UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

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RTI INTERNATIONAL METALS, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Notice of Annual Meeting of
Shareholders and Proxy Statement

 

April 24, 2009

1:00 p.m. Eastern Daylight Time

 

Hyatt Regency

Pittsburgh International Airport

Pittsburgh, Pennsylvania

USA

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS

 

The following proxy materials are available for you to review online at www.proxydocs.com/rti:

 

 

This website is designed to provide complete anonymity with respect to a shareholder accessing the website, consistent with the Securities and Exchange Commission rules.

Westpointe Corporate Center One, 5^th Floor

1550 Coraopolis Heights Road

Pittsburgh, Pennsylvania 15108-2973

 

March 13, 2009

 

Dear RTI Shareholder:

 

 

You are cordially invited to attend our 2009 Annual Meeting of Shareholders on April 24, 2009, at the Hyatt Regency Hotel located at the Pittsburgh International Airport.

 

The meeting will begin promptly at 1:00 p.m. Eastern Daylight Time with a report on Company operations. We will then elect directors and seek ratification of the appointment of our independent registered public accounting firm and approval of our employee stock purchase plan.

 

You have a choice of voting your proxy via the Internet, by telephone or by completing and returning the enclosed proxy card. Whether or not you plan to attend the meeting, it is important that you vote your shares and we encourage you to do so as soon as possible.

 

We look forward to seeing as many of you as possible at the 2009 Annual Meeting.

 

Sincerely,

 

 

Table of Contents

 

 

Time:

       1:00 p.m. Eastern Daylight Time

 

Date:

       April 24, 2009

 

Place:

       The Hyatt Regency

       Pittsburgh International Airport

       1111 Airport Boulevard

       Pittsburgh, Pennsylvania 15231

 

Purpose:

 

 

 

 

Chad Whalen

Secretary

 

March 13, 2009

 

Only shareholders of record on February 27, 2009 may vote at the meeting.

 

 

 

Shareholders of RTI as of the close of business on the record date, February 27, 2009, are entitled to vote at the Annual Meeting.

 

 

You may vote on:

 

 

 

The Board recommends that you vote:

 

FOR each of the nominees presented in this proxy statement;

 

FOR the ratification of the appointment of PricewaterhouseCoopers as our independent registered public accounting firm for 2009; and

 

FOR the approval of the Company’s Employee Stock Purchase Plan.

 

 

This proxy statement is being furnished by RTI to its shareholders in connection with the solicitation of proxies to be voted at the Annual Meeting. RTI intends to first mail this proxy statement to shareholders on or about March 13, 2009.

 

 

You may vote in any one of the following three ways:

 

 

You have the right to revoke your proxy at any time before the meeting by sending a written notice of revocation or a later-dated proxy card to RTI’s Secretary, by voting subsequently through the Internet or by telephone, or by voting in person at the meeting.

 

 

Business Ethics and Corporate Governance

 

Business Conduct and Ethics

 

RTI is committed to conducting business ethically, as well as legally. Ethical and legal conduct in all of the Company’s business affairs is essential to the Company’s future. The Company’s Code of Ethical Business Conduct, adopted by the Board of Directors, applies to all directors and employees of the Company, including all of our executive and other officers. The Code of Ethical Business Conduct is intended to comply with the requirements of the New York Stock Exchange and Securities and Exchange Commission regulations.

 

The Code of Ethical Business Conduct is posted on the RTI website, www.rtiintl.com, and is also available in print without charge to any shareholder who makes a written request to the corporate Secretary at the address set forth under the caption “Other Information” on the last page of this proxy statement. Any amendments as well as waivers of the application of the Code of Ethical Business Conduct to directors or executive officers will be disclosed promptly on the RTI website.

 

Corporate Governance Guidelines

 

The Company’s Corporate Governance Guidelines were adopted by the Board of Directors to promote sound corporate citizenship and are intended to comply with the requirements of the New York Stock Exchange. The Guidelines, taken together with the charters of the various committees of the Board of Directors, provide the framework for the corporate governance of the Company. The Corporate Governance Guidelines cover a number of topics, including: the size and role of the Board of Directors; non-employee director executive sessions; attendance at Board of Directors meetings; access to senior management and advisors; compensation of the Board of Directors; independence, composition and membership criteria of the Board of Directors; self-assessment of the Board of Directors; retirement age; and process for nominations to the Board of Directors.

 

The Company’s Corporate Governance Guidelines are posted on the RTI website, www.rtiintl.com, and are also available in print without charge to any shareholder who makes a written request to the corporate Secretary at the address set forth under the caption “Other Information” on the last page of this proxy statement.

 

Director Education

 

The Company encourages its directors to attend educational seminars and conferences to enhance his or her knowledge of the role and responsibilities of directors. Any director who attends an educational seminar or conference may receive reimbursement from RTI for the costs incurred in connection with his or her attendance. Four directors attended director education seminars or programs during 2008, two of which were accredited by the RiskMetrics Group. Educational presentations are also made at Board meetings from time to time.

 

The Board of Directors

 

The business and affairs of RTI are under the general direction of the Board of Directors. The Board presently consists of eleven members, nine of whom are neither officers nor employees of RTI or its subsidiaries. The Board of Directors has determined that Craig R. Andersson, Daniel I. Booker, Donald P. Fusilli, Jr., Ronald L. Gallatin, Charles C. Gedeon, Robert M. Hernandez, Edith E. Holiday, Bryan T. Moss, and James A. Williams all meet the New York Stock Exchange rules and listing standards relating to independence generally and for all committees on which they serve. None of the independent directors has a relationship with the Company that is material.

 

The Board met 10 times during 2008. All of the directors, with the exception of Mr. Moss, attended more than 75% of the total number of meetings of the Board and of the committees on which they serve. Mr. Moss was elected to the Board on June 1, 2008 and attended 100% of the meetings

subsequent to his election. The Chairman of the Board chairs the regularly-scheduled executive sessions of the non-management directors. In the Chairman’s absence, the chairperson of the Nominating/Corporate Governance Committee chairs the meeting.

 

It is the policy of the Nominating/Corporate Governance Committee to consider recommendations by shareholders, directors, officers, employees, and others for nominees for election as director. Recommendations, together with the nominee’s qualifications and consent to be considered as a nominee, should be sent to the corporate Secretary of RTI for presentation to the Committee. Board Membership criteria considered by the Committee is discussed below under the caption “Nominating/Corporate Governance Committee” and is set forth in the Company’s Corporate Governance Guidelines, available free of charge on the RTI website, www.rtiintl.com, or by sending a written request to the corporate Secretary at the address set forth under the caption “Other Information” on the last page of this proxy statement.

 

There are four principal committees of the Board of Directors. Committee membership, the functions of each committee and the number of meetings held during 2008 are described below.

