RTI Announces Third Quarter Results

November 3, 2009 8:08 AM EST

PITTSBURGH--(BUSINESS WIRE)-- RTI International Metals, Inc., (NYSE: RTI), released results today for the third quarter of 2009 and nine months ended September 30, 2009.

Third Quarter 2009 Results

    --  Net sales for the third quarter were $100.2 million
    --  Operating income for the third quarter was $2.0 million
    --  Excluding charges of $5.7 million associated with the Company's debt
        repayment, earnings before taxes for the third quarter were $0.9 million
    --  Earnings before taxes were a $4.8 million loss for the third quarter.

For the third quarter, the Company reported net sales of $100.2 million, compared to $150.6 million in the third quarter of 2008. Including charges of $5.7 million associated with the Company's debt repayment plus a tax expense of $3.9 million, the Company reported a net loss of $8.7 million, or $0.35 per diluted share, in the current quarter in comparison to net income of $11.3 million, or $0.49 per diluted share, for the same period in the prior year. The third quarter 2009 results were negatively affected primarily by lower trade shipments and average realized selling prices for titanium mill products, the impact from lower production utilization in the Fabrication Group, the continued weakness in commercial aerospace demand, and charges related to the repayment of its outstanding debt during the quarter.

During the third quarter, the Company repaid $242.8 million of its outstanding bank indebtedness and thereby incurred finance-related charges of $5.7 million. At the end of the third quarter, the Company had $124.7 million of cash and cash equivalents and an undrawn revolving credit facility of $200 million.

For the nine months ended September 30, 2009, the Company reported net sales of $310.7 million, compared with net sales of $461.1 million for the same period last year. For the nine-month period, the Company reported a net loss of $10.0 million, or $0.42 per diluted share, compared with net income of $52.1 million, or $2.26 per diluted share for the same period a year ago. Year-to-date results also include finance-related charges of $5.7 million as well as charges of $2.5 million associated with the U.S. Customs' investigation related to the Company's previously filed duty drawback claims.

NOTE: Reconciliations of non-GAAP financial measures are provided in the appendix.

Titanium Group

For the third quarter of 2009, the Titanium Group had operating income of $1.0 million on sales of $54.4 million, including intersegment sales of $25.6 million. During the same period in 2008, this Group had operating income of $11.9 million on sales of $85.3 million, including intersegment sales of $35.9 million. Mill product shipments for the third quarter were 2.4 million pounds at an average realized price of $21.32 per pound compared to mill product shipments of 3.4 million pounds in the third quarter of 2008 at an average realized price of $23.04 per pound.

The decrease in average realized selling prices year-over-year was driven primarily by a larger portion of total sales under long-term agreements and continued lack of spot market business, driven by lower end-market demand, as well as the excess titanium inventory in the commercial aerospace supply chain.

During the first nine months of 2009, the Titanium Group posted operating income of $7.4 million on sales of $180.9 million, including intersegment sales of $94.6 million. For the same period in 2008, operating income was $58.7 million on sales of $283.5 million, including intersegment sales of $126.6 million. Mill product shipments for the first nine months of 2009 were 7.8 million pounds at an average realized price of $21.95 per pound compared to mill product shipments of 11.2 million pounds in 2008 at an average realized price of $23.79 per pound.

Fabrication Group

Net sales for the Fabrication Group declined during the third quarter to $27.3 million versus $35.7 million for the same period a year ago. This Group had an operating loss of $0.5 million, compared to operating income of $1.0 million in the third quarter of 2008. The Fabrication Group continues to be impacted by the ongoing delays in the production of the Boeing 787, resulting in lower utilization, and by a slowdown in orders from its energy customers. Year-to-date, the Fabrication Group reported net sales of $79.9 million resulting in an operating loss of $14.2 million compared with net sales of $106.8 million and operating income of $3.4 million from the same period the previous year.

Distribution Group

For the third quarter, net sales for the Distribution Group were $44.1 million compared to $65.5 million for the same period a year ago. This Group had operating income of $1.4 million compared to $4.9 million in the third quarter of 2008. The operating income decline was primarily attributable to lower demand in the commercial aerospace market, as well as the overall global economy. Year-to-date, the Distribution Group reported net sales of $144.5 million resulting in operating income of $6.4 million compared with net sales of $197.4 million and operating income of $19.9 million from the same period in the prior year.

