<PAGE> 1
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 June 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 jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1999 Broadway, Suite 4300, Denver, Colorado 80202
----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 296-5600
---------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- --------
Number of shares of common stock outstanding on July 31, 1997: 31,456,655
----------
<PAGE> 2
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.
<PAGE> 3
TITANIUM METALS CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - December 31, 1996 and
June 30, 1997 2-3
Consolidated Statements of Operations - Three months and
six months ended June 30, 1996 and 1997 4
Consolidated Statement of Stockholders' Equity - Six
months ended June 30, 1997 5
Consolidated Statements of Cash Flows - Three months and
six months ended June 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. 12-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 14
Item 4. Submission of Matters to a Vote of Security Holders. 14
Item 6. Exhibits and Reports on Form 8-K. 15
</TABLE>
1
<PAGE> 4
TITANIUM METALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
ASSETS 1996 1997
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 86,526 $ 83,703
Receivables, net 114,100 136,514
Receivable from related parties 1,676 1,883
Inventories 155,488 166,397
Prepaid expenses 12,510 8,481
Deferred income taxes 718 431
---------- ----------
Total current assets 371,018 397,409
---------- ----------
Other assets:
Goodwill 67,430 61,996
Other intangible assets 19,314 18,283
Deferred income taxes 11,618 10,913
Other 14,069 17,519
---------- ----------
Total other assets 112,431 108,711
---------- ----------
Property and equipment:
Land 6,129 6,112
Buildings 32,929 33,094
Equipment 207,046 225,454
Construction in progress 17,513 31,576
---------- ----------
263,617 296,236
Less accumulated depreciation 44,048 54,084
---------- ----------
Net property and equipment 219,569 242,152
---------- ----------
$ 703,018 $ 748,272
========== ==========
</TABLE>
2
<PAGE> 5
TITANIUM METALS CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1997
---------- ----------
<S> <C> <C>
Current liabilities:
Notes payable $ 7,992 $ 3,628
Current maturities of long-term debt 397 796
Accounts payable 49,628 50,196
Accrued liabilities 46,173 51,508
Payable to related parties 1,649 630
Income taxes 6,638 17,274
Deferred income taxes 348 1,269
---------- ----------
Total current liabilities 112,825 125,301
---------- ----------
Noncurrent liabilities:
Long-term debt 1,158 1,566
Capital lease obligations 11,562 11,026
Payable to related parties 996 857
Accrued OPEB cost 27,512 27,079
Accrued pension cost 2,743 2,572
Deferred income taxes 10,629 9,848
Other 3,920 2,827
---------- ----------
Total noncurrent liabilities 58,520 55,775
---------- ----------
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 5,366
Stockholders' equity:
Common stock 315 315
Additional paid-in capital 346,133 346,382
Retained earnings (deficit) (25,009) 11,078
Currency translation adjustment 5,635 3,663
Pension liabilities adjustment (858) (858)
---------- ----------
Total stockholders' equity 326,216 360,580
---------- ----------
$ 703,018 748,272
========== ==========
</TABLE>
Commitments and contingencies (Note 1)
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1996 1997 1996 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues and other income:
Net sales $118,834 $181,378 $226,390 $348,428
Other, net 2,929 1,694 4,282 2,569
-------- -------- -------- --------
121,763 183,072 230,672 350,997
-------- -------- -------- --------
Costs and expenses:
Cost of sales 100,743 138,107 193,231 268,407
Selling, general, administrative and development 6,624 10,704 12,155 20,827
Special charges 100 -- 4,308 --
Interest 3,354 3,847 6,852 7,875
-------- -------- -------- --------
110,821 152,658 216,546 297,109
-------- -------- -------- --------
Income before income taxes 10,942 30,414 14,126 53,888
Income tax expense 2,873 9,428 3,530 16,588
Minority interest -- 676 411 1,213
-------- -------- -------- --------
Net income $ 8,069 20,310 $ 10,185 $ 36,087
======== ======== ======== ========
Fully diluted net income $ 8,069 $ 22,525 $ 10,185 $ 40,500
======== ======== ======== ========
Net income per common share $ .30 $ .65 $ .43 $ 1.15
Fully diluted earnings per share $ .30 $ .61 $ .43 $ 1.10
Weighted average shares outstanding:
Common shares 27,094 31,457 23,784 31,457
