UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): MARCH 31, 2005
-------------------
RTI INTERNATIONAL METALS, INC.
-------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
OHIO
-------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
001-14437 52-2115953
-------------------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
1000 WARREN AVENUE
NILES, OHIO 44446
-------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(330) 544-7700
-------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
N/A
-------------------------------------------------------------------------------
(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 8.01. OTHER EVENTS.
RTI International Metals, Inc. ("RTI") issued a press release (the
"Press Release") on March 31, 2005 announcing that it would be further delayed
in filing its Annual Report on Form 10-K for the fiscal year ended December 31,
2004. The Press Release is set forth in its entirety as Exhibit 99.1 hereto and
is incorporated herein by reference.
On March 16, 2005, the Company filed Form 12b-25 in order to continue
its compliance work under Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX
404") and prepare its consolidated financial statements for the year ended
December 31, 2004. That work has not been completed. The Company continues to
dedicate considerable resources to this effort. The Company is working to
complete the consolidated financial statements for the year ended December 31,
2004 and may be in a position to file its financial statements and certain other
parts of its Form 10-K before it is in a position to file its report on its
assessment on internal control over financial information required by Item 308
of Regulation S-K.
SOX 404 and related rules of the SEC require management of public
companies to periodically assess the effectiveness of internal control over
financial reporting and to annually report their conclusions, including the
disclosure of all material weaknesses in internal control over financial
reporting. In addition, SOX 404 requires the Company to provide a report of
its independent registered public accounting firm on management's annual
assessment of the effectiveness of the Company's internal control over financial
reporting.
As an "accelerated filer," the Company is required to comply with SOX
404 for the year ended December 31, 2004 and thus management's report on its
internal control assessment as of the end of the year, as well as the
attestation report of the Company's registered public accounting firm on
management's assessment, must be included in the Form 10-K for the year ended
December 31, 2004.
Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting. The Company's
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles ("GAAP"). Because of its inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of control must be
considered relative to their costs. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of compliance
with the policies or procedure may deteriorate.
The Company is in the process of conducting an evaluation of its
internal control over financial reporting as of December 31, 2004. In making its
assessment of internal control over financial reporting, management is using the
criteria described in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
A material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. As stated above, the Company has not yet completed the process of
evaluating identified deficiencies against the Company's internal control
framework.
However, the Company's management met with its Audit Committee on March
29, 2005 and they have concluded that the Company did not maintain effective
controls over the period-end closing process, spreadsheets, a third-party
service organization and our fixed asset accounting process. Accordingly,
management and the Audit Committee determined that these control deficiencies
each represent material weaknesses in the Company's internal control over
financial reporting as of December 31, 2004. Further discussion of these
material weaknesses follows.
Period-end Closing Process
The Company was subject to unusual resource restraints that caused the
Company to be unable to timely and accurately complete its work needed to close
its books and prepare GAAP financial statements. This resulted in a number of
adjustments to the financial statements that occurred during the closing
process. The Company was unable to file its Form 10-K on the due date of March
16, 2004 and filed a Form 12b-25 on March 17, 2005 disclosing, among other
things, the fact that its closing process was not then complete. The Company is
still unable to complete the closing process and thus has filed this Form 8-K.
The closing process suffered due to the resource restraints, lack of effective
control and the potential existed for error.
The resource restraints included, without limitation:
o The Company's management has spent a significant amount of
time and resources toward compliance with SOX 404;
o The work stoppage at the Company's Niles, Ohio facility;
o Higher than normal turnover of accounting personnel;
o The acquisition of Claro Precision, Inc. in the fourth quarter
of 2004; and
o The additional efforts required to sustain the normal
operations of the Company.
With the exception of the normal operations of the Company, the
Company's management believes that the resource restraints that led to the
control failure are not continuing and that there is not a significant risk that
they will be repeated in future periods.
Spreadsheets
The Company utilizes over 500 Excel(TM) Spreadsheets in its consolidation
accounting and other applications. Management must establish effective internal
control over these spreadsheets.
