RTI Announces First Quarter 2013 Financial Results

Financial Performance Tracks Full Year Guidance

Financing and Non-Core Asset Disposal Support Growth Strategy


PITTSBURGH--(BUSINESS WIRE)-- RTI International Metals, Inc. (NYS: RTI) , today reported results for the 2013 first quarter ending March 31, 2013. In connection with these results, RTI reaffirmed its previously reported operating income guidance for the year. In addition, recent activities, including the public sale of $402.5 million of Convertible Senior Notes due 2019 and plans for the disposal of non-core assets, are expected to enhance the Company's execution of its long-term growth strategy.

Financial Summary

First quarter 2013 vs. 2012 comparisons:

  • Q1 net sales increased 21% to $187.5 million from $154.6 million in 2012.
  • Q1 operating income was $12.2 million in 2013 as compared to $12.1 million in the first quarter of 2012.
  • Titanium mill product shipments during the quarter were 4.3 million pounds, unchanged from the 2012 first quarter.
  • Average realized mill product price during the quarter was $19.35 per pound compared to $19.41 per pound during the same period in 2012.
  • Backlog at the end of the quarter remains near record-high levels as it increased to $569 million from $554 million in the fourth quarter of 2012.

First Quarter Summary and Highlights

For the first quarter of 2013, RTI reported net income from continuing operations of $5.5 million, or $0.18 per diluted share, on net sales of $187.5 million and operating income of $12.2 million. For the first quarter of 2012, RTI reported net income from continuing operations of $5.1 million, or $0.17 per diluted share, on net sales of $154.6 million and operating income of $12.1 million. First quarter 2013 results include a complete quarter contribution from the acquisition of Remmele Engineering, Inc., which closed on February 13, 2012. The first quarter of 2013 also includes sooner than expected receipt of $4.3 million of import duty cost recoveries under the Company's duty drawback program as well as $3.3 million of pre-tax charges related to the implementation of a voluntary early retirement program and restructuring actions associated with a small non-core business. First quarter 2012 results included a $3.0 million favorable duty drawback accrual reversal. Consequently, adjusted operating income from continuing operations for the first quarters of 2013 and 2012 were $11.2 million and $9.1 million, respectively.

During April of 2013, the Company completed its public offering of $402.5 million aggregate principal amount of 1.625% Convertible Senior Notes due 2019. The Company used approximately $133.4 million of the proceeds from this offering to repurchase, through privately negotiated transactions, approximately $115.6 million aggregate principal amount of its outstanding $230 million 3.000% Convertible Senior Notes due 2015, including accrued interest. Through these financing actions, the Company secured additional capital to continue executing its strategic growth plan as well as extending the maturity of a portion of its debt obligations by 4 years. In conjunction with the repurchase transactions, the Company expects to record a pre-tax, non-operating charge of approximately $14 million in the second quarter of 2013. Interest expense on the $516.9 million principal amount of convertible notes outstanding will be approximately $22 million during the last nine months of the year, including approximately $7.5 million of cash interest expense.

Segment Results

In conjunction with the restructuring of the Company's management organization announced on February 6, 2013, the Company has changed the structure of its reportable segments. The new structure combines the global operations of the Company into two business segments: the Titanium Segment and the Engineered Products and Services Segment. The Titanium Segment combines the Company's former Titanium and Distribution Groups. The Engineered Products and Services Segment is the Company's former Fabrication Group. Prior year amounts have been reclassified to conform to the current year presentation.

Titanium Segment

For the first quarter of 2013, the Titanium Segment operating income declined by $0.8 million to $11.0 million on net sales of $98.9 million, compared to first quarter 2012 operating income of $11.8 million on net sales of $89.3 million. First quarter 2013 operating income included $2.4 million of import duty cost recoveries under the Company's duty drawback program and $2.5 million of pre-tax charges related to the voluntary early retirement program and restructuring actions at a small non-core business. First quarter 2012 operating income included a $3.0 million favorable duty drawback accrual reversal. Excluding these items, first quarter 2013 Titanium Segment adjusted operating income was $11.1 million compared to $8.8 million in the same period a year ago. This $2.3 million increase was primarily due to a more profitable product mix and continued improved operating performance.