Fully diluted shares 27,094 36,971 23,784 36,944
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Six months ended June 30, 1997
(In thousands)
<TABLE>
<CAPTION>
ADJUSTMENTS
ADDITIONAL RETAINED -------------------------
COMMON COMMON PAID-IN EARNINGS 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 -- -- -- 36,087 -- -- 36,087
Adjustments, net -- -- -- -- (1,972) -- (1,972)
Other, net 2 -- 249 -- -- -- 249
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at June 30, 1997 31,457 $ 315 $ 346,382 $ 11,078 $ 3,663 $ (858) $ 360,580
========== ========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 8
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1996 and 1997
(In thousands)
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,185 $ 36,087
Depreciation and amortization 8,357 14,365
Earnings of joint ventures, net of distributions (3,610) --
Special charges 4,308 --
Deferred income taxes 12 1,517
Minority interest 411 1,213
Other, net (654) (150)
---------- ----------
19,009 53,032
Change in assets and liabilities, net of acquisitions:
Receivables (30,482) (22,242)
Inventories (9,801) (12,358)
Prepaid expenses (2,788) 2,272
Accounts payable and accrued liabilities 14,928 2,938
Income taxes 3,366 11,031
Accounts with related parties (4,370) (1,013)
Other, net 365 1,658
---------- ----------
Net cash provided (used) by operating activities (9,773) 35,318
---------- ----------
Cash flows from investing activities:
Capital expenditures (6,412) (29,741)
Business acquisitions (2,250) (476)
Other investments -- (3,400)
Other, net 147 169
---------- ----------
Net cash used by investing activities (8,515) (33,448)
---------- ----------
Cash flows from financing activities:
Indebtedness:
Borrowings 17,150 --
Repayments (83,307) (3,645)
Related party debt payments (42,489) (929)
Proceeds from issuance of common stock, net 132,126 --
---------- ----------
Net cash provided (used) by financing activities 23,480 (4,574)
---------- ----------
$ 5,192 $ (2,704)
========== ==========
</TABLE>
6
<PAGE> 9
TITANIUM METALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Six months ended June 30, 1996 and 1997
(In thousands)
1996 1997
--------- ---------
Net increase (decrease) in cash and equivalents from:
Operating, investing and financing activities $ 5,192 $ (2,704)
Cash acquired 1,901 --
Currency translation 62 (119)
--------- ---------
7,155 (2,823)
Cash and equivalents at beginning of period 24 86,526
--------- ---------
Cash and equivalents at end of period $ 7,179 $ 83,703
========= =========
Supplemental disclosures:
Cash paid for:
Interest $ 6,232 $ 7,617
Income taxes 150 3,606
--
Business acquisitions:
Cash and 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
========= =========
See accompanying notes to consolidated financial statements.
<PAGE> 10
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 June 30, 1997 and the
consolidated statements of operations, stockholders' equity and cash flows for
the interim periods ended June 30, 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 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").
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 six months 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.
<PAGE> 11
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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
1996 1997 1996 1997
---------- ---------- ---------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Net sales $ 118,834 $ 181,378 $ 226,390 $ 348,428
========== ========== ========== ==========
Operating income $ 13,748 $ 32,843 $ 20,571 $ 59,378
General corporate income, net 548 1,418 407 2,385
Interest expense (3,354) (3,847) (6,852) (7,875)
---------- ---------- ---------- ----------
Income before income taxes $ 10,942 $ 30,414 $ 14,126 $ 53,888
========== ========== ========== ==========
</TABLE>
Operating income for the three months and six months ended June 30,
1996 included $.1 million and $4.3 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 $1.3 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, (i) net sales for the second quarter of 1996 were $141.1
million, operating income was $14.7 million, net income was $7.0 million and
net income per share was $.26 and (ii) net sales for the six months ended June
30, 1996 were $265.0 million, operating income was $19.0 million, net income
was $5.7 million and net income per share was $.22. 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.