 

Audit Committee

 

The members of the Audit Committee are James A. Williams (Chairman), Donald P. Fusilli, Jr., Ronald L. Gallatin and Robert M. Hernandez. All of the members of this Committee meet the New York Stock Exchange’s rules and listing standards for audit committee independence. The Board has determined that Messrs. Fusilli, Gallatin, Hernandez and Williams are each qualified as an audit committee financial expert within the meaning of Securities and Exchange Commission regulations and that each of the members of the Audit Committee has accounting or financial management expertise within the meaning of the listing standards of the New York Stock Exchange.

 

The Audit Committee assists the Board in overseeing RTI’s financial reporting process and systems of internal accounting control, RTI’s compliance with legal and regulatory requirements and qualifications, and the independence and performance of RTI’s internal auditors and independent registered public accounting firm. The Committee has direct responsibility for the appointment, compensation, retention and oversight of RTI’s independent registered public accounting firm. The Committee has adopted, and the Board has approved, the Committee charter, which is available free of charge on the RTI website, www.rtiintl.com, or by sending a written request to the corporate Secretary at the address set forth under the caption “Other Information” on the last page of this proxy statement.

 

The Audit Committee held 5 meetings in 2008.

 

The Compensation Committee

 

This Committee discharges the Board’s duties concerning executive compensation.

 

The members of the Compensation Committee are Daniel I. Booker (Chairman), Craig R. Andersson, Charles C. Gedeon, Edith E. Holiday, and Bryan T. Moss. All of the members of this Committee meet the New York Stock Exchange’s rules and listing standards for independence for purposes of this Committee.

 

The Compensation Committee is responsible for review and approval of RTI’s compensation philosophy; executive compensation programs, plans and awards (see “Compensation Discussion and Analysis” on page 18 for further information); policies, principles and procedures for selection and performance review of the CEO and other top management; and for establishing the CEO and other top management’s compensation levels based on the Committee’s evaluation of their performance. The Committee also administers RTI’s long-term incentive plans and stock or stock-based plans. The Committee is also tasked with the review of management’s Compensation Discussion and Analysis (“CD&A”) and submits the Compensation Committee Report contained in this proxy statement. The Committee has adopted, and the Board has approved, a Committee charter, which is available free of charge on the RTI website, www.rtiintl.com, or by sending a written request to the corporate Secretary at the address set forth under the caption “Other Information” on the last page of this proxy statement.

The Compensation Committee held 7 meetings in 2008.

 

Nominating/Corporate Governance Committee

 

The members of the Nominating/Corporate Governance Committee are Edith E. Holiday (Chair), Daniel I. Booker and Robert M. Hernandez. All of the members of this Committee meet the New York Stock Exchange’s rules and listing standards for independence for purposes of this Committee.

 

The Nominating/Corporate Governance Committee is responsible for identifying individuals qualified to serve as directors; recommending to the Board candidates for election at the Annual Meeting of Shareholders or by the Board to fill vacancies occurring on the Board; and also reviewing and evaluating RTI’s director compensation from time to time. The Committee considers director candidates submitted by directors, officers, employees, shareholders and other constituencies. The Committee is also responsible for developing and recommending to the Board corporate governance principles applicable to RTI as well as conducting periodic reviews of such principles. The Committee has adopted, and the Board has approved, a Committee charter, which is available free of charge on the RTI website, www.rtiintl.com, or by sending a written request to the corporate Secretary at the address set forth under the caption “Other Information” on the last page of this proxy statement.

 

The Nominating/Corporate Governance Committee annually reviews the skills and attributes of Board members within the context of the current make-up of the full Board. Board members should have individual backgrounds that, when combined, provide a portfolio of experience and knowledge that well serve RTI’s governance and strategic needs. Board candidates are typically suggested by members of the Committee but the Committee will also consider Board candidates recommended or identified by other directors, management, shareholders, and others, and will be considered on the basis of a range of criteria including the current composition of the Board, broad-based business knowledge and contacts, prominence, diversity of talents and background and sound reputation in their fields as well as a global business perspective and commitment to corporate citizenship. See “Shareholder Proposals” on page 41 of this proxy statement for additional information regarding procedures to be followed by shareholders in submitting recommendations. Additional information concerning director candidates is contained in RTI’s Corporate Governance Guidelines, available free of charge on the RTI website at www.rtiintl.com, or by sending a written request to the corporate Secretary at the address set forth under the caption “Other Information” on the last page of this proxy statement.

 

The Nominating/Corporate Governance Committee held 5 meetings in 2008.

 

Executive Committee

 

The members of the Executive Committee are Robert M. Hernandez (Chairman), Craig R. Andersson, Daniel I. Booker, Dawne S. Hickton and Michael C. Wellham.

 

The Executive Committee assists the Board in the discharge of its responsibilities and may act on behalf of the Board when emergencies or scheduling make it difficult to convene the Board. All actions taken by the Committee must be reported at the Board’s next meeting. The Executive Committee held no meetings during 2008.

 

RTI’s directors are elected for one-year terms. Non-employee directors may not stand for election after age seventy-two. Employee directors leave the Board when they retire from RTI. The Board has the ability to extend the retirement age for a particular director.

 

The Board has nominated eleven directors for election. With the exception of Mr. Moss, all of the nominees for election have previously been elected by the shareholders. Mr. Moss was elected to the Board effective June 1, 2008 by vote of the Board members. Of the eleven individuals who are nominees for election, two are current RTI officers and the remaining nine are high-level executives with professional experience. If any nominee is unable to stand for election, your proxy may be voted for another nominee designated by the Board.

 

NOMINEES FOR DIRECTOR

Aristech Chemical Corporation

(chemical producer)

 

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, 1986. He is a past director of Albermarle Corporation and Duquesne University. He is a member of the American Institute of Chemical Engineers and Alpha Chi Sigma (a professional chemical society) and has served on the boards and executive committees of The Society of the Chemical Industry, the Chemical Manufacturers Association, the Pennsylvania Business Roundtable and the Greater Pittsburgh Chamber of Commerce. He has a bachelor’s degree in chemical engineering from the University of Minnesota and did graduate work in the same discipline at the University of Delaware.

 

Reed Smith LLP

(law firm)

 

Mr. Booker is a partner of the law firm of Reed Smith LLP. From 1992 until December 31, 2000 he was 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. He is a member of the District of Columbia, Pennsylvania and U.S. Supreme Court bars. Mr. Booker is a director of Océ USA Holding, Inc.; a director of the Allegheny Conference on Community Development; and a director of other community and professional organizations.

