SECURITIES AND 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 September 30, 2003
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
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1999 Broadway, Suite 4300, Denver, Colorado 80202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 296-5600
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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
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes No X
--- ---
Number of shares of common stock outstanding on November 4, 2003: 3,180,062
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 in
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A"), are forward-looking statements that represent management's
beliefs and assumptions based on currently available information.
Forward-looking statements can generally 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
assurance 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 risks and uncertainties in those portions referenced above and those
described from time to time in the Company's other filings with the Securities
and Exchange Commission ("SEC") 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 renewal of
certain 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 or the Company's ability 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 terrorist activities or global conflicts,
the Company's ability to achieve reductions in its cost structure 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 - September 30, 2003 (unaudited)
and December 31, 2002 2
Consolidated Statements of Operations - Three and
nine months ended September 30, 2003 and 2002 (unaudited) 4
Consolidated Statements of Comprehensive Loss - Three
and nine months ended September 30, 2003 and 2002 (unaudited) 6
Consolidated Statements of Cash Flows - Nine months ended
September 30, 2003 and 2002 (unaudited) 7
Consolidated Statement of Changes in Stockholders' Equity -
Nine months ended September 30, 2003 (unaudited) 9
Notes to Consolidated Financial Statements (unaudited) 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 21
Item 3. Quantitative and Qualitative Disclosures about Market Risk 32
Item 4. Controls and Procedures 32
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 33
Item 6. Exhibits and Reports on Form 8-K 33
- 1 -
TITANIUM METALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
ASSETS 2003 2002
-------------------- ------------------
(unaudited)
Current assets:
Cash and cash equivalents $ 29,914 $ 6,214
Accounts and other receivables, less allowance
of $2,496 and $2,859, respectively 66,480 66,393
Receivable from related parties 1,774 2,398
Refundable income taxes 1,219 1,703
Inventories 162,397 181,932
Prepaid expenses and other 4,446 3,077
Deferred income taxes 812 809
-------------------- ------------------
Total current assets 267,042 262,526
Investment in joint ventures 22,325 22,287
Property and equipment, net 235,449 254,672
Intangible assets, net 7,185 8,442
Other 16,295 15,851
-------------------- ------------------
Total assets $ 548,296 $ 563,778
==================== ==================
See accompanying Notes to Consolidated Financial Statements
- 2 -
TITANIUM METALS CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except per share data)
September 30, December 31,
LIABILITIES, MINORITY INTEREST AND 2003 2002
STOCKHOLDERS' EQUITY --------------------- -------------------
(unaudited)
Current liabilities:
Notes payable $ 864 $ 12,994
Current maturities of long-term debt and capital
lease obligations 569 642
Accounts payable 27,778 26,460
Accrued liabilities 48,013 46,511
Customer advances 14,707 5,416
Payable to related parties 257 602
--------------------- -------------------
Total current liabilities 92,188 92,625
Long-term debt - 6,401
Capital lease obligations 9,160 9,575
Payable to related parties 644 644
Accrued OPEB cost 13,135 13,417
Accrued pension cost 59,856 61,080
Accrued environmental cost 3,716 3,531
Deferred income taxes 784 1,036
Accrued dividends on BUCS 14,854 4,462
Other 986 -
--------------------- -------------------
Total liabilities 195,323 192,771
--------------------- -------------------
Minority interest - Company-obligated mandatorily
redeemable convertible preferred securities of subsidiary
trust holding solely subordinated debt securities ("BUCS") 201,241 201,241
Other minority interest 9,843 10,416
Stockholders' equity:
Preferred stock, $.01 par value; 100 shares authorized,
none issued - -
Common stock, $.01 par value; 9,900 shares authorized,
3,191 and 3,194 shares issued 32 32
Additional paid-in capital 350,713 350,889
Accumulated deficit (150,299) (127,371)
Accumulated other comprehensive loss (57,257) (62,737)
Treasury stock, at cost (9 shares) (1,208) (1,208)
Deferred compensation (92) (255)
--------------------- -------------------
Total stockholders' equity 141,889 159,350
--------------------- -------------------
Total liabilities and stockholders' equity $ 548,296 $ 563,778
===================== ===================
Commitments and contingencies (Note 14)
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 Nine months ended
September 30, September 30,
------------------------------- -----------------------------------
2003 2002 2003 2002
-------------- ------------- --------------- -----------------
Net sales $ 83,635 $ 82,794 $ 284,741 $ 281,529
Cost of sales 83,677 87,734 279,407 279,937
-------------- ------------- --------------- -----------------
Gross margin (42) (4,940) 5,334 1,592
Selling, general, administrative and
development expense 8,538 10,714 28,016 32,508
Equity in (losses) earnings of
joint ventures (93) 342 321 1,670
Other income (expense), net 9,940 10,946 13,476 13,155
-------------- ------------- --------------- -----------------
Operating income (loss) 1,267 (4,366) (8,885) (16,091)
Interest expense 328 915 1,504 2,388
Other non-operating
income (expense), net (116) (846) (904) (29,203)
-------------- ------------- --------------- -----------------
Income (loss) before income taxes,
minority interest and cumulative
effect of change in accounting
principles 823 (6,127) (11,293) (47,682)
Income tax expense (benefit) 326 (473) 807 (1,312)
Minority interest - BUCS 3,521 3,333 10,391 9,999
Other minority interest, net of tax (38) 161 246 1,206
-------------- ------------- --------------- -----------------
Loss before cumulative effect of
change in accounting principles (2,986) (9,148) (22,737) (57,575)
Cumulative effect of change in
accounting principles - - (191) (44,310)
-------------- ------------- --------------- -----------------
Net loss $ (2,986) $ (9,148) $ (22,928) $ (101,885)
============== ============= =============== =================
See accompanying Notes to Consolidated Financial Statements
- 4 -
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (CONTINUED)
(In thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
------------------------------- --------------------------------
2003 2002 2003 2002
-------------- ------------- -------------- --------------
Basic and diluted loss per share:
Before cumulative effect of change in
accounting principles $ (0.94) $ (2.89) $ (7.18) $ (18.23)
Cumulative effect of change in
accounting principles - - (0.06) (14.03)
-------------- ------------- -------------- --------------
Basic and diluted loss per share $ (0.94) $ (2.89) $ (7.24) $ (32.26)
============== ============= ============== ==============
Weighted average shares outstanding 3,172 3,161 3,168 3,159
============== ============= ============== ==============
Pro forma amounts assuming
Statement of Financial Accounting
Standards No. 143 was applied
during all periods affected (Note 1):
Net loss $ (2,986) $ (9,156) $ (22,737) $ (101,910)
============== ============= ============== ==============
Basic and diluted loss per share $ (0.94) $ (2.90) $ (7.18) $ (32.26)
============== ============= ============== ==============
See accompanying Notes to Consolidated Financial Statements
- 5 -
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)
(In thousands)
Three months ended Nine months ended
September 30, September 30,
------------------------------- ---------------------------------
2003 2002 2003 2002
-------------- ------------- -------------- ---------------
Net loss $ (2,986) $ (9,148) $ (22,928) $ (101,885)
Other comprehensive income (loss) -
currency translation adjustment 741 1,546 5,480 9,112
-------------- ------------- -------------- ---------------
Comprehensive loss $ (2,245) $ (7,602) $ (17,448) $ (92,773)
============== ============= ============== ===============
See accompanying Notes to Consolidated Financial Statements
- 6 -
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
Nine months ended September 30,
-------------------------------------
2003 2002
----------------- ----------------
Cash flows from operating activities:
Net loss $ (22,928) $ (101,885)
Depreciation and amortization 28,344 27,623
Cumulative effect of change in accounting principles 191 44,310
Noncash impairment of investment in Special Metals
Corporation preferred securities - 27,500
Equity in earnings of joint ventures, net of distributions 926 (641)
Deferred income taxes (203) (2,813)
Other minority interest 246 1,206
Other, net 683 1,682
Change in assets and liabilities:
Receivables 469 12,970
Inventories 22,915 (704)
Prepaid expenses and other (1,318) 5,038
Accounts payable and accrued liabilities 2,424 (14,315)
Customer advances 11,095 (16,639)
