SECURITIES AN.D EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
---- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-28538
Titanium Metals Corporation
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(Exact name of registrant as specified in its charter)
Delaware 13-5630895
------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1999 Broadway, Suite 4300, Denver, Colorado 80202
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 296-5600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Number of shares of common stock outstanding on May 10, 2002: 31,866,338
Forward-Looking Information
The statements contained in this Quarterly Report on Form 10-Q ("Quarterly
Report") that are not historical facts, including, but not limited to,
statements found in the Notes to Consolidated Financial Statements and under the
captions "Results of Operations" and "Liquidity and Capital Resources" (both
contained in Management's Discussion and Analysis of Financial Condition and
Results of Operations), are forward-looking statements that represent
management's beliefs and assumptions based on currently available information.
Forward-looking statements can be identified by the use of words such as
"believes," "intends," "may," "will," "looks," "should," "could," "anticipates,"
"expects" or comparable terminology or by discussions of strategies or trends.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it cannot give any assurances that
these expectations will prove to be correct. Such statements by their nature
involve substantial risks and uncertainties that could significantly affect
expected results. Actual future results could differ materially from those
described in such forward-looking statements, and the Company disclaims any
intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. Among the
factors that could cause actual results to differ materially are the risks and
uncertainties discussed in this Quarterly Report, including in those portions
referenced above and those described from time to time in the Company's other
filings with the Securities and Exchange Commission which include, but are not
limited to, the cyclicality of the commercial aerospace industry, the
performance of aerospace manufacturers and the Company under their long-term
agreements, the difficulty in forecasting demand for titanium products, global
economic and political conditions, global productive capacity for titanium,
changes in product pricing and costs, the impact of long-term contracts with
vendors on the ability of the Company to reduce or increase supply or achieve
lower costs, the possibility of labor disruptions, fluctuations in currency
exchange rates, control by certain stockholders and possible conflicts of
interest, uncertainties associated with new product development, the supply of
raw materials and services, changes in raw material and other operating costs
(including energy costs), possible disruption of business or increases in the
cost of doing business resulting from war or terrorist activities, and other
risks and uncertainties. Should one or more of these risks materialize (or the
consequences of such a development worsen), or should the underlying assumptions
prove incorrect, actual results could differ materially from those forecasted or
expected.
TITANIUM METALS CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - March 31, 2002 (unaudited)
and December 31, 2001 2
Consolidated Statements of Operations - Three months
ended March 31, 2002 and 2001 (unaudited) 4
Consolidated Statements of Comprehensive Income (Loss) -
Three months ended March 31, 2002 and 2001 (unaudited) 5
Consolidated Statements of Cash Flows - Three months
ended March 31, 2002 and 2001 (unaudited) 6
Consolidated Statement of Changes in Stockholders' Equity -
Three months ended March 31, 2002 (unaudited) 8
Notes to Consolidated Financial Statements (unaudited) 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures about Market Risk 25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 6. Exhibits and Reports on Form 8-K 26
TITANIUM METALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2002 2001
------------------ ------------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 5,913 $ 24,500
Accounts and other receivables, less
allowance of $2,676 and $2,739 79,526 83,347
Receivables from related parties 5,630 5,907
Refundable income taxes 1,221 470
Inventories 192,766 185,052
Prepaid expenses and other 6,256 9,026
Deferred income taxes 368 385
------------------ ------------------
Total current assets 291,680 308,687
Investment in joint ventures 21,155 20,585
Preferred securities of Special Metals Corporation ("SMC") - 27,500
Property and equipment, net 267,577 275,308
Goodwill, net 44,166 44,310
Other intangible assets, net 9,264 9,836
Deferred income taxes 57 56
Other 13,093 13,101
------------------ ------------------
$ 646,992 $ 699,383
================== ==================
- 2 -
TITANIUM METALS CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
March 31, December 31,
2002 2001
------------------ ------------------
LIABILITIES, MINORITY INTEREST AND (unaudited)
STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 1,654 $ 1,522
Current maturities of long-term debt and
capital lease obligations 648 512
Accounts payable 34,040 42,821
Accrued liabilities 39,831 41,799
Customer advance payments 29,363 33,242
Payable to related parties 311 1,612
Income taxes 1,372 746
Deferred income taxes 91 106
------------------ ------------------
Total current liabilities 107,310 122,360
Long-term debt 12,762 10,712
Capital lease obligations 8,727 8,598
Payable to related parties 644 953
Accrued OPEB cost 14,852 15,980
Accrued pension cost 23,666 23,690
Accrued environmental cost 3,262 3,262
Deferred income taxes 4,415 5,509
Other 21 237
------------------ ------------------
Total liabilities 175,659 191,301
------------------ ------------------
Minority interest - Company-obligated mandatorily
redeemable preferred securities of subsidiary trust
holding solely subordinated debt securities ("Convertible
Preferred Securities") 201,241 201,241
Other minority interest 9,245 8,727
Stockholders' equity:
Preferred stock - -
Common stock 319 319
Additional paid-in capital 350,514 350,514
Accumulated deficit (51,923) (15,841)
Accumulated other comprehensive loss (36,550) (35,274)
Treasury stock, at cost (90 shares) (1,208) (1,208)
Deferred compensation (305) (396)
------------------ ------------------
Total stockholders' equity 260,847 298,114
------------------ ------------------
$ 646,992 $ 699,383
================== ==================
Commitments and contingencies (Note 12)
See accompanying notes to consolidated financial statements.
- 3 -
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In thousands, except per share data)
Three months ended March 31,
----------------------------------------
2002 2001
------------------ ------------------
Revenues and other income:
Net sales $ 104,440 $ 124,008
Equity in earnings of joint ventures 505 866
Other 73 2,236
------------------ ------------------
105,018 127,110
------------------ ------------------
Costs and expenses:
Cost of sales 99,332 116,745
Selling, general, administrative and development 10,379 10,700
Restructuring income - (220)
Interest 738 1,512
Other 28,151 -
------------------ ------------------
138,600 128,737
------------------ ------------------
Loss before income taxes and minority interest (33,582) (1,627)
Income tax benefit (1,454) (570)
Minority interest - Convertible Preferred Securities,
net of tax in 2001 3,333 2,186
Other minority interest, net of tax 621 373
------------------ ------------------
Net loss $ (36,082) $ (3,616)
================== ==================
Basic and diluted loss per share $ (1.14) $ (.12)
================== ==================
Basic and diluted weighted average
shares outstanding 31,562 31,417
================== ==================
See accompanying notes to consolidated financial statements.
