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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(MARK ONE)
[ X ] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [fee required] for the fiscal year ended December 31, 1999 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [no fee required] for the transition period from
______________________ to _____________________
COMMISSION FILE NUMBER 001-14437
RTI INTERNATIONAL METALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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OHIO 52-2115953
(State of Incorporation) (I.R.S. Employer Identification No.)
1000 WARREN AVENUE, NILES, OHIO 44446
(Address of principal executive offices) (Zip code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 330-544-7700
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, Par Value $0.01 Per Share New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
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Aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 1, 2000: $79,421,024. The amount shown is based on the
closing price of the registrant's common stock on the New York Stock Exchange on
that date. Shares of common stock known by the registrant to be beneficially
owned by officers or directors of the registrant or persons who have filed a
report on Schedule 13D or 13G are not included in the computation. The
registrant, however, has made no determination that such persons are
"affiliates" within the meaning of Rule 12b-2 under the Securities Exchange Act
of 1934.
Number of shares of common stock outstanding at March 1, 2000: 20,851,799
DOCUMENTS INCORPORATED BY REFERENCE:
Selected Portions of the 2000 Proxy Statement-Part III of this Report.
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RTI INTERNATIONAL METALS, INC.
AND CONSOLIDATED SUBSIDIARIES
As used in this report, the terms "RTI", "Company", and "Registrant" mean
RTI International Metals, Inc., its predecessors and consolidated subsidiaries,
taken as a whole, unless the context indicates otherwise.
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TABLE OF CONTENTS
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 10
Item 3. Legal Proceedings........................................... 10
Item 4. Submission of Matters to a Vote of Security Holders......... 12
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters......................................... 13
Item 6. Selected Financial Data..................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 14
Item 7(a). Quantitative and Qualitative Disclosures About Market
Risk........................................................ 21
Item 8. Financial Statements and Supplementary Data................. 21
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 40
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 41
Item 11. Executive Compensation...................................... 41
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 41
Item 13. Certain Relationships and Related Transactions.............. 41
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 41
Signatures.............................................................. 42
Index to Exhibits....................................................... 43
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PART I
ITEM 1. BUSINESS
THE COMPANY
RTI International Metals, Inc., is a leading U.S. producer of titanium mill
and fabricated-metal products for the global market. The Company conducts
business in two segments: the Titanium Group and the Fabrication and
Distribution Group. The Titanium Group's mill products are processed by RTI's
customers to provide products for use in the aerospace industry and industrial
markets. The Fabrication and Distribution Group's products are used primarily in
the aerospace, oil and gas, geothermal energy production and chemical process
industries, as well as for a number of other industrial applications. This Group
also provides fabrication, extrusion and conversion services for titanium and
other specialty metals producers, and operates a number of distribution centers,
specializing in high temperature and corrosion resistant alloys including
titanium, stainless steel and nickel-based products.
On September 30, 1998, the shareholders of the Company's now wholly-owned
subsidiary RMI Titanium Company ("RMI") approved a proposal to reorganize into a
holding company structure (the "1998 Reorganization"). Pursuant to this
reorganization, the Company became the parent company of RMI, and shares of RMI
Common Stock were automatically exchanged on a one-for-one (1:1) basis for
shares of the Company. Shares of RTI began trading on the New York Stock
Exchange on October 1, 1998.
The Company is a successor to entities that have been operating in the
titanium industry since 1958. In 1990, USX Corporation and Quantum Chemical
Corporation ("Quantum") transferred their entire ownership interest in RMI's
immediate predecessor, RMI Company, an Ohio general partnership, to the Company
in exchange for shares of Common Stock (the "1990 Reorganization"). Quantum sold
its shares of Common Stock to the public while USX retained ownership of its
shares.
In November, 1996, USX completed a public offering of its 6 3/4% notes (the
"Notes") which were exchangeable in February, 2000, for 5,483,600 shares of RTI
Common Stock owned by USX. On March 31, 1999, USX announced that it had
terminated its ownership interest in the Company. USX irrevocably deposited with
Chase Manhattan Trust Company, NA, all of the 5,483,600 shares of the Company's
common stock it previously owned. The deposit of the shares was in full
satisfaction of the Notes. Chase was the trustee under the note indenture and
held the shares in trust for the benefit of the holders of the Notes until the
shares were exchanged for the Notes on the maturity date.
On February 1, 2000, Chase delivered 5,483,000 of RTI common shares to the
note holders in exchange for the Notes.
On October 1, 1998, RTI acquired all of the capital stock of New Century
Metals ("NCM") of Solon, Ohio. NCM is a manufacturer and distributor of high
temperature and corrosion resistant alloys such as titanium, stainless steel and
nickel, in long bar form, to the aerospace, chemical processing, oil exploration
and production, and power generation industries. In addition to manufacturing
facilities, NCM operates five distribution centers. Also on October 1, 1998, RTI
acquired the assets of Weld-Tech Engineering, L.P. ("Weld-Tech"). Weld-Tech,
based in Houston, Texas operates under the name RTI Energy Systems, Inc.
Weld-Tech provides engineering and fabrication services for the oil and gas
industry, including weld design, fabrication and repair as well as materials
engineering and testing services.
On July 3, 1997, the Company acquired 90% of the common stock of Galt
Alloys, Inc., ("Galt") a manufacturer of ferro titanium and a producer and
worldwide distributor of specialty alloys to ferrous and nonferrous customers.
INDUSTRY OVERVIEW
Titanium is one of the newest specialty metals. Its physical
characteristics include high strength-to-weight ratio, high temperature
performance and superior corrosion and erosion resistance. The first major
commercial application of titanium occurred in the early 1950's when it was used
as a component in aircraft gas turbine engines. Subsequent applications were
developed to use the material in other aerospace component parts and in airframe
construction. Historically, a majority of the U.S. titanium industry's output
has been used in aerospace
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applications. However, significant quantities of the industry's output is used
in nonaerospace applications, such as oil and gas exploration and production,
geothermal energy production, chemical process industries and armor plate for
military applications.
Aerospace demand originates from two aerospace sectors: commercial and
military. Since the late 1980's, commercial aerospace has been the dominant
source of titanium demand. The commercial aerospace sector is expected to
continue to dominate the demand for titanium as a result of the expected growth
of worldwide airline traffic and the need to repair and replace aging commercial
airline fleets and reduced military aerospace spending.
Historically, the cyclical nature of the aerospace industry has been the
principal cause of the fluctuations in performance of companies engaged in the
titanium industry. Over the past 20 years, U.S. titanium mill product shipments
registered cyclical peaks of 62 million pounds in 1997 to a low of 32 million
pounds in 1983.
Commercial aerospace markets experienced significant increases in demand
beginning in 1995 and extending through 1998 in new aircraft deliveries, while
military aerospace markets stabilized at historically reduced build rate levels.
During this period, most major U.S. commercial airline carriers reported strong
operating profits, prompting them to place orders for new aircraft.
Because of the Asian financial crisis, production difficulties at its
manufacturing facilities, and uncertain global economic conditions which
affected the demand for commercial aircraft, Boeing Commercial Airplane Group
made a number of announcements concerning its reduced 1999 production and also
reducing forecasted production rates on a number of aircraft models in the
2000-2001 time frame.
Aerospace subcontractors have announced delivery delays and rescheduling
resulting from the Boeing announcements and, therefore, a need to adjust
inventory requirements downward from peak levels. The reduction of commercial
aircraft build rates will impact overall demand for titanium mill products for
at least the next two or three quarters. Based upon currently available
information, the Company estimates that the U.S. titanium industry's total
shipments decreased 20-25% in 1999 from 1998 levels of approximately 60 million
pounds, although the amount of decrease cannot be accurately documented. If
worldwide economic conditions cause commercial airlines to cancel or delay
aircraft, titanium demand and pricing could come under further pressure.
Despite increased oil and gas prices in 1999, reduced exploration resulted
in lower demand for the Company's products used in oil and gas; however, deep
water, offshore exploration projects and more demanding environments, where most
of the Company's products are targeted, are expected to remain active and should
improve as oil and gas prices rise.
PRODUCTS AND MARKETS
The Company's products are produced and marketed by two segments.
The Titanium Group's products consist primarily of titanium mill products
and specialty alloys for use in the ferrous and nonferrous metals industries.
Titanium mill products consist of basic mill shapes such as ingot, slab, bloom,
billet, bar, sheet, plate, strip and welded tube. These products are sold to a
customer base consisting primarily of manufacturing and fabrication companies in
the aerospace and nonaerospace markets such as prime aircraft manufacturers and
subcontractors including metal fabricators, forge shops, machine shops and metal
distribution companies. Titanium mill products are semi-finished goods and most
often represent the raw or starting material for these customers, who then form,
fabricate, machine or further process them into finished or semi-finished parts.
This Group also manufactures titanium powders and, through Galt Alloys, Inc.,
specialty alloys used by the ferrous and nonferrous metal industries. Galt also
processes, consolidates and melts titanium scrap which is used in the Company's
titanium mill product melting facilities.
In addition, this Group administers and acts, through its Environmental
Services Division, as prime contractor for the U.S. Department of Energy ("DOE")
for the remediation and restoration of the Company's closed facilities located
in Ashtabula, Ohio.
The Fabrication and Distribution Group consists primarily of businesses
engaged in the fabrication and distribution of titanium and other ferrous and
nonferrous metals such as stainless steel and nickel-based alloys. Fabricated
products include pipe, engineered tubular products, hot-formed and
superplastically formed parts, cut
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shapes, and various specialized cut-to-size programs. NCM extrudes numerous
shapes and sizes of specialty metals for use in aerospace and nonaerospace
applications. Weld-Tech fabricates oil and gas components such as production
manifolds and riser systems which are used in offshore oil and gas production.
RTI Energy Systems, Inc., designs and markets offshore riser systems, stress
joints and drill pipe. This Group also operates a number of metal distribution
facilities, both foreign and domestic, which stock and deliver cut-to-size
titanium products, as well as other nonferrous and ferrous metals.
The amount of sales and the Company's consolidated percentage of
consolidated sales represented by each Group during each of the years beginning
in 1997 were as follows (dollars in millions):
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1999 1998 1997(2)
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$ % $ % $ %
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Titanium Group.................................... $125.1 51% $229.2 68% $243.9 77%
Fabrication and Distribution Group................ 100.2 41 91.6 27 61.4 19
Other (1)......................................... 18.0 8 16.7 5 13.2 4
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Total........................................ $243.3 100% $337.5 100% $318.5 100%
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(1) Includes DOE remediation and restoration contract which is managed as part
of the Titanium Group.
(2) Certain prior year amounts have been reclassified to reflect current
business segments.
Operating profit (loss) and the percentage of consolidated operating profit
contributed by each Group during each of the years beginning in 1997 was as
follows (dollars in millions):
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1999 1998 1997
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$ % $ % $ %
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Titanium Group................................ $ 9.2 192% $59.8 88% $53.5 95%
Fabrication and Distribution Group............ (6.4) (134) 7.4 11 2.5 4
Other (1)..................................... 2.0 42 0.8 1 0.3 1
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Total.................................... $ 4.8 100% $68.0 100% $56.3 100%
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(1) Includes DOE remediation and restoration contract which is managed as part
of the Titanium Group.
The amount of the Company's consolidated assets identified with each Group
for each of the years ended December 31 were as follows (dollars in millions):
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1999 1998 1997
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Titanium Group........................................... $255.8 $253.4 $212.8
Fabrication and Distribution Group....................... 134.7 116.8 36.0
Other (1)................................................ 0.5 0.2 0.4
General Corporate (2).................................... 9.2 25.6 42.1
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Total............................................... $400.2 $396.0 $291.3
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(1) Includes DOE remediation and restoration contract which is managed as part
of the Titanium Group.
(2) Consists primarily of unallocated cash, short-term investments and deferred
tax assets.
TITANIUM GROUP
The Titanium Group produces a full range of titanium mill products which
are used in both the aerospace and nonaerospace markets.
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Aerospace Business. Approximately 83% of the Company's 1999 mill product
sales were aerospace-related compared with approximately 86% in 1998 and 83% in
1997. The Company's products are certified and approved for use by all major
domestic and most international manufacturers of commercial and military
aircraft and jet engines. Products such as sheet, plate, strip, bar, billet and
ingot, are utilized in aircraft bulkheads, tail sections, wing support and
carry-through structures and various engine components including rotor blades,
vanes, discs, rings and engine cases.
As of December 31, 1999, the leading manufacturers of commercial aircraft,
Boeing Company, (including the former McDonnell Douglas Corporation which was
acquired by Boeing in 1997), and Airbus Industrie, reported an aggregate of
2,957 planes under firm order and deliverable over the next five years. The
comparable backlogs as of December 31, 1998 and 1997 were 3,095 and 2,753
planes, respectively. Included in the backlog at December 31, 1999 were 189 firm
orders for the new Boeing 777 wide-body aircraft, which requires more titanium
than any other commercial aircraft. Deliveries of commercial aircraft by these
manufacturers totaled 914 in 1999, 790 in 1998, and 557 in 1997. Because it
typically takes from 12 to 18 months from placement of an order until delivery
of a commercial aircraft, realized delivery rates generally lag behind announced
backlog estimates. In addition, changing economic conditions in the domestic and
international commercial airline industry has caused manufacturers to
re-evaluate aircraft orders and options, thus affecting realized aircraft
delivery rates. Recent announcements by Boeing regarding reductions in its
forecasted production rates in 2000 has resulted in some industry-wide
rescheduling and delays resulting in a need to adjust inventory levels downward
from peak levels. This slowing of build rates will impact the overall demand for
titanium products in the near term. However, the Company expects that increased
military spending will increase military aerospace demand.
Nonaerospace. Principal nonaerospace mill products include commercially
pure (unalloyed) strip, welded tube and plate used for chemical processing and
pulp and paper equipment. Bar is sold for the production of medical implants and
high-performance automotive engine parts. The Company is also a supplier of
commercially pure titanium plate and strip, which offers superior corrosion
resistance and ductility for critical forming and metal expansion required in
applications such as heat exchangers and anodes for the chlorine industry.
Nonaerospace sales accounted for 17% of the Company's mill product sales in
1999, 14% in 1998 and 17% in 1997. Since the Company's entry into strip
production in 1984 and tube production in 1986, sales of these two products have
grown to represent a majority of the Company's total nonaerospace mill product
sales.
In July 1997, the Company acquired 90% of the common stock of Galt Alloys,
Inc., a manufacturer of ferro titanium and a producer and worldwide distributor
of specialty alloys to ferrous and nonferrous customers. In connection with this
transaction, Galt undertook a major expansion program designed to enable Galt to
better serve the titanium industry and its customers.
Currently Galt is in the process of acquiring customer certifications for
the newly installed equipment. The Company achieved ISO 9002 and AS 9000
certificates in September, 1999.
Other. The Company has a long-term agreement with the DOE covering the
remediation and restoration of the Company's closed facilities in Ashtabula,
Ohio, for which the DOE is responsible as a result of work performed there by
the Company for the U.S. government. The Company is serving as the prime
contractor during the remediation and restoration period. Year-to-year revenues
and the time of completion of the project will depend on DOE funding. In 1999,
the Company recognized $18.0 million in such revenues compared to $16.7 million
in 1998 and $13.2 million in 1997. As the prime contractor, the Company provides
management services necessary to complete assessment, clean-up and remediation
activities.
FABRICATION AND DISTRIBUTION GROUP
Fabricated products include pipe, engineered tubular products and
extrusions for the oil and gas exploration and production and geothermal energy
production industries, hot-formed and superplastically formed parts and cut
shapes and extrusions for aerospace applications.
The Company owns and operates a number of distribution facilities, both
foreign and domestic. These centers stock titanium as well as other nonferrous
and ferrous metals to fill customer needs for smaller quantity, quick delivery
orders. These centers also provide cutting and light fabrication services. Two
locations, one near
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St. Louis, Missouri, and the other near Birmingham, England operate stocking and
cut-to-size programs designed to meet the needs of aerospace customers.
In an effort to expand the fabrication and distribution business, the
Company made two strategic acquisitions during the fourth quarter of 1998. On
October 1, RTI acquired NCM of Solon, Ohio. NCM manufactures and distributes
high temperature and corrosion resistant alloys such as titanium, stainless
steel and nickel to the aerospace, chemical processing, oil exploration and
production, and power generation industries. NCM also operates five distribution
facilities. Additionally, in order to enhance and further expand its already
significant efforts to develop new markets for titanium in oil and gas
exploration and production and geothermal energy production industries, RTI
acquired the assets of Weld-Tech of Houston, Texas on October 1, 1998. Weld-Tech
provides engineering and fabrication services to the oil and gas industry,
including weld design, fabrication and repair, as well as materials engineering
and testing services. RTI increased its investment in Weld-Tech with the
addition of a machining center. This addition improved capabilities and provided
additional fabrication services to Weld-Tech's expanding customer base in
titanium and other specialty metals, as well as various steels.
Another newly formed subsidiary, RTI Energy Systems, Inc., also serves the
oil and gas markets. RTI Energy Systems specializes in the design, engineering
and marketing of offshore riser systems, connectors, stress joints and drill
pipe from titanium and other metals. Weld-Tech operates under the name of RTI
Energy Systems.
The Company continues to work closely with a number of oil companies and
engineering concerns to develop other titanium projects or applications in the
oil and gas and geothermal energy production industries. RTI has entered into
several cooperative ventures to market, engineer, fabricate and install titanium
production risers, flow lines and other titanium subsea systems.
RTI entered into a Joint Industry Project with a number of significant
companies in the oil and gas field including Exxon-Mobil, Oryx Energy, Statoil,
SagaPetroleum and NorskAgip for the purpose of identifying potential
applications where titanium, either alone or in combination with other
materials, can provide a cost effective, lightweight solution to competing
materials in offshore oil and gas applications, such as production and export
riser systems.
EXPORTS
The majority of the Company's exports consist of titanium mill products and
extrusions used in aerospace markets. Other exports include slab, commercially
pure strip, plate and welded tubing used in nonaerospace markets. The Company's
export sales were 21% of sales in 1999, 21% in 1998 and 19% of sales in 1997.
Such sales were made primarily to the European market, where the Company
believes it is a leader in supplying flat-rolled titanium alloy mill products.
Most of the Company's export sales are made in U.S. dollars, which minimizes
exposure to foreign currency fluctuations.
As a leading supplier of flat-rolled titanium alloy mill products to the
European market, the Company has worked through its distributors to secure
contracts to furnish mill products to the major European aerospace
manufacturers. As a result, the Company has significant export sales to
customers in France, the United Kingdom and Germany. In order to enhance its
presence in the European market, in 1992 the Company acquired a 40% ownership
interest in its French distributor, Reamet, SA. In addition, the Company has
expanded its operations in the United Kingdom to include a distribution and
service center facility in Birmingham, England. Operations at the facility
commenced during the second quarter of 1995, and have exhibited steady growth
since that time. In 1996, the Company became a qualified supplier to Rolls Royce
Plc and has received orders to supply material from the Birmingham facility for
use in fan blades and other critical rotating parts in Rolls Royce's family of
jet engines. In January, 1998 RTI, through its French affiliate, Reamet, SA.,
was chosen by Aerospatiale as a major supplier of the titanium flat rolled
products required for its Airbus programs beginning in 1999 and extending
through 2001.
BACKLOG
For a discussion of order backlog, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
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RAW MATERIALS
The principal raw materials used in the production of titanium mill
products are titanium sponge, a porous metallic material; titanium scrap; and
alloying agents. RTI acquires its raw materials from a number of suppliers, both
domestic and foreign, under long-term contracts and other negotiated
transactions. The Company purchased approximately 6 million pounds of titanium
sponge in 1999 and approximately 19 million pounds in 1998. Based on current
levels of customer demand, current production schedules, and the level of
inventory on hand, the Company broadly estimates its 2000 sponge purchases will
approximate 5 million pounds. Requirements for sponge vary based upon product
mix and the level of scrap usage. The completion of the Galt expansion program
referred to below permits the Company to consume significantly more scrap in its
primary melting facility, thus reducing the need for titanium sponge.
Following the closure of its sponge production facilities in 1992, the
Company began purchasing its titanium sponge from outside sources. The Company
has entered into two long-term sponge supply arrangements, each with pricing
below the cost of sponge which was produced at the Company's own facilities
prior to their closure. In addition, the Company has supplemented its metal
requirements with additional sponge and raw material purchases, including
titanium scrap, from other U.S. and foreign suppliers.
One of the sponge contracts, which is with a competing producer of mill
products, permits the Company to purchase up to seven million pounds per year at
negotiated price levels in 2000, depending on the volume of sponge purchased,
and thereafter through 2003 at the Company's option at either market price (but
not below the supplier's cost) or the price in effect under the contract plus
adjustments for changes in certain of the supplier's costs, such as labor,
electricity and raw materials. The other contract, which is with a Japanese
supplier, permits the Company to purchase up to four million pounds of sponge
per year through 2005, either at market price or the price in effect under the
contract plus changes in certain of the suppliers' costs, such as labor,
electricity and raw materials. In addition, this contract permits the Company to
purchase up to an additional four million pounds of sponge at negotiated prices.
These contracts are subject to renegotiation or termination under certain
circumstances. In the event additional sponge is required the Company will
purchase the balance of its sponge requirements pursuant to short-term
agreements or at negotiated prices. Prices for the Company's 2000 requirements
have already been set under these contracts and other short-term arrangements.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
In November 1996, the Company was notified that the Department of Commerce
had issued a final determination that dumping did not occur on sales of titanium
sponge made by Interlink, a major trading company for Russian produced titanium
sponge. The Company purchases nearly all of its Russian titanium sponge through
Interlink. These purchases previously carried an 84% dumping duty. The
no-dumping finding eliminated the duty, and has allowed the Company to purchase
a significant portion of its titanium sponge at lower prices.
On July 3, 1997, the Company acquired 90% of the common stock of Galt
Alloys, Inc., a manufacturer of ferro titanium and a producer and worldwide
distributor of specialty alloys to ferrous and nonferrous customers. In
connection with this transaction, Galt undertook a major expansion program
costing $25 million, which enabled Galt to better serve the titanium industry
and its customers, and to provide RMI with an increased supply of scrap and
consumable titanium electrodes for remelt at lower cost and easier to use sizes
and shapes. The expansion included a new scrap preparation facility, a plasma
consolidation furnace, and a plasma hearth furnace. The scrap preparation
facility and the consolidation furnace were brought online in 1998, and startup
of the hearth furnace occurred in the first half of 1999.
The Company purchases titanium tetrachloride, the primary raw material used
in the manufacture of titanium sponge, from Millennium Inorganic Chemicals, Inc.
pursuant to a long-term supply agreement expiring in 2003. Titanium
tetrachloride is shipped to one of the Company's long-term sponge suppliers
where it is used in providing sponge for the Company.
Companies in the Fabrication and Distribution group obtain the majority of
their titanium mill product requirements from RMI. These transactions are made
at an arm's length pricing arrangement, which approximates market price.
Titanium products which are not available from or are not produced by RMI, are
purchased at
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market prices from independent third-party suppliers. Non-titanium metallic
requirements are generally sourced from the best available producer at
competitive market prices.
The Company believes it has adequate sources for titanium sponge, scrap,
alloying agents and other raw materials.
COMPETITION AND OTHER MARKET FACTORS
The titanium metals industry is highly competitive on a worldwide basis.
Titanium competes with other metals such as stainless steel and nickel-based
corrosion resistant alloys. A metal manufacturing company with rolling and
finishing facilities could participate in the mill product segment of the
titanium industry. However, entry into the titanium industry as an integrated
producer would require a significant investment of capital and extensive
technical expertise.
The aerospace consumers of titanium mill products tend to be highly
concentrated. The Boeing Company and Airbus Industrie, through direct purchase
and their families of subcontractors, consume most of the aerospace products.
Shipments of aerospace products represented approximately 83% of RMI's mill
product shipments in 1999, 40% of which were used in defense applications.
Producers of titanium mill products are located primarily in the U.S., Japan,
Russia, Europe and China.
Imports of titanium mill products from countries that receive the normal
trade relations ("NTR") tariff rate are subject to a 15% tariff. The tariff rate
applicable to imports from countries that do not receive NTR treatment is 45%.
Japanese producers, which benefit from NTR treatment, participate significantly
in the European market, but historically have not been a major factor in the
U.S. mill products market. The United States currently grants NTR treatment to
imports, including titanium mill product imports, from the former Soviet Union
countries, including Russia. Effective October 18, 1993, the U.S. Government
extended the benefits of the Generalized System of Preferences ("GSP") to
Russia. Under GSP, the U.S. grants duty-free access to products from developing
countries and territories. Certain wrought titanium products are covered by GSP
up to certain competitive needs-based limits, which effectively restrict the
volume of imports for these products. However, unwrought products such as
titanium sponge, ingot and billet have not been afforded GSP treatment. In 1995,
an integrated Russian producer began to participate in the U.S. market for
wrought titanium mill products. This titanium producer has the largest rated
capacity in the world although management believes practical capacity is
substantially less.
In the second half of 1997, this Russian producer filed two separate
petitions under the trade laws. The first sought GSP treatment for unwrought
products from Russia (sponge, powders, ingot and billet). The second petition
sought removal of the competitive needs limit for wrought products (plate,
sheet, pipe, etc.). The competitive needs limit was actually exceeded by this
producer in 1997, and 1998, and 1999. In July of 1998 the second petition was
granted thereby extending the GSP eligibility for wrought products from Russia.
A decision on whether or not to grant similar GSP treatment to unwrought
products is pending.
The Company believes that any significant increase in the imports of
titanium mill products from Russia, without similar treatment for unwrought
products, in particular for sponge, could materially affect competition in the
domestic titanium industry. The Company is vigorously supporting the granting of
the petition to provide GSP treatment for all unwrought products.
Competition in the Fabrication and Distribution Group is primarily on the
basis of price, quality, timely delivery and customer service. Weld-Tech
competes with a number of other fabricators, some of which are significantly
larger, in the offshore oil and gas exploration and production industry.
MARKETING AND DISTRIBUTION
RTI markets its titanium mill products and related products and services
worldwide. The majority of the company's sales are made through its own sales
force and smaller amounts through independent distributors. RTI's domestic sales
force has offices in Niles, Ohio; Houston, Texas; Brea, California; Washington,
Missouri; and Salt Lake City, Utah. Technical marketing personnel are available
to service these offices and to assist in new product applications and
development. In addition, the Company's Customer Technical Service and Research
and Development departments, both located in Niles, Ohio, provide extensive
customer support. Sales of products and
7
<PAGE> 10
services provided by companies in the Fabrication and Distribution Group are
made by personnel at each plant location. Major locations are in Solon and
Niles, Ohio; Houston, Texas; Sullivan and Washington, Missouri; and Birmingham,
England. Major distribution centers are located in California, Texas, Missouri,
Connecticut, and England.
RESEARCH, TECHNICAL AND PRODUCT DEVELOPMENT
The Company conducts research, technical and product development activities
at facilities in Niles, Ohio. The principal goals of the Company's research
program are maintaining technical expertise in the production of titanium mill
and fabricated products and providing technical support in the development of
new markets and products. In addition to the Company's own funding, certain
major customers have assisted in funding the Company's development of specific
titanium applications. Research, technical and product development costs totaled
$4.5 million in 1999, $4.4 million in 1998 and $3.7 million in 1997. Customer
assisted funding, which is treated as a reduction of research and development
spending, reduced the Company's portion of research and development expense to
$4.0 million in 1999, $3.9 million in 1998, and $3.1 million in 1997.
The Company has research laboratories in Niles with melting, metal
processing and metal testing facilities and a corrosion laboratory for support
of nonaerospace markets.
PATENTS AND TRADEMARKS
The Company possesses a substantial body of technical know-how and trade
secrets and owns a number of U.S. patents applicable primarily to product
formulations and uses. The Company considers its know-how, trade secrets and
patents important to conduct its business, although no individual item is
considered to be material to the Company's current business.
EMPLOYEES
As of December 31, 1999, the Company and its subsidiaries employed 1,275
persons, 442 of whom were classified as administrative and sales personnel.
1,021 of the total number of employees were in the Titanium Group, while 243
were employed in the Fabrication and Distribution Group.
The United Steelworkers of America ("USWA") represents 465 of the hourly
and clerical and technical employees at RMI's plant in Niles, Ohio and the
hourly employees at the closed facilities in Ashtabula, Ohio. Other than 4
hourly workers at the Ashtabula facility, who are represented by the Oil,
Chemicals and Atomic Workers Union, the Company's other employees are not
represented by a union. After the United Steelworkers of America and RMI failed
to reach agreement on a new contract covering the hourly workforce at its Niles,
Ohio plant, a work stoppage commenced October 1, 1998, and ended on April 12,
1999. The Niles plant is the Company's largest production facility. Operations
at the plant were conducted by nonstriking personnel while negotiations
continued. The hourly and clerical employees agreed to a forty-two month
contract which provided them with increases in wages and pensions while agreeing
to significant changes in work rules. This contract expires in September 2003.
The hourly employees at the facilities in Ashtabula agreed to a five-year
contract on January 15, 1996.