 

 

Mr. Fusilli is the owner of The Telum Group, a privately-held consulting firm focusing on strategic planning, business development, program/project management and selected recruiting. Mr. Fusilli was President and Chief Executive Officer of Michael Baker Corporation from April 25, 2001 to September 12, 2006. He joined Michael Baker in 1973 and spent six years in the engineering department before obtaining his law degree in 1979. He became General Counsel in 1984, Executive Vice President Administration of the Energy Group in 1994 and Executive Vice President and General Manager of the Group in 1995. He was elected President and Chief Operating Officer in March 2000. Mr. Fusilli is a Civil Engineering graduate of Villanova University and holds a juris doctor degree from Duquesne University School of Law. He also attended the Advanced Management Program at the Harvard University Business School. Mr. Fusilli is also a Director of Sterling Construction Company, Inc. and Merrick & Company.

Lehman Brothers Inc.

(investment banking firm)

 

Mr. Gallatin 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. During his 24 years with Lehman, Mr. Gallatin had various senior roles in both its investment banking and capital markets divisions and was responsible for a series of financial innovations, most notably Zero Coupon Treasury Receipts, Money Market Preferred Stock and Targeted Stock. A graduate of New York University, and both Brooklyn and New York University Law Schools, Mr. Gallatin has bachelor’s, juris doctor and master of law (taxation) degrees and is a Certified Public Accountant.

 

 

Mr. Gedeon joined United States Steel Corporation in 1986 as Vice President Raw Materials and President of U.S. Steel Mining Co., Inc. He was promoted to Senior Vice President Related Resources in 1988 and advanced to the position of President, U.S. Diversified Group in 1990. He became Executive Vice President Raw Materials and Transportation of U.S. Steel in 2003. He retired from this position on June 30, 2003. From 1983 until he joined U.S. Steel, Mr. Gedeon had been Vice President Operations of National Steel Corporation.

 

 

On December 31, 2001, Mr. Hernandez retired as Vice Chairman and Chief Financial Officer and director of USX Corporation. He was elected to this position on December 1, 1994. Mr. Hernandez had been elected Executive Vice President, Accounting & Finance and Chief Financial Officer and director of USX on November 1, 1991. He was Senior Vice President, Finance & Treasurer of USX from October 1, 1990, to October 31, 1991. Mr. Hernandez was President, U.S. Diversified Group of USX from June 1, 1989, to September 30, 1990, and in such role had responsibilities for USX’s businesses not related to energy and steel. From January 1, 1987, until May 31, 1989, he was Senior Vice President and Comptroller of USX. Mr. Hernandez has his undergraduate degree from the University of Pittsburgh and his masters of business administration from the Wharton Graduate School of the University of Pennsylvania. He is Chairman of the Board of Trustees of BlackRock Open End Equity & Long-Term Bond Funds; lead director of American Casualty Excess (ACE) Limited; a director of Eastman Chemical Company; and a director of Tyco Electronics Corporation.

 

 

Ms. Hickton has served as the Vice Chairman and Chief Executive Officer of the Company since 2007. Since June 2005, she served as Senior Vice President of Administration and Chief Administrative Officer. In this capacity she managed the accounting, treasury, tax, business information systems, personnel and legal functions of the Company. From April 1997 until June 2004, Ms. Hickton was Vice President and General Counsel. She holds a bachelor’s degree from the University of Rochester and a juris doctor degree from the University of Pittsburgh. She is also a director of F.N.B. Corporation and a member of the Board of Trustees of the University of Pittsburgh.

 

 

Ms. Holiday was elected a director on July 29, 1999. She served as Assistant to the President and Secretary of the Cabinet in the White House from 1990 to 1993. Prior to that, she held several senior positions in the United States Treasury Department including General Counsel. She is a director of Hess Corporation; White Mountains Insurance Group, Ltd.; Canadian National Railway Company and H.J. Heinz Company. She is also a director or trustee of a number of investment companies in the Franklin Templeton Group of Funds. She has bachelor’s and juris doctor degrees from the University of Florida.

 

 

Mr. Moss was elected a director effective June 1, 2008, when the size of the Board was increased to eleven. He served as President Emeritus of Gulfstream Aerospace (a subsidiary of General Dynamics Corporation) from April 2007 until his retirement in March 2008, and prior to that served for four years as President of Gulfstream Aerospace and Executive Vice President, Aerospace Group, General Dynamics Corporation. Mr. Moss is currently serving as a consultant to General Dynamics and has served on the U.S.-Japan Business Council, the U.S.-China Business Council, and the U.S.-Hong Kong Business Council. He is also a member of the Georgia Tech Advisory Board and the Savannah College of Art and Design Board of Visitors.

 

 

Mr. Wellham has served as the President and Chief Operating Officer of the Company since 2007. Since 2002, he has served as Senior Vice President in charge of the Company’s Fabrication & Distribution Group, responsible for 14 RTI locations in seven countries. He came to RTI in 1998 with the acquisition of New Century Metals. Prior to that, Mr. Wellham was President of Advanced Aerospace Metals Corporation, a full line metals distributor that he led through the start-up phase. He holds a bachelor’s degree from the University of Phoenix and a masters of business administration from the University of Tennessee.

 

Ernst & Young

(accounting firm)

 

Mr. Williams retired as a Partner at Ernst & Young on September 30, 2003. He has over 37 years experience working with large multi-location clients and served in numerous leaderships roles, including Pittsburgh Office Managing Partner, Area Managing Partner, and Partner in Charge-Audit. He is a Certified Public Accountant and has a bachelor’s degree from Miami University.

 

Vote Required

 

Each share of RTI’s Common Stock is entitled to one vote per share. Under Ohio law and the Company’s Code of Regulations, the eleven director candidates receiving the greatest number of votes for election will be elected to the Company’s Board of Directors. Common Shares represented by properly executed and returned forms of proxy or properly authenticated voting instructions recorded through the Internet or by telephone will be voted for the election of the Board of Directors’ nominees unless authority to vote for one or more of the nominees is withheld. Common Shares as to which the authority to vote is withheld will not be counted toward the election of the individual nominees specified on the form of proxy.

 

THE BOARD RECOMMENDS A VOTE FOR EACH OF THE LISTED NOMINEES.

 

PricewaterhouseCoopers LLP (“PwC”) has served as the independent registered public accounting firm for RTI and its predecessors for a number of years. For 2008, PwC rendered professional services in connection with the audit of the financial statements of RTI and its subsidiaries, including review of quarterly reports and filings with the Securities and Exchange Commission and provided tax services. They are knowledgeable about RTI’s operations and accounting practices and are well qualified to act as the independent registered public accounting firm, and the Audit Committee has selected PwC as such for 2009.

 

Audit Fees

 

The aggregate fees billed for professional services rendered by PwC for the audit of RTI’s annual financial statements and review of financial statements in RTI’s Quarterly Reports on Form 10-Q in 2008 and 2007 were $1,792,580 and $2,117,053, respectively.

