RTI Q1 2002
1st Quarter - 2002
RTI International Metals, Inc.
1st Quarter 2002
To Our Shareholders First quarter earnings of $0.39 per share turned out a lot better than expected. We knew receipt of a payment from Boeing for deliveries not taken in 2001 would contribute $0.21 per share and that appreciation of the Anthem shares received late last year would add another $0.06 per share (details can be found in the first quarter earnings release).
The performance of our operating units is what exceeded our
expectations, particularly the Titanium Group, which generated the remaining $0.12 per share.
Cost reductions contributed greatly to the Titanium Group’s operating income of $4.1 million. Demand from commercial aerospace markets continues to be weak, but facilities were operated at efficient levels by producing orders ahead of their scheduled shipping dates. (The Niles, Ohio, plant will be temporarily idled for three to four weeks in July to accommodate the reduced order flow and reduce expense.) Ongoing lean manufacturing efforts also contributed to the cost reduction efforts during the quarter.
The Fabrication & Distribution Group, particularly our distribution businesses, also experienced reduced business levels due to the weakness in commercial aerospace and tentative spending in a number of their traditional markets. RTI Energy Systems, Inc., on the other hand, worked on several long-term oil and gas projects that were not billed during the quarter, but are expected to be completed in the second half of the year.
RTI International Metals, Inc.
1st Quarter 2002
th
We will be dealing with the aftermath of the September 11 terrorist attacks and the resultant effect on commercial aerospace for the balance of this year and likely into 2003.
However, our people are up to the challenge and we have several growth
prospects working for us, namely military applications and new markets such as deepwater offshore oil & gas exploration.
As always, we appreciate your support and welcome your comments.
Robert M. Hernandez Chairman of the Board May, 2002
Timothy G. Rupert President and Chief Executive Officer
RTI International Metals, Inc.
1st Quarter 2002
Focus on...
TRADCO
Our last two quarterly reports featured articles centered on our goal of product diversification and dedication to being the “Supplier of Choice.” As we continue to provide our customers with “A World of Possibilities,” we once again “Focus on…” our ability to supply a wide variety of options.
Our TRADCO (Titanium Research And Development Company) operation in St. Louis specializes in Super Plastic Forming (SPF) and hot forming titanium alloyed sheet for both commercial and military aerospace applications worldwide.
SPF
and hot forming provide near-net-shape cost-effective components with unique advantages over competing metalworking
SPF C-17 Com ponent
and machining processes. This, along with our
downstream
finishing
capabilities,
allows us to provide products to our customers that reduce their material requirements, as well as their manufacturing costs. TRADCO utilizes input titanium from other RTI companies and processes it to the required specification, thus adding value for our customers and creating synergy within the RTI family of companies.
TRADCO also produces assemblies, sub-assemblies and kits, which enable our customers to maximize procurement efficiencies by providing a wider range of products and services in support of RTI’s goal of being the “Supplier of Choice.”
RTI International Metals, Inc.
Focus on... TRADCO
1st Quarter 2002
continued
TRADCO’s products are used on military aircraft including the F-15, F-16, F-18, F-22, C-17, as well as most other commercial and military aircraft programs. Our emphasis on the utilization of state-of-theart technology and design initiatives will position RTI International Metals for involvement
in
future
developing
programs such as the Airbus - A380; Boeing - Sonic Cruiser; and Lockheed Martin
-
Joint
Strike
Fighter
(JSF)
programs.
RTI is using its growing capabilities and expertise to supply our customers with the materials, products, and services they require, while growing the value of our shareholder’s equity in RTI.
RTI International Metals, Inc.
1st Quarter 2002
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (Dollars in Thousands)
Quarter Ended March 31 2002 2001 Sales ................................................................................................... Operating costs: Cost of sales........................................................................................ Selling, general and administrative expenses .................................... Research, technical and product development expenses.................. Total operating costs................................................................