- 4 -
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
(In thousands)
Three months ended March 31,
----------------------------------------
2002 2001
------------------ ------------------
Net loss $ (36,082) $ (3,616)
Other comprehensive loss - currency
translation adjustment (1,276) (4,308)
------------------ ------------------
Comprehensive loss $ (37,358) $ (7,924)
================== ==================
See accompanying notes to consolidated financial statements.
- 5 -
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
Three months ended March 31,
----------------------------------------
2002 2001
------------------ ------------------
Cash flows from operating activities:
Net loss $ (36,082) $ (3,616)
Depreciation and amortization 9,034 10,072
Noncash impairment of SMC securities 27,500 -
Equity in earnings of joint ventures, net of distributions (385) (716)
Deferred income taxes (1,016) (1,701)
Other minority interest 621 373
Other, net 674 (59)
Change in assets and liabilities:
Receivables 3,077 (14,633)
Inventories (8,704) 4,188
Prepaid expenses and other 2,769 (1,952)
Accounts payable and accrued liabilities (9,952) (8,663)
Customer advance payments (3,960) 334
Accrued restructuring charges (8) (275)
Income taxes (1,129) 480
Accounts with related parties, net (1,333) 1,087
Accrued OPEB and pension costs (857) 73
Accrued dividends on SMC securities - (148)
Accrued dividends on Convertible Preferred Securities - 3,352
Other, net 550 (1,277)
------------------ ------------------
Net cash used by operating activities (19,201) (13,081)
------------------ ------------------
Cash flows from investing activities:
Capital expenditures (1,282) (2,601)
------------------ ------------------
Net cash used by investing activities (1,282) (2,601)
------------------ ------------------
Cash flows from financing activities:
Indebtedness:
Borrowings 102,704 165,540
Repayments (100,512) (154,861)
Other, net (182) 17
------------------ ------------------
Net cash provided by financing activities 2,010 10,696
------------------ ------------------
Net cash used by operating, investing
and financing activities $ (18,473) $ (4,986)
================== ==================
See accompanying notes to consolidated financial statements.
- 6 -
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (CONTINUED)
(In thousands)
Three months ended March 31,
----------------------------------------
2002 2001
------------------ ------------------
Cash and cash equivalents
Net increase (decrease) from:
Operating, investing and financing activities $ (18,473) $ (4,986)
Currency translation (114) 31
------------------ ------------------
(18,587) (4,955)
Cash at beginning of period 24,500 9,796
------------------ ------------------
Cash at end of period $ 5,913 $ 4,841
================== ==================
Supplemental disclosures:
Cash paid for:
Interest, net of amounts capitalized $ 413 $ 1,323
Convertible Preferred Securities dividends $ 3,333 $ -
Income taxes, net $ 691 $ 668
See accompanying notes to consolidated financial statements.
- 7 -
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
(In thousands)
Accumulated Other
Comprehensive Loss
Additional ----------------------- Total
Common Common Paid-In Accumulated Currency Pension Treasury Deferred Stockholders'
Shares Stock Capital Deficit Translation Liabilities Stock Compensation Equity
------ ------ ---------- ----------- ----------- ----------- -------- ------------ -------------
Balance at December 31, 2001 31,856 $ 319 $ 350,514 $ (15,841) $ (14,395) $ (20,879) $(1,208) $ (396) $ 298,114
Components of comprehensive
income (loss):
Net loss - - - (36,082) - - - - (36,082)
Change in cumulative
currency translation
adjustment - - - - (1,276) - - - (1,276)
Amortization of deferred
compensation - - - - - - - 91 91
------ ------ ---------- ----------- ----------- ----------- -------- ------------ -------------
Balance at March 31, 2002 31,856 $ 319 $ 350,514 $ (51,923) $ (15,671) $ (20,879) $(1,208) $ (305) $ 260,847
====== ====== ========== =========== =========== =========== ======== ============ =============
See accompanying notes to consolidated financial statements.
- 8 -
TITANIUM METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Note 1 - Organization and basis of presentation
Titanium Metals Corporation ("TIMET") is a vertically integrated producer
of titanium sponge, melted products and a variety of mill products for
aerospace, industrial and other applications. At March 31, 2002, Tremont
Corporation ("Tremont") held approximately 39% of TIMET's outstanding common
stock. At March 31, 2002, the Combined Master Retirement Trust ("CMRT"), a trust
formed by Valhi, Inc. ("Valhi") to permit the collective investment by trusts
that maintain the assets of certain employee benefit plans adopted by Valhi and
related companies, held approximately an additional 3% of TIMET's common stock.
At March 31, 2002, subsidiaries of Valhi held an aggregate of approximately 80%
of Tremont's outstanding common stock, and Contran Corporation ("Contran") held,
directly or through subsidiaries, approximately 94% of Valhi's outstanding
common stock. Substantially all of Contran's outstanding voting stock is held by
trusts established for the benefit of certain children and grandchildren of
Harold C. Simmons, of which Mr. Simmons is sole trustee. In addition, Mr.
Simmons is the sole trustee of the CMRT and a member of the trust investment
committee for the CMRT. Mr. Simmons may be deemed to control each of Contran,
Valhi, Tremont and TIMET.
The consolidated balance sheet at March 31, 2002 and the consolidated
statements of operations, comprehensive income (loss), changes in stockholders'
equity and cash flows for the interim periods ended March 31, 2002 and 2001 have
been prepared by the Company without audit. In the opinion of management, all
adjustments necessary to present fairly the consolidated financial position,
results of operations and cash flows have been made. The results of operations
for interim periods are not necessarily indicative of the operating results of a
full year or of future operations. Certain prior year amounts have been
reclassified to conform to the current year presentation.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The accompanying consolidated financial
statements should be read in conjunction with the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2001 (the "2001 Annual Report").