 

Audit-Related Fees

 

The aggregate fees billed for assurance and related services rendered by PwC that were related to the services described above were $21,000 in both 2008 and 2007. These services include certain agreed upon procedures related to compliance requirements.

 

Tax Fees

 

The aggregate fees billed for services rendered by PwC for tax services in 2008 and 2007 were $115,000 and $55,101, respectively. The services comprising these fees include federal and state tax return compliance, international tax consulting projects and assistance with new tax pronouncements.

 

All Other Fees

 

Other than fees disclosed above, there was a payment of $2,400 related to licensing fees in each of 2008 and 2007.

 

The Audit Committee preapproves the Audit Plan on an annual basis along with the estimated fees for the plan. At each regularly scheduled, quarterly meeting, the Audit Plan and fees incurred to date are reviewed, and any fees above the estimate are reviewed and approved or disapproved at the meeting. In addition, the Chairman of the Audit Committee has been delegated authority by the full Committee to preapprove additional audit and non-audit fees between meetings, subject to review by the full Committee at the next regularly scheduled meeting. For 2008 and 2007, 100% of PwC’s fees were preapproved.

 

Representatives of PwC will be present at the Annual Meeting, will have an opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions.

 

Vote Required

 

Ratification of the appointment of the independent registered public accounting firm requires the favorable vote of a majority of the votes cast. Each share of RTI’s Common Stock is entitled to one vote per share and only votes for or against the proposal count. Abstentions and broker non-votes do not count for voting purposes, but are counted for purposes of establishing a quorum. Broker non-votes occur when a broker returns a proxy but does not have authority from the beneficial owner to vote on a particular proposal.

 

THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS
RTI’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2009.

 

On January 30, 2009, the Board approved the RTI International Metals, Inc. Employee Stock Purchase Plan, which we refer to as the ESPP, and directed that the ESPP be submitted to the shareholders for approval. The following is a summary of the ESPP and is qualified by reference to the full text of the ESPP. A copy of the ESPP is attached to this Proxy Statement as Annex A. The terms of our ESPP are summarized below.

 

The purpose of the ESPP is to encourage employee stock ownership to better align employees’ interests with those of our shareholders. The ESPP provides employees of RTI and certain designated subsidiaries (i.e., those subsidiaries designated as eligible to participate in the ESPP) with an opportunity to purchase shares of our common stock through accumulated payroll deductions. By participating in the ESPP eligible employees are able to purchase shares of our stock at a 5% discount to the fair market value. The maximum number of shares to be issued under the ESPP is 2,000,000. The shares to be sold to participants under the plan may, at our election, be newly issued shares, treasury shares or shares acquired in the open market or otherwise. If approved by the shareholders, the ESPP is anticipated to become effective following compliance by the Company with the rules and regulations set forth by the Securities and Exchange Commission and New York Stock Exchange.

 

Eligibility. All persons employed by us or a designated subsidiary are eligible to participate in the ESPP so long as their customary employment with the Company or designated subsidiary is at least twenty (20) hours per week and more than five (5) months in any calendar year. Eligible employees must enroll by completing a subscription agreement indicating the percentage of compensation to be withheld for each pay period. Participation by employees in the ESPP will be strictly voluntary. Employees who elect to participate in the ESPP are called “participants.”

 

When a participant has a separation from service or otherwise becomes ineligible to participate, ESPP participation will end. The participant will be treated as having withdrawn from the ESPP and accumulated payroll deductions for the period will be returned.

 

Based on our current headcount, we expect that approximately 1,300 U.S. employees will be eligible to participate in the ESPP initially, with an additional 300 non-U.S. employees at some point in the future.

 

Operation of the Plan. Participant contributions to the ESPP will be made by after-tax payroll deduction, also called a deferral percentage, up to approximately $1,980 per pay period (assuming monthly pay periods). For purposes of the ESPP, compensation generally includes all cash compensation from RTI or a designated subsidiary that is subject to federal income tax. Participants may not purchase stock with a fair market value exceeding $25,000 in the aggregate in any calendar year. Since the fair market value cannot exceed $25,000 and the purchase price of the stock is discounted 5% under the ESPP, the maximum dollar amount that may be deferred in any calendar year is $23,750.

 

The right to defer compensation under the ESPP to purchase stock will be considered an “offer”. Each calendar quarter is an “offering period”. During each offering period, amounts are withheld from each ESPP participant’s compensation based on the designated deferral percentage. The quarterly deferral amount will be used to purchase stock.

 

A participant’s payroll contributions will be used to purchase shares for the participant’s ESPP account on the last trading day of the quarterly offering period. Shares will be purchased at 95% of the fair market value (which is defined in the ESPP as the closing sales price of our common stock as quoted New York Stock Exchange (“NYSE”), or in the absence of the NYSE, the stock exchange with the greatest volume of trading in common stock on the last market trading day prior to the determination) of a share of our common stock on the last trading day of the quarterly purchase period. Whole shares will be purchased. Any remaining funds will be retained in the participant’s

account for the following offering period. A book entry account for each ESPP participant will be maintained to record the number of shares accumulated and the deferral amount for the offering period.

 

A participant may elect to terminate participation prior to the commencement of an offering period. The participant may request to participate again in future offering periods by submitting a new subscription agreement. Participants will not receive interest on the dollars contributed to, or withdrawn from, the ESPP.

 

A participant may sell all or a portion of the ESPP shares at any time, but a participant cannot sell, assign or transfer payroll deductions credited to a participant’s account or any rights with regard to the exercise of an option or to receive shares under the ESPP, other than by will or the laws of descent and distribution. Options are exercisable only on the last day of the offering period, and they do not vest.

 

Administration of the Plan. The ESPP will be administered by the Board or a designated committee of members of the Board. Initially, the Board has designated the Company’s existing Retirement Board as responsible for administering the ESPP, with full discretion and exclusive power to make eligibility determinations under the ESPP.

 

The ESPP will be effective for a period of ten years from the date of the first monthly offering period. The Board reserves the right to amend or terminate the ESPP; however, no amendment can be made to increase the total number of shares that we may issue under the ESPP without shareholder approval.

 

In the event that our stock is changed by reason of a change in capitalization or the dissolution, liquidation, merger or sale of assets (collectively a “corporate transaction”) in which we are the surviving corporation, or similar changes to our capital structure, the plan administrator will appropriately adjust the number of shares of stock subject to the ESPP, the number of shares of stock to be purchased pursuant to an option, and the price per share of common stock covered by an option, and other relevant provisions of the ESPP.

