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Titanium Metals Corp. Reports Operating Results (10-K)

February 29, 2012 | About:
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10qk

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Titanium Metals Corp. (TIE) filed Annual Report for the period ended 2011-12-31.

Titanium Metals has a market cap of $2.63 billion; its shares were traded at around $14.76 with a P/E ratio of 25.8 and P/S ratio of 3.1. The dividend yield of Titanium Metals stocks is 2%.

Highlight of Business Operations:

Net sales. Our net sales were $1,045.2 million for 2011 compared to net sales of $857.2 million for 2010. The 22% increase in net sales was principally the result of increased volumes, partially offset by lower average selling prices for our mill products during 2011. Product shipment volume increased 18% for melted products and 26% for mill products from 2010 to 2011, reflecting improved demand for certain titanium products within the commercial aerospace sector as manufacturing activity and inventory levels within the supply chain continued to increase and improve demand for certain industrial products. The decrease in average selling prices for mill products is primarily due to relative changes in product mix, with increased sales of industrial products in 2011 which are generally project-oriented and sell at lower prices than more complex aerospace grade products with higher alloy content. Mill product shipments to the industrial market sector were 24% of total mill product sales volume in 2011 compared to 13% during 2010.

Gross margin. For 2011, our gross margin was $223.6 million as compared to $178.8 million for 2010, reflecting higher sales volume and the related favorable impact on per-unit manufacturing cost of increased utilization of our manufacturing capacity, offset by the relative change in product mix discussed above. Increased production volumes throughout our major manufacturing operations during 2011 resulted in $1.2 million of unabsorbed fixed overhead costs in 2011 as compared to $8.8 million in 2010.

Income taxes. Our effective income tax rate was 35% in 2011 compared to 34% in 2010. We operate in multiple tax jurisdictions, and as a result, the geographic mix of our pre-tax income or loss can impact our overall effective tax rate. Our effective rate in 2011 was equal to the U.S. statutory rate primarily due to the offsetting effects of (i) the positive impact of a portion of earnings being generated in lower tax rate jurisdictions, (ii) the negative impact of certain U.K. tax legislation which was enacted in 2011 and (iii) the positive impact of the domestic production activities deduction. Our effective income tax rate in 2010 was lower than the U.S. statutory rate primarily due to the net effects of (i) the positive impact of the domestic production activities deduction and (ii) the negative impact of certain U.K. tax legislation which was enacted in 2010. See Note 13 to our Consolidated Financial Statements for a tabular reconciliation of our statutory income tax expense to our actual tax expense. Some of the more significant items impacting this reconciliation are summarized below.

Net sales. Our net sales were $857.2 million for 2010 compared to net sales of $774.0 million for 2009. The 11% increase in net sales was principally the result of increased volumes, partially offset by lower average selling prices during 2010. Product shipment volume increased 90% for melted products and 12% for mill products from 2009 to 2010, due to improved demand for certain titanium products within the commercial aerospace sector as manufacturing activity and inventory levels within the supply chain continued to recover from the global economic downturn affecting 2009 shipment volumes. Average selling prices decreased 18% for melted products and 4% for mill products from 2009 to 2010, primarily driven by pricing adjustments under long-term customer agreements, lower spot market prices for our products and the relative mix of products sold during the period.

Gross margin. For 2010, our gross margin was $178.8 million as compared to $113.3 million for 2009, primarily reflecting a higher gross margin percentage relative to net sales. Our improved profitability reflects lower cost raw materials, principally titanium sponge and scrap, and the benefit of higher utilization of our production capacity, partially offset by lower average selling prices. Increased production rates throughout our major manufacturing operations during 2010 resulted in lower unabsorbed fixed overhead costs of $8.8 million as compared to $23.4 million in 2009.

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