S-4/A 1 d888545ds4a.htm AMENDMENT NO. 2 TO S-4 AMENDMENT NO. 2 TO S-4
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As filed with the Securities and Exchange Commission on June 10, 2015

Registration No. 333-203275

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 2

to

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

ALCOA INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Pennsylvania   3350   25-0317820

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

390 Park Avenue

New York, New York 10022-4608

212-836-2600

(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)

 

 

Audrey Strauss, Esq.

Executive Vice President, Chief Legal Officer and Secretary

Alcoa Inc.

390 Park Avenue

New York, New York 10022-4608

(212) 836-2731

(Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service)

 

 

With Copies to:

 

Chad Whalen, Esq.

General Counsel and Senior Vice President

RTI International Metals, Inc.

1550 Coraopolis Heights Road, Fifth Floor

Pittsburgh, Pennsylvania 15108-2973

(412) 893-0026

 

Ronald C. Chen, Esq.

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

(212) 403-1000

 

Lyle G. Ganske, Esq.

Jones Day

North Point

901 Lakeside Avenue

Cleveland, Ohio 44114

(216) 586-3939

 

 

Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and upon completion of the merger described in the enclosed document.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨    Smaller reporting company   ¨

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file an amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such dates as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This document shall not constitute an offer to sell or the solicitation of any offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED JUNE 10, 2015

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

Dear RTI Shareholder:

On March 8, 2015, RTI International Metals, Inc. and Alcoa Inc. agreed to a strategic business combination in which RTI will merge with Alcoa. If the merger is completed, RTI shareholders will have the right to receive 2.8315 shares of Alcoa common stock for each share of RTI common stock held immediately prior to the merger plus an amount of cash in lieu of fractional shares of Alcoa common stock. Based on current information, an aggregate amount of approximately 89.6 million shares of Alcoa common stock is estimated to be delivered to holders of shares of RTI common stock and equity based awards at the closing of the merger, representing approximately 7% of the shares of Alcoa common stock expected to be outstanding immediately following the merger.

RTI will hold an annual meeting where you will be asked to vote to approve a proposal to adopt the merger agreement. RTI shareholders will also be asked to approve (i) a proposal to elect nine directors of RTI; (ii) a proposal to ratify the appointment of PricewaterhouseCoopers LLP as RTI’s independent registered public accounting firm for 2015; (iii) a proposal to approve, on an advisory (non-binding) basis, the compensation of RTI’s named executive officers; (iv) a proposal to approve, on an advisory (non-binding) basis, the compensation that certain executive officers of RTI may receive in connection with the merger pursuant to existing agreements or arrangements with RTI; and (v) a proposal to adjourn the RTI annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the RTI merger proposal.

The annual meeting of RTI shareholders will be held on                 , 2015 at             , at     a.m. Eastern Daylight Time.

The market value of the merger consideration will fluctuate with the market price of Alcoa common stock and will not be known at the time RTI’s shareholders vote on the merger. Alcoa common stock is currently quoted on the New York Stock Exchange under the symbol “AA.” On March 6, 2015, the last full trading day before the public announcement of the merger agreement, the closing share price of Alcoa common stock was $14.48 as reported on the New York Stock Exchange. On                 , 2015 the last practicable trading day before the date of this proxy statement/prospectus, the closing share price of Alcoa common stock was $         per share as reported on the New York Stock Exchange. RTI urges you to obtain current market quotations for Alcoa common stock.

The merger is intended to be treated as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. RTI stockholders generally are not expected to recognize any gain or loss on the exchange of shares of RTI common stock for shares of Alcoa common stock, but will recognize gain on any cash received in lieu of fractional shares of Alcoa common stock.

Your vote is important. Among other conditions, RTI and Alcoa cannot complete the merger unless RTI’s shareholders adopt the merger agreement. Adoption of the merger agreement requires the affirmative vote of the holders of two-thirds of the outstanding shares of RTI common stock entitled to vote. Regardless of whether you plan to attend the annual meeting, please take the time to vote your shares in accordance with the instructions contained in this proxy statement/prospectus.

RTI’s board of directors determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of RTI and its shareholders and has unanimously approved the merger and the merger agreement. RTI’s board of directors unanimously recommends that RTI shareholders vote “FOR” adoption of the merger agreement, “FOR” the directors proposal, “FOR” the accountant proposal, “FOR” the compensation proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal, if necessary or appropriate, to solicit additional proxies in favor of the approval of the merger agreement.

This proxy statement/prospectus describes the annual meeting, the merger, the documents related to the merger and other related matters. Please carefully read this entire proxy statement/prospectus, including “Risk Factors,” beginning on page 17, for a discussion of the risks relating to the proposed merger. You also can obtain information about RTI and Alcoa from documents that each of RTI and Alcoa have filed with the Securities and Exchange Commission.

If you have any questions concerning the merger, RTI shareholders should please contact Dan Crookshank, Director—Investor Relations, Westpointe Corporate Center One, 1550 Coraopolis Heights Road, Fifth Floor, Pittsburgh, Pennsylvania 15108-2973 at (412) 893-0084.

 

 
Dawne S. Hickton
Vice Chair, President, and Chief Executive Officer
RTI International Metals, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the securities to be issued in the merger or determined if this proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

The date of this proxy statement/prospectus is                 , 2015, and it is first being mailed or otherwise delivered to RTI shareholders on or about                 , 2015.


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RTI INTERNATIONAL METALS, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Our Fellow Shareholders:

You are cordially invited to attend the RTI International Metals, Inc. (the “Company”) 2015 Annual Meeting of Shareholders on                 , 2015 at             , at         a.m. Eastern Daylight Time. At the meeting, all holders of the Company’s common stock at the close of business on                 , 2015, will be entitled to vote on the following matters:

 

    a proposal to adopt the Agreement and Plan of Merger, dated as of March 8, 2015, by and among the Company, Alcoa Inc. and Ranger Ohio Corporation, pursuant to which Ranger Ohio Corporation will merge with and into the Company and the Company will become a wholly owned subsidiary of Alcoa Inc. as more fully described in the attached proxy statement/prospectus;

 

    election of the nine directors nominated by the Company’s board of directors;

 

    a proposal to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2015;

 

    a non-binding advisory vote to approve compensation of the Company’s named executive officers as disclosed in these materials;

 

    a non-binding advisory vote to approve compensation that the Company’s named executive officers may receive in connection with the merger pursuant to existing agreements or arrangements with the Company;

 

    a proposal to approve the adjournment of the annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the approval of the merger agreement; and

 

    conduct other business if properly raised.

Only Company shareholders of record at that time are entitled to notice of, and to vote at, the annual meeting, or any adjournment or postponement of the annual meeting. In order for the merger to be adopted, the holders of at least two-thirds of the shares of Company common stock outstanding and entitled to vote must vote in favor of approval of the proposal to adopt the merger agreement. Regardless of whether you plan to attend the annual meeting, please vote as soon as possible. If you hold stock in your name as a shareholder of record, please complete, sign, date and return the accompanying proxy card in the enclosed postage-paid return envelope, or call the toll-free telephone number or use the Internet as described in the instructions included with your proxy card or voting instruction card. If you hold your stock in “street name” through a bank or broker, please follow the instructions on the voting instruction card furnished by the record holder. RTI and Alcoa cannot complete the merger unless the Company’s common shareholders adopt the merger agreement. Failure to vote will have the same effect as voting against the merger.

The enclosed proxy statement/prospectus provides a detailed description of the merger, the merger agreement and related matters. RTI urges you to read the proxy statement/prospectus, including any documents incorporated in the proxy statement/prospectus by reference, and its appendices carefully and in their entirety. If you have any questions concerning the merger or the proxy statement/prospectus, would like additional copies of the proxy statement/prospectus or need help voting your shares of Company common stock, please contact the Company’s proxy solicitor, Georgeson Inc., 480 Washington Blvd., 26th Floor, Jersey City, New Jersey 07310 at (800) 733-6198 (toll free).

The Company’s board of directors has unanimously approved the merger and the merger agreement and unanimously recommends that Company shareholders vote “FOR” approval of the merger agreement, “FOR” the directors proposal, “FOR” the accountant proposal, “FOR” the compensation proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal, if necessary or appropriate, to solicit additional proxies in favor of approval of the merger agreement.

 

BY ORDER OF THE BOARD OF DIRECTORS,
 

 

Loretta L. Benec
Secretary

                , 2015

Only shareholders of record on                 , 2015, may vote at the meeting.


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REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates important business and financial information about Alcoa and RTI from documents filed with or furnished to the Securities and Exchange Commission (the “SEC”) that are not included in or delivered with this proxy statement/prospectus. You can obtain any of the documents filed with or furnished to the SEC by Alcoa or RTI, as the case may be, at no cost from the SEC’s website at http://www.sec.gov. You may also request copies of these documents, including documents incorporated by reference in this proxy statement/prospectus, at no cost by contacting either Alcoa or RTI, as the case may be, at the following addresses:

 

Alcoa Inc.

390 Park Avenue

New York, New York 10022-4608

Attention: Investor Relations
Telephone: (212) 836-2674

RTI International Metals, Inc.

1550 Coraopolis Heights Road, Fifth Floor

Pittsburgh, Pennsylvania 15108-2973

Attention: Secretary

Email: request@rtiintl.com

Telephone: (844) 784-4685

You will not be charged for any of these documents that you request. RTI shareholders requesting documents must do so by                 , 2015, in order to receive them before the annual meeting.

In addition, if you have questions about the merger or the annual meeting, need additional copies of this proxy statement/prospectus or need to obtain proxy cards or other information related to the proxy solicitation, you may contact Georgeson Inc., RTI’s proxy solicitor, at the following address and telephone numbers:

Georgeson Inc.

480 Washington Blvd., 26th Floor

Jersey City, New Jersey 07310

(800) 733-6198 (toll free)

See “Where You Can Find More Information” beginning on page 158 for more details.


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE RTI ANNUAL MEETING

     1   

SUMMARY

     5   

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ALCOA

     12   

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF RTI

     13   

COMPARATIVE PER SHARE DATA

     14   

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     16   

RISK FACTORS

     17   

THE RTI ANNUAL MEETING

     21   

Date, Time and Place of Meeting

     21   

Matters to Be Considered

     21   

Recommendation of the RTI Board of Directors

     21   

Record Date and Quorum

     21   

Shares Held by Officers and Directors

     22   

Voting of Proxies; Incomplete Proxies

     22   

Shares Held in Street Name; Broker Non-Votes

     23   

Revocability of Proxies and Changes to a RTI Shareholder’s Vote

     23   

Solicitation of Proxies

     23   

Attending the Meeting

     23   

Assistance

     24   

CORPORATE GOVERNANCE

     25   

Business Ethics and Corporate Governance

     25   

The Board of Directors

     25   

Director Independence

     26   

Transactions with Related Parties

     26   

Board Committees

     27   

Board Membership Selection Process

     29   

Board Leadership Structure

     29   

Board’s Role in the Oversight of Risk Management

     29   

Compensation Committee Interlocks and Insider Participation

     30   

SECURITY OWNERSHIP

     30   

Security Ownership of Certain Beneficial Owners

     30   

Security Ownership of Directors and Executive Officers

     32   

RTI PROPOSALS

     34   

PROPOSAL NO. 1—RTI MERGER PROPOSAL

     34   

PROPOSAL NO. 2—ELECTION OF DIRECTORS

     35   

PROPOSAL NO. 3—RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     39   

PROPOSAL NO. 4—APPROVAL BY NON-BINDING VOTE OF COMPENSATION OF NAMED EXECUTIVE OFFICERS

     40   

PROPOSAL NO. 5—RTI MERGER-RELATED COMPENSATION PROPOSAL

     42   

PROPOSAL NO. 6—RTI ADJOURNMENT PROPOSAL

     44   

INFORMATION ABOUT THE COMPANIES

     45   

Alcoa

     45   

RTI

     46   

COMMITTEE REPORTS

     47   

Audit Committee Report

     47   

Compensation Committee Report

     47   

EXECUTIVE COMPENSATION

     48   

Compensation Discussion and Analysis

     48   

Summary Compensation Table

     61   

All Other Compensation Table

     62   


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(cont.)

 

     Page  

Grants of Plan-Based Awards Table- 2014

     63   

Letter Agreements

     64   

Awards under the 2004 Stock Plan

     65   

Cash Incentive Compensation Awards

     68   

Perquisites and Other Compensation

     68   

Post-Employment Compensation Arrangements

     68   

Outstanding Equity Awards at Fiscal Year End Table—2014

     69   

Option Exercises and Stock Vested—2014

     70   

Retirement Benefits

     71   

Potential Payments Upon Termination or Change in Control

     72   

Director Compensation Table—2014

     81   

THE MERGER

     83   

Terms of the Merger

     83   

Background of the Merger

     83   

RTI’s Reasons for the Merger; Recommendation of the RTI Board of Directors

     91   

Opinion of Barclays Capital Inc.

     97   

Certain RTI Financial Projections

     105   

Alcoa’s Reasons for the Merger

     108   

Management and Board of Directors of Alcoa After the Merger

     108   

Interests of RTI’s Directors and Executive Officers in the Merger

     108   

Public Trading Markets

     116   

Alcoa’s Dividend Policy

     116   

RTI Shareholders Do Not Have Dissenters’ Appraisal Rights in the Merger

     117   

Regulatory Approvals Required for the Merger

     117   

THE MERGER AGREEMENT

     118   

Structure of the Merger

     118   

Treatment of RTI Equity-Based Awards and RTI Employee Stock Purchase Plan

     119   

Treatment of RTI Convertible Notes

     120   

Closing and Effective Time of the Merger

     120   

Conversion of Shares; Exchange of Certificates

     121   

Representations and Warranties

     121   

Covenants and Agreements

     124   

RTI Meeting of Shareholders and Recommendation of RTI’s Board of Directors

     127   

Agreement Not to Solicit Other Offers

     129   

Conditions to Complete the Merger

     130   

Termination of the Merger Agreement

     132   

Effect of Termination

     133   

Termination Fee

     133   

Expenses

     133   

Amendments; Waivers

     134   

ACCOUNTING TREATMENT

     135   

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

     136   

Tax Consequences of the Merger Generally

     137   

Cash Instead of a Fractional Share

     137   

Backup Withholding

     138   

DESCRIPTION OF COMMON STOCK OF ALCOA

     139   

General

     139   

Dividend Rights

     139   

Voting Rights

     139   

Liquidation Rights

     139   


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(cont.)

 

     Page  

Preemptive or Other Subscription Rights

     139   

Conversion and Other Rights

     139   

Other Matters

     140   

COMPARISON OF SHAREHOLDERS’ RIGHTS

     142   

Authorized Capital Stock

     142   

Size of Board of Directors

     142   

Cumulative Voting

     143   

Classes of Directors

     143   

Removal of Directors

     143   

Filling Vacancies on the Board of Directors

     143   

Nomination of Director Candidates by Shareholders

     144   

Calling Special Meetings of Shareholders

     145   

Quorum

     145   

Shareholder Proposals

     146   

Notice of Shareholder Meetings

     147   

Business Combinations

     147   

Limitation of Personal Liability of Directors

     149   

Indemnification of Directors and Officers

     149   

Amendments to Articles of Incorporation and Bylaws/Code of Regulations

     151   

Action by Written Consent

     151   

Rights of Dissenting Shareholders

     152   

COMPARATIVE MARKET PRICES AND DIVIDENDS

     153   

LEGAL MATTERS

     154   

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     155   

OTHER MATTERS

     156   

Other business at the Annual Meeting

     156   

Outstanding shares

     156   

How RTI solicits proxies

     156   

Shareholder proposals

     156   

Shareholder and other interested party communications

     156   

Board Attendance at Annual Meeting

     156   

Section 16(a) Beneficial Ownership Reporting Compliance

     156   

“Householding” of Proxy Materials

     157   

WHERE YOU CAN FIND MORE INFORMATION

     158   

Annex A—Agreement and Plan of Merger

     A-1   

Annex B—Opinion of Barclays Capital Inc.

     B-1   


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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE RTI ANNUAL MEETING

The following are some questions that you may have regarding the merger and the RTI annual meeting, and brief answers to those questions. RTI and Alcoa urge you to read carefully the remainder of this proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the merger and the RTI annual meeting. Additional important information is also contained in the documents incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 158.

References in this proxy statement/prospectus to “RTI” refer to RTI International Metals, Inc., an Ohio corporation, and, unless the context otherwise requires, to its affiliates. References in this proxy statement/prospectus to “Alcoa” refer to Alcoa Inc., a Pennsylvania corporation, and, unless the context otherwise requires, to its consolidated subsidiaries.

 

Q: What am I being asked to vote on at the RTI annual meeting?

 

A: Alcoa and RTI have entered into an Agreement and Plan of Merger, dated as of March 8, 2015, which is referred to as the merger agreement, pursuant to which Alcoa has agreed to acquire RTI. Under the terms of the merger agreement, Ranger Ohio Corporation (a wholly owned subsidiary of Alcoa) will merge with and into RTI and RTI will become a wholly owned subsidiary of Alcoa, which is referred to as the merger. RTI’s shareholders are being asked to adopt the merger agreement and the transactions it contemplates, including the merger. RTI’s shareholders may be asked to adopt the adjournment of the annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the merger agreement, which is referred to as the adjournment proposal.

In addition to the merger agreement proposal and, if necessary or appropriate, the adjournment proposal, RTI shareholders will be asked to approve the following proposals at the annual meeting:

 

    election of the nine directors nominated by the RTI’s board of directors, which is referred to as the RTI directors proposal;

 

    a proposal to ratify the appointment of PricewaterhouseCoopers LLP (“PwC”), as RTI’s independent registered public accounting firm for 2015, which is referred to as the RTI accountant proposal;

 

    a non-binding advisory vote to approve compensation of RTI’s named executive officers as disclosed in these materials, which is referred to as the RTI compensation proposal;

 

    a non-binding advisory vote to approve compensation that RTI’s named executive officers may receive in connection with the merger pursuant to existing agreements or arrangements with RTI, which is referred to as the RTI merger-related compensation proposal.

 

Q: How does RTI’s board of directors recommend that I vote at the annual meeting?

 

A: RTI’s board of directors unanimously recommends that RTI shareholders vote “FOR” adoption of the merger agreement, “FOR” the RTI directors proposal, “FOR” the RTI accountant proposal, “FOR” the RTI compensation proposal, “FOR” the RTI merger-related compensation proposal and “FOR” the adjournment proposal, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the merger agreement.

 

Q: When and where is the RTI annual meeting?

 

A: The annual meeting of RTI shareholders will be held on                 , 2015 at         , at         a.m. Eastern Daylight Time.

 

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Q: What do I need to do now?

 

A: After you have carefully read this proxy statement/prospectus and have decided how you wish to vote your shares, please vote your shares promptly so that your shares are represented and voted at the annual meeting. If you hold stock in your name as a shareholder of record, you must complete, sign, date and mail your proxy card in the enclosed postage-paid return envelope as soon as possible, or call the toll-free telephone number or use the Internet as described in the instructions included with your proxy card or voting instruction card. If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the instructions you have received from your bank or broker. “Street name” shareholders who wish to vote at the annual meeting will need to obtain a proxy form from the institution that holds their shares.

 

Q: What constitutes a quorum for the annual meeting?

 

A: The presence at the annual meeting, in person or by proxy, of holders of a majority of the outstanding shares of RTI common stock entitled to vote at the annual meeting will constitute a quorum for the transaction of business. All shares of RTI common stock, whether present in person or represented by proxy, including abstentions and broker non-votes, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the RTI annual meeting. A broker non-vote occurs under stock exchange rules when a broker is not permitted to vote on a matter without instructions from the beneficial owner of the shares and no instruction is given.

 

Q: What is the vote required to approve each proposal at the RTI annual meeting?

 

A: Adoption of the merger agreement requires the affirmative vote of the holders of two-thirds of the outstanding shares of RTI common stock as of the close of business on                 , 2015, the record date for the annual meeting.

Under Ohio law and RTI’s Code of Regulations, the nine director candidates receiving the greatest number of votes for election will be elected to RTI’s board of directors.

Ratification of the appointment of PwC as RTI’s independent registered public accounting firm for 2015 requires the favorable vote of a majority of the votes cast.

The result of the shareholder vote on compensation of RTI’s named executive officers is not binding on RTI. Approval of the compensation proposal requires the favorable vote of the majority of the votes cast. RTI’s board of directors will not be required to act in response to the results of the vote, as the ultimate decision regarding RTI’s named executive officers’ compensation remains with RTI’s Compensation Committee.

Approval of the merger-related compensation proposal requires the favorable vote of the majority of the votes cast. The result of the shareholder vote on the merger-related compensation of RTI’s named executive officers is not binding on RTI.

Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of shares of RTI common stock entitled to vote on, and voting for or against or expressly abstaining with respect to, such proposal at the annual meeting, even if less than a quorum.

 

Q: Why is my vote important?

 

A:

If you do not vote, it will be more difficult for RTI to obtain the necessary quorum to hold RTI’s annual meeting. In addition, your failure to vote or failure to instruct your bank or broker how to vote will have the

 

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  same effect as a vote against adoption of the merger agreement. The merger agreement must be adopted by the holders of two-thirds of the outstanding shares of RTI common stock entitled to vote at the annual meeting. RTI’s board of directors unanimously recommends that you vote to adopt the merger agreement.

 

Q: If my shares of common stock are held in street name by my bank or broker, will my bank or broker automatically vote my shares for me?

 

A: No. Your bank or broker cannot vote your shares without instructions from you. You should instruct your bank or broker as to how to vote your shares in accordance with the instructions provided to you. Please check the voting form used by your bank or broker.

 

Q: What if I abstain from voting or fail to instruct my bank or broker?

 

A: If you fail to vote or mark “ABSTAIN” on your proxy, or fail to instruct your bank or broker with respect to the merger agreement proposal, it will have the same effect as a vote “AGAINST” such proposal.

If you mark “ABSTAIN” on your proxy with respect to the directors proposal, the accountant proposal, the compensation proposal or the merger-related compensation proposal, it will have no effect on the proposal. The failure to instruct your bank or broker with respect to the directors proposal, the compensation proposal or the merger-related compensation proposal will result in shares not being voted and will have no effect on the proposal. However, the failure to instruct your bank or broker with respect to the accountant proposal will allow your bank or broker to exercise its discretion with respect to the approval of the accountant proposal.

If you mark “ABSTAIN” on your proxy with respect to the adjournment proposal, it will have the same effect as a vote “AGAINST” the proposal. The failure to vote or failure to instruct your bank or broker with respect to the adjournment proposal, however, will have no effect on the adjournment proposal.

 

Q: Can I attend the annual meeting and vote my shares in person?

 

A: Yes. All holders of RTI common stock as of the record date, including shareholders of record and shareholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the annual meeting. RTI shareholders of record can vote in person at the annual meeting. If you are not a shareholder of record, you must obtain a proxy executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the annual meeting. If you plan to attend the annual meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of personal photo identification with you in order to be admitted. RTI reserves the right to refuse admittance to anyone without proper proof of share ownership and without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the annual meeting is prohibited without RTI’s express written consent.

 

Q: Can I change my vote?

 

A: Yes. You may revoke any proxy at any time before it is voted by (1) signing and returning a proxy card with a later date, (2) delivering a written revocation letter to RTI’s corporate secretary, (3) voting again by telephone or the Internet or (4) attending the annual meeting in person, notifying the corporate secretary and voting by ballot at the annual meeting. Attendance at the annual meeting will not automatically revoke your proxy. A revocation or later-dated proxy received by RTI after the vote will not affect the vote. The RTI corporate secretary’s mailing address is Secretary, Westpointe Corporate Center One, 1550 Coraopolis Heights Road, Fifth Floor, Pittsburgh, Pennsylvania 15108-2973. If you hold your stock in “street name” through a bank or broker, you should contact your bank or broker to revoke your proxy.

 

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Q: What are the U.S. federal income tax consequences of the merger to RTI shareholders?

 

A: The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and holders of RTI common stock are not expected to recognize any gain or loss for United States federal income tax purposes on the exchange of shares of RTI common stock for shares of Alcoa common stock in the merger, except with respect to any cash received instead of fractional shares of Alcoa common stock. See the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 136.

 

Q: Do I have appraisal rights in connection with the merger?

 

A: No. Under Ohio law, holders of RTI common stock are not entitled to any dissenters’ rights of appraisal in connection with the merger. See the section entitled “The Merger—RTI Shareholders Do Not Have Dissenters’ Appraisal Rights in the Merger” beginning on page 117.

 

Q: If I am an RTI shareholder, should I send in my RTI stock certificates now?

 

A: No. Please do not send in your RTI stock certificates with your proxy. After the merger, an exchange agent designated by Alcoa will send you instructions for exchanging RTI stock certificates for the merger consideration. See “The Merger Agreement—Conversion of Shares; Exchange of Certificates” beginning on page 121.

 

Q: What should I do if I hold my shares of RTI common stock in book-entry form?

 

A: You are not required to take any specific actions if your shares of RTI common stock are held in book-entry form. After the completion of the merger, shares of RTI common stock held in book-entry form will automatically be exchanged for shares of Alcoa common stock in book-entry form and cash to be paid instead of fractional shares of Alcoa common stock.

 

Q: May I place my RTI stock certificate(s) into book-entry form prior to the merger?

 

A: Yes, RTI stock certificates may be placed into book-entry form prior to the merger. For more information, please contact Computershare at (800) 622-6757.

 

Q: Whom may I contact if I cannot locate my RTI stock certificate(s)?

 

A: If you are unable to locate your original RTI stock certificate(s), you should contact Computershare at (800) 622-6757.

 

Q: When do you expect to complete the merger?

 

A: RTI and Alcoa expect to complete the merger within two to five months of the date of this preliminary proxy statement/prospectus. However, RTI and Alcoa cannot assure you when or if the merger will occur. RTI and Alcoa must first obtain the approval of RTI shareholders at the annual meeting and the necessary regulatory approvals.

 

Q: Whom should I call with questions?

 

A: If you have any questions concerning the merger or this proxy statement/prospectus, would like additional copies of this proxy statement/prospectus or need help voting your shares of RTI common stock, please contact: Georgeson Inc., RTI’s proxy solicitor, at (800) 733-6198 (toll free).

 

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SUMMARY

This summary highlights selected information from this proxy statement/prospectus. It may not contain all of the information that is important to you. RTI and Alcoa urge you to carefully read the entire proxy statement/prospectus, including the appendices, and the other documents referred to herein in order to fully understand the merger. See “Where You Can Find More Information” on page 158. Each item in this summary refers to the page of this proxy statement/prospectus on which that subject is discussed in more detail.

In the Merger, RTI Shareholders Will Have the Right to Receive 2.8315 Shares of Alcoa Common Stock Per Share of RTI Common Stock (page 83)

RTI and Alcoa are proposing the merger of a subsidiary of Alcoa with and into RTI, with RTI continuing its existence as the surviving corporation and as a direct wholly owned subsidiary of Alcoa. If the merger is completed, you will have the right to receive 2.8315 shares of Alcoa common stock for each share of RTI common stock you hold immediately prior to the merger. Alcoa will not issue any fractional shares of Alcoa common stock in the merger. Each RTI shareholder who would otherwise be entitled to a fractional share, or fractional shares, of Alcoa common stock will instead receive an amount in cash based on prevailing prices of Alcoa common stock following the effective time of the merger.

Example: If you hold 100 shares of RTI common stock, you will have the right to receive 283 shares of Alcoa common stock and a cash payment instead of the 0.15 shares of Alcoa common stock that you otherwise would have received (i.e., 100 shares x 2.8315 = 283.15 shares).

The merger agreement governs the merger. The merger agreement is included in this proxy statement/prospectus as Annex A. Please read the merger agreement carefully. All descriptions in this summary and elsewhere in this proxy statement/prospectus of the terms and conditions of the merger are qualified by reference to the merger agreement.

RTI’s Board of Directors Unanimously Recommends That RTI Shareholders Vote “FOR” Adoption of the Merger Agreement (page 91)

RTI’s board of directors determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of RTI and its shareholders and has unanimously approved the merger agreement. RTI’s board of directors unanimously recommends that RTI shareholders vote “FOR” adoption of the merger agreement. For the factors considered by RTI’s board of directors in reaching its decision to approve the merger agreement, see the section entitled “The Merger—RTI’s Reasons for the Merger; Recommendation of the RTI Board of Directors” beginning on page 91.

Barclays Capital Inc. Has Provided an Opinion to RTI’s Board of Directors Regarding the Exchange Ratio to be Offered to the Holders of RTI Common Stock (page 97 and Annex B)

In connection with the proposed transaction, RTI engaged Barclays Capital Inc. (“Barclays”) to act as financial advisor to RTI in connection with a potential sale of the company. At the RTI board of directors meeting on March 8, 2015, Barclays rendered its oral opinion and delivered its written opinion to the board of directors of RTI that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the exchange ratio of 2.8315 shares of Alcoa common stock per share of RTI common stock to be offered to the shareholders of RTI common stock pursuant to the merger agreement was fair, from a financial point of view, to the shareholders of RTI.

 

 

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The full text of Barclays’ written opinion, dated as of March 8, 2015, is attached as Annex B to this proxy statement/prospectus. Barclays’ written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered and limitations upon the review undertaken by Barclays in rendering its opinion. You are encouraged to read the opinion carefully in its entirety. This summary is qualified in its entirety by reference to the full text of the opinion. Barclays’ opinion is addressed to the board of directors of RTI, addresses only the fairness, from a financial point of view, of the exchange ratio to be offered to the shareholders of RTI and does not constitute a recommendation to any shareholder of RTI as to how such shareholder should vote with respect to the proposed transaction or any other matter. Barclays was not requested to opine as to, and its opinion does not in any manner address, RTI’s underlying business decision to proceed with or effect the proposed transaction or the likelihood of the consummation of the proposed transaction.

For further information, please see the discussion under the caption “The Merger—Opinion of Barclays Capital Inc.” beginning on page 97.

 

What Holders of RTI Equity-Based Awards Will Receive (page 119)

Stock options: Each RTI stock option (whether vested or unvested) will be converted at the closing into an option to purchase, on the same terms and conditions (including with respect to vesting), the number of Alcoa common shares (rounded down to the nearest whole share) equal to the number of RTI common shares subject to such option multiplied by the exchange ratio, at an exercise price per Alcoa share (rounded up to the nearest whole cent) equal to the exercise price per RTI share subject to such option divided by the exchange ratio.

