SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
January 25, 1999
(Date of Report, date of earliest event reported)
TITANIUM METALS CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 0-28538 13-5630895
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
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1999 Broadway, Suite 4300, Denver, CO 80202
(Address of principal executive offices) (Zip Code)
(303) 296-5600
(Registrant's telephone number, including area code)
Not Applicable
(Former name or address, if changed since last report)
Item 5: Other Events
On January 25, 1999 the Registrant issued the three press releases attached
hereto as Exhibits 99.1, 99.2, and 99.3, each of which is incorporated herein by
reference. The press releases relate to announcements by Registrant regarding
(a) Registrant's Fourth Quarter 1998 results and 1999 outlook, (b) Registrant's
agreement with United Technologies Corporation and related companies, and (c)
Registrant's agreement with Rolls-Royce plc, respectively.
Item 7: Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
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Item Exhibit List
No.
99.1 Press release dated January 25, 1999
issued by Registrant.
99.2 Press release dated January 25, 1999
issued by Registrant.
99.3 Press release dated January 25, 1999
issued by Registrant.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TITANIUM METALS CORPORATION
(Registrant)
By: /s/ Robert E. Musgraves
Robert E. Musgraves
Vice President, General Counsel
and Secretary
Date: January 26, 1999
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Exhibit 99.1
PRESS RELEASE
FOR IMMEDIATE RELEASE: CONTACT:
Titanium Metals Corporation J. Thomas Montgomery, Jr.
1999 Broadway, Suite 4300 Vice President - Finance
Denver, Colorado 80202 (303) 296-5617
TIMET ANNOUNCES FOURTH QUARTER 1998 RESULTS AND 1999 OUTLOOK
DENVER, COLORADO . . . January 25, 1999 . . . Titanium Metals Corporation
("TIMET") (NYSE: TIE) announced today earnings of $.30 per share for the quarter
ended December 31, 1998 before special charges. After special restructuring
charges of $18 million pretax, TIMET reported a net loss for the quarter of $.08
per share. Full year earnings were $1.96 per share before special charges and
$1.46 per share after pretax special charges of $24 million for the year.
Results for the fourth quarter and full year were below the record 1997 levels
primarily due to (i) reductions in demand for both aerospace and industrial
products and (ii) higher general and administrative expenses in 1998, primarily
information technology costs, including implementation of the Company's
enterprise-wide business information system and addressing "Year 2000" issues.
Average selling prices for the fourth quarter of 1998 were $36.25 per
kilogram, higher than the fourth quarter of 1997 average of $34.00 per Kg and
the third quarter 1998 average of $35.50 per Kg. The increase in fourth quarter
average prices over the third quarter is due to a change in the mix of products
sold. Mill product shipment volumes of 3,400 metric tons were significantly
below the fourth quarter 1997 shipments of 4,500 metric tons and below third
quarter 1998 shipments of 3,500. Fourth quarter ingot shipments were also
significantly below those prior periods. The lower shipment volumes resulted in
lower sales and a decline in gross profit margin as a percent of sales.
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TIMET recorded restructuring charges of $18 million in the fourth quarter
of 1998 which relate to the Company's decision to close facilities and to
implement other cost reductions in response to deteriorating market conditions.
The fourth quarter special charge exceeds the estimated charge of $10 million
previously announced primarily due to management's decision to accelerate cost
reductions and to a $5.5 million non-cash pension plan curtailment charge in the
United Kingdom resulting from workforce reductions.
TIMET's backlog at the end of December was approximately $350 million.
Comparable backlog at the end of 1997 was approximately $500 million.
~Outlook~for~1999~- J. Landis Martin, Chairman and CEO of TIMET, said, "The
business environment in which we find ourselves in 1999 is substantially
different from the 1996-1998 market for titanium metal. Throughout 1996, 1997
and much of 1998, we were producing titanium ingot and mill products for
aerospace customers in contemplation of continuing record jet aircraft build
rates expected to last through at least 2001. During the second half of 1998 it
became evident that the anticipated record rates of aircraft production would
not be reached, and that a decline in overall production rates would begin
earlier than forecast, particularly in titanium-intensive widebody planes. As
our aerospace customers reduce inventories during 1999 and adjust to decreases
in overall production rates, TIMET faces a decrease in demand from 1997-98
levels."
