RTI International Metals Reports First Quarter 2014 Financial Results

First Quarter Results Reflect Challenging Conditions to the Start of the Year

PITTSBURGH--()--RTI International Metals, Inc. (NYSE: RTI), a leading vertically integrated global supplier of advanced titanium and specialty metals products and services, today reported first quarter 2014 results. RTI also provided an update to its 2014 full year revenue and operating income outlook.

2014 First Quarter Results Summary

  • Revenues totaled $174.5 million, compared to $189.2 million for the same period last year.
  • Operating income was $1.6 million, compared to $13.6 million in last year’s first quarter.
  • Factors that unfavorably impacted first quarter results included higher development costs related to certain new Engineered Products and Services Segment programs, build-rate schedule adjustments to certain commercial aircraft programs, and adverse weather conditions.
  • Net loss attributable to continuing operations was $3.8 million, or $(0.13) per diluted share, including $(0.18) per diluted share of interest expense (net of tax), compared to prior year net income attributable to continuing operations of $5.0 million, or $0.16 per diluted share, including $(0.11) per diluted share of interest expense (net of tax).
  • Titanium mill product shipments were 3.8 million pounds, compared to 4.3 million pounds in last year’s first quarter.
  • Boeing 787 seat track deliveries totaled 28 equivalent ship sets, compared to 12 in the same period last year.

CEO Comment

RTI’s first quarter results confirmed a challenging start to the new year. As we previously advised, these challenges were driven by several factors including higher development costs related to certain new Engineered Products and Services Segment programs, build-rate schedule adjustments to certain commercial aircraft programs, and adverse winter weather conditions,” Dawne Hickton, Vice Chair, President and CEO of RTI, said. “Despite these specific challenges to the first quarter, we are encouraged that our underlying operational execution continues to improve, as demonstrated by RTI’s delivery of 28 equivalent Boeing 787 seat track ship sets during the quarter.”

Commenting on the Company’s 2014 full year outlook, Ms. Hickton continued, “With significant hurdles behind us, and our visibility for the remainder of the year improving, we are refining our expectations for our full year financial performance. We still expect full year revenues to exceed $800 million and full year mill product shipments to approach 17 million pounds. However, and principally as a result of larger than previously expected impacts from the operational challenges cited above, today we expect our full year operating income to be at the lower end of our previously announced range of $75 to $85 million. But, as we look forward, we will continue to focus on opportunities to improve our operating performance. While we expect RTI’s second quarter operating income to improve sequentially from the first, we continue to anticipate generating a majority of our remaining 2014 operating income in the second half of the year.”

Financial Review

For the 2014 first quarter, the Company reported net sales of $174.5 million, compared to net sales of $189.2 million for the same period last year. First quarter 2014 operating income was $1.6 million and net loss attributable to continuing operations was $3.8 million, or $(0.13) per diluted share. This compares to 2013 first quarter operating income of $13.6 million and net income attributable to continuing operations of $5.0 million, or $0.16 per diluted share.

First quarter 2014 results were negatively impacted by a number of factors. First quarter 2014 sales and operating income were impacted by customer order and delivery timing, build-rate schedule adjustments to certain commercial aircraft programs, and lower energy and medical market sales. First quarter 2014 operating income was also impacted by higher development costs related to certain new Engineered Products and Services Segment programs, operational disruptions related to adverse weather conditions, and severance costs related to fixed cost reduction actions.

Interest expense for the 2014 first quarter increased to $7.6 million compared to $4.8 million for last year’s first quarter due to the April 2013 issuance of $402.5 million of 1.625% Convertible Senior Notes due 2019, a portion of the proceeds from which were used to repurchase $115 million of 3.000% Convertible Senior Notes due 2015.

Segment Results

Titanium Segment

During the first quarter of 2014, the Titanium Segment reported operating income of $5.9 million on net sales of $77.0 million, compared to 2013 first quarter operating income of $11.2 million on net sales of $96.8 million. First quarter sales and operating income declined principally due to a less favorable product mix combined with lower shipment volumes in the current year first quarter due to customer order and delivery timing. Current year first quarter operating income was also impacted by weather-related operational disruptions.

First quarter 2014 total titanium mill product shipments were 3.8 million pounds compared to 4.3 million pounds for the same period last year.

