RTI INTERNATIONAL METALS INC - 10-Q filing on 2015-04-30

GUARANTOR SUBSIDIARIES

3 Months Ended

Mar. 31, 2015

GUARANTOR SUBSIDIARIES:

The 2015 Notes and 2019 Notes (together, the “Notes”) are jointly and severally, fully and unconditionally (subject to the customary exceptions discussed below) guaranteed by several 100% owned subsidiaries (the “Guarantor Subsidiaries”) of RTI International Metals, Inc. (the “Parent”). Each Guarantor Subsidiary would be automatically released from its guarantee of the Notes if either (i) it ceased to be a guarantor under the Parent’s Second Amended and Restated Credit Agreement or (ii) it ceased to be a direct or indirect subsidiary of the Parent. Separate financial statements of the Parent and each of the Guarantor Subsidiaries are not presented because the guarantees are full and unconditional (subject to the aforementioned customary exceptions) and the Guarantor Subsidiaries are jointly and severally liable. The Company believes separate financial statements and other disclosures concerning the Guarantor Subsidiaries would not be material to investors in the Notes.

There are no current restrictions on the ability of the Guarantor Subsidiaries to make payments under the guarantees referred to above, except, however, the obligations of each Guarantor Subsidiary under its guarantee will be limited to the maximum amount as will result in obligations of such Guarantor Subsidiary under its guarantee not constituting a fraudulent conveyance or fraudulent transfer for purposes of bankruptcy law, the Uniform Conveyance Act, the Uniform Fraudulent Transfer Act, or any similar Federal or state law.

The following tables present Condensed Consolidating Financial Statements as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014:

Condensed Consolidating Statement of Operations and Comprehensive Income

Three Months Ended March 31, 2015



	RTI International Metals, Inc.			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	123,972	$	131,417		$	(56,897	)	$	198,492
Costs and expenses:
Cost of sales	—			104,146		109,222			(56,897		)	156,471
Selling, general, and administrative expenses (1)	(312		)	11,869		12,101			—			23,658
Merger expenses	4,734			—		—			—			4,734
Research, technical, and product development expenses	—			1,465		—			—			1,465
Operating income (loss)	(4,422		)	6,492		10,094			—			12,164
Other income (expense), net	(2		)	38		(892		)	—			(856		)
Interest income (expense), net	(7,940		)	1,014		(958		)	—			(7,884		)
Equity in earnings of subsidiaries	11,036			720		44			(11,800		)	—
Income (loss) before income taxes	(1,328		)	8,264		8,288			(11,800		)	3,424
Provision for (benefit from) income taxes	(5,861		)	2,538		2,214			—			(1,109		)
Net income	$	4,533		$	5,726	$	6,074		$	(11,800	)	$	4,533
Comprehensive income (loss)	$	(4,091	)	$	6,614	$	(3,546	)	$	(3,068	)	$	(4,091	)


(1)	The Parent allocates selling, general, and administrative expenses (“SG&A”) to the subsidiaries based upon its budgeted annual expenses. A credit in Parent SG&A is offset by an equal debit amount in the subsidiaries’ SG&A.

Condensed Consolidating Statement of Operations and Comprehensive Income

Three Months Ended March 31, 2014



	RTI International Metals, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	114,123		$	114,289		$	(53,867	)	$	174,545
Costs and expenses:
Cost of sales	—			102,120			97,823			(53,867		)	146,076
Selling, general, and administrative expenses (1)	947			12,158			12,763			—			25,868
Research, technical, and product development expenses	—			984			—			—			984
Operating income (loss)	(947		)	(1,139		)	3,703			—			1,617
Other income (expense)	1,490			(838		)	(117		)	—			535
Interest expense, net	(5,815		)	(1,202		)	(540		)	—			(7,557		)
Equity in earnings of subsidiaries	1,458			348			975			(2,781		)	—
Income (loss) before income taxes	(3,814		)	(2,831		)	4,021			(2,781		)	(5,405		)
Provision for (benefit from) income taxes	2			(1,530		)	(61		)	—			(1,589		)
Net income (loss) attributable to continuing operations	$	(3,816	)	$	(1,301	)	$	4,082		$	(2,781	)	$	(3,816	)
Net loss attributable to discontinued operations, net of tax	(365		)	—			(365		)	365			(365		)
Net income (loss)	$	(4,181	)	$	(1,301	)	$	3,717		$	(2,416	)	$	(4,181	)
Comprehensive loss	$	(7,195	)	$	(346	)	$	(376	)	$	722		$	(7,195	)


(1)	The Parent allocates SG&A to the subsidiaries based upon its budgeted annual expenses.