Income taxes 550 (1,427)
Accounts with related parties, net 273 1,184
Accrued OPEB and pension costs (2,962) (2,150)
Accrued dividends on BUCS 10,391 -
Other, net (491) 411
----------------- ----------------
Net cash provided (used) by operating activities 50,605 (18,650)
----------------- ----------------
Cash flows from investing activities:
Capital expenditures (5,984) (4,765)
Other 36 -
----------------- ----------------
Net cash used by investing activities (5,948) (4,765)
----------------- ----------------
Cash flows from financing activities:
Indebtedness:
Borrowings 353,380 307,613
Repayments (371,839) (301,877)
Dividends paid to minority interest (1,892) (1,115)
Other, net (770) (471)
----------------- ----------------
Net cash (used) provided by financing activities (21,121) 4,150
----------------- ----------------
Net cash provided (used) by operating,
investing and financing activities $ 23,536 $ (19,265)
================= ================
See accompanying Notes to Consolidated Financial Statements
- 7 -
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (CONTINUED)
(In thousands)
Nine months ended
September 30,
-------------------------------------
2003 2002
----------------- ----------------
Cash and cash equivalents:
Net increase (decrease) from:
Operating, investing and financing activities $ 23,536 $ (19,265)
Currency translation 164 (673)
----------------- ----------------
23,700 (19,938)
Cash at beginning of period 6,214 24,500
----------------- ----------------
Cash at end of period $ 29,914 $ 4,562
================= ================
Supplemental disclosures:
Cash paid for:
Interest, net of amounts capitalized $ 954 $ 1,462
BUCS dividends $ - $ 9,999
Income taxes, net $ 463 $ 2,928
Noncash investing and financing activities:==
Capital lease obligations incurred when the Company
entered into certain leases for new equipment $ - $ 779
See accompanying Notes to Consolidated Financial Statements
- 8 -
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
Nine months ended September 30, 2003
(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, 2002 3,185 $ 32 $ 350,889 $(127,371) $ (1,036) $ (61,701) $ (1,208) $ (255) $ 159,350
Components of comprehensive
loss:
Net loss - - - (22,928) - - - - (22,928)
Change in cumulative
currency translation
adjustment - - - - 5,480 - - - 5,480
Issuance of common stock 3 - 72 - - - - - 72
Stock award cancellations (6) - (248) - - - - 248 -
Amortization of deferred
compensation, net of effects
of stock award cancellations - - - - - - - (85) (85)
-------- ------ ---------- ---------- --------- ---------- --------- ---------- ----------
Balance at September 30, 2003 3,182 $ 32 $ 350,713 $(150,299) $ 4,444 $ (61,701) $ (1,208) $ (92) $ 141,889
======== ====== ========== ========== ========= ========== ========= ========== ==========
See accompanying Notes to Consolidated Financial Statements
- 9 -
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. The accompanying Consolidated
Financial Statements include the accounts of TIMET and its majority-owned
subsidiaries (collectively, the "Company"). All material intercompany
transactions and balances have been eliminated. The Consolidated Balance Sheet
at September 30, 2003 and the Consolidated Statements of Operations,
Comprehensive Loss, Changes in Stockholders' Equity and Cash Flows for the
interim periods ended September 30, 2003 and 2002, as applicable, 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, 2002 (the "2002
Annual Report").
At September 30, 2003, Valhi, Inc. and subsidiaries ("Valhi") held
approximately 40.8% of TIMET's outstanding common stock and approximately 0.4%
of the Company's outstanding BUCS. At September 30, 2003, the Combined Master
Retirement Trust ("CMRT"), a trust formed by Valhi to permit the collective
investment by trusts that maintain the assets of certain employee benefit plans
adopted by Valhi and certain related companies, held approximately 9% of TIMET's
common stock. TIMET's U.S. pension plans began investing in the CMRT in the
second quarter of 2003; however, these plans invest only in a portion of the
CMRT that does not hold TIMET common stock. At September 30, 2003, Contran
Corporation ("Contran") held directly an additional 42.2% of the Company's
outstanding BUCS and held, directly or through subsidiaries, approximately 90%
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 and TIMET.
The Company completed a reverse split of its common stock (one share of
post-split common stock for each outstanding ten shares of pre-split common
stock) effective after the close of trading on February 14, 2003. All share and
per share disclosures for all periods presented in the Consolidated Financial
Statements and Notes thereto have been adjusted to give effect to the reverse
stock split.
- 10 -
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 143, Accounting for Asset Retirement Obligations on January 1, 2003. Under
SFAS No. 143, the fair value of a liability for an asset retirement obligation
covered under the scope of SFAS No. 143 is 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 is accreted to its future
value, and the capitalized cost is depreciated over the useful life of the
related asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement.
Under the transition provisions of SFAS No. 143, the Company recognized (i)
an asset retirement cost capitalized as an increase to the carrying value of its
property, plant and equipment of approximately $0.2 million, (ii) accumulated
depreciation on such capitalized cost of approximately $0.1 million and (iii) an
other noncurrent liability for the asset retirement obligation of approximately
$0.3 million. Amounts resulting from the initial application of SFAS No. 143
were measured using information, assumptions and interest rates all as of
January 1, 2003. The amount recognized as the asset retirement cost was measured
as of the date the asset retirement obligation was incurred. Cumulative
accretion on the asset retirement obligation and accumulated depreciation on the
asset retirement cost were recognized for the time period from the date the
asset retirement cost and liability would have been recognized had the
provisions of SFAS No. 143 been in effect at the date the liability was
incurred, through January 1, 2003. The difference between the amounts to be
recognized as described above and any associated amounts recognized in the
Company's balance sheet as of December 31, 2002 was recognized as a cumulative
effect of a change in accounting principle as of January 1, 2003. The asset
retirement obligation recognized as a result of adopting SFAS No. 143 relates
primarily to landfill closure and leasehold restoration costs.
The following table shows pro forma amounts relating to the Company's asset
retirement obligations as if SFAS No. 143 were applied throughout 2002, as well
as a roll forward of the asset retirement obligation through September 30, 2003:
(In thousands)
Asset retirement obligation, 1/1/2002 $ 312
Accretion expense 15
---------------
Asset retirement obligation, 12/31/2002 327
New obligation 69
Accretion expense 14
---------------
Asset retirement obligation, 9/30/2003 $ 410
===============
Accretion expense during the first nine months of 2003 is reported as a
component of other operating expense.
The Company has elected the disclosure alternative prescribed by SFAS No.
123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148,
Accounting for Stock-Based Compensation - Transition and Disclosure, and has
chosen to account for its stock-based employee compensation related to stock
options in accordance with Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and its various interpretations. Under
APB Opinion No. 25, compensation cost is generally recognized for fixed stock
options for which the exercise price is less than the market price of the
underlying stock on the grant date. The Company recognized no compensation cost
for fixed stock options during the three and nine months ended September 30,
2003 and 2002.
- 11 -
The following table illustrates the effect on net loss and loss per share
if the Company had applied the fair value recognition provisions of SFAS No.
123:
Three months ended Nine months ended
September 30, September 30,
------------------------------ --------------------------------
2003 2002 2003 2002
-------------- ------------ -------------- ---------------
(In thousands, except per share data)
Net loss, as reported $ (2,986) $ (9,148) $ (22,928) $ (101,885)
Less total option related stock-based
employee compensation expense
determined under SFAS No. 123 (45) (109) (186) (442)
-------------- ------------ -------------- ---------------
Pro forma net loss $ (3,031) $ (9,257) $ (23,114) $ (102,327)
============== ============ ============== ===============
Basic and diluted loss per share:
As reported $ (0.94) $ (2.89) $ (7.24) $ (32.26)
============== ============ ============== ===============
Pro forma $ (0.96) $ (2.93) $ (7.30) $ (32.40)
============== ============ ============== ===============
In January 2003, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation ("FIN") No. 46, Consolidation of Variable Interest Entities.
The Company is required to comply with the consolidation requirements of FIN No.
46, as amended, as of December 31, 2003. The Company is still studying this
interpretation, and the FASB staff continues to provide implementation guidance.