Performance share awards: The number of shares of RTI common stock subject to outstanding RTI performance share awards (“RTI PSAs”) will be fixed at the closing based on the deemed level of achievement of the performance targets applicable to RTI PSAs. Each RTI PSA granted in 2013, which by its terms vests at the closing, will be converted into the right to receive the merger consideration in respect of each RTI common share underlying such award. Each RTI PSA granted in 2014 or 2015 will be converted into an award (which for the avoidance of doubt will not be subject to any further performance-based vesting) covering shares of Alcoa common stock by multiplying the number of shares of RTI common stock subject to such RTI PSA by the exchange ratio (with the resulting number rounded down to the nearest whole share) and will continue to vest over time in accordance with its original service-vesting schedule.

Restricted shares: With respect to each outstanding award of restricted RTI common stock subject to vesting, repurchase or other lapse restrictions, such restrictions will, by their terms, lapse at closing and such award will be converted into the right to receive the merger consideration with respect to each RTI common share subject to such award.

Restricted stock unit awards: Each outstanding RTI restricted stock unit award (an “RTI RSU”) will be converted into a restricted stock unit award covering shares of Alcoa common stock by multiplying the number of shares of RTI common stock subject to such RTI RSU by the exchange ratio (with the resulting number rounded down to the nearest whole share) and will continue to vest over time in accordance with its original service-vesting schedule.

 

RTI Will Hold Its Annual Meeting on             , 2015 (page 21)

The annual meeting of RTI shareholders will be held on             , 2015 at         , at         a.m. Eastern Daylight Time. At the meeting, all holders of the RTI’s common stock at the close of business on                 , 2015, will be asked to:

 

   

approve the adoption of the Agreement and Plan of Merger, dated as of March 8, 2015, by and among RTI, Alcoa Inc. and Ranger Ohio Corporation, pursuant to which Ranger Ohio Corporation will merge

 

 

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with and into RTI and RTI will become a wholly owned subsidiary of Alcoa Inc. as more fully described in the attached proxy statement/prospectus;

 

    elect nine directors nominated by RTI’s board of directors;

 

    ratify the appointment of PwC, as RTI’s independent registered public accounting firm for 2015;

 

    approve (on a non-binding advisory basis) compensation of RTI’s named executive officers as disclosed in these materials;

 

    approve (on a non-binding advisory basis) compensation that RTI’s named executive officers may receive in connection with the merger pursuant to existing agreements or arrangements with RTI; and

 

    approve the adjournment of the annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the approval of the merger agreement.

Only holders of record at the close of business on                 , 2015, will be entitled to vote at the annual meeting. Each share of RTI common stock is entitled to one vote on each proposal to be considered at the RTI annual meeting. As of the record date, there were                 shares of RTI common stock entitled to vote at the annual meeting. As of the record date, directors and executive officers of RTI and their affiliates owned and were entitled to vote                 shares of RTI common stock, representing approximately     % of the shares of RTI common stock outstanding on that date. RTI currently expects that its directors and executive officers will vote their shares in favor of the merger agreement proposal, the RTI directors proposal, the accountant proposal, the RTI compensation proposal, the RTI merger-related compensation proposal and the adjournment proposal, although none of them has entered into any agreements obligating them to do so.

To adopt the merger agreement, holders of two-thirds of the outstanding shares of RTI common stock entitled to vote at the annual meeting must vote in favor of approving the adoption of the merger agreement. Because approval is based on the affirmative vote of two-thirds of the shares outstanding, your failure to vote, failure to instruct your bank or broker with respect to the proposal to approve the adoption of the merger agreement, or abstention will have the same effect as a vote against approval of the merger agreement.

Under Ohio law and RTI’s Code of Regulations, the nine director candidates receiving the greatest number of votes for election will be elected to RTI’s board of directors. RTI shareholders may cast their votes for or withhold with respect to each nominee. RTI 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. Abstentions will have no effect on the outcome of the vote. Consistent with RTI’s Governance Guidelines, any nominee who fails to receive more votes cast for than withheld for his or her election to the board of directors must irrevocably tender his or her resignation. The failure to instruct your bank or broker with respect to the RTI directors proposal will result in your shares not being counted in determining the number of shares necessary for approval.

Ratification of the appointment of PwC as RTI’s independent registered public accounting firm for 2015 requires the favorable vote of a majority of the votes cast. An abstention does not represent a vote cast, and as such has no effect on the advisory vote.

Approval of the RTI compensation proposal and the RTI merger-related compensation proposal requires, in each case, the favorable vote of a majority of the votes cast. The result of the shareholder votes on the RTI compensation proposal and the RTI merger-related compensation proposal are not binding on RTI. An abstention does not represent an advisory vote cast, and as such has no effect on the advisory vote. The failure to instruct your bank or broker with respect to the RTI compensation proposal or the RTI merger-related compensation proposal will result in your shares not being counted in determining the number of shares necessary for approval.

 

 

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Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of shares of RTI common stock entitled to vote on, and voting for or against or expressly abstaining with respect to, such proposal at the annual meeting, even if less than a quorum. Because approval of the adjournment proposal is based on the affirmative vote of a majority of shares voting or expressly abstaining at the annual meeting, abstentions will have the same effect as a vote against this proposal. The failure to vote or failure to instruct your bank or broker with respect to the adjournment proposal, however, will have no effect on the adjournment proposal.

The Merger Is Intended to Be Tax-Free to Holders of RTI Common Stock as to the Shares of Alcoa Common Stock They Receive (page 137)

The merger is intended to be treated as a “reorganization” within the meaning of Section 368(a) of the Code, and it is a condition to RTI’s obligation to complete the merger that RTI receive a legal opinion to that effect. Accordingly, the merger generally will be tax-free to a holder of RTI common stock for United States federal income tax purposes as to the shares of Alcoa common stock he or she receives in the merger, except for any gain or loss that may result from the receipt of cash instead of fractional shares of Alcoa common stock that such holder of RTI common stock would otherwise be entitled to receive.

The United States federal income tax consequences described above may not apply to all holders of RTI common stock. Your tax consequences will depend on your individual situation. Accordingly, RTI strongly urges you to consult your tax advisor for a full understanding of the particular tax consequences of the merger to you.

RTI’s Officers and Directors Have Financial Interests in the Merger That Differ from Your Interests (page 108)

In considering the RTI board of directors’ recommendation to vote for the proposal to approve the adoption of the merger agreement, RTI shareholders should be aware that the directors and executive officers of RTI have interests in the merger that are different from, or in addition to, the interests of RTI shareholders generally and that may create potential conflicts of interest. The RTI board of directors was aware of these interests and considered them, among other matters, in evaluating and negotiating the merger agreement and approving the merger, and in recommending the approval of the merger agreement by RTI shareholders.

For a complete description of these interests, see “The Merger—Interests of RTI’s Directors and Executive Officers in the Merger” beginning on page 108.

 

RTI’s Shareholders Do Not Have Dissenters’ Appraisal Rights in the Merger (page 117)

Appraisal rights are statutory rights that, if applicable under law, enable shareholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with the extraordinary transaction. Appraisal rights are not available in all circumstances, and exceptions to these rights are provided under the Ohio Revised Code. Because both RTI’s and Alcoa’s common stock is listed on the New York Stock Exchange, RTI’s shareholders do not have dissenters’ appraisal rights in the merger with respect to their shares of RTI common stock.

 

Conditions That Must Be Satisfied or Waived for the Merger to Occur (page 130)

Currently, RTI and Alcoa expect to complete the merger within two to five months of the date of this preliminary proxy statement/prospectus. As more fully described in this proxy statement/prospectus and in the merger agreement, the completion of the merger depends on a number of conditions being satisfied or, where legally permissible, waived. These conditions include, among others, approval of the merger agreement by RTI’s shareholders and the receipt of certain required regulatory approvals.

 

 

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RTI and Alcoa cannot be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.

 

Termination of the Merger Agreement (page 132)

Either RTI or Alcoa may decide to terminate the merger agreement if the RTI shareholders fail to adopt the merger agreement at the annual meeting.

In addition, RTI and Alcoa may mutually agree in writing to terminate the merger agreement before completing the merger, even after the RTI shareholders adopt the merger agreement.

In addition, either RTI or Alcoa may decide to terminate the merger agreement, even after the RTI shareholders adopt the merger agreement, if:

 

    an injunction has been entered permanently prohibiting the consummation of the merger and such injunction has become final and nonappealable, but the right to terminate the agreement in this circumstance will not be available to a party if the injunction is due to the failure of that party to perform any of its obligations under the merger agreement;

 

    the merger has not been completed by December 8, 2015, if (i) the failure to complete the merger by that date is not caused by the terminating party’s material breach of the merger agreement and (ii) the other party has not filed (and is not then pursuing) an action seeking specific performance as permitted by the merger agreement; or

 

    the other party breaches the merger agreement in a way that would grant the party seeking to terminate the agreement the right not to consummate the merger, unless the breach is capable of being cured (and is cured) within 30 days following receipt of written notice of such breach (provided that the terminating party is not then in material breach of the merger agreement).

In addition, Alcoa, prior to the adoption of the merger agreement by the RTI shareholders, may terminate the merger agreement if RTI’s board of directors:

 

    changes, qualifies, withholds, withdraws or modifies, in a manner adverse to Alcoa, its recommendation that RTI shareholders vote to adopt the merger agreement (or publicly proposes to do so);

 

    takes any formal action or makes any recommendation or public statement in connection with a tender offer or exchange offer (other than a recommendation against such offer or a customary “stop, look and listen” communication); or

 

    adopts, approves or recommends to RTI shareholders an alternative acquisition proposal (or publicly proposes to do so).

In addition, Alcoa, prior to the adoption of the merger agreement by the RTI shareholders, may terminate the merger agreement if RTI materially breaches its non-solicitation obligations or obligations with respect to other acquisition proposals set forth in the merger agreement.

In addition, RTI, prior to the adoption of the merger agreement by the RTI shareholders, may terminate the merger agreement if (i) RTI’s board of directors authorizes RTI to enter into a definitive agreement with respect to a superior proposal and (ii) RTI enters into such definitive agreement, in each case subject to complying in all material respects with the non-solicitation obligations and obligations with respect to other acquisition proposals set forth in the merger agreement.

 

 

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Termination Fee (page 133)

If the merger agreement is terminated under certain circumstances, including circumstances involving a change in recommendation by RTI’s board of directors, RTI may be required to pay Alcoa a termination fee of $50 million. The termination fee could discourage other companies from seeking to acquire or merge with RTI.

 

Regulatory Approvals Required for the Merger (page 117)

RTI and Alcoa have agreed to use their reasonable best efforts to obtain all regulatory approvals required to complete the transactions contemplated by the merger agreement. Alcoa and RTI have filed applications and notifications to obtain the required regulatory approvals. In particular, Alcoa and RTI have filed all notifications and filings required under the Hart–Scott–Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and all notifications and filings required by the European Commission pursuant to Council Regulation 139/2004 of the European Union, as amended.

Although RTI and Alcoa do not know of any reason why RTI and Alcoa cannot obtain the required regulatory approvals in a timely manner, RTI and Alcoa cannot be certain when or if RTI and Alcoa will obtain them.

 

Board of Directors and Executive Officers of Alcoa Following Completion of the Merger (page 108)

The directors of RTI and its subsidiaries will resign as of the effective time of the merger. The composition of Alcoa’s board of directors and executive officers is not anticipated to change in connection with the completion of the merger.

 

The Rights of RTI Shareholders Will Change as a Result of the Merger (page 142)

The rights of RTI shareholders will change as a result of the merger due to differences in Alcoa’s and RTI’s governing documents. The rights of RTI shareholders are governed by Ohio law, and by RTI’s articles of incorporation and code of regulations, each as amended to date (which is referred to as RTI’s articles of incorporation and code of regulations, respectively). Upon the completion of the merger, the rights of RTI shareholders will be governed by Pennsylvania law, Alcoa’s articles of incorporation and bylaws (which is referred to as Alcoa’s articles of incorporation and bylaws, respectively).

This proxy statement/prospectus contains descriptions of the material differences in shareholder rights under each of the Alcoa and RTI governing documents.

 

Information about the Companies (page 45)

Alcoa

Alcoa is a global leader in lightweight metals engineering and manufacturing. Alcoa’s multi-material products, which include aluminum, titanium, and nickel, are used worldwide in aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas, defense, consumer electronics, and industrial applications. Alcoa is also the world leader in the production and management of primary aluminum, fabricated aluminum, and alumina combined, through its participation in all major aspects of the industry: technology, mining, refining, smelting, fabricating, and recycling. Sales of primary aluminum and alumina represent approximately 40% of Alcoa’s revenues. Alcoa operates in 30 countries. The United States and Europe generated 51% and 27%, respectively, of Alcoa’s sales in 2014. Alcoa is incorporated under the laws of the Commonwealth of Pennsylvania and headquartered in New York, New York.

 

 

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Alcoa’s principal executive offices are located at 390 Park Avenue, New York, New York 10022-4608. The telephone number of its investor relations office is (212) 836-2674, and the telephone number of the office of the secretary is (212) 836-2732.

Additional information about Alcoa and its subsidiaries is included in documents incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information” on page 158.

RTI

RTI is a leading producer and global supplier of titanium mill products, and a manufacturer of fabricated titanium and specialty metal components for the international aerospace, defense, energy, medical device, and other consumer and industrial markets. It is a successor to entities that have been operating in the titanium industry since 1951. RTI first became publicly traded on the New York Stock Exchange in 1990 under the name RMI Titanium Co. and the symbol “RTI”, and was reorganized into a holding company structure in 1998 under the name RTI International Metals, Inc.

RTI’s principal executive offices are located at Westpointe Corporate Center One, 1550 Coraopolis Heights Road, Fifth Floor, Pittsburgh, Pennsylvania 15108-2973 and RTI’s telephone number is (412) 893-0026. RTI’s website can be accessed at http://www.rtiintl.com. Information contained in RTI’s website does not constitute part of, and is not incorporated into, this proxy statement/prospectus.

Additional information about RTI and its subsidiaries is included in documents incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information” on page 158.

 

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ALCOA

The following table presents selected historical consolidated financial data of Alcoa for the periods and at the dates indicated. The historical consolidated financial information (except for shipments and realized prices) for Alcoa for each of the years in the five-year period ended December 31, 2014 is derived from the audited consolidated financial statements of Alcoa as of and for each of the five years ended December 31, 2014. The historical consolidated financial information (except for shipments and realized prices) for Alcoa as of and for the three months ended March 31, 2015 and 2014 has been derived from unaudited interim consolidated financial statements of Alcoa. The data should be read in conjunction with Alcoa’s consolidated financial statements, the notes to the consolidated financial statements and the information in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Alcoa’s Annual Report on Form 10-K for the year ended December 31, 2014 and Quarterly Report on Form 10-Q for the three months ended March 31, 2015, which are incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information” on page 158 for instructions on how to obtain the information that has been incorporated by reference.

(dollars in millions, except per-share amounts and realized prices;

shipments in thousands of metric tons [kmt])

 

    For the three
months ended
March 31,
    For the year ended December 31,  
    2015     2014     2014     2013     2012     2011     2010  

Sales

  $ 5,819      $ 5,454      $ 23,906      $ 23,032      $ 23,700      $ 24,951      $ 21,013   

Amounts attributable to Alcoa common shareholders:

             

Income (loss) from continuing operations

  $ 195      $ (178   $ 268      $ (2,285   $ 191      $ 614      $ 262   

Loss from discontinued operations

    —          —          —          —          —          (3     (8
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

$ 195    $ (178 $ 268    $ (2,285 $ 191    $ 611    $ 254   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share attributable to Alcoa common shareholders:

Basic:

Income (loss) from continuing operations

$ 0.15    $ (0.16 $ 0.21    $ (2.14 $ 0.18    $ 0.58    $ 0.25   

Loss from discontinued operations

  —        —        —        —        —        (0.01   —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

$ 0.15    $ (0.16 $ 0.21    $ (2.14 $ 0.18    $ 0.57    $ 0.25   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted:

Income (loss) from continuing operations

$ 0.14    $ (0.16 $ 0.21    $ (2.14 $ 0.18    $ 0.55    $ 0.25   

Loss from discontinued operations

  —        —        —        —        —        —        (0.01
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

$ 0.14    $ (0.16 $ 0.21    $ (2.14 $ 0.18    $ 0.55    $ 0.24   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shipments of alumina (kmt)

  2,538      2,649      10,652      9,966      9,295      9,218      9,246   

Shipments of aluminum products (kmt)

  1,091      1,156      4,794      4,994      5,197      5,037      4,757   

Alcoa’s average realized price per metric ton of primary aluminum

$ 2,420    $ 2,205    $ 2,405    $ 2,243    $ 2,327    $ 2,636    $ 2,356   

Cash dividends declared per common share

$ 0.03    $ 0.03    $ 0.12    $ 0.12    $ 0.12    $ 0.12    $ 0.12   

Total assets

$ 35,694    $ 35,605    $ 37,399    $ 35,742    $ 40,179    $ 40,120    $ 39,293   

Total debt

$ 8,817    $ 7,747    $ 8,852    $ 8,319    $ 8,829    $ 9,371    $ 9,165   

Cash provided from (used for) operations

$ (175 $ (551 $ 1,674    $ 1,578    $ 1,497    $ 2,193    $ 2,261   

Capital expenditures

$ 247    $ 209    $ 1,219    $ 1,193    $ 1,261    $ 1,287    $ 1,015   

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF RTI

The following table presents selected historical consolidated financial data of RTI for the periods and at the dates indicated. The historical consolidated financial information for RTI for each of the years in the five-year period ended December 31, 2014 is derived from the audited consolidated financial statements of RTI as of and for each of the five years ended December 31, 2014. The historical consolidated financial information for RTI as of and for the three months ended March 31, 2015 and 2014 has been derived from unaudited interim consolidated financial statements of RTI. The data should be read in conjunction with RTI’s consolidated financial statements, the notes to the consolidated financial statements and the information in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in RTI’s Annual Report on Form 10-K for the year ended December 31, 2014 and Quarterly Report on Form 10-Q for the three months ended March 31, 2015, which are incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information” on page 158 for instructions on how to obtain the information that has been incorporated by reference.

(dollars in thousands, except per share data)

 

     Three Months Ended
March 31,
    Years Ended December 31,  
     2015      2014     2014      2013      2012(3)      2011     2010  

Income Statement Data:

                  

Net sales

   $ 198,492       $ 174,545      $ 793,579       $ 783,273       $ 699,987       $ 488,352      $ 398,163   

Operating income

     12,164         1,617        70,327         62,015         47,417         23,382        14,423   

Income (loss) before income taxes

     3,424         (5,405     41,738         22,796         29,138         7,793        12,182   

Net income (loss) from continuing operations

     4,533         (3,816     31,701         15,657         13,453         (2,308     (18,122

Basic earnings (loss) per share—continuing operations

   $ 0.15       $ (0.13   $ 1.03       $ 0.51       $ 0.44       $ (0.08   $ (0.61

Diluted earnings (loss) per share—continuing operations

   $ 0.15       $ (0.13   $ 1.03       $ 0.51       $ 0.44       $ (0.08   $ (0.61

 

     March 31,      December 31,  
     2015      2014      2014(1)      2013(2)      2012(3)      2011      2010  

Balance Sheet Data:

                    

Working capital

   $ 705,621       $ 772,189       $ 698,578       $ 791,143       $ 472,084       $ 586,965       $ 638,519   

Total assets

     1,568,745         1,500,343         1,565,694         1,505,545         1,220,092         1,100,996         1,089,606   

Long-term debt

     461,152         434,209         456,657         430,300         198,337         186,981         178,107   

Total shareholders’ equity

     792,866         767,602         795,480         773,974         708,239         694,640         696,529   

 

(1) In 2014, the outstanding principal amount of 3.000% Convertible Senior Notes due 2015 (the “2015 Notes”) was reclassified to current portion of long-term debt. The 2015 Notes are due in December 2015.
(2) RTI issued the $402.5 million aggregate principal amount of 1.625% Convertible Senior Notes due 2019 (the “2019 Notes”), and repurchased approximately $115.6 million of the then outstanding $230 million aggregate principal amount 2015 Notes in April 2013.
(3) In 2012, RTI acquired RTI Remmele Engineering, Inc. and RTI Remmele Medical, Inc.

 

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COMPARATIVE PER SHARE DATA

The below table sets forth selected historical as reported and unaudited pro forma per share information of Alcoa and RTI.

As Reported Per Share Information of Alcoa and RTI. The as reported per share information of each of Alcoa and RTI below is derived from the audited financial statements as of, and for the year ended, December 31, 2014 and the unaudited financial statements as of, and for the three months ended, March 31, 2015 for each such company.

Pro Forma Combined Per Share Information of Alcoa. The unaudited pro forma combined per share information of Alcoa below gives effect to the merger under the acquisition method of accounting, as if the merger had been effective on January 1, 2014, and assuming that 2.8315 shares of Alcoa common stock had been issued in exchange for each (i) outstanding share of RTI common stock, (ii) issuable share of RTI common stock related to its two outstanding series of convertible senior notes and (iii) issuable share of RTI common stock related to its compensatory equity awards that either could be issued prior to the completion of the merger or become entitled to receive the merger consideration. This unaudited pro forma combined per share information also provides for the consideration of an after-tax estimate for additional depreciation expense due to a step-up in asset basis and a reduction in interest expense related to RTI’s two outstanding series of convertible senior notes. The unaudited pro forma combined per share information of Alcoa is derived from the audited financial statements, as adjusted for the applicable pro forma adjustments, as of, and for the year ended, December 31, 2014 and the unaudited financial statements, as adjusted for the applicable pro forma adjustments, as of, and for the three months ended, March 31, 2015 for Alcoa and RTI.

The unaudited pro forma combined per share information of Alcoa does not purport to represent the actual results of operations and financial position that Alcoa would have achieved had the companies been combined during the year ended December 31, 2014 or the three months ended March 31, 2015 or to project the future results of operations and financial position that Alcoa may achieve after the merger.

Equivalent Pro Forma Per Share Information of RTI. The unaudited equivalent pro forma per share amounts of RTI below are calculated by multiplying the unaudited pro forma combined per share amounts of Alcoa by the exchange ratio (2.8315 shares of Alcoa common stock for each share of RTI common stock) so that the per share amounts are equated to the respective values for one share of RTI common stock.

Generally. You should read the below information in conjunction with the selected historical financial information included elsewhere in this proxy statement/prospectus and the historical financial statements of Alcoa and RTI and related notes that are incorporated into this proxy statement/prospectus by reference. See “Selected Historical Consolidated Financial Data of Alcoa,” “Selected Historical Consolidated Financial Data of RTI” and “Where You Can Find More Information” beginning on pages 12, 13 and 158, respectively, of this proxy statement/prospectus.

 

Per common share data    As Reported      Pro Forma  
     Alcoa      RTI      Alcoa
Combined
     RTI
Equivalent
 

For the year ended December 31, 2014

           

Income from continuing operations—basic

   $ 0.21       $ 1.03       $ 0.21       $ 0.59   

Income from continuing operations—diluted(1)

   $ 0.21       $ 1.03       $ 0.21       $ 0.59   

Cash dividends(2)

   $ 0.12         —         $ 0.12       $ 0.34   

As of December 31, 2014

           

Book value(3)

   $ 9.07       $ 25.89       $ 9.45       $ 26.76   

For the three months ended March 31, 2015

           

Income from continuing operations—basic

   $ 0.15       $ 0.15       $ 0.13       $ 0.37   

Income from continuing operations—diluted(1)

   $ 0.14       $ 0.15       $ 0.13       $ 0.37   

Cash dividends(2)

   $ 0.03         —         $ 0.03       $ 0.08   

As of March 31, 2015

           

Book value(3)

   $ 8.43       $ 25.75       $ 8.85       $ 25.06   

 

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(1) The Alcoa pro forma combined income from continuing operations—diluted per share amount excludes the potential dilution from RTI compensatory equity awards outstanding that will remain outstanding subsequent to the merger (see “The Merger Agreement” beginning on page 118 of this proxy statement/prospectus for additional information).
(2) The Alcoa pro forma combined cash dividends per share is the same as the as reported amount because no change in dividend policy is expected as a result of the merger.
(3) Book value per share is calculated by dividing total shareholders’ equity (excluding preferred stock) by the number of common shares outstanding at the end of the period.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained or incorporated by reference in this proxy statement/prospectus contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements about the financial condition, results of operations, earnings outlook and prospects of Alcoa, RTI and the combined company following the proposed transaction and statements for the period following the completion of the merger. Words such as “anticipates,” “believes,” “feels,” “expects,” “estimates,” “seeks,” “strives,” “plans,” “intends,” “outlook,” “forecast,” “position,” “target,” “mission,” “assume,” “achievable,” “potential,” “strategy,” “goal,” “aspiration,” “outcome,” “continue,” “remain,” “maintain,” “trend,” “objective” and variations of such words and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions, as they relate to Alcoa, RTI, the proposed transaction or the combined company following the transaction often identify forward-looking statements.

These forward-looking statements are predicated on the beliefs and assumptions of each of Alcoa management and RTI management based on information known to management as of the date of this proxy statement/prospectus and do not purport to speak as of any other date. Forward-looking statements may include descriptions of the expected benefits and costs of the transaction; forecasts of revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries; management plans relating to the transaction; the expected timing of the completion of the transaction; the ability to complete the transaction; the ability to obtain any required regulatory, shareholder or other approvals; any statements of the plans and objectives of management for future or past operations, products or services, including the execution of integration plans; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing.

The forward-looking statements contained or incorporated by reference in this proxy statement/prospectus reflect the view of management as of this date with respect to future events and are subject to risks and uncertainties. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, actual results could differ materially from those anticipated by the forward-looking statements or historical results. Factors that could cause or contribute to such differences include, but are not limited to, (1) the matters set forth under “Risk Factors” beginning on page 17; (2) the possibility that expected benefits may not materialize in the timeframe expected or at all, or may be more costly to achieve; (3) that the transaction may not be timely completed, if at all; (4) that prior to the completion of the transaction or thereafter, Alcoa’s and RTI’s respective businesses may not perform as expected due to transaction-related uncertainty or other factors; (5) that the parties are unable to successfully implement integration strategies; (6) that required regulatory, shareholder or other approvals are not obtained or other closing conditions are not satisfied in a timely manner or at all; (7) reputational risks and the reaction of the companies’ customers to the transaction; (8) diversion of management time on merger-related issues; and (9) those factors referenced in Alcoa’s and RTI’s filings with the SEC.

For any forward-looking statements made in this proxy statement/prospectus or in any documents incorporated by reference into this proxy statement/prospectus, Alcoa and RTI claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this proxy statement/prospectus or the date of any document incorporated by reference in this proxy statement/prospectus. Alcoa and RTI do not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this proxy statement/prospectus and attributable to Alcoa, RTI or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this proxy statement/prospectus.

 

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RISK FACTORS

In addition to general investment risks and the other information contained in or incorporated by reference into this proxy statement/prospectus, including the matters addressed under the heading “Cautionary Statement Regarding Forward-Looking Statementson page 16 and the matters discussed under the caption “Risk Factors” in the Annual Reports on Forms 10-K filed by Alcoa and RTI, respectively, for the year ended December 31, 2014, as updated by other reports filed with the SEC, you should carefully consider the following risk factors in deciding how to vote on the merger agreement proposal.

Because the exchange ratio is fixed and the market price of Alcoa common stock will fluctuate, RTI shareholders cannot be sure of the market value of the merger consideration they will receive.

Upon completion of the merger, each share of RTI common stock will be converted into 2.8315 shares of Alcoa common stock, plus cash in lieu of any fractional shares. Because the exchange ratio is fixed, the value of the shares of Alcoa common stock that will be issued to you in the merger will depend on the market price of Alcoa common stock at the time the shares are issued. There will be no adjustment to the fixed number of shares of Alcoa common stock that will be issued to you based upon changes in the market price of Alcoa common stock or RTI common stock prior to the closing. Neither Alcoa nor RTI is permitted to terminate the merger agreement or resolicit the vote of RTI shareholders solely because of changes in the market price of either company’s stock.

The market price of Alcoa common stock at the time the merger is completed may vary from the market price of Alcoa common stock on the date the merger agreement was executed, on the date of this proxy statement/prospectus and on the date of the RTI annual meeting as a result of various factors that are beyond the control of Alcoa and RTI, including but not limited to general market and economic conditions, changes in each of RTI’s and Alcoa’s respective businesses, operations and prospects, and regulatory considerations. In addition to the adoption of the merger agreement by RTI shareholders, completion of the merger is subject to receipt of required regulatory approvals and satisfaction of other conditions that may not occur until after the RTI annual meeting. Therefore, at the time of the RTI annual meeting you will not know the precise value of the consideration you will receive at the effective time of the merger. You should obtain current market quotations for shares of Alcoa common stock and for shares of RTI common stock.

The market price of Alcoa common stock after the merger may be affected by factors different from those affecting the shares of Alcoa or RTI currently.

Upon completion of the merger, holders of RTI common stock will become holders of Alcoa common stock. Alcoa’s business differs from that of RTI, and, accordingly, the results of operations of the combined company and the market price of the combined company’s shares of common stock may be affected by factors different from those currently affecting the independent results of operations of each of Alcoa and RTI. For a discussion of the businesses of Alcoa and RTI and of certain factors to consider in connection with those businesses, see the documents incorporated by reference in this proxy statement/prospectus and referred to under “Where You Can Find More Information” beginning on page 158.

Regulatory approvals may not be received, may take longer than expected or impose conditions that are not presently anticipated.

Before the merger may be completed, RTI and Alcoa must obtain various approvals from regulatory authorities. These regulators may impose conditions on the completion of the merger or require changes to the terms of the merger. Such conditions or changes could have the effect of delaying completion of the merger or imposing additional costs on Alcoa following the merger. See “The Merger—Regulatory Approvals Required for the Merger” beginning on page 117.

 

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Combining the two companies may be more difficult, costly or time-consuming than expected.

Alcoa and RTI have operated and, until the completion of the merger, will continue to operate, independently. The success of the merger will depend, in part, on RTI and Alcoa’s ability to successfully combine the businesses of Alcoa and RTI. To realize these anticipated benefits, after the completion of the merger, Alcoa expects to integrate RTI’s business into its own. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with customers and employees or to achieve the anticipated benefits of the merger. The loss of key employees could adversely affect Alcoa’s ability to successfully conduct its business in the markets in which RTI now operates, which could have an adverse effect on Alcoa’s financial results and the value of its common stock. If Alcoa experiences difficulties with the integration process, the anticipated benefits of the merger may not be realized fully or at all, or may take longer to realize than expected. There also may be business disruptions that cause RTI to lose customers or cause customers to move their business to competing companies. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on each of RTI and Alcoa during this transition period and for an undetermined period after consummation of the merger.

