RTI International Metals Inc. Reports Operating Results (10-Q)
Rti International Metals Inc. has a market cap of $883.7 million; its shares were traded at around $29.38 with a P/E ratio of 979.4 and P/S ratio of 2.2. RTI is in the portfolios of Arnold Schneider of Schneider Capital Management, Stanley Druckenmiller of Duquesne Capital Management, LLC, Chuck Royce of Royce& Associates, Jeremy Grantham of GMO LLC.
Highlight of Business Operations: An increase of 36% in shipments, offset by a 27% decrease in the average realized selling prices of prime mill products to our trade customers, resulted in a $0.2 million reduction in the Titanium Groups net sales. The decrease in average realized selling prices was primarily due to the continued high proportion of sales under long-term agreements with lower contract pricing versus the comparable period in the prior year. Offsetting these impacts was a strengthening in ferro-alloy demand from the specialty steel industry which resulted in a $3.7 million increase in net sales.
Excluding the $2.3 million charge in the prior year period associated with the U.S. Customs investigation of our previously filed duty drawback claims, gross profit for the Titanium Group decreased $5.2 million compared to the prior year. Lower average realized selling prices reduced gross profit by $8.4 million. Further, the Titanium Groups gross profit was unfavorably impacted by $0.3 million due to lower sales of Titanium Group-sourced inventory by our Fabrication and Distribution Group businesses. These decreases were partially offset by a higher margin sales mix which increased gross profit by $3.0 million. Additionally, gross profit at the Titanium Group was favorably impacted $0.7 million due to higher ferro-alloy demand.
The $1.8 million increase in SG&A was primarily related to a $2.8 million increase in salaries and benefits in the current year compared to the prior year, partially offset by a reduction of $0.4 million in professional and consulting expenses. SG&A expense for the three months ended June 30, 2009 included the reversal of $2.2 million of incentive compensation accruals as a result of our decision to eliminate incentive compensation in 2009 in response to the challenging market conditions which existed at the time.
Excluding the $2.3 million charge in the prior year period associated with the U.S. Customs investigation of our previously filed duty drawback claims, operating income decreased $2.6 million for the Titanium Group compared to the prior year. The decrease was primarily attributable to lower gross profit due to lower realized selling prices, partially offset by a reduction in SG&A costs.
Interest Income and Interest Expense. Interest income for the three months ended June 30, 2010 and 2009 was $0.1 million and $0.4 million, respectively. The decrease in interest income was principally related to lower returns on invested cash, as well as lower overall cash balances, compared to the prior year period. Interest expense was $0.3 million and $2.4 million for the three months ended June 30, 2010 and 2009, respectively. The decrease in interest expense was primarily attributable to the decrease in our long-term debt compared to the prior year as a result of the payoff of our $225 million term loan in September 2009.
Inclusive of discrete items, we recognized a benefit from income taxes of $8.1 million, or (372.3)% of pretax income, and $2.8 million, or 104.7% of the pretax loss, for federal, state, and foreign income taxes for the three months ended June 30, 2010 and 2009, respectively. The current year-to-date benefit is expected to reverse in the second half of 2010 based on our most recent forecast. Discrete items recognized during each of the three months periods were immaterial.
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