<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10319
RMI TITANIUM COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
OHIO 31-0875005
(State or other
jurisdiction of
incorporation or (I.R.S. Employer
organization) Identification No.)
</TABLE>
1000 WARREN AVENUE, NILES, OHIO 44446
(Address of principal executive offices)
(216) 544-7700
(Registrant's telephone number, including area code)
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
At April 17, 1995, 15,271,561 shares of common stock of the registrant were
outstanding.
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RMI TITANIUM COMPANY
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements:
Introduction to Financial Statements......................................... 2
Consolidated Statement of Operations......................................... 3
Consolidated Balance Sheet................................................... 4
Consolidated Statement of Cash Flows......................................... 5
Consolidated Statement of Shareholders' Equity............................... 6
Selected Notes to Financial Statements....................................... 7
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition...................................................... 10
PART II--OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.......................... 13
Item 6. Exhibits and Reports on Form 8-K............................................. 13
Signatures........................................................................... 14
</TABLE>
<PAGE> 3
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTRODUCTION TO FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared by
RMI Titanium Company (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial information
presented reflects all adjustments, consisting only of normal recurring
adjustments, which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods presented. The results for the
interim periods are not necessarily indicative of the results to be expected for
the year.
2
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RMI TITANIUM COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31
-------------------
1995 1994
------- -------
<S> <C> <C>
Sales................................................................. $40,103 $36,360
Operating costs:
Cost of sales......................................................... 38,166 35,833
Selling, general and administrative expenses.......................... 2,406 2,406
Research and development expenses..................................... 408 337
------- -------
Total operating costs............................................ 40,980 38,576
Operating loss........................................................ (877) (2,216)
Other income -- net................................................... 33 15
Interest expense...................................................... (1,019) (728)
------- -------
Loss before income taxes and cumulative effect of change in accounting
principle........................................................... (1,863) (2,929)
Provision for income taxes............................................ -- --
------- -------
Loss before cumulative effect of change in accounting principle....... (1,863) (2,929)
Cumulative effect of change in accounting principle................... -- (1,202)
------- -------
Net loss.............................................................. $(1,863) $(4,131)
======= =======
Net loss per common share -- (Note 3):
Before cumulative effect of change in accounting principle....... $ (0.12) $ (1.99)
Cumulative effect of change in accounting principle.............. $ -- $ (.81)
------- -------
Net loss.................................................... $ (0.12) $ (2.80)
======= =======
Weighted average shares outstanding.............................. 15,271,561 1,475,049
========== =========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
3
<PAGE> 5
RMI TITANIUM COMPANY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31 DECEMBER 31
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................... $ 278 $ 385
Receivables -- less allowance for doubtful accounts of $921
and $704.................................................... 35,986 28,846
Inventories.................................................. 71,246 72,466
Other current assets......................................... 1,545 1,674
--------- --------
Total current assets.................................... 109,055 103,371
--------- --------
Property, plant and equipment, net of accumulated
depreciation................................................ 48,598 50,016
Other noncurrent assets...................................... 8,310 7,423
--------- --------
Total assets............................................ $ 165,963 $160,810
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............................ $ 120 $ 120
Accounts payable............................................. 12,419 17,832
Accrued wages and other employee costs....................... 8,678 7,238
Other accrued liabilities.................................... 4,406 3,487
--------- --------
Total current liabilities............................... 25,623 28,677
Long-term debt.................................................... 64,810 54,740
Accrued postretirement benefit cost............................... 17,286 17,286
Noncurrent pension liabilities.................................... 15,501 15,501
Other noncurrent liabilities...................................... 2,010 2,010
--------- --------
Total liabilities....................................... 125,230 118,214
--------- --------
Contingencies (see Note 3)........................................