TIMET Capital Trust I (the "Trust"), a wholly-owned subsidiary of TIMET that
issued the Company's BUCS, is a variable interest entity that would require
consolidation under FIN No. 46. TIMET is the primary beneficiary of the Trust
and has consolidated the Trust since its formation, as the Company owns 100% of
the Trust's outstanding voting securities. See the 2002 Annual Report for
further discussion of the Trust. The Company is still evaluating whether it has
involvement with any other variable interest entities and, if applicable, will
apply the consolidation provisions of the Interpretation to those entities as of
December 31, 2003. It is possible that VALTIMET SAS ("VALTIMET"), a manufacturer
of welded stainless steel and titanium tubing in which the Company has a 43.7%
equity investment, may be determined to be a variable interest entity. TIMET's
maximum exposure to loss in VALTIMET is the recorded value of its investment,
which was $22.1 million at September 30, 2003.
- 12 -
Note 2 - Business segment information
The Company's production facilities are located in the United States,
United Kingdom, France and Italy, and its products are sold throughout the
world. The Company's worldwide integrated activities are conducted through its
"Titanium melted and mill products" segment, currently the Company's only
segment. Sales, gross margin, operating income (loss), inventory and receivables
are the key management measures used to evaluate segment performance. The
following table provides supplemental segment information to the Company's
Consolidated Financial Statements:
Three months ended Nine months ended
September 30, September 30,
------------------------------- -------------------------------
2003 2002 2003 2002
------------- -------------- -------------- --------------
($ in thousands, except selling price data)
Titanium melted and mill products:
Mill product net sales $ 65,185 $ 62,656 $ 208,646 $ 212,940
Melted product net sales 12,261 8,656 41,300 27,951
Other product sales 12,989 11,482 41,595 40,638
Other (1) (6,800) - (6,800) -
------------- -------------- -------------- --------------
$ 83,635 $ 82,794 $ 284,741 $ 281,529
============= ============== ============== ==============
Mill product shipments:
Volume (metric tons) 2,015 2,005 6,510 6,825
Average price ($ per kilogram) $ 32.35 $ 31.25 $ 32.05 $ 31.20
Melted product shipments:
Volume (metric tons) 1,220 625 3,500 1,895
Average price ($ per kilogram) $ 10.05 $ 13.85 $ 11.80 $ 14.75
-----------------------------------------------------------------------------------------------------------------------
(1) Represents the effect of a $6.8 million reduction to sales during the third
quarter of 2003 related to termination of a purchase and sale agreement with
Wyman-Gordon Company ("Wyman-Gordon"). See further discussion in Note 8.
Note 3 - Inventories
September 30, December 31,
2003 2002
-------------------- ------------------
(In thousands)
Raw materials $ 36,977 $ 52,825
Work-in-process 75,745 82,190
Finished products 62,067 63,458
Supplies 13,479 13,829
-------------------- ------------------
188,268 212,302
Less adjustment of certain inventories to LIFO basis 25,871 30,370
-------------------- ------------------
$ 162,397 $ 181,932
==================== ==================
- 13 -
Note 4 - Preferred securities of Special Metal Corporation ("SMC")
As previously disclosed in the 2002 Annual Report, in March 2002, SMC and
its U.S. subsidiaries filed a voluntary petition 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 to other non-operating
expense during the first quarter of 2002 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 the SMC securities to zero. Under
the terms of SMC's Second Amended Joint Plan of Reorganization, which was
confirmed by the Bankruptcy Court on September 29, 2003, the Company currently
believes that it will not recover any material amount from this investment.
Note 5 - Property and equipment
September 30, December 31,
2003 2002
--------------------- ------------------
(In thousands)
Land $ 6,288 $ 6,224
Buildings 39,745 38,874
Information technology systems 58,435 58,217
Manufacturing and other 308,278 312,163
Construction in progress 5,091 3,493
--------------------- ------------------
417,837 418,971
Less accumulated depreciation 182,388 164,299
--------------------- ------------------
$ 235,449 $ 254,672
===================== ==================
Note 6 - Goodwill
On January 1, 2002, the Company adopted 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. As a result of the adoption of SFAS No.
142, the Company recorded a non-cash goodwill impairment charge of $44.3
million, representing the entire balance of the Company's recorded goodwill at
January 1, 2002. Pursuant to the transition requirements of SFAS No. 142, this
charge was reported in the Company's Consolidated Statement of Operations as a
cumulative effect of a change in accounting principle as of January 1, 2002.
Note 7 - Other noncurrent assets
September 30, December 31,
2003 2002
-------------------- ------------------
(In thousands)
Deferred financing costs $ 7,732 $ 8,244
Prepaid pension cost 8,268 7,295
Notes receivable from officers 146 163
Other 149 149
-------------------- ------------------
$ 16,295 $ 15,851
==================== ==================
- 14 -
Note 8 - Accrued liabilities
September 30, December 31,
2003 2002
--------------------- ------------------
(In thousands)
OPEB cost $ 3,669 $ 3,818
Pension cost 8,320 7,969
Payroll and vacation 6,946 6,007
Incentive compensation 513 1,326
Other employee benefits 9,060 11,141
Deferred income 1,511 1,679
Environmental costs 301 803
Accrued tungsten costs 500 2,190
Taxes, other than income 4,126 3,519
Wyman-Gordon installments 4,800 -
Other 8,267 8,059
--------------------- ------------------
$ 48,013 $ 46,511
===================== ==================
During the third quarter of 2003, the Company and Wyman-Gordon agreed to
terminate the 1998 purchase and sale agreement associated with the formation of
the titanium castings joint venture previously owned by the two parties. The
Company agreed to pay Wyman-Gordon a total of $6.8 million in three quarterly
installments in connection with this termination, which included the termination
of certain favorable purchase terms. The Company recorded a one-time charge for
the entire $6.8 million as a reduction to sales in the third quarter of 2003.
The Company paid the first installment of $2.0 million to Wyman-Gordon in the
third quarter of 2003, with the remaining two installments of $2.0 million and
$2.8 million due in the fourth quarter of 2003 and the first quarter of 2004,
respectively.
Also during the third quarter of 2003, the Company reduced its accrual for
potential claims related to the tungsten inclusion matter. See further
discussion in Note 14.
Note 9 - Boeing advance
Under the terms of the amended long-term agreement ("LTA") between TIMET
and The Boeing Company ("Boeing"), in years 2002 through 2007, Boeing is
required to advance TIMET $28.5 million annually less $3.80 per pound of
titanium product purchased by Boeing subcontractors from TIMET during the
preceding year. The advance relates to Boeing's take-or-pay obligations under
the LTA. Effectively, the Company collects $3.80 less from Boeing than the LTA
selling price for each pound of titanium product sold directly to Boeing and
reduces the related customer advance recorded by the Company. For titanium
products sold to Boeing subcontractors, the Company collects the full LTA
selling price, but gives Boeing credit by reducing the next year's annual
advance by $3.80 per pound of titanium product sold to Boeing subcontractors.
The Boeing customer advance is also reduced as take-or-pay benefits are earned.
As of September 30, 2003, approximately $11.9 million of customer advances
related to the Company's LTA with Boeing.
- 15 -
Note 10 - Notes payable, long-term debt and capital lease obligations
September 30, December 31,
2003 2002
-------------------- ------------------
(In thousands)
Notes payable:
U.S. credit agreement $ - $ 11,944
European credit agreements 864 1,050
-------------------- ------------------
$ 864 $ 12,994
==================== ==================
Long-term debt:
U.K. bank credit agreement $ - $ 6,401
==================== ==================
Capital lease obligations $ 9,729 $ 10,217
Less current maturities 569 642
-------------------- ------------------
$ 9,160 $ 9,575
==================== ==================
During the second quarter of 2003, TIMET UK received an interest-bearing
intercompany loan from a U.S. subsidiary of the Company enabling TIMET UK to
reduce its long-term borrowings under its U.K. bank credit agreement to zero. As
of September 30, 2003, the Company had aggregate unused borrowing availability
under its U.S. and European credit facilities of approximately $133 million.
Note 11 - Minority interests
In October 2002, the Company exercised its right to defer future dividend
payments on its BUCS for a period of up to 20 consecutive quarters, effective
beginning with the Company's December 1, 2002 scheduled dividend payment.
Dividends continue to accrue at the coupon rate on the principal and unpaid
dividends. Based on this deferral, accrued dividends on these BUCS are reflected
as long-term liabilities in the Consolidated Balance Sheets. Dividends are
reported in the Consolidated Statements of Operations as minority interest.
TIMET Savoie, S.A. ("TIMET Savoie"), the Company's 70% owned French
subsidiary, paid dividends during the second quarter of 2003 and 2002, of which
$1.9 million and $1.1 million, respectively, was paid to Compagnie Europeene du
Zirconium ("CEZUS"), the 30% minority owner in TIMET Savoie.
