 million income tax benefit for the nine months ended
    September 30, 1996 and a $7.2 million income tax benefit for the year ended
    December 31, 1995. See Note 4 to the unaudited Consolidated Financial
    Statements for the nine months ended September 30, 1996 and Note 8 to the
    Consolidated Financial Statements for the year ended December 31, 1995.
 
(2) Reflects the adoption of SFAS No. 112. See Note 11 to the Consolidated
    Financial Statements for the year ended December 31, 1995.
 
(3) Reflects immediate recognition of the transition obligation determined as of
    the January 1, 1993 adoption of SFAS No. 106. See Note 11 to the
    Consolidated Financial Statements for the year ended December 31, 1995.
 
(4) Includes net proceeds of $80.3 million from the sale of Common Stock in May
    1996.
 
(5) Includes sales of discontinued products of $2.6 million and $13.2 million in
    1992 and 1991, respectively.
 
(6) EBITDA consists of income before interest expense, income taxes,
    depreciation and amortization and the charges related to an asset impairment
    in 1995, changes in accounting principles in 1994 and 1993, and a plant
    closing in 1991. Management believes EBITDA is useful in measuring the
    Company's ability to service its debt. EBITDA should not be considered as an
    alternative to, or more meaningful than, operating income or cash flow, as
    determined in accordance with generally accepted accounting principles, as
    an indicator of the Company's operating performance.
 
(7) "Order backlog" is defined as firm purchase orders generally subject, upon
    payment of specified charges, to cancellation by the customer.
 
                                        7
   44
 
                           FORWARD-LOOKING STATEMENTS
 
     Certain statements incorporated by reference or made in this Prospectus
under the captions "Summary," "Risk Factors," "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
elsewhere in this Prospectus are "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995, and are subject to the
safe harbor created by that Act. Such forward-looking statements include,
without limitation, statements regarding estimates of industry shipments, the
future availability and prices of raw materials, the availability of capital on
acceptable terms, the competitiveness of the titanium industry, potential
environmental liabilities, the Company's order backlog and the conversion of
that backlog into revenue, the Company's strategies and other statements
contained herein that are not historical facts. Because such forward-looking
statements involve risks and uncertainties, there are important factors that
could cause actual results to differ materially from those expressed or implied
by such forward-looking statements. Factors that could cause actual results to
differ materially include, but are not limited to, changes in general economic
and business conditions (including in the aerospace and golf club markets), the
Company's ability to recover its raw material costs in the pricing of its
products, the availability of capital on acceptable terms, actions of
competitors, the extent to which the Company is able to develop new markets for
its products, the time required for such development and the level of demand for
such products, changes in the Company's business strategies, and other factors
discussed under "Risk Factors."
 
                                  RISK FACTORS
 
     The following factors should be considered in connection with an investment
in shares of RMI Common Stock. Any one or more of such factors may cause RMI's
actual results for various financial reporting periods to differ materially from
those expressed in any forward-looking statements made by or on behalf of RMI.
 
DEPENDENCE ON CYCLICAL AEROSPACE MARKETS
 
     The U.S. titanium industry, including RMI, is dependent on the aerospace
industry, which has traditionally consumed the majority of titanium mill
products produced in the U.S. Sales to the aerospace industry accounted for
approximately 73% of RMI's sales in the first nine months of 1996, 68% in 1995,
54% in 1994 and 63% in 1993.
 
     The cyclical nature of the aerospace industry has been the principal cause
of the fluctuations in performance of companies in the titanium industry. Prior
to the years 1989 and 1990, the last peak in the titanium industry cycle
occurred during the years 1979 through 1982. While U.S. industry mill products
shipment volumes, as reported by the USGS, averaged approximately 52 million
pounds for the years 1988 through 1990, such shipments dropped to an average of
approximately 35 million pounds for the years 1991 through 1994. The declining
U.S. military budget and production cutbacks at Boeing, McDonnell Douglas and
Airbus Industrie resulting from reduced commercial airline demand for new
aircraft negatively affected demand and prices for titanium products until 1995,
when demand for titanium products used in the production of commercial aircraft
began to increase. See "History of Losses" below and "Business--Industry
Overview," "--Products and Markets" and "--Mill Products." In 1995, most major
U.S. commercial airline carriers reported stronger operating profits and, in the
second half of 1995, aircraft manufacturers began to increase aircraft build
rates. This trend continued through the first nine months of 1996. RMI can give
no assurance as to the extent or duration of any recovery in the commercial
aerospace market or the extent to which such recovery will result in increases
in demand for titanium products.
 
HISTORY OF LOSSES
 
     RMI's results of operations for the years 1991 through 1995 reflect the
severe downturn in market conditions experienced generally by the titanium
industry over that period. RMI incurred net losses of $117.4 million from 1991
through 1995, including $18.2 million in charges relating to accounting changes,
a $37.1 million charge in 1991 for closure of its sponge facilities and a $5.0
million asset impairment charge in 1995. Excluding the effects of these items,
for the years 1991 through 1995, RMI's aggregate net losses were $57.1 million.
The Company operated profitably in the last quarter of 1995 and in the first
nine months of
 
                                        8
   45
 
1996. Continuing profitable operations will depend on continued strength in
orders from aerospace markets, favorable pricing and the Company's ability to
control its raw material and other costs. See "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
 
POTENTIAL LIMITATIONS ON ACCESS TO CAPITAL
 
     RMI believes that if the titanium industry experiences an extended
downturn, RMI may require additional capital to maintain its operations and
competitive position. RMI can give no assurance that it will have access to such
capital when required. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
 
     The Company's Credit Agreement dated April 15, 1996 (the "Credit Facility")
contains covenants requiring, among other things, that the Company maintain a
minimum ratio of consolidated earnings before interest and taxes to consolidated
interest expense and a minimum consolidated net worth. The Company believes that
continuation of profitable operations experienced in the last four calendar
quarters and its reduction in outstanding indebtedness will permit it to comply
with these covenants. However, if the Company is unable to comply with these
covenants, borrowings under the Credit Facility could become due and the
Company's ability to obtain capital could be impaired. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Credit Facility."
 
DEPENDENCE ON OTHERS FOR RAW MATERIALS AND CERTAIN CONVERSION SERVICES
 
     RMI is dependent on third parties for titanium sponge, its basic raw
material. RMI is party to two long-term contracts, one of which is with a
competing producer of mill products, that permit RMI to purchase eleven million
pounds of sponge per year through 1999 and seven million pounds per year
thereafter through 2003. Prices, which are set annually, are a function of the
volume purchased and following 1996 are, at RMI's option, at market price or the
price in effect for specified years plus changes in certain of the suppliers'
costs such as labor, electricity and materials. Each contract is subject to
renegotiation or termination if certain events occur. One of the contracts
guarantees an additional two million pounds of availability per year at a
negotiated price. See "Business--Raw Materials." The Company purchases the
balance of its sponge requirements at negotiated prices from a number of
suppliers.
 
     If demand for titanium products continues to increase, it is possible that
supplies of titanium sponge could become limited or that prices could increase
substantially, or both, and, as a result, that the Company's costs could rise
accordingly. To the extent that the Company is unable to recover its increased
costs, operating results may be adversely affected.
 
     The Company is dependent upon the services of outside converters to perform
important conversion services with respect to certain of its products. An
interruption in these functions could have an adverse effect on the Company's
business in the short term. See "Business--Conversion Services."
 
ENVIRONMENTAL CONTINGENCIES
 
     RMI is subject to pervasive environmental laws and regulations as well as
various health and safety laws and regulations that are subject to frequent
modifications and revisions. While the costs of compliance for these matters
have not had a material adverse impact on the Company in the past, it is
impossible to predict accurately the ultimate effect these changing laws and
regulations, and the enforcement thereof, may have on it in the future. RMI is
involved in investigative or cleanup projects under federal or state
environmental laws at a number of waste disposal sites, including a Superfund
site. RMI can give no assurance that additional environmental investigation or
remediation obligations at other locations will not be asserted against it or
entities for which it may be responsible, whether by contract (including
indemnity agreements relating to environmental matters) or by operation of law.
 
     The Company is one of 31 companies identified by the U.S. Environmental
Protection Agency (the "EPA") as a potentially responsible party ("PRP") under
the Comprehensive Environmental Response,
 
                                        9
   46
 
Compensation and Liability Act ("CERCLA") with respect to a superfund site in
Ashtabula, Ohio. Recent studies have estimated the cost of remediation of this
site to be approximately $25 million. Under CERCLA, a PRP's liability can be
joint and several and, therefore, the Company could be liable for the entire
amount. Under allocation agreements with other PRP's, RMI's share has been
established at approximately 10%. Actual percentages may be more or less.
 
     At September 30, 1996, RMI had accrued $2.4 million for future
environmental-related costs. Based on available information, RMI believes that
its share of potential environmental-related costs will be in the range of $3.7
to $6.3 million in the aggregate, before expected contributions from third
parties (which does not include any amounts from insurers) of $2.1 million which
the Company believes are probable. As these proceedings continue toward final
resolution, amounts in excess of those already provided may be necessary to
discharge RMI from its obligations for these projects. See "Business--Legal
Proceedings--Environmental", Note 5 to the unaudited Consolidated Financial
Statements for the nine months ended September 30, 1996 and Note 15 to the
Consolidated Financial Statements for the year ended December 31, 1995 included
elsewhere herein. The ultimate resolution of environmental matters could,
individually or in the aggregate, be material to RMI's consolidated financial
statements.
 
NO ASSURANCES AS TO NEW PRODUCT AND MARKET DEVELOPMENT
 
     In an effort to lessen its dependence on the aerospace market and to
increase its participation in other markets, RMI has been devoting significant
resources to developing new markets and applications for its products,
principally in the oil and gas and geothermal energy production industries.
Other new markets, particularly golf clubs, have developed. RMI cannot give any
assurances as to the extent to which it will be able to develop new markets for
its products, the time required for such development or the level of demand for
such products. The consequence of failure to develop these new markets would be
that the Company's dependence on the cyclical aerospace industry would not be
reduced. See "Business--Products and Markets--Mill Products" and "--Fabricated
Products and Other Services."
 
TITANIUM INDUSTRY HIGHLY COMPETITIVE
 
     The titanium industry is highly competitive on a worldwide basis.
Competition is primarily on the basis of price, quality and timely delivery. In
recent years the industry has been suffering from excess production capacity,
which has intensified price competition for available business. Integrated and
nonintegrated producers of mill products are located primarily in the U.S.,
Japan, the former Soviet Union, Europe and China. Following closure of RMI's
sponge facilities in 1992, there are two remaining integrated producers in the
U.S. There are a small number of domestic non-integrated producers which produce
mill products from purchased sponge, scrap or ingot. RMI is the largest such
non-integrated producer. RMI currently obtains a significant portion of its
supply of sponge from a competing producer of mill products. Disruption of this
supply could have a material adverse effect on RMI. See "Business--Raw
Materials."
 
     Imports of titanium mill products from countries that receive the
most-favored-nation ("MFN") tariff rate are subject to a 15% tariff. The tariff
rate applicable to imports from countries that do not receive MFN treatment is
45%. Japanese producers, which benefit from MFN treatment, participate
significantly in the European market, but historically have not been a major
factor in the U.S. mill products market. The United States currently grants MFN
treatment to imports, including titanium mill product imports, from the former
Soviet Union countries including Russia. Effective October 18, 1993, the U.S.
Government extended the benefits of the Generalized System of Preferences
("GSP") to Russia. Under GSP, the U.S. grants duty-free access to semifinished
and agricultural products from developing countries and territories. Certain
titanium mill products are covered by GSP. However, titanium sponge, ingot and
slab have not been afforded GSP treatment. In 1995, a Russian producer began to
participate in the U.S. market for titanium products. This titanium producer has
the largest rated capacity in the world (although management believes practical
capacity is substantially less) and could materially affect competition if its
exports of titanium mill products were to increase significantly. See
"Business--Competition and Other Market Factors."
 
                                       10
   47
 
PRINCIPAL SHAREHOLDER
 
     As of October 31, 1996, USX was the owner of 5,483,600 shares of Common
Stock, constituting approximately 27% of the outstanding shares of Common Stock.
USX may be able to exercise effective control over the Company through its
representation on the Board of Directors of RMI and by reason of its substantial
voting power with respect to the election of directors and actions requiring
shareholder approval. See "Certain Relationships." The issuance of the DECS will
not affect the ability of USX to vote the shares of Common Stock owned by it.
See "--Potential Conflicts of Interest" and "--Limitation on Use of Tax Losses"
below. RMI is unable to predict the effect on the relationship between RMI and
USX of USX's issuance of the DECS or any transfer by USX (upon maturity of the
DECS or otherwise) of shares of Common Stock held by USX.
 
POTENTIAL CONFLICTS OF INTEREST
 
     Two executives of USX (one of whom is a director of USX) and one
non-employee director of USX serve on RMI's ten-member Board of Directors. One
of these USX executives also serves as RMI's Chairman. For information
concerning positions held by directors and officers of RMI with USX, see
"Management." These individuals owe fiduciary duties to RMI and USX and it is
possible that the interests of one entity may differ from the interests of the
other. Members of the Company's Board of Directors have been advised generally
to abstain from voting on matters where they may have a conflict of interest. If
a director were to vote in spite of a potential conflict of interest, there is a
possibility that such director may not vote consistent with RMI's best interest.
Possible differing interests could include future equity transactions by USX
which could trigger a change in ownership in RMI as provided under Section 382
of the Internal Revenue Code of 1986, as amended (the "Code"). See "--Limitation
on Use of Tax Losses" below, "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Income Tax Considerations--Section 382
Limitation" and "Certain Relationships."
 
LIMITATION ON USE OF TAX LOSSES
 
     At December 31, 1995, RMI had net operating loss carryforwards of
approximately $104 million, the ultimate realization of which depends on the
Company's ability to generate sufficient future taxable income prior to the
expiration dates of the loss carryforwards. Further, the loss carryforwards
could be subject to an annual limitation on their deductibility if a change in
its ownership should occur over any three-year period, as provided under Section
382 of the Code. The potential annual limitation under Section 382 with respect
to these tax attributes could restrict RMI's ability to use them to reduce
future income tax liabilities. While not free from doubt, the Company believes
that the sale of the DECS should not result in such an ownership change;
however, future equity transactions by RMI, USX or by either of these companies'
significant current or future shareholders (some of which will not be within the
control of RMI or USX) could cause an ownership change to occur. USX has agreed
to indemnify the Company for additional taxes incurred if the sale of the DECS
is determined to result in an ownership change, subject to certain limitations.
The Company is unable to determine whether an ownership change will occur if
Common Stock is exchanged for the DECS. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Income Tax
Considerations--Section 382 Limitation."
 
ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS
 
     Certain provisions of RMI's Amended Articles of Incorporation and its Code
of Regulations (the "Regulations"), the Credit Facility and Ohio law could
discourage potential acquisition proposals and could delay or prevent a change
in control of RMI. RMI is authorized to issue up to five million shares of
Preferred Stock, the relative rights and preferences of which may be fixed by
RMI's Board of Directors (subject to the provisions of the Amended Articles of
Incorporation), without shareholder approval. While RMI has no present plans to
issue any shares of Preferred Stock, the future issuance thereof may have the
effect of delaying, deferring or preventing a change in control of RMI or the
payment of dividends on Common Stock. The issuance of Preferred Stock could also
adversely affect the voting power of the holders of Common Stock, including the
loss of voting control to others. RMI's Amended Articles of Incorporation
provide that certain
 
                                       11
   48
 
extraordinary transactions, such as certain mergers and consolidations, a sale
or disposition of all or substantially all of the assets, a dissolution of RMI
and any amendment to the Amended Articles of Incorporation, require a two-thirds
vote of the shareholders. Other provisions of the Regulations provide that
directors may be removed only for cause and special meetings may be called only
by a shareholder or shareholders holding 50% of the shares of stock entitled to
vote. The acquisition by any person or group (other than USX) of beneficial
ownership of 25% or more of the voting capital stock of RMI and, within any
twelve month period, individuals who were directors of RMI ceasing to constitute
a majority of the Board of Directors of RMI will constitute events of default
under the Credit Facility entitling the banks to accelerate the maturity of
RMI's borrowings thereunder. In addition, certain provisions of Ohio law
regulate certain transactions between RMI and certain holders of Common Stock.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Credit Facility" and "Description
of Capital Stock."
 
IMPACT OF THE DECS ON THE MARKET FOR THE COMMON STOCK
 
     It is not possible to predict accurately how or whether the DECS will trade
in the secondary market or whether such market will be liquid. Any market that
develops for the DECS is likely to influence and be influenced by the market for
the Common Stock. For example, the price of the shares of Common Stock could
become more volatile and could be depressed by investors' anticipation of the
potential distribution into the market, upon the maturity of the DECS or
otherwise, of the additional number of shares of Common Stock held by USX. Such
shares currently constitute approximately 27% of the outstanding Common Stock.
See "Certain Relationships." The price of shares of Common Stock could also be
affected by possible sales of shares of Common Stock by investors who view the
DECS as a more attractive means of equity participation in RMI and by hedging or
arbitrage trading activity that may develop involving the DECS and the Common
Stock.
 
                                USE OF PROCEEDS
 
     The Company will not receive any proceeds from the sale of the DECS,
delivery thereunder of the shares of Common Stock or any other sale of shares of
Common Stock by USX to which this Prospectus relates.
 
                                 CAPITALIZATION
 
     The following table sets forth the consolidated capitalization of RMI as of
September 30, 1996. The data should be read in conjunction with the Consolidated
Financial Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" related thereto, included elsewhere herein.
 


                                                                           SEPTEMBER 30, 1996
                                                                           ------------------
                                                                         (DOLLARS IN THOUSANDS)
                                                                        
Long-term debt (including current maturities):
  Credit Facility(1)....................................................        $  5,900
  Industrial revenue bond...............................................             850
Shareholders' equity:
     Common Stock, $0.01 par value; 30,000,000 shares authorized;
       20,814,398 shares issued.........................................             208
     Additional paid-in capital.........................................         234,655
     Accumulated deficit................................................         (82,151)
     Excess minimum pension liability and deferred compensation.........          (8,972)
     Treasury Common Stock, at cost; 568,198 shares.....................          (3,078)
                                                                                --------
          Total shareholders' equity....................................         140,662
                                                                                --------
Total capitalization....................................................        $147,412
                                                                                ========

 
- ---------
 
(1) For information concerning the Credit Facility, see "Management's Discussion
    and Analysis of Financial Condition and Results of Operations--Liquidity and
    Capital Resources--Credit Facility."
 
                                       12
   49
 
                   PRICE RANGE OF COMMON STOCK AND DIVIDENDS
 
     The Common Stock is traded on the NYSE under the symbol "RTI." The
following table sets forth, for each of the quarterly periods indicated, the
high and low sales price for the Common Stock, as reported on the NYSE Composite
Tape and as adjusted for a 1-for-10 reverse stock split effective March 31,
1994.
 


            1994
            QUARTER                                              HIGH       LOW
            -------                                              ----       ----
                                                                      
            First.............................................   $21 1/4    $15
            Second............................................    17 5/8      2 3/8
            Third.............................................     2 3/4      2
            Fourth............................................     5 5/8      2 1/2
 
            1995
            QUARTER
            -------      
            First.............................................   $ 5 1/2    $ 3 1/8
            Second............................................     9 3/4      3 3/4
            Third.............................................    10 3/8      6 3/4
            Fourth............................................     9 7/8      6 1/2
 
            1996
            QUARTER
            -------
            First.............................................   $16 1/2    $ 7 3/8
            Second............................................    24 3/4     14
            Third.............................................    28 1/2     18 3/4
            Fourth (through November 15, 1996)................    26 3/4     21 3/8

 
     In June 1994, the Company commenced a rights offering pursuant to which
each holder of Common Stock was entitled to subscribe for shares of Common Stock
at a price of $2 per share. In July 1994, the Company issued approximately 13.8
million shares of Common Stock in that offering.
 
     On November 15, 1996, the reported last sale price of the Common Stock on
the NYSE Composite Tape was $23.375 per share.
 
     As of September 30, 1996, the Common Stock was held by 865 holders of
record.
 
     RMI has not paid dividends on its Common Stock since the second quarter of
1991. The declaration of dividends is at the discretion of the Board of
Directors of the Company. The declaration and payment of future dividends and
the amount thereof will be dependent upon the Company's results of operations,
financial condition, cash requirements for its business, future prospects and
other factors deemed relevant by the Board of Directors.
 
     The Credit Facility does not contain any restrictions on the payment of
dividends other than a financial covenant which requires RMI to maintain a
minimum consolidated net worth. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources--Credit Facility."
 
                                       13
   50
 
                                    BUSINESS
 
     The following information contains forward-looking statements which involve
certain risks and uncertainties. See "Forward-Looking Statements."
 
THE COMPANY
 
     RMI is a leading U.S. producer of titanium mill and fabricated products for
the global market. The Company's mill products are processed by RMI's customers
to provide products for use in the aerospace industry and other industrial
markets, including, most recently, golf club manufacturing. The Company's
fabricated products are used primarily in the aerospace, oil and gas, geothermal
energy production and chemical process industries as well as for a number of
other industrial applications. The Company also provides fabrication and
conversion services for titanium and other specialty metals producers.
 
     The Company is a successor to entities that have been operating in the
titanium industry since 1958. In 1990, USX and Quantum Chemical Corporation
("Quantum") transferred their entire ownership interest in the Company's
immediate predecessor, RMI Company, an Ohio general partnership, to the Company
in exchange for shares of Common Stock (the "Reorganization"). Quantum sold its
shares of Common Stock to the public while USX retained ownership of its shares.
At October 31, 1996, USX owned approximately 27% of the outstanding Common
Stock.
 
INDUSTRY OVERVIEW
 
     Titanium is one of the newest specialty metals. Its physical
characteristics include high strength-to-weight ratio, high temperature
performance and superior corrosion and erosion resistance. The first major
commercial application of titanium occurred in the early 1950's when it was used
as a component in aircraft gas turbine engines. Subsequent applications were
developed to use the material in other aerospace component parts and in airframe
construction.
 
     Historically, a majority of the U.S. titanium industry's output has been
used in aerospace applications. In recent years, increased quantities of the
industry's output have been used in nonaerospace applications. Based on data
published by the USGS, the Company estimates that more than 35% of the total
1995 U.S. market shipments, including exports, were made to nonaerospace
markets, including the oil and gas, geothermal energy production and chemical
process industries and golf club manufacturing.
 
     Aerospace demand originates from two aerospace sectors: commercial and
military. Since 1987, commercial aerospace has become the dominant factor in
titanium demand. The commercial aerospace sector is expected to continue to
dominate the demand for titanium as a result of the expected growth of worldwide
airline traffic and the need to repair and replace aging commercial airline
fleets and continuing depressed military aerospace markets.
 
     The cyclical nature of the aerospace industry has been the principal cause
of the fluctuations in performance of companies engaged in the titanium
industry. Over the past 19 years, U.S. titanium mill product shipments
registered cyclical peaks of 54 million pounds in 1980 and 55 million pounds in
1989. Beginning in 1991, the industry experienced a dramatic downturn in demand
for mill products. Domestic industry shipments fell from 53 million pounds in
1990 to 34 million pounds in 1991, a decrease of 35%, the largest single one
year decrease in the history of the industry. Domestic industry shipments only
recovered modestly during the years 1991 through 1994. This most recent decline
in industry shipments reflected a sharp decline in military aerospace
consumption and a decline in commercial aircraft build rates due in part to
significant financial losses suffered by commercial airline carriers. RMI's
average realized mill product selling prices also deteriorated throughout this
period reaching lows during the years 1993 and 1994 that were approximately 30%
below 1990.
 
     The following table highlights the cyclical nature of the titanium industry
by setting forth the total pounds of U.S. mill products shipped during the years
1977 through 1995 and the Company's shipments and average mill product prices
during such period.
 