8
<PAGE> 11
EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are the executive officers of the Company, together with their
ages as of December 31, 1999, and titles.
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
Timothy G. Rupert......................... 53 President and Chief Executive Officer
John H. Odle.............................. 57 Executive Vice President
Lawrence W. Jacobs........................ 44 Vice President, Chief Financial Officer, and Treasurer
Dawne S. Hickton.......................... 42 Vice President and General Counsel
Gordon L. Berkstresser.................... 52 Vice President and Controller
Richard R. Burkhart....................... 49 Group Vice President - Fabrication and Distribution
Group (resigned February 1, 2000)
Harry B. Watkins.......................... 61 Vice President (retired January 31, 2000)
</TABLE>
Mr. Rupert was elected President and Chief Executive Officer in July 1999
and had served as Executive Vice President and Chief Financial Officer since
June of 1996 and Vice President and Chief Financial Officer since September
1991. He is also a Director of the Company.
Mr. Odle was elected Executive Vice President in June 1996. He previously
was Senior Vice President-Commercial of RMI and its predecessor since 1989 and
served as Vice President-Commercial from 1978 until 1989. Prior to that, Mr.
Odle served as General Manager-Sales. He is also a Director of the Company.
Mr. Jacobs was elected Vice President Chief Financial Officer in July 1999,
having served as Vice President and Treasurer since March 1998. Mr. Jacobs had
been Senior Vice President of PNC Bank, N.A. in Pittsburgh, Pennsylvania, where
he was the segment executive for the bank's metal industry clients.
Ms. Hickton was elected Vice President and General Counsel in June 1997.
Ms. Hickton had been an Associate Professor of Law at The University of
Pittsburgh School of Law and was associated with the Pittsburgh law firm of
Burns, White and Hickton.
Mr. Berkstresser was elected Vice President and Controller in October 1999.
Mr. Berkstresser joined RTI in February 1999 as Group Controller of the
Fabrication and Distribution Group. Prior to that, he was Senior Vice President
Finance and Administration of ERI Services Inc., a wholly owned subsidiary of
Equitable Resources Inc. Formerly, he worked for Aristech Chemical Corporation,
Pittsburgh, Pennsylvania. Mr. Berkstresser is a Certified Public Accountant.
Mr. Burkhart resigned in February 2000 to pursue other business interests
outside the Company. Mr. Burkhart who was elected Group Vice President of the
Fabrication and Distribution Group in February 1999, had been half-owner and
President of NCM prior to its acquisition by RTI on October 1, 1998.
Mr. Watkins who was elected Vice President on April 25, 1996, retired on
January 31, 2000. Mr. Watkins was President of RTI Energy Systems, Inc., while
serving in the capacity of Vice President of the Company.
9
<PAGE> 12
ITEM 2. PROPERTIES
MANUFACTURING FACILITIES
The Company has approximately 840,000 square feet of manufacturing
facilities, exclusive of office space, which are located primarily in Niles,
Ohio. The Company's principal manufacturing plants, the principal products
produced at such plants and their aggregate capacities are set forth below.
MANUFACTURING FACILITIES
<TABLE>
<CAPTION>
ANNUAL RATED
LOCATION PRODUCTS CAPACITY
-------- -------- ------------
<S> <C> <C>
TITANIUM
- --------
Niles, Ohio Ingot (million pounds)............................. 36
Niles, Ohio Mill Products (million pounds)..................... 22
Hermitage, PA Tube (thousand pounds)............................. 780
Salt Lake City, UT Powders (million pounds)........................... 1.5
Canton, Ohio Ferro titanium and specialty alloys (million
pounds)............................................ 16
FABRICATION AND DISTRIBUTION
- ----------------------------
Washington & Hot-Formed and superplastically formed
Sullivan, MO components (thousand press hours).................. 21
Solon, Ohio Extruded products (million pounds)................. 1.8
Houston, TX Fabrication oil and gas products (thousand man
hours)............................................. 246
Birmingham, England Cut parts and components (thousand man hours)...... 21
</TABLE>
The Company owns all of the foregoing facilities, except for the Solon,
Ohio; Sullivan, Missouri; Birmingham, England and certain buildings and property
at Washington, Missouri, all of which are leased. The plants have been
constructed at various times over a long period, many of the buildings have been
remodeled or expanded and additional buildings have been constructed from time
to time.
CONVERSION SERVICES
The Company utilizes third-party converters to melt and/or finish
approximately 35% of its mill products. The use of these converters raises the
Company's effective processing capacity. Certain mill products, such as hot band
and cold rolled strip and oversized plate, are produced entirely by such
converters using semi-finished titanium mill products supplied by RMI. However,
RMI is responsible for inspecting and delivering these products to customers.
RMI maintains long-term relationships with many of these conversion companies.
The Company believes that, if necessary, it could obtain alternative sources for
conversion services.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. Given the
critical nature of many of the aerospace end uses for the Company's products,
including specifically their use in critical rotating parts of gas turbine
engines, the Company maintains aircraft products liability insurance of $250
million, which includes grounding liability.
ENVIRONMENTAL
The Company is subject to extensive federal, state and local laws and
regulations concerning environmental matters. During each of 1999, 1998 and
1997, the Company spent approximately $1.4 million, $1.4 million and $1.3
million, respectively, for environmental-related expenditures. The Company
estimates environmental-related expenditures, including capital items and
compliance costs, will total approximately $3.0 million during the 2000-2001
period.
10
<PAGE> 13
In connection with the 1990 Reorganization, the Company assumed all
responsibility for environmental matters relating to RMI Company and its
immediate predecessor, Reactive Metals, Inc., which commenced business on April
1, 1964, and agreed to indemnify Quantum and USX against any liability relating
to such environmental matters. Quantum and USX have been named as potentially
responsible parties in connection with the Fields Brook Superfund site discussed
below. In addition, Quantum initially acquired the Company's now closed
Ashtabula facilities in 1950, which it owned until 1964, when they were acquired
by Reactive Metals, Inc. Although the Company believes it may have claims with
respect to possible remediation and other costs against Quantum for the pre-1964
period, ultimate apportionment of any liability between the Company and Quantum
has not been finally agreed upon.
Active Investigative or Cleanup Sites. The Company is involved in
investigative or cleanup projects at certain waste disposal sites, including
those discussed below.
Fields Brook Superfund Site. The Company, together with 31 other companies,
has been identified by the U. S. Environmental Protection Agency the ("EPA") as
a potentially responsible party ("PRP") under Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") with respect to a superfund
site defined as the Fields Brook Watershed in Ashtabula, Ohio, which includes
the Company's now closed Ashtabula facilities. A remedial action contractor was
selected recently and cleanup is expected to take place in 2000 with a small
portion of the work to be completed in 2001. Based on the bid, the estimated
cost of overseeing the project and the long-term maintenance of the landfill,
the cost of remediation is estimated to be $15.0 million. The actual cost of
remediation may vary from the estimate depending upon any number of factors.
The Company and twelve others have entered into a cleanup allocation
agreement which assigns 9.44% of the cost to RMI. However, actual percentages
may be more or less based on contributions from other parties which are not
currently participating in the allocation agreement. The Company has accrued an
amount for this matter. See note 14 to the consolidated financial statements.
Resource Conservation and Recovery Act of 1976 ("RCRA")
Proceedings-Ashtabula Sodium Plant. The Company, through its independent
environmental consultant, has identified and reported to the EPA the presence of
metals and hazardous organic materials on portions of its closed facilities in
Ashtabula, Ohio. As to the organic material, the consultant has determined it
originates from an off-site source, and the Company does not anticipate it will
be required to clean up this material.
A Corrective Measures Study report prepared for the Company by the
consultant states that the presence of metals would not be expected to have an
adverse impact on humans or the environment, and, after conducting a detailed
analysis of cleanup alternatives, the study recommended that metals contaminated
material be consolidated at an on-site landfill and contained in place, at an
estimated cost of $1 million. The EPA has approved the Corrective Measures Study
but has not yet selected a cleanup alternative. The Company has accrued an
amount for this matter. See note 14 to the consolidated financial statements.
Ashtabula River. The Ashtabula River and Harbor has been designated one of
43 Areas of Concern on the Great Lakes by the International Joint Commission.
Fields Brook empties into the Ashtabula River, which in turn flows into Lake
Erie. The State of Ohio has appropriated $7 million in state funds to the
Ashtabula River dredging project to assist in securing federal funds needed to
conduct the dredging.
The Company believes it is most appropriate to use public funds to cleanup
a site with regional environmental and economic development implications such as
the Ashtabula River and Harbor. The Ashtabula River Partnership ("ARP"), a
voluntary group of public and private entities including, among others, the
Company, the EPA, and the Ohio EPA, was formed in July 1994 to bring about the
remediation of the river. The ARP is working both to design a cost-effective
remedy and to secure public funding. Phase 1, the Comprehensive Management Plan,
is well underway and is completely funded with public money. To fund the
Detailed Design and Remedial Action, the Company has estimated the private
contribution to the project could approximate $10 million, of which roughly 10%
is allocated to the Company (before contributions from third parties). It is
possible that the EPA could determine that the Ashtabula River and Harbor should
be designated as an extension of the Fields Brook Superfund site, or,
alternatively, as a separate Superfund site. It is not possible at this time to
predict the methods or responsibility for any remediation and whether the
Company will have any liability for any costs incurred in cleaning up the
Ashtabula River and Harbor. However, the Company has accrued an amount for
11
<PAGE> 14
this matter based on its best estimate of its share of the currently proposed
remediation plan. The Fields Brook PRP group has indicated to the Ashtabula
River Partnership the group's willingness to participate in funding in exchange
for a release from CERCLA liability. See note 14 to the consolidated financial
statements.
With respect to each of the above sites, all of which are located in Ohio,
the State of Ohio may assert its interests and rights independent of those of
the EPA. The Company has notified all its insurers relative to the environmental
claims reported above and has demanded that the insurers assume the Company's
defense of such claims and indemnify the Company against such claims. The
Company has settled claims with several insurers.
Given the status of the proceedings at certain of these sites, and the
evolving nature of environmental laws, regulations, and remediation techniques,
the Company's ultimate obligation for investigative and remediation costs cannot
be predicted. It is the Company's policy to recognize environmental costs in its
financial statements when an obligation becomes probable and a reasonable
estimate of exposure can be determined. At December 31, 1999, the amount accrued
for future environmental-related costs was $2.6 million. Based on available
information, RMI believes that its share of potential environmental-related
costs, before expected contributions from third parties, is in a range from $4.2
to $7.0 million in the aggregate. The amount accrued is net of expected
contributions from third parties (which does not include any amounts from
insurers) of approximately $2.1 million which the Company believes are probable.
The Company has been receiving contributions from such third parties for a
number of years as partial reimbursement for costs incurred by the Company. As
these proceedings continue toward final resolution, amounts in excess of those
already provided may be necessary to discharge the Company from its obligations
for these sites.
The ultimate resolution of the foregoing contingencies could, individually
or in the aggregate, be material to the consolidated financial statements.
However, management believes that RMI will remain a viable and competitive
enterprise even though it is possible these matters could be resolved
unfavorably.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
12
<PAGE> 15
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
COMMON STOCK DATA:
Principal market for common stock: New York Stock Exchange
Holders of record of common stock at January 31, 2000: 978
RANGE OF COMMON STOCK PRICES AND DIVIDENDS FOR 1999
<TABLE>
<CAPTION>
DIVIDEND
QUARTER HIGH LOW DECLARED
- ------- ------ ------ --------
<S> <C> <C> <C>
First............................................. $16 $ 9 1/8 $ --
Second............................................ 15 9 1/8 --
Third............................................. 14 9/16 9 1/8 --
Fourth............................................ 10 1/16 5 7/16 --
Year.............................................. $16 $ 5 7/16 $ --
</TABLE>
RANGE OF COMMON STOCK PRICES AND DIVIDENDS FOR 1998
<TABLE>
<CAPTION>
DIVIDEND
QUARTER HIGH LOW DECLARED
- ------- ------ ------ --------
<S> <C> <C> <C>
First............................................. $24 11/16 $20 $ --
Second............................................ 23 1/8 20 1/16 --
Third............................................. 23 7/8 16 11/16 --
Fourth............................................ 20 10 5/8 --
Year.............................................. $24 11/16 $10 5/8 $ --
</TABLE>
The Company has not paid dividends on its Common Stock since the second
quarter of 1991. The declaration of dividends is at the discretion of the Board
of Directors of the Company. The declaration and payment of future dividends and
the amount thereof will be dependent upon the Company's results of operations,
financial condition, cash requirements for its business, future prospects and
other factors deemed relevant by the Board of Directors.
13
<PAGE> 16
ITEM 6. SELECTED FINANCIAL DATA
FIVE YEAR SUMMARY
Years Ended December 31
(Dollars in thousands except for per share data)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales............................... $243,309 $337,476 $318,530 $251,357 $171,166
Operating income (loss)............. 4,769 67,996 56,315 33,730 (5,220)(1)
Income (loss) before income taxes... 3,527 70,101 57,317 31,659 (11,808)
Net income (loss)................... 2,223 68,143(2) 60,085(2) 31,759 (4,608)(3)
BALANCE SHEET DATA:
(at end of period)
Working Capital..................... $209,174 $196,225 $184,824 $132,136 $ 86,738
Total assets........................ 400,243 396,020 291,309 215,880 171,559
Long-term debt...................... 36,200 20,080 -- 3,600 64,020
Equity.............................. 295,604 292,765 221,173 158,736(4) 36,889
NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss):
Basic............................. $ 0.11 $ 3.31 $ 2.94 $ 1.71 $ (0.30)
Diluted........................... $ 0.11 $ 3.29 $ 2.92 $ 1.70 $ (0.30)
</TABLE>
- ---------------
(1) Includes a $5.0 million charge for asset impairments under Statement of
Financial Accounting Standards ("SFAS") No. 121.
(2) Includes a $22.8 million and a $21.2 million income tax benefit relating to
NOL utilization and the reduction in the deferred tax valuation allowance in
1998 and 1997, respectively.
(3) Includes a $7.2 million income tax benefit from the recognition of deferred
tax assets.
(4) Includes a $80.3 million increase resulting from the net proceeds of a
common stock offering.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in connection with the information
contained in the Consolidated Financial Statements and Notes to Consolidated
Financial Statements. The following information contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, and are subject to the safe harbor created by that Act. Such
forward-looking statements include, without limitation, statements regarding the
future availability and prices of raw materials, competition in the titanium
industry, demand for the Company's products, the historic cyclicality of the
titanium and aerospace industries, uncertain defense spending, long-term supply
agreements, the ultimate determination of pending trade petitions, global
economic conditions, the Company's order backlog and the conversion of that
backlog into revenue, labor relations, the impact of Year 2000 compliance, and
other statements contained herein that are not historical facts. Because such
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from those
expressed or implied by such forward-looking statements. These and other risk
factors are set forth below in the "Outlook" section, as well as being described
in the Company's other filings with the Securities and Exchange Commission
("SEC") over the last 12 months, copies of which are available from the SEC or
may be obtained upon request from the Company.
OVERVIEW
Historically, a majority of the U.S. titanium industry's output has been
used in aerospace applications. The cyclical nature of the aerospace industry
has been the principal cause of the fluctuations in performance of companies
engaged in the titanium industry. Over the past 20 years, titanium mill products
shipments registered a cyclical peak of 62 million pounds in 1997 and a low of
32 million pounds in 1983.
14
<PAGE> 17
In the last several years, commercial aerospace markets have shown a
significant increase in demand although 1999 reflected a reduction over prior
years while military aerospace markets have stabilized at reduced build rate
levels. In the 1995-1997 period, most major commercial airlines reported
stronger operating profits and, during this same period, aircraft manufacturers
increased build rates. As of December 31, 1999, the leading manufacturers of
commercial aircraft, Boeing Commercial Airplane Group and Airbus Industrie,
reported an aggregate of 2,957 planes under firm order and deliverable over the
next five years. The comparable backlogs as of December 31, 1998 and 1997 were
3,095 and 2,753 planes, respectively. The Company estimates that total industry
shipments of titanium mill products in 1999 were 45 million pounds, down from 60
million pounds in 1998.
Because of the ongoing Asian financial crisis, production difficulties at
its manufacturing facilities and uncertain global economic conditions which
affected the demand for commercial aircraft, Boeing Commercial Airplane Group
has recently made a number of announcements reducing its forecasted production
rates on a number of aircraft models in the 2000-2001 time frame. Boeing and
Airbus Industrie, through direct purchases and their families of subcontractors,
consume the majority of titanium mill products produced for aerospace needs.
These companies and their subcontractors exercise considerable purchasing power
in the industry. Aerospace contractors have announced delivery delays and
rescheduling resulting from the Boeing announcements and, therefore, a need to
adjust inventory requirements downward from peak levels. The reduction of
commercial aircraft build rates will impact the overall demand for titanium mill
products for at least the next two to three quarters. Based on currently
available information, the Company anticipates that the U.S. titanium industry's
total shipments will decrease in 2000 from 1999 levels; although, the amount of
decrease cannot be accurately predicted. If worldwide economic conditions cause
commercial airlines to cancel or delay aircraft, titanium demand and pricing
could come under further pressure.
In recent years, the Company has devoted significant resources to
developing new markets for titanium in the oil and gas and geothermal energy
production industries. In addition to designing and fabricating the world's
first all titanium high pressure drilling riser in 1995, the Company has also
produced significant quantities of seamless titanium pipe for use in geothermal
energy applications. The Company also supplied titanium stress joints for use in
a production riser system located in the Gulf of Mexico. In an effort to expand
on these successes, and reach other offshore application markets, in October
1998 the Company acquired the assets of Weld-Tech of Houston, Texas. Weld-Tech
fabricates oil and gas components such as production manifolds, connectors and
riser systems used in offshore oil and gas production. Additionally, the Company
formed a new subsidiary, RTI Energy Systems, Inc., which engineers, designs and
markets offshore riser systems, stress joints, drill pipe and components. RTI
intends to build on its capabilities in these areas.
RTI's strategy is to build on its leading position in the worldwide
titanium industry while maintaining a strong financial condition and stringent
quality, safety and environmental standards. RTI is emphasizing higher margin
products in its traditional markets, while continuing to develop new markets and
products such as seamless tubulars for oil and gas and geothermal energy
production.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net Sales. Net sales for the year ended December 31, 1999 decreased to
$243.3 from $337.5 million in 1998, a decrease of $94.2 million, or 28%. Sales
in the Titanium Group decreased to $125.1 million in 1999 from $229.2 million in
1998. This decrease was due primarily to reduced titanium mill product shipments
in the first half of 1999 during the continuation of the work stoppage for 3 1/2
months at RMI's Niles, Ohio plant and the remobilization period in May and June
following the work stoppage. Mill product shipments for 1999 amounted to 8.9
million pounds compared to 17.0 million pounds in 1998. Average realized selling
prices for mill products increased to $16.06 per pound in 1999 compared to
$15.15 per pound in 1998 as a result of improved product mix. Fabrication and
Distribution Group sales increased to $100.2 million in 1999 from $91.6 in 1998.
Fabrication and Distribution sales were favorably impacted by the full year
effect in 1999 of the additions of NCM and Weld-Tech during the fourth quarter
of 1998. This increase was partially offset by reduced sales in the Company's
energy businesses.
15
<PAGE> 18
Gross Profit. Gross profit for the year ended December 31, 1999 amounted to
$33.6 million, or 13.8% of sales compared to $91.8 million, or 27.2% of sales in
1998. This decrease results primarily from work stoppage related effects,
reduced margins and shipment levels in Fabrication and Distribution energy
markets and startup costs at the Company's newly expanded Galt Alloys facility.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses amounted to $24.8 million in 1999 compared to $19.9
million in 1998. This increase results primarily from the full year effect of
the acquisitions of NCM and Weld-Tech.
Research, Technical and Product Development Expenses. Gross research,
technical and product development costs amounted to $4.5 million in 1999 and
$4.4 million in 1998. Certain customers assist in funding the Company's overall
research and product development costs. Such funding, which is treated as a
reduction of expense, reduced the Company's portion of research and development
expense to $4.0 million in 1999 and $3.9 million in 1998.
Operating Income. Operating income for the year ended December 31, 1999
amounted to $4.8 million, or 2.0% of sales compared to $68.0 million, or 20.2%
of sales in 1998. This reduction results primarily from work stoppage related
effects, reduced margins and shipment levels in Fabrication and Distribution's
energy markets and startup costs at the Company's newly expanded Galt Alloys
facility. Full year effects of the Company's newly acquired New Century Metals
and Weld-Tech acquisitions also increased period costs in selling, general and
administrative expenses.
Income Taxes. For the year ended December 31, 1999, the Company recorded a
provision for income taxes of $1.3 million compared to $2.0 million provision in
1998. The income tax provision of $1.3 million recorded in 1999 is comprised of
a current income tax benefit of $4.2 million and a deferred tax provision of
$5.5 million. The income tax provision of $2.0 million recorded in 1998 was
comprised of a current provision of $8.2 million and a deferred tax benefit of
$6.2 million. The effective tax rate for the year ended December 31, 1999 was
approximately 37% compared to 2.8% in 1998. The difference between the statutory
tax rate of 35% and the effective rate for the year ended December 31, 1999 is
primarily due to state income taxes and non-deductible goodwill amortization.
The difference between the statutory tax rate of 35% and the effective tax rate
for the year ended December 31, 1998 was primarily due to adjustments to the
deferred tax valuation allowance.
Other Income. Other income in 1999 amounted to $1.1 million compared to
$2.8 million in 1998. This decrease results primarily from a decrease in
investment income on short-term securities.
Interest Expense. Interest expense in 1999 amounted to $2.6 million
compared to $0.7 million in 1998. This increase results primarily from increased
levels of borrowing.
Net Income. Net income for year ended December 31, 1999 amounted to $2.2
million, or 0.9% of sales compared to $68.1 million, or 20.2% of sales in 1998.
This decrease is due primarily to reduced titanium mill product shipments,
startup costs at the Company's Galt facility, the work stoppage and restart of
operations in the first half and higher losses in the Fabrication and
Distribution businesses.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net Sales. Net sales for the year ended December 31, 1998 increased to
$337.5 from $318.5 million in 1997, an increase of $19.0 million, or 6%. Sales
in the Titanium Group decreased to $229.1 million in 1998 from $243.9 million in
1997. This decrease is due primarily to reduced titanium mill product shipments
in the fourth quarter of 1998 resulting from the work stoppage at RMI's Niles,
Ohio plant, partially offset by higher average selling prices on mill products
and a shift in product mix toward more value-added higher margin flat rolled
products such as sheet and plate and away from lower margin commodity products
such as billet and bloom. Mill product shipments for 1998 amounted to 17.0
million pounds compared to 18.8 million pounds in 1997. Average realized selling
prices for mill products increased to $15.15 per pound in 1998 compared to
$14.23 per pound in 1997. Fabrication and Distribution Group sales increased to
$91.6 million in 1998 from $61.4 in 1997. Fabrication and Distribution sales
were favorably impacted by the addition of New Century Metals and Weld-Tech
during the fourth quarter of 1998.
Gross Profit. Gross profit for the year ended December 31, 1998 amounted to
$91.8 million, or 27.2% of sales compared to $72.8 million, or 22.9% of sales in
1997. This increase results primarily from increased selling
16
<PAGE> 19
prices for titanium mill products, a favorable shift in product mix to higher
value-added flat rolled products and the inclusion of NCM and Weld-Tech results,
partially offset by the effects of the work stoppage.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses amounted to $19.9 million in 1998 compared to $13.4
million in 1997. This increase results primarily from increased levels of
business activity and the acquisitions of New Century Metals and Weld-Tech.
Research, Technical and Product Development Expenses. Gross research,
technical and product development costs amounted to $4.4 million in 1998 and
$3.7 million in 1997. Certain customers assist in funding the Company's overall
research and product development costs. Such funding, which is treated as a
reduction of expense, reduced the Company's portion of research and development
expense to $3.9 million in 1998 and $3.1 million in 1997.
Operating Income. Operating income for the year ended December 31, 1998
amounted to $68.0 million, or 20.2% of sales compared to $56.3 million, or 17.7%
of sales in 1997. This improvement resulted primarily from increases in average
realized selling prices, a shift in mill product shipments from low margin
commodity products to higher-value flat rolled products and the inclusion of NCM
and Weld-Tech operating results during the fourth quarter, partially offset by
the adverse effects of the work stoppage.
Income Taxes. For the year ended December 31, 1998, the Company recorded a
provision for income taxes of $2.0 million compared to a $2.8 million income tax
benefit in 1997. The income tax provision of $2.0 million recorded in 1998 is
comprised of a current income tax provision of $8.2 million and a deferred tax
benefit of $6.2 million. Both components were significantly affected by
adjustments to the Company's deferred tax asset valuation allowance resulting
from changes in the Company's expectations about the ultimate realization of its
deferred tax assets. Exclusive of these adjustments, the effective federal tax
rate for the year ended December 31, 1998 was approximately 26%. The difference
between the statutory tax of 35% and the effective tax rate for the year ended
December 31, 1998 is primarily due to adjustments to the deferred tax asset
valuation allowance related to expected current year results.
Other Income. Other income in 1998 amounted to $2.8 million compared to
$1.2 million in 1997. This increase results primarily from increased investment
income on short-term securities.
Interest Expense. Interest expense in 1998 amounted to $0.7 million
compared to $0.2 million in 1997. This increase results primarily from increased
levels of borrowing.
Net Income. Net income for year ended December 31, 1998 amounted to $68.1
million, or 20.2% of sales compared to $60.1 million, or 18.9% of sales in 1997.
This increase is due primarily to increased profit margins on titanium mill
products partially offset by increased income tax expense and the unfavorable
effects of the work stoppage.
OUTLOOK
Because of the Asian financial crisis, production difficulties at its
manufacturing facilities and uncertain global economic conditions which affects
the demand for commercial aircraft, Boeing Commercial Airplane Group recently
made a number of announcements reducing its forecasted production rates on a
number of aircraft models in the 2000-2001 time frame. Aerospace contractors
have announced delivery delays and rescheduling resulting from the Boeing
announcements and, therefore, a need to adjust inventory requirements downward
from peak levels. The extent or duration of this inventory adjustment period, or
the amount of excess inventory in the procurement pipeline is unknown. The
Company has experienced some order cancellations, and in addition volume and
pricing of incoming orders has shown some softening particularly in forging
products such as ingot and bloom. Demand and pricing for the Company's core
value-added products, alloy sheet and plate, while softening somewhat, remain
relatively strong. The reduction of commercial aircraft build rates will impact
the overall demand for titanium mill products for at least the next two to three
quarters. However, increased military spending should result in increased
military aerospace demand. Based on currently available information, the Company
anticipates that the U.S. titanium industry's total shipments will decrease in
2000 from 1999 levels although the amount of decrease cannot be accurately
predicted. If worldwide economic conditions cause commercial airlines to cancel
or delay aircraft, titanium demand and pricing could come under further
pressure.
17
<PAGE> 20
On January 29, 1998, RMI entered into an agreement with Boeing Commercial
Airplane Group whereby RMI would supply Boeing and its family of commercial
suppliers with up to 4.5 million pounds of titanium products annually. The
agreement, which began in 1999, has an initial term of five years and, subject
to review by the parties in the fourth year, could be extended for an additional
five years. Under the accord, Boeing receives firm prices in exchange for RMI
receiving a minimum volume commitment of 3.25 million pounds per year. If
volumes drop below the minimum commitment, the contract contains provisions for
financial compensation. In accordance with the agreement RMI presented a demand
notice of approximately $7.0 million to Boeing Commercial Airplane Group for
such compensation since 1999 shipments amounted to only 900,000 pounds. RMI has
not yet received any of the proceeds related to this claim, nor has it accrued
the effect of the expected revenues.
In another accord, RMI, through its French affiliate, Reamet, was chosen by
Aerospatiale as the major supplier of the titanium flat rolled products required
for its Airbus programs beginning in 1999 and extending through 2001.
Requirements are principally for flat rolled products, including value added
cut-to-size shapes.
During the second quarter of 1998, RMI was designated the sole supplier of
titanium mill products for the Air Force F-22 fighter being built by Lockheed
Martin and Boeing. The new contract began in 1998 and will continue through the
life of the program with approximately 339 aircraft forecast to be produced by
the year 2012. Revenues over the life of this contract could potentially total
$340 million.
RMI was also selected by military aircraft producers Boeing and Northrop as
the principal supplier of titanium alloy plate and alloy sheet including
just-in-time, cut-to-size products, for the C-17 Transport and the F/A-18 Hornet
programs. The Hornet program includes the new E/F version which utilizes
considerably more titanium than earlier C/D models. The agreement began in May
1999 and runs through April 2001.
RMI is also the principal supplier of alloy sheet to B.F. Goodrich
Aerospace Aerostructures Group, which designs and manufactures engine nacelle
systems for large commercial and military aerospace applications. RMI has
contracts with Construcciones Aeronauticas S.A. (CASA) of Spain and Daimler-Benz
Aerospace AG of Germany for their alloy plate and sheet requirements in
connection with the Airbus and Eurofighter programs. All three contracts, with
potential revenues totaling $60 million, began in 1999 and extend for a minimum
of three years.