$
Operating income................................................................................ Other income, net................................................................................ Interest expense .................................................................................. Income before income taxes............................................................... Provision for income taxes ................................................................. Income before cumulative effect of change in accounting principle ... Cumulative effect of change in accounting principle .......................... Net income ..........................................................................................
65,678
$
66,239
51,882 9,060 360 61,302
56,728 8,349 362 65,439
4,376
800
$
8,936 (147) 13,165 5,134 8,031 -8,031 $
6,049 (210) 6,639 2,581 4,058 (191) 3,867
Income before cumulative effect of change in accounting principle: Basic ..............................................................................................
$
0.39
$
0.19
Diluted............................................................................................
$
0.38
$
0.19
Net income: Basic ..............................................................................................
$
0.39
$
0.19
Diluted............................................................................................
$
0.38
$
0.18
Earnings per common share
Weighted average shares used to compute earnings per share: Basic ..............................................................................................
20,767,586
20,890,835
Diluted............................................................................................
20,898,346
21,184,026
RTI International Metals, Inc.
1st Quarter 2002
CONSOLIDATED BALANCE SHEET (Dollars in Thousands)
March 31, December 31,
2002 (Unaudited)
2001
Assets Assets: Cash and cash equivalents ................................................................. Receivables--less allowance for doubtful accounts of $1,413 and $1,219......................................................................... Inventories, net .................................................................................... Deferred income taxes ........................................................................ Other current assets ............................................................................ Total current assets ....................................................................... Property, plant and equipment, net ..................................................... Goodwill............................................................................................... Other noncurrent assets...................................................................... Total assets.................................................................................
$ 14,182
$
8,036
58,900 166,243 8,096 6,061 253,482 96,124 34,133 17,284 $401,023
50,572 158,561 7,418 13,136 237,723 98,375 34,133 17,520 $387,751
Liabilities and Shareholders' Equity Liabilities: Accounts payable ................................................................................ Accrued wages and other employee costs ......................................... Other accrued liabilities ....................................................................... Total current liabilities .................................................................... Long-term debt .......................................................................................... Accrued postretirement benefit cost ......................................................... Deferred income taxes .............................................................................. Accrued pension cost................................................................................ Other noncurrent liabilities ........................................................................ Total liabilities.................................................................................
$ 18,038 7,749 24,021 49,808 -19,940 1,296 10,681 5,294 87,019
$ 17,799 7,494 11,173 36,466 -19,940 1,296 17,787 5,287 80,776
Shareholders' equity: Common stock, $0.01 par value, 50,000,000 shares authorized; 21,087,454 and 21,035,454 shares issued; 20,782,604 and 20,730,604 shares outstanding................................. Additional paid-in capital...................................................................... Deferred compensation ....................................................................... Treasury stock, at cost; 304,850 shares ............................................. Accumulated other comprehensive (loss) ........................................... Retained earnings ............................................................................... Total shareholders' equity......................................................................... Total liabilities and shareholders' equity ........................................
211 210 242,075 241,579 (2,517) (2,278) (2,612) (2,612) (8,677) (7,417) 85,524 77,493 314,004 306,975 $401,023 $387,751
RTI International Metals, Inc.
1st Quarter 2002
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (Dollars in Thousands)
Three Months Ended March 31 2002 2001 Cash flows from operating activities: Net income ................................................................................................ Adjustment for items not affecting funds from operations: Depreciation and amortization............................................................. Deferred income taxes ........................................................................ Stock-based compensation and other.................................................
8,031
$3,867
3,143 (678) 1,000
3,230 -266
Changes in assets and liabilities (excluding cash): Receivables ......................................................................................... Inventories ........................................................................................... Accounts payable ................................................................................ Other current liabilities......................................................................... Other assets and liabilities................................................................... Cash provided by operating activities ......................................
(8,522) (7,682) 239 13,103 (1,042) 7,592
(6,083) 3,383 (3,261) 6,447 762 8,611
Cash flows from investing activities: Capital expenditures ............................................................................ Cash used in investing activities ..............................................