                                       14
   51
 
                    SHIPMENT AND MILL PRODUCT PRICE HISTORY


Measurement                            RMI Ship-       Industry        RMI Avg.
  Period                                 ments         Shipments        Price
- -----------                            ---------       ---------       --------
                                                              
'77                                        9.6            21.4            5.0
'78                                       11.3            30.7            5.5
'79                                       13.0            33.0            8.1
'80                                       14.0            39.5           12.2 
'81                                       15.0            35.0           15.7
'82                                       10.0            28.0           16.3
'83                                        8.5            23.5           10.5
'84                                       13.7            31.3           10.0
'85                                       13.7            31.3           10.2
'86                                       13.0            29.0            9.6
'87                                       13.7            30.3            9.3
'88                                       14.5            34.5           10.7
'89                                       16.0            38.0           12.2
'90                                       16.5            34.5           13.1
'91                                       11.5            21.5           12.2
'92                                       11.5            23.5           11.3
'93                                       11.3            24.7           10.6
'94                                       11.6            23.4            9.9
'95                                       14.4            28.6           10.9


Sources: RMI and International Titanium Association.

     Commercial aerospace markets have shown a recent increase in demand while
military aerospace markets have stabilized at the reduced build rate levels. In
1995, most major U.S. commercial airline carriers reported stronger operating
profits and, in the second half of 1995 and through the first nine months of
1996, aircraft manufacturers increased build rates. As of September 30, 1996,
the leading manufacturers of commercial aircraft, Boeing Company, McDonnell
Douglas Corporation and Airbus Industrie, reported an aggregate of 2,299 planes
under firm order and deliverable over the next five years. The comparable
backlogs as of December 31, 1995, 1994 and 1993 were 1,869 planes, 1,742 planes
and 2,022 planes, respectively. RMI estimates, based on USGS data, that domestic
industry mill product shipments to the commercial aerospace market in 1995 were
approximately 20 million pounds, an increase of approximately 18% compared to
1994. Based on USGS data, total U.S. industry shipments in the first six months
of 1996 (the latest figures available) were 29 million pounds compared with 20
million pounds in the first six months of 1995, 44 million pounds in 1995 and 35
million pounds in 1994.
 
     The following data illustrates the cyclical profitability of worldwide
members of the International Civil Aviation Organization (excluding countries of
the former Soviet Union) and the relationship between their profitability and
firm aircraft orders. RMI can give no assurance as to the extent or duration of
any recovery in
 
                                       15
   52
 
the commercial aerospace market or the extent to which such recovery will result
in increases in demand for titanium products. See "Risk Factors--Dependence on
Cyclical Aerospace Markets."
 
                 AIRLINE PROFITABILITY AND FIRM AIRCRAFT ORDERS


Measurement          
  Period                           Operating Income        Annual Firm Orders
- -----------                        ----------------        ------------------
                                                           
'77                                       2629                     348
'78                                       3070                     659
'79                                        736                     530
'80                                       -634                     397
'81                                       -692                     269
'82                                       -160                     183
'83                                       2000                     282
'84                                       5100                     360
'85                                       4100                     685
'86                                       4600                     634
'87                                       7200                     631
'88                                      10200                   1,021
'89                                       7600                   1,345  
'90                                      -1500                     907
'91                                       -500                     462
'92                                      -1800                     464
'93                                       2300                     407
'94                                       8000                     369
'95                                      11000                     697


Source: Airline Monitor.
 
PRODUCTS AND MARKETS
 
     Titanium mill products consist of products such as ingot, slab, bloom,
billet, bar, plate, sheet, strip and welded tube. Fabricated products include
pipe, engineered tubular products, hot-formed and superplastically formed parts
for aerospace applications, cut shapes and titanium metal powders. Other
services include conversion and fabrication services for other titanium and
specialty metal producers and project management. In addition, the Company acts
as contractor for the U.S. Department of Energy ("DOE") for the remediation and
restoration of the Company's closed facilities in Ashtabula, Ohio.
 
     The amount of the Company's consolidated sales and the percentage of
consolidated sales represented by each class of product during the five years
ended December 31, 1995 and the nine months ended September 30, 1996 and 1995
were as follows:
 


                                                              SALES
                     NINE MONTHS ENDED
                       SEPTEMBER 30,                                         YEAR ENDED DECEMBER 31,
               -----------------------------     --------------------------------------------------------------------------------
                   1996             1995             1995             1994             1993             1992             1991
               ------------     ------------     ------------     ------------     ------------     ------------     ------------
                                                             (DOLLARS IN MILLIONS)
                                                                                    
Mill
 products....  $144.8    82%    $100.5    82%    $138.1    81%    $103.8    72%    $ 96.5    76%    $110.5    81%    $128.8    78%
Fabricated
 products and
 other
 services....    25.4    14       17.6    14       26.9    16       31.1    22       20.5    16       16.7    13       17.3    10
Other(1).....     7.2     4        4.5     4        6.2     3        8.5     6       10.4     8        5.8     4        6.3     4
Discontinued
 products(2)...     --   --         --    --         --    --         --    --         --    --        2.6     2       13.2     8
               ------   ---     ------   ---     ------   ---     ------   ---     ------   ---     ------   ---     ------   ---
  Total......  $177.4   100%    $122.6   100%    $171.2   100%    $143.4   100%    $127.4   100%    $135.6   100%    $165.6   100%
               ======   ===     ======   ===     ======   ===     ======   ===     ======   ===     ======   ===     ======   ===

 
- ---------
 
(1) Includes DOE remediation and restoration contract.
 
(2) Discontinued products includes titanium sponge, sodium chloride, sodium
    hypochlorite and metallic sodium, which are no longer manufactured by the
    Company.
 
                                       16
   53
 
     The following table summarizes consolidated sales and the percentage of
consolidated sales represented by market during the five years ended December
31, 1995 and the nine months ended September 30, 1996 and 1995:
 


                                                            SALES
                     NINE MONTHS ENDED
                       SEPTEMBER 30,                                         YEAR ENDED DECEMBER 31,
               -----------------------------     --------------------------------------------------------------------------------
                   1996             1995             1995             1994             1993             1992             1991
               ------------     ------------     ------------     ------------     ------------     ------------     ------------
                                                             (DOLLARS IN MILLIONS)
                                                                                    
Commercial
 aerospace...  $106.1    60%    $ 65.9    54%    $ 91.1    53%    $ 54.4    38%    $ 56.1    44%    $ 68.9    51%    $ 87.2    53%
Military
 aerospace...    23.7    13       19.4    16       26.2    15       23.9    17       24.2    19       25.6    19       30.1    18
Nonaerospace...   47.6   27       37.3    30       53.9    32       65.1    45       47.1    37       41.1    30       48.3    29
               ------   ---     ------   ---     ------   ---     ------   ---     ------   ---     ------   ---     ------   ---
  Total......  $177.4   100%    $122.6   100%    $171.2   100%    $143.4   100%    $127.4   100%    $135.6   100%    $165.6   100%
               ======   ===     ======   ===     ======   ===     ======   ===     ======   ===     ======   ===     ======   ===

 
  MILL PRODUCTS
 
     The Company produces a full range of titanium mill products which are used
in both the aerospace and nonaerospace markets.
 
     Aerospace.  Mill product sales to the commercial and military aerospace
industries accounted for approximately 69% and 9%, respectively, of RMI's mill
product sales during the first nine months of 1996, compared with 64% and 11% in
1995 and 50% and 13% in 1994. RMI sells titanium mill products to major aircraft
manufacturers and to subcontractors in the commercial and military aerospace
industries. The Company's products are certified and approved for use by all
major domestic and most international manufacturers of commercial and military
aircraft and jet engines. Products such as sheet, plate, strip, bar, billet and
ingot are utilized in aircraft bulkheads, tail sections, wing supports and
carry-through structures and various engine components including rotor blades,
vanes, discs, rings and engine cases.
 
     As of September 30, 1996, the leading manufacturers of commercial aircraft,
Boeing Company, McDonnell Douglas Corporation and Airbus Industrie, reported an
aggregate of 2,299 planes under firm order and deliverable over the next five
years. The comparable backlogs as of December 31, 1995, 1994 and 1993 were 1,869
planes, 1,742 planes and 2,022 planes, respectively. Included in the backlog for
September 30, 1996 are 244 firm orders for the new Boeing 777 wide-body
aircraft, which requires more titanium than any other commercial aircraft.
Deliveries of commercial aircraft by these three manufacturers totaled 345 in
the first nine months of 1996, 380 in 1995, 432 in 1994, and 546 in 1993.
Because it typically takes from 12 to 18 months from placement of an order until
delivery of a commercial aircraft, realized delivery rates generally lag behind
announced backlog estimates. In addition, changing economic conditions and
instability in the domestic commercial airline industry may cause manufacturers
to re-evaluate aircraft orders and options, thus affecting realized aircraft
delivery rates.
 
                                       17
   54
 
     The following table presents RMI's estimates, based on information from the
aircraft manufacturers, of the titanium mill product requirements of selected
commercial and military aircraft:
 
                  ESTIMATED TITANIUM MILL PRODUCT REQUIREMENTS
                                  PER AIRCRAFT
                            (in thousands of pounds)
 
                            
Commercial:
  Airbus Industrie             BUY-WEIGHT(1)(2)
     A319/A320/A321............       10-15
     A330......................       23-44
     A340......................        32

  Boeing
     737.......................       17-22
     747.......................       82-88
     757.......................       37-38
     767.......................       36-40
     777.......................      85-111

  McDonnell Douglas
     MD-11.....................       63-64

Military:
  General Dynamics             
     F-16 Falcon...............       6-10

  McDonnell Douglas
     F-15 Eagle................        62
     F/A-18 Hornet.............       10-13
     C-17......................        193
     F-22......................        120

  Sikorsky
     Blackhawk.................         6
     Super Stallion............        19
     Seahawk...................         5


 
- ---------
 
(1) Due to yield loss during milling and fabrication of parts, a smaller portion
    of the titanium buy-weight is ultimately used in the aircraft and engines.
 
(2) Ranges refer to aircraft with variable engine configurations.
 
     Nonaerospace.  Principal nonaerospace mill products include commercially
pure (unalloyed) strip, welded tube and plate used for oil and gas and
geothermal energy production, chemical processing and pulp and paper equipment.
Bar is sold for the production of medical implants and high-performance
automotive engine parts. The Company is also a leading supplier of commercially
pure titanium plate and strip, which offers superior corrosion resistance and
ductility for critical forming and metal expansion required in applications such
as heat exchangers and anodes for the chlorine industry. Nonaerospace sales
accounted for 22% of the Company's mill product sales in the first nine months
of 1996, 25% in 1995 and 37% in 1994. Since the Company's entry into strip
production in 1984 and tube production in 1986, sales of these two products have
grown to a majority of the Company's total nonaerospace mill product sales.
 
     The use of titanium in golf club heads emerged in 1995 as an important
nonaerospace product application for the titanium industry. Management believes
this market amounted to 3.5 million pounds, or approximately 8%, of U.S.
industry mill product shipments in 1995. While titanium golf clubs have been
used in Japan for over six years, with titanium woods currently commanding
approximately 60% of the Japanese market, they have only recently gained
significant popularity in the U.S. market. Titanium golf clubs have developed as
the latest of several technological innovations in the golf industry in the last
25 years.
 
     Titanium has become a desirable material for golf clubs due to its superior
strength-to-weight ratio as compared to steel. This characteristic allows club
manufacturers to create a larger club head without increasing the weight of the
club and to distribute weight more strategically around the club while
maintaining the club's structural integrity. Titanium also has a higher elastic
deformation than steel, providing optimal energy transfer at impact with the
ball and improved carry and distance. Titanium clubs have attracted the
attention of Professional Golf Association ("PGA"), Ladies PGA and Senior PGA
tour members, many of whom now use a titanium driver.
 
     Almost every major golf club manufacturer, including Callaway, Cleveland,
Cobra, Lynx, Taylor Made, Titleist and Tommy Armour, is currently marketing a
titanium driver, and several of the major manufacturers are using titanium in
club heads for other clubs, including woods, irons and putters. Certain golf
club manufacturing companies have introduced full sets of titanium golf clubs. A
number of golf club head casting
 
                                       18
   55
 
companies have announced expansions of their golf club head production
facilities. The Company sells titanium mill products directly to golf club head
casting companies who, in turn, sell their products to major golf club
manufacturers. Sales to the emerging golf club market increased to 7% of RMI's
sales in the first nine months of 1996 from less than 1% of RMI's sales in 1995
and 1994. In addition to the direct benefit of increased sales, demand from the
golf club market also benefits RMI indirectly by increasing utilization in the
titanium mill products industry, resulting in increased prices for titanium mill
products industry-wide.
 
  FABRICATED PRODUCTS AND OTHER SERVICES
 
     Fabricated products include pipe, engineered tubular products for the oil
and gas and geothermal energy production industries, hot-formed and
superplastically formed parts and cut shapes for aerospace applications and
titanium metal powders. Titanium powders are used for alloy additions,
superconductors, grain refinement of other metals and titanium powder metal
parts. Other services include conversion and fabrication services for other
titanium and specialty metals producers and project management. Revenues from
fabricated products and other services accounted for 14% of RMI's sales in the
first nine months of 1996, 16% in 1995 and 22% in 1994. Sales to the aerospace
market represented 66%, 51% and 41% of such revenues in the first nine months of
1996 and in 1995 and 1994, respectively, with sales to the nonaerospace market
representing the balance.
 
     The Company has devoted significant resources, the costs of which have been
expensed, to develop new applications and markets for titanium in the oil and
gas and geothermal energy production industries. Sales to the oil and gas and
geothermal energy production industries were 1% of RMI's sales in the first nine
months of 1996, 3% of RMI's sales in 1995 and 9% of RMI's sales in 1994.
 
     During 1995, the Company completed shipment of the world's first
high-pressure titanium drilling riser for use in the Conoco Heidrun project (one
of the world's largest floating, deep-water oil and gas production platforms)
located in the Norwegian sector of the North Sea. During 1995, the Company
received several orders, valued in excess of $3 million, to supply titanium
stress joints for use in the Oryx Energy Neptune Production Riser System in the
Gulf of Mexico.
 
     In late 1994, the Company was awarded a contract (expiring in January 1998)
to supply all of the seamless titanium pipe required for a number of geothermal
energy production facilities located in the Imperial Valley of California.
Deliveries under the initial order of $7 million were completed during the first
nine months of 1996.
 
     The Company continues to work closely with several oil companies and
engineering concerns to develop other titanium projects or applications in the
oil and gas and geothermal energy production industries. RMI has entered into
several cooperative ventures to encourage and develop titanium products for use
in the oil and gas industry. For example, in January 1995, the Company entered
into an agreement with Stolt Comex Seaway SA ("Stolt Comex"), a Norwegian-based
diversified contractor to the offshore oil and gas industry, to combine RMI's
and Stolt Comex's expertise to market, engineer, fabricate and install titanium
production risers, flow lines and other titanium subsea systems. Pursuant to
this agreement, the parties have entered into discussions to form a joint
venture if a commercial market for such subsea systems is proven to exist. In
addition, in February 1996, the Company, Stolt Comex and Kvaerner Oilfield
Products Ltd., a Norwegian engineering concern, entered into an agreement
pursuant to which the parties agreed to submit joint bids for titanium riser
systems.
 
  OTHER
 
     The Company has a long-term agreement with the DOE covering the remediation
and restoration of the Company's closed facilities in Ashtabula, Ohio, for which
the DOE is responsible as a result of work performed there by the Company for
the U.S. government. The Company is serving as the prime contractor during the
remediation and restoration period. Year-to-year revenues and the time of
completion of the project will depend on DOE funding. In the first nine months
of 1996, the Company recognized $7.2 million in such revenues compared to $6.2
million in 1995, $8.5 million in 1994 and $10.4 million in 1993. As the prime
contractor, the Company provides management services necessary to complete
assessment, clean-up and remediation activities.
 
                                       19
   56
 
EXPORTS
 
     Most of the Company's exports, with the exception of the drilling riser
discussed above under "Products and Markets--Fabricated Products and Other
Services," have consisted of titanium mill products used in aerospace markets.
Other exports include slab, commercially pure strip, plate and welded tubing
used in nonaerospace markets. The Company's export sales were 17% of sales in
the first nine months of 1996 and 18%, 27% and 19% of sales in 1995, 1994 and
1993, respectively. Such sales were made primarily to the European market, where
the Company believes it is a leader in supplying alloy flat-rolled titanium mill
products as well as rotating-quality billet. Export sales in 1994 and 1993
include revenues recognized in connection with the titanium drilling riser
contract. Most of the Company's export sales are made in U.S. dollars, which
minimizes exposure to foreign currency fluctuations.
 
     As a leading supplier of alloy flat-rolled titanium mill products to the
European market, the Company has worked through its distributors to secure
contracts to furnish mill products to the major European aerospace
manufacturers. As a result, the Company has significant export sales to
customers in France, the United Kingdom and Germany. In order to enhance its
presence in the European market, in 1992 the Company acquired a 40% ownership
interest in its French distributor, Reamet, SA. In addition, the Company has
expanded its operations in the United Kingdom to include a distribution and
service center facility in Birmingham, England. Operations at the facility
commenced during the second quarter of 1995. In 1996, the Company became a
qualified supplier to Rolls Royce Plc and received an order to supply material
from the Birmingham facility for use in fan blades and other critical rotating
parts in Rolls Royce's family of jet engines.
 
RAW MATERIALS
 
     The principal raw materials used in the production of titanium mill
products are titanium sponge, a porous metallic material; titanium scrap; and
alloying agents. RMI acquires its raw materials from a number of suppliers, both
domestic and foreign, under long-term contracts and other negotiated
transactions. The Company purchased approximately 12 million pounds of titanium
sponge in the first nine months of 1996 and approximately 12 million pounds of
titanium sponge in 1995. Requirements for sponge vary based upon product mix and
the level of scrap usage.
 
     Following the closure of its sponge production facilities in 1992, the
Company began purchasing its titanium sponge from outside sources. The Company
has entered into two long-term sponge supply arrangements, each with pricing
below the cost of sponge which was produced at the Company's own facilities
prior to their closure. In addition, the Company has supplemented its metal
requirements with additional sponge and raw material purchases, including
titanium scrap, from other U.S. and foreign suppliers.
 
     One of the sponge contracts, which is with a competing producer of mill
products, permits the Company to purchase up to seven million pounds per year at
specified prices per pound during 1996, depending on the volume of sponge
purchased, and thereafter through 2003 at the Company's option at either market
price (but not below the supplier's cost) or the price in effect under the
contract for 1996 plus adjustments for changes in certain of the supplier's
costs, such as labor, electricity and materials. The other contract, which is
with a Japanese supplier, permits the Company to purchase up to four million
pounds of sponge per year through 1999, either at market price or a 1994 base
price plus changes in certain of the supplier's costs, such as labor,
electricity and materials. In addition, this contract permits the Company to
purchase up to an additional two million pounds of sponge at negotiated prices.
These contracts are subject to renegotiation or termination under certain
circumstances. The Company purchases the balance of its sponge requirements
pursuant to short-term agreements or at negotiated prices. Prices for the
Company's 1996 and 1997 requirements have already been set under these contracts
and other short-term arrangements. See "Risk Factors--Dependence on Others for
Raw Materials and Certain Conversion Services" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
 
     In July 1996, the Company was notified that the Department of Commerce
released preliminary findings in a review of an existing anti-dumping order on
titanium sponge from Russia. The Department of Commerce determined that dumping
did not occur on sales made by Interlink, a major trading company for Russian-
 
                                       20
   57
 
produced titanium sponge, during the review period. A final determination
confirming the earlier finding was issued in November 1996. The final
determination can be appealed to the Court of International Trade but is
effective unless and until it is overturned. The Company purchases nearly all of
its Russian titanium sponge through Interlink. These purchases previously
carried an 84% dumping duty. The no-dumping finding eliminates this duty,
thereby allowing the Company access to lower cost sources for a significant
portion of its titanium sponge requirements.
 
     The Company purchases titanium tetrachloride, the primary raw material used
in the manufacture of titanium sponge, from SCM Chemicals, Inc. pursuant to a
long-term supply agreement expiring in 2003. Titanium tetrachloride is shipped
to one of the Company's long-term sponge suppliers where it is used in providing
sponge for the Company.
 
     The Company believes it has adequate sources for titanium sponge, scrap,
alloying agents and other raw materials.
 
COMPETITION AND OTHER MARKET FACTORS
 
     The titanium metals industry is highly competitive on a worldwide basis.
Competition is primarily on the basis of price, quality and timely delivery.
Titanium also competes with other metals such as stainless steel and nickel
based corrosion resistant alloys. A metal manufacturing company with rolling and
finishing facilities could participate in the mill product segment of the
titanium industry. However, entry into the titanium industry as an integrated
producer would require a significant investment of capital and extensive
technical expertise.
 
     Producers of titanium mill products are located primarily in the U.S.,
Japan, the former Soviet Union, Europe and China. Following closure of the
Company's sponge facilities in 1992, Oregon Metallurgical Corporation (Oremet)
and Titanium Metals Corporation of America (Timet) are the two remaining U.S.
integrated producers that produce their own sponge. There are also a small
number of domestic nonintegrated producers that, along with the Company, produce
mill products from purchased sponge, scrap or ingot. The Company does not
believe, however, that any of its nonintegrated U.S. competitors produce as full
a line of mill products as does RMI.
 
     Imports of titanium mill products from countries that receive the
most-favored-nation ("MFN") tariff rate are subject to a 15% tariff. The tariff
rate applicable to imports from countries that do not receive MFN treatment is
45%. Japanese producers, which benefit from MFN treatment, participate
significantly in the European market, but historically have not been a major
factor in the U.S. mill products market. The United States currently grants MFN
treatment to imports, including titanium mill product imports, from the former
Soviet Union countries, including Russia. Effective October 18, 1993, the U.S.
Government extended the benefits of the Generalized System of Preferences
("GSP") to Russia. Under GSP, the U.S. grants duty-free access to semifinished
and agricultural products from developing countries and territories. Certain
titanium mill products are covered by GSP. However, titanium sponge, ingot and
slab have not been afforded GSP treatment. In 1995, a Russian producer began to
participate in the U.S. market for titanium mill products. This titanium
producer has the largest rated capacity in the world (although management
believes practical capacity is substantially less) and could materially affect
competition if its exports of titanium mill products were to increase
significantly.
 
MARKETING AND DISTRIBUTION
 
     RMI markets its titanium mill products and related products and services
worldwide. Approximately 80% of the Company's sales are made through its own
sales force and the balance through independent distributors. RMI's domestic
sales force has offices in Niles, Ohio; Houston, Texas; Brea, California;
Washington, Missouri; and Salt Lake City, Utah. Technical marketing personnel
are available to service these offices and to assist in new product applications
and development. In addition, the Company's Customer Technical Service and
Research and Development Departments, both located in Niles, Ohio, provide
extensive customer support.
 
                                       21
   58
 
     In the U.S., RMI has expanded its market share by establishing
relationships with several specialized distributors that allow for a targeted
marketing approach to large customers that require a full-service distribution
supply. RMI also provides a direct distribution service on cut-to-size parts out
of its TRADCO, Inc. subsidiary in Washington, Missouri.
 
     Internationally, RMI maintains a sales office and distribution warehouse in
Birmingham, England. In December 1992, the Company completed an acquisition of a
40% ownership interest in its French distributor, Reamet, SA. The Company also
has independent distributors covering The Netherlands, Italy, Israel, Norway,
Spain, Sweden, Brazil, Belgium, Germany, Switzerland, Korea, Philippines,
Taiwan, South Africa, India and Australia.
 
MANUFACTURING FACILITIES
 
     The Company has over 728,000 square feet of manufacturing facilities
exclusive of office space, located primarily in Niles, Ohio. The Company's
principal manufacturing plants, the principal products produced at such plants
and their aggregate capacities are set forth below.
 
