<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 8, 1996
REGISTRATION NO. 33-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------
RMI TITANIUM COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
OHIO 31-0875005
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
1000 WARREN AVENUE, NILES, OHIO 44446 (216) 544-7604
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
TIMOTHY G. RUPERT
SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER
1000 WARREN AVENUE
NILES, OHIO 44446
(216) 544-7700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
R. E. HILTON, ESQ. (412) 433-2868
ASSISTANT GENERAL COUNSEL--U.S. STEEL GROUP RAYMOND W. WAGNER, ESQ.
USX CORPORATION SIMPSON THACHER & BARTLETT
600 GRANT STREET 425 LEXINGTON AVENUE
PITTSBURGH, PENNSYLVANIA 15219-4776 NEW YORK, NEW YORK 10017
(212) 455-2568
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===========================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(2) PER UNIT(1) OFFERING PRICE(1)(2) FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 4,600,000 shares $12.00 $55,200,000 $19,035
===========================================================================================================
<FN>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933.
(2) Includes shares of Common Stock that the Underwriters have the option to
purchase solely to cover over-allotment options, if any.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
===============================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION, DATED MARCH 8, 1996
4,000,000 Shares
LOGO
Common Stock
---------------------------
All of the shares of common stock, par value $.01 per share (the "Common
Stock"), offered hereby are being offered by RMI Titanium Company (the "Company"
or "RMI").
The Common Stock is traded on the New York Stock Exchange, Inc. ("NYSE")
under the symbol "RTI." On March 5, 1996, the last reported sale price of the
Common Stock on the NYSE Composite Tape was $12.00 per share. See "Price Range
of Common Stock and Dividends."
---------------------------
SEE "RISK FACTORS" ON PAGES 9 THROUGH 13 FOR A DISCUSSION OF CERTAIN RISKS
WHICH SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
========================================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................................... $ $ $
- ------------------------------------------------------------------------------------------------------------------------
Total(3).................................................... $ $ $
========================================================================================================================
<FN>
(1) RMI has agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses payable by RMI estimated at $ .
(3) RMI has granted the Underwriters a 30-day option to purchase up to 600,000
additional shares of Common Stock on the same terms and conditions as set
forth above solely to cover over-allotments, if any. If such option is
exercised in full, the Total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be , and
, respectively. See "Underwriting."
</TABLE>
---------------------------
The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that delivery of the shares
will be made at the offices of Lehman Brothers Inc., New York, New York on or
about , 1996.
---------------------------
LEHMAN BROTHERS SALOMON BROTHERS INC
, 1996
<PAGE> 3
MARKETS
FOR
RMI TITANIUM PRODUCTS
Clockwise from upper left
Offshore drilling platform
Jet aircraft gas turbine engines
Golf clubs
Petroleum refining equipment
center photo - International and
domestic commercial aircraft
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NYSE, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
RMI is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy and information
statements and other information filed by RMI can be inspected and copied at the
Public Reference Room of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the public reference facilities maintained
by the Commission at Seven World Trade Center, New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Common Stock is listed on the NYSE, and such reports,
proxy statements and other information can also be inspected at the offices of
the NYSE, 20 Broad Street, New York, New York 10005.
RMI has filed a Registration Statement on Form S-3 (the "Registration
Statement") with the Commission pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits thereto, to which reference is
hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by RMI with the Commission (file
no. 1-10319) are incorporated herein by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1994.
(b) Quarterly Reports on Form 10-Q for the periods ended March 31, 1995,
June 30, 1995, as amended by Form 10-Q/A dated March 5, 1996, and
September 30, 1995, as amended by Form 10-Q/A dated March 5, 1996.
(c) Current Report on Form 8-K dated July 7, 1995.
(d) The description of the Registrant's Common Stock contained in the
Registration Statement of RMI on Form 8-A filed on September 1, 1989.
All documents filed by RMI pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Common Stock offered hereby shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the respective dates of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
RMI undertakes to provide without charge to each person, including any
beneficial owner, to whom a Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the information incorporated by
reference in this Prospectus, other than exhibits to such information (unless
such exhibits are specifically incorporated by reference into the information
that this Prospectus incorporates). Requests for such copies should be directed
to the Director-Investor Relations, RMI Titanium Company, 1000 Warren Avenue,
Niles, Ohio 44446 (telephone 216-544-7622).
------------------------
As used in this Prospectus, the terms "RMI" and "Company" mean RMI Titanium
Company, its predecessors and consolidated subsidiaries, taken as a whole,
unless the context indicates otherwise.
3
<PAGE> 5
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information set forth elsewhere or incorporated by reference in this
Prospectus. Unless otherwise indicated, all information in this Prospectus (1)
has been adjusted to give effect to RMI's one-for-ten reverse split of Common
Stock on March 31, 1994 and (2) assumes no exercise of the Underwriters'
over-allotment option. This Prospectus contains forward-looking statements which
involve certain risks and uncertainties. Actual results and events may differ
significantly from those discussed in the forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those
discussed in "Risk Factors."
THE COMPANY
RMI is a leading U.S. producer of titanium mill and fabricated products for
the global market. The Company's mill products, which include ingot, slab,
bloom, billet, bar, plate, sheet, strip and welded tube, are processed by RMI's
customers to provide products for use in the aerospace industry and other
industrial markets, including, most recently, golf club manufacturing. The
Company's fabricated products, which include pipe, tube and cut shapes, 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. Sales to the commercial and military aerospace industries
accounted for approximately 53% and 15%, respectively, of RMI's 1995 sales. In
1995, RMI reported sales of $171.2 million, an operating loss of $189,000
(before a $5.0 million unfavorable accounting charge) and a net loss of $4.6
million (which reflects a $7.2 million tax benefit and such accounting charge).
During the fourth quarter of 1995, RMI reported sales of $48.5 million,
operating income of $2.9 million and net income of $8.7 million (which reflects
the $7.2 million tax benefit), the first fiscal quarter since 1991 in which RMI
has reported operating profit and net income.
Titanium is one of the newest industrial metals. Its physical
characteristics include high strength-to-weight ratio, high temperature
performance and superior corrosion and erosion resistance. Titanium is extracted
from ore through a chemical reduction process to form titanium sponge, a porous
metallic material which is purchased by RMI and melted, along with titanium
scrap and various alloying agents, to form ingots. Ingots are then converted
into various mill product shapes and fabricated products.
Historically, commercial and military aerospace have been the major markets
for RMI as sophisticated aircraft have required high performance metals such as
titanium for use in bulkheads, tail sections, wing supports and various engine
components and other sub-assemblies. Total domestic titanium industry mill
product shipments declined from 55 million pounds in 1989 to 34 million pounds
in 1991, reflecting a sharp decline in military aerospace consumption, which
continues to the present, and a decline in commercial aircraft build rates which
continued through the first half of 1995.
In 1995, most major U.S. airline carriers reported stronger operating
profits and in the second half of 1995 aircraft manufacturers began to increase
aircraft build rates. The firm order backlog for Boeing, McDonnell Douglas and
Airbus Industrie increased to 1,869 planes at year end 1995 from 1,742 planes at
year end 1994 and includes a significant number of wide body designs which have
higher titanium requirements.
The use of titanium in golf clubs emerged in 1995 as an important
nonaerospace market for the titanium industry. Management believes this market
accounted for approximately 9% of U.S. titanium industry mill product shipments
in 1995. Almost every major golf club manufacturer, including Callaway,
Cleveland, Cobra, Lynx, Taylor Made, Titleist and Tommy Armour, is currently
marketing a titanium driver, and several of the major manufacturers are using
titanium in club heads for other clubs, including woods, irons and putters.
Certain golf club manufacturing companies have introduced full sets of titanium
golf clubs. In response to this market demand, a number of golf club head
casting companies have announced expansions of their titanium golf club head
production facilities.
The increase in aircraft build rates and the emergence of the golf club
market in 1995 have resulted in increased demand for titanium mill products. RMI
estimates that U.S. industry mill product shipments in 1995 were approximately
43 million pounds, an increase of 26% compared to 1994. RMI further estimates
that 1995 U.S. industry mill product shipments to the commercial aerospace
market in 1995 were approximately
4
<PAGE> 6
20 million pounds, approximately 18% higher compared to 1994, and that 1995 U.S.
industry mill product shipments to the golf club market were approximately 3.5
million pounds. Although no assurance can be provided, based on current market
conditions, management believes that 1996 U.S. industry mill product shipments
to the commercial aerospace market will increase to 23 million pounds and that
shipments to the golf club market will increase to 8 million pounds. See "Risk
Factors--Dependence on Cyclical Aerospace Markets" and "--No Assurances as to
New Product and Market Development."
RMI's shipments of titanium mill products in 1995 were approximately 14.4
million pounds, an increase of 25.5% compared to 1994. RMI's average realized
mill product sales price increased to $10.23 per pound in 1995, 6.2% higher than
in 1994, and to $10.97 in January of 1996 as demand from the commercial
aerospace and golf club markets continued to strengthen. Reflecting these
trends, RMI's order backlog increased to $159 million at February 29, 1996 from
$134 million at year-end 1995, $83 million at June 30, 1995 and $67 million at
year-end 1994. As of February 29, 1996, orders for approximately 90% of RMI's
anticipated 1996 shipments had been booked or shipped.
RMI'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. RMI 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 and use of billet for golf club applications. See "Risk Factors--No
Assurances as to New Product and Market Development."
As part of its strategy and in response to the depressed industry
conditions that existed in 1991, RMI closed facilities and began to develop new
markets for titanium. RMI completed delivery in 1995 of the world's first
titanium drilling riser for the Conoco Heidrun project in the North Sea, one of
the world's largest floating, deep-water oil and gas production platforms. The
Company has also entered into a three-year contract to supply seamless titanium
pipe for a number of geothermal energy production facilities in California. In
addition, RMI has entered into several cooperative ventures to encourage and
develop titanium products for use in the oil and gas industry, including a
teaming arrangement to market, engineer, fabricate and install titanium
production risers, flow lines and other titanium subsea systems.
RMI's principal manufacturing plant is located in Niles, Ohio. Other
manufacturing operations are located in Ashtabula, Ohio; Hermitage,
Pennsylvania; Sullivan and Washington, Missouri; and Salt Lake City, Utah. RMI's
equipment, facilities and its products meet the most stringent quality
standards, including ISO-9002. RMI's products are marketed worldwide through its
own sales organization and a network of independent distributors.
RMI's principal executive offices are located at 1000 Warren Avenue, Niles,
Ohio 44446, and its telephone number is (216) 544-7622.
5
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered: 4,000,000 shares(1)
Common Stock to be Outstanding
after the Offering: 19,393,532 shares(2)
Use of Proceeds: The net proceeds to the Company from the sale of the
shares of Common Stock offered hereby are estimated (after
deducting underwriting discounts and commissions and
offering expenses) to be approximately $44.9 million
(approximately $51.7 million if the Underwriters'
over-allotment option is exercised in full), assuming an
initial public offering price of $12.00 per share (the
closing sales price of the Common Stock on the NYSE
Composite Tape on March 5, 1996). The Company intends to
use the net proceeds to repay outstanding indebtedness
under the Existing Credit Facilities (as defined herein).
As of February 29, 1996, the Company had approximately
$63.9 million of indebtedness outstanding under the
Existing Credit Facilities.
NYSE Symbol...................... RTI
<FN>
- ---------
(1) 4,600,000 shares if the Underwriters' over-allotment option is exercised in
full.
(2) Based on the number of shares outstanding as of February 29, 1996. Excludes
615,172 shares of Common Stock issuable upon the exercise of employee stock
options and shares which are subject to the Underwriters' over-allotment
option.
</TABLE>
RISK FACTORS
Prospective purchasers of shares of the Common Stock offered hereby should
carefully consider the factors set forth in "Risk Factors."
6
<PAGE> 8
RMI TITANIUM COMPANY
SUMMARY SELECTED FINANCIAL INFORMATION
The following summary selected financial information has been derived from
the Consolidated Financial Statements of RMI for each of the five years during
the period ended December 31, 1995. The information set forth below should be
read in connection with the Consolidated Financial Statements included elsewhere
herein and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE AND PRICE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales:
Commercial aerospace.................. $ 91,117 $ 54,366 $ 56,059 $ 68,872 $ 87,187
Military aerospace.................... 26,174 23,869 24,238 25,629 30,099
Nonaerospace.......................... 53,875 65,157 47,100 41,106 48,282
-------- -------- -------- -------- --------
Total sales....................... 171,166 143,392 127,397 135,607 165,568
Operating loss before accounting change
and plant closing charge.............. (189) (7,971) (10,764) (11,387) (15,589)
Operating loss.......................... (5,220)(1) (7,971) (10,764) (11,387) (52,712)(3)
Loss before cumulative effect of change
in accounting principle............... (4,608)(2) (11,562) (11,955) (14,062) (57,085)(3)
Cumulative effect of change in
accounting principle.................. -- (1,202)(4) (16,938)(5) -- --
Net loss................................ (4,608)(2) (12,764) (28,893) (14,062) (57,085)(3)
Net loss per common share before
cumulative effect of change in
accounting principle.................. $ (0.30)(2) $ (1.45) $ (8.14) $ (9.66) $ (39.17)(3)
Net loss per common share............... (0.30)(2) (1.60) (19.67) (9.66) (39.17)(3)
Cash dividends per common share......... -- -- -- -- .75
BALANCE SHEET DATA: (at end of period)
Working capital......................... $ 86,738 $ 74,694 $ 66,319 $ 72,229 $ 79,820
Total assets............................ 171,559 160,810 152,471 153,257 173,888
Long-term debt.......................... 64,020 54,740 66,660 62,280 58,800
Total shareholders' equity.............. 36,889 42,596 27,861 63,302 77,705
OPERATING AND OTHER FINANCIAL DATA:
Sales:
Mill products......................... $138,077 $103,790 $ 96,453 $110,509 $128,803
Fabricated products and other
services............................ 26,904 31,134 20,512 16,745 17,260
Other(6).............................. 6,185 8,468 10,432 8,353 19,505
-------- -------- -------- -------- --------
Total sales....................... $171,166 $143,392 $127,397 $135,607 $165,568
Mill product shipments (thousands of pounds):
Aerospace............................. 10,526 8,109 7,619 8,699 9,379
Nonaerospace.......................... 3,884 3,370 3,406 2,585 1,938
-------- -------- -------- -------- --------
Total shipments................... 14,410 11,479 11,025 11,284 11,317
Average realized mill product sales
price (per pound)..................... $ 10.23 $ 9.63 $ 9.60 $ 10.20 $ 11.69
EBITDA (7).............................. $ 4,632 $ (2,122) $ (2,912) $ (4,703) $ (5,535)
Order backlog at December 31(8)......... $134,000 $ 67,000 $ 70,000 $ 53,000 $ 82,000
Active employees at December 31......... 844 817 782 843 1,172
<FN>
- ---------
(1) Includes a charge of $5.0 million reflecting the June 30, 1995 adoption of
Statement of Financial Accounting Standards ("SFAS") No. 121. See Note 7 to
the Consolidated Financial Statements.
(2) Includes a $5.0 million charge reflecting the adoption of SFAS No. 121 and a
$7.2 million tax benefit. See Notes 7 and 8 to the Consolidated Financial
Statements.
(3) Includes a charge of $37.1 million relating to the closing of RMI's titanium
sponge production facilities.
(4) Reflects the adoption of SFAS No. 112. See Note 11 to the Consolidated
Financial Statements.
(5) Reflects immediate recognition of the transition obligation determined as of
the January 1, 1993 adoption of SFAS No. 106. See Note 11 to the
Consolidated Financial Statements.
(6) Includes sales of discontinued products of $2.6 million and $13.2 million in
1992 and 1991, respectively.
(7) EBITDA consists of income before interest expense, income taxes,
depreciation and amortization and the charges related to changes in
accounting principles in 1995, 1994 and 1993, and a plant closing in 1991.
EBITDA should not be considered as an alternative to, or more meaningful
than, operating income or cash flow, as determined in accordance with
generally accepted accounting principles, as an indicator of the Company's
operating performance.
(8) "Order backlog" is defined as firm purchase orders generally subject, upon
payment of specified charges, to cancellation by the customer.
</TABLE>
7
<PAGE> 9
SUMMARY CAPITALIZATION
The following table sets forth in summary form the consolidated
capitalization of RMI as of December 31, 1995 and as adjusted for the sale of
the Common Stock offered hereby (assuming the Underwriters' over-allotment
option is not exercised) and the application of the net proceeds therefrom to
repay $44.9 million of indebtedness under the Existing Credit Facilities.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------------------------
ACTUAL AS ADJUSTED (1)
----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Total debt (including current maturities)....... $ 64,140 63% $ 19,240 19%
Total shareholders' equity...................... 36,889 37 81,789 81
-------- --- -------- ---
Total capitalization.......................... $101,029 100% $101,029 100%
======== === ======== ===
<FN>
- ---------
(1) Assumes an initial public offering price of $12.00 per share based upon the
closing sales price of a share of Common Stock on the NYSE Composite Tape on
March 5, 1996. If the Underwriters' over-allotment option is exercised in
full, the net proceeds therefrom would be used to further reduce Total debt,
as adjusted, to $12,436, and Total shareholders' equity and Total
capitalization, as adjusted, would be $88,593 and $101,029, respectively,
and the percentage of Total debt to Total capitalization would be 12%.
</TABLE>
8
<PAGE> 10
RISK FACTORS
A purchase of Common Stock involves substantial risks. Potential purchasers
of Common Stock should carefully consider, in addition to the other information
set forth or incorporated herein, the following risk factors:
DEPENDENCE ON CYCLICAL AEROSPACE MARKETS
The U.S. titanium industry, including RMI, is dependent on the aerospace
industry, which has traditionally consumed the majority of titanium mill
products produced in the U.S. Sales to the aerospace industry accounted for
approximately 68% of RMI's sales in 1995, compared to 54% in 1994 and 63% in
1993.
The cyclical nature of the aerospace industry has been the principal cause
of the fluctuations in performance of companies in the titanium industry. Prior
to the years 1989 and 1990, the last peak in the titanium industry cycle
occurred during the years 1979 through 1982. While U.S. industry mill products
shipment volumes averaged approximately 52.7 million pounds for the years 1988
through 1990, such shipments dropped to an average of approximately 35.2 million
pounds for the years 1991 through 1994. The declining U.S. military budget and
production cutbacks at Boeing, McDonnell Douglas and Airbus Industrie resulting
from reduced commercial airline demand for new aircraft negatively affected
demand and prices for titanium products until 1995, when demand for titanium
products used in the production of commercial aircraft began to increase. See
"History of Losses" below and "Business--Industry Overview," "--Products and
Markets" and "--Mill Products." In 1995, most major U.S. commercial airline
carriers reported stronger operating profits and, in the second half of 1995,
aircraft manufacturers began to increase aircraft build rates. RMI can give no
assurance as to the extent or duration of any recovery in the commercial
aerospace market or the extent to which such recovery will result in increases
in demand for titanium products.
RMI believes that if the titanium industry experiences an extended
downturn, RMI may require additional capital to maintain its operations and
competitive position. RMI can give no assurance that it will have access to such
capital when required. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
HISTORY OF LOSSES
RMI's results of operations for the years 1991 through 1995 reflect the
severe downturn in market conditions experienced generally by the titanium
industry over that period. RMI incurred net losses of $117.4 million from 1991
through 1995, including $23.2 million in charges relating to accounting changes
and a $37.1 million charge in 1991 for closure of its sponge facilities.
Excluding the effects of such charges, for the years 1991 through 1995, RMI's
aggregate net losses were $57.1 million. Although the Company reported an
operating profit and net income in the fourth quarter of 1995, there can be no
assurance as to the results of the Company's operations in the future. See
"Selected Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
DEPENDENCE ON OTHERS FOR RAW MATERIALS
RMI is dependent on third parties for titanium sponge, its basic raw
material. RMI is party to two long-term contracts, one of which is with a
competitor, that permit RMI to purchase eleven million pounds of sponge per year
through 1999 and seven million pounds per year thereafter through 2003. Prices,
which are set annually, are a function of the volume purchased and following
1996 are, at RMI's option, at market price or the price in effect for specified
years plus changes in the suppliers' costs. Each contract is subject to
renegotiation or termination if certain events occur. One of the contracts
guarantees an additional two million pounds of availability per year at a
negotiated price. See "Business--Raw Materials." The Company purchases the
balance of its sponge requirements at negotiated prices from a number of
suppliers.