Mr. Martin also said, "Adding to our challenges in the aerospace sector,
industrial demand for titanium has also declined due to the weakness in Asian
and other economies. This has led to significant declines in volume and
pricing." Mr. Martin went on to add "These declines in our key markets hit us
much earlier than we had anticipated and at a time when we were in the midst of
a large capital expenditure program to modernize operations and to provide
lower-cost, more efficient capacity to meet peak demand for our products. We
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were also in the middle of installing enterprise-wide software in order to
improve efficiencies, reduce costs and make our systems Y2K compliant."
Mr. Martin said further, "Assuming demand remains at current levels and
does not decrease or increase significantly in 1999, I would expect modest net
losses in at least the first two quarters and a return to modest profitability
in the third or fourth quarter. In both the aerospace and industrial sectors,
reduced demand and lower prices (including prices under new long term contracts)
will cause lower sales and gross profit margins."
Martin also said, "On the expense side, our costs related to the new
business enterprise system and Y2K compliance program will continue to run at
high levels throughout 1999. At the same time, the benefits of the new business
enterprise system will likely be negligible in 1999, particularly with the
reduction in our capacity utilization."
Mr. Martin went on to say, "In the fourth quarter of 1998, we began
implementing a plan of action designed to address current market conditions
without abandoning key elements of our long-term strategy, which we believe is
still sound. Our action plan entails the following:
1. We have permanently or temporarily closed or will soon close, manufacturing
facilities in Verdi, Nevada, Milbury, Massachusetts and Pomona, California,
as well as parts of facilities in Henderson, Nevada, Morgantown,
Pennsylvania and Witton, England.
2. As of December 31, 1998, we have achieved or planned workforce reductions
of approximately 600 people in the United States and Europe. These
reductions represent over 20% of our worldwide workforce and have occurred
at all levels of the Company. Approximately two-thirds of the reductions
have been implemented.
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3. We have targeted reductions in plant overhead costs as well as in selling
and administrative costs.
4. We have renegotiated supply contracts with key vendors in order to reduce
volumes and prices.
5. Capital expenditures will be substantially cut back with exceptions of
expenditure for environmental and safety purposes and funds needed to
complete carryover projects begun in 1998, including the capital needed to
implement our new business enterprise-wide software system. Total capital
expenditures will be less than $40 million in 1999, compared to an
aggregate of $180 million in 1997 and 1998. For the year 2000, capital
expenditures should decline further to around $25 million.
6. Plans are already in place to reduce working capital, especially inventory
and receivables, and we believe we will see the benefits of this program
beginning in the first quarter of 1999.
7. We have also obtained the agreement of Nippon Mining & Metals Company and
Mitsui & Company Incorporated to defer indefinitely TIMET's plan to
purchase approximately 5% of the outstanding stock of TOHO Titanium
Company, Ltd. from Nippon Mining & Metals and Mitsui at a purchase price of
approximately $13 million. We do plan to proceed with the other elements
of the announced strategic alliance between TOHO and TIMET, including the
formation of a titanium hearth melting joint venture in Japan and a long-
term agreement for the purchase of certain grades of titanium sponge by
TIMET from TOHO.
8. We have merged all of our North American manufacturing operations into one
operating unit to reduce costs and, at the same time, improve customer
service.
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With our short-term plan in place and with the separate announcements made today
of new long-term agreements with Rolls-Royce plc and United Technologies
Corporation, we believe we will be able to achieve full-year profitability in
the year 2000 and beyond. These new contracts, along with previously-announced
contracts with Boeing and Wyman-Gordon, assure that we will have substantial
volumes at prices that should allow us to achieve some level of profit. These
contracts and others represent the core of our long-term aerospace strategy and
in 1999 and beyond should account for more than 60% of our aerospace revenues.
The contracts are structured to provide incentives to both parties to the
contracts to lower TIMET's costs and share in the savings. With our new
business enterprise-wide system in place and the assured minimum volume levels
and prices of our contracts, we can focus on cost reduction programs to increase
TIMET's profitability to acceptable levels."