- 9 -
Note 2 - Business segment information
The Company's worldwide operations are conducted through one business
segment - the production and sale of titanium melted and mill products. The
following provides supplemental segment information to the consolidated
statements of operations:
Three months ended March 31,
----------------------------------------
2002 2001
------------------ ------------------
($ in thousands except selling price data)
Net sales $ 104,440 $ 124,008
Cost of sales 99,332 116,745
------------------ ------------------
Gross margin 5,108 7,263
Selling, general, administrative and development expense 10,379 10,700
Equity in earnings of joint ventures 505 866
Restructuring income - (220)
Other income 51 536
------------------ ------------------
Operating loss (4,715) (1,815)
General corporate income (expense):
Dividends and interest income 65 1,532
Currency translation and other, net (694) 168
Impairment of investment in SMC (27,500) -
Interest expense 738 1,512
------------------ ------------------
Loss before income taxes and minority interest $ (33,582) $ (1,627)
================== ==================
Titanium melted and mill products:
Mill product net sales $ 79,745 $ 93,798
Melted product net sales 9,965 14,678
Other 14,730 15,532
------------------ ------------------
$ 104,440 $ 124,008
================== ==================
Mill product shipments:
Volume (metric tons) 2,685 3,185
Average price ($ per kilogram) $ 29.70 $ 29.45
Melted product shipments:
Volume (metric tons) 645 1,030
Average price ($ per kilogram) $ 15.45 $ 14.25
- 10 -
Note 3 - Preferred securities of SMC
On March 27, 2002, SMC and its U.S. subsidiaries filed voluntary petitions
for reorganization under Chapter 11 of the U.S. Bankruptcy Code. As a result,
the Company undertook an assessment of its investment in SMC with the assistance
of an external valuation specialist and recorded a $27.5 million impairment
charge for an other than temporary decline in the estimated fair value of its
investment in SMC. This charge reduced the Company's carrying amount of its
investment in SMC to zero.
Note 4 - Inventories
March 31, December 31,
2002 2001
------------------ ------------------
(In thousands)
Raw materials $ 52,507 $ 43,863
Work-in-process 90,904 94,709
Finished products 58,495 54,074
Supplies 13,430 13,476
------------------ ------------------
215,336 206,122
Less adjustment of certain inventories to LIFO basis 22,570 21,070
------------------ ------------------
$ 192,766 $ 185,052
================== ==================
Note 5 - Goodwill and intangible assets
The Company's goodwill, arising from business combinations accounted for
under the purchase method, is stated net of accumulated amortization recorded
through December 31, 2001. On January 1, 2002, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible
Assets. Under SFAS No. 142, goodwill is no longer amortized on a periodic basis,
but instead is subject to a two-step impairment test to be performed on at least
an annual basis. The change in net goodwill during the first quarter of 2002 is
due to currency translation effects.
SFAS No. 142 requires the Company to identify its reporting units and
determine the carrying value of each reporting unit by assigning its assets and
liabilities, including existing goodwill and intangible assets, to those
reporting units as of January 1, 2002. The first step of the impairment test
requires the Company to determine the fair value of each reporting unit and
compare it to the reporting unit's carrying amount. To the extent that a
reporting unit's carrying amount exceeds its fair value, an indication exists
that the reporting unit's goodwill may be impaired and the Company must perform
the second step of the impairment test. As required by SFAS No. 142, the Company
will complete the first step of this test by June 30, 2002. The second step of
the impairment test requires the Company to compare the implied fair value of
the reporting unit's goodwill with the carrying amount of that goodwill. If the
carrying amount of the reporting unit goodwill exceeds the implied fair value of
that goodwill, an impairment loss would be recognized in an amount equal to that
excess. If any goodwill impairment is determined to exist, such impairment will
be recognized as a cumulative effect of a change in accounting principle no
later than December 31, 2002, as provided by the transition requirements of SFAS
No. 142.
- 11 -
As shown in the following table, the Company would have reported a net loss
of $2.8 million or $.09 per share in the first quarter of 2001 if the goodwill
amortization included in the Company's reported net income had not been
recognized.
Three months ended March 31,
----------------------------------------
2002 2001
------------------ ------------------
($ in thousands except per share data)
Net loss as reported $ (36,082) $ (3,616)
Adjustments for:
Goodwill amortization - 1,157
Tax provision on amortization - (307)
------------------ ------------------
Adjusted net loss $ (36,082) $ (2,766)
================== ==================
Net loss per share as reported $ (1.14) $ (.12)
Adjustments for:
Goodwill amortization - .04
Tax provision on amortization - (.01)
------------------ ------------------
Adjusted net loss per share $ (1.14) $ (.09)
================== ==================
As required by SFAS No. 142, the Company has evaluated the remaining useful
lives of its intangible assets with definite lives, comprised of patents and
covenants not to compete. Based on this evaluation, the Company's patents and
covenants not to compete will continue to be amortized over their weighted
average remaining amortization periods of 4 and 1 years, respectively. The
carrying amount and accumulated amortization of the Company's intangible assets
are as follows:
March 31, 2002 December 31, 2001
---------------------------- ---------------------------
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
------------ ------------ ----------- ------------
(In thousands)
Intangible assets:
Definite lives, subject to amortization:
Patents $ 13,322 $ 7,918 $ 13,405 $ 7,606
Covenants not to compete 8,314 7,652 8,353 7,514
Other intangible asset - pension asset(1) 3,198 - 3,198 -
------------ ------------ ----------- ------------
$ 24,834 $ 15,570 $ 24,956 $ 15,120
============ ============ =========== ============
(1) Not covered by the scope of SFAS No. 142.
- 12 -
For the three months ended March 31, 2002, the Company's amortization
expense relating to its intangible assets was $.5 million. The estimated
aggregate annual amortization expense for the Company's patents and covenants
not to compete for the next five fiscal years are summarized in the table below.