If demand for titanium products continues to increase, it is possible that
supplies of titanium sponge could become limited or that prices could increase
substantially, or both, and, as a result, that RMI's costs could rise
accordingly.
9
<PAGE> 11
UNDERFUNDED PENSION AND POSTRETIREMENT OBLIGATIONS
RMI has substantial underfunded obligations related to its pension and
other postretirement benefit programs, as indicated in Notes 10 and 11 to the
Consolidated Financial Statements included elsewhere herein. As of December 31,
1995, the actuarial present value of the accumulated benefit obligation for the
defined benefit pension plans of RMI was approximately $71.6 million, and the
fair market value of the pension fund assets available to pay such benefit
obligation was approximately $52.3 million. Also, as of December 31, 1995, RMI's
unfunded accumulated postretirement benefit obligations were $21.7 million.
ENVIRONMENTAL CONTINGENCIES
RMI 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 the Company in the past, it is
impossible to predict accurately the ultimate effect these changing laws and
regulations, and the enforcement thereof, may have on it in the future. RMI is
involved in investigative or cleanup projects under federal or state
environmental laws at a number of waste disposal sites, including a Superfund
site. RMI can give no assurance that additional environmental investigation or
remediation obligations at other locations will not be asserted against it or
entities for which it may be responsible, whether by contract (including
indemnity agreements relating to environmental matters) or by operation of law.
At December 31, 1995, RMI had accrued $2.4 million for future
environmental-related costs. Based on available information, RMI believes that
its share of potential environmental-related costs will be in the range of $3.7
to $6.3 million in the aggregate, before expected contributions from third
parties (other than insurers) of $2.1 million which the Company believes are
probable. As these proceedings continue toward final resolution, amounts in
excess of those already provided may be necessary to discharge RMI from its
obligations for these projects. See "Business--Legal Proceedings--Environmental"
and Note 15 to the Consolidated Financial Statements included elsewhere herein.
The ultimate resolution of environmental matters could, individually or in the
aggregate, be material to the consolidated financial statements.
NO ASSURANCES AS TO NEW PRODUCT AND MARKET DEVELOPMENT
In an effort to lessen its dependence on the aerospace market and to
increase its participation in other markets, RMI has been devoting significant
resources to developing new markets and applications for its products,
principally in the oil and gas and geothermal energy production industries.
Other new markets, particularly golf clubs, have developed. RMI cannot give any
assurances as to the extent to which it will be able to develop new markets for
its products, the time required for such development or the level of demand for
such products. See "Business--Mill Products" and "--Related Products and
Services."
TITANIUM INDUSTRY HIGHLY COMPETITIVE
The titanium industry is highly competitive on a worldwide basis.
Competition is primarily on the basis of price, quality and timely delivery. In
recent years the industry has been suffering from excess production capacity,
which has intensified price competition for available business. Integrated and
nonintegrated producers of mill products are located primarily in the U.S.,
Japan, the former Soviet Union, Europe and China. Following closure of RMI's
sponge facilities in 1992, there are two remaining integrated producers in the
U.S. There are a small number of domestic nonintegrated producers, of which RMI
is the largest, which produce mill products from purchased sponge, scrap or
ingot.
Imports of titanium mill products from countries that receive the
most-favored-nation tariff rate ("MFN") are subject to a 15% tariff. The tariff
rate applicable to imports from countries that do not receive MFN treatment is
45%. Japanese producers, which benefit from MFN 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 does not currently
grant MFN treatment to imports, including titanium mill product imports, from
the former Soviet Union countries, except Russia. In 1995, a Russian producer
began to participate in the U.S. market for titanium products. This titanium
producer has the largest rated capacity in the world
10
<PAGE> 12
(although management believes practical capacity is substantially less) and
could materially affect competition if its exports of titanium mill products
were to increase significantly. See "Business--Competition."
DILUTION
Purchasers of shares of Common Stock offered hereby will experience
immediate dilution of $8.07 in net tangible book value per share of Common Stock
from an assumed initial public offering price of $12.00 per share (the closing
sales price of the Common Stock on the NYSE Composite Tape on March 5, 1996).
See "Dilution." After the sale of the shares of Common Stock offered hereby,
authorized but unissued shares of Common Stock may be issued as authorized by
the Board of Directors of RMI without further action by shareholders. Such
issuance of Common Stock may be at prices which could dilute the equity interest
of existing shareholders.
PRINCIPAL SHAREHOLDERS
USX Corporation ("USX") was the owner as of January 31, 1996 of 7,783,600
shares of Common Stock, constituting approximately 51% of the outstanding shares
of Common Stock. RMI has been advised by USX that it will not purchase any of
the shares of Common Stock offered hereby. USX has also advised RMI that,
simultaneous with the closing of the sale of the shares of Common Stock offered
hereby, it intends to contribute approximately 2.5 million shares of Common
Stock (the "USX Pension Plan Contribution") to the United States Steel
Corporation Plan for Employee Pension Benefits (the "USX Pension Plan"). The
United States Steel and Carnegie Pension Fund (the "U.S. Steel Pension Fund")
serves as trustee of the USX Pension Plan. Assuming the sale of the shares of
Common Stock offered hereby (assuming no exercise of the Underwriters'
over-allotment option) and the USX Pension Plan Contribution had been
consummated at January 31, 1996, USX would have owned approximately 5,283,600
shares of Common Stock, or approximately 27% of the outstanding shares of Common
Stock (26.5% if the Underwriters' over-allotment option were exercised in full).
Of the nine members of the RMI Board of Directors, three are officers
and/or directors of USX. One of these persons (along with eight other USX
officers and employees) are also on the Board of Directors of the U.S. Steel
Pension Fund. For information concerning positions held by directors and
officers of RMI with USX or the U.S. Steel Pension Fund, see "Management." These
individuals owe fiduciary duties to RMI, USX and/or the U.S. Steel Pension Fund,
as the case may be, and it is possible that the interests of one entity may
differ from the interests of the others. Possible differing interests could
include sales of Common Stock by USX or the U.S. Steel Pension Fund, either of
which could trigger a change in ownership in RMI as provided under Section 382
of the Internal Revenue Code of 1986, as amended (the "Code"). The likelihood of
such a change in ownership will significantly increase as a result of the USX
Pension Plan Contribution. See "Limitation on Use of Tax Losses" and "Shares
Available for Sale" below.
LIMITATION ON USE OF TAX LOSSES
At December 31, 1995, RMI had net operating loss carryforwards of
approximately $104 million that could be subject to an annual limitation on
their deductibility if a change in its ownership should occur over any
three-year period, as provided under Section 382 of the Code. The potential
annual limitation under Section 382 with respect to these tax attributes could
restrict RMI's ability to use them to reduce future income tax liabilities.
Although it is not expected that the sale of the shares of Common Stock offered
hereby and the USX Pension Plan Contribution will cause an ownership change to
occur, future equity transactions by RMI, USX, by either of these companies'
significant current or future shareholders, or by the U.S. Steel Pension Fund
following such sale (some of which will not be within the control of RMI or
USX), could cause an ownership change to occur. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Income Tax
Considerations."
11
<PAGE> 13
SHARES AVAILABLE FOR SALE
The Company, its directors (excluding Mr. L. Frederick Gieg, Jr., President
and Chief Executive Officer) and USX have agreed not to offer, sell or otherwise
dispose of any shares of Common Stock for a period of 180 days following the
date of this Prospectus, without the prior consent of the Representatives
(defined herein) of the Underwriters. Certain officers, including Mr. Gieg, have
agreed not to offer, sell or otherwise dispose of any shares of Common Stock for
a period of 90 days following the date of this Prospectus without the prior
consent of the Representatives of the Underwriters. See "Principal Shareholders"
above. USX has previously indicated an intent to dispose of its interest and may
do so, subject to such agreement, either publicly or privately, as market
conditions warrant. Since 1994, USX had sold, as of February 29, 1996, 466,400
shares of Common Stock in the public market.
Following the expiration of the 180 day period, referred to above, shares
owned by USX may be sold in the public market only if registered under the
Securities Act or if such sales qualify for an exemption from registration under
the Securities Act, such as pursuant to Rule 144 thereunder. In general, under
Rule 144 as currently in effect, a person (or persons whose shares must be
aggregated) who has beneficially owned "restricted shares" (as defined by Rule
144) for at least two years, including any person who may be deemed an
"affiliate" (as defined) of the Company, is entitled to sell within any
three-month period that number of shares that does not exceed the greater of one
percent of the then outstanding shares of Common Stock, or the average weekly
trading volume of the then outstanding shares for the four weeks preceding each
such sale. Sales under Rule 144 are also subject to certain other conditions. A
person who is not deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale and who has beneficially owned the shares
proposed to be sold for at least three years is entitled to sell such shares
without complying with the volume limitation and certain other conditions of
Rule 144. The Commission has proposed to amend the holding period required by
Rule 144 to permit sales of "restricted securities" after one year rather than
two years (and to permit sales without any volume limitation after two years,
rather than three years, for non-affiliates). If such amendment were adopted, a
portion of the "restricted securities" held by USX may (following the expiration
of such 180 day period) become freely tradeable at an earlier date.
Immediately after the sale of the shares of Common Stock offered hereby,
the U.S. Steel Pension Fund will own, as a result of the USX Pension Plan
Contribution as described under "Principal Shareholders" above, approximately
2.5 million shares of Common Stock, or approximately 13% of the outstanding
shares of Common Stock (12.5% if the Underwriters' over-allotment option is
exercised in full). The U.S. Steel Pension Fund has agreed not to offer, sell or
otherwise dispose of any shares of Common Stock for a period of 180 days
following the date of this Prospectus without the prior consent of the
Representatives of the Underwriters. Prior to the effectiveness of the
Registration Statement, RMI plans to register under the Securities Act, for
potential sale, the shares of Common Stock to be received by the U.S. Steel
Pension Fund as part of the USX Pension Plan Contribution.
The sale of a substantial number of shares of Common Stock by USX, the
Pension Fund or RMI could reduce the market price of the Common Stock.
ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS
Certain provisions of RMI's Amended Articles of Incorporation and its Code
of Regulations (the "Regulations"), the New Credit Facility (as defined below)
and Ohio law could discourage potential acquisition proposals and could delay or
prevent a change in control of RMI. RMI is authorized to issue up to five
million shares of Preferred Stock, the relative rights and preferences of which
may be fixed by RMI's Board of Directors (subject to the provisions of the
Amended Articles of Incorporation), without shareholder approval. While RMI has
no present plans to issue any shares of Preferred Stock, the future issuance
thereof may have the effect of delaying, deferring or preventing a change in
control of RMI or the payment of dividends on Common Stock. The issuance of
Preferred Stock could also adversely affect the voting power of the holders of
Common Stock, including the loss of voting control to others. RMI's Amended
Articles of Incorporation provide that certain extraordinary transactions, such
as certain mergers and consolidations, a sale or disposition of all or
substantially all of the assets, a dissolution of RMI and any amendment to the
Amended Articles of Incorporation, require a two-thirds vote of the
shareholders. Other provisions of the
12
<PAGE> 14
Regulations provide that directors may be removed only for cause and special
meetings may be called only by a shareholder or shareholders holding 50% of the
shares of stock entitled to vote. RMI expects that a "change in control" of the
Company will constitute a breach of a covenant under the New Credit Facility
entitling the banks to accelerate the maturity of RMI's borrowings thereunder.
In addition, certain provisions of Ohio law regulate certain transactions
between RMI and certain holders of Common Stock. See "Description of Capital
Stock."
13
<PAGE> 15
USE OF PROCEEDS
RMI will use the net proceeds of the shares of Common Stock offered hereby,
estimated at $44.9 million based upon the closing sales price of $12.00 per
share of Common Stock on the NYSE Composite Tape on March 5, 1996 ($51.7 million
if the Underwriters' over-allotment option is exercised in full), to repay
indebtedness outstanding under RMI's Existing Credit Facilities (defined below).
As of February 29, 1996, the total principal amounts outstanding under its $75
million credit facility (the "Existing Bank Credit Facility") and its $5 million
bank credit facility guaranteed by the Export-Import Bank of the United States
(the "EXIM Bank Credit Facility") were approximately $58.9 million and $5
million, respectively. The indebtedness outstanding under the Existing Bank
Credit Facility and the EXIM Bank Credit Facility (together the "Existing Credit
Facilities") bears interest at floating rates based on several interest rate
calculations selected by the Company. At February 29, 1996, the average interest
rate in effect was 7.37%. Amounts borrowed under the Existing Bank Credit
Facility must be repaid upon termination of that facility on March 31, 1997.
Amounts outstanding under the EXIM Bank Credit Facility mature on September 27,
1996. See "Capitalization" and "Management's Discussion and Analysis of the
Financial Condition and Results of Operations--Liquidity and Capital Resources."
The Company is negotiating a new three-year credit agreement with certain
banks (the "New Credit Facility") which would replace the Existing Bank Credit
Facility and would provide for lower interest rates. See "Capitalization--New
Credit Facility." The use of the net proceeds from the sale of the shares of
Common Stock offered hereby to reduce RMI's indebtedness, together with lower
borrowing rates under the New Credit Facility, will significantly reduce the
Company's interest expense.
CAPITALIZATION
The following table sets forth the consolidated capitalization of RMI as of
December 31, 1995, and as adjusted for the sale of the shares of Common Stock
offered hereby (assuming no exercise of the Underwriters' over-allotment option)
and the application of the net proceeds therefrom as set forth under "Use of
Proceeds." The data should be read in conjunction with the Consolidated
Financial Statements and the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" related thereto, included elsewhere herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------
AS ADJUSTED
ACTUAL (1)
--------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Debt (including current maturities)
Existing Bank Credit Facility................................ $ 58,200 18,300
EXIM Bank Credit Facility.................................... 5,000 --
Industrial revenue bond...................................... 940 940
--------- -------------
Total debt.............................................. 64,140 19,240
--------- -------------
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; 15,908,091 shares issued....................... 159 199
Additional paid-in capital................................... 151,715 196,575
Accumulated deficit.......................................... (103,526) (103,526)
Excess minimum pension liability............................. (8,381) (8,381)
Treasury Common Stock, at cost; 568,198 shares............... (3,078) (3,078)
--------- -------------
Total shareholders' equity.............................. 36,889 81,789
--------- -------------
Total capitalization.............................................. $ 101,029 $ 101,029
========= ============
<FN>
- ---------
(1) If the Underwriters' over-allotment option is exercised in full, the net
proceeds therefrom would be used to further reduce Total debt, as adjusted,
to $12,436, and Total shareholders' equity and Total capitalization, as
adjusted, would be $88,593 and $101,029, respectively.
</TABLE>
14
<PAGE> 16
NEW CREDIT FACILITY
The Company is negotiating the New Credit Facility to replace the Existing
Bank Credit Facility. The New Credit Facility, provided by two of the banks
party to the Existing Bank Credit Facility, is expected to be conditioned upon
the Company receiving at least $35 million in proceeds from the sale of the
shares of the Common Stock offered hereby and the application of the net
proceeds therefrom to reduce indebtedness under the Existing Credit Facilities,
have a term of three years and permit borrowings of up to $50 million. Amounts
available under the New Credit Facility would be used to repay the balance of
indebtedness under the Existing Bank Credit Facility. Until RMI operates for
four consecutive quarters without a breach of the financial covenants under the
New Credit Facility, the New Credit Facility would be secured by accounts
receivable and inventory and borrowings would be further limited by a borrowing
base formula. At February 29, 1996, the Company believes it had more than
sufficient collateral to permit RMI to borrow the entire $50 million.
The financial covenants of the New Credit Facility would require that:
(1) The Company maintain its tangible net worth at an amount equal to its
tangible net worth immediately following the sale of shares of Common
Stock offered hereby plus 50% of net income plus the net proceeds of
any future equity offerings.
(2) As of the end of each fiscal quarter, and measured for the four
quarters ending with the most recent fiscal quarter (but excluding
quarters prior to the sale of shares of Common Stock offered hereby),
the ratio of the Company's earnings before interest and taxes to
interest expense be not less than 2.5 to 1.
(3) Capital expenditures, including assets acquired under capitalized
leases, not exceed $10 million per year.
Interest rates under the New Credit Facility would be, at the Company's
option:
(1) A base rate which is the higher of the prime rate or the Federal Funds
rate plus 1/2%, or
(2) LIBOR plus a spread to be determined based on the ratio of the
Company's earnings before interest and taxes to interest expense. If
such ratio is greater than or equal to 2.5 but less than 3.5, the
spread would be 1%. If such ratio is greater than or equal to 3.5 but
less than 4.5, the spread would be 3/4%. If such ratio is greater than
4.5, the spread would be 1/2%.
The New Credit Facility is not expected to contain any restrictions on the
payment of dividends (other than restrictions imposed as a result of the
tangible net worth financial covenant described above).
If the Company fails to receive at least $35 million in proceeds from the
sale of Common Stock offered hereby, the New Credit Facility would be secured as
described above until the Company operates for eight consecutive quarters
without a breach of the New Credit Facility's financial covenants and interest
rates would be adjusted depending on the Company's debt to equity ratio.
The New Credit Facility would contain other terms and conditions which are
typical for such facilities.
15
<PAGE> 17
DILUTION
At December 31, 1995, the Company had net tangible book value of $31.2
million, or $2.03 per share of Common Stock (based on 15,339,893 shares
outstanding). Assuming that the four million shares of Common Stock offered
hereby had been sold at December 31, 1995 at a price of $12.00 per share (the
closing sales price of the Common Stock on the NYSE Composite Tape on March 5,
1996), the Company's net tangible book value would have been $76.1 million, or
$3.93 per share of Common Stock. This represents an immediate dilution of $8.07
per share to new investors purchasing Common Stock. Net tangible book value per
share is determined by dividing the difference between tangible assets and
liabilities by the number of shares of Common Stock outstanding. The following
table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........................ $ 12.00
Net tangible book value per share at December 31, 1995...... $ 2.03
Increase in net tangible book value per share after the
Common Stock offered hereby is sold....................... 1.90
------
Pro forma net tangible book value per share after the Common Stock
offered hereby is sold............................................... 3.93
-------
Dilution per share to new investors.................................... $ 8.07
======
</TABLE>
If the Underwriters were to exercise in full their over-allotment option,
the Company's pro forma net tangible book value, assuming the sale of Common
Stock offered hereby, would have been $4.16 per share of Common Stock, which
would result in dilution to new investors of $7.84 per share.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is traded on the NYSE under the symbol "RTI." The
following table sets forth, for each of the quarterly periods indicated, the
high and low sales price for the Common Stock, as reported on the NYSE Composite
Tape.
<TABLE>
<CAPTION>
1994
QUARTER HIGH LOW
------- ---- -------
<S> <C> <C>
First............................................. $21 1/4 $15
Second............................................ 17 5/8 2 3/8
Third............................................. 2 3/4 2
Fourth............................................ 5 5/8 2 1/2
</TABLE>
<TABLE>
<CAPTION>
1995
QUARTER
-------
<S> <C> <C>
First............................................. $5 1/2 $3 1/8
Second............................................ 9 3/4 3 3/4
Third............................................. 10 3/8 6 3/4
Fourth............................................ 9 7/8 6 1/2
</TABLE>
<TABLE>
<CAPTION>
1996
QUARTER
-------
<S> <C> <C>
First (through March 5)........................... $14 5/8 $7 3/8
</TABLE>
In June 1994, the Company commenced a rights offering pursuant to which
each holder of Common Stock was entitled to subscribe for shares of Common Stock
at a price of $2 per share. In July 1994, the Company issued approximately 13.8
million shares of Common Stock in that offering.