The statements in this release relating to matters that are not historical
facts are forward-looking statements that represent management's beliefs and
assumptions based on currently available information. Forward-looking
statements can be indentified by the use of words such as "believes," "intends,"
"may," "will," "should," "anticipates" or comparable terminology or by
discussions of strategy. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it cannot assure
that these expectations will prove to be correct. Such statements involve risks
and uncertainties, including, but not limited to, the cyclicality of the
commercial aerospace industry, global economic conditions, global productive
capacity, changes in product pricing, "Year 2000" issues, and other risks and
uncertainties included in the Company's filings with the Securities and Exchange
Commission. Should one or more of these risks materialize (or the consequences
of such a development worsen), or should the underlying assumptions prove
incorrect, actual results could differ materially from those forecasted or
expected. The Company assumes no duty to update any forward-looking statements.
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TIMET, headquartered in Denver, Colorado, is a leading worldwide integrated
producer of titanium metal products.
NOTE: A conference call for the investment community will be held at 10:00
A.M., Eastern Time, on Tuesday, January 26, 1999. On the conference call will
be J. Landis Martin, Chairman and Chief Executive Officer, Andrew R. Dixey,
President and Chief Operating Officer, and J. Thomas Montgomery, Jr., Vice
President-Finance and Treasurer. Participants can access the call by dialing 1-
800-553-5275 (domestically) and 612-332-1025 (internationally). A taped replay
of the call will be available until 12:00 P.M., Eastern Time, on February 26,
1999, by dialing 1-800-475-6701 (domestically) and 320-365-3844
(internationally), and using the access code 430148.
oo o o o
TITANIUM METALS CORPORATION
SUMMARY OF CONSOLIDATED OPERATIONS
(In millions, except per share data)
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<TABLE>
<CAPTION>
Quarter Ended Year Ended
December 31, December 31,
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Net sales $208.0 $156.3 $733.6 $707.7
Cost of sales 153.4 123.9 554.6 542.3
Selling, administrative and development 14.4 14.9 45.3 59.7
expense
Special charges - 18.0 - 24.0
Other income (expense) .1 .3 (.7) 1.0
Operating income 40.3 (.2) 133.0 82.7
General corporate income .3 1.1 4.3 6.1
Interest expense .1 .6 2.1 2.9
Pretax income 40.5 .3 135.2 85.9
Income tax expense (benefit) 12.1 .1 41.1 29.2
Minority interest - Convertible Preferred 2.2 2.2 8.8 8.8
Securities, net of tax
Other minority interest .6 .5 2.3 2.2
Net income (loss) $ 25.6 $ (2.5) $ 83.0 $ 45.7
Diluted net income (loss) $ 27.8 $ (.3) $ 91.8 $ 54.5
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Earnings (loss) per share:
Basic $ .81 $(.08) $2.64 $1.46
Diluted .75 * 2.49 *
Weighted average shares outstanding:
Common shares 31.5 31.4 31.5 31.4
Diluted shares 37.0 36.8 36.9 36.8
Mill product shipments:
Volume (metric tons) 4,500 3,400 15,100 14,800
Average price ($ per kilogram) $ 34.00 $36.25 $ 35.00 $ 35.25
</TABLE>
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*Assumed conversion of Convertible Preferred Securities is antidilutive
to earnings per share.
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Exhibit 99.2
PRESS RELEASE
FOR IMMEDIATE RELEASE CONTACT:
Titanium Metals Corporation J. Landis Martin
1999 Broadway, Suite 4300 Chief Executive Officer
Denver, Colorado 80202 (303) 291-5600
TIMET COMPLETES SUPPLY AGREEMENTS WITH UNITED TECHNOLOGIES COMPANIES
DENVER, COLORADO . . . January 25, 1999 . . . Titanium Metals Corporation
("TIMET") (NYSE: TIE) announced that it has signed a series of long-term supply
agreements with United Technologies Corporation and with members of its family
of aerospace manufacturing subsidiaries and affiliates, including Pratt &
Whitney, Sikorsky Aircraft, Carmel Forge, Precision Components International,
and Blades Technology.
Under these agreements, TIMET will be the principal supplier for the
combined direct purchases of titanium products by this important group of
aerospace titanium users through 2007. Pricing under the agreements is subject
to limited annual adjustment beginning in 1999 based upon changes in the market
pricing to TIMET for certain key raw materials and significant inflationary or
deflationary conditions. The companies have also agreed to work together to
formulate, develop, and implement cost savings initiatives, the benefits of
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which will be shared by both TIMET and the UTC companies to help lower the cost
of titanium end products to the ultimate customers.
