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RTI Announces 2010 Results

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RTI Announces 2010 Results

RTI Announces 2010 Results

PITTSBURGH--(BUSINESS WIRE)--RTI International Metals, Inc., (NYSE: RTI), released results today for the fourth quarter and full year of 2010.

“The year started out under very challenging circumstances for our Company, and continued to provide us with on-going challenges throughout 2010”

Fourth Quarter 2010 Results

  • Net sales during the quarter were $114.7 million
  • Operating income totaled $2.5 million for the fourth quarter which includes an $8.3 million accrual in connection with the disputed Tronox supply contract
  • Titanium mill product shipments were 3.1 million pounds at an average realized price of $18.67 per pound for the quarter

Full Year 2010 Results

  • Net sales for 2010 were $431.8 million
  • Operating income for the year was $14.1 million which includes an $8.3 million accrual in connection with the disputed Tronox supply agreement
  • Cash and short-term investments at the end of the year were $397.2 million while total debt outstanding was $230.0 million
  • Titanium mill product shipments for the year were 10.5 million pounds at an average realized price of $18.81

Both the full year and quarterly results reflected an improving market for our titanium products and services, but one that continued to be impacted by excess titanium inventory in the commercial aerospace supply chain and looming defense budget costs. We expect titanium mill product inventories for the aerostructure market to continue to be a challenge until production on the Boeing 787 Dreamliner program increases from current levels.

For the fourth quarter of 2010, the Company reported net sales of $114.7 million compared to $97.3 million in the fourth quarter of 2009. Operating income for the quarter was $2.5 million compared to an operating loss of $86.9 million for the same period in 2009. The quarterly operating income for 2010 was impacted by an $8.3 million accrual in connection with the Tronox supply contract dispute associated with the indefinitely idled titanium sponge plant. The quarterly operating loss for 2009 was impacted by a $68.9 million sponge plant asset impairment and an $8.7 million goodwill impairment. The fourth quarter net loss for 2010 was $1.4 million, or $0.05 per diluted share, in comparison to a net loss of $57.3 million, or $1.91 per diluted share, for the same period in the prior year.

For the full year 2010, the Company reported net sales of $431.8 million versus net sales of $408.0 million for 2009 with operating income of $14.1 million versus an operating loss of $87.3 million for 2009. The Company posted net income of $3.4 million, or $0.11 per diluted share for 2010, versus a net loss of $67.2 million, or $2.67 per diluted share, in the previous year.

The Company ended 2010 with cash and short-term investments of $397.2 million and $230.0 million of total debt outstanding. The increase in this cash balance since the end of 2009 was driven by a focus on reducing working capital that contributed to $75.2 million of cash from operations for the year, as well as a $230.0 million issuance in December of 2010 of 3.0% Convertible Senior Notes due 2015.

Titanium Group

For the fourth quarter of 2010, the Titanium Group posted operating income of $0.3 million on sales of $61.5 million, including intersegment sales of $20.2 million. During the same period in 2009, this Group had an operating loss of $75.4 million on sales of $48.4 million including intersegment sales of $27.0 million. The operating income for the quarter was negatively impacted by an $8.3 million accrual associated with the disputed Tronox contract.

Sales in 2010 for the Titanium Group were $230.2 million, including intersegment sales of $87.3 million versus $229.3 million, including intersegment sales of $121.7 million in 2009. The Group had operating income of $18.4 million for the year, compared to an operating loss of $68.1 million in 2009.

Mill product shipments for the fourth quarter were 3.1 million pounds at an average realized price of $18.67 per pound, compared to mill product shipments of 2.2 million pounds in the fourth quarter of 2009 at an average realized price of $20.86 per pound. Mill product shipments for the full year were 10.5 million pounds at an average realized price of $18.81 per pound, compared to mill product shipments of 10.0 million pounds in 2009 at an average realized price of $21.71 per pound.

Fabrication Group

During the fourth quarter of 2010, the Fabrication Group posted operating income of $1.5 million on net sales of $34.4 million. For the same period in 2009, this Group had an operating loss of $12.2 million on net sales of $26.3 million. While continuing to be adversely impacted by the prolonged production delays on the Boeing 787, this Group made significant operational improvements throughout its internal supply chain supporting this program.

In 2010, net sales for the Fabrication Group were $134.4 million versus $106.2 million in 2009. This Group had an operating loss of $7.6 million for the year, compared to an operating loss of $26.3 million in 2009.