                            MANUFACTURING FACILITIES
 


                                                                      ANNUAL RATED     ANNUAL PRACTICAL
        LOCATION                           PRODUCT                      CAPACITY         CAPACITY(1)
        --------                           -------                      --------         -----------
                                                                              
Niles, Ohio                 Ingot (Million Pounds)................          36                 30
Niles, Ohio                 Mill Products (Million Pounds)........          22                 20
Hermitage, Pennsylvania     Tube (Thousand Pounds)................         780                780
Washington, Missouri        Hot-Formed and Superplastically Formed
 Sullivan, Missouri          Components (Thousand Press Hours)....          21                 21
Salt Lake City, Utah        Powders (Million Pounds)..............         1.5                1.5

 
- ---------
 
(1) Practical capacity is based on current product mix and yields.
 
     The Company owns all of the foregoing facilities, except for the Sullivan,
Missouri facility and certain buildings and property at Washington, Missouri,
all of which are leased. The plants have been constructed at various times over
a long period, many of the buildings have been remodeled or expanded and
additional buildings have been constructed from time to time.
 
CONVERSION SERVICES
 
     The Company utilizes third-party converters to melt and/or finish
approximately 35% of its mill products. The use of these converters raises the
Company's effective processing capacity. Certain mill products, such as hot band
and cold rolled strip and oversized plate, are produced entirely by such
converters using semi-finished titanium mill products supplied by the Company.
The Company, however, is responsible for inspecting and delivering these
products to customers. The Company maintains long-term relationships with many
of these conversion companies. The Company believes that, if necessary, it could
obtain alternative sources for conversion services.
 
RESEARCH, TECHNICAL AND PRODUCT DEVELOPMENT
 
     The Company conducts research, technical and product development activities
at facilities in Niles, Ohio. The principal goals of the Company's research
program are maintaining technical expertise in the production of titanium mill
and fabricated products and providing technical support in the development of
new markets and products. In addition to the Company's own funding, certain
major customers have assisted in funding the Company's development of specific
titanium applications. Research, technical and product development costs totaled
$2.0 million in the first nine months of 1996, $3.4 million in 1995, $3.3
million in 1994 and $2.4 million in 1993. Customer assisted funding, which is
treated as a reduction of research and
 
                                       22
   59
 
development spending, reduced the Company's portion of research and development
expense to $1.4 million in the first nine months of 1996, $1.8 million in 1995
and $1.5 million in each of 1994 and 1993.
 
     The Company has research laboratories in Niles with melting, metal
processing and metal testing facilities and a corrosion laboratory for support
of nonaerospace markets.
 
PATENTS AND TRADEMARKS
 
     The Company possesses a substantial body of technical know-how and trade
secrets and owns a number of U.S. patents applicable primarily to product
formulations and uses. The Company considers its know-how, trade secrets and
patents important to conduct its business, although no individual item is
considered to be material to the Company's current business.
 
EMPLOYEES
 
     As of September 30, 1996, the Company and its subsidiaries employed 902
persons, 190 of whom were classified as administrative and sales personnel. At
September 30, 1996, 66 of the 902 employees were directly involved with the DOE
remediation and restoration contract at the Company's now closed facilities in
Ashtabula, Ohio.
 
     The United Steelworkers of America ("USWA") represents 466 of the hourly
and clerical and technical employees at the Company's plant in Niles, Ohio and
the hourly employees at the closed facilities in Ashtabula, Ohio. Other than six
hourly workers at the Ashtabula facilities, who are represented by the Oil,
Chemicals and Atomic Workers Union, the Company's other employees are not
represented by a union. In October 1995, following a five day work stoppage, a
three-year labor agreement was reached with the USWA represented employees at
Niles. The hourly employees at the facilities in Ashtabula agreed to a five-year
contract on January 15, 1996.
 
LEGAL PROCEEDINGS
 
     From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. Given the
critical nature of many of the aerospace end uses for the Company's products,
including specifically their use in critical rotating parts of gas turbine
engines, the Company maintains aircraft products liability insurance of $250
million, which includes grounding liability.
 
     In connection with the closing of the Company's facilities in Ashtabula,
Ohio, the Oil, Chemical and Atomic Workers Union, Local 729, commenced an action
in 1992 in the U.S. District Court for the Northern District of Ohio, captioned
OCAW, Local 7-629, AFL-CIO, et al. vs. RMI Titanium Company, against the Company
alleging violation of the notification provisions of the Worker Adjustment and
Retraining Notification Act ("WARN"). Three classes of former employees at such
facilities have alleged that they did not receive appropriate notice of their
pending layoffs or terminations as required under WARN and are seeking back pay
for the notification period. The Company believes that it has complied with the
provisions of WARN and that the claims are without merit.
 
  Environmental
 
     The Company is subject to extensive federal, state and local laws and
regulations concerning environmental matters. During each of 1995 and 1994, the
Company spent approximately $0.6 million for environmental-related expenditures.
Such expenditures totaled $0.9 million in 1993. The Company broadly estimates
environmental-related expenditures, including capital items and compliance
costs, will total approximately $3.4 million during the 1996-1998 period.
 
     In connection with the Reorganization, the Company assumed all
responsibility for environmental matters relating to RMI Company and its
immediate predecessor, Reactive Metals, Inc., which commenced business on April
1, 1964, and agreed to indemnify Quantum and USX against any liability relating
to such environmental matters. Quantum and USX have been named as potentially
responsible parties in connection with the Fields Brook Superfund site discussed
below. In addition, Quantum initially acquired the Company's
 
                                       23
   60
 
now closed Ashtabula facilities in 1950, which it owned until 1964, when they
were acquired by Reactive Metals, Inc. Although the Company believes it may have
claims with respect to possible remediation and other costs against Quantum for
the pre-1964 period, ultimate apportionment of any liability between the Company
and Quantum has not been finally agreed upon.
 
     Active Investigative or Cleanup Sites.  The Company is involved in
investigative or cleanup projects at certain waste disposal sites, including
those discussed below.
 
     Fields Brook Superfund Site.  The Company, together with 31 other
companies, has been identified by the EPA as a PRP under CERCLA with respect to
a superfund site defined as the Fields Brook Watershed in Ashtabula, Ohio, which
includes the Company's now closed Ashtabula facilities. The EPA's 1986 estimate
of the cost of remediation of the Fields Brook sediment operable unit was $48
million. Recent studies, together with improved remediation technology and
redefined cleanup standards, have resulted in a more recent estimate of the
remediation cost of approximately $25 million. The actual cost of remediation
may vary from the estimate depending upon any number of factors.
 
     The EPA, beginning in March 1989, ordered 22 of the PRPs to conduct a
design phase study for the sediment operable unit and a source control study.
These studies are nearly complete and currently estimated to cost $22 million.
The Company, working cooperatively with fourteen others, is complying with the
order and has accrued and has been paying its portion of the cost of such
compliance. It is anticipated that the studies will be completed no earlier than
1997. Actual cleanup is not expected to commence prior to 1998. The Company's
share of the study costs has been established at 9.95%. In June, 1995, the
Company and twelve others entered into a Phase 2 (actual cleanup) allocation
agreement which assigns 9.44% of the cost to RMI. However, actual percentages
may be more or less based on contributions from other parties which are not
currently participating in the Phase 2 allocation agreement.
 
     The U.S. Department of the Interior, on behalf of the Natural Resource
Trustees for Fields Brook, has notified the PRPs of the Trustees' belief that
the PRPs have incurred liability for injuries to natural resources and has
proposed a negotiated settlement. It is not possible to predict at this time the
cost of a natural resource settlement, although the Company believes it is
likely that the PRPs will negotiate a settlement that will not result in any
material obligation to the Company.
 
     Resource Conservation and Recovery Act of 1975 ("RCRA")
Proceedings-Ashtabula Sodium Plant. The Company, through its independent
environmental consultant, has identified and reported to the EPA the presence of
metals and hazardous organic materials on portions of its closed facilities in
Ashtabula, Ohio. As to the organic material, the consultant has determined it
originates from an off-site source, and the Company does not anticipate it will
be required to clean up this material.
 
     A Corrective Measures Study report prepared for the Company by the
consultant states that the presence of metals would not be expected to have an
adverse impact on humans or the environment, and, after conducting a detailed
analysis of cleanup alternatives, the study recommended that metals contaminated
material be consolidated at an on-site landfill and contained in place, at an
estimated cost of $1 million. The EPA has approved the Corrective Measures Study
but has not yet selected a cleanup alternative. The Company has accrued an
amount for this matter.
 
     Ashtabula River.  The Ashtabula River and Harbor has been designated one of
43 Areas of Concern on the Great Lakes by the International Joint Commission.
Fields Brook empties into the Ashtabula River, which in turn flows into Lake
Erie. The State of Ohio has appropriated $7 million in state funds to the
Ashtabula River dredging project to assist in securing federal funds needed to
conduct the dredging.
 
     The Company believes it is most appropriate to use public funds to cleanup
a site with regional environmental and economic development implications such as
the Ashtabula River and Harbor. The Ashtabula River Partnership ("ARP"), a
voluntary group of public and private entities including, among others, the
Company, the EPA, and the Ohio EPA, was formed in July 1994 to bring about the
remediation of the river. The ARP is working both to design a cost-effective
remedy and to secure public funding. Phase 1, the Comprehensive Management Plan,
is well underway and is completely funded with public money. To fund Phase 2,
the Detailed Design, the Company and the 14 other PRPs who are cooperating at
the Fields Brook
 
                                       24
   61
 
Superfund site collectively have pledged a voluntary contribution of $1 million
over two years, contingent upon receiving matching Federal funds. In 1996, $0.5
million in matching Federal funds was granted. It is possible that the EPA could
determine that the Ashtabula River and Harbor should be designated as an
extension of the Fields Brook Superfund site, or, alternatively, as a separate
Superfund site. It is not possible at this time to predict the methods or
responsibility for any remediation and whether the Company will have any
liability for any costs incurred in cleaning up the Ashtabula River and Harbor.
 
     With respect to each of the above sites, all of which are located in Ohio,
the State of Ohio may assert its interests and rights independent of those of
the EPA. The Company has notified all its insurers relative to the environmental
claims reported above and has demanded that the insurers assume the Company's
defense of such claims and indemnify the Company against such claims. During
1993, the Company settled a claim with one insurer for $0.4 million. None of the
remaining insurers have agreed to defend or indemnify the Company, and several
have denied coverage. However, the Company continues to pursue these claims with
its insurers.
 
     Alleged RCRA Violations.  On October 9, 1992, the EPA filed a complaint
alleging certain violations of RCRA at the Company's now closed facilities in
Ashtabula, Ohio. The EPA's determination is based on information gathered during
inspections of the facility in 1991. Under the complaint the EPA proposed to
assess a civil penalty of approximately $1.4 million for alleged failure to
comply with RCRA. The Company is contesting the complaint. It is the Company's
position that it has complied with the provisions of RCRA and that the EPA's
assessment of penalties is inappropriate. A formal hearing has been requested
and informal discussions with the EPA to settle this matter are ongoing. Based
on the nature of the proceedings, the Company is currently unable to determine
the ultimate liability, if any, that may arise from this matter.
 
     Given the status of the proceedings at certain of these sites, and the
evolving nature of environmental laws, regulations, and remediation techniques,
the Company's ultimate obligation for investigative and remediation costs cannot
be predicted. It is the Company's policy to recognize in its financial
statements environmental costs as an obligation becomes probable and a
reasonable estimate of exposure can be determined. At September 30, 1996, the
amount accrued for future environmental-related costs was $2.4 million. Based on
available information, RMI believes that its share of potential
environmental-related costs, before expected contributions from third parties,
is in a range from $3.7 to $6.3 million in the aggregate. The amount accrued is
net of expected contributions from third parties (which does not include any
amounts from insurers) of approximately $2.1 million which the Company believes
are probable. The Company has been receiving contributions from such third
parties for a number of years as partial reimbursement for costs incurred by the
Company. As these proceedings continue toward final resolution, amounts in
excess of those already provided may be necessary to discharge the Company from
its obligations for these sites.
 
     The ultimate resolution of the foregoing contingencies could, individually
or in the aggregate, be material to the consolidated financial statements.
However, management believes that RMI will remain a viable and competitive
enterprise even though it is possible these matters could be resolved
unfavorably.
 
                                       25
   62
 
                            SELECTED FINANCIAL DATA
 
    The following selected financial data has been derived from the Consolidated
Financial Statements of RMI for each of the five years during the period ended
December 31, 1995. The selected financial data for the nine month periods ended
September 30, 1996 and 1995 has been derived from the unaudited Consolidated
Financial Statements of RMI, which, in the opinion of the Company, reflect all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation. The information set forth below should be read in connection
with the Consolidated Financial Statements included elsewhere herein and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
 


                                     NINE MONTHS ENDED
                                       SEPTEMBER 30,                               YEAR ENDED DECEMBER 31,
                                   ----------------------      ----------------------------------------------------------------
                                     1996          1995          1995          1994          1993          1992          1991
                                   --------      --------      --------      --------      --------      --------      --------
                                                    (DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE AND PRICE DATA)
                                                                                                  
STATEMENT OF OPERATIONS DATA:
Sales:
  Mill products.................   $144,773      $100,475      $138,077      $103,790      $ 96,453      $110,509      $128,803
  Fabricated products and other
    services....................     25,428        17,589        26,904        31,134        20,512        16,745        17,260
  Other(1)......................      7,185         4,572         6,185         8,468        10,432         8,353        19,505
                                   --------      --------      --------      --------      --------      --------      --------
      Total sales...............    177,386       122,636       171,166       143,392       127,397       135,607       165,568
Cost of sales...................    146,134       121,808(2)    164,949(2)    140,289       127,486       135,985       204,086(3)
                                   --------      --------      --------      --------      --------      --------      --------
  Gross profit (loss)...........     31,252           828         6,217         3,103           (89)         (378)      (38,518)
Selling, general and
  administrative expenses.......      7,294         7,495         9,576         9,531         9,133         9,365        10,687
Research, technical and product
  development expenses..........      1,456         1,433         1,861         1,543         1,542         1,644         3,507
                                   --------      --------      --------      --------      --------      --------      --------
Operating income (loss).........     22,502        (8,100)       (5,220)       (7,971)      (10,764)      (11,387)      (52,712)
Other (expense) income, net.....        244        (1,640)       (1,622)         (291)        1,554           178          (735)
Interest expense................     (1,978)       (3,599)       (4,966)       (3,300)       (2,745)       (2,746)       (3,538)
                                   --------      --------      --------      --------      --------      --------      --------
Income (loss) before income
  taxes.........................     20,768       (13,339)      (11,808)      (11,562)      (11,955)      (13,955)      (56,985)
Provision (credit) for income
  taxes.........................       (607)(4)        --        (7,200)(4)        --            --           107           100
                                   --------      --------      --------      --------      --------      --------      --------
Income (loss) before cumulative
  effect of change in accounting
  principle.....................     21,375       (13,339)       (4,608)      (11,562)      (11,955)      (14,062)      (57,085)
Cumulative effect of change in
  accounting principle..........         --            --            --        (1,202)(5)   (16,938)(6)        --            --
                                   --------      --------      --------      --------      --------      --------      --------
Net income (loss)...............   $ 21,375      $(13,339)     $ (4,608)     $(12,764)     $(28,893)     $(14,062)     $(57,085)
                                   ========      ========      ========      ========      ========      ========      ========
Net income (loss) per common
  share before cumulative effect
  of change in accounting
  principle.....................   $   1.19      $  (0.87)     $  (0.30)     $  (1.45)     $  (8.14)     $  (9.66)     $ (39.17)
Net income (loss) per common
  share.........................       1.19         (0.87)        (0.30)        (1.60)       (19.67)        (9.66)       (39.17)
Weighted average shares
  outstanding (in thousands)....     17,930        15,289        15,302         7,958         1,469         1,456         1,458

BALANCE SHEET DATA:
  (at end of period)
Working capital.................   $115,938      $ 84,916      $ 86,738      $ 74,694      $ 66,319      $ 72,229      $ 79,820
Total assets....................    205,999       160,614       171,559       160,810       152,471       153,257       173,888
Long-term debt..................      6,630        67,950        64,020        54,740        66,660        62,280        58,800
Total shareholders' equity......    140,662(7)     29,806        36,889        42,596        27,861        63,302        77,705

OPERATING AND OTHER FINANCIAL DATA:
Mill product shipments
  (thousands of pounds):
  Aerospace.....................     10,273         7,944        10,526         8,109         7,619         8,699         9,379
  Nonaerospace..................      3,137         2,691         3,884         3,370         3,406         2,585         1,938
                                   --------      --------      --------      --------      --------      --------      --------
      Total shipments...........     13,410        10,635        14,410        11,479        11,025        11,284        11,317
Average realized mill product
  sales price (per pound).......   $  11.71      $  10.14      $  10.23      $   9.63      $   9.60      $  10.20      $  11.69
EBITDA (8)......................   $ 26,457      $ (4,914)     $  4,632      $ (2,122)     $ (2,912)     $ (4,703)     $ (5,535)
Cash flows (used in) provided
  from:
  Operating activities..........   $(22,311)     $(11,590)     $ (7,725)     $(13,217)     $ (4,229)     $ (2,562)     $ 15,049
  Investing activities..........     (2,392)       (1,009)       (1,422)       (1,115)         (106)       (2,444)       (8,799)
  Financing activities..........     24,917        13,210         9,271        14,424         4,358         3,398        (4,818)
                                   --------      --------      --------      --------      --------      --------      --------
      Total.....................   $    214      $    611      $    124      $     92      $     23      $ (1,608)     $  1,432
Order backlog at period end
  (9)...........................   $327,000      $110,000      $134,000      $ 67,000      $ 70,000      $ 53,000      $ 82,000
Active employees at period
  end...........................        902           832           844           817           782           843         1,172

 
                                                   (footnotes on following page)
 
                                       26
   63
 
- ---------
 
(1) Includes sales of discontinued products of $2.6 million and $13.2 million in
    1992 and 1991, respectively.
 
(2) Includes a charge of $5.0 million reflecting the June 30, 1995 adoption of
    SFAS No. 121. See Note 8 to the unaudited Consolidated Financial Statements
    for the nine months ended September 30, 1996 and Note 7 to the Consolidated
    Financial Statements for the year ended December 31, 1995.
 
(3) Includes a charge of $37.1 million relating to the closing of RMI's titanium
    sponge production facilities.
 
(4) See Note 4 to the unaudited Consolidated Financial Statements for the nine
    months ended September 30, 1996 and Note 8 to the Consolidated Financial
    Statements for the year ended December 31, 1995.
 
(5) Reflects the adoption of SFAS No. 112. See Note 11 to the Consolidated
    Financial Statements for the year ended December 31, 1995.
 
(6) Reflects immediate recognition of the transition obligation determined as of
    the January 1, 1993 adoption of SFAS No. 106. See Note 11 to the
    Consolidated Financial Statements for the year ended December 31, 1995.
 
(7) Includes net proceeds of $80.3 million from the sale of Common Stock in May
    1996.
 
(8) EBITDA consists of income before interest expense, income taxes,
    depreciation and amortization and the charges related to an asset impairment
    in 1995, changes in accounting principles in 1994 and 1993, and a plant
    closing in 1991. Management believes EBITDA is useful in measuring the
    Company's ability to service its debt. EBITDA should not be considered as an
    alternative to, or more meaningful than, operating income or cash flow, as
    determined in accordance with generally accepted accounting principles, as
    an indicator of the Company's operating performance.
 
(9) "Order backlog" is defined as firm purchase orders generally subject, upon
    payment of specified charges, to cancellation by the customer.
 
                                       27
   64
 
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS
 
     The following discussion should be read in conjunction with "Selected
Financial Data" and the Consolidated Financial Statements and Notes thereto of
the Company included elsewhere herein. The following information contains
forward-looking statements which involve certain risks and uncertainties. See
"Forward-Looking Statements."
 
OVERVIEW
 
     Historically, a majority of the U.S. titanium industry's output has been
used in aerospace applications. The cyclical nature of the aerospace industry
has been the principal cause of the fluctuations in performance of companies
engaged in the titanium industry. Over the past 19 years, titanium mill products
shipments registered cyclical peaks of 54 million pounds in 1980 and 55 million
pounds in 1989. Beginning in 1991, the industry experienced a dramatic downturn
in demand for mill products. Domestic industry shipments fell from 53 million
pounds in 1990 to 34 million pounds in 1991, a decrease of 35%, the largest
single one year decrease in the history of the industry. This decline in
industry shipments reflected a sharp decline in military aerospace consumption
and a decline in commercial aircraft build rates due in part to significant
financial losses suffered by U.S. commercial airline carriers. RMI's average
realized mill product selling prices deteriorated during the years 1993 and 1994
and were approximately 30% below 1990 levels.
 
     Commercial aerospace markets have shown a recent increase in demand while
military aerospace markets have stabilized at the reduced build rate levels. In
1995, most major commercial airlines reported stronger operating profits and, in
the second half of 1995 and through the first nine months of 1996, aircraft
manufacturers increased build rates. As of September 30, 1996, the leading
manufacturers of commercial aircraft, Boeing Company, McDonnell Douglas
Corporation and Airbus Industrie, reported an aggregate of 2,299 planes under
firm order and deliverable over the next five years. The comparable backlogs as
of December 31, 1995, 1994 and 1993 were 1,869 planes, 1,742 planes and 2,022
planes, respectively. The Company estimates, based on USGS data, that industry
mill products shipments to the commercial aerospace market in 1995 were 20
million pounds, an increase of approximately 18% compared to 1994 and total
industry shipments in 1995 were approximately 44 million pounds, an increase of
26% compared to 1994. Based on USGS data, total U.S. industry shipments in the
first six months of 1996 (the latest figures available) were 29 million pounds
compared to 20 million pounds in the first six months of 1995, 44 million pounds
in 1995 and 35 million pounds in 1994. RMI can give no assurance as to the
extent or duration of any recovery in the commercial aerospace market or the
extent to which such recovery will result in increases in demand for titanium
products. See "Risk Factors--Dependence on Cyclical Aerospace Markets."
 
     During 1995, the use of titanium in golf clubs emerged as an important
nonaerospace market for the U.S. titanium industry. See "Business--Products and
Markets--Mill Products." The Company believes that titanium shipments for use in
golf clubs amounted to 3.5 million pounds, or approximately 8% of U.S. industry
mill product shipments, in 1995. Demand from the golf club market benefits RMI
by increasing utilization in the titanium mill products industry, resulting in
increased prices for titanium mill products industry-wide. Although demand for
titanium scrap for the golf club manufacturing market has placed upward pressure
on the Company's raw material costs, this pressure has been more than offset to
date by higher selling prices for the Company's mill products.
 
     In response to industry-wide conditions the Company closed its sponge
production facilities in early 1992, which allowed the Company to stem
immediately significant losses generated at these plants, as well as maintain
the flexibility to purchase titanium sponge and other raw materials, such as
foreign or domestic scrap, at favorable prices. The Company entered into two
long-term titanium sponge supply arrangements which assure a supply of a
substantial portion of the Company's expected sponge requirements. Prices for
the Company's 1996 and 1997 requirements have been set under these contracts and
other short term arrangements. See "Risk Factors--Dependence on Others for Raw
Materials and Certain Conversion Services" and "Business--Raw Materials." Raw
material prices are a significant factor in the overall cost of production of
the Company's titanium mill products. RMI has instituted raw material escalator
and surcharge
 
                                       28
   65
 
clauses on all of its new incoming orders. These escalators and surcharges are
linked directly to current raw material prices for titanium sponge, alloys and
scrap. However, because of the cyclical nature of the titanium industry and the
effect that overall demand for titanium mill products may have on future
pricing, the Company can give no assurances as to the continuing ability to
recover raw material cost increases.
 
     RMI's strategy is to build on its leading position in the worldwide
titanium industry while maintaining a strong financial condition and stringent
quality, safety and environmental standards. RMI is emphasizing higher margin
products in its traditional markets, while continuing to develop new markets and
products such as seamless tubulars for oil and gas and geothermal energy
production and the use of billet for golf club applications. See "Risk
Factors--No Assurances as to New Product and Market Development" and
"Business--Products and Markets--Fabricated Products and Other Services."
 