Engineered Products and Services Segment

During the first quarter of 2014, the Engineered Products and Services Segment reported an operating loss of $4.3 million on net sales of $97.5 million, compared to operating income of $2.4 million on net sales of $92.4 million for the same period last year. Current quarter sales and operating income were positively impacted by higher volumes and improved performance on the Boeing 787 program. This was offset by the anticipated impacts of absorbing build-rate schedule adjustments to certain commercial aircraft programs and lower energy and medical market volumes. Current quarter operating income was also impacted by higher development costs related to certain new programs, weather-related operational disruptions, and severance costs related to fixed cost reduction actions. RTI Extrusions Europe, acquired in October 2013, and RTI Directed Manufacturing, acquired in January 2014, contributed $5.6 million in revenues in the first quarter.

Conference Call and Webcast Information

To participate in today's 10:00 a.m. Eastern Time conference call, please dial toll free (USA/Canada) 888-895-5479 or (International) 847-619-6250 several minutes prior to the start time and specify the RTI International Metals' Conference Call.

To listen to today’s conference call on the live webcast, please access the link available on the Events and Presentations page in the Investor Relations section of RTI’s website, www.rtiintl.com, at least 15 minutes before the event is scheduled to begin to register and download or install any necessary software.

Replay Information

Replay of the conference call and the webcast will be available approximately one hour after the conference ends and will remain accessible through Tuesday, May 20, 2014. To listen to the conference call replay, dial (USA/Canada) 888-843-7419 or (International) 630-652-3042 and enter conference pass code 3713 1954#. The webcast replay can be accessed on the Events and Presentations page in the Investor Relations section of RTI’s website at www.rtiintl.com.

Forward Looking Statement

All statements in this release relating to matters that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected, anticipated or implied. These risks and uncertainties include, but are not limited to, global economic and political uncertainties including the developing turmoil in Ukraine, the concentration of our revenue within the commercial aerospace and defense industries, actual build-rates, production schedules and titanium content per aircraft for commercial and military aerospace programs, the effectiveness of our internal controls, the successful completion and integration of completed acquisitions, our ability to recover the carrying value of goodwill and other intangible assets, military spending generally and in particular, demand from the Joint Strike Fighter program, the competitive nature of the markets for specialty metals, the ability of RTI to obtain adequate raw materials, the successful completion of RTI’s capital expansion projects, and other risks and uncertainties described and included in RTI’s filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year ended December 31, 2013, and the exhibits attached thereto. 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 they may be amended from time to time. The forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. RTI undertakes no obligation to update or revise any forward-looking statements.

Company Description

RTI International Metals, Inc. is a leading vertically integrated global supplier of advanced titanium and specialty metals products and services to commercial aerospace, defense, energy, medical device and other customers. For more than 60 years, RTI has been taking titanium further through advanced manufacturing, engineering, machining, and forming processes. RTI delivers titanium mill products, extruded shapes, formed and 3D-printed parts, and highly engineered precision-machined components through our downstream integrated supply chain.

Headquartered in Pittsburgh, Pa., RTI has locations in the United States, Canada, Europe, and Asia. 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

March 31,

   

2013

2014

(As Restated)

 
Net sales $ 174,545 $ 189,202
Cost and expenses:
Cost of sales 146,076 149,949
Selling, general, and administrative expenses 25,868 24,605
Research, technical, and product development expenses   984     1,001  
Operating income 1,617 13,647
Other income (expense), net 535 559
Interest income 50 31
Interest expense   (7,607 )   (4,796 )
 
Income (loss) before income taxes (5,405 ) 9,441
Provision for (benefit from) income taxes   (1,589 )   4,473  
Net income (loss) attributable to continuing operations $ (3,816 ) $ 4,968  

Net income (loss) attributable to discontinued operations, net of tax

  (365 )   (83 )
Net income (loss) $ (4,181 ) $ 4,885  
 
Earnings (loss) per share attributable to continuing operations:
Basic $ (0.13 ) $ 0.16  
Diluted $ (0.13 ) $ 0.16  
 
Earnings (loss) per share attributable to discontinued operations:
Basic $ (0.01 ) $ -  
Diluted $ (0.01 ) $ -  
 
Weighted-average shares outstanding:
Basic   30,445,681     30,230,641  

Diluted

  30,445,681     30,504,177  
 

       

RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share and per share amounts)

 
ASSETS March 31, 2014 December 31, 2013
Current assets:
Cash and cash equivalents $ 167,908 $ 343,637
Short-term investments 128,197 -
Receivables, less allowance for doubtful accounts of $980 and $820

107,699

105,271
Inventories, net 452,173 430,088
Cost in excess of billings

7,538

5,377
Deferred income taxes 32,040 32,032
Assets of discontinued operations 1,460 5,274
Other current assets   20,424     16,947  
Total current assets

917,439

938,626
Property, plant, and equipment, net 371,450 372,340
Goodwill 130,254 117,578
Other intangible assets, net 57,516 53,754
Other noncurrent assets   23,684     23,247  
Total assets $

1,500,343

  $ 1,505,545  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 81,181 $ 79,039
Accrued wages and other employee costs 23,090 29,787
Unearned revenues

16,632

15,625
Liabilities of discontinued operations - 458
Other accrued liabilities   24,347     22,574  
Total current liabilities

145,250

 

147,483
Long-term debt 434,209 430,300
Liability for post-retirement benefits 43,640 43,447
Liability for pension benefits 13,454 13,787
Deferred income taxes 74,666 74,078
Unearned revenues 10,204 10,470
Other noncurrent liabilities   11,318     12,006  
Total liabilities  

732,741

 

 

  731,571  
Commitments and Contingencies
Shareholders’ equity:

Common stock, $0.01 par value; 50,000,000 shares authorized;

31,510,945 and 31,399,661 shares issued;

30,672,172 and 30,593,251 shares outstanding

315 314
Additional paid-in capital 533,921 532,249
Treasury stock, at cost; 838,773 and 806,410 shares (19,648 ) (18,798 )
Accumulated other comprehensive loss (43,411 ) (40,397 )
Retained earnings   296,425     300,606  
Total shareholders’ equity   767,602     773,974  
Total liabilities and shareholders’ equity $

1,500,343

  $ 1,505,545  
 

 

RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

   
Three Months Ended
March 31,
    2013

2014

(As Restated)

Cash used in operating activities (including adjustment for

depreciation and amortization of $10,986 and $11,000 for the

three months ended March 31, 2014 and 2013, respectively)

$ (20,715

)

$ (30,723 )
 
Cash used in investing activities (1) (153,582 ) (9,160 )
 
Cash provided by (used in) financing activities   (600 )   856  
 
Effect of exchange rate changes on cash and cash equivalents   (832 )   (148 )
 
Decrease in cash and cash equivalents (175,729 ) (39,175 )
Cash and cash equivalents at beginning of period   343,637     97,190  
Cash and cash equivalents at end of period $ 167,908   $ 58,015  
 

(1) Three months ended March 31, 2014 included cash used for the purchase of available-for-sale,

short-term investments of $128,216 and the purchase of RTI Directed Manufacturing for $21,797.

 

   

RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES

Selected Operating Segment Information

(Unaudited)

(In thousands)

 
Three Months Ended
March 31,
    2013
2014 (As Restated)
Net sales:
Titanium Segment $ 76,980 $ 96,825
Intersegment sales   25,046     16,268  
Total Titanium Segment sales 102,026 113,093
 
Engineered Products and Services Segment 97,565 92,377
Intersegment sales   27,966     15,843  
Total Engineered Products and Services
Segment sales 125,531 108,220
 
Eliminations   53,012     32,111  
Total consolidated net sales $ 174,545   $ 189,202  
 
Operating income:
Titanium Segment before corporate allocations $ 10,429 $ 16,137
Corporate allocations   (4,527 )   (4,900 )
Total Titanium Segment operating income 5,902 11,237
 

Engineered Products and Services Segment before corporate allocations

1,811 8,092
Corporate allocations   (6,096 )   (5,682 )

Total Engineered Products and Services

Segment operating income (loss)

  (4,285 )   2,410  
 
Total consolidated operating income $ 1,617   $ 13,647  

Contacts

RTI International Metals, Inc.
Dan Crookshank, Director – Investor Relations, 412-893-0084
dcrookshank@rtiintl.com

Sharing

Contacts

RTI International Metals, Inc.
Dan Crookshank, Director – Investor Relations, 412-893-0084
dcrookshank@rtiintl.com