On March 5, 1996, the reported last sale price of the Common Stock on the
NYSE Composite Tape was $12.00 per share.
As of January 31, 1996, the Common Stock was held by 863 holders of record.
16
<PAGE> 18
RMI 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.
The New Credit Facility is not expected to contain any restrictions on the
payment of dividends other than a financial covenant which requires RMI to
maintain a minimum tangible net worth. See "Capitalization--New Credit
Facility."
The Existing Credit Facilities do not permit RMI to pay dividends,
distributions or other payments in respect of shares of its capital stock,
including the Common Stock, or redeem or purchase such shares, except for annual
redemptions not in excess of $200,000 consistent with past practices.
Notwithstanding the foregoing, if RMI has had positive net income for each of
two consecutive quarters, it may pay dividends to its shareholders to the extent
of 25% of net income for the current and immediately preceding quarter, provided
no event of default shall have occurred and be continuing, or shall thereby
occur.
17
<PAGE> 19
BUSINESS
The following information contains forward-looking statements which involve
certain risks and uncertainties. Actual results and events may differ
significantly from those discussed in the forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those
discussed in "Risk Factors."
THE COMPANY
The Company is a leading U.S. producer of titanium mill and fabricated
products for the global market. The Company's mill products are processed by
RMI's customers to provide products for use in the aerospace industry and other
industrial markets, including, most recently, golf club manufacturing. The
Company's fabricated 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. The Company also provides fabrication
and conversion services for other titanium and specialty metals producers.
The Company is a successor to entities that have been operating in the
titanium industry since 1958. In 1990, 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 Common Stock (the "Reorganization"). Quantum sold its
shares of Common Stock to the public while USX retained ownership of its shares.
At December 31, 1995, USX owned approximately 51% of the outstanding Common
Stock.
INDUSTRY OVERVIEW
Titanium is one of the newest industrial 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 applications. In recent years, increased quantities of the
industry's output have been used in nonaerospace applications. Based on data
published by the U.S. Bureau of Mines, in 1995 more than 35% of the total U.S.
market shipments, including exports, were made to nonaerospace markets,
including the oil and gas, geothermal energy production and chemical process
industries and golf club manufacturing.
Aerospace demand originates from two sectors: commercial and military.
Since 1987, commercial aerospace has become the dominant factor in 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
continuing depressed military aerospace markets.
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 19 years, U.S. titanium mill product shipments
registered cyclical peaks of 54 million pounds in 1980 and 55 million pounds in
1989. Beginning in 1991, the industry experienced a dramatic downturn in demand
for mill products. Domestic industry shipments fell from 53 million pounds in
1990 to 34 million pounds in 1991, a decrease of 35%, the largest single one
year decrease in the history of the industry. Domestic industry shipments only
recovered modestly during the years 1991 through 1994. This most recent decline
in industry shipments reflected a sharp decline in military aerospace demand,
which continues to the present, and a decline in commercial aircraft build rates
due in part to significant financial losses suffered by commercial airline
carriers. Average realized mill product selling prices also deteriorated
throughout this period reaching lows during the years 1993 and 1994 that were
approximately 30% below 1990.
18
<PAGE> 20
The following table highlights the cyclical nature of the titanium industry
by setting forth the total pounds of U.S. mill products shipped during the years
1977 through 1995 and the Company's shipments and average mill product prices
during such period.
SHIPMENT AND MILL PRODUCT PRICE HISTORY
<TABLE>
<CAPTION>
Measurement
Period RMI Shipments Industry Shipments RMI Avg. Price
- ----------- ------------- ------------------ --------------
<S> <C> <C> <C>
'77 9.6 21.4 5.0
'78 11.3 30.7 5.5
'79 13.0 33.0 8.1
'80 14.0 39.5 12.2
'81 15.0 35.0 15.7
'82 10.0 28.0 16.3
'83 8.5 23.5 10.5
'84 13.7 31.3 10.0
'85 13.7 31.3 10.2
'86 13.0 29.0 9.6
'87 13.7 30.3 9.3
'88 14.5 34.5 10.7
'89 16.0 38.0 12.2
'90 16.5 34.5 13.1
'91 11.5 21.5 12.2
'92 11.5 23.5 11.3
'93 11.3 24.7 10.6
'94 11.6 23.4 9.9
'95 14.4 28.6 10.9
</TABLE>
Sources: RMI and Titanium Development Association.
Although military aerospace markets remain depressed, commercial aerospace
markets have shown a recent increase in demand. In 1995, most major U.S.
commercial airline carriers reported stronger operating profits, and in the
second half of 1995 the commercial aerospace industry began to restore depleted
inventories of titanium mill products and aircraft manufacturers began to
increase build rates. RMI estimates, based on U.S. Bureau of Mines data, that
industry mill product shipments to the commercial aerospace market in 1995 were
approximately 20 million pounds, an increase of approximately 18% compared to
1994. RMI further estimates, based on U.S. Bureau of Mines data, that total
industry shipments in 1995 were approximately 43 million pounds, an increase of
26% compared to 1994.
The following data, derived from The Airline Monitor, illustrates the
cyclical profitability of worldwide members of the International Civil Aviation
Organization (excluding countries of the former Soviet Union) and the
relationship between their profitability and aircraft orders. RMI can give no
assurance as to the extent or duration of any recovery in the commercial
aerospace market or the extent to which such recovery will
19
<PAGE> 21
result in increases in demand for titanium products. See "Risk
Factors--Dependence on Cyclical Aerospace Markets."
AIRLINE PROFITABILITY AND AIRCRAFT ORDERS
<TABLE>
<CAPTION>
Measurement
Period Operating Income Industry Shipments
- ----------- ---------------- ------------------
<S> <C> <C>
'77 2629 348
'78 3070 659
'79 736 530
'80 -634 397
'81 -692 269
'82 -160 183
'83 2000 282
'84 5100 360
'85 4100 685
'86 4600 634
'87 7200 631
'88 10200 1,021
'89 7600 1,345
'90 -1500 907
'91 -500 462
'92 -1800 464
'93 2300 407
'94 8000 369
'95 11000 697
</TABLE>
PRODUCTS AND MARKETS
Titanium mill products consist of products such as ingot, slab, bloom,
billet, bar, plate, sheet, strip and welded tube. Fabricated products include
pipe, engineered tubular products, hot-formed and superplastically formed parts
for aerospace applications, cut shapes and titanium metal powders. Other
services include conversion and fabrication services for other titanium and
specialty metal producers and project management. In addition, the Company acts
as contractor for the U.S. Department of Energy ("DOE") for the remediation and
restoration of the Company's closed facilities in Ashtabula, Ohio.
The amount of the Company's consolidated sales and the percentage of
consolidated sales represented by class of product during the five years ended
December 31, 1995 were as follows:
<TABLE>
<CAPTION>
SALES
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------- ------------- ------------- ------------- -------------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mill products............. $138.1 81% $103.8 72% $ 96.5 76% $110.5 81% $128.8 78%
Fabricated products and
other services.......... 26.9 16 31.1 22 20.5 16 16.7 13 17.3 10
Other(1).................. 6.2 3 8.5 6 10.4 8 5.8 4 6.3 4
Discontinued
products(2)............. -- -- -- -- -- -- 2.6 2 13.2 8
------ --- ------ --- ------ --- ------ --- ------ ---
Total................... $171.2 100% $143.4 100% $127.4 100% $135.6 100% $165.6 100%
======= ==== ======= ==== ======= ==== ======= ==== ======= ====
<FN>
- ---------
(1) Includes DOE remediation and restoration contract.
(2) Discontinued products includes titanium sponge, sodium chloride, sodium
hypochlorite and metallic sodium, which are no longer manufactured by the
Company.
</TABLE>
20
<PAGE> 22
MILL PRODUCTS
The Company produces a full range of titanium mill products which are used
in both the aerospace and nonaerospace markets.
Aerospace. Mill product sales to the commercial and military aerospace
industries accounted for approximately 64% and 11%, respectively, of RMI's 1995
mill product sales compared to approximately 50% and 13% of RMI's 1994 mill
product sales. 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 supports and
carry-through structures and various engine components including rotor blades,
vanes, discs, rings and engine cases.
As of December 31, 1995, the leading manufacturers of commercial aircraft,
Boeing Company, McDonnell Douglas Corporation and Airbus Industrie, reported an
aggregate of approximately 1,869 planes under firm order and deliverable over
the next five years. The comparable backlog as of December 31, 1994 and 1993 was
1,742 planes and 2,025 planes, respectively. Included in this backlog for 1995
are 230 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 three manufacturers totaled 380 in 1995, 432 in 1994, and 546
in 1993. 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 and instability in the domestic commercial airline industry may cause
manufacturers to re-evaluate aircraft orders and options, thus affecting
realized aircraft delivery rates.
The following table presents RMI's estimates, based on information from the
aircraft manufacturers, of the titanium mill product requirements of selected
commercial and military aircraft:
ESTIMATED TITANIUM MILL PRODUCT REQUIREMENTS
PER AIRCRAFT
(in thousands of pounds)
<TABLE>
<S> <C>
Commercial:
Airbus Industrie BUY-WEIGHT(1)(2)
A319/A320/A321............ 10-15
A330...................... 18-44
A340...................... 32
Boeing
737....................... 17-22
747....................... 60-82
757....................... 33-37
767....................... 26-38
777....................... 80-105
McDonnell Douglas
MD-11..................... 63-64
Military:
General Dynamics BUY-WEIGHT(1)(2)
F-16 Falcon............... 6-10
McDonnell Douglas
F-15 Eagle................ 62
F/A-18 Hornet............. 16
C-17...................... 193
F-22...................... 120
Sikorsky
Blackhawk................. 6
Super Stallion............ 19
Seahawk................... 5
<FN>
- ---------
(1) Due to yield loss during milling and fabrication of parts, a smaller portion
of the titanium buy-weight is ultimately used in the aircraft and engines.
(2) Ranges refer to aircraft with variable engine configurations.
</TABLE>
Nonaerospace. Principal nonaerospace mill products include commercially
pure (unalloyed) strip, welded tube and plate used for oil and gas, geothermal
energy production, 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 leading 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 approximately
21
<PAGE> 23
25% of the Company's mill product sales in 1995 and 37% of such sales in 1994.
Since the Company's entry into strip production in 1984 and tube production in
1986, sales of these two products have grown to a majority of the Company's
total nonaerospace mill product sales.
The use of titanium in golf club heads emerged in 1995 as an important
nonaerospace product application for the titanium industry. Titanium was first
used in golf club manufacturing in the U.S. in 1988, and management believes the
market grew in 1995 to approximately 3.5 million pounds, or approximately 9%, of
U.S. industry mill product shipments. While titanium golf clubs have been used
in Japan for over six years, with titanium woods currently commanding
approximately 60% of the Japanese market, they have only recently gained
significant popularity in the U.S. market. Titanium golf clubs have developed as
the latest of several technological innovations in the golf industry in the last
25 years.
Titanium has become a desirable material for golf clubs due to its superior
strength-to-weight ratio as compared to steel. This characteristic allows club
manufacturers to create a larger club head without increasing the weight of the
club and to distribute weight more strategically around the club while
maintaining the club's structural integrity. Titanium also has a higher elastic
deformation than steel, providing optimal energy transfer at impact with the
ball and improved carry and distance. Titanium clubs have attracted the
attention of Professional Golf Association ("PGA"), Ladies PGA and Senior PGA
tour members, many of whom now use a titanium driver.
Almost every major golf club manufacturer, including Callaway, Cleveland,
Cobra, Lynx, Taylor Made, Titleist and Tommy Armour, is currently marketing a
titanium driver, and several of the major manufacturers are using titanium in
club heads for other clubs, including woods, irons and putters. Certain golf
club manufacturing companies have introduced full sets of titanium golf clubs. A
number of golf club head casting companies have announced expansions of their
golf club head production facilities.
FABRICATED PRODUCTS AND OTHER SERVICES
Fabricated products include pipe, engineered tubular products for the oil
and gas and geothermal energy production industries, hot-formed and
superplastically formed parts and cut shapes for aerospace applications and
titanium metal powders. Titanium powders are used for alloy additions,
superconductors, grain refinement of other metals and titanium powder metal
parts. Other services include conversion and fabrication services for other
titanium and specialty metals producers and project management.
The Company has devoted significant resources to develop new applications
and markets for titanium in the oil and gas and geothermal energy production
industries. During 1995, the Company completed shipment of the world's first
high-pressure titanium drilling riser for use in the Conoco Heidrun project
located in the Norwegian sector of the North Sea (one of the world's largest
floating, deep-water oil and gas production platforms). During 1995 the Company
was awarded a contract, valued in excess of $3 million, to supply titanium
stress joints for use in the Oryx Energy Neptune Production Riser System in the
Gulf of Mexico.
In late 1994, the Company was awarded a three-year contract to supply all
of the seamless titanium pipe required for a number of geothermal energy
production facilities located in the Imperial Valley of California. The initial
order under the contract is valued in excess of $7 million. Deliveries commenced
in late 1995 and are continuing in 1996. The Company expects to receive a second
order to be produced and shipped during 1996 and 1997.
The Company continues to work closely with several oil companies and
engineering concerns to develop other titanium projects or applications in the
oil and gas and geothermal energy production industries. RMI has entered into
several cooperative ventures to encourage and develop titanium products for use
in the oil and gas industry. For example, in January 1995, the Company entered
into an agreement with Stolt Comex Seaway SA ("Stolt Comex"), a Norwegian-based
diversified contractor to the offshore oil and gas industry, to combine RMI's
and Stolt Comex's expertise to market, engineer, fabricate and install titanium
production risers, flow lines and other titanium subsea systems. Pursuant to
this agreement, the parties have entered into discussions to form a joint
venture if a commercial market for such subsea systems is proven to exist. In
addition, in February 1996, the Company, Stolt Comex and Kvaerner Oilfield
Products Ltd., a Norwegian
22
<PAGE> 24
engineering concern, entered into an agreement pursuant to which the parties
agreed to submit joint bids for titanium riser systems.
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. Revenues will vary year-to-year depending on
DOE funding. In 1995, the Company recognized $6.2 million in such revenues
compared to $8.5 million in 1994 and $10.4 million in 1993. As the prime
contractor, the Company provides management services necessary to complete
assessment, clean-up and remediation activities.
EXPORTS
Most of the Company's exports, with the exception of the drilling riser
discussed above under "Products and Markets--Fabricated Products and Other
Services," have consisted of titanium mill products used in aerospace markets.
Other exports include slab, commercially pure strip, plate and welded tubing
used in nonaerospace markets. The Company's export sales in 1995 were
approximately $30.1 million. Such sales were made primarily to the European
market, where the Company believes it is a leader in supplying alloy flat-rolled
titanium mill products as well as rotating-quality billet. The Company's export
sales were $39.8 million and $24.2 million in 1994 and 1993, respectively.
Export sales in 1994 and 1993 include revenues recognized in connection with the
titanium drilling riser contract.
As a leading supplier of alloy flat-rolled titanium 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. Recently, the Company became a
qualified supplier to Rolls Royce Plc and received an order 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.
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. RMI acquires its raw materials from a number of suppliers, both
domestic and foreign, under long-term contracts and other negotiated
transactions. In 1995, the Company purchased approximately 14 million pounds of
titanium sponge. Requirements for sponge vary based upon product mix and the
level of scrap usage.
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 competitor, permits the
Company to purchase up to seven million pounds per year at specified prices per
pound during 1996, 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 for 1996 plus
adjustments for changes in the supplier's costs. The other contract, which is
with a Japanese supplier, permits the Company to purchase up to four million
pounds of sponge per year through 1999, either at market price or a 1994 base
price plus changes in the supplier's costs. In addition, this contract permits
the Company to purchase up to an additional two million
23
<PAGE> 25
pounds of sponge at negotiated prices. This contract is subject to renegotiation
or termination under certain circumstances. The Company purchases the balance of
its sponge requirements pursuant to short-term agreements or at negotiated
prices. Prices for the Company's 1996 requirements have already been set under
these contracts and other short-term arrangements. In addition, RMI has
negotiated at firm prices approximately one-third of its anticipated sponge
requirements for customer orders scheduled for delivery in 1997. See "Risk
Factors--Dependence on Others for Raw Materials."
The Company purchases titanium tetrachloride, the primary raw material used
in the manufacture of titanium sponge, from SCM Chemicals, Inc. ("SCM") 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.
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.
Competition is primarily on the basis of price, quality and timely delivery.
Titanium also competes with other metals such as stainless steel and nickel
based corrosion resistant alloys.
Producers of titanium mill products are located primarily in the U.S.,
Japan, the former Soviet Union, Europe and China. Following closure of the
Company's sponge facilities in 1992, Oregon Metallurgical Corporation (Oremet)
and Titanium Metals Corporation of America (Timet) are the two remaining U.S.
integrated producers that produce their own sponge. There are also a small
number of domestic nonintegrated producers that, along with the Company, produce
mill products from purchased sponge, scrap or ingot. The Company does not
believe, however, that any of its nonintegrated U.S. competitors produce as full
a line of mill products as does RMI.
Imports of titanium mill products from countries that receive the
most-favored-nation tariff rate are subject to a 15% tariff. The tariff rate
applicable to imports from countries that do not receive MFN treatment is 45%.
Japanese producers, which benefit from MFN 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 does not grant MFN
treatment to imports, including titanium mill product imports, from the former
Soviet Union countries, except Russia. In 1995, a Russian producer began to
participate in the U.S. market for titanium mill products. This titanium
producer has the largest rated capacity in the world (although management
believes practical capacity is substantially less) and could materially affect
competition if its exports of titanium mill products were to increase
significantly.
MARKETING AND DISTRIBUTION
RMI markets its titanium mill products and related products and services
worldwide. Approximately 80% of the Company's consolidated sales are made
through its own sales force and the balance through independent distributors.
RMI'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.
In the U.S., RMI has expanded its market share by establishing
relationships with several specialized distributors that allow for a targeted
marketing approach to large customers that require a full-service distribution
supply. RMI also provides a direct distribution service on cut-to-size parts out
of its TRADCO, Inc. subsidiary in Washington, Missouri.
Internationally, RMI maintains a sales office and distribution warehouse in
Birmingham, England. In December 1992, the Company completed an acquisition of a
40% ownership interest in its French distributor, Reamet, SA. The Company also
has independent distributors covering The Netherlands, Italy, Israel,
24
<PAGE> 26
Norway, Spain, Sweden, Brazil, Belgium, Germany, Switzerland, Korea,
Philippines, Taiwan, South Africa, India and Australia.
MANUFACTURING FACILITIES
The Company has over 728,000 square feet of manufacturing facilities
exclusive of office space, 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 ANNUAL PRACTICAL
LOCATION PRODUCT CAPACITY CAPACITY(1)
- ------------------------- -------------------------------------- -------------- ----------------
<S> <C> <C> <C>
Niles, Ohio Ingot (Million Pounds)................ 36 30
Niles, Ohio Mill Products (Million Pounds)........ 22 20
Hermitage, Pennsylvania Tube (Thousand Pounds)................ 780 780
Washington, Missouri Hot-Formed and Superplastically Formed
Sullivan, Missouri Components (Thousand Press Hours)..... 21 21
Salt Lake City, Utah Powders (Million Pounds).............. 1.5 1.5
<FN>
- ---------
(1) Practical capacity is based on current product mix and yields.
</TABLE>
The Company owns all of the foregoing facilities, except for the Sullivan,
Missouri facility 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
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 the Company.
The Company, however, is responsible for inspecting and delivering these
products to customers. The Company maintains long-term relationships with many
of these conversion companies.
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
$3.4 million in 1995, $3.3 million in 1994 and $2.4 million in 1993. 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
$1.8 million in 1995 and $1.5 million in each of 1994 and 1993.
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,
25
<PAGE> 27
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, 1995, the Company and its subsidiaries employed 844
persons, 180 of whom were classified as administrative and sales personnel. At
December 31, 1995, approximately 62 of the 844 employees were directly involved
with the DOE remediation and restoration contract at the Company's now closed
facilities in Ashtabula, Ohio.