RESULTS OF OPERATIONS
 
     Net Sales.  Net sales for the nine months ended September 30, 1996
increased by $54.8 million, or 45%, compared to the first nine months of 1995.
This increase resulted primarily from increased mill product shipments and
higher average selling prices. Mill products shipments for the first nine months
of 1996 amounted to 13.4 million pounds compared to 10.6 million pounds in the
comparable period of 1995. Average realized mill product selling prices
increased to $11.71 per pound in the first nine months of 1996 compared to
$10.14 per pound during the comparable period of 1995. Both demand and pricing
for titanium mill products continued to remain strong in both commercial
aerospace and industrial product markets. Sales related to new products and
markets decreased from $2.2 million in the first nine months of 1995 to $1.9
million in the first nine months of 1996. Sales of hot-formed parts and cut
shapes increased to $12.1 million in the first nine months of 1996 from $9.6
million in the same period of 1995.
 
     Net sales in 1995 increased by $27.8 million, or 19%, compared to 1994.
This increase resulted primarily from an increase in the volume of mill product
shipments and higher average selling prices, partially offset by decreased
revenues from fabricated products and other services and other sales. Shipments
of mill products in 1995 increased to 14.4 million pounds, 25% higher than in
1994, reflecting an increase in demand for mill products from commercial
aerospace and other industrial markets. The majority of this increase occurred
in the second half of 1995, reflecting strengthening business conditions as the
year progressed. Approximately 75% of RMI's 1995 mill product sales were
aerospace related compared with approximately 63% in 1994. The Company's average
realized mill product selling price increased to $10.23 per pound in 1995,
approximately 6% higher than in 1994. Realized prices were favorably affected in
1995 by increasing demand from the golf club market. See "Overview" above.
Because the titanium drilling riser for the Conoco Heidrun project was
substantially completed in 1994, sales of fabricated products and other services
declined to $26.9 million in 1995 from $31.1 million in 1994. Other sales
decreased by $2.3 million, or 27%, compared to 1994, due to decreased funding
for the DOE remediation and restoration contract.
 
     Net sales in 1994 increased by $16.0 million, a 12% increase, compared to
1993. This increase resulted primarily from increased revenues recognized in
connection with the titanium drilling riser contract and an increase in mill
product shipments. Shipments of mill products increased in 1994 to 11.5 million
pounds, 4% higher than in 1993. The Company's average realized selling price for
mill products of $9.63 per pound, however, remained virtually unchanged in 1994
compared to 1993. Prices on orders in 1994, while showing slight improvement,
reflected soft demand for titanium mill products. Sales of related products and
other services increased to $31.1 million in 1994 compared to $20.5 in 1993
primarily as a result of revenues recognized in connection with the titanium
drilling riser. Revenue recognized under the DOE remediation and restoration
contract decreased from $10.4 million to $8.5 million in 1994 due to decreased
DOE funding levels.
 
     Gross Profit.  Gross profit for the nine months ended September 30, 1996
amounted to $31.3 million, or 17.6% of sales, compared to gross profit of $0.8
million, or 0.7% of sales, in the first nine months of 1995. This increase
results primarily from increased shipments and selling prices for titanium mill
products. Results in 1995 were adversely impacted by a $5.0 million asset
impairment charge following the adoption of SFAS No. 121 and costs associated
with the cost of stock appreciation rights amounting to $0.8 million.
 
                                       29
   66
 
     Gross profit in 1995 improved to $6.2 million, an increase of 100%,
compared to $3.1 million in 1994. This improvement relates primarily to
increased shipments of titanium mill products and higher realized mill product
selling prices, partially offset by a reduction in sales of fabricated products
and other services, increases in raw material costs and an asset impairment
charge of $5.0 million following the adoption of SFAS No. 121.
 
     Gross profit in 1994 improved to a profit of $3.1 million compared to a
loss of $0.1 million in 1993. This improvement related primarily to the titanium
drilling riser contract as well as the favorable impact of increased mill
product shipments.
 
     Selling, General and Administrative Expenses ("SG&A").  SG&A expenses
amounted to $7.3 million for the first nine months of 1996 compared to $7.5
million for the comparable period in 1995. SG&A expenses, together with
research, technical and product development expenses, discussed below, for the
first nine months of 1995, include $0.6 million of costs related to stock
appreciation rights.
 
     SG&A expenses of $9.5 million in 1995 remained virtually flat compared to
1994, despite increased sales in 1995, as a result of the Company's efforts to
contain costs. SG&A expenses increased by $0.4 million in 1994 compared to 1993
primarily as a result of increased levels of business activity. As a percentage
of sales, SG&A expenses were 5.6% in 1995, 6.6% in 1994 and 7.2% in 1993.
 
     Research, Technical and Product Development Expenses.  Research, technical
and product development expenses amounted to $1.5 million in the nine month
period ended September 30, 1996, compared to $1.4 million in the nine month
period ended September 30, 1995. The Company's total research spending amounted
to $2.0 million for the first nine months of 1996, $2.8 million for the first
nine months of 1995, $3.4 million in 1995, $3.3 million in 1994 and $2.4 million
in 1993. The Company's major research objectives are to maintain its technical
expertise in titanium production, provide customer technical support and develop
new products and markets. Certain major customers have assisted in funding the
Company's overall product development effort. Such funding, which is included as
a reduction of research expense, reduced the Company's portion of research
expense to $1.5 milion for the first nine months of 1996, $1.4 million for the
first nine months of 1995, $1.9 million in 1995 and $1.5 million in each of 1994
and 1993, respectively.
 
     Operating Income/Loss.  Operating income for the nine months ended
September 30, 1996 amounted to $22.5 million, or 12.7% of sales compared to a
loss of $8.1 million in the same period of 1995. This improvement results
primarily from significant increases in mill product shipments and average mill
product selling prices. Results for the 1995 period were adversely impacted by a
$5.0 million asset impairment charge and costs associated with stock
appreciation rights referred to above.
 
     The operating loss for 1995 amounted to $5.2 million compared to an $8.0
million loss in 1994. This improvement resulted primarily from increased
shipments of mill products and higher realized mill product selling prices,
partially offset by a $5.0 million asset impairment charge following the
adoption of SFAS No. 121. Both shipments and selling prices were favorably
impacted by a general increase in demand for titanium mill products.
 
     The operating loss for 1994 of $8.0 million compared to a loss of $10.7
million in 1993. The improved results in 1994 reflect profit recognized in
connection with the titanium drilling riser contract combined with an increase
in mill product shipments.
 
     Other Income (Expense).  Other income (expense) for the first nine months
of 1995 and the year 1995 included a $1.9 million charge for impairment of the
Company's investment in a joint venture. In June 1995, the Company and
Permascand AB of Sweden decided, for economic reasons, to discontinue operations
of Permipipe Titanium AS, their welded titanium pipe joint venture in Norway.
Amounts in 1993 include a $1.4 million gain on sales and retirements of
equipment and facilities.
 
     Interest Expense.  Interest expense for the first nine months of 1996
amounted to $2.0 million compared to $3.6 million in the same period of 1995.
This improvement results primarily from reduced levels of indebtedness during
1996. For further information on indebtedness, see "Liquidity and Capital
Resources" below.
 
                                       30
   67
 
     Net interest expense amounted to $5.0 million in 1995, $3.3 million in 1994
and $2.7 million in 1993. Interest expense increased in 1995 from 1994 due to
higher levels of borrowing to support increased business levels and higher
overall interest rates. Interest expense increased in 1994 from 1993 due to
significantly higher overall interest rates partially offset by lower levels of
borrowing.
 
     Income Taxes.  In the first nine months of 1996, the Company recorded an
income tax benefit of $0.6 million. This amount is comprised of an income tax
provision against pretax income for the nine-month period of $2.0 million and an
income tax benefit of $2.6 million resulting from an adjustment to the deferred
tax asset valuation allowance due to changes in the Company's expectations about
the ultimate realization of its deferred tax assets in years after 1996. No tax
effect was recorded for the nine months ended September 30, 1995. Excluding the
$2.6 million valuation allowance adjustment, the effective tax rate for the nine
months ended September 30, 1996 was approximately 9.6%. The difference between
the statutory federal tax rate of 35% and the effective tax rate is principally
due to an adjustment to the deferred tax asset valuation allowance which existed
at December 31, 1995 as it related to expected 1996 results. The Company
currently expects improved profitability in 1996 compared to the expectations
inherent in the December 31, 1995 deferred tax asset. The effect of this
adjustment reduced the year to date 1996 tax provision by approximately $5.3
million. The amount of current taxes expected to be paid in 1996 is minimal.
 
     In 1995, an income tax benefit of $7.2 million was recorded to recognize a
portion of the Company's deferred tax assets believed more likely than not to be
realized under the provisions of SFAS No. 109, "Accounting for Income Taxes."
For additional information, including a potential Section 382 limitation due to
a change in control, see "Income Tax Considerations" below. No tax provision or
benefit was recorded in either 1994 or 1993.
 
     Net Income/Loss.  Net income for the nine months ended September 30, 1996
amounted to $21.4 million, or 12.1% of sales compared to a loss of $13.3 million
in the first nine months of 1995. Results for the 1995 period include the $5.0
million impairment charge following the adoption of SFAS No. 121, a $1.9 million
impairment of an investment in a joint venture, and $1.5 million in costs
incurred in connection with stock appreciation rights.
 
     In 1995, the Company reported a net loss of $4.6 million compared to a net
loss of $12.8 million in 1994 and $28.9 million in 1993. The 1995 results were
adversely affected by a $5.0 million charge resulting from the adoption of SFAS
No. 121. The 1994 results were adversely affected by a $1.2 million charge
representing the cumulative effect of adopting the provisions of SFAS No. 112,
"Employers' Accounting for Postretirement Benefits," while the 1993 results were
adversely affected by a $16.9 million charge representing the cumulative effect
of adopting the provisions of SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions."
 
1996 AND 1995 QUARTERLY RESULTS OF OPERATIONS AND OTHER FINANCIAL AND OPERATING
DATA
 
     The following table presents certain unaudited consolidated quarterly
financial data for the nine months ended September 30, 1996 and the year ended
December 31, 1995. In the opinion of the Company's management, this information
includes all adjustments (consisting only of normal recurring adjustments)
 
                                       31
   68
 
necessary to present fairly the unaudited quarterly results set forth herein.
The operating results for any quarter are not necessarily indicative of results
for any future period.
 


                            NINE MONTHS ENDED SEPTEMBER 30,
                                         1996                               YEAR ENDED DECEMBER 31, 1995
                           ---------------------------------       -----------------------------------------------
                             3RD          2ND         1ST            4TH          3RD         2ND            1ST
                           QUARTER      QUARTER     QUARTER        QUARTER      QUARTER     QUARTER        QUARTER
                           --------     --------    --------       --------     --------    --------       -------
                                                (DOLLARS IN THOUSANDS EXCEPT FOR PRICE DATA)
                                                                                      
Sales...................   $ 64,479     $ 58,310    $ 54,597       $ 48,530     $ 42,912    $ 39,621       $40,103
Gross profit............   $ 11,625     $ 10,280    $  9,347       $  5,389     $  2,890    $ (3,999)(1)   $ 1,937
Operating income
  (loss)................   $  8,660     $  7,410    $  6,432       $  2,880     $    199    $ (7,422)      $  (877)
Net income (loss).......   $ 10,838(2)  $  5,981    $  4,556       $  8,731(3)  $   (967)   $(10,509)      $(1,863)
Mill product shipments
  (thousands of
  pounds)...............      4,536        4,628       4,247          3,775        3,762       3,568         3,304
Average realized mill
  product sales price
  (per pound)...........   $  12.26     $  11.54    $  11.31       $  10.49     $  10.31    $   9.93       $ 10.19
Order backlog at period
  end (4)...............   $327,000     $239,000    $194,000       $134,000     $110,000    $ 83,000       $86,000

 
- ---------
 
(1) Includes a $5.0 million asset impairment charge following the adoption of
    SFAS No. 121.
 
(2) Includes a $2.1 million tax benefit.
 
(3) Includes a $7.2 million tax benefit.
 
(4) "Order backlog" is defined as firm purchase orders generally subject, upon
    payment of specified charges, to cancellation by the customer.
 
OUTLOOK
 
     During 1995 and to date in 1996, the Company experienced a significant
increase in the volume of incoming orders at increased prices, resulting in a
steady increase in order backlog (see quarterly data above). The Company
estimates that as of September 30, 1996, orders for substantially all of its
anticipated 1996 shipments have been booked or shipped at average prices more
than 15% higher than its 1995 average realized mill product selling price of
$10.23 per pound. The Company's average realized mill product selling price
increased to $12.26 per pound in the third quarter of 1996. The Company
estimates that as of September 30, 1996, orders for 84% of its anticipated 1997
shipments have been booked at average prices greater than $13 per pound. The
increase in demand has been driven primarily by the recovery in the commercial
aerospace market and the emergence of the golf club market. Because of
competitive factors in the titanium industry and the cyclical nature of the
aerospace industry, there can be no assurances that prices and demand will
continue to improve. The Company intends to continue its efforts to develop new
markets and products such as seamless tubulars for oil and gas and geothermal
energy production, as well as the use of billet for golf club applications.
 
     The increase in demand for titanium products has put upward pressure on
prices for certain raw materials used by the Company. Prices for the Company's
1996 and 1997 titanium sponge requirements have been set under long-term supply
contracts and short-term arrangements. Prices for titanium sponge in 1997 are
expected to increase over 1996 levels. Due to increased demand resulting
primarily from the emerging golf club market, current prices for titanium scrap,
which accounts for approximately 40% of the Company's raw material requirements,
have increased significantly during 1996. Prices of certain alloying agents have
also increased as a result of increased demand. The Company, and others, have
announced increased prices and surcharges to recover these increased costs.
 
     In July 1996, the Company was notified that the Department of Commerce
released preliminary findings in a review of an existing anti-dumping order on
titanium sponge from Russia. The Department of Commerce determined that dumping
did not occur on sales made by Interlink, a major trading company for Russian-
produced titanium sponge, during the review period. A final determination
confirming the earlier finding was
 
                                       32
   69
 
issued in November 1996. The final determination can be appealed to the Court of
International Trade but is effective unless and until it is overturned. The
Company purchases nearly all of its Russian titanium sponge through Interlink.
These purchases previously carried an 84% dumping duty. The no-dumping finding
eliminates this duty, thereby allowing the Company access to lower cost sources
for a significant portion of its titanium sponge requirements.
 
     The information included in this "Outlook" section includes
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and are subject to the safe harbor created by
that Act. Such forward-looking statements include, without limitation,
statements regarding the future availability and prices of raw materials, the
competitiveness of the titanium industry, the Company's order backlog and the
conversion of that backlog into revenue and other statements contained herein
that are not historical facts. Because such forward-looking statements involve
risks and uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause actual results to differ
materially include, but are not limited to, changes in general economic and
business conditions (including in the aerospace and golf club markets), the
Company's ability to recover its raw material costs in the pricing of its
products, actions of competitors, the extent to which the Company is able to
develop new markets for its products, changes in the Company's business
strategies and other factors discussed under "Risk Factors."
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Net cash flows used in operating activities totaled $22.3 million in the
first nine months of 1996 compared to $11.6 million used in operations during
the first nine months of 1995. The change in net cash flows from operating
activities in the first nine months of 1996, compared to the first nine months
of 1995 was due primarily to improved results of operations offset by an
increase in working capital. Working capital amounted to $115.9 million at
September 30, 1996, compared to $86.7 million at December 31, 1995. The increase
in working capital results primarily from increases in accounts receivable and
inventories, partially offset by increases in accounts payable and other current
liabilities. The Company's working capital ratio was 4.15 to 1 at September 30,
1996 compared to 3.73 to 1 at December 31, 1995.
 
     Net cash flows used in operating activities totaled $7.7 million in 1995,
$13.2 million in 1994 and $4.2 million in 1993. The change in net cash flows
used in operating activities in 1995 compared to 1994 was due primarily to
improved results of operations partially offset by an increase in accounts
receivable and noncash deferred tax assets. The increase in net cash flows used
in operating activities in 1994 compared to 1993 was primarily the result of
increased inventory levels required for the Company's long-term contract for the
titanium drilling riser.
 
     On May 7, 1996, the Company completed a public offering of 4,600,000 shares
of common stock at a price of $18.50 per share (the "Common Stock Offering").
Net proceeds to RMI after deducting underwriting fees and expenses amounted to
$80.3 million. The net proceeds were used to repay all outstanding indebtedness
(amounting to $65.5 million) under the then existing bank credit facilities, and
to contribute $10.2 million to certain of the Company's defined benefit pension
plans, as referred to below, and the balance was used for general corporate
purposes. In 1994, the Company raised working capital through a rights offering
to shareholders (the "Rights Offering"). After deducting expenses of the
offering, net proceeds increased total shareholders' equity by approximately
$26.4 million.
 
     In September 1996, the Company made a $16.1 million cash contribution to
certain of its defined benefit pension plans. This contribution was funded by
using $10.2 million of the net proceeds from the Common Stock Offering, and $5.9
million in borrowings under the Credit Facility, discussed below.
 
     During the first nine months of 1996, the Company's cash flow requirements
for capital expenditures were funded by internally generated funds and proceeds
from the Common Stock Offering. In 1995, the Company's cash flow requirements
for operating losses, capital expenditures and working capital were funded
primarily through borrowings. In 1994, the Company's cash flow requirements for
operating losses, capital expenditures and working capital were funded through
proceeds from the Rights Offering.
 
                                       33
   70
 
     The Company anticipates that it will be able to fund its 1996 working
capital requirements and its capital expenditures primarily from funds generated
by operations, proceeds from the Common Stock Offering, and, to the extent
necessary, from borrowings under the Credit Facility. The Company anticipates
that it will be able to fund its 1997 working capital requirements and its
currently expected capital expenditures primarily from funds generated by
operations and borrowings under the Credit Facility. The Company may, however,
undertake strategic initiatives and make additional capital expenditures in 1997
which may require additional financing therefor. The Company's long-term
liquidity requirements, including capital expenditures, are expected to be
financed by a combination of internally generated funds, borrowings and other
sources of external financing as needed.
 
     Credit Facility.  The Company entered into the Credit Facility with PNC
Bank, N.A. as agent. The Credit Facility has a term of three years and permits
borrowings, on a revolving basis, of up to the lesser of $50 million or a
borrowing base equal to the sum of 85% of qualified accounts receivable and 50%
of qualified inventory. The Company had sufficient accounts receivable and
inventory at September 30, 1996 to borrow the entire $50 million. At September
30, 1996, $5.9 million was outstanding under the Credit Facility. The Credit
Facility contains the following financial covenants: (i) the Company shall not
permit its consolidated net worth to be less than $36.9 million plus 50% of the
Company's consolidated net income for each fiscal quarter in which net income
was earned beginning January 1, 1996; (ii) the Company shall not permit the
ratio of consolidated earnings before interest and taxes to consolidated
interest expense to be less than 2.5 to 1.0; and (iii) capital expenditures,
including assets acquired under capitalized leases, shall not exceed $10 million
per year.
 
     An event of default under the Credit Facility may occur, among other
things, if: (a) certain defaults or events of default occur under the Credit
Facility (including the failure to observe its financial covenants) or other
indebtedness in excess of $10 million in the aggregate, (b) certain final
judgments are rendered against the Company or there shall occur any material
uninsured damage to or loss, theft or destruction of the collateral each in
excess of $10 million, (c) within a period of 12 consecutive calendar months,
individuals who were members of the Board of Directors of the Company on the
first day of such period cease to constitute a majority of the Board of
Directors, (d) any person or group of persons other than USX shall have acquired
beneficial ownership of 25% or more of the voting stock of the Company, or (e)
certain events of bankruptcy, insolvency or reorganization occur. For further
information regarding the Credit Facility, see Note 7 to the unaudited
Consolidated Financial Statements for the nine months ended September 30, 1996.
 
STOCK-BASED COMPENSATION
 
     In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." SFAS No. 123 established
standards for accounting for stock-based compensation but also allows companies
to continue to account for stock-based compensation under the provisions of
Accounting Principles Board ("APB") Opinion No. 25 "Accounting for Stock Issued
to Employees" and make certain additional disclosures in the notes to their
financial statements. The new standard is effective for fiscal years beginning
after December 15, 1995. It is the Company's intention to continue to account
for stock-based compensation in accordance with APB Opinion No. 25 and provide
the additional required disclosure in the notes to the consolidated financial
statements.
 
INCOME TAX CONSIDERATIONS
 
     Section 382 Limitation.  At December 31, 1995, the Company had net
operating loss carryforwards of approximately $104 million available to reduce
federal taxable income through at least 2006. If an "ownership change" were to
occur, the utilization of net operating loss carryforwards would be subject to
an annual limitation. Generally, an ownership change occurs with respect to a
corporation if shareholders who own, directly or indirectly, 5% or more of the
capital stock of the corporation increase their aggregate percentage ownership
of such stock by more than 50 percentage points over the lowest percentage of
such stock owned by such shareholders at any time during a prescribed testing
period. An ownership change could result from equity transactions such as
exercises of stock options, purchases or sales of Common Stock by certain
stockholders, including USX, and other issuances of Common Stock by the Company.
If the annual limitation
 
                                       34
   71
 
were to apply, the amount of the limitation would generally equal the product of
(i) the fair market value of the Company's equity immediately prior to the
ownership change, with certain adjustments, including a possible adjustment to
exclude certain capital contributions made in the two years preceding the date
of the ownership change, and (ii) a long-term tax exempt bond rate of return
published monthly by the Internal Revenue Service. Should the annual limitation
apply, the Company believes that it would not materially affect the potential
use of the net operating loss carryforwards to reduce any future income tax
liabilities over time; however, it is possible that the Company's results in a
particular year could exceed the annual limitation, in which case such excess
would not be reduced by the net operating loss carryforward and the Company's
tax liability would be correspondingly higher.
 
     While not free from doubt, the Company believes the sale of the DECS should
not result in an ownership change. USX has agreed to indemnify the Company
against any additional federal, state and local taxes incurred if there is a
determination that an ownership change has occurred as a result of the sale by
USX of the DECS (but not the exchange, at maturity, of the Common Stock for the
DECS, if USX delivers Common Stock), other than in the event there is a
determination that an ownership change has occurred prior to the date of
issuance of the DECS. If one or more events occur subsequent to the issuance of
the DECS which would have constituted an ownership change if the sale of the
DECS had not occurred, USX's indemnification obligation is limited to the
difference between the additional taxes payable as a result of an ownership
change resulting from the sale of the DECS and the additional taxes payable
assuming such ownership change had occurred as a result of one or more such
events. The Company is unable to determine whether an ownership change will
occur if Common Stock is exchanged for the DECS since such determination will be
dependent on the facts at the time of exchange.
 
     SFAS No. 109 Effects.  SFAS 109 requires a valuation allowance when it is
more likely than not that some portion or all of the deferred tax assets will
not be realized. It further states that forming a conclusion that a valuation
allowance is not needed is difficult when there is negative evidence such as
cumulative losses in recent years. The ultimate realization of all or part of
the Company's deferred income tax assets depends on the Company's ability to
generate sufficient taxable income in the future.
 
     When preparing future periods' interim and annual financial statements, the
Company will periodically evaluate its strategic and business plans, in light of
evolving business conditions, and the valuation allowance will be adjusted for
future income expectations resulting from that process, to the extent different
from those inherent in the current valuation allowance. In making an assessment
of realizability at September 30, 1996, the Company considered a number of
factors including the improved profitability in 1996 compared to expectations
inherent in the December 31, 1995 valuation allowance. Accordingly, the
valuation allowance has been adjusted by approximately $5.3 million as of
September 30, 1996 for the difference between such revised future income
expectations and those inherent in the valuation allowance at December 31, 1995
as it related to expected 1996 results. Additionally, the valuation allowance
was adjusted by $2.6 million at September 30, 1996 because of improving
expectations regarding income in years after 1996 which were not inherent in the
valuation allowance at December 31, 1995. The effect of these adjustments
resulted in a tax benefit of $0.6 million for the nine months ended September
30, 1996.
 