- 16 -
Note 12 - Other income (expense)
Three months ended Nine months ended
September 30, September 30,
------------------------------- -------------------------------
2003 2002 2003 2002
-------------- -------------- -------------- -------------
(In thousands)
Other operating income (expense):
Boeing take-or-pay $ 10,123 $ 10,540 $ 12,943 $ 12,696
Litigation settlement - - 475 -
Other, net (183) 406 58 459
-------------- -------------- -------------- -------------
$ 9,940 $ 10,946 $ 13,476 $ 13,155
============== ============== ============== =============
Other non-operating income (expense):
Interest income $ 74 $ 16 $ 255 $ 105
Impairment of investment in SMC
preferred securities - - - (27,500)
Foreign exchange gain (loss) 240 50 (647) (292)
Surety bond guarantee (50) (918) (50) (918)
Other, net (380) 6 (462) (598)
-------------- -------------- -------------- -------------
$ (116) $ (846) $ (904) $ (29,203)
============== ============== ============== =============
During the first quarter of 2003, the Company received $0.5 million related
to its settlement of certain litigation relating to power outages suffered at
its Henderson, Nevada facility in 1997 and 1998 as a result of contractor
activity. See Note 9 for further discussion of the Boeing take-or-pay income.
Note 13 - Income taxes
Nine months ended September 30,
--------------------------------------------
2003 2002
--------------------- -------------------
(In thousands)
Expected income tax benefit, at 35% $ (3,953) $ (16,689)
Non-U.S. tax rates 537 823
U.S. state income taxes, net 5 186
Dividends received deduction (312) -
Extraterritorial income exclusion (123) (280)
Change in valuation allowance:
Effect of change in tax law - (1,797)
Adjustment of deferred tax valuation allowance 4,690 16,367
Other, net (37) 78
--------------------- -------------------
$ 807 $ (1,312)
===================== ===================
During the first quarter of 2002, the Job Creation and Worker Assistance
Act of 2002 (the "JCWA Act") was signed into law. The Company benefits from
provisions of the JCWA Act liberalizing certain net operating loss ("NOL") and
alternative minimum tax ("AMT") restrictions. As a result, the Company
recognized $1.8 million of refundable U.S. income taxes during the first quarter
of 2002. The Company received $0.8 million of this refund in the fourth quarter
of 2002 and the remaining $1.0 million during the third quarter of 2003.
- 17 -
At September 30, 2003, the Company had, for U.S. federal income tax
purposes, NOL carryforwards of approximately $138 million that expire between
2020 and 2023. At September 30, 2003, the Company had AMT credit carryforwards
of approximately $4 million, which can be utilized to offset regular income
taxes payable in future years. The AMT credit carryforward has an indefinite
carryforward period. At September 30, 2003, the Company had the equivalent of a
$26 million NOL carryforward in the United Kingdom and a $2 million NOL
carryforward in Germany, both of which have indefinite carryforward periods.
Note 14 - Commitments and contingencies
Environmental matters. As previously disclosed in the 2002 Annual Report,
TIMET and Basic Management, Inc. ("BMI") reached an agreement in 1999 that upon
payment by BMI of the cost to design, purchase and install the technology and
equipment necessary to allow the Company to stop discharging liquid and solid
effluents and co-products into settling ponds located on certain lands owned by
the Company adjacent to its Henderson, Nevada plant site (the "TIMET Pond
Property"), the Company would convey to BMI, at no additional cost, the TIMET
Pond Property. Under this agreement, BMI will pay 100% of the first $15.9
million of the cost for this project, and TIMET agreed to contribute 50% of the
cost in excess of $15.9 million, up to a maximum payment by TIMET of $2 million.
The Company presently expects that the total cost of this project will not
exceed $15.9 million. The Company and BMI are continuing discussions about this
project and also continuing investigation with respect to certain environmental
issues associated with the TIMET Pond Property, including possible groundwater
issues.
The Company is also continuing assessment work with respect to its own
active plant site in Henderson, Nevada. During 2000, an initial study of certain
groundwater remediation issues at the Company's plant site and other
Company-owned sites within the BMI Complex was completed. The Company accrued
$3.3 million in 2000 based on the undiscounted cost estimates set forth in the
initial study. During 2002, the Company updated this study and accrued an
additional $0.3 million based on revised cost estimates. The Company expects
these accrued expenses to be paid over a period of up to thirty years.
As of September 30, 2003, the Company had accrued an aggregate of
approximately $4.0 million for environmental matters, including those discussed
above. The Company records liabilities related to environmental remediation
obligations when estimated future costs are probable and reasonably estimable.
Such accruals are adjusted as further information becomes available or
circumstances change. Estimated future costs are not discounted to their present
value. It is not possible to estimate the range of costs for certain sites. The
imposition of more stringent standards or requirements under environmental laws
or regulations, the results of future testing and analysis undertaken by the
Company at its operating facilities, or a determination that the Company is
potentially responsible for the release of hazardous substances at other sites,
could result in costs in excess of amounts currently estimated to be required
for such matters. No assurance can be given that actual costs will not exceed
accrued amounts or that costs will not be incurred with respect to sites as to
which no problem is currently known or where no estimate can presently be made.
Further, there can be no assurance that additional environmental matters will
not arise in the future.
- 18 -
Legal proceedings. The Company records liabilities related to legal
proceedings when estimated costs are probable and reasonably estimable. Such
accruals are adjusted as further information becomes available or circumstances
change. Estimated future costs are not discounted to their present value. It is
not possible to estimate the range of costs for certain matters. No assurance
can be given that actual costs will not exceed accrued amounts or that costs
will not be incurred with respect to matters as to which no problem is currently
known or where no estimate can presently be made. Further, there can be no
assurance that additional legal proceedings will not arise in the future.
Other. TIMET is the primary obligor on two $1.5 million workers'
compensation bonds issued on behalf of a former subsidiary, Freedom Forge
Corporation ("Freedom Forge"), which TIMET sold in 1989. The bonds were provided
as part of the conditions imposed on Freedom Forge in order to self-insure its
workers' compensation obligations. Freedom Forge filed for Chapter 11 bankruptcy
protection on July 13, 2001, and discontinued payment on the underlying workers'
compensation claims in November 2001. During 2002, TIMET received notices that
the issuers of the bonds were required to make payments on one of the bonds with
respect to certain of these claims and were requesting reimbursement from TIMET.
Based upon loss projections, the Company accrued $0.9 million in the third
quarter of 2002 and $0.7 million (including $0.1 million in legal fees
reimbursable to the issuer of the bonds) in the fourth quarter of 2002 for this
bond as other non-operating expense in 2002. Through September 30, 2003, TIMET
has reimbursed the issuer approximately $0.7 million under this bond and $0.9
million remains accrued for future payments. During 2003, TIMET received notice
that certain claimants had submitted claims under the second bond. As of
September 30, 2003, payments under the second bond have been immaterial;
however, the Company expects to make additional payments in the future.
Accordingly, the Company accrued $50,000 for this bond as other non-operating
expense in the third quarter of 2003. TIMET may revise its estimated liability
under these bonds in the future as additional facts become known or claims
develop.
As of September 30, 2003, the Company has $0.5 million accrued for pending
and potential future customer claims associated with certain standard grade
material produced by the Company which was subsequently found to contain
tungsten inclusions as a result of tungsten contaminated silicon sold to the
Company by a third-party supplier. Pending claims are being investigated and
negotiated, and the Company believes that certain claims are without merit or
can be settled for less than the amount of the original claim. There is no
assurance that all potential claims have been submitted to the Company. Based
upon an analysis of information pertaining to asserted and unasserted claims,
the Company revised its estimate of probable loss and reduced its accrual for
pending and future customer claims to $0.5 million, resulting in a $1.7 million
reduction in cost of sales during the third quarter of 2003. The Company has
filed suit seeking full recovery from its silicon supplier for any liability the
Company has incurred or might incur, although no assurance can be given that the
Company will ultimately be able to recover all or any portion of such amounts.
In April 2003, the Company received notice that this silicon supplier had filed
a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy
Code. TIMET is currently investigating what effect, if any, this bankruptcy may
have on the Company's potential recovery. The Company has not recorded any
recoveries related to this matter as of September 30, 2003.
