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.  )

Filed by the Registrant þ
Filed by a Party other than the Registrant o

Check the appropriate box:

o		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to §240.14a-12

 

RTI INTERNATIONAL METALS, INC.

(Name of Registrant as Specified In Its Charter)

 

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

Payment of Filing Fee (Check the appropriate box):

þ		No fee required.
o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)		Title of each class of securities to which transaction applies:
	(2)		Aggregate number of securities to which transaction applies:
	(3)		Per unit or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
	(4)		Proposed maximum aggregate value of transaction:
	(5)		Total fee paid:

o		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	(1)		Amount Previously Paid:
	(2)		Form, Schedule or Registration Statement No.:
	(3)		Filing Party:
	(4)		Date Filed:

 

Notice of Annual Meeting of
Shareholders and Proxy Statement

 

April 25, 2008

1:00 p.m. Eastern Daylight Time

 

Glenmoor Country Club

4191 Glenmoor Road, N.W.

Canton, Ohio 44718

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 Securities and Exchange Commission rules.

 

Westpointe Corporate Center One

1550 Coraopolis Heights Road, 5^th Floor

Pittsburgh, Pennsylvania 15108-2973

 

March 28, 2008

 

Dear RTI Shareholder:

 

 

You are cordially invited to attend our 2008 Annual Meeting of Shareholders on April 25, 2008, at the Glenmoor Country Club in Canton, Ohio.

 

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 ratify the appointment of our independent registered public accounting firm.

 

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, 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 2008 Annual Meeting.

 

Sincerely,

Table of Contents

 

 

 

Time:

       1:00 p.m. Eastern Daylight Time

 

Date:

       April 25, 2008

 

Place:

       Glenmoor Country Club

       4191 Glenmoor Road, N.W.

       Canton, Ohio 44718

       USA

 

Purpose:

 

 

Chad Whalen

Secretary

 

March 28, 2008

 

Only shareholders of record on March 12, 2008 may vote at the meeting.

 

 

 

Shareholders of RTI as of the close of business on the record date, March 12, 2008, 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; and

 

FOR the ratification of the appointment of PricewaterhouseCoopers as our independent registered public accounting firm for 2008.

 

 

This proxy statement is being furnished by RTI to its shareholders in connection with the solicitation of proxies by the Board to be voted at the Annual Meeting. RTI intends to first mail this proxy statement to shareholders on or about March 28, 2008.

 

 

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

 

The Company 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 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 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.

 

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 ten members, eight 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 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 7 times during 2007. All of the directors attended more than 75% of the total number of meetings of the Board and of the committees on which they serve. 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 the committees and the number of meetings held during 2007 are described below.

 

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 2007.

 

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, 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 2007.

 

The Compensation Committee

 

This Committee discharges the Board’s duties concerning executive compensation and prepares the report on such compensation required by the Securities and Exchange Commission.

 

The members of the Compensation Committee are Daniel I. Booker (Chairman), Craig R. Andersson, Charles C. Gedeon and Edith E. Holiday. 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 15 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 4 meetings in 2007.

 

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 their periodic review. The Committee has adopted, and the Board has approved, a Committee Charter that 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 39 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 3 meetings in 2007.

 

ELECTION OF DIRECTORS

 

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 may determine to extend the retirement age for a particular director.

 

The Board has nominated ten directors for election. All ten of the nominees for election have previously been elected by the shareholders. Of the ten individuals who are nominees for election, two are current RTI officers and the remaining eight are high-level executives with professional experience. If any nominee is unable to serve, your proxy may be voted for another person 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 BS 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.

 

David Evans Marine Science, Inc.

(marine surveying company)

 

Mr. Fusilli is the Chief Executive Officer of David Evans Marine Science, Inc., a Portland, Oregon based company that provides hydrogeographic surveying of seabed surfaces along ocean, river and lake coastlines. He also 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 6 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 JD 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.

 

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 BS, JD and LLM (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 MBA 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. 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 BS and JD degrees from the University of Florida.

 

 

Ms. Hickton, as of April 27, 2007, is the Vice Chairman and Chief Executive Officer of the Company. 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 BA from the University of Rochester and a JD from the University of Pittsburgh. She is also a director of First National Bank Corporation.

 

 

Mr. Wellham, as of April 27, 2007, is the President & Chief Operating Officer of the Company. 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 BA from the University of Phoenix and a MBA 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 BS degree from Miami University.

 

Vote Required

 

The ten director candidates receiving the most votes will be elected to the Board. Each share of RTI’s Common Stock is entitled to one vote per share and only votes for the election of a director count. Withheld votes and broker non-votes do not count for voting purposes.