Management ascertained that all spreadsheets used for consolidation purposes
were so protected as of December 31, 2004. However, other spreadsheets, used in
year-end closing and other spreadsheets supporting financial reporting, were not
effectively protected at December 31, 2004. During the closing process an error
was discovered in one such spreadsheet. This error was corrected in the closing
process and management has no reason to believe that any additional errors
existed.
Third Party Health Care Administrator
Anthem Blue Cross Blue Shield is a third party service provider that
the Company contracts annually to process all health care claims for Company
employees and retirees. The Company has traditionally received from Anthem an
independent audit report, referred to as a SAS-70 Type 2 report, regarding the
effectiveness of certain controls at Anthem. While Anthem represented to the
Company's management as late as the Fall of 2004 that Anthem would provide a
SAS-70 report, on January 12, 2005, the Company received notice that Anthem's
SAS-70 report for the 2004 policy year would not be available. The notice
stated: "Since Anthem has committed significant resources to assure its Section
404 compliance, we would like to delay our SAS-70 review of our Facets system
until the end of 2005 policy year." As a result, the Company could not make a
conclusion as to Anthem's control environment, and as such, a deficiency existed
at December 31, 2004 in the absence of the SAS-70 report. As a further result,
the Company had to conduct an operational review and claims audit to assure that
the costs recognized and recorded on the Company's books during 2004 were
accurate within a statistically acceptable range. The operational review and
claims audit is complete and indicated that there was no material impact to the
Company's financial statements but was one of the reasons that the Company is
late in completing its financial statements and thus delayed the filing of it
Form 10-K.
Fixed Asset System
During the fourth quarter of 2004, the Company decided to convert to a
new fixed asset accounting system. As a result, all SOX 404 required
documentation and testing plans were designed to accommodate the change. During
the process of the period-end close, however, it was determined that the new
system was not working properly causing management to rely on the legacy fixed
asset accounting system to prepare the financial statements. Management
performed testing procedures to assure the accuracy of the accounting for the
fixed assets in the financial statements, but the legacy system was not
compliant for purposes of SOX 404. The Company expects that by the end of the
second quarter of 2005 the new fixed asset system will be in place, working
properly, and tested soon thereafter.
***
Finally, as described above, the Company is still in the process of
conducting an evaluation of its internal control over financial reporting as of
December 31, 2004. In connection with its ongoing process, the Company has
identified certain other control deficiencies some of which may also be
determined to be material weaknesses including: (i) the Company has several
individuals that had full access to its Enterprise Resource Planning ("ERP")
system; and (ii) there were a number of other deficiencies which individually or
when aggregated could possibly be material weaknesses. Additionally, once
we have completed our evaluation of all deficiencies (those identified to date
and those which may be identified as we complete our evaluation) we may
determine that the deficiencies, either alone or in combination with others,
constitute one or more material weaknesses. The existence of one or more
material weaknesses as of December 31, 2004 would preclude a conclusion that the
Company's internal control over financial reporting was effective as of December
31,2004. As a result of the material weaknesses set forth above, the Company's
management expects that when its report on the effectiveness of internal control
over financial reporting is published, management will conclude that the
Company's internal control over financial reporting was ineffective as of
December 31, 2004. Thus, the Company expects that its independent registered
public accounting firm will issue an adverse opinion on the effectiveness of the
Company's internal control as of December 31, 2004. Should the Company issue its
Annual Report on Form 10-K before it is in a position to issue its report on
internal control for financial reporting, then the Company's independent
registered public accounting firm will be required to disclaim from issuing an
opinion on the effectiveness of the Company's internal control as of December
31, 2004.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits. The following exhibit is being filed pursuant to Item 601 of
Regulation S-K:
Exhibit No. Description
----------- -----------
99.1 RTI press release issued March 31, 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 thereunto duly authorized.
RTI International Metals, Inc.
Date: April 1, 2005 By: /s/ Lawrence W. Jacobs
--------------------------
Lawrence W. Jacobs
Vice President and
Chief Financial Officer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
99.1 RTI press release issued March 31, 2005.