As a result of softening aerospace demand, and the aerospace inventory
adjustments referred to above, the Company's total order backlog as of December
31, 1999 was approximately $150 million, compared to $303 million at December
31, 1998. The backlog includes amounts for the Company's newly acquired
subsidiaries, New Century Metals and Weld-Tech Engineering Services L.P.
On April 12, 1999, a strike by the United Steelworkers of America that
began on October 1, 1998 was settled by negotiation. The Niles plant is the
Company's largest production facility. Operations at the plant were conducted by
nonstriking personnel at a rate of approximately 40-50% of normal production
levels while negotiations continued. The cost of the strike, including lost
shipments, was estimated to have been between $1.0 to $2.5 million per month.
Fourth quarter 1998 and first quarter 1999 results were adversely impacted by
the effects of the work stoppage. Second quarter 1999 results were also effected
as the strike extended until April 12, 1999 and startup and retraining time
delayed the resumption of full operations until July 1999.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows from operating activities totaled $20.0 million in 1999
compared to $33.1 million in 1998. The change in net cash flows from operating
activities for the year ended December 31, 1999, compared to the comparable 1998
period was due primarily to reduced income partially offset by reduced spending
on working capital compared to 1998. Working capital amounted to $209.2 million
at December 31, 1999, compared to $196.2 million at December 31, 1998. The
increase in working capital results primarily from the repayment of the NCM note
payable in January 1999. The Company's working capital ratio was 5.8 to 1 at
December 31, 1999 compared to 4.3 to 1 at December 31, 1998.
During 1999 and 1998, the Company's cash flow requirements for capital
expenditures were funded by cash flow from operations and borrowing under the
Company's $150 million unsecured credit facility. Cash flow
18
<PAGE> 21
requirements for the acquisitions made in 1998 were provided through a
combination of cash from operating activities and borrowings under the Company's
credit facility. No acquisitions were made in 1999.
The Company anticipates that it will be able to fund its 2000 working
capital requirements and its capital expenditures from funds generated primarily
by operations.
On September 9, 1999, RTI filed a universal shelf registration with the
Securities and Exchange Commission. The registration would permit RTI to issue
up to $100 million of debt and/or equity securities at an unspecified future
date. The proceeds of any such issuance could be utilized to finance
acquisitions, capital investments or other general purposes; however, RTI has no
immediate plans to do so.
CAPITAL EXPENDITURES
Gross capital expenditures for the years ended December 31, 1999 and 1998
amounted to $27.2 and $33.1 million, respectively. Included in 1999 spending was
$4.4 million on the Galt Alloys expansion, $3.3 million related to a new 5,000
ton press at NCM, $3.0 million for a new machine shop at the Company's Houston
facility, approximately $4.0 million for process improvements in Niles, Ohio and
$9.8 million on the Company's Enterprise Resource Planning (ERP) software
system. RTI anticipates that current capital spending plans can be funded using
cash provided from internally generated sources. Capital spending for 2000 is
budgeted at approximately $15.0 million.
After completing an evaluation of future information technology needs and
growth, together with expanding requirements for additional decision making
tools, the Company decided to install an ERP software system. In 1999 the ERP
system was installed at the Company's largest domestic operations, and will
eventually be installed at all domestic and foreign operations. The Company
spent $6.3 million in 1998. Approximately $1.7 million is budgeted for 2000.
CREDIT AGREEMENT
RTI entered into an unsecured credit agreement, dated September 30, 1998
(the "Credit Facility"), to replace RMI's then existing credit facilities. This
agreement provides for $125 million five-year and $25 million one-year
borrowings, on a revolving basis, of up to the lesser of $150 million or a
borrowing base equal to the sum of 85% of qualifying accounts receivable and 60%
of qualifying inventory. Total borrowings are subject to a maximum leverage test
in accordance with the agreement. Under the terms of the Credit Facility, the
Company, at its option, will be able to borrow at (a) a base rate (which is the
higher of PNC Bank's prime rate or the Federal Funds Effective Rate plus 0.5%
per annum), or (b) LIBOR plus a spread (ranging from 0.5% to 1.5%) determined by
the ratio of the Company's consolidated total indebtedness to consolidated
earnings before interest, taxes, depreciation and amortization. At December 31,
1999, the Company was in compliance with all covenants under this credit
agreement and, under these covenants, had additional borrowing capacity of
approximately $23.4 million. At December 31, 1999, $36.2 million was outstanding
under the facility.
ENVIRONMENTAL MATTERS
The Company is subject to environmental laws and regulations as well as
various health and safety laws and regulations that are subject to frequent
modifications and revisions. While the costs of compliance for these matters
have not had a material adverse impact on the Company in the past, it is
impossible to predict accurately the ultimate effect these changing laws and
regulations may have on the Company in the future.
At December 31, 1999, the amount accrued for future environment-related
costs was $2.6 million. Based on available information, the Company believes its
share of potential environmental-related costs, before expected contributions
from third parties, is in a range from $4.2 million to $7.0 million, in the
aggregate. The amount accrued is net of expected contributions from third
parties (which does not include any amounts from insurers) of approximately $2.1
million, which the Company believes are probable. The Company has received
contributions from such third parties for a number of years as partial
reimbursement for costs incurred by the Company. As these proceedings continue
toward final resolution, amounts in excess of those already provided may be
necessary to discharge the Company from its obligations for these projects.
19
<PAGE> 22
The ultimate resolution of these environmental matters could individually,
or in the aggregate, be material to the consolidated financial statements.
However, management believes that the Company will remain a viable and
competitive enterprise even though it is possible that these matters could be
resolved unfavorably.
NEW ACCOUNTING STANDARDS
The FASB issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" in June 1998. SFAS No. 133 requires all derivatives to be
recognized as either assets or liabilities on the balance sheet and be measured
at fair value. Changes in such fair value will be recognized in income
immediately if the derivatives are deemed not to be effective hedges. SFAS No.
133 is effective for fiscal years beginning after June 15, 2000. The Company is
currently assessing the financial effect of the adoption of SFAS No. 133.
YEAR 2000 COMPLIANCE
This is a "Year 2000 readiness disclosure" as that term is defined in the
Year 2000 Information and Readiness Disclosure Act of 1998. Beginning in January
of 1996, the Company began to aggressively manage its computer software and
hardware to insure that the Year 2000 date change would not adversely impact its
business. The Company made certain investments in its application software to
ensure the Company was Year 2000 compliant. In addition, the Company monitored
the compliance efforts of entities with which it interacts. The Company began
modification of its internally developed proprietary software in 1996.
Noninformation technology systems such as process control devices and other
automated equipment which may have contained imbedded chips that could have been
affected by the year 2000 problem were identified and modified during 1999. The
Company contacted its key vendors, suppliers and service providers to monitor
their compliance efforts. A follow-up was made with those third parties not
responding to the Company's original request. To the extent necessary, the
Company identified alternative suppliers. A survey of the Company's customers to
assess their Year 2000 readiness was performed. The Company spent $1.0 million
to inventory, assess, modify and test both its information and noninformation
technology requirements. These costs do not include the Enterprise Resource
Planning software.
Following a thorough evaluation and review of its existing and future
information technology requirements, RTI invested in a packaged Enterprise
Resource Planning (ERP) software system which replaced much of the Company's
existing business systems. Initially, the ERP system was installed at the
Company's largest domestic operations. Eventually, all domestic and foreign
operations will be converted to the new system.
The ERP system is certified Year 2000 compliant. The system replaced
certain existing software which was not restructured to address the year-end
change at December 31, 1999.
The Company spent approximately $16.1 million for consulting, software and
hardware in conjunction with the Enterprise Resource Planning software. Of that
amount, $9.8 million was spent in 1999, and $6.3 million was spent in 1998. The
Company expects to spend an additional $1.7 million in 2000.
The Company believes that its Year 2000 compliance efforts were successful,
that its ability to manufacture and distribute its products was not impaired by
Year 2000 issues, and that it will not incur liability for breach of contract or
other harm arising out of any failure of its ERP system to be Year 2000
compliant.
WORK STOPPAGE
RMI and the United Steelworkers reached an agreement on a four and a half
year agreement after a six month strike which ended April 12, 1999. The new
agreement provided the union with increases in wages and pensions while in turn
they agreed to significant changes in work rules. Operations during the strike
were conducted by management and salaried personnel at a rate of approximately
40-50% of normal production levels. The cost of the strike including the effect
of lost shipments was estimated at $1.0 to $2.5 million per month from January
through June of 1999. Startup and retraining costs were incurred from mid-April
through June. The effect of the work stoppage for the entire fourth quarter 1998
was also estimated at $1.0 to $2.5 million per month. The Niles plant is the
Company's largest production facility.
20
<PAGE> 23
ACQUISITIONS
On October 1, 1998, RTI acquired all of the capital stock of New Century
Metals, Inc., for $35 million and the payment by RTI of certain bank debt
amounting to $8.9 million. The $35 million purchase price consisted of $16
million in cash, a $16 million note, payable January 4, 1999, bearing interest
at 5.81% per annum, and $3 million of the Company's common stock valued at
$19.2875 per share. NCM is a manufacturer and distributor of high temperature
and corrosion resistant alloys such as titanium, stainless steel and nickel, in
long bar form, to the aerospace, chemical processing, oil and gas exploration
and production, and power generation industries. In addition to the
manufacturing facilities, NCM operates four distribution centers in the United
States and one in England.
Also on October 1, 1998, RTI acquired all of the assets of Weld-Tech
Engineering, L.P., for $11.3 million in cash and the payment of a $1.4 million
note owed by Weld-Tech to a corporation, the shareholders of which were also
partners of Weld-Tech. Weld-Tech, based in Houston, Texas, operates under the
name RTI Energy Systems. Weld-Tech provides engineering and fabrication services
for the oil and gas industry, including weld design, fabrication and repair, as
well as materials engineering and testing services.
RTI is also in the process of evaluating other potential acquisition
candidates. RTI evaluates such potential acquisitions on the basis of their
ability to enhance or improve the Company's existing operations or capabilities,
as well as the ability to provide access to new markets and/or customers for its
products. RTI may make acquisitions using its available cash resources,
borrowings under its existing credit facility, new debt financing, RTI Common
Stock, joint venture/partnership arrangements or any combination of the above.
ITEM 7(a). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, the Company is exposed to market risk and
price fluctuations related to the purchases of certain materials and supplies
used in its manufacturing operations. The Company obtains competitive prices for
materials and supplies when available. The majority of the Company's raw
material purchases for titanium sponge and titanium tetrachloride are made under
long-term contracts with negotiated prices.
The Company's long-term debt is based on rates that float with LIBOR based
rates or bank prime rates and the carrying value approximates fair value.
The Company is also subject to foreign currency exchange exposure for
operations whose assets and liabilities are denominated in currencies other than
the U.S. dollar. The Company does not use forward exchange contracts to manage
these risks, which are considered to be minimal. The majority of the Company's
sales are made in U.S. dollars, which minimizes exposure to foreign currency
fluctuation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Management........................................ 22
Report of Independent Accountants........................... 22
FINANCIAL STATEMENTS:
Consolidated Statement of Income for the years ended
December 31, 1999, 1998 and 1997....................... 23
Consolidated Balance Sheet at December 31, 1999 and
1998................................................... 24
Consolidated Statement of Cash Flows for the years ended
December 31, 1999, 1998 and 1997....................... 25
Consolidated Statement of Shareholders' Equity for the
years ended December 31, 1999, 1998 and 1997........... 26
Notes to Consolidated Financial Statements................ 27
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
21
<PAGE> 24
REPORT OF MANAGEMENT
RTI International Metals, Inc., has prepared and is responsible for the
consolidated financial statements and other financial information included in
this Annual Report. The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and necessarily include
some amounts based on the best judgments and estimates of management. Financial
information displayed in other sections of this Annual Report is consistent with
that in the consolidated financial statements.
The Company maintains a comprehensive formalized system of internal
accounting controls. Management believes that the internal accounting controls
provide reasonable assurance that transactions are executed and recorded in
accordance with Company policy and procedures and that the accounting records
may be relied on as a basis for preparation of the consolidated financial
statements and other financial information. In addition, as part of their audit
of the consolidated financial statements, the Company's independent accountants,
who are elected by the shareholders, review and test the internal accounting
controls selectively to establish a basis of reliance thereon in determining the
nature, extent and timing of audit tests to be applied.
The Audit Committee of the Board of Directors, composed entirely of
directors who are not employees of the Company, meets regularly with the
independent accountants, management and internal auditors to discuss the
adequacy of internal accounting controls and the quality of financial reporting.
Both the independent accountants and internal auditors have full and free access
to the Audit Committee.
/s/ T. G. Rupert
T. G. Rupert
President and
Chief Executive Officer
/s/ Lawrence W. Jacobs
Lawrence W. Jacobs
Vice President,
Chief Financial Officer and Treasurer
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF RTI INTERNATIONAL METALS, INC.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of RTI International Metals, Inc. and its subsidiaries at December 31,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
January 28, 2000
22
<PAGE> 25
RTI INTERNATIONAL METALS, INC.
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Sales...................................................... $243,309 $337,476 $318,530
Operating costs:
Cost of sales.............................................. 209,703 245,710 245,687
Selling, general and administrative expenses............... 24,794 19,884 13,397
Research, technical and product development expenses....... 4,043 3,886 3,131
-------- -------- --------
Total operating costs................................. 238,540 269,480 262,215
-------- -------- --------
Operating income........................................... 4,769 67,996 56,315
Other income-net........................................... 1,319 2,773 1,246
Interest expense........................................... (2,561) (668) (244)
-------- -------- --------
Income before income taxes................................. 3,527 70,101 57,317
Provision (credit) for income taxes (Note 8)............... 1,304 1,958 (2,768)
-------- -------- --------
Net income................................................. $ 2,223 $ 68,143 $ 60,085
======== ======== ========
Net income per common share (Note 4)
Basic.................................................... $ 0.11 $ 3.31 $ 2.94
======== ======== ========
Diluted.................................................. $ 0.11 $ 3.29 $ 2.92
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
23
<PAGE> 26
RTI INTERNATIONAL METALS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
ASSETS
ASSETS:
Cash and cash equivalents................................... $ 3,664 $ 11,075
Receivables, less allowance for doubtful accounts of $1,454
and $911 (Note 5)......................................... 56,050 63,077
Inventories, net (Note 6)................................... 175,783 166,835
Deferred income taxes (Note 8).............................. 6,764 2,259
Other current assets........................................ 10,508 11,685
-------- --------
Total current assets................................... 252,769 254,931
Property, plant and equipment, net (Note 7)................. 96,524 77,024
Deferred income taxes (Note 8).............................. 2,274 13,675
Goodwill.................................................... 37,366 38,144
Other noncurrent assets..................................... 11,310 12,246
-------- --------
Total assets........................................... $400,243 $396,020
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Note payable (Note 3)....................................... $ -- $ 16,000
Accounts payable............................................ 20,271 16,279
Accrued wages and other employee costs...................... 16,560 15,446
Other accrued liabilities................................... 6,764 10,981
-------- --------
Total current liabilities.............................. 43,595 58,706
Long-term debt (Note 9)..................................... 36,200 20,080
Accrued postretirement benefit cost (Note 10)............... 19,383 19,020
Other noncurrent liabilities................................ 5,461 5,449
-------- --------
Total liabilities...................................... 104,639 103,255
-------- --------
Commitments and Contingencies (Note 14)
SHAREHOLDERS' EQUITY:
Common Stock, $0.01 par value; 50,000,000 and 30,000,000
shares authorized; 20,860,599 and 20,719,758 shares
issued; and 20,798,299 and 20,719,758 outstanding......... 208 207
Additional paid-in capital.................................. 239,812 238,109
Deferred compensation....................................... (2,660) (2,012)
Treasury Stock, at cost; 62,300 and 0 shares................ (440) --
Accumulated earnings........................................ 58,684 56,461
-------- --------
Total shareholders' equity............................. 295,604 292,765
-------- --------
Total liabilities and shareholders' equity............. $400,243 $396,020
======== ========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
24
<PAGE> 27
RTI INTERNATIONAL METALS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 2,223 $68,143 $60,085
Adjustment for items not affecting funds from operations:
Depreciation and amortization.......................... 9,338 5,426 5,047
Deferred income taxes.................................. 6,894 (6,266) (2,768)
Other noncash charges-net.............................. 1,016 435 617
Changes in assets and liabilities (net of effects of
businesses acquired):
Receivables............................................ 7,027 16,354 (10,463)
Inventories............................................ (8,948) (32,777) (25,886)
Accounts payable....................................... 3,992 (14,322) 7,368
Other current liabilities.............................. (3,103) 514 5,259
Other assets and liabilities........................... 1,609 (4,452) (876)
-------- ------- -------
Cash provided by operating activities................ 20,048 33,055 38,383
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in subsidiaries, net of cash acquired......... (16,000) (39,287) (2,605)
Capital expenditures...................................... (27,179) (33,131) (7,894)
-------- ------- -------
Cash used in investing activities.................... (43,179) (72,418) (10,499)
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of employee stock options........................ 40 184 1,095
Borrowings under revolving credit agreements.............. 16,120 20,080 --
Debt repayments........................................... -- -- (4,565)
Treasury common stock repurchased......................... (440) (37) (147)
-------- ------- -------
Cash provided by (used in) financing activities...... 15,720 20,227 (3,617)
-------- ------- -------
Increase (decrease) in cash and cash equivalents............ (7,411) (19,136) 24,267
Cash and cash equivalents at beginning of period............ 11,075 30,211 5,944
-------- ------- -------
Cash and cash equivalents at end of period.................. $ 3,664 $11,075 $30,211
======== ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest (net of amounts capitalized)......... $ 2,218 $ 412 $ 72
======== ======= =======
Cash paid for income taxes.................................. $ 712 $ 7,982 $ 1,105
======== ======= =======
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for restricted stock awards........ $ 1,502 $ 1,347 $ 832
======== ======= =======
Issuance of note payable for purchase of business........... $ -- $16,000 $ --
======== ======= =======
Issuance of common stock for purchase of business........... $ -- $ 2,774 $ --
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
25
<PAGE> 28
RTI INTERNATIONAL METALS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EXCESS
ADDT'L. TREASURY ACCUMULATED MINIMUM
SHARES COMMON PAID-IN DEFERRED COMMON EARNINGS PENSION
OUTSTANDING STOCK CAPITAL COMPENSATION STOCK (DEFICIT) LIABILITY TOTAL
----------- ------ -------- ------------ -------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996................. 20,290,550 $208 $234,958 $ (557) $(3,078) $(71,767) $(1,028) $158,736
Shares issued for
directors'
compensation......... 3,346 -- 87 -- -- -- -- 87
Shares issued for
restricted stock
award plans.......... 34,950 -- 832 (832) -- -- -- --
Compensation expense
recognized........... -- -- -- 289 -- -- -- 289
Treasury common stock
purchased at cost.... (7,287) -- -- (147) -- -- (147)
Shares issued upon
exercise of employee
stock options........ 125,209 2 1,093 -- -- -- -- 1,095
Net income............. -- -- -- -- -- 60,085 -- 60,085
Adjustment to minimum
pension liability.... -- -- -- -- -- -- 1,028 1,028
Comprehensive income...
---------- ---- -------- ------- ------- -------- ------- --------
Balance at December 31,
1997................. 20,446,768 $210 $236,970 $(1,100) $(3,225) $(11,682) $ -- $221,173
Shares issued for
directors'
compensation......... 4,416 -- 92 -- -- -- -- 92
Shares issued for
restricted stock
award plans.......... 69,125 -- 1,347 (1,347) -- -- -- --
Compensation expense
recognized........... -- -- -- 435 -- -- -- 435
Treasury common stock
purchased at cost.... (1,816) -- -- -- (37) -- -- (37)
Shares issued upon
exercise of employee
stock options........ 45,725 1 183 -- -- -- -- 184
Reorganization of RMI
Titanium Company and
RTI International
Metals............... -- (6) (3,256) -- 3,262 -- -- --
Shares issued in New
Century Metals
acquisition.......... 155,540 2 2,773 -- -- -- -- 2,775
Net income............. -- -- -- -- -- 68,143 -- 68,143
Comprehensive income... -- -- -- -- -- -- --
---------- ---- -------- ------- ------- -------- ------- --------
Balance at December 31,
1998................. 20,719,758 $207 $238,109 $(2,012) $ -- $ 56,461 $ -- $292,765
Shares issued for
directors'
compensation......... 12,841 -- 162 -- -- -- -- 162
Shares issued for
restricted stock
award plans.......... 118,250 1 1,501 (1,502) -- -- -- --
Compensation expense
recognized........... -- -- -- 854 -- -- -- 854
Treasury common stock
purchased at cost.... (62,300) -- -- -- (440) -- -- (440)
Shares issued upon
exercise of employee
stock options........ 9,750 -- 40 -- -- -- -- 40
Net income............. -- -- -- -- -- 2,223 -- 2,223
Comprehensive income...
---------- ---- -------- ------- ------- -------- ------- --------
Balance at December 31,
1999................. 20,798,299 $208 $239,812 $(2,660) $ (440) $ 58,684 $ -- $295,604
========== ==== ======== ======= ======= ======== ======= ========
<CAPTION>
COMPREHENSIVE
INCOME
-------------
<S> <C>
Balance at December 31,
1996.................
Shares issued for
directors'
compensation.........
Shares issued for
restricted stock
award plans..........
Compensation expense
recognized...........
Treasury common stock
purchased at cost....
Shares issued upon
exercise of employee
stock options........
Net income............. $60,085
Adjustment to minimum
pension liability.... 1,028
-------
Comprehensive income... $61,113
=======
Balance at December 31,
1997.................
Shares issued for
directors'
compensation.........
Shares issued for
restricted stock
award plans..........
Compensation expense
recognized...........
Treasury common stock
purchased at cost....
Shares issued upon
exercise of employee
stock options........
Reorganization of RMI
Titanium Company and
RTI International
Metals...............
Shares issued in New
Century Metals
acquisition..........
Net income............. $68,143
-------
Comprehensive income... $68,143
=======
Balance at December 31,
1998.................
Shares issued for
directors'
compensation.........
Shares issued for
restricted stock
award plans..........
Compensation expense
recognized...........
Treasury common stock
purchased at cost....
Shares issued upon
exercise of employee
stock options........
Net income............. $ 2,223
-------
Comprehensive income... $ 2,223
=======
Balance at December 31,
1999.................
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
26
<PAGE> 29
RTI INTERNATIONAL METALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1--ORGANIZATION AND OPERATIONS:
The consolidated financial statements of RTI International Metals, Inc.
(the "Company") include the financial position and results of operations for the
Company and its subsidiaries.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of consolidation:
The consolidated financial statements include the accounts of RTI
International Metals, Inc. and its majority owned subsidiaries. All significant
intercompany accounts and transactions are eliminated.
Use of Estimates:
Generally accepted accounting principles require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at year-end
and the reported amounts of revenues and expenses during the year. Actual
results could differ from these estimates.
Inventories:
Inventories are primarily valued at cost as determined by the last-in,
first-out (LIFO) method which, in the aggregate, is lower than market. Inventory
costs generally include materials, labor costs and manufacturing overhead
(including depreciation).
Depreciation and amortization:
In general, depreciation and amortization of properties is determined using
the straight-line method over the estimated useful lives of the various classes
of assets. For financial accounting purposes, depreciation and amortization are
provided over the following useful lives:
<TABLE>
<S> <C>
Building and improvements................................... 20-25 years
Machinery and equipment..................................... 10-14 years
Furniture and fixtures...................................... 3-10 years
</TABLE>
Retirement and disposal of properties:
The cost of properties retired or otherwise disposed of, together with the
accumulated depreciation provided thereon, is eliminated from the accounts. The
net gain or loss is recognized in other income and expense.
Maintenance and repairs:
Routine maintenance, repairs and replacements are charged to operations.
Expenditures that materially increase values, change capacities or extend useful
lives are capitalized.
Goodwill:
Goodwill arising from business acquisitions, which represents the excess of
the purchase price over the fair value of the assets acquired is generally
amortized over the life of assets acquired, not to exceed 25 years.
Environmental:
The Company expenses environmental expenditures related to existing
conditions from which no future benefit is determinable. Expenditures that
enhance or extend the life of the assets are capitalized. The Company determines
its liability for remediation on a site by site basis and records a liability at
the time when it is probable and can be reasonably estimated. The Company's
estimated liability is reduced to reflect the anticipated
27
<PAGE> 30
participation of other potentially responsible parties in those instances where
it is probable that such parties are legally responsible and financially capable
of paying their respective shares of the relevant costs. The estimated liability
of the Company is not discounted or reduced for possible recoveries from
insurance carriers.
Revenue and cost recognition:
Revenues from the sale of commercial products are recognized upon passage
of title to the customer, which in most cases coincides with shipment. Revenues
from long-term, fixed-price contracts are recognized on the
percentage-of-completion method, measured based on the achievement of certain
milestones in the production and fabrication process. Such milestones have been
weighted based on the critical nature of the operation performed, which
management believes is the best available measure of progress on these
contracts. Revenues related to cost-plus-fee contracts are recognized on the
basis of costs incurred during the period plus the fee earned.
Contract costs comprise all direct material and labor costs, including
outside processing fees, and those indirect costs related to contract
performance. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined.
Contract costs and estimated earnings on uncompleted contracts, net of
progress billings, are included in the consolidated balance sheet under
"Inventories."
Pensions:
The Company and its subsidiaries have a number of pension plans which cover
substantially all employees. Most employees in the Titanium Group are covered by
defined benefit plans in which benefits are based on years of service and annual
compensation. Contributions to the defined benefit plans, as determined by an
independent actuary in accordance with regulations, provide not only for
benefits attributed to date but also for those expected to be earned in the
future. The Company's policy is to fund pension costs at amounts equal to the
minimum funding requirements of ERISA plus additional amounts as may be approved
from time to time.
The majority of employees in the Fabrication and Distribution Group
participate in defined contribution or money purchase plans. Employees of
Tradco, Inc., participate in a defined benefit plan.
Postretirement benefits:
The Company provides health care benefits and life insurance coverage for
certain of its employees and their dependents. Under the Company's current
plans, certain of the Company's employees will become eligible for those
benefits if they reach retirement age while working with the Company. In
general, employees of the Titanium Group are covered by postretirement health
care and life insurance benefits.
The Company does not prefund postretirement benefit costs, but rather pays
claims as presented.
Income taxes:
In connection with the 1990 Reorganization and Initial Public Offering, the
tax basis of RMI Titanium Company's assets at that time reflected the fair
market value of the common stock then issued by RMI. The new tax basis was
allocated to all assets of RMI based on federal income tax rules and
regulations, and the results of an independent appraisal. For financial
statement purposes, these assets are carried at historical cost. As a result,
the tax basis of a significant portion of RMI's assets exceeds the related book
values and depreciation and amortization for tax purposes exceeds the
corresponding financial statement amounts.
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities as
measured by the enacted tax rates which will be in effect when these differences
reverse. In addition, deferred tax assets can result from net operating losses
("NOL") which can be carried forward to offset future taxable income.
Statement of Financial Accounting Standards No. 109 (SFAS No. 109),
"Accounting for Income Taxes," requires a valuation allowance when it is "more
likely than not" that some portion or all of the deferred tax assets
28
<PAGE> 31
will not be realized. The Company continually evaluates the available evidence
supporting the realization of deferred tax assets and adjusts the valuation
allowance accordingly.
Stock-based compensation:
As permitted by the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123), the Company has elected to measure stock-based
compensation under the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB No. 25), and to adopt the
disclosure-only alternative described in SFAS No. 123. For stock options granted
at exercise prices less than fair value, the Company records deferred
stock-based compensation. Such deferred stock-based compensation is amortized
over the vesting period of each individual award.
Cash equivalents:
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
NOTE 3--ACQUISITIONS:
On October 1, 1998, the Company completed the acquisition of two companies,
New Century Metals, Inc. (NCM) and Weld-Tech Engineering, L.P. (Weld-Tech). Both
acquisitions have been accounted for under the purchase method of accounting.
NCM
Pursuant to a Stock Purchase Agreement, dated as of October 1, 1998, by the
Company, Richard R. Burkhart, Joseph H. Rice and New Century Metals, Inc. (NCM),
the Company purchased all of the capital stock of NCM for $35.0 million. The
consideration consisted of $16.0 million in cash, a $16.0 million note payable
January 4, 1999, together with interest at the rate of 5.81% per annum and $3.0
million of the Company's Common Stock (155,541 shares valued at $19.2875 per
share). The note was paid in full on January 4, 1999.
NCM manufactures and distributes titanium and other high temperature and
corrosion-resistant alloys in long bar form to the aerospace, chemical
processing, oil exploration and production and power generation industries. NCM
also operates five distribution centers.
Weld-Tech
Pursuant to an Asset Purchase Agreement, dated as of October 1, 1998, the
Company acquired substantially all of the assets, and assumed certain
liabilities, of Weld-Tech Engineering L.P. for $11.3 million in cash.
