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 quarter ended September 30, 1997
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
(Exact name of registrant as specified
in its charter)
Delaware 13-5630895
(State or other (IRS Employer
jurisdiction of Identification
incorporation or No.)
organization)
1999 Broadway, Suite 4300, Denver, Colorado
80202
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including (303) 296-
area code: 5600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Number of shares of common stock outstanding on October 31, 1997: 31,456,655
FORWARD - LOOKING INFORMATION
The statements contained in this Report on Form 10-Q ("Quarterly Report")
which are not historical facts, including, but not limited to, statements found
in the Notes to Consolidated Financial Statements and under the captions
"Results of Operations" and "Liquidity and Capital Resources," (both contained
in Management's Discussion and Analysis of Financial Condition and Results of
Operations), are forward-looking statements or discussions of trends which by
their nature involve substantial risks and uncertainties that could
significantly impact expected results. Actual results could differ materially
from those described in such forward-looking statements. Among the factors that
could cause actual results to differ materially are the risks and uncertainties
discussed in this Quarterly Report, including in the portions referenced above
and those described from time to time in the Company's other filings with the
Securities and Exchange Commission, such as the cyclicality of the Company's
business and its dependence on the aerospace industry, the sensitivity of the
Company's business to global industry capacity, global economic conditions,
changes in product pricing, the possibility of labor disruptions, control by
certain stockholders and possible conflicts of interest, potential difficulties
in integrating acquisitions, uncertainties associated with new product
development and the supply of raw materials and services.
TITANIUM METALS CORPORATION
INDEX
Page
number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - December 31, 1996 and
September 30, 1997 2-3
Consolidated Statements of Income - Three months and
nine months ended September 30, 1996 and 1997 4
Consolidated Statement of Stockholders' Equity - Nine
months ended September 30, 1997 5
Consolidated Statements of Cash Flows - Nine months
ended September 30, 1996 and 1997 6-7
Notes to Consolidated Financial Statements 8-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 12-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 16
Item 6. Exhibits and Reports on Form 8-K. 16
TITANIUM METALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, SEPTEMBER 30,
ASSETS 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 86,526 $ 68,789
Receivables, net 114,100 136,671
Receivable from related parties 1,676 7,417
Inventories 155,488 168,850
Prepaid expenses and other 12,510 14,670
Deferred income taxes 718 4,240
Total current assets 371,018 400,637
Other assets:
Investments in joint ventures 270 22,969
Goodwill 67,430 60,590
Other intangible assets 19,314 17,529
Deferred income taxes 11,618 3,631
Other 13,799 14,743
Total other assets 112,431 119,462
Property and equipment:
Land 6,129 5,814
Buildings 32,929 26,762
Equipment 207,046 223,409
Construction in progress 17,513 29,459
263,617 285,444
Less accumulated depreciation 44,048 50,837
Net property and equipment 219,569 234,607
$703,018 $754,706
</TABLE>
TITANIUM METALS CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' December 31, SEPTEMBER 30,
EQUITY 1996 1997
<S> <C> <C>
Current liabilities:
Notes payable $ 7,992 $ 5,439
Current maturities of long-term debt 397 784
Accounts payable 49,628 52,188
Accrued liabilities 46,173 42,700
Payable to related parties 1,649 29
Income taxes 6,638 16,050
Deferred income taxes 348 90
Total current liabilities 112,825 117,280
Noncurrent liabilities:
Long-term debt 1,158 1,508
Capital lease obligations 11,562 10,633
Payable to related parties 996 842
Accrued OPEB cost 27,512 26,722
Accrued pension cost 2,743 353
Deferred income taxes 10,629 8,218
Other 3,920 2,694
Total noncurrent liabilities 58,520 50,970
Minority interest - Company-obligated
mandatorily redeemable preferred securities
of subsidiary trust holding solely
subordinated debt securities 201,250 201,250
Other minority interest 4,207 5,828
Stockholders' equity:
Common stock 315 315
Additional paid-in capital 346,133 346,557
Retained earnings (deficit) (25,009) 32,413
Currency translation adjustment 5,635 951
Pension liabilities adjustment (858) (858)
Total stockholders' equity 326,216 379,378
$703,018 $754,706
</TABLE>