Estimated annual
amortization expense
----------------------
(In thousands)
Year ending December 31,
2002 $ 2,062
2003 $ 1,560
2004 $ 1,392
2005 $ 947
2006 $ 677
Note 6 - Property and equipment
March 31, December 31,
2002 2001
------------------ ------------------
(In thousands)
Land $ 6,124 $ 6,138
Buildings 36,406 36,574
Information technology systems 55,835 55,112
Manufacturing and other 303,435 300,315
Construction in progress 8,217 11,631
------------------ ------------------
410,017 409,770
Less accumulated depreciation 142,440 134,462
------------------ ------------------
$ 267,577 $ 275,308
================== ==================
Note 7 - Other noncurrent assets
March 31, December 31,
2002 2001
------------------ ------------------
(In thousands)
Deferred financing costs $ 7,237 $ 8,212
Notes receivable from officers 163 163
Prepaid pension cost 3,826 4,006
Refundable income taxes 1,009 -
Other 858 720
------------------ ------------------
$ 13,093 $ 13,101
================== ==================
- 13 -
Note 8 - Accrued liabilities
March 31, December 31,
2002 2001
------------------ ------------------
(In thousands)
OPEB cost $ 4,484 $ 2,969
Pension cost 751 555
Accrued profit sharing 2,904 6,077
Other employee benefits 14,259 14,616
Deferred income 408 325
Environmental costs 540 654
Restructuring costs 190 198
Accrued tungsten costs 2,728 2,743
Taxes, other than income 5,021 4,867
Accrued dividends on Convertible Preferred Securities 1,111 1,111
Other 7,435 7,684
------------------ ------------------
$ 39,831 $ 41,799
================== ==================
Accrued restructuring costs of $.2 million at March 31, 2002 consist of
unpaid personnel severance and benefits for terminated employees relating to the
Company's restructuring plans implemented during 1999 and 2000. No material
payments were applied against the accrued costs related to the restructuring
plans during the three months ended March 31, 2002. During the first quarter of
2001, the Company applied payments of $.3 million against the accrued costs
related to the restructuring plans and recorded income of $.2 million related to
revisions to estimates of previously established restructuring accruals.
Note 9 - Notes payable, long-term debt and capital lease obligations
March 31, December 31,
2002 2001
------------------ ------------------
(In thousands)
Notes payable:
U.S. credit agreement $ - $ 30
European credit agreements 1,654 1,492
------------------ ------------------
$ 1,654 $ 1,522
================== ==================
Long-term debt:
Bank credit agreement - U.K. $ 12,762 $ 10,712
Other 85 172
------------------ ------------------
12,847 10,884
Less current maturities 85 172
------------------ ------------------
$ 12,762 $ 10,712
================== ==================
Capital lease obligations $ 9,290 $ 8,938
Less current maturities 563 340
------------------ ------------------
$ 8,727 $ 8,598
================== ==================
- 14 -
The weighted average interest rate on borrowings outstanding under the
U.S., U.K. and other European credit agreements for the three months ended March
31, 2002 was 5.25%, 3.73% and 3.94%, respectively. As of March 31, 2002, the
Company had approximately $150 million of unused borrowing availability under
its U.S. and European credit agreements.
Note 10 - Other income and other expense
Three months ended March 31,
----------------------------------------
2002 2001
------------------ ------------------
(In thousands)
Other income:
Dividends and interest income $ 65 $ 1,532
Foreign exchange (loss) gain (117) 133
Other 125 571
------------------ ------------------
$ 73 $ 2,236
================== ==================
Other expense:
Impairment of investment in SMC (Note 3) $ 27,500 $ -
Other 651 -
------------------ ------------------
$ 28,151 $ -
================== ==================
Note 11 - Income taxes
Three months ended March 31,
----------------------------------------
2002 2001
------------------ ------------------
(In thousands)
Expected income tax benefit, at 35% $ (11,754) $ (569)
Non-U.S. tax rates 230 144
U.S. state income taxes, net 25 109
Dividends received deduction - (324)
Effect of change in tax law (1,797) -
Adjustment of deferred tax valuation allowance 11,877 (18)
Other, net (35) 88
------------------ ------------------
$ (1,454) $ (570)
================== ==================
During the first quarter of 2002, the Job Creation and Worker Assistance
Act of 2002 (the "Act") was signed into law. The Company benefits from certain
provisions of the Act, which liberalized certain net operating loss ("NOL") and
alternative minimum tax ("AMT") restrictions. Prior to the law change, NOL's
could be carried back two years and forward 20 years. The Act increases the
carryback period for losses generated in 2001 and 2002 to five years with no
change to the carryforward period. In addition, losses generated in 2001 and
2002 can be carried back and offset against 100% of a taxpayer's alternative
minimum taxable income ("AMTI"). Prior to the law change, an NOL could offset no
more than 90% of a taxpayer's AMTI. The suspension of the 90% limitation is also
applicable to NOL's carried forward into 2001 and 2002. Based on these changes,
the Company recognized $1.8 million of refundable U.S. income taxes during the
first quarter of 2002.
- 15 -
At March 31, 2002, the Company had, for U.S. federal income tax purposes,
NOL carryforwards of approximately $77.4 million that expire between 2020 and
2022. At March 31, 2002, the Company had AMT credit carryforwards of
approximately $3.8 million, which can be utilized to offset regular income taxes
payable in future years. The AMT credit carryforward has an indefinite
carryforward period. At March 31, 2002, the Company had the equivalent of an
$8.5 million NOL carryforward in the United Kingdom and a $2.0 million NOL
carryforward in Germany, both of which have indefinite carryforward periods.
Note 12 - Commitments and contingencies
For additional information concerning certain legal proceedings and
contingencies related to the Company, see (i) Part I, Item 2 - Management's
Discussion and Analysis of Financial Condition and Results of Operations, (ii)
Part II, Item 1 - Legal Proceedings, (iii) the 2001 Annual Report on Form 10K
and (iv) Note 1 to the Consolidated Financial Statements.
In March 2001, the Company was notified by one of its customers that a
product the customer manufactured from standard grade titanium produced by the
Company contained what has been confirmed to be a tungsten inclusion. Based upon
the Company's assessment of possible losses, TIMET recorded an aggregate charge
to cost of sales for this matter of $3.3 million during 2001 (of which $1.0
million was recorded in the first quarter of 2001). This amount represents the
Company's best estimate of the most likely amount of loss to be incurred. It
does not represent the maximum possible loss, which is not possible for the
Company to estimate at this time, and may be periodically revised in the future
as more facts become known. As of March 31, 2002, $2.7 million remains accrued
for potential future claims.
The Company is involved in various other environmental, contractual,
product liability and other claims, disputes and litigation incidental to its
business.
