RTI International Metals Reports Second Quarter 2014 Financial Results

Engineered Products and Services Segment Drives Improvement in Quarterly Financial Results

PITTSBURGH--()--RTI International Metals, Inc. (NYSE: RTI) today reported second quarter 2014 results that show improved performance from the first quarter led by its Engineered Products and Services Segment.

2014 Second Quarter Results Summary

  • Revenues totaled $205.3 million compared to prior year second quarter revenues of $199.1 million.
  • Operating income was $17.5 million compared to $20.5 million in the second quarter of 2013. Last year’s second quarter operating income included $8.3 million of higher duty drawback cost recoveries.
  • Net income attributable to continuing operations was $7.1 million, or $0.23 per diluted share, compared to prior year second quarter net income attributable to continuing operations of $1.1 million, or $0.03 per diluted share. 2013 second quarter results included a $13.7 million pre-tax charge to interest expense related to the early extinguishment of a portion of long-term convertible debt.
  • Total titanium mill product shipments were 3.9 million pounds compared to 4.1 million pounds in last year’s second quarter.
  • Boeing 787 seat track deliveries totaled 36 equivalent ship sets compared to 18 delivered in the same period last year.

CEO Comment

“Our second quarter results reflect the expected build in earnings as we closed out the first half of the year,” Dawne Hickton, Vice Chair, President and CEO of RTI, said. “Work completed on certain energy market projects and continued execution on the Boeing 787 seat track system program were the primary contributors during the second quarter, which resulted in our Engineered Products and Services Segment returning to profitability. In addition, the Titanium Segment delivered modest improvements in sales and operating income compared to the first quarter as a result of continued improvements in material and production costs.”

Commenting on the Company’s outlook, Ms. Hickton said, “Indications from our participation at last month’s Farnborough International Airshow continue to point to a steady commercial aerospace growth cycle that remains intact, and a market environment that continues to present RTI with future growth opportunities. Specific to 2014, we continue to expect a ramping increase in financial results in the third and fourth quarters, consistent with our previously announced full year outlook.”

Financial Review

For the 2014 second quarter, the Company reported net sales of $205.3 million, compared to net sales of $199.1 million for the same period last year. Second quarter 2014 operating income was $17.5 million and net income attributable to continuing operations was $7.1 million, or $0.23 per diluted share. This compares to 2013 second quarter operating income of $20.5 million and net income attributable to continuing operations of $1.1 million, or $0.03 per diluted share.

Second quarter 2013 operating income and net income attributable to continuing operations included the benefit of $8.3 million (pre-tax) of higher duty drawback cost recoveries, primarily related to the 2013 second quarter collection of a substantial portion of the Company’s prior period duty drawback claims backlog.

Second quarter 2013 interest expense and net income attributable to continuing operations included a $13.7 million pre-tax charge related to the early retirement of a portion of the Company’s 3.000% Convertible Senior Notes due 2015.

Segment Results

Titanium Segment

During the second quarter of 2014, the Titanium Segment reported operating income of $7.9 million on net sales of $83.3 million, compared to 2013 second quarter operating income of $17.0 million on net sales of $83.5 million. 2014 second quarter operating income was lower by $5.9 million due to the benefit in last year’s second quarter from the collection of a substantial portion of the Company’s prior period duty drawback claims backlog. Second quarter 2014 sales were flat with last year as the impact of higher trade customer shipment volumes was offset by a lower priced product mix. In addition, second quarter 2014 operating income was also lower due to the impact of a lower margin product mix and severance costs related to fixed cost reduction actions implemented in the current year second quarter.

Second quarter 2014 total titanium mill product shipments were 3.9 million pounds compared to 4.1 million pounds for the same period last year. Titanium mill product shipments for the first half of 2014 were 7.6 million pounds compared to 8.4 million pounds for the first six months of 2013.

Engineered Products and Services Segment

During the second quarter of 2014, the Engineered Products and Services Segment reported operating income of $9.6 million on net sales of $122.0 million, compared to operating income of $3.5 million on net sales of $115.6 million for the same period last year. The improved performance was driven by a higher contribution in the current quarter from certain energy market projects, as well as higher volumes on the Boeing 787 seat track system program. This was partially offset by build-rate schedule adjustments for certain commercial aircraft programs, and the continued impact of higher new program development costs, which began to abate from 2014 first quarter cost levels. RTI Extrusions Europe, acquired in October 2013, and RTI Directed Manufacturing, acquired in January 2014, contributed $6.2 million in net sales in the second quarter. The increase in operating income from last year’s second quarter was achieved despite a $2.4 million reduction in duty drawback cost recoveries.

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, August 19, 2014. To listen to the conference call replay, dial (USA/Canada) 888-843-7419 or (International) 630-652-3042 and enter conference pass code 3770 2474#. 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 ongoing 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 release 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 Six Months Ended
June 30, June 30,
2014  

2013
(As Restated)

2014

2013
(As Restated)

 
Net sales $ 205,334 $ 199,123 $ 379,879 $ 388,325
Cost and expenses:
Cost of sales 163,022 155,346 309,098 305,295
Selling, general, and administrative expenses 23,631 22,314 49,499 46,919
Research, technical, and product development expenses   1,209     982     2,193     1,983  
Operating income 17,472 20,481 19,089 34,128
Other income (expense), net (375 ) 700 160 1,259
Interest income 95 50 145 81
Interest expense   (7,724 )   (20,693 )   (15,331 )   (25,489 )
 
Income before income taxes 9,468 538 4,063 9,979
Provision for (benefit from) income taxes   2,357     (521 )   768     3,952  
Net income attributable to continuing operations $ 7,111   $ 1,059   $ 3,295   $ 6,027  
Net loss attributable to discontinued operations,
net of tax   (70 )   (389 )   (435 )   (472 )
Net income $ 7,041   $ 670   $ 2,860   $ 5,555  
 