[FN]Commitments and contingencies (Note 1)
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1997 1996 1997
<S> <C> <C> <C> <C>
Revenues and other income:
Net sales $123,435 $177,177 $349,825 $525,606
Other, net 2,311 457 6,593 3,025
125,746 177,634 356,418 528,631
Costs and expenses:
Cost of sales 100,922 132,747 294,153 401,153
Selling, general, administrative
and development 6,459 10,076 18,614 30,904
Special charges 380 - 4,688 -
Interest 414 870 7,266 1,955
108,175 143,693 324,721 434,012
Income before income taxes
and minority interest 17,571 33,941 31,697 94,619
Income tax expense 4,261 9,880 7,791 28,846
Minority interest - Convertible
Preferred Securities - 2,214 - 6,627
Other minority interest 22 511 433 1,724
Net income $ 13,288 $ 21,336 $ 23,473 $ 57,422
Fully diluted net income $ 13,288 $ 23,550 $ 23,473 $ 64,049
Net income per common share $ .42 .68 $ .89 1.83
Fully diluted earnings per share .42 .64 .89 1.73
Weighted average shares
outstanding:
Common shares 31,469 31,457 26,346 31,457
Fully diluted shares 31,533 37,078 26,370 36,988
</TABLE>
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Nine months ended September 30, 1997
(In thousands)
<TABLE>
<CAPTION>
Additional
Common Common paid-in
shares stock capital
<S> <C> <C> <C>
Balance December 31, 1996 31,455 $315 $346,133
Net income - - -
Adjustments, net - - -
Other, net 2 - 424
Balance September 30, 1997 31,457 $315 $346,557
</TABLE>
<TABLE>
<CAPTION>
Retained Adjustments
earnings Currency Pension
(deficit) translation liabilities Total
<C> <C> <C> <C>
$(25,009) $5,635 $ (858) $326,216
57,422 - - 57,422
- (4,684) - (4,684)
- - - 424
$ 32,413 $ 951 $(858) $379,378
</TABLE>
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1996 and 1997
(In thousands)
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 23,473 $ 57,422
Depreciation and amortization 12,580 21,312
Joint ventures, net of distributions (5,814) 891
Special charges 4,688 -
Deferred income taxes - 2,307
Other minority interest 433 1,725
Other, net (812) 229
34,468 83,886
Change in assets and liabilities, net of
acquisitions:
Receivables (33,320) (24,731)
Inventories (16,460) (16,425)
Prepaid expenses (3,922) 2,605
Accounts payable and accrued liabilities 17,610 (1,504)
Income taxes 5,991 10,376
Accounts with related parties (3,892) (6,587)
Other, net (2,063) (2,543
Net cash provided (used) by operating activities (1,508) 45,077
Cash flows from investing activities:
Capital expenditures (10,836) (40,859)
Business acquisitions (13,135) (476)
Other investments - (11,683)
Other, net 149 102
Net cash used by investing activities (23,822) (52,916)
Cash flows from financing activities:
Indebtedness:
Borrowings 18,248 -
Repayments (83,307) (2,653)
Deferred financing costs - (2,059)
Related party debt repayments (42,505) (929)
Letters of credit collateralized - (4,753)
Proceeds from issuance of common stock, net 131,488 -
Other - 150
Net cash provided (used) by financing activities 23,924 (10,244)
$ (1,406) $(18,083)
</TABLE>
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Nine months ended September 30, 1996 and 1997
(In thousands)
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Net increase (decrease) in cash and equivalents from:
Operating, investing and financing activities $ (1,406) $(18,083)
Cash acquired 3,399 -
Currency translation 203 346
2,196 (17,737)
Cash and equivalents at beginning of period 24 86,526
Cash and equivalents at end of period $ 2,220 $ 68,789
Supplemental disclosures:
Cash paid for:
Interest expense $ 6,689 $ 1,421
Convertible Preferred Securities dividends - 10,148
Income taxes 874 11,973
Business acquisitions:
Cash and equivalents $ 3,399 $ -
Goodwill and other intangibles 16,224 577
Other noncash assets 160,918 3,503
Liabilities (97,406) (3,604)
Common stock issued to IMI (70,000) -
Cash paid $ 13,135 $ 476
Noncash contribution to joint venture,
principally property and equipment $ - $ 11,337
</TABLE>
TITANIUM METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of presentation:
The consolidated balance sheet of Titanium Metals Corporation ("TIMET") and
subsidiaries (collectively, the "Company") at December 31, 1996 has been
condensed from the Company's audited consolidated financial statements at that
date. The consolidated balance sheet at September 30, 1997 and the consolidated
statements of operations, stockholders' equity and cash flows for the interim
periods ended September 30, 1996 and 1997 have been prepared by the Company
without audit. Certain previously reported amounts have been reclassified to
conform to the current presentation. 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 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, 1996 (the "1996 Annual Report").