CEO Comment

Vice Chairman, President and CEO Dawne S. Hickton commented, "As we look toward the end of 2009, we still have not seen a pickup in demand nor do I expect to see demand improve until the end of 2010 at the earliest. The production delays associated with the 787 Dreamliner continue to stress our Company, particularly in the Fabrication Group. The Distribution Group, which has the best visibility into the market among our three segments, continues to see depressed spot market activity with somewhat volatile pricing. As was the case in the prior quarters of 2009, our long-term customer agreements and ability to manage expenses allow us to operate profitably in our Titanium and Distribution segments.

"Given the continued uncertainty in the commercial aerospace market, the resulting reduced cash flows relative to our expectations, as well as our desire to be positioned to be opportunistic in our organic growth initiatives, particularly in the Fabrication Group, we elected to recalibrate our balance sheet by raising common equity and paying off $242.8 million of bank debt. We now have substantial financial flexibility with no funded debt, over $124 million in cash and cash equivalents and an undrawn $200 million revolving credit facility."

Conference Call Information

To participate in today's call at 11 a.m. Eastern Time, please dial toll free (USA/Canada) 800-446-2782 or (International) 847-413-3235 a few minutes prior to the start time and specify the RTI International Metals' Conference Call.

Replay Information

Replay of the call will be available one hour after the conference ends and remains accessible until Tuesday, November 17, 2009, at 11:59 p.m., Eastern Time. To listen to the replay, dial (USA/Canada) 888-843-8996 or (International) 630-652-3044 and enter passcode #25587585.

Forward Looking Statement

The statements in this release relating to matters that are not historical facts are forward-looking statements that may involve risks and uncertainties. These include, but are not limited to, the impact of global events on the commercial aerospace industry, actual build-rates, production schedules and content per aircraft for commercial and military aerospace programs, military spending and continued support for the Joint Strike Fighter program, the impact from Boeing 787 production delays, global economic conditions, the competitive nature of the markets for specialty metals, the ability of the Company to obtain an adequate supply of raw materials, long-term contracts, the successful completion of our capital expansion projects, the current delay and potential further delay, idling, abandonment or impairment and other risks and uncertainties included in the Company's filings with the Securities and Exchange Commission. Actual results can differ materially from those forecasted or expected. The information contained in this release is qualified by and should be read in conjunction with the statements and notes filed with the Securities and Exchange Commission on Forms 10-K and 10-Q, as may be amended from time to time.

Company Description

RTI International Metals(R), headquartered in Pittsburgh, Pennsylvania, is one of the world's largest producers of titanium mill products and a global supplier of fabricated titanium and specialty metal components for the international market. Through its various subsidiaries, RTI manufactures and distributes titanium and specialty metal mill products, extruded shapes, formed parts and engineered systems for commercial aerospace, defense, energy, industrial, chemical, and consumer applications for customers around the world. To learn more about RTI International Metals, Inc., visit our website at www.rtiintl.com.

RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share amounts)

                  Three Months Ended              Nine Months Ended

                  September 30,                   September 30,

                  2009            2008            2009            2008

Net sales         $ 100,247       $ 150,615       $ 310,655       $ 461,092

Cost and expenses:

 Cost of sales      82,426          113,492         263,047         322,708

 Selling,
 general, and       15,384          18,723          46,526          54,829
 administrative
 expenses

 Research,
 technical, and
 product            466             555             1,493           1,590
 development
 expenses

Operating income    1,971           17,845          (411       )    81,965
(loss)

 Other income       252             551             2,006           (129       )
 (expense)

 Interest income    257             799             1,325           2,172

 Interest           (7,231     )    (979       )    (12,007    )    (1,595     )
 expense

Income (loss)
before income       (4,751     )    18,216          (9,087     )    82,413
taxes

 Provision for      3,901           6,964           899             30,311
 income taxes

Net Income        $ (8,652     )  $ 11,252        $ (9,986     )  $ 52,102
(loss)

Earnings per share:

 Basic            $ (0.35      )  $ 0.49          $ (0.42      )  $ 2.26

 Diluted          $ (0.35      )  $ 0.49          $ (0.42      )  $ 2.26

Weighted-average shares outstanding:

 Basic              24,643,301      22,838,900      23,588,555      22,881,457

 Diluted            24,643,301      22,915,541      23,588,555      23,007,236

RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share and per share amounts)

                                                    September 30, December 31,

ASSETS                                              2009          2008

Current assets:

 Cash and cash equivalents                          $ 124,733     $ 284,449

 Receivables, less allowance for doubtful accounts    66,265        79,778
 of $605 and $2,260

