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 $548 million; its shares were traded at around $18.82 with a P/E ratio of 30.3 and P/S ratio of 0.9. Highlight of Business Operations: Our net loss for the three months ended September 30, 2009 totaled $(8.7) million, or $(0.35) per diluted share, on sales of $100.2 million, compared with net income totaling $11.3 million, or $0.49 per diluted share, on sales of $150.6 million for the three months ended September 30, 2008. Our net loss for the nine months ended September 30, 2009 totaled $(10.0) million, or $(0.42) per diluted share, on sales of $310.7 million, compared with net income of $52.1 million, or $2.26 per diluted share, on sales of $461.1 million for the nine months ended September 30, 2008.
The decrease in the Titanium Groups gross profit was largely the result of lower sales levels, which reduced gross profit by $4.8 million. In addition, lower average realized selling prices and a lower margin sales mix reduced gross profit by $2.5 million. Higher raw material costs and lower overhead absorption reduced gross profit by $3.4 million. Furthermore, gross profit at the Titanium Group was unfavorably impacted by $1.6 million due to reduced sales of Titanium Group-sourced inventory by our Fabrication Group and Distribution Group business.
The $3.3 million decrease in SG&A was primarily related to a $1.1 million reduction in salary, benefit, 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 $1.2 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 future growth.
Other Income. Other income for the three months ended September 30, 2009 and 2008 was $0.3 million and $0.6 million, respectively. Other income consists primarily of foreign exchange gains and losses from our international operations and fair value adjustments related to our foreign currency forward contracts.
Interest Income and Interest Expense. Interest income for the three months ended September 30, 2009 and 2008 was $0.3 million and $0.8 million, respectively. The decrease was principally related to lower returns on invested cash compared to the prior year period. Interest expense was $7.2 million and $1.0 million for the three months ended September 30, 2009 and 2008, respectively. The increase in interest expense was due to a $4.9 million charge for the termination of our interest rate swap agreements and a $0.8 million write-off of deferred financing fees as a result of the payoff of our $225 million term loan.
Provision for Income Taxes. We recognized a provision for income taxes of $3.9 million, or (82.1)% of pretax income, and $7.0 million, or 38.2% of pretax income, for federal, state, and foreign income taxes for the three months ended September 30, 2009 and 2008, respectively. The quarterly provision represents the reversal of tax benefits provided in previous quarters on previously reported losses and the discrete items of tax related to prior tax years. Discrete items recognized during the current quarter related primarily to normal adjustments associated with filing the 2008 U.S. federal income tax return. Discrete items recognized in the prior year period were not material. The relationship between tax expense and reported results varied year over year primarily as a result of the mix of domestic income and foreign losses benefited at lower rates. The lower level of income amplifies the rate impact of these mix effects in the current period compared to the comparable prior period.
Read the The complete ReportRTI is in the portfolios of Ronald Muhlenkamp of Muhlenkamp Fund.