<PAGE> 1
FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-18829
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 14, 1997)
4,025,000 BUCS(SM*)
TIMET CAPITAL TRUST I
6 5/8% CONVERTIBLE PREFERRED SECURITIES
BENEFICIAL UNSECURED CONVERTIBLE SECURITIES (BUCS)(SM*)
(LIQUIDATION AMOUNT $50 PER CONVERTIBLE PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY, AND CONVERTIBLE INTO COMMON STOCK
OF,
TITANIUM METALS CORPORATION
5,161,305 SHARES
TITANIUM METALS CORPORATION COMMON STOCK
Set forth in this Prospectus Supplement is the Quarterly Report on Form 10-Q of
Titanium Metals Corporation for the Quarterly Period ended March 31, 1997,
excluding exhibits.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MAY 15, 1997.
<PAGE> 2
================================================================================
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 MARCH 31, 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)
<TABLE>
<C> <C>
DELAWARE 13-5630895
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
</TABLE>
1999 BROADWAY, SUITE 4300, DENVER, COLORADO 80202
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (303) 296-5600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Number of shares of common stock outstanding on April 30, 1997: 31,456,655
================================================================================
<PAGE> 3
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
<TABLE>
<CAPTION>
PAGE
NUMBER
-----------
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -- December 31, 1996 and March
31, 1997............................................... S-3
Consolidated Statements of Operations -- Three months
ended March 31, 1996 and 1997.......................... S-4
Consolidated Statement of Stockholders' Equity -- Three
months ended March 31, 1997............................ S-5
Consolidated Statements of Cash Flows -- Three months
ended March 31, 1996 and 1997.......................... S-6
Notes to Consolidated Financial Statements................ S-7 - S-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. S-11 - S-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... S-13
Item 6. Exhibits and Reports on Form 8-K............................ S-13
</TABLE>
S-2
<PAGE> 4
TITANIUM METALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 86,526 $ 78,496
Receivables, net.......................................... 114,100 135,442
Receivable from related parties........................... 1,676 2,707
Inventories............................................... 155,488 161,803
Prepaid expenses.......................................... 12,510 7,820
Deferred income taxes..................................... 718 1,322
-------- --------
Total current assets............................... 371,018 387,590
-------- --------
Other assets:
Goodwill.................................................. 67,430 62,506
Other intangible assets................................... 19,314 18,703
Deferred income taxes..................................... 11,618 11,044
Other..................................................... 14,069 13,271
-------- --------
Total other assets................................. 112,431 105,524
-------- --------
Property and equipment:
Land...................................................... 6,129 6,094
Buildings................................................. 32,929 32,508
Equipment................................................. 207,046 214,351
Construction in progress.................................. 17,513 24,174
-------- --------
263,617 277,127
Less accumulated depreciation............................. 44,048 49,482
-------- --------
Net property and equipment.............................. 219,569 227,645
-------- --------
$703,018 $720,759
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable............................................. $ 7,992 $ 6,092
Current maturities of long-term debt...................... 397 449
Accounts payable.......................................... 49,628 55,604
Accrued liabilities....................................... 46,173 45,250
Payable to related parties................................ 1,649 --
Income taxes.............................................. 6,638 13,189
Deferred income taxes..................................... 348 --
-------- --------
Total current liabilities.......................... 112,825 120,584
-------- --------
Noncurrent liabilities:
Long-term debt............................................ 1,158 1,072
Capital lease obligations................................. 11,562 11,010
Payable to related parties................................ 996 914
Accrued OPEB cost......................................... 27,512 27,151
Accrued pension cost...................................... 2,743 2,613
Deferred income taxes..................................... 10,629 9,844
Other..................................................... 3,920 2,920
-------- --------
Total noncurrent liabilities....................... 58,520 55,524
-------- --------
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 4,586
Stockholders' equity:
Common stock.............................................. 315 315
Additional paid-in capital................................ 346,133 346,337
Accumulated deficit....................................... (25,009) (9,232)
Currency translation adjustment........................... 5,635 2,253
Pension liabilities adjustment............................ (858) (858)
-------- --------
Total stockholders' equity......................... 326,216 338,815
-------- --------
$703,018 $720,759
======== ========
</TABLE>
Commitments and contingencies (Note 1)
See accompanying notes to consolidated financial statements.