Additionally, the Company paid a total of $1.4 million owed by Weld-Tech to a
corporation, the shareholders of which were also partners of Weld-Tech.
Weld-Tech provides engineering and fabrication services for the oil and gas
industry, including weld design, fabrication and repair as well as materials
engineering and testing services.
29
<PAGE> 32
NOTE 4--EARNINGS PER SHARE:
A reconciliation of the income and weighted average number of outstanding
common shares used in the calculation of basic and diluted earnings per share
for each of the years ended December 31, 1999, 1998, 1997 follows (in thousands
except number of shares and per share amounts):
<TABLE>
<CAPTION>
NET EARNINGS
INCOME SHARES PER SHARE
------- ---------- ---------
<S> <C> <C> <C>
For the year ended December 31, 1999
Basic EPS.......................................... $ 2,223 20,776,200 $0.11
Effect of potential common stock:
Stock options.................................... -- 94,683 --
------- ---------- -----
Diluted EPS........................................ $ 2,223 20,870,883 $0.11
======= ========== =====
For the year ended December 31, 1998
Basic EPS.......................................... $68,143 20,560,824 $3.31
Effect of potential common stock:
Stock options.................................... 123,803 0.02
------- ---------- -----
Diluted EPS........................................ $68,143 20,684,627 $3.29
======= ========== =====
For the year ended December 31, 1997
Basic EPS.......................................... $60,085 20,401,601 $2.94
Effect of potential common stock:
Stock options.................................... -- 165,254 0.02
------- ---------- -----
Diluted EPS........................................ $60,085 20,566,855 $2.92
======= ========== =====
</TABLE>
NOTE 5--ACCOUNTS RECEIVABLE:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Trade and commercial customers.......................... $56,824 $62,634
U.S. Government--Department of Energy................... 680 1,354
------- -------
57,504 63,988
Less--Allowance for doubtful accounts................... (1,454) (911)
------- -------
$56,050 $63,077
======= =======
</TABLE>
NOTE 6--INVENTORIES:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Raw materials and supplies............................. $ 65,468 $ 73,820
Work-in-process and finished goods..................... 128,140 111,103
Adjustment to LIFO values.............................. (17,825) (18,088)
-------- --------
$175,783 $166,835
======== ========
</TABLE>
30
<PAGE> 33
NOTE 7--PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is stated at cost and consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Land................................................. $ 1,174 $ 1,247
Buildings and improvements........................... 41,752 42,059
Machinery and equipment.............................. 125,894 112,228
Other................................................ 37,626 19,976
Construction in progress............................. 9,427 11,718
--------- ---------
215,873 187,228
Less--Accumulated depreciation....................... (119,349) (110,204)
--------- ---------
$ 96,524 $ 77,024
========= =========
</TABLE>
NOTE 8--INCOME TAXES:
The "Provision (credit) for income taxes" caption in the Consolidated
Statement of Income includes the following income tax expense (benefit):
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
--------------------------- --------------------------- ----------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- ------ ------- -------- ------ ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal.............. $(4,227) $5,287 $1,060 $6,467 $(4,155) $2,312 $ -- $(2,768) $(2,768)
State................ 36 318 354 1,250 (2,111) (861) -- -- --
Foreign.............. (42) (68) (110) 507 -- 507 -- -- --
------- ------ ------ ------ ------- ------ ---- ------- -------
Total............ $(4,233) $5,537 $1,304 $8,224 $(6,266) $1,958 $ -- $(2,768) $(2,768)
======= ====== ====== ====== ======= ====== ==== ======= =======
</TABLE>
A reconciliation of the expected tax at the federal statutory tax rate to the
actual provision (benefit) follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1999 1998 1997
------ -------- --------
<S> <C> <C> <C>
Statutory rate of 35% applied to income before
income taxes................................... $1,234 $ 24,535 $ 20,061
Effects of net operating loss carryforwards and
valuation allowance adjustments................ 312 (22,752) (21,255)
State income taxes, net of federal benefit....... 559 (560) --
Adjustments of prior year's tax.................. (844) 777 --
Effects of foreign operations.................... (530) (109) --
Nondeductible business expenses.................. 573 201 60
Other miscellaneous.............................. -- (134) (1,634)
------ -------- --------
Total provision (benefit)................... $1,304 $ 1,958 $ (2,768)
====== ======== ========
</TABLE>
31
<PAGE> 34
Deferred tax assets and liabilities resulted from the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Deferred Tax Assets
Inventories............................................... $ 5,122 $ 6,756
Property, plant and equipment............................. -- 1,705
Intangible assets......................................... 1,585 1,652
Other postretirement benefit costs........................ 7,888 7,740
Other employment costs.................................... 2,809 2,484
Tax credits............................................... 44 1,519
Environmental related costs............................... 1,074 1,634
Other..................................................... 1,472 986
-------- --------
Total deferred tax assets.............................. 19,994 24,476
Deferred tax liabilities
Pension costs............................................. (6,036) (7,820)
Property, plant and equipment............................. (4,195) --
Federal effect of state deferred tax assets............... (413) (722)
-------- --------
Total deferred tax liabilities......................... $(10,644) $ (8,542)
Valuation Allowance....................................... (312) --
-------- --------
Net deferred tax asset...................................... $ 9,038 $ 15,934
======== ========
</TABLE>
NOTE 9--LONG-TERM DEBT:
Concurrent with the 1998 Reorganization, RTI entered into a credit
agreement dated September 30, 1998 (the "Credit Facility"), replacing RMI's then
existing credit facilities. The unsecured Credit Facility provides for $125
million in five-year borrowings and $25 million in one-year borrowings, on a
revolving basis, of up to the lesser of $150 million or a borrowing base equal
to the sum of 85% of qualified accounts receivable and 60% of qualified
inventory. At December 31, 1999, $36.2 million was outstanding under the
facility.
Under the terms of the Credit Facility, the Company, at its option, will be
able to borrow at (a) a base rate (which is the higher of PNC Bank's prime rate
or the Federal Funds Effective Rate plus 0.5% per annum), or (b) LIBOR, plus a
spread (ranging from 0.5% to 1.5%) determined by the ratio of the Company's
consolidated total indebtedness to consolidated earnings before interest, taxes,
depreciation and amortization.
The Credit Facility contains additional terms and financial covenants which
are typical for other similar facilities. At December 31, 1999 the Company was
in compliance with all covenants and terms of the Credit Facility.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Revolving Credit Facility dated September 30, 1998,
Maturing September 29, 2003 bearing interest at 6.02%
at December 31, 1999.................................. $36,200 $20,080
------- -------
$36,200 $20,080
======= =======
</TABLE>
32
<PAGE> 35
NOTE 10--EMPLOYEE BENEFIT PLANS:
The following table provides reconciliations of the changes in the
Company's pension and other postemployment benefit plan obligations and the
values of plan assets for the years ended December 31, 1999 and 1998, and a
statement of the funded status as of December 31, 1999 and 1998.
<TABLE>
<CAPTION>
PENSION OTHER POSTRETIREMENT
BENEFIT PLANS BENEFIT PLANS
------------------ --------------------
1999 1998 1999 1998
------- ------- -------- --------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation January 1........................ $79,094 $76,630 $19,748 $19,227
Service cost........................................ 1,801 1,465 197 291
Interest cost....................................... 5,461 5,154 1,211 1,312
Plan amendments..................................... 4,904 (710) -- --
Actuarial (gain) loss............................... 24 2,569 (3,483) 522
Benefits paid....................................... (6,445) (6,014) (1,044) (1,604)
------- ------- ------- -------
Benefit obligation December 31...................... $84,839 $79,094 $16,629 $19,748
======= ======= ======= =======
CHANGE IN PLAN ASSETS:
Fair value of plan assets January 1................. $94,501 $84,697
Actual return on plan assets........................ 5,845 12,512
Employer contributions.............................. 214 3,306
Benefits paid....................................... (6,445) (6,014)
------- -------
Fair value of plan assets December 31............... $94,115 $94,501
======= =======
</TABLE>
As of December 31, 1999, approximately 56.4% of the plans' assets are
invested in equity securities, 20.9% in government debt instruments, and the
balance in cash equivalents or debt securities.
<TABLE>
<CAPTION>
PENSION OTHER POSTRETIREMENT
BENEFIT PLANS BENEFIT PLANS
------------------ --------------------
1999 1998 1999 1998
------- ------- -------- --------
<S> <C> <C> <C> <C>
FUNDED STATUS:
Funded status December 31....................... $ 9,276 $15,407 $(16,629) $(19,748)
Unrecognized net transition obligation.......... 256 563 -- --
Unrecognized (gain) loss........................ (364) (1,550) (2,754) 728
Unrecognized prior service cost................. 5,970 1,857 -- --
------- ------- -------- --------
Net amount recognized........................... $15,138 $16,277 $(19,383) $(19,020)
======= ======= ======== ========
</TABLE>
Amounts recognized in the Consolidated Balance Sheet at December 31 consist
of the following:
<TABLE>
<CAPTION>
PENSION OTHER POSTRETIREMENT
BENEFIT PLANS BENEFIT PLANS
------------------ --------------------
1999 1998 1999 1998
------- ------- -------- --------
<S> <C> <C> <C> <C>
Prepaid benefit cost.................... $15,138 $16,277 $ -- $ --
Accrued benefit liability............... -- -- (19,383) (19,020)
------- ------- -------- --------
$15,138 $16,277 $ 19,383 $(19,020)
======= ======= ======== ========
</TABLE>
33
<PAGE> 36
Net periodic benefit costs as determined by independent actuaries, include
the following components:
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFIT PLANS BENEFIT PLANS
--------------------------- ------------------------
1999 1998 1997 1999 1998 1997
------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Service cost....................... $ 1,801 $ 1,465 $ 1,252 $ 197 $ 291 $ 260
Interest cost...................... 5,461 5,154 5,166 1,211 1,312 1,405
Expected return on assets.......... (7,183) (6,515) (6,159) -- -- --
Prior service cost amortization.... 791 445 445 -- -- --
Amortization of actuarial loss..... 175 223 69 -- -- 130
Amortization of transition
Obligation....................... 307 307 307 -- -- --
------- ------- ------- ------ ------ ------
Net periodic benefit cost.......... $ 1,352 $ 1,079 $ 1,080 $1,408 $1,603 $1,795
======= ======= ======= ====== ====== ======
</TABLE>
Assumptions used in the determination of the benefit obligations include
the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Discount rate............................................... 7.75% 6.75%
Rate of increase in compensation............................ 4.8% 4.8%
Expected return on plan assets.............................. 9.0% 9.0%
</TABLE>
The ultimate costs of certain of the Company's retiree health care plans
are capped at predetermined out-of-pocket spending limits. The annual rate of
increase in the per capita costs for these plans is limited to the predetermined
spending cap. As of December 31, 1999, the predetermined limits had been reached
and, as a result, increases in claim cost rates will have no impact on the
reported accumulated postretirement benefit obligation or net periodic expense.
NOTE 11--OPERATING LEASES:
The Company and its subsidiaries have entered into various operating leases
for the use of certain equipment, principally office equipment and vehicles. The
leases generally contain renewal options and provide that the lessee pay
insurance and maintenance costs. The total rental expense under operating leases
amounted to $3.6 million in 1999, $2.9 million in 1998 and $1.9 million in 1997.
The Company's commitments under operating leases for years after 1999 are
as follows (in thousands):
<TABLE>
<CAPTION>
FUTURE
2000 2001 2002 2003 2004 YEARS
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
$2,444 $2,574 $1,938 $1,471 $1,057 $55
====== ====== ====== ====== ====== ===
</TABLE>
NOTE 12--TRANSACTIONS WITH RELATED PARTIES:
The Company, in the ordinary course of business, purchases goods and
services, including conversion services, from USX, which until March 31, 1999,
owned approximately 27% of RTI's common stock, and related companies. The cost
of such transactions to the Company amounted to $0.8 million in 1999, $0.6
million in 1998, and $1.2 million in 1997. The United States Steel and Carnegie
Pension Fund (the "Pension Fund") is the trustee of the Company's pension plans.
The Pension Fund is a registered investment advisor under the Investment
Advisors Act of 1940, and receives a negotiated fee for such services. The
Company paid the Pension Fund $131,000 in 1999, $136,000 in 1998 and $106,000 in
1997.
Mr. Richard Burkhart, an officer of the Company prior to his resignation in
February, 2000 received, as a 50% owner of XXI, LLC, Company, the benefit of
rent paid for a building in Solon, Ohio amounting to $159,566 in 1999 and
$39,891 in 1998. On January 6, 1999, RTI paid $16,247,443 to Mr. Burkhart as
part of the purchase transaction for NCM. Mr. Burkhart was 50% owner of NCM.
34
<PAGE> 37
NOTE 13--SEGMENT REPORTING
The Company's reportable operating segments are the Titanium Group and the
Fabrication and Distribution Group.
The Titanium Group manufactures and sells a wide range of titanium mill
products to a customer base consisting primarily of manufacturing and
fabrication companies in the aerospace and nonaerospace markets. Titanium mill
products consist of basic mill shapes such as ingot, slab, bloom, billet, bar,
plate, sheet, strip and welded tube. Titanium mill products are sold primarily
to customers such as metal fabricators, forge shops and, to a lesser extent,
metal distribution companies. Titanium mill products are usually raw or starting
material for these customers, who then form, fabricate or further process mill
products into finished or semi-finished components or parts.
The Fabrication and Distribution Group is engaged primarily in the
fabrication of titanium, specialty metals and steel products including pipe,
engineered tubular products for use in the oil and gas and geothermal energy
industries; hot and superplastically formed parts, cut, forged, extruded and
rolled shapes for aerospace and nonaerospace applications. This segment also
provides warehousing, distribution, finishing, cut-to-size and just-in-time
delivery services of titanium, steel and other metal products.
Other Operations is comprised of certain small businesses and operations
dissimilar to either the Titanium Group or the Fabrication and Distribution
Group, and primarily consists of the Company's Environmental Services Division
located in Ashtabula, Ohio. While the Environmental Services Division is
structurally a part of the Titanium Group, the aggregation rules of generally
accepted accounting principles do not permit combination with that group for
this footnote disclosure.
Intersegment sales are accounted for at prices which are generally
established by reference to similar transactions with unaffiliated customers.
Reportable segments are measured based on segment operating income after an
allocation of certain corporate items such as general corporate overhead and
expenses. Assets of general corporate activities include unallocated cash and
short-term investments, and deferred taxes.
Segment information for the three years ended December 31, 1999 is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
NET SALES:
Titanium
Trade.................................................... $125,079 $229,170 $243,906
Intersegment............................................. 40,680 49,716 41,064
-------- -------- --------
165,759 278,886 284,970
Fabrication and Distribution
Trade.................................................... $100,195 91,608 61,399
Intersegment............................................. 2,238 105 130
-------- -------- --------
102,433 91,713 61,529
Other Operations........................................... 18,035 16,698 13,225
Adjustments and Eliminations............................... (42,918) (49,821) (41,194)
-------- -------- --------
Total Net Sales..................................... $243,309 $337,476 $318,530
======== ======== ========
OPERATING INCOME (LOSS):
Titanium................................................... $ 9,153 $ 59,791 $ 53,498
Fabrication and Distribution............................... (6,356) 7,399 2,475
Other Operations........................................... 1,972 806 342
-------- -------- --------
Total............................................... $ 4,769 $ 67,996 $ 56,315
======== ======== ========
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Allocated Corporate Items included in Segment Operating
Income(1):
Titanium................................................... $ (6,500) $ (5,015) $ (3,343)
Fabrication and Distribution............................... (3,633) (1,574) (702)
-------- -------- --------
$(10,133) $ (6,589) $ (4,045)
======== ======== ========
(1) Allocated on a three factor formula based on sales, assets and payrolls.
ASSETS:
Titanium................................................... $255,825 $253,357 $212,781
Fabrication and Distribution............................... 134,695 116,837 35,978
Other Operations........................................... 505 198 459
General Corporate Assets................................... 9,218 25,628 42,091
-------- -------- --------
Total Consolidated Assets........................... $400,243 $396,020 $291,309
======== ======== ========
CAPITAL EXPENDITURES:
Titanium................................................... $ 20,071 $ 32,031 $ 7,193
Fabrication and Distribution............................... 6,995 1,100 686
Other Operations........................................... 113 -- 15
-------- -------- --------
Total Capital Spending.............................. $ 27,179 $ 33,131 $ 7,894
======== ======== ========
DEPRECIATION AND AMORTIZATION:
Titanium................................................... $ 6,425 $ 4,450 $ 4,726
Fabrication and Distribution............................... 2,898 958 301
Other Operations........................................... 15 18 20
-------- -------- --------
Total depreciation and amortization................. $ 9,338 $ 5,426 $ 5,047
======== ======== ========
REVENUE BY MARKET INFORMATION:
Titanium
Aerospace................................................ $127,859 $218,719 $239,472
Nonaerospace............................................. 55,625 60,167 53,539
-------- -------- --------
Total............................................... $183,484 $278,886 $293,011
Fabrication and Distribution
Aerospace................................................ $ 75,163 $ 70,773 $ 50,945
Nonaerospace............................................. 27,382 20,940 10,584
-------- -------- --------
Total............................................... $102,545 $ 91,713 $ 61,529
Other Operations
Nonaerospace............................................. $ 18,035 $ 16,698 $ 13,225
Adjustments and Eliminations............................. (60,755) (49,821) (49,235)
-------- -------- --------
Total Net Sales..................................... $243,309 $337,476 $318,530
======== ======== ========
</TABLE>
36
<PAGE> 39
The following geographic area information includes trade sales based on
product shipment destination, and property, plant and equipment based on
physical location.
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Geographic location of trade sales:
United States............................................ $192,434 $266,596 $256,951
England.................................................. 18,775 23,770 22,193
France................................................... 13,269 16,376 15,123
Rest of World............................................ 18,831 30,734 24,263
-------- -------- --------
Total............................................... $243,309 $337,476 $318,530
======== ======== ========
Gross Property, Plant and Equipment:
United States............................................ $213,929 $185,695 $147,014
England.................................................. 1,944 1,533 1,179
-------- -------- --------
Total............................................... $215,873 $187,228 $148,193
======== ======== ========
</TABLE>
In 1999, no single customer accounted for more than 10% of consolidated
revenues. In the years ended December 31, 1999, 1998 and 1997, export sales were
$50.9 million, $70.9 million, and $61.6 million, respectively, principally to
customers in Western Europe.
Substantially all of the Company's sales and operating revenues are
generated from its U.S. and European operations. A significant portion of the
Company's sales are made to customers in the aerospace industry. The
concentration of aerospace customers may expose the Company to cyclical, credit
and other risks generally associated with the aerospace industry. In the three
years ended December 31, 1999, no single customer accounted for as much as 10%
of consolidated sales, although Boeing Company, Airbus Industrie and their
subcontractors together consume in excess of 10% of the Company's sales. Trade
accounts receivable are generally not secured or collateralized.
NOTE 14--CONTINGENCIES:
In connection with the 1990 Reorganization, the Company agreed to indemnify
USX and Quantum against liabilities related to their ownership of RMI and its
immediate predecessor, Reactive Metals, Inc., which was formed by USX and
Quantum in 1964.
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. Given the
critical nature of many of the aerospace end uses for the Company's products,
including specifically their use in critical rotating parts of gas turbine
engines, the Company maintains aircraft products liability insurance of $250
million, which includes grounding liability.
Environmental Matters
In the ordinary course of business, the Company is subject to pervasive
environmental laws and regulations concerning the production, handling, storage,
transportation, emission, and disposal of waste materials and is also subject to
other federal and state laws and regulations regarding health and safety
matters. These laws and regulations are constantly evolving, and it is not
currently possible to predict accurately the ultimate effect these laws and
regulations will have on the Company in the future.
The Company is involved in investigative or cleanup projects under federal
or state environmental laws at a number of waste disposal sites, including the
Fields Brook Superfund Site. Given the status of the proceedings with respect to
these sites, ultimate investigative and remediation costs cannot presently be
accurately predicted, but could, in the aggregate be material. Based on the
information available regarding the current ranges of estimated remediation
costs at currently active sites, and what the Company believes will be its
ultimate share of such costs, provisions for environmental-related costs have
been recorded. These provisions are in addition to amounts which have previously
been accrued for the Company's share of environmental study costs.
37
<PAGE> 40
With regard to the Fields Brook Superfund Site, the Company, together with
31 other companies, has been identified by the U. S. Environmental Protection
Agency ("EPA") as a potentially responsible party ("PRP") with respect to a
superfund site defined as the Fields Brook Watershed in Ashtabula, Ohio, which
includes the Company's now closed Ashtabula facilities. The EPA's 1986 estimate
of the cost of remediation of the Fields Brook operable sediment unit was $48
million. However, recent studies show the volume of sediment to be substantially
lower than projected in 1986. These studies, together with improved remediation
technology and redefined cleanup standards have resulted in a more recent
estimate of the remediation cost of approximately $15 million. The actual cost
of remediation may vary from the estimate depending upon any number of factors.
The Company and twelve others entered into a Phase 2 (actual cleanup)
allocation agreement which assigns 9.44% of the cost to RMI. However, the actual
percentage may be more or less based on contributions from other parties which
are not currently participating in the Phase 2 allocation agreement.
At December 31, 1999, the amount accrued for future environmental-related
costs was $2.7 million. Based on available information, RMI believes its share
of potential environmental-related costs, before expected contributions from
third parties, is in a range from $4.2 million to $7.0 million, in the
aggregate. The amount accrued is net of expected contributions from third
parties (other than insurers) of approximately $2.1 million, which the Company
believes are probable. The Company has been receiving contributions from such
third parties for a number of years as partial reimbursement for costs incurred
by the Company. As these proceedings continue toward final resolution, amounts
in excess of those already provided may be necessary to discharge the Company
from its obligations for these projects.
Gain Contingency
RTI made claim against Boeing Commercial Airplane Group of approximately $7
million for contractual amounts due in connection with the terms of their
long-term supply agreement. Under the terms of the contract, Boeing was required
to order a minimum of 3.25 million pounds of titanium during 1999. Actual
shipments were less than one million pounds. This claim has been treated as a
gain contingency under SFAS No. 5, "Accounting for Contingencies." Therefore,
recognition of any amounts under this claim has been deferred pending resolution
of the contingency.
Other
The Company is also the subject of, or a party to, a number of other
pending or threatened legal actions involving a variety of matters incidental to
its business.
The ultimate resolution of these foregoing contingencies could,
individually or in the aggregate, be material to the consolidated financial
statements. However, management believes that the Company will remain a viable
and competitive enterprise even though it is possible that these matters could
be resolved unfavorably.
NOTE 15--STOCK OPTION AND RESTRICTED STOCK AWARD PLANS:
1989 STOCK OPTION INCENTIVE PLAN:
The 1989 Stock Option Incentive Plan authorized the granting of options to
purchase up to 775,500 shares of Common Stock to eligible officers and key
management employees at not less than the market value on the date the options
are granted. Options granted could include stock appreciation rights. The option
period was not to exceed ten years from the date of the grant. During 1995
substantially all option holders voluntarily relinquished their stock
appreciation rights. No further grants can be made under the plan. There are
still stock options outstanding under the Plan at December 31, 1999.
1995 STOCK PLAN
The 1995 Stock Plan, which was approved by a vote of the Company's
shareholders at the 1995 Annual Meeting of Shareholders, replaced both the 1989
Stock Option Incentive Plan and the 1989 Employee Restricted Stock Award Plan.
The Plan permits the grant of any or all of the following types of awards in any
combination: a) Stock Options; b) Stock Appreciation Rights; and c) Restricted
Stock. A committee appointed by the Board of Directors administers the Plan, and
determines the type or types of grants to be made under the Plan and sets
38
<PAGE> 41
forth in each such Grant the terms, conditions and limitations applicable to it,
including, in certain cases, provisions relating to a possible change in control
of the Company.
During 1999, 184,500 option shares were granted at an exercise price of
$12.438 and 198,000 option shares were granted at an exercise price of $9.59375.
In 1998, 132,000 option shares were granted at a price of $20.1875, and in 1997
109,500 option shares were granted at a price of $25.5625. All option exercise
prices were equal to the common stock's fair market value on the date of the
grant. Options are for a term of ten years from the date of the grant, and vest
ratably over the three year period beginning with the date of the grant. All
1999 grants were outstanding at December 31, 1999.
During 1999 and 1998, 53,500 shares and 39,750 shares, respectively, of
restricted stock were granted under the 1995 Stock Plan. Compensation expense
equal to the fair market value on the date of the grant is recognized ratably
over the vesting period of each grant which is typically five years.
The following table presents a summary of stock option activity under the
plans described above for the years ended December 31, 1997 through 1999:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Balance January 1, 1997..................................... 533,100 $12.61
Granted..................................................... 109,500 $25.56
Exercised................................................... (127,609) $ 8.59
--------- ------
Balance December 31, 1997................................... 514,991 $16.21
Granted..................................................... 308,000 $16.53
Exercised................................................... (45,725) $ 3.98
--------- ------
Balance December 31, 1998................................... 777,266 $17.21
Granted..................................................... 382,500 $10.97
Exercised................................................... (9,750) $ 4.06
--------- ------
Balance December 31, 1999................................... 1,150,016 $15.25
========= ======
</TABLE>
Fair values of options at grant date were estimated using the Black-Scholes
model and the assumptions listed below.
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- ------
<S> <C> <C> <C>
Expected life (years)....................................... 5 5 5
Risk-free interest rate..................................... 5.5% 5.5% 5.5%
Volatility.................................................. 58.8% 53.5% 45.7%
Dividend yield.............................................. 0% 0% 0%
Weighted average fair value of options granted during the
year...................................................... $6.13 $8.67 $12.12
</TABLE>
At December 31, 1999 the weighted average exercise price and weighted
average remaining contractual life for all outstanding options was $15.25 and
7.91 years, respectively. 520,649 of the outstanding options at December 31,
1999 were exercisable at a weighted average exercise price of $17.18.
39
<PAGE> 42
If compensation expense for the Company's stock options granted had been
determined based on the fair value at the grant date for the awards in
accordance with SFAS No. 123, the effect on the Company's net income and
earnings per share for the three years ended December 31, 1999 would have been
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------- -------
<S> <C> <C> <C>
Net income
As reported............................................ $2,223 $68,143 $60,085
Pro forma.............................................. (101) 65,885 58,460
Basic earnings per share
As reported............................................ $ 0.11 $ 3.31 $ 2.94
Pro forma.............................................. -- 3.20 2.87
Diluted earnings per share
As reported............................................ $ 0.11 $ 3.29 $ 2.92
Pro forma.............................................. -- 3.18 2.84
</TABLE>
NOTE 16--SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
The following table sets forth selected quarterly financial data for 1999
and 1998.
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
1999 QUARTER QUARTER QUARTER QUARTER
---- ------- ------- ---------- -------
<S> <C> <C> <C> <C>
Sales.............................................. $67,450 $59,186 $51,383 $65,290
Gross profit....................................... 13,338 7,773 3,499 8,996
Operating income................................... 6,291 447 (3,353) 1,384
Net income......................................... 3,742 204 (2,483) 760
Net income per share:
Basic............................................ 0.18 0.01 (0.12) 0.04
Diluted.......................................... 0.18 0.01 (0.12) 0.04
</TABLE>
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
1998 QUARTER QUARTER QUARTER(1) QUARTER
---- ------- ------- ---------- -------
<S> <C> <C> <C> <C>
Sales.............................................. $89,039 $96,542 $81,027 $70,868
Gross profit....................................... 25,518 24,178 25,248 16,822
Operating income................................... 20,665 19,394 20,019 7,918
Net income......................................... 15,053 30,410 15,703 6,977
Net income per share:
Basic............................................ 0.73 1.48 0.76 0.34
Diluted.......................................... 0.73 1.47 0.76 0.33
</TABLE>
- ---------------
(1) Net income was favorably affected by the recognition of a $16.1 million
income tax benefit in the second quarter of 1998.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
40
<PAGE> 43
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
In addition to the information set forth under the caption "Executive
Officers of the Registrant" in Part I, Item 1 of this report, information
concerning the directors of the Company is incorporated by reference to
"Election of Directors" in the 2000 Proxy Statement, to be filed at a later
date.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated by reference to "The
Board of Directors-Compensation of Directors" and "Executive Compensation" in
the 2000 Proxy Statement, to be filed at a later date.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated by reference to "Other
Information-Security Ownership" in the 2000 Proxy Statement, to be filed at a
later date.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is incorporated by reference to "Certain
Relationships and Related Transactions" in the 2000 Proxy Statement, to be filed
at a later date.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) AND (2) FINANCIAL STATEMENTS
See "Financial Statements."
(3) See Index to Exhibits.
(b) REPORT ON FORM 8-K FILED IN THE FOURTH QUARTER OF 1999
None.
(c) EXHIBITS
The exhibits listed on the Index to Exhibits are filed herewith or are
incorporated by reference.
41
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
RTI INTERNATIONAL METALS, INC.