Shareholders' equity:
Preferred Stock, no par value; 5,000,000 shares authorized;
no shares outstanding....................................... -- --
Common Stock, $0.01 par value, 30,000,000 shares authorized;
15,838,661 shares issued (Note 3)........................... 158 158
Additional paid-in capital................................... 151,058 151,058
Retained deficit............................................. (100,781) (98,918)
Minimum pension liability adjustment......................... (6,633) (6,633)
Treasury Common Stock at cost 567,100 shares................. (3,069) (3,069)
--------- --------
Total shareholders' equity........................................ 40,733 42,596
--------- --------
Total liabilities and shareholders' equity.............. $ 165,963 $160,810
========= ========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
4
<PAGE> 6
RMI TITANIUM COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------
1995 1994
-------- --------
<S> <C> <C>
CASH PROVIDED FROM (USED IN) OPERATIONS:
Net loss............................................................. $ (1,863) $ (4,131)
Adjustment for items not affecting funds from operations:
Depreciation....................................................... 1,604 1,560
Cumulative effect of change in accounting principle................ -- 1,202
Other -- net....................................................... 414 578
-------- -------
155 (791)
-------- -------
CHANGES IN ASSETS AND LIABILITIES (EXCLUDING CASH):
Receivables.......................................................... (7,357) 565
Inventories.......................................................... 1,220 (3,359)
Accounts payable..................................................... (5,413) 1,497
Other current liabilities............................................ 2,162 633
Other assets......................................................... (758) (97)
-------- -------
(10,146) (761)
Cash used in operating activities.......................... (9,991) (1,552)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of facilities................................... 128 7
Capital expenditures............................................... (314) (98)
Investment in joint venture........................................ -- (172)
-------- -------
Cash used in investing activities.......................... (186) (263)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit agreements................................. 10,100 1,900
Debt repayments.................................................... (30) (30)
-------- -------
Cash provided from financing activities............................ 10,070 1,870
-------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................... (107) 55
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..................... $ 385 $ 293
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........................... $ 278 $ 348
======== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest (net of amounts capitalized)................ $ 959 $ 738
======== =======
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
5
<PAGE> 7
RMI TITANIUM COMPANY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MINIMUM
ADD'TL. RETAINED TREASURY PENSION
SHARES COMMON DEFERRED PAID-IN EARNINGS COMMON LIABILITY
OUTSTANDING STOCK COMPENSATION CAPITAL (DEFICIT) STOCK ADJUSTMENT
----------- ------ ------------ -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993....................... 14,750,459 $ 153 $(205) $124,578 $ (86,154) $(2,991) $(7,520)
Compensation expense
recognized................. -- -- 205 -- -- -- --
One-for-ten reverse stock
split effective March 31,
1994
(Note 3)................... (13,275,414) (138) -- 138 -- -- --
Shares issued as result of
Rights Offering (Note 3)... 13,775,057 143 -- 26,279 -- -- --
Shares issued in lieu of
Directors' Compensation.... 25,783 -- -- 59 -- -- --
Treasury Common Stock
purchased at cost.......... (4,564) -- -- -- -- (78) --
Shares issued for Restricted
Stock Award Plans.......... 240 -- -- 4 -- -- --
Net loss..................... -- -- -- -- (12,764) -- --
Excess minimum pension
liability.................. -- -- -- -- -- -- 887
---------- ----- ----- -------- --------- ------- -------
Balance at December 31,
1994....................... 15,271,561 $ 158 $ -- $151,058 $ (98,918) $(3,069) $(6,633)
Net loss..................... -- -- -- -- (1,863) -- --
---------- ----- ----- -------- --------- ------- -------
Balance at March 31, 1995.... 15,271,561 $ 158 $ -- $151,058 $(100,781) $(3,069) $(6,633)
========== ===== ===== ======== ========= ======= =======
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
6
<PAGE> 8
RMI TITANIUM COMPANY
SELECTED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1--GENERAL
The consolidated financial statements include the accounts of RMI Titanium
Company and its majority owned subsidiaries. All significant intercompany
transactions are eliminated. The Company's operations are conducted in one
business segment, the production and marketing of titanium metal and related
products.
NOTE 2--ORGANIZATION
The Company is a successor to entities that have been operating in the
titanium industry since 1958. In 1990, USX Corporation ("USX") and Quantum
Chemical Corporation ("Quantum") transferred their entire ownership interest in
the Company's immediate predecessor, RMI Company, an Ohio general partnership,
to the Company in exchange for shares of the Company's Common Stock (the
"Reorganization"). Quantum then sold its shares to the public. USX retained
ownership of its shares. At March 31, 1995, approximately 54% of the outstanding
common stock was owned by USX. For additional information on the Company's
capital structure see Note 3.