S-3
<PAGE> 5
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Revenues and other income:
Net sales................................................. $107,556 $167,050
Other, net................................................ 1,353 875
-------- --------
108,909 167,925
-------- --------
Costs and expenses:
Cost of sales............................................. 92,488 130,300
Selling, general, administrative and development.......... 5,531 10,123
Special charges........................................... 4,208 --
Interest.................................................. 3,498 4,028
-------- --------
105,725 144,451
-------- --------
Income before income taxes................................ 3,184 23,474
Income tax expense.......................................... 657 7,160
Minority interest........................................... 411 537
-------- --------
Net income................................................ $ 2,116 15,777
======== ========
Fully diluted net income.................................... $ 2,116 $ 17,975
======== ========
Net income per common share................................. $ .10 $ .50
Fully diluted earnings per share............................ $ .10 $ .49
Weighted average shares outstanding:
Common shares............................................. 20,474 31,457
Fully diluted shares...................................... 20,474 36,916
</TABLE>
See accompanying notes to consolidated financial statements.
S-4
<PAGE> 6
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
ADDITIONAL -------------------------
COMMON COMMON PAID-IN ACCUMULATED CURRENCY PENSION
SHARES STOCK CAPITAL DEFICIT TRANSLATION LIABILITIES TOTAL
------ ------ ---------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996.................................. 31,455 $315 $346,133 $(25,009) $ 5,635 $(858) $326,216
Net income.............................. -- -- -- 15,777 -- -- 15,777
Adjustments, net........................ -- -- -- -- (3,382) -- (3,382)
Other, net.............................. 2 -- 204 -- -- -- 204
------ ---- -------- -------- ------- ----- --------
Balance at March 31, 1997............... 31,457 $315 $346,337 $ (9,232) $ 2,253 $(858) $338,815
====== ==== ======== ======== ======= ===== ========
</TABLE>
See accompanying notes to consolidated financial statements.
S-5
<PAGE> 7
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
MARCH 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 2,116 $ 15,777
Depreciation and amortization............................. 3,939 6,961
Earnings of joint ventures, net of distributions.......... (1,327) 100
Special charges........................................... 4,208 --
Deferred income taxes..................................... (62) (470)
Minority interest......................................... 411 537
Other, net................................................ 33 --
-------- --------
9,318 22,905
Change in assets and liabilities, net of acquisitions:
Receivables............................................. (25,622) (20,771)
Inventories............................................. (10,379) (7,885)
Prepaid expenses........................................ (390) 1,490
Accounts payable and accrued liabilities................ 15,837 3,364
Income taxes............................................ 637 7,477
Accounts with related parties........................... (906) (1,803)
Other, net.............................................. 535 (4)
-------- --------
Net cash provided (used) by operating activities... (10,970) 4,773
-------- --------
Cash flows from investing activities:
Capital expenditures...................................... (2,415) (10,134)
Business acquisitions..................................... (2,250) (476)
Other, net................................................ 194 30
-------- --------
Net cash used by investing activities.............. (4,471) (10,580)
Cash flows from financing activities:
Indebtedness:
Borrowings.............................................. 14,786 --
Reductions.............................................. (750) (1,352)
Related party debt payments............................... -- (1,036)
-------- --------
Net cash provided (used) by financing activities... 14,036 (2,388)
$ (1,405) $ (8,195)
======== ========
Net increase (decrease) in cash and equivalents from:
Operating, investing and financing activities............... $ (1,405) $ (8,195)
Cash acquired............................................. 1,901 --
Currency translation...................................... (51) 165
-------- --------
445 (8,030)
Cash and equivalents at beginning of period............... 24 86,526
-------- --------
Cash and equivalents at end of period..................... $ 469 $ 78,496
======== ========
Supplemental disclosures:
Cash paid for:
Interest................................................ $ 2,270 $ 3,758
Income taxes............................................ -- 341
-------- --------
Business acquisitions:
Cash and cash equivalents............................... $ 1,901 $ --
Goodwill and other intangibles.......................... 11,367 577
Other noncash assets.................................... 131,451 3,503
Liabilities............................................. (72,469) (3,604)
Common stock issued to IMI.............................. (70,000) --
-------- --------
Cash paid............................................. $ 2,250 $ 476
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
S-6
<PAGE> 8
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 March 31, 1997 and the consolidated
statements of operations, stockholders' equity and cash flows for the interim
periods ended March 31, 1996 and 1997 have been prepared by the Company without
audit. Certain prior year amounts have been reclassified to conform to the
current year presentation. In the opinion of management, all adjustments,
consisting only of normal recurring 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 after giving effect to the June 1996 65-for-1 stock
split. 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 (the "Convertible
Preferred Securities").
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," issued in February 1997 is required to be retroactively adopted by the
Company in the fourth quarter of 1997. Had SFAS No. 128 been effective during
1996 and the first quarter of 1997, (i) "Basic earnings per share" under SFAS
No. 128 would have been the same as earnings per common share reported by the
Company and (ii) "Dilutive earnings per share" under SFAS No. 128 would have
been the same as fully diluted earnings per share reported by the Company.