J. Landis Martin, Chairman and Chief Executive Officer of TIMET, noted, "We
are very pleased to have reached agreement with Pratt & Whitney and the other
important UTC aerospace companies to be one of the key suppliers of their direct
titanium needs through 2007. We believe this series of agreements, taken
together with our other significant long-term supply arrangements previously
announced, will fundamentally improve the way we do business with our major
aerospace customers by reducing volatility and increasing volumes over the
course of the traditional aerospace business cycle."
United Technologies Corporation (NYSE: UTX), headquartered in Hartford,
Connecticut, provides a broad range of high technology products and support
services to the aerospace, building systems, and automotive industries. United
Technologies' products include Pratt & Whitney jet engines, Sikorsky
helicopters, and Hamilton Standard flight and space systems, as well as non-
aerospace products such as Carrier heating and air conditioning systems, Otis
elevators and escalators, and UT Automotive components and systems.
TIMET, headquartered in Denver, Colorado, is a leading worldwide integrated
producer of titanium metal products. Information about TIMET is available on
the worldwide web at http://www.timet.com.
The statements in this release relating to matters that are not historical
facts are forward looking statements that involve risks and uncertainties,
including but not limited to, the cyclicality of the commercial aerospace
industry, future global economic conditions, global productive capacity,
competitive products, and other risks and uncertainties included in TIMET's
filings with the Securities and Exchange Commission.
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.. .. .
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Exhibit 99.3
PRESS RELEASE
FOR IMMEDIATE RELEASE CONTACT:
Titanium Metals Corporation J. Landis Martin
1999 Broadway, Suite 4300 Chief Executive Officer
Denver, Colorado 80202 (303) 291-5600
TIMET COMPLETES SUPPLY AGREEMENT WITH ROLLS-ROYCE PLC
DENVER, COLORADO . . . January 25, 1999 . . . Titanium Metals Corporation
("TIMET") (NYSE: TIE) announced that it has completed a ten-year supply
agreement with Rolls-Royce plc, one of the world's leading manufacturers of
airplane engines and engine components.
Pursuant to the agreement, TIMET will supply a substantial portion of the
titanium needs of Rolls-Royce for the next ten years. As part of the agreement,
the companies are committed to working together to lower the cost of producing
titanium and improve the quality of titanium, the benefits of which will be
shared by the two companies.
Commenting on the new agreement, J. Landis Martin, Chairman and Chief
Executive Officer of TIMET, noted, "TIMET is pleased to have been recognized by
one of our key aerospace customers, Rolls-Royce, as its strategic supplier in
titanium for the term of this agreement. From TIMET's perspective, we believe
this important agreement with Rolls-Royce will help reduce the volatility of our
business and increase our production volumes over the course of the aerospace
business cycle. The agreement will also give us the foundation for working
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closely together long-term as an integral part of the Rolls-Royce supply chain
on important areas such as cost reduction and quality and service improvements
and, in this way, enable us to improve and build on what has already been a
solid relationship of long-standing between our two companies."
Rolls-Royce plc is a global company meeting present and future requirements
of civil aerospace, defense and energy markets, with facilities in 14 countries
and customers in 135 countries. It has more than 55,000 engines in service with
300 airlines, 2,400 corporate and utility operators and more than 100 armed
forces. As the pioneer of gas turbine technology for aerospace, power
generation and marine propulsion, Rolls-Royce is today involved in the major
future programs in these fields, including the Trent aerospace and industrial
engines, the Eurofighter Typhoon and Joint Strike Fighter combat engines and the
WR21 marine engine. Information about Rolls-Royce is available on the worldwide
web at http://www.rolls-royce.com.
TIMET, headquartered in Denver, Colorado, is a leading worldwide integrated
producer of titanium metal products. Information about TIMET is available on
the worldwide web at http://www.timet.com.
The statements in this release relating to matters that are not historical
facts are forward looking statements that involve risks and uncertainties,
including but not limited to, the cyclicality of the commercial aerospace
industry, future global economic conditions, global productive capacity,
competitive products, cost reductions, quality and service improvements,
business volatility, production volumes, and other risks and uncertainties
included in TIMET's filings with the Securities and Exchange Commission.
.. .. .
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