UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 10, 2004
TITANIUM METALS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-28538 13-5630895
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1999 Broadway, Ste. 4300, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 296-5600
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 7.01 Regulation FD Disclosure.
The registrant hereby furnishes the information set forth in the transcript
of an interview between Registrant's Chairman, President and Chief Executive
Officer and the Wall Street Journal conducted on September 1, 2004 for
publication on or about September 13, 2004, a copy of which is attached hereto
as Exhibit 99.1 and incorporated herein by reference.
The information, including the exhibit, the registrant furnishes in this
report is not deemed "filed" for purposes of section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the liabilities of
that section. Registration statements or other documents filed with the
Securities and Exchange Commission shall not incorporate this information by
reference, except as otherwise expressly stated in such filing.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Item No. Exhibit Index
99.1 Transcript of an interview between Registrant's
Chairman, President and Chief Executive Officer and the
Wall Street Journal conducted on September 1, 2004 for
publication on September 13, 2004.
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 hereunto duly authorized.
TITANIUM METALS CORPORATION
(Registrant)
/s/ Matthew O'Leary
Matthew O'Leary
Corporate Attorney and Assistant Secretary
Date: September 10, 2004
INDEX TO EXHIBITS
Exhibit No. Description
99.1 Transcript of an interview between Registrant's
Chairman, President and Chief Executive Officer and the
Wall Street Journal conducted on September 1, 2004 for
publication on September 13, 2004.
EXHIBIT 99.1
J. LANDIS MARTIN is Chairman & CEO Titanium Metals Corp.
(YAZ615) TWST: Could you begin with a brief overview of Titanium Metals
Corporation?
Mr. Martin: Titanium Metals Corporation, (our trade name is TIMET), is one
of the world's largest producers of titanium metal. The end use of our titanium
is primarily in the commercial and military aerospace market. Titanium is an
essential material for building any type of large aircraft, whether it's
commercial or military, and aerospace sales represent about 65%-70% of our
revenues. The other 30%-35% is made up of sales to industrial markets, military
armor markets, and more specialized uses such as automotive, architecture, oil
and gas, golf clubs, eyeglasses, watches, and medical implants.
TWST: Where does your company get the raw material from and where are your
manufacturing facilities?
Mr. Martin: We get most of our raw material, which is titanium ore, from
Australia, and it's shipped to a U.S. port and then sent by rail to Henderson,
Nevada. Our major U.S. production facilities are located in Henderson, which is
where we make the first pure form of titanium, called "sponge", Morgantown,
Pennsylvania and Toronto, Ohio. In Europe, we have a manufacturing facility near
Swansea in Wales, in Birmingham, England, and in Ugine, France, and we have a
fabrication facility near Milan, Italy. We also have a number of service centers
in the U.S. and overseas that stock material for "just-in-time" deliveries and
also do some fabrication.
TWST: Could you describe the global environment for the commercial airline
industry and compare that to what is happening here in the US airline industry,
where they are going through some financial turmoil?
Mr. Martin: I think worldwide all major airlines have recovered from the
setback after September 11 in terms of the number of revenue passenger miles
(RPMs). As of last November we first started seeing year-over-year RPM figures
above pre- September 11 numbers. In the United States the high cost of fuel,
labor costs including pensions and other issues continue to put a major strain
on the airlines and, as we all know, a number of U.S. carriers are either in
bankruptcy or seriously exploring going into bankruptcy. But we think these
issues in the US will be worked out and these companies will survive as they
are, or will go through bankruptcy, have a large reduction in debt and costs,
and continue to be viable. Americans are going to travel and there's going to be
somebody there to provide them with a seat.
TWST: What are the prospects overall for aircraft delivery as you look
ahead in 2005, 2006?
Mr. Martin: There are a couple of interesting things going on in the
industry as far as purchasing new aircraft, which is where much of our titanium
is destined. The new airlines, the lower-fare airlines, the ones that don't have
collective bargaining agreements and don't have a lot of the old liability
issues that the big carriers have, have found that it's a lot more efficient to
buy new aircraft. Twenty or thirty years ago if you wanted to start a new
airline you usually went out and bought four or five used aircraft and started
from there, and added on first with more used aircraft and later with new
airplanes. Today the startups are mostly buying new airplanes and the reason for
that is that the new airplanes are more efficient than used aircraft from a fuel
standpoint and from a maintenance point of view. So there's been a fairly strong
ongoing demand for airplanes after the falloff caused by September 11, and we
see that continuing. We also think the major airlines throughout the world are
going to continue to add new planes and we see the new aircraft build rate
picking up.