S-7
<PAGE> 9
TITANIUM METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
MARCH 31,
--------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $107,556 $167,050
======== ========
Operating income............................................ $ 6,823 $ 26,535
General corporate income (expense), net..................... (141) 967
Interest expense............................................ (3,498) (4,028)
-------- --------
Income before income taxes................................ $ 3,184 $ 23,474
======== ========
</TABLE>
Operating income for the three months ended March 31, 1996 includes $4.2
million 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 $1.2 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 and early 1997, 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, net sales for the first quarter of 1996 were $123.9 million, operating
income was $4.3 million, net loss was $1.3 million and net loss per share was
$.05. The pro forma effect of the previously-reported TISTO (July 1996), TIMET
Savoie (August 1996), and LASAB (January 1997) transactions 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.
In March 1997, TIMET announced that it had executed definitive agreements
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", would be 46%
owned by TIMET and 54% owned by Valinox Welded. TIMET will supply titanium strip
product to ValTimet under a long-term contract as the preferred supplier. The
transaction is expected to close during the second quarter of 1997. The effect
of the transaction on TIMET's 1997 financial results is not expected to be
material.
S-8
<PAGE> 10
TITANIUM METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- INVENTORIES:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Raw materials.............................................. $ 22,806 $ 24,316
In process and finished products........................... 125,137 129,586
Supplies................................................... 7,545 7,901
-------- --------
$155,488 $161,803
======== ========
</TABLE>
The average cost of LIFO inventories exceeded the net carrying amount of
such inventories by approximately $32 million at December 31, 1996 and $34
million at March 31, 1997.
NOTE 6 -- ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Postretirement benefit costs................................ $ 2,024 $ 2,024
Pension costs............................................... 1,507 1,882
Other employee benefits..................................... 21,360 18,649
Environmental costs......................................... 1,643 1,643
Taxes, other than income.................................... 2,292 4,527
Interest.................................................... 1,304 1,214
Other....................................................... 16,043 15,311
------- -------
$46,173 $45,250
======= =======
</TABLE>
NOTE 7 -- NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS:
Notes payable at December 31, 1996 and March 31, 1997 consists of
borrowings under the Company's European bank credit agreements. At March 31,
1997, the Company had approximately $132 million of unused borrowing
availability under its existing U.S. and European bank credit agreements.
Long-term debt at December 31, 1996 and March 31, 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.
S-9
<PAGE> 11
TITANIUM METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
THREE MONTHS ENDED,
MARCH 31,
--------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Expected income tax expense............. $1,114 $8,216
Adjustment of deferred tax valuation
allowance related to current year
results............................... (332) (822)
U.S. state income taxes, net............ 25 175
Incremental tax and rate differences on
non-tax group companies............... (107) (270)
Other, net.............................. (43) (139)
------ ------
$ 657 $7,160
====== ======
</TABLE>
NOTE 9 -- RELATED PARTY TRANSACTIONS:
At March 31, 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 45% 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.
Receivables from related parties principally relate to sales made to Union
Titanium Sponge Corporation ("UTSC"), a 10% shareholder, pursuant to a long-term
titanium sponge supply contract. Noncurrent payables to related parties are
amounts owed to Tremont pursuant to compensation arrangements.
S-10
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The significant improvement in earnings for the 1997 quarter was driven by
price increases and a 17% increase in mill products volume compared to the first
quarter of 1996. Titanium mill products shipments in the first quarter were 7.4
million pounds. Selling prices have continued to increase, and the average price
of mill products shipped in 1997 was $16.00 per pound compared to $13.49 in the
first quarter of 1996 and $14.80 in the fourth quarter of 1996. The Company's
operating income margin increased to 15.9% in the first quarter of 1997,
significantly above year-ago levels, and up from 13.6% in the fourth quarter of
1996.
The selling price increases reflect both the pass-through of cost
increases, particularly raw material costs, and real price increases associated
with increased market demand. Although the Company and the titanium industry are
continuing to experience increases in the cost of certain raw materials, the
Company's increased selling prices have more than offset those cost increases.
Firm order backlog at March 31, 1997 was approximately $460 million, up from
$440 million at year-end 1996. Average prices on recent orders have continued to
increase relative to 1996 levels.
Operating levels at the Company's plants in 1997 were generally higher than
in the comparable 1996 period and contributed to the better operating results.
However, operating levels at one of the Company's two casting facilities, which
plant primarily produced for the golf market, were well below levels of late
1996 and negatively impacted earnings. Due to excess capacity currently existing
in the golf club head castings market, TIMET has determined not to pursue growth
in this market at this time. TIMET plans to continue its strategy of supplying
other golf club casters with input stocks. Total worldwide employment at March
31, 1997 approximated 3,000 compared to 2,950 at year-end 1996 and 2,550 one
year ago (proforma for the AJM acquisition).
