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 28, 2000
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(Date of Report, date of earliest event reported)
TITANIUM METALS CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 0-28538 13-5630895
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State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
1999 Broadway, Suite 4300, Denver, CO 80202
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(Address of principal executive offices) (Zip Code)
(303) 296-5600
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or address, if changed since last report)
<PAGE>
Item 5: Other Events
On January 28, 2000 the Registrant issued the press release attached
hereto as Exhibit 99.1, which is incorporated herein by reference. The press
release relates to an announcement by Registrant regarding Registrant's fourth
quarter 1999 results and cost reduction plan.
Item 7: Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
Item No. Exhibit List
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99.1 Press release dated January 28, 2000 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 & Secretary
Date: January 28, 2000
PRESS RELEASE
CONTACT:
Titanium Metals Corporation J. Landis Martin
1999 Broadway, Suite 4300 Chairman & CEO
Denver, Colorado 80202 (303) 296-5600
TIMET ANNOUNCES FOURTH QUARTER 1999 RESULTS AND COST REDUCTION PLAN
DENVER, COLORADO . . . January 28, 2000 ...Titanium Metals Corporation
("TIMET") (NYSE:TIE) announced today its fourth quarter and full year financial
results, its outlook for the year 2000, and a further cost reduction plan,
including several management changes.
Fourth Quarter and Full Year Results
TIMET had a loss of $.28 per share for the quarter ended December 31,
1999 before special charges discussed below. After the special charges of $11
million pretax, TIMET reported a net loss of $.56 per share. In the fourth
quarter of 1998, TIMET reported income before charges of $.30 per share and a
net loss of $.08 per share after restructuring charges. For the full year 1999,
TIMET reported a net loss of $1.00 per share compared to net income of $1.46 per
share in 1998. Results in 1999 were worse than in 1998 primarily due to the
decline in both volume and prices caused by lower demand in both aerospace and
industrial markets, and production-related problems discussed below.
Fourth quarter 1999 sales of $105.5 million, the lowest quarterly sales
amount in four years, were 6% below third quarter levels primarily due to a 4%
decline in average mill product sales prices and a 22% decline in volume of
ingot and slab products. The Company's fourth quarter gross margins were also
negatively impacted by continuing yield, rework and deviated material levels, as
well as the additional provisions for slow-moving inventories discussed below.
The $11 million of special charges consist of $4.5 million of
restructuring charges, $2.3 million of write-downs associated with the Company's
investments in certain start-up joint ventures and $4.3 million of charges to
cost of sales for slow-moving inventories. Approximately half of the $4.5
million restructuring charges were non-cash, primarily related to the
disposition of a German subsidiary, with substantially all of the cash component
related to the termination of 100 people.
Outlook for 2000
TIMET said the current outlook for 2000 remains weak. Customers and end
users continue to indicate that a substantial inventory overhang exists. TIMET's
backlog at the end of December was approximately $195 million compared to
approximately $350 million at the end of 1998 and $530 million at the end of
1997.
Most importantly, orders under the Boeing contract are far below
contract requirements. Other than orders for finishing work on product melted
for Boeing in 1999, TIMET has received virtually no Boeing-related orders for
the year 2000.
These factors lead us to believe that year 2000 sales will be somewhat
lower than the fourth quarter 1999 annualized. If the inventory situation were
to improve, a pick up in orders in the third and fourth quarters could result in
sales exceeding current expectations.
Cost Reduction Plan and Management Changes
Addressing the results and outlook, J. Landis Martin, Chairman and CEO
commented, "In view of these market considerations, I asked Andrew Dixey,
TIMET's President and COO, to undertake the development of a plan to
dramatically reduce our costs. To that end, we have adopted a plan to
restructure our organization, including making a number of management changes."
"Under our new structure, I will be assuming the role of President, as
well as Chairman and CEO. Our global manufacturing operations will be
consolidated into a single team under Christian Leonhard, who is being promoted
to Executive Vice President - Operations and will be based in the United States.
Christian previously served as Vice President - European Operations. Our
worldwide commercial operation will be headed by Dr. Charles H. Entrekin, who is
being named Executive Vice President - Commercial. Chuck was previously
responsible for TIMET's North American Operations."
"In addition, Mark A. Wallace, previously Vice President--Strategic
Change and Information Technology, has been named Executive Vice President &
Chief Financial Officer, where he will oversee the finance and accounting, and
information technology groups. Robert E. Musgraves, previously Vice President &
General Counsel, has been appointed as Executive Vice President--Legal &
Administration, with responsibility for legal, human resources, and health,
safety and environmental matters."
"As a consequence of this cost reduction program, Andrew Dixey, Dr.
Joseph S. Broz, Vice President--Corporate Development, John P. Monahan, Vice
President--Service Center Operations, and J. Thomas Montgomery, Jr., Vice
President--Finance & Treasurer will be stepping down from their roles at TIMET.
We wish the very best to these gentlemen, each of whom has made valuable
contributions to TIMET over the course of their employment."
"As part of this cost reduction plan, we have targeted further
personnel reductions of about 250 people. More importantly, we are focusing on
significantly improving our manufacturing performance. Under the leadership of
Christian Leonhard, Mark Wallace and Jim Pieron, Vice President of Manufacturing
Strategies, we will devote considerable resources during 2000 and beyond on our
continuous improvement programs to improve the quality of our manufacturing,
customer service and management processes. These efforts should provide the
foundation for reducing our cost structure beginning in 2000 and accelerating in
2001 and beyond."