     The application of SFAS No. 109 valuation allowance determination process
could result in recognition of further significant income tax provisions or
benefits in a single interim or annual period due to changes in income
expectations over a horizon that may span several years. Such tax provision or
benefit effect would likely be material in the context of the specific interim
or annual reporting period in which changes in judgement about more extended
future periods are reported. This effect is a consequence of the application of
the SFAS No. 109 valuation allowance determination process, which is a balance
sheet oriented model and which does not have periodic matching of pretax income
or loss and the related tax effects as an objective.
 
     The Section 382 limitation described above could, if applicable, adversely
impact the income tax provision or benefit in a particular year as a result of
the application of the SFAS No. 109 valuation allowance determination process;
however, it is not expected to have an adverse impact over time.
 
                                       35
   72
 
     If the Company's principal markets continue to exhibit improvement,
additional tax benefits may be reported in future periods, as the valuation
allowance is further reduced. Alternatively, to the extent that the Company's
future profit expectations remain static or are diminished tax provisions may be
charged against pretax income. In either event, such valuation allowance-related
tax provisions or benefits should not necessarily be viewed as recurring.
Further, subject to the effects, if any, of the limitation described above, the
amount of current taxes that the Company expects to pay for the foreseeable
future is minimal. The Company's carryforward tax attributes are viewed by
management as a significant competitive advantage to the extent that profits can
be sheltered effectively from tax and re-employed in the growth of the business.
 
ENVIRONMENTAL MATTERS
 
     The Company is subject to environmental laws and regulations as well as
various health and safety laws and regulations that are subject to frequent
modifications and revisions. While the costs of compliance for these matters
have not had a material adverse impact on RMI in the past, it is impossible to
predict accurately the ultimate effect these changing laws and regulations may
have on the Company in the future.
 
     At September 30, 1996, the amount accrued for future environment-related
costs was $2.4 million. Based on available information, RMI believes its share
of potential environmental-related costs, before expected contributions from
third parties, is in a range from $3.7 million to $6.3 million, in the
aggregate. The amount accrued is net of expected contributions from third
parties (which does not include any amounts from insurers) of approximately $2.1
million, which the Company believes are probable. The Company has been receiving
contributions from such third parties for a number of years as partial
reimbursement for costs incurred by the Company. As these proceedings continue
toward final resolution, amounts in excess of those already provided may be
necessary to discharge the Company from its obligations for these projects. In
1992, the EPA filed a complaint and proposed a $1.4 million civil penalty for
alleged failure to comply with RCRA. The Company is contesting the complaint.
Based on the nature of the proceeding the Company is currently unable to
determine the ultimate liability, if any, that may arise from this matter.
 
     The ultimate resolution of these environmental matters could individually,
or in the aggregate, be material to the consolidated financial statements.
However, management believes that the Company will remain a viable and
competitive enterprise even though it is possible that these matters could be
resolved unfavorably.
 
     For a further discussion of environmental matters, see "Business--Legal
Proceedings--Environmental."
 
CAPITAL EXPENDITURES
 
     Gross capital expenditures in the first nine months of 1996 and 1995
amounted to $2.4 million and $1.1 million, respectively. The Company has
budgeted capital spending of approximately $5.0 million in 1996. The Company
currently estimates that its 1997 capital expenditures will be approximately
$8.0 million. The Company may, however, undertake strategic initiatives and make
additional capital expenditures in 1997. See "Liquidity and Capital Resources"
above.
 
                                       36
   73
 
                                   MANAGEMENT
 
     The following table sets forth, as of November 1, 1996, certain information
regarding RMI's directors and executive officers.
 


               NAME                     AGE                       POSITION
               ----                     ---                       --------                    
                                           
Craig R. Andersson.................     59       Director
Neil A. Armstrong..................     66       Director
Daniel I. Booker...................     48       Director
Ronald L. Gallatin.................     51       Director
Charles C. Gedeon..................     56       Director
L. Frederick Gieg, Jr. ............     64       Director, President and Chief Executive Officer
Robert M. Hernandez................     52       Director, Chairman of the Board
John H. Odle.......................     54       Director and Executive Vice President
Timothy G. Rupert..................     49       Director, Executive Vice President and Chief
                                                 Financial Officer
Wesley W. von Schack...............     52       Director

 
     At the 1996 Annual Meeting held on April 25, 1996, all directors (with the
exception of Messrs. Odle and Rupert, who were elected by the board on July 26,
1996, were elected for terms of one year and until their successors are elected
and qualified.
 
     The Company has established an Office of the Chairman consisting of Robert
M. Hernandez, L. Frederick Gieg, Jr., John H. Odle and Timothy G. Rupert to
concentrate on the Company's strategic planning.
 
ADDITIONAL INFORMATION CONCERNING DIRECTORS AND OFFICERS
 
     Mr. Andersson has been a director since 1990. Mr. Andersson retired as a
director and Vice-Chairman of Aristech Chemical Corporation on April 30, 1995.
Previously, he was President and Chief Operating Officer, a position he had held
since December 4, 1986. Mr. Andersson was President of USS Chemicals Division of
USX (the predecessor of Aristech) from 1985. He is a director of Albermarle
Corporation. He has a B.S. degree in chemical engineering from the University of
Minnesota.
 
     Mr. Armstrong has been a director since 1990. For 17 years he served with
the National Aeronautics and Space Administration and its predecessor agency as
an engineer, test pilot, astronaut and administrator. From 1971 to 1979 he was
professor of aerospace engineering at the University of Cincinnati. He became
Chairman of Cardwell International, Ltd. in 1980; Chairman of CTA, Inc. in 1982;
and Chairman of AIL Systems, Inc. in 1989. He is a director of Cinergy
Corporation, Cincinnati Milacron, Inc., Eaton Corporation, Thiokol Corp., and
USX. He has a B.S. degree in aeronautical engineering from Purdue University and
an M.S. in aeronautical engineering from the University of Southern California.
 
     Mr. Booker has been a director since 1995. He is a partner of the law firm
of Reed Smith Shaw & McClay, headquartered in Pittsburgh, Pennsylvania. Since
1992, he has been Managing Partner, or chief executive, of Reed Smith. He
received an undergraduate degree from the University of Pittsburgh and a law
degree from the University of Chicago.
 
     Mr. Gallatin has been a director since 1996. He served as a Managing
Director of Lehman Brothers Inc., where he was a member of the firm's Operating
Committee and its Director of Corporate Strategy and Product Development until
his retirement on December 31, 1995. He is currently a Senior Advisor to Lehman
Brothers Inc. and a director of Gabelli Securities, Inc. and First Mexico Income
Fund, N.V. A graduate of New York University, and both Brooklyn and New York
University Law Schools, Mr. Gallatin has B.S., J.D. and L.L.M. (Taxation)
degrees and is a Certified Public Accountant.
 
     Mr. Gedeon has been a director since 1991. He is Executive Vice
President-Raw Materials & Diversified Businesses of the U.S. Steel Group of USX.
From 1983 until he joined USX in 1986, Mr. Gedeon had been Vice
President-Operations of National Steel Corporation. Mr. Gedeon is a director of
the U.S. Steel Group of USX Corporation.
 
                                       37
   74
 
     Mr. Gieg has been a director and President and Chief Executive Officer of
the Company since 1990 and will retire on February 28, 1997. He was President
and Chief Executive Officer of its predecessor since September 1, 1982.
Previously, Mr. Gieg had been Vice President and General Manager of the Western
Steel Division of what is now the U.S. Steel Group of USX. He began his career
with USX in June 1953. He has a B.A. degree from Dartmouth College and a degree
from the Advanced Management Program at Harvard University.
 
     Mr. Hernandez has been Chairman and a director since 1990. He is Vice
Chairman and Chief Financial Officer of USX and has been a director of USX since
1991. Mr. Hernandez has an undergraduate degree from the University of
Pittsburgh and an M.B.A. from the Wharton Graduate School of the University of
Pennsylvania. He is a director and chairman of the executive committee of ACE
Limited, a trustee of Compass Capital Fund and a director of Marinette Marine
Corporation and Transtar, Inc. Mr. Hernandez is also a director and Chairman of
the United States Steel and Carnegie Pension Fund.
 
     Mr. Odle was elected a Director on July 26, 1996 and has been Executive
Vice President since June 1996. He was Senior Vice President--Commercial of RMI
and its predecessor from 1989 to 1996 and served as Vice President-Commercial
from 1978 until 1989. Prior to that, Mr. Odle served as General Manager-Sales.
He has 18 years of service with RMI and its predecessor and began his career as
a commercial management trainee in 1964 with USX. Mr. Odle is a graduate of
Miami University, Oxford, Ohio.
 
     Mr. Rupert was elected a Director on July 26, 1996 and has been Executive
Vice President and Chief Financial Officer since June 1996. Prior to that, Mr.
Rupert had been Senior Vice President and Chief Financial Officer from 1994 to
1996 and had served as Vice President and Chief Financial Officer since
September 1991. Prior to joining RMI, Mr. Rupert was employed by USX for 23
years in various accounting and finance positions.
 
     Mr. von Schack has been a director since 1991. He is a director, Chairman,
President and Chief Executive Officer of New York State Electric & Gas Corp. He
was Chairman of the Board, President and Chief Executive Officer of DQE and of
Duquesne Light prior to joining New York State Electric & Gas Corp. He is also a
director of Mellon Bank Corporation and Mellon Bank, N.A.
 
                             CERTAIN RELATIONSHIPS
 
     At October 31, 1996, USX owned 5,483,600 shares of Common Stock,
constituting 27% of the outstanding Common Stock. Pursuant to a Registration
Rights Agreement, dated August 21, 1996, between the Company and USX (the
"Registration Rights Agreement"), the Company has agreed to indemnify USX
against certain liabilities and expenses (including amounts paid in any
settlement effected with the Company's consent) to which USX may become subject
under the Securities Act, state securities or blue sky laws, common law or
otherwise, in connection with this Prospectus. USX has agreed to indemnify the
Company against any additional federal, state and local taxes incurred as a
result of a determination that an ownership change has occurred as a result of
the sale by USX of the DECS (but not the exchange, at maturity, of the Common
Stock for the DECS, if USX delivers Common Stock), subject to certain
limitations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Income Tax Considerations--Section 382 Limitation."
 
     As a result of USX's ownership of shares of Common Stock, USX may be able
to exercise effective control over the Company through its representation on the
Board of Directors and by reason of its substantial voting power with respect to
the election of directors and actions requiring shareholder approval. Two
executives of USX (one of whom is a director of USX) and one non-employee
director of USX serve on RMI's ten-member Board of Directors. One of these USX
executives also serves as RMI's Chairman. For information concerning positions
held by directors and officers of RMI with USX, see "Risk Factors-- Potential
Conflicts of Interest" and "Management."
 
     The Company, in the ordinary course of business, purchases goods and
services from USX. The costs of such transactions to the Company amounted to
approximately $1,275,000 in 1995 and $462,000 in the first nine months of 1996.
 
                                       38
   75
 
                          DESCRIPTION OF CAPITAL STOCK
 
     The following discussion of RMI's Amended Articles of Incorporation and
Regulations, Ohio law and other documents is qualified in its entirety by the
actual terms of such documents and laws. Copies of RMI's Amended Articles of
Incorporation and Regulations have been filed with the Commission.
 
     RMI is authorized to have outstanding 30,000,000 shares of Common Stock,
$.01 par value per share, and 5,000,000 shares of Preferred Stock, no par value
("Preferred Stock"). As of October 31, 1996, 20,246,600 shares of Common Stock
were outstanding. All of the shares of Common Stock issued and outstanding as of
the date of this Prospectus are, and the shares of Common Stock offered hereby
by the Company will be, fully paid and nonassessable. The Preferred Stock is
issuable in one or more series, with such designations, dividend rates, dates at
which dividends shall be payable and from which they shall be cumulative,
redemption rights and prices, sinking fund requirements, liquidation prices,
conversion rights and restrictions as the Board of Directors shall fix, subject
to any limitations prescribed by law and to the provisions of the Amended
Articles of Incorporation. No shares of Preferred Stock have been issued.
 
     Each holder of shares of Common Stock is entitled to one vote for each
share upon all matters presented to shareholders. Each holder of Preferred Stock
is entitled to one vote for each share thereof and generally votes together with
the Common Stock as one class on all matters, except that Preferred Stock is
entitled to vote separately to elect two additional Directors in the event of a
default in the payment in six quarters of dividends on any series of such class
until no quarterly dividend is in arrears. In addition, under Ohio law, holders
of Preferred Stock have the right to vote separately as a class on specified
matters.
 
     The Common Stock is not subject to redemption and has no conversion rights.
Upon liquidation, dissolution or winding up of the Company, holders of Common
Stock are entitled to receive pro rata all assets of RMI remaining after payment
of debts and liquidation preferences and accrued and unpaid dividends relating
to the Preferred Stock.
 
     No holder of Common Stock or Preferred Stock has any preemptive rights or
cumulative voting rights.
 
     Holders of Common Stock are entitled to receive such dividends and other
distributions as may be declared from time to time by the Board of Directors out
of funds legally available for such purposes, subject to any preferential rights
of, and any sinking fund or redemption or purchase rights with respect to,
outstanding shares of Preferred Stock, if any. Dividends on Preferred Stock may
be cumulative in preference to holders of Common Stock at such rates and from
such dates as shall be set by the Board of Directors. Dividend payments are
prohibited to the holders of Common Stock, unless all accrued and unpaid
dividends have been paid to the holders of the Preferred Stock.
 
     RMI's Amended Articles of Incorporation may be amended by the affirmative
vote of at least two-thirds of the voting power of the Company and, if required
by applicable law, at least two-thirds of the outstanding Preferred Stock.
 
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
 
     At October 31, 1996, there were 9,753,400 shares of Common Stock authorized
and not outstanding and five million shares of undesignated Preferred Stock. The
Treasury shares and the unissued shares of Common Stock, to the extent not
reserved for issuance pursuant to RMI's stock option and stock plans, may be
utilized for a variety of corporate purposes, including future public offerings
to raise additional capital or to make corporate acquisitions. Except for the
issuance of Common Stock pursuant to certain director and employee benefit
plans, RMI does not currently have any plans to issue additional shares of
Common Stock or any shares of Preferred Stock.
 
     One of the effects of the existence of unissued and unreserved Common Stock
and undesignated Preferred Stock may be to enable the Board of Directors to
render more difficult or to discourage an attempt to obtain control of the
Company by means of a merger, tender offer, proxy contest or otherwise, and
thereby to protect the continuity of RMI's management. If, in the due exercise
of its fiduciary obligations, for example, the Board of Directors were to
determine that a takeover proposal was not in RMI's best interest, such shares
 
                                       39
   76
 
could be issued by the Board of Directors without shareholder approval in one or
more private placements or other transactions that might prevent or render more
difficult or costly the completion of the takeover transaction by diluting the
voting or other rights of the proposed acquiror or insurgent shareholder group,
by creating a substantial voting block in institutional or other hands that
might undertake to support the position of the incumbent Board of Directors, by
effecting an acquisition that might complicate or preclude the takeover, or
otherwise. In this regard, except with respect to voting rights, RMI's Amended
Articles of Incorporation grants the Board of Directors broad power to establish
the rights and preferences of the authorized and unissued Preferred Stock,
including the power to convert Preferred Stock into a larger number of shares of
Common Stock or other securities, to demand redemption at a specified price
under prescribed circumstances related to a change of control, or to exercise
other powers to impede a takeover. The issuance of shares of Preferred Stock
pursuant to the Board of Director's authority described above may adversely
affect the rights of the holders of the Common Stock. It should be noted that,
although Ohio law and RMI's Amended Articles of Incorporation would not require
shareholder approval to issue authorized shares, historically the NYSE on which
the Common Stock is listed, has prohibited certain issuances and has required
shareholder approval of certain other issuances as a condition of listing the
additional shares or, in some instances, of continued listing of the outstanding
shares.
 
     In addition, certain other charter provisions, which are described below,
may have the effect, alone or in combination with each other or with the
existence of authorized but unissued capital stock, of rendering more difficult
or discouraging an acquisition of RMI deemed undesirable by the Board of
Directors.
 
CERTAIN PROVISIONS OF RMI'S ARTICLES OF INCORPORATION AND REGULATIONS
 
     Size of Board of Directors; Removal of Directors; Filling of Vacancies on
the Board of Directors.  RMI's Regulations provide that the number of directors
may be changed from time to time, by the directors or at a meeting of
shareholders called for the purpose of electing directors, but shall not be
fewer than three nor more than twelve. Under Ohio law, unless the articles of
incorporation or regulations otherwise provide, a director may be removed by the
shareholders with or without cause. RMI's Regulations specifically provide that
directors may be removed only for cause. RMI's Regulations also provide that
vacancies on the Board of Directors that may occur between annual meetings shall
be filled only by the Board of Directors. In addition, these provisions specify
that any director elected to fill a vacancy on the Board will serve for the
balance of the term of the replaced director.
 
     Calling of Meetings of Shareholders.  RMI's Regulations provide that
special meetings of shareholders may be called by a shareholder or shareholders
only if they hold 50% of the shares of stock entitled to vote.
 
     Certain Voting Provisions.  RMI's Amended Articles of Incorporation provide
that the approval of holders of at least two-thirds of the voting power of RMI
(and, if required by applicable law, a class vote of preferred holders) is
required to approve a merger or consolidation if under Ohio law such merger or
consolidation would have to be submitted to RMI's shareholders, a sale or
disposition of all or substantially all the assets of RMI or a dissolution of
RMI.
 
CERTAIN PROVISIONS OF OHIO LAW
 
     RMI is subject to certain provisions of Ohio law that may discourage or
render more difficult an unsolicited takeover of RMI. The Merger Moratorium Act
prohibits certain mergers, sales of assets, issuances or purchases of
securities, liquidation or dissolution, or reclassifications of the
then-outstanding shares of an Ohio corporation involving, or for the benefit of,
certain beneficial holders of stock representing 10% or more of the voting power
of the corporation (a "10% shareholder"), unless (i) the transaction is approved
by the directors prior to the time that the 10% shareholder became a 10%
shareholder (the "Shareholder Acquisition Date"), (ii) the acquisition of 10% of
the voting power is approved by the directors prior to the Shareholder
Acquisition Date or (iii) the transaction involves a 10% shareholder that has
been such for at least three years and (a) the transaction is approved by
holders of two-thirds of the voting power of the corporation and the holders of
a majority of the voting power not owned by 10% shareholders, or (b) certain
minimum price and form of consideration requirements are met.
 
                                       40
   77
 
     The Control Share Act provides that the acquisition of shares entitling the
holder to exercise voting power in certain ranges (one-fifth or more, one-third
or more, or a majority) can be made only with the prior authorization of (i) the
holders of at least a majority of the total voting power and (ii) the holders of
at least a majority of the total voting power held by shareholders other than
the proposed acquirer, officers of the corporation elected or appointed by the
directors, and directors of the corporation who are also employees and excluding
certain shares that are transferred after the announcement of the proposed
acquisition and prior to the vote with respect to the proposed acquisition. The
Control Share Act does not specify a remedy for violation of the Act. However,
in at least one situation, a court has set aside an acquisition made in
violation of the Control Share Act. The Profit Disgorgement Act, which is
contained in Section 1707.043 of the Ohio Revised Code, provides Ohio
corporations, or in certain circumstances the shareholders of an Ohio
corporation, a cause of action to recover profits realized under certain
circumstances by persons who dispose of securities of a corporation within 18
months of proposing to acquire such corporation.
 
                                       41
   78
 
                              PLAN OF DISTRIBUTION
 
     Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement) among USX, RMI and the underwriters named below
(the "Underwriters"), USX has agreed to sell to the Underwriters, and the
Underwriters have severally agreed to purchase, the aggregate number of DECS set
forth opposite their names below:
 


                                                                    NUMBER OF
    UNDERWRITERS                                                      DECS
    ------------                                                    ---------
                                                                 
    Salomon Brothers Inc ..........................................
    Lehman Brothers Inc. ..........................................
                                                                    ---------
              Total ............................................... 5,000,000
                                                                    =========

 
     In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the DECS offered pursuant to the DECS Prospectus if
any of the DECS are purchased.
 
     USX and RMI have been advised by the Underwriters that they propose to
offer the DECS directly to the public initially at the public offering price set
forth on the cover of the DECS Prospectus and to certain dealers at such prices
less a concession not in excess of $       per DECS. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $          per DECS
to other dealers. After the initial public offering, such public offering price
and such concession and reallowance may be changed.
 
     The Company, its directors and executive officers and USX have agreed not
to (i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or indirectly,
or announce the offering of, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for shares of Common Stock or
(ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of shares of
Common Stock, whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of shares of Common Stock or such other securities,
in cash or otherwise, for a period of at least 90 days from the date of this
Prospectus without the prior written consent of the Underwriters; provided,
however, that (x) the Company may issue, or grant options for, shares of Common
Stock pursuant to any stock plan for employees or directors, or any qualified
employee benefit plan, in effect on the date of this Prospectus, or pursuant to
any stock options outstanding on the date of this Prospectus, and any qualified
employee benefit plan in effect on the date of this Prospectus may sell shares
of Common Stock to satisfy plan liquidity needs, and (y) such executive officers
and directors may sell up to 100,000 shares of Common Stock in the aggregate. If
any such consent is given, it would not necessarily be preceded or followed by a
public announcement thereof.
 
     USX has granted to the Underwriters an option, exercisable for the 30-day
period after the date of the DECS Prospectus, to purchase up to an additional
483,600 DECS from USX, at the same price per DECS as the initial DECS to be
purchased by the Underwriters. The Underwriters may exercise such option only
for the purpose of covering over-allotments, if any, incurred in connection with
the sale of DECS offered pursuant to the DECS Prospectus. To the extent that the
Underwriters exercise such option, each Underwriter will have a firm commitment,
subject to certain conditions, to purchase the same proportion of the DECS as
the number of DECS to be purchased and offered by such Underwriter in the above
table bears to the total number of the initial DECS to be purchased by the
Underwriters.
 
     To the extent that the over-allotment option granted to the Underwriters of
the DECS Offering is not exercised in full, USX may sell up to 483,600 shares of
Common Stock pursuant to this Prospectus. Pursuant to the Registration Rights
Agreement, USX may not, without the written consent of RMI, sell any shares of
Common Stock prior to July 26, 1997. RMI can withhold such consent if it
reasonably determines that the proposed sale would be inconsistent with its
proposed utilization of its net operating losses for federal income tax
purposes. The foregoing restriction is in addition to the restrictions contained
in the Underwriting Agreement described above.
 
                                       42
   79
 
     The DECS will be a new issue of securities with no established trading
market. The Underwriters intend to make a market in the DECS, subject to
applicable laws and regulations. However, the Underwriters are not obligated to
do so and any such market-making may be discontinued at any time at the sole
discretion of the Underwriters without notice. Accordingly, no assurance can be
given as to the liquidity of such market.
 
     Upon maturity of the DECS, USX has the option to pay cash or deliver shares
of Common Stock pursuant to the terms of the DECS. For a description of the
terms of such exchange, see the DECS Prospectus.
 
     The Underwriting Agreement provides that the Company and USX will indemnify
the Underwriters against certain liabilities, including liabilities under the
Securities Act, or contribute to payments the Underwriters may be required to
make in respects thereof.
 
     In the ordinary course of their respective businesses, certain of the
Underwriters and their respective affiliates have engaged in and may in the
future engage in commercial and investment banking transactions with the
Company, USX and their respective affiliates, for which customary compensation
has been received.
 
     Ronald L. Gallatin, a director of the Company, is a Senior Advisor to
Lehman Brothers Inc.
 