Earnings per share attributable to continuing operations:
Basic $ 0.23   $ 0.03   $ 0.11   $ 0.20  
Diluted $ 0.23   $ 0.03   $ 0.11   $ 0.20  
 
Earnings (loss) per share attributable to discontinued operations:
Basic $ -   $ (0.01 ) $ (0.01 ) $ (0.02 )
Diluted $ -   $ (0.01 ) $ (0.01 ) $ (0.02 )
 
Weighted-average shares outstanding:
Basic   30,499,809     30,306,545     30,472,209     30,266,584  
Diluted   30,575,712     30,432,874     30,579,672     30,479,476  
 

     

RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share and per share amounts)

 
ASSETS  

June 30,
2014

   

December 31,
2013

Current assets:
Cash and cash equivalents $ 148,953 $ 343,637
Short-term investments 143,602 -
Receivables, less allowance for doubtful accounts of $1,063 and $820 109,328 105,271
Inventories, net 450,451 430,088
Cost in excess of billings 7,331 5,377
Deferred income taxes 32,211 32,032
Assets of discontinued operations 806 5,274
Other current assets   20,629     16,947  
Total current assets 913,311 938,626
Property, plant, and equipment, net 373,976 372,340
Goodwill 144,572 117,578
Other intangible assets, net 61,264 53,754
Other noncurrent assets   22,386     23,247  
Total assets $ 1,515,509   $ 1,505,545  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 80,423 $ 79,039
Accrued wages and other employee costs 27,273 29,787
Unearned revenues 10,944 15,625
Liabilities of discontinued operations - 458
Other accrued liabilities   21,423     22,574  
Total current liabilities 140,063

 

147,483
Long-term debt 442,406 430,300
Liability for post-retirement benefits 43,931 43,447
Liability for pension benefits 13,121 13,787
Deferred income taxes 76,304 74,078
Unearned revenues 5,435 10,470
Other noncurrent liabilities   12,966     12,006  
Total liabilities   734,226  

 

  731,571  
Commitments and Contingencies
Shareholders’ equity:
Common stock, $0.01 par value; 100,000,000 and 50,000,000 shares authorized;
31,558,149 and 31,399,661 shares issued; 30,708,631 and
30,593,251 shares outstanding 316 314
Additional paid-in capital 535,436 532,249
Treasury stock, at cost; 849,518 and 806,410 shares (19,649 ) (18,798 )
Accumulated other comprehensive loss (38,286 ) (40,397 )
Retained earnings   303,466     300,606  
Total shareholders’ equity   781,283     773,974  
Total liabilities and shareholders’ equity $ 1,515,509   $ 1,505,545  
 

 

RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

       
Six Months Ended
June 30,
2014    

2013
(As Restated)

Cash provided by (used in) operating activities (including adjustment for
depreciation and amortization of $22,203 and $21,753 for the periods
ended June 30, 2014 and 2013, respectively) $ (1,337 ) $ 619
 
Cash used in investing activities (1) (191,097 ) (137,481 )
 
Cash provided by (used in) financing activities (2)   (1,356 )   271,234  
 
Effect of exchange rate changes on cash and cash equivalents   (894 )   (129 )
 
Increase (decrease) in cash and cash equivalents (194,684 ) 134,243
Cash and cash equivalents at beginning of period   343,637     97,190  
Cash and cash equivalents at end of period $ 148,953   $ 231,433  
 

(1)

 

Six months ended June 30, 2014 included cash used for the net purchase of available-for-sale, short-term investments of $143,555 and the purchases of Dynamet Technologies, Inc. and RTI Directed Manufacturing for a combined $37,217. Six months ended June 30, 2013 included cash used for the net purchase of available-for-sale, short-term investments of $128,291.

(2)

Six months ended June 30, 2013 included $402,500 in proceeds from the issuance of the Company's 1.625% Convertible Senior Notes due 2019, net of financing fees paid of $12,370, and the repurchase of a portion of the Company's 3.000% Convertible Senior notes due 2015 for $120,362.

 

 

RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES

Selected Operating Segment Information

(Unaudited)

(In thousands)

 
        Three Months Ended     Six Months Ended
June 30, June 30,
2014  

2013
(As Restated)

2014  

2013
(As Restated)

Net sales:
Titanium Segment net sales $ 83,318 $ 83,521 $ 160,298 $ 180,346
Intersegment sales   22,547     25,350     47,593     41,618  
Total Titanium Segment sales 105,865 108,871 207,891 221,964
 
Engineered Products and Services Segment net sales 122,016 115,602 219,581 207,979
Intersegment sales   22,115     17,196     50,081     33,039  

Total Engineered Products and Services Segment sales

144,131 132,798 269,662 241,018
 
Eliminations   44,662     42,546     97,674     74,657  
Total consolidated net sales $ 205,334   $ 199,123   $ 379,879   $ 388,325  
 
Operating income:
Titanium Segment before corporate allocations $ 12,381 $ 21,474 $ 22,810 $ 37,611
Corporate allocations   (4,518 )   (4,510 )   (9,045 )   (9,410 )
Total Titanium Segment operating income 7,863 16,964 13,765 28,201
 

Engineered Products and Services Segment before corporate allocations

15,715 7,740 17,526 16,729
Corporate allocations   (6,106 )   (4,223 )   (12,202 )   (10,802 )

Total Engineered Products and Services Segment operating income

  9,609     3,517     5,324     5,927  
 
Total consolidated operating income $ 17,472   $ 20,481   $ 19,089   $ 34,128  
 

Contacts

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

Contacts

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