Alcoa may fail to realize the cost savings estimated for the merger.

Alcoa estimates that it will achieve cost savings from the merger when the two companies have been fully integrated. While Alcoa continues to be comfortable with these expectations as of the date of this proxy statement/prospectus, it is possible that the estimates of the potential cost savings could turn out to be incorrect. The cost savings estimates also assume Alcoa’s ability to combine the businesses of Alcoa and RTI in a manner that permits those cost savings to be realized. If the estimates turn out to be incorrect or Alcoa is not able to combine successfully the two companies, the anticipated cost savings may not be fully realized or realized at all, or may take longer to realize than expected.

The fairness opinion rendered to the board of directors of RTI by its financial advisor was based on the financial analyses performed by RTI’s financial advisor, which considered factors such as market and other conditions then in effect, and financial forecasts and other information made available to RTI’s financial advisor, as of the date of its fairness opinion. As a result, the fairness opinion does not reflect changes in events or circumstances after the date of the fairness opinion. RTI has not obtained, and does not expect to obtain, an updated fairness opinion from its financial advisor reflecting changes in circumstances that may have occurred between signing the merger agreement and the completion of the merger.

The fairness opinion rendered to the board of directors of RTI by Barclays was provided in connection with, and at the time of, the board of directors’ evaluation of the merger and the merger agreement. Barclays’ fairness opinion was based on the financial analyses performed, which considered factors such as market and other conditions then in effect, and financial forecasts and other information made available to Barclays, as of the date of its opinion, which may have changed, or may change, after the date of the fairness opinion. RTI has not obtained an updated fairness opinion as of the date of this proxy statement/prospectus from Barclays and RTI will not obtain an updated fairness opinion prior to the completion of the merger. Changes in the operations and prospects of RTI or Alcoa, general market and economic conditions and other factors that may be beyond the control of RTI and Alcoa, and on which the fairness opinion was based, may alter the value of RTI or Alcoa or the prices of shares of RTI common stock or Alcoa common stock by the time the merger is completed. The fairness opinion does not speak as of any date other than the date of the fairness opinion. The fairness opinion is included as Annex B to this proxy statement/prospectus. For a description of the fairness opinion that RTI received from its financial advisor, please refer to “The Merger—Opinion of Barclays Capital Inc.” on page 97. For a description of the other factors considered by RTI’s board of directors in determining to approve the merger, please refer to “The Merger—RTI’s Reasons for the Merger; Recommendation of the RTI Board of Directors” on page 91.

 

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The shares of Alcoa common stock to be received by RTI shareholders as a result of the merger will have different rights from the shares of RTI common stock they currently hold.

Following completion of the merger, holders of RTI common stock will no longer be shareholders of RTI, an Ohio corporation, but will instead be shareholders of Alcoa, a Pennsylvania corporation. The rights associated with RTI common stock are different from the rights associated with Alcoa common stock. See the section of this proxy statement/prospectus entitled “Comparison of Shareholders’ Rights” beginning on page 142.

RTI shareholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

RTI shareholders currently have the right to vote in the election of the RTI board of directors and on other matters affecting RTI. When the merger occurs, each RTI shareholder that receives shares of Alcoa common stock will become a shareholder of Alcoa with a percentage ownership of the combined organization that is much smaller than the shareholder’s percentage ownership of RTI. Because of this, RTI shareholders will have less influence on the management and policies of Alcoa than they now have on the management and policies of RTI.

RTI will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on RTI. These uncertainties may impair RTI’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with RTI to seek to change existing business relationships with RTI. Retention of certain employees by RTI may be challenging while the merger is pending, as certain employees may experience uncertainty about their future roles with RTI. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with RTI, RTI’s business following the merger could be harmed. See the section entitled “The Merger Agreement—Covenants and Agreements” beginning on page 124 of this proxy statement/prospectus for a description of the restrictive covenants applicable to RTI.

Termination of the merger agreement could negatively impact RTI.

If the merger agreement is terminated, there may be various consequences. For example, RTI’s businesses may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger, or the market price of RTI common stock could decline to the extent that the current market price reflects a market assumption that the merger will be completed. If the merger agreement is terminated and RTI’s board of directors seeks another merger or business combination, RTI shareholders cannot be certain that RTI will be able to find a party willing to pay the equivalent or greater consideration than that which Alcoa has agreed to pay in the merger. In addition, if the merger agreement is terminated under certain circumstances, including circumstances involving a change in recommendation by RTI’s board of directors, RTI may be required to pay Alcoa a termination fee of $50 million.

The directors and executive officers of RTI have interests and arrangements that may have influenced their decisions to support or recommend that you adopt the merger agreement.

Some of the interests of the directors and executive officers of RTI are different from those of RTI common shareholders in general, and directors and officers of RTI are participants in arrangements that are different from, or in addition to, those of RTI common shareholders. These interests are described in more detail in the section of this proxy statement/prospectus entitled “The Merger—Interests of RTI’s Directors and Executive Officers in the Merger” beginning on page 108.

 

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RTI shareholders do not have dissenters’ appraisal rights in the merger.

Appraisal rights are statutory rights that, if applicable under law, enable shareholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with the extraordinary transaction. RTI’s shareholders are not entitled to any appraisal rights in connection with the merger. See the sections of this proxy statement/prospectus entitled “The Merger—RTI Shareholders Do Not Have Dissenters’ Appraisal Rights in the Merger” beginning on page 117 and “Comparison of Shareholders’ Rights—Rights of Dissenting Shareholders” beginning on page 152.

 

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THE RTI ANNUAL MEETING

This section contains information for RTI shareholders about the annual meeting that RTI has called to allow its shareholders to consider and adopt the merger agreement and other proposals set forth herein. RTI is mailing this proxy statement/prospectus to you, as a RTI shareholder, on or about                 , 2015. Together with this proxy statement/prospectus, RTI is also sending to you a notice of the annual meeting of RTI shareholders and a form of proxy card that RTI’s board of directors is soliciting for use at the annual meeting and at any adjournments or postponements of the annual meeting.

This proxy statement/prospectus is also being furnished by Alcoa to RTI shareholders as a prospectus in connection with the issuance of shares of Alcoa common stock upon completion of the merger.

Date, Time and Place of Meeting

The annual meeting will be held                 , 2015 at         , at             a.m. Eastern Daylight Time.

Matters to Be Considered

At the annual meeting of shareholders, you will be asked to consider and vote upon the following matters:

 

    a proposal to adopt the merger agreement and the transactions it contemplates;

 

    election of the nine directors nominated by the RTI board of directors;

 

    a proposal to ratify the appointment of PwC as RTI’s independent registered public accounting firm for 2015;

 

    a non-binding advisory vote to approve compensation of RTI’s named executive officers as disclosed in these materials;

 

    a non-binding advisory vote to approve compensation that certain executive officers of RTI may receive in connection with the merger pursuant to existing agreements or arrangements with RTI; and

 

    a proposal to approve the adjournment of the annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the approval of the merger agreement.

Recommendation of the RTI Board of Directors

RTI’s board of directors determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of RTI and its shareholders and has unanimously approved the merger and the merger agreement. RTI’s board of directors unanimously recommends that RTI shareholders vote “FOR” approval of the merger agreement, FOR the directors proposal, FOR the accountant proposal, FOR the compensation proposal, FOR the merger-related compensation proposal and “FOR” the adjournment proposal. See “The Merger—RTI’s Reasons for the Merger; Recommendation of the RTI Board of Directors” on page 91 for a more detailed discussion of the RTI board of directors’ recommendation.

Record Date and Quorum

RTI’s board of directors has fixed the close of business on                 , 2015, as the record date for determining the holders of RTI common stock entitled to receive notice of and to vote at the RTI annual meeting.

As of the record date, there were                 shares of RTI common stock outstanding and entitled to vote at the RTI annual meeting held by approximately             holders of record. Each share of RTI common stock entitles the holder to one vote at the RTI annual meeting on each proposal to be considered at the RTI annual meeting.

 

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The presence at the annual meeting, in person or by proxy, of holders of a majority of the outstanding shares of RTI common stock entitled to vote at the annual meeting will constitute a quorum for the transaction of business. All shares of RTI common stock, whether present in person or represented by proxy, including abstentions and broker non-votes, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the RTI annual meeting. A broker non-vote occurs under stock exchange rules when a broker is not permitted to vote on a matter without instructions from the beneficial owner of the shares and no instruction is given.

Shares Held by Officers and Directors

As of the record date, directors and executive officers of RTI and their affiliates owned and were entitled to vote                 shares of RTI common stock, representing approximately     % of the shares of RTI common stock outstanding on that date. RTI currently expects that its directors and executive officers will vote their shares in favor of the merger agreement proposal, the directors proposal, the accountant proposal, the compensation proposal, the merger-related compensation proposal and the adjournment proposal, although none of them has entered into any agreements obligating them to do so. Approval of the merger agreement will require the affirmative vote of the holders of two-thirds of the outstanding shares of RTI common stock entitled to vote at the annual meeting. See “The Merger—Interests of RTI’s Directors and Executive Officers in the Merger” beginning on page 108.

Voting of Proxies; Incomplete Proxies

Each copy of this proxy statement/prospectus mailed to holders of RTI common stock is accompanied by a form of proxy with instructions for voting. If you hold stock in your name as a shareholder of record, you may vote in any one of the following three ways:

 

    by Internet: go to the website shown on the enclosed proxy card;

 

    by telephone: call the toll-free number shown on the enclosed proxy card (1-800-652-8683) and follow the voice prompts using a touch-tone telephone; or

 

    by mail: sign and date each proxy card you receive and return it in the envelope provided. If you return a signed proxy card but do not mark the boxes showing how you wish to vote, your shares will be voted FOR all proposals as recommended by the RTI board of directors.

If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the instructions you have received from your bank or broker.

Each share of the RTI’s common stock is entitled to one vote per share. The specific votes required to approve each proposal is discussed at the end of each proposal as set forth in this proxy statement/prospectus. 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 each proposal as set forth therein.

All shares represented by valid proxies (including those given by telephone or the Internet) that RTI receives through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card. If you make no specification on your proxy card as to how you want your shares voted before signing and returning it, your proxy will be voted “FOR” approval of the merger agreement, FOR the directors proposal, FOR the accountant proposal, FOR the compensation proposal, FOR the merger-related compensation proposal and “FOR” the adjournment proposal. No matters other than the matters described in this proxy statement/prospectus are anticipated to be presented for action at the annual meeting or at any adjournment or postponement of the annual meeting.

RTI shareholders should not send RTI stock certificates with their proxy cards. After the merger is completed, holders of RTI common stock will be mailed a transmittal form with instructions on how to exchange their RTI stock certificates for the merger consideration.

 

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Shares Held in Street Name; Broker Non-Votes

Under stock exchange rules, banks, brokers and other nominees who hold shares of RTI common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokers and other nominees are not allowed to exercise their voting discretion with respect to the approval of matters determined to be “non-routine,” such as approval of the merger agreement proposal, without specific instructions from the beneficial owner. Broker non-votes are shares held by a broker, bank or other nominee that are represented at the RTI annual meeting, but with respect to which the broker or nominee is not instructed by the beneficial owner of such shares to vote on the particular proposal and the broker does not have discretionary voting power on such proposal. It is expected that brokers, banks and other nominees will not have discretionary authority to vote on the merger agreement proposal, the RTI directors proposal, the RTI compensation proposal, the RTI merger-related compensation proposal or the adjournment proposal and, as a result, RTI anticipates that there will not be any broker non-votes cast in connection with these proposals. Therefore, if your broker, bank or other nominee holds your shares of RTI common stock in “street name,” your broker, bank or other nominee will vote your shares of RTI common stock only if you provide instructions on how to vote by filling out the voter instruction form sent to you by your broker, bank or other nominee with this proxy statement/prospectus.

Revocability of Proxies and Changes to a RTI Shareholder’s Vote

If you hold stock in your name as a shareholder of record, you may revoke any proxy at any time before it is voted by (1) signing and returning a proxy card with a later date, (2) delivering a written revocation letter to RTI’s corporate secretary, (3) voting again by telephone or the Internet, or (4) attending the annual meeting in person, notifying the corporate secretary, and voting by ballot at the annual meeting.

Any RTI shareholder entitled to vote in person at the annual meeting may vote in person regardless of whether a proxy has been previously given, but the mere presence (without notifying RTI’s corporate secretary) of a RTI shareholder at the annual meeting will not constitute revocation of a previously given proxy.

Written notices of revocation and other communications about revoking your proxy should be addressed to:

Westpointe Corporate Center One

1550 Coraopolis Heights Road, Fifth Floor

Pittsburgh, Pennsylvania 15108-2973

Attention: Secretary

If your shares are held in “street name” by a bank or broker, you should follow the instructions of your bank or broker regarding the revocation of proxies.

Solicitation of Proxies

RTI will bear the entire cost of soliciting proxies from you. In addition to solicitation of proxies by mail, RTI will request that banks, brokers, and other record holders send proxies and proxy material to the beneficial owners of RTI common stock and secure their voting instructions. RTI will reimburse the record holders for their reasonable expenses in taking those actions. RTI has also made arrangements with Georgeson Inc. to assist it in soliciting proxies and has agreed to pay them $13,500 plus reasonable out-of-pocket expenses for these services. If necessary, RTI may use several of its regular employees, who will not be specially compensated, to solicit proxies from the RTI shareholders, either personally or by telephone, facsimile, letter or other electronic means.

Attending the Meeting

All holders of RTI common stock as of the record date, including shareholders of record and shareholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the

 

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annual meeting. RTI shareholders of record can vote in person at the annual meeting. If you are not a shareholder of record, you must obtain a proxy executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the annual meeting. If you plan to attend the annual meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership as of the record date. In addition, you must bring a form of personal photo identification with you in order to be admitted. RTI reserves the right to refuse admittance to anyone without proper proof of share ownership and without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the annual meeting is prohibited without RTI’s express written consent.

Assistance

If you have any questions concerning the merger or this proxy statement/prospectus, would like additional copies of this proxy statement/prospectus or need help voting your shares of RTI common stock, please contact Georgeson Inc., RTI’s proxy solicitor:

Georgeson Inc.

480 Washington Blvd., 26th Floor

Jersey City, New Jersey 07310

(800) 733-6198 (toll free)

 

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CORPORATE GOVERNANCE

Business Ethics and Corporate Governance

Business Conduct and Ethics

RTI is committed to conducting business both ethically and legally. Ethical and legal conduct in all of RTI’s business affairs is essential to RTI’s future. RTI’s Code of Ethical Business Conduct, adopted by the RTI board of directors, applies to all directors and employees of RTI, including all of RTI’s executive and other officers, and its principles extend to those with whom RTI conducts business. RTI’s Code of Ethical Business Conduct complies with the requirements of the New York Stock Exchange (the “NYSE”) and Securities and Exchange Commission (“SEC”) regulations.

RTI’s Code of Ethical Business Conduct is posted under the Investor Relations link on RTI’s website, www.rtiintl.com. Any amendments to RTI’s Code of Ethical Business Conduct, or waivers of its application with respect to RTI’s directors or executive officers, will be disclosed promptly on RTI’s website. There were no waivers or significant amendments during 2014.

Corporate Governance Guidelines

RTI’s Corporate Governance Guidelines (the “Governance Guidelines”) were adopted by the RTI board of directors to promote sound corporate citizenship. The Governance Guidelines, together with the charters for the RTI board committees, provide the framework for RTI’s corporate governance. The Governance Guidelines, which comply with the requirements of the NYSE, address a number of topics, including: the size and role of the RTI board of directors; director resignations; non-employee director executive sessions; Board and committee meeting attendance; access to senior management and advisors; Board compensation; Board independence, composition, and membership criteria; Board and committee self-assessments; director orientation and continuing education; retirement age; and the RTI board of directors nomination process.

RTI’s Governance Guidelines are posted under the Investor Relations link on RTI’s website, www.rtiintl.com.

Director Education

RTI has educational presentations from time to time at Board and committee meetings, and RTI 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 reasonable costs incurred in connection with his or her attendance. All of the then-elected directors attended a formal continuing education session on corporate governance sponsored by RTI in October 2014. In addition, directors were given the opportunity to participate in online cybersecurity training that addressed topics such as e-mail security, passwords, smartphone security, social engineering and URL training.

The Board of Directors

The business and affairs of RTI are conducted under the general direction of the RTI board of directors. The RTI board of directors presently consists of ten members:

 

Daniel I. Booker, Jr.

Dawne S. Hickton James A. Williams

Ronald L. Gallatin

Edith E. Holiday Arthur B. Winkleblack

Robert M. Hernandez

Jerry Howard

David P. Hess

Bryan T. Moss

 

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The RTI board of directors met nine times during 2014. All of RTI’s directors attended 75% or more of the total number of meetings of the RTI board of directors and of the committees on which they serve. The Chairman of the Board chairs the regularly-scheduled executive sessions of the non-management directors, and in the Chairman’s absence, the chair of the Nominating/Corporate Governance Committee chairs the meeting.

Director Independence

Dawne S. Hickton was the only member of the RTI board of directors in 2014 who was also an officer and employee of RTI or its subsidiaries. The RTI board of directors reviewed existing director and director nominee independence in accordance with RTI’s Governance Guidelines and applicable SEC and NYSE rules and listing standards relating to independence, including any transactions or relationships between each current director or nominee for director with RTI (either directly or as a partner, stockholder or officer of any organization that has a relationship with RTI). As a result of such review, the RTI board of directors determined that other than Ms. Hickton, all current directors (Daniel I. Booker, Jr., Ronald L. Gallatin, Robert M. Hernandez, David P. Hess, Edith E. Holiday, Jerry Howard, Bryan T. Moss, James A. Williams and Arthur B. Winkleblack) do meet RTI’s Governance Guidelines and applicable NYSE requirements relating to board and committee independence.

Transactions with Related Parties

RTI is aware of no transactions with RTI involving over $120,000 since the beginning of 2014 in which any of RTI’s directors, director nominees, executive officers, five percent shareholders, or certain of their relatives (“related parties”) had or will have a direct or indirect material interest. RTI recognizes that transactions between RTI and its related parties can present potential or actual conflicts of interest and may create the appearance that decisions may not be based on considerations in the best interests of RTI.

As a result of Mr. Hess’ assumption of the role of Senior Vice President, Aerospace Business Development for United Technologies Corporation (“UTC”) in January 2015, RTI has assessed RTI’s transactions with subsidiaries of UTC. Several of RTI’s subsidiaries sold products to UTC’s subsidiaries, in an aggregate amount of approximately $11.2 million, which constitutes less than 0.017% of the consolidated gross revenues of UTC in 2014. These contracts pre-date Mr. Hess’ current role at UTC and the RTI board of directors does not believe Mr. Hess has a direct or indirect material interest in such transactions.

Although as a general matter, and in accordance with RTI’s Code of Ethical Business Conduct and RTI’s Conflict of Interest Policy (both of which are available under the Investor Relations link on RTI’s website at www.rtiintl.com), RTI’s preference is to avoid transactions in which any of RTI’s related parties had or will have a direct or indirect material interest, RTI recognizes that, from time to time, such related party transactions may be contemplated. On an annual basis, RTI asks all non-union employees to review RTI’s Code of Ethical Business Conduct and Conflict of Interest Policy and to certify their compliance with these policies in writing. In the event that RTI becomes aware, through this process or otherwise during the year, that a potential transaction with a related party is being contemplated, the matter would be reviewed and considered by executive management or by the RTI board of directors. Based on this review, a determination is made as to whether RTI would have a material interest in the transaction and whether such transaction could present potential or actual conflicts of interest or create the appearance that RTI’s decisions are based on considerations other than the best interests of RTI and RTI’s shareholders. Only related-party transactions that, in the business judgment of RTI’s executive management or the RTI board of directors, as the case may be, are in the best interests of RTI should be approved or ratified, and all others should be rejected.

RTI also circulates an annual questionnaire to each of RTI’s non-employee directors, director nominees, and each executive officer of RTI in connection with the preparation of RTI’s proxy statement. Completion of this questionnaire allows RTI to review and address any actions that RTI should take with respect to any current or contemplated relationships each respondent may have with RTI’s significant customers, service providers, suppliers, or other vendors, which RTI identifies by name in the questionnaire.

 

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Board Committees

There are five principal committees of the RTI board of directors. Committee membership, the primary functions of each committee, and the number of meetings held during 2014 are described below.

 

Name of Committee and
Members

  

Primary Committee Functions

   Number of
Meetings
 

Audit Committee:

 

    James A. Williams (Chairman)

    Ronald L. Gallatin

    Robert M. Hernandez

    Arthur B. Winkleblack

  

•  Assists the RTI board of directors in overseeing RTI’s financial reporting process and systems of internal control over financial reporting

 

•  Assists RTI with legal and regulatory compliance requirements and qualifications, and the evaluation of the independence and performance of RTI’s internal auditors and independent registered public accounting firm

 

•  Has direct responsibility for the appointment, compensation, retention, and oversight of RTI’s independent registered public accounting firm

 

•  Periodic review of risk assessment as it relates to activities being contemplated or undertaken by management throughout the year

 

•  Submits the Audit Committee Report contained in the proxy statement

 

     9   

Compensation Committee:

 

    Daniel I. Booker (Chairman)

    David P. Hess

    Edith E. Holiday

    Jerry Howard

    Bryan T. Moss

  

•  Reviews and approves RTI’s compensation philosophy, including assessing the risks arising from RTI’s compensation philosophy, policies, and practices

 

•  Reviews and approves executive compensation programs, plans, and awards

 

•  Reviews and approves policies, principles, and procedures for selection and performance review of RTI’s Chief Executive Officer (the “CEO”) and other top members of management

 

•  Reviews and recommends to the full Board employment agreements, severance arrangements, and change in control agreements for RTI’s CEO and senior executives

 

•  Establishes goals and objectives for RTI’s CEO and other top management, setting the compensation of executive officers and, together with the independent directors, setting the CEO’s compensation, based on an evaluation of her performance

 

•  Determines whether to retain or terminate any compensation adviser (considering, among other things, the independence thereof)

 

•  Administers RTI’s long-term incentive plans and equity plans

 

•  Reviews management’s Compensation Discussion and Analysis (“CD&A”) and submits the Compensation Committee Report contained in this proxy statement/prospectus

 

     6   

 

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Name of Committee and
Members

  

Primary Committee Functions

   Number of
Meetings
 

Nominating/Corporate

Governance Committee:

 

    Edith E. Holiday (Chair)

    Daniel I. Booker

    Robert M. Hernandez

  

•  Identifies individuals qualified to serve as directors

 

•  Recommends to the RTI board of directors the appropriate size of the RTI board of directors and candidates for election to the RTI board of directors, including at the Annual Meeting, and to fill vacancies occurring on the RTI board of directors

 

•  Oversees the evaluation process of the RTI board of directors

 

•  Reviews and evaluates RTI’s director compensation

 

•  Develops and recommends to the RTI board of directors corporate governance principles applicable to RTI as well as conducts periodic reviews of such principles

 

    

 

5

 

  

 

Executive Committee:

 

    Robert M. Hernandez (Chairman)

    Daniel I. Booker

    Dawne S. Hickton

  

•  Assists the RTI board of directors in the discharge of its responsibilities

 

•  Reports all actions taken by the Executive Committee at the RTI board of directors’ next meeting

 

     0   

Strategic Transactions Committee:

 

    Robert M. Hernandez (Chairman)

    Ronald L. Gallatin

    Dawne S. Hickton

    Arthur B. Winkleblack

 

  

•  Assists the RTI board of directors in the discharge of its responsibilities with respect to oversight of RTI’s evaluation of potential strategic transaction opportunities and/or major financings that may be brought forth from time to time by management or the RTI board of directors

 

     0   

Audit Committee—All members of RTI’s Audit Committee meet the NYSE’s rules and listing standards for audit committee independence. The RTI board of directors has determined that Messrs. Gallatin, Hernandez, Williams and Winkleblack are each qualified as an audit committee financial expert within the meaning of SEC regulations, and that each member of the Audit Committee has accounting or financial management expertise within the meaning of the listing standards of the NYSE. The Audit Committee may, subject to applicable law and the listing requirements of the NYSE, delegate its responsibilities to subcommittees, composed solely of Audit Committee members, as deemed appropriate. RTI’s Audit Committee has adopted, and the RTI board of directors has approved, the Audit Committee charter, which may be accessed under the Investor Relations link on RTI’s website, www.rtiintl.com.

Compensation Committee—RTI’s Compensation Committee discharges the RTI board of directors’ duties concerning executive compensation. The Compensation Committee may, if appropriate, delegate matters within its responsibility to subcommittees composed of certain of its members. All members of RTI’s Compensation Committee meet the NYSE’s rules and listing standards for compensation committee independence. RTI’s Compensation Committee has adopted, and the RTI board of directors has approved, a Compensation Committee charter, which may be accessed under the Investor Relations link on RTI’s website, www.rtiintl.com.

For more information on the responsibilities and activities of RTI’s Compensation Committee, including the committee’s processes for determining executive compensation, see “Executive Compensation” beginning on page 48 of this proxy statement/prospectus.

Nominating/Corporate Governance Committee—All members of RTI’s Nominating/Corporate Governance Committee meet the NYSE’s rules and listing standards for independence for purposes of the Nominating/Corporate Governance Committee. RTI’s Nominating/Corporate Governance Committee has adopted, and the

 

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RTI board of directors has approved, a Nominating/Corporate Governance Committee charter, which may be accessed under the Investor Relations link on RTI’s website, www.rtiintl.com.

Board Membership Selection Process

Board candidates are typically suggested by members of the Nominating/Corporate Governance Committee; however, it is the policy of the Nominating/Corporate Governance Committee to consider recommendations by shareholders, directors, officers, employees, and others as nominees for election as director. Recommendations, together with the nominee’s qualifications and consent to be considered as a nominee, should be sent to RTI’s Secretary, at the address set forth under the captionWhere You Can Find More Information on page 158 of this proxy statement/prospectus, for presentation to the Nominating/Corporate Governance Committee.

The Nominating/Corporate Governance Committee annually reviews the skills and attributes of Board members and candidates for the RTI board of directors within the context of the current make-up of the full Board, which is premised on the concept that RTI’s Board members should have individual backgrounds that, when combined, provide a diverse portfolio of experience and knowledge that well serve RTI’s governance and strategic needs. Although the RTI board of directors does not have a specific diversity policy, candidates for Board service are considered on the basis of a range of criteria including the current composition of the RTI board of directors and the need to maintain a diversity of talents, genders, backgrounds, and perspectives. Further, candidates are evaluated as to their broad-based business knowledge and contacts, prominence, commitment to ethical and moral values, personal and professional integrity and sound reputation in their respective fields as well as a global business perspective and commitment to corporate citizenship. See “Other Matters—Shareholder Proposals” on page 156 of this proxy statement/prospectus for additional information regarding director candidate submission procedures. Additional information concerning director candidates is contained in RTI’s Governance Guidelines, which may be accessed under the Investor Relations link on RTI’s website at www.rtiintl.com.

Board Leadership Structure

Mr. Hernandez serves as the independent Chairman of the RTI board of directors and has served in such position since RTI became publicly traded. Ms. Hickton currently serves as Vice Chair, President, and CEO. The RTI board of directors believes this is currently the most appropriate structure for RTI as it allows each person to focus on their respective roles; RTI’s CEO can focus on the strategic direction of RTI and its day-to-day leadership and performance, while the Chairman can focus on providing guidance to RTI’s CEO and setting the agenda and presiding over meetings of the full Board.

The RTI board of directors does not have a written policy on whether or not the roles of CEO and Chairman of the Board should be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or be an employee, as the RTI board of directors believes that it should be free to evaluate the current needs and interests of RTI and RTI’s shareholders at any given point in time and to make changes appropriate for those facts and circumstances.

Board’s Role in the Oversight of Risk Management

RTI’s Audit Committee has been designated to lead the RTI board of directors’ risk management responsibilities. Accordingly, in addition to its other duties, RTI’s Audit Committee schedules time for periodic review of risk assessment as it relates to activities being contemplated or undertaken by management throughout the year. In this role, RTI’s Audit Committee receives reports from management, internal audit, and other advisors, and regularly engages in serious and thoughtful discussion regarding RTI’s risk management process and system, the nature of the material risks RTI faces, and the adequacy of RTI’s policies and procedures that are designed to respond to and mitigate perceived and potential risks. Although RTI’s Audit Committee leads these efforts, risk management is also periodically reported on and discussed at the full Board level, and feedback is sought from each director as to the most significant risks faced by RTI. This is principally accomplished through submission of Audit Committee reports to the RTI board of directors and discussion with management.

 

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RTI’s Audit Committee also leads the RTI board of directors’ oversight of cybersecurity, and over the past two years, the Audit Committee has received regular reports on cybersecurity from the Chief Information Officer or the Director-Information Security at its quarterly meetings. In addition, the RTI board of directors has received cybersecurity reports from the Chief Information Officer and, in January 2015, attended a presentation on information security by the Assistant U.S. Attorney for the Western District of Pennsylvania, National Security Cyber Specialist. The Audit Committee of the RTI board of directors believes that these reports and training enable it to appropriately evaluate cybersecurity risks that impact, or have the potential to impact, RTI.

In addition to the formal risk management program, the RTI board of directors and Audit Committee encourage management to promote a corporate culture that is sensitive to and understands risk management, and incorporates risk management into RTI’s overall corporate strategy as well as its day-to-day business operations. Additionally, RTI’s risk management structure includes an ongoing effort to assess and analyze the most likely areas of future risk for RTI and to address them as part of its long-term planning process.

Compensation Committee Interlocks and Insider Participation

RTI’s Compensation Committee currently consists of Messrs. Booker, Hess, Howard, Moss and Ms. Holiday. None of the current members of the Committee has ever been an officer or employee of RTI or any of its subsidiaries. None of RTI’s executive officers serve or have served as a member of the RTI board of directors, Compensation Committee, or other board committee performing equivalent functions of any entity that has one or more executive officers serving as one of RTI’s directors or on RTI’s Compensation Committee.

SECURITY OWNERSHIP

Security Ownership of Certain Beneficial Owners

The following table sets forth each person or entity known to RTI 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 June 10, 2015.