We follow The Airline Monitor, which is a third-party service that predicts
the number of airplanes that will be built over the next several years, and we
think they're as accurate as anybody and at least as accurate as we are. They
see a steady pickup over the next couple of years. We're beginning to see it in
our order book, so we think the outlook is very positive for the next few years
in the aerospace part of our business.
TWST: What about prospects for other aspects of your market?
Mr. Martin: We have a very aggressive plan to expand our markets into
nontraditional uses, including automotive and oil and gas, as well as some
recreational and medical uses. Part of the reason the market is starting to pick
up is these uses are beginning to develop and to become commercially successful.
We plan to continue to support these emerging markets. Even though we expect to
have higher ongoing demand from our aerospace customers, we're certainly not
going to abandon these new markets we worked so hard to develop.
TWST: Would you give us some examples of the new markets that are currently
coming onstream and which ones seem to show the most promise?
Mr. Martin: I think for obvious reasons one new market that all titanium
companies are very involved in is the military armor market. There is work being
done to make armored vehicles lighter so that they can move faster and they can
be transported more easily. That's consuming a fair amount of titanium. Other
markets that are having
some significant success include the automotive market, both the racing market
and the mainstream automotive market. And we continue to see success in other
areas such as, again, recreational, architectural and consumer products, and
whether it's climbing equipment or eyeglasses or watches, there's a steadily
increasing amount of business.
TWST: What is the state of total titanium production, the availability of
ore versus demand?
Mr. Martin: The availability of ore is one of the very good things about
our industry. About 90% of all titanium ore goes into a different industry,
which is the titanium dioxide business, and titanium dioxide is an essential
ingredient in high quality paint and plastics. So that is a much bigger market
than the metals industry. And most of the producers in that industry have
long-term contracts that are negotiated every several years, and as demand
increases, suppliers add additional capacity. We buy from the same producers
that supply that industry, and we've always had a steady supply and don't see
any likelihood of shortages there. However, we produce only about 30% of our
metal needs through our own production of titanium sponge from the titanium ore.
The other 70% of our base metal needs are met by buying scrap worldwide and
buying sponge from producers outside of the United States. With demand picking
up there has been an acceleration in the need for sponge and scrap, and because
the industry was at such a low level in terms of production just six or eight
months ago, the amount of scrap produced has been limited. Some titanium scrap
goes into the steel market, and as a result everybody is seeking to shore up
their raw material supplies for next year, and there are concerns about the cost
of securing those supplies
TWST: What impact is the higher raw material price having in terms of
alloys, etc.?
Mr. Martin: It's having a very substantial impact on us. The cost of almost
everything we buy is going up significantly, and first and foremost is energy.
Secondly, some alloy prices have almost doubled, so we're seeing a real cost
squeeze, and that's something we are trying to deal with.
TWST: Have you been able to pass these cost increases along to your
customers?
Mr. Martin: In some cases yes, in some cases no. We have some long-term
contracts where that's just simply not possible to do in the short-term. Most of
those contracts have constraints on our ability to adjust pricing in the
short-term. In other cases we have been able to pass on some or all of these
costs.
TWST: Do you have competition from abroad?
Mr. Martin: We do; we have substantial competition from many sources,
primarily from a Russian producer, two U.S. companies, and a number of Japanese
producers. It's a very competitive industry.
TWST: Are they all experiencing the pressure from price increases in terms
of energy? Have they also been able to pass these price increases along?
Mr. Martin: In general, yes, every producer is seeing substantial increases
in both energy and other raw material costs, and everyone is attempting to pass
those increased costs along as best they can.
TWST: Are there any instruments for hedging your raw material supply?
Mr. Martin: There is really no organized exchange for titanium, and one of
the reasons for that is that there are so many different alloys of titanium that
go into the various markets. It's also a relatively small market and there has
never been an exchange that trades in titanium futures, so there's really no
practical way to do it, other than through contractual agreements directly with
suppliers.
