RTI International Metals Inc. Reports Operating Results (10-Q)
RMI TITANIUM CO. is a producer of titanium mill and fabricated products for the global market. The Company\'s mill products are processed by RMI\'s customers to provide products for use in the aerospace industry and other industrial markets including most recently golf club manufacturing. The Company\'s fabricated products are used primarily in the aerospace oil and gas geothermal energy production and chemical process industries as well as for a number of other industrial applications. RTI International Metals Inc. has a market cap of $410.82 million; its shares were traded at around $17.77 with a P/E ratio of 28.66 and P/S ratio of 0.67. Highlight of Business Operations: Our net income for the three months ended June 30, 2009 totaled $0.1 million, or $0.01 per diluted share, on sales of $104.4 million, compared with net income totaling $18.6 million, or $0.81 per diluted share, on sales of $159.8 million for the three months ended June 30, 2008. Our net loss for the six months ended June 30, 2009 totaled $(1.3) million, or $(0.06) per diluted share, on sales of $210.4 million, compared with net income of $40.9 million, or $1.76 per diluted share, on sales of $310.5 million for the six months ended June 30, 2008.
Excluding the $2.3 million charge in the current period associated with the U.S. Customs investigation of our previously filed duty drawback claims, gross profit for the Titanium Group decreased $15.1 million compared to the prior year. The decrease in the Titanium Groups gross margin was largely the result of lower sales levels, which reduced gross profit by $5.7 million. In addition, lower average realized selling prices and a lower margin sales mix reduced gross profit by $3.5 million. Higher raw material costs and lower absorption of production overhead due to the lower level of production in the current period reduced gross profit $1.4 million. Furthermore, gross profit at the Titanium Group was unfavorably impacted $0.6 million by reduced sales of Titanium Group-sourced inventory by our Fabrication Group and Distribution Group business.
The decrease in gross profit for the Fabrication Group was driven by several factors, including reduced sales volumes which reduced gross profit by $3.0 million and continued cost overruns related to certain energy market projects which negatively impacted gross profit by $6.0 million. In addition, production execution issues at one of the Fabrication Groups facilities negatively impacted its ability to deliver orders and lower than expected material yields at that same location resulted in higher than expected material costs. These issues, although largely corrected by the end of the current period, reduced gross profit by $3.7 million compared to the prior year. Additionally, ongoing uncertainty and delays in the ramp up of the Boeing 787 Dreamliner® program continue to result in lower utilization and other operational inefficiencies despite significant actions taken to manage costs in line with demand.
The $3.2 million decrease in SG&A was primarily related to a $2.2 million reduction in salary and incentive related expenses, driven by a reduction in expected cash incentive compensation in the current year compared to the prior year. Additionally there was a $0.7 million reduction in pension related expenses and a $0.6 million reduction in professional and consulting expenses. The decreases reflect managements focus on reducing expenses during the current economic downturn while continuing to position the Company for growth in the future.
Excluding the $2.3 million charge in the current period associated with the U.S. Customs investigation of our previously filed duty drawback claims, operating income for the Titanium Group decreased $14.0 million. The decrease was primarily attributable to lower gross profit, largely due to unfavorable volume and lower realized selling prices, which were partially offset by a reduction in SG&A expenses.
Interest Income and Interest Expense. Interest income for the three months ended June 30, 2009 and 2008 was $0.4 million and $0.5 million, respectively. The decrease was principally related to lower returns on invested cash compared to the prior year period. Interest expense was $2.4 and $0.3 million for the three months ended June 30, 2009 and 2008, respectively. The increase in interest expense was primarily attributable to the increase in our long-term debt compared to the prior year as a result of the closing of our $225 million term loan in September 2008.
Read the The complete ReportRTI is in the portfolios of Ronald Muhlenkamp of Muhlenkamp Fund.