 

In the event of a corporate transaction in which we are not the surviving corporation, the plan administrator may take such actions with respect to the ESPP that the plan administrator deems appropriate, which could be a determination that each option issued under the ESPP will be assumed by, or an equivalent option substituted by, the successor company or its affiliates, that the purchase date will be accelerated, or that all outstanding options will terminate and accumulated payroll deductions will be refunded.

 

We will pay the administrative expenses for the ESPP, including any expenses associated with the purchase of stock. However, we will not pay any other fees, such as the broker fees associated with a participant selling stock.

 

Restrictions on resale of the shares purchased under the ESPP. If approved by the shareholders, we will register the shares of stock that may be issued under the ESPP. Any restrictions on the sale of common stock that is acquired under the ESPP depends upon whether a participant is our “affiliate”. Affiliates generally include persons or entities who control, who are controlled by or who are under common control with our Company, such as officers, directors and 10% shareholders. Participants who are not affiliates may resell the common stock purchased under the ESPP without restriction. Affiliates may resell common stock purchased under the ESPP only as allowed under the provisions of Rule 144 of the Securities Act of 1933 or pursuant to a separate registration for sale of the shares.

 

Federal income tax consequences. The following generally describes the United States federal income tax consequences of ESPP participation for participants who are citizens or residents of the United States. State, local and foreign tax consequences are not addressed. The following description does not address any individual’s specific tax situation. The description is based on current federal income tax laws, and is subject to change when such laws change.

 

The ESPP is not intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code. This means that the special income tax benefits of a Section 423 Plan are

not available under our plan. Payroll deductions under the ESPP are made on an after-tax basis, which means that applicable federal and state tax withholding is applied to a participant’s pay before ESPP contributions are deducted. Shares purchased under the ESPP will be treated, for tax purposes, as though it had been acquired under a nonstatutory stock option. A participant will not recognize income by virtue of participating in the plan, but instead will recognize ordinary compensation income for federal income tax purposes at the time of each purchase. Taxable income will be measured by the excess, if any, in the value of the shares at the time of purchase over the purchase price. The compensation income recognized at the time of purchase will be treated as wages and will be subject to tax withholding and reporting by RTI.

 

Upon a resale of the ESPP shares by the participant, any difference between the sales price and the purchase price (plus any compensation income recognized with respect to such shares) will generally be a capital gain or loss and will qualify for long-term capital gain or loss treatment if the shares have been held for more than one year.

 

Federal Income Tax Consequences to Us. Since this plan is not intended to comply with Code Section 423, the Company will generally treat the excess of the value of the shares over the amount paid by the employee as compensation. Such compensation will be deductible in accordance with the same general laws that apply to cash compensation, and will similarly be subject to withholding and payroll taxes at that time.

 

Vote Required

 

Approval of the RTI Employee Stock Purchase Plan requires the favorable vote of a majority of the votes cast. Each share of RTI’s Common Stock is entitled to one vote per share and only votes for or against the proposal count. Abstentions and broker non-votes do not count for voting purposes, but are counted for purposes of establishing a quorum. Broker non-votes occur when a broker returns a proxy but does not have authority from the beneficial owner to vote on a particular proposal.

 

THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE
EMPLOYEE STOCK PURCHASE PLAN.

 

Audit Committee Report

 

The Committee met with management, PricewaterhouseCoopers LLP, and representatives of the Internal Audit group (which is outsourced to Ernst & Young LLP) frequently throughout the year to review and consider the adequacy of RTI’s internal control over financial reporting and the objectivity of its financial reporting, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002. We also discussed with RTI’s management and PricewaterhouseCoopers LLP the process used for certifications by RTI’s chief executive officer and principal financial officer that are required for certain of RTI’s filings with the Securities and Exchange Commission. We have reviewed and discussed RTI’s 2008 audited financial statements with management and with PricewaterhouseCoopers LLP. The Committee also discussed with PricewaterhouseCoopers LLP the matters required to be communicated by Statement on Auditing Standards (SAS) No. 61 as amended by SAS No. 90 (Communications With Audit Committees).

 

In addition, the Committee received from PricewaterhouseCoopers LLP the written disclosures required by the Public Company Accounting Oversight Board’s (“PCAOB”) Rule 3256, Communication with Audit Committees Concerning Independence, and have discussed their independence with them. We have considered whether the provision by PricewaterhouseCoopers LLP of the professional services described above was compatible with the maintenance by PricewaterhouseCoopers LLP of its independent status and have determined that it was.

 

Based on these reviews and discussions, we recommended to RTI’s Board of Directors, and the Board has approved, that the Audited Financial Statements be included in RTI’s Annual Report on Form 10-K for the year ended December 31, 2008 for filing with the Securities and Exchange Commission.

 

 

Compensation Committee Report

 

The Compensation Committee (“Committee”) discharges the Board’s duties concerning executive compensation and prepares the report on such compensation required by the Securities and Exchange Commission.

 

The Committee met with management to review and discuss the Compensation Discussion and Analysis. Based on their reviews and discussions, the Committee recommended to RTI’s Board of Directors that the Compensation Discussion and Analysis be included in the Company’s annual report on Form 10-K and this proxy statement.

 

 

Security Ownership of Certain Beneficial Owners

 

The following table sets forth each person or entity known to us that may be deemed to have beneficial ownership of more than five percent of the outstanding Common Stock of RTI based on information publicly available as of March 1, 2009.

 

Security Ownership of Directors and Executive Officers

 

The following table sets forth information concerning the “beneficial ownership” of our common stock by each director and nominee, by each executive officer named in the Summary Compensation Table, and by all directors and executive officers as a group. “Beneficial ownership” is a concept which takes into account shares that may be acquired within 60 days (such as by exercising vested stock options) and shares as to which the named person has or shares voting and/or investment power. Information is provided as of March 1, 2009. Absence of an entry in the Percent of Class column indicates beneficial ownership of less than 1%.

 

 

 

 

  A. Overview and Pay Philosophy

 

For the 2008 executive compensation detailed in the tables that follow this discussion and analysis, our Board of Directors empowered the Compensation Committee (the “Committee” or the “Compensation Committee”) to discharge the Board’s duties concerning executive compensation and to advise the Board on the Company’s compensation philosophy, programs, and objectives. Specifically, the Committee makes decisions regarding compensation of our named executive officers in accordance with the Committee’s Charter and in accordance with the Company’s compensation philosophy. The Committee is responsible for the review and approval of the Company’s compensation philosophy including executive compensation programs, plans and awards; for policies, principles and procedures for the selection of performance objectives of the CEO and other named executive officers; for establishing compensation levels for the named executive officers based on the Committee’s evaluation of performance; and for recommending CEO compensation levels to the Board based on the Committee’s evaluation of performance.. The Committee also administers RTI’s stock-based compensation plans (including the shareholder-approved 2004 Stock Plan) through which long-term incentive compensation awards are granted to our named executive officers and other managers and employees.