Condensed Consolidating Balance Sheet

As of March 31, 2015



	RTI International Metals, Inc.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	627	$	149,052	$	59,346	$	—		$	209,025
Short-term investments	—		129,895		—		—			129,895
Receivables, net	1,600		60,707		79,914		(30,804		)	111,417
Inventories, net	—		321,248		154,471		—			475,719
Cost in excess of billings	—		4,271		3,900		—			8,171
Deferred income taxes	25,589		2,755		2,288		—			30,632
Other current assets	7,333		11,528		4,956		—			23,817
Total current assets	35,149		679,456		304,875		(30,804		)	988,676
Property, plant, and equipment, net	9,520		275,243		81,473		—			366,236
Goodwill	—		94,769		49,744		—			144,513
Other intangible assets, net	—		32,221		22,910		—			55,131
Other noncurrent assets	8,145		883		5,161		—			14,189
Intercompany investments (1)	1,292,438		161,557		68,244		(1,522,239		)	—
Total assets	$	1,345,252	$	1,244,129	$	532,407	$	(1,553,043	)	$	1,568,745
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	110,281	$	541	$	2,299	$	—		$	113,121
Accounts payable	1,847		56,512		57,846		(30,804		)	85,401
Accrued wages and other employee costs	5,322		12,269		6,541		—			24,132
Billings in excess of cost	—		1,814		9,963		—			11,777
Unearned revenue	—		14,661		7,381		—			22,042
Other accrued liabilities	7,552		7,398		11,632		—			26,582
Total current liabilities	125,002		93,195		95,662		(30,804		)	283,055
Long-term debt	335,191		474		12,366		—			348,031
Intercompany debt	18,832		63,320		237,065		(319,217		)	—
Liability for post-retirement benefits	—		48,935		—		—			48,935
Liability for pension benefits	6,714		9,799		160		—			16,673
Deferred income taxes	57,405		—		3,062		—			60,467
Unearned revenue	—		—		4,829		—			4,829
Other noncurrent liabilities	9,242		4,370		277		—			13,889
Total liabilities	552,386		220,093		353,421		(350,021		)	775,879
Shareholders’ equity	792,866		1,024,036		178,986		(1,203,022		)	792,866
Total liabilities and shareholders’ equity	$	1,345,252	$	1,244,129	$	532,407	$	(1,553,043	)	$	1,568,745


(1)	Intercompany investments include equity investments and intercompany loans receivable from legal entities not included within the same consolidation.

Condensed Consolidating Balance Sheet

As of December 31, 2014



	RTI International Metals, Inc.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	117,086	$	64,973	$	—		$	182,059
Short-term investments	—		148,383		—		—			148,383
Receivables, net	928		78,436		70,911		(32,530		)	117,745
Inventories, net	—		319,107		155,199		—			474,306
Costs in excess of billings	—		2,393		3,129		—			5,522
Deferred income taxes	25,591		2,754		2,287		—			30,632
Other current assets	1,307		13,345		5,151		—			19,803
Total current assets	27,826		681,504		301,650		(32,530		)	978,450
Property, plant, and equipment, net	2,028		280,805		86,454		—			369,287
Goodwill	—		94,769		50,749		—			145,518
Other intangible assets, net	—		32,897		24,225		—			57,122
Other noncurrent assets	8,635		948		5,734		—			15,317
Intercompany investments (1)	1,290,173		148,432		66,101		(1,504,706		)	—
Total assets	$	1,328,662	$	1,239,355	$	534,913	$	(1,537,236	)	$	1,565,694
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	108,767	$	721	$	2,157	$	—		$	111,645
Accounts payable	1,559		81,055		54,960		(32,530		)	105,044
Accrued wages and other employee costs	6,345		13,491		7,038		—			26,874
Billings in excess of cost	—		2,205		7,757		—			9,962
Unearned revenue	—		519		7,104		—			7,623
Other accrued liabilities	1,411		7,879		9,434		—			18,724
Total current liabilities	118,082		105,870		88,450		(32,530		)	279,872
Long-term debt	331,998		572		12,442		—			345,012
Intercompany debt	9,768		55,486		238,953		(304,207		)	—
Liability for post-retirement benefits	—		48,295		—		—			48,295
Liability for pension benefits	6,655		10,172		159		—			16,986
Deferred income taxes	57,441		—		3,062		—			60,503
Unearned revenue	—		—		5,476		—			5,476
Other noncurrent liabilities	9,238		4,549		283		—			14,070
Total liabilities	533,182		224,944		348,825		(336,737		)	770,214
Shareholders’ equity	795,480		1,014,411		186,088		(1,200,499		)	795,480
Total liabilities and shareholders’ equity	$	1,328,662	$	1,239,355	$	534,913	$	(1,537,236	)	$	1,565,694


(1)	Intercompany investments include equity investments and intercompany loans receivable from legal entities not included within the same consolidation.

