UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 26, 2005
TITANIUM METALS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-28538 13-5630895
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1999 Broadway, Ste. 4300, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 296-5600
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 7.01 Regulation FD Disclosure.
The registrant hereby furnishes the information set forth in the speech
with an accompanying visual presentation delivered by Registrant's Chairman,
President and Chief Executive Officer to the 2005 Annual International Titanium
Association ("ITA") meeting, copies of which are attached hereto as Exhibits
99.1 and 99.2 and incorporated herein by reference.
The information, including the exhibit, the registrant furnishes in this
report is not deemed "filed" for purposes of section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the liabilities of
that section. Registration statements or other documents filed with the
Securities and Exchange Commission shall not incorporate this information by
reference, except as otherwise expressly stated in such filing.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Item No. Exhibit Index
99.1 Speech of Registrant's Chairman, President and Chief
Executive Officer delivered September 26, 2005.
99.2 Visual presentation of Registrant's Chairman, President and
Chief Executive Officer delivered September 26, 2005.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TITANIUM METALS CORPORATION
(Registrant)
/s/ Matthew O'Leary
Matthew O'Leary
Corporate Attorney and Assistant Secretary
Date: September 26, 2005
INDEX TO EXHIBITS
Exhibit No. Description
99.1 Speech of Registrant's Chairman, President and Chief
Executive Officer delivered September 26, 2005.
99.2 Visual presentation of Registrant's Chairman, President and
Chief Executive Officer delivered September 26, 2005.
EXHIBIT 99.1
TITLE PAGE
Slide 1
Good Morning. Today I am going to look at the relatively recent surge of
investment in the titanium industry and talk about what that signals about the
current expectations for the future of the industry. I'll also talk about what I
believe we, as an industry, are doing and what we should do in light of these
expectations of our investors.
DISCLAIMER
Slide 2
As always, this presentation contains forward-looking statements and actual
results may and often do differ from what we say. TIMET's SEC filings contain a
discussion of risks and uncertainties that may affect actual results.
Stock Price Appreciation
Slide 3
Beginning around the end of the third quarter of 2003, investors in the
capital markets began placing what has become a rather extraordinarily large bet
on the future of the titanium industry. Stock price appreciation for the
individual companies, as shown on this chart, has ranged from a low of 239% to a
high of 1,204% over the period of the end of the third quarter of 2003 through
last week's stock prices.
Market capitalization increase
Slide 4
As you can see from this chart, the market capitalization of the common
equity of the six public titanium companies - TIMET, ATI, RTI, Toho, Sumitomo
and VSMPO - has collectively increased by approximately 585% during the past 24
months to a combined market cap of over $6 billion. It should be noted that for
ATI, I have arbitrarily allocated one-third of their total market cap toward
their high performance metals segment. In essence, the capital markets have
invested over $5.2 billion in our industry, through these six companies, just in
the past 24 months and over $4 billion in the last 12 months.
Market Cap increase from 2000 through 9/11/01
Slide 5
Another set of facts is to look at investor reaction to the upturn in
1999-2001 and the 1995-1997 upturn. If we look at the market capitalization of
the public titanium companies during the run up of the previous up-cycle, from
the time period of the end of 1999 through September 11, 2001, we can see that
the investment in the titanium industry during that time was not nearly as
significant as this recent investment has been. During this cycle, mill product
sales for the industry rose from a cyclical low of 47,000 metric tons to a high
of 54,000 MT. This 15% increase still left the industry below the previous peak
demand of 1997.
The combined market capitalization for TIMET, RTI, ATI and Toho was at its
low point around the end of the second quarter of 2000 at just under $1.0
billion. By the end of the second quarter a year later, that number increased to
$1.5 billion, or an increase of approximately 48%. Percentage wise, this is
significantly less than the run-up 585% during the past 24 months. Today, the
total market cap of the same four companies is $4.6 billion, which is more than
triple the market cap at the peak of the last cycle. While less information is
available on the 1995-1997 upturn, just looking at proportional growth in
investment, the percentage surge in investment in the 1995-1997 period was not
nearly as great as today's surge.
Looking at the macro picture instead of at the individual investor point of
view, the current trend tells us something I don't think we should ignore. Most
investors in public titanium company stocks are sophisticated institutional
investors or individuals familiar with our industry. They carefully pour over
the same future business indicators that we all look at: Boeing and Airbus
aircraft build projections, Airline Monitor and other third-party sources for
aircraft build-rate, projections for growth in our end use markets, global GDP
projections and many other indicators.
Based on this analysis as we sit here today, and assuming that the stock
market is relatively efficient, investors expect that the six public companies
will generate free cash flow before non-maintenance capital expenditures over
the next several years that when discounted to the present equals $6.1 billion.
The discount rate presumably takes into account the expected future risk in the
industry.
To me, this indicates that the stock market is telling us what many of us
believe; that this upturn will be longer and more pronounced than any in the
past and that when the next downturn comes, it will be less severe. I say that
with some trepidation. We always seem to say that the current cycle is different
and we as an industry as well as investors in general, have often been wrong in
our predictions. Many of these same investors gave us the dot.com boom and bust
we all remember well. But, as I will address in a minute, I don't think it is
healthy for the industry to plan, assuming a downturn is lurking around the
corner. It will come, fair enough, but there is much we can do now to mitigate
its impact.