- 19 -
The Company is involved in various employment, environmental, contractual
and other claims, disputes and litigation incidental to its business including
those discussed above. While management, including internal counsel, currently
believes that the outcome of these matters, individually and in the aggregate,
will not have a material adverse effect on the Company's financial position,
liquidity or overall trends in results of operations, all such matters are
subject to inherent uncertainties. If an unfavorable outcome were to occur in
any given period, it is possible that it could have a material adverse impact on
the results of operations or cash flows in that particular period.
See the 2002 Annual Report for additional information concerning certain
legal and environmental matters, commitments and contingencies.
Note 15 - 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 reflects the dilutive effect of common stock options,
restricted stock and the assumed conversion of the BUCS. The assumed conversion
of the BUCS was omitted from the diluted loss per share calculation for the
three and nine months ended September 30, 2003 and 2002 because the effect was
antidilutive. Had the BUCS not been antidilutive, diluted losses would have been
decreased by $3.5 million and $10.4 million for the three and nine months ended
September 30, 2003, respectively, and by $3.3 million and $10.0 million for the
three and nine months ended September 30, 2002, respectively. Diluted average
shares outstanding would have been increased by 540,000 shares for each of these
periods from the assumed conversion of the BUCS. Stock options and restricted
shares excluded from the calculation because they were antidilutive approximated
132,000 for the three and nine months ended September 30, 2003 and 154,000 for
the three and nine months ended September 30, 2002.
- 20 -
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table summarizes certain information regarding the Company's
results of operations for the three and nine months ended September 30, 2003 and
2002. The 2003 percentage change information represents changes from the 2002
periods to the corresponding 2003 periods, and the 2002 percentage change
information represents changes from the 2001 periods to the corresponding 2002
periods. See "Outlook" for further discussion of the Company's business
expectations for the remainder of 2003.
Three months ended Nine months ended
September 30, September 30,
------------------------------- -------------------------------
2003 2002 2003 2002
-------------- ------------- -------------- --------------
($ in thousands) ($ in thousands)
Net sales $ 83,635 $ 82,794 $ 284,741 $ 281,529
Gross margin (42) (4,940) 5,334 1,592
Operating income (loss) 1,267 (4,366) (8,885) (16,091)
Gross margin percent of net sales 0% -6% 2% 1%
Percentage change in:
Sales volume:
Mill product sales volume - -33 -5 -26
Melted product sales volume +95 -54 +85 -45
Average selling prices - includes
changes in product mix:
Mill products +4 +3 +3 +5
Melted products -27 -6 -20 +3
Selling prices - excludes changes
in product mix:
Mill products in U.S. dollars -2 +2 -2 +5
Mill products in billing currencies(1) -5 -1 -7 +4
Melted products -20 -5 -15 +2
----------------------------------------------------------------------------------------------------------------------
(1) Excludes the effect of changes in foreign currencies.
Third quarter of 2003 compared to third quarter of 2002. The Company's
sales of mill products increased 4% from $62.7 million during the third quarter
2002 to $65.2 million during the third quarter of 2003. This increase was
principally due to a 0.5% increase in mill product sales volume, a 4% increase
in mill product average selling prices (using actual product mix and foreign
currency exchange rates prevailing during the respective periods) and the
effects of the weakening of the U.S. dollar compared to the British pound
sterling and the euro. In billing currencies (which exclude the effects of
foreign currency translation), mill product selling prices decreased 5% during
the third quarter of 2003 compared to the year ago period. Mill product selling
prices expressed in U.S. dollars (using actual foreign currency exchange rates
prevailing during the respective periods) decreased 2% during the third quarter
of 2003 compared to the third quarter of 2002.
- 21 -
Melted product sales increased 42% from $8.7 million during the third
quarter of 2002 to $12.3 million during the third quarter of 2003 primarily due
to a 95% increase in melted product sales volume, partially offset by a 27%
decrease in melted product average selling prices. Melted products consist of
ingot and slab and are generally only sold in U.S. dollars. Melted product sales
increased principally as a result of new customer relationships, share gains and
changes in product mix, including a significant sale of slab in the third
quarter of 2003. Excluding the effects of changes in product mix, melted product
selling prices decreased 20% during the third quarter of 2003 compared to the
third quarter of 2002.
Net sales during the third quarter of 2003 were reduced by $6.8 million
related to a one-time charge incurred by the Company to terminate a purchase and
sale agreement between the Company and Wyman-Gordon. See Note 8 to the
Consolidated Financial Statements. The Company and Wyman-Gordon entered into a
new long-term purchase and sale agreement covering the sale of TIMET products to
various Wyman-Gordon locations through 2008. The Company expects the new
agreement to, among other things, improve its future plant operating rates.
Gross margin (net sales less cost of sales) was 0% during the third quarter
of 2003, compared to negative 6% during the year-ago period. The improvement in
gross margin was primarily a result of the Company's continued cost reduction
efforts, improved plant operating rates (from 45% in the third quarter of 2002
to 55% in the third quarter of 2003) and favorable raw material mix.
Additionally, the Company currently expects a reduction in its LIFO inventory
reserve at the end of 2003 as compared to the end of 2002. As a result, the
Company reduced cost of sales by $3.9 million in the third quarter of 2003 in
anticipation of this reduction. This compared with an increase in the Company's
LIFO inventory reserve at September 30, 2002 compared to the end of 2001, for
which the Company increased cost of sales by $3.5 million in the third quarter
of 2002. Gross margin during the third quarter of 2003 was also positively
impacted by the Company's revision of its estimate of probable loss associated
with the previously reported tungsten inclusion matter. Based upon an analysis
of information pertaining to asserted and unasserted claims, the Company reduced
its accrual for pending and future customer claims to $0.5 million, resulting in
a $1.7 million reduction in cost of sales during the third quarter of 2003. See
Note 14 to the Consolidated Financial Statements. Gross margin during the third
quarter of 2003 was adversely impacted by the $6.8 million reduction in sales
relating to the termination of the Wyman-Gordon agreement.
Selling, general, administrative and development expenses decreased by 20%
from $10.7 million during the third quarter of 2002 to $8.5 million during the
third quarter of 2003, principally as a result of lower personnel and travel
costs, as well as focused cost control in other administrative areas.
Equity in (losses) earnings of joint ventures decreased from earnings of
$0.3 million during the third quarter of 2002 to a loss of $0.1 million during
the third quarter of 2003, principally due to a decrease in the operating
results of VALTIMET, the Company's minority-owned welded tube joint venture.
Net other income (expense) decreased by 9% from $10.9 million during the
third quarter of 2002 to $9.9 million during the third quarter of 2003,
principally due to an decrease in the amount of income the Company recognized
under the take-or-pay provisions of its agreement with Boeing.
- 22 -
First nine months of 2003 compared to first nine months of 2002. The
Company's sales of mill products decreased 2% from $212.9 million during the
nine months ended September 30, 2002 to $208.6 million during the nine months
ended September 30, 2003. This decrease was principally due to a 5% decrease in
mill product sales volume, partially offset by a 3% increase in mill product
average selling prices (using actual product mix and foreign currency exchange
rates prevailing during the respective periods) and the effects of the weakening
of the U.S. dollar compared to the British pound sterling and the euro. In
billing currencies, mill product selling prices decreased 7% during the nine
months ended September 30, 2003 compared to the year ago period. Mill product
selling prices expressed in U.S. dollars decreased 2% during the nine months
ended September 30, 2003 compared to the 2002 period.
Melted product sales increased 48% from $28.0 million during the nine
months ended September 30, 2002 to $41.3 million during the nine months ended
September 30, 2003 primarily due to an 85% increase in melted product sales
volume, partially offset by a 20% decrease in melted product average selling
prices. The increase in melted product sales was a result of new customer
relationships, share gains and changes in product mix. Excluding the effects of
changes in product mix, melted product selling prices decreased 15% during the
nine months ended September 30, 2003 compared to the 2002 period.
Net sales during the nine months ended September 30, 2003 were also reduced
by the $6.8 million one-time charge related to the termination of the
Wyman-Gordon agreement.