NOTE 3--REVERSE STOCK SPLIT AND RIGHTS OFFERING
At its Annual Meeting held on March 31, 1994, the Company's shareholders
approved an amendment to the Articles of Incorporation of the Company, effecting
a one-for-ten reverse stock split. A Certificate of Amendment to the Articles of
Incorporation was filed with the Ohio Secretary of State on March 31, 1994, and
the reverse split became effective on that date. Pursuant to the reverse split,
each certificate representing shares of common stock outstanding immediately
prior to the reverse split was deemed to represent one-tenth the number of
shares immediately after the reverse split. In order to supplement its financial
resources and provide financing for new titanium market opportunities, the Board
of Directors approved a rights offering to raise up to $30 million. Each record
holder of Common Stock at the close of business on June 24, 1994 received five
transferable rights for each share of Common Stock. Each right entitled the
holder to purchase two shares of RMI Common Stock for a price of $2.00 per
share. The rights offering expired at July 22, 1994. Approximately 93% of the
total number of rights were exercised. The exercise of the rights resulted in
the issuance of 13,775,057 new shares of the Company's Common Stock. Gross
proceeds from the offering were $27.6 million. Net proceeds increased
Shareholders' Equity by approximately $26.4 million. Following completion of the
rights offering, USX Corporation beneficially owned approximately 54% of the
Company's Common Stock. However, in accordance with the provisions of a voting
trust agreement, USX has placed 1,319,175 shares of RMI stock into the trust so
that the number of shares of stock held by USX and its affiliates outside the
trust does not exceed the number of shares held by all other holders. This
arrangement results in USX having a direct voting interest in RMI of
approximately 46%.
NOTE 4--NEW ACCOUNTING STANDARDS
Effective January 1, 1994 the Company adopted the provisions of Statement
of Financial Accounting Standards No. 112 ("SFAS 112"), "Employers' Accounting
for Postemployment Benefits." The results for the three months ended March 31,
1994 reflect a one-time charge of $1.2 million representing the cumulative
effect of adopting the new standard. The liabilities pursuant to SFAS 112 relate
principally to workers' compensation.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of ",
which is effective for the first quarter of 1996. For additional information,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
7
<PAGE> 9
NOTE 5--CONTINGENCIES
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.
On October 9, 1992 the U.S. Environmental Protection Agency ("EPA") filed a
complaint alleging certain violations of the Resource Conservation and Recovery
Act of 1976, as amended ("RCRA") at the Company's now closed Sodium Plant in
Ashtabula, Ohio. The USEPA's determination is based on information gathered
during inspections of the facility in February, March and June of 1991. Under
the complaint the USEPA proposes to assess a civil penalty of approximately $1.4
million for alleged failure to comply with RCRA. The Company is contesting the
complaint. It is the Company's position that it has complied with the provisions
of RCRA and that the EPA's assessment of penalties is inappropriate. A formal
hearing has been requested and informal discussions with the EPA to settle this
matter are ongoing. Based on the preliminary nature of the proceedings, the
Company is currently unable to determine the ultimate liability, if any, that
may arise from this matter.
The Company is involved in investigative or cleanup projects under federal
or state environmental laws at a number of waste disposal sites, including the
Field 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.
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 $25 million. The actual cost
of remediation may vary from the estimate depending upon any number of factors.
The EPA, in March 1989, ordered 19 of the PRPs to conduct a design phase
study for the sediment operable unit and a source control study, which studies
are currently estimated to cost $19 million. Three additional PRPs were added by
the EPA in 1994. The Company, working cooperatively with fourteen others in
accordance with two separate agreements, is complying with the order. The
Company has accrued and has been paying its portion of the cost of complying
with the EPA's order, which includes the studies. It is anticipated that the
studies will be completed no earlier than mid 1996. Actual cleanup would not
commence prior to that time. In connection with the agreements referred to
above, the cooperating companies entered into a nonbinding arbitration process
in an effort to allocate the Phase I (study) costs among the group. In the final
arbitrator's report dated October 11, 1994, the Company's share of the study
costs were established at 9.95%. It is not possible to determine accurately the
Company's cost or share of any final allocation formula with respect to the
actual cleanup; however, based on the results of the allocation of the study
costs referred to above, the Company believes its share of the cleanup costs
will be approximately 10%.
At March 31, 1995, the amount accrued for future environmental-related
costs was $2.5 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 $4.0 million to $6.3 million, in the
aggregate. The amount accrued is net of expected contributions from third
parties (other than insurers) of approximately $1.4 million, which the Company
believes are probable. The Company has been receiving contributions from such
third
8
<PAGE> 10
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.
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.