Titanium mill product shipments for the first quarter were 4.3 million pounds at an average realized price of $19.35 per pound, compared to titanium mill product shipments of 4.3 million pounds in the first quarter of 2012 at an average realized price of $19.41 per pound.

Engineered Products and Services Segment

For the first quarter of 2013, Engineered Products and Services Segment operating income increased by $0.9 million to $1.2 million on net sales of $88.6 million, compared to first quarter 2012 Engineered Products and Services Segment operating income of $0.3 million on net sales of $65.3 million. This increase in 2013 operating income was positively impacted by three full months of revenue and operating income contributions from the Remmele Engineering acquisition, increased production from the 787 program, and $1.9 million of import duty cost recoveries under the Company's duty drawback program. Offsetting these items were lower sales to energy and military market customers and a $0.8 million pre-tax charge related to the voluntary early retirement program.

CEO Comment

"RTI's first quarter financial results reflect earlier than planned collection of duty drawback, continued operational improvements and a favorable mill product mix," Dawne S. Hickton, Vice Chair, President, and CEO of RTI said. "Our anticipated full year operating performance continues to be driven by the same items that existed at the end of 2012, specifically, we expect our mill product shipments to Airbus and the Joint Strike Fighter to remain as previously forecasted, and expect the Boeing 787 pi-box seat track program will continue to ramp to a ten ship sets per month run rate towards year end.

"Since our last earnings call we also undertook several significant initiatives including our $402.5 million financing and the anticipated disposition of two small, non-titanium distribution businesses.

"Based on these first quarter results and continued market support for our products in both our Titanium and Engineered Products & Services segments, RTI is reaffirming our expectation that full year 2013 operating income will be in the $65 million to $75 million range," concluded Ms. Hickton.

Conference Call Information

To participate in today's 10:00 a.m. Eastern Time conference call, please dial toll free (USA/Canada) 866-813-5647 or (International) 847-619-6249 several minutes prior to the start time and specify the RTI International Metals' Conference Call.

Replay Information

Replay of the call will be available approximately one hour after the conference ends and will remain accessible through Tuesday, May 14, 2013. To listen to the replay, dial (USA/Canada) 888-843-7419 or (International) 630-652-3042 and enter conference pass code 3470 6264#.

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, 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 successful completion and integration of completed acquisitions, military spending generally and in particular, demand from the Joint Strike Fighter program, the impact from Boeing 787 production delays, 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 its Annual Report on Form 10-K for the year ended December 31, 2012, 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 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.

RTI International Company Description

RTI International Metals, Inc., headquartered in Pittsburgh, specializes in advanced titanium, meeting the requirements of the world's most technologically sophisticated applications in aerospace, defense, propulsion, medical device, energy, industrial, and chemical markets. For over 60 years, RTI has been taking titanium further through advanced manufacturing, engineering, machining, and forming processes. RTI delivers titanium mill products, extruded shapes, form-ready parts, and highly engineered components through our downstream-integrated supply chain. RTI has locations in the United States, Canada, Europe, and Asia.

           
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   2012
 
Net sales $ 187,470 $ 154,569
Cost and expenses:
Cost of sales 149,381 120,545
Selling, general, and administrative expenses 24,908 20,833
Research, technical, and product development expenses   1,001     1,065  
Operating income 12,180 12,126
Other expense 559 (268 )
Interest income 31 82
Interest expense   (4,796 )   (4,278 )
 
Income before income taxes 7,974 7,662
Provision for income taxes   2,470     2,608  
Net income attributable to continuing operations   5,504     5,054  
Net income attributable to discontinued operations   151     571  

Net income

$ 5,655   $ 5,625  
 
Earnings per share attributable to continuing operations:
Basic $ 0.18   $ 0.17  
Diluted $ 0.18   $ 0.17  
 