(1,464) (1,464)
(2,351) (2,351)
18 --18 6,146 8,036 $ 14,182
190 (6,800) (42) (6,652) (392) 6,374 $5,982
$ $
79 365
$ 374 $ 192
$ $
479 --
$ 544 $ --
Cash flows from financing activities: Exercise of employee stock options.................................................... Net borrowings and repayments under revolving credit agreement ... Purchase of common stock held in treasury ....................................... Cash provided by (used in) financing activities ........................ Increase (decrease) in cash and cash equivalents ............................. Cash and cash equivalents at beginning of period............................. Cash and cash equivalents at end of period ....................................... Supplemental cash flow information: Cash paid for interest, net of amounts capitalized .............................. Cash paid for income taxes ................................................................. Noncash financing activities: Issuance of common stock for restricted stock awards ...................... Capital lease obligations incurred .......................................................
$
RTI International Metals, Inc.
1st Quarter 2002
SEGMENT REPORTING (Unaudited) (Dollars in Thousands)
The Company's reportable segments are the Titanium Group and the Fabrication and Distribution Group. Segment information for the three-month periods ended March 31, 2002 and 2001 is as follows: Quarter Ended March 31 2002 2001 Net sales: Titanium Trade .................................................................................... Intersegment......................................................................... Fabrication and distribution Trade .................................................................................... Intersegment.........................................................................
$ 28,345 14,207 42,552
$26,602 13,690 40,292
Other operations ........................................................................ Adjustments and eliminations .................................................... Total net sales.................................................................
33,888 36,139 375 43 34,263 36,182 3,445 3,498 (14,582) (13,733) $ 65,678 $66,239
Operating income: Titanium ..................................................................................... Fabrication and distribution........................................................ Other operations ........................................................................ Total operating income.........................................................
$ 4,032 229 115 4,376
Reconciliation of operating income to reported income before taxes: Other income--net................................................................. Interest expense ................................................................... Reported income before taxes........................................
8,936 6,049 (147) (210) $ 13,165 $ 6,639
$
(503) 1,129 174 800
RTI International Metals, Inc.
1st Quarter 2002
To Our Shareholders First quarter earnings of $0.39 per share turned out a lot better than expected. We knew receipt of a payment from Boeing for deliveries not taken in 2001 would contribute $0.21 per share and that appreciation of the Anthem shares received late last year would add another $0.06 per share (details can be found in the first quarter earnings release).
The performance of our operating units is what exceeded our
expectations, particularly the Titanium Group, which generated the remaining $0.12 per share.
Cost reductions contributed greatly to the Titanium Group’s operating income of $4.1 million. Demand from commercial aerospace markets continues to be weak, but facilities were operated at efficient levels by producing orders ahead of their scheduled shipping dates. (The Niles, Ohio, plant will be temporarily idled for three to four weeks in July to accommodate the reduced order flow and reduce expense.) Ongoing lean manufacturing efforts also contributed to the cost reduction efforts during the quarter.
The Fabrication & Distribution Group, particularly our distribution businesses, also experienced reduced business levels due to the weakness in commercial aerospace and tentative spending in a number of their traditional markets. RTI Energy Systems, Inc., on the other hand, worked on several long-term oil and gas projects that were not billed during the quarter, but are expected to be completed in the second half of the year.
RTI International Metals, Inc.
1st Quarter 2002
th
We will be dealing with the aftermath of the September 11 terrorist attacks and the resultant effect on commercial aerospace for the balance of this year and likely into 2003.
However, our people are up to the challenge and we have several growth
prospects working for us, namely military applications and new markets such as deepwater offshore oil & gas exploration.
As always, we appreciate your support and welcome your comments.
Robert M. Hernandez Chairman of the Board May, 2002
Timothy G. Rupert President and Chief Executive Officer
RTI International Metals, Inc.
1st Quarter 2002
Focus on...
TRADCO
Our last two quarterly reports featured articles centered on our goal of product diversification and dedication to being the “Supplier of Choice.” As we continue to provide our customers with “A World of Possibilities,” we once again “Focus on…” our ability to supply a wide variety of options.