Condensed Consolidating Statement of Cash Flows

Three Months Ended March 31, 2015



	RTI International Metals, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash provided by (used in) operating activities	$	(1,241	)	$	14,190		$	8,987		$	—		$	21,936
Investing activities:
Capital expenditures	(61		)	(9,011		)	(1,068		)	—			(10,140		)
Short-term investments, net	—			18,523			—			—			18,523
Intercompany debt activity, net	—			639			(7,834		)	7,195			—
Cash provided by (used in) investing activities	(61		)	10,151			(8,902		)	7,195			8,383
Financing activities:
Proceeds from exercise of employee stock options	1,208			—			—			—			1,208
Excess tax benefits from stock-based compensation activity	36			—			—			—			36
Repayments on long-term debt	—			(277		)	173			—			(104		)
Intercompany debt activity, net	1,249			7,834			(1,888		)	(7,195		)	—
Purchase of common stock held in treasury	(325		)	—			—			—			(325		)
Other equity activities	(239		)	68			171			—			—
Cash provided by (used in) financing activities	1,929			7,625			(1,544		)	(7,195		)	815
Effect of exchange rate changes on cash and cash equivalents	—			—			(4,168		)	—			(4,168		)
Increase (decrease) in cash and cash equivalents	627			31,966			(5,627		)	—			26,966
Cash and cash equivalents at beginning of period	—			117,086			64,973			—			182,059
Cash and cash equivalents at end of period	$	627		$	149,052		$	59,346		$	—		$	209,025

Condensed Consolidating Statement of Cash Flows

Three Months Ended March 31, 2014



	RTI International Metals, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash provided by (used in) operating activities	$	1,279		$	(13,239	)	$	(8,755	)	$	—		$	(20,715	)
Investing activities:
Investments in subsidiaries, net	—			(852		)	852			—			—
Acquisitions, net of cash acquired	—			—			(21,797		)	—			(21,797		)
Capital expenditures	(43		)	(4,026		)	(2,781		)	—			(6,850		)
Short-term investments, net	—			(128,216		)	—			—			(128,216		)
Divestitures	—			—			3,281			—			3,281
Intercompany debt activity, net (1)	(1,120		)	(23,816		)	6,945			17,991			—
Cash used in investing activities	(1,163		)	(156,910		)	(13,500		)	17,991			(153,582		)
Financing activities:
Proceeds from exercise of employee stock options	539			—			—			—			539
Excess tax benefits from stock-based compensation activity	195			—			—			—			195
Parent company investments, net	—			234			(234		)	—			—
Repayments on long-term debt	—			(245		)	(239		)	—			(484		)
Intercompany debt activity, net (1)	—			(5,825		)	23,816			(17,991		)	—
Purchase of common stock held in treasury	(850		)	—			—			—			(850		)
Cash provided by (used in) financing activities	(116		)	(5,836		)	23,343			(17,991		)	(600		)
Effect of exchange rate changes on cash and cash equivalents	—			—			(832		)	—			(832		)
Increase (decrease) in cash and cash equivalents	—			(175,985		)	256			—			(175,729		)
Cash and cash equivalents at beginning of period	—			312,202			31,435			—			343,637
Cash and cash equivalents at end of period	$	—		$	136,217		$	31,691		$	—		$	167,908

(1)

The Condensed Consolidating Statements of Cash Flows have been adjusted to revise the presentation of intercompany debt activities to present gross investing and financing activities, rather than net financing activities as previously reported. These adjustments increased (decreased) cash flows from investing activities for the Guarantor Subsidiaries, Non-Guarantor Subsidiaries, and Eliminations by $(23,816), $(23,816), and $47,632 and increased (decreased) cash flows from financing activities for the Guarantor Subsidiaries, Non-Guarantor Subsidiaries, and Eliminations by $23,816, $23,816, and $(47,632), respectively.