                                 LEGAL MATTERS
 
     The validity of the shares of the Common Stock offered hereby by the
Company will be passed upon for RMI by Jones, Day, Reavis & Pogue, Cleveland,
Ohio. Jones, Day, Reavis & Pogue acts as counsel for USX in matters unrelated to
this Prospectus. Certain legal matters will be passed upon for the Underwriters
by Simpson Thacher & Bartlett (a partnership which includes professional
corporations), 425 Lexington Avenue, New York, New York 10017. Simpson Thacher &
Bartlett will rely upon the opinion of Jones, Day, Reavis & Pogue as to certain
matters of Ohio law. Simpson Thacher & Bartlett has acted in the past as counsel
in certain matters for a subsidiary of USX.
 
                                    EXPERTS
 
     The financial statements as of December 31, 1995 and 1994 and for each of
the three years in the period ended December 31, 1995 included in this
Prospectus have been so included and in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
 
                                       43
   80
 
                      [This page intentionally left blank]
   81
 
                              RMI TITANIUM COMPANY
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 


                                                                                        PAGE
                                                                                        ----
                                                                                     
    AUDITED FINANCIAL STATEMENTS

    Report of Independent Accountants................................................   F-2

    Consolidated Statement of Operations for the years ended
      December 31, 1995, 1994 and 1993...............................................   F-3

    Consolidated Balance Sheet at December 31, 1995 and 1994.........................   F-4

    Consolidated Statement of Cash Flows for the years ended
      December 31, 1995, 1994 and 1993...............................................   F-5

    Consolidated Statement of Shareholders' Equity for the years ended
      December 31, 1995, 1994 and 1993...............................................   F-6

    Notes to Consolidated Financial Statements.......................................   F-7

    UNAUDITED INTERIM FINANCIAL INFORMATION

    Consolidated Statement of Operations for the nine months ended
      September 30, 1996 and 1995....................................................   F-20

    Consolidated Balance Sheet at September 30, 1996 and
      December 31, 1995..............................................................   F-21

    Consolidated Statement of Cash Flows for the nine months ended
      September 30, 1996 and 1995....................................................   F-22

    Consolidated Statement of Shareholders' Equity for the year ended
      December 31, 1995 and the nine months ended September 30, 1996.................   F-23

    Notes to Consolidated Financial Statements.......................................   F-24

 
                                       F-1
   82
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Shareholders
of RMI Titanium Company
 
     In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of RMI Titanium Company and its subsidiaries at December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
 
     As discussed in Note 2 to the financial statements, in 1995 the Company
adopted Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ."
As discussed in Note 11 to the financial statements, in 1994 the Company adopted
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits." As discussed in Note 11 to the financial statements,
in 1993 the Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions."
 
PRICE WATERHOUSE LLP
Pittsburgh, Pennsylvania
January 26, 1996
 
                                       F-2
   83
 
                              RMI TITANIUM COMPANY
 
                      CONSOLIDATED STATEMENT OF OPERATIONS
                             (DOLLARS IN THOUSANDS)
 


                                                                   YEAR ENDED DECEMBER 31
                                                           --------------------------------------
                                                              1995          1994          1993
                                                              ----          ----          ----
                                                                               
Sales....................................................  $  171,166     $ 143,392     $ 127,397
Operating costs:
Cost of sales (Note 7)...................................     164,949       140,289       127,486
Selling, general and administrative expenses.............       9,576         9,531         9,133
Research, technical and product development expenses.....       1,861         1,543         1,542
                                                           ----------     ---------     ---------
          Total operating costs..........................     176,386       151,363       138,161
                                                           ----------     ---------     ---------
Operating loss...........................................      (5,220)       (7,971)      (10,764)
Other (expense) income--net..............................      (1,622)         (291)        1,554
Interest expense.........................................      (4,966)       (3,300)       (2,745)
                                                           ----------     ---------     ---------
Loss before income taxes.................................     (11,808)      (11,562)      (11,955)
Provision (credit) for income taxes (Note 8).............      (7,200)           --            --
                                                           ----------     ---------     ---------
Loss before cumulative effect of change in accounting
  principle..............................................      (4,608)      (11,562)      (11,955)
Cumulative effect of change in accounting principle
  (Note 11)..............................................          --        (1,202)      (16,938)
                                                           ----------     ---------     ---------
Net loss.................................................  $   (4,608)    $ (12,764)    $ (28,893)
                                                           ==========     =========     =========
Net loss per common share:
  Before cumulative effect of change in accounting
     principle...........................................  $    (0.30)    $   (1.45)    $   (8.14)
  Cumulative effect of change in accounting principle....          --         (0.15)       (11.53)
                                                           ----------     ---------     ---------
Net loss.................................................  $    (0.30)    $   (1.60)    $  (19.67)
                                                           ==========     =========     =========
Weighted average shares outstanding (Note 4).............  15,301,854     7,958,395     1,468,885
                                                           ==========     =========     =========

 
  The accompanying notes are an integral part of these Consolidated Financial
                                  Statements.
 
                                       F-3
   84
 
                              RMI TITANIUM COMPANY
 
                           CONSOLIDATED BALANCE SHEET
                             (DOLLARS IN THOUSANDS)
 


                                                                         1995          1994
                                                                         ----          ----
                                                                               
                                            ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................  $     509     $     385
Receivables, less allowance for doubtful accounts of $1,670 and
  $704...............................................................     41,251        28,846
Inventories..........................................................     74,053        72,466
Deferred tax asset...................................................      1,036            --
Other current assets.................................................      1,656         1,674
                                                                       ---------     ---------
     Total current assets............................................    118,505       103,371
Property, plant and equipment, net of accumulated depreciation.......     39,964        50,016
Noncurrent deferred tax asset........................................      6,164            --
Other noncurrent assets..............................................      6,926         7,423
                                                                       ---------     ---------
     Total assets....................................................  $ 171,559     $ 160,810
                                                                       =========     =========
                             LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt....................................  $     120     $     120
Accounts payable.....................................................     17,646        17,832
Accrued wages and other employee costs...............................      7,237         7,238
Other accrued liabilities............................................      6,764         3,487
                                                                       ---------     ---------
     Total current liabilities.......................................     31,767        28,677
Long-term debt.......................................................     64,020        54,740
Accrued postretirement benefit cost..................................     18,795        17,286
Noncurrent pension liabilities.......................................     18,078        15,501
Other noncurrent liabilities.........................................      2,010         2,010
                                                                       ---------     ---------
     Total liabilities...............................................    134,670       118,214
                                                                       ---------     ---------
Contingencies (see Note 15)..........................................

SHAREHOLDERS' EQUITY:
Preferred Stock, no par value; 5,000,000 shares authorized;
  no shares outstanding..............................................         --            --
Common Stock, $0.01 par value, 30,000,000 shares authorized;
  15,908,091 and 15,838,661 shares issued (Note 4)...................        159           158
Additional paid-in capital (Note 4)..................................    151,715       151,058
Accumulated deficit..................................................   (103,526)      (98,918)
Excess minimum pension liability.....................................     (8,381)       (6,633)
Treasury Common Stock, at cost (shares: 1995-568,198;
  1994-567,100)......................................................     (3,078)       (3,069)
                                                                       ---------     ---------
     Total shareholders' equity......................................     36,889        42,596
                                                                       ---------     ---------
     Total liabilities and shareholders' equity......................  $ 171,559     $ 160,810
                                                                       =========     =========

 
  The accompanying notes are an integral part of these Consolidated Financial
                                  Statements.
 
                                       F-4
   85
 
                              RMI TITANIUM COMPANY
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 


                                                                    YEAR ENDED DECEMBER 31
                                                              ----------------------------------
                                                                1995         1994         1993
                                                              --------     --------     --------
                                                                               
CASH PROVIDED FROM (USED IN) OPERATIONS:
Net loss...................................................   $ (4,608)    $(12,764)    $(28,893)
Adjustment for items not affecting funds from operations:
  Asset impairment charge..................................      5,031           --           --
  Change in accounting principle...........................         --        1,202       16,938
  Compensation expense for stock appreciation rights.......      1,465           --           --
  Depreciation.............................................      6,443        6,140        6,298
  Deferred income taxes....................................     (7,200)          --           --
  Impairment of joint venture investment...................      1,901           --           --
  Other-noncash charges--net...............................      2,137        1,757         (493)
                                                              --------     --------     --------
                                                                 5,169       (3,665)      (6,150)
                                                              --------     --------     --------
CHANGES IN ASSETS AND LIABILITIES (EXCLUDING CASH):
Receivables................................................    (13,159)        (248)      (3,792)
Inventories................................................     (1,587)     (14,974)       1,332
Accounts payable...........................................       (186)       6,062        2,881
Other current liabilities..................................      2,469         (331)       2,475
Other assets and liabilities...............................       (732)         197         (883)
Other......................................................        301         (258)         (92)
                                                              --------     --------     --------
                                                               (12,894)      (9,552)       1,921
                                                              --------     --------     --------
          Cash used in operating activities................     (7,725)     (13,217)      (4,229)
                                                              --------     --------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Investments in joint ventures............................         --         (172)      (1,216)
  Proceeds from sale of facilities.........................        130          120        2,124
  Capital expenditures.....................................     (1,552)      (1,063)      (1,014)
                                                              --------     --------     --------
          Cash used in investing activities................     (1,422)      (1,115)        (106)
                                                              --------     --------     --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from issuance of Common Stock...............         --       26,422           --
  Net borrowings under revolving credit agreements.........      9,400       15,750        4,500
  Debt repayments..........................................       (120)     (27,670)        (120)
  Treasury Common Stock repurchased........................         (9)         (78)         (22)
                                                              --------     --------     --------
          Cash from financing activities...................      9,271       14,424        4,358
                                                              --------     --------     --------
Increase in cash and cash equivalents......................        124           92           23
Cash and cash equivalents at beginning of period...........        385          293          270
                                                              --------     --------     --------
Cash and cash equivalents at end of period.................   $    509     $    385     $    293
                                                              ========     ========     ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest (net of amounts capitalized)........   $  4,320     $  3,283     $  2,548
                                                              ========     ========     ========

 
  The accompanying notes are an integral part of these Consolidated Financial
                                  Statements.
 
                                       F-5
   86
 
                              RMI TITANIUM COMPANY
 
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)
 


                                                                                                           EXCESS
                                                                     ADDT'L.     RETAINED     TREASURY    MINIMUM
                              SHARES       COMMON      DEFERRED      PAID-IN     EARNINGS      COMMON     PENSION
                            OUTSTANDING    STOCK     COMPENSATION    CAPITAL     (DEFICIT)     STOCK      LIABILITY
                            -----------    ------    ------------    --------    ---------     ------     ---------
                                                                                     
Balance at December 31,
  1992.....................  14,604,384    $ 152        $ (249)      $124,306    $ (57,261)   $(2,969)    $  (677)
Compensation expense
  recognized...............          --       --           245             --           --         --          --
Shares issued for
  Restricted Stock Plans...     122,700        1          (201)           200           --         --          --
Shares issued for
  Directors'
  Compensation.............      35,439       --            --             72           --         --          --
Treasury Common Stock
  purchased at cost........     (12,064)      --            --             --           --        (22)         --
Net loss...................          --       --            --             --      (28,893)        --          --
Excess minimum pension
  liability................          --       --            --             --           --         --      (6,843)
                            -----------    -----        ------       --------    ---------    -------     -------
Balance at December 31,
  1993.....................  14,750,459    $ 153        $ (205)      $124,578    $ (86,154)   $(2,991)    $(7,520)
Compensation expense
  recognized...............          --       --           205             --           --         --          --
One-for-ten reverse stock
  split effective March 31,
  1994 (Note 4)............ (13,275,414)    (138)           --            138           --         --          --
Shares issued as result of
  Rights Offering (Note
  4).......................  13,775,057      143            --         26,279           --         --          --
Shares issued for
  Directors'
  Compensation.............      25,783       --            --             59           --         --          --
Treasury Common Stock
  purchased at cost........      (4,564)      --            --             --           --        (78)         --
Shares issued for
  Restricted Stock Award
  Plans....................         240       --            --              4           --         --          --
Net loss...................          --       --            --             --      (12,764)        --          --
Excess minimum pension
  liability................          --       --            --             --           --         --         887
                            -----------    -----        ------       --------    ---------    -------     -------
Balance at December 31,
  1994.....................  15,271,561    $ 158        $   --       $151,058    $ (98,918)   $(3,069)    $(6,633)
Shares issued for
  Directors'
  Compensation.............       4,952       --            --             38           --         --          --
Treasury Common Stock
  purchased at cost........      (1,098)      --            --             --           --         (9)         --
Shares issued for
  Restricted Stock Award
  Plans....................      10,000       --            --             71           --         --          --
Shares issued from exercise
  of employee stock
  options..................      54,478        1            --            548           --         --          --
Net loss...................          --       --            --             --       (4,608)        --          --
Excess minimum pension
  liability................          --       --            --             --           --         --      (1,748)
                            -----------    -----        ------       --------    ---------    -------     -------
Balance at December 31,
  1995.....................  15,339,893    $ 159        $   --       $151,715    $(103,526)   $(3,078)    $(8,381)
                            ===========    =====        ======       ========    =========    =======     =======

 
  The accompanying notes are an integral part of these Consolidated Financial
                                  Statements.
 
                                       F-6
   87
 
                              RMI TITANIUM COMPANY
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)
 
NOTE 1--ORGANIZATION AND OPERATIONS:
 
     The consolidated financial statements of RMI Titanium Company (the
"Company") include the financial position and results of operations for the
Company and its subsidiaries.
 
     The Company is a successor to entities that have been operating in the
titanium industry since 1958. In 1990, USX Corporation ("USX") and Quantum
Chemical Corporation ("Quantum") transferred their entire ownership interest in
the Company's immediate predecessor, RMI Company, an Ohio general partnership,
to the Company in exchange for shares of the Company's Common Stock (the
"Reorganization"). Quantum then sold its shares to the public. USX retained
ownership of its shares. At December 31, 1995, approximately 50.7% of the
outstanding Common Stock was owned by USX. For additional information on the
Company's capital structure, see Note 4.
 
     The Company's operations are conducted primarily in one business segment,
the production and marketing of titanium metal and related products. In 1995, no
single customer accounted for more than 10% of consolidated revenues. In the
years ended December 31, 1995, 1994 and 1993, export sales were $30.1 million,
$39.8 million, and $24.2 million, respectively, principally to customers in
Western Europe.
 
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
  Principles of consolidation:
 
     The consolidated financial statements include the accounts of RMI Titanium
Company and its majority owned subsidiaries. All significant intercompany
accounts and transactions are eliminated.
 
  Use of estimates:
 
     Generally accepted accounting principles require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at year-end and
the reported amounts of revenues and expenses during the year.
 
  Inventories:
 
     Inventories are primarily valued at cost as determined by the last-in,
first-out (LIFO) method which, in the aggregate, is lower than market. Inventory
costs generally include materials, labor costs and manufacturing overhead
(including depreciation).
 
  Depreciation and amortization:
 
     In general, depreciation and amortization of properties is determined using
the straight-line method over the estimated useful lives of the various classes
of assets. For financial accounting purposes, depreciation and amortization are
provided over the following useful lives:
 
                                          
Buildings and improvements...................   20-25 years
Machinery and equipment......................   10-14 years
Furniture and fixtures.......................    3-10 years


 
  Retirement and disposal of properties:
 
     The cost of properties retired or otherwise disposed of, together with the
accumulated depreciation provided thereon, is eliminated from the accounts. The
net gain or loss is recognized in other income and expense.
 
                                       F-7
   88
 
  Maintenance and repairs:
 
     Routine maintenance, repairs and replacements are charged to operations.
Expenditures that materially increase values, change capacities or extend useful
lives are capitalized.
 
  Long-lived assets:
 
     Effective June 30, 1995, the Company adopted Statement of Financial
Accounting Standards No. 121 ("SFAS No. 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The new standard
requires that certain long-lived and intangible assets be written down to fair
value whenever an impairment review indicates that the carrying value of the
asset cannot be recovered. (See Note 7).
 
  Revenue and cost recognition:
 
     Revenues from the sale of commercial products are recognized upon passage
of title to the customer, which in most cases coincides with shipment. Revenues
from long-term, fixed-price contracts are recognized on the
percentage-of-completion method, measured based on the achievement of certain
milestones in the production and fabrication process. Such milestones have been
weighted based on the critical nature of the operation performed, which
management believes is the best available measure of progress on these
contracts. Revenues related to cost-plus-fee contracts are recognized on the
basis of costs incurred during the period plus the fee earned.
 
     Contract costs comprise all direct material and labor costs, including
outside processing fees, and those indirect costs related to contract
performance. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined.
 
     Contract costs and estimated earnings on uncompleted contracts, net of
progress billings, are included in the consolidated balance sheet under
"Inventories."
 
  Pensions:
 
     The Company and its subsidiaries have a number of noncontributory pension
plans which cover substantially all employees. Most employees are covered by
defined benefit plans in which benefits are based on years of service and annual
compensation. Contributions to the defined benefit plans, as determined by an
independent actuary in accordance with regulations, provide not only for
benefits attributed to date but also for those expected to be earned in the
future.
 
     The Company's policy is to fund pension costs at amounts equal to the
minimum funding requirements of ERISA plus additional amounts as may be approved
from time to time.
 
  Postretirement benefits:
 
     The Company provides certain health care benefits and life insurance
coverage for certain of its employees and their dependents. Under the Company's
current plans, certain of the Company's employees will become eligible for those
benefits if they reach retirement age while working with the Company.
 
     Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 ("SFAS No. 106"), "Employers' Accounting for
Postretirement Benefits Other Than Pensions". The new standard requires accrual
accounting for postretirement benefits, similar to accounting for pensions,
rather than recognizing cost as claims are paid, which was the method the
Company previously used. As permitted by SFAS No. 106, the Company elected to
recognize the accumulated postretirement benefit obligation at adoption
(transition obligation) immediately as a cumulative effect of a change in
accounting principle.
 
     The Company does not prefund postretirement benefit costs, but rather pays
claims as presented.
 
                                       F-8
   89
 
  Income tax:
 
     In connection with the Reorganization, the tax basis of the Company's
assets at that time reflected the fair market value of the Common Stock then
issued by the Company. The new tax basis was allocated to all assets of the
Company based on federal income tax rules and regulations, and the results of an
independent appraisal. For financial statement purposes, the Company's assets
are carried at historical cost. As a result, the tax basis of a significant
portion of the Company's assets exceeds the related book values and depreciation
and amortization for tax purposes exceeds the corresponding financial statement
amounts.
 
     Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes."
Under the liability method specified by SFAS No. 109, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities as measured by the enacted tax
rates which will be in effect when these differences reverse. Prior to the
adoption of SFAS No. 109, the Company accounted for income taxes pursuant to
Statement of Financial Accounting Standards No. 96 ("SFAS No. 96"), "Accounting
for Income Taxes." The change from SFAS No. 96 to SFAS No. 109 did not have a
material effect on the financial position, results of operations or cash flows
of the Company.
 
  Stock-based compensation:
 
     In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for
Stock-Based Compensation." The statement established standards for accounting
for stock-based compensation but also allows companies to continue to account
for stock-based compensation under the provisions of Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and make
certain additional disclosures in the notes to financial statements. The new
standard is effective for fiscal years beginning after December 15, 1995. It is
the Company's intention to continue to account for stock-based compensation in
accordance with APB Opinion No. 25 and provide the additional required
disclosure pursuant to the provisions of SFAS No. 123 in the notes to the
financial statements.
 
  Cash flows:
 
     For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
 
NOTE 3--LONG-TERM CONTRACTS:
 
     During 1993, the Company executed an agreement to supply all the titanium
components for the world's first high-pressure drilling riser for use by a major
oil company in development of a project in the Norwegian sector of the North Sea
(the "Riser Contract"). Work commenced on the Riser Contract during the third
quarter of 1993, and is now completed with final shipments of the riser joints
having been made in the first quarter of 1995. During the fourth quarter of
1994, the Company was awarded a three-year contract to supply all of the
titanium pipe casing required for a geothermal energy facility located in the
Imperial Valley of California. The initial release under the contract was
delivered in late 1995 and early 1996.
 
     During 1995, 1994 and 1993, the Company recorded estimated revenues earned
under the above referenced contracts of $5.8 million, $13.2 million and $4.3
million, respectively. At December 31, 1995 and 1994, there were $2.5 million
and $8.1 million, respectively, included in the consolidated balance sheet under
"Inventories," which represents the amount of cost incurred on the contracts,
plus estimated earnings, less progress billings. (See Notes 5 and 6).
 
     In October 1993, the Company executed a long-term contract with the U.S.
Department of Energy ("DOE") covering the remediation and restoration of the
Company's former Extrusion Plant in Ashtabula, Ohio. The contract calls for the
Company to earn fees on cost-plus-fee basis, and acknowledges the DOE's
responsibility for the remediation of the site. During 1995, 1994 and 1993, the
Company recognized revenues,
 
                                       F-9
   90
 
including fees, of $6.2 million, $8.5 million and $10.4 million, respectively,
under the contract. Total estimated revenues under this contract are not
determinable.
 
NOTE 4--REVERSE STOCK SPLIT AND RIGHTS OFFERING:
 
     At its Annual Meeting held on March 31, 1994, the Company's shareholders
approved an amendment to the Articles of Incorporation of the Company, effecting
a one-for-ten reverse stock split. A Certificate of Amendment to the Articles of
Incorporation was filed with the Ohio Secretary of State on March 31, 1994, and
the reverse split became effective on that date. Pursuant to the reverse split,
each certificate representing shares of Common Stock outstanding immediately
after the reverse split was deemed to represent one-tenth the number of shares
it represented immediately prior to the reverse split. In order to supplement
its financial resources and provide financing for new titanium market
opportunities, the Board of Directors approved a rights offering to raise up to
$30 million. Each record holder of Common Stock at the close of business on June
24, 1994 received five transferable rights for each share of Common Stock. Each
right entitled the holder to purchase two shares of RMI Common Stock for a price
of $2.00 per share. The rights offering expired July 22, 1994. Approximately 93%
of the total number of rights were exercised. The exercise of the rights
resulted in the issuance of 13,775,057 new shares of the Company's Common Stock.
Gross proceeds from the rights offering were $27.6 million. Net proceeds
increased Shareholders' Equity by approximately $26.4 million. As of December
31, 1995, USX Corporation beneficially owns approximately 50.7% of the Company's
Common Stock. However, in accordance with the provisions of a voting trust
agreement, USX has placed 1,319,175 shares of RMI Common Stock into the trust so
that the number of shares of stock held by USX and its affiliates outside the
trust do not exceed the number of shares held by all other holders. This
arrangement resulted in USX (exclusive of its affiliates) having a direct voting
interest in RMI as of December 31, 1995 of approximately 42%. Per share and
weighted average share amounts reported herein have been adjusted to reflect the
reverse split and subsequent rights offering. Treasury Common Stock was not
affected by the reverse split or rights offering.
 
NOTE 5--INVENTORIES:
 


                                                                         DECEMBER 31
                                                                   -----------------------
                                                                     1995           1994
                                                                   --------       --------
                                                                            
    Raw materials and supplies...................................  $ 22,609       $ 13,825
    Work-in-process and finished goods...........................    71,290         71,933
    Adjustment to LIFO values....................................   (19,846)       (13,292)
                                                                   --------       --------
                                                                   $ 74,053       $ 72,466
                                                                   ========       ========

 
     Included in inventories are costs relating to the Riser Contract and
geothermal pipe contract. Such costs, net of amounts recognized to date,
amounted to $2.5 million in 1995 and $8.1 million in 1994.
 
     During 1993 LIFO inventory quantities, which were carried at lower costs
than those prevailing in prior years, were reduced. The effect of this reduction
was to reduce cost of sales for 1993 by $128.
 