Our TRADCO (Titanium Research And Development Company) operation in St. Louis specializes in Super Plastic Forming (SPF) and hot forming titanium alloyed sheet for both commercial and military aerospace applications worldwide.
SPF
and hot forming provide near-net-shape cost-effective components with unique advantages over competing metalworking
SPF C-17 Com ponent
and machining processes. This, along with our
downstream
finishing
capabilities,
allows us to provide products to our customers that reduce their material requirements, as well as their manufacturing costs. TRADCO utilizes input titanium from other RTI companies and processes it to the required specification, thus adding value for our customers and creating synergy within the RTI family of companies.
TRADCO also produces assemblies, sub-assemblies and kits, which enable our customers to maximize procurement efficiencies by providing a wider range of products and services in support of RTI’s goal of being the “Supplier of Choice.”
RTI International Metals, Inc.
Focus on... TRADCO
1st Quarter 2002
continued
TRADCO’s products are used on military aircraft including the F-15, F-16, F-18, F-22, C-17, as well as most other commercial and military aircraft programs. Our emphasis on the utilization of state-of-theart technology and design initiatives will position RTI International Metals for involvement
in
future
developing
programs such as the Airbus - A380; Boeing - Sonic Cruiser; and Lockheed Martin
-
Joint
Strike
Fighter
(JSF)
programs.
RTI is using its growing capabilities and expertise to supply our customers with the materials, products, and services they require, while growing the value of our shareholder’s equity in RTI.
RTI International Metals, Inc.
1st Quarter 2002
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (Dollars in Thousands)
Quarter Ended March 31 2002 2001 Sales ................................................................................................... Operating costs: Cost of sales........................................................................................ Selling, general and administrative expenses .................................... Research, technical and product development expenses.................. Total operating costs................................................................
$
Operating income................................................................................ Other income, net................................................................................ Interest expense .................................................................................. Income before income taxes............................................................... Provision for income taxes ................................................................. Income before cumulative effect of change in accounting principle ... Cumulative effect of change in accounting principle .......................... Net income ..........................................................................................
65,678
$
66,239
51,882 9,060 360 61,302
56,728 8,349 362 65,439
4,376
800
$
8,936 (147) 13,165 5,134 8,031 -8,031 $
6,049 (210) 6,639 2,581 4,058 (191) 3,867
Income before cumulative effect of change in accounting principle: Basic ..............................................................................................
$
0.39
$
0.19
Diluted............................................................................................
$
0.38
$
0.19
Net income: Basic ..............................................................................................
$
0.39
$
0.19
Diluted............................................................................................
$
0.38
$
0.18
Earnings per common share
Weighted average shares used to compute earnings per share: Basic ..............................................................................................
20,767,586
20,890,835
Diluted............................................................................................
20,898,346
21,184,026
RTI International Metals, Inc.
1st Quarter 2002
CONSOLIDATED BALANCE SHEET (Dollars in Thousands)
March 31, December 31,
2002 (Unaudited)
2001
Assets Assets: Cash and cash equivalents ................................................................. Receivables--less allowance for doubtful accounts of $1,413 and $1,219......................................................................... Inventories, net .................................................................................... Deferred income taxes ........................................................................ Other current assets ............................................................................ Total current assets ....................................................................... Property, plant and equipment, net ..................................................... Goodwill............................................................................................... Other noncurrent assets...................................................................... Total assets.................................................................................
$ 14,182
$
8,036
58,900 166,243 8,096 6,061 253,482 96,124 34,133 17,284 $401,023
50,572 158,561 7,418 13,136 237,723 98,375 34,133 17,520 $387,751
Liabilities and Shareholders' Equity Liabilities: Accounts payable ................................................................................ Accrued wages and other employee costs ......................................... Other accrued liabilities ....................................................................... Total current liabilities .................................................................... Long-term debt .......................................................................................... Accrued postretirement benefit cost ......................................................... Deferred income taxes .............................................................................. Accrued pension cost................................................................................ Other noncurrent liabilities ........................................................................ Total liabilities.................................................................................