Distribution Group

For the fourth quarter of 2010, the Distribution Group posted operating income of $0.8 million on net sales of $39.0 million. For the same period in 2009, this Group had operating income of $0.7 million on net sales of $49.6 million. During the fourth quarter, pricing for titanium products appeared to stabilize while nickel-bearing alloys increased modestly.

For 2010, net sales for the Distribution Group were $154.5 million versus $194.1 million in 2009. The Group had operating income of $3.3 million for the year, compared to $7.1 million in 2009.

CEO Comment

“The year started out under very challenging circumstances for our Company, and continued to provide us with on-going challenges throughout 2010,” commented Dawne S. Hickton, Vice Chairman, President, and CEO. “Forecasted shipment levels in January were under 8.0 million pounds as our major customers continued to work through excess inventories, and defense programs were under budget scrutiny causing purchasing delays. Fortunately, we were able to manage substantial improvement in the Titanium Group’s performance for the fourth quarter and for the year, increasing shipments to 10.5 million pounds, albeit at a somewhat lower average sales price than initially anticipated. A large portion of this increase was due to increased orders from Airbus, but also reflected a commercial focus on expanding our opportunities for this Group. Looking forward into 2011, I expect that the Titanium Group’s shipments will exceed 12.0 million pounds at prices similar to 2010 pricing. Although this Group should be profitable in 2011, it will not get the benefit of the one-time payment received from Airbus in 2010, resulting in lower operating income in 2011 as compared to 2010.”

Ms. Hickton continued, “Similarly, the Fabrication Group generated an operating profit for the quarter as it continued to make significant operational improvements. At the same time, I was not satisfied with this Group’s financial performance for the year. Despite increased demand from our energy customers and the opportunity to participate in the Macondo recovery project in the Gulf of Mexico, this Group’s performance was again negatively impacted by Boeing’s 787 Dreamliner production delays. Going forward, until such time that the 787 program gains traction, which for 2011 may now be equivalent to the run rate levels experienced during the fourth quarter of 2010, the operating results for the Fabrication Group will be breakeven at best.

“The Distribution Group was also modestly profitable for the quarter and for the year, driven by improvements to our overhead cost structure coupled with gradual increases in spot orders. Although spot pricing stabilized, we are yet to see a consistent trend towards sustained price increases.

“While the near term outlook continues to be muted, I believe the future remains robust. We have a significant presence on all four of the new key titanium intensive airframes: Airbus’ A350 and A380, Boeing’s 787, and Lockheed Martin’s Joint Strike Fighter. In light of our strong balance sheet and market position within the commercial and defense aerospace supply chains, RTI is positioned for long term growth, as production ramps on these key platforms.”

Outlook

As compared to 2010, net revenue in 2011 will increase modestly while operating profits will be lower, as a result of the positive impact from the one-time Airbus payment received in 2010, as well as a potential $10.7 million accrual in 2011 associated with the disputed Tronox supply contract. Total mill product shipments are expected to exceed 12.0 million pounds at prices similar to 2010 prices. Capital expenditures will be in the range of $80.0 to $90.0 million for the year.

Conference Call Information

To participate in today’s call at 11:00 a.m. Eastern Time, please dial toll free (USA/Canada) 800-446-1671 or (International) 847-413-3362 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, February 15, 2011, at 11:59 p.m., Eastern Time. To listen to the replay, dial (USA/Canada) 888-843-7419 or (International) 630-652-3042 and enter passcode 2880 8136#.

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 titanium content per aircraft for commercial and military aerospace programs, military spending generally and in particular, our demand from the Joint Strike Fighter program, the impact from Boeing 787 production delays, variability in our quarterly tax rate driven by the mix and level of foreign and domestic earnings, the outcome of our pending challenge of our titanium tetrachloride supply agreement, 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, the successful completion of our capital expansion projects, 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®, headquartered in Pittsburgh, Pennsylvania, is celebrating 60 years of providing titanium and other specialty metals to our customers around the world. RTI manufactures and distributes extruded shapes, formed parts and engineered systems for commercial aerospace, defense, energy, industrial, chemical, and consumer applications. Our Titanium, Distribution, and Fabrication Groups have locations in the United States, Canada, Europe, and Asia to better serve our global customers. We look forward to serving new and existing customers during the next 60 years and beyond!

