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

May 05, 2010 | About:

10qk

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Titanium Metals Corp. (TIE) filed Quarterly Report for the period ended 2010-03-31.

Titanium Metals Corp. has a market cap of $2.6 billion; its shares were traded at around $14.49 with a P/E ratio of 72.5 and P/S ratio of 3.4. TIE is in the portfolios of Jim Simons of Renaissance Technologies LLC, Bruce Kovner of Caxton Associates, Jeremy Grantham of GMO LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Net sales. Our net sales were $217.5 million for the first quarter of 2010 compared to net sales of $203.4 million for the first quarter of 2009. The 7% increase in net sales was the result of increased volumes, partially offset by a shift in customer requirements during the quarter toward melted products, as well as moderately lower average selling prices during the first quarter of 2010. Product shipment volume increased 80% for melted products and 16% for mill products from the first quarter of 2009 to the first quarter of 2010, as demand for certain titanium products improved within the commercial aerospace sector. Average selling prices decreased 25% for melted products and 10% for mill products from the first quarter of 2009 to the first quarter of 2010. Factors contributing to the change in average selling prices for melted and mill products during the first quarter of 2010 include lower annual pricing under long-term customer agreements, lower spot market prices and the relative mix of products sold during the period.

Gross margin. For the first quarter of 2010, our gross margin was $37.8 million compared to $39.4 million for the first quarter of 2009, reflecting a lower gross margin percentage relative to net sales. The lower gross margin as a percent of sales resulted from lower average selling prices and the impact of lower utilization of our expanded production capacity in the first quarter of 2010 compared to the first quarter of 2009. Continued efforts to manage production rates and inventories throughout our major manufacturing operations resulted in unabsorbed fixed overhead costs of $4.1 million for the first quarter of 2010 as compared to $2.0 million in the same period of 2009.

Operating activities. Cash flow from operations is a primary source of our liquidity. Changes in pricing, production volume and customer demand, among other things, could significantly affect our liquidity. Cash provided by operating activities increased $26.9 million, from $24.9 million for the first three months of 2009 to $51.8 million for the first three months of 2010. The net effects of the following significant items contributed to the overall increase in cash provided by operating activities:

Investing activities. Cash flows used in our investing activities changed from $5.2 million in the first three months of 2009 to $6.6 million in the first three months of 2010. Our capital expenditures were $8.1 million during the first three months of 2009 and $2.4 million in the same period of 2010. In addition, we entered into an unsecured revolving credit facility with Contran Corporation during 2009, pursuant to which we had net loans of $4.1 million to Contran during the quarter ended March 31, 2010. In April 2010, we amended our unsecured revolving demand credit facility with Contran, increasing the maximum aggregate outstanding principal from $60 million to $90 million. See Note 2 to our Condensed Consolidated Financial Statements.

At March 31, 2010, we had aggregate borrowing availability under our existing U.S and European credit facilities of $200.8 million, and we could borrow all such amounts without violating any covenants of our credit facilities. We had an aggregate of $211.5 million of cash and cash equivalents. Our U.S. credit facility matures in February 2011, and our U.K. credit facilities mature in August 2012. Based upon our expectations of our operating performance, the anticipated demands on our cash resources, the demand feature of the unsecured revolving demand credit facility from Contran with outstanding principal balance of $37.9 million at March 31, 2010, borrowing availability under our existing credit facilities and anticipated borrowing capacity after the maturity of these credit facilities, we expect to have sufficient liquidity to meet our obligations for the short-term (defined as the next twelve-month period) and our long-term obligations.

Capital expenditures. We currently estimate we will invest a total of approximately $35 million to $40 million for capital expenditures during 2010. In response to current economic conditions, our planned capital expenditures are concentrated in areas that allow us to properly maintain and drive efficiencies in the operation of our equipment and facilities. Capital spending for 2010 is expected to be funded by cash flows from operating activities or existing cash resources and available credit facilities.

Read the The complete Report

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