For information concerning certain legal proceedings and certain
contingencies related to the Company, see (i) Item 2 -- "Management's
Discussion and Analysis of Financial Condition and Results of Operations," (ii)
Part II, Item 1 -- "Legal Proceedings," and (iii) the 1996 Annual Report.
Note 2 - Earnings per share:
Net income per common share is based upon the weighted average number of
common shares outstanding. Fully diluted earnings per share reflects an
immaterial number of dilutive common stock options and the assumed conversion of
the Company-obligated mandatorily redeemable preferred securities of a
subsidiary trust (the "Convertible Preferred Securities").
The Company will retroactively adopt Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share," effective December 31, 1997.
Had SFAS No. 128 been effective during 1996 and the first nine months of 1997,
(i) "Basic earnings per share" under SFAS No. 128 would have approximated
earnings per common share reported by the Company and (ii) "Dilutive earnings
per share" under SFAS No. 128 would have approximated fully diluted earnings per
share reported by the Company.
Note 3 - Business segment information:
The Company's operations are conducted in one business segment, titanium
metals operations. The Company is a vertically integrated producer of titanium
sponge, ingot, slab and mill forged or cast products for aerospace, industrial
and other applications. The Company's production facilities are located
principally in the United States, United Kingdom and France and the Company's
products are sold throughout the world.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1997 1996 1997
(In thousands) (In thousands)
<S> <C> <C>
Net sales $123,435 $177,177 $349,825 $525,606
Operating income $ 17,824 $ 33,310 $ 38,395 $ 92,688
General corporate income, net 161 1,501 568 3,886
Interest expense (414) (870) (7,266) (1,955)
Income before income taxes
and minority interest $ 17,571 $ 33,941 $ 31,697 $ 94,619
</TABLE>
Effective in July 1997, TIMET closed the previously-reported transaction to
combine its welded tubing operations with those of Valinox Welded, a French
manufacturer of welded tubing, principally stainless steel and titanium, with
operations in France and China. The joint venture, "ValTimet", is 46% owned by
TIMET and 54% owned by Valinox Welded and is reported by the Company by the
equity method. TIMET supplies titanium strip product to ValTimet under a long-
term contract as the preferred supplier. Sales to ValTimet in the third quarter
of 1997 were $9.0 million. Current accounts receivable from ValTimet at
September 30, 1997, included in receivables from related parties, were $7.4
million.
Operating income for the three months and nine months ended September 30,
1996 included $.4 million and $4.7 million, respectively, of special charges
resulting from the February 1996 acquisition of the titanium metals business of
IMI plc and related business integration. The special charges included
$3 million of compensation costs and $1.7 million of integration costs relating
to the relocation of personnel and the consolidation of certain facilities.
Note 4 - Business combinations:
As previously reported, the Company completed certain acquisitions during
1996, principally IMI's titanium metals business in February 1996 and the assets
of Axel Johnson Metals ("AJM") in October 1996. On a pro forma basis assuming
the IMI and AJM acquisitions had occurred at the beginning of 1996, (i) net
sales for the third quarter of 1996 were $142.1 million, operating income was
$20.3 million, net income was $13.4 million and net income per share was $.43
and (ii) net sales for the nine months ended September 30, 1996 were $407.1
million, operating income was $39.3 million, net income was $19.1 million and
net income per share was $.68. The pro forma effect of the previously-reported
TISTO (July 1996), TIMET Savoie (August 1996), and LASAB (January 1997)
acquisitions is not material. The above pro forma financial information is not
necessarily indicative of the operating results that might have occurred if the
IMI and AJM acquisitions had actually been completed at the beginning of 1996.