 

Name and Address of Beneficial Owner

   Amount and
Nature of
Beneficial Ownership
    Percent of
Class
 

FMR LLC
245 Summer Street
Boston, MA 02210

     2,734,500 (1)      8.9

BlackRock, Inc.
40 East 52nd Street
New York, NY 10022

     2,703,019 (2)      8.8

Dimensional Fund Advisors LP
Palisades West Building One
6300 Bee Cave Road
Austin, TX 78746

     2,582,134 (3)      8.4

The Carlyle Group L.P.
1001 Pennsylvania Avenue NW
Suite 220 South
Washington, DC 20004

     2,031,615 (4)      6.6

The Vanguard Group
100 Vanguard Boulevard
Malvern, PA 19355

     1,989,748 (5)      6.5

 

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(1) This information is based solely on the Schedule 13G/A filed with the SEC on November 10, 2014 by FMR LLC. The shares reported reflect the beneficially ownership of FMR LLC, certain of its subsidiaries including various investment companies advised by Fidelity Management & Research Company (“Fidelity”), a wholly owned subsidiary of FMR LLC and a registered investment adviser. Edward C. Johnson 3d, Chairman of FMR LLC, Abigail P. Johnson, Vice Chairman, CEO and President of FMR LLC, and FMR LLC, through its control of Fidelity and the funds each has sole power to dispose of the shares reported. Neither FMR LLC nor Edward C. Johnson 3d nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the funds, which power resides with the funds’ boards of trustees. One investment company, Fidelity Small Cap Discovery Fund, reported beneficial ownership of 2,185,000 shares.
(2) This information is based solely on the Schedule 13G/A filed with the SEC on January 22, 2015, by BlackRock, Inc., a parent holding company or control person of the following subsidiaries: BlackRock Fund Advisors; BlackRock Institutional Trust Company, N.A.; BlackRock Investment Management (Australia) Limited; BlackRock Asset Management Canada Limited; BlackRock Asset Management Ireland Limited; BlackRock Advisors (UK) Limited; BlackRock Advisors, LLC; BlackRock Investment Management, LLC; and BlackRock Investment Management (UK) Limited. Such filing indicates that BlackRock, Inc. has sole voting power over 2,638,096 shares and sole dispositive power over all 2,703,019 shares reported.
(3) This information is based solely on the Schedule 13G/A filed with the SEC on February 5, 2015 by Dimensional Fund Advisors LP (“Dimensional”). Dimensional reports sole dispositive power over all such shares and sole voting power with respect to 2,489,196 of such shares.
(4) This information is based solely on the Schedule 13G filed with the SEC on February 14, 2013 by The Carlyle Group L.P. Each of The Carlyle Group L.P., Carlyle Group Management L.L.C., Carlyle Holdings I GP Inc., Carlyle Holdings I GP Sub L.L.C., Carlyle Holdings I L.P., TC Group, L.L.C., TC Group Sub L.P., TC Group CSP II, L.L.C., and CSP II General Partner, L.P. report shared voting and dispositive power over all shares reported. Carlyle Strategic Partners II, L.P. reports shared voting and dispositive power over 1,963,371 of the shares reported, CSP II Coinvestment, L.P. reports shared voting and dispositive power over 68,244 of the shares reported.
(5) This information is based solely on the Schedule 13G/A filed with the SEC on February 10, 2015 by the Vanguard Group, Inc. (“Vanguard”). Vanguard’s wholly owned subsidiary, Vanguard Fiduciary Trust Company, is an investment manager for collective trust accounts and is the beneficial owner of 43,348 of the shares reported above. Vanguard’s wholly owned subsidiary, Vanguard Investments Australia, Ltd., is an investment manager of Australian investment offerings and is the beneficial owner of 1,855 of the shares reported above. Vanguard reports sole dispositive power over 1,946,400 of such shares and shared dispositive power over 43,348 of such shares.

 

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Security Ownership of Directors and Executive Officers

The following table sets forth information concerning the “beneficial ownership” of RTI’s common stock of each director and director 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 as to which the named person has or shares voting and/or investment power, as well as shares that may be acquired within 60 days (such as by exercising vested stock options). Information is provided as of March 1, 2015.

 

Name

   Amount and Nature
of Beneficial
Ownership(1)(2)(3)
    Percent of
Class(9)
 

Daniel I. Booker

     38,457        *   

Ronald L. Gallatin

     32,691        *   

Robert M. Hernandez

     84,186 (4)      *   

Dawne S. Hickton

     237,057        *   

Edith E. Holiday

     29,034        *   

Jerry Howard

     5,355        *   

David P. Hess

     1,611        *   

William T. Hull

     72,368        *   

Michael G. McAuley

     200        *   

James L. McCarley

     64,308 (5)      *   

Bryan T. Moss

     19,711 (6)      *   

Patricia A. O’Connell

     34,353 (7)      *   

Chad Whalen

     43,518        *   

James A. Williams

     22,896 (8)      *   

Arthur B. Winkleblack

     3,572        *   

All directors and executive officers as a group (14 persons)(10)

     654,964        2.3

 

* Indicates beneficial ownership of less than 1%.
(1) Includes the following number of shares of common stock subject to stock options exercisable within 60 days of March 1, 2015 for the following persons: Dawne S. Hickton: 96,265; William T. Hull: 38,646; James L. McCarley: 28,554; and Chad Whalen: 25,756.
(2) Includes the following number of restricted shares of RTI common stock for the following persons: Daniel I. Booker, 2,691; Ronald L. Gallatin, 2,691; Robert M. Hernandez, 4,305; Dawne S. Hickton, 28,963; Edith E. Holiday, 2,691; Jerry Howard, 2,691; David P. Hess, 1,611; William T. Hull, 6,811; Michael G. McAuley, 0; James L. McCarley, 12,691; Bryan T. Moss, 2,691; Chad Whalen, 4,586; James A. Williams, 2,691; Arthur Winkleblack, 2,691; Patricia A. O’Connell, 23,004.
(3) Does not include the following number of shares of common stock subject to restricted stock units that are unvested as of March 1, 2015, and which will not vest within 60 days of March 1, 2015, for the following persons: Dawne S. Hickton, 25,770; Michael G. McAuley, 5,555; William T. Hull, 5,007; James L. McCarley, 9,534; and Chad Whalen, 4,814.
(4) Includes for Mr. Hernandez 79,881 shares of common stock held in the Robert M. Hernandez Revocable Trust.
(5) Does not include for Mr. McCarley 5,889 units (“Units”) reported to RTI and Mr. McCarley reflecting Mr. McCarley’s interest in a unitized RTI common stock fund available to participants in the RTI International Metals, Inc. Employee Savings and Investment Plan. Each Unit represents an unspecified number of shares of RTI common stock.
(6) Includes for Mr. Moss 2,500 shares of common stock held in trust by Bryan T. Moss Premier Alliance LLP.
(7) Ms. O’Connell’s share ownership is presented as of December 31, 2014, and includes 23,004 restricted shares of common stock and 1,968 shares of common stock subject to stock options exercisable within 60 days of December 31, 2014. Ms. O’Connell ceased to be an employee of RTI as of January 31, 2015.

 

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(8) Includes for Mr. Williams 4,065 shares of common stock held in an IRA.
(9) There were 30,758,392 shares of RTI’s common stock outstanding as of March 1, 2015. In accordance with the rules and regulations of the SEC, in computing the percentage ownership for each person listed, any shares which the listed person had the right to acquire within 60 days are deemed outstanding; however, shares which any other person had the right to acquire within 60 days are disregarded in the calculation. Therefore, the denominator used in calculating beneficial ownership among the persons listed may differ for each person.
(10) The total for all directors and executive officers as a group does not include shares of common stock beneficially owned by Ms. O’Connell, who ceased being an executive officer as of January 31, 2015.

 

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RTI PROPOSALS

PROPOSAL NO. 1—RTI MERGER PROPOSAL

RTI is asking its shareholders to adopt the merger agreement and the transactions contemplated thereby (including the issuance of Alcoa voting common stock in the merger pursuant to the merger agreement). Holders of RTI common stock should read this proxy statement/prospectus carefully and in its entirety, including the annexes, for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this proxy statement/prospectus as Annex A.

After careful consideration, RTI’s board of directors unanimously approved the merger agreement and declared the transactions contemplated thereby, including the merger, to be advisable and in the best interests of RTI and its shareholders. See “The Merger—RTI’s Reasons for the Merger; Recommendation of the RTI Board of Directors” on page 91 for a more detailed discussion of the RTI board of directors’ recommendation.

Vote Required

Approval of the merger agreement requires the affirmative vote of the holders of two-thirds of the outstanding shares of RTI common stock entitled to vote at the annual meeting. You are entitled to one vote for each share of RTI common stock you held as of the record date. Because approval is based on the affirmative vote of two-thirds of shares outstanding, your failure to vote, failure to instruct your bank or broker with respect to the proposal to approve the adoption of the merger agreement, or an abstention will have the same effect as a vote against adoption of the merger agreement.

The RTI board of directors unanimously recommends that RTI shareholders vote “FOR” the RTI merger proposal.

 

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PROPOSAL NO. 2—ELECTION OF DIRECTORS

RTI’s directors are elected for one-year terms. The RTI board of directors has nominated nine directors for election—all of whom are current directors. A current director, Mr. Moss, is retiring from the RTI board of directors at the annual meeting of the RTI shareholders. Of the nine individuals who are nominees for election, one is a current RTI officer and the remaining eight are high-level current or former executives with significant professional experience. If any nominee is unable to stand for election, your proxy may be voted for another nominee designated by the RTI board of directors.

The professional and personal backgrounds, experiences, qualifications, attributes, and skills of each nominee, as set forth below, reflect the qualities that RTI seeks in its board members. In addition to the specific examples set forth below, the RTI board of directors and RTI believe that all nominees possess additional qualifications, attributes, and skills that lead the RTI board of directors to believe the nominee should serve as a director, including broad-based business and industry knowledge, commitment to ethical and moral values, personal and professional integrity, sound business judgment, and commitment to corporate citizenship.

Nominees for Director

 

DANIEL I. BOOKER

Age: 67

Partner

Director since 1995

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 is Chairman of the Pittsburgh Parks Conservancy; a member of the Judicial Council of Pennsylvania; a director of the Pennsylvania Lawyers Fund for Client Security; and an officer or director of other business, community, and professional organizations. Mr. Booker served as a director of Océ USA Holding, Inc. from 2001-2012. 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. In addition to Mr. Booker’s legal experience, he brings to the RTI board of directors demonstrated leadership skills, both professionally as the former Managing Partner of a large law firm and through his service as chairman and director of various community and professional organizations.

 

RONALD L. GALLATIN

  Age: 69   

Retired Managing Director

  Director since 1996   

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 laws (taxation) degrees and is a Certified Public Accountant. Mr. Gallatin provides financing and investment banking experience, as well as strategic advice, as a result of his career on Wall Street and educational background. Mr. Gallatin also brings a sense of social responsibility and fiduciary leadership as demonstrated through his involvement with various charitable organizations.

 

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ROBERT M. HERNANDEZ

  Age: 70   

Chairman of the Board of RTI

  Director since 1990   

On December 31, 2001, Mr. Hernandez retired as Vice Chairman and Chief Financial Officer and director of USX Corporation (“USX”) (NYSE: X). 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 the BlackRock Equity Bond Mutual Fund Complex; lead director of American Casualty Excess (ACE) Limited; and a director of Eastman Chemical Company (NYSE: EMN). Mr. Hernandez served as a director of TE Connectivity from June 2007 until March 2012. As a former executive officer of USX and one of RTI’s original directors upon becoming publicly traded, he brings to the RTI board of directors a wealth of executive management and financial experience in the metals industry. Through his service as a director on various publicly-traded companies, Mr. Hernandez has considerable leadership, finance, and corporate governance experience.

 

DAVID P. HESS

  Age: 59   

Senior Vice President

  Director since 2014   

United Technologies Corporation

(aerospace and building systems)

In January 2015, Mr. Hess was appointed to the position of UTC Senior Vice President, Aerospace Business Development. In this newly created position, Mr. Hess works in collaboration with senior executives to strengthen relationships with key aerospace customers and partners, as well as in reviewing the corporation’s aerospace portfolio and evaluating acquisition opportunities. Mr. Hess retired from United Technologies Corp. in January 2014 after a 35-year career that included serving as president of the corporation’s Hamilton Sundstrand and Pratt & Whitney businesses. He was named Pratt & Whitney president in 2009 and was responsible for the company’s global operations in the design, manufacture and service of aircraft engines, auxiliary and ground power units and small turbojet propulsion products. Previously, he served four years as president of Hamilton Sundstrand, the United Technologies Corp. business where he began his professional career in 1979. Mr. Hess is chairman of the International Aero Engines (IAE) Board of Directors, and a member of the Aerospace Industries Association Board of Governor’s executive committee, where he served as board chairman in 2012. He also serves on the Board of Directors for Cytec Industries, Inc. (NYSE: CYT), a New Jersey-based specialty chemicals and material technology company. In addition, Mr. Hess serves on the boards of Hartford HealthCare, the National World War II Museum and other civic organizations. He holds a bachelor’s degree in physics from Hamilton College and a bachelor’s and master’s degree in electrical engineering from Rensselaer Polytechnic Institute. He was awarded an MIT Sloan Fellowship in 1989 and earned a master’s degree in management in 1990. Mr. Hess’s extensive experience in the aerospace industry, particularly as the leader of an engine manufacturer, augments the RTI board of directors’ knowledge of RTI’s markets and customers.

 

DAWNE S. HICKTON

  Age: 57   

Vice Chair, President, and Chief Executive Officer

  Director since 2007   

Ms. Hickton has served as the Vice Chair, President, and Chief Executive Officer of RTI since October 2009 and as Vice Chair and CEO of RTI since 2007. From June 2005 to April 2007, 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 RTI. From April 1997 until June 2004, Ms. Hickton was Vice President and General Counsel. Also, prior to her tenure with RTI, Ms. Hickton was

 

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an Assistant Clinical Professor of Law at the University of Pittsburgh School of Law and managed the innovative Corporation Counsel Clinic in conjunction with the Carnegie Mellon Graduate School of Industrial Administration. Prior to her academic career, Ms. Hickton was employed as an in-house counsel with another public company, USX Corporation. She holds a bachelor’s degree from the University of Rochester and a juris doctor degree from the University of Pittsburgh. She served as a director of F.N.B. Corporation (NYSE: FNB) from 2006 until January 2013, and serves as a member of the Board of Trustees of the University of Pittsburgh, a member of the Board of Governors of the Aerospace Industries Association, and a director and President of the International Titanium Association. As a result of her executive experience, Ms. Hickton was appointed to the board of the Federal Reserve Bank of Cleveland, Pittsburgh branch in January 2012 and became its chair in January 2014. As the most senior executive of RTI, Ms. Hickton provides the RTI board of directors with insight into RTI’s business operations, opportunities, and challenges. In addition, Ms. Hickton’s history with RTI, metals industry experience, and leadership skills, as well as service on other boards of directors support her contributions to the RTI board of directors.

 

EDITH E. HOLIDAY

  Age: 63   

Former Government Official

  Director since 1999   

Ms. Holiday was elected as 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 (NYSE: HES); White Mountains Insurance Group, Ltd.; and Canadian National Railway Company. She is also a director or trustee of a number of investment companies in the Franklin Templeton Group of Funds. Ms. Holiday was a director of H.J. Heinz Company from 1994-2013. She has bachelor’s and juris doctor degrees from the University of Florida. Ms. Holiday’s service on the boards of multiple publicly-held companies allows her to bring leadership skills and experience in a variety of matters including corporate governance, compensation, and finance to RTI’s Board. This skill set, as well as her legal background and the experience gained while serving in various positions with the federal government, make Ms. Holiday a unique contributor to the RTI board of directors’ deliberations.

 

JERRY HOWARD

  Age: 66   

Retired Senior Vice President

  Director since 2013   

Marathon Oil Corporation

(international energy company)

Mr. Howard retired from Marathon Oil Corporation (“Marathon”) as Senior Vice President of Corporate Affairs, effective June 1, 2010, after thirty-five years of service. Mr. Howard had served in this role since 2002, managing Marathon’s information technology, global procurement, governmental affairs, corporate social responsibility, business and process transformation, and administrative services departments. Also at that time, he served as an adjunct to the public policy committee and the governance committee of the Marathon board of directors. As a senior executive at Marathon, he was a member of Marathon’s executive committee, salary and benefits committee, and served as treasurer of the Marathon Oil Company Foundation. From 1998-2002, Mr. Howard served as Vice President of Taxes of USX Corporation, the former parent company of Marathon. From 1997-1998, he was Vice President of Human Resources and Environment at Marathon. Mr. Howard has served as a director of many industry and community groups, including the National Association of Manufacturers, the Executive Committee of the Houston Forum, the Governmental Relations Advisory Committee of the Greater Houston Partnership, the American Petroleum Institute (“API”), the American Red Cross and Junior Achievement. He is also a former chairman of the Tax Coordinating Committee of the Business Roundtable, the General Committee on Taxation at the API and former president of the Center for Strategic Tax Reform. Mr. Howard earned a bachelor’s degree in accounting from Morris Brown College, a master’s degree in accounting and transportation from Northwestern University, and is a certified public accountant. The RTI board of directors believes Mr. Howard’s experience as a leader of strategic and legislative initiatives, his financial and taxation background, and his knowledge of the energy market will enhance the RTI board of directors’ capabilities.

 

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JAMES A. WILLIAMS

  Age: 70   

Retired Partner

  Director since 2005   

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-national 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. Mr. Williams adds significant financial reporting and management skills as a result of his long career with a large public accounting firm, and further enhances the RTI board of directors’ knowledge base with respect to accounting, financial, and other matters.

 

ARTHUR B. WINKLEBLACK

  Age: 57   

Retired Executive

  Director since 2013   

H.J. Heinz Company

(packaged food manufacturer)

Mr. Winkleblack served as Executive Vice President and Chief Financial Officer of H.J. Heinz Company, a global packaged food manufacturer, from January 2002 through June 2013. From 1999 through 2001, Mr. Winkleblack was Acting Chief Operating Officer—Perform.com and Chief Executive Officer—Freeride.com at Indigo Capital. Earlier in his career, Mr. Winkleblack held senior finance roles at companies including the C. Dean Metropoulos Group, Six Flags Entertainment Corporation, AlliedSignal and Pepsico. Mr. Winkleblack is currently a member of the board of directors of Church & Dwight Co., Inc. (NYSE: CHD), a manufacturer of household, personal care and specialty products, for which he serves as chairman of the Compensation and Organization Committee and member of the Executive Committee. He is also a Senior Advisor to the CEO of Ritchie Brothers Auctioneers (RBA), an industrial auctioneer of used and unused equipment. Mr. Winkleblack has an MBA in Finance from the Wharton School at the University of Pennsylvania, and a BA in Business Economics from UCLA. The RTI board of directors believes that Mr. Winkleblack’s substantial executive experience provides him with knowledgeable perspectives on strategic planning, international operations, acquisitions and divestitures, financial controls and public reporting.

Vote Required

Under Ohio law and RTI’s Code of Regulations, the nine director candidates receiving the greatest number of votes for election will be elected to RTI’s board of directors. RTI shareholders may cast their votes for or withhold with respect to each nominee. RTI 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. Abstentions will have no effect on the outcome of the vote. Consistent with RTI’s Governance Guidelines, any nominee who fails to receive more votes cast for than withheld for his or her election to the RTI board of directors must irrevocably tender his or her resignation.

If you hold your shares in “street name”, your broker or nominee will not be permitted to exercise voting discretion with respect to Proposal No. 2. Thus, if you do not give your broker or nominee specific instructions, your shares will not be voted on Proposal No. 2 and will not be counted in determining the number of shares necessary for approval.

If your card is signed but a choice is not marked, the shares will be voted in favor of each of the listed nominees.

The RTI board of directors unanimously recommends a vote for each of the listed nominees.

 

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PROPOSAL NO. 3—RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PwC has served as the independent registered public accounting firm for RTI and its predecessors for a number of years. For 2014, 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. It is knowledgeable about RTI’s operations and accounting practices and is well qualified to act as its independent registered public accounting firm, and RTI’s Audit Committee has selected PwC as such for 2015.

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 2014 and 2013 were approximately $3.2 million and $3.4 million, respectively.

Audit-Related Fees

The aggregate fees billed for audit-related services rendered by PwC were approximately $15,000 and $14,000 in 2014 and 2013, respectively. 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 were approximately $190,000 in each of 2014 and 2013. The services comprising these fees primarily included tax compliance and consulting projects.

All Other Fees

Other than fees disclosed above, there were fees of $5,000 related to licensing fees in each of 2014 and 2013.

RTI’s Audit Committee pre-approves 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 RTI’s Audit Committee has been delegated authority by the full Audit Committee to pre-approve additional audit and non-audit fees between meetings, subject to review by the full Audit Committee at the next regularly scheduled meeting. For 2014 and 2013, no fees were subject to the de minimis exception.

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 PwC as RTI’s independent registered public accounting firm for 2015 requires the favorable vote of a majority of the votes cast. RTI shareholders may cast their votes for, against or abstain from voting with respect to Proposal No. 3. An abstention does not represent a vote cast, and as such has no effect on the advisory vote. Broker nonvotes will be counted for purposes of Proposal No. 3.

If your card is signed but a choice is not marked, the shares will be voted in favor of Proposal No. 3.

The RTI board of directors unanimously recommends a vote for ratification of the appointment of PricewaterhouseCoopers LLP as RTI’s independent registered public accounting firm for 2015.

 

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PROPOSAL NO. 4—APPROVAL BY NON-BINDING VOTE OF COMPENSATION OF NAMED EXECUTIVE OFFICERS

RTI annually provides its shareholders with the opportunity to vote to approve, on a non-binding advisory basis, the compensation of RTI’s named executive officers as disclosed in this proxy statement/prospectus in accordance with the Section 14A of the Securities Exchange Act of 1934 and the related compensation disclosure rules of the Securities and Exchange Commission.

As described in detail under the heading “Executive Compensation—Compensation Discussion and Analysis” (“CD&A”) beginning on page 48 of this proxy statement/prospectus, the Pay Philosophy and Guiding Principles Governing Officer Compensation (the “Pay Philosophy”) adopted by RTI is intended to achieve multiple goals. It aims to promote achievement of RTI’s business objectives, to reinforce RTI’s strategies, to align RTI’s executives’ interests with those of RTI shareholders, and to recruit and retain outstanding executives through internally equitable and externally competitive compensation. RTI’s Compensation Committee continually reviews the compensation programs for RTI’s executive officers to ensure they achieve the desired goals of aligning RTI executive compensation structure with RTI shareholders’ interests and current market practices.

For 2014, RTI continued to emphasize performance-based objectives in its annual incentive program that support the business goals of RTI. Specifically, RTI’s Compensation Committee set pre-established target financial goals under the program that aligned with RTI’s 2014 business plan, which anticipated year-over-year improvement in operating income and managed working capital as a percentage of sales, and introduced a new metric, operating cash flow, which targeted a considerable increase in cash flow. RTI’s Compensation Committee also continued the practice of using long-term equity incentive awards (performance share awards, stock options, and restricted stock) as a significant portion of total compensation, so as to promote the long-term interests of RTI shareholders by retaining and motivating management.

From a financial perspective, 2014 saw RTI achieve record revenues and a significant increase in its operating income. In addition to stronger financial results, management’s performance on team and personal objectives largely exceeded expectations and contributed to a stronger RTI that is better positioned for growth and further creation of shareholder value.

RTI’s board of directors believes these compensation decisions reward performance and ensure that the long-term interests of RTI’s shareholders are served, and therefore asks for the support of RTI shareholders in approving the compensation of RTI’s named executive officers. Accordingly, RTI asks its shareholders to vote on the following resolution at the 2015 annual meeting:

“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s proxy statement for the 2015 Annual Meeting pursuant to the compensation disclosure rules of the SEC, including the CD&A, the compensation tables, and narrative disclosure set forth in this proxy statement.”

Vote Required and Effect of Vote on Proposal

Approval of Proposal No. 4 requires the favorable vote of a majority of the votes cast. The result of the shareholder vote on Proposal No. 4 is not binding on RTI. RTI’s board of directors will not be required to act in response to the results of the vote, as the ultimate decision regarding RTI’s named executive officers’ compensation remains with RTI’s Compensation Committee. RTI’s board of directors believes that its Compensation Committee is in the best position to consider the extensive information and factors necessary to make independent, appropriate, and competitive compensation recommendations and decisions that are in the best interest of RTI and its shareholders. However, RTI’s board of directors values the opinions of RTI shareholders as expressed through their votes and other communications.

 

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Shareholders may cast their votes for, against, or abstain from voting with respect to Proposal No. 4. An abstention does not represent an advisory vote cast, and as such has no effect on the advisory vote. If you hold your shares in “street name”, your broker or nominee will not be permitted to exercise voting discretion with respect to this Proposal No. 4. Thus, if you do not give your broker or nominee specific instructions, your shares will not be voted on this matter. If your card is signed but a choice is not marked, the shares will be voted in favor of the compensation of RTI’s named executive officers.

The RTI board of directors unanimously recommends a vote “FOR” the approval, on a non-binding advisory basis, of the compensation of RTI’s named executive officers as disclosed in this proxy statement/prospectus.

 

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PROPOSAL NO. 5—RTI MERGER-RELATED COMPENSATION PROPOSAL

RTI is required pursuant to Section 14A of the Exchange Act and the applicable SEC rules issued thereunder to include in this proxy statement/prospectus a proposal for a non-binding, advisory vote on the compensation that will or may be paid to each of RTI’s named executive officers (Dawne S. Hickton, James L. McCarley, William T. Hull, Michael G. McAuley, Patricia A. O’Connell and Chad Whalen) that is based on or otherwise relates to the merger and the other transactions contemplated by the merger agreement, as disclosed in this proxy statement/prospectus, including the disclosures set forth in the section entitled “The Merger—Interests of RTI’s Directors and Executive Officers in the Merger” beginning on page 108 of this proxy statement/prospectus. This vote is commonly referred to as a “Golden Parachute say-on-pay” vote. This non-binding, advisory proposal relates only to already existing contractual obligations of RTI that may result in a payment to RTI’s named executive officers in connection with, or following, the consummation of the proposed merger and the other transactions contemplated by the merger agreement, does not relate to any new compensation or other arrangements between RTI’s named executive officers and Alcoa or, following the consummation of the merger and the other transactions contemplated by the merger agreement, Alcoa, RTI and their respective affiliates. Further, it does not relate to any compensation arrangement with RTI’s directors or executive officers who are not named executive officers.

RTI’s board of directors unanimously recommends that RTI shareholders approve the following resolution:

“RESOLVED, that the shareholders of RTI International Metals, Inc. approve, on an advisory (non-binding) basis, the compensation to be paid to RTI International Metals, Inc.’s named executive officers in connection with the merger, as disclosed pursuant to Item 402(t) of Regulation S-K in the table entitled “Golden Parachute Compensation – RTI” in the proxy statement/prospectus, including the related footnotes, and the associated narrative disclosures in the section of the proxy statement/prospectus entitled “The Merger—Interests of RTI’s Directors and Executive Officers in the Merger.”

This vote on named executive officer compensation payable in connection with the merger is separate and apart from the vote to approve the merger proposal. Accordingly, you may vote to approve the merger proposal and vote not to approve the merger-related compensation proposal and vice versa. Because the vote is advisory in nature only, it will not be binding on RTI or the RTI board of directors. Accordingly, because RTI is contractually obligated to pay the compensation, such compensation will be payable, subject only to the conditions applicable thereto, if the merger is consummated and regardless of the outcome of this advisory vote. If a quorum is present at the annual meeting, the merger-related compensation proposal will be deemed approved if more votes are cast in favor of the proposal than are cast against it. The merger-related compensation payments are a part of RTI’s comprehensive executive compensation program and are intended to align RTI’s named executive officers’ interests with yours as shareholders by ensuring their continued retention and commitment during critical events such as the merger and the other transactions contemplated by the merger agreement, which may create significant personal uncertainty for them.

The description of the payments contained in the section entitled “The Merger—Interests of RTI’s Directors and Executive Officers in the Merger” beginning on page 108 of this proxy statement/prospectus as well as in the table entitled “Golden Parachute Compensation – RTI” and the related footnotes, beginning on page 114 of this proxy statement/prospectus, is intended to comply with Item 402(t) of Regulation S-K, which requires disclosure of information about compensation for each named executive officer that is based on or otherwise relates to the merger and will or may become payable. RTI is asking RTI shareholders to approve the executive officer compensation that will or may become payable to each of RTI’s named executive officers as set forth in the table entitled “Golden Parachute Compensation – RTI” table beginning on page 114 of this proxy statement/prospectus and as described in the section entitled “The Merger—Interests of RTI’s Directors and Executive Officers in the Merger” beginning on page 108 of this proxy statement/prospectus.

 

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Vote Required and Effect of Vote on Proposal

Approval of Proposal No. 5 requires the favorable vote of a majority of the votes cast. The vote on the merger-related compensation proposal is a vote separate and apart from the other proposals at the RTI annual meeting, including the vote to approve the adoption of the merger agreement (Proposal No. 1) or the advisory vote on annual compensation of executive officers (Proposal No. 4). RTI shareholders may vote for the RTI merger-related compensation proposal and against the RTI merger proposal, and vice versa. Because the vote on the RTI merger-related compensation proposal is advisory only, it will not be binding on RTI. Accordingly, because RTI is contractually obligated to pay the compensation, if the merger is completed, the compensation will be payable, subject only to the conditions applicable thereto, regardless of the outcome of the advisory vote.

RTI shareholders may cast their votes for, against, or abstain from voting with respect to Proposal No. 5. An abstention does not represent an advisory vote cast, and as such has no effect on the advisory vote. If you hold your shares in “street name”, your broker or nominee will not be permitted to exercise voting discretion with respect to this Proposal No. 5. Thus, if you do not give your broker or nominee specific instructions, your shares will not be voted on this matter. If your card is signed but a choice is not marked, the shares will be voted in favor of the merger-related compensation proposal.

The RTI board of directors unanimously recommends that RTI shareholders vote “FOR” the merger-related compensation proposal.

 

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PROPOSAL NO. 6—RTI ADJOURNMENT PROPOSAL

The RTI annual meeting may be adjourned to another time or place, if necessary or appropriate, to permit, among other things, further solicitation of proxies if necessary to obtain additional votes in favor of the RTI merger proposal.

If, at the RTI annual meeting, the number of shares of RTI common stock present or represented and voting in favor of the merger proposal is insufficient to approve such proposal, RTI intends to move to adjourn the RTI annual meeting to solicit additional proxies for the adoption of the merger agreement. In that event, RTI will ask its shareholders to vote upon the adjournment proposal, but not the merger proposal.