TWST: Could you share with us your short-term financial outlook and your
long-term goals?
Mr. Martin: We see an improving market, improving profitability, and
long-term we hope to be far less dependent on the aerospace market than we are
today. Emphasizing and supporting new uses for titanium is a core part of our
philosophy.
TWST: What were your revenues when you last reported your earnings and your
net income?
Mr. Martin: During our last quarterly report we had just under $125 million
in revenues, and our earnings were positive at just under $2 million, which is
good.
TWST: Have you given the Street any guidance for future revenue increases,
etc.?
Mr. Martin: In our last quarterly report to the public, we advised that we
expected sales to range from $490 million to $510 million in 2004, with net
income between $8 million and $18 million, which includes an estimated $23
million of income under a take-or-pay contract with Boeing. These figures
exclude any impact from a one-time non-cash gain that we will report from the
exchange of subordinated debt into Series A Preferred stock that occurred at the
end of August, or a non-operating gain from a potential sale of certain real
property in Henderson, Nevada, or the possible reversal of a portion of the
deferred tax asset valuation allowance.
TWST: Do you have the management team in place to accomplish your goals?
Mr. Martin: We have a strong management team. Our Chief Operating Officer
here in the United States is Bob Musgraves, and Christian Leonhard is our Chief
Operating Officer in Europe, and they're both doing a very good job.
TWST: What occupies most of your time on a day-to-day basis?
Mr. Martin: Continuing to become more efficient, reducing our cost of
production, and focusing on the development of the new markets.
TWST: Are you contemplating any further manufacturing facilities in the
United States?
Mr. Martin: No, we're not considering that.
TWST: At what level are you operating at this point?
Mr. Martin: Our operating rate on average for most of our plants was
between 72% and 75% the last time we reported it.
TWST: So if a pickup in demand does materialize, there is plenty of excess
capacity for you to utilize your current plants.
Mr. Martin: There is. We still have an issue of making sure we can produce
or purchase enough sponge and scrap in order to keep our plants busy and to
increase the operating rate, so that's really the thing that's going to make the
difference.
TWST: Would you consider that a challenge that you face?
Mr. Martin: Yes.
TWST: What would be the solution to that challenge?
Mr. Martin: Again, there is plenty of titanium ore available, so eventually
you will see an expansion of sponge facilities throughout the world. And as the
aerospace market picks up, there will be more scrap becoming available to the
industry than there has been for some time.
TWST: How does the balance sheet look to you?
Mr. Martin: Our balance sheet is very strong. We have very little debt and
a lot of debt capacity, and we're in good shape from a balance sheet point of
view.
TWST: Does your company have a dividend policy?
Mr. Martin: At this time we're not paying a dividend on our common stock
and that's something that the board decides. That's really a board issue.
TWST: What's your view on how your company is perceived in the financial
market?
Mr. Martin: We're a small company, so it's difficult to get coverage and
very few analysts follow us. So although over the last year and a half or two
years our stock has gone up dramatically, maybe 10 times, we still are a small
company and it's tough to get coverage.
TWST: Are there any sellside analysts that follow you at all?
Mr. Martin: I don't think so, no.
TWST: Are there any programs in place to make your company better
understood and to get better exposure?
Mr. Martin: We handle that internally and I think our Vice President of
Finance and marketing team are doing a good job and continue to pursue leads in
that area.
TWST: What would be the three main reasons you would outline to investors
to continue to buy shares in your company at this level?
Mr. Martin: First, we think we're going to see earnings growth in the
ensuing quarters for some time to come. Second, we think that we have made a lot
of progress in the last several years in reducing our base cost of operation, so
in an up market our profitability should be more significant. Third, this is an
important segment of the economy and it's a small market, but titanium is
essential for many end uses. And if an investor is going to be investing in the
economy, this is a good company to invest in.
TWST: Thank you. (WT)
J. LANDIS MARTIN
Chairman & CEO
Titanium Metals Corp.
1999 Broadway, Suite 4300
Denver, CO 80202
(303) 296-5600
(303) 296-5650 - FAX
www.timet.com