 

Consistent with the Committee’s mandate, RTI has adopted a comprehensive statement entitled “Pay Philosophy and Guiding Principles Governing Officer Compensation” (the “Pay Philosophy”). The overall philosophy related to our officer compensation programs set out in the Pay Philosophy is as follows:

 

 

The Company’s compensation programs, as outlined in the Pay Philosophy, are managed to help communicate desired results and promote decisions and actions that produce those results. Specifically, the Pay Philosophy states that the Company’s compensation programs should be characterized by:

 

 

 

  B. Elements of Named Executive Officer Compensation

 

The Company’s comprehensive compensation program consists of the following elements for our named executive officers:

 

 

 

No bonus will be paid to an officer whose individual performance is judged to be unacceptable regardless of the level of corporate performance. Likewise, the Compensation Committee may, in order to retain valued executives, pay bonuses to recognize exceptional individual performance regardless of the level of corporate performance.

 

 

 

 

 

The Committee intends to cause approximately 40% of the value of long-term incentives to be in the form of performance share awards for each named executive officer. The remaining long-term incentives are split, with approximately 40% consisting of restricted shares and 20% consisting of stock options for our CEO and COO and split approximately 35% consisting of restricted shares and 25% consisting of stock options for our other named executive officers.

 

Chief Executive Officer		5 times base salary
Chief Operating Officer		4 times base salary
Executive and Senior Vice Presidents		3 times base salary
Certain Vice Presidents		2 times base salary

 

Under the guidelines, participants will be given a five-year period to accumulate sufficient equity through various means (including open market purchases, ESPP purchases (if approved), restricted stock ownership and shares owned through 401(k) or Company savings plans), after which Board discretion will be used to address situations where the applicable guidelines have not been achieved.

 

 

 

 

 

 

 

Tax Considerations

 

The Committee considers the impact of the applicable tax laws with respect to executive compensation. In certain circumstances, applicable tax laws impose potential penalties on compensation or result in a loss of deduction to RTI for such compensation.

 

Participation in and compensation paid under our plans, contracts and compensation arrangements may result in the deferral of compensation that is subject to the requirements of Section 409A of the Internal Revenue Code. While we intend for our plans, contracts and compensation arrangements to be structured and administered in a manner that complies with the requirements of Section 409A, to the extent that our plans, contracts and compensation arrangements fail to meet certain requirements under Section 409A, compensation earned thereunder may be subject to immediate taxation and tax penalties.

 

With certain exceptions, Section 162(m) of the Internal Revenue Code limits the deductibility of compensation in excess of $1 million paid to certain covered employees. Compensation paid to covered employees is not subject to the deduction limitation if it is considered “qualified performance-based compensation.” The Committee reserves the right to provide both market and performance-based compensation to covered employees. Certain awards, such as stock options, are intended to qualify for deduction under Section 162(m). Other types of awards, such as restricted shares and performance share awards, however, may not qualify for the performance-based exception and therefore may not be deductible under Section 162(m). While the Committee considers the tax impact of any compensation arrangement, it reserves the right to approve non-deductible compensation that is consistent with the overall pay philosophy of the Company.

 

If a change in control of the Company results in the payment of severance or the accelerated vesting of equity-based awards, a disqualified individual could, in some cases, be considered to have received “parachute payments” within the meaning of Sections 280G and 4999 of the Internal Revenue Code. A disqualified individual can be subject to a 20% excise tax on excess parachute payments and the Company can be denied a tax deduction. Our executive change in control severance policy discussed above provides that if it is determined any payment or benefit thereunder would constitute an excess parachute payment, the Company will pay a gross-up payment, subject to certain limitations, such that the net amount retained by the disqualified person after the application of any excise taxes will be equal to such payments or distributions. Gross-up payments will not be deducted by the Company.

 

  C. Overview of the Decision Making Process

 

In January 2008, with input from the individual executives as well as the Chairman of the Board of Directors, Ms. Hickton established specific performance-based objectives for each member of the

executive team, based upon various factors including the immediate past performance of the Company and its reporting segments, the projected market conditions in the industry, and the short and long-term strategic plan of the Company as established by the Board. At the same time, and using the same general factors, the Compensation Committee and the Chairman of the Board established specific performance-based objectives for Ms. Hickton. Each performance-based objective is reviewed by the Compensation Committee and approved by the Board of Directors. Executive performance against the objectives is evaluated and monitored throughout the year.

 

In October, the CEO reviewed the performance of the other named executive officers for the purpose of setting base salary for the following year and bonus and incentive compensation for the year then ending. She reviewed the RTI stock price during the year; the Company earnings per share and return on invested capital (each determined in accordance with Company accounting policy) as compared to the Company’s annual business plan; and individual performance for each of the named executive officers as compared against their personal and team objectives set the prior year, and discussed these factors with members of the Compensation Committee and the Chairman of the Board.

 

After discussions concerning executive compensation at its regular October meeting, the Compensation Committee reconvened in early December with the CEO and discussed the current financial condition of the Company and the elements of compensation for the named executive officers. Members of the Committee made recommendations to Ms. Hickton for her to consider in preparing final recommendations to the Committee. Using this information, with input from the Chair of the Compensation Committee and the Chairman of the Board, basic information regarding trends in executive salaries in the manufacturing industry, and market data on comparator companies, the CEO made recommendations as to the compensation of the other named executive officers. The recommendations, along with tally sheets summarizing each executive’s current compensation and aggregate stock holdings and benefits were distributed to the Compensation Committee in advance of the January 2009 Committee meeting. The overall purpose of the tally sheets is to bring together, in one place, all the elements of compensation so that the Committee may analyze both the individual elements of compensation (including the compensation mix) as well as total compensation.

 

In January 2009, the Committee reviewed and considered the recommendations of the CEO with respect to the other executive officers and then, with the assistance of the Chairman of the Board, reviewed the performance of the CEO in the same manner that the CEO evaluated the other executive officers. The Committee then made the final determination as to base salaries for the new year and any bonus and incentive compensation for the immediate past year’s performance based upon each individual’s status and performance, in each case consistent with the Pay Philosophy set forth above. Awards of long-term, equity-based compensation were granted at this January meeting.

 

  D. Analysis of Compensation Awards for Our Named Executive Officers

 

Beginning in late 2007 and through January 2008, in order to determine base salaries for 2008, the Compensation Committee reviewed the compensation practices among peer companies to ensure the appropriateness of the Company’s compensation program design and compensation levels. Towers Perrin, a national benefits consulting firm, was engaged to report directly to the Compensation Committee as its independent compensation consultant to advise on compensation matters. The consultant participated in Committee meetings throughout 2007, 2008 and 2009 and was engaged to advise on compensation trends and best practices, plan design and the reasonableness of individual compensation awards.