 
 

RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share amounts)

             
 
Three Months Ended Year Ended
December 31, December 31,
2010   2009 2010 2009
 
Net sales $ 114,664 $ 97,323 $ 431,793 $ 407,978
Cost and expenses:
Cost of sales 97,426 89,120 355,908 352,167
Selling, general, and administrative expenses 15,752 16,964 63,580 63,490

Research, technical, and product development expenses

720 508 3,256 2,001
Asset and asset-related charges (1,750 ) 68,897 (5,012 ) 68,897
Goodwill impairment   -     8,699     -     8,699  
Operating income (loss) 2,516 (86,865 ) 14,061 (87,276 )
Other income (expense) (469 ) 50 (622 ) 2,056
Interest income 134 186 492 1,511
Interest expense   (1,283 )   (340 )   (2,111 )   (12,347 )
 
Income (loss) before income taxes 898 (86,969 ) 11,820 (96,056 )
Provision for (benefit from) income taxes   2,343     (29,716 )   8,403     (28,817 )
Net income (loss) $ (1,445 ) $ (57,253 ) $ 3,417   $ (67,239 )
 
Earnings (loss) per share:
Basic $ (0.05 ) $ (1.91 ) $ 0.11   $ (2.67 )
Diluted $ (0.05 ) $ (1.91 ) $ 0.11   $ (2.67 )
 
Weighted-average shares outstanding:
Basic   29,964,709     29,833,757     29,916,465     25,029,976  
Diluted   29,964,709     29,833,757     30,145,099     25,029,976  
 
 
 

RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share and per share amounts)

           
 
December 31, December 31,

ASSETS

2010 2009
Current assets:
Cash and cash equivalents $ 376,951 $ 56,216
Short-term investments 20,275 65,042

Receivables, less allowance for doubtful accounts of $478 and $646

56,235 60,924
Inventories, net 269,719 266,887
Deferred income taxes 22,891 21,237
Other current assets   16,299     21,410  
Total current assets 762,370 491,716
Property, plant, and equipment, net 260,576 252,301
Goodwill 41,795 41,068
Other intangible assets, net 14,066 14,299
Deferred income taxes 21,699 53,814
Other noncurrent assets   6,348     1,537  
Total assets $ 1,106,854   $ 854,735  
 

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 47,226 $ 39,193
Accrued wages and other employee costs 21,951 9,796
Unearned revenue 28,358 21,832
Current liability for post-retirement benefits 3,052 2,476
Current liability for pension benefits 248 140
Other accrued liabilities   24,879     30,518  
Total current liabilities 125,714 103,955
 
Long-term debt 178,107 81
Noncurrent liability for post-retirement benefits 39,903 34,530
Noncurrent liability for pension benefits 33,830 28,102
Deferred income taxes 3,147 244
Other noncurrent liabilities   7,753     8,617  
Total liabilities   388,454     175,529  
Shareholders’ equity:

Common stock, $0.01 par value; 50,000,000 shares authorized;
30,858,725 and 30,724,351 shares issued;
30,123,519 and 30,010,998 shares outstanding

309 307
Additional paid-in capital 474,277 439,361
Treasury stock, at cost; 735,206 and 713,353 shares (17,363 ) (16,996 )
Accumulated other comprehensive loss (32,337 ) (33,563 )
Retained earnings   293,514     290,097  
Total shareholders’ equity   718,400     679,206  
Total liabilities and shareholders’ equity $ 1,106,854   $ 854,735  
 
           
 

RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 
 
Year Ended
December 31,
2010 2009
Cash provided by operating activities (including adjustments for
depreciation and amortization of $22,111 and $21,163 for the
years ended December 31, 2010 and 2009, respectively) $ 75,208 $ 32,999
 
Cash provided by (used in) investing activities 20,145 (147,263 )
 
Cash provided by (used in) financing activities   223,823   (115,097 )
 
Effect of exchange rate changes on cash and cash equivalents   1,559   1,128  
 
Increase (decrease) in cash and cash equivalents 320,735 (228,233 )
Cash and cash equivalents at beginning of period   56,216   284,449  
Cash and cash equivalents at end of period $ 376,951 $ 56,216  
 

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RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES

Selected Operating Segment Information

(Unaudited)

(In thousands)

 
 
Three Months Ended Year Ended
December 31, December 31,
2010 2009 2010 2009
Net sales:
Titanium Group $ 41,260 $ 21,342 $ 142,920 $ 107,622
Intersegment sales   20,195     27,049     87,257     121,664  
Total Titanium Group sales 61,455 48,391 230,177 229,286
 
Fabrication Group 34,405 26,346 134,418 106,231
Intersegment sales   12,405     12,817     52,589     57,378  
Total Fabrication Group sales 46,810 39,163 187,007 163,609
 
Distribution Group 38,999 49,635 154,455 194,125
Intersegment sales   2,032     367     4,148     2,230  
Total Distribution Group sales 41,031 50,002 158,603 196,355
 
Eliminations   34,632     40,233