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

November 05, 2009 | About:
10qk

10qk

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Titanium Metals Corp. (TIE) filed Quarterly Report for the period ended 2009-09-30.

Titanium Metals Corporation is an integrated producers of titanium sponge melted and mill products. They are the only integrated producer with major titanium production facilities in both the United States and Europe. Titanium Metals Corp. has a market cap of $1.62 billion; its shares were traded at around $8.95 with a P/E ratio of 16.6 and P/S ratio of 1.4.

Highlight of Business Operations:

Net sales. Our net sales were $181.4 million for the third quarter of 2009 compared to net sales of $295.4 million for the third quarter of 2008. The 39% decrease in net sales was principally the result of reduced volumes and, to a lesser extent, lower average selling prices in the third quarter of 2009 compared to the same period in 2008. Product shipment volumes decreased 39% for melted products and 31% for mill products from the third quarter of 2008 to the third quarter of 2009, as overall titanium demand remains low due to the weak global economy and production delays within the commercial aerospace sector. Additionally, as a result of these production delays, we believe many of our customers have implemented strategies to reduce excess inventories and to maximize operating cash flows. Average selling prices decreased 20% for melted products and 6% for mill products over these same periods due to competitive pricing pressures resulting from lower demand for titanium products and a decline in raw material costs, primarily titanium scrap. The decline in raw material costs has contributed to lower selling prices for certain products under long-term customer agreements, in part due to raw material indexed pricing adjustments included in certain of these agreements.

Gross margin. For the third quarter of 2009, our gross margin was $17.7 million as compared to $72.9 million for the third quarter of 2008, primarily reflecting the effects of lower volumes and average selling prices for our melted and mill products. Due to low utilization of our production capacity, the favorable impacts on our gross margin from declining raw material costs, primarily titanium scrap, were largely offset by higher per-unit overhead costs. In addition, abnormally low production throughout our major manufacturing operations resulted in unabsorbed overhead of $9.4 million for the third quarter of 2009.

Operating income. Our operating income for the third quarter of 2009 was $3.5 million compared to $52.9 million for the same period of 2008, primarily reflecting the decline in gross margin.

Net sales. Our net sales were $590.5 million for the first nine months of 2009 compared to net sales of $886.3 million for the first nine months of 2008. The 33% decrease in net sales was principally the result of reduced volumes and, to a lesser extent, lower average selling prices in the first nine months of 2009 compared to the same period in 2008. Product shipment volumes decreased 37% for melted products and 22% for mill products from the first nine months of 2008 to the same period of 2009, as overall titanium demand remains low due to the weak global economy and production delays within the commercial aerospace sector. Additionally, as a result of these production delays, we believe many of our customers have implemented strategies to reduce excess inventories and to maximize operating cash flows. Average selling prices decreased 14% for melted products and 11% for mill products over these same periods due to competitive pricing pressures resulting from lower demand for titanium products and a decline in raw material costs, primarily titanium scrap. The decline in raw material costs has contributed to lower selling prices for certain products under long-term customer agreements, in part due to raw material indexed pricing adjustments included in certain of these agreements.

Gross margin. For the first nine months of 2009, our gross margin was $88.7 million as compared to $238.3 million for the first nine months of 2008, primarily reflecting the effects of lower volumes and average selling prices for our melted and mill products. Due to low utilization of our production capacity, the favorable impacts on ou

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