Gross margin was 2% during the nine months ended September 30, 2003,
compared to 1% during the year-ago period. The improvement in gross margin was
primarily a result of the Company's continued cost reduction efforts and
favorable raw material mix. Additionally, the Company currently expects a
reduction in its LIFO inventory reserve at the end of 2003 as compared to the
end of 2002. As a result, the Company reduced cost of sales by $4.5 million in
the nine months ended September 30, 2003 in anticipation of this reduction. This
compared with an increase in the Company's LIFO inventory reserve at September
30, 2002 compared to the end of 2001, for which the Company increased cost of
sales by $7.0 million in the nine months ended September 30, 2002. Gross margin
during the nine months ended September 30, 2003 was also positively impacted by
the $1.7 million reduction in cost of sales during the third quarter of 2003
related to the Company's revision of its estimate of probable loss associated
with the tungsten inclusion matter. See Note 14 to the Consolidated Financial
Statements. Gross margin during the nine months ended September 30, 2003 was
adversely impacted by the $6.8 million reduction in sales relating to the
termination of the Wyman-Gordon agreement.
Selling, general, administrative and development expenses decreased by 14%
from $32.5 million during the nine months ended September 30, 2002 to $28.0
million during the nine months ended September 30, 2003, principally as a result
of lower personnel and travel costs, as well as focused cost control in other
administrative areas.
Equity in earnings of joint ventures decreased from $1.7 million during the
nine months ended September 30, 2002 to $0.3 million during the nine months
ended September 30, 2003, principally due to a decrease in earnings of VALTIMET.
- 23 -
Net other income (expense) increased by 2% from $13.2 million during the
nine months ended September 30, 2002 to $13.5 million during the nine months
ended September 30, 2003, principally due to an increase in the amount of income
the Company recognized under the take-or-pay provisions of its agreement with
Boeing and a $0.5 million first quarter 2003 gain from the Company's settlement
of certain litigation relating to power outages suffered at its Henderson,
Nevada facility in 1997 and 1998 as a result of contractor activity.
Non-operating income (expense).
Three months ended Nine months ended
September 30, September 30,
-------------------------------- -------------------------------
2003 2002 2003 2002
-------------- -------------- -------------- --------------
(In thousands) (In thousands)
Interest income $ 74 $ 16 $ 255 $ 105
SMC impairment charge - - - (27,500)
Foreign exchange gain (loss) 240 50 (647) (292)
Interest expense (328) (915) (1,504) (2,388)
Surety bond guarantee (50) (918) (50) (918)
Other income (expense), net (380) 6 (462) (598)
-------------- -------------- -------------- --------------
$ (444) $ (1,761) $ (2,408) $ (31,591)
============== ============== ============== ==============
In March 2002, SMC and its U.S. subsidiaries filed a voluntary petition 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 an additional $27.5 million
impairment charge during the first quarter of 2002 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 the SMC securities to
zero. Under the terms of SMC's Second Amended Joint Plan of Reorganization,
which was confirmed by the Bankruptcy Court on September 29, 2003, the Company
currently believes that it will not recover any material amount from this
investment.
TIMET is the primary obligor on two $1.5 million workers' compensation
bonds issued on behalf of Freedom Forge, which TIMET sold in 1989. Freedom Forge
filed for Chapter 11 bankruptcy protection on July 13, 2001, and discontinued
payment on the underlying workers' compensation claims in November 2001. During
2002, TIMET received notices that the issuers of the bonds were required to make
payments on one of the bonds with respect to certain of these claims and were
requesting reimbursement from TIMET. Based upon loss projections, the Company
accrued $0.9 million in the third quarter of 2002 for this bond as other
non-operating expense. During 2003, TIMET received notice that certain claimants
had submitted claims under the second bond. As of September 30, 2003, payments
under the second bond have been immaterial, however the Company expects to make
additional payments in the future. Accordingly, the Company accrued $50,000 for
this bond as other non-operating expense in the third quarter of 2003. See Note
14 to the Consolidated Financial Statements.
- 24 -
Income taxes. The Company operates in several tax jurisdictions and is
subject to varying income tax rates. As a result, the geographic mix of pretax
income or loss can impact the Company's overall effective tax rate. For the
three and nine months ended September 30, 2003 and 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 those
periods. See Note 13 to the Consolidated Financial Statements. The Company's
current tax expense during the three and nine months ended September 30, 2003
and 2002 relates primarily to its operations in France and Italy.
Minority interest. Dividend expense related to the Company's 6.625% BUCS
approximates $3.3 million per quarter and is reported in the Consolidated
Statement of Operations as minority interest. As previously reported in the 2002
Annual Report, no income tax benefit is currently associated with this expense.
In October 2002, the Company exercised its right to defer future dividend
payments on these securities effective with the Company's December 1, 2002
scheduled dividend payment. Dividends continue to accrue at the coupon rate on
the principal and unpaid dividends. The Company will consider resuming payment
of dividends on the BUCS once the outlook for the Company's business improves
substantially. See Note 11 to the Consolidated Financial Statements.
Cumulative effect of change in accounting principles. On January 1, 2003,
the Company adopted SFAS No. 143, Accounting for Asset Retirement Obligations,
and recognized (i) an asset retirement cost capitalized as an increase to the
carrying value of its property, plant and equipment of approximately $0.2
million, (ii) accumulated depreciation on such capitalized cost of approximately
$0.1 million and (iii) a liability for the asset retirement obligation of
approximately $0.3 million. The asset retirement obligation recognized relates
primarily to landfill closure and leasehold restoration costs.
On January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other
Intangible Assets, and recorded a non-cash goodwill impairment charge of $44.3
million, representing the entire balance of the Company's recorded goodwill at
January 1, 2002.
See further discussion regarding the Company's adoption of these accounting
principles in Notes 1 and 6 to the Consolidated Financial Statements.
European operations. The Company has substantial operations and assets
located in Europe, principally the United Kingdom, with smaller operations in
France and Italy. Titanium is sold worldwide, and many factors influencing the
Company's U.S. and European operations are similar. Approximately 42% of the
Company's sales originated in Europe for the nine months ended September 30,
2003, of which approximately 63% were denominated in the British pound sterling
or 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, and the European subsidiaries 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 are not subject to currency exchange rate fluctuations.
- 25 -
The Company does not use currency contracts to hedge its currency
exposures. The Company's results of operations included net currency transaction
losses of $0.6 million during the nine months ended September 30, 2003 and $0.3
million during the nine months ended September 30, 2002. At September 30, 2003,
consolidated assets and liabilities denominated in currencies other than
functional currencies were approximately $28.4 million and $41.8 million,
respectively, consisting primarily of U.S. dollar cash, accounts receivable,
accounts payable and borrowings.
Supplemental information. The Company completed a reverse split of its
common stock (one share of post-split common stock for each outstanding ten
shares of pre-split common stock) effective after the close of trading on
February 14, 2003. All share and per share disclosures for all periods presented
in MD&A have been adjusted to give effect to the reverse stock split.
The Company's U.K. hourly workforce and a substantial portion of its U.K.
salaried workforce are covered by collective bargaining agreements that are
re-negotiated annually on a calendar-year basis. Negotiations continue relative
to the 2003 agreements. While the Company currently expects such negotiations to
be finalized during the fourth quarter of 2003, it is possible that there could
be work stoppages or other labor disruptions prior to finalization of these
agreements that could adversely affect the Company's business, results of
operations, financial position and liquidity.
Outlook. The Outlook section contains a number of forward-looking
statements, all of which are based on current expectations and exclude the
effect of potential future charges related to restructurings, asset impairments,
valuation allowances, changes in accounting principles and similar items, unless
otherwise noted. Undue reliance should not be placed on these statements, as
more fully discussed in the "Forward-Looking Information" statement of this
Quarterly Report. Actual results may differ materially. See also Notes to the
Consolidated Financial Statements regarding commitments, contingencies, legal
matters, environmental matters and other matters, including new accounting
principles, which could materially affect the Company's future business, results
of operations, financial position and liquidity.
Although the commercial airline industry continues to face significant
challenges, recent economic data have shown signs of an improving business
environment in that sector. Airline passenger traffic in the U.S. and Europe has
benefited from, among other things, the limited duration of the war in Iraq and
the containment of the Severe Acute Respiratory Syndrome (SARS). However,
traffic continues to remain below pre-September 11, 2001 levels. In June 2003,
The Airline Monitor, a leading aerospace publication, forecasted that the major
U.S. airlines' losses would decrease to $6.3 billion in 2003 and $3.0 billion in
2004, after posting $11.2 billion in losses in 2002. Since that time, several
U.S.-based commercial airlines have reported positive third quarter operating
results or have similarly indicated expectations of improved results in the last
half of 2003.