By /s/ LAWRENCE W. JACOBS
------------------------------------
Lawrence W. Jacobs
Vice President,
Chief Financial Officer & Treasurer
Dated: March 28, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE AND TITLE DATE
------------------- ----
<S> <C>
CRAIG R. ANDERSSON, Director;
NEIL A. ARMSTRONG, Director;
DANIEL I. BOOKER, Director;
RONALD L. GALLATIN, Director;
CHARLES C. GEDEON, Director;
ROBERT M. HERNANDEZ, Director;
EDITH E. HOLIDAY, Director;
JOHN H. ODLE, Director;
WESLEY W. VON SCHACK, Director
/s/ TIMOTHY G. RUPERT March 28, 2000
- ------------------------------------------------------------
T. G. Rupert
Attorney-in-Fact
/s/ TIMOTHY G. RUPERT March 28, 2000
- ------------------------------------------------------------
T. G. Rupert
Director and President and Chief Executive Officer
(Principal Executive Officer)
</TABLE>
42
<PAGE> 45
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NO. DESCRIPTION NUMBER
--- ----------- ------
<S> <C> <C>
2.0 Amended and Restated Reorganization Agreement, incorporated
by reference to Exhibit 2.1 to the Company's Registration
Statement on Form S-1 No. 33-30667 Amendment No. 1.
2.1 Stock Purchase Agreement, dated as of October 1, 1998, by
and among RTI International Metals, Inc., New Century
Metals, Inc., Richard R. Burkart and Joseph H. Rice,
incorporated by reference to Exhibit 2.1 and 2.2 to the
Company's Current Report on Form 8-K dated October 15, 1998.
2.2 Asset Purchase Agreement, dated October 1, 1998, by and
among Weld-Tech Engineering Services, L.P. and Weld-Tech
Engineering, L.P., incorporated by reference to Exhibit 2.1
and 2.2 to the Company's Current Report on Form 8-K dated
October 15, 1998.
3.1 Amended and Restated Articles of Incorporation of the
Company, incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K dated October 15, 1998.
3.2 Amended Code of Regulations of the Company, incorporated by
reference to Exhibit 3.3 to the Company's Registration
Statement on Form S-4 No. 333-61935.
4.1 Credit Agreement between RTI International Metals, Inc. and
PNC Bank, National Association, as agent; Mellon Bank,
National Association of Pennsylvania and Bank One. National
Association as co-agents, dated as of September 30, 1998,
incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended September 30,
1998.
10.1 Agreement for the sale and purchase of titanium
tetrachloride between SCM Chemicals, Inc., and RMI Titanium
Company dated March 9, 1993, incorporated by reference to
Exhibit 10.13 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992.+
10.2 Agreement for the supply, purchase and sale of chlorine
between SCM Chemicals, Inc., and RMI Titanium Company dated
as of November 13, 1990, incorporated by reference to
Exhibit 10.3 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1990.
10.3 RMI Company Annual Incentive Compensation Plan, incorporated
by reference to Exhibit 10.3 to the Company's Registration
Statement on Form S-1 No. 33-30667 Amendment No. 2.
10.4 RMI Titanium Company 1989 Stock Option Incentive Plan,
incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement on Form S-1 No. 33-30667 Amendment
No. 2.
10.5 RMI Titanium Company Supplemental Pension Plan effective
August 1, 1987, and amended as of December 12, 1990,
incorporated by reference to Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1990.
10.6 RMI Titanium Company Excess Benefits Plan effective July 18,
1991, incorporated by reference to Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1991.
10.7 Sales Agreement for the supply of titanium sponge and plasma
electrodes between Oregon Metallurgical Corporation and RMI
Titanium Company dated as of August 8, 1994 incorporated by
reference to Exhibit 10.9 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995.+
</TABLE>
43
<PAGE> 46
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NO. DESCRIPTION NUMBER
--- ----------- ------
<S> <C> <C>
10.8 Sales Agreement for the supply of titanium sponge between
Osaka Titanium Co., Ltd., Sumitomo Corporation, Sumitomo
Corporation of America, and RMI Titanium Company dated as of
September 4, 1992 incorporated by reference to Exhibit 10.10
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.+
10.9 RTI International Metals, Inc., 1995 Stock Plan incorporated
by reference to Exhibit 10.11 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995.
10.10 Employment agreement, dated August 1, 1999, between the
Company and John H. Odle, filed herewith.
10.11 Employment agreement, dated August 1, 1999, between the
Company and T. G. Rupert, filed herewith.
10.12 Employment agreement, dated August 1, 1999 between the
Company and Dawne S. Hickton, filed herewith.
10.13 Employment agreement, dated August 1, 1999 between the
Company and Lawrence W. Jacobs, filed herewith.
10.14 Employment agreement, dated November 1, 1999, between the
Company and Gordon L. Berkstresser, filed herewith.
21 Subsidiaries of the Company.
23.1 Consent of PricewaterhouseCoopers LLP.
24 Powers of Attorney.
27 Financial Data Schedule.
99.1 Financial Statements of The RMI Employee Savings and
Investment Plan for the year ended December 31, 1999 (to be
filed by amendment).
99.2 Financial Statements of The RMI Bargaining Unit Employee
Savings and Investment Plan for the year ended December 31,
1999 (to be filed by amendment).
</TABLE>
- ---------------
+ Confidential treatment has been requested.
44
<PAGE> 1
Exhibit 10.10
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
August 1, 1999
Mr. John H. Odle
Executive Vice President
RTI International Metals, Inc.
1000 Warren Avenue
Niles, OH 44446
Dear Mr. Odle:
This Letter Agreement sets forth the basis upon which I have been
authorized by the Board of Directors of RTI International Metals, Inc.
("Company") to continue your employment in the executive officer position
described in paragraph 1 below for the Employment Period (as hereinafter
defined). The "Employment Period" shall initially be the period August 1, 1999
through July 31, 2003; provided, however, that on August 1, 2003 and each August
1 thereafter, the Employment Period shall automatically be extended for one
additional year unless, not later than the immediately preceding April 1, either
you or the Company shall have given written notice to the other that you or it
does not wish to extend the Employment Period; and provided further that the
Employment Period shall terminate automatically when you attain age 65. In the
event this Letter Agreement is terminated for any reason other than your death,
your obligations as set forth in paragraph 10 shall survive and be enforceable
notwithstanding such termination. This Letter Agreement supersedes and replaces
in its entirety the Letter Agreement between you and the Company dated September
1, 1996.
1. During the Employment Period, you will serve as Executive Vice
President of the Company (or on any other executive officer position within the
Company to which you may hereafter be elected by the Company's Board of
Directors), performing all duties and functions appropriate to that office, as
well as such additional duties as the Company's President & Chief Executive
Officer or Board of Directors may, from time to time, assign to you. During the
Employment Period, you will devote your full time and best efforts to the
performance of all such duties.
<PAGE> 2
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. John H. Odle
August 1, 1999
Page 2
2. During the Employment Period, the Company will pay you, in equal
monthly installments, as compensation for your services an annual salary of
$250,000. This annual salary may be increased from time to time in the sole
discretion of the Company, but may only be decreased by the Company with your
written consent. Such annual salary, whether increased or decreased, shall
constitute your "Base Salary." In addition, you may be awarded such bonuses as
the Board of Directors of the Company determines to be appropriate under the
Company's Annual Incentive Compensation Plan or any successor bonus plan. You
will also be eligible to participate in the Company's 1995 Stock Plan, or any
successor stock plan.
3. You understand and acknowledge that: (1) under the provisions of
the United States Steel Corporation Plan for Employee Pension Benefits (Revision
of 1950) your first period of employment with the former United States Steel
Corporation ("USS"), amounting to 3.58 years of service, cannot be credited as
pensionable service when you retire; and (2) under the provisions of the
Company's Pension Plan for Eligible Salaried Employees ("Pension Plan")
applicable to you, your first period of employment with the Company (January 1,
1968 through July 27, 1973), amounting to 5.58 years of service, also cannot be
credited as pensionable service when you retire. Notwithstanding those facts, if
you continue in active employment with the Company until either age 65, i.e.,
until September 30, 2007, or such earlier date as the Company's Board of
Directors may approve, the Company, at your retirement, will, from the general
assets of the Company, pay you a one time lump sum payment of the then present
value of the 9.16 years of non-pensionable service attributable to your first
periods of employment with USS and the Company respectively, calculated pursuant
to the provisions for determining accrued pension benefits set forth in both the
Company's Pension Plan and its Supplemental Pension Program applicable to you at
date of retirement and based on your average monthly earnings (or then
applicable pensionable earnings) at such time. In addition, should you die prior
to age 65 while still actively employed by the Company, the Company will, from
the general assets of the Company, pay your surviving spouse, if any, a one time
lump sum payment of the then present value of the 9.16 years of non-pensionable
service attributable to your first periods of employment with USS and the
Company respectively, calculated pursuant to the provision for determining
surviving spouse eligibility and pension benefits set forth in both the
Company's Pension Plan and its Supplemental Pension Program applicable to you at
date of death.
<PAGE> 3
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. John H. Odle
August 1, 1999
Page 3
4. In the event of your death during the Employment Period, your right
to all compensation under this Letter Agreement allocable to days subsequent to
your death shall terminate and no further payments shall be due to you, your
personal representative, or your estate, except for that portion, if any, of
your Base Salary that is accrued and unpaid upon the date of your death.
5. In the event you become physically or mentally disabled, in the
sole judgment of physicians selected by the Company's Board of Directors, such
that you cannot perform the duties and functions contracted for pursuant to this
Letter Agreement, and should such disability continue for at least 180
consecutive days (or in the judgment of such physicians, be likely to continue
for at least 180 consecutive days), the Company may terminate your employment
upon written notice to you; provided, however, that such termination shall be
deemed to be a retirement authorized by the Company's Board of Directors for
purposes of paragraph 3 of this Letter Agreement. If your employment is
terminated because of physical or mental disability, your right to all
compensation under this Letter Agreement allocable to days subsequent to such
termination shall terminate and no further payments shall be due to you, your
personal representative, or your estate, except for that portion, if any, of
your Base Salary that is accrued and unpaid upon the date of termination.
6. The Company may, upon written notice to you fixing the date of
termination, terminate your services during the Employment Period for Cause, (as
Cause is defined in paragraph 8(d) below). In such event, your right to receive
continued compensation under this Letter Agreement will terminate and no further
installments will be paid to you, except for that portion, if any, of your Base
Salary that is accrued and unpaid upon the date of termination.
7. In addition to your annual Base Salary as set forth in Paragraph 2
above, you will be entitled in each calendar year to a vacation with pay in
accordance with the vacation policies of the Company. You will also be entitled
to: (1) participate in all of the Company's existing and future employee benefit
programs applicable to officers of the Company in accordance with the terms of
such benefit program plan documents; (2) receive one comprehensive physical
examination, at Company expense, in each calendar year, such examination to be
conducted by the Cleveland Clinic, the Greenbrier Clinic or comparable facility;
and (3) tax preparation and financial planning advice.
<PAGE> 4
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. John H. Odle
August 1, 1999
Page 4
8. Change of Control Provisions
(a) For purposes of this Letter Agreement, a "Change in
Control" of the Company shall mean a change in control of a nature that would be
required to be reported by it in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), whether or not the Company is then subject to such
reporting requirement; provided, that, without limitation, such a change in
control shall be deemed to have occurred if:
(1) any person (within the meaning of that term as
used in Sections 13(d) and 14(d) of the Exchange Act (a "Person") is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing twenty percent
(20%) or more of the combined voting power of the Company's then outstanding
voting securities; provided, however, that for purposes of this Agreement the
term "Person" shall not include (i) the Company or any of its majority-owned
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company; or
(2) the following individuals cease for any reason to
constitute a majority of the number of directors then serving on the Board of
Directors of the Company: individuals who, on the date hereof, are serving as
directors on the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of the Company) whose appointment or election by the Board
or nomination for election by the Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who either
were directors on the date hereof or whose appointment, election or nomination
for election was previously so approved, or
(3) there is consummated a merger or consolidation of
the Company or a subsidiary thereof with any other corporation, other than a
merger or consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior thereto holding
securities which represent immediately after such merger or consolidation at
least 50% of the combined voting power of the voting securities of the entity
surviving the merger or consolidation, (or the parent of such surviving entity)
or the shareholders of the Company approve a plan of complete
<PAGE> 5
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. John H. Odle
August 1, 1999
Page 5
liquidation of the Company, or there is consummated the sale or other
disposition of all or substantially all of the Company's assets.
(b) In the event of a Change in Control of the Company, you
may, at your sole option, terminate your employment with the Company within the
initial 90 calendar days from the occurrence of such Change in Control (a "Sole
Option" termination). If your employment is involuntarily terminated by the
Company other than for Cause within such initial 90 calendar day period, if you
elect a Sole Option termination, or if, after the first 90 calendar days
following a Change in Control you terminate for Good Reason, you shall not be
required to remain in the Company's employ, and the benefits set forth in
paragraph 8(g) shall be applicable.
(c) If any of the events described above constituting a Change
in Control of the Company shall have occurred, you shall be entitled to the
benefits provided in paragraph 8(g) hereof upon the termination of your
employment during the term of this Letter Agreement unless such termination is
(i) because of your death or disability, (ii) by the Company for Cause, (iii) by
you other than for Good Reason after the first 90 calendar days after a Change
in Control has occurred, or (iv) on or after the date that you attain age
sixty-five (65). In the event your employment with the Company is terminated for
any reason prior to the occurrence of a Change in Control, you shall not be
entitled to any benefits under this paragraph 8; provided, however, that if your
employment is terminated prior to a Change in Control without Cause at the
direction of a person who has entered into an agreement with the Company, the
consummation of which will constitute a Change in Control, your employment shall
be deemed to have terminated following a Change in Control. Your entitlement to
benefits under any of the Company's retirement plans will not adversely affect
your rights to receive payments hereunder.
(d) Termination by the Company of your employment for "Cause"
shall mean termination upon (i) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from a Sole Option termination by you within the first 90 calendar
days after a Change in Control has occurred or thereafter for Good Reason),
after a demand for substantial performance is delivered to you that specifically
identifies the manner in which the Company believes that you have not
substantially performed your duties, and you have failed to resume substantial
performance of your duties on a continuous basis within fourteen (14) days of
receiving such demand, (ii) the willful engaging by you in conduct which is
demonstrably and materially injurious to the Company, monetarily or otherwise or
(iii) your conviction of any felony or conviction of a misdemeanor which impairs
your ability substantially to perform your duties with the Company. For purposes
of this paragraph, no act, or failure
<PAGE> 6
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. John H. Odle
August 1, 1999
Page 6
to act, on your part shall be deemed "willful" unless done, or omitted to be
done, by you not in good faith and without reasonable belief that your action or
omission was in the best interest of the Company.
(e) For purposes of this Letter Agreement, "Good Reason" shall
mean, without your express written consent, the occurrence after a Change in
Control of the Company of any one or more of the following:
(1) the assignment to you of duties inconsistent with
your position immediately prior to the Change in Control;
(2) a reduction or alteration in the nature of your
position, duties, status or responsibilities from those in effect immediately
prior to the Change in Control;
(3) the failure by the Company to continue in effect
any of the Company's employee benefit plans, programs, policies, practices or
arrangements in which you participate (or substantially equivalent successor or
replacement employee benefit plans, programs, policies, practices or
arrangements) or the failure by the Company to continue your participation
therein on substantially the same basis, both in terms of the amount of benefits
provided and the level of your participation relative to other participants, as
existed immediately prior to the Change in Control;
(4) the failure of the Company to obtain a
satisfactory agreement from any successor to the Company to assume and agree to
perform this Letter Agreement;
(5) any purported termination by the Company of your
employment that is not effected pursuant to a Notice of Termination satisfying
the requirements of subparagraph (f) below, and for purposes of this Letter
Agreement, no such purported termination shall be effective; and
(6) the Company's requiring you to be based at a
location in excess of fifty (50) miles from the location where you are based
immediately prior to the Change in Control.
<PAGE> 7
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. John H. Odle
August 1, 1999
Page 7
(f) Any termination by the Company for Cause or by you for
Sole Option or Good Reason shall be communicated by Notice of Termination to the
other party hereto. For purposes of this Letter Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate the specific
termination provision in this Letter Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(g) Following a Change in Control of the Company, as defined
above, upon termination of your employment you shall be entitled to the
following benefits:
(1) If your employment shall be terminated by the
Company for Cause or by you other than by Sole Option or Good Reason, the
Company shall pay you your full Base Salary through the date of termination at
the rate in effect at the time Notice of Termination is given, plus all other
amounts to which you are entitled under any compensation plan of the Company at
the time such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(2) If your employment terminates by reason of your
death or disability, your benefits shall be determined in accordance with
paragraphs 3, 4 and 5 of this Letter Agreement and the Company's retirement,
survivor's benefits, insurance and other applicable programs and plans, then in
effect.
(3) If your employment by the Company shall be
terminated (i) by the Company other than for Cause, your death or disability, or
(ii) by you by Sole Option or (iii) by you for Good Reason, you shall be
entitled to the benefits (the "Severance Payments") provided in paragraphs
8(g)(3), (i), (ii), (iii), (iv) and (v) following, which Severance Payments
shall be in lieu of and cancel any further rights you have to receive any Base
Salary that would be otherwise due under paragraph 2 of this Letter Agreement:
(i) the Company shall pay you your full Base
Salary through the date of termination at the rate in effect at the time Notice
of Termination is given;
(ii) the Company will pay as severance
benefits to you, not later than the fifth day following the date of
termination, a lump sum severance payment (the "Severance Payment") equal to the
product of (1) a fraction, the numerator of which is equal to the lesser of (x)
thirty-six (36) or (y) the number of full and partial
<PAGE> 8
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. John H. Odle
August 1, 1999
Page 8
months existing between the date of termination and your sixty-fifth (65th)
birthday and the denominator of which is equal to twelve (12), and (2) the sum
of(x) your annual Base Salary in effect immediately prior to the occurrence of
the circumstances giving rise to such termination, and (y) the amount, if any,
of the highest annual bonus awarded to you under any annual bonus plan of the
Company during the four (4) years immediately preceding date of termination;
(iii) the options previously issued to you
under any option or incentive plan of the Company to purchase shares of Common
Stock of the Company (Option Shares), as well as any previously unvested shares
of Restricted Stock granted to you, shall irrevocably vest upon any such
termination and the stock options for such Option Shares shall become thereafter
uncancellable by the Company;
(iv) in the event that you become entitled to
the Severance Payments, if any of the Severance Payments or other portion of the
Total Payments (as defined below) will be subject to the tax (the "Excise Tax")
imposed by section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), the Company shall pay to you at the time specified below, an additional
amount (the "Gross-Up Payment") such that the net amount retained by you, after
deduction of (1) any Excise Tax on the Severance Payments and such other Total
Payments, and (2) any federal, state and local income tax, FICA-Health Insurance
tax, and Excise Tax upon the payment provided for by this paragraph, shall be
equal to the Severance Payments and such other Total Payments. For purposes of
determining whether any of the payments will be subject to the Excise Tax and
the amount of such Excise Tax, (1) any other payments or benefits received or to
be received by you in connection with a Change in Control of the Company or your
termination of employment whether pursuant to the terms of this Letter Agreement
or any other plan, arrangement or agreement with the Company, any person whose
actions result in a Change in Control of the Company or any person affiliated
with the Company or such person (together with the Severance Payment, the "Total
Payments") shall be treated as "parachute payments" within the meaning of
section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of section 280G(b)(l) shall be treated as subject to the Excise Tax,
except to the extent that in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to you such other payments or
benefits (in whole or in part) do not constitute parachute payments, or such
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of section
280G(b)(4) of the Code in excess of the base amount within the meaning of
Section
<PAGE> 9
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. John H. Odle
August 1, 1999
Page 9
280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax, (2) the
amount of the Total Payments which shall be treated as subject to the Excise Tax
shall be equal to the lesser of(A) the total amount of the Total Payments or (B)
the amount of excess parachute payments within the meaning of section 280G(b)(1)
(after applying clause (1), above), and (3) the value of any non-cash benefits
or any deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections 280G(d)(3)
and (4) of the Code. For purposes of determining the amount of the Gross-Up
Payment, you shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of your residence on the date of
termination, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount taken into
account hereunder at the time of termination of your employment, you shall repay
to the Company at the time that the amount of such reduction in Excise Tax is
finally determined the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to the Excise
Tax and federal and state and local income tax imposed on the Gross-Up Payment
being repaid by you if such repayment results in a reduction in Excise Tax
and/or a federal and state and local income tax deduction) plus interest on the
amount of such repayment at the rate provided in section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to exceed the amount taken
into account hereunder at the time of the termination of your employment
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall make an
additional Gross-Up Payment in respect of such excess (plus any interest payable
with respect to such excess) at the time that the amount of such excess is
finally determined.
The payments provided for in the paragraph
above shall be made not later than the fifth day following the date of
termination; provided, however, that if the amounts of such payments cannot
be finally determined on or before such day, the Company shall pay to you on
such day an estimate as determined in good faith by the Company of the minimum
amount of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the thirtieth
day after the date of termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to you payable on the fifth day
after demand by the
<PAGE> 10
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. John H. Odle
August 1, 1999
Page 10
Company (together with interest at the rate provided in Section 1274(b)(2)(B)
of the Code);
(v) The Company shall also pay to you all
legal fees and expenses incurred by you as a result of such termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce any right
or benefit provided by this Letter Agreement or in connection with any tax audit
or proceeding to the extent attributable to the application of section 4999 of
the Code to any payment or benefit provided hereunder); and
(vi) for a twenty-four (24) month period
after date of termination, the Company will arrange to provide you at the
Company's expense with life, disability, accident and health insurance benefits
substantially similar to those which you were receiving immediately prior to the
Notice of Termination; but benefits otherwise receivable by you pursuant to this
paragraph shall be reduced to the extent comparable benefits are actually
received by you during the twenty-four (24) month period following your
termination, and any such benefits actually received by you shall be reported to
the Company.
(h) You shall not be required to mitigate the amount of any
Severance Payments provided for in this paragraph 8 by seeking other employment
or otherwise, nor, except as provided in paragraph (vi) above, shall the amount
of any payment or benefit provided for in this paragraph 8 be reduced by any
compensation or benefit earned by you as the result of employment by another
employer after the date of termination, or otherwise.
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or of any
division or subsidiary thereof employing you to expressly assume and agree to
perform this Letter Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Letter Agreement
and shall entitle you to compensation from the Company in the same amount and on
the same terms as you would be entitled hereunder if you terminate your
employment for Good Reason.
<PAGE> 11
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RTI
INTERNATIONAL
METALS, INC.
Mr. John H. Odle
August 1, 1999
Page 11
9. This Letter Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Letter Agreement, to your devisee,
legatee or other designee or, if there is not such designee, to your estate.
10. As additional consideration for the compensation and benefits
provided to you pursuant to this Letter Agreement, you agree that you will not,
for a period of 24 months after the end of the Employment Period, or the
termination of your employment with the Company (whichever first occurs),
directly or indirectly, compete with, engage in the same business as, be
employed by, act a consultant to, or be a director, officer, employee, owner or
partner, or otherwise participate in or assist (including, without limitation,
by soliciting customers for, or individuals to provide services to), any
business or organization which competes with the Company or any subsidiary or
affiliate thereof. In addition, you agree that during such 24-month period, you
will not directly or indirectly induce, or attempt to influence, any employee of
the Company or any subsidiary or affiliate thereof to terminate his or her
employment with the Company or any subsidiary or affiliate thereof or in any
manner seek to engage or seek to employ any such employee (whether or not for
compensation) such that such employee would thereafter be unable to devote his
or her full efforts to the business then conducted by the Company or any
subsidiary or affiliate thereof. These restrictions shall not apply if you
terminate your employment with the Company by Sole Option or for Good Reason
after a Change in Control of the Company. For purposes of this Paragraph 10, you
will not be deemed to have breached your commitment merely because you own,
directly or indirectly, not more than one percent (1%) of the outstanding common
stock of such a corporation if, at the time you acquire such stock, such stock
is listed on a national securities exchange or is regularly traded in the
over-the-counter market by a member of either a national securities exchange or
the National Association of Securities Dealers, Inc. In order to protect the
interest of the Company, you will also maintain in strict confidence and not
disclose to any other person or entity any information received from any source
in the Company or developed by you in the course of performing your duties for
the Company. This obligation shall not extend to: (a) anything you can establish
as known to you from a source outside the Company, (b) anything which has been
published or becomes published hereafter other than by you, or (c) anything
which you receive from a non-Company source without restriction on its
disclosure. Should you breach or threaten to breach the commitments in this
Paragraph 10, and in recognition of the fact that the Company would not under
such circumstances be adequately compensated by money damages, the Company shall
be entitled, in addition to any other rights and remedies available to it, to
<PAGE> 12
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RTI
INTERNATIONAL
METALS, INC.
Mr. John H. Odle
August 1, 1999
Page 12
an injunction restraining you from such breach. Further, you acknowledge and
agree that the provisions of this Paragraph 10 are necessary, reasonable, and
proportionate to protect the Company during such noncompetition period.
11. The Company's Stock Plan Committee has granted to you 26,000
shares of restricted stock subject to your execution of a Restricted Stock Grant
in the form attached hereto. The restriction period with regard to such shares
shall commence August 1, 1999 and end July 31, 2003.
12. The validity, interpretation, construction and performance of this
Letter Agreement shall be governed by the laws of the State of Ohio.
If the provisions of this Letter Agreement are acceptable to you,
please sign one original copy of this Letter Agreement and return it to me. You
may retain the second signed original for your files.
Very truly yours,
RTI International Metals, Inc.
By /s/ TIMOTHY G. RUPERT
------------------------------
Timothy G. Rupert
President & Chief Executive Officer
Attachment
Confirmed:
/s/ JOHN H. ODLE
- ---------------------------
John H. Odle
8-11-99
- ---------------------------
Date
<PAGE> 1
Exhibit 10.11
[LOGO]
RTI P.O. Box 269
INTERNATIONAL 1000 WARREN AVENUE
METALS, INC. NILES, OHIO 44446-0269
August 1, 1999
Mr. Timothy G. Rupert
President and Chief Executive Officer
RTI International Metals, Inc.
1000 Warren Avenue
Niles, OH 44446
Dear Mr. Rupert:
This Letter Agreement sets forth the basis upon which I have been
authorized by the Board of Directors of RTI International Metals, Inc.
("Company") to continue your employment in the executive officer position
described in paragraph 1 below for the Employment Period (as hereinafter
defined). The "Employment Period" shall initially be the period August 1, 1999
through July 31, 2003; provided, however, that on August 1, 2003 and each August
1 thereafter, the Employment Period shall automatically be extended for one
additional year unless, not later than the immediately preceding April 1, either
you or the Company shall have given written notice to the other that you or it
does not wish to extend the Employment Period; and provided further that the
Employment Period shall terminate automatically when you attain age 65. In the
event this Letter Agreement is terminated for any reason other than your death,
your obligations as set forth in paragraph 9 shall survive and be enforceable
notwithstanding such termination. This Letter Agreement supersedes and replaces
in its entirety the Letter Agreement between you and the Company dated September
1, 1996.
1. During the Employment Period, you will serve as President and Chief
Executive Officer of the Company (or on any other executive officer position
within the Company to which you may hereafter be elected by the Company's Board
of Directors), performing all duties and functions appropriate to that office,
as well as such additional duties as the Company's Board of Directors may, from
time to time, assign to you. During the Employment Period, you will devote your
full time and best efforts to the performance of all such duties.
2. During the Employment Period, the Company will pay you, in equal
monthly installments, as compensation for your services an annual salary of
$350,000. This annual salary may be increased from time to time in the sole
discretion of the Company, but may only be decreased by the Company with your
written consent. Such annual salary, whether increased or decreased, shall
constitute your "Base Salary." In addition, you may be awarded such bonuses as
the Board of Directors of the Company
<PAGE> 2
Mr. Timothy G. Rupert
August 1,1999
Page 2
determines to be appropriate under the Company's Annual Incentive Compensation
Plan or any successor bonus plan. You will also be eligible to participate in
the Company's 1995 Stock Plan, or any successor stock plan.
3. In the event of your death during the Employment Period, your right
to all compensation under this Letter Agreement allocable to days subsequent to
your death shall terminate and no further payments shall be due to you, your
personal representative, or your estate, except for that portion, if any, of
your Base Salary that is accrued and unpaid upon the date of your death.
4. In the event you become physically or mentally disabled, in the sole
judgment of physicians selected by the Company's Board of Directors, such that
you cannot perform the duties and functions contracted for pursuant to this
Letter Agreement, and should such disability continue for at least 180
consecutive days (or in the judgment of such physicians, be likely to continue
for at least 180 consecutive days), the Company may terminate your employment
upon written notice to you. If your employment is terminated because of physical
or mental disability, your right to all compensation under this Letter Agreement
allocable to days subsequent to such termination shall terminate and no further
payments shall be due to you, your personal representative, or your estate,
except for that portion, if any, of your Base Salary that is accrued and unpaid
upon the date of termination.
5. The Company may, upon written notice to you fixing the date of
termination, terminate your services during the Employment Period for Cause, (as
Cause is defined in paragraph 7(d) below). In such event, your right to receive
continued compensation under this Letter Agreement will terminate and no further
installments will be paid to you, except for that portion, if any, of your Base
Salary that is accrued and unpaid upon the date of termination.