"It is too early to put a firm dollar number on the amount of cost
savings expected in 2000, but it is my goal to achieve a savings level by the
fourth quarter of 2000 equal to an annualized savings rate of at least $20
million. "
TIMET anticipates an additional restructuring charge in the first
quarter of 2000 of about $10 million to primarily cover termination costs
associated with the implementation of these proposed organizational changes.
Martin continued, "Regarding the Boeing contract, Boeing has informed
us that it will either order the required contractual volume under the contract
in the year 2000 or pay the liquidated damages provided for in the agreement.
Beyond year 2000, Boeing is unwilling to commit to the contract at this time. We
are considering an appropriate response."
At December 31, 1999, TIMET had deferred approximately $16 million of
revenue on ingot produced for, and billed to, Boeing. This ingot is legally
Boeing's material and counts as 1999 purchases by Boeing under the long-term
contract. However, because the ingot may be subject to future conversion into
mill products at Boeing's request, these "bill and hold" transactions did not
meet all of the criteria for revenue recognition by TIMET in 1999. This deferred
revenue will be reflected in TIMET's results of operations at such time as the
material is shipped to Boeing in its final form. TIMET anticipates recognizing
most of this revenue in 2000.
TIMET has received a waiver of compliance with certain financial covenants
contained in its U.S. bank credit agreement until February 29, 2000. TIMET has
reached an agreement in principle with another lender for a new $125 million,
three-year, U.S. asset-based credit agreement. The Company has also agreed in
principle with its existing U.K. lender to an increase in its U.K. credit
facilities from(pound)18 million ($29 million) to(pound)30 million ($48
million). Both the new U.S. credit agreement and the increased U.K. credit
agreement are expected to close in February 2000, at which time borrowings under
the Company's existing U.S. credit agreement will be repaid and the agreement
terminated. The Company believes the new U.S. and U.K. credit facilities will
provide it with the liquidity necessary for current market and operating
conditions.
Mr. Martin concluded, "While the year 2000 will be a difficult one for
the titanium industry, we see it as an opportunity to make the changes necessary
to put us in a position to return to profitability in 2001 and beyond. We remain
optimistic that with aircraft build rates continuing at healthy levels by
historical benchmarks and the rebound in the Asian economies, the titanium
industry will begin to see a turnaround in 2001. Until then, we will be focused
on improving our manufacturing performance and reducing our costs wherever
possible."
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 identified 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, the performance of Boeing and other
aerospace manufacturers under their long-term purchase agreements with the
Company, global economic conditions, global productive capacity, changes in
product pricing, 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.
TIMET, headquartered in Denver, Colorado, is a leading worldwide
integrated producer of titanium metal products. Information regarding TIMET is
available on the World Wide Web at http://www.timet.com.
NOTE: A conference call for the investment community will be held at 10:30 A.M.,
Eastern Time, on Friday, January 28, 2000. On the conference call will be J.
Landis Martin, Chairman, President and Chief Executive Officer, and Mark
Wallace, Chief Financial Officer. Participants can access the call by dialing
1-800-260-0712 (domestically) and 612-332-0418 (internationally). A taped replay
of the call will be available until 12:00 P.M., Eastern Time, on February 28,
2000, by dialing 1-800-475-6701 (domestically) and 320-365-3844
(internationally), and using the access code 499678.
o o o o o
TITANIUM METALS CORPORATION
SUMMARY OF CONSOLIDATED OPERATIONS
(In millions, except per share data)
Quarter Ended Year Ended
December 31, December 31,
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1998 1999 1998 1999
Net sales $156.3 $105.5 $707.7 $480.0
Cost of sales 123.9 110.0 542.3 454.5
Selling, administrative and development expense 14.9 11.9 59.7 48.6
Restructuring charges 18.0 4.5 24.0 4.5
Impairment of joint ventures - 2.3 - 2.3
Other expense (income) (.3) - (1.0) 1.5
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Operating income (loss) (.2) (23.2) 82.7 (31.4)
General corporate income 1.1 1.3 6.1 4.8
Interest expense .6 2.1 2.9 7.1
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Pretax income (loss) .3 (24.0) 85.9 (33.7)
Income tax expense (benefit) .1 (8.6) 29.2 (12.0)
Minority interest - Convertible Preferred
Securities, net of tax 2.2 2.2 8.8 8.7
Other minority interest .5 (.1) 2.2 1.0
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Net income (loss) $ (2.5) $ (17.5) $45.7 $(31.4)
Diluted net income (loss) $ (.3) $ (15.3) $54.5 $(22.7)
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Earnings (loss) per share:
Basic $ (.08) $(.56) $1.46 $(1.00)
Diluted * * * *
Weighted average shares outstanding:
Common shares 31.4 31.4 31.4 31.4
Diluted shares 36.8 36.8 36.8 36.8
Mill product shipments:
Volume (metric tons) 3,400 2,800 14,800 11,400
Average price ($ per kilogram) $36.25 $30.50 $35.25 $33.00
* Assumed conversion of Convertible Preferred Securities is antidilutive to
earnings per share in all periods presented.