TIMET expects sales for the full year 2003 to approximate $375 million to
$385 million. Mill product sales volume for the full year 2003 is expected to
approximate 8,700 metric tons, reflecting a 2% decrease compared to 2002 levels.
Melted product sales volume for the full year 2003 is expected to approximate
4,350 metric tons, reflecting an 81% increase over 2002 levels. The increase in
melted product sales volume is due in part to new customer relationships, share
gains at certain customers, increased military aerospace business and, to a
lesser extent, a shift in purchasing preference by certain customers in favor of
ingot and away from wrought products.
- 26 -
The Company's backlog of unfilled orders was approximately $160 million at
September 30, 2003, up from $140 million at June 30, 2003, but down slightly
from $165 million at September 30, 2002. Substantially all the September 30,
2003 backlog is scheduled to ship within the next 12 months. However, the
Company's order backlog may not be a reliable indicator of future business
activity.
The Company's cost of sales is affected by a number of factors including,
among others, customer and product mix, material yields, plant operating rates,
raw material costs, labor and energy costs. Raw material costs represent the
largest portion of the Company's manufacturing cost structure. The Company
expects to manufacture a significant portion of its titanium sponge requirements
during the next several quarters and purchase the balance. The Company expects
the aggregate cost of purchased sponge to remain relatively stable through the
remainder of 2003. The Company is experiencing higher prices for certain types
of scrap, but it has somewhat mitigated those increased costs by utilizing other
cheaper raw material inputs. In addition, the Company recently announced an
increase in prices on all non-contract titanium mill and melted products in an
effort to offset increased raw material and energy costs. Overall capacity
utilization should average approximately 54% in 2003; however, practical
capacity utilization measures can vary significantly based on product mix. The
Company has implemented a number of actions to reduce manufacturing costs,
including seeking supplier price concessions and implementing stringent spending
controls and programs to improve manufacturing yields. The combination of these
efforts have improved gross margins, and the Company continues to expect its
gross margin to be about 2% for the full year 2003.
Selling, general, administrative and development expenses for 2003 should
approximate $37 million. Interest expense in 2003 should approximate $2 million.
Minority interest on the Company's BUCS in 2003 should approximate $14 million,
including additional interest costs related to the deferral of the related
dividend payments.
The Company currently anticipates Boeing will purchase about 1.4 million
pounds of product from the Company in 2003. At this projected order level, the
Company expects to recognize about $23 million of income under the Boeing LTA's
take-or-pay provisions in 2003, which is $1 million lower than previously
anticipated. Any such earnings will be reported as operating income, but will
not be included in sales revenue, sales volume or gross margin.
The Company now expects its operating loss in 2003 to range from breakeven
to a $5 million loss and its net loss in 2003 to range from $20 million to $25
million, which reflects a $5 million to $10 million improvement from previously
reported expectations.
The Company continues to expect to generate $40 million to $50 million in
cash flow from operations during 2003. Capital expenditures in 2003 are expected
to approximate $11 million, principally covering capital maintenance, safety and
environmental programs. Depreciation and amortization should approximate $37
million in 2003.
- 27 -
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated cash flows provided (used) by operating,
investing and financing activities are presented below. The following discussion
should be read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto.
Nine months ended September 30,
--------------------------------------------
2003 2002
--------------------- -----------------
(In thousands)
Cash provided (used) by:
Operating activities $ 50,605 $ (18,650)
Investing activities (5,948) (4,765)
Financing activities (21,121) 4,150
--------------------- -----------------
Net cash provided (used) by operating,
investing and financing activities $ 23,536 $ (19,265)
===================== =================
Operating activities. The titanium industry historically has derived a
substantial portion of its business from the aerospace industry. The aerospace
industry is cyclical, and changes in economic conditions within the aerospace
industry significantly impact the Company's earnings and operating cash flows.
Cash flow from operations is considered a primary source of the Company's
liquidity. Changes in titanium pricing, production volume and customer demand,
among other things, could significantly affect the Company's liquidity.
Certain items included in the determination of net income (loss) have an
impact on cash flows from operating activities, but the impact of such items on
cash may differ from their impact on net income. For example, pension expense
and OPEB expense will generally differ from the outflows of cash for payment of
such benefits. In addition, relative changes in assets and liabilities generally
result from the timing of production, sales and purchases. Such relative changes
can significantly impact the comparability of cash flow from operations from
period to period, as the income statement impact of such items may occur in a
different period than that in which the underlying cash transaction occurs. For
example, raw materials may be purchased in one period, but the cash payment for
such raw materials may occur in a subsequent period. Similarly, inventory may be
sold in one period, but the cash collection of the receivable may occur in a
subsequent period.
Net loss decreased from $101.9 million for the nine months ended September
30, 2002, to $22.9 million for the nine months ended September 30, 2003. See
"Results of Operations - Cumulative effect of change in accounting principles"
and Note 6 to the Consolidated Financial Statements for discussion of the
Company's adoption of SFAS No. 142 and the related effect on net loss for the
nine months ended September 30, 2002. See "Results of Operations - Non-operating
income (expense), net" and Note 4 to the Consolidated Financial Statements for
discussion of the Company's impairment of its investment in SMC securities and
its affect on net loss for the period ended September 30, 2002.
Accounts receivable was relatively unchanged during the first nine months
of 2003. Accounts receivable decreased during the first nine months of 2002
primarily as a result of decreased sales, partially offset by an increase in
days sales outstanding.
- 28 -
Inventories decreased during the first nine months of 2003 as a result of
higher melted product sales volumes during the first nine months of 2003 and the
Company's focus on inventory reduction. The Company expects inventory levels to
decline further during the fourth quarter of 2003, although at a slower pace.
Inventories increased in the first nine months of 2002 as a result of production
begun by the Company prior to certain customer cancellations and push-outs
related to the downturn in the commercial aerospace market, the timing of
certain raw materials purchases and the accelerated production of certain orders
as part of the Company's contingency planning for a possible labor disruption at
the Company's Toronto plant.
Prepaid expenses and other assets increased during the first nine months of
2003 primarily due to an increase in advance payments made by the Company for
property and equipment yet to be received. Prepaid expenses and other assets
decreased during the first nine months of 2002 primarily due to the receipt of
raw materials and property and equipment for which the Company had made advance
payments during 2001.
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. In addition, the Company accrued $4.8 million
in the third quarter of 2003 for future installments due to Wyman-Gordon
relative to the previously discussed termination of the purchase and sale
agreement.
Under the terms of the amended Boeing LTA, in years 2002 through 2007,
Boeing advances TIMET $28.5 million annually, less $3.80 per pound of titanium
product purchased from TIMET by Boeing subcontractors during the preceding year.
The increase in customer advances during the first nine months of 2003 primarily
reflects the Company's receipt in January 2003 of a $27.7 million advance from
Boeing, partially offset by the application of customer purchases and the
recognition of $12.9 million of Boeing-related take-or-pay income though
September 30, 2003. The 2002 advance of $28.5 million was received in December
2001. Consequently, customer advances decreased during the first nine months of
2002 as a result of the application of customer purchases and the recognition of
$12.7 million of Boeing-related take-or-pay income though September 30, 2002.
The Company currently estimates that the reduction against the 2004 advance from
Boeing for subcontractor purchases during 2003 will be less than $1 million. See
also Note 9 to the Consolidated Financial Statements.
In October 2002, the Company exercised its right to defer future dividend
payments on its BUCS for a period of up to 20 consecutive quarters, effective
beginning with the Company's December 1, 2002 scheduled dividend payment.
Dividends continue to accrue at the coupon rate on the principal and unpaid
dividends and are reflected as long-term liabilities in the Consolidated Balance
Sheet. The Company will consider resuming payment of dividends on the BUCS once
the outlook for the Company's business improves substantially. Since the Company
exercised its right to defer dividend payments, it is unable under the terms of
these securities, among other things, to pay dividends on or reacquire its
capital stock during the deferral period. However, the Company is permitted to
reacquire the BUCS during the deferral period provided the Company has satisfied
certain conditions under its U.S. credit facility, including maintenance of the
Company's excess availability above $25 million before and after such
reacquisition.
