Titanium Metals Corp. Reports Operating Results (10-Q)
Titanium Metals Corp. has a market cap of $4.06 billion; its shares were traded at around $22.62 with a P/E ratio of 125.7 and P/S ratio of 5.3. Titanium Metals Corp. had an annual average earning growth of 19.8% over the past 5 years.TIE is in the portfolios of Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors, George Soros of Soros Fund Management LLC, Jeremy Grantham of GMO LLC.
Highlight of Business Operations: Net sales. Our net sales were $212.0 million for the second quarter of 2010 compared to net sales of $205.7 million for the second quarter of 2009. The increase in net sales was primarily the result of a 116% increase in melted product volumes partially offset by lower selling prices for those melted products. Factors contributing to the change in average selling prices for melted products during the second quarter of 2010 include lower annual pricing under long-term customer agreements primarily due to lower raw material index adjustments, lower spot market pricing and the relative mix of products sold during the period. Customer requirements during the second quarter of 2010 have continued to reflect improving demand for titanium products in the commercial aerospace sector, as manufacturing activity and inventory levels within the supply chain continue to recover and uncertainties within the sector continue to be resolved.
Gross margin. For the second quarter of 2010, our gross margin was $40.8 million compared to $31.6 million for the second quarter of 2009, reflecting a higher gross margin percentage relative to net sales. Our improved profitability reflects lower cost raw materials, principally titanium sponge and scrap, and higher utilization of our production capacity in the second quarter of 2010 compared to the second quarter of 2009. Increased production rates throughout our major manufacturing operations during the second quarter of 2010 resulted in lower unabsorbed fixed overhead costs of $2.1 million for the second quarter of 2010 as compared to $4.5 million in the same period of 2009.
Operating income. Our operating income for the second quarter of 2010 was $26.7 million compared to $15.6 million for the same period of 2009, primarily reflecting the increase in gross margin.
Gross margin. For the first half of 2010, our gross margin was $78.6 million compared to $71.0 million for the first half of 2009, reflecting a slightly higher gross margin percentage relative to net sales. Gross margin as a percent of sales was influenced by the net effects of lower unit cost raw materials and improving production levels, partially offset by lower average selling prices. Increasing production rates throughout our major manufacturing operations during the first half of 2010 resulted in slightly lower unabsorbed fixed overhead costs of $6.2 million as compared to $6.5 million in the same period of 2009. As our production levels continue to reflect increased demand and order backlog, we expect our production capacity utilization rate will continue to improve for the remainder of 2010 as compared to the second half of 2009, which should continue to positively impact our profitability for the remainder of 2010.
Operating income. Our operating income for the first half of 2010 was $50.9 million compared to $42.1 million for the same period of 2009, primarily the result of higher gross margin.
Through prudent management of production rates and costs, as well as conservative capital investment, we continue to maintain positive cash flows and a strong balance sheet, including $186.1 million of cash, borrowing availability under our bank credit agreements of approximately $200 million and no bank debt as of June 30, 2010. We have maintained positive earnings and generated significant operating cash flows during the most severe recession in decades. Through continued focus on improving our production capabilities and managing resources, we believe that we are well-positioned to serve our customers needs both now and into the foreseeable future.
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