NOTE 6--ACCOUNTS RECEIVABLE:
 


                                                                          DECEMBER 31
                                                                     ---------------------
                                                                      1995          1994
                                                                     -------       -------
                                                                             
    Trade and commercial customers.................................  $39,655       $29,127
    Progress billings on uncompleted contracts.....................    2,604            --
    U. S. Government-DOE...........................................      662           423
                                                                     -------       -------
                                                                     $42,921       $29,550
    Less allowance for doubtful accounts...........................   (1,670)         (704)
                                                                     -------       -------
                                                                     $41,251       $28,846
                                                                     =======       =======

 
                                      F-10
   91
 
NOTE 7--PROPERTY, PLANT AND EQUIPMENT:
 
     Property, plant and equipment is stated at cost and consists of the
following:
 


                                                                         DECEMBER 31
                                                                    ---------------------
                                                                      1995         1994
                                                                    --------     --------
                                                                           
     Land.........................................................  $    659     $    659
     Buildings and improvements...................................    36,451       36,443
     Machinery and equipment......................................    77,409       79,460
     Other........................................................    13,684       13,607
     Construction in progress.....................................     5,541        7,326
                                                                    --------     --------
                                                                     133,744      137,495
     Less -- Accumulated depreciation.............................    93,780       87,479
                                                                    --------     --------
                                                                    $ 39,964     $ 50,016
                                                                    ========     ========

 
     The Company elected to adopt SFAS No. 121 effective June 30, 1995. After
completing a review of its assets, the Company impaired the value of an asset
consisting of design and engineering work for a proposed titanium tetrachloride
facility. This asset was impaired due to recent market developments, the
conclusion of certain joint venture negotiations and the determination that such
a facility was not likely to be constructed in the near future. The asset
carrying value has been reduced from $5.0 million to a nominal amount reflecting
a fair value determination under SFAS No. 121 versus a determination of ultimate
net realizable value under the Company's previous impairment approach.
 
NOTE 8--INCOME TAXES:
 
     As discussed in Note 2, effective January 1, 1993, the Company adopted the
provisions of SFAS No. 109.
 
     Deferred taxes result from the following (in thousands):
 


                                                                         DECEMBER 31
                                                                    ---------------------
                                                                      1995         1994
                                                                    --------     --------
                                                                           
     Deferred taxes assets:
       Loss carryforwards ($104,133 expiring in 2006 through
          2010)...................................................  $ 37,488     $ 31,838
       Inventories................................................     5,929        5,590
       Property, plant and equipment..............................     6,223        5,494
       Intangible assets..........................................     1,514        2,243
       Other postretirement benefit costs.........................     6,522        6,090
       Other employment related items.............................     2,771        2,001
       Other......................................................     2,789        1,410
       Valuation allowance........................................   (56,036)     (54,666)
                                                                    --------     --------
          Total deferred tax assets...............................     7,200           --
                                                                    --------     --------
     Deferred tax liabilities.....................................        --           --
                                                                    --------     --------
          Net deferred taxes......................................  $  7,200     $     --
                                                                    ========     ========

 
     SFAS No. 109 requires a valuation allowance when it is "more likely than
not that some portion or all of the deferred tax assets will not be realized."
It further states that "forming a conclusion that a valuation allowance is not
needed is difficult when there is negative evidence such as cumulative losses in
recent years." The ultimate realization of this deferred income tax asset
depends on the Company's ability to generate sufficient taxable income in the
future prior to the expiration of the loss carryforwards. The Company has
evaluated the available evidence supporting the realization of future taxable
income and, based upon that evaluation, believes it is more likely than not at
this time that a portion of its deferred tax assets will be realized. Factors
considered in the evaluation process included the return to profitability during
the fourth quarter of 1995, a substantial and growing backlog of profitable
orders and a general improvement in overall titanium industry operating
conditions. Accordingly, a portion of the valuation allowance was released,
resulting in a credit to income tax expense in the fourth quarter of 1995. The
remaining valuation allowance
 
                                      F-11
   92
 
was retained, in light of the requirement in SFAS No. 109 to give weight to
objective evidence such as recent losses and the historical titanium industry
business cycle.
 
     When preparing 1996 and future periods' interim and annual financial
statements, the Company will periodically evaluate its strategic and business
plans, in light of evolving business conditions, and the valuation allowance
will be adjusted for future income expectations resulting from that process, to
the extent different from those inherent in the valuation allowance established
as of December 31, 1995.
 
     As a result, the application of the SFAS No. 109 valuation allowance
determination process could result in recognition of significant income tax
provisions or benefits in a single interim or annual period due to changes in
income expectations over a horizon that may span several years. Such tax
provision or benefit effect would likely be material in the context of the
specific interim or annual reporting period in which changes in judgment about
more extended future periods are reported.
 
     If an "ownership change" were to occur within the meaning of Section 382 of
the Internal Revenue Code of 1986, as amended, the utilization of net operating
loss carryforwards would be subject to an annual limitation. Should the annual
limitation apply, the Company believes that it would affect the timing of the
use of, but not the ultimate ability of the Company to use, the net operating
loss carryforwards to reduce future income tax liabilities.
 
     The difference between the statutory tax rate of 35% applied to the pretax
loss and the effective tax rate for the year ended December 31, 1995 is due
principally to the release of $7.2 million of the valuation allowance.
 
NOTE 9--LONG-TERM DEBT:
 
     On May 3, 1995, the Company reached agreement with the participating banks
on the terms of an amendment to the $75 million revolving credit facility. The
new agreement extends the maturity of the loan from March 15, 1996 to March 31,
1997. The amendment also modifies an existing financial covenant for the
requirement to maintain a minimum balance of shareholders' equity, and
provisions requiring the imposition of a borrowing base formula. Under the
borrowing base formula, the Company can borrow up to the lesser of $75 million
or an amount equal to the products of the aggregate value of each of various
categories of collateral and an advance rate established by the banks for each
category of collateral, plus an available overadvance. The agreement also
contains a provision that if USX were to cease to beneficially own at least 48%
of the Company's voting equity securities, the terms of the agreement would be
subject to renegotiation and, in such event, failure by the Company and the
banks to reach agreement on appropriate amendments to the facility could
constitute an event of default. As of December 31, 1995 the Company was in
compliance with the covenants and terms of the amended revolving credit
facility. At December 31, 1995, the available and unused portion of the facility
was $16.8 million. The Company is currently negotiating with certain of the
participating banks to replace this agreement.
 
     The Company and the banks which are parties to the amended revolving credit
facility are also parties to a second revolving credit facility which provides
for up to an additional $5 million of borrowings. The second facility permits
borrowings up to an amount determined pursuant to a borrowing base formula which
includes only certain collateral related to, or arising out of, the Company's
export sales. The second facility, which matures on September 26, 1996, is
guaranteed by the Export Import Bank of the United States. This facility
 
                                      F-12
   93
 
continues to be classified as long-term debt at December 31, 1995 based on the
company's intent and ability to refinance at maturity through the use of its $75
million revolving credit facility.
 


                                                                               DECEMBER 31
                                                                           -------------------
                                                                            1995        1994
                                                                           -------     -------
                                                                                 
Credit Agreement, dated May 3, 1995, final maturity March 31, 1997,
  bearing interest at rates ranging from 7.93% to 8.11% at December 31,
  1995 and 7.44% to 7.83% at December 31, 1994...........................  $58,200     $53,800
Foreign Loan Agreement, dated May 3, 1995, final maturity September 26,
  1996 bearing interest at 7.18% at December 31, 1995....................    5,000          --
Industrial revenue bond bearing interest at a floating rate based on
  weekly tax exempt market rates (5.5% and 6.1% at December 31, 1995 and
  1994, respectively) repayable in annual sinking fund payments of $120
  over 15 years from October 1988........................................      940       1,060
Current portion of long-term debt........................................     (120)       (120)
                                                                           -------     -------
                                                                           $64,020     $54,740
                                                                           =======     =======

 
     The minimum principal payments on long-term debt outstanding at December
31, 1995 for the succeeding five years are as follows:
 
                                              
                  1996...........................................  $   120
                  1997...........................................   63,320
                  1998...........................................      120
                  1999...........................................      120
                  2000...........................................      120

                  
 
NOTE 10--PENSION PLANS:
 
     Pension expense was determined assuming an expected rate of return on plan
assets of 9% for 1995 and 1994 and 10% in 1993. The components of pension
expense for the three years ended December 31, 1995 are summarized as follows:
 


                                             1995                   1994                   1993
                                      ------------------      -----------------      -----------------
                                                                             
Service cost.......................              $ 1,063                $ 1,242                $ 1,092
Interest cost......................                5,064                  4,755                  4,940
Return on plan assets:
  Actual...........................   (10,598)                   809                 (3,460)
  Deferred gain (loss).............     6,095     (4,503)     (5,422)    (4,613)     (1,595)    (5,055)
                                      -------                 ------                 ------
Net amortization and deferral......                  606                    693                    611
                                                 -------                -------                -------
Pension expense....................              $ 2,230                $ 2,077                $ 1,588
                                                 =======                =======                =======

 
                                      F-13
   94
 
     Funds' status--The benefit obligations at December 31, 1995 and 1994 were
determined using discount rates of 7.0% and 8.25%, respectively, and an assumed
rate of compensation increase of 5.75% for both years.
 


                                                                          DECEMBER 31
                                                                     ---------------------
                                                                       1995         1994
                                                                       ----         ----
                                                                            
    Fair value of plan assets......................................  $ 52,292     $ 44,465
    Projected benefit obligation (PBO).............................   (75,175)     (64,231)
                                                                     --------     --------
    Plan assets less than PBO......................................   (22,883)     (19,766)
    Unrecognized net loss..........................................    12,277        9,967
    Unrecognized transition obligation.............................     1,484        1,791
    Unrecognized prior service cost................................     3,903        2,579
    Adjustment required to recognize minimum liability.............   (14,068)     (11,366)
                                                                     --------     --------
      Net pension liability........................................  $(19,287)    $(16,795)
                                                                     ========     ========
    Accumulated benefit obligation.................................  $(71,579)    $(61,260)
                                                                     ========     ========
    Vested benefit obligation......................................  $(66,810)    $(57,962)
                                                                     ========     ========

 
     As of December 31, 1995, approximately 51% of the plans' assets are
invested in equity securities, and 39% in government debt instruments and the
balance in cash equivalents or debt securities.
 
     Pursuant to the provisions of Statement of Financial Accounting Standards
No. 87 "Employers Accounting for Pensions," the Company recorded in other
noncurrent liabilities an additional minimum pension obligation of $14.1 million
and $11.4 million as of December 31, 1995 and 1994, respectively, representing
the amount by which the accumulated benefit obligation exceeded the fair value
of plan assets plus accrued amounts previously recorded.
 
NOTE 11--POSTRETIREMENT HEALTH CARE BENEFITS AND OTHER EMPLOYEE BENEFITS:
 
     As discussed in Note 2, RMI adopted SFAS No. 106 effective January 1, 1993.
The Company elected to recognize immediately the transition obligation
determined at the date of adoption of the new accounting standard. The
cumulative effect of this change in accounting principle resulted in a charge of
$16.9 million to the Company's 1993 results.
 
     Net periodic postretirement benefit cost for the three years ended December
31, 1995 included the following components (in thousands):
 


                                                             1995       1994       1993
                                                             ----       ----       ----
                                                                         
        Service cost.....................................   $  266     $  357     $  316
        Interest cost....................................    1,543      1,533      1,337
        Net amortization and deferrals...................      119        254         --
                                                            ------     ------     ------
                                                            $1,928     $2,144     $1,653
                                                            ======     ======     ======

 
     The following table sets forth the plans' status reconciled with the amount
reported in the Company's balance sheet at December 31, 1995 and 1994 (in
thousands):
 


                                                                       1995         1994
                                                                       ----         ----
                                                                            
    Accumulated Postretirement Benefit Obligation ("APBO") 
      attributable to:
       Retirees....................................................  $(13,020)    $(11,867)
       Active participants.........................................    (8,692)      (7,242)
                                                                     --------     --------
         Total APBO................................................  $(21,712)    $(19,109)
                                                                     ========     ========
    Accrued liability included in balance sheet, including
      transition
      obligation...................................................  $(18,199)    $(17,768)
    Unrecognized net loss..........................................    (3,513)      (1,341)
                                                                     --------     --------
         Total APBO................................................  $(21,712)    $(19,109)
                                                                     ========     ========

 
                                      F-14
   95
 
     For measurement purposes, a 5% annual rate of increase in the per capita
cost of postretirement medical benefits was assumed beginning in 1996 and
declining to 0% in 2004. The ultimate costs of certain of the Company's retiree
health care plans are capped at contractually determined out-of-pocket spending
limits. The annual rate of increase in the per capita costs for these plans is
limited to the contractually determined spending cap. The health care cost trend
assumption has a significant effect on the amounts reported. For example,
increasing the health care cost trend rate by one percentage point in each year
would increase the accumulated postretirement benefit obligation at December 31,
1995 by $2.3 million and increase net periodic expense by $0.2 million. The
discount rate used in determining the accumulated postretirement benefit
obligation at December 31, 1995 and 1994 was 7.0% and 8.25%, respectively.
 
     Effective January 1, 1994 the Company adopted the provisions of Statement
of Financial Accounting Standards No. 112 ("SFAS No. 112"), "Employer's
Accounting for Postemployment Benefits." The results for the year ended December
31, 1994 reflect a one-time charge of $1.2 million representing the cumulative
effect of adopting the new standard. The liabilities recorded pursuant to SFAS
No. 112 relate principally to workers' compensation.
 
NOTE 12--OPERATING LEASES:
 
     The Company and its subsidiaries have entered into various operating leases
for the use of certain equipment, principally office equipment and vehicles. The
leases generally contain renewal options and provide that the lessee pay
insurance and maintenance costs. The total rental expense under operating leases
amounted to $1.3 million in 1995, $1.3 million in 1994, and $1.4 million in
1993. Future commitments under operating leases are considered to be immaterial
by management of the Company.
 
NOTE 13--TRANSACTIONS WITH RELATED PARTIES:
 
     The Company, in the ordinary course of business, purchases goods and
services, including conversion services, from USX and related companies. The
cost of such transactions to the Company amounted to approximately $1.3 million
in 1995, $0.7 million in 1994 and $0.1 million in 1993. The cost of these
transactions were on terms no less favorable to the Company than those obtained
from other parties. On August 2, 1993 the United States Steel and Carnegie
Pension Fund (the "Pension Fund") was appointed as trustee of the Company's
pension plans. The Pension Fund has for many years acted as trustee of USX
Corporation employee benefit plans. The Pension Fund is a registered investment
advisor under the Investment Advisors Act of 1940, and receives a negotiated fee
for such services. Other transactions with related parties are incidental to the
Company's business and are not significant.
 
NOTE 14--OTHER INCOME STATEMENT INFORMATION:
 
     Costs incurred for repairs and maintenance of plant and equipment totaled
$4.8 million, $3.3 million, and $2.8 million, for the years ended December 31,
1995, 1994, and 1993, respectively.
 
     Real and personal property taxes amounted to $1.8 million, $1.7 million,
and $1.5 million, for the years ended December 31, 1995, 1994, and 1993,
respectively.
 
     Other income (expense) for 1995 includes a $1.9 million impairment of the
Company's investment in the Permipipe Titanium AS joint venture. 1993 amounts
include a $1.4 million gain on sales and retirements of equipment and
facilities.
 
NOTE 15--CONTINGENCIES:
 
     In connection with the Reorganization, the Company has agreed to indemnify
USX and Quantum against liabilities related to their ownership of RMI Company
and its immediate predecessor, Reactive Metals, Inc., which was formed by USX
and Quantum in 1964.
 
     The Company is the subject of, or a party to, a number of pending or
threatened legal actions involving a variety of matters.
 
                                      F-15
   96
 
AIRCRAFT PRODUCT LIABILITY
 
     The Company was named as a defendant in a number of cases arising from the
aircraft crash at Sioux City, Iowa, which occurred on July 19, 1989. In its
final report, issued November 1, 1990, the National Transportation Safety Board
("NTSB") concluded that the titanium used to manufacture the fan disc which
ultimately failed, leading to the crash, was supplied by a major competitor of
the Company. In November, 1995 the Company was granted summary judgement in this
matter dismissing it from all cases.
 
ENVIRONMENTAL MATTERS
 
     In the ordinary course of business, the Company is subject to pervasive
environmental laws and regulations concerning the production, handling, storage,
transportation, emission, and disposal of waste materials and is also subject to
other federal and state laws and regulations regarding health and safety
matters. These laws and regulations are constantly evolving, and it is not
currently possible to predict accurately the ultimate effect these laws and
regulations will have on the Company in the future.
 
     On October 9, 1992 the U. S. Environmental Protection Agency ("EPA") filed
a complaint alleging certain violations of the Resource Conservation and
Recovery Act of 1976, as amended ("RCRA") at the Company's now closed Sodium
Plant in Ashtabula, Ohio. The EPA's determination is based on information
gathered during inspections of the facility in February, March and June of 1991.
Under the complaint the EPA proposes to assess a civil penalty of approximately
$1.4 million for alleged failure to comply with RCRA. The Company is contesting
the complaint. It is the Company's position that it has complied with the
provisions of RCRA and that the EPA's assessment of penalties is inappropriate.
A formal hearing has been requested and informal discussions with the EPA to
settle this matter are ongoing. Based on the preliminary nature of the
proceedings, the Company is currently unable to determine the ultimate
liability, if any, that may arise from this matter.
 
     The Company is involved in investigative or cleanup projects under federal
or state environmental laws at a number of waste disposal sites, including the
Fields Brook Superfund Site. Given the status of the proceedings with respect to
these sites, ultimate investigative and remediation costs cannot presently be
accurately predicted, but could, in the aggregate be material. Based on the
information available regarding the current ranges of estimated remediation
costs at currently active sites, and what the Company believes will be its
ultimate share of such costs, provisions for environmental-related costs have
been recorded. These provisions are in addition to amounts which have previously
been accrued for the Company's share of environmental study costs.
 
     With regard to the Fields Brook Superfund Site, the Company, together with
31 other companies, has been identified by the EPA as a potentially responsible
party ("PRP") with respect to a superfund site defined as the Fields Brook
Watershed in Ashtabula, Ohio, which includes the Company's now closed Ashtabula
facilities. The EPA's 1986 estimate of the cost of remediation of the Fields
Brook operable sediment unit was $48 million. Recent studies, together with
improved remediation technology and redefined cleanup standards, have resulted
in a more recent estimate of the remediation cost of approximately $25 million.
The actual cost of remediation may vary from the estimate depending upon any
number of factors.
 
     The EPA, in March 1989, ordered 22 of the PRPs to conduct a design phase
study for the sediment operable unit and a source control study, which studies
are currently estimated to cost $19 million. The Company, working cooperatively
with fourteen others in accordance with two separate agreements, is complying
with the order. The Company has accrued and has been paying its portion of the
cost of complying with the EPA's order, which includes the studies. It is
anticipated that the studies will be completed no earlier than late 1996. Actual
cleanup would not commence prior to that time. The Company's share of the design
cost has been established at 9.95%. On June 21, 1995, the Company and twelve
others entered into a Phase 2 (actual cleanup) allocation agreement which
assigns 9.44% of the cost to the Company. However, the actual percentage may be
more or less based on contributions from other parties which are not currently
participating in the Phase 2 allocation agreement.
 
                                      F-16
   97
 
     At December 31, 1995, the amount accrued for future environmental-related
costs was $2.4 million. Based on available information, RMI believes its share
of potential environmental-related costs, before expected contributions from
third parties, is in a range from $3.7 million to $6.3 million, in the
aggregate. The amount accrued is net of expected contributions from third
parties (which does not include any amounts from insurers) of approximately $2.1
million, which the Company believes are probable. The Company has been receiving
contributions from such third parties for a number of years as partial
reimbursement for costs incurred by the Company. As these proceedings continue
toward final resolution, amounts in excess of those already provided may be
necessary to discharge the Company from its obligations for these projects.
 
     The Company is also the subject of, or a party to, a number of other
pending or threatened legal actions involving a variety of matters.
 
     The ultimate resolution of these foregoing contingencies could,
individually or in the aggregate, be material to the consolidated financial
statements. However, management believes that the Company will remain a viable
and competitive enterprise even though it is possible that these matters could
be resolved unfavorably.
 
     For a more detailed discussion of environmental matters, see
"Business--Legal Proceedings-- Environmental."
 
NOTE 16--STOCK OPTION AND RESTRICTED STOCK AWARD PLANS:
 
STOCK OPTION INCENTIVE PLAN:
 
     The 1989 Stock Option Incentive Plan authorized the granting of options to
purchase up to 775,500 shares of Common Stock to eligible officers and key
management employees at not less than the market value on the date the options
are granted. Options granted included stock appreciation rights. The option
period may not exceed ten years from the date of the grant. During 1995
substantially all option holders voluntarily relinquished their stock
appreciation rights. No further grants will be made under the plan.
 
     The following table presents a summary of stock option transactions under
the 1989 Stock Option Incentive Plan: (as adjusted for the one-for-ten reverse
stock split and rights offering)
 


                                                                 SHARES          PRICE
                                                                 -------     --------------
                                                                       
     Balance December 31, 1992.................................  332,151     $4.13 - 13.32
     Granted...................................................  103,390          2.80
     Exercised.................................................       --           --
     Forfeited.................................................  (73,714)     4.13 - 13.32
                                                                 -------     -------------
     Balance December 31, 1993.................................  361,827     $2.80 - 13.32
     Granted...................................................  370,000          4.06
     Exercised.................................................       --           --
     Forfeited.................................................  (44,083)     2.80 - 13.32
                                                                 -------     -------------
     Balance December 31, 1994.................................  687,744     $2.80 - 13.32
     Granted...................................................       --           --
     Exercised.................................................  (54,478)     2.80 -  6.91
     Forfeited.................................................  (18,094)     2.80 - 13.32
                                                                 -------     -------------
     Balance December 31, 1995.................................  615,172     $2.80 - 13.32
                                                                 =======     =============

 
1989 EMPLOYEE RESTRICTED STOCK AWARD PLAN:
 
     The 1989 Restricted Stock Award Plan authorized the granting of shares of
Common Stock to employees who have made significant contribution to the success
of the Company. The plan authorized the award of up to 300,000 shares of Common
Stock, subject to adjustment in certain circumstances. Shares awarded are
subject to restrictions.
 
                                      F-17
   98
 
     In 1995 and 1993, respectively, 10,000 and 134,000 shares of Common Stock
were awarded under the plan. No grants were made in 1994. Compensation expense
equivalent to the fair market value of the shares on the date of the grant is
being recognized over the vesting periods during which the restrictions lapse.
All restrictions on the 1993 grants were removed as of April 4, 1994. No further
grants will be made under the plan.
 
NON-EMPLOYEE DIRECTOR RESTRICTED STOCK AWARD PLAN:
 
     The Non-Employee Director Restricted Stock Award Plan authorized the
granting of up to 15,000 shares of Common Stock to directors who are not and
have never been officers or employees of the Company. Shares awarded are subject
to a restriction providing that a participant shall not be permitted to sell,
transfer, pledge or assign awarded shares during the period commencing with the
date of an award and ending upon the participant retiring from the Board of
Directors. On the date of the Company's Annual Meeting of Shareholders each
calendar year, each eligible director was awarded 300 restricted shares. No
grant of such shares may be made after December 31, 1994.
 
1995 STOCK PLAN
 
     The RMI Titanium Company 1995 Stock Plan, which was approved by a vote of
the Company's shareholders at the 1995 Annual Meeting of Shareholders, replaced
both the 1989 Stock Option Incentive Plan and the 1989 Employee Restricted Stock
Award Plan. The plan permits the grant of any or all of the following types of
awards in any combination: Stock Options, Stock Appreciation Rights and
Restricted Stock. Up to 2% of the outstanding Common Stock as determined on
December 31 of the preceding year may be granted in the form of such awards. The
Stock Plan Committee, appointed by the Board of Directors, administers the plan,
and determines the type or types of grants to be made under the plan and shall
set forth in each such grant the terms, conditions and limitations applicable to
grants, including provisions relating to a possible change in control of the
Company.
 