6. In addition to your annual Base Salary as set forth in Paragraph 2
above, you will be entitled in each calendar year to a vacation with pay in
accordance with the vacation policies of the Company. You will also be entitled
to: (1) participate in all of the Company's existing and future employee benefit
programs applicable to officers of the Company in accordance with the terms of
such benefit program plan documents; (2) receive one comprehensive physical
examination, at Company expense, in each calendar year, such examination to be
conducted by the Cleveland Clinic, the Greenbrier Clinic or comparable facility;
and (3) tax preparation and financial planning advice.
<PAGE> 3
Mr. Timothy G. Rupert
August 1, 1999
Page 3
7. Change of Control Provisions
(a) For purposes of this Letter Agreement, a "Change in
Control" of the Company shall mean a change in control of a nature that would be
required to be reported by it in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), whether or not the Company is then subject to such
reporting requirement; provided, that, without limitation, such a change in
control shall be deemed to have occurred if:
(1) any person (within the meaning of that term as
used in Sections 13(d) and 14(d) of the Exchange Act (a "Person") is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing twenty percent
(20%) or more of the combined voting power of the Company's then outstanding
voting securities; provided, however, that for purposes of this Agreement the
term "Person" shall not include (i) the Company or any of its majority-owned
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company; or
(2) the following individuals cease for any reason to
constitute a majority of the number of directors then serving on the Board of
Directors of the Company: individuals who, on the date hereof, are serving as
directors on the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of the Company) whose appointment or election by the Board
or nomination for election by the Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who either
were directors on the date hereof or whose appointment, election or nomination
for election was previously so approved, or
(3) there is consummated a merger or consolidation of
the Company or a subsidiary thereof with any other corporation, other than a
merger or consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior thereto holding
securities which represent immediately after such merger or consolidation at
least 50% of the combined voting power of the voting securities of the entity
surviving the merger or consolidation, (or the parent of such
<PAGE> 4
Mr. Timothy G. Rupert
August 1, 1999
Page 4
surviving entity) or the shareholders of the Company approve a plan of complete
liquidation of the Company, or there is consummated the sale or other
disposition of all or substantially all of the Company's assets.
(b) In the event of a Change in Control of the Company, you
may, at your sole option, terminate your employment with the Company within the
initial 90 calendar days from the occurrence of such Change in Control (a "Sole
Option" termination). If your employment is involuntarily terminated by the
Company other than for Cause within such initial 90 calendar day period, if you
elect a Sole Option termination, or if, after the first 90 calendar days
following a Change in Control you terminate for Good Reason, you shall not be
required to remain in the Company's employ, and the benefits set forth in
paragraph 7(g) shall be applicable.
(c) If any of the events described above constituting a Change
in Control of the Company shall have occurred, you shall be entitled to the
benefits provided in paragraph 7(g) hereof upon the termination of your
employment during the term of this Letter Agreement unless such termination is
(i) because of your death or disability, (ii) by the Company for Cause, (iii) by
you other than for Good Reason after the first 90 calendar days after a Change
in Control has occurred, or (iv) on or after the date that you attain age
sixty-five (65). In the event your employment with the Company is terminated for
any reason prior to the occurrence of a Change in Control, you shall not be
entitled to any benefits under this paragraph 7; provided, however, that if your
employment is terminated prior to a Change in Control without Cause at the
direction of a person who has entered into an agreement with the Company, the
consummation of which will constitute a Change in Control, your employment shall
be deemed to have terminated following a Change in Control. Your entitlement to
benefits under any of the Company's retirement plans will not adversely affect
your rights to receive payments hereunder.
(d) Termination by the Company of your employment for "Cause"
shall mean termination upon (i) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from a Sole Option termination by you within the first 90 calendar
days after a Change in Control has occurred or thereafter for Good Reason),
after a demand for substantial performance is delivered to you that specifically
identifies the manner in which the Company believes that you have not
substantially performed your duties, and you have failed to resume substantial
performance of your duties on a continuous basis within fourteen (14) days of
receiving such demand, (ii) the willful engaging by you in conduct which is
demonstrably
<PAGE> 5
Mr. Timothy G. Rupert
August 1, 1999
Page 5
and materially injurious to the Company, monetarily or otherwise or (iii) your
conviction of any felony or conviction of a misdemeanor which impairs your
ability substantially to perform your duties with the Company. For purposes of
this paragraph, no act, or failure to act, on your part shall be deemed
"willful" unless done, or omitted to be done, by you not in good faith and
without reasonable belief that your action or omission was in the best interest
of the Company.
(e) For purposes of this Letter Agreement, "Good Reason" shall
mean, without your express written consent, the occurrence after a Change in
Control of the Company of any one or more of the following:
(1) the assignment to you of duties inconsistent with
your position immediately prior to the Change in Control;
(2) a reduction or alteration in the nature of your
position, duties, status or responsibilities from those in effect immediately
prior to the Change in Control;
(3) the failure by the Company to continue in effect
any of the Company's employee benefit plans, programs, policies, practices or
arrangements in which you participate (or substantially equivalent successor or
replacement employee benefit plans, programs, policies, practices or
arrangements) or the failure by the Company to continue your participation
therein on substantially the same basis, both in terms of the amount of benefits
provided and the level of your participation relative to other participants, as
existed immediately prior to the Change in Control;
(4) the failure of the Company to obtain a
satisfactory agreement from any successor to the Company to assume and agree to
perform this Letter Agreement;
(5) any purported termination by the Company of your
employment that is not effected pursuant to a Notice of Termination satisfying
the requirements of subparagraph (f) below, and for purposes of this Letter
Agreement, no such purported termination shall be effective; and
(6) the Company's requiring you to be based at a
location in excess of fifty (50) miles from the location where you are based
immediately prior to the Change in Control.
<PAGE> 6
Mr. Timothy G. Rupert
August 1,1999
Page 6
(f) Any termination by the Company for Cause or by you for
Sole Option or Good Reason shall be communicated by Notice of Termination to the
other party hereto. For purposes of this Letter Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate the specific
termination provision in this Letter Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(g) Following a Change in Control of the Company, as defined
above, upon termination of your employment you shall be entitled to the
following benefits:
(1) If your employment shall be terminated by the
Company for Cause or by you other than by Sole Option or Good Reason, the
Company shall pay you your full Base Salary through the date of termination at
the rate in effect at the time Notice of Termination is given, plus all other
amounts to which you are entitled under any compensation plan of the Company at
the time such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(2) If your employment terminates by reason of your
death or disability, your benefits shall be determined in accordance with
paragraphs 3 and 4 of this Letter Agreement and the Company's retirement,
survivor's benefits, insurance and other applicable programs and plans, then in
effect.
(3) If your employment by the Company shall be
terminated (i) by the Company other than for Cause, your death or disability, or
(ii) by you by Sole Option or (iii) by you for Good Reason, you shall be
entitled to the benefits (the "Severance Payments") provided in paragraphs
7(g)(3), (i), (ii), (iii), (iv) and (v) following, which Severance Payments
shall be in lieu of and cancel any further rights you have to receive any Base
Salary that would be otherwise due under paragraph 2 of this Letter Agreement:
(i) the Company shall pay you your full Base
Salary through the date of termination at the rate in effect at the time Notice
of Termination is given;
(ii) the Company will pay as severance
benefits to you, not later than the fifth day following the date of
termination, a lump sum severance
<PAGE> 7
Mr. Timothy G. Rupert
August 1, 1999
Page 7
payment (the "Severance Payment") equal to the product of (1) a fraction, the
numerator of which is equal to the lesser of (x) thirty-six (36) or (y) the
number of full and partial months existing between the date of termination and
your sixty-fifth (65th) birthday and the denominator of which is equal to twelve
(12), and (2) the sum of (x) your annual Base Salary in effect immediately prior
to the occurrence of the circumstances giving rise to such termination, and (y)
the amount, if any, of the highest annual bonus awarded to you under any annual
bonus plan of the Company during the four (4) years immediately preceding date
of termination;
(iii) the options previously issued to you
under any option or incentive plan of the Company to purchase shares of Common
Stock of the Company (Option Shares), as well as any previously unvested shares
of Restricted Stock granted to you, shall irrevocably vest upon any such
termination and the stock options for such Option Shares shall become thereafter
uncancellable by the Company;
(iv) in the event that you become entitled
to the Severance Payments, if any of the Severance Payments or other portion of
the Total Payments (as defined below) will be subject to the tax (the "Excise
Tax") imposed by section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), the Company shall pay to you at the time specified below, an
additional amount (the "Gross-Up Payment") such that the net amount retained by
you, after deduction of(1) any Excise Tax on the Severance Payments and such
other Total Payments, and (2) any federal, state and local income tax,
FICA-Health Insurance tax, and Excise Tax upon the payment provided for by this
paragraph, shall be equal to the Severance Payments and such other Total
Payments. For purposes of determining whether any of the payments will be
subject to the Excise Tax and the amount of such Excise Tax, (1) any other
payments or benefits received or to be received by you in connection with a
Change in Control of the Company or your termination of employment whether
pursuant to the terms of this Letter Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a Change in
Control of the Company or any person affiliated with the Company or such person
(together with the Severance Payment, the "Total Payments") shall be treated as
"parachute payments" within the meaning of section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of section 280G(b)(l) shall
be treated as subject to the Excise Tax, except to the extent that in the
opinion of tax counsel selected by the Company's independent auditors and
acceptable to you such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually rendered within
the meaning of section
<PAGE> 8
Mr. Timothy G. Rupert
August 1, 1999
Page 8
280G(b)(4) of the Code in excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax,
(2) the amount of the Total Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (A) the total amount of the Total
Payments or (B) the amount of excess parachute payments within the meaning of
section 280G(b)(l) (after applying clause (1), above), and (3) the value of any
non-cash benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, you shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of your residence on the
date of termination, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes. In the event
that the Excise Tax is subsequently determined to be less than the amount taken
into account hereunder at the time of termination of your employment, you shall
repay to the Company at the time that the amount of such reduction in Excise Tax
is finally determined the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to the Excise
Tax and federal and state and local income tax imposed on the Gross-Up Payment
being repaid by you if such repayment results in a reduction in Excise Tax
and/or a federal and state and local income tax deduction) plus interest on the
amount of such repayment at the rate provided in section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to exceed the amount taken
into account hereunder at the time of the termination of your employment
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall make an
additional Gross-Up Payment in respect of such excess (plus any interest payable
with respect to such excess) at the time that the amount of such excess is
finally determined.
The payments provided for in the paragraph
above shall be made not later than the fifth day following the date of
termination; provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay to you on such
day an estimate as determined in good faith by the Company of the minimum amount
of such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined but in no event later than the thirtieth
day after the date of termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess
<PAGE> 9
Mr. Timothy G. Rupert
August 1, 1999
Page 9
shall constitute a loan by the Company to you payable on the fifth day after
demand by the Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code);
(v) The Company shall also pay to you all
legal fees and expenses incurred by you as a result of such termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce any right
or benefit provided by this Letter Agreement or in connection with any tax audit
or proceeding to the extent attributable to the application of section 4999 of
the Code to any payment or benefit provided hereunder); and
(vi) for a twenty-four (24) month period
after date of termination, the Company will arrange to provide you at the
Company's expense with life, disability, accident and health insurance benefits
substantially similar to those which you were receiving immediately prior to the
Notice of Termination; but benefits otherwise receivable by you pursuant to this
paragraph shall be reduced to the extent comparable benefits are actually
received by you during the twenty-four (24) month period following your
termination, and any such benefits actually received by you shall be reported to
the Company.
(h) You shall not be required to mitigate the amount of any
Severance Payments provided for in this paragraph 7 by seeking other employment
or otherwise, nor, except as provided in paragraph (vi) above, shall the amount
of any payment or benefit provided for in this paragraph 7 be reduced by any
compensation or benefit earned by you as the result of employment by another
employer after the date of termination, or otherwise.
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or of any
division or subsidiary thereof employing you to expressly assume and agree to
perform this Letter Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Letter Agreement
and shall entitle you to compensation from the Company in the same amount and
on the same terms as you would be entitled hereunder if you terminate your
employment for Good Reason.
<PAGE> 10
Mr. Timothy G. Rupert
August 1, 1999
Page 10
8. This Letter Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Letter Agreement, to your devisee,
legatee or other designee or, if there is not such designee, to your estate.
9. As additional consideration for the compensation and benefits
provided to you pursuant to this Letter Agreement, you agree that you will not,
for a period of 24 months after the end of the Employment Period, or the
termination of your employment with the Company (whichever first occurs),
directly or indirectly, compete with, engage in the same business as, be
employed by, act a consultant to, or be a director, officer, employee, owner or
partner, or otherwise participate in or assist (including, without limitation,
by soliciting customers for, or individuals to provide services to), any
business or organization which competes with the Company or any subsidiary or
affiliate thereof. In addition, you agree that during such 24-month period, you
will not directly or indirectly induce, or attempt to influence, any employee of
the Company or any subsidiary or affiliate thereof to terminate his or her
employment with the Company or any subsidiary or affiliate thereof or in any
manner seek to engage or seek to employ any such employee (whether or not for
compensation) such that such employee would thereafter be unable to devote his
or her full efforts to the business then conducted by the Company or any
subsidiary or affiliate thereof. These restrictions shall not apply if you
terminate your employment with the Company by Sole Option or for Good Reason
after a Change in Control of the Company. For purposes of this Paragraph 9, you
will not be deemed to have breached your commitment merely because you own,
directly or indirectly, not more than one percent (1%) of the outstanding common
stock of such a corporation if, at the time you acquire such stock, such stock
is listed on a national securities exchange or is regularly traded in the
over-the-counter market by a member of either a national securities exchange or
the National Association of Securities Dealers, Inc. In order to protect the
interest of the Company, you will also maintain in strict confidence and not
disclose to any other person or entity any information received from any source
in the Company or developed by you in the course of performing your duties for
the Company. This obligation shall not extend to: (a) anything you can establish
as known to you from a source outside the Company, (b) anything which has been
published or becomes published hereafter other than by you, or (c) anything
which you receive from a non-Company source without restriction on its
disclosure. Should you breach or threaten to breach the commitments in this
Paragraph 9, and in recognition of the fact that
<PAGE> 11
Mr. Timothy G. Rupert
August 1, 1999
Page 11
the Company would not under such circumstances be adequately compensated by
money damages, the Company shall be entitled, in addition to any other rights
and remedies available to it, to an injunction restraining you from such breach.
Further, you acknowledge and agree that the provisions of this Paragraph 9 are
necessary, reasonable, and proportionate to protect the Company during such
noncompetition period.
10. The Company's Stock Plan Committee has granted to you 40,000 shares
of restricted stock subject to your execution of a Restricted Stock Grant in the
form attached hereto. The restriction period with regard to such shares shall
commerce August 1, 1999 and end July 31, 2003.
11. The validity, interpretation, construction and performance of this
Letter Agreement shall be governed by the laws of the State of Ohio.
If the provisions of this Letter Agreement are acceptable to you,
please sign one original copy of this Letter Agreement and return it to me. You
may retain the second signed original for your files.
Very truly yours,
RTI International Metals, Inc.
By /s/ ROBERT M. HERNANDEZ
-------------------------------------
Robert M. Hernandez
Chairman of the Board of Directors
Attachment
Confirmed:
/s/ TIMOTHY G. RUPERT
- -------------------------
Timothy G. Rupert
8/9/99
- -------------------------
Date
<PAGE> 1
Exhibit 10.12
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
August 1, 1999
Mrs. Dawne S. Hickton
Vice President & General Counsel
RTI International Metals, Inc.
1000 Warren Avenue
Niles, OH 44446
Dear Mrs. Hickton:
This Letter Agreement sets forth the basis upon which I have been authorized by
the Board of Directors of RTI International Metals, Inc. ("Company") to employ
you in the executive officer position described in Paragraph 1 below for the
Employment Period (as hereinafter defined). The "Employment Period" shall
initially be the period August 1, 1999 through July 31, 2003; provided, however,
that on August 1,2003 and each August 1 thereafter, the Employment Period shall
automatically be extended for one additional year unless, not later than the
immediately preceding April 1, either you or the Company shall have given
written notice to the other that you or it does not wish to extend the
Employment Period; and provided further that the Employment Period shall
terminate automatically when you attain age sixty-five (65). In the event this
Letter Agreement is terminated for any reason other than your death, your
obligations as set forth in Paragraph 9 shall survive and be enforceable
notwithstanding such termination. This Letter Agreement supersedes and replaces
in its entirety the Letter Agreement between you and the Company dated May
1,1997.
1. During the Employment Period, you will serve as Vice President
& General Counsel of the Company (or on any other executive
officer position within the Company to which you may hereafter
be elected by the Company's Board of Directors), performing
all duties and functions appropriate to that office, as well
as such additional duties as the Company's President & Chief
Executive Officer or Board of Directors may, from time to
time, assign to you. During the Employment Period, you will
devote your full time and best efforts to the performance of
all such duties.
2. During the Employment Period, the Company will pay you, in
equal monthly installments, as compensation for your services
an annual salary of $150,000. This annual salary may be
increased from time to time in the sole discretion of the
Company, but may only be decreased by the Company with
your written consent. Such annual salary, whether increased or
decreased, shall constitute your "Base Salary". In addition,
you may be awarded such bonuses as the Board of Directors of
the Company determines to be appropriate under the Company's
Annual Incentive Compensation
<PAGE> 2
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mrs. Dawne S. Hickton
August 1, 1999
Page 2
Plan or any successor bonus plan. You will also be eligible to
participate in the Company's 1995 Stock Plan, or any successor
stock plan.
3. In the event of your death during the Employment Period, your
right to all compensation under this Letter Agreement
allocable to days subsequent to your death shall terminate and
no further payments shall be due to you, your personal
representative, or your estate, except for that portion, if
any, of your Base Salary that is accrued and unpaid upon the
date of your death.
4. In the event you become physically or mentally disabled, in
the sole judgment of physicians selected by the Company's
Board of Directors, such that you cannot perform the duties
and functions contracted for pursuant to this Letter
Agreement, and should such disability continue for at least
180 consecutive days (or in the judgment of such physicians,
be likely to continue for at least 180 consecutive days), the
Company may terminate your employment upon written notice to
you. If your employment is terminated because of physical or
mental disability, your right to all compensation under this
Letter Agreement allocable to days subsequent to such
termination shall terminate and no further payments shall be
due to you, your personal representative, or your estate,
except for that portion, if any, of your Base Salary that is
accrued and unpaid upon the date of termination.
5. The Company may, upon written notice to you fixing the date of
termination, terminate your services during the Employment
Period for Cause, (as Cause is defined in Paragraph 7(c)
below). In such event, your right to receive continued
compensation under this Letter Agreement will terminate and no
further installments will be paid to you, except for that
portion, if any, of your Base Salary that is accrued and
unpaid upon the date of termination.
6. In addition to your annual Base Salary as set forth in
Paragraph 2 above, you will be entitled in each calendar year
to a vacation with pay in accordance with the vacation
policies of the Company. You will also be entitled to: (1)
participate in all of the Company's existing and future
employee benefit programs applicable to officers of the
Company in accordance with the terms of such benefit program
plan documents; (2) receive one comprehensive physical
examination, at Company expense, in each calendar year, such
examination to be conducted by the Cleveland Clinic, the
Greenbrier Clinic or comparable facility; and (3) tax
preparation and financial planning advice.
7. Change of Control Provisions
(a) For purposes of this Letter Agreement, a "Change in
Control" of the Company shall mean a change in
control of a nature that would be required to be
reported by it in response to Item 6(e) of Schedule
14A of Regulation 14A
<PAGE> 3
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mrs. Dawne S. Hickton
August 1, 1999
Page 3
promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), whether or not
the Company is then subject to such reporting
requirement; provided, that, without limitation, such
a change in control shall be deemed to have occurred
if:
(1) Any person (within the meaning of that term
as used in Sections 13(d) and 14(d) of the
Exchange Act (a "Person") is or becomes the
"beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or
indirectly, of securities of the Company
representing twenty percent (20%) or more
of the combined voting power of the Company's
then outstanding voting securities; provided,
however, that for purposes of this Agreement
the term "Person" shall not include (i) the
Company or any of its majority-owned
subsidiaries, (ii) a trustee or other
fiduciary holding securities under an
employee benefit plan of the Company or any
of its subsidiaries, (iii) an underwriter
temporarily holding securities pursuant to an
offering of such securities, or (iv) a
corporation owned, directly or indirectly, by
the stockholders of the Company in
substantially the same proportions as their
ownership of stock of the Company; or
(2) The following individuals cease for any
reason to constitute a majority of the number
of directors then serving on the Board of
Directors of the Company; individuals who, on
the date hereof; are serving as directors on
the Board and any new director (other than a
director whose initial assumption of office
is in connection with an actual or threatened
election contest, including but not limited
to a consent solicitation, relating to the
election of directors of the Company) whose
appointment or election by the Board or
nomination for election by the Company's
stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then
still in office who either were directors on
the date hereof or whose appointment,
election or nomination for election was
previously so approved, or
(3) There is consummated a merger or
consolidation of the Company or a subsidiary
thereof with any other corporation, other
than a merger or consolidation which would
result in the holders of the voting
securities of the Company outstanding
immediately prior thereto holding securities
which represent immediately after such merger
or consolidation at least 50% of the
combined voting power of the voting
securities of the entity surviving the merger
or consolidation, (or the parent of such
surviving entity) or the shareholders of the
Company approve a plan of complete
liquidation of the Company, or there is
consummated the sale or other disposition of
all or substantially all of the Company's
assets.
<PAGE> 4
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mrs. Dawne S. Hickton
August 1, 1999
Page 4
(b) If any of the events described above constituting a
Change in Control of the Company shall have occurred,
you shall be entitled to the benefits provided in
Paragraph 7(f) hereof upon the termination of your
employment during the term of this Letter Agreement
unless such termination is (i) because of your death
or disability, (ii) by the Company for Cause,
(iii) by you other than for Good Reason, or (iv) on
or after the date that you attain age sixty-five
(65). In the event your employment with the Company
is terminated for any reason prior to the occurrence
of a Change in Control, you shall not be entitled to
any benefits under this Paragraph 7; provided,
however, that if your employment is terminated prior
to a Change in Control without Cause at the direction
of a person who has entered into an agreement with
the Company, the consummation of which will
constitute a Change in Control, your employment shall
be deemed to have terminated following a Change in
Control. Your entitlement to benefits under any of
the Company's retirement plans will not adversely
affect your rights to receive payments hereunder.
(c) Termination by the Company of your employment for
"Cause" shall mean termination upon (i) the willful
and continued failure by you to substantially perform
your duties with the Company (other than any such
failure resulting from termination by you for Good
Reason), after a demand for substantial performance
is delivered to you that specifically identifies the
manner in which the Company believes that you have
not substantially performed your duties, and you have
failed to resume substantial performance of your
duties on a continuous basis within fourteen (14)
days of receiving such demand, (ii) the willful
engaging by you in conduct which is demonstrably and
materially injurious to the Company, monetarily or
otherwise or (iii) your conviction of any felony or
conviction of a misdemeanor which impairs your
ability substantially to perform your duties with the
Company. For purposes of this paragraph, no act, or
failure to act, on your part shall be deemed
"willful" unless done, or omitted to be done, by you
not in good faith and without reasonable belief that
your action or omission was in the best interest of
the Company.
(d) For purposes of this Letter Agreement, "Good Reason"
shall mean, without your express written consent, the
occurrence after a Change in Control of the Company
of any one or more of the following:
(1) The assignment to you of duties inconsistent
with your position immediately prior to the
Change in Control;
(2) A reduction or alteration in the nature of
your position, duties, status or
<PAGE> 5
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mrs. Dawne S. Hickton
August 1, 1999
Page 5
responsibilities from those in effect
immediately prior to the Change in Control;
(3) The failure by the Company to continue in
effect any of the Company's employee benefit
plans, programs, policies, practices or
arrangements in which you participate (or
substantially equivalent successor or
replacement employee benefit plans,
programs, policies, practices or
arrangements) or the failure by the Company
to continue your participation therein on
substantially the same basis, both in terms
of the amount of benefits provided and the
level of your participation relative to
other participants, as existed immediately
prior to the Change in Control;
(4) The failure of the Company to obtain a
satisfactory agreement from any successor to
the Company to assume and agree to perform
this Letter Agreement;
(5) Any purported termination by the Company of
your employment that is not effected
pursuant to a Notice of Termination
satisfying the requirements of Subparagraph
(e) below, and for purposes of this Letter
Agreement, no such purported termination
shall be effective; and
(6) The Company's requiring you to be based at a
location in excess of fifty (50) miles from
the location where you are based immediately
prior to the Change in Control.
(e) Any termination by the Company for Cause or by you
for Good Reason shall be communicated by Notice of
Termination to the other party hereto. For purposes
of this Letter Agreement, a "Notice of Termination"
shall mean a written notice which shall indicate the
specific termination provision in this Letter
Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed
to provide a basis for termination of your employment
under the provision so indicated.
(f) Following a Change in Control of the Company, as
defined above, upon termination of your employment
you shall be entitled to the following benefits:
(1) If your employment shall be terminated by
the Company for Cause or by you other than
for Good Reason, the Company shall pay you
your full Base Salary through the date of
termination at the rate in effect at the
time Notice of Termination is given, plus
all other amounts to which you are entitled
under any compensation plan of the Company
at the time such payments are due, and the
Company shall have no further obligations to
you under this Agreement.
<PAGE> 6
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mrs. Dawne S. Hickton
August 1, 1999
Page 6
(2) If your employment terminates by reason of
your death or disability, your benefits
shall be determined in accordance with
Paragraphs 3 and 4 of this Letter Agreement
and the Company's retirement, survivor's
benefits, insurance and other applicable
programs and plans, then in effect.
(3) If your employment by the Company shall be
terminated (i) by the Company other than for
Cause, your death or disability, or (ii) by
you for Good Reason, you shall be entitled
to the benefits (the "Severance Payments")
provided in Paragraphs 7(f)(3), (i), (ii),
(iii), (iv) and (v) following, which
Severance Payments shall be in lieu of and
cancel any further rights you have to
receive any Base Salary that would be
otherwise due under Paragraph 2 of this
Letter Agreement:
(i) The Company shall pay you your full
Base Salary through the date of
termination at the rate in effect
at the time Notice of Termination
is given;
(ii) The Company will pay as severance
benefits to you, not later than the
fifth day following the date of
termination, a lump sum severance
payment (the "Severance Payment")
equal to the product of (1) a
fraction, the numerator of which is
equal to the lesser of (x)
thirty-six (36) or (y) the number
of full and partial months existing
between the date of termination and
your sixty-fifth (65th) birthday
and the denominator of which is
equal to twelve (12), and (2) the
sum of (x) your annual Base Salary
in effect immediately prior to the
occurrence of the circumstances
giving rise to such termination,
and (y) the amount, if any, of the
highest annual bonus awarded to you
under any annual bonus plan of the
Company during the four (4) years
immediately preceding date of
termination;
(iii) The Options previously issued to
you under any option or incentive
plan of the Company to purchase
shares of Common Stock of the
Company (Option Shares), as well as
any previously unvested shares of
Restricted Stock granted to you,
shall irrevocably vest upon any
such termination and the stock
options for such Option Shares
shall become thereafter
uncancellable by the Company;
(iv) In the event that you become
entitled to the Severance Payments,
if any of the Severance Payments or
other portion of the Total Payments
(as defined below) will be subject
to the tax
<PAGE> 7
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mrs. Dawne S. Hickton
August 1, 1999
Page 7
(the "Excise Tax") imposed by
Section 4999 of the Internal
Revenue Code of 1986, as amended
(the "Code"), the Company shall pay
to you at the time specified below,
an additional amount (the "Gross-Up
Payment") such that the net amount
retained by you, after deduction
of (1) any Excise Tax on the
Severance Payments and such other
Total Payments, and (2) any
federal, state and local income
tax, FICA-Health Insurance tax, and
Excise Tax upon the payment
provided for by this paragraph,
shall be equal to the Severance
Payments and such other total
Payments. For purposes of
determining whether any of the
payments will be subject to the
Excise Tax and the amount of such
Excise Tax, (1) any other payments
or benefits received or to be
received by you in connection with
a Change in Control of the Company
or your termination of employment
whether pursuant to the terms of
this Letter Agreement or any other
plan, arrangement or agreement with
the Company, any person whose
actions result in a Change of
Control of the Company or any
person affiliated with the Company
or such person (together with the
Severance Payment, the "Total
Payments") shall be treated as
"parachute payments" within the
meaning of Section 280G(b)(2) of
the Code, and all "excess parachute
payments" within the meaning of
Section 280G(b)(1) shall be treated
as subject to the Excise Tax,
except to the extent that in the
opinion of tax counsel selected by
the Company's independent auditors
and acceptable by you such other
payments or benefits (in whole or
in part) do not constitute
parachute payments, or such excess
parachute payments (in whole or in
part) represent reasonable
compensation for services actually
rendered within the meaning of
Section 280G(b)(4) of the Code in
excess of the base amount within
the meaning of Section 280G(b)(3)
of the Code, or are otherwise not
subject to the Excise Tax, (2) the
amount of the Total Payments
which shall be treated as subject
to the Excise Tax shall be equal to
the lesser of (A) the total amount
of the Total Payments or (B) the
amount of excess parachute payments
within the meaning of Section
280G(b)(l) (after applying clause
(1), above), and (3) the value of
any non-cash benefits or any
deferred payment or benefit shall
be determined by the Company's
independent auditors in accordance
with the principles of Sections
280G(d)(3) and (4) of the Code. For
purposes of determining the amount
of the Gross-Up Payment, you shall
be deemed to pay federal income
taxes at the highest marginal rate
of federal income taxation in the
calendar year in
<PAGE> 8
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mrs. Dawne S. Hickton
August 1, 1999
Page 8
which the Gross-Up Payment is to be
made and state and local income
taxes at the highest marginal rate
of taxation in the state and
locality of your residence on the
date of termination, net of the
maximum reduction in federal income
taxes which could be obtained from
deduction of such state and local
taxes. In the event that the Excise
Tax is subsequently determined to
be less than the amount taken into
account hereunder at the time of
termination of your employment, you
shall repay to the Company at the
time that the amount of such
reduction in Excise Tax is finally
determined the portion of the
Gross-Up Payment attributable to
such reduction (plus the portion of
the Gross-Up Payment attributable
to the Excise Tax and federal and
state and local income tax imposed
on the Gross-Up Payment being
repaid by you if such repayment
results in a reduction in Excise
Tax and/or a federal and state and
local income tax deduction) plus
interest on the amount of such
repayment at the rate provided in
Section 1274(b)(2)(B) of the Code.