Investing activities. The Company's capital expenditures were $6.0 million
for the nine months ended September 30, 2003, compared to $4.8 million for the
same period in 2002, principally for capital maintenance and safety and
environmental projects.
- 29 -
Financing activities. Cash used during the nine months ended September 30,
2003 was due primarily to the Company's $18.5 million of net repayments on its
outstanding borrowings upon the Company's receipt of the $27.7 million Boeing
advance in January 2003. Cash provided during the nine months ended September
30, 2002 was due primarily to $5.7 million of net borrowings necessary to
fulfill the Company's working capital needs. TIMET Savoie also made dividend
payments to CEZUS of $1.9 million and $1.1 million during the second quarter of
2003 and 2002, respectively.
Borrowing arrangements. Under the terms of the Company's U.S. asset-based
revolving credit agreement, which matures in February 2006, borrowings are
limited to the lesser of $105 million or a formula-determined borrowing base
derived from the value of accounts receivable, inventory and equipment
("borrowing availability"). This facility requires the Company's U.S. daily cash
receipts to be used to reduce outstanding borrowings, which may then be
reborrowed subject to the terms of the agreement. Interest generally accrues at
rates that vary from LIBOR plus 2% to LIBOR plus 2.5%. Borrowings are
collateralized by substantially all of the Company's U.S. assets. The credit
agreement prohibits the payment of dividends on TIMET's BUCS if "excess
availability," as defined, is less than $25 million, limits additional
indebtedness, prohibits the payment of dividends on the Company's common stock
if excess availability is less than $40 million, requires compliance with
certain financial covenants and contains other covenants customary in lending
transactions of this type. The Company was in compliance in all material
respects with all covenants for the nine months ended September 30, 2003 and for
all periods during the year ended December 31, 2002. Excess availability is
defined as borrowing availability less outstanding borrowings and certain
contractual commitments such as letters of credit. At September 30, 2003, excess
availability was approximately $78 million.
The Company's subsidiary, TIMET UK, has a credit agreement that provides
for borrowings limited to the lesser of (pound)22.5 million or a
formula-determined borrowing base derived from the value of accounts receivable,
inventory and equipment ("borrowing availability"). The credit agreement
includes a revolving and term loan facility and an overdraft facility (the "U.K.
facilities") and matures in December 2005. Borrowings under the U.K. facilities
can be in various currencies including U.S. dollars, British pounds sterling and
euros; accrue interest at rates that vary from LIBOR plus 1% to LIBOR plus
1.25%; and are collateralized by substantially all of TIMET UK's assets. The
U.K. facilities require the maintenance of certain financial ratios and amounts
and other covenants customary in lending transactions of this type. TIMET UK was
in compliance in all material respects with all covenants for the nine months
ended September 30, 2003 and for all periods during the year ended December 31,
2002. The U.K. overdraft facility is subject to annual review in December of
each year. In the event the overdraft facility is not renewed, the Company
believes it could refinance any outstanding overdraft borrowings under either
the revolving or term loan features of the U.K. facilities. During the second
quarter of 2003, TIMET UK received an interest-bearing intercompany loan from a
U.S. subsidiary of the Company enabling TIMET UK to reduce its long-term
borrowings under the U.K. facilities to zero. Unused borrowing availability at
September 30, 2003 under the U.K. facilities was approximately $37 million.
The Company also has overdraft and other credit facilities at certain of
its other European subsidiaries. These facilities accrue interest at various
rates and are payable on demand. Unused borrowing availability at September 30,
2003 under these facilities was approximately $18 million.
- 30 -
Legal and environmental matters. See Note 14 to the Consolidated Financial
Statements for discussion of legal and environmental matters, commitments and
contingencies.
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, or 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 common stock or BUCS, 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.
Non-GAAP financial measures
In an effort to provide investors with information in addition to the
Company's results as determined by accounting principles generally accepted in
the United States of America ("GAAP"), the Company has provided the following
non-GAAP financial disclosures that it believes may provide useful information
to investors:
o The Company discloses percentage changes in its mill and melted
product selling prices in U.S. dollars, which have been adjusted to
exclude the effects of changes in product mix. The Company believes
such disclosure provides useful information to investors, allowing
them to analyze such changes without the impact of changes in product
mix, thereby facilitating period-to-period comparisons of the relative
changes in average selling prices. Depending on the composition of
changes in product mix, the percentage change in selling prices
excluding the effect of changes in product mix can be higher or lower
than such percentage change would be using the actual product mix
prevailing during the respective periods; and
o In addition to disclosing percentage changes in its mill product
selling prices adjusted to exclude the effects of changes in product
mix, the Company also discloses such percentage changes in billing
currencies, which have been further adjusted to exclude the effects of
changes in foreign currency exchange rates. The Company believes such
disclosure provides useful information to investors, allowing them to
analyze such changes without the impact of changes in foreign currency
exchange rates, thereby facilitating period-to-period comparisons of
the relative changes in average selling prices in the actual various
billing currencies. Generally, when the U.S. dollar strengthens
(weakens) against other currencies, the percentage change in selling
prices in billing currencies will be higher (lower) than such
percentage changes would be using actual exchange rates prevailing
during the respective periods.
- 31 -
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For a discussion of the Company's market risks, refer to the Item 7A,
"Quantitative and Qualitative Disclosures About Market Risk," in the 2002 Annual
Report. There have been no material changes to the information provided that
would require additional information with respect to the nine months ended
September 30, 2003.
Item 4. CONTROLS AND PROCEDURES
The Company maintains a system of disclosure controls and procedures. The
term "disclosure controls and procedures," as defined by regulations of the SEC,
means controls and other procedures of the Company that are designed to ensure
that information required to be disclosed in the reports that the Company files
or submits to the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), is recorded, processed, summarized and reported, within the
time periods specified in the SEC's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by the Company in the reports
that it files or submits to the SEC under the Exchange Act is accumulated and
communicated to the Company's management, including its principal executive
officer and its principal financial officer, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure. Both J. Landis Martin, the Company's Chief Executive Officer, and
Bruce P. Inglis, the Company's Vice President - Finance and Corporate
Controller, have evaluated the Company's disclosure controls and procedures as
of September 30, 2003. Based upon their evaluation, these executive officers
have concluded that the Company's disclosure controls and procedures are
effective as of the date of such evaluation.
The Company also maintains a system of internal controls over financial
reporting. The term "internal control over financial reporting," as defined by
regulations of the SEC, means a process designed by, or under the supervision
of, the Company's principal executive and principal financial officers, or
persons performing similar functions, and effected by the Company's board of
directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP, and includes
those policies and procedures that:
o Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the
assets of the Company;
o Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with GAAP, and that receipts and expenditures of the Company are being
made only in accordance with authorizations of management and
directors of the Company; and
o Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Company's
assets that could have a material effect on the Company's consolidated
financial statements.
There has been no change to the Company's system of internal control over
financial reporting during the quarter ended September 30, 2003 that has
materially affected, or is reasonably likely to materially affect, the Company's
system of internal controls over financial reporting.
- 32 -
PART II. - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Reference is made to Note 14 of the Consolidated Financial Statements,
which information is incorporated herein by reference, and to the Company's
Quarterly Report for the period ended June 30, 2003 and the 2002 Annual Report
for descriptions of certain previously reported legal proceedings.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Termination Agreement by and between Wyman-Gordon Company and
Titanium Metals Corporation effective as of September 28, 2003.
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
Note:The Company has retained a signed original of any exhibit listed
above that contains signatures, and the Company will provide any
such exhibit to the SEC or its staff upon request.
(b) Reports on Form 8-K filed by the registrant for the quarter ended
September 30, 2003 and through November 4, 2003:
Date of Report Items Reported
---------------------- --------------------
July 3, 2003 5 and 7
July 7, 2003 5 and 7
July 25, 2003 12 (under 9)
October 6, 2003 5 and 7
October 14, 2003 5 and 7
October 14, 2003 9
October 22, 2003 5 and 7
October 23, 2003 7 and 12
- 33 -
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: November 5, 2003 By /s/ J. Landis Martin
-------------------------------------------------
J. Landis Martin
Chairman of the Board, President and
Chief Executive Officer
Date: November 5, 2003 By /s/ Bruce P. Inglis
-------------------------------------------------
Bruce P. Inglis
Vice President - Finance and Corporate Controller
- 34 -