The United Steelworkers of America ("USWA") represents approximately 440 of
the hourly and clerical and technical employees at the Company's plant in Niles,
Ohio and the hourly employees at the closed facilities in Ashtabula, Ohio. Other
than six hourly workers at the Ashtabula facilities, who are represented by the
Oil, Chemicals and Atomic Workers Union, the Company's other employees are not
represented by a union. In October 1995, following a five day work stoppage, a
three-year labor agreement was reached with the USWA unit at Niles. The hourly
employees at the facilities in Ashtabula agreed to a five-year contract on
January 15, 1995.
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.
In connection with the closing of the Company's facilities in Ashtabula,
Ohio, the Oil, Chemical and Atomic Workers Union, Local 729, commenced an action
in 1992 in the U.S. District Court for the Northern District of Ohio, captioned
OCAW, Local 7-629, AFL-CIO, et al. vs. RMI Titanium Company, against the Company
alleging violation of the notification provisions of the Worker Adjustment and
Retraining Notification Act ("WARN"). Three classes of former employees at such
facilities have alleged that they did not receive appropriate notice of their
pending layoffs or terminations as required under WARN and are seeking back pay
for the notification period. The Company believes that it has complied with the
provisions of WARN and that the claims are without merit.
ENVIRONMENTAL
The Company is subject to extensive federal, state and local laws and
regulations concerning environmental matters. During each of 1995 and 1994, the
Company spent approximately $0.6 million for environmental-related expenditures.
Such expenditures totaled $0.9 million in 1993. The Company broadly estimates
environmental-related expenditures, including capital items and compliance
costs, will total approximately $3.4 million during the 1996-1997 period.
In connection with the 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") with
26
<PAGE> 28
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 sediment operable
unit was $48 million. Recent 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, beginning in March 1989, ordered 22 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. The Company, working
cooperatively with fourteen others, is complying with the order and has accrued
and has been paying its portion of the cost of such compliance. It is
anticipated that the studies will be completed no earlier than late 1996. Actual
cleanup is not expected to commence prior to mid-year 1997. The Company's share
of the study costs has been established at 9.95%. In June, 1995, the Company and
twelve others entered into a Phase 2 (actual 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 Phase 2 allocation agreement.
The Ohio Environmental Protection Agency (the "Ohio EPA") has notified the
PRPs of its intention to undertake a Natural Resource Damage Assessment ("NRDA")
for the Fields Brook site which could lead to a Natural Resource Damage Claim
("NRDC") against the PRPs. The NRDA cannot be completed until the remediation of
the Fields Brook watershed is complete. It is not possible to predict, at this
time, the cost to the Company, if any, as a result of the NRDA and any NRDC that
might be brought.
Resource Conservation and Recovery Act of 1975 ("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
fill 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.
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 Phase 2,
the Detailed Design, the Company and at least three other private parties have
pledged a voluntary contribution of up to $100,000 each, contingent upon
receiving matching federal funds. 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.
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
27
<PAGE> 29
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. During 1993, the Company settled a claim with one insurer for $0.4
million. None of the remaining insurers have agreed to defend or indemnify the
Company, and several have denied coverage. However, the Company continues to
pursue these claims with its insurers.
Alleged RCRA Violations. On October 9, 1992, the EPA filed a complaint
alleging certain violations of RCRA at the Company's now closed facilities in
Ashtabula, Ohio. The EPA's determination is based on information gathered during
inspections of the facility in 1991. Under the complaint the EPA proposed 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.
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 in its financial
statements environmental costs as an obligation becomes probable and a
reasonable estimate of exposure can be determined. At December 31, 1995, the
amount accrued for future environmental-related costs was $2.4 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 $3.7 to $6.3 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 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.
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<PAGE> 30
RMI TITANIUM COMPANY
SELECTED FINANCIAL DATA
The following selected financial data has been derived from the Consolidated
Financial Statements of RMI for each of the five years during the period ended
December 31, 1995. The information set forth below should be read in connection
with the Consolidated Financial Statements included elsewhere herein and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE AND PRICE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales:
Mill products.................................... $138,077 $103,790 $ 96,453 $110,509 $128,803
Fabricated products and other services........... 26,904 31,134 20,512 16,745 17,260
Other(1)......................................... 6,185 8,468 10,432 8,353 19,505
-------- -------- -------- -------- --------
Total sales.................................. 171,166 143,392 127,397 135,607 165,568
Cost of sales...................................... 164,949(2) 140,289 127,486 135,985 204,086 (3)
-------- -------- -------- -------- --------
Gross profit (loss).............................. 6,217(2) 3,103 (89) (378) (38,518) (3)
Selling, general and administrative expenses....... 9,576 9,531 9,133 9,365 10,687
Research, technical and product development
expenses......................................... 1,861 1,543 1,542 1,644 3,507
-------- -------- -------- -------- --------
Operating loss..................................... (5,220)(2) (7,971) (10,764) (11,387) (52,712) (3)
Other (expense) income, net........................ (1,622) (291) 1,554 178 (735)
Interest expense................................... (4,966) (3,300) (2,745) (2,746) (3,538)
-------- -------- -------- -------- --------
Loss before income taxes........................... (11,808)(2) (11,562) (11,955) (13,955) (56,985) (3)
Provision (credit) for income taxes................ (7,200) -- -- 107 100
-------- -------- -------- -------- --------
Loss before cumulative effect of change in
accounting principle............................. (4,608) (11,562) (11,955) (14,062) (57,085)
Cumulative effect of change in accounting
principle........................................ -- (1,202)(4) (16,938)(5) -- --
-------- -------- -------- -------- --------
Net loss........................................... $ (4,608) $(12,764) $(28,893) $(14,062) $(57,085)
======== ======== ======== ======== ========
Net loss per common share before cumulative effect
of change in accounting principle................ $ (0.30) $ (1.45) $ (8.14) (9.66) (39.17)
Net loss per common share.......................... (0.30) (1.60) (19.67) (9.66) (39.17)
BALANCE SHEET DATA: (at end of period)
Working capital.................................... $ 86,738 $ 74,694 $ 66,319 $ 72,229 $ 79,820
Total assets....................................... 171,559 160,810 152,471 153,257 173,888
Long-term debt..................................... 64,020 54,740 66,660 62,280 58,800
Total shareholders' equity......................... 36,889 42,596 27,861 63,302 77,705
OPERATING AND OTHER FINANCIAL DATA:
Mill product shipments (thousands of pounds):
Aerospace........................................ 10,526 8,109 7,619 8,699 9,379
Nonaerospace..................................... 3,884 3,370 3,406 2,585 1,938
-------- -------- -------- -------- --------
Total shipments.............................. 14,410 11,479 11,025 11,284 11,317
Average realized mill product sales price (per
pound)........................................... $ 10.23 $ 9.63 $ 9.60 $ 10.20 $ 11.69
EBITDA (6)......................................... $ 4,632 $ (2,122) $ (2,912) $ (4,703) $ (5,535)
Order backlog at December 31 (7)................... $134,000 $ 67,000 $ 70,000 $ 53,000 $ 82,000
Active employees at December 31.................... 844 817 782 843 1,172
<FN>
- ---------
(1) Includes sales of discontinued products of $2.6 million and $13.2 million in
1992 and 1991, respectively.
(2) Includes a charge of $5.0 million reflecting the June 30, 1995 adoption of
SFAS No. 121. See Note 7 to the Consolidated Financial Statements.
(3) Includes a charge of $37.1 million relating to the closing of RMI's titanium
sponge production facilities.
(4) Reflects the adoption of SFAS No. 112. See Note 11 to the Consolidated
Financial Statements.
(5) Reflects immediate recognition of the transition obligation determined as of
the January 1, 1993 adoption of SFAS No. 106. See Note 11 to the
Consolidated Financial Statements.
(6) EBITDA consists of income before interest expense, income taxes,
depreciation and amortization and the charges related to changes in
accounting principles in 1995, 1994 and 1993, and a plant closing in 1991.
EBITDA should not be considered as an alternative to, or more meaningful
than, operating income or cash flow, as determined in accordance with
generally accepted accounting principles, as an indicator of the Company's
operating performance.
(7) "Order backlog" is defined as firm purchase orders generally subject, upon
payment of specified charges, to cancellation by the customer.
</TABLE>
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<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Financial Data" and the Consolidated Financial Statements and Notes thereto of
the Company included elsewhere herein. The following information contains
forward-looking statements which involve certain risks and uncertainties. Actual
results and events may differ significantly from those discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors."
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 19 years, titanium mill products
shipments registered cyclical peaks of 54 million pounds in 1980 and 55 million
pounds in 1989. Beginning in 1991, the industry experienced a dramatic downturn
in demand for mill products. Domestic industry shipments fell from 53 million
pounds in 1990 to 34 million pounds in 1991, a decrease of 35%, the largest
single one year decrease in the history of the industry. This most recent
decline in industry shipments reflects a sharp decline in military aerospace
demand, which continues to the present, and a decline in commercial aircraft
build rates due in part to significant financial losses suffered by U.S.
commercial airline carriers. Average realized mill product selling prices
deteriorated during the years 1993 and 1994 and were approximately 30% below
1990 levels.
Although military aerospace markets remain at historically low levels,
commercial aerospace markets have shown a recent increase in demand. In 1995,
most major commercial airlines reported stronger operating profits and, in the
second half of 1995, the commercial aerospace industry began to restore depleted
inventories of titanium mill products and aircraft manufacturers began to
increase build rates. RMI estimates, based on U.S. Bureau of Mines data, that
industry mill products shipments to the commercial aerospace market in 1995 were
20 million pounds, an increase of approximately 18% compared to 1994. RMI
further estimates, based on U.S. Bureau of Mines data, that total industry
shipments in 1995 were approximately 43 million pounds, an increase of 26%
compared to 1994. RMI can give no assurance as to extent or duration of any
recovery in the commercial aerospace market or the extent to which such recovery
will result in increases in demand for titanium products. See "Risk
Factors--Dependence on Cyclical Aerospace Markets."
During 1995, the use of titanium in golf clubs emerged as an important
nonaerospace market for the U.S. titanium industry. See "Business--Products and
Markets--Mill Products." The Company believes that titanium shipments for use in
golf clubs amounted to approximately 9% of total titanium mill product shipments
in 1995. Based on industry estimates, RMI believes that industry mill product
shipments to the golf club market could increase to eight million pounds in
1996. See "Risk Factors--No Assurance as to New Product and Market Development."
The golf club market benefits RMI indirectly by increasing prices for titanium
mill products industry-wide. Although demand for titanium scrap for the golf
club manufacturing market has placed upward pressure on the Company's raw
material costs, this pressure has been more than offset to date by higher
selling prices for the Company's mill products.
In response to industry-wide conditions the Company closed its sponge
production facilities in early 1992, which allowed the Company to stem
immediately significant losses generated at these plants, as well as maintain
the flexibility to purchase titanium sponge and other raw materials, such as
foreign or domestic scrap at favorable prices. The Company entered into two
long-term titanium sponge supply arrangements which assure a supply of a
substantial portion of the Company's expected sponge requirements. Prices for
the Company's 1996 requirements, have already been set under these contracts and
other short term arrangements. In addition, RMI has negotiated at firm prices
approximately one-third of its anticipated sponge requirements for customer
orders scheduled for delivery in 1997. See "Risk Factors--Dependence on Others
for Raw Materials" and "Business--Raw Materials." These actions have reduced the
Company's raw material costs during the years 1993 through 1995 and should
continue to improve the Company's competitive position. See "Risk
Factors--Dependence on Others for Raw Materials."
30
<PAGE> 32
RMI'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. RMI 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 and use of billet for golf club applications. See "Risk Factors--No
Assurance as to New Product and Market Development" and "Business--Fabricated
Products and Other Services."
RESULTS OF OPERATIONS
Net Sales. Net sales in 1995 increased by $27.8 million, or 19%, compared
to 1994. This increase resulted primarily from an increase in the volume of mill
product shipments and higher average selling prices, partially offset by
decreased revenues from fabricated products and other services and other sales.
Shipments of mill products in 1995 increased to 14.4 million pounds, 25% higher
than in 1994, reflecting the increase in demand for mill products from
commercial aerospace and other industrial markets. The majority of this increase
occurred in the second half of 1995 reflecting strengthening business conditions
as the year progressed. Approximately 75% of RMI's 1995 mill product sales were
aerospace related compared with approximately 63% in 1994. The Company's average
realized mill product selling price increased to $10.23 per pound in 1995,
approximately 6% higher than in 1994, and increased to $10.49 per pound in the
fourth quarter of 1995. Realized prices were favorably affected in 1995 by
increasing demand from the golf club market. See "Overview" above. Because the
titanium drilling riser for the Conoco Heidrun project was substantially
completed in 1994, sales of fabricated products and other services declined to
$26.9 million in 1995 from $31.1 million in 1994. Other sales decreased by $2.3
million, or 27%, compared to 1994 due to decreased funding for the DOE
remediation and restoration contract.
Net sales in 1994 increased by $16.0 million, a 12% increase, compared to
1993. This increase resulted primarily from increased revenues recognized in
connection with the titanium drilling riser contract and an increase in mill
product shipments. Shipments of mill products increased in 1994 to 11.5 million
pounds, 4% higher than in 1993. The Company's average realized selling price for
mill products of $9.63 per pound, however, remained virtually unchanged in 1994
compared to 1993. Prices on orders in 1994, while showing slight improvement,
reflected soft demand for titanium mill products. Sales of related products and
other services increased to $31.1 million in 1994 compared to $20.5 in 1993
primarily as a result of revenues recognized in connection with the titanium
drilling riser. Revenue recognized under the DOE remediation and restoration
contract decreased from $10.4 million to $8.5 million in 1994 due to decreased
DOE funding levels.
Gross Profit. Gross profit in 1995 improved to $6.2 million, an increase
of 100%, compared to $3.1 million in 1994. This improvement relates primarily to
increased shipments of titanium mill products and higher realized mill product
selling prices, partially offset by a reduction in sales of fabricated products
and other services, increases in raw material costs and an asset impairment
charge of $5.0 million following the adoption of Statement of Financial
Accounting Standards No. 121 ("SFAS No. 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
Gross profit in 1994 improved to a profit of $3.1 million compared to a
loss of $0.1 million in 1993. This improvement related primarily to the titanium
drilling riser contract as well as the favorable impact of increased mill
product shipments.
Selling, General and Administrative Expenses ("SG&A"). SG&A expenses of
$9.5 million in 1995 remained virtually flat compared to 1994, despite increased
sales in 1995, as a result of the Company's efforts to contain costs. SG&A
expenses increased by $0.4 million in 1994 compared to 1993 primarily as a
result of increased levels of business activity. As a percentage of sales, SG&A
expenses were 5.6% in 1995, 6.6% in 1994 and 7.2% in 1993.
Research, Technical and Product Development Expenses. The Company's total
research spending amounted to $3.4 million in 1995, $3.3 million in 1994 and
$2.4 million in 1993. The Company's major research objectives are to maintain
its technical expertise in titanium production, provide customer technical
support and develop new products and markets. Certain major customers have
assisted in funding the
31
<PAGE> 33
Company's overall product development effort. Such funding, which is included as
a reduction of research expense, reduced the Company's portion of research
expense to $1.9 million in 1995 and $1.5 million in each of 1994 and 1993,
respectively.
Operating Loss. The operating loss for 1995 amounted to $5.2 million
compared to an $8.0 million loss in 1994. This improvement resulted primarily
from increased shipments of mill products and higher realized mill product
selling prices, partially offset by a $5.0 million asset impairment charge
following the adoption of SFAS No. 121. Both shipments and selling prices were
favorably impacted by a general increase in demand for titanium mill products.
The operating loss for 1994 of $8.0 million compared to a loss of $10.7
million in 1993. The improved results in 1994 reflect profit recognized in
connection with the titanium drilling riser contract combined with an increase
in mill product shipments.
Other Income (Expense). Other income (expense) for 1995 included a $1.9
million charge for impairment of the Company's investment in a joint venture.
Amounts in 1993 include a $1.4 million gain on sales and retirements of
equipment and facilities.
Interest Expense. Net interest expense amounted to $5.0 million in 1995,
$3.3 million in 1994 and $2.7 million in 1993. Interest expense increased in
1995 from 1994 due to higher levels of borrowing to support increased business
levels and higher overall interest rates. Interest expense increased in 1994
from 1993 due to significantly higher overall interest rates partially offset by
lower levels of borrowing.
Income Taxes. In 1995, an income tax benefit of $7.2 million was recorded
to recognize a portion of the Company's deferred tax assets believed more likely
than not to be realized under the provisions of SFAS No. 109, "Accounting for
Income Taxes." For additional information, see "Income Tax Considerations"
below. No tax provision or benefit was recorded in either 1994 or 1993.
Net Loss. In 1995, the Company reported a net loss of $4.6 million
compared to a net loss of $12.8 million in 1994 and $28.9 million in 1993. The
1995 results were adversely affected by a $5.0 million charge resulting from the
adoption of SFAS No. 121. The 1994 results were adversely affected by a $1.2
million charge representing the cumulative effect of adopting the provisions of
SFAS No. 112, "Employers' Accounting for Postretirement Benefits," while the
1993 results were adversely affected by a $16.9 million charge representing the
cumulative effect of adopting the provisions of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions."
QUARTERLY RESULTS OF OPERATIONS AND OTHER FINANCIAL AND OPERATING DATA
The following table presents certain unaudited consolidated quarterly
financial data for 1995 and 1994. In the opinion of the Company's management,
this information includes all adjustments (consisting only of
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<PAGE> 34
normal recurring adjustments) necessary to present fairly the unaudited
quarterly results set forth herein. The operating results for any quarter are
not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1994
------------------------------------------ ----------------------------------------
4TH 3RD 2ND 1ST 4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS EXCEPT FOR PRICE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales................ $48,530 $42,912 $39,621 $40,103 $38,853 $32,842 $35,337 $36,360
Gross profit......... 5,389 2,890 (3,999)(1) 1,937 887 996 693 527
Operating income
(loss)............. 2,880 199 (7,422) (877) (1,754) (1,984) (2,017) (2,216)
Cumulative effect of
change in
accounting
principle.......... -- -- -- -- -- -- (1,202)
Net income (loss).... 8,731(2) (967) (10,509) (1,863) (2,830) (2,780) (3,023) (4,131)
Mill product
shipments
(thousands of
pounds)............ 3,775 3,762 3,568 3,304 2,849 2,715 3,071 2,843
Average realized mill
product sales price
(per pound)........ $ 10.49 $ 10.31 $ 9.93 $ 10.19 $ 10.37 $ 9.43 $ 9.29 $ 9.46
<FN>
- ---------
(1) Includes a $5.0 million asset impairment charge following the adoption of
SFAS No. 121.
(2) Includes a $7.2 million tax benefit.
</TABLE>
OUTLOOK
RMI's order backlog increased to $159 million at February 29, 1996 from
$134 million at year-end 1995, $83 million at June 30, 1995 and $67 million at
year-end 1994. The following table summarizes the Company's quarterly order
backlog for the three years ended December 31, 1995. The Company defines "Order
backlog" as firm purchase orders generally subject, upon payment of specified
charges, to cancellation by the customer.
<TABLE>
<CAPTION>
AS OF THE QUARTER ENDED
--------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
----------- ------------ ------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
1995............................ $ 134 $110 $83 $ 86
1994............................ 67 61 61 70
1993............................ 70 72 58 59
</TABLE>
During the second half of 1995 and continuing into 1996, the Company has
experienced a significant increase in the volume of incoming orders at increased
prices. The Company estimates that as of February 29, 1996 orders for
approximately 90% of its anticipated 1996 shipments have been booked or shipped
at average prices approximately 15% higher than its 1995 average realized mill
product selling price of $10.23. The Company is currently booking orders for
titanium mill products for delivery in early 1997 at prices greater than $12 per
pound. The increase in demand has been driven primarily by the recovery in the
commercial aerospace market and the emergence of the golf club market. As
facility utilization in the titanium industry continues to grow and lead times
lengthen, the Company expects prices on new orders to continue to strengthen.