 Inventories, net                                     271,738       274,330

 Deferred income taxes                                25,577        29,456

 Other current assets                                 8,073         11,109

 Total current assets                                 496,386       679,122

Property, plant, and equipment, net                   305,272       271,062

Goodwill                                              49,401        47,984

Other intangible assets, net                          14,136        13,196

Deferred income taxes                                 30,611        15,740

Other noncurrent assets                               1,602         2,099

 Total assets                                       $ 897,408     $ 1,029,203

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

 Accounts payable                                   $ 43,032      $ 54,422

 Accrued wages and other employee costs               10,744        20,452

 Unearned revenue                                     20,249        22,352

 Current portion of long-term debt                    -             1,375

 Current liability for post-retirement benefits       2,632         2,632

 Current liability for pension benefits               121           121

 Other accrued liabilities                            21,342        18,167

 Total current liabilities                            98,120        119,521

Long-term debt                                        86            238,550

Noncurrent liability for post-retirement benefits     31,520        30,732

Noncurrent liability for pension benefits             24,625        26,535

Deferred income taxes                                 154           154

Other noncurrent liabilities                          7,310         11,777

 Total liabilities                                    161,815       427,269

Commitments and Contingencies

Shareholders' equity:

 Common stock, $0.01 par value; 50,000,000 shares
 authorized; 30,715,403 and 23,688,010 shares         307           237
 issued; 30,021,089 and 23,004,136 shares
 outstanding

 Additional paid-in capital                           438,547       307,604

 Treasury stock, at cost; 694,314 and 683,874         (16,979 )     (16,891   )
 shares

 Accumulated other comprehensive loss                 (33,632 )     (46,352   )

 Retained earnings                                    347,350       357,336

 Total shareholders' equity                           735,593       601,934

 Total liabilities and shareholders' equity         $ 897,408     $ 1,029,203

RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

                                                   Nine Months Ended

                                                   September 30,

                                                   2009          2008

Cash provided by operating activities (including
depreciation and
amortization of $15,985 and $14,891 for the nine   $ 16,738      $ 53,155
months
ended September 30, 2009 and 2008, respectively)

Cash used in investing activities                    (63,362  )    (88,815 )

Cash provided by (used in) financing activities      (114,743 )    218,986

 Effect of exchange rate changes on cash and cash    1,651         (800    )
 equivalents

 Increase (decrease) in cash and cash equivalents    (159,716 )    182,526

 Cash and cash equivalents at beginning of period    284,449       107,505

 Cash and cash equivalents at end of period        $ 124,733     $ 290,031

RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES

Selected Operating Segment Information

(Unaudited)

(In thousands)

                            Three Months Ended        Nine Months Ended

                            September 30,             September 30,

                            2009         2008         2009         2008

Net sales:

 Titanium Group             $ 28,853     $ 49,367     $ 86,280     $ 156,868

 Intersegment sales           25,586       35,931       94,615       126,599

  Total Titanium Group net    54,439       85,298       180,895      283,467
  sales

 Fabrication Group            27,334       35,731       79,885       106,795

 Intersegment sales           15,986       17,125       44,561       62,692

  Total Fabrication Group     43,320       52,856       124,446      169,487
  net sales

 Distribution Group           44,060       65,517       144,490      197,429

 Intersegment sales           598          642          1,863        1,760

  Total Distribution Group    44,658       66,159       146,353      199,189
  net sales

 Eliminations                 42,170       53,698       141,039      191,051

  Total consolidated net    $ 100,247    $ 150,615    $ 310,655    $ 461,092
  sales

Operating income (loss):

 Titanium Group before      $ 3,591      $ 16,138     $ 15,066     $ 68,825
 corporate allocations

 Corporate allocations        (2,569  )    (4,210  )    (7,713  )    (10,112 )

  Total Titanium Group        1,022        11,928       7,353        58,713
  operating income

 Fabrication Group before   $ 1,898      $ 3,695      $ (6,968  )  $ 10,913
 corporate allocations

 Corporate allocations        (2,394  )    (2,713  )    (7,185  )    (7,511  )

  Total Fabrication Group     (496    )    982          (14,153 )    3,402
  operating income (loss)

 Distribution Group before  $ 3,349      $ 7,200      $ 12,101     $ 26,107
 corporate allocations

 Corporate allocations        (1,904  )    (2,265  )    (5,712  )    (6,257  )

  Total Distribution Group    1,445        4,935        6,389        19,850
  operating income

  Total consolidated        $ 1,971      $ 17,845     $ (411    )  $ 81,965
  operating income

RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES

GAAP to Non-GAAP Reconciliation

(Unaudited)

(In thousands)

                                          Three Months Ended
                                          September 30, 2009

Income (loss) before income taxes - GAAP  $ (4,751 )

Finance-related charges                     5,623

Income before income taxes - Non-GAAP     $ 872

    Source: RTI International Metals, Inc.

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