 

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

PROPOSAL NO. 2

RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

PricewaterhouseCoopers LLP (“PwC”) has served as the independent registered public accounting firm for RTI and its predecessors for a number of years. For 2007, PwC rendered professional services in connection with the audit of the financial statements of RTI and its subsidiaries, including review of quarterly reports and review of 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 2008.

 

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 2007 and 2006 were $2,117,053 and $2,625,074, respectively.

 

Audit-Related Fees

 

The aggregate fees billed for assurance and related services rendered by PwC that were related to the services described above in 2007 and 2006 were $9,000 and $12,000, respectively. These services include agreed upon procedures related to compliance requirements.

 

Tax Fees

 

The aggregate fees billed for services rendered by PwC for tax services in 2007 and 2006 were $55,101 and $103,700, 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 $2,400 related to licensing fees in each of 2007 and 2006.

 

The Audit Committee on an annual basis preapproves the Audit Plan for the year 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 2007 and 2006, 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. 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 2008.

 

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 2007 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 Independence Standards Board Standard No. 1 and discussed with them their independence from RTI and its management. 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, 2007 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, 2008.

 

          ­ ­

 

 

Security Ownership of Directors and Executive Officers

 

The following table reflects the number of shares of our Common Stock beneficially owned, as of March 1, 2008, 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:

 

 

 

 

For the 2007 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 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; policies, principles and procedures for the selection of performance objectives of the CEO and other named executive officers; and for establishing compensation levels for the CEO and other named executive officers 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 Pay Philosophy covering 2007 was amended to provide for performance-based long-term equity incentive awards in addition to the stock options and time-based restricted stock awards that we have used historically. We also made the Pay Philosophy applicable to the new executive officer positions created in connection with our management succession plan that became effective in April 2007. As such, the Pay Philosophy is applicable to RTI’s Vice Chairman & Chief Executive Officer, President & Chief Operating Officer, Executive Vice Presidents, Senior Vice Presidents and Vice Presidents.

 

The overall philosophy related to our officer compensation programs set out in the Pay Philosophy is as follows:

 

 

The Pay Philosophy is designed to reward executive performance on both an individual basis and as a team as follows:

 

 

 

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 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.

 

 

In January 2008, when determining the grants of long-term incentives based upon 2007 performance, the Compensation Committee instituted a change in our philosophy for long-term incentives by introducing performance-based awards to be implemented over a transition year. The Committee determined that long-term incentives that are in part based upon the future performance of the Company rather than being entirely time based will more closely align the compensation of our executives with the interests of our shareholders. Generally, our executives who are granted performance awards will earn shares of our common stock in amounts ranging from 0% to 200% of a target number of shares based upon the total shareholder return (“TSR”) of RTI as compared to our peers over a pre-determined performance period. For years after this transition year the Committee intends that approximately 40% of the long-term incentives should be in the form of performance share awards for all the named executives. Performance share awards granted after this transition year are expected to have a three-year performance period. The remaining long-term incentives after this year are anticipated to be split approximately 40% time-based restricted shares and 20% stock options for our CEO and COO with a slightly higher percentage of options (and correlating decrease in restricted shares) for our other named executives.

 

The Committee recognizes that while performance share awards more closely align incentive compensation with the interests of our shareholders, from the executives’ point of view, performance-based awards contain additional risk. Specifically, if RTI does not produce a TSR at the minimum specified levels during the performance period, the executive will not receive any shares of our common stock while, in contrast, if the executive had received restricted shares that vest over time, he or she would have received the shares regardless of the future performance of the Company so long as the executive continued to be employed. The long-term incentives granted in January 2008 were based upon the performance of the named

executives and RTI during 2007 with certain transition year adjustments. The executives performed in 2007 in part because they believed that they were eligible to receive the time based long-term incentives if they and the Company met their objectives. As a result the Committee decided to transition the shift to performance awards for this year only by increasing the total mix of incentive awards granted, increasing the target amount of the long-term incentives as a percentage of salary and reducing the performance period for the performance award component to two years.

 

Although the Company has not imposed strict stock ownership guidelines for management, the Board of Directors expects our named executive officers to continue to align their interests with that of our shareholders through long-term holdings in our common stock.