Note 5 - Inventories:
<TABLE>
<CAPTION>
December 31, SEPTEMBER 30,
1996 1997
(In thousands)
<S> <C> <C>
Raw materials $ 22,806 $ 20,158
In process and finished products 125,137 139,510
Supplies 7,545 9,182
$155,488 $168,850
</TABLE>
The average cost of LIFO inventories exceeded the net carrying amount of
such inventories by approximately $32 million at December 31, 1996 and $35
million at September 30, 1997.
Note 6 - Accrued liabilities:
<TABLE>
<CAPTION>
December 31, SEPTEMBER 30,
1996 1997
(In thousands)
<S> <C> <C>
Postretirement benefit costs $ 2,024 $ 2,024
Pension costs 1,507 1,250
Other employee benefits 21,360 22,183
Environmental costs 1,643 1,808
Taxes, other than income 2,292 1,702
Interest 1,304 48
Convertible Preferred Securities - dividends - 1,103
Other 16,043 12,582
$46,173 $42,700
</TABLE>
Note 7 - Notes payable, long-term debt and capital lease obligations:
Notes payable at December 31, 1996 and September 30, 1997 consists of
borrowings under the Company's European bank credit agreements. At September
30, 1997, the Company had approximately $220 million of unused borrowing
availability under its U.S. and European bank credit agreements.
Long-term debt at December 31, 1996 and September 30, 1997 consists
principally of notes payable to former TISTO shareholders. Capital lease
obligations relate principally to production facilities in the United Kingdom
held under long-term leases with IMI.
Note 8 - Income taxes:
The difference between the Company's provision for income tax expense and
the amounts that would be expected using the U.S. federal statutory income tax
rate of 35% is presented below. The valuation allowance reductions in both
periods relate primarily to current utilization of certain tax carryforwards not
previously recognized.
<TABLE>
<CAPTION>
Nine months ended
September 30,
1996 1997
(In thousands)
<S> <C> <C>
Expected income tax expense $11,094 $33,117
Non-U.S. tax rates (124) (414)
Rate change adjustment of
foreign deferred taxes - (365)
Adjustment of deferred tax valuation allowance
related to current year results (4,453) (2,779)
U.S. state income taxes, net 669 598
Other, net 605 (1,311)
Provision for income taxes $ 7,791 $28,846
</TABLE>
Minority interest - Convertible Preferred Securities are stated net of
income tax benefits of $1.2 million in the third quarter and $3.6 million in the
nine-month 1997 period.
Note 9 - Ownership structure:
At September 30, 1997, Tremont Corporation held approximately 30% of
TIMET's outstanding common stock. Contran Corporation and other entities
related to Harold C. Simmons hold an aggregate of approximately 47% of Tremont's
outstanding common stock. Substantially all of Contran's outstanding voting
stock is held by trusts established for the benefit of the children and
grandchildren of Harold C. Simmons, of which Mr. Simmons is the sole trustee.
Mr. Simmons may be deemed to control each of Contran, Tremont and TIMET.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The significant improvement in 1997 earnings compared to last year was
driven by price increases and a 20% increase in mill products volume compared
to the first nine months of 1996. Titanium mill products shipments in the third
quarter were 8.1 million pounds (23.7 million pounds for the 1997 nine-month
period), up from 7.1 million pounds and 19.7 million pounds, respectively, in
the comparable 1996 periods. The Company's operating income margin increased to
18.8% in the third quarter of 1997, significantly above year-ago levels, and up
from 18.1% in the second quarter of 1997. Firm order backlog at September 30,
1997 was approximately $530 million, up from $440 million at year-end 1996.
In August 1997, TIMET announced that it has been selected by Boeing
Commercial Airplane Group to serve as the principal supplier to Boeing of
titanium mill products under a long-term agreement beginning in 1998. Boeing
and its suppliers, as a group, are the largest consumers of titanium in the
world and therefore this new alliance is expected to have a positive impact on
TIMET. This contract, when finalized, is expected to help mitigate the
historical cyclicality of aerospace-related titanium business. The contract
will give Boeing and its suppliers lower cost titanium and shorter lead times
for deliveries, in return for minimum quantities of orders and long term
pricing. The parties expect to execute a definitive agreement during the fourth
quarter and begin the long-term arrangement in 1998.