The increase in demand for titanium products has put upward pressure on
prices for certain raw materials used by the Company. Prices paid by the Company
for titanium sponge have remained relatively stable due to the Company's long
term supply arrangements. Prices for titanium sponge under the terms of the
Company's long-term supply contracts are fixed for 1996, based on the quantity
purchased. Purchases of sponge above the quantities available under the
contracts would likely be purchased from other sources at higher prices. Due to
increased demand resulting primarily from the emerging golf club markets,
current prices for titanium scrap,
33
<PAGE> 35
which account for approximately 40% of the Company's raw material requirements,
have increased approximately 46% from first quarter 1995 prices. Prices of
certain alloying agents have also increased as a result of increased demand. The
Company, and others, have announced increased prices and surcharges to recover
these increased costs.
The information included in this "Outlook" section is forward-looking and
involves risks and uncertainties that could significantly impact expected
results. The Company's outlook is significantly dependent upon the continued
growth of the commercial aerospace and golf club markets and its ability to
recover its raw material costs in the pricing of its products. See "Risk
Factors--Dependence on Cyclical Aerospace Markets" and "--No Assurance as to New
Product and Market Development." Other factors include those discussed under
"Risk Factors."
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows used in operating activities totaled $7.7 million in 1995,
$13.2 million in 1994 and $4.2 million in 1993. The change in net cash flows
used in operating activities in 1995 compared to 1994 was due primarily to
improved results of operations partially offset by an increase in accounts
receivable and noncash deferred tax assets. The increase in net cash flows used
in operating activities in 1994 compared to 1993 was primarily the result of
increased inventory levels required for the Company's long-term contract for the
titanium drilling riser. Working capital amounted to $86.7 million at December
31, 1995, compared to $74.7 million at December 31, 1994. The increase in
working capital in 1995 compared to 1994 reflects an increase in inventories and
accounts receivable. The Company's working capital ratio was 3.73 to 1 at
December 31, 1995 compared to 3.60 to 1 at December 31, 1994.
In 1995, the Company's cash flow requirements for operating losses, capital
expenditures and working capital were funded by borrowings under the Existing
Credit Facilities. In 1994, the Company's cash flow requirements for operating
losses, capital expenditures and working capital were funded through proceeds
from a rights offering to holders of Common Stock.
At December 31, 1995, the Company had borrowings of $58.2 million under the
Existing Bank Credit Facility and $5.0 million under the EXIM Bank Credit
Facility. Other long-term debt of $0.9 million consisted of industrial revenue
bonds. At December 31, 1995, RMI's percentage of total debt to total
capitalization was 63%. Assuming the sale of the shares of Common Stock offered
hereby had been consummated on December 31, 1995 at a price of $12 per share
(based on the closing sales price of the Common Stock on the NYSE Composite Tape
on March 5, 1996 and assuming that the Underwriters' overallotment option is not
exercised) and application of the proceeds therefrom as set forth under "Use of
Proceeds," such percentage at such date would have been 19% (12% if the
Underwriters' overallotment option were exercised in full).
The Company is in the process of negotiating the New Credit Facility which
would replace the Existing Bank Credit Facility. See "Capitalization--New Credit
Facility." For additional information concerning the Existing Credit Facilities,
see Note 9 to the Consolidated Financial Statements included elsewhere herein.
In early 1994 the Company raised working capital through a rights offering
to shareholders. After deducting expenses of the offering, net proceeds
increased total shareholders' equity by approximately $26.4 million.
The Company anticipates that it will be able to fund its 1996 working
capital requirements and its capital expenditures primarily from funds generated
by operating activities and, to the extent necessary, from borrowings under the
New Credit Facility.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." SFAS No. 123 established
standards for accounting for stock-based compensation or allows companies to
continue to account for stock-based compensation under the provisions of
Accounting Principles Board ("APB") Opinion No. 25 "Accounting for Stock Issued
to Employees" and
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<PAGE> 36
make certain additional disclosures in the notes to financial statements. The
new standard is effective for fiscal years beginning after December 15, 1995. It
is the Company's intention to continue to account for stock-based compensation
in accordance with APB Opinion No. 25 and provide the additional required
disclosure in the notes to the consolidated financial statements.
INCOME TAX CONSIDERATIONS
Section 382 Limitation. At December 31, 1995, the Company had net
operating loss carryforward of approximately $104 million available to reduce
federal taxable income through 2010. If an "ownership change" were to occur
within the meaning of Section 382 of the Code, the utilization of net operating
loss carryforwards would be subject to an annual limitation. Generally, an
"ownership change" occurs with respect to a corporation if shareholders who own,
directly or indirectly, 5% or more of the capital stock of the corporation
increase their aggregate percentage ownership of such stock by more than 50
percentage points over the lowest percentage of such stock owned by such
shareholders at any time during a prescribed testing period. The sale of the
shares of Common Stock offered hereby and the USX Pension Fund Contribution are
not expected to result in an ownership change that would cause the annual
limitation to apply. In the event the offering and the USX Pension Fund
Contribution do not cause such an ownership change, an ownership change could
result from other equity transactions immediately following the sale, including
transactions such as exercises of stock options, purchases or sales of Common
Stock by certain stockholders, including USX and the U.S. Steel Pension Fund,
and other issuances of Common Stock by the Company. If the annual limitation
were to apply, the amount of the limitation would generally equal the product of
(i) the fair market value of the Company's equity immediately prior to the
ownership change, with certain adjustments, including a possible adjustment to
exclude certain capital contributions made in the two years preceding the date
of the ownership change, and (ii) a long-term tax exempt bond rate of return
published monthly by the Internal Revenue Service. Should the annual limitation
apply, the Company believes that it would not materially affect the potential
use of the net operating loss carryforwards to reduce any future income tax
liabilities over time; however, it is possible that the Company's results in a
particular year could exceed the annual limitation, in which case such excess
would not be reduced by the net operating loss carryforward and the Company's
tax liability would be correspondingly higher.
SFAS No. 109 Effects. SFAS No. 109 requires a valuation allowance when it
is more likely than not that some portion or all of the deferred tax assets will
not be realized. It further states that forming a conclusion that a valuation
allowance is not needed is difficult when there is negative evidence such as
cumulative losses in recent years. The ultimate realization of all or part of
the Company's deferred income tax assets depends on the Company's ability to
generate sufficient taxable income in the future.
In making an assessment of realizability at December 31, 1995, the Company
considered a number of factors, including the return to profitability in the
fourth quarter of 1995, a substantial and growing backlog of profitable orders
and a general improvement in overall industry operating conditions and business
fundamentals in the Company's key market sectors. The Company concluded that it
was appropriate to recognize a portion of its deferred tax assets, corresponding
to the level of income which could reasonably be expected over the course of a
historical titanium industry business cycle of approximately three years.
Accordingly, a portion of the valuation allowance provided in previous years was
released, resulting in a credit to income tax expense in 1995 of $7.2 million.
The remaining valuation allowance was retained, in light of the requirement in
SFAS No. 109 to give weight to objective evidence such as recent losses and the
historical titanium industry business cycle.
When preparing 1996 and future periods' interim and annual financial
statements, the Company will periodically evaluate its strategic and business
plans, in light of evolving business conditions, and the valuation allowance
will be adjusted for future income expectations resulting from that process, to
the extent different from those inherent in the valuation allowance established
as of December 31, 1995.
As a result, the application of the SFAS No. 109 valuation allowance
determination process could result in recognition of significant income tax
provisions or benefits in a single interim or annual period due to changes in
income expectations over a horizon that may span several years. Such tax
provision or benefit effect
35
<PAGE> 37
would likely be material in the context of the specific interim or annual
reporting period in which changes in judgment about more extended future periods
are reported. This effect is a consequence of the application of the SFAS No.
109 valuation allowance determination process, which is a balance sheet oriented
model and which does not have periodic matching of pretax income or loss and the
related tax effects as an objective.
The Section 382 limitation described above could, if applicable, adversely
impact the income tax provision or benefit in a particular year as a result of
the application of the SFAS No. 109 valuation allowance determination process;
however, it is not expected to have an adverse impact over time.
If the Company's principal markets continue to exhibit improvement, and
such improvement is manifested in positive trends in the value and profitability
of customer orders and backlog, additional tax benefits may be reported in
future periods as the valuation allowance is further reduced. Alternatively, to
the extent that the Company's future profit expectations remain static or are
diminished, tax provisions may be charged against pretax income. In either
event, such valuation allowance-related tax provisions or benefits should not
necessarily be viewed as recurring. Further, subject to the effects, if any, of
the limitation described above, the amount of current taxes that the Company can
be expected to pay for the foreseeable future is de minimis, and the Company's
carryforward tax attributes are viewed by management as a significant
competitive advantage to the extent that profits can be sheltered effectively
from tax and re-employed in the growth of the business.
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 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. During each of 1995 and 1994, the Company
spent approximately $0.6 million for environmental-related expenditures, such
expenditures having totaled $0.9 million in 1993.
At December 31, 1995, the amount accrued for future environment-related
costs was $2.4 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 $3.7 million to $6.3 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. 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.
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.
For a further discussion of environmental matters, see "Business--Legal
Proceedings--Environmental."
CAPITAL EXPENDITURES
Gross capital expenditures in 1995 and 1994 amounted to $1.5 million and
$1.0 million, respectively. The Company has budgeted capital spending of
approximately $5.0 million in 1996. RMI anticipates that it can fund this
spending using cash provided from operations.
36
<PAGE> 38
MANAGEMENT
The following table sets forth, as of March 1, 1996, certain information
regarding RMI's directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- ----------------------------------------------
<S> <C> <C>
Craig R. Andersson................. 58 Director
Neil A. Armstrong.................. 65 Director
Daniel I. Booker................... 48 Director
Ronald A. Gallatin................. 50 Director
Charles C. Gedeon.................. 55 Director
L. Frederick Gieg, Jr. ............ 64 Director, President and Chief Executive
Officer
Robert M. Hernandez................ 51 Director, Chairman of the Board
John H. Odle....................... 53 Senior Vice President--Commercial
Timothy G. Rupert.................. 49 Senior Vice President and Chief Financial
Officer
Louis A. Valli..................... 63 Director
Wesley W. von Schack............... 51 Director
</TABLE>
RMI's Board of Directors is currently classified into three classes. At the
1995 Annual Meeting of Shareholders, the Regulations were amended, effective as
of the date of the 1996 Annual Meeting of Shareholders, currently scheduled to
be held April 25, 1996, to eliminate such classes. At the 1996 Annual Meeting,
all directors will be elected for terms of one year and until their successors
are elected and qualified.
ADDITIONAL INFORMATION CONCERNING DIRECTORS AND OFFICERS
Mr. Andersson has been a director since 1990. Mr. Andersson retired as a
director and Vice-Chairman of Aristech Chemical Corporation on April 30, 1995.
Previously, he was President and Chief Operating Officer, a position he had held
since December 4, 1986. Mr. Andersson was President of USS Chemicals Division of
USX (the predecessor of Aristech) from 1985. He is a director of Albermarle
Corporation. He has a B.S. degree in chemical engineering from the University of
Minnesota.
Mr. Armstrong has been a director since 1990. For 17 years he served with
the National Aeronautics and Space Administration and its predecessor agency as
an engineer, test pilot, astronaut and administrator. From 1971 to 1979 he was
professor of aerospace engineering at the University of Cincinnati. He became
Chairman of Cardwell International, Ltd. in 1980; Chairman of CTA, Inc. in 1982;
and Chairman of AIL Systems, Inc. in 1989. He is a director of Cinergy
Corporation, Cincinnati Milacron, Inc., Eaton Corporation, Thiokol Corp., and
USX. He has a B.S. degree in aeronautical engineering from Purdue University and
an M.S. in aeronautical engineering from the University of Southern California.
Mr. Booker has been a director since 1995. He is a partner of the law firm
of Reed Smith Shaw & McClay, headquartered in Pittsburgh, Pennsylvania. Since
1992, he has been Managing Partner, or chief executive, of Reed Smith. He
received an undergraduate degree from the University of Pittsburgh and a law
degree from the University of Chicago.
Mr. Gallatin has been a director since 1996. He served as a Managing
Director of Lehman Brothers Inc., where he was a member of the firm's Operating
Committee and its Director of Corporate Strategy and Product Development until
his retirement on December 31, 1995. He is currently a Senior Advisor to Lehman
Brothers Inc. A graduate of New York University, and both Brooklyn and New York
University Law Schools, Mr. Gallatin has B.S., J.D. and L.L.M. (Taxation)
degrees and is a Certified Public Accountant.
Mr. Gedeon has been a director since 1991. He is Executive Vice
President-Raw Materials & Diversified Businesses of the U.S. Steel Group of USX.
From 1983 until he joined USX in 1986, Mr. Gedeon had been Vice
President-Operations of National Steel Corporation. Mr. Gedeon is a director of
the U.S. Steel Group of USX Corporation.
37
<PAGE> 39
Mr. Gieg has been a director and President and Chief Executive Officer of
the Company since 1990 and was President and Chief Executive Officer of its
predecessor since September 1, 1982. Previously, Mr. Gieg had been Vice
President and General Manager of the Western Steel Division of what is now the
U.S. Steel Group of USX. He began his career with USX in June 1953. He has a
B.A. degree from Dartmouth College and a degree from the Advanced Management
Program at Harvard University.
Mr. Hernandez has been Chairman and a director since 1990. He is Vice
Chairman and Chief Financial Officer of USX and has been a director of USX since
1991. Mr. Hernandez has an undergraduate degree from the University of
Pittsburgh and an M.B.A. from the Wharton Graduate School of the University of
Pennsylvania. He is a director of ACE Limited, Compass Capital Fund and
Marinette Marine Corporation. Mr. Hernandez is also a director of the U.S. Steel
Pension Fund.
Mr. Odle has been 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 has 18 years
of service with RMI and its predecessor and began his career as a commercial
management trainee in 1964 with USX. Mr. Odle is a graduate of Miami University,
Oxford, Ohio.
Mr. Rupert was appointed Senior Vice President and Chief Financial Officer
in March 1994 and had served as Vice President and Chief Financial Officer since
September 1991. Prior to joining RMI, Mr. Rupert was employed by USX for 23
years in various accounting and finance positions.
Mr. Valli has been a director since 1993. He was Senior Vice
President-Employee Relations of USX until he retired on February 29, 1996. He is
retiring from the RMI Board of Directors as of April 25, 1996. He began his
career with USX in 1954.
Mr. von Schack has been a director since 1991. He has been a director of
DQE, Inc. since 1989 and of Duquesne Light Company since 1986 and is Chairman of
the Board, President and Chief Executive Officer of DQE and of Duquesne Light.
DQE is the parent company of Duquesne Light. He is also a director of Mellon
Bank Corporation and Mellon Bank, N.A.
38
<PAGE> 40
DESCRIPTION OF CAPITAL STOCK
RMI is authorized to have outstanding 30,000,000 shares of Common Stock,
$.01 par value per share, and 5,000,000 shares of Preferred Stock, no par value
("Preferred Stock"). As of February 29, 1996, there were 15,393,532 shares of
Common Stock outstanding. All of the shares of Common Stock issued and
outstanding as of the date of this Prospectus are, and the shares of Common
Stock offered hereby will be, fully paid and nonassessable. The Preferred Stock
is issuable in one or more series, with such designations, dividend rates, dates
at which dividends shall be payable and from which they shall be cumulative,
redemption rights and prices, sinking fund requirements, liquidation prices,
conversion rights and restrictions as the Board of Directors shall fix, subject
to any limitations prescribed by law and to the provisions of the Amended
Articles of Incorporation. No shares of Preferred Stock have been issued.
Each holder of shares of Common Stock is entitled to one vote for each
share upon all matters presented to shareholders. Each holder of Preferred Stock
is entitled to one vote for each share thereof and generally votes together with
the Common Stock as one class on all matters, except that Preferred Stock is
entitled to vote separately to elect two additional Directors in the event of a
default in the payment in six quarters of dividends on any series of such class
until no quarterly dividend is in arrears. In addition, under Ohio law, holders
of Preferred Stock have the right to vote separately as a class on specified
matters.
The Common Stock is not subject to redemption and has no conversion rights.
Upon liquidation, holders of Common Stock are entitled to receive pro rata all
assets of RMI remaining after payment of debts and liquidation preferences and
accrued and unpaid dividends relating to the Preferred Stock.
No holder of Common Stock or Preferred Stock has any preemptive rights or
cumulative voting rights.
Holders of Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors of RMI out of funds legally
available for the payment of dividends. Dividends on Preferred Stock may be
cumulative in preference to holders of Common Stock at such rates and from such
dates as shall be set by the Directors. Dividend payments are prohibited to the
holders of Common Stock, unless all accrued and unpaid dividends have been paid
to the holders of the Preferred Stock.
RMI's Amended Articles of Incorporation may be amended by the affirmative
vote of at least two-thirds of the voting power of the Company and, if required
by applicable law, at least two-thirds of the outstanding Preferred Stock.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
Under RMI's Amended Articles of Incorporation on February 29, 1996, there
were 14,606,468 authorized and unissued shares of Common Stock and five million
shares of undesignated Preferred Stock. The unissued shares of Common Stock, to
the extent not reserved for issuance pursuant to RMI's stock option and stock
plans, may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital or to make corporate acquisitions.
Except for the issuance of Common Stock pursuant to certain director and
employee benefit plans, RMI does not currently have any plans to issue
additional shares of Common Stock or any shares of Preferred Stock.
One of the effects of the existence of unissued and unreserved Common Stock
and undesignated Preferred Stock may be to enable the Board of Directors to
render more difficult or to discourage an attempt to obtain control of the
Company by means of a merger, tender offer, proxy contest or otherwise, and
thereby to protect the continuity of RMI's management. If, in the due exercise
of its fiduciary obligations, for example, the Board of Directors were to
determine that a takeover proposal was not in RMI's best interest, such shares
could be issued by the Board of Directors without shareholder approval in one or
more private placements or other transactions that might prevent or render more
difficult or costly the completion of the takeover transaction by diluting the
voting or other rights of the proposed acquiror or insurgent shareholder group,
by creating a substantial voting block in institutional or other hands that
might undertake to support the position of the incumbent Board of Directors, by
effecting an acquisition that might complicate or preclude the takeover, or
otherwise. In this regard, except with respect to voting rights, RMI's Amended
Articles of Incorporation grants the Board of Directors broad power to establish
the rights and preferences of the
39
<PAGE> 41
authorized and unissued Preferred Stock, including the power to convert
Preferred Stock into a larger number of shares of Common Stock or other
securities, to demand redemption at a specified price under prescribed
circumstances related to a change of control, or to exercise other powers to
impede a takeover. The issuance of shares of Preferred Stock pursuant to the
Board of Director's authority described above may adversely affect the rights of
the holders of the Common Stock. It should be noted that, although Ohio law and
RMI's Amended Articles of Incorporation would not require shareholder approval
to issue authorized shares, historically the NYSE on which the Common Stock is
listed, has prohibited certain issuances and has required shareholder approval
of certain other issuances as a condition of listing the additional shares or,
in some instances, of continued listing of the outstanding shares.
In addition, certain other charter provisions, which are described below,
may have the effect, alone or in combination with each other or with the
existence of authorized but unissued capital stock, of rendering more difficult
or discouraging an acquisition of RMI deemed undesirable by the Board of
Directors.
CERTAIN PROVISIONS OF RMI'S ARTICLES OF INCORPORATION AND REGULATIONS
Classified Board of Directors. RMI's Regulations have been amended,
effective as of the date of the 1996 Annual Meeting of Shareholders, currently
scheduled to be held April 25, 1996, to eliminate the classified nature of its
Board of Directors. At the Annual Meeting, all directors will be elected to
serve terms expiring at the next annual meeting of shareholders.