In this proposal, RTI is asking its shareholders to authorize the holder of any proxy solicited by the RTI board of directors on a discretionary basis to vote in favor of adjourning the RTI annual meeting to another time and place to solicit additional proxies, including the solicitation of proxies from RTI shareholders who have previously voted.

Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of shares of RTI common stock entitled to vote on, and voting for or against or expressly abstaining with respect to, such proposal at the annual meeting, even if less than a quorum. Because approval of the adjournment proposal is based on the affirmative vote of a majority of shares voting or expressly abstaining at the annual meeting, abstentions will have the same effect as a vote against this proposal. The failure to vote or failure to instruct your bank or broker with respect to the adjournment proposal, however, will have no effect on the adjournment proposal.

The RTI board of directors unanimously recommends that RTI shareholders vote “FOR” the adjournment proposal, if necessary or appropriate, to solicit additional proxies in favor of the approval of the merger agreement.

 

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INFORMATION ABOUT THE COMPANIES

Alcoa

Alcoa is a global leader in lightweight metals engineering and manufacturing. Alcoa’s multi-material products, which include aluminum, titanium, and nickel, are used worldwide in aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas, defense, consumer electronics, and industrial applications. Alcoa is also the world leader in the production and management of primary aluminum, fabricated aluminum, and alumina combined, through its participation in all major aspects of the industry: technology, mining, refining, smelting, fabricating, and recycling. Sales of primary aluminum and alumina represent approximately 40% of Alcoa’s revenues. Alcoa operates in 30 countries. In addition, Alcoa has investments and operating activities in, among others, Australia, Brazil, China, Guinea, Iceland, Russia, and Saudi Arabia. The United States and Europe generated 51% and 27%, respectively, of Alcoa’s sales in 2014. Alcoa is incorporated under the laws of the Commonwealth of Pennsylvania and headquartered in New York, New York.

Alcoa’s operations consist of four worldwide reportable segments: Alumina, Primary Metals, Global Rolled Products, and Engineered Products and Solutions.

 

    Alumina: This segment represents a portion of Alcoa’s upstream operations and consists of Alcoa’s worldwide refinery system, including the mining of bauxite, which is then refined into alumina. Alumina is mainly sold directly to internal and external smelter customers worldwide or is sold to customers who process it into industrial chemical products. A portion of this segment’s third-party sales are completed through the use of agents, alumina traders, and distributors. More than half of Alcoa’s alumina production is sold under supply contracts to third parties worldwide, while the remainder is used internally by the Primary Metals segment.

 

    Primary Metals: This segment represents a portion of Alcoa’s upstream operations and consists of Alcoa’s worldwide smelter system. Primary Metals receives alumina, mostly from the Alumina segment, and produces primary aluminum used by Alcoa’s fabricating businesses, as well as sold to external customers and traders. Results from the sale of aluminum powder, scrap, and excess power are also included in this segment, as well as the results of aluminum derivative contracts and buy/resell activity. Primary aluminum produced by Alcoa and used internally is transferred to other segments at prevailing market prices. The sale of primary aluminum represents approximately 90% of this segment’s third-party sales. Buy/resell activity occurs when this segment purchases metal and resells such metal to external customers or the midstream and downstream segments in order to maximize smelting system efficiency and to meet customer requirements.

 

    Global Rolled Products: This segment represents Alcoa’s midstream operations, whose principal business is the production and sale of aluminum plate and sheet. A small portion of this segment’s operations relate to foil produced at one plant in Brazil. This segment includes rigid container sheet (RCS), which is sold directly to customers in the packaging and consumer market and is used to produce aluminum beverage cans. Seasonal increases in RCS sales are generally experienced in the second and third quarters of the year. Approximately one-half of the third-party shipments in this segment consist of RCS. This segment also includes sheet and plate used in the aerospace, automotive, commercial transportation, building and construction, and industrial products (mainly used in the production of machinery and equipment and consumer durables) end markets, which is sold directly to customers and through distributors. While the customer base for flat-rolled products is large, a significant amount of sales of RCS, sheet, and plate is to a relatively small number of customers.

 

    Engineered Products and Solutions: This segment represents Alcoa’s downstream operations and includes titanium, aluminum, and super alloy investment castings; fasteners; aluminum wheels; integrated aluminum structural systems; architectural extrusions; and forgings and hard alloy extrusions. These products, which are used in the aerospace, automotive, building and construction, commercial transportation, power generation, and industrial products end markets, are sold directly to customers and through distributors.

 

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Alcoa’s principal executive offices are located at 390 Park Avenue, New York, New York 10022-4608. The telephone number of its investor relations office is (212) 836-2674, and the telephone number of the office of the secretary is (212) 836-2732. Alcoa’s website can be accessed at http://www.alcoa.com. Information contained on Alcoa’s website does not constitute part of, and is not incorporated into, this proxy statement/prospectus.

Additional information about Alcoa and its subsidiaries is included in documents incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information” on page 158.

RTI

RTI is a leading producer and global supplier of titanium mill products, and a manufacturer of fabricated titanium and specialty metal components for the international aerospace, defense, energy, medical device, and other consumer and industrial markets. It is a successor to entities that have been operating in the titanium industry since 1951. RTI first became publicly traded on the New York Stock Exchange in 1990 under the name RMI Titanium Co. and the symbol “RTI”, and was reorganized into a holding company structure in 1998 under the name RTI International Metals, Inc.

RTI’s principal executive offices are located at Westpointe Corporate Center One, 1550 Coraopolis Heights Road, Fifth Floor, Pittsburgh, Pennsylvania 15108-2973 and RTI’s telephone number is (412) 893-0026. RTI’s website can be accessed at http://www.rtiintl.com. Information contained in RTI’s website does not constitute part of, and is not incorporated into, this proxy statement/prospectus.

Additional information about RTI and its subsidiaries is included in documents incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information” on page 158.

 

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COMMITTEE REPORTS

The following reports of the Audit and Compensation Committees do not constitute soliciting materials and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent RTI specifically incorporates either report by reference therein.

Audit Committee Report

The Audit Committee met with management, PwC, and representatives of the Internal Audit group (which is partially 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. The Audit Committee also discussed with management the process used for certifications by RTI’s CEO and principal financial officer that are required for certain of RTI’s filings with the SEC. The Audit Committee has reviewed and discussed RTI’s 2014 Audited Financial Statements with management and with PwC. In addition, the Audit Committee also discussed with PwC the matters required to be communicated by the Public Company Accounting Oversight Board’s (“PCAOB”) Auditing Standard No. 16.

The Audit Committee received from PwC the written disclosures required by PCAOB Rule 3526, Communication with Audit Committees Concerning Independence, and discussed with PwC its independence. The Audit Committee has considered whether the provision by PwC of the professional services described above was compatible with the maintenance by PwC of its independent status and has determined that it was.

Based on these reviews and discussions, the Audit Committee recommended to RTI’s board of directors, and the RTI board of directors has approved, that the Audited Financial Statements be included in RTI’s Annual Report on Form 10-K for the year ended December 31, 2014 for filing with the SEC.

James A. Williams (Chairman)

Ronald L. Gallatin

Robert M. Hernandez

Arthur B. Winkleblack

Compensation Committee Report

The Compensation Committee discharges the RTI board of directors’ duties concerning executive compensation and prepares the report on such compensation required by the SEC.

Members of the Compensation Committee reviewed and discussed the Compensation Discussion and Analysis with management. Based on their reviews and discussions, the Compensation Committee recommended to RTI’s Board that the Compensation Discussion and Analysis be included in this proxy statement/prospectus.

Daniel I. Booker (Chairman)

David P. Hess

Edith E. Holiday

Jerry Howard

Bryan T. Moss

 

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

A. Executive Summary of 2014 Compensation

RTI’s executive team delivered a fifth consecutive year of sales and operating income growth in 2014. Nevertheless, performance with respect to the three financial performance goals established in RTI’s annual incentive program was below target. The majority of the named executive officers’ team goals were exceeded, and all of their personal objectives were achieved or exceeded. RTI’s relative total shareholder return for the three-year period ended December 31, 2014 resulted in an 83% payout of performance shares in early 2015.

Prior to the 2014 Annual Meeting of Shareholders, RTI conducted outreach to its 25 largest shareholders representing 85.2% of RTI’s outstanding shares. None of the shareholders suggested any changes to the design of RTI’s compensation programs, and shareholder satisfaction with RTI’s compensation programs resulted in a high approval percentage achieved (96% of the votes cast) on RTI’s 2014 say-on-pay vote. Moreover, at the 2014 Annual Meeting of Shareholders, RTI’s shareholders approved the 2014 Stock and Incentive Plan. RTI’s Compensation Committee discussed these results at its meetings in April 2014, and took them into consideration when choosing to retain the current design of the major elements of compensation for RTI’s named executive officers.

In light of these circumstances, as more fully explained in detail below, RTI’s Compensation Committee took the following approach to the three principal components of executive compensation:

 

    SalaryBase salary for 2014 increased 6.2% for RTI’s CEO and increased between 0% and 5.26% for the other named executive officers. All such increases were guided by peer group and market survey data, individual 2013 performance and expectations for future performance.

 

    Annual Cash Incentive Compensation. Payment of cash incentive compensation for 2014 performance was driven primarily by performance against pre-established, objective financial goals (operating income, operating cash flow, and managed working capital as a percentage of sales), and secondarily against defined team objectives and specific individual objectives. The payments were below target, and RTI’s Compensation Committee also exercised negative discretion to reduce actual payments because despite delivering meaningful growth, RTI did not meet its 2014 business plan financial goals.

 

    Long-Term IncentivesSeveral adjustments were made to the long-term incentive program in early 2014. The proportion of each form of long-term incentive was standardized for all non-CEO executives. In addition, the performance share award program was redesigned to include earnings per share growth as a second performance measure alongside relative total shareholder return. Long-term incentive awards were made at 110% of target levels for all named executive officers due to the improved year-over-year performance of RTI, the attainment of the highest revenues in RTI’s history, and the achievement of the highest operating income in seven years.

B. Overview and Pay Philosophy

For the 2014 executive compensation detailed in the tables that follow this discussion and analysis, the RTI board of directors empowered RTI’s Compensation Committee to discharge the RTI board of directors’ duties concerning executive compensation and to advise the RTI board of directors on RTI’s compensation philosophy, programs, and objectives.

RTI employs a comprehensive statement entitled “Pay Philosophy and Guiding Principles Governing Officer Compensation.” RTI’s Pay Philosophy governs RTI’s officer compensation programs, and provides that the goals of RTI’s compensation programs are to:

 

    Promote achievement of RTI’s business objectives and reinforce RTI’s strategies;

 

    Align the interests of RTI’s named executive officers with those of RTI’s shareholders;

 

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    Provide externally competitive and internally equitable compensation that rewards identifiable and measurable accomplishments and that delivers significant rewards for exceptional performance without creating incentive for the assumption of unnecessary or excessive risk; and

 

    Promote retention of officers and non-officer executives who perform well.

RTI’s compensation programs, as outlined in RTI’s Pay Philosophy, are managed so as to help communicate RTI’s desired results and to promote decisions and actions by RTI’s named executive officers that produce those results. Specifically, RTI’s Pay Philosophy states that RTI’s compensation programs should be characterized by the following attributes:

 

    Variability (i.e., performance-based)—a large portion of total compensation will be based on Company performance, recognizing the highly cyclical nature of RTI’s business and the need to maintain conservative compensation levels during business downturns. Salaries are to be generally maintained at competitive levels, with opportunities for significant upward shifts in total compensation to be provided by performance-based cash incentive compensation and long-term equity incentive awards;

 

    Clarity—all relevant performance objectives for annual cash incentive compensation and long-term incentive programs will be clearly established and articulated;

 

    Communicability—officers will be made aware of and fully understand their earnings potential for a given year and what specific actions and results are necessary to achieve that potential;

 

    Strategic Emphasis—compensation programs will include recognition of the roles that various elements of compensation play in attracting, retaining, and motivating employees, the performance aspects that each element is best suited to reward, and the needs of RTI and its officers that may warrant emphasis on specific elements of pay; and

 

    Risk Management—compensation programs will provide appropriate rewards for prudent risk taking, and will not create incentive for the assumption of unnecessary and/or excessive risks that would threaten the reputation or sustainability of RTI.

The RTI board of directors has implemented certain pay practices that RTI’s board of directors believes further align RTI’s compensation programs and practices with RTI’s Pay Philosophy and the interests of RTI’s shareholders, including the following:

 

    No Pledging or Hedging of Company Securities. RTI’s Policy on Insider Trading, which is posted under the Investor Relations link on RTI’s website, www.rtiintl.com, prohibits RTI’s directors and officers from holding RTI securities in a margin account or otherwise pledging RTI securities as collateral for a loan. In addition, RTI’s directors, officers, and employees are prohibited from engaging in transactions in put options, call options or other derivative securities on an exchange or in any other organized market.

 

    Executive Compensation Clawback Policy. RTI’s Executive Compensation Clawback Policy, which is posted under the Investor Relations link on RTI’s website, www.rtiintl.com, provides that if the RTI board of directors determines that fraud, negligence or intentional misconduct by an officer of RTI was a significant contributing factor to RTI’s having to restate all or a portion of RTI’s financial statements, the RTI board of directors has the right to cause the immediate forfeiture of any unvested equity compensation awarded to such officer to the extent permitted in the respective award agreement(s) and, during the two-year period following a cash incentive payment, to require reimbursement of any payout to the extent the payout would have been reduced due to such restatement.

 

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    Stock Ownership Guidelines. RTI’s board of directors has established stock ownership guidelines applicable to RTI’s executive officers, under which each participating officer has been asked to achieve certain stock ownership levels based on a percentage of base salary (calculated by award price or cost basis of the shares, as applicable). The current guidelines call for the following stock ownership goals:

 

CEO

  5 times base salary   

Other Executive Officers

  3 times base salary   

Under the guidelines, participants have five years from the implementation of the guidelines, or the application of a new ownership multiple (e.g., through hire or promotion), to accumulate sufficient equity through various means (including long-term incentive program awards, open market purchases, employee stock purchase plan purchases, stock option exercises, restricted stock ownership, and shares owned through 401(k) or Company savings plans), after which time Board discretion will be used to address situations where the applicable guidelines have not been achieved.

C. Elements of Named Executive Officer Compensation

RTI’s Pay Philosophy is applied consistently among RTI’s named executive officers; however, the aggregate amount of compensation, and the allocation of compensation among salary, cash incentive compensation, and long-term equity incentive awards payable to RTI’s named executive officers does differ to some degree based on experience, strategic importance, level of responsibility and other position-specific factors. RTI’s comprehensive compensation program consists of the following elements for RTI’s named executive officers:

 

    Base Salary. Base salary is paid to attract and retain qualified executives, to recognize consistent performance excellence over a number of years and to provide a base level of income regardless of fluctuations in Company performance. Base salaries are set within a pre-determined range, the midpoint of which is near the median of similar positions at appropriate comparator companies, and with a maximum near the 75th percentile of the comparator group. Individual base salaries and adjustments reflect a variety of individual factors, including the responsibilities and scope of the position, relevant experience, time in position, and individual performance as measured by the executive’s annual performance review.

 

    Annual Cash Incentive Compensation ProgramThe primary purpose of RTI’s annual cash incentive compensation is to motivate RTI’s named executive officers by recognizing attainment of Company performance against pre-determined financial goals and secondarily upon satisfaction of personal and team objectives. RTI’s Pay Philosophy calls for annual cash incentive compensation for target performance as a percentage of base salary to be established near the median level for similar positions at appropriate comparator companies. After applying the objective formula set forth in the program, RTI’s Compensation Committee applies a cap of 150% of target to payouts unless an individual’s performance was extraordinary and resulted in the creation of significant shareholder value. RTI’s Compensation Committee may exercise discretion and reduce or withhold cash incentive compensation payments where either individual performance criteria or overall Company performance has not been met.

 

    Long-term IncentivesLong-term incentive awards are designed specifically to reward increases in shareholder value as measured by RTI’s common stock price, as well as improvement in earnings per share. They also align the compensation of RTI’s named executive officers with those of RTI’s shareholders. Long-term incentive awards may be made in a combination of stock (restricted shares, performance shares, phantom stock, or non-restricted shares) and stock options. Target awards, as a percentage of salary, are determined with reference to comparator peer group data provided by Pay Governance. RTI’s board of directors believes this approach keeps compensation in-line with RTI’s peers and, more importantly, puts 60% or more of long-term incentive awards at risk if future performance is not achieved.

 

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The allocation across RTI’s three types of long-term incentive awards was standardized this year so that the value of long-term incentive grants was allocated as follows for all named executive officers in 2014:

 

Performance
Share
Awards

   Restricted
Shares
(time-based
vesting)
  Stock
Options

40%

   35%   25%

Stock Options. RTI’s stock options are designed to align the interests of RTI’s named executive officers with those of RTI’s shareholders, and have value only if RTI’s stock price increases over time. Options are granted at fair market value on the date of grant and vest ratably over a three-year period from the date of grant.

Restricted Stock. In 2014, RTI utilized time-based restricted share awards that vest ratably over five years from the date of grant as a retention tool for RTI’s named executive officers, and to provide externally competitive compensation. Grants of restricted stock also build the ownership of RTI’s named executive officers and address the cyclical nature of RTI’s business by providing stability to the program when markets are down. Beginning in January 2015, RTI determined to grant restricted stock units instead of restricted stock, as further described in section F under the heading “Changes in Compensation for 2015” beginning on page 60 of this proxy statement/prospectus.

Performance Shares. Changes were made to the design of the performance share award program in 2014. This year, 50% of the award will be determined by the historic measure, which provided for potential issuance of RTI’s common stock at the end of a three-year performance period if pre-established goals relating to total shareholder return (TSR) over the three-year period are achieved. TSR for the awards was defined as the share price appreciation of RTI’s common stock (plus any dividends accrued during the performance period), as compared to the collective TSR of a peer group of companies established by RTI’s Compensation Committee (the “Performance Award Peer Group”). The comparator companies comprising RTI’s Performance Award Peer Group are Board approved and communicated to the award recipients at the time of grant of the performance share award. Additional information, including the companies comprising the Performance Award Peer Group and threshold, target, and maximum performance goals, is set forth on pages 65-67 of this proxy statement/prospectus.

The other 50% of the award will be determined pursuant to RTI’s performance under a second metric, earnings growth. Earnings growth will be determined by RTI’s year-over-year earnings per share from continuing operations growth (“EPS Growth”) achieved during the performance period, computed by dividing net income (loss) from continuing operations by the weighted-average of all potentially dilutive shares of common stock that were outstanding during the periods presented, as reflected in RTI’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission. Recipients will have the ability to earn one-half of the EPS Growth metric target award based on the average EPS Growth over the first two years, and one-half of the EPS Growth metric target award based on EPS Growth in the third year; provided, however, that in no circumstances shall any shares be paid under the Award until the end of the performance period.

 

    Health and Welfare Benefits. RTI provides certain health and welfare benefits to its named executive officers that are not tied to any individual or corporate performance objectives, and are intended to be part of an overall competitive compensation program. RTI’s named executive officers participate in these plans on the same terms as other eligible employees, subject to any regulatory limits on amounts that may be contributed by or paid to the named executive officers under such health and welfare plans.

 

   

Perquisites. RTI restricts the issuance of perquisites to those that serve legitimate business functions. To that end, tax preparation and financial counseling advice, certain business-related club memberships utilized by RTI as a whole, and annual executive medical exams are permitted, while personal club memberships, automobile allowances, and other perquisites are disallowed. Perquisites, including relocation benefits provided to Mr. McAuley, are discussed in greater detail in the footnotes to and

 

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narrative disclosure following the Summary Compensation Table on page 61 of this proxy statement/prospectus.

 

    Post-Employment Compensatory Arrangements.

 

    Pension Plan. RTI has a qualified defined benefit pension plan that covers Ms. Hickton and Mr. Hull. The other executive officers each joined RTI after the pension plan was closed to new participants. The benefits are based on a formula that includes a percentage of the participant’s average monthly base salary multiplied by continuous years of service. See “Executive Compensation—Retirement Benefits” on page 71 of this proxy statement/prospectus for a description of RTI’s defined benefit pension plan.

 

    Excess Benefit Plan. RTI maintains an excess benefit plan that covers Ms. Hickton and Mr. Hull. The excess benefit plan is an unfunded, non-qualified defined benefit plan that 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 “Executive Compensation—Retirement Benefits” on page 71 of this proxy statement/prospectus for a description of RTI’s Excess Benefit Plan.

 

    Supplemental Pension Program. RTI’s named executive officers participate in the supplemental pension program, an unfunded, non-qualified defined benefit plan. This plan entitles RTI’s executives to specified annual benefits based upon average annual cash incentive compensation and years of service if they retire (i) after having met the eligibility requirements for an immediate pension under the provisions of the qualified Pension Plan (whether or not they are a participant in the qualified Pension Plan) or (ii) after having achieved 30 years of service prior to age 60 with the consent of RTI. See “Executive Compensation—Retirement Benefits” on page 71 of this proxy statement/prospectus for a description of RTI’s Supplemental Pension Program.

 

    401(k) Plan. Messrs. McAuley, McCarley and Whalen and Ms. O’Connell, who are not eligible to participate in the defined benefit pension plan, may participate in RTI’s 401(k) defined contribution employee savings and investment plan, in which RTI contributes 50% of the first 8% of an executive’s base salary and cash incentive compensation contributed by the executive, subject to applicable Internal Revenue Code limits. Other named executive officers who participate in the defined benefit pension plan may participate in the 401(k) plan up to applicable Internal Revenue Code limits, but will not receive Company matching contributions.

 

    Change in Control Severance Policy. Each named executive officer is eligible to participate in RTI’s Executive Change in Control Severance Policy, which entitles them to a benefit equal to 2.0 times their annual base salary and bonus (2.5 for RTI’s CEO), in each case if the executive’s employment with RTI is terminated either by RTI other than for cause, death, or disability, or by the executive for good reason, within 24 months after a change in control of RTI (as defined therein). Also, upon such event the executive will be entitled to accelerated vesting of previously unvested stock-based long-term incentive awards, and the continuation of life, disability, and health insurance benefits for a specified period. During 2010, RTI discontinued, on a prospective basis, providing an excise tax “gross-up” payment pursuant to the policy. As such, only Ms. Hickton and Messrs. Hull and Whalen are entitled to receive a “gross-up” payment under the Change in Control Severance Policy.

 

    Non-Change in Control Severance Policy. Each named executive officer is also eligible to participate in RTI’s Executive Non-Change in Control Severance Policy, which entitles the named executive officers to certain severance benefits in the event that RTI terminates the executive’s employment other than for cause, death, or disability outside of the context of a change of control, if RTI breaches the executive’s employment agreement in certain circumstances or if RTI reduces the executive’s base salary without the executive’s consent. See pages 78-80 of this proxy statement/prospectus for additional detail regarding these policies.

 

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D. Overview of the Decision Making Process

Role of Compensation ConsultantRTI’s Compensation Committee reviews the compensation practices among peer companies to ensure the appropriateness of RTI’s compensation program design and compensation levels. Pay Governance LLC (“Pay Governance”), an independent consulting firm focused on delivering advisory services to compensation committees, was engaged in 2014 to report directly to RTI’s Compensation Committee as its independent compensation consultant to advise on compensation matters. Pay Governance was engaged to advise on compensation trends and best practices, plan design and the reasonableness of individual compensation awards, as well as proxy statement preparation and disclosure. RTI’s Compensation Committee has considered the independence of Pay Governance as a compensation consultant, and has determined that no conflict of interest existed that would affect Pay Governance’s independence.

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

 

    Understand the competitiveness of current pay levels relative to peer companies with similar revenues and business characteristics;

 

    Understand the alignment between executive compensation levels and Company performance; and

 

    Serve as a basis for developing salary adjustments and incentive awards for RTI’s Compensation Committee’s approval.

When advising RTI’s Compensation Committee on base salary and incentive compensation, Pay Governance used market compensation data from reputable compensation surveys such as Towers Watson 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, at the end of 2013, included:

 

    Annual revenues ranging from approximately half to double RTI’s revenues;

 

    Relevant Global Industry Classification System (GICS) codes representing industrial manufacturing companies; and

 

    Asset-intensive companies similar to RTI.

The revised peer group for 2014 compensation purposes, which consists of 20 companies, added Woodward, Inc., Kaiser Aluminum Corporation, Barnes Group, Inc., RBC Bearings, Inc., Hexcel Corporation and Quaker Chemical Corporation. The following companies comprise the 2014 compensation peer group (the “2014 Peer Group”):

 

Barnes Group

LMI Aerospace Inc. Dril-Quip, Inc. Horsehead Holding Corp.

Eagle Materials

Quaker Chemical Co. Hexcel Corp. NN Inc.

Kaiser Aluminum Corp.

Castle (AM) & Co. Myers Industries Inc. Woodward, Inc.

Olympic Steel Inc.

Haynes International Inc. Universal Stainless & Alloy

Carpenter Technology Corp.

Materion Corporation Products, Inc.

Esterline Technologies Corp.

RBC Bearings Inc. Ducommun Inc.

Pay practices of the 2014 Peer Group were analyzed with respect to base salary, target annual cash incentive opportunities, and long-term incentives. The 2014 peer group data was supplemented by broader general industry data from the compensation surveys to facilitate the evaluation of compensation levels and design. When survey data was used, the base salary data was sized accordingly based on the revenue responsibilities of the named executive officer using regression equations provided by the survey.

 

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Using this peer group benchmarking approach, Pay Governance presented ranges of base salary, target annual cash incentive payments as a percentage of salaries, and target long-term incentives as a percentage of salaries for each of RTI’s named executive officers to RTI’s Compensation Committee.

Process for Establishing Base Salary and Long-Term Incentive Awards. At its January 2014 meeting, RTI’s Compensation Committee reviewed and considered recommendations of RTI’s CEO and information presented by Pay Governance with respect to the other executive officers relating to base salary and then, with the assistance of the RTI board of directors, reviewed the performance of RTI’s CEO. RTI’s Compensation Committee also reviewed tally sheets summarizing each named executive officer’s current compensation, aggregate stock holdings and benefits. The overall purpose of the tally sheets is to bring together, in one place, all elements of compensation, including compensation obligations upon various termination scenarios, so RTI’s Compensation Committee can analyze both the individual elements of compensation (including the compensation mix) as well as total compensation. After discussing potential payments in executive session with the RTI board of directors, with and without RTI’s CEO present, RTI’s Compensation Committee made a final determination as to base salaries for 2014 and awards of 2014 long-term, equity-based compensation, in each case consistent with RTI’s Pay Philosophy.

Process for Establishing 2014 Annual Incentive Compensation Program. In January 2014, RTI’s Compensation Committee reviewed the annual incentive compensation program designed by Pay Governance, which was similar to the 2011, 2012, and 2013 programs utilized by RTI’s Compensation Committee, and decided to continue to refer to this program, with slight modifications, as the basis for awarding 2014 annual incentive compensation. The 2014 annual incentive program (the “2014 Program”) was designed as a performance-based program, with achievement benchmarked against Company-wide financial goals, team objectives, and personal objectives. RTI’s Compensation Committee retained discretion to adjust the final awards in light of various factors including unplanned or unintended Company gains or losses or extraordinary events, unplanned events outside of the control of management, changes in accounting standards and changes in shareholder value. Final payments in excess of 150% of target would be made only if management’s performance had been exemplary and significant shareholder value was created. RTI’s Compensation Committee considered the recommendations of the CEO and determined that the three primary performance measures would be Company operating income, operating cash flow, and managed working capital as a percentage of sales. Specific targets for each of these performance measures were established by RTI’s Compensation Committee and approved by the RTI board of directors based upon consideration of RTI’s annual operating plan, historic actual performance, potential one-time items, and the current economic environment. In addition, team and individual performance goals were set for each officer based on recommendations from the CEO and input from RTI’s Compensation Committee and the RTI board of directors.

Between December 2014 and January 2015, RTI’s CEO reviewed the performance of RTI’s other named executive officers against the 2014 Program goals and objectives and presented RTI’s 2014 accomplishments in each segment and how such achievements were aligned to RTI’s long-term strategic plan to RTI’s Compensation Committee. RTI’s CEO also presented an assessment of each named executive officer’s achievement against the pre-established financial goals, team objectives, and personal objectives.

At its January 2015 meeting, RTI’s Compensation Committee reviewed and considered the recommendations of RTI’s CEO and information presented by Pay Governance with respect to target compensation for the other executive officers and then reviewed the performance of RTI’s CEO in the same manner that the CEO evaluated the other executive officers. RTI’s Compensation Committee discussed the potential payments in executive session with the RTI board of directors, with and without the CEO present. RTI’s Compensation Committee then made the final determination as to incentive compensation payments for 2014 performance, which included the exercise of negative discretion, consistent with RTI’s Pay Philosophy, which is discussed in Section E below.

 

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E. Analysis of Compensation Awards for RTI’s Named Executive Officers

Base SalarySalaries earned by RTI’s named executive officers for 2012, 2013, and 2014 are set forth in the table entitled “Summary Compensation Table” located on page 61 of this proxy statement/prospectus. In January 2014, RTI’s Compensation Committee determined to increase base salaries for each of RTI’s named executive officers as set forth below, effective February 14, 2014.

 

Named Executive Officer

   Annualized 2013
Base Salary
     New Base Salary
Effective February 14,
2014
     Percentage
Increase
 

Dawne S. Hickton

   $ 650,000       $ 690,000         6.15

Michael G. McAuley(1)

     —         $ 375,000         —     

William T. Hull

   $ 338,000       $ 338,000         0.00

James L. McCarley

   $ 475,000       $ 500,000         5.26

Patricia A. O’Connell

   $ 430,000       $ 440,000         2.33

Chad Whalen

   $ 305,000       $ 325,000         6.56

 

(1) Mr. McAuley’s salary was set in July 2014 when he joined RTI.

The increase was premised upon a review of comparative market data on base salary ranges provided by Pay Governance, which took into account the increase in the size of RTI as a result of its acquisitions over the preceding year, and the prevalence of merit increases across industries. In making this determination, RTI’s Compensation Committee considered salary history, experience in the position, the amount of the increase of the salary level over the current compensation, relative internal positioning, and individual performance and contribution to RTI.

Annual Incentive CompensationAnnual incentive compensation target amounts were established as a percentage of each named executive officer’s base salary. For 2014, the CEO’s target cash incentive compensation was increased to 90% of her base salary to more closely align it with the market median. The target cash incentive compensation amounts were as follows:

 

Named Executive Officer

   Target Cash Incentive Compensation
(as percentage of base salary)
 

Dawne S. Hickton

     90

Michael G. McAuley

     50

William T. Hull

     50

James L. McCarley

     60

Patricia A. O’Connell

     60

Chad Whalen

     50

So as to enhance the pay-for-performance alignment of the program, as well as the clarity and communicability to management of opportunities and expectations, RTI’s Compensation Committee has, with the assistance of Pay Governance, implemented a formulaic annual incentive program. RTI’s Pay Philosophy continues to provide RTI’s Compensation Committee with discretion to adjust awards accordingly to reflect such things as business or economic conditions or shareholder value creation or lack thereof.