Earnings per share attributable to discontinued operations:
Basic $ -   $ 0.02  
Diluted $ -   $ 0.02  
 
Weighted-average shares outstanding:
Basic   30,230,641    

30,090,101

 
Diluted   30,504,177     30,200,542  
 

 
RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share and per share amounts)
   
 
March 31, December 31,

ASSETS

2013 2012
Current assets:

Cash and cash equivalents

$ 58,015 $ 97,190
Receivables, less allowance for doubtful accounts of $712 and $722 114,075 106,578
Inventories, net 421,402 394,165
Deferred income taxes 28,962 28,899
Assets of discontinued operations 14,971 14,741
Other current assets   11,115     10,709  

Total current assets

648,540 652,282
Property, plant, and equipment, net 371,299 375,949
Goodwill 135,341 135,870
Other intangible assets, net 55,228 56,495
Deferred income taxes 29,624 33,287
Other noncurrent assets   5,197     5,844  
Total assets $ 1,245,229   $ 1,259,727  
 

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 79,587 $ 91,661
Accrued wages and other employee costs 21,826 34,096
Unearned revenues 24,991 26,164
Liabilities of discontinued operations 2,821 2,332
Other accrued liabilities   25,379     22,550  
Total current liabilities 154,604 176,803
Long-term debt 200,663 198,337
Liability for post-retirement benefits 43,729 45,066
Liability for pension benefits 15,229 20,711
Deferred income taxes 51,400 51,452
Unearned revenues 9,922 9,991
Other noncurrent liabilities   12,129     11,798  
Total liabilities   487,676     514,158  
Commitments and Contingencies
Shareholders' equity:
Common stock, $0.01 par value; 50,000,000 shares authorized; 31,300,737 and
31,136,899 shares issued; 30,498,948 and 30,354,324 shares outstanding 313 311
Additional paid-in capital 487,512 484,798
Treasury stock, at cost; 801,789 and 782,575 shares (18,798 ) (18,399 )
Accumulated other comprehensive loss (40,710 ) (44,722 )
Retained earnings   329,236     323,581  
Total shareholders' equity   757,553     745,569  
Total liabilities and shareholders' equity $ 1,245,229   $ 1,259,727  
 

           
RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
Three Months Ended
March 31,
2013   2012
Cash used in operating activities (including depreciation and
amortization of $11,000 and $8,734 for the three months ended
March 31, 2013 and 2012, respectively) $ (30,723 ) $ (12,959 )
 
Cash used in investing activities (1) (9,160 ) (25,990 )
 
Cash used in financing activities   856     (658 )
 
Effect of exchange rate changes on cash and cash equivalents   (148 )   637  
 
Decrease in cash and cash equivalents (39,175 ) (38,970 )
Cash and cash equivalents at beginning of period   97,190     156,842  
Cash and cash equivalents at end of period $ 58,015   $ 117,872  
 
(1 ) Three months ended March 31, 2012 included cash used for the purchase of Remmele Engineering,
Inc. of $185,633 and net cash provided by the sale of available-for-sale investments of $176,771.
 

     
RTI INTERNATIONAL METALS, INC. AND SUBSIDIARIES
Selected Operating Segment Information
(Unaudited)
(In thousands)
 
Three Months Ended
March 31,
2013   2012
Net sales:
Titanium Segment $ 98,860 $ 89,271
Intersegment sales   16,270     22,073  
Total Titanium Segment sales 115,130 111,344
 
Engineered Products and Services Segment 88,610 65,298
Intersegment sales   15,843     20,595  
Total Engineered Products and Services Segment sales 104,453 85,893
 
Eliminations   32,113     42,668  
Total consolidated net sales $ 187,470   $ 154,569  
 
Operating income:
Titanium Segment before corporate allocations $ 15,887 $ 17,555
Corporate allocations   (4,900 )   (5,725 )
Total Titanium Segment operating income

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