Size of Board of Directors; Removal of Directors; Filling of Vacancies on
the Board of Directors. RMI's Regulations provide that the number of directors
may be changed from time to time, by the directors or at a meeting of
shareholders called for the purpose of electing directors, but shall not be
fewer than three nor more than twelve. Under Ohio law, unless the articles of
incorporation or regulations otherwise provide, a director may be removed by the
shareholders with or without cause. RMI's Regulations specifically provide that
directors may be removed only for cause. RMI's Regulations also provide that
vacancies on the Board of Directors that may occur between annual meetings shall
be filled only by the Board of Directors. In addition, these provisions specify
that any director elected to fill a vacancy on the Board will serve for the
balance of the term of the replaced director.
Calling of Meetings of Shareholders. RMI's Regulations provide that
special meetings of shareholders may be called by a shareholder or shareholders
only if they hold 50% of the shares of stock entitled to vote.
Certain Voting Provisions. RMI's Amended Articles of Incorporation provide
that the approval of holders of at least two-thirds of the voting power of RMI
(and, if required by applicable law, a class vote of preferred holders) is
required to approve a merger or consolidation if under Ohio law such merger or
consolidation would have to be submitted to RMI's shareholders, a sale or
disposition of all or substantially all the assets of RMI or a dissolution of
RMI.
CERTAIN PROVISIONS OF OHIO LAW
RMI is subject to certain provisions of Ohio law that may discourage or
render more difficult an unsolicited takeover of RMI. The Merger Moratorium Act
prohibits certain mergers, sales of assets, issuances or purchases of
securities, liquidation or dissolution, or reclassifications of the
then-outstanding shares of an Ohio corporation involving, or for the benefit of,
certain beneficial holders of stock representing 10% or more of the voting power
of the corporation (a "10% shareholder"), unless (i) the transaction is approved
by the directors prior to the time that the 10% shareholder became a 10%
shareholder (the "Shareholder Acquisition Date"), (ii) the acquisition of 10% of
the voting power is approved by the directors prior to the Shareholder
Acquisition Date or (iii) the transaction involves a 10% shareholder that has
been such for at least three years and (a) the transaction is approved by
holders of two-thirds of the voting power of the corporation and the holders of
a majority of the voting power not owned by 10% shareholders, or (b) certain
minimum price and form of consideration requirements are met.
The Control Share Act provides that the acquisition of shares entitling the
holder to exercise voting power in certain ranges (one-fifth or more, one-third
or more, or a majority) can be made only with the prior
40
<PAGE> 42
authorization of (i) the holders of at least a majority of the total voting
power and (ii) the holders of at least a majority of the total voting power held
by shareholders other than the proposed acquirer, officers of the corporation
elected or appointed by the directors, and directors of the corporation who are
also employees and excluding certain shares that are transferred after the
announcement of the proposed acquisition and prior to the vote with respect to
the proposed acquisition. The Control Share Act does not specify a remedy for
violation of the Act. However, in at least one situation, a court has set aside
an acquisition made in violation of the Control Share Act. The Profit
Disgorgement Act, which is contained in Section 1707.043 of the Ohio Revised
Code, provides Ohio corporations, or in certain circumstances the shareholders
of an Ohio corporation, a cause of action to recover profits realized under
certain circumstances by persons who dispose of securities of a corporation
within 18 months of proposing to acquire such corporation.
CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a discussion of certain anticipated United States income
and estate tax consequences of the ownership and disposition of the Common Stock
applicable to Non-United States Holders of such Common Stock. For the purpose of
this discussion, a "Non-United States Holder" is any corporation, individual,
partnership, estate or trust that is, as to the United States, a foreign
corporation, a non-resident alien individual, a foreign partnership or a foreign
estate or trust as such terms are defined in the Code. This discussion does not
deal with all aspects of United States income and estate taxation and does not
deal with foreign, state and local tax consequences that may be relevant to
Non-United States Holders in light of their personal circumstances. Furthermore,
the following discussion is based on current provisions of the Code and
administrative and judicial interpretations as of the date hereof, all of which
are subject to change. EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS URGED TO
CONSULT A TAX ADVISOR REGARDING CURRENT AND POSSIBLE FUTURE UNITED STATES
FEDERAL, STATE, LOCAL AND NON-UNITED STATES INCOME AND OTHER TAX CONSEQUENCES OF
ACQUIRING, HOLDING AND DISPOSING OF COMMON STOCK.
DIVIDENDS
Generally, any dividend paid to a Non-United States Holder of Common Stock
will be subject to United States withholding tax at a rate of 30% of the gross
amount of the dividend, or at a lesser applicable treaty rate. Dividends
received by a Non-United States Holder that are effectively connected with a
United States trade or business conducted by such Non-United States Holder are
exempt from such withholding tax. However, such effectively connected dividends,
net of certain deductions and credits, are taxed at the same graduated rates
applicable to United States persons.
In addition to the graduated tax described above, dividends received by a
corporate Non-United States Holder that are effectively connected with a United
States trade or business of the corporate Non-United States Holder may also be
subject to a branch profits tax at a rate of 30% or at a lesser applicable
treaty rate.
Under current United States Treasury regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of such
country (unless the payor has knowledge to the contrary) for purposes of the
withholding discussed above and, under the current interpretation of United
States Treasury regulations, for purposes of determining the applicability of a
tax treaty rate. However, under proposed United States Treasury regulations not
currently in effect, a Non-United States Holder of Common Stock who wishes to
claim the benefit of an applicable treaty rate would be required to satisfy
applicable certification and other requirements. A Non-United States Holder may
claim exemption from withholding under the effectively connected income
exception by filing Form 4224 (Statement Claiming Exemption from Withholding of
Tax on Income Effectively Connected With the Conduct of Business in the United
States) with RMI or its paying agent.
A Non-United States Holder of Common Stock eligible for a reduced rate of
United States withholding tax pursuant to a tax treaty may obtain a refund of
any excess amounts currently withheld by filing an appropriate claim for refund
with the United States Internal Revenue Service (the "IRS").
41
<PAGE> 43
SALE OF COMMON STOCK
A Non-United States Holder generally will not be subject to United States
federal income tax on any gain realized upon the sale or other disposition of
its Common Stock unless (i) such gain is effectively connected with a United
States trade or business of the Non-United States Holder, (ii) the Non-United
States Holder is an individual who holds the Common Stock as a capital asset and
is present in the United States for a period or periods aggregating 183 days or
more during the calendar year in which such sale or other disposition occurs and
certain other conditions are met or (iii) RMI is or has been a "United States
real property holding corporation" for federal income tax purposes.
RMI has not determined whether it is a "United States real property holding
corporation" for federal income tax purposes. If RMI is or becomes a "United
States real property holding corporation," so long as the Common Stock continues
to be regularly traded on an established securities market, only a Non-United
States Holder who holds or held (during the five year period preceding such
disposition) more than 5% of the Common Stock will be subject to federal income
tax on the sale or other disposition of such stock.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments of dividends to a Non-United States Holder at an address outside
the United States will generally not be subject to information reporting and
backup withholding (unless the payor has actual knowledge that the payee is a
United States person). The payment of the proceeds of the disposition of Common
Stock to or through the United States office of a broker is subject to
information reporting and backup withholding at a rate of 31% unless the
beneficial owner certifies its non-United States status under penalties of
perjury or otherwise establishes an exemption. The payment of the proceeds of
the disposition by a Non-United States Holder of Common Stock to or through a
foreign office of a broker will not be subject to backup withholding. The IRS
has indicated, however, that it is studying the possible application of backup
withholding in the case of a foreign office of a broker that is (a) a United
States person, (b) a United States controlled foreign corporation or (c) a
foreign person 50% or more of whose gross income for certain periods is from a
United States trade or business. Moreover, in the case of foreign offices of
such brokers, information reporting will apply to such payments of proceeds
unless (1) such broker has documentary evidence in its files of the beneficial
owner's foreign status and does not have actual knowledge to the contrary or (2)
the beneficial owner otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
ESTATE TAX
Common Stock owned, or treated as owned, by a nonresident alien individual
at the time of his death will be included in such holder's gross estate for
United States federal estate tax purposes, unless an applicable estate tax
treaty provides otherwise.
42
<PAGE> 44
UNDERWRITING
Under the terms of, and subject to the conditions contained in, the
Underwriting Agreement, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, the Underwriters
named below, for whom Lehman Brothers Inc. and Salomon Brothers Inc are acting
as representatives (the "Representatives"), have severally agreed to purchase
from the Company, and the Company has agreed to sell to each Underwriter, the
aggregate number of shares of Common Stock set forth opposite the name of each
such Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Lehman Brothers Inc. .........................................................
Salomon Brothers Inc .........................................................
---------
Total.................................................................... 4,000,000
==========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to purchase shares of Common Stock are subject to certain
conditions, and that if any of the shares of Common Stock offered hereby are
purchased by the Underwriters pursuant to the Underwriting Agreement, all of the
shares of Common Stock agreed to be purchased by the Underwriters pursuant to
the Underwriting Agreement must be so purchased.
The Company has been advised that the Underwriters propose to offer the
shares of Common Stock offered hereby directly to the public initially at the
public offering price set forth on the cover page of this Prospectus, and to
certain selected dealers (who may include the Underwriters) at such initial
public offering price less a selling concession not in excess of $ per share.
The selected dealers may reallow a concession not in excess of $ per share to
certain brokers and dealers. After the initial offering of the Common Stock, the
public offering price, the concession to selected dealers and the reallowance
may be changed by the Underwriters.
The Company has granted to the Underwriters an option to purchase up to an
additional 600,000 shares of Common Stock at the initial public offering price
less the aggregate underwriting discounts and commissions shown on the cover
page of this Prospectus, solely to cover over-allotments, if any. The option may
be exercised at any time up to 30 days after the date of this Prospectus. To the
extent that the Underwriters exercise such option, each of the Underwriters will
be committed, subject to certain conditions, to purchase a number of option
shares proportionate to such Underwriter's initial commitment.
The Company, its directors (excluding Mr. L. Frederick Gieg, Jr., President
and Chief Executive Officer) and USX have agreed not to offer, sell or otherwise
dispose of any shares of Common Stock for a period of 180 days following the
date of this Prospectus, without the prior consent of the Representatives of the
Underwriters. Certain officers, including Mr. Gieg, have agreed not to offer,
sell or otherwise dispose of any shares of Common Stock for a period of 90 days
following the date of this Prospectus without the prior consent of the
Representatives of the Underwriters. In addition, the U.S. Steel Pension Fund
has agreed not to offer, sell or otherwise dispose of any shares of Common Stock
for a period of 180 days following the date of this Prospectus without the prior
consent of the Representatives of the Underwriters. See "Risk Factors--Shares
Available for Sale."
43
<PAGE> 45
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments that the Underwriters may be required to make in respect thereof.
Ronald L. Gallatin, a director of the Company, is a Senior Advisor to
Lehman Brothers Inc.
Lehman Brothers Inc. and Salomon Brothers Inc, and certain of their
affiliates, have from time to time provided investment banking, financial
advisory and other services to the Company and its affiliates, including USX, in
the ordinary course of their respective businesses.
LEGAL MATTERS
The validity of the shares of the Common Stock offered hereby will be
passed upon for RMI by D. D. Sandman, Esq., General Counsel and Secretary of
USX. The Law Department of the U.S. Steel Group of USX acts as counsel to RMI.
Mr. Sandman, in his capacity as General Counsel and Secretary of USX, is paid a
salary by USX and participates in various employee benefit plans offered to
officers of USX generally. Certain legal matters will be passed upon for the
Underwriters by Simpson Thacher & Bartlett (a partnership which includes
professional corporations), 425 Lexington Avenue, New York, New York 10017.
Simpson Thacher & Bartlett will rely upon the opinion of D. D. Sandman as to
certain matters of Ohio law.
EXPERTS
The financial statements as of December 31, 1995 and 1994 and for each of
the three years in the period ended December 31, 1995 included in this
Prospectus have been so included and in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
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<PAGE> 46
RMI TITANIUM COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants................................................. F-2
Consolidated Statement of Operations for the years ended
December 31, 1995, 1994 and 1993................................................ F-3
Consolidated Balance Sheet at December 31, 1995 and 1994.......................... F-4
Consolidated Statement of Cash Flows for the years ended
December 31, 1995, 1994 and 1993................................................ F-5
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993................................................ F-6
Notes to Consolidated Financial Statements........................................ F-7
</TABLE>
F-1
<PAGE> 47
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of RMI Titanium Company
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of RMI Titanium Company and its subsidiaries at December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. 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 generally accepted auditing
standards 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.
As discussed in Note 2 to the financial statements, in 1995 the Company
adopted Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ."
As discussed in Note 11 to the financial statements, in 1994 the Company adopted
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits." As discussed in Note 11 to the financial statements,
in 1993 the Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions."
PRICE WATERHOUSE LLP
Pittsburgh, Pennsylvania
January 26, 1996
F-2
<PAGE> 48
RMI TITANIUM COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
Sales.................................................... $ 171,166 $ 143,392 $ 127,397
Operating costs:
Cost of sales (Note 7)................................... 164,949 140,289 127,486
Selling, general and administrative expenses............. 9,576 9,531 9,133
Research, technical and product development expenses..... 1,861 1,543 1,542
---------- --------- ---------
Total operating costs.......................... 176,386 151,363 138,161
---------- --------- ---------
Operating loss........................................... (5,220) (7,971) (10,764)
Other (expense) income--net.............................. (1,622) (291) 1,554
Interest expense......................................... (4,966) (3,300) (2,745)
---------- --------- ---------
Loss before income taxes................................. (11,808) (11,562) (11,955)
Provision (credit) for income taxes (Note 8)............. (7,200) -- --
---------- --------- ---------
Loss before cumulative effect of change in accounting
principle.............................................. (4,608) (11,562) (11,955)
Cumulative effect of change in accounting principle
(Note 11).............................................. -- (1,202) (16,938)
---------- --------- ---------
Net loss................................................. $ (4,608) $ (12,764) $ (28,893)
========= ======== ========
Net loss per common share:
Before cumulative effect of change in accounting
principle........................................... $ (0.30) $ (1.45) $ (8.14)
Cumulative effect of change in accounting principle.... -- (0.15) (11.53)
---------- --------- ---------
Net loss................................................. $ (0.30) $ (1.60) $ (19.67)
========= ======== ========
Weighted average shares outstanding (Note 4)............. 15,301,854 7,958,395 1,468,885
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-3
<PAGE> 49
RMI TITANIUM COMPANY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................ $ 509 $ 385
Receivables, less allowance for doubtful accounts of $1,670 and
$704............................................................... 41,251 28,846
Inventories.......................................................... 74,053 72,466
Deferred tax asset................................................... 1,036 --
Other current assets................................................. 1,656 1,674
--------- ---------
Total current assets............................................ 118,505 103,371
Property, plant and equipment, net of accumulated depreciation....... 39,964 50,016
Noncurrent deferred tax asset........................................ 6,164 --
Other noncurrent assets.............................................. 6,926 7,423
--------- ---------
Total assets.................................................... $ 171,559 $ 160,810
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt.................................... $ 120 $ 120
Accounts payable..................................................... 17,646 17,832
Accrued wages and other employee costs............................... 7,237 7,238
Other accrued liabilities............................................ 6,764 3,487
--------- ---------
Total current liabilities....................................... 31,767 28,677
Long-term debt....................................................... 64,020 54,740
Accrued postretirement benefit cost.................................. 18,795 17,286
Noncurrent pension liabilities....................................... 18,078 15,501
Other noncurrent liabilities......................................... 2,010 2,010
--------- ---------
Total liabilities............................................... 134,670 118,214
--------- ---------
Contingencies (see Note 15)..........................................
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;
15,908,091 and 15,838,661 shares issued (Note 4)................... 159 158
Additional paid-in capital (Note 4).................................. 151,715 151,058
Accumulated deficit.................................................. (103,526) (98,918)
Excess minimum pension liability..................................... (8,381) (6,633)
Treasury Common Stock, at cost (shares: 1995-568,198;
1994-567,100)...................................................... (3,078) (3,069)
--------- ---------
Total shareholders' equity...................................... 36,889 42,596
--------- ---------
Total liabilities and shareholders' equity...................... $ 171,559 $ 160,810
========= =========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-4
<PAGE> 50
RMI TITANIUM COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CASH PROVIDED FROM (USED IN) OPERATIONS:
Net loss................................................... $ (4,608) $(12,764) $(28,893)
Adjustment for items not affecting funds from operations:
Change in accounting principle........................... 5,031 1,202 16,938
Compensation expense for stock appreciation rights....... 1,465 -- --
Depreciation............................................. 6,443 6,140 6,298
Deferred income taxes.................................... (7,200) -- --
Impairment of joint venture investment................... 1,901 -- --
Other-noncash charges--net............................... 2,137 1,757 (493)
-------- -------- --------
5,169 (3,665) (6,150)
-------- -------- --------
CHANGES IN ASSETS AND LIABILITIES (EXCLUDING CASH):
Receivables................................................ (13,159) (248) (3,792)
Inventories................................................ (1,587) (14,974) 1,332
Accounts payable........................................... (186) 6,062 2,881
Other current liabilities.................................. 2,469 (331) 2,475
Other assets and liabilities............................... (732) 197 (883)
Other...................................................... 301 (258) (92)
-------- -------- --------
(12,894) (9,552) 1,921
-------- -------- --------
Cash used in operating activities................ (7,725) (13,217) (4,229)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in joint ventures............................ -- (172) (1,216)
Proceeds from sale of facilities......................... 130 120 2,124
Capital expenditures..................................... (1,552) (1,063) (1,014)
-------- -------- --------
Cash used in investing activities................ (1,422) (1,115) (106)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Common Stock............... -- 26,422 --
Net borrowings under revolving credit agreements......... 9,400 15,750 4,500
Debt repayments.......................................... (120) (27,670) (120)
Treasury Common Stock repurchased........................ (9) (78) (22)
-------- -------- --------
Cash from financing activities................... 9,271 14,424 4,358
-------- -------- --------
Increase in cash and cash equivalents...................... 124 92 23
Cash and cash equivalents at beginning of period........... 385 293 270
-------- -------- --------
Cash and cash equivalents at end of period................. $ 509 $ 385 $ 293
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest (net of amounts capitalized)........ $ 4,320 $ 3,283 $ 2,548
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-5
<PAGE> 51
RMI TITANIUM COMPANY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EXCESS
ADDT'L. RETAINED TREASURY MINIMUM
SHARES COMMON DEFERRED PAID-IN EARNINGS COMMON PENSION
OUTSTANDING STOCK COMPENSATION CAPITAL (DEFICIT) STOCK LIABILITY
----------- ------ ------------ -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992..................... 14,604,384 $ 152 $ (249) $124,306 $ (57,261) $(2,969 ) $ (677 )
Compensation expense
recognized............... -- -- 245 -- -- -- --
Shares issued for
Restricted Stock Plans... 122,700 1 (201) 200 -- -- --
Shares issued in lieu of
Directors'
Compensation............. 35,439 -- -- 72 -- -- --
Treasury Common Stock
purchases at cost........ (12,064) -- -- -- -- (22 ) --
Net loss................... -- -- -- -- (28,893) -- --
Excess minimum pension
liability................ -- -- -- -- -- -- (6,843 )
----------- ------ ------ -------- --------- -------- --------
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 )
Shares issued in lieu of
Directors'
Compensation............. 4,952 -- -- 38 -- -- --
Treasury Common Stock
purchased at cost........ (1,098) -- -- -- -- (9 ) --
Shares issued for
Restricted Stock Award
Plans.................... 10,000 -- -- 71 -- -- --
Shares issued from exercise
of employee stock
options.................. 54,478 1 -- 548 -- -- --
Net loss................... -- -- -- -- (4,608) -- --
Excess minimum pension
liability................ -- -- -- -- -- -- (1,748 )
----------- ------ ------ -------- --------- -------- --------
Balance at December 31,
1995..................... 15,339,893 $ 159 $ -- $151,715 $(103,526) $(3,078 ) $(8,381 )
============ ======== ============= ========= ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-6
<PAGE> 52
RMI TITANIUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1--ORGANIZATION AND OPERATIONS:
The consolidated financial statements of RMI Titanium Company (the
"Company") include the financial position and results of operations for the
Company and its subsidiaries.