 

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At its January 2014 meeting, RTI’s Compensation Committee approved pre-established performance goals for three Company financial metrics: operating income; managed working capital as a percentage of sales; and operating cash flow. Operating cash flow replaced return on invested capital to reflect management’s focus on cash generation. In addition, pre-established team and individual personal objectives in support of RTI’s overall corporate strategy were established. The weightings of the performance metrics in the 2014 Program were changed to increase the weighting of the operating income metric, which management believes is the most important profitability measure that it uses to judge its performance and likewise is the profitability metric that is regularly communicated by management to the public. The following table illustrates the weightings for the performance metrics under the 2014 Program:

 

Weighting Metric

   CEO     Other NEOs  

Operating Income

     45     36

Managed Working Capital as a Percentage of Sales

     15     12

Operating Cash Flow

     15     12

Team and Individual Personal Objectives

     25     40

RTI’s Compensation Committee continued to weight the financial goals more heavily than the team and personal goals for Ms. Hickton so that her annual incentive compensation would be most influenced by the overall financial performance of RTI.

A formal performance range around each performance goal was established to determine the payout for varying levels of actual performance. RTI’s Compensation Committee determined that, given the cyclicality of the industry, which directly impacts Company results, wide performance ranges resulting in a more gradual payment curve would be appropriate. For each financial metric, performance between 50% of target and 150% of target would result in suggested payouts to range between 50% of target and 200% of target, in line with typical market design for companies in cyclical industries. In evaluating each team and individual personal objective, credit would be determined as follows: 50% for threshold performance, 75% partially achieving performance, 100% for achieving the objective, 150% for partially exceeding the objective, and 200% for maximum performance.

RTI’s Compensation Committee carefully analyzed the appropriate performance goals for the three financial metrics. The primary reference for establishing financial goals has been RTI’s annual operating plan. For 2014, RTI’s annual operating plan reflected an improvement in managed working capital as a percentage of sales over 2013 and an increase in operating income. RTI’s performance in 2014 resulted in below-target performance of its three financial goals, and it only achieved threshold performance with respect to managed working capital as a percentage of sales. The following table summarizes the actual 2014 performance relative to the pre-established performance goals for the three financial metrics:

 

Financial Metric

  

Target
Performance Goal

  

Actual 2014
Performance(1)

   Performance
Against Target
 

Operating Income

   $83 million    $70 million      84.3

Operating Cash Flow(2)

   $100.4 million    $54.4 million      54.2

Managed Working Capital as a Percentage of Sales(3)

   60.1%    62.9%      53.0

 

(1) The named executive officers were paid using the preliminary performance results reflected in this table. Final 2014 performance resulted in a decrease in operating cash flow to $53.9 million rather than $54.4 million and an increase in managed working capital percentage of sales to 63.7% rather than 62.9%.
(2) Operating Cash Flow equals Cash Provided by Operating Activities as reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 26, 2015.
(3) Managed Working Capital as Percentage of Sales equals (Trade Accounts Receivable + Costs in Excess of Billings + Inventory – Accounts Payable – Billings in Excess of Costs – Unearned Revenue) ÷ Net Sales

 

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Most of the shared short-term team objectives, which are designed to touch upon various aspects of RTI’s operations and business that RTI’s Compensation Committee has determined are key areas for RTI’s continued growth and development, were achieved, and in fact performance exceeded the target for all but two goals. Further, all individual personal objectives were at least achieved at the target level. The following tables summarize the named executive officer’s performance against the shared team and individual personal objectives, except for Ms. O’Connell, who did not receive a payment under the 2014 Program due to the expiration of her employment agreement.

Team Objectives

 

Shared Team Objective

Performance  

•    Achieve RTI’s safety objectives

  Achieved   

•    Achieve target adjusted return on invested capital of 6.8%(1)

  Achieved   

•    Identify and substantially complete two key acquisitions consistent with RTI’s 2017 Strategic Plan

  Exceeded   

•    Complete a strategic “One Company” action plan and complete at least one synergy project

  Exceeded   

•    Conduct a review to identify appropriate energy-related acquisition targets and initiate solicitations

  Exceeded   

 

(1) Adjusted return on invested capital will be calculated as follows: the denominator will be fixed and be based on RTI’s capital base (debt plus equity) as of the end of 2013 ($1,206 million) and the numerator will be Annual Operating Plan operating earnings. This calculation will be adjusted for the impact of acquisitions, restructurings, and impairments.

Individual Personal Objectives

Dawne S. Hickton—Vice Chair, President and Chief Executive Officer

 

•    Evaluate the finance and accounting organizational structure, competencies, skill sets and staffing

  Achieved   

•    Advance the role of RTI within the industry as a leader in titanium powder manufacturing within the context of industry-wide manufacturing initiatives, including the successful integration of at least one technology acquisition and positioning with two or more key customers

  Exceeded   

•    Continue to improve Return on Invested Capital year-over-year to meet metric that is at 50th percentile or above peer group by end of 2015

  Achieved   

•    Continue to enhance succession planning and talent leadership training process, focusing on internal candidates and enhancing opportunities for inclusion

  Exceeded   

Michael G. McAuley—Senior Vice President, Chief Financial Officer and Treasurer

 

•    Acquire knowledge of RTI’s products, manufacturing, people, key customers and programs via site visits and operations reviews of every key site and business team by end of 2014

  Achieved   

•    Assess finance and accounting organizational structure, competencies, skill sets and staffing and develop a plan for migration in late 2014 and early 2015

  Achieved   

•    Complete material weakness remediation plans on schedule and incur no new material weaknesses or restatements during 2014

  Achieved   

 

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•    Identify and work on at least one key transaction

  Achieved   

•    Work with the legal and human resources teams to evaluate opportunities to consolidate pension plans, simplify processes, reduce control risk and potentially reduce pension funding

  Achieved   

William T. Hull—Senior Vice President and Chief Risk Officer

 

•    Oversee the successful remediation of three material weaknesses

  Achieved   

•    Develop formal annual business process reviews with business unit management and corporate to identify high-risk areas and/or rapidly changing environments requiring additional risk management and to ensure that the proper accounting policies and practices are in place; then manage the process reviews to identify the top five accounting and reporting risks across the organization and develop and implement remediation or mitigation plans

  Achieved   

•    Work with legal, accounting and human resources to evaluate and revamp the administration of RTI’s equity plans

  Achieved   

•    Expand on RTI’s framework for assessing and managing risks within each business unit and across the organization

  Achieved   

•    Oversee the successful integration of functional aspects of new acquisitions

  Achieved   

•    Collaborate with management on cost reduction and/or cash improvement efforts focusing on improved operating earnings and positive free cash flow in line with RTI’s 2017 Strategic Plan

  Achieved   

James L. McCarley—Executive Vice President-Operations

 

•    Realize reduction in 2014 melted material costs versus 2013 and overall sheet and round billet yield improvement

  Achieved   

•    Expand product offering at Medical to include at least one new product or capability

  Achieved   

•    Reduce total OSHA recordable hand injury incidents

  Achieved   

•    Improve consolidated inventory days

  Achieved   

•    Implement 2013 baseline sustainability metrics for each reporting segment and a baseline sustainability improvement plan

  Achieved   

Chad Whalen—General Counsel & Senior Vice President

 

•    Work with Ms. O’Connell to analyze RTI’s approach to commercial contract negotiation and contract management and define and implement enhancements to this business process

  Achieved   

•    Identify a worthwhile professional group and take an active role in same to expand RTI’s network of contacts in the corporate legal community.

  Exceeded   

•    In coordination with the finance and accounting departments, evaluate and revamp RTI’s approach to the administration of RTI’s equity plans and programs. This objective includes the comprehensive review of RTI’s transfer agent, RTI’s stock option exercise program, ESPP, and 401(k) stock fund, as well as evaluating the potential outsourcing of RTI’s equity award management and tracking, which is currently a manual process involving Accounting, HR and Legal.

  Exceeded   

 

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The table below sets forth the target cash incentive compensation amounts, the amounts earned and payable under the 2014 Program, and the actual cash incentive compensation paid for performance in the 2014 fiscal year:

 

Named Executive Officer

   Target Cash
Incentive
Compensation
     Earned Cash
Incentive
Compensation
     Actual Cash Incentive
Compensation Awarded
 

Dawne S. Hickton

   $ 621,000       $ 533,439       $ 525,000   

Michael G. McAuley(1)

   $ 187,500       $ 83,532       $ 80,000   

William T. Hull

   $ 169,000       $ 149,565       $ 140,000   

James L. McCarley

   $ 300,000       $ 267,300       $ 250,000   

Patricia A. O’Connell

   $ —         $ —         $ —     

Chad Whalen

   $ 162,500       $ 155,350       $ 150,000   

 

(1) Mr. McAuley’s actual 2014 annual incentive program award is prorated to reflect his hiring half-way through 2014.

RTI’s Compensation Committee exercised negative discretion, which resulted in the actual payment being less than the amount earned after applying the weightings and methodology of the 2014 Program. The final annual incentive payouts were determined by RTI’s Compensation Committee to be between 82.8% and 85.3% of target payout.

Long-term incentive awards. Long-term equity-based incentives award grants were made to the then-named executive officers in January 2014 under the 2004 Stock Incentive Plan. The long-term incentive grant made to Mr. McAuley in July 2014 was made from the 2014 Stock and Incentive Plan. Consistent with RTI’s Pay Philosophy and 2014 Peer Group data compiled by Pay Governance, 2014 long-term awards were made at 10% higher than target levels due to RTI’s above-target performance in 2013.

 

Named Executive Officer

   2014 Target
Equity Award
as a Percentage
of Salary
    Modifier to
Reflect Improved
2013 Performance
    2014 Award Value as
Percentage of Base
Salary Awarded
 

Dawne S. Hickton

     170     10     187

Michael G. McAuley

     80     10     88

William T. Hull

     80     10     88

James L. McCarley

     105     10     116

Patricia A. O’Connell

     100     10     110

Chad Whalen

     80     10     88

In each case, awards consisted of time-based restricted stock, stock options, and performance shares. For additional information regarding the specific awards received and the amounts of such awards, see the “Grants of Plan-Based Awards Table” and accompanying narrative beginning on page 63 of this proxy statement/prospectus.

 

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F. Changes in Compensation for 2015

During RTI’s Compensation Committee’s meeting in January 2015, salary recommendations for the named executive officers were reviewed, discussed, and determined for 2015 as follows:

 

Named Executive Officer

   Annualized 2014
Base Salary
     New Base Salary
Effective
February 2015
     Percentage
Increase
 

Dawne S. Hickton

   $ 690,000       $ 745,000         7.97

Michael G. McAuley

   $ 375,000       $ 425,000         13.3

William T. Hull

   $ 338,000       $ 355,000         5.03

James L. McCarley

   $ 500,000       $ 540,000         8.00

Patricia A. O’Connell

   $ 440,000       $ —           —     

Chad Whalen

   $ 325,000       $ 375,000         15.38

Based on the comparative market data reviewed, performance in 2014 and expectations for 2015 performance, RTI’s Compensation Committee believes these salaries to be appropriate for 2015 and consistent with RTI’s Pay Philosophy.

Also in January 2015, RTI’s Compensation Committee reviewed the target award values for long-term incentives for RTI’s named executive officers and increased the target percentages based on market data presented by Pay Governance and also made grants for the named executive officers at 110% of target due to the improved year-over-year performance of RTI and five consecutive years of record sales and operating income growth.

 

Named Executive Officer

   2014 Target
Equity Award
Value as a
Percentage of
Salary
    2015 Target
Equity Award
Value as a
Percentage of
Salary
    Modifier to
Reflect
Improved
2014
Performance
    Total Equity
Award Value as a
Percentage of
Salary
 

Dawne S. Hickton

     170     215     10     237

Michael G. McAuley

     —          85     10     94

William T. Hull

     80     85     10     94

James L. McCarley

     105     110     10     121

Patricia A. O’Connell

     100     —          —          —     

Chad Whalen

     80     85     10     94

Finally, in January 2015, RTI’s Compensation Committee determined to grant restricted stock units, which are a contractual promise to issue shares of stock at a future vesting date, instead of restricted stock to the named executive officers primarily because restricted stock units offer some tax advantages over restricted stock for retirement-eligible participants. After consultation with Pay Governance, RTI’s Compensation Committee set the vesting period for the restricted stock unit awards as ratably over three years, as opposed to the vesting period for restricted stock awards, which had been ratably over five years.

G. Tax Considerations

RTI’s Compensation 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 RTI’s 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 RTI intend for its 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 RTI’s 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.

 

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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.” RTI’s Compensation 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, however, may not qualify for the performance-based exception, and therefore may not be deductible under Section 162(m). RTI’s annual cash incentive compensation program is not intended to qualify for deduction under Section 162(m). While RTI’s Compensation Committee considers the tax impact of any compensation arrangement, it reserves the right to approve non-deductible compensation that is consistent with RTI’s overall Pay Philosophy.

If a change in control of RTI 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 RTI can be denied a tax deduction. RTI’s 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, RTI 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 RTI. Although gross-up benefits in connection with the excise tax on excess parachute payments were eliminated in 2010 on a going forward basis for new executives, such payments may be made to persons covered by the policy prior to 2010. See footnote 6 to the table entitled “Golden Parachute Compensation – RTI” beginning on page 114 of this proxy statement/prospectus.

Summary Compensation Table

 

Name and Principal Position(1)(a)

  Year
(b)
    Salary
($)(c)
    Bonus
($)(2)
(d)
    Stock
Awards
($)(3)(4)
(e)
    Option
Awards
($)(3)(f)
    Non-Equity
Incentive Plan
Compensation
($)(5)(g)
    Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(6)(h)
    All Other
Compensation
($)(7)(i)
    Total
($)(j)
 

Dawne S. Hickton

    2014      $ 685,385      $ —        $ 789,277      $ 265,962      $ 525,000      $ 1,111,599      $ 24,368      $ 3,401,591   

Vice Chair, President and

    2013        646,538        —          899,054        228,834        411,450        524,077        20,790        2,730,743   

Chief Executive Officer

    2012        617,692        —          699,227        177,367        616,590        776,081        19,241        2,906,198   

Michael G. McAuley

    2014        171,635        —          —          121,700        80,000        1,187        153,714        528,236   

Senior Vice President, Chief

    2013        —          —          —          —          —          —          —          —     

Financial Officer and Treasurer

    2012        —          —          —          —          —          —          —          —     

William T. Hull

    2014        338,000        —          193,159        65,083        140,000        227,330        —          963,572   

Senior Vice President-

    2013        336,500        —          207,481        70,560        125,000        103,865        —          843,406   

Chief Risk Officer

    2012        323,846        —          183,346        62,081        205,563        163,718        —          938,554   

James L. McCarley

    2014        497,115        —          357,769        120,560        250,000        100,696        8,750        1,334,890   

Executive Vice President-

    2013        468,077        —          373,283        95,018        247,950        55,265        8,750        1,248,343   

Operations

    2012        413,269        —          310,760        78,836        307,266        37,550        8,500        1,156,181   

Patricia A. O’Connell

    2014        438,846        50,000        307,158        103,494        —          9,194        269,858        1,178,550   

Executive Vice President-

    2013        396,923        100,000        1,095,066        93,358        237,360        6,251        381,637        2,310,595   

Commercial

    2012        —          —          —          —          —          —          —          —     

Chad Whalen

    2014        322,692        —          174,307        58,734        150,000        56,997        8,750        771,480   

General Counsel and

    2013        300,385        —          118,136        51,778        145,790        32,567        8,750        657,406   

Senior Vice President

    2012        264,192        —          104,949        45,758        134,196        28,154        19,515        596,764   

 

(1) Mr. McAuley was hired July 1, 2014. Ms. O’Connell was hired January 14, 2013 and she was no longer an executive officer of RTI as of January 31, 2015. Mr. Hull was Senior Vice President and Chief Financial Officer until June 19, 2014.
(2) Cash compensation paid to Ms. O’Connell in 2013 and 2014 as her signing bonus.
(3)

Represents the aggregate grant date fair value, computed in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 718 (excluding the effect of estimated forfeitures), of restricted stock, performance shares, and option awards issued by RTI during

 

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  the years presented. The grant date fair value of restricted stock awards is based on the average of the high and low market prices on the date of grant. The grant date fair value of stock option awards is based on the Black-Scholes option pricing model. The actual value, if any, that a named executive officer may realize upon exercise of stock options will depend on the excess of the stock option price over the exercise price on the date of exercise. As such, there is no assurance that the value realized by a named executive officer will be at or near the value estimated by the Black-Scholes model. The grant date fair value of the performance share awards granted was calculated using a Monte Carlo model which incorporates the market-based performance conditions within the grant. The assumptions used in determining the grant date fair values of the 2014 awards are set forth in Note 15 to RTI’s Consolidated Financial Statements, which is included in RTI’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 26, 2015.
(4) The grant date fair value of the performance share awards included in this column was calculated based on the probable outcome of the performance condition, as determined at the grant date. The 2014 grant date fair value of the performance share awards, if they were calculated at the maximum payout for each of the named executive officers, would have been: Ms. Hickton: $727,690; Mr. McAuley: $0; Mr. McCarley: $329,842; Ms. O’Connell: $283,202; Mr. Hull: $178,094; and Mr. Whalen: $160,726.
(5) Cash incentive compensation awarded to the named executive officers for their performance in accordance with the 2012 annual cash incentive program, the 2013 annual incentive program and the 2014 Program in which awards were earned during a given fiscal year and paid in the first quarter of the following fiscal year.
(6) Reflects the increase during the year presented in actuarial present values of each named executive officer’s accumulated benefits under the Pension Plan for Eligible Salaried Employees, the Supplemental Pension Plan and Excess Benefit plans. These amounts were determined using interest rate and mortality rate assumptions consistent with those used in RTI’s Consolidated Financial Statements, which are included in RTI’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 26, 2015. There are many assumptions that are used to determine the present value of accumulated pension benefits, with interest rates (i.e., discount rates) and mortality assumptions being two of the key assumptions. Generally, a decrease in the interest rate increases the present value of pension benefits. In 2014, RTI adopted an updated mortality table which increased the present value of pension benefits for each of the participants. The degree of changes in the present value depends on the age of the employee, when the benefit payments are projected to begin, and how long the benefits are expected to last.
(7) Represents the aggregate incremental cost to RTI with respect to the perquisites and other personal benefits provided to the named executive officer in each year presented. See the table entitled “All Other Compensation Table” below for further information on perquisites and other personal benefits provided to RTI’s named executive officers.

All Other Compensation Table

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

 

Name

  Year     Perquisites(1)     Relocation
Benefits(2)
    Tax
Reimbursements(3)
    Insurance
Premiums
    Company
Contributions
to DC Plans(4)
    Severance
Payments/
Accruals(5)
    Change in
Control
Payments/
Accrual
    Total  

Dawne S. Hickton

    2014      $ 24,368        N/A        N/A        N/A      $ —          N/A        N/A      $ 24,368   
    2013        20,790        N/A        N/A        N/A        —          N/A        N/A        20,790   
    2012        19,241        N/A        N/A        N/A        —          N/A        N/A        19,241   

Michael G. McAuley

    2014        —          118,731        29,791        N/A        5,192        N/A        N/A        153,714   
    2013        —          N/A        N/A        N/A        —          N/A        N/A        —     
    2012        —          N/A        N/A        N/A        —          N/A        N/A        —     

William T. Hull

    2014        —          N/A        N/A        N/A        —          N/A        N/A        —     
    2013        —          N/A        N/A        N/A        —          N/A        N/A        —     
    2012        —          N/A        N/A        N/A        —          N/A        N/A        —     

James L. McCarley

    2014        —          N/A        N/A        N/A        8,750        N/A        N/A        8,750   
    2013        —          N/A        N/A        N/A        8,750        N/A        N/A        8,750   
    2012        —          N/A        N/A        N/A        8,500        N/A        N/A        8,500   

Patricia A. O’Connell

    2014        14,532        N/A        N/A        N/A        8,750        246,576        N/A        269,858   
    2013        —          248,583        124,304        N/A        8,750        N/A        N/A        381,637   
    2012        —          N/A        N/A        N/A        —          N/A        N/A        —     

Chad Whalen

    2014        —          N/A        —          N/A        8,750        N/A        N/A        8,750   
    2013        —          N/A        —          N/A        8,750        N/A        N/A        8,750   
    2012        11,015        N/A        —          N/A        8,500        N/A        N/A        19,515   

 

(1) Amounts show the aggregate incremental cost to RTI in 2014 for all perquisites and personal benefits for the listed individuals in the event that such amounts exceeded $10,000 in the aggregate. Perquisites and personal benefits for 2014 consisted of (i) annual tax preparation and financial counseling services for each named executive officer and (ii) annual executive physical examination and diagnostic services at a designated medical facility. In addition, Ms. Hickton maintains business-related club memberships which are used by RTI as a whole. Unless a dollar amount is included in this footnote, none of these benefits exceeded the greater of $25,000 or 10% of the total amount of these benefits for the listed individuals, and as such are not separately quantified.

 

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(2) Reflects RTI’s payment of relocation benefits pursuant to RTI’s relocation policy related to Mr. McAuley’s and Ms. O’Connell’s moves to Pittsburgh, Pennsylvania upon joining RTI. For Mr. McAuley, such amounts included $41,394 in brokers’ commission. For Ms. O’Connell, such amounts include $88,000 for the relocation service provider’s loss on the sale of Ms. O’Connell’s residence and $45,720 in brokers’ commission.
(3) Reflects RTI’s reimbursement of tax payments made related to Mr. McAuley’s and Ms. O’Connell’s relocation benefits.
(4) Reflects RTI’s 401(k) matching contribution for the named executive officer. Messrs. McAuley, McCarley and Whalen and Ms. O’Connell are the only named executive officers participating in RTI’s defined contribution 401(k) plan who received matching contributions.
(5) Reflects the amount of a separation payment made to Ms. O’Connell after her letter agreement expired.

Grants of Plan-Based Awards Table- 2014

 

Name

  Grant
Date
    Estimated Future Payouts Under Non-
Equity Incentive Plan Awards ($)(1)
    Non-
Equity
Rights
(#)
    Estimated Future Payouts Under
Equity Incentive Plan Awards (#)(2)
    All Other
Stock
Awards:
Number
of Shares of
Stock
or Units
(#)(3)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(4)
    Exercise
or Base
Price of
Option
Awards
($/sh)(5)
    Grant Date
Fair Value
of Stock
and Option
Awards(6)
 
    Threshold     Target     Maximum       Threshold     Target     Maximum          

Dawne S. Hickton

    1/31/2014      $ 310,500      $ 621,000      $ 1,242,000        —          —          —          —          —          —        $ —        $ —     
    1/31/2014        —          —          —          —          5,195        10,391        20,782        —          —          —          363,845   
    1/31/2014        —          —          —          —          —          —          —          —          17,719        31.19        265,962   
    1/31/2014        —          —          —          —          —          —          —          13,640        —          —          425,432   

Michael G. McAuley

    1/31/2014        93,750        187,500        375,000        —          —          —          —          —          —          —          —     
    1/31/2014        —          —          —          —          —          —          —          —          —          —          —     
    7/24/2014        —          —          —          —          —          —          —          —          10,000        25.12        121,700   
    1/31/2014        —          —          —          —          —          —          —          —          —          —          —     

William T. Hull

    1/31/2014        84,500        169,000        338,000        —          —          —          —          —          —          —          —     
    1/31/2014        —          —          —          —          1,271        2,543        5,086        —          —          —          89,047   
    1/31/2014        —          —          —          —          —          —          —          —          4,336        31.19        65,083   
    1/31/2014        —          —          —          —          —          —          —          3,338        —          —          104,112   

James L. McCarley

    1/31/2014        150,000        300,000        600,000        —          —          —          —          —          —          —          —     
    1/31/2014        —          —          —          —          2,355        4,710        9,420        —          —          —          164,921   
    1/31/2014        —          —          —          —          —          —          —          —          8,032        31.19        120,560   
    1/31/2014        —          —          —          —          —          —          —          6,183        —          —          192,848   

Patricia A. O’Connell

    1/31/2014        132,000        264,000        528,000        —          —          —          —          —          —          —          —     
    1/31/2014        —          —          —          —          2,022        4,044        8,088        —          —          —          141,601   
    1/31/2014        —          —          —          —          —          —          —          —          6,895        31.19        103,494   
    1/31/2014        —          —          —          —          —          —          —          5,308        —          —          165,557   

Chad Whalen

    1/31/2014        81,250        162,500        325,000        —          —          —          —          —          —          —          —     
    1/31/2014        —          —          —          —          1,147        2,295        4,590        —          —          —          80,363   
    1/31/2014        —          —          —          —          —          —          —          —          3,913        31.19        58,734   
    1/31/2014        —          —          —          —          —          —          —          3,012        —          —          93,944   

 

(1) Potential threshold, target and maximum payments to the named executive officers pursuant to the 2014 Program. RTI’s 2014 Program pays from 0% to 200% of the target award based on performance against predetermined metrics, although the award payout is generally capped at 150% of target unless significant shareholder value is created during the performance period.
(2) Reflects the number of shares underlying performance share awards granted in 2014 to the named executive officers. Performance share awards earn shares of RTI’s common stock in amounts ranging from 0% to 200% of the target number of shares based 50% upon the total shareholder return of RTI compared to a designated peer group over a pre-determined performance period and 50% on RTI’s earnings growth as described on page 66.
(3) Shows the number of shares of restricted stock granted in 2014 to the named executive officers. These awards vest ratably in five equal annual installments beginning one year after the grant date.
(4) Reflects the number of shares underlying stock option awards granted in 2014 to the named executive officers. These awards vest ratably in three equal annual installments beginning one year after the grant date.
(5) Represents the exercise price for the stock options granted, which is determined based on the average of the high and low market prices of RTI’s common stock on the date of grant.
(6)

Represents the grant date fair value of the award determined in accordance with the FASB’s authoritative guidance. The grant date fair value for restricted stock awards is based on the average of the high and low market prices on the date of grant. The grant date fair value for stock option awards is based on the Black-Scholes option pricing model. The actual value, if any, that a named executive officer may realize upon exercise of stock options will depend on the excess of the stock price over the base value on the date of exercise. As such, there is no assurance that the value realized by a named executive officer will be at or near the value estimated by the Black-Scholes model. The grant date fair value of the performance share awards granted was calculated using a Monte Carlo model, which incorporates

 

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  the market-based performance conditions within the grant. The assumptions used in determining the grant date fair value of these awards are set forth in Note 15 to RTI’s Consolidated Financial Statements, which are included in its Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 26, 2015.

The tables above summarize the total compensation paid to or earned by each of RTI’s named executive officers for the fiscal year ended December 31, 2014. The narrative below describes current employment agreements and material employment terms with each of RTI’s named executive officers, as applicable, and provides additional information with respect to the compensation components set forth in the above tables.

Letter Agreements

RTI has entered into letter agreements with each named executive officer. In connection with a review of various retirement benefit plans and to enhance certain retention aspects of the plans with respect to key management, in January 2015, Ms. Hickton’s Letter Agreement was amended to provide that if her employment is terminated prior to attaining age 62 (i) by RTI without cause (as defined), whether or not in connection with a change in control (as defined), or (ii) by Ms. Hickton for good reason (as defined) in connection with a change in control, then she will be eligible to receive a payment equal to the difference between the pension benefits she would have received under certain Company retirement plans in which Ms. Hickton participates as though she had retired at age 62, and the actual benefits received by her under such plans. The plans in which Ms. Hickton participates are the Pension Plan for Eligible Salaried Employees of RMI Titanium Company, as amended, the RTI International Metals, Inc. Excess Benefit Plan, as amended, and the RTI International Metals, Inc. Supplemental Pension Program, as amended. Separately, Ms. O’Connell’s Letter Agreement expired in January 2015 and was not renewed.

Except as described below, each of the five letter agreements is identical. In each case the named executive is employed by RTI for an initial three-year term, which is automatically extended for additional one year periods thereafter until the executive attains age 65 unless either RTI or the executive gives prior notice that the agreement will not be extended. RTI may terminate an agreement at any time for any reason, including “cause” as defined (see page 79 of this proxy statement/prospectus for the definition). If employment is terminated for “cause” he or she will be entitled to no further compensation other than accrued and unpaid base salary as of the date of termination. If employment is terminated other than for cause and not in connection with a “change in control” of RTI, then RTI’s Executive Non-Change in Control Severance Policy, as described on page 79 of this proxy statement/prospectus, governs. If employment is terminated other than for cause and in connection with a “change in control” of RTI, then RTI’s Executive Change in Control Severance Policy, as described on pages 78-79 of this proxy statement/prospectus, will control. Due to RTI’s proactive revision to the Executive Change in Control Severance Policy, described on page 52, only Ms. Hickton and Messrs. Hull and Whalen will be entitled to receive any “gross-up” payments under the Executive Change in Control Severance Policy for any excise tax imposed by Section 4999 of the Internal Revenue Code.

Payment under each letter agreement is predicated on the named executive officer adhering to the non-competition and non-solicitation provisions set forth in each agreement for a period equal to the longer of 12 months (24 months in the case of Ms. Hickton; 18 months in the case of Mr. McAuley) after termination of employment or the period during which severance benefits are received.

Under the letter agreements, each named executive officer will be paid the annual salary set forth therein, subject to increases from time to time at the discretion of the RTI board of directors. Each named executive officer is also eligible to receive annual cash incentive compensation as determined by the RTI board of directors consistent with RTI’s Pay Philosophy, and will be eligible to participate in RTI’s stock incentive plans. Each named executive officer is also entitled to paid vacation and other benefits in accordance with RTI’s existing policies and future applicable employee benefit programs including RTI’s Supplemental Pension Program and Excess Benefit plans, as they may be amended from time to time. For further information regarding RTI’s Supplemental Pension and Excess Benefit Plan, see page 72 of this proxy statement/prospectus.

 

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Awards under the 2004 Stock Plan

RTI’s 2004 Stock Plan permits the granting of awards, which may be made in a combination of stock (restricted share awards, performance shares, phantom stock or non-restricted shares) and stock options. In 2014, RTI utilized a mix of incentive stock options, restricted share awards, and performance share awards, with each vesting over time.