In the event that the Excise Tax is
determined to exceed the amount
taken into account hereunder at the
time of the termination of your
employment (including by reason of
any payment the existence or amount
of which cannot be determined at
the time of the Gross-Up Payment),
the Company shall make an
additional Gross-Up Payment in
respect of such excess (plus any
interest payable with respect to
such excess) at the time that the
amount of such excess is finally
determined.
The payments provided for in the
paragraph above shall be made not
later than the fifth day following
the date of termination; provided,
however, that if the amounts of
such payments cannot be finally
determined on or before such day,
the Company shall pay to you on
such day an estimate as determined
in good faith by the Company of
the minimum amount of such payments
and shall pay the remainder of such
payments (together with interest at
the rate provided in Section
1274(b)(2)(B) of the Code) as soon
as the amount thereof can be
determined but in no event later
than the thirtieth day after the
date of termination. In the event
that the amount of the estimated
payments exceeds the amount
subsequently determined to have
been due, such excess shall
constitute a loan by the Company to
you payable on the fifth day after
demand by the Company (together
with interest at the rate provided
in Section 1274(b)(2)(B) of the
Code);
<PAGE> 9
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mrs. Dawne S. Hickton
August 1, 1999
Page 9
(v) The Company shall also pay to you
all legal fees and expenses
incurred by you as a result of such
termination of employment
(including all such fees and
expenses, if any, incurred in
contesting or disputing any such
termination or in seeking to obtain
or enforce any right or benefit
provided by this Letter Agreement
or in connection with any tax audit
or proceeding to the extent
attributable to the application of
Section 4999 of the Code to any
payment or benefit provided
hereunder); and
(vi) For a twenty-four (24) month period
after date of termination, the
Company will arrange to provide you
at the Company's expense with life,
disability, accident and health
insurance benefits substantially
similar to those which you were
receiving immediately prior to the
Notice of Termination; but benefits
otherwise receivable by you
pursuant to this paragraph shall be
reduced to the extent comparable
benefits are actually received by
you during the twenty-four (24)
month period following your
termination, and any such benefits
actually received by you shall be
reported to the Company.
(h) You shall not be required to mitigate the amount of
any Severance Payments provided for in this Paragraph
7 by seeking other employment or otherwise, nor,
except as provided in Paragraph (vi) above, shall the
amount of any payment or benefit provided for in this
Paragraph 7 be reduced by any compensation or benefit
earned by you as the result of employment by another
employer after the date of termination, or otherwise.
(i) The Company will require any successor (whether
direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company or
of any division or subsidiary thereof employing you
to expressly assume and agree to perform this Letter
Agreement in the same manner and to the same extent
that the Company would be required to perform it if
no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be
a breach of this Letter Agreement and shall entitle
you to compensation from the Company in the same
amount and on the same terms as you would be entitled
hereunder if you terminate your employment for Good
Reason.
8. This Letter Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued
to live, all such amounts, unless otherwise
<PAGE> 10
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mrs. Dawne S. Hickton
August 1, 1999
Page 10
provided herein, shall be paid in accordance with the terms of
this Letter Agreement, to your devisee, legatee or other
designee or, if there is not such designee, to your estate.
9. As additional consideration for the compensation and benefits
provided to you pursuant to this Letter Agreement, you agree
that you will not, for a period of twenty-four (24) months
after the end of the Employment Period, or the termination of
your employment with the Company (whichever first occurs),
directly or indirectly, compete with, engage in the same
business as, be employed by, act a consultant to, or be a
director, officer, employee, owner or partner, or otherwise
participate in or assist (including, without limitation, by
soliciting customers for, or individuals to provide services
to), any business or organization which has as its principal
business the production of titanium or titanium-related
products. In addition, you agree that during such 24-month
period, you will not directly or indirectly induce, or attempt
to influence, any employee of the Company or any subsidiary or
affiliate thereof to terminate his or her employment with the
Company or any subsidiary or affiliate thereof or in any
manner seek to engage or seek to employ any such employee
(whether or not for compensation) such that such employee
would thereafter be unable to devote his or her full efforts
to the business then conducted by the Company or any
subsidiary or affiliate thereof. These restrictions shall not
apply if you terminate your employment with the Company for
Good Reason after a Change in Control of the Company. For
purposes of this Paragraph 9, you will not be deemed to have
breached your commitment merely because you own, directly or
indirectly, not more than one percent (1%) of the outstanding
common stock of such a corporation if, at the time you acquire
such stock, such stock is listed on a national securities
exchange or is regularly traded in the over-the-counter market
by a member of either a national securities exchange or the
National Association of Securities Dealers, Inc. In order to
protect the interest of the Company, you will also maintain in
strict confidence and not disclose to any other person or
entity any information received from any source in the Company
or developed by you in the course of performing your duties
for the Company. This obligation shall not extend to: (a)
anything you can establish as known to you from a source
outside the Company, (b) anything which has been published or
becomes published hereafter other than by you, or (c) anything
which you receive from a non-Company source without
restriction on its disclosure. Should you breach or threaten
to breach the commitments in this Paragraph 9, and in
recognition of the fact that the Company would not under such
circumstances be adequately compensated by money damages, the
Company shall be entitled, in addition to any other rights and
remedies available to it, to an injunction restraining you
from such breach. Further, you acknowledge and agree that the
provisions of this Paragraph 9 are necessary, reasonable, and
proportionate to protect the Company during such
non-competition period.
10. The Company's Stock Plan Committee has granted to you 8,000
shares of restricted stock subject to your execution of a
Restricted Stock Grant in the form attached hereto. The
restriction period with regard to such shares shall commence
August 1, 1999 and end July 31, 2003.
<PAGE> 11
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mrs. Dawne S. Hickton
August 1, 1999
Page 11
11. The validity, interpretation, construction and performance of
this Letter Agreement shall be governed by the laws of the
State of Ohio.
If the provisions of this Letter Agreement are acceptable to you, please sign
one original copy of this Letter Agreement and return it to me. You may retain
the second signed original for your files.
Very truly yours,
RTI International Metals, Inc.
By /s/ TIMOTHY G. RUPERT
------------------------------
TIMOTHY G. RUPERT
President & Chief Executive Officer
Attachment
CONFIRMED:
/s/ DAWNE S. HICKTON DATE: 8-1-99
- ------------------------- ------------
Dawn S. Hickton
<PAGE> 1
Exhibit 10.13
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
August 1,1999
Mr. Lawrence W. Jacobs
Vice President & Chief Financial Officer
RTI International Metals, Inc.
1000 Warren Avenue
Niles, OH 44446
Dear Mr. Jacobs:
This Letter Agreement sets forth the basis upon which I have been authorized by
the Board of Directors of RTI International Metals, Inc. ("Company") to employ
you in the executive officer position described in Paragraph 1 below for the
Employment Period (as hereinafter defined). The "Employment Period" shall
initially be the period August 1, 1999 through July 31, 2003; provided, however,
that on August 1, 2003 and each August 1 thereafter, the Employment Period shall
automatically be extended for one additional year unless, not later than the
immediately preceding April 1, either you or the Company shall have given
written notice to the other that you or it does not wish to extend the
Employment Period; and provided further that the Employment Period shall
terminate automatically when you attain age sixty-five (65). In the event this
Letter Agreement is terminated for any reason other than your death, your
obligations as set forth in Paragraph 9 shall survive and be enforceable
notwithstanding such termination. This Letter Agreement supersedes and replaces
in its entirety the Letter Agreement between you and the Company dated March 6,
1998.
1. During the Employment Period, you will serve as Vice President
& Chief Financial Officer of the Company (or on any other
executive officer position within the Company to which you
may hereafter be elected by the Company's Board of Directors),
performing all duties and functions appropriate to that
office, as well as such additional duties as the Company's
President & Chief Executive Officer or Board of Directors may,
from time to time, assign to you. During the Employment
Period, you will devote your full time and best efforts to the
performance of all such duties.
<PAGE> 2
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RTI
Mr. Lawrence W. Jacobs INTERNATIONAL
August 1, 1999 METALS, INC.
Page 2
2. During the Employment Period, the Company will pay you, in
equal monthly installments, as compensation for your services
an annual salary of $140,000. This annual salary may be
increased from time to time in the sole discretion of the
Company, but may only be decreased by the Company with your
written consent. Such annual salary, whether increased or
decreased, shall constitute your "Base Salary". In addition,
you may be awarded such bonuses as the Board of Directors of
the Company determines to be appropriate under the Company's
Annual Incentive Compensation Plan or any successor bonus
plan. You will also be eligible to participate in the
Company's 1995 Stock Plan, or any successor stock plan.
3. In the event of your death during the Employment Period, your
right to all compensation under this Letter Agreement
allocable to days subsequent to your death shall terminate and
no further payments shall be due to you, your personal
representative, or your estate, except for that portion, if
any, of your Base Salary that is accrued and unpaid upon the
date of your death.
4. In the event you become physically or mentally disabled, in
the sole judgment of physicians selected by the Company's
Board of Directors, such that you cannot perform the duties
and functions contracted for pursuant to this Letter
Agreement, and should such disability continue for at least
180 consecutive days (or in the judgment of such physicians,
be likely to continue for at least 180 consecutive days), the
Company may terminate your employment upon written notice to
you. If your employment is terminated because of physical or
mental disability, your right to all compensation under this
Letter Agreement allocable to days subsequent to such
termination shall terminate and no further payments shall be
due to you, your personal representative, or your estate,
except for that portion, if any, of your Base Salary that is
accrued and unpaid upon the date of termination.
5. The Company may, upon written notice to you fixing the date of
termination, terminate your services during the Employment
Period for Cause, (as Cause is defined in Paragraph 7(c)
below). In such event, your right to receive continued
compensation under this Letter Agreement will terminate and no
further installments will be paid to you, except for that
portion, if any, of your Base Salary that is accrued and
unpaid upon the date of termination.
6. In addition to your annual Base Salary as set forth in
Paragraph 2 above, you will be entitled in each calendar year
to a vacation with pay in accordance with the vacation
policies of the Company. You will also be entitled to: (1)
participate in all of the Company's existing and future
employee benefit programs applicable to officers of the
Company in accordance with the terms of such benefit program
plan documents; (2) receive one comprehensive physical
examination, at Company expense, in each calendar year, such
examination to be conducted by the Cleveland Clinic, the
Greenbrier Clinic or comparable facility; and (3) tax
preparation and financial planning advice.
<PAGE> 3
[LOGO]
RTI
Mr. Lawrence W. Jacobs INTERNATIONAL
August 1, 1999 METALS, INC.
Page 3
7. Change of Control Provisions
(a) For purposes of this Letter Agreement, a "Change in
Control" of the Company shall mean a change in
control of a nature that would be required to be
reported by it in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Company is then
subject to such reporting requirement; provided,
that, without limitation, such a change in control
shall be deemed to have occurred if:
(1) Any person (within the meaning of that term
as used in Sections 13(d) and 14(d) of the
Exchange Act (a "Person") is or becomes the
"beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or
indirectly, of securities of the Company
representing twenty percent (20%) or more of
the combined voting power of the Company's
then outstanding voting securities;
provided, however, that for purposes of this
Agreement the term "Person" shall not
include (i) the Company or any of its
majority-owned subsidiaries, (ii) a trustee
or other fiduciary holding securities under
an employee benefit plan of the Company or
any of its subsidiaries, (iii) an
underwriter temporarily holding securities
pursuant to an offering of such securities,
or (iv) a corporation owned, directly or
indirectly, by the stockholders of the
Company in substantially the same
proportions as their ownership of stock of
the Company; or
(2) The following individuals cease for any
reason to constitute a majority of the
number of directors then serving on the
Board of Directors of the Company;
individuals who, on the date hereof, are
serving as directors on the Board and any
new director (other than a director whose
initial assumption of office is in
connection with an actual or threatened
election contest, including but not limited
to a consent solicitation, relating to the
election of directors of the Company) whose
appointment or election by the Board or
nomination for election by the Company's
stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then
still in office who either were directors on
the date hereof or whose appointment,
election or nomination for election was
previously so approved, or
(3) There is consummated a merger or
consolidation of the Company or a subsidiary
thereof with any other corporation, other
than a merger or consolidation which would
result in the holders of the voting
securities of the Company outstanding
immediately prior thereto holding securities
which represent immediately after such
merger or consolidation at least 50% of the
combined voting power of the voting
securities of the entity
<PAGE> 4
[LOGO]
RTI
Mr. Lawrence W. Jacobs INTERNATIONAL
August 1, 1999 METALS, INC.
Page 4
surviving the merger or consolidation, (or
the parent of such surviving entity) or the
shareholders of the Company approve a plan
of complete liquidation of the Company, or
there is consummated the sale or other
disposition of all or substantially all of
the Company's assets.
(b) If any of the events described above constituting a
Change in Control of the Company shall have occurred,
you shall be entitled to the benefits provided in
Paragraph 7(f) hereof upon the termination of your
employment during the term of this Letter Agreement
unless such termination is (i) because of your death
or disability, (ii) by the Company for Cause, (iii)
by you other than for Good Reason, or (iv) on or
after the date that you attain age sixty-five (65).
In the event your employment with the Company is
terminated for any reason prior to the occurrence of
a Change in Control, you shall not be entitled to any
benefits under this Paragraph 7; provided, however,
that if your employment is terminated prior to a
Change in Control without Cause at the direction of a
person who has entered into an agreement with the
Company, the consummation of which will constitute a
Change in Control, your employment shall be deemed to
have terminated following a Change in Control. Your
entitlement to benefits under any of the Company's
retirement plans will not adversely affect your
rights to receive payments hereunder.
(c) Termination by the Company of your employment for
"Cause" shall mean termination upon (i) the willful
and continued failure by you to substantially perform
your duties with the Company (other than any such
failure resulting from termination by you for Good
Reason), after a demand for substantial performance
is delivered to you that specifically identifies the
manner in which the Company believes that you have
not substantially performed your duties, and you have
failed to resume substantial performance of your
duties on a continuous basis within fourteen (14)
days of receiving such demand, (ii) the willful
engaging by you in conduct which is demonstrably and
materially injurious to the Company, monetarily or
otherwise or (iii) your conviction of any felony or
conviction of a misdemeanor which impairs your
ability substantially to perform your duties with the
Company. For purposes of this paragraph, no act, or
failure to act, on your part shall be deemed
"willful" unless done, or omitted to be done, by you
not in good faith and without reasonable belief that
your action or omission was in the best interest
of the Company.
(d) For purposes of this Letter Agreement, "Good Reason"
shall mean, without your express written consent, the
occurrence after a Change in Control of the Company
of any one or more of the following:
(1) The assignment to you of duties inconsistent
with your position immediately prior to the
Change in Control;
<PAGE> 5
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RTI
Mr. Lawrence W. Jacobs INTERNATIONAL
August 1, 1999 METALS, INC.
Page 5
(2) A reduction or alteration in the nature of
your position, duties, status or
responsibilities from those in effect
immediately prior to the Change in Control;
(3) The failure by the Company to continue in
effect any of the Company's employee benefit
plans, programs, policies, practices or
arrangements in which you participate (or
substantially equivalent successor or
replacement employee benefit plans,
programs, policies, practices or
arrangements) or the failure by the Company
to continue your participation therein on
substantially the same basis, both in terms
of the amount of benefits provided and the
level of your participation relative to
other participants, as existed immediately
prior to the Change in Control;
(4) The failure of the Company to obtain a
satisfactory agreement from any successor to
the Company to assume and agree to perform
this Letter Agreement;
(5) Any purported termination by the Company of
your employment that is not effected
pursuant to a Notice of Termination
satisfying the requirements of Subparagraph
(e) below, and for purposes of this Letter
Agreement, no such purported termination
shall be effective; and
(6) The Company's requiring you to be based at a
location in excess of fifty (50) miles from
the location where you are based immediately
prior to the Change in Control.
(e) Any termination by the Company for Cause or by you
for Good Reason shall be communicated by Notice of
Termination to the other party hereto. For purposes
of this Letter Agreement, a "Notice of Termination"
shall mean a written notice which shall indicate the
specific termination provision in this Letter
Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed
to provide a basis for termination of your employment
under the provision so indicated.
(f) Following a Change in Control of the Company, as
defined above, upon termination of your employment
you shall be entitled to the following benefits:
(1) If your employment shall be terminated by
the Company for Cause or by you other than
for Good Reason, the Company shall pay you
your full Base Salary through the date of
termination at the rate in effect at the
time Notice of Termination is given, plus
all other amounts to which you are entitled
under any compensation plan of the Company
at the time such payments are due, and the
Company shall have no further obligations to
you under this Agreement.
<PAGE> 6
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RTI
Mr. Lawrence W. Jacobs INTERNATIONAL
August 1, 1999 METALS, INC.
Page 6
(2) If your employment terminates by reason of
your death or disability, your benefits
shall be determined in accordance with
Paragraphs 3 and 4 of this Letter Agreement
and the Company's retirement, survivor's
benefits, insurance and other applicable
programs and plans, then in effect.
(3) If your employment by the Company shall be
terminated (i) by the Company other than for
Cause, your death or disability, or (ii) by
you for Good Reason, you shall be entitled
to the benefits (the "Severance Payments")
provided in Paragraphs 7(f)(3), (i), (ii),
(iii), (iv) and (v) following, which
Severance Payments shall be in lieu of and
cancel any further rights you have to
receive any Base Salary that would be
otherwise due under Paragraph 2 of this
Letter Agreement:
(i) The Company shall pay you your full
Base Salary through the date of
termination at the rate in effect
at the time Notice of Termination
is given;
(ii) The Company will pay as severance
benefits to you, not later than the
fifth day following the date of
termination, a lump sum severance
payment (the "Severance Payment")
equal to the product of (1) a
fraction, the numerator of which is
equal to the lesser of (x)
thirty-six (36) or (y) the number
of full and partial months existing
between the date of termination and
your sixty-fifth (65th) birthday
and the denominator of which is
equal to twelve (12), and (2) the
sum of (x) your annual Base Salary
in effect immediately prior to the
occurrence of the circumstances
giving rise to such termination,
and (y) the amount, if any, of the
highest annual bonuses awarded to
you under any annual bonus plan of
the Company during the four (4)
years immediately preceding date of
termination;
(iii) The Options previously issued to
you under any option or incentive
plan of the Company to purchase
shares of Common Stock of the
Company (Option Shares), as well as
any previously unvested shares of
Restricted Stock granted to you,
shall irrevocably vest upon any
such termination and the stock
options for such Option Shares
shall become thereafter
uncancellable by the Company;
<PAGE> 7
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RTI
Mr. Lawrence W. Jacobs INTERNATIONAL
August 1, 1999 METALS, INC.
Page 7
(iv) In the event that you become
entitled to the Severance Payments,
if any of the Severance Payments or
other portion of the Total Payments
(as defined below) will be subject
to the tax (the "Excise Tax")
imposed by Section 4999 of the
Internal Revenue Code of 1986, as
amended (the "Code"), the Company
shall pay to you at the time
specified below, an additional
amount (the "Gross-Up Payment")
such that the net amount retained
by you, after deduction of (l) any
Excise Tax on the Severance
Payments and such other Total
Payments, and (2) any federal,
state and local income tax,
FICA-Health Insurance tax, and
Excise Tax upon the payment
provided for by this paragraph,
shall be equal to the Severance
Payments and such other total
Payments. For purposes of
determining whether any of the
payments will be subject to the
Excise Tax and the amount of such
Excise Tax, (1) any other payments
or benefits received or to be
received by you in connection with
a Change in Control of the Company
or your termination of employment
whether pursuant to the terms of
this Letter Agreement or any other
plan, arrangement or agreement with
the Company, any person whose
actions result in a Change of
Control of the Company or any
person affiliated with the Company
or such person (together with the
Severance Payment, the "Total
Payments") shall be treated as
"parachute payments" within the
meaning of Section 280G(b)(2) of
the Code, and all "excess parachute
payments" within the meaning of
Section 280G(b)(1) shall be treated
as subject to the Excise Tax,
except to the extent that in the
opinion of tax counsel selected by
the Company's independent auditors
and acceptable by you such other
payments or benefits (in whole or
in part) do not constitute
parachute payments, or such excess
parachute payments (in whole or in
part) represent reasonable
compensation for services actually
rendered within the meaning of
Section 280G(b)(4) of the Code in
excess of the base amount within
the meaning of Section 280G(b)(3)
of the Code, or are otherwise not
subject to the Excise Tax, (2) the
amount of the Total Payments which
shall be treated as subject to the
Excise Tax shall be equal to the
lesser of (A) the total amount of
the Total Payments or (B) the
amount of excess parachute payments
within the meaning of Section
280G(b)(1) (after applying clause
(1), above), and (3) the value of
any non-cash benefits or any
deferred payment or benefit shall
be determined by the Company's
independent auditors in accordance
with the principles of Sections
280G(d)(3) and (4) of the Code. For
purposes of determining the amount
of the Gross-Up Payment,
<PAGE> 8
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RTI
Mr. Lawrence W. Jacobs INTERNATIONAL
August 1, 1999 METALS, INC.
Page 8
you shall be deemed to pay federal
income taxes at the highest
marginal rate of federal income
taxation in the calendar year in
which the Gross-Up Payment is to be
made and state and local income
taxes at the highest marginal rate
of taxation in the state and
locality of your residence on the
date of termination, net of the
maximum reduction in federal income
taxes which could be obtained from
deduction of such state and local
taxes. In the event that the Excise
Tax is subsequently determined to
be less than the amount taken into
account hereunder at the time of
termination of your employment, you
shall repay to the Company at the
time that the amount of such
reduction in Excise Tax is finally
determined the portion of the
Gross-Up Payment attributable to
such reduction (plus the portion of
the Gross-Up Payment attributable
to the Excise Tax and federal and
state and local income tax imposed
on the Gross-Up Payment being
repaid by you if such repayment
results in a reduction in Excise
Tax and/or a federal and state and
local income tax deduction) plus
interest on the amount of such
repayment at the rate provided in
Section 1274(b)(2)(B) of the Code.
In the event that the Excise Tax is
determined to exceed the amount
taken into account hereunder at the
time of the termination of your
employment (including by reason of
any payment the existence or amount
of which cannot be determined at
the time of the Gross-Up Payment),
the Company shall make an
additional Gross-Up Payment in
respect of such excess (plus any
interest payable with respect to
such excess) at the time that the
amount of such excess is finally
determined.
The payments provided for in the
paragraph above shall be made not
later than the fifth day following
the date of termination; provided,
however, that if the amounts of such
payments cannot be finally
determined on or before such day,
the Company shall pay to you on such
day an estimate as determined in
good faith by the Company of the
minimum amount of such payments and
shall pay the remainder of such
payments (together with interest at
the rate provided in Section
1274(b)(2)(B) of the Code) as soon
as the amount thereof can be
determined but in no event later
than the thirtieth day after the
date of termination. In the event
that the amount of the estimated
payments exceeds the amount
subsequently determined to have
been due, such excess shall
constitute a loan by the Company to
you payable on the fifth day after
demand by the Company (together
with interest at the rate provided
in Section 1274(b)(2)(B) of the
Code);
<PAGE> 9
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RTI
Mr. Lawrence W. Jacobs INTERNATIONAL
August 1, 1999 METALS, INC.
Page 9
(v) The Company shall also pay to you
all legal fees and expenses
incurred by you as a result of such
termination of employment
(including all such fees and
expenses, if any, incurred in
contesting or disputing any such
termination or in seeking to obtain
or enforce any right or benefit
provided by this Letter Agreement
or in connection with any tax audit
or proceeding to the extent
attributable to the application of
Section 4999 of the Code to any
payment or benefit provided
hereunder); and
(vi) For a twenty-four (24) month period
after date of termination, the
Company will arrange to provide you
at the Company's expense with life,
disability, accident and health
insurance benefits substantially
similar to those which you were
receiving immediately prior to the
Notice of Termination; but benefits
otherwise receivable by you
pursuant to this paragraph shall be
reduced to the extent comparable
benefits are actually received by
you during the twenty-four (24)
month period following your
termination, and any such benefits
actually received by you shall be
reported to the Company.
(h) You shall not be required to mitigate the amount of
any Severance Payments provided for in this Paragraph
7 by seeking other employment or otherwise, nor,
except as provided in Paragraph (vi) above shall the
amount of any payment or benefit provided for in this
Paragraph 7 be reduced by any compensation or benefit
earned by you as the result of employment by another
employer after the date of termination, or otherwise.
(i) The Company will require any successor (whether
direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company or
of any division or subsidiary thereof employing you
to expressly assume and agree to perform this Letter
Agreement in the same manner and to the same extent
that the Company would be required to perform it if
no such succession had taken place. Failure of the
Company to obtain such assumption and agreement
prior to the effectiveness of any such succession
shall be a breach of this Letter Agreement and shall
entitle you to compensation from the Company in the
same amount and on the same terms as you would be
entitled hereunder if you terminate your employment
for Good Reason.
<PAGE> 10
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RTI
Mr. Lawrence W. Jacobs INTERNATIONAL
August 1, 1999 METALS, INC.
Page 10
8. This Letter Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Letter
Agreement, to your devisee, legatee or other designee or, if
there is not such designee, to your estate.
9. As additional consideration for the compensation and benefits
provided to you pursuant to this Letter Agreement, you agree
that you will not, for a period of twenty-four (24) months
after the end of the Employment Period, or the termination of
your employment with the Company (whichever first occurs),
directly or indirectly, compete with, engage in the same
business as, be employed by, act a consultant to, or be a
director, officer, employee, owner or partner, or otherwise
participate in or assist (including, without limitation, by
soliciting customers for, or individuals to provide services
to), any business or organization which competes with the
Company; or any subsidiary or affiliate thereof. In addition,
you agree that during such 24-month period, you will not
directly or indirectly induce, or attempt to influence, any
employee of the Company or any subsidiary or affiliate thereof
to terminate his or her employment with the Company or any
subsidiary or affiliate thereof or in any manner seek to
engage or seek to employ any such employee (whether or not for
compensation) such that such employee would thereafter be
unable to devote his or her full efforts to the business then
conducted by the Company or any subsidiary or affiliate
thereof. These restrictions shall not apply if you terminate
your employment with the Company for Good Reason after a
Change in Control of the Company. For purposes of this
Paragraph 9, you will not be deemed to have breached your
commitment merely because you own, directly or indirectly, not
more than one percent (1%) of the outstanding common stock of
such a corporation if, at the time you acquire such stock,
such stock is listed on a national securities exchange or is
regularly traded in the over-the-counter market by a member of
either a national securities exchange or the National
Association of Securities Dealers, Inc. In order to protect
the interest of the Company, you will also maintain in strict
confidence and not disclose to any other person or entity any
information received from any source in the Company or
developed by you in the course of performing your duties for
the Company. This obligation shall not extend to: (a) anything
you can establish as known to you from a source outside the
Company, (b) anything which has been published or becomes
published hereafter other than by you, or (c) anything
which you receive from a non-Company source without
restriction on its disclosure. Should you breach or threaten
to breach the commitments in this Paragraph 9, and in
recognition of the fact that the Company would not under
such circumstances be adequately compensated by money damages,
the Company shall be entitled, in addition to any other rights
and remedies available to it, to an injunction restraining you
from such breach. Further, you acknowledge and agree that the
provisions of this Paragraph 9 are necessary, reasonable, and
proportionate to protect the Company during such
non-competition period.
<PAGE> 11
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RTI
Mr. Lawrence W. Jacobs INTERNATIONAL
August 1, 1999 METALS, INC.