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 December 31, 1995, approximately 50.7% of the
outstanding Common Stock was owned by USX. For additional information on the
Company's capital structure, see Note 4.
The Company's operations are conducted primarily in one business segment,
the production and marketing of titanium metal and related products. In 1995, no
single customer accounted for more than 10% of consolidated revenues. In the
years ended December 31, 1995, 1994 and 1993, export sales were $30.1 million,
$39.8 million, and $24.2 million, respectively, principally to customers in
Western Europe.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of consolidation:
The consolidated financial statements include the accounts of RMI Titanium
Company 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, the disclosure of contingent assets and liabilities at year-end and
the reported amounts of revenues and expenses during the year.
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.
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.
F-7
<PAGE> 53
Long-lived assets:
Effective June 30, 1995, the Company adopted Statement of Financial
Accounting Standards No. 121 ("SFAS No. 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The new standard
requires that certain long-lived and intangible assets be written down to fair
value whenever an impairment review indicates that the carrying value of the
asset cannot be recovered. (See Note 7).
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 noncontributory pension
plans which cover substantially all employees. Most employees 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.
Postretirement benefits:
The Company provides certain 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.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions," ("SFAS No. 106"). The new standard requires accrual
accounting for postretirement benefits, similar to accounting for pensions,
rather than recognizing cost as claims are paid, which was the method the
Company previously used. As permitted by SFAS No. 106, the Company elected to
recognize the accumulated postretirement benefit obligation at adoption
(transition obligation) immediately as a cumulative effect of a change in
accounting principle.
The Company does not prefund postretirement benefit costs, but rather pays
claims as presented.
Income tax:
In connection with the Reorganization, the tax basis of the Company's
assets at that time reflected the fair market value of the Common Stock then
issued by the Company. The new tax basis was allocated to all assets of the
Company based on federal income tax rules and regulations, and the results of an
independent appraisal. For financial statement purposes, the Company's assets
are carried at historical cost. As a result, the
F-8
<PAGE> 54
tax basis of a significant portion of the Company's assets exceeds the related
book values and depreciation and amortization for tax purposes exceeds the
corresponding financial statement amounts.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes."
Under the liability method specified by SFAS No. 109, 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. Prior to the
adoption of SFAS No. 109, the Company accounted for income taxes pursuant to
Statement of Financial Accounting Standards No. 96 ("SFAS No. 96") "Accounting
for Income Taxes." The change from SFAS No. 96 to SFAS No. 109 did not have a
material effect on the financial position, results of operations or cash flows
of the Company.
Stock-based compensation:
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for
Stock-Based Compensation." The statement established standards for accounting
for stock-based compensation or allows companies to continue to account for
stock-based compensation under the provisions of Accounting Principles Board
("APB") Opinion No. 25 "Accounting for Stock Issued to Employees" and make
certain additional disclosures in the notes to financial statements. The new
standard is effective for fiscal years beginning after December 15, 1995. It is
the Company's intention to continue to account for stock-based compensation in
accordance with APB Opinion No. 25 and provide the additional required
disclosure pursuant to the provisions of SFAS No. 123 in the notes to the
financial statements.
Cash flows:
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
NOTE 3--LONG-TERM CONTRACTS:
During 1993, the Company executed an agreement to supply all the titanium
components for the world's first high-pressure drilling riser for use by a major
oil company in development of a project in the Norwegian sector of the North Sea
(the "Riser Contract"). Work commenced on the Riser Contract during the third
quarter of 1993, and is now completed with final shipments of the riser joints
having been made in the first quarter of 1995. During the fourth quarter of
1994, the Company was awarded a three year contract to supply all of the
titanium pipe casing required for a geothermal energy facility located in the
Imperial Valley of California. The initial release under the contract was
delivered in late 1995, and early 1996.
During 1995, 1994 and 1993, the Company recorded estimated revenues earned
under the above referenced contracts of $5.8 million, $13.2 million and $4.3
million respectively. At December 31, 1995 and 1994, there were $2.5 million and
$8.1 million, respectively, included in the consolidated balance sheet under
"Inventories," which represents the amount of cost incurred on the contracts,
plus estimated earnings, less progress billings. (See Notes 5 and 6).
In October 1993, the Company executed a long-term contract with the U.S.
Department of Energy ("DOE") covering the remediation and restoration of the
Company's former Extrusion Plant in Ashtabula, Ohio. The contract calls for the
Company to earn fees on cost-plus-fee basis, and acknowledges the DOE's
responsibility for the remediation of the site. During 1995, 1994 and 1993, the
Company recognized revenues, including fees, of $6.2 million, $8.5 million and
$10.4 million, respectively, under the contract. Total estimated revenues under
this contract are not determinable.
NOTE 4--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
F-9
<PAGE> 55
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 after the reverse split was deemed to represent
one-tenth the number of shares it represented immediately prior to 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 rights offering were $27.6
million. Net proceeds increased Shareholders' Equity by approximately $26.4
million. As of December 31, 1995, USX Corporation beneficially owns
approximately 50.7% 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 Common Stock into the trust so that the number of shares of stock held by
USX and its affiliates outside the trust do not exceed the number of shares held
by all other holders. This arrangement results in USX (exclusive of its
affiliates) having a direct voting interest in RMI of approximately 42%. Per
share and weighted average share amounts reported herein have been adjusted to
reflect the reverse split and subsequent rights offering. Treasury Common Stock
was not affected by the reverse split or rights offering.
NOTE 5--INVENTORIES:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1995 1994
-------- --------
<S> <C> <C>
Raw materials and supplies................................... $ 22,609 $ 13,825
Work-in-process and finished goods........................... 71,290 71,933
Adjustment to LIFO values.................................... (19,846) (13,292)
-------- --------
$ 74,053 $ 72,466
======== ========
</TABLE>
Included in inventories are costs relating to the Riser Contract and
geothermal pipe contract. Such costs, net of amounts recognized to date,
amounted to $2.5 million in 1995 and $8.1 million in 1994.
During 1993 LIFO inventory quantities, which were carried at lower costs
than those prevailing in prior years, were reduced. The effect of this reduction
was to reduce cost of sales for 1993 by $128.
NOTE 6--ACCOUNTS RECEIVABLE:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1995 1994
------- -------
<S> <C> <C>
Trade and commercial customers................................. $39,655 $29,127
Progress billings on uncompleted contracts..................... 2,604 --
U. S. Government-DOE........................................... 662 423
------- -------
$42,921 $29,550
Less allowance for doubtful accounts........................... (1,670) (704)
------- -------
$41,251 $28,846
======= =======
</TABLE>
F-10
<PAGE> 56
NOTE 7--PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is stated at cost and consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1995 1994
-------- --------
<S> <C> <C>
Land......................................................... $ 659 $ 659
Buildings and improvements................................... 36,451 36,443
Machinery and equipment...................................... 77,409 79,460
Other........................................................ 13,684 13,607
Construction in progress..................................... 5,541 7,326
-------- --------
133,744 137,495
Less -- Accumulated depreciation............................. 93,780 87,479
-------- --------
$ 39,964 $ 50,016
======== ========
</TABLE>
The Company elected to adopt SFAS No. 121, effective June 30, 1995. After
completing a review of its assets, the Company impaired the value of an asset
consisting of design and engineering work for a proposed titanium tetrachloride
facility. This asset was impaired due to recent market developments, the
conclusion of certain joint venture negotiations and the determination that such
a facility will not likely be constructed in the near future. The asset carrying
value has been reduced from $5.0 million to a nominal amount reflecting a fair
value determination under SFAS No. 121 versus a determination of ultimate net
realizable value under the Company's previous impairment approach.
NOTE 8--INCOME TAXES:
As discussed in Note 2, effective January 1, 1993, the Company adopted the
provisions of SFAS No. 109.
Deferred taxes result from the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1995 1994
-------- --------
<S> <C> <C>
Deferred taxes assets:
Loss carryforwards ($104,133 expiring in 2006 through
2010)................................................... $ 37,488 $ 31,838
Inventories................................................ 5,929 5,590
Property, plant and equipment.............................. 6,223 5,494
Intangible assets.......................................... 1,514 2,243
Other postretirement benefit costs......................... 6,522 6,090
Other employment related items............................. 2,771 2,001
Other...................................................... 2,789 1,410
Valuation allowance........................................ (56,036) (54,666)
-------- --------
Total deferred tax assets............................... 7,200 --
-------- --------
Deferred tax liabilities..................................... -- --
-------- --------
Net deferred taxes...................................... $ 7,200 $ --
======== ========
</TABLE>
SFAS No. 109 requires a valuation allowance when it is "more likely than
not that some portion or all of the deferred tax assets will not be realized."
It further states that "forming a conclusion that a valuation allowance is not
needed is difficult when there is negative evidence such as cumulative losses in
recent years." The ultimate realization of this deferred income tax asset
depends on the Company's ability to generate sufficient taxable income in the
future. The Company has evaluated the available evidence supporting the
realization of future taxable income and, based upon that evaluation, believes
it is more likely than not at this time that a portion of its deferred tax
assets will be realized. Factors considered in the evaluation process included
the return to profitability during the fourth quarter of 1995, a growing order
backlog at increased transaction prices, and the overall improvement in titanium
industry market conditions. Accordingly, a portion of the valuation allowance
was released, resulting in a credit to income tax expense in the fourth quarter
of
F-11
<PAGE> 57
1995. The remaining valuation allowance was retained, in light of the
requirement in SFAS No. 109 to give weight to objective evidence such as recent
losses and the historical titanium industry business cycle.
When preparing 1996 and future periods' interim and annual financial
statements, the Company will periodically evaluate its strategic and business
plans, in light of evolving business conditions, and the valuation allowance
will be adjusted for future income expectations resulting from that process, to
the extent different from those inherent in the valuation allowance established
as of December 31, 1995.
If an "ownership change" were to occur within the meaning of Section 382 of
the Internal Revenue Code of 1986, as amended, the utilization of net operating
loss carryforwards would be subject to an annual limitation. Should the annual
limitation apply, the Company believes that it would affect the timing of the
use of, but not the ultimate ability of the Company to use, the net operating
loss carryforwards to reduce future income tax liabilities.
The difference between the statutory tax rate of 35% applied to the pretax
loss and the effective tax rate for the year ended December 31, 1995 is due
principally to the release of $7.2 million of the valuation allowance.
NOTE 9--LONG-TERM DEBT:
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
new agreement extends the maturity of the loan from March 15, 1996 to March 31,
1997. The amendment also modifies an existing financial covenant for the
requirement to maintain a minimum balance of shareholders' equity, and
provisions requiring the imposition of a borrowing base formula. Under the
borrowing base formula, the Company can borrow up to the lesser of $75 million
or an amount equal to the products of the aggregate value of each of various
categories of collateral and an advance rate established by the banks for each
category of collateral, plus an available overadvance. The agreement also
contains a provision that if USX were to cease to beneficially own at least 48%
of the Company's voting equity securities, the terms of the agreement would be
subject to renegotiation and, in such event, failure by the Company and the
banks to reach agreement on appropriate amendments to the facility could
constitute an event of default. As of December 31, 1995 the Company was in
compliance with the covenants and terms of the amended revolving credit
facility. At December 31, 1995, the available and unused portion of the facility
was $16.8 million. The Company is currently negotiating with the participating
banks to further modify or replace the existing agreement.
The Company and the banks which are parties to the amended revolving credit
facility are also parties to a second revolving credit facility which provides
for up to an additional $5 million of borrowings. The second facility permits
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 on September 26, 1996, is
guaranteed by the Export Import Bank of the United States. This facility
F-12
<PAGE> 58
continues to be classified as long-term debt at December 31, 1995 based on the
company's intent and ability to refinance at maturity through the use of its $75
million revolving credit facility.
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1995 1994
------- -------
<S> <C> <C>
Credit Agreement, dated May 3, 1995, final maturity March 31, 1997,
bearing interest at rates ranging from 7.93% to 8.11% at December 31,
1995 and 7.44% to 7.83% at December 31, 1994........................... $58,200 $53,800
Foreign Loan Agreement, dated May 3, 1995, final maturity September 26,
1996 bearing interest at 7.18% at December 31, 1995.................... 5,000 --
Industrial revenue bond bearing interest at a floating rate based on
weekly tax exempt market rates (5.5% and 6.1% at December 31, 1995 and
1994, respectively) repayable in annual sinking fund payments of $120
over 15 years from October 1988........................................ 940 1,060
Current portion of long-term debt........................................ (120) (120)
------- -------
$64,020 $54,740
======= =======
</TABLE>
The minimum principal payments on long-term debt outstanding at December
31, 1995 for the succeeding five years are as follows:
<TABLE>
<S> <C>
1996........................................... $ 120
1997........................................... 63,320
1998........................................... 120
1999........................................... 120
2000........................................... 120
</TABLE>
NOTE 10--PENSION PLANS:
Pension expense was determined assuming an expected rate of return on plan
assets of 9% for 1995 and 1994 and 10% in 1993. The components of pension
expense for the three years ended December 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------------ ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Service cost....................... $ 1,063 $ 1,242 $ 1,092
Interest cost...................... 5,064 4,755 4,940
Return on plan assets:
Actual........................... (10,598) 809 (3,460)
Deferred gain (loss)............. 6,095 (4,503) (5,422) (4,613) (1,595) (5,055)
------- ------ ------
Net amortization and deferral...... 606 693 611
------- ------- -------
Pension expense.................... $ 2,230 $ 2,077 $ 1,588
======= ======= =======
</TABLE>
F-13
<PAGE> 59
Funds' status--The benefit obligations at December 31, 1995 and 1994 were
determined using discount rates of 7.0% and 8.25%, respectively, and an assumed
rate of compensation increase of 5.75% for both years.
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1995 1994
-------- --------
<S> <C> <C>
Fair value of plan assets...................................... $ 52,292 $ 44,465
Projected benefit obligation (PBO)............................. (75,175) (64,231)
-------- --------
Plan assets less than PBO...................................... (22,883) (19,766)
Unrecognized net loss.......................................... 12,277 9,967
Unrecognized transition obligation............................. 1,484 1,791
Unrecognized prior service cost................................ 3,903 2,579
Adjustment required to recognize minimum liability............. (14,068) (11,366)
-------- --------
Net pension liability........................................ $(19,287) $(16,795)
======== ========
Accumulated benefit obligation................................. $(71,579) $(61,260)
======== ========
Vested benefit obligation...................................... $(66,810) $(57,962)
======== ========
</TABLE>
As of December 31, 1995, approximately 51% of the plans' assets are
invested in equity securities, and 39% in government debt instruments and the
balance in cash equivalents or debt securities.
Pursuant to the provisions of Statement of Financial Accounting Standards
No. 87 "Employers Accounting for Pensions," the Company recorded in other
noncurrent liabilities an additional minimum pension obligation of $14.1 million
and $11.4 million as of December 31, 1995 and 1994, respectively, representing
the amount by which the accumulated benefit obligation exceeded the fair value
of plan assets plus accrued amounts previously recorded.
NOTE 11--POSTRETIREMENT HEALTH CARE BENEFITS AND OTHER EMPLOYEE BENEFITS:
As discussed in Note 2, RMI adopted SFAS No. 106 effective January 1, 1993.
The Company elected to recognize immediately the transition obligation
determined at the date of adoption of the new accounting standard. The
cumulative effect of this change in accounting principle resulted in a charge of
$16.9 million to the Company's 1993 results.
Net periodic postretirement benefit cost for the three years ended December
31, 1995 included the following components (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Service cost..................................... $ 266 $ 357 $ 316
Interest cost.................................... 1,543 1,533 1,337
Net amortization and deferrals................... 119 254 --
------ ------ ------
$1,928 $2,144 $1,653
====== ====== ======
</TABLE>
The following table sets forth the plans' status reconciled with the amount
reported in the Company's balance sheet at December 31, 1995 and 1994 (in
thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Accumulated Postretirement Benefit Obligation ("APBO") attributable to:
Retirees..................................................... $(13,020) $(11,867)
Active participants.......................................... (8,692) (7,242)
-------- --------
Total APBO................................................ $(21,712) $(19,109)
======== ========
Accrued liability included in balance sheet, including
transition
obligation................................................... $(18,199) $(17,768)
Unrecognized net loss.......................................... (3,513) (1,341)
-------- --------
Total APBO................................................ $(21,712) $(19,109)
======== ========
</TABLE>
F-14
<PAGE> 60
For measurement purposes, a 5% annual rate of increase in the per capita
cost of postretirement medical benefits was assumed beginning in 1996 and
declining to 0% in 2004. The ultimate costs of certain of the Company's retiree
health care plans are capped at contractually determined out-of-pocket spending
limits. The annual rate of increase in the per capita costs for these plans is
limited to the contractually determined spending cap. The health care cost trend
assumption has a significant effect on the amounts reported. For example,
increasing the health care cost trend rate by one percentage point in each year
would increase the accumulated postretirement benefit obligation at December 31,
1995 by $2.3 million and increase net periodic expense by $0.2 million. The
discount rate used in determining the accumulated postretirement benefit
obligation at December 31, 1995 and 1994 was 7.0% and 8.25%, respectively.
Effective January 1, 1994 the Company adopted the provisions of Statement
of Financial Accounting Standards No. 112 ("SFAS No. 112"), "Employer's
Accounting for Postemployment Benefits." The results for the year ended December
31, 1994 reflect a one-time charge of $1.2 million representing the cumulative
effect of adopting the new standard. The liabilities recorded pursuant to SFAS
No. 112 relate principally to workers' compensation.
NOTE 12--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 $1.3 million in 1995, $1.3 million in 1994, and $1.4 million in
1993. Future commitments under operating leases are considered to be immaterial
by management of the Company.
NOTE 13--TRANSACTIONS WITH RELATED PARTIES:
The Company, in the ordinary course of business, purchases goods and
services, including conversion services, from USX and related companies. The
cost of such transactions to the Company amounted to $1.3 million in 1995, $0.7
million in 1994 and $0.1 million in 1993. The cost of these transactions were on
terms no less favorable to the Company than those obtained from other parties.
On August 2, 1993 the United States Steel and Carnegie Pension Fund (the
"Pension Fund") was appointed as trustee of the Company's pension plans. The
Pension Fund has for many years acted as trustee of USX Corporation employee
benefit plans. The Pension Fund is a registered investment advisor under the
Investment Advisors Act of 1940, and receives a negotiated fee for such
services. Other transactions with related parties are incidental to the
Company's business and are not significant.
NOTE 14--OTHER INCOME STATEMENT INFORMATION:
Costs incurred for repairs and maintenance of plant and equipment totaled
$4.8 million, $3.3 million, and $2.8 million, for the years ended December 31,
1995, 1994, and 1993, respectively.
Real and personal property taxes amounted to $1.8 million, $1.7 million,
and $1.5 million, for the years ended December 31, 1995, 1994, and 1993,
respectively.
Other income (expense) for 1995 includes a $1.9 million impairment of the
Company's investment in the Permipipe Titanium AS joint venture. 1993 amounts
include a $1.4 million gain on sales and retirements of equipment and
facilities.
NOTE 15--CONTINGENCIES:
In connection with the Reorganization, the Company has agreed to indemnify
USX and Quantum against liabilities related to their ownership of RMI Company
and its immediate predecessor, Reactive Metals, Inc., which was formed by USX
and Quantum in 1964.
The Company is the subject of, or a party to, a number of pending or
threatened legal actions involving a variety of matters.
F-15
<PAGE> 61
AIRCRAFT PRODUCT LIABILITY
The Company was named as a defendant in a number of cases arising from the
aircraft crash at Sioux City, Iowa, which occurred on July 19, 1989. In its
final report, issued November 1, 1990, the National Transportation Safety Board
("NTSB") concluded that the titanium used to manufacture the fan disc which
ultimately failed, leading to the crash, was supplied by a major competitor of
the Company. In November, 1995 the Company was granted summary judgement in this
matter dismissing it from all cases.
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.
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 EPA's determination is based on information
gathered during inspections of the facility in February, March and June of 1991.