 

 

 

 

 

In furtherance of our management succession plan that was put into effect in April 2007, the Compensation Committee hired Towers Perrin, a national benefits consulting firm, to review the Company’s executive compensation generally, and to give specific advice on the compensation of the Company’s executive officers. Considering this advice, the Company entered into new employment contracts with each of Ms. Hickton, Mr. Wellham, Mr. Hull and Mr. Giangiordano effective on April 27, 2007, with Mr. Whalen effective February 23, 2007 and with Mr. Strome in November 19, 2007 (who is an executive officer, but for 2007 was not a named executive officer). The initial salaries and incentive targets for each named executive officer as reflected in the employment contracts are discussed below under the heading “Analysis of Compensation Awards for Our NEOs”.

 

In making determinations as to the compensation for the named executive officers for the different elements of the compensation program, the Committee looks at each of the following considerations:

 

 

° Vice Chairman & CEO — 35% salary, 20% bonus and 45% long-term incentives.

 

° President & COO — 35% salary, 20% bonus and 45% long-term incentives.

 

° Executive Vice Presidents — 40% salary, 20% bonus and 40% long-term incentives.

 

° Senior Vice Presidents — 40% salary, 20% bonus and 40% long-term incentives.

 

° Vice Presidents — 45% salary, 15% bonus and 40% long-term incentives.

The Pay Philosophy provides that RTI’s officers compensation should generally range at about the average or median of the remuneration paid by the Company’s comparator group when aspects of performance are at target levels.

 

Upon her appointment as CEO, 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. Each performance-based objective is reviewed by the Compensation Committee. 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.

 

The Compensation Committee met in October and agreed to introduce performance-based long-term incentive awards for 2007 to enhance the link between compensation and objectively measurable performance of the Company.

 

In November, the CEO began to review the performance of the named executive officers, other than herself, 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 and each business unit’s performance with respect to income before tax, cash flow return on invested capital, return on equity and return of assets (all determined in accordance with Company accounting policy) as compared to the Company’s annual and six month business plans; and individual performance for each of the named executive officers as compared against the specific objectives set earlier in the year, and discussed these factors with the Chairman of the Board. Using this information, with input from the Chairman of the Board, and basic information regarding trends in executive salaries in the manufacturing industry and the understanding that performance-based awards would be introduced, 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 January. 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.

 

The Committee reviewed 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 by the Committee at this January meeting and the compensation of the named executive officers was ratified by the Board of Directors.

 

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 RTI’s tax deduction for compensation deduction for 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 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.

 

 

In order to determine the initial base salaries for 2007 the Compensation Committee reviewed the compensation practices among publicly-owned peer companies in order to ensure the appropriateness of the Company’s compensation program design and compensation levels. Towers Perrin was hired to report directly to the Compensation Committee as its compensation consultant to advise on compensation matters. The consultant participated in Committee meetings throughout 2007 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 2007 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 compensation peer group was established in January 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. The Compensation Committee reviewed these ranges and determined the base salaries and incentive targets to be included in each named executive officer’s employment contract 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 2007 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.

 

Based upon the Towers Perrin recommendations, the Committee caused the Company to enter into employment contracts with each of our named executive officers pursuant to which the Company established initial compensation for 2007 as follows:

 

 

In reviewing the performance of the named executive officers for purposes of determining if bonuses and long-term incentive compensation should be awarded for 2007, 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 RTI’s share price declined from December 31, 2006 to December 31, 2007 by approximately 12%. It was noted that the peer group showed an aggregate appreciation during the period of approximately 36% and the S&P 500 appreciated by approximately 4%. Offsetting this, however, the Committee noted that RTI’s actual income before tax, earnings per share, cash flow, return on invested capital, return on equity and return on assets for the year all were better than as projected in the Company’s 6-plus-6 business plan. The 6-plus-6 business plan shows the actual results for the first six months of the year and the projected results for the last six months of the year. Given the timing of the management succession, the 6-plus-6 plan was used rather than the full-year business plan because the CEO and named executives all assumed their current positions at the end of April (with the exception of Mr. Whalen). The Committee noted that RTI reported record revenues for the year and increased its earnings per share by 22%. Finally, the Committee noted that the Company signed several long-term contracts with key customers estimated to generate over $4 billion in revenue, thus helping to create a significant foundation for long-term stability and growth.

 

The Committee also measures executive performance against pre-determined personal objectives. Specific objectives for 2007 for Ms. Hickton were to develop a comprehensive five-year strategic plan, strengthen relationships with key customers, strengthen the Company’s investor relations initiatives,

secure raw material sourcing plans, lead the Company’s efforts to support legislation concerning military procurement of specialty metals, and develop an internal management structure to support the Company’s strategic plan. 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:

 

 

Certain operational goals (for example, productivity, inventory turnover and on-time deliveries) are established for each of the Company’s two operating segments, often times at levels that represent significant improvements from prior periods. These operational goals are included in the personal objectives of Mr. Wellham, Mr. Giangiordano and Mr. Hull and were not 100% achieved in 2007. However, several of the operational goals were met and marked improvements were seen in certain of those goals that were not fully achieved during the year.