Operating income in the first quarter of 1996 included special charges of
$4.2 million related to the IMI titanium acquisition. See Note 3 to the
Consolidated Financial Statements.
Interest expense in the first quarter of 1997 includes $3.4 million related
to the Convertible Preferred Securities issued in November 1996. Interest in the
1996 period relates primarily to indebtedness subsequently repaid with the
proceeds of the Company's June 1996 initial public stock offering.
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 may slightly 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.
The Company operates in several tax jurisdictions and is subject to varying
income tax rates. For financial reporting purposes, the Company has previously
recognized substantially all of its net operating loss and other carryforwards,
and, accordingly, its effective income tax rate in 1997 was higher than in 1996.
Such effective rate for the full year 1997 may vary slightly from that in the
first quarter due to the combined effects of state income taxes and varying
non-U.S. rates. See Note 8 to the Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position has significantly improved since the
beginning of 1996 through the combined effects of (i) improved industry
conditions, (ii) acquisitions made during 1996, (iii) the
S-11
<PAGE> 13
Company's June 1996 initial public stock offering and (iv) the November 1996
issuance of the Convertible Preferred Securities.
At March 31, 1997, the Company had $78 million of cash and equivalents and
$132 million of borrowing availability under its existing U.S. and European bank
credit lines. Indebtedness consisted primarily of capital lease obligations
related to certain of its European manufacturing facilities and a relatively
nominal amount of European working capital borrowings. The Convertible Preferred
Securities do not require principal amortization and the Company has the right
to defer interest 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 $23
million in the 1997 period compared to $9 million in the 1996 period. Changes in
assets and liabilities used approximately $18 million of cash in 1997, about $2
million less than in the first quarter of 1996 despite the higher levels of
working capital necessary to support the higher production and sales levels. The
Company's goal is to better manage working capital such that both "days sales
outstanding" in receivables and "days sales in inventory" improve in 1997 over
year-end 1996.
Investing activities. The Company estimates capital expenditures for all of
1997 to be about $60 million, including capacity expansion and a major project
to redesign business processes and implement integrated information systems
throughout TIMET. About one-third of planned capital expenditures in 1997 relate
to capacity expansion projects, the largest of which is a 20 million pound
electron beam furnace to be completed in the second half of 1998. Capital
spending related to the business process/information systems project is
currently estimated at over $30 million during the next few years, about
one-half of which is expected to be incurred in 1997.
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. In
this regard, during March 1997 the Company agreed to invest up to approximately
$5 million in Titanium Memory Systems, Inc. ("TMS") for an approximate 20%
equity interest in TMS and funded approximately $3 million of this amount in
April 1997. The funds will be used by TMS to continue its development and
initial production of a titanium substrate for use in computer hard disk drives.
Financing activities. Debt repayments in 1997 related primarily to
reductions in European working capital borrowings, including amounts due to
CEZUS, the 30% minority owner in TIMET Savoie. Borrowings in the first quarter
of 1996 were primarily to fund working capital needs and capital expenditures.
The Company is negotiating to increase its borrowing availability, and expects,
among other things, to be able to reduce current restrictions on use of borrowed
proceeds in order to further enhance its financial flexibility and to lower the
cost of borrowings.
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,
refinance or restructure indebtedness, repurchase shares of capital stock, sell
other 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 may investigate, evaluate and discuss acquisition, joint venture and
other business combination opportunities in the titanium, specialty metal and
related industries, and in this regard the Company has been exploring a
potential strategic relationship with a large titanium producer in Russia. In
the event of any future acquisition or joint venture opportunities, the Company
may consider using available cash, issuing equity securities or incurring
indebtedness.
S-12
<PAGE> 14
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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
<TABLE>
<C> <S>
10.1 Intercorporate Services Agreement by and between TIMET and
NL Industries, Inc. effective as of January 1, 1997,
incorporated by reference to Exhibit 10.5 of NL's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997
(File No. 1-640).
10.2 Intercorporate Services Agreement by and between TIMET and
Tremont effective as of January 1, 1997.
27.1 Financial Data Schedule for the quarter ended March 31,
1997.
</TABLE>
(b) Reports on Form 8-K:
Reports on Form 8-K filed by the Registrant for the quarter ended March 31,
1997 and for the month of April 1997:
January 24, 1997 -- Reported Items 5 and 7
March 13, 1997 -- Reported Items 5 and 7
March 26, 1997 -- Reported Items 5 and 7
April 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.
TITANIUM METALS CORPORATION
(Registrant)
Date: May 14, 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)
S-13