Under the complaint the EPA 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
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.
With regard to the Fields Brook Superfund Site, the Company, together with
31 other companies, has been identified by the 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. Recent 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 22 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. 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 late 1996. Actual
cleanup would not commence prior to that time. The Company's share of the design
cost has been established at 9.95%. On June 21, 1995, the Company and twelve
others entered into a Phase 2 (actual cleanup) allocation agreement which
assigns 9.44% of the cost to the Company. 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.
F-16
<PAGE> 62
At December 31, 1995, the amount accrued for future environmental-related
costs was $2.4 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 $3.7 million to $6.3 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.
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.
For a more detailed discussion of environmental matters, see
"Business--Legal Proceedings-- Environmental."
NOTE 16--STOCK OPTION AND RESTRICTED STOCK AWARD PLANS:
STOCK OPTION INCENTIVE PLAN:
The 1989 Stock Option Incentive Plan authorizes 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. No option may be granted after August 14, 1999. Options granted may
include stock appreciation rights. The option period may not exceed ten years
from the date of the grant. During 1995 substantially all option holders
voluntarily relinquished their stock appreciation rights. No further grants will
be made under the plan.
The following table presents a summary of stock option transactions under
the 1989 Stock Option Incentive Plan: (as adjusted for the one-for-ten reverse
stock split and rights offering)
<TABLE>
<CAPTION>
SHARES PRICE
------- --------------
<S> <C> <C>
Balance December 31, 1992................................. 332,151 $4.13 - 13.32
Granted................................................... 103,390 2.80
Exercised................................................. -- --
Forfeited................................................. (73,714) 4.13 - 13.32
------- --------------
Balance December 31, 1993................................. 361,827 $2.80 - 13.32
Granted................................................... 370,000 4.06
Exercised................................................. -- --
Forfeited................................................. (44,083) 2.80 - 13.32
------- --------------
Balance December 31, 1994................................. 687,744 $2.80 - 13.32
Granted................................................... -- --
Exercised................................................. (54,478) 2.80 - 6.91
Forfeited................................................. (18,094) 2.80 - 13.32
------- --------------
Balance December 31, 1995................................. 615,172 $2.80 - 13.32
======= ============
</TABLE>
1989 EMPLOYEE RESTRICTED STOCK AWARD PLAN:
The 1989 Restricted Stock Award Plan authorizes the granting of shares of
Common Stock to employees who have made significant contribution to the success
of the Company. The plan authorizes the award of up to 300,000 shares of Common
Stock, subject to adjustment in certain circumstances. Shares awarded are
subject to restrictions, established by the Stock Plan Committee of the Board of
Directors, that during a period set by the Committee of no less than one year
nor more than ten years a participant shall not be permitted to sell,
F-17
<PAGE> 63
transfer, pledge or assign awarded shares. Additionally, the Committee may
establish such other restrictions and conditions as it may deem appropriate for
carrying out the plan.
In 1995 and 1993, respectively, 10,000 and 134,000 shares of Common Stock
were awarded under the plan. No grants were made in 1994. Compensation expense
equivalent to the fair market value of the shares on the date of the grant is
being recognized over the vesting periods during which the restrictions lapse.
All restrictions on the 1993 grants were removed as of April 4, 1994. No further
grants will be made under the plan.
NON-EMPLOYEE DIRECTOR RESTRICTED STOCK AWARD PLAN:
The Non-Employee Director Restricted Stock Award Plan authorizes the
granting of up to 15,000 shares of Common Stock to directors who are not and
have never been officers or employees of the Company. Shares awarded are subject
to a restriction providing that a participant shall not be permitted to sell,
transfer, pledge or assign awarded shares during the period commencing with the
date of an award and ending upon the participant retiring from the Board of
Directors. On the date of the Company's Annual Meeting of Shareholders each
calendar year, each eligible director shall be awarded 300 restricted shares. No
grant of such shares may be made after December 31, 1994.
1995 STOCK PLAN
The RMI Titanium Company 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; c)
Restricted Stock. The Stock Plan 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 set forth in each such grant the terms, conditions and
limitations applicable to it, including provisions relating to a possible change
in control of the Company.
As of December 31, 1995, no grants had been made under the Plan.
F-18
<PAGE> 64
NOTE 17--SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
The following table sets forth selected quarterly financial data for 1995
and 1994.
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
1995 QUARTER(1) QUARTER(1) QUARTER QUARTER(2)
- ---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales............................................... $40,103 $39,621 $42,912 $48,530
Gross profit........................................ 1,937 (3,999) 2,890 5,389
Operating profit (loss)............................. (877) (7,422) 199 2,880
Net income (loss)................................... (1,863) (10,509) (967) 8,731
Net loss per share.................................. (0.12) (0.69) (0.06) 0.57
</TABLE>
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
1994 QUARTER QUARTER QUARTER QUARTER
- ---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales............................................... $36,360 $35,337 $32,842 $38,853
Gross profit........................................ 527 693 996 887
Operating loss...................................... (2,216) (2,017) (1,984) (1,754)
Cumulative effect of change in accounting
principle......................................... (1,202) -- -- --
Net loss............................................ (4,131) (3,023) (2,780) (2,830)
Net loss per common share before change in
accounting principle.............................. (1.99) (2.05) (0.21) (0.18)
Net loss per share.................................. (2.80) (2.05) (0.21) (0.18)
<FN>
- ---------
(1) The effect of adopting SFAS No. 121 amounting to $5,031, previously reported
as a cumulative effect of a change in accounting principle in the first
quarter of 1995, has been adjusted to reflect such affect as an element of
operating income in the second quarter of 1995.
(2) Net income in the fourth quarter of 1995 was favorably affected by the
recognition of a $7,200 tax benefit.
</TABLE>
F-19
<PAGE> 65
COMPONENTS MADE
FROM
RMI TITANIUM PRODUCTS
Clockwise from upper left
Jet engine fan blade
Golf club
Superplastically formed aircraft wing part
Titanium tubing
center photo - Titanium Drilling Riser
<PAGE> 66
===============================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO
ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................... 3
Incorporation of Certain Documents by
Reference.............................. 3
Summary.................................. 4
Risk Factors............................. 9
Use of Proceeds.......................... 14
Capitalization........................... 14
Dilution................................. 16
Price Range of Common Stock
and Dividends.......................... 16
Business................................. 18
Selected Financial Data.................. 29
Management's Discussion and Analysis
of Financial Condition and Results
of Operations.......................... 30
Management............................... 37
Description of Capital Stock............. 39
Certain United States Tax Consequences to
Non-United States Holders.............. 41
Underwriting............................. 43
Legal Matters............................ 44
Experts.................................. 44
Index to Consolidated Financial
Statements............................. F-1
</TABLE>
===============================================================================
===============================================================================
4,000,000 SHARES
LOGO
COMMON STOCK
---------------------------
PROSPECTUS
, 1996
---------------------------
LEHMAN BROTHERS
SALOMON BROTHERS INC
===============================================================================
<PAGE> 67
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 19,035
NASD fee........................................................ 6,020
Blue Sky fees and expenses...................................... **
Costs of printing............................................... **
Legal fees and expenses......................................... **
Accounting fees and expenses.................................... **
Stock Exchange listing fee...................................... **
Miscellaneous expenses.......................................... **
--------
Total...................................................... $
========
<FN>
- ---------
* Estimated.
** To be filed by amendment.
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Ohio law contains numerous provisions concerning the responsibilities of
the officers and directors of Ohio corporations, such as the Company, including
provisions that have the effect of limiting the potential liability of such
officers and directors. The latter provisions are discussed below.
In general terms and subject to certain limitations, under Ohio law an Ohio
corporation is explicitly authorized to indemnify its directors, officers,
employees and agents who are parties or threatened to be made parties to any
threatened, pending or completed civil, criminal, administrative or
investigative action, suit or proceeding against expenses, including attorney's
fees, or any judgment, fines or settlement amounts issued against or incurred by
them, provided that they acted in good faith and in a manner reasonably believed
to be in or not opposed to the corporation's best interests. An Ohio corporation
is also specifically authorized (1) to provide indemnification to an even
greater extent than that described above, and (2) to purchase and maintain
insurance for or on behalf of its directors, officers, employees and agents
against liability arising out of their service, even if indemnification would
not be permitted under the circumstances. Ohio law concerning director
responsibilities was amended in 1990 to provide that a director shall be liable
in damages only if it is proved by clear and convincing evidence that his action
or failure to act arose out of deliberate intent to harm the corporation or out
of reckless disregard for the corporation's best interests, subject to certain
limitations and exceptions. Moreover, Ohio law makes clear that directors may
legitimately consider the interests of persons and groups such as employees and
local and national economic and other interests, in addition to interests of
shareholders, in connection with matters on which they may act.
The Company's Regulations provide that its directors and officers shall be
indemnified to the full extent permitted by law against liability and expenses.
In addition, the Company has obtained insurance covering liability of its
directors and officers for their actions as such. The Company will essentially
be a self-insurer with respect to any director and officer indemnification claim
not covered by the insurance policy.
In the Underwriting Agreement, the Underwriters have agreed to indemnify
the officers and directors of the Company for certain liabilities, including
liabilities under the Securities Act.
II-1
<PAGE> 68
ITEM 16. EXHIBITS
EXHIBITS
<TABLE>
<S> <C>
1.1 --Form of Underwriting Agreement**
3.2 --Articles of Incorporation of the Company, as amended March 31, 1994 (incorporated
by reference to the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1994).
3.3 --Amended Code of Regulations of the Company (incorporated by reference to Exhibit
3.2 to the Company's Annual Report on Form 10-K for the year ended December 31,
1993, and the shareholder approved amendment to RMI's Amended Code of Regulations
(incorporated by reference to the Company's Notice of Annual Meeting of
Shareholders and Proxy Statement for the April 26, 1995 Shareholder meeting), such
amendment to be effective as of the 1996 Annual Meeting of Shareholders.
4 --Specimen Common Stock Certificate of the Company*
5 --Opinion of D. D. Sandman, Esq., General Counsel and Secretary of USX Corporation,
regarding legality of the securities being offered**
23.1 --Consent of Price Waterhouse LLP*
23.2 --Consent of D. D. Sandman, Esq., General Counsel and Secretary of USX Corporation
(included in Exhibit 5)**
24 --Powers of Attorney.*
<FN>
- ---------
* filed herewith
** to be filed by amendment
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is contained in the financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A
II-2
<PAGE> 69
and contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 70
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF PITTSBURGH, COMMONWEALTH OF PENNSYLVANIA, ON MARCH 6,
1996.
<TABLE>
<S> <C>
RMI TITANIUM COMPANY
By *
-------------------------------------------
L. Frederick Gieg, Jr.
President and Chief
Executive Officer
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MARCH 6, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* President and Chief Executive Officer and Director
- -------------------------------------------------
L. Frederick Gieg, Jr.
/s/ T. G. RUPERT Senior Vice President and Chief Financial Officer;
- -------------------------------------------------
Timothy G. Rupert Chief Accounting Officer
* Director
- -------------------------------------------------
Craig R. Andersson
* Director
- -------------------------------------------------
Neil A. Armstrong
* Director
- -------------------------------------------------
Daniel I. Booker
* Director
- -------------------------------------------------
Ronald L. Gallatin
* Director
- -------------------------------------------------
Charles C. Gedeon
* Chairman of the Board and Director
- -------------------------------------------------
R. M. Hernandez
* Director
- -------------------------------------------------
Wesley W. von Schack
* Director
- -------------------------------------------------
Louis A. Valli
*By: /s/ T. G. RUPERT
--------------------------------------------
T. G. Rupert
Attorney-in-fact
</TABLE>
II-4
<PAGE> 71
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<C> <S>
4 Specimen Common Stock Certificate of the Company
23.1 Consent of Price Waterhouse LLP
24 Powers of Attorney
</TABLE>
<PAGE> 1
NUMBER EXHIBIT 4
RMI 11581
LOGO
<TABLE>
<S> <C> <C>
THIS CERTIFICATE IS TRANSFERABLE IN THE CITIES OF
THIS CERTIFICATE REFLECTS A LOGO NEW YORK, NEW YORK AND PITTSBURGH, PENNSYLVANIA
ONE-FOR-TEN REVERSE STOCK
SPLIT WHICH BECAME EFFECTIVE
MARCH 31, 1994.
COMMON STOCK SHARES
Par Value $.01 Per Share
INCORPORATED UNDER THE LAWS CUSIP 74961H 20 3
OF THE STATE OF OHIO SEE REVERSE FOR CERTAIN DEFINITIONS
RMI TITANIUM COMPANY
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY-PAID AND NON ASSESSABLE SHARES OF THE COMMON STOCK OF
RMI Titanium Company (herein called the "Corporation"), transferable on the books of the Corporation by the holder hereof in
person or by duly authorized attorney upon surrender of this Certificate properly endorsed.
This Certificate and the shares represented hereby are issued and shall be held subject to all the provisions of the Articles of
Incorporation and all amendments thereto (copies of which amend file at the office of the Corporation), to all of which the holder
of this Certificate asserts by acceptance hereof.
This Certificate is not valid unless countersigned by the Transfer Agent and Registrar of the Corporation.
Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
DATED:
COUNTERSIGNED AND REGISTERED:
MELLON SECURITIES TRUST COMPANY
(New York, N.Y.)
Transfer Agent and Register
By:
T. G. Rupert L. Frederick Gieg Jr.
Authorized Signature Vice President and Chief Financial Officer President and Chief Executive Officer
</TABLE>
<PAGE> 2
RMI TITANIUM COMPANY
The express terms of the shares represented by this Certificate and of the
other class or classes and series of shares which the Corporation is authorized
to issue are contained in the Corporation's Articles of Incorporation, as
amended. The Corporation will mail to the hodler of this Certificate a copy of
such Articles of Incorporation, as amended, without charge within five (5) days
after receipt of written request therefor addressed to the Secretary of the
Corporation at its principal office, 1000 Warren Avenue, Niles, Ohio 44446.
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT -________________ Custodian __________
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
of suvivorship and not as --------------------------------------
tenants in common (State)
Additional abbreviations may also be used through not in the above list.
FOR VALUE RECEIVED, _____________________________________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
_______________________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________________
(Please print or typewrite name and address including postal zip code of assignee)
_______________________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________ OF THE SHARES
REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT
______________________________________________________________________________________________________________________ ATTORNEY
TO TRANSFER THE SAID SHARES ON THE BOOKS OF THE WITHIN-NAMED CORPORATION, WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED:____________________________________ _________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICU-
LAR, WITHOUT ALTERNATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
January 26, 1995 appearing on page 18 of RMI Titanium Company's Annual Report on
Form 10-K for the year ended December 31, 1994. We also consent to the use in
this Prospectus of our report dated January 26, 1996 relating to the financial
statements of RMI Titanium Company, which appears in such Prospectus. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Pittsburgh, Pennsylvania
March 6, 1996
<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, L. Frederick Gieg, Jr., Robert E. Hilton, or any one of them, my true
and lawful attorneys-in-fact to sign and execute for me and on my behalf a
registration statement or statements on Form S-3, or on such form as the
Securities and Exchange Commission shall deem appropriate, and any and all
amendments thereto, to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, 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 RMI Titanium Company
to comply with said Act and the rules and regulations thereunder in connection
with an offering by RMI Titanium Company of shares of its common stock.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 17th day of
February, 1996.
/s/ CRAIG R. ANDERSSON
------------------------------
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, L. Frederick Gieg, Jr., Robert E. Hilton, or any one of them, my true
and lawful attorneys-in-fact to sign and execute for me and on my behalf a
registration statement or statements on Form S-3, or on such form as the
Securities and Exchange Commission shall deem appropriate, and any and all
amendments thereto, to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, 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 RMI Titanium Company
to comply with said Act and the rules and regulations thereunder in connection
with an offering by RMI Titanium Company of shares of its common stock.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 17th day of
February, 1996.
/s/ NEIL A. ARMSTRONG
------------------------------
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, L. Frederick Gieg, Jr., Robert E. Hilton, or any one of them, my true
and lawful attorneys-in-fact to sign and execute for me and on my behalf a
registration statement or statements on Form S-3, or on such form as the
Securities and Exchange Commission shall deem appropriate, and any and all
amendments thereto, to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, 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 RMI Titanium Company
to comply with said Act and the rules and regulations thereunder in connection
with an offering by RMI Titanium Company of shares of its common stock.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 19th day of
February, 1996.
/s/ DANIEL I. BOOKER
------------------------------
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, L. Frederick Gieg, Jr., Robert E. Hilton, or any one of them, my true
and lawful attorneys-in-fact to sign and execute for me and on my behalf a
registration statement or statements on Form S-3, or on such form as the
Securities and Exchange Commission shall deem appropriate, and any and all
amendments thereto, to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, 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 RMI Titanium Company
to comply with said Act and the rules and regulations thereunder in connection
with an offering by RMI Titanium Company of shares of its common stock.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 22nd day of
February, 1996.
/s/ RONALD L. GALLATIN
------------------------------
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, L. Frederick Gieg, Jr., Robert E. Hilton, or any one of them, my true
and lawful attorneys-in-fact to sign and execute for me and on my behalf a
registration statement or statements on Form S-3, or on such form as the
Securities and Exchange Commission shall deem appropriate, and any and all
amendments thereto, to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, 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 RMI Titanium Company
to comply with said Act and the rules and regulations thereunder in connection
with an offering by RMI Titanium Company of shares of its common stock.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this day of
February, 1996.
/s/ CHARLES C. GEDEON
------------------------------
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, L. Frederick Gieg, Jr., Robert E. Hilton, or any one of them, my true
and lawful attorneys-in-fact to sign and execute for me and on my behalf a
registration statement or statements on Form S-3, or on such form as the
Securities and Exchange Commission shall deem appropriate, and any and all
amendments thereto, to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, 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 RMI Titanium Company
to comply with said Act and the rules and regulations thereunder in connection
with an offering by RMI Titanium Company of shares of its common stock.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this day of
February, 1996.
/s/ L. FREDERICK GIEG, JR.
------------------------------
L. Frederick Gieg, Jr.
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby make, constitute and appoint Timothy G.
Rupert, L. Frederick Gieg, Jr., Robert E. Hilton, or any one of them, my true
and lawful attorneys-in-fact to sign and execute for me and on my behalf a
registration statement or statements on Form S-3, or on such form as the
Securities and Exchange Commission shall deem appropriate, and any and all
amendments thereto, to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, 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 RMI Titanium Company
to comply with said Act and the rules and regulations thereunder in connection
with an offering by RMI Titanium Company of shares of its common stock.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 19th day of
February, 1996.
/s/ ROBERT M. HERNANDEZ
------------------------------
Robert M. Hernandez
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby make, constitute and appoint Timothy G.
Rupert, L. Frederick Gieg, Jr., Robert E. Hilton, or any one of them, my true
and lawful attorneys-in-fact to sign and execute for me and on my behalf a
registration statement or statements on Form S-3, or on such form as the
Securities and Exchange Commission shall deem appropriate, and any and all
amendments thereto, to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, 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 RMI Titanium Company
to comply with said Act and the rules and regulations thereunder in connection
with an offering by RMI Titanium Company of shares of its common stock.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this day of
February, 1996.
/s/ L. A. VALLI
------------------------------
L. A. Valli
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby make, constitute and appoint Timothy G.
Rupert, L. Frederick Gieg, Jr., Robert E. Hilton, or any one of them, my true
and lawful attorneys-in-fact to sign and execute for me and on my behalf a
registration statement or statements on Form S-3, or on such form as the
Securities and Exchange Commission shall deem appropriate, and any and all
amendments thereto, to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, 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 RMI Titanium Company
to comply with said Act and the rules and regulations thereunder in connection
with an offering by RMI Titanium Company of shares of its common stock.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 19th day of
February, 1996.
/s/ WESLEY W. VON SCHACK
------------------------------
Wesley W. von Schack
Subscribed and sworn to before me
this 19th day of February, 1996.
/s/ JANET T. KUZORA
- ---------------------------
Notary Public