 

In addition to the personal objectives described above, each of the executive officers is responsible for the Company’s safety goal for reportable incidents during the year. The Company did not meet this goal for 2007.

 

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, the Committee decided to award cash bonuses at approximately the target amount for our CEO and each other named executive officer. The long-term incentives granted to Ms. Hickton included time-based awards (restricted shares and stock options) at approximately 176% of her base salary and performance awards at approximately 88% of her base salary. Time-based awards to Mr. Wellham were granted at 96% of his base salary and he received performance awards at approximately 48% of his base salary. Mr. Giangiordano receives time-based awards at approximately 87% of his base salary and performance awards at approximately 44% of his base salary. Mr. Hull’s time-based awards were granted at approximately 70% of his base salary and his performance awards at approximately 36% of his base salary. Finally, Mr. Whalen was granted time-based awards valued at approximately 55% of his base salary and performance awards valued at approximately 28% of his base salary.

 

In each case the Committee’s intent was to compensate each of our executive officers near the targeted amount established for 2007, as the Committee believes each person’s performance was at least at the expected level and that the Company’s record sales and earnings should be recognized despite the stock price performance. The value of the time-based awards was less than the target established in the Pay Philosophy due to the addition of the performance awards that were not contemplated by the Pay Philosophy as in effect for 2007. The value of the combination of the time based and performance awards was in excess of the targeted amounts to account for the transition to performance based awards as described above.

 

 

In January 2008, we amended the Pay Philosophy to provide for the addition of performance awards as described above. In addition, we expanded the Pay Philosophy to make it applicable to non-officer executives designated by the CEO. Finally, we removed the previously included targets and ranges for incentive grant types and for the proportion of total compensation to be represented by each element. These were removed as the Committee, after consultation with Towers Perrin, believes that our compensation programs should emphasize variable components over guaranteed fixed components. Going forward, we intend to develop award guidelines and targets to approximate the median of comparator companies.

 

 

 

 

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 our named executive officers for the fiscal year ended December 31, 2007. 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.

 

On August 1, 1999, RTI entered into employment agreements with Messrs. Odle and Rupert covering their employment for an initial four year term and for additional one year terms each year thereafter until the officer attains age 65 unless terminated prior thereto by either party on 120 days notice. Under the agreements, each of Mr. Odle and Rupert received the annual salary set forth, subject to increases from time to time in the sole discretion of RTI. RTI had the ability to terminate the services of the officer at any time for “cause” as defined in the agreement. They each agreed, for a period of 24 months after the end of the employment period or employment termination, whichever occurs first, not to be employed by, or otherwise participate in, any business which competes with RTI. This restriction does not apply if the officer terminates employment with RTI under certain circumstances following a “change in control” of RTI as defined therein.

 

Timothy G. Rupert stepped down as President and Chief Executive Officer of the Company on April 27, 2007 and retired from the Company on July 31, 2007. John H. Odle stepped down as Executive Vice President of the Company on April 27, 2007 and retired, consistent with RTI’s mandatory retirement policy, on September 28, 2007 when he reached 65 years of age. See page 30 of this proxy statement for information regarding the payments to be received by each of them in connection with their respective retirements.

 

The Company entered into letter agreements with each of Dawne S. Hickton, William T. Hull, Michael C. Wellham and Stephen R. Giangiordano, effective April 27, 2007, with Chad Whalen on February 23, 2007 and William F. Strome on November 19, 2007, with respect to their employment as executive officers of the Company. These letter agreements superseded any previous agreements in place between the executive and the Company with respect to their employment.

 

Except as described below, each of the five letter agreements are alike. 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 the agreements 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 37 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 35 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: 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. These covenants apply to each of the executives 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.

 

Under the agreements, each 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 for 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 15, 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 Plan, as may be amended from

time to time. For further information regarding RTI’s Supplemental Pension Plan, see page 30 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 24 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 15 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”. The principal perquisite programs that may be utilized by 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.

 

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. Whalen 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 Employee, Supplemental Pension Program and 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. Whalen. The benefits are based on a formula which includes a percentage of the participants average monthly base salary multiplied by 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 29 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 and restricted stock awards by the Named Executive Officers. This table includes unexercised and unvested option awards as well as unvested restricted stock awards. Each equity grant is shown separately for each Named Executive Officer.