Percentage increase in various industry indices
Slide 6
But why do investors feel this cycle is different? Basically, because the
demand in our traditional and emerging markets have never been stronger across
the board.
As you will hear repeatedly today and tomorrow, aerospace demand is moving
to record levels of production with dramatically more titanium-intensive
airplanes. Power generation, chemical processing and desalination markets are
rebuilding from recent lows and are struggling to meet demand. Oil and gas
markets have rarely been stronger, and as hydrocarbons get harder to find,
titanium applications abound.
Non-traditional markets like automotive have incentive to move to greater
usage of titanium. As the worldwide population ages, niche markets like medical
implants should show continuing strong growth. When you add to that the strength
of the military markets in armor and
aerospace, we see a confluence of events or indications that the industry
has never before seen - all moving up and to the right all at the same time.
Another way of looking at what investors think is to see the size of the
bets they have made in our end use markets. During the same timeframe used
before, the Dow Jones Chemicals Asia index is up over 2,000%, the Dow Jones Oil
and Gas index is up over 800%, the Dow Jones Industrials Asia index is up 640%
and the Dow Jones Aerospace and Defense index is up 163%.
Delivering on Market Expectations
Slide 7
I think the industry as a whole has responded to the expectations of the
stock market, but must continue to do so in order to fully meet expectations.
First, we must continue to meet the demand of all of our markets. Some
progress is being made. By late 2007, we will have increased sponge capacity by
20%. But more may be needed.
Second, we must continue to chase the Holy Grail - that is, a method of
producing sponge that is less expensive than the Kroll Process, which dates back
to the 1950s. Some investment is being made here, but I think it needs to
accelerate.
Third, we must not snuff out or constrain irreparably the growth of our
emerging markets by failing to support demand or by making the use of titanium
prohibitively expensive.
Fourth, in addition to investing in expansion projects, we must continue to
reduce the cost of manufacturing our product. In the long run we must be able to
deliver a less expensive product in order to expand the use of titanium and make
us more profitable during down markets. Each company must look closely at its
"wish list" of capital projects and get the right mix of expansion and cost
reduction initiatives.
Estimated consumption through 2010
Slide 8
Summing up, this last chart provides the expected consumption of mill
products through 2010, as estimated by TIMET based on information from various
sources and assumptions. The aircraft build rate estimated by The Airline
Monitor in July 2005 was used to estimate the commercial aerospace titanium
requirements. As we are all aware, the new Boeing 787 and Airbus A380 airplanes
will utilize more titanium per plane (both buy weight and fly weight) than any
previous plane, and the decline in demand for titanium by the commercial
aerospace market is not currently expected until 2009. Military aerospace demand
is based on numbers from the Teal Group. Industrial market demand is estimated
to grow by 3% per year as the Far East and China continue to build power plants
to support internal growth. Finally, emerging market demand is estimated to grow
at double-digit rates fueled significantly by demand from the oil and gas
markets.
What this slide indicates is that consumption of titanium products is
expected to continue to grow from the record in 2004 of 61,800 metric tons to a
peak of 86,000 metric tons in 2010.
If this demand occurs as projected, then the titanium industry will for perhaps
the first time, have an extended up-cycle during which it should have the
financial resources to invest capital to improve the production process and/or
develop low-cost sponge capabilities. The studies tell us that with lower cost
titanium, the opportunities to increase the penetration of titanium into other
markets should rise significantly, which should help to lessen the cyclicality
of the industry.
I am encouraged by the prospect of sustained healthy demand for at least
the balance of this decade and believe the titanium industry is well positioned
to take a large step towards being able to maintain profitability throughout the
demand cycle.
End of speech
EXHIBIT 99.2
TIMET Logo
Titanium Companies and the Capital Markets
J. Landis Martin
September 2005
Disclaimer
This presentation contains forward-looking statements regarding the
titanium industry generally. Actual results may differ materially from results
anticipated in the forward-looking statements. These anticipated results and
additional risk factors are described from time to time in TIMET's filings with
the Securities and Exchange Commission, including its report on Form 10-K for
the year ending December 31, 2004 and its quarterly reports on form 10-Q.
Recent Investment in the Titanium Industry
Individual Stock Price Appreciation Percentage
[graph]
Recent Investment in the Titanium Industry
Total Market Capitalization for
Six (1) Public Titanium Companies
[graph]
(1) TIE, RTI, ATI, Toho & VSMPO. ATI's total market cap has been allocated as
one-third to its HPM segment
Market Capitalization Changes During the 1999-2001 Up-cycle
Total Market Capitalization for
Four (1) Public Titanium Companies
[graph]
(1) TIE, RTI, ATI and Toho. ATI's total market cap has been allocated as
one-third to its HPM segment.
Industry Indices Recent Appreciation
DJ Chemicals Asia
DJ Industrials Asia
DJ Oil and Gas
DJ Aerospace and Defense
[graph]
Delivering on Market Expectations
(i) Increase capacity to meet market demand
(ii) Expand market demand through production of lower cost sponge
(iii) Support demand in emerging markets
(iv) Reduce manufacturing costs
World Mill Product Titanium Consumption by Major Industry
[graph]
Source: The Airline Monitor, The Teal Group and TIMET estimates