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 6--INVENTORIES:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
MARCH 31, 1995 DECEMBER 31,
(UNAUDITED) 1994
-------------- ------------
<S> <C> <C>
Raw material and supplies.................... $ 16,547 $ 13,825
Work-in-process and finished goods........... 67,991 71,933
Adjustments to LIFO values................... (13,292) (13,292)
-------- --------
$ 71,246 $ 72,466
======== ========
</TABLE>
Inventories are 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).
Included in work-in-process are costs relating to long-term contracts. Such
costs, net of amounts recognized to date, were $2.2 million at March 31, 1995
and $8.1 million at December 31, 1994.
9
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in connection with the information
contained in the Consolidated Financial Statements and Selected Notes to
Financial Statements.
NET SALES
Net sales increased by $3.7 million, or 10.3%, for the three months ended
March 31, 1995 compared to the corresponding 1994 period. This sales increase is
due primarily to increased sales of titanium mill products. Shipments of
titanium mill products increased by 16% from first quarter 1994 shipments.
Average selling prices on mill products in the first quarter of 1995 increased
by approximately 8% from 1994 first quarter levels. Both demand and pricing on
incoming orders for titanium mill products continue to show improvement from
1994 levels. Because of reduced government funding levels, revenues under the
Department of Energy ("DOE") remediation and restoration contract decreased by
$1.0 million in the first quarter of 1995, or 38% from the same period in 1994.
Sales of hot formed parts and cut shapes during the first quarter of 1995
increased approximately $0.7 million or 17% from 1994 first quarter levels. With
the completion of the titanium drilling riser, sales related to long-term
contracts decreased by $1.0 million in the first quarter of 1995 compared to the
first quarter of 1994.
GROSS PROFIT
Gross profit amounted to $1.9 million for the quarter ended March 31, 1995
compared to a gross profit of $0.5 million for the comparable 1994 period. This
improvement results primarily from the increased volume and prices for titanium
mill products partially offset by decreased profits from the DOE remediation and
restoration contract.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to $2.4 million in
each of the quarters ended March 31, 1995 and 1994. Research, technical and
product development expenses amounted to $0.4 million in the first quarter of
1995 compared to $0.3 million in the first quarter of 1994.
OPERATING LOSS
The operating loss for the three months ended March 31, 1995 and 1994
amounted to $0.8 million and $2.2 million respectively.
INTEREST EXPENSE
Because of increased overall interest rates, interest expense increased to
$1.0 million in the first quarter of 1995 from $0.7 million in 1994.
NET LOSS
The net loss for the quarter ended March 31, 1995 amounted to $1.9 million
compared to a net loss of $4.1 million in the comparable 1994 period. The net
loss for the 1994 first quarter includes a one-time charge of $1.2 million
resulting from the cumulative effect of adopting SFAS No. 112.
OUTLOOK
The Company's total backlog as of March 31, 1995 was approximately $86
million, compared to $67 million at December 31, 1994. The Company has recently
experienced an increase in mill product orders at increased prices. During the
second half of 1994 and through the first quarter of 1995, aerospace customers
began to replace inventories that had been depleted below working levels.
Additionally, manufacturers of commercial aircraft have forecasted increased
build rates for certain aircraft scheduled for delivery in 1996 and later.
Because of the long manufacturing lead times, orders for materials, including
titanium, would be expected to be placed 12 to 18 months in advance. At the
present time, it is impossible to predict if the
10
<PAGE> 12
increased demand for mill products will continue throughout 1995 or into future
periods. If the trend continues, the Company would expect to experience upward
pressure on prices for raw materials, including titanium sponge. Producers of
certain alloys have recently increased prices significantly. The Company, and
others, have announced the imposition of surcharges in an attempt to cover these
increases. The Company has also announced general price increases for mill
products.
In spite of the recent increase in demand referred to above, overall demand
for titanium mill products remains well below the 1990 shipment level of 53
million pounds. For the years 1991-1994, domestic industry shipments were at a
34-36 million pound level. As a result, the titanium industry continues to
suffer from excess production capacity, which intensifies price competition for
available business. Many aerospace contractors have adopted just-in-time
inventory practices or have demanded significantly shorter lead times.
Additionally, contractors are waiting until the last minute to place orders in
an effort to obtain the best possible pricing, including demands for fixed
long-term pricing arrangements. Any improvement will depend largely on sustained
improvement in aerospace demand, increased prices for mill products and the
development of new market applications.