Page 11
10. The Company's Stock Plan Committee has granted to you 8,000
shares of restricted stock subject to your execution of a
Restricted Stock Grant in the form attached hereto. The
restriction period with regard to such shares shall commerce
August 1, 1999 and end July 31, 2003.
11. The validity, interpretation, construction and performance of
this Letter Agreement shall be governed by the laws of the
State of Ohio.
If the provisions of this Letter Agreement are acceptable to you, please sign
one original copy of this Letter Agreement and return it to me. You may retain
the second signed original for your files.
Very truly yours,
RTI International Metals, Inc.
By: /s/ TIMOTHY G. RUPERT
-----------------------------------
TIMOTHY G. RUPERT
President & Chief Executive Officer
Attachment
CONFIRMED:
/s/ LAWRENCE W. JACOBS DATE: 8/16/99
- ------------------------------- ----------------------------
LAWRENCE W. JACOBS
<PAGE> 1
Exhibit 10.14
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
November 1, 1999
Mr. Gordon L. Berkstresser
RTI International Metals, Inc.
1000 Warren Avenue
Niles, OH 44446
Dear Mr. Berkstresser:
This Letter Agreement sets forth the basis upon which I have been authorized by
the Board of Directors of RTI International Metals, Inc. ("Company") to employ
you in the executive officer position described in Paragraph 1 below for the
Employment Period (as hereinafter defined). The "Employment Period" shall
initially be the period November 1, 1999 through October 31, 2003; provided,
however, that on November 1, 2003 and each August 1 thereafter, the Employment
Period shall automatically be extended for one additional year unless, not later
than the immediately preceding July 1, either you or the Company shall have
given written notice to the other that you or it does not wish to extend the
Employment Period; and provided further that the Employment Period shall
terminate automatically when you attain age sixty-five (65). In the event this
Letter Agreement is terminated for any reason other than your death, your
obligations as set forth in Paragraph 9 shall survive and be enforceable
notwithstanding such termination.
1. During the Employment Period, you will serve as Vice President
& Controller of the Company (or on any other executive officer
portion within the Company to which you may hereafter be
elected by the Company's Board of Directors), performing all
duties and functions appropriate to that office, as well as
such additional duties as the Company's Vice President & Chief
Financial Officer or Board of Directors may, from time to
time, assign to you. During the Employment Period, you will
devote your full time and best efforts to the performance of
all such duties.
<PAGE> 2
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. Gordon L. Berkstresser
November 1, 1999
Page 2
2. During the Employment Period, the Company will pay you, in
equal monthly installments, as compensation for your services
an annual salary of $120,000. This annual salary may be
increased from time to time in the sole discretion of the
Company, but may only be decreased by the Company with your
written consent. Such annual salary, whether increased or
decreased, shall constitute your "Base Salary". In addition,
you may be awarded such bonuses as the Board of Directors of
the Company determines to be appropriate under the Company's
Annual Incentive Compensation Plan or any successor bonus
plan. You will also be eligible to participate in the
Company's 1995 Stock Plan, or any successor stock plan.
3. In the event of your death during the Employment Period, your
right to all compensation under this Letter Agreement
allocable to days subsequent to your death shall terminate and
no further payments shall be due to you, your personal
representative, or your estate, except for that portion, if
any, of your Base Salary that is accrued and unpaid upon the
date of your death.
4. In the event you become physically or mentally disabled, in
the sole judgment of physicians selected by the Company's
Board of Directors, such that you cannot perform the duties
and functions contracted for pursuant to this Letter
Agreement, and should such disability continue for at least
180 consecutive days (or in the judgment of such physicians,
be likely to continue for at least 180 consecutive days), the
Company may terminate your employment upon written notice to
you. If your employment is terminated because of physical or
mental disability, your right to all compensation under this
Letter Agreement allocable to days subsequent to such
termination shall terminate and no further payments shall be
due to you, your personal representative, or your estate,
except for that portion, if any, of your Base Salary that is
accrued and unpaid upon the date of termination.
5. The Company may, upon written notice to you fixing the date of
termination, terminate your services during the Employment
Period for Cause, (as Cause is defined in Paragraph 7(c)
below). In such event, your right to receive continued
compensation under this Letter Agreement will terminate and no
further installments will be paid to you, except for that
portion, if any, of your Base Salary that is accrued and
unpaid upon the date of termination.
6. In addition to your annual Base Salary as set forth in
Paragraph 2 above, you will be entitled in each calendar year
to a vacation with pay in accordance with the vacation
policies of the Company. You will also be entitled to: (1)
participate in all of the Company's existing and future
employee benefit programs applicable to officers of the
Company in accordance with the terms of such benefit program
plan documents; (2) receive one comprehensive physical
examination, at Company expense, in each calendar year, such
examination to be conducted by the Cleveland Clinic, the
Greenbrier Clinic or
2
<PAGE> 3
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. Gordon L. Berkstresser
November 1, 1999
Page 3
comparable facility; and (3) tax preparation and financial
planning advice.
7. Change of Control Provisions
(a) For purposes of this Letter Agreement, a "Change in
Control" of the Company shall mean a change in
control of a nature that would be required to be
reported by it in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Company is then
subject to such reporting requirement; provided,
that, without limitation, such a change in control
shall be deemed to have occurred if:
(1) Any person (within the meaning of that term
as used in Sections 13(d) and 14(d) of the
Exchange Act (a "Person") is or becomes the
"beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or
indirectly, of securities of the Company
representing twenty percent (20%) or more
of the combined voting power of the
Company's then outstanding voting
securities; provided, however, that for
purposes of this Agreement the term "Person"
shall not include (i) the Company or any of
its majority-owned subsidiaries, (ii) a
trustee or other fiduciary holding
securities under an employee benefit plan of
the Company or any of its subsidiaries,
(iii) an underwriter temporarily holding
securities pursuant to an offering of such
securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders
of the Company in substantially the same
proportions as their ownership of stock of
the Company; or
(2) The following individuals cease for any
reason to constitute a majority of the
number of directors then serving on the
Board of Directors of the Company;
individuals who, on the date hereof, are
serving as directors on the Board and any
new director (other than a director whose
initial assumption of office is in
connection with an actual or threatened
election contest, including but not limited
to a consent solicitation, relating to the
election of directors of the Company) whose
appointment or election by the Board or
nomination for election by the Company's
stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then
still in office who either were directors on
the date hereof or whose appointment,
election or nomination for election was
previously so approved, or
(3) There is consummated a merger or
consolidation of the Company or a subsidiary
thereof with any other corporation, other
than a merger or consolidation which would
result in the holders of the voting
securities
3
<PAGE> 4
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. Gordon L. Berkstresser
November 1, 1999
Page 4
of the Company outstanding immediately prior
thereto holding securities which represent
immediately after such merger or
consolidation at least 50% of the combined
voting power of the voting securities of the
entity surviving the merger or
consolidation, (or the parent of such
surviving entity) or the shareholders of the
Company approve a plan of complete
liquidation of the Company, or there is
consummated the sale or other disposition of
all or substantially all of the Company's
assets.
(b) If any of the events described above constituting a
Change in Control of the Company shall have occurred,
you shall be entitled to the benefits provided in
Paragraph 7(f) hereof upon the termination of your
employment during the term of this Letter Agreement
unless such termination is (i) because of your death
or disability, (ii) by the Company for Cause, (iii)
by you other than for Good Reason, or (iv) on or
after the date that you attain age sixty-five (65).
In the event your employment with the Company is
terminated for any reason prior to the occurrence of
a Change in Control, you shall not be entitled to any
benefits under this Paragraph 7; provided, however,
that if your employment is terminated prior to a
Change in Control without Cause at the direction of a
person who has entered into an agreement with the
Company, the consummation of which will constitute a
Change in Control, your employment shall be deemed to
have terminated following a Change in Control. Your
entitlement to benefits under any of the Company's
retirement plans will not adversely affect your
rights to receive payments hereunder.
(c) Termination by the Company of your employment for
"Cause" shall mean termination upon (i) the willful
and continued failure by you to substantially perform
your duties with the Company (other than any such
failure resulting from termination by you for Good
Reason), after a demand for substantial performance
is delivered to you that specifically identifies the
manner in which the Company believes that you have
not substantially performed your duties, and you have
failed to resume substantial performance of your
duties on a continuous basis within fourteen (14)
days of receiving such demand, (ii) the willful
engaging by you in conduct which is demonstrably and
materially injurious to the Company, monetarily or
otherwise or (iii) your conviction of any felony or
conviction of a misdemeanor which impairs your
ability substantially to perform your duties with the
Company. For purposes of this paragraph, no act, or
failure to act, on your part shall be deemed
"willful" unless done, or omitted to be done, by you
not in good faith and without reasonable belief that
your action or omission was in the best interest of
the Company.
(d) For purposes of this Letter Agreement, "Good Reason"
shall mean, without your express written consent, the
occurrence after a Change in Control of the Company
of any one or more of the following:
4
<PAGE> 5
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. Gordon L. Berkstresser
November 1, 1999
Page 5
(1) The assignment to you of duties inconsistent
with your position immediately prior to the
Change in Control;
(2) A reduction or alteration in the nature of
your position, duties, status or
responsibilities from those in effect
immediately prior to the Change in Control;
(3) The failure by the Company to continue in
effect any of the Company's employee benefit
plans, programs, policies, practices or
arrangements in which you participate (or
substantially equivalent successor or
replacement employee benefit plans,
programs, policies, practices or
arrangements) or the failure by the Company
to continue your participation therein on
substantially the same basis, both in terms
of the amount of benefits provided and the
level of your participation relative to
other participants, as existed immediately
prior to the Change in Control;
(4) The failure of the Company to obtain a
satisfactory agreement from any successor to
the Company to assume and agree to perform
this Letter Agreement;
(5) Any purported termination by the Company of
your employment that is not effected
pursuant to a Notice of Termination
satisfying the requirements of Subparagraph
(e) below, and for purposes of this Letter
Agreement, no such purported termination
shall be effective; and
(6) The Company's requiring you to be based at a
location in excess of fifty (50) miles from
the location where you are based immediately
prior to the Change in Control.
(e) Any termination by the Company for Cause or by you
for Good Reason shall be communicated by Notice of
Termination to the other party hereto. For purposes
of this Letter Agreement, a "Notice of Termination"
shall mean a written notice which shall indicate the
specific termination provision in this Letter
Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed
to provide a basis for termination of your employment
under the provision so indicated.
(f) Following a Change in Control of the Company, as
defined above, upon termination of your employment
you shall be entitled to the following benefits:
5
<PAGE> 6
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. Gordon L. Berkstresser
November 1, 1999
Page 6
(1) If your employment shall be terminated by
the Company for Cause or by you other than
for Good Reason, the Company shall pay you
your full Base Salary through the date of
termination at the rate in effect at the
time Notice of Termination is given, plus
all other amounts to which you are entitled
under any compensation plan of the Company
at the time such payments are due, and the
Company shall have no further obligations to
you under this Agreement.
(2) If your employment terminates by reason of
your death or disability, your benefits
shall be determined in accordance with
Paragraphs 3 and 4 of this Letter Agreement
and the Company's retirement, survivor's
benefits, insurance and other applicable
programs and plans, then in effect.
(3) If your employment by the Company shall be
terminated (i) by the Company other than for
Cause, your death or disability, or (ii) by
you for Good Reason, you shall be entitled
to the benefits (the "Severance Payments")
provided in Paragraphs 7(f)(3), (i), (ii),
(iii), (iv) and (v) following, which
Severance Payments shall be in lieu of and
cancel any further rights you have to
receive any Base Salary that would be
otherwise due under Paragraph 2 of this
Letter Agreement:
(i) The Company shall pay you your full
Base Salary through the date of
termination at the rate in effect
at the time Notice of Termination
is given;
(ii) The Company will pay as severance
benefits to you, not later than the
fifth day following the date of
termination, a lump sum severance
payment (the "Severance Payment")
equal to the product of (1) a
fraction, the numerator of which is
equal to the lesser of (x)
thirty-six (36) or (y) the number
of full and partial months
existing between the date of
termination and your sixty-fifth
(65th) birthday and the denominator
of which is equal to twelve (12),
and (2) the sum of (x) your annual
Base Salary in effect immediately
prior to the occurrence of the
circumstances giving rise to such
termination, and (y) the amount, if
any, of the highest annual bonuses
awarded to you under any annual
bonus plan of the Company during
the four (4) years immediately
preceding date of termination;
(iii) The Options previously issued to
you under any option or incentive
plan of the Company to purchase
shares of Common
6
<PAGE> 7
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. Gordon L. Berkstresser
November 1, 1999
Page 7
Stock of the Company (Option
Shares), as well as any previously
unvested shares of Restricted Stock
granted to you, shall irrevocably
vest upon any such termination and
the stock options for such Option
Shares shall become thereafter
uncancellable by the Company;
(iv) In the event that you become
entitled to the Severance Payments,
if any of the Severance Payments or
other portion of the Total Payments
(as defined below) will be subject
to the tax (the "Excise Tax")
imposed by Section 4999 of the
Internal Revenue Code of 1986, as
amended (the "Code"), the Company
shall pay to you at the time
specified below, an additional
amount (the "Gross-Up Payment")
such that the net amount retained
by you, after deduction of (1) any
Excise Tax on the Severance
Payments and such other Total
Payments, and (2) any federal,
state and local income tax,
FICA-Health Insurance tax, and
Excise Tax upon the payment
provided for by this paragraph,
shall be equal to the Severance
Payments and such other total
Payments. For purposes of
determining whether any of the
payments will be subject to the
Excise Tax and the amount of such
Excise Tax, (1) any other payments
or benefits received or to be
received by you in connection with
a Change in Control of the Company
or your termination of employment
whether pursuant to the terms of
this Letter Agreement or any other
plan, arrangement or agreement with
the Company, any person whose
actions result in a Change of
Control of the Company or any
person affiliated with the Company
or such person (together with the
Severance Payment, the "Total
Payments") shall be treated as
"parachute payments" within the
meaning of Section 280G(b)(2) of
the Code, and all "excess parachute
payments" within the meaning of
Section 280G(b)(1) shall be treated
as subject to the Excise Tax,
except to the extent that in the
opinion of tax counsel selected by
the Company's independent auditors
and acceptable by you such other
payments or benefits (in whole or
in part) do not constitute
parachute payments, or such excess
parachute payments (in whole or in
part) represent reasonable
compensation for services actually
rendered within the meaning of
Section 280G(b)(4) of the Code in
excess of the base amount within
the meaning of Section 280G(b)(3)
of the Code, or are otherwise not
subject to the Excise Tax, (2) the
amount of the Total Payments which
shall be treated as subject to the
Excise
7
<PAGE> 8
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. Gordon L. Berkstresser
November 1, 1999
Page 8
Tax shall be equal to the lesser of
(A) the total amount of the Total
Payments or (B) the amount of
excess parachute payments within
the meaning of Section 280G(b)(1)
(after applying clause (1), above),
and (3) the value of any non-cash
benefits or any deferred payment or
benefit shall be determined by the
Company's independent auditors in
accordance with the principles of
Sections 280G(d)(3) and (4) of the
Code. For purposes of determining
the amount of the Gross-Up Payment,
you shall be deemed to pay federal
income taxes at the highest
marginal rate of federal income
taxation in the calendar year in
which the Gross-Up Payment is to be
made and state and local income
taxes at the highest marginal rate
of taxation in the state and
locality of your residence on the
date of termination, net of the
maximum reduction in federal income
taxes which could be obtained from
deduction of such state and local
taxes. In the event that the Excise
Tax is subsequently determined to
be less than the amount taken into
account hereunder at the time of
termination of your employment, you
shall repay to the Company at the
time that the amount of such
reduction in Excise Tax is finally
determined the portion of the
Gross-Up Payment attributable to
such reduction (plus the portion of
the Gross-Up Payment attributable
to the Excise Tax and federal and
state and local income tax imposed
on the Gross-Up Payment being
repaid by you if such repayment
results in a reduction in Excise
Tax and/or a federal and state and
local income tax deduction) plus
interest on the amount of such
repayment at the rate provided in
Section 1274(b)(2)(B) of the Code.
In the event that the Excise Tax is
determined to exceed the amount
taken into account hereunder at the
time of the termination of your
employment (including by reason of
any payment the existence or amount
of which cannot be determined at
the time of the Gross-Up Payment),
the Company shall make an
additional Gross-Up Payment in
respect of such excess (plus any
interest payable with respect to
such excess) at the time that the
amount of such excess is finally
determined.
The payments provided for in the
paragraph above shall be made not
later than the fifth day following
the date of termination; provided,
however, that if the amounts of
such payments cannot be finally
determined on or before such day,
the Company shall pay to you on
such day an estimate as determined
in good faith by the Company of the
minimum amount of such payments and
8
<PAGE> 9
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. Gordon L. Berkstresser
November 1, 1999
Page 9
shall pay the remainder of such
payments (together with interest at
the rate provided in Section
1274(b)(2)(B) of the Code) as soon
as the amount thereof can be
determined but in no event later
than the thirtieth day after the
date of termination. In the event
that the amount of the estimated
payments exceeds the amount
subsequently determined to have
been due, such excess shall
constitute a loan by the Company to
you payable on the fifth day after
demand by the Company (together
with interest at the rate provided
in Section 1274(b)(2)(B) of the
Code);
(v) The Company shall also pay to you
all legal fees and expenses
incurred by you as a result of such
termination of employment
(including all such fees and
expenses, if any, incurred in
contesting or disputing any such
termination or in seeking to obtain
or enforce any right or benefit
provided by this Letter Agreement
or in connection with any tax audit
or proceeding to the extent
attributable to the application of
Section 4999 of the Code to any
payment or benefit provided
hereunder); and
(vi) For a twenty-four (24) month period
after date of termination, the
Company will arrange to provide you
at the Company's expense with life,
disability, accident and health
insurance benefits substantially
similar to those which you were
receiving immediately prior to the
Notice of Termination; but benefits
otherwise receivable by you
pursuant to this paragraph shall be
reduced to the extent comparable
benefits are actually received by
you during the twenty-four (24)
month period following your
termination, and any such benefits
actually received by you shall be
reported to the Company.
(h) You shall not be required to mitigate the amount of
any Severance Payments provided for in this Paragraph
7 by seeking other employment or otherwise, nor,
except as provided in Paragraph (vi) above, shall the
amount of any payment or benefit provided for in this
Paragraph 7 be reduced by any compensation or benefit
earned by you as the result of employment by another
employer after the date of termination, or otherwise.
(i) The Company will require any successor (whether
direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company or
of any division or subsidiary thereof employing you
to expressly assume and agree to perform this Letter
Agreement in the same manner and to the same extent
that the Company would be required
9
<PAGE> 10
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. Gordon L. Berkstresser
November 1, 1999
Page 10
to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such
succession shall be a breach of this Letter Agreement
and shall entitle you to compensation from the
Company in the same amount and on the same terms as
you would be entitled hereunder if you terminate your
employment for Good Reason.
8. This Letter Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Letter
Agreement, to your devisee, legatee or other designee or, if
there is not such designee, to your estate.
9. As additional consideration for the compensation and benefits
provided to you pursuant to this Letter Agreement, you agree
that you will not, for a period of twenty-four (24) months
after the end of the Employment Period, or the termination of
your employment with the Company (whichever first occurs),
directly or indirectly, compete with, engage in the same
business as, be employed by, act a consultant to, or be a
director, officer, employee, owner or partner, or otherwise
participate in or assist (including, without limitation, by
soliciting customers for, or individuals to provide services
to), any business or organization which competes with the
Company; or any subsidiary or affiliate thereof. In addition,
you agree that during such 24-month period, you will not
directly or indirectly induce, or attempt to influence, any
employee of the Company or any subsidiary or affiliate thereof
to terminate his or her employment with the Company or any
subsidiary or affiliate thereof or in any manner seek to
engage or seek to employ any such employee (whether or not for
compensation) such that such employee would thereafter be
unable to devote his or her full efforts to the business then
conducted by the Company or any subsidiary or affiliate
thereof. These restrictions shall not apply if you terminate
your employment with the Company for Good Reason after a
Change in Control of the Company. For purposes of this
Paragraph 9, you will not be deemed to have breached your
commitment merely because you own, directly or indirectly, not
more than one percent (1%) of the outstanding common stock
of such a corporation if, at the time you acquire such stock,
such stock is listed on a national securities exchange or is
regularly traded in the over-the-counter market by a member of
either a national securities exchange or the National
Association of Securities Dealers, Inc. In order to protect
the interest of the Company, you will also maintain in strict
confidence and not disclose to any other person or entity any
information received from any source in the Company or
developed by you in the course of performing your duties for
the Company.
10
<PAGE> 11
[LOGO]
RTI
INTERNATIONAL
METALS, INC.
Mr. Gordon L. Berkstresser
November 1, 1999
Page 11
This obligation shall not extend to: (a) anything you can
establish as known to you from a source outside the Company,
(b) anything which has been published or becomes published
hereafter other than by you, or (c) anything which you receive
from a non-Company source without restriction on its
disclosure. Should you breach or threaten to breach the
commitments in this Paragraph 9, and in recognition of the
fact that the Company would not under such circumstances be
adequately compensated by money damages, the Company shall be
entitled, in addition to any other rights and remedies
available to it, to an injunction restraining you from such
breach. Further, you acknowledge and agree that the provisions
of this Paragraph 9 are necessary, reasonable, and
proportionate to protect the Company during such
non-competition period.
10. The validity, interpretation, construction and performance of
this Letter Agreement shall be governed by the laws of the
State of Ohio.
If the provisions of this Letter Agreement are acceptable to you, please sign
one original copy of this Letter Agreement and return it to me. You may retain
the second signed original for your files.
Very truly yours,
RTI International Metals, Inc.
By: /s/ TIMOTHY G. RUPERT
-----------------------------
TIMOTHY G. RUPERT
President & Chief Executive Officer
Attachment
CONFIRMED:
/s/ GORDON L. BERKSTRESSER DATE: 11-1-99
- --------------------------------- -----------
GORDON L. BERKSTRESSER
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
OTHER NAME, IF ANY,
STATE OR OTHER JURISDICTION THAT THE SUBSIDIARY
NAME OF INCORPORATION DOES BUSINESS UNDER
<S> <C> <C>
Galt Alloys, Inc Ohio
NATI Gas Company Ohio
New Century Metals, Inc Ohio
RMI Metals, Inc.
(DBA Micron Metals, Inc.) Utah
RMI Titanium Company Ohio
RTI Energy Systems, Inc. Ohio
RMI International Metals Limited United Kingdom
TRADCO, Inc. Missouri
Weld-Tech Engineering Services, L.P. Texas
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the following
registration statements of RTI International Metals, Inc. of our report dated
January 28, 2000 relating to the financial statements, which appears in this
Form 10-K.
o Form S-8 (File No. 33-36248) relating to the RMI 1989 Stock Option
Incentive Plan
o Form S-8 (File No. 33-38340) relating to the RMI Bargaining Unit Employees
Savings and Investment Plan
o Form S-8 (File No. 33-38339) relating to the RMI Savings and Investment
Plan
o Form S-8 (File No. 33-63025) relating to the RMI Titanium Company 1995
Stock Plan
o Form S-3 (File No. 333-73281) relating to shares issued to selling
shareholders in connection with the acquisition of New Century Metals, Inc.
o Form S-3 (File No. 333-86729) relating to debt and equity securities of
RTI International Metals, Inc.
We also consent to the reference to us under the heading "Experts" in the
registration statements on Form S-3 (File Nos. 333-73281 and 333-86729).
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
March 28, 2000
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That, the undersigned does hereby make, constitute and appoint, Timothy G.
Rupert or Lawrence W. Jacobs, my true and lawful attorney-in-fact, to sign and
execute for me and on my behalf, the Annual Report on Form 10K for the year 1999
for RTI International Metals, Inc., and any and all amendments thereto to be
filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act, as amended, in such form as they or any one or more of them may
approve, and to do any and all other acts which said attorney-in-fact may deem
necessary or desirable to enable RTI International Metals, Inc. to comply with
said Act and the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
3/21/00 /s/ Craig R. Andersson
- ------- ------------------------
(Date) Craig R. Andersson
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That, the undersigned does hereby make, constitute and appoint, Timothy G.
Rupert or Lawrence W. Jacobs, my true and lawful attorney-in-fact, to sign and
execute for me and on my behalf, the Annual Report on Form 10K for the year 1999
for RTI International Metals, Inc., and any and all amendments thereto to be
filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act, as amended, in such form as they or any one or more of them may
approve, and to do any and all other acts which said attorney-in-fact may deem
necessary or desirable to enable RTI International Metals, Inc. to comply with
said Act and the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
3/22/00 /s/ Neil A. Armstrong
- ------- ------------------------
(Date) Neil A. Armstrong
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That, the undersigned does hereby make, constitute and appoint, Timothy G.
Rupert or Lawrence W. Jacobs, my true and lawful attorney-in-fact, to sign and
execute for me and on my behalf, the Annual Report on Form 10K for the year 1999
for RTI International Metals, Inc., and any and all amendments thereto to be
filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act, as amended, in such form as they or any one or more of them may
approve, and to do any and all other acts which said attorney-in-fact may deem
necessary or desirable to enable RTI International Metals, Inc. to comply with
said Act and the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
3/25/00 /s/ Daniel I. Booker
- ------- ------------------------
(Date) Daniel I. Booker
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That, the undersigned does hereby make, constitute and appoint, Timothy G.
Rupert or Lawrence W. Jacobs, my true and lawful attorney-in-fact, to sign and
execute for me and on my behalf, the Annual Report on Form 10K for the year 1999
for RTI International Metals, Inc., and any and all amendments thereto to be
filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act, as amended, in such form as they or any one or more of them may
approve, and to do any and all other acts which said attorney-in-fact may deem
necessary or desirable to enable RTI International Metals, Inc. to comply with
said Act and the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
3/20/00 /s/ Ronald L. Gallatin
- ------- ------------------------
(Date) Ronald L. Gallatin
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That, the undersigned does hereby make, constitute and appoint, Timothy G.
Rupert or Lawrence W. Jacobs, my true and lawful attorney-in-fact, to sign and
execute for me and on my behalf, the Annual Report on Form 10K for the year 1999
for RTI International Metals, Inc., and any and all amendments thereto to be
filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act, as amended, in such form as they or any one or more of them may
approve, and to do any and all other acts which said attorney-in-fact may deem
necessary or desirable to enable RTI International Metals, Inc. to comply with
said Act and the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
3/23/00 /s/ Charles C. Gedeon
- ------- ------------------------
(Date) Charles C. Gedeon
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That, the undersigned does hereby make, constitute and appoint, Timothy G.
Rupert or Lawrence W. Jacobs, my true and lawful attorney-in-fact, to sign and
execute for me and on my behalf, the Annual Report on Form 10K for the year 1999
for RTI International Metals, Inc., and any and all amendments thereto to be
filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act, as amended, in such form as they or any one or more of them may
approve, and to do any and all other acts which said attorney-in-fact may deem
necessary or desirable to enable RTI International Metals, Inc. to comply with
said Act and the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
3/20/00 /s/ Robert M. Hernandez
- ------- ------------------------
(Date) Robert M. Hernandez
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That, the undersigned does hereby make, constitute and appoint, Timothy G.
Rupert or Lawrence W. Jacobs, my true and lawful attorney-in-fact, to sign and
execute for me and on my behalf, the Annual Report on Form 10K for the year 1999
for RTI International Metals, Inc., and any and all amendments thereto to be
filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act, as amended, in such form as they or any one or more of them may
approve, and to do any and all other acts which said attorney-in-fact may deem
necessary or desirable to enable RTI International Metals, Inc. to comply with
said Act and the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
3/22/00 /s/ Edith E. Holiday
- ------- ------------------------
(Date) Edith E. Holiday
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That, the undersigned does hereby make, constitute and appoint, Timothy G.
Rupert or Lawrence W. Jacobs, my true and lawful attorney-in-fact, to sign and
execute for me and on my behalf, the Annual Report on Form 10K for the year 1999
for RTI International Metals, Inc., and any and all amendments thereto to be
filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act, as amended, in such form as they or any one or more of them may
approve, and to do any and all other acts which said attorney-in-fact may deem
necessary or desirable to enable RTI International Metals, Inc. to comply with
said Act and the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
3/16/00 /s/ John H. Odle
- ------- ------------------------
(Date) John H. Odle
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That, the undersigned does hereby make, constitute and appoint, Timothy G.
Rupert or Lawrence W. Jacobs, my true and lawful attorney-in-fact, to sign and
execute for me and on my behalf, the Annual Report on Form 10K for the year 1999
for RTI International Metals, Inc., and any and all amendments thereto to be
filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act, as amended, in such form as they or any one or more of them may
approve, and to do any and all other acts which said attorney-in-fact may deem
necessary or desirable to enable RTI International Metals, Inc. to comply with
said Act and the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
3/28/00 /s/ Wesley W. von Schack
- ------- ------------------------
(Date) Wesley W. von Schack
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
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<TOTAL-LIABILITY-AND-EQUITY> 400,243
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