     As of December 31, 1995, no grants had been made under the Plan.
 
                                      F-18
   99
 
NOTE 17--SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
 
     The following table sets forth selected quarterly financial data for 1995
and 1994.
 


                                                        1ST         2ND         3RD         4TH
1995                                                  QUARTER(1)  QUARTER(1)  QUARTER     QUARTER(2)
- ----                                                  -------     -------     -------     -------
                                                                              
Sales...............................................  $40,103     $39,621     $42,912     $48,530
Gross profit........................................    1,937      (3,999)      2,890       5,389
Operating profit (loss).............................     (877)     (7,422)        199       2,880
Net income (loss)...................................   (1,863)    (10,509)       (967)      8,731
Net income (loss) per share.........................    (0.12)      (0.69)      (0.06)       0.57

 


                                                        1ST         2ND         3RD         4TH
1994                                                  QUARTER     QUARTER     QUARTER     QUARTER
- ----                                                  -------     -------     -------     -------
                                                                              
Sales...............................................  $36,360     $35,337     $32,842     $38,853
Gross profit........................................      527         693         996         887
Operating loss......................................   (2,216)     (2,017)     (1,984)     (1,754)
Cumulative effect of change in accounting
  principle.........................................   (1,202)         --          --          --
Net loss............................................   (4,131)     (3,023)     (2,780)     (2,830)
Net loss per common share before change in
  accounting principle..............................    (1.99)      (2.05)      (0.21)      (0.18)
Net loss per share..................................    (2.80)      (2.05)      (0.21)      (0.18)

 
- ---------
 
(1) The effect of adopting SFAS No. 121 amounting to $5,031, previously reported
    as a cumulative effect of a change in accounting principle in the first
    quarter of 1995, has been adjusted to reflect such affect as an element of
    operating income in the second quarter of 1995.
 
(2) Net income in the fourth quarter of 1995 was favorably affected by the
    recognition of a $7,200 income tax benefit.
 
                                      F-19
   100
 
                              RMI TITANIUM COMPANY
 
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                  (UNAUDITED)
                             (DOLLARS IN THOUSANDS)
 


                                                                         NINE MONTHS ENDED
                                                                            SEPTEMBER 30
                                                                     --------------------------
                                                                        1996            1995
                                                                     ----------      ----------
                                                                               
Sales.............................................................   $  177,386      $  122,636
Operating costs:
Cost of sales (Note 8)............................................      146,134         121,808
Selling, general and administrative expenses......................        7,294           7,495
Research, technical and product development expenses..............        1,456           1,433
                                                                     ----------      ----------
     Total operating costs........................................      154,884         130,736
Operating income (loss)...........................................       22,502          (8,100)
Other income (expense)-net........................................          244          (1,640)
Interest expense..................................................       (1,978)         (3,599)
                                                                     ----------      ----------
Income (loss) before income taxes.................................       20,768         (13,339)
Provision (credit) for income taxes (Note 4)......................         (607)             --
                                                                     ----------      ----------
Net income (loss).................................................   $   21,375      $  (13,339)
                                                                     ==========      ==========
Net income (loss) per common share--(Note 3)......................   $     1.19      $    (0.87)
                                                                     ==========      ==========
  Weighted average shares outstanding.............................   17,930,408      15,288,824
                                                                     ==========      ==========

 
  The accompanying notes are an integral part of these Consolidated Financial
                                  Statements.
 
                                      F-20
   101
 
                              RMI TITANIUM COMPANY
 
                           CONSOLIDATED BALANCE SHEET
                             (DOLLARS IN THOUSANDS)
 


                                                                      (UNAUDITED)
                                                                     SEPTEMBER 30      DECEMBER 31
                                                                         1996              1995
                                                                     -------------     ------------
                                                                                 
ASSETS
Current assets:
  Cash and cash equivalents.......................................     $     723        $      509
  Receivables--less allowance for doubtful accounts
     of $1,897 and $1,670.........................................        55,309            41,251
  Inventories.....................................................        94,637            74,053
  Deferred tax asset..............................................           261             1,036
  Other current assets............................................         1,775             1,656
                                                                       ---------        ----------
       Total current assets.......................................       152,705           118,505
  Property, plant and equipment, net of accumulated
     depreciation.................................................        38,645            39,964
  Noncurrent deferred tax asset...................................         7,611             6,164
  Other noncurrent assets.........................................         7,038             6,926
                                                                       ---------        ----------
       Total assets...............................................     $ 205,999        $  171,559
                                                                       =========        ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt...............................     $     120        $      120
  Accounts payable................................................        20,413            17,646
  Accrued wages and other employee costs..........................         7,787             7,237
  Other accrued liabilities.......................................         8,447             6,764
                                                                       ---------        ----------
       Total current liabilities..................................        36,767            31,767
Long-term debt (see Notes 3 and 7)................................         6,630            64,020
Accrued postretirement benefit cost...............................        18,795            18,795
Noncurrent pension liabilities....................................         1,135            18,078
Other noncurrent liabilities......................................         2,010             2,010
                                                                       ---------        ----------
       Total liabilities..........................................        65,337           134,670
                                                                       ---------        ----------
Contingencies (Note 5)............................................
Shareholders' equity:
  Preferred Stock, no par value; 5,000,000 shares authorized;
     no shares outstanding........................................            --                --
  Common Stock, $0.01 par value, 30,000,000 shares authorized;
     20,814,398 and 15,908,091 shares issued (Note 3).............           208               159
  Additional paid-in capital (Note 3).............................       234,655           151,715
  Accumulated deficit.............................................       (82,151)         (103,526)
  Deferred compensation...........................................          (591)               --
  Excess minimum pension liability................................        (8,381)           (8,381)
  Treasury Common Stock at cost 568,198 shares....................        (3,078)           (3,078)
                                                                       ---------        ----------
Total shareholders' equity........................................       140,662            36,889
                                                                       ---------        ----------
       Total liabilities and shareholders' equity.................     $ 205,999        $  171,559
                                                                       =========        ==========

 
  The accompanying notes are an integral part of these Consolidated Financial
                                  Statements.
 
                                      F-21
   102
 
                              RMI TITANIUM COMPANY
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (UNAUDITED)
                             (DOLLARS IN THOUSANDS)
 


                                                                          NINE MONTHS ENDED
                                                                             SEPTEMBER 30
                                                                        ----------------------
                                                                          1996          1995
                                                                        --------      --------
                                                                                
CASH PROVIDED FROM (USED IN) OPERATIONS:
Net income (loss)....................................................   $ 21,375      $(13,339)
Adjustment for items not affecting funds from operations:
  Depreciation.......................................................      3,711         4,826
  Deferred taxes.....................................................       (607)           --
  Asset impairment charge............................................         --         5,031
  Write-down of joint venture investment.............................         --         1,901
  Expense for stock appreciation rights..............................         --         1,465
  Other--net.........................................................        516           649
                                                                        --------      --------
                                                                          24,995           533
                                                                        --------      --------
CHANGES IN ASSETS AND LIABILITIES (EXCLUDING CASH):
Receivables..........................................................    (14,278)      (10,647)
Inventories..........................................................    (20,584)        1,117
Accounts payable.....................................................      2,767        (4,369)
Other current liabilities............................................      1,963         2,837
Noncurrent pension liabilities.......................................    (16,100)           --
Other assets.........................................................     (1,074)       (1,061)
                                                                        --------      --------
                                                                         (47,306)      (12,123)
                                                                        --------      --------
       Cash used in operating activities.............................    (22,311)      (11,590)
                                                                        --------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of facilities...................................         --           130
  Capital expenditures...............................................     (2,392)       (1,139)
                                                                        --------      --------
       Cash used in investing activities.............................     (2,392)       (1,009)
                                                                        --------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Exercise of Employee Stock Options.................................      1,914            --
  Net proceeds from Common Stock Offering............................     80,393            --
  Borrowings under credit agreements.................................      5,900        13,300
  Debt repayments....................................................    (63,290)          (90)
                                                                        --------      --------
  Cash provided from financing activities............................     24,917        13,210
                                                                        --------      --------
INCREASE IN CASH AND CASH EQUIVALENTS................................        214           611
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.....................   $    509      $    385
                                                                        --------      --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...........................   $    723      $    996
                                                                        ========      ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest (net of amounts capitalized)..................   $  2,466      $  3,350
                                                                        ========      ========
Cash paid for income taxes...........................................   $    211      $     --
                                                                        ========      ========

 
  The accompanying notes are an integral part of these Consolidated Financial
                                  Statements.
 
                                      F-22
   103
 
                              RMI TITANIUM COMPANY
 
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                  (UNAUDITED)
                             (DOLLARS IN THOUSANDS)
 


                                                                                                               EXCESS
                                                                                                               MINIMUM
                                                                        ADD'TL.     RETAINED     TREASURY      PENSION
                                    SHARES      COMMON     DEFERRED     PAID-IN     EARNINGS      COMMON      LIABILITY
                                  OUTSTANDING   STOCK    COMPENSATION   CAPITAL     (DEFICIT)     STOCK      ADJUSTMENT
                                  -----------   ------   ------------   --------    ---------    --------    -----------
                                                                                        
Balance at December 31, 1994....  15,271,561     $158       $   --      $151,058    $ (98,918)   $(3,069)      $(6,633)
Shares issued for Directors'
  Compensation..................       4,952       --           --            38           --         --            --
Treasury Common Stock purchased
  at cost.......................      (1,098)      --           --            --           --         (9)           --
Shares issued for Restricted
  Stock Award Plans.............      10,000       --           --            71           --         --            --
Shares issued from exercise of
  employee stock options........      54,478        1           --           548           --         --            --
Net loss........................          --       --           --            --       (4,608)        --            --
Excess minimum pension
  liability.....................          --       --           --            --           --         --        (1,748)
                                  ----------     ----       ------      --------    ---------    -------       -------
Balance at December 31, 1995....  15,339,893     $159       $   --      $151,715    $(103,526)   $(3,078)      $(8,381)
Shares issued for Restricted
  Stock Award Plans.............      51,000       --         (682)          682           --         --            --
Compensation expense
  recognized....................          --       --           91            --           --         --            --
Shares issued as a result of
  Common Stock Offering (Note
  3)............................   4,600,000       46           --        80,347           --         --            --
Shares issued from exercise of
  employee stock options........     255,307        3           --         1,911           --         --            --
Net income......................          --       --           --            --       21,375         --            --
                                  ----------     ----       ------      --------    ---------    -------       -------
Balance at September 30, 1996...  20,246,200     $208       $ (591)     $234,655    $ (82,151)   $(3,078)      $(8,381)
                                  ==========     ====       ======      ========    =========    =======       =======

 
  The accompanying notes are an integral part of these Consolidated Financial
                                  Statements.
 
                                      F-23
   104
 
                              RMI TITANIUM COMPANY
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
 
NOTE 1--GENERAL
 
     The consolidated financial statements include the accounts of RMI Titanium
Company and its majority owned subsidiaries. All significant intercompany
transactions are eliminated. The Company's operations are conducted in one
business segment, the production and marketing of titanium metal and related
products.
 
NOTE 2--ORGANIZATION
 
     The Company is a successor to entities that have been operating in the
titanium industry since 1958. In 1990, USX Corporation ("USX") and Quantum
Chemical Corporation ("Quantum") transferred their entire ownership interest in
the Company's immediate predecessor, RMI Company, an Ohio general partnership,
to the Company in exchange for shares of the Company's Common Stock (the
"Reorganization"). Quantum then sold its shares to the public. USX retained
ownership of its shares. At September 30, 1996, approximately 27% of the
outstanding common stock was owned by USX. For information on the Company's
capital structure see Note 3.
 
NOTE 3--COMMON STOCK OFFERING
 
     On May 7, 1996, the Company completed a Common Stock Offering of 4,600,000
shares at a price of $18.50 per share. Net proceeds of RMI after deducting
underwriting fees and expenses amounted to $80.3 million. The proceeds were used
to repay all outstanding indebtedness under the existing bank credit facilities
amounting to $65.5 million, $10.1 million was contributed to the Company's
pension plans and the balance used for general corporate purposes. Concurrent
with the Company's Stock Offering, USX Corporation sold 2,300,000 shares of its
investment in RMI Common Stock at the same price. RMI did not receive any of the
proceeds from the sale of RMI Common Stock by USX. As a result of these
transactions, USX's percentage of ownership in RMI was reduced from
approximately 51% to approximately 27%. As of September 30, 1996, there were
20,246,200 shares of RMI Common Stock outstanding.
 
NOTE 4--INCOME TAXES
 
     For the nine month period ended September 30, 1996, the Company recorded an
income tax benefit of $0.6 million. This amount is comprised of an income tax
provision against pretax income for the nine month period of $2.0 million and an
income tax benefit of $2.6 million, resulting from an adjustment to the deferred
tax asset valuation allowance due to changes in the Company's expectations about
the ultimate realization of its deferred tax assets in years after 1996. No tax
effect was recorded for the nine months ended September 30, 1995. Excluding the
$2.6 million valuation allowance adjustment, the effective tax rate for the nine
months ended September 30, 1996 was approximately 9.6 percent. The difference
between the statutory federal tax rate of 35 percent and the effective tax rate
is principally due to an adjustment to the deferred tax asset valuation
allowance which existed at December 31, 1995 as it related to expected 1996
results. The Company currently expects improved profitability in 1996 when
compared to the expectations inherent in the December 31, 1995 deferred tax
asset. The effect of this adjustment reduced the year to date 1996 tax provision
by approximately $5.3 million for the nine month period ended September 30,
1996. The amount of current taxes expected to be paid in 1996 is minimal.
 
     Statement of Financial Accounting Standards No. 109 (SFAS No. 109),
"Accounting for Income Taxes," requires a valuation allowance when it is "more
likely than not" that some portion or all of the deferred tax assets will not be
realized. It further states that "forming a conclusion that a valuation
allowance is not needed is difficult when there is negative evidence such as
cumulative losses in recent years." The ultimate realization of this deferred
income tax asset depends upon the Company's ability to generate sufficient
taxable income in the future prior to the expiration of its loss carryforwards.
The Company has evaluated the available evidence supporting the realization of
future taxable income and, based upon that
 
                                      F-24
   105
 
                              RMI TITANIUM COMPANY
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
 
evaluation, believes it is more likely than not at this time that a portion of
its deferred tax assets will be realized. The remaining valuation allowance has
been retained in light of the requirement in SFAS No. 109 to give weight to
objective evidence such as recent losses and the historical titanium industry
business cycle.
 
     When preparing future periods' interim and annual financial statements, the
Company will periodically evaluate its strategic and business plans, in light of
evolving business conditions, and the valuation allowance will be adjusted for
future income expectations resulting from that process, to the extent different
from those inherent in the current valuation allowance.
 
     As a result, the application of SFAS No. 109 valuation allowance
determination process could result in recognition of significant income tax
provisions or benefits in a single interim or annual period due to changes in
income expectations over a horizon that may span several years. Such tax
provision or benefit effect would likely be material in the context of the
specific interim or annual reporting period in which changes in judgement about
more extended future periods are reported.
 
     If an "ownership change" were to occur within the meaning of Section 382 of
the Internal Revenue Code of 1986, as amended, the utilization of net operating
loss carryforwards would be subject to an annual limitation. Should the annual
limitation apply, the Company believes that it would affect the timing of the
use of, but not the ultimate ability of the Company to use, the net operating
loss carryforwards to reduce future income tax liabilities.
 
NOTE 5--CONTINGENCIES
 
     In the ordinary course of business, the Company is subject to pervasive
environmental laws and regulations concerning the production, handling, storage,
transportation, emission, and disposal of waste materials and is also subject to
other federal and state laws and regulations regarding health and safety
matters. These laws and regulations are constantly evolving, and it is not
currently possible to predict accurately the ultimate effect these laws and
regulations will have on the Company in the future.
 
     On October 9, 1992 the U.S. Environmental Protection Agency ("EPA") filed a
complaint alleging certain violations of the Resource Conservation and Recovery
Act of 1976, as amended ("RCRA") at the Company's now closed Sodium Plant in
Ashtabula, Ohio. The USEPA's determination is based on information gathered
during inspections of the facility in February, March and June of 1991. Under
the complaint of the USEPA proposes to assess a civil penalty of approximately
$1.4 million for alleged failure to comply with RCRA. The Company is contesting
the complaint. It is the Company's position that it has complied with the
provisions of RCRA and that the EPA's assessment of penalties is inappropriate.
A formal hearing has been requested and informal discussions with the EPA to
settle this matter are ongoing. Based on the nature of the proceedings, the
Company is currently unable to determine the ultimate liability, if any, that
may arise from this matter.
 
     The Company is involved in investigative or cleanup projects under federal
or state environmental laws at a number of waste disposal sites, including the
Field Brooks Superfund Site. Given the status of the proceedings with respect to
these sites, ultimate investigative and remediation costs cannot presently be
accurately predicted, but could, in the aggregate, be material. Based on the
information available regarding the current ranges of estimated remediation
costs at currently active sites, and that the Company believes will be its
ultimate share of such costs, provisions for environmental-related costs have
been recorded. These provisions are in addition to amounts which have previously
been accrued for the Company's share of environmental study costs.
 
     With regard to the Fields Brook Superfund Site, the Company, together with
31 other companies, has been identified by the EPA as a potentially responsible
party ("PRP") with respect to a superfund site defined as the Fields Brook
Watershed in Ashtabula, Ohio, which includes the Company's now closed Ashtabula
 
                                      F-25
   106
 
                              RMI TITANIUM COMPANY
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
 
facilities. The EPA's 1986 estimate of the cost of remediation of the Fields
Brook operable sediment unit was $48 million. However, recent studies show the
volume of sediment to be substantially lower than projected in 1986. These
studies, together with improved remediation technology and redefined cleanup
standards have resulted in a more recent estimate of the remediation cost of
approximately $25 million. The actual cost of remediation may vary from the
estimate depending upon any number of factors.
 
     The EPA, in March 1989, ordered 22 of the PRPs to conduct a design phase
study for the sediment operable unit and a source control study, which studies
are nearly complete and are estimated to cost $22 million. The Company, working
cooperatively with fourteen others in accordance with two separate agreements,
is complying with the order. The Company has accrued and has been paying its
portion of the cost of complying with the EPA's order, which includes the
studies. It is anticipated that the studies will be completed in 1997. Actual
cleanup would not commence prior to 1998. The Company's share of the study costs
has been established at 9.95%. On June 21, 1995, the Company and twelve others
entered into a Phase 2 (actual cleanup) allocation agreement which assigns 9.44%
of the cost to the Company. However, the actual percentage may be more or less
based on contributions from other parties which are not currently participating
in the Phase 2 allocation agreement.
 
     At September 30, 1996, the amount accrued for future environmental-related
costs was $2.4 million. Based on available information, RMI believes its share
of potential environmental-related costs, before expected contributions from
third parties, is in a range from $3.7 million to $6.3 million, in the
aggregate. The amount accrued is net of expected contributions from third
parties (which does not include any amounts from insurers) of approximately $2.1
million, which the Company believes are probable. The Company has been receiving
contributions from such third parties for a number of years as partial
reimbursement for costs incurred by the Company. As these proceedings continue
toward final resolution, amounts in excess of those already provided may be
necessary to discharge the Company from its obligations for these projects.
 
     The Company is also the subject of, or a party to, a number of other
pending or threatened legal actions involving a variety of matters.
 
     The ultimate resolution of these foregoing contingencies could,
individually or in the aggregate, be material to the consolidated financial
statements. However, management believes that the Company will remain a viable
and competitive enterprise even though it is possible that these matters could
be resolved unfavorably.
 
NOTE 6--INVENTORIES:
 


                                                                 (DOLLARS IN THOUSANDS)
                                                           ----------------------------------
                                                           SEPTEMBER 30, 1996    DECEMBER 31,
                                                              (UNAUDITED)            1995
                                                           ------------------    ------------
                                                                           
        Raw material and supplies.......................        $ 28,596           $ 22,609
        Work-in-process and finished goods..............          90,677             71,290
        Adjustments to LIFO values......................         (24,636)           (19,846)
                                                                --------           --------
                                                                $ 94,637           $ 74,053
                                                                ========           ========

 
Inventories are valued at cost as determined by the last-in, first-out (LIFO)
method which, in the aggregate, is lower than market. Inventory costs generally
include materials, labor costs and manufacturing overhead (including
depreciation).
 
Included in work-in-process are costs relating to long-term contracts. Such
costs, net of amounts recognized to date, were $1.3 million at September 30,
1996 and $2.5 million at December 31, 1995.
 
                                      F-26
   107
 
                              RMI TITANIUM COMPANY
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
 
NOTE 7--CREDIT FACILITY:
 
     In connection with the Common Stock Offering referred to in Note 3 above,
the Company has entered into a credit agreement, dated April 15, 1996 (the
"Credit Facility"), to replace the Company's prior credit facilities. The Credit
Facility has a term of three years and permits borrowings, on a revolving basis,
of up to the lesser of $50 million or a borrowing base equal to the sum of 85%
of qualified accounts receivable and 50% of qualified inventory. At September
30, 1996, $5.9 million was outstanding under the facility. The Company had
sufficient accounts receivable and inventory at September 30, 1996 to borrow the
entire $50 million.
 
     Under the terms of the Credit Facility, the Company, at its option, is able
to borrow at (a) a base rate (which is the higher of PNC Bank's prime rate or
the Federal Funds Effective Rate plus  1/2% per annum), or (b) LIBOR or the
Federal Funds Effective Rate, plus a spread (ranging for  1/2% to 1%) determined
by the ratio of the Company's consolidated earnings before interest and taxes to
consolidated interest expense.
 
     Borrowings under the Credit Facility will initially be secured by the
Company's accounts receivable, inventory, other personal property and cash and
cash equivalents. Borrowings will become unsecured if the Company complies with
all the financial covenants under the New Credit Facility for four consecutive
quarters, beginning with the date of the Credit Facility and expiring with the
quarter ended June 30, 1997.
 
     An event of default under the Credit Facility shall occur if, among other
things, any person or group of persons other than USX shall have acquired
beneficial ownership of 25% or more of the voting stock of the Company. The
Credit Facility contains additional terms and financial covenants which are
typical for other similar facilities.
 
NOTE 8--ASSET IMPAIRMENT:
 
     The Company elected to adopt SFAS No. 121 effective June 30, 1995. After
completing a review of its assets, the Company impaired the value of an asset
consisting of design and engineering work for a proposed titanium tetrachloride
facility. The asset was impaired due to recent market developments, the
conclusion of certain joint venture negotiations and the determination that such
a facility was not likely to be constructed in the near future. The asset
carrying value has been reduced from $5.0 million to a nominal amount reflecting
a fair value determination under SFAS No. 121 versus a determination of ultimate
net realizable value under the Company's previous impairment approach.
 
                                      F-27
   108
 
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY RMI TITANIUM COMPANY OR ANY OF THE UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF RMI TITANIUM COMPANY SINCE THE DATES AS OF WHICH INFORMATION IS GIVEN
IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
 
                            ------------------------
 
 


           TABLE OF CONTENTS
                                          PAGE
                                          ----
                                       
Available Information....................   2
Incorporation of Certain Documents by
  Reference..............................   2
Summary..................................   3
Forward-Looking Statements...............   8
Risk Factors.............................   8
Use of Proceeds..........................  12
Capitalization...........................  12
Price Range of Common Stock
  and Dividends..........................  13
Business.................................  14
Selected Financial Data..................  26
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations..........................  28
Management...............................  37
Certain Relationships....................  38
Description of Capital Stock.............  39
Plan of Distribution.....................  42
Legal Matters............................  43
Experts..................................  43
Index to Consolidated Financial
  Statements............................. F-1

 


5,000,000 SHARES
 
RMI TITANIUM
COMPANY
 
COMMON STOCK
($.01 PAR VALUE)
 
[RMI LOGO]
 
PROSPECTUS
 
DATED          , 1996