The Company currently believes the disposition of all claims and disputes,
individually or in the aggregate, should not have a material adverse effect on
the Company's business, results of operations, consolidated financial condition
or liquidity.
Note 13 - Earnings (loss) per share
Basic earnings (loss) per share is based on the weighted average number of
unrestricted common shares outstanding during each period. Diluted earnings
(loss) per share reflect the dilutive effect of common stock options, restricted
stock and the assumed conversion of the Convertible Preferred Securities, if
applicable. The assumed conversion of the Convertible Preferred Securities was
omitted from the diluted earnings (loss) per share calculation for the three
months ended March 31, 2002 and 2001 because the effect was antidilutive. Had
the Convertible Preferred Securities not been antidilutive, diluted losses would
have been decreased by $3.3 million and $2.2 million for the three months ended
March 31, 2002 and 2001, respectively, and diluted average shares outstanding
would have been increased by 5.4 million shares. Stock options and restricted
shares omitted from the calculation because they were antidilutive approximated
1.8 million and 1.9 million for the three months ended March 31, 2002 and 2001,
respectively.
- 16 -
Note 14 - Accounting principle not yet adopted
In 2001, the Financial Accounting Standards Board issued SFAS No. 143,
Accounting for Asset Retirement Obligations. Under SFAS No. 143, the fair value
of a liability for an asset retirement obligation covered under the scope of
SFAS No. 143 would be recognized in the period in which the liability is
incurred, with an offsetting increase in the carrying amount of the related
long-lived asset. Over time, the liability would be accreted to its present
value, and the capitalized cost would be depreciated over the useful life of the
related asset. Upon settlement of the liability, an entity would either settle
the obligation for its recorded amount or incur a gain or loss upon settlement.
The Company is still studying this standard to determine, among other things,
whether it has any asset retirement obligations that are covered under the scope
of SFAS No. 143, and the effect, if any, to the Company of adopting this
standard has not yet been determined. The Company will implement SFAS No. 143 no
later than January 1, 2003.
- 17 -
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales and operations.
Three months ended March 31,
----------------------------------------
2002 2001
------------------ ------------------
($ in thousands)
Net sales $ 104,440 $ 124,008
Gross margin 5,108 7,263
Gross margin, excluding special items 5,108 8,263
Operating loss (4,715) (1,815)
Operating loss, excluding restructuring and special items (4,715) (1,035)
Percent of net sales:
Gross margin 5% 6%
Gross margin, excluding special items 5% 7%
Percent change in:
Mill product sales volume -16
Mill product selling prices (1) +6
Melted product sales volume -37
Melted product selling prices (1) +8
(1) Change expressed in U.S. dollars and mix adjusted.
First quarter of 2002 compared to first quarter of 2001. Sales of $104.4
million in the first quarter of 2002 were 16% lower than the year-ago period due
principally to the net effects of a 16% decrease in mill product sales volume, a
37% decrease in melted product sales volume and changes in customer and product
mix, partially offset by 6% and 8% increases in mill and melted product selling
prices (expressed in U.S. dollars using actual foreign currency exchange rates
prevailing during the respective periods), respectively. In billing currencies
(which exclude the effects of foreign currency translation), mill product
selling prices increased 7% from the year-ago period while currency fluctuations
had no effect on melted product selling price changes.
Gross margin (net sales less cost of sales) was 5% of sales for the first
quarter of 2002 compared to 6% in the year-ago period. The decrease reflects
lower operating rates at certain facilities (estimated capacity utilization
declined from 70% to 65%) and correspondingly higher unit costs, a lower
proportion of aerospace sales and changes in mix during 2002. The 2001 period
was also adversely impacted by a $1.0 million charge for the tungsten matter
discussed below and by goodwill amortization of $1.2 million. As required by
SFAS No. 142, and effective January 1, 2002, the Company no longer amortizes its
goodwill on a periodic basis. See Note 5 to the Consolidated Financial
Statements.
- 18 -
In March 2001, the Company was notified by one of its customers that a
product the customer manufactured from standard grade titanium produced by the
Company contained what has been confirmed to be a tungsten inclusion. Based upon
the Company's assessment of possible losses, TIMET recorded an aggregate charge
to cost of sales for this matter of $3.3 million during 2001 (of which $1.0
million was recorded in the first quarter of 2001). This amount represents the
Company's best estimate of the most likely amount of loss to be incurred. It
does not represent the maximum possible loss, which is not possible for the
Company to estimate at this time, and may be periodically revised in the future
as more facts become known. As of March 31, 2002, $2.7 million remains accrued
for potential future claims.
Selling, general, administrative and development expenses during the first
quarter of 2002 decreased by approximately 3% from year-ago levels principally
due to a decrease in personnel and related costs.
Equity in earnings of joint ventures during the first quarter of 2002 was
approximately $.4 million lower than the year-ago period principally due to a
decrease in earnings of VALTIMET, the Company's minority-owned welded tube joint
venture.
General corporate income (expense). General corporate income (expense) for
the three months ended March 31, 2001 includes interest income and dividend
income on $80 million of nonvoting preferred securities of Special Metals
Corporation ("SMC"), which accrued at an annual rate of 6.625%. No interest
income or dividend income relating to these securities was recognized during the
three months ended March 31, 2002. On March 27, 2002, SMC and its U.S.
subsidiaries filed voluntary petitions for reorganization under Chapter 11 of
the U.S. Bankruptcy Code. As a result, the Company undertook an assessment of
its investment in SMC with the assistance of an external valuation specialist
and recorded a $27.5 million impairment charge for an other than temporary
decline in the estimated fair value of its investment in SMC. This charge
reduced the Company's carrying amount of its investment in SMC to zero. See Note
3 to the Consolidated Financial Statements.
Interest expense. Interest expense during the three months ended March 31,
2002 was lower than in the comparable period in 2001, primarily due to lower
average debt levels and lower average interest rates during the 2002 period.