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. TIMET will supply
titanium strip product to ValTimet under a long-term contract as the preferred
supplier. The effect of the transaction on TIMET's 1997 financial results is
not expected to be material.
<PAGE> 12
Note 5 - Inventories:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
---------- ----------
(In thousands)
<S> <C> <C>
Raw materials $ 22,806 $ 23,590
In process and finished products 125,137 134,734
Supplies 7,545 8,073
---------- ----------
$ 155,488 $ 166,397
========== ==========
</TABLE>
The average cost of LIFO inventories exceeded the net carrying amount
of such inventories by approximately $32 million at December 31, 1996 and $36
million at June 30, 1997.
Note 6 - Accrued liabilities:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
---------- ----------
(In thousands)
<S> <C> <C>
Postretirement benefit costs $ 2,024 $ 2,024
Pension costs 1,507 1,516
Other employee benefits 21,360 21,047
Environmental costs 1,643 1,843
Taxes, other than income 2,292 1,572
Interest 1,304 1,103
Other 16,043 22,403
---------- ----------
$ 46,173 $ 51,508
========== ==========
</TABLE>
Note 7 - Notes payable, long-term debt and capital lease obligations:
Notes payable at December 31, 1996 and June 30, 1997 consists of
borrowings under the Company's European bank credit agreements. At June 30,
1997, the Company had approximately $132 million of unused borrowing
availability under its then-existing U.S. and European bank credit agreements.
In July 1997, the Company entered into a new $200 million five-year secured
bank credit agreement. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Long-term debt at December 31, 1996 and June 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.
<PAGE> 13
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>
SIX MONTHS ENDED,
JUNE 30,
------------------------
1996 1997
---------- ----------
(In thousands)
<S> <C> <C>
Expected income tax expense $ 4,944 $ 18,861
Adjustment of deferred tax valuation allowance
related to current year results (1,160) (1,498)
U.S. state income taxes, net 49 397
Incremental tax and rate differences on
non-tax group companies, net (210) (600)
Other, net (93) (572)
---------- ----------
$ 3,530 $ 16,588
========== ==========
</TABLE>
Note 9 - Organization structure:
At June 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 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.
<PAGE> 14
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The significant improvement in 1997 earnings was driven by price
increases and a 25% increase in mill products volume compared to the first six
months of 1996. Titanium mill products shipments in the second quarter were a
record 8.2 million pounds (15.6 million pounds for the 1997 six-month period).
The average selling price of mill products shipped in the second quarter of
1997 was $16.18 per pound compared to $14.54 in the second quarter of 1996 and
$16.00 in the first quarter of 1997. The Company's operating income margin
increased to 18.1% in the second quarter of 1997, significantly above year-ago
levels, and up from 15.9% in the first quarter of 1997.
The higher average selling prices reflect the pass-through of cost
increases, particularly raw material costs, real price increases associated
with increased market demand and product mix. Although the Company and the
titanium industry are continuing to experience increases in the cost of certain
raw materials, the Company's higher selling prices have more than offset those
cost increases. Firm order backlog at June 30, 1997 was approximately $485
million, up from $440 million at year-end 1996. Average prices on recent orders
have continued to be above prior period levels.
Operating levels at the Company's plants in 1997 were generally higher
than in the comparable 1996 period and contributed to improved operating
results. However, operating levels at one of the Company's two casting
facilities, which facility primarily produced for non-aerospace markets, were
well below 1996 levels and negatively impacted earnings. Total worldwide
employment at June 30, 1997 approximated 3,050 compared to 2,950 at year-end
1996 and 3,050 one year ago (proforma for the AJM acquisition).
Operating income in the first half of 1996 included special charges of
$4.3 million related to the IMI titanium acquisition. See Note 3 to the
Consolidated Financial Statements.
Interest expense in the first half of 1997 includes $6.8 million
related to the Convertible Preferred Securities issued in November 1996.