$ 18,038 7,749 24,021 49,808 -19,940 1,296 10,681 5,294 87,019
$ 17,799 7,494 11,173 36,466 -19,940 1,296 17,787 5,287 80,776
Shareholders' equity: Common stock, $0.01 par value, 50,000,000 shares authorized; 21,087,454 and 21,035,454 shares issued; 20,782,604 and 20,730,604 shares outstanding................................. Additional paid-in capital...................................................................... Deferred compensation ....................................................................... Treasury stock, at cost; 304,850 shares ............................................. Accumulated other comprehensive (loss) ........................................... Retained earnings ............................................................................... Total shareholders' equity......................................................................... Total liabilities and shareholders' equity ........................................
211 210 242,075 241,579 (2,517) (2,278) (2,612) (2,612) (8,677) (7,417) 85,524 77,493 314,004 306,975 $401,023 $387,751
RTI International Metals, Inc.
1st Quarter 2002
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (Dollars in Thousands)
Three Months Ended March 31 2002 2001 Cash flows from operating activities: Net income ................................................................................................ Adjustment for items not affecting funds from operations: Depreciation and amortization............................................................. Deferred income taxes ........................................................................ Stock-based compensation and other.................................................
8,031
$3,867
3,143 (678) 1,000
3,230 -266
Changes in assets and liabilities (excluding cash): Receivables ......................................................................................... Inventories ........................................................................................... Accounts payable ................................................................................ Other current liabilities......................................................................... Other assets and liabilities................................................................... Cash provided by operating activities ......................................
(8,522) (7,682) 239 13,103 (1,042) 7,592
(6,083) 3,383 (3,261) 6,447 762 8,611
Cash flows from investing activities: Capital expenditures ............................................................................ Cash used in investing activities ..............................................
(1,464) (1,464)
(2,351) (2,351)
18 --18 6,146 8,036 $ 14,182
190 (6,800) (42) (6,652) (392) 6,374 $5,982
$ $
79 365
$ 374 $ 192
$ $
479 --
$ 544 $ --
Cash flows from financing activities: Exercise of employee stock options.................................................... Net borrowings and repayments under revolving credit agreement ... Purchase of common stock held in treasury ....................................... Cash provided by (used in) financing activities ........................ Increase (decrease) in cash and cash equivalents ............................. Cash and cash equivalents at beginning of period............................. Cash and cash equivalents at end of period ....................................... Supplemental cash flow information: Cash paid for interest, net of amounts capitalized .............................. Cash paid for income taxes ................................................................. Noncash financing activities: Issuance of common stock for restricted stock awards ...................... Capital lease obligations incurred .......................................................
$
RTI International Metals, Inc.
1st Quarter 2002
SEGMENT REPORTING (Unaudited) (Dollars in Thousands)
The Company's reportable segments are the Titanium Group and the Fabrication and Distribution Group. Segment information for the three-month periods ended March 31, 2002 and 2001 is as follows: Quarter Ended March 31 2002 2001 Net sales: Titanium Trade .................................................................................... Intersegment......................................................................... Fabrication and distribution Trade .................................................................................... Intersegment.........................................................................
$ 28,345 14,207 42,552
$26,602 13,690 40,292
Other operations ........................................................................ Adjustments and eliminations .................................................... Total net sales.................................................................
33,888 36,139 375 43 34,263 36,182 3,445 3,498 (14,582) (13,733) $ 65,678 $66,239
Operating income: Titanium ..................................................................................... Fabrication and distribution........................................................ Other operations ........................................................................ Total operating income.........................................................
$ 4,032 229 115 4,376
Reconciliation of operating income to reported income before taxes: Other income--net................................................................. Interest expense ................................................................... Reported income before taxes........................................
8,936 6,049 (147) (210) $ 13,165 $ 6,639
$
(503) 1,129 174 800