Income taxes. During the first quarter of 2002, the Job Creation and Worker
Assistance Act of 2002 (the "Act") was signed into law. The Company benefits
from certain provisions of the Act, which liberalized certain net operating loss
("NOL") and alternative minimum tax restrictions. Prior to the law change, NOL's
could be carried back two years and forward 20 years. The Act increases the
carryback period for losses generated in 2001 and 2002 to five years with no
change to the carryforward period. In addition, losses generated in 2001 and
2002 can be carried back and offset against 100% of a taxpayer's alternative
minimum taxable income ("AMTI"). Prior to the law change, an NOL could offset no
more than 90% of a taxpayer's AMTI. The suspension of the 90% limitation is also
applicable to NOL's carried forward into 2001 and 2002. Based on these changes,
the Company recognized $1.8 million of refundable U.S. income taxes during the
first quarter of 2002.
The Company operates in several tax jurisdictions and is subject to varying
income tax rates. As a result, the geographic mix of pretax income can impact
the Company's overall effective tax rate. The Company's income tax rate
approximated the U.S. statutory rate during the first quarter 2001. For the
first quarter 2002, the Company's income tax rate varied from the U.S. statutory
rate primarily due to an increase in the deferred tax valuation allowance
related to the Company's tax attributes that did not meet the
"more-likely-than-not" recognition criteria during that period. See Note 11 to
the Consolidated Financial Statements.
- 19 -
Minority interest. Dividend expense related to the Company's 6.625%
Convertible Preferred Securities approximates $3.3 million per quarter and is
reported as minority interest. For the three months ended March 31, 2001, this
expense was recorded net of allocable income taxes; however, as a result of the
Company's decision to increase its deferred tax valuation allowance as described
above, this expense was reported pre-tax for the three months ended March 31,
2002. Other minority interest relates primarily to the 30% interest in TIMET
Savoie, SA held by Compagnie Europeene du Zirconium-CEZUS, S.A.
Supplemental information. Approximately 40% of the Company's sales
originated in Europe for the three months ended March 31, 2002, of which
approximately 60% were denominated in currencies other than the U.S. dollar,
principally the British pound and European currencies tied to the euro. Certain
purchases of raw materials, principally titanium sponge and alloys, for the
Company's European operations are denominated in U.S. dollars, while labor and
other production costs are primarily denominated in local currencies. The
functional currencies of the Company's European subsidiaries are those of their
respective countries; thus, the U.S. dollar value of these subsidiaries' sales
and costs denominated in currencies other than their functional currency,
including sales and costs denominated in U.S. dollars, are subject to exchange
rate fluctuations that may impact reported earnings and may affect the
comparability of period-to-period operating results. Borrowings of the Company's
European operations may be in U.S. dollars or in functional currencies. The
Company's export sales from the U.S. are denominated in U.S. dollars and as such
are not subject to currency exchange rate fluctuations.
The Company does not use currency contracts to hedge its currency
exposures. At March 31, 2002, consolidated assets and liabilities denominated in
currencies other than functional currencies were approximately $37.3 million and
$43.0 million, respectively, consisting primarily of U.S. dollar cash, accounts
receivable, accounts payable and borrowings.
Outlook. The Outlook section contains a number of forward-looking
statements, all of which are based on current expectations, and exclude the
potential effect of special and other charges related to restructurings, asset
impairments, valuation allowances and similar items, unless otherwise noted.
Undue reliance should not be placed on forward-looking statements. Actual
results may differ materially. See Notes 1, 5, 12 and 14 to the Consolidated
Financial Statements regarding commitments, contingencies, legal, environmental
and other matters, which may materially affect the Company's future business,
results of operations, financial position and liquidity.
The economic slowdown that began during 2001 in the economies of the U.S.
and other regions of the world combined with the events of September 11, 2001
have resulted in the major commercial airframe and jet engine manufacturers
substantially reducing their forecast of engine and aircraft deliveries over the
next few years and their production levels in 2002. The Company continues to
expect that aggregate industry mill product shipments will decrease in 2002 by
approximately 16% to about 43,000 metric tons and that demand for mill products
for the commercial aerospace sector could decline by up to 40% in 2002,
primarily due to a combination of reduced aircraft production rates and excess
inventory accumulated throughout the aerospace supply chain. Excess inventory
accumulation typically leads to order demand for titanium products falling below
actual consumption.
- 20 -
The demand for titanium generally precedes aircraft deliveries by
approximately one year, although this varies considerably by titanium product.
According to The Airline Monitor, a leading aerospace publication, large
commercial aircraft deliveries totaled 834 in 2001, and the most recent forecast
of aircraft deliveries by The Airline Monitor calls for 660 deliveries in 2002,
505 deliveries in 2003 and 515 deliveries in 2004. After 2004, The Airline
Monitor calls for a continued increase each year in large commercial aircraft
deliveries, with forecasted deliveries of 920 aircraft in 2008 exceeding 2001
levels. Compared to 2001, these forecasted delivery rates represent anticipated
declines of about 20% in 2002 and just under 40% in 2003 and 2004. Although
certain recently reported data indicates a modest level of recovery in the
aerospace industry, adverse world events, including terrorist activities and
conflicts in the Middle East, could negatively affect the timing of the
commercial aerospace recovery and have broader economic consequences.
Although the current business environment makes it particularly difficult
to predict the Company's future performance, the Company expects sales revenue
for the full year 2002 to decline to about $375 million, reflecting the combined
effects of decreases in sales volume, softening of market selling prices, and
changes in customer and product mix. Compared to 2001, mill product sales volume
is expected to decline about 20% to just under 10,000 metric tons. Melted
product sales volume is expected to decline 35% to just under 3,000 metric tons.
The Company expects about 60% of its sales volume to be generated from the
commercial aerospace sector this year compared to about two-thirds in 2001. The
reduced sales volume in 2002 is principally driven by an anticipated decline in
commercial aerospace sales volume of about 30% compared to 2001, partly offset
by sales volume growth to other markets. The Company expects market selling
prices on new orders to soften throughout 2002. However, about one-half of the
Company's commercial aerospace volume is under long-term agreements ("LTAs")
that provide the Company with price stability on that portion of its business.
The Company's forecast continues to anticipate that Boeing will purchase about 3
million pounds of product in 2002. At that level, the Company would expect to
recognize about $17 million of income under the take or pay provisions of the
Company's agreement with Boeing in 2002. Any such earnings will be reported as
operating income, but will not be included in sales revenue, sales volume or
gross margin.