 

    Stock Options: Incentive stock options were granted to RTI’s named executive officers as set forth in the Grant of Plan Based Awards Table above. The term of the options is ten years from the date of the grant, and vests ratably over a three-year period on each anniversary of the date of grant. See “Executive Compensation—Potential Payments Upon Termination or Change in Control” beginning on page 72 of this proxy statement/prospectus for a description of the effects of employment termination or a change in control on stock option awards.

 

    Restricted Shares: Shares of restricted stock were granted to RTI’s named executive officers on January 31, 2014 as set forth in the Grant of Plan Based Awards Table above, and to RTI’s non-employee directors as set forth in the Director Compensation Table on page 81 of this proxy statement/prospectus. Restricted shares awarded to RTI’s named executive officers vest ratably over a five-year period on the last business day of each January. See “Executive Compensation—Potential Payments Upon Termination or Change in Control” beginning on page 72 of this proxy statement/prospectus for a description of the effects of employment termination or a change in control on restricted share awards.

 

    Performance Shares: Performance share award grants were made on January 31, 2014 to all named executive officers at a target level as set forth in the Grant of Plan Based Awards Table above. Vesting is performance-based and occurs, if at all, following the end of the three-year performance period (the “performance period”) on the date RTI’s Compensation Committee determines RTI’s actual performance for the performance period. See “Executive Compensation—Potential Payments Upon Termination or Change in Control” beginning on page 72 of this proxy statement/prospectus for a discussion of the effects of termination or a change in control on performance share awards. Performance share award payouts are based on two equally-weighted metrics. The first metric is based on RTI’s TSR for the performance period, defined as the share price appreciation of RTI’s common stock plus dividends accrued as measured during the performance period, compared to the TSR of the Performance Award Peer Group. The starting and ending points for calculating TSR are the average closing stock price of RTI’s common stock for the five trading days prior to the start or end date, as applicable.

The following table sets forth the correlation of performance shares earned as a percentage of target award, based on RTI’s TSR results compared to the Performance Award Peer Group:

 

If Company TSR is:

  

Performance Shares earned as a

percentage of Target Award will be:

less than the 30th percentile of the peer group TSR

   0%

greater than or equal to the 30th percentile and less than the 50th percentile of the peer group TSR

   50.00% to 99.99%(1)

equal to the 50th percentile of the peer group TSR

   100.00% (Target Award)

greater than 50th percentile, less than the 75th percentile of peer group TSR

   100.00% to 199.99%(2)

greater than or equal to the 75th percentile of the Peer Group TSR

   200.00% (Maximum Award)

 

(1) The Performance Shares earned as a percentage of the Target Award will be computed by adding 50% to a percentage determined as follows: (A)(i) the TSR as a percentile of the Performance Award Peer Group TSR index less 30% divided by (ii) 20%; multiplied by (B) 50%.
(2) The Performance Shares earned as a percentage of the Target Award will be computed by adding 100% to a percentage determined as follows: (A)(i) the TSR as a percentile of the Performance Award Peer Group TSR index less 50% divided by (ii) 25%; multiplied by (B) 100%.

 

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Interpolation is used to determine actual awards earned as a percentage of Target Award.

The remaining 50% of the target Award will be determined by RTI’s year-over-year earnings per share from continuing operations growth (“EPS Growth”) achieved during the performance period, computed by dividing net income (loss) from continuing operations by the weighted-average of all potentially dilutive shares of Company Common Stock that were outstanding during the periods presented, as reflected in RTI’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission. Recipients will have the ability to earn one-half of the EPS Growth metric target award based on the average EPS Growth over the first two years, and one-half of the EPS Growth metric target award based on EPS Growth in the third year; provided, however, that in no circumstances shall any shares be paid under the Award until the end of the performance period.

The calculation of EPS Growth for each EPS Performance Period shall be determined as follows:

 

If EPS Growth for each EPS Performance Period is(1):

  

Performance Shares earned for as a
percentage of Target Award will  be(1):

less than 5% over the prior year

   0%

greater than or equal to 5% and less than 15% over the prior year

   50.00% to 99.99%(2)

equal to 15% over the prior year

   100.00% (Target Award)

greater than 15% but less than 25% over the prior year

   100.00% to 199.99%(3)

greater than or equal to 25% over the prior year

   200.00% (Maximum Award)

 

(1) EPS Metric represents one-half (1/2) of the Target Award opportunity; and one-half (1/2) of the EPS Target Award may be earned in each of the two EPS Performance Periods.
(2) In the event that EPS Growth in any EPS Performance Period is greater than or equal to 5% and less than 15% over the prior period the Performance Shares earned as a percentage of the Target Award(1) will be computed by adding 50% to a percentage determined as follows: (i) EPS Growth less 5% multiplied by (ii) five.
(3) In the event that EPS Growth in any EPS Performance Period is greater than 15% but less than 25% over the prior period, the Performance Shares earned as a percentage of the Target Award(1) will be computed as follows: (i) EPS Growth less 5% multiplied by (ii) ten.

 

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RTI’s Compensation Committee establishes the Performance Award Peer Group at the grant date, and has the ability to adjust the members of the peer group in response to a change in circumstances that results in a member of the peer group no longer satisfying the criteria for which it was originally selected, for example, where a member of the peer group is acquired by another company, sells a portion of its business, is delisted, or files for bankruptcy. The companies included in the Performance Award Peer Group for the 2014 and 2013 performance share award programs are as follows:

 

Performance Award Peer Companies

   2014    2013  

Allegheny Technologies, Inc.

   ü    ü     

AMCOL International Corp.

   (1)    ü     

Barnes Group, Inc.

   ü   

Carpenter Technology Corp.

   ü    ü     

Castle (AM) & Co.

   ü    ü     

CPI Aerostructures

   ü    ü     

Dril-Quip, Inc.

   ü    ü     

Ducommun Inc.

   ü    ü     

Eagle Materials

   ü    ü     

Esterline Technologies Corp.

   ü    ü     

Haynes International Inc.

   ü    ü     

Hexcel Corp.

   ü   

Horsehead Holding Corp.

   ü    ü     

Kaiser Aluminum Corp.

   ü   

Kaydon Corporation

   (2)    ü     

LMI Aerospace Inc.

   ü    ü     

Materion Corporation

   ü    ü     

Myers Industries Inc.

   ü    ü     

NN Inc.

   ü    ü     

Olympic Steel Inc.

   ü    ü     

Quaker Chemical Co.

   ü   

RBC Bearings, Inc.

   ü   

Reliance Steel & Aluminum Company

      ü     

Triumph Group, Inc.

   ü    ü     

Universal Stainless & Alloy Products, Inc.

   ü    ü     

Woodward, Inc.

   ü   

 

(1) Acquired by Minerals Technologies, Inc. in May 2014.
(2) Acquired by SKF Group in October 2013.

The 2014 Performance Award Peer Group is comprised of the same companies as constituted RTI’s 2014 Peer Group, listed on page 53 of this proxy statement/prospectus, except that three business competitors, Allegheny Technologies Inc., CPI Aerostructures and Triumph Group, Inc., were added to the Performance Award Peer Group as they are appropriate for evaluating total shareholder return for incentive purposes, but are inappropriate, given their size (too large or too small), for use in establishing pay levels.

The performance share award agreements contain a specific clawback provision in which the named executive officers agree that if the RTI board of directors determines that any fraud, negligence, or intentional misconduct by an officer was a significant contributing factor to RTI having to restate all or a portion of its financial statements, RTI’s Compensation Committee has the right to cause the immediate forfeiture of the award or, during the two year period following any payout, to require reimbursement of any payout in the event the payout would have been reduced due to such restatement.

 

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Cash Incentive Compensation Awards

Consistent with RTI’s Pay Philosophy, annual cash incentive compensation 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. RTI’s Compensation Committee has discretion to pay or not pay cash incentive compensation to a particular officer, based on his or her individual performance, regardless of the level of corporate performance. See page 48 of this proxy statement/prospectus under the section entitled “Executive Compensation—Compensation Discussion and Analysis” for additional information regarding RTI’s payment of cash incentive compensation awards.

Perquisites and Other Compensation

Certain perquisites are provided to RTI’s named executive officers that RTI’s board of directors believes are competitive with other similar companies and consistent with RTI’s Pay Philosophy, as discussed under “Compensation Discussion and Analysis”. Effective November 1, 2008, the principal perquisite programs utilized by RTI’s named executive officers include tax preparation and financial counseling and annual executive medical exams. With the exception of Ms. Hickton, each of RTI’s named executive officers at that time had their base salary adjusted to include an automobile allowance and a business-related club membership allowance at that time. Ms. Hickton’s base salary was adjusted to include an automobile allowance, and she maintained her business-related club memberships, which are used by RTI as a whole.

RTI currently also has in place a 401(k) defined contribution plan in which RTI contributes 50% of the first 8% of an executive’s base salary and cash incentive compensation contributed by the executive, subject to applicable Internal Revenue Code limits, for those named executive officers not eligible to participate in the defined benefit pension plan, which was closed to new participants in 2006 and is discussed below. Messrs. McAuley, McCarley and Whalen and Ms. O’Connell are the named executive officers for whom RTI is making matching contributions. Other named executive officers may participate in the 401(k) plan up to applicable Internal Revenue Code limits but RTI does not match their contributions.

Post-Employment Compensation Arrangements

RTI currently has in place a Pension Plan for Eligible Salaried Employees (the “Pension Plan”), a Supplemental Pension Program (the “Supplemental Pension Program”), and the RTI International Metals, Inc. Excess Benefits Plan (the “Excess Benefit Plan”) that may be utilized by some or all of the named executive officers. RTI’s Pension Plan is a qualified defined benefit plan that covers each of RTI’s current named executive officers except for Messrs. McAuley, McCarley and Whalen and Ms. O’Connell, who joined RTI after the Pension Plan was closed to new participants in 2006. The benefits are based on a formula whereby a percentage of the participant’s average monthly base salary is 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 named executive officer to specified annual benefits based upon average annual cash incentive compensation and years of service if they retire (i) after having met the eligibility requirements for an immediate pension under the provisions of the qualified Pension Plan (whether or not they are a participant in the qualified Pension Plan) or (ii) after having achieved 30 years of service prior to age 60 with the consent of RTI. RTI also maintains the 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 RTI’s Pension Plan but for certain tax limitations imposed by the Internal Revenue Code and amounts actually payable under the Pension Plan. See “Executive Compensation—Retirement Benefits” on page 71 of this proxy statement/prospectus for additional detail regarding RTI’s pension plans.

 

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Outstanding Equity Awards at Fiscal Year End Table—2014

The following table provides information on the holdings of stock option, restricted stock, and performance share awards by the named executive officers, as of the end of fiscal year 2014. For information as to equity holdings of each RTI executive officer and non-executive director as of March 23, 2015, see the table on page 32 of this proxy statement/prospectus, under the section entitled “Security Ownership,” beginning on page 30 of this proxy statement/prospectus. This table includes vested and unvested option awards as well as unvested restricted stock and performance share awards. Each equity grant is shown separately for each named executive officer.

 

Name Option Awards   Stock Awards  
Grant Date
of Award
  Number of Securities Underlying
Unexercised Options (#)
  Option
Exercise
Price ($)
  Option
Expiration
Date
  Number of
Shares or
Units of
Stock That
Have Not
Vested (#)(2)
  Market Value
of Shares or
Units of
Stock That
Have Not
Vested ($)(3)
  Equity
Incentive Plan
Awards: Number
of Unearned
Shares, Units, or
Other Rights That
Have Not
Vested (#)
(4)(5)
  Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned Shares,
Units, or Other
Rights That Have
Not Vested ($)
 
Exercisable   Unexercisable(1)  

Dawne S. Hickton

  1/31/2014      —        17,719 (6)  $ 31.19      1/31/2024      13,640 (10)  $ 344,546      12,990    $ 328,127   
  1/25/2013      4,824      9,650 (7)    29.13      1/25/2023      12,736 (11)    321,711      5,306      134,030   
  1/27/2012      8,765      4,383 (8)    24.62      1/27/2022      8,679 (12)    219,232      9,641      243,532   
  1/28/2011      13,562      —        28.47      1/28/2021      5,426 (13)    137,061      —        —     
  1/29/2010      18,000      —        25.18      1/29/2020      3,304 (14)    83,459      —        —     
  1/30/2009      15,000      —        13.88      1/30/2019      —        —        —        —     
  1/25/2008      9,000      —        51.17      1/25/2018      —        —        —        —     
  1/26/2007      5,000      —        76.85      1/26/2017      —        —        —        —     
  1/27/2006      7,000      —        45.09      1/27/2016      —        —        —        —     

Michael G. McAuley

  7/24/2014      —        10,000 (9)    25.12      7/24/2024      —        —        —        —     

William T. Hull

  1/31/2014      —        4,336 (6)    31.19      1/31/2024      3,338 (10)    84,318      3,180      80,327   
  1/25/2013      1,487      2,976 (7)    29.13      1/25/2023      2,749 (11)    69,440      1,309      33,065   
  1/27/2012      3,068      1,534 (8)    24.62      1/27/2022      2,127 (12)    53,728      2,700      68,202   
  1/28/2011      4,714      —        28.47      1/28/2021      1,320 (13)    33,343      —        —     
  1/29/2010      4,810      —        25.18      1/29/2020      620 (14)    15,661      —        —     
  1/30/2009      —        —        13.88      1/30/2019      —        —        —        —     
  1/25/2008      2,600      —        51.17      1/25/2018      —        —        —        —     
  1/26/2007      3,500      —        76.85      1/26/2017      —        —        —        —     
  1/27/2006      4,000      —        45.09      1/27/2016      —        —        —        —     
  8/1/2005      10,000      —        34.90      8/1/2015      —        —        —        —     

James L. McCarley

  1/31/2014      —        8,032 (6)    31.19      1/31/2024      6,183 (10)    156,183      5,888      148,731   
  1/25/2013      2,003      4,007 (7)    29.13      1/25/2023      5,288 (11)    133,575      2,203      55,648   
  1/27/2012      3,896      1,948 (8)    24.62      1/27/2022      3,858 (12)    97,453      4,285      108,239   
  1/28/2011      6,027      —        28.47      1/28/2021      2,412 (13)    60,927      —        —     
  5/17/2010      10,000      —        25.87      5/17/2020      —        —        —        —     

Patricia A. O’Connell

  1/31/2014      —        6,895 (6)    31.19      1/31/2024      5,308 (10)    134,080      5,055      127,689   
  1/25/2013      1,968      3,937 (7)    29.13      1/25/2023      17,696 (11,15)    447,001      2,165      54,688   

Chad Whalen

  1/31/2014      —        3,913 (6)    31.19      1/31/2024      3,012 (10)    76,083      2,870      72,496   
  1/25/2013      1,091      2,184 (7)    29.13      1/25/2023      1,441 (11)    36,400      801      20,221   
  1/27/2012      2,261      1,131 (8)    24.62      1/27/2022      1,120 (12)    28,291      1,658      41,881   
  1/28/2011      3,477      —        28.47      1/28/2021      696 (13)    17,581      —        —     
  1/29/2010      3,500      —        25.18      1/29/2020      320 (14)    8,083      —        —     
  1/30/2009      —        —        13.88      1/30/2019      —        —        —        —     
  1/25/2008      1,900      —        51.17      1/25/2018      —        —        —        —     
  2/19/2007      10,000      —        83.41      1/26/2017      —        —        —        —     

 

(1) These stock option awards vest in three equal annual installments beginning one year after the grant date.
(2) Represents time-based restricted stock awards that vest in five equal annual installments beginning one year after the grant date, and for Ms. O’Connell also represents 25,000 shares of restricted stock that will vest in two equal annual installments beginning one year after the date of grant.

 

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(3) The market value of restricted stock awards is based on the closing market price of RTI common stock as of December 31, 2014, which was $25.26 per share.
(4) Represents the number of shares of RTI common stock payable under performance share awards based on achieving target performance goals for the January 27, 2012 grant, achieving threshold performance goals for the January 25, 2013 grant, and achieving threshold performance goals for 50% and maximum performance goals for 50% for the January 31, 2014 grant.
(5) The performance period for the January 27, 2012 performance share awards closed on December 31, 2014. There was an 83% payout of shares for the performance period made January 30, 2015.
(6) 33% of the award will vest on each of January 31, 2015, 2016, and 2017.
(7) 33% of the award vested on January 25, 2014 and the remainder will vest in 33% increments on each of January 25, 2015 and 2016.
(8) 33% of the award vested on each of January 27, 2013 and 2014, and the remainder will vest on January 27, 2015.
(9) 33% of the award will vest on each of July 24, 2015, 2016 and 2017.
(10) 20% of the award will vest on each of January 30, 2015, January 29, 2016, and January 31, 2017, 2018 and 2019.
(11) 20% of the award vested on January 31, 2014 and the remainder will vest in 20% increments on each of January 30, 2015, January 29, 2016, and January 31, 2017 and 2018.
(12) 20% of the award vested on each of January 31, 2013 and 2014 and the remainder will vest in 20% increments on each of January 30, 2015, January 29, 2016 and January 31, 2017.
(13) 20% of the award vested on each of January 31, 2012, 2013 and 2014 and the remainder will vest in 20% increments on each of January 30, 2015 and January 29, 2016.
(14) 20% of the award vested on each of January 31, 2011, 2012, 2013 and 2014 and the remainder will vest on January 30, 2015.
(15) 12,500 shares vested on January 14, 2014 and the remaining 12,500 shares will vest on January 14, 2015.

Option Exercises and Stock Vested—2014

The following table sets forth information regarding stock option exercises during 2014, including the number of shares acquired upon exercise and the value realized, and the number of shares acquired upon the vesting of restricted stock awards and the value realized, before payment of any applicable withholding tax and broker commissions, for each of RTI’s named executive officers.

 

Name

   Option Awards      Stock Awards  
   Number of
Shares Acquired
on Exercise (#)(1)
     Value Realized on
Exercise ($)(1)
     Number of Shares
Acquired on
Vesting (#)(2)
     Value Realized on
Vesting ($)(2)
 

Dawne S. Hickton

     8,000       $ 20,000         24,659       $ 769,114   

Michael G. McAuley

     —           —           —           —     

William T. Hull

     —           —           5,611         175,007   

James L. McCarley

     —           —           6,777         211,375   

Patricia A. O’Connell

     —           —           13,799         445,141   

Chad Whalen

     —           —           3,097         96,595   

 

(1) Ms. Hickton exercised options, which were expiring on January 28, 2015, to purchase 8,000 shares of RTI’s stock on November 7, 2014, at an exercise price of $21.50 per share and sold at an average market price of $24.00 per share.
(2) The number of shares acquired and value realized on vesting of stock awards for 2014 is vested restricted stock.

 

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Retirement Benefits

The following table sets forth information with respect to each plan that provides for payments or other benefits at, following, or in connection with retirement of RTI’s named executive officers.

Pension Benefits Table—2014

 

Name

 

Plan Name

  Number of
Years of
Credited
Service (#)
    Present Value
of
Accumulated
Benefits ($)(1)
    Payments
During Last
Fiscal Year ($)
 

Dawne S. Hickton

  Pension Plan     17      $ 689,507      $ —     
  Supplemental Pension Program     17        2,202,901        —     
  Excess Benefits Plan     17        1,247,785        —     

Michael G. McAuley

  Pension Plan     N/A        —          —     
  Supplemental Pension Program     0        1,187        —     
  Excess Benefits Plan     N/A        —          —     

William T. Hull

  Pension Plan     9        346,072        —     
  Supplemental Pension Program     9        352,046        —     
  Excess Benefits Plan     9        118,397        —     

James L. McCarley

  Pension Plan     N/A        —          —     
  Supplemental Pension Program     4        209,231        —     
  Excess Benefits Plan     N/A        —          —     

Patricia A. O’Connell

  Pension Plan     N/A        —          —     
  Supplemental Pension Program     2        15,445        —     
  Excess Benefits Plan     N/A        —          —     

Chad Whalen

  Pension Plan     N/A        —          —     
  Supplemental Pension Program     7        142,410        —     
  Excess Benefits Plan     N/A        —          —     

 

(1) The present value has been calculated assuming the earliest time at which the named executive officer may retire without any benefit reduction. The remaining assumptions used are consistent with the assumptions as described in RTI’s Consolidated Financial Statements, which are included in RTI’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 26, 2015. As described in the Consolidated Financial Statements, the discount rate assumption for the RTI Pension Plan is 4.01%, for the Supplemental Pension Program is 3.16%, and for the Excess Benefit Plan is 2.95%.

The following narrative describes each plan set forth in the above table.

Pension Plan

RTI’s Pension Plan is a tax-qualified defined benefit plan which first became effective at Reactive Metals, Inc. (a predecessor of RTI) in 1964, and was closed to new participants as of January 1, 2006. The amounts payable under the Pension Plan will be paid monthly after a participant retires. The benefits are based on a formula which provides, under normal retirement, amounts equal to 1.25% of the average monthly earnings multiplied by continuous years of service up to and including 30 years; plus 1.35% of the average monthly earnings multiplied by continuous years of service in excess of 30 years. Average monthly earnings, defined as base salary only, are determined based upon annual eligible earnings in the five consecutive years in the ten years prior to retirement in which such earnings are highest. Incentive awards and similar benefits are excluded. In order to comply with the limitations of the Internal Revenue Code, when pension payments exceed the amounts permitted to be paid from federal income tax qualified plan, the excess pension benefits will be paid directly by RTI under the Excess Benefits Plan.

 

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Excess Benefits Plan

The Internal Revenue Code imposes limits on the amount of annual eligible compensation under tax-qualified pension plans. For 2014, annual compensation in excess of $260,000 cannot be taken into account in determining qualified plan benefits. RTI maintains the RTI Excess Benefits Plan for certain highly-compensated employees who participate in RTI’s tax-qualified pension plans and would otherwise be subject to such tax limits. The Excess Benefits Plan is an unfunded “excess benefit plan” within the meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended. It provides additional retirement income in an amount equal to the difference between benefits that would have been received under the Pension Plan but for the limitations imposed by the Internal Revenue Code and amounts actually payable under the Pension Plan. Participants must be designated by the RTI board of directors; at this time only Ms. Hickton and Mr. Hull have been so designated.

Supplemental Pension Program

Officers participating in RTI’s annual incentive compensation programs also participate in the RTI Supplemental Pension Program, an unfunded non-qualified defined benefit plan. Participants in the Supplemental Pension Program will be entitled to receive the benefits shown in the table above if they retire or otherwise terminate employment (i) after having met the eligibility requirements for an immediate pension under the provisions of the qualified Pension Plan (whether or not they are a participant in the qualified Pension Plan) or (ii) after having achieved 30 years of service prior to age 60 with the consent of RTI. Benefits under the Supplemental Pension Program are based on a formula whereby the average annual cash incentive compensation for the highest five years in the preceding ten year period is multiplied by a factor of 1.5% for each year of continuous service. Average annual cash incentive compensation as of December 31, 2014, for purposes of the pension benefits under the Supplemental Pension Program for each of the following named executive officers were as follows: Ms. Hickton, $575,608; Mr. McAuley, $16,000; Mr. McCarley, $262,163; Ms. O’Connell, $47,472; Mr. Hull, $187,733; and Mr. Whalen, $142,544. Amounts would be paid as a lump sum distribution based on the present value of the actuarially determined amounts payable, and provides for surviving spouse benefits at a reduced rate under certain conditions described in the Supplemental Pension Program. In January 2015, the Supplemental Pension Program was amended to provide RTI’s board of directors or RTI’s Compensation Committee the discretion to allow a participant’s benefit in the Supplemental Pension Program to vest upon separation of service in circumstances where the participant has not otherwise met the vesting requirements.

Potential Payments Upon Termination or Change in Control

The tables below reflect the estimated amount of compensation to be paid, and/or benefits to be provided, to each of the named executive officers in the event of termination of such executive’s employment as of December 31, 2014 under the different scenarios captioned in the tables. Actual amounts are tied to the day of termination and can only be finally determined following such date. The following tables should be read in conjunction with the narrative following the tables, as well as the table and narrative related to retirement benefits on page 71 of this proxy statement/prospectus.

 

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Dawne S. Hickton

 

Component

For Cause
Termination
  Voluntary
Termination
  Death   Disability(3)   Retirement   Involuntary Not
For Cause
Termination
  Involuntary Not
For Cause
or Employee for
Good Reason
Termination
(Change-In-
Control)
 

Severance & Short-Term Compensation

Bonus Earned In Year of Termination

$ —      $ 525,000    $ 525,000    $ 525,000    $ 525,000    $ —      $ 525,000   

Cash Severance & Short-Term Incentive

  —        —        172,500      172,500      —        1,380,000      3,313,645   

Long-Term Incentive

Stock Options (Unexercisable)

  —        —        —        —        —        —        2,805   

Time-Based Restricted Stock

  —        —        —        —        —        —        1,106,009   

Performance-Based Restricted Stock

  —        —        87,475      —        —        —        661,749   

Other Benefits

Pension Plan(1)

  51,517      51,517      12,322      51,517      51,517      51,517      51,517   

Supplemental Pension Program(2)

  —        —        1,177,342      151,788      —        —        —     

Excess Benefits Plan(2)

  —        662,780      287,860      83,066      662,780      662,780      662,780   

Change-In-Control Retirement Benefit Enhancement

  —        —        —        —        —        —        156,836   

Health & Welfare Benefits

  —        —        —        —        —        27,847      34,809   

Life, LTD, Supplemental LTD and Insurance

  —        —        —        —        —        22,012      27,515   

Excise Tax and Related Gross-Up

  —        —        —        —        —        —        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

$ 51,517    $ 1,239,297    $ 2,262,499    $ 983,871    $ 1,239,297    $ 2,144,156    $ 6,542,665   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) All benefits shown are annual benefits based on a 50% joint and survivor form of payment. The death benefit is an annual benefit that would be payable immediately to the spouse as a life annuity.
(2) For payments other than disability, amounts are based upon a lump sum form of payment payable immediately. For disability, the benefit shown is the annual accrued benefit that would not be payable until age 65 based on years of service at termination date.
(3) Participants retiring on Disability Retirement (with at least 15 years of continuous service) under Section 5.03(e) of the Pension Plan would continue to accrue service until age 65 while receiving benefits under RTI’s long-term disability insurance. The benefit shown is the annual accrued benefit that would be payable as a lump sum at age 65.

 

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(Potential Payments Upon Termination of Change in Control—Continued)

Michael G. McAuley

 

Component

For Cause
Termination
  Voluntary
Termination
  Death   Disability   Retirement   Involuntary Not
For Cause
Termination
  Involuntary Not
For Cause
or Employee for
Good Reason
Termination
(Change-In-
Control)
 

Severance & Short-Term Compensation

Bonus Earned In Year of Termination

$ —      $ 80,000    $ 80,000    $ 80,000    $ 80,000    $ —      $ 80,000   

Cash Severance & Short-Term Incentive

  —        —        93,750      93,750      —        375,000      1,088,307   

Long-Term Incentive

Stock Options (Unexercisable)

  —        —        —        —        —        —        1,400   

Time-Based Restricted Stock

  —        —        —        —        —        —        —     

Performance-Based Restricted Stock

  —        —        —        —        —        —        —     

Other Benefits

Supplemental Pension Program

  —        —        —        —        —        —        —     

Change-In-Control Retirement Benefit Enhancement

  —        —        —        —        —        —        —     

Health & Welfare Benefits

  —        —        —        —        —        6,962      13,924   

Life, LTD, Supplemental LTD and Insurance

  —        —        —        —        —        1,592      3,184   

Excise Tax and Related Gross-Up

  N/A      N/A      N/A      N/A      N/A      N/A      N/A   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

$ —      $ 80,000    $ 173,750    $ 173,750    $ 80,000    $ 383,554    $ 1,186,815   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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(Potential Payments Upon Termination of Change in Control—Continued)

William T. Hull

 

Component

For Cause
Termination
  Voluntary
Termination
  Death   Disability   Retirement   Involuntary Not
For Cause
Termination
  Involuntary Not
For Cause
or Employee for
Good Reason
Termination
(Change-In-
Control)
 

Severance & Short-Term Compensation

Bonus Earned In Year of Termination

$ —      $ 140,000    $ 140,000    $ 140,000    $ 140,000    $ —      $ 140,000   

Cash Severance & Short-Term Incentive

  —        —        84,500      84,500      —        338,000      1,070,096   

Long-Term Incentive

Stock Options (Unexercisable)

  —        —        —        —        —        —        982   

Time-Based Restricted Stock

  —        —        —        —        —        —        256,490   

Performance-Based Restricted Stock

  —        —        21,395      —        —        —        162,460   

Other Benefits

Pension Plan(1)

  26,570      26,570      6,435      26,570      26,570      26,570      26,570   

Supplemental Pension Program

  —        —        —        —        —        —        —     

Excess Benefits Plan(2)

  —        68,774      36,354      8,619      68,774      68,774      68,774   

Change-In-Control Retirement Benefit Enhancement

  —        —        —        —        —        —        64,669   

Health & Welfare Benefits

  —        —        —        —        —        13,924      27,848   

Life, LTD, Supplemental LTD and Insurance

  —        —        —        —        —        2,992      5,984   

Excise Tax and Related Gross-Up

  N/A      N/A      N/A      N/A      N/A      N/A      —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

$ 26,570    $ 235,344    $ 288,684    $ 259,689    $ 235,344    $ 450,260    $ 1,823,873   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) All benefits shown are annual benefits based on a 50% joint and survivor form of payment. The death benefit is an annual benefit that would be payable immediately to the spouse as a life annuity.
(2) Participants retiring on Disability Retirement (with at least 15 years of continuous service) under Section 5.03(e) of the Pension Plan would continue to accrue service until age 65 while receiving benefits under RTI’s long-term disability insurance. The benefit shown is the annual accrued benefit that would be payable as a lump sum at age 65.

