RTI reports second-quarter net income of $10.2M on net sales of $106.7M

For the six months ended June 30, 2010, RTI reported net sales of $214.5 million, compared with net sales of $210.4 million for the same period a year ago. The Company also reported operating income of $13.8 million and net income of $21.6 million, or $0.72 per diluted share, compared with an operating loss of $2.4 million and a net loss of $1.3 million, or $0.06 per diluted share, for the same period a year ago.

For the three and six month periods ended June 30, 2010, the Company recorded a benefit from income taxes and expects that benefit to reverse in the second half of 2010.

Titanium Group

For the second quarter of 2010, the Titanium Group posted operating income of $1.8 million on sales of $53.8 million, including intersegment sales of $23.3 million. During the same period in 2009, this Group reported operating income of $2.1 million on sales of $62.4 million, including intersegment sales of $35.3 million. Excluding the impact of a $2.3 million charge, related to duty drawback during the second quarter in 2009, operating income declined by $2.6 million compared to the prior year. This decline was driven by lower average realized selling prices due to the continued high proportion of sales under long-term agreements with lower contract pricing versus the comparable period last year. This decrease was partially offset by increased sales of ferro-alloys to the specialty steel industry.

During the first six months of 2010, the Titanium Group posted operating income of $16.8 million on sales of $116.5 million, including intersegment sales of $47.1 million. During the first six months of 2009, operating income was $6.3 million on sales of $126.5 million, including intersegment sales of $69.0 million. The year-over-year increase in sales and operating income was driven primarily by the receipt of the previously disclosed $15.4 million payment by Airbus during the first quarter of 2010.

Mill product shipments for the second quarter were 2.5 million pounds at an average realized price of $19.33 per pound, compared to mill product shipments of 2.7 million pounds in the second quarter of 2009 at an average realized price of $22.23 per pound.

Mill product shipments for the first six months of 2010 were 4.7 million pounds at an average realized price of $19.34 per pound compared to mill product shipments of 5.4 million pounds in 2009 at an average realized price of $22.22 per pound.

Fabrication Group

During the second quarter of 2010, the Fabrication Group posted an operating loss of $0.8 million on net sales of $37.3 million. For the same period in 2009, this Group had an operating loss of $6.4 million on net sales of $26.5 million. The increase in net sales, as well as the decrease in the operating loss, was principally the result of an increase in sales to energy market customers related to the completion of several engineered components in connection with containment efforts associated with the oil spill in the Gulf of Mexico, as well as higher sales of value-added fabricated parts. Partially offsetting the decrease in the operating loss was higher production costs and SG&A expenses associated with the ramp up of the Boeing 787 Pi Box program.

For the first six months of 2010, the Fabrication Group reported net sales of $65.9 million with an operating loss of $6.1 million compared with net sales of $52.6 million resulting in an operating loss of $13.7 million for the same period in the prior year. Included in 2010 net sales is $4.2 million in prefunded nonrecurring engineering funds recorded in the first quarter, related to the Boeing 787 program with a corresponding amount included in cost of sales.

Distribution Group

For the second quarter of 2010, the Distribution Group posted operating income of $1.1 million on net sales of $38.8 million. During the same period in 2009, this Group earned operating income of $2.7 million on net sales of $50.7 million. The decrease in sales and operating income was driven by lower demand from the commercial aerospace market due to continued high levels of titanium inventory in the supply chain, as well as a decrease in average selling prices for certain titanium products.

Year-to-date, the Distribution Group reported net sales of $79.2 million resulting in operating income of $3.0 million, compared with net sales of $100.4 million and operating income of $4.9 million for the same period in the prior year.

CEO Comment

Dawne S. Hickton, Vice Chairman, President, and CEO stated, "Clearly the good news in the quarter was the modification of the long-term agreement with Airbus for titanium mill products, as well as the award of two new fabrication agreements. I am also pleased that we now have visibility to the shipment of approximately 9.0 million pounds of titanium mill products for 2010.

"But near-term, continued caution is warranted. Our results for the first six months were positively impacted by several nonrecurring items including the $15.4 payment by Airbus in the first quarter as well as the substantial amount of work associated with the Gulf of Mexico oil spill containment during the second quarter. However, the amount of titanium inventory in the commercial aerospace supply chain continues to negatively impact spot market demand. And, further, the production schedule for the Joint Strike Fighter program has been pushed out again and thus we expect slightly less volume on this program through 2011.

"Finally, I expect that expenses associated with the ramp up of the Boeing 787 Pi-Box program will mute results in the Fabrication Group over the balance of this year and into 2011. Consequently, in light of the foregoing, as well as the uncertain economic recovery, our overall operating environment will continue to be difficult and challenge RTI's ability to generate meaningful operating income in 2010. However, we are starting to see a sustained recovery into 2011."