In the third quarter of 1997, TIMET completed its tubing joint venture,
ValTimet, which is reported by the equity method as an unconsolidated affiliate
(See Note 3 to the Consolidated Financial Statements). As a result, TIMET now
sells intermediate strip product to the joint venture rather than selling
finished tubing, which reduces the Company's average sales price per mill
product pound shipped compared to prior periods. The Company's average price
per mill product pound shipped in the third quarter of 1997 was $15.50
(approximately $16.20 on a basis adjusting for the effect of the ValTimet
transaction so as to be comparable to the second quarter average price of $16.18
and the third quarter 1996 average price of $14.09).
Operating levels at the Company's plants in 1997 were generally higher than
in the comparable 1996 periods and contributed to improved operating results.
However, sales and operating income in the third quarter were negatively
impacted by reduced production levels associated with (i) management decisions
to complete capacity-increasing projects early to help insure the higher demand
levels expected in 1998 are met, (ii) startup of the ValTimet joint venture and
(iii) a fire in September which destroyed a portion of the Oregon castings
facility (substantially all of the damage is covered by insurance). In
addition, operating levels at the Company's other casting facility, which
primarily produced for non-aerospace markets, were well below 1996 levels.
Total worldwide employment at September 30, 1997 approximated 3,000
compared to 2,950 at year-end 1996 and 3,100 one year ago (proforma for the AJM
acquisition). In August 1997, the hourly workers at TIMET's Toronto, Ohio
facility ratified a three-year extension to the existing labor pact that will
now expire in July 2002. The 415 production, maintenance, clerical and
technical workers affected are represented by the United Steelworkers of
America, AFL-CIO-CLC. The extension provides for wage increases over the next
five years, plus modest enhancements in pension benefits and certain one-time
payments. The Union agreed to certain workrule changes allowing for increased
workplace flexibility. The Company agreed to transfer certain work currently
being performed in Morristown, Tennessee to Toronto and to make additional
investments in Toronto under certain circumstances. In addition, TIMET and the
Union agreed to jointly pursue the design and implementation of a gainsharing
program that will allow affected employees to share in the benefits derived from
targeted cost reduction and productivity improvements at the facility.
The Company has substantial operations and assets located in Europe,
principally the United Kingdom. The U.S. dollar value of the Company's foreign
sales and operating costs are subject to currency exchange rate fluctuations
which can impact reported earnings and may affect the comparability of period-
to-period operating results. Approximately one-half of the Company's European
sales are denominated in currencies other than the U.S. dollar, principally
major European currencies. Certain purchases of raw materials, principally
titanium sponge, for the Company's European operations are denominated in U.S.
dollars while labor and other production costs are primarily denominated in
local currencies.
Substantially all interest expense in the 1997 periods and the third
quarter of 1996 relates to capital lease obligations and short-term European
working capital borrowings. Interest in the 1996 nine-month period includes
interest on indebtedness repaid with the proceeds of the Company's June 1996
initial public stock offering.
The Company operates in several tax jurisdictions and is subject to varying
income tax rates. As a result, the geographical mix of pretax income can impact
the Company's effective income tax rate. For financial reporting purposes, the
Company has previously recognized substantially all of its net operating loss
carryforwards, and, accordingly, its effective income tax rate in 1997 is higher
than in 1996. See Note 8 to the Consolidated Financial Statements.
Dividends on the Convertible Preferred Securities, previously reported as
interest expense, are now reported net of tax benefit as minority interest.
This reclassification within the income statement has no effect on net income or
earnings per share.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had $69 million of cash and equivalents
and $220 million of borrowing availability under its U.S. and European bank
credit lines. Indebtedness outstanding consisted primarily of capital lease
obligations related to certain of its European manufacturing facilities and
nominal amounts of European working capital borrowings. The Convertible
Preferred Securities do not require principal amortization and the Company has
the right to defer dividend payments for one or more periods of up to 20
consecutive quarters each.
Operating activities. Reflecting improved operating results, cash
provided by operating activities (before changes in assets and liabilities) was
$84 million in the 1997 nine-month period compared to $34 million in the same
period of 1996. Changes in assets and liabilities used $39 million of cash in
1997, approximately the same as the $36 million used in the first nine months of
1996 despite the higher levels of working capital necessary to support the
higher 1997 production and sales levels. A Company goal is to better manage
working capital such that both "days sales outstanding" in receivables and "days
sales in inventory" improve during 1997 and 1998 over current levels.