 

The consultant employed a benchmarking process as an assessment tool that compares elements of RTI’s compensation programs with those of other companies that have similar characteristics. The purpose of the benchmarking process is to:

 

 

 

When advising the Compensation Committee on 2008 base salary and incentive compensation, the consultant used both market compensation data from reputable compensation surveys (Towers Perrin, Mercer, and Watson Wyatt) representing general industry companies and a more specific analysis of proxy disclosures from publicly-owned peer companies. The peer group was developed based on a set of characteristics that include:

 

 

The following 2008 compensation peer group was established in October 2007:

 

 

Peer group pay practices for each pay element were analyzed for base salary, target annual bonus opportunities and long-term incentives. The peer group data was supplemented by broader general industry data from compensation surveys to facilitate the evaluation of compensation levels and design.

 

Towers Perrin presented the Compensation Committee with ranges of base salary, target annual bonus as a percentage of salaries and target long-term incentives as a percentage of salaries for each of our named executive officers. In January 2008, the Compensation Committee reviewed these ranges and determined changes to the base salaries and incentive targets for each named executive officer as described below. In making this determination, the Committee considered each executive officer’s experience in the position, the amount of the increase of the salary level over the current compensation and relative internal positioning. In the case of each of our named executives, the base salaries used for 2008 were below the median of the ranges determined by the peer group and the broader industry surveys. The Compensation Committee believed this was appropriate as each executive was new to their respective positions in 2007 and due to the performance of the Company.

 

Based upon the Towers Perrin recommendations, the Committee established base compensation and target bonus amounts for 2008 as follows:

 

 

To adjust for the elimination of certain perquisites as discussed above, a one-time adjustment was made to the base salaries of the executive officers effective November 1, 2008: Ms. Hickton’s base salary was increased to $537,000; Mr. Wellham’s base salary was increased to $396,836; Mr. Giangiordano’s salary was increased to $316,272; Mr. Hull’s base salary was increased to $287,000; and Mr. Strome’s base salary was increased to $280,652.

 

The Company maintains a discretionary annual cash bonus program not tied to specific formulas. In January 2009, when reviewing the performance of the named executive officers for purposes of determining if bonuses and long-term incentive compensation should be awarded for 2008, the

Committee took into consideration RTI’s operating and financial performance as well as the change in share price during the year. The Committee noted that the Company’s earnings, earnings per share, return on invested capital, and cash flow were each considerably under the Company’s annual plan. The Committee also noted that RTI’s share price declined from December 31, 2007 to December 31, 2008 by approximately 79%. It was noted that the peer group showed an aggregate decline during the period of approximately 53% and the S&P 500 declined by approximately 38%. While these results clearly indicate that the Company and thus the executives did not meet the stated financial and stock performance goals, the Committee did recognize that to some degree this performance was outside the control of our CEO and named executives and is attributable to the global economic recession and liquidity crisis and delays in the anticipated Boeing 787 project. Notwithstanding the industry and worldwide slowdown, sales for the year were recorded at the second highest amount in Company history and operating income was the third highest in Company history. The Committee also noted the fact that the Company successfully refinanced its credit facility during the year with attractive terms to the Company notwithstanding the global credit crises thus leaving the Company with strong cash flow and a strong balance sheet.

 

Each of the executive officers is also responsible for five team objectives, including implementing the Company’s strategic plan, aiding in the announced capital expansion projects with respect to a new sponge plant and mill facility, meeting Company safety goals for reportable incidents during the year and budgeting and forecasting. All of the team objectives were met during the year.

 

The Committee also measures executive performance against pre-determined personal objectives. Specific objectives for 2008 for Ms. Hickton were to develop a succession planning process for levels immediately below the executive officer level, lead industry efforts to support legislation concerning military procurement of specialty metals, continue to drive the strategic planning process throughout the Company, develop and strengthen relationships with key customers and suppliers, support objectives to improve operating results in the Company’s Fabrication Group, and achieve a new collective bargaining agreement for the work force at the Company’s Niles Ohio facility. Certain of the other named executive officers shared some of Ms. Hickton’s objectives and were tasked with other goals and objectives specific to their individual tasks and responsibilities.

 

The following chart summarizes the achievement of each of the named executive officer’s personal objectives:

 

 

The personal objective that Ms. Hickton did not meet was a goal to improve operating results in the Fabrication Group, which was significantly impacted by the announced delays in the Boeing 787 program.

 

After considering the Company’s overall performance, each executive’s performance against their personal objectives, and the performance of the executive management team as a whole and the general economic conditions, the Committee decided to award cash bonuses at less than the target amount for our CEO and each of the other named executive officers. The main reason for this decision was the failure of the Company and the executives to achieve the stated financial goals and stock performance goals. Specifically, Ms. Hickton and Mr. Hull received bonuses in the amount of approximately 75% of the targeted amount. Mr. Wellham and Mr. Giangiordano received bonuses in amounts of approximately 70% of their respective targeted amounts. Mr. Strome was awarded a bonus at 80% of his targeted amount. The variation in the percentage of target amount awarded was primarily in relation to the achievement by each individual of his or her personal objectives.

 

Long-term incentive awards were granted to the named executive officers approximately at target levels (based on base salaries in place prior to any adjustments made in connection with the Company’s elimination of certain perquisites). Ms. Hickton’s awards included time-based awards (restricted shares and stock options) and performance awards in aggregate at a value of approximately 200% of her base salary. Mr. Wellham received such long-term incentives at a value of approximately 110% of his base salary. Mr. Giangiordano’s long-term incentives were granted in an aggregate amount of approximately 100% of his base salary and each of Mr. Hull and Mr. Strome were granted such awards in aggregate amounts of approximately 80% of their respective salaries. In each case, these awards were made at the targeted amounts established at the beginning of the year. The Committee believes that awards of the long-term incentives at target levels are appropriate for several reasons. Each named executive’s performance was at least at the expected level. The overall compensation program is based on peer group data and is designed to keep compensation in-line with the Company’s peers and to put 60% or more of long-term incentive awards (performance shares and stock options) at risk if future performance is not achieved. And despite the performance of the Company’s stock and the overall market during 2008, the Company achieved the second highest sales and third highest operating income in the Company’s history.

 

  E. Changes in Compensation for 2009

 

In light of the Company’s disappointing stock performance, the general state of the global economy, and the uncertainties in the Company’s markets heading into 2009, the Committee determined to maintain base salaries at 2008 levels and to forgo any annual increases for our CEO and each of the named executive officers except for Mr. Strome. The Committee believes the salary freeze is appropriate and prudent despite benchmark data that would support increases and will best prepare the Company to be competitive in the coming year, which is expected to remain difficult. The freeze in salaries is also partially a result of the failure of the Company and the executives to meet the stated financial goals for 2008. Mr. Strome’s base salary increased to $306,659 to bring him closer in line with the median salary for similar positions within the peer group and to account for the increased responsibilities taken on during 2008.