Interest in the 1996 period relates primarily to indebtedness 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
<PAGE> 15
slightly from that in the first half of the year 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
At June 30, 1997, the Company had $84 million of cash and equivalents
and $132 million of borrowing availability under its then-existing U.S. and
European bank credit lines ($227 million of borrowing availability proforma for
the new bank credit agreement entered into in July 1997). Indebtedness
outstanding 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
$53 million in the 1997 six-month period compared to $19 million in the same
period of 1996. Changes in assets and liabilities used approximately $18
million of cash in 1997, about $11 million less than in the first half 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 during 1997 and 1998 over year-end 1996.
Investing activities. The Company estimates capital expeditures 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 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 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. Other cash investments in the 1997 period 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
CEZUS, the 30% minority owner 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, will be available for general corporate purposes,
including potential acquisitions. Borrowings under the new facility will
initially be at a rate of LIBOR plus 50 basis points.
<PAGE> 16
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.
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 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders on May 9, 1997.
All the nominees for director were elected with the voting results for each as
follows:
<TABLE>
<CAPTION>
Director Votes For Votes Withheld
-------- --------- --------------
<S> <C> <C>
J. Landis Martin 26,585,366 160,590
Andrew R. Dixey 26,585,366 160,590
Joseph S. Compofelice 26,585,366 160,590
Edward C. Hutcheson, Jr. 26,589,566 156,390
Hiroomi Mikami 26,589,566 156,390
Thomas P. Stafford 26,589,566 156,390
</TABLE>
The Company's shareholders also approved the following two proposals
with the voting results for each as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Votes Abstained
--------- ------------- ---------------
<S> <C> <C> <C>
(a) Approval of the Company's 1996 Long Term 20,670,358 4,792,729 88,468
Performance Incentive Plan
(b) Approval of the Company's Senior Executive 26,300,560 37,827 15,965
Incentive Compensation Plan
</TABLE>
<PAGE> 17
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.1 $200,000,000 Credit Agreement among Titanium
Metals Corporation and various lending institutions
dated as of July 30, 1997 incorporated by
reference to Exhibit 10.1 of a Current Report on
Form 8-K dated July 30, 1997 filed by the
Registrant.
27.1 Financial Data Schedule for the six-month period
ended June 30, 1997.
(b) Reports on Form 8-K:
Reports on Form 8-K filed by the Registrant for the quarter ended June
30, 1997 and for the month of July 1997:
April 22, 1997 - Reported Items 5 and 7.
July 3, 1997 - Reported Items 5 and 7.
July 21, 1997 - Reported Items 5 and 7.
July 30, 1997 - Reported Items 5 and 7.
<PAGE> 18
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: August 6, 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)
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<S> <C>
10.1 $200,000,000 Credit Agreement among Titanium Metals Corporation and
various lending institutions dated as of July 30, 1997 incorporated by
reference to Exhibit 10.1 of a Current Report on Form 8-K dated July
30, 1997 filed by the Registrant.
27.1 Financial Data Schedule for the six-month period ended June 30, 1997.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TITANIUM
METALS CORPORATIONS'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX-MONTHS ENDED
JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BE REFERENCE TO SUCH CONSOLIDATED
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 83,703
<SECURITIES> 0
<RECEIVABLES> 136,514
<ALLOWANCES> 2,947
<INVENTORY> 166,397
<CURRENT-ASSETS> 397,409
<PP&E> 296,236
<DEPRECIATION> 54,084
<TOTAL-ASSETS> 748,272
<CURRENT-LIABILITIES> 125,301
<BONDS> 1,566
0
0
<COMMON> 315
<OTHER-SE> 360,265
<TOTAL-LIABILITY-AND-EQUITY> 748,272
<SALES> 350,997
<TOTAL-REVENUES> 350,997
<CGS> 268,407
<TOTAL-COSTS> 268,422
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 89
<INTEREST-EXPENSE> 7,875
<INCOME-PRETAX> 53,888
<INCOME-TAX> 16,588
<INCOME-CONTINUING> 36,087
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,087
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.10
</TABLE>