In an effort to lessen its dependence on the aerospace market and to
increase its participation in commercial applications, the Company has devoted
significant efforts to developing applications and markets for use in the energy
extraction and chemical process industries. In addition to the contract to
produce the world's first all titanium drilling riser for Conoco Norway, which
was successfully completed in the first quarter of 1995, and the three year
contract to supply all of the titanium pipe casing required by MAGMA Operating
Company for a geothermal energy facility, the Company has entered into several
cooperative ventures: one for the manufacture of heavy wall pipe, and the other
to market, engineer, fabricate and install titanium production risers, flow
lines and other titanium subsea systems. The Company is currently working with
other companies to develop and expand opportunities for titanium in the energy
field.
LIQUIDITY AND CAPITAL RESOURCES
Working capital amounted to $83.4 million at March 31, 1995 compared to
$74.7 million at December 31, 1994.
For the quarter ended March 31, 1995, the Company's cash flow requirements
for capital spending and working capital needs were funded from borrowings under
the Company's revolving credit facility and cash from operations.
On May 3, 1995, the Company reached agreement with the participating banks
on the terms of an amendment to the $75 million revolving credit facility. The
amendment extends the maturity of the loan to March 31, 1997 along with
modifying an existing financial covenant for the requirement to maintain a
minimum balance of total shareholders' equity, and the imposition of a borrowing
base formula. The agreement also provides for payment of increased fees and
borrowing rates.
The Company has also reached agreement with the banks which are parties to
the amended revolving credit facility on the terms of a second revolving credit
facility providing for up to an additional $5 million of borrowings. The second
facility would permit borrowings up to an amount determined pursuant to a
borrowing base formula which includes only certain collateral related to, or
arising out of, the Company's export sales. The second facility, which matures
March 31, 1996, is guaranteed by the Export Import Bank of the United States.
At March 31, 1995, the Company had $64.8 million outstanding under the $75
million revolving credit facility.
Capital expenditures for the three months ended March 31, 1994 and 1993
amounted to $0.3 million and $0.1 million, respectively. The Company has
budgeted total capital spending for 1995 of $1.3 million compared to total
capital spending of $1.0 million in 1994.
11
<PAGE> 13
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of."
This standard must be adopted no later than the 1996 reporting year but can be
adopted early. SFAS 121 requires that operating assets and associated goodwill
be written down to fair value whenever an impairment review indicates that the
carrying value cannot be recovered on an
undiscounted cash flow basis. After any such noncash write-down, results of
operations would be favorably affected by reduced depreciation, depletion and
amortization charges. At this time, the Company cannot provide an assessment of
either the financial impact or the timing of adoption.
ENVIRONMENTAL MATTERS
The Company is subject to pervasive 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 RMI 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 March 31, 1995, the amount accrued for future environment-related costs
was $2.5 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 $4.0 million to $6.3 million, in the aggregate. The
amount accrued is net of expected contributions from third parties (other than
insurers) of approximately $1.4 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.
In 1992, the EPA proposed a $1.4 million civil penalty for alleged failure
to comply with RCRA. The Company is contesting the complaint. Based on the
preliminary nature of the proceeding, the Company is currently unable to
determine the ultimate liability, if any, that may arise from this matter.
The ultimate resolution of these environmental matters could individually,
or in the aggregate, be material to the consolidated financial statements.
12
<PAGE> 14
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of stockholders was held April 26, 1995. In connection
with the meeting, proxies were solicited pursuant to the Securities Exchange
Act. The following are the voting results on proposals considered and voted upon
at the meeting, all of which were described in the proxy statement.
1. All nominees for directors listed in the proxy statement were elected.
2. Price Waterhouse was elected as independent accountants for 1995. (For,
14,386,461; against, 19,668; abstained, 8,594).
3. The proposal concerning amending the Company's Code of Regulations to
provide for annual election of all directors was approved. (For,
11,269,703; against, 48,160; abstained, 17,004; broker nonvotes,
1,505,623).
4. The proposal concerning the 1995 Stock Plan was approved. (For,
11,132,038; against, 181,622; abstained, 21,207; broker nonvotes,
1,505,623).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended March 31,
1995.
13
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RMI TITANIUM COMPANY
(Registrant)
Date: May 8, 1995
By: /s/ T. G. RUPERT
-------------------
T. G. Rupert
Senior Vice President and Chief
Financial Officer
14
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