The Company currently anticipates gross margin as a percent of sales will
decrease over the year and that gross margin for the full year will be near
break even or less. This reflects the combined effects of lower volumes, higher
unit costs, softening of market selling prices, and changes in raw material and
other costs. Selling, general, administrative and development expense should be
approximately $42 million. Interest expense should approximate $4 million. The
Company's consolidated effective book tax rate is expected to be about 5%, but
could vary significantly with the geographic mix of income. Minority interest on
the Company`s Convertible Preferred Securities should approximate $13 million.
The Company presently expects an operating loss in 2002 of about $25 million and
a net loss before special items for 2002 of about $40 million.
The Company expects cash flow from operations to be negative in 2002. This
is influenced by, among other things, the effect in 2002 of the $28.5 million
cash advance payment that the Company received from Boeing in December 2001.
That advance created a liability on the Company's books for the same amount at
year-end 2001. The liability is being reduced during 2002 as product shipments
are made, and will be further reduced as the take or pay benefits are earned.
The advance for calendar year 2003 will not be received until early in 2003.
Excluding the effect of the Boeing advance, the Company expects cash flow from
operations to be slightly positive. Capital expenditures are expected to be
approximately $12 million. Depreciation and amortization should approximate $37
million.
- 21 -
For the second quarter of 2002, the Company expects sales revenue to range
between $85 million and $95 million. Mill product sales volume is expected to be
about 2,300 metric tons with melted product shipments of about 600 metric tons.
Gross margin as a percent of sales in the second quarter is expected to range
between breakeven and a positive 2%. SGA&D costs in the second quarter of 2002
should be about $11 million. Interest expense should be less than $1 million
while minority interest on the Company's Convertible Preferred Securities should
approximate $3.3 million. With these estimates, the Company expects an operating
loss in the second quarter of 2002 of between $10 million and $12 million, and a
net loss before special items of between $15 million and $17 million.
In terms of quarterly trends during the year, the Company continues to
expect its results in the last half of 2002 to be improved compared to the first
half. This anticipated improvement reflects the fact that the estimated $17
million expected to be earned under the take or pay provision of the Boeing
contract should be reflected in the last half of the year. However, depending on
Boeing's quarterly purchases, it is possible that some amount of income under
the take or pay provisions of the Boeing contract could be earned and recognized
in the second quarter of 2002.
The Company's agreement with its labor union at its Toronto, Ohio plant
expires at the end of June 2002. The Company does not presently anticipate any
work stoppage or other labor disruption at any facility, and its outlook for
2002 does not contemplate any such event. However, should the Company's efforts
to negotiate a mutually satisfactory agreement be unsuccessful, any work
stoppage or other labor disruption at any facility could materially and
adversely affect the Company's business, results of operations, financial
position and liquidity. The Company may undertake certain actions as part of its
contingency planning for the possibility of a labor disruption. These actions
could include the production of certain inventory earlier than normally
scheduled and the incurrence of certain costs, which could have an impact on
operating results and working capital. The Company's anticipated results
included herein do not incorporate the effects of any such actions.
The Company adopted Statement of Financial Accounting Standards No. 142
effective as of January 1, 2002. Under SFAS No. 142, goodwill is no longer
amortized on a periodic basis, but is subject to an impairment test at least
annually. The Company will complete the first step of its goodwill impairment
analysis under the new standard by June 30, 2002. If an impairment is determined
to exist, such impairment would be recognized as a cumulative effect of a change
in accounting principle no later than December 31, 2002. The Company cannot, at
this time, reasonably estimate the impact of SFAS No. 142 on its financial
statements other than with respect to amortization expense. Goodwill
amortization was approximately $4.5 million in 2001.
- 22 -
Future results of operations and other forward-looking statements contained
in this Outlook involve a number of substantial risks and uncertainties that
could significantly affect expected results. Actual results could differ
materially from those described in such forward-looking statements, and the
Company disclaims any intention or obligation to update or revise any
forward-looking statements. Among the factors that could cause actual results to
differ materially are the risks and uncertainties discussed in this Annual
Report and those described from time to time in the Company's other filings with
the Securities and Exchange Commission which include, but are not limited to,
the cyclicality of the commercial aerospace industry, the performance of
aerospace manufacturers and the Company under their LTAs, the difficulty in
forecasting demand for titanium products, global economic and political
conditions, global productive capacity for titanium, changes in product pricing
and costs, the impact of long-term contracts with vendors on the ability of the
Company to reduce or increase supply or achieve lower costs, the possibility of
labor disruptions, fluctuations in currency exchange rates, control by certain
stockholders and possible conflicts of interest, uncertainties associated with
new product development, the supply of raw materials and services, changes in
raw material and other operating costs (including energy costs), possible
disruption of business or increases in the cost of doing business resulting from
war or terrorist activities and other risks and uncertainties. Should one or
more of these risks materialize (or the consequences of such a development
worsen), or should the underlying assumptions prove incorrect, actual results
could differ materially from those forecasted or expected.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated cash flows provided by operating, investing and
financing activities are presented below:
Three months ended March 31,
----------------------------------------
2002 2001
------------------ ------------------
(In thousands)
Cash provided (used) by:
Operating activities:
Excluding changes in assets and liabilities $ 346 $ 4,353
Changes in assets and liabilities (19,547) (17,434)
------------------ ------------------
(19,201) (13,081)
Investing activities (1,282) (2,601)
Financing activities 2,010 10,696
------------------ ------------------
Net cash used by operating, investing
and financing activities $ (18,473) $ (4,986)
================== ==================
Operating activities. Cash used by operating activities, excluding changes
in assets and liabilities, generally followed the trend in gross margin. Changes
in assets and liabilities reflect primarily the timing of purchases, production
and sales and can vary significantly from period to period. Accounts receivable
decreased in the first quarter of 2002 primarily as a result of decreased sales,
partially offset by a slight increase in days sales outstanding. Inventories
increased in the first quarter of 2002 principally as a result of production
begun by the Company prior to certain customer cancellations and push-outs
related to the recent downturn in the commercial aerospace market combined with
the timing of certain raw material purchases. Changes in accounts payable and
accrued liabilities reflect, among other things, the timing of payments to
suppliers of titanium sponge, titanium scrap and other raw materials purchases.