 

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(Potential Payments Upon Termination of Change in Control—Continued)

James L. McCarley

 

Component

For Cause
Termination
  Voluntary
Termination
  Death   Disability   Retirement   Involuntary Not
For Cause
Termination
  Involuntary Not
For Cause
or Employee for
Good Reason
Termination
(Change-In-
Control)
 

Severance & Short-Term Compensation

Bonus Earned In Year of Termination

$ —      $ 250,000    $ 250,000    $ 250,000    $ 250,000    $ —      $ 250,000   

Cash Severance & Short-Term Incentive

  —        —        125,000      125,000      —        500,000      1,455,282   

Long-Term Incentive

Stock Options (Unexercisable)

  —        —        —        —        —        —        1,247   

Time-Based Restricted Stock

  —        —        —        —        —        —        448,138   

Performance-Based Restricted Stock

  —        —        39,658      —        —        —        289,758   

Other Benefits

Supplemental Pension Program

  —        —        —        —        —        —        —     

Change-In-Control Retirement Benefit Enhancement

  —        —        —        —        —        —        —     

Health & Welfare Benefits

  —        —        —        —        —        13,924      27,848   

Life, LTD, Supplemental LTD and Insurance

  —        —        —        —        —        3,258      6,516   

Excise Tax and Related Gross-Up

  N/A      N/A      N/A      N/A      N/A      N/A      N/A   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

$ —      $ 250,000    $ 414,658    $ 375,000    $ 250,000    $ 517,182    $ 2,478,789   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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(Potential Payments Upon Termination of Change in Control—Continued)

Chad Whalen

 

Component

For Cause
Termination
  Voluntary
Termination
  Death   Disability   Retirement   Involuntary Not
For Cause
Termination
  Involuntary Not
For Cause
or Employee for
Good Reason
Termination
(Change-In-
Control)
 

Severance & Short-Term Compensation

Bonus Earned In Year of Termination

$ —      $ 150,000    $ 150,000    $ 150,000    $ 150,000    $ —      $ 150,000   

Cash Severance & Short-Term Incentive

  —        —        81,250      81,250      —        325,000      993,941   

Long-Term Incentive

Stock Options (Unexercisable)

  —        —        —        —        —        —        724   

Time-Based Restricted Stock

  —        —        —        —        —        —        166,438   

Performance-Based Restricted Stock

  —        —        19,324      —        —        —        127,373   

Other Benefits

Supplemental Pension Program

  —        —        —        —        —        —        —     

Change-In-Control Retirement Benefit Enhancement

  —        —        —        —        —        —        —     

Health & Welfare Benefits

  —        —        —        —        —        —        —     

Life, LTD, Supplemental LTD and Insurance

  —        —        —        —        —        2,899      5,798   

Excise Tax and Related Gross-Up

  N/A      N/A      N/A      N/A      N/A      N/A      N/A   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

$ —      $ 150,000    $ 250,574    $ 231,250    $ 150,000    $ 327,899    $ 1,444,274   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Patricia A. O’Connell

In January 2015, the letter agreement for Ms. O’Connell expired by its terms and RTI and Ms. O’Connell entered into a new arrangement. Pursuant to the terms of that arrangement, Ms. O’Connell ceased to be an employee of RTI on January 31, 2015, although she agreed to remain available to RTI on an on-call basis for consulting services related to commercial and/or strategic initiatives through May 2015, for which she would be paid at the same monthly rate as one month of her most recent base salary. Ms. O’Connell also received a payment of $246,576 in lieu of a payment under the 2014 annual incentive program, as well as the payment of $8,500 in related legal fees. She is also entitled to receive up to $35,000 in reimbursement for moving and closing expenses incurred in 2015.

Letter Agreements

Each of the letter agreements currently in place for Ms. Hickton and Messrs. McAuley, McCarley, Hull and Whalen, and formerly in place for Ms. O’Connell, provide that if the executive is terminated for “cause”, regardless of whether there is a change in control, he or she will be entitled to no further compensation except for any base salary accrued and unpaid on the date of termination. If RTI terminates the executive’s employment other than for cause, the provisions of the executive Severance Policies described below govern. “Cause” is defined in the letter agreements to include (i) material breaches of the letter agreement, (ii) gross misconduct, (iii) gross neglect of his or her duties with RTI, insubordination, or failure to follow the lawful directives of the RTI board of directors, in each case after receiving a demand for substantial performance that identifies the manner in which RTI believes that the executive has not acted in accordance with requirements and failure to resume substantial performance of duties within 14 days of such demand, (iv) commission, indictment, conviction, guilty plea, or plea of nolo contendere, to or of any felony, a misdemeanor which substantially impairs the executive’s ability to perform his or her duties with RTI, act of moral turpitude, or intentional or willful securities law violation, (v) the executive’s act of theft or dishonesty which is injurious to RTI, or (vi) violation of any Company policy, including any substance abuse policy. If the executive dies or becomes

 

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disabled, then he or she would be entitled to (i) any accrued and unpaid salary, (ii) any vested or other benefits payable pursuant to the terms of any employee benefit plan, (iii) a pro-rated bonus, and (iv) payment of three additional months’ salary.

Executive Change in Control Severance Policy

RTI’s Executive Change in Control Severance Policy (the “Change in Control Policy”) that the RTI board of directors adopted is applicable to each of RTI’s named executive officers, except as noted below. It will also be applicable to any successor to these individuals should any of them leave the position they each hold pursuant to their letter agreement and to any other executive officer who is informed in writing by RTI of participation.

The Change in Control Policy in effect on December 31, 2014 provided that if the employment of an executive to whom the policy is applicable is terminated by RTI other than for “cause” (which is defined below), death or disability, or if the executive’s employment is terminated by the executive for “good reason” (as defined below) in each case within 24 months following a change in control of RTI, the executive would receive the following severance benefits (please refer to page 110 for the terms of the Amended and Restated Change in Control Policy adopted on March 8, 2015):

 

    Provided the executive does not violate his or her duty to maintain strict confidence and does not disclose any confidential information or disseminate any false and/or defamatory information pertaining to RTI or its stockholders, a lump sum payment payable on the first day following the six month anniversary of the executive’s termination of employment equal to a multiple of the sum of the executive’s base salary in effect immediately prior to the circumstances giving rise to the termination and the executive’s annual cash incentive compensation as calculated under the terms of the Change in Control Policy. The multiple is 2.5 for the CEO and 2.0 for all other executives;

 

    The immediate and irrevocable vesting of any previously granted but unvested stock options and restricted stock grants;

 

    The immediate vesting of any outstanding performance shares or other performance-based awards representing a right to receive shares of RTI common stock or their equivalent at the greater of (i) 100% of the target award or (ii) RTI’s actual performance over the abbreviated performance period;

 

    For Ms. Hickton and Messrs. Hull and Whalen only, and subject to limitations and caps specified in the Change in Control Policy, a payment payable on the first day following the six month anniversary of the executive’s termination of employment equal to an amount, if any, necessary to gross-up the total benefits payable to the executive under the Change in Control Policy for any excise tax imposed by Section 4999 of the Internal Revenue Code and for any income or other taxes due on the payment of the gross-up payment;

 

    Continuation for up to 24 months (30 months in the case of the CEO) (the “Payment Period”) of life, disability, accident, and health insurance benefits similar to those the executive was receiving immediately prior to the termination of employment but subject to reduction to the extent that the executive receives comparable benefits from other employment during such period; and

 

    An amount equal to the difference in the amount of pension benefits that the executive would have received assuming he or she had continued to be employed through the Payment Period and assuming the methods of calculations set forth in the Change in Control Policy, and the pension benefits actually payable as of the executive’s termination of employment, in each case under RTI’s Pension Plan and the RTI Supplemental Pension Program.

The definition of a change in control provides, in summary, that a change in control will have occurred if:

 

    Any person not affiliated with RTI acquires 30% or more of the voting power of RTI’s outstanding securities;

 

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    The RTI board of directors no longer has a majority made up of (1) individuals who were directors on February 22, 2007 and (2) new directors (other than directors who join the RTI board of directors in connection with an election contest) approved by two-thirds of the directors then in office who (a) were directors on February 22, 2007 or (b) were themselves previously approved by the RTI board of directors in this manner;

 

    RTI merges with another company and RTI’s shareholders ultimately own less than 60 percent of the voting power of the new entity;

 

    RTI shareholders approve a plan of complete liquidation of RTI; or

 

    RTI sells all or substantially all of its assets.

“Cause” is defined under the policy as termination upon (i) any material breach by Executive of their Letter Agreement, if any, (ii) the Executive’s gross misconduct, (iii) the Executive’s gross neglect of their duties with RTI or failure to follow the lawful directives of the RTI board of directors, in each case after a demand for substantial performance is delivered to the Executive that identifies the manner in which RTI believes that the Executive has not acted in accordance with requirements and the Executive has failed to resume substantial performance of their duties within 14 days of receiving such demand, (iv) the Executive’s indictment, conviction, guilty plea, or plea of nolo contendere to or of any felony, a misdemeanor which substantially impairs the Executive’s ability to perform his or her duties with RTI, or intentional or willful securities law violation, including Sarbanes-Oxley law violations, (v) the Executive’s act of theft or dishonesty which is injurious to RTI, or (vi) the Executive’s intentional violation of any written Company policy, including any substance abuse policy, that is not cured within 14 days after written notice of such violation is delivered to Executive.

“Good Reason” is defined under the policy as, without the Executive’s express written consent, the occurrence after a Change in Control of RTI of any one or more of the following: (A) the assignment of duties inconsistent with the Executive’s position immediately prior to the Change in Control; (B) a material reduction or alteration in the nature of Executive’s position, duties, status, or responsibilities from those in effect immediately prior to the Change in Control; (C) failure by RTI to continue any of RTI’s employee benefit programs or practices (excluding any retention, transaction or other “deal bonus” arrangements adopted in connection with a Change in Control) in which Executive participates (or substantially equivalent successors to such programs or practices) or failure to continue Executive’s participation on substantially the same basis as existed immediately prior to the Change in Control; (D) the failure of RTI to obtain a satisfactory agreement from any successor to RTI to assume and agree to perform Executive’s letter agreement; (E) any purported termination of Executive’s employment not effected pursuant to the Executive’s letter agreement; (F) requiring Executive to be based at a location in excess of 50 miles from the location where Executive is based immediately prior to the Change in Control; (G) the election by RTI not to extend the Employment Period of Executive’s Letter Agreement; or (H) a decrease in Executive’s base salary.

Executive Non-Change in Control Severance Policy

The Executive Non-Change in Control Severance Policy (the “Non-Change in Control Policy”) that the RTI board of directors adopted is applicable to the same executives and on the same dates as the Change in Control Policy. It provides that if the employment of an executive to whom the policy is applicable is terminated prior to the expiration of the employment period specified in the executive’s letter agreement by RTI other than for “cause” (using the definition set forth on this page 79 of this proxy statement/prospectus), death, or disability, by the executive within 90 days of a material breach by RTI of the executive’s letter agreement, or by the executive due to the reduction in the executive’s base salary without the consent of the executive, the executive will receive the following severance benefits:

 

   

Monthly payments in the amount of a multiple of the executive’s monthly base salary in effect immediately prior to the termination of employment for up to 24 months in the case of the CEO and 12 months for the other applicable executives. In each case, such payments are subject to reduction to

 

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the extent that the executive receives comparable compensation from other employment during such period. The multiple is 2.0 for the CEO, and 1.0 for the other applicable executives. No monthly payments will be made until the first day following the six month anniversary of the executive’s separation from service on which date the first seven monthly installments shall be paid with successive monthly installments paid on the monthly anniversaries thereafter; and

 

    Continuation for up to 24 months for the CEO and 12 months for the other applicable executives, of life, disability, accident, and health insurance benefits similar to those the executive was receiving immediately prior to the termination of employment but subject to reduction to the extent that the executive receives comparable benefits from other employment during such period.

If an executive is entitled to payments or benefits under the Change in Control Policy then the executive shall not be entitled to payments or benefits under the Non-Change in Control Policy. If RTI elects not to extend the employment period of an executive’s letter agreement such that the employment period terminates, the non-extension shall not be treated for purposes of the Non-Change in Control Policy as an involuntary termination by RTI that would entitle the executive to benefits under such policy.

2004 Stock Plan

Under the terms of RTI’s 2004 Stock Plan, any unvested restricted stock awards or stock options automatically terminate and any vested but unexercised stock options are immediately forfeited in the event that the named executive officer is terminated for cause, without cause, voluntarily terminates employment, or becomes permanently disabled. In the event that an executive retires (which is deemed to occur only under conditions which entitle the executive to an immediately receivable pension and not a deferred vested pension) or dies, vested stock options may continue to be exercised for a period equal to the lesser of (a) three years following retirement or death or (b) expiration of the term of the award; provided, however, that RTI’s Compensation Committee may cause the immediate forfeiture of unvested shares where a named executive officer retires before the age of 65 or after the executive retires at any age if RTI’s Compensation Committee deems such forfeiture to be in the best interests of RTI.

Notwithstanding any provisions of RTI’s 2004 Stock Plan or any award agreement to the contrary, unless the board of directors of RTI determined otherwise at the time of the grant of an award with respect to such award, in the event of a change in control, all outstanding awards under RTI’s 2004 Stock Plan shall become fully vested.

2014 Stock and Incentive Plan

The 2014 Stock and Incentive Plan generally provides that the plan administrator shall have the discretion to determine, at the time an award is made to a participant or any time thereafter, the effect of such participant’s termination of employment or service with RTI and its affiliates, whether for or without cause, or as a result of death, disability or retirement, on the award, which determination shall be set forth in the applicable award agreement.

If the holder of an award under the 2014 Stock and Incentive Plan has an employment, retention, change of control, severance or similar agreement with RTI or any affiliate that discusses the effect of a change of control on his or her awards, that agreement would control. In all other cases, unless provided otherwise in an award agreement or under the 2014 Stock and Incentive Plan prior to the date of the change of control, the following provisions of the 2014 Stock and Incentive Plan would determine the effect of a change of control on awards.

If the purchaser, successor or surviving corporation (or parent thereof) (the “Survivor”) so agrees, some or all outstanding awards would be assumed or replaced with the same type of award with similar terms and conditions by the Survivor in the change of control transaction. If applicable, each award which is assumed by

 

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the Survivor would be appropriately adjusted, immediately after such change of control, to apply to the number and class of securities which would have been issuable to the award holder upon the consummation of such change of control had the award been exercised, vested or earned immediately prior to such change of control, and other appropriate adjustments in the terms and conditions of the award would be made.

To the extent the Survivor in the change of control transaction does not agree to assume the awards or issue replacement awards, then immediately prior to the date of the change of control outstanding options and stock appreciation rights would become vested and exercisable and, unless otherwise determined by the board of directors of RTI or RTI’s Compensation Committee, would be cancelled in exchange for a cash payment equal to the excess of the change of control price of the shares over the purchase or grant price of the shares under the award; all other outstanding awards that vest based on service would vest, and performance-based awards would, unless otherwise determined by the board of directors of RTI or RTI’s Compensation Committee, become payable at the level earned if earned but not paid, and otherwise would be cancelled in exchange for a cash payment equal to the target value payable on a pro rata basis based on the portion of the performance period that has elapsed prior to the change of control event.

Upon termination of employment without Cause (as defined in the 2014 Stock and Incentive Plan or form of award) by the Survivor or termination of employment by the employee with good reason (if the employee is entitled to terminate his employment for good reason in his or her employment, severance or other similar agreement) occurring during the period of twenty-four (24) months after the change of control, (i) all outstanding or replacement awards held by the participant would become vested, exercisable, earned and payable (assuming any award for which vesting is subject to performance goals that such goals are met at the target level), (ii) all options and stock appreciation rights held by the participant immediately before the termination of employment would be cancelled as of the date of termination in exchange for a payment of cash or shares equal to the excess of the fair market value of the shares on the date of termination over the exercise or grant price of such shares underlying the award multiplied by the number of shares underlying the award, (iii) all restricted stock or restricted stock units would be cancelled as of the date of termination in exchange for a payment of cash or shares equal to the fair market value of the shares on the date of termination, (iv) all performance-based awards that have been earned but not paid would be paid at the level earned, and for such performance-based awards for which the performance period has not yet expired, the award would be cancelled in exchange for a cash payment equal to the target value payable on a pro-rated basis calculated based on the portion of the performance period that had elapsed prior to termination, and (v) all other awards would be cancelled in exchange for a cash payment equal to the value of the award.

Director Compensation Table—2014

 

Name(1)

   Fees Earned or
Paid in Cash ($)
     Stock Awards
($)(2)(3)
     Total ($)  

Daniel I. Booker

   $ 95,000       $ 74,998       $ 169,998   

Ronald L. Gallatin

     75,000         74,998         149,998   

Robert M. Hernandez

     120,000         119,980         239,980   

David P. Hess(4)

     18,750         37,488         56,238   

Edith E. Holiday

     85,000         74,998         159,998   

Jerry Howard

     75,000         74,998         149,998   

Mario Longhi(5)

     18,750         —           18,750   

Rokus L. van Iperen(5)

     18,750         —           18,750   

Bryan T. Moss

     75,000         74,998         149,998   

James A. Williams

     95,000         74,998         169,998   

Arthur B. Winkleblack

     75,000         74,998         149,998   

 

(1) Dawne S. Hickton serves as both a director and an employee of RTI and receives no extra compensation for serving as a director.

 

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(2) Represents the aggregate grant date fair value, computed in accordance with the FASB’s authoritative guidance, of awards granted to each non-employee director, except for Mr. Hess, on April 25, 2014, and for Mr. Hess, on October 31, 2014. The grant date fair value of the stock awards on April 25, 2014 was $27.87 and the stock award on October 31, 2014 was $23.27. The assumptions used in determining the grant date fair value of these awards are set forth in Note 15 to RTI’s Consolidated Financial Statements, which is included in its Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 26, 2015.
(3) As of December 31, 2014, each non-employee director beneficially owned the following aggregate number of shares of RTI common stock: Daniel I. Booker: 38,457; Ronald L. Gallatin: 32,691; Robert M. Hernandez: 84,186; David P. Hess: 1,611; Edith E. Holiday: 29,034; Jerry Howard: 5,355; Bryan T. Moss: 19,711; James A. Williams: 22,896; and Arthur B. Winkleblack: 3,572.
(4) Mr. Hess was elected by the directors on October 30, 2014.
(5) Messrs. Longhi and van Iperen did not stand for re-election at the Annual Meeting of Shareholders on April 25, 2014.

Narrative to Director Compensation Table

Non-employee directors (except for the Chairman) received an annual retainer for their service on the RTI board of directors of $150,000 and the Chairman received an annual retainer of $240,000, which is paid 50% in cash and 50% through awards of restricted stock under the 2004 Stock Plan. The additional annual cash retainer for the Chairperson of the Nominating/Corporate Governance Committee was $10,000, for the Chairperson of the Compensation Committee was $20,000, and for the Chairperson of the Audit Committee was $20,000.

No fees are paid for RTI’s board of directors or committee meetings attended except that if, in the opinion of the Chairman of the Board, circumstances require that an extraordinary number of RTI’s board of directors or committee meetings be held, non-employee directors, except for the Chairman of the Board, will receive a meeting fee of $1,000 for attending such meetings. No additional meeting fees were paid during 2014.

Director Stock Ownership.

The RTI board of directors has adopted a policy that each non-employee director is expected to own, at a minimum, shares of common stock equal to three times their annual retainer within five years of joining the RTI board of directors.

 

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THE MERGER

The following discussion contains material information about the merger. The discussion is subject, and qualified in its entirety by reference, to the merger agreement included as Annex A to this proxy statement/prospectus. RTI and Alcoa urge you to read carefully this entire proxy statement/prospectus, including the merger agreement included as Annex A, for a more complete understanding of the merger.

Terms of the Merger

Alcoa’s and RTI’s boards of directors have approved the merger agreement. The merger agreement provides for the acquisition of RTI by Alcoa through the merger of a subsidiary of Alcoa with and into RTI, with RTI continuing as the surviving entity. In the merger, each share of RTI common stock, par value $0.01 per share, issued and outstanding immediately prior to the completion of the merger, except for shares of RTI common stock owned or held in treasury by RTI, will be converted into the right to receive 2.8315 shares of Alcoa common stock. No fractional shares of Alcoa common stock will be issued in connection with the merger. Instead, holders of RTI common stock who would otherwise have received a fraction of a share of Alcoa common stock will be entitled to receive cash in lieu thereof.

RTI shareholders are being asked to adopt the merger agreement. See the section entitled “The Merger Agreement” beginning on page 118 for additional and more detailed information regarding the legal document that governs the merger, including information about the conditions for the completion of the merger and the provisions for terminating or amending the merger agreement.

Background of the Merger

In the ordinary course of business and independently of each other, the senior management and board of directors of each of RTI and Alcoa regularly review and assess developments in their respective industry segments, as well as strategic options available to their respective businesses in light of economic and market conditions. In addition, on a regular basis, the senior management and board of directors of RTI assess whether the continued execution of its strategy as a standalone company or the possible sale to, or combination with, a third party offers the best avenue to achieve RTI’s long-term strategic goals and enhance shareholder value. In connection with these reviews and assessments, the RTI board of directors and senior management enlist the assistance of financial advisors and outside legal counsel.

The following chronology sets forth a summary of the material events leading up to the execution of the merger agreement.

On September 30, 2014, at a regularly scheduled meeting of Alcoa’s Board of Directors, Alcoa management reviewed with Alcoa’s Board of Directors the three-year strategic plan of Alcoa’s downstream business. Included in the strategic plan review was a list of potential acquisition targets, including RTI, to grow Alcoa’s global aerospace portfolio and broaden its multi-material product mix.

On December 2, 2014, during an executive session of a regularly scheduled meeting of Alcoa’s Board of Directors, Klaus Kleinfeld, Chairman of the Board and Chief Executive Officer of Alcoa, discussed with Alcoa’s Board of Directors Alcoa management’s preliminary view that a transaction with RTI could benefit Alcoa by expanding its range of midstream and downstream titanium offerings and positioning Alcoa to benefit from both an expanded portfolio in value-add businesses, such as aerospace, and RTI’s advanced manufacturing technologies.

On December 8, 2014, Mr. Kleinfeld called Robert Hernandez, Chairman of the Board of Directors of RTI, and indicated that Mr. Kleinfeld wanted to set up a meeting with Mr. Hernandez. Mr. Hernandez indicated that he was willing to meet with Mr. Kleinfeld, and informed Mr. Kleinfeld that Dawne Hickton, Vice Chair,

 

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President, and Chief Executive Officer of RTI, would attend the meeting. Mr. Kleinfeld and Mr. Hernandez did not engage in discussion regarding a potential business combination between RTI and Alcoa at this time.

Later on December 8, 2014, Mr. Hernandez updated the RTI board of directors as to Mr. Kleinfeld’s request for a meeting.

On December 9, 2014, Mr. Hernandez’s office called Mr. Kleinfeld’s office to confirm a meeting in Pittsburgh, Pennsylvania on December 17, 2014.

On December 13, 2014, Mr. Hernandez, on behalf of the RTI board of directors, contacted a representative of Jones Day, legal counsel to RTI, to discuss the upcoming meeting with Mr. Kleinfeld. Jones Day had from time to time in the past provided RTI with legal advice.

On December 17, 2014, Mr. Kleinfeld met with Mr. Hernandez and Ms. Hickton in Pittsburgh, Pennsylvania. At the meeting, Mr. Kleinfeld discussed with Mr. Hernandez and Ms. Hickton how, in Mr. Kleinfeld’s view, RTI could complement Alcoa’s high-level strategic plan, which entailed enhancing Alcoa’s existing titanium investment casting and forging capabilities with RTI’s titanium capabilities in aerospace and other value-add businesses, expanding Alcoa’s advanced manufacturing and materials technologies and leveraging Alcoa’s execution strength and discipline to create value. In this regard, Mr. Kleinfeld noted that on November 19, 2014, Alcoa had completed the acquisition of the Firth Rixson business, a leader in aerospace jet engine components, and on December 15, 2014, Alcoa had announced plans to further expand its global aerospace business through a definitive agreement to acquire privately held TITAL, a leader in titanium and aluminum structural castings for aircraft engines and airframes. Mr. Kleinfeld stated his belief that Alcoa’s and RTI’s businesses were complementary and that the two companies would make strong strategic partners. Mr. Hernandez and Ms. Hickton indicated to Mr. Kleinfeld that RTI was not for sale, but that RTI’s board of directors would be willing to consider strategic options that would deliver shareholder value, and therefore that they would convey Alcoa’s expression of interest to the RTI board of directors. Mr. Hernandez indicated that any further discussion would need to be premised on relevant historical highs in the trading price of RTI’s stock, as opposed to the then-current price of RTI’s stock.

Later on December 17, 2014, Mr. Hernandez, on behalf of the RTI board of directors, contacted a representative of Barclays to discuss Alcoa’s expression of interest. Barclays had from time to time in the past provided RTI with financial and investment banking advice.

On December 18, 2014, the RTI board of directors met in executive session following a regularly scheduled meeting of RTI’s Audit Committee of the RTI board of directors. All of the RTI directors were present. At the meeting, Mr. Hernandez reported to the other directors on the conversation he, Ms. Hickton and Mr. Kleinfeld had on December 17, 2014. The board of directors, recognizing that RTI’s aerospace and defense customers continued to look to larger, more fully integrated suppliers, believed that a business combination with Alcoa may have the potential to unlock future value for the enterprise. The RTI board of directors agreed that, in order to determine whether Alcoa would make a compelling offer for a business combination with RTI, and assuming a confidentiality agreement were in place, the parties would continue to engage in preliminary discussions.

Later on December 18, 2014, Mr. Hernandez called Mr. Kleinfeld and stated that the RTI board of directors was willing to engage in preliminary discussions with Alcoa if an appropriate confidentiality agreement was executed by the parties. At this time, Mr. Kleinfeld, on behalf of Alcoa, requested contractual exclusivity for Alcoa with RTI, which would prohibit RTI from engaging in business combination discussions with third parties for a limited period of time. Mr. Kleinfeld also requested that RTI provide Alcoa with due diligence information after the execution of a confidentiality agreement. Mr. Hernandez indicated to Mr. Kleinfeld that RTI would not provide due diligence information unless and until Alcoa gave RTI a firm indication of its interest, including the potential financial terms of any offer. Later on December 18, 2014, Mr. Hernandez called Mr. Kleinfeld and stated that RTI would not agree to exclusivity.

 

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From December 18, 2014 to December 22, 2014, representatives of the two companies, assisted by Jones Day and Wachtell, Lipton, Rosen & Katz, legal counsel to Alcoa, which is referred to as Wachtell Lipton, negotiated a confidentiality agreement between RTI and Alcoa that contained a standstill in favor of RTI, which generally prohibited Alcoa from making public proposals to acquire RTI without RTI’s consent, acquiring RTI securities and taking similar actions, and a mutual non-solicitation of employees. On December 22, 2014, RTI and Alcoa entered into the confidentiality agreement.

On December 22, 2014, the Nominating/Corporate Governance Committee of the RTI board of directors, which is referred to as the RTI governance committee, held a telephonic meeting. All of the members of the RTI governance committee were present on the call. Also present were Chad Whalen, General Counsel and Senior Vice President of RTI, and, at the request of the RTI governance committee, representatives of Barclays and Jones Day. The RTI governance committee discussed the formation of a Business Combination Committee of the RTI board of directors, which is referred to as the BC committee, in light of the potential for fast-paced and frequent developments relating to Alcoa’s proposal and potential future proposals from third parties. The RTI governance committee directed Jones Day to draft a potential charter for the BC committee for review by the RTI governance committee and the RTI board of directors.

Later on December 22, 2014, following the execution of the confidentiality agreement, Alcoa delivered a letter to RTI. The letter indicated that Alcoa was prepared to offer $35 per share for RTI, representing a 43% premium over the 90-day volume weighted average price of RTI common stock. Alcoa’s letter further specified that the proposed price constituted a value nearly equal to the three-year highest trading price of RTI stock and a 13.0x LTM EBITDA multiple based on RTI’s September 30, 2014 quarterly results, which were the most recent publicly available quarterly results of RTI. The letter also indicated that the form of consideration would be Alcoa stock, with a fixed exchange ratio to be determined at the time of signing. As of the date of the letter, Alcoa’s offer of $35 per share for RTI represented an exchange ratio of 2.20 Alcoa shares for each share of RTI. The letter stated that Alcoa would require limited access to RTI management and RTI non-public information, and that Alcoa would expect due diligence and negotiations to commence no later than January 9, 2015.

On December 23, 2014, the RTI board of directors held a telephonic meeting. All of the RTI directors were present on the call. Also present were Mr. Whalen, and, at the request of the RTI board of directors, representatives of Barclays and Jones Day. At the meeting, Mr. Hernandez updated the RTI directors on Alcoa’s letter. The RTI board of directors engaged in an extensive discussion with RTI management, Barclays and Jones Day about Alcoa’s proposal. Representatives of Jones Day advised the RTI board of directors on its fiduciary duties under Ohio law in respect of the Alcoa letter. The RTI board of directors also consulted Barclays and Jones Day as to its potential response to Alcoa’s proposal, including the factors that the RTI board of directors should consider in connection with its review of the proposal. The RTI directors determined that RTI should move forward in evaluating a transaction with Alcoa, with a focus on maximizing the value of a potential transaction. The RTI governance committee recommended to the RTI board of directors the creation of the BC committee, which the RTI board of directors approved after discussing the charter drafted by Jones Day.

During the period between December 23, 2014 and December 30, 2014, representatives of Barclays, at the direction of the RTI board of directors, and Greenhill & Co., LLC, Alcoa’s financial advisor, which is referred to as Greenhill, communicated regarding the anticipated timing of and process for the RTI board of directors’ evaluation of Alcoa’s proposal.

On December 30, 2014, the RTI board of directors held a telephonic meeting. All of the RTI directors were present on the call. Also present were Mr. Whalen and, at the request of the RTI board of directors, representatives of Barclays and Jones Day. Representatives of Jones Day advised the RTI directors on their fiduciary duties under Ohio law with respect to the proposed transaction and transactions generally. The RTI directors reviewed the proposed resolutions and charter of the BC committee. After discussion, the board resolved to create the BC committee. The initial membership of the BC committee included Daniel Booker, Ronald Gallatin and Arthur Winkleblack, with Mr. Booker serving as the Chairman. The board of directors

 

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selected Mr. Booker for his legal background and experience advising on large international acquisitions, Mr. Gallatin for his investment banking background, and Mr. Winkleblack for his financial background and his recent sell-side experience. The RTI board of directors determined that forming the BC committee was advisable in light of the potential for fast-paced and frequent developments relating to Alcoa’s proposal and potential future proposals from third parties. The responsibilities of the BC committee included providing analysis, advice and opinion to the full RTI board of directors and engaging in discussions with advisors and third parties in respect of potential business combinations. The RTI board of directors determined that meetings of the BC committee would be open to all other RTI directors. For this reason, and because several or all RTI directors who were not members of the BC committee were available for and present at each meeting of the BC committee in addition to the committee members, all meetings of the BC committee were functionally equivalent to meetings of the full RTI board of directors.

Also at the December 30th meeting, the RTI directors, together with Barclays and Jones Day, engaged in a discussion of other potential acquirors and strategic partners. The RTI board o