 

 

 

 

All Other Compensation Table

 

The following table describes each component of the All Other Compensation column in the Summary Compensation Table:

 

 

 

 

 

 

 

The tables above summarize the total compensation paid to or earned by each of named executive officers for the fiscal year ended on December 31, 2008. The narrative below describes current employment agreements and material employment terms with each of our named executive officers, as applicable, and provides additional description with respect to the compensation components set forth in the above tables.

 

The Company entered into amended and restated letter agreements with each named executive officer on December 31, 2008. These amended and restated letter agreements superseded any previous agreements in place between the executives and the Company with respect to their employment.

 

Except as described below, each of the five letter agreements are identical. In each case the named executive will be employed by the Company for an initial three-year term. Each executive’s employment will be automatically extended for additional one year periods until the executive attains age 65 unless either the Company or the executive gives prior notice that the agreement will not be renewed. The Company may terminate an agreement at any time for any reason including “cause” as defined in the agreement. If an executive’s employment is terminated for “cause” he or she will be entitled to no further compensation except for any base salary accrued and unpaid on the date of termination. If the Company terminates the executive’s employment other than for cause and not in connection with a “change in control” of the Company as defined, the provisions of the Company’s Executive Non-Change in Control Severance Policy, as described on page 38 of this proxy statement, will be effective. If the Company terminates the executive’s employment other than for cause and in connection with a “change in control” of the Company as defined, the provisions of the Company’s Executive Change in Control Severance Policy, as described on page 37 of this proxy statement, will be effective.

 

Each executive who is party to a letter agreement has agreed not to do any of the following during the period equal to the longer of 12 months (24 months in the case of Ms. Hickton) after termination of employment or the period during which the executive is receiving any severance benefits: compete with the Company or be involved with any business that has as its principal business the production of titanium; solicit the business of any Company customer, supplier or licensee; or induce or attempt to influence any employee of the Company or its affiliates to terminate his or her employment with the Company or its affiliate.

 

Under the terms of the letter agreements, each executive officer will be paid the annual salary set forth therein, subject to increases from time to time in the sole discretion of the Company. In addition to base salaries, each executive is eligible to receive bonuses as the Board of Directors of the Company may determine under the Company’s Pay Philosophy and Guiding Principles Governing Officer Compensation, which is discussed under “Compensation Discussion and Analysis” on page 18,

and will be eligible to participate in the Company’s stock incentive plan. Each executive is also entitled to paid vacation and other benefits in accordance with the Company’s existing policies and existing and future applicable employee benefit programs including RTI’s Supplemental Pension and Excess Benefit plans, as may be amended from time to time. For further information regarding RTI’s Supplemental Pension Plan, see page 31 of the proxy statement.

 

Awards under the 2004 Stock Plan

 

The Company’s 2004 Stock Plan permits the granting of awards, which may be made in a combination of stock (which, under the plan, may be awards of restricted shares, performance shares, phantom stock or non-restricted shares) and stock options. Historically, the Company has utilized a mix of incentive stock options and restricted share awards, with each vesting over time. Stock options are granted at fair market value on the date of grant and vest ratably over three years. Restricted share awards are also granted by the Company, and vest ratably over five years. See page 39 of the proxy statement for additional information regarding awards issued under the Company’s 2004 Stock Plan.

 

Incentive Bonus Awards

 

Consistent with the Company’s Pay Philosophy, annual bonuses for target performance against short-term objectives and/or other strategic milestones or operational goals are established near the median of that for similar positions at appropriate comparator companies. The Compensation Committee has discretion to pay or not pay a bonus to a particular officer, based on his individual performance, regardless of the level of corporate performance. See page 18 of this proxy statement under “Compensation Discussion and Analysis” for additional information regarding the Company’s payment of bonus awards.

 

Perquisites and Other Compensation

 

Certain perquisites are provided to our named executive officers that the Company believes are competitive with other similar companies and consistent with the Company’s compensation philosophy, as discussed under “Compensation Discussion and Analysis”. Through October 2008, the principal perquisite programs that were available to the named executive officers include tax preparation and financial planning advice, use of a Company automobile or automobile allowance, business-related club memberships, and annual executive medical exams. Effective November 1, 2008, the Board moved to eliminate automobile-related perquisites and most club memberships. With the exception of Ms. Hickton, the base salary of each executive officer was increased through a one-time adjustment to reflect the elimination of such perquisites. Ms. Hickton’s base salary was adjusted to reflect the elimination of her automobile allowance and she maintained her business-related club memberships, which are used by the Company as a whole.

 

The Company currently also has in place a 401(k) defined contribution plan in which the Company contributes 50% of the first 8% of an executive’s base salary and bonus contributed by the executive, subject to applicable Internal Revenue Code limits, for those named executive officers that do not participate in the defined benefit pension plan, which is discussed below. Mr. Wellham and Mr. Strome are the only named executive officers for whom the Company is making matching contributions. Other named executive officers may participate in the 401(k) plan up to applicable Internal Revenue Code limits but the Company does not match their contributions.

 

Post-Employment Compensatory Arrangements

 

The Company currently has in place a Pension Plan for Eligible Salaried Employees, a Supplemental Pension Program and an Excess Pension Plan that may be utilized by some or all of the named executive officers. The Company’s pension plan is a qualified defined benefit plan that covers each of the Company’s current named executive officers except for Mr. Wellham and Mr. Strome. The benefits are based on a formula which includes a percentage of the participant’s average monthly base salary multiplied by the number of continuous years of service. The named executive officers also participate

in the supplemental pension program, a non-qualified defined benefit plan, which entitles the executive to specified annual benefits based upon average annual bonuses and years of service if they retire after age 60 or prior to age 60 with 30 years of service with RTI’s consent. The Company also maintains the RTI International Metals, Inc. Excess Benefits Plan for certain highly-compensated employees, which is an unfunded “excess benefit plan”, and provides additional retirement income in an amount equal to the difference between benefits that would have been received under the Pension Plan but for certain tax limitations imposed by the Internal Revenue Code and amounts actually payable under the Pension Plan. See “Retirement Benefits” on page 30 of the proxy statement for additional detail regarding the Company’s pension plans.

 

 

The following table provides information on the current holdings of stock option, restricted stock, and performance share awards by the named executive officers. This table includes vested and unvested option awards as well as unvested restricted stock awards. Each equity grant is shown separately for each named executive officer.