Changes in customer advance payments reflect the application of customer
advances to customer purchases during the first quarter of 2002. During the
first quarter of 2002, the Boeing customer advance was reduced by $1.8 million
to $26.7 million.
- 23 -
On March 27, 2002, SMC and its U.S. subsidiaries filed voluntary petitions
for reorganization under Chapter 11 of the U.S. Bankruptcy Code. As a result,
the Company, with the assistance of an external valuation specialist, undertook
a further assessment of its investment in SMC and recorded an additional $27.5
million impairment charge to general corporate expense for an other than
temporary decline in the fair value of its investment in SMC, reducing the
Company's carrying amount of its investment in SMC to zero.
Investing activities. The Company's capital expenditures were $1.3 million
for the three months ended March 31, 2002 compared to $2.6 million for the same
period in 2001, principally for capacity enhancements, capital maintenance, and
safety and environmental projects.
Financing activities. At March 31, 2002, the Company's net debt was
approximately $8.6 million, consisting of $5.9 million of cash and $14.5 million
of debt (principally borrowings under the Company's U.S. and U.K. credit
agreements). This compares to a net cash position of $12.1 million as of
December 31, 2001. Net cash in the 2001 period was primarily attributable to
receipt of the Boeing advance payment. Net borrowings of $2.2 million in the
2002 period and $10.7 million in the 2001 period were primarily attributable to
increases in working capital (exclusive of cash).
As of March 31, 2002, the Company had approximately $150 million of
borrowing availability under its various worldwide credit agreements. The
Company's U.S. credit facility, a $125 million asset-based revolving credit
agreement, expires in February 2003. The Company is currently negotiating with
its lender to extend the maturity date of this agreement on substantially
similar terms. The U.S. credit agreement allows the lender to modify the
borrowing base formulas at its discretion, subject to certain conditions.
See Note 12 to the Consolidated Financial Statements for additional
discussion of environmental and legal matters.
Other. The Company periodically evaluates its liquidity requirements,
capital needs and availability of resources in view of, among other things, its
alternative uses of capital, debt service requirements, the cost of debt and
equity capital and estimated future operating cash flows. As a result of this
process, the Company has in the past, and in light of its current outlook, may
in the future seek to raise additional capital, modify its common and preferred
dividend policies, restructure ownership interests, incur, refinance or
restructure indebtedness, repurchase shares of capital stock, sell assets, or
take a combination of such steps or other steps to increase or manage its
liquidity and capital resources.
In the normal course of business, the Company investigates, evaluates,
discusses and engages in acquisition, joint venture, strategic relationship and
other business combination opportunities in the titanium, specialty metal and
other industries. In the event of any future acquisition or joint venture
opportunities, the Company may consider using then-available liquidity, issuing
equity securities or incurring additional indebtedness.
- 24 -
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
General. The Company is exposed to market risk from changes in foreign
currency exchange rates, interest rates and commodity prices. The Company
typically does not enter into interest rate swaps or other types of contracts in
order to manage its interest rate market risk and typically does not enter into
currency forward contracts to manage its foreign exchange market risk associated
with receivables, payables and indebtedness denominated in a currency other than
the functional currency of the particular entity.
Interest rates. Information regarding the Company's market risk relating to
interest rate volatility was disclosed in the Company's 2001 Annual Report and
should be read in conjunction with this interim financial information. Since
December 31, 2001, there has been no significant change in the nature of the
Company's exposure to market risks.
Foreign currency exchange rates. The Company is exposed to market risk
arising from changes in foreign currency exchange rates as a result of its
international operations. See Item 2 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Commodity prices. The Company is exposed to market risk arising from
changes in commodity prices as a result of its long-term purchase and supply
agreements with certain suppliers and customers. These agreements, which offer
various fixed pricing arrangements, effectively obligate the Company to bear (i)
the risk of increased raw material and other costs to the Company which cannot
be passed on to the Company's customers through increased titanium product
prices (in whole or in part) or (ii) the risk of decreasing raw material costs
to the Company's suppliers which are not passed on to the Company in the form of
lower raw material prices.
- 25 -
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Reference is made to Note 12 of the Consolidated Financial Statements which
information is incorporated herein by reference and to the Company's 2001 Annual
Report for descriptions of certain previously reported legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 7, 2002, for the
purpose of electing six directors to serve until the 2003 Annual Meeting of
Shareholders and until their successors are duly elected and qualified. All
nominees for director were elected with the following vote:
Director Votes For Votes Withheld
-------------------------------------------- --------------------------------- ----------------------------------
Norman N. Green 29,723,558 723,536
J. Landis Martin 29,725,244 721,850
Albert W. Niemi, Jr. 29,726,747 720,347
Glenn R. Simmons 29,665,002 782,092
Gen. Thomas P. Stafford (retired) 29,676,556 770,538
Steven L. Watson 29,681,002 766,092
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1* Titanium Metals Corporation Amended and Restated 1996
Non-Employee Director Compensation Plan, as amended and
restated effective May 7, 2002.
10.2 Intercorporate Services Agreement between Titanium
Metals Corporation and Tremont Corporation, effective as
of January 1, 2002.
10.3 Intercorporate Services Agreement between Titanium
Metals Corporation and NL Industries, Inc., effective
as of January 1, 2002, incorporated by reference to
Exhibit 10.3 to NL Industries, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended March 31, 2002.
* Management contract, compensatory plan or arrangement.
(b) Reports on Form 8-K:
Reports on Form 8-K filed by the Registrant for the quarter
ended March 31, 2002 and the month of April 2002:
Date of Report Items Reported
--------------------- --------------------
January 4, 2002 5 and 7
February 8, 2002 5 and 7
April 1, 2002 5 and 7
April 26, 2002 5 and 7
- 26 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TITANIUM METALS CORPORATION
--------------------------------------------
(Registrant)
Date: May 14, 2002 By /s/ Mark A. Wallace
-------------------------- --------------------------------------------
Mark A. Wallace
(Executive Vice President and
Chief Financial Officer)
Date: May 14, 2002 By /s/ JoAnne A. Nadalin
-------------------------- --------------------------------------------
JoAnne A. Nadalin
(Vice President, Corporate Controller and
Principal Accounting Officer)
- 27 -