Investing activities. The Company estimates capital expeditures for all
of 1997 to be between $55 million and $60 million, including capacity expansion
and a major project to implement integrated information systems throughout the
Company. About 40% of planned capital expenditures in 1997 relate to capacity
expansion projects, the largest of which include a 20 million pound electron
beam furnace in the U.S. and a radial forge press in the U.K., both to be
completed by the second half of 1998. Capital spending related to the business
process/information systems project is currently estimated at over $30 million
during 1997 and 1998, about one-half of which is expected to be incurred in
1997. Certain costs associated with the business process/information systems
project, including training and reengineering, are expensed as incurred.
TIMET's strategy for developing new markets and uses for titanium includes
providing funds to third parties to prove out a new use or uses of titanium.
Other cash investments in the 1997 period include $8 million of cash
contributions in connection with the formation of ValTimet and otherwise consist
principally of the Company's previously-reported investment in Titanium Memory
Systems, Inc.
Financing activities. Debt repayments in 1997 related primarily to
reductions in European working capital borrowings, including amounts due to
TIMET's minority partner in TIMET Savoie. Borrowings in the 1996 period were
primarily to fund working capital needs and capital expenditures prior to
outstanding borrowings being repaid from proceeds of the June 1996 IPO. In July
1997, the Company entered into a new $200 million five-year secured revolving
credit facility with a group of lenders to replace an existing $105 million
secured agreement which was not scheduled to terminate until the end of 1998.
Borrowings under the new agreement, which are secured by substantially all of
the Company's assets, are available for general corporate purposes, including
potential acquisitions. Borrowings under the new facility are initially at a
rate of LIBOR plus 50 basis points. In conjunction with the change in credit
agreements, the Company temporarily cash collateralized approximately $5 million
of outstanding letters of credit. Substantially all of such cash collateral
should be refunded in the fourth quarter.
The Company periodically evaluates its liquidity requirements, capital
needs and availability of resources in view of, among other things, its
alternative uses of capital, its debt service requirements, the cost of debt and
equity capital, and estimated future operating cash flows. As a result of this
process, the Company has in the past and may in the future seek to raise
additional capital, modify its dividend policy, restructure ownership interests,
incur, refinance or restructure indebtedness, repurchase shares of capital
stock, sell assets, or take a combination of such steps or other steps to
increase or manage its liquidity and capital resources. In the normal course of
business, the Company investigates, evaluates and discusses acquisition, joint
venture, strategic relationship and other business combination opportunities in
the titanium, specialty metal and related industries. In the event of any
future acquisition or joint venture opportunities, the Company may consider
using available cash, issuing additional equity securities or incurring
additional indebtedness.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
Reference is made to the Company's 1996 Annual Report for descriptions of
certain previously reported legal proceedings.
In September 1997, the previously reported action, Cadmus v. Titanium
Metals Corporation (No. C2-95-586, U.S. District Court, Southern District of
Ohio), was dismissed without prejudice without payment by the Company.
TIMET Castings, a wholly owned subsidiary of TIMET, has settled the
previously reported action involving Ray Cook Golf Company for an immaterial
sum.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27.1 Financial Data Schedule for the nine-month period ended
September 30, 1997.
(b) Reports on Form 8-K:
Reports on Form 8-K filed by the Registrant for the quarter ended
September 30, 1997 and for the month of October 1997:
July 3, 1997 - Reported Items 5 and 7.
July 21, 1997 - Reported Items 5 and 7.
July 30, 1997 - Reported Items 5 and 7.
August 1, 1997 - Reported Items 5 and 7.
August 25, 1997 - Reported Items 5 and 7.
August 27, 1997 - Reported Items 5 and 7.
October 21, 1997 - Reported Items 5 and 7.
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.
<TABLE>
<CAPTION>
TITANIUM METALS CORPORATION
(Registrant)
<S> <C> <C>
Date: October 31, 1997 By /s/ Joseph S. Compofelice
Joseph S. Compofelice
Vice President and Chief Financial
Officer
By /s/ J. Thomas Montgomery, Jr.
J. Thomas Montgomery, Jr.
Vice President - Finance and Treasurer
(Chief Accounting Officer)
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