RTI Q1 2004
RTI International Metals, Inc.
1st Quarter 2004
To Our Shareholders RTI earned $0.13 per share in the first quarter on sales of $54 million. However, profitability did not come from operations. During the quarter the Company received its final payment under a 5-year take-or-pay contract with Boeing which contributed $0.28 per share. Operating results continued to reflect weak demand from commercial aerospace markets. The Titanium Group lost $4.1 million, most of which came from the Group’s Niles, Ohio plant where management employees operated the facility after hourly workers declined a new contract in October of 2003. To date, the work stoppage has not been an impediment to operational utilization or the booking of new orders. In fact, during the quarter, shipments of mill products increased slightly to 1.5 million pounds. The Fabrication and Distribution Group also had a loss of $0.9 million, despite a good performance by the Group’s domestic distribution businesses. There continues to be talk among industry insiders of signs of improving conditions in commercial aerospace, but evidence is not yet in hand. Airbus and Boeing have announced increased build rates and titanium order backlogs have increased some, but profitability within the airline industry remains elusive. Without profits, carriers cannot buy new planes. After the long drought in this market, everyone is eager for positive signs, but a measure of caution also seems appropriate.
Robert M. Hernandez Chairman of the Board July, 2004
Timothy G. Rupert President and Chief Executive Officer
RTI International Metals, Inc.
1st Quarter 2004
Focus on...
China
RTI International Metals opened a new office in Guangzhou, China, last year in order to increase our participation in a part of the world that is currently experiencing dramatic economic growth and development. It is this new effort that we “Focus on…” in this quarterly report to investors.
The opportunities for titanium mill products and business relationships in China and the Pacific Rim are as vast as the geography they cover. RTI’s office opened in September 2003, and during these past nine months, we have established numerous contacts and potential customers throughout the entire region. The Chinese titanium market has experienced rapid growth since 2000, due to the internal domestic needs for power plants, chemical facilities, and numerous other corrosion related applications as they continue to develop their infrastructure. Demand from China’s aerospace industries is also expanding, which bodes well for titanium alloys. In addition, the consumer markets continue to grow, requiring titanium in everything from bicycles to golf clubs, eyeglasses, pots and pans for cooking, jewelry, watches, medical implants, and architectural applications.
China, like the rest of the world, is an extremely competitive environment. Although RTI’s established presence on the ground is new, we have a long recognized history of providing products and services to that part of the world. Adding an RTI location in China has further established our commitment to working in and with the industries of that vast country. We hope that through our presence there, our customers will come to know RTI even better.
RTI International Metals, Inc.
1st Quarter 2004
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (Dollars in Thousands)
Quarter Ended March 31, 2004 2003 Sales ..................................................................... $ Operating costs: Cost of sales ......................................................... Selling, general and administrative expenses ....... Research, technical and product development expenses............................................................. Total operating costs ........................................ Operating (loss).....................................................
54,112
$
58,532
50,351 8,566
52,135 7,631
287 59,204 (5,092)
387 60,153 (1,621)
Other income ........................................................ Interest expense.................................................... Income before income taxes ................................. Provision for income taxes ................................... Net income ............................................................ $
9,318 (3) 4,223 1,448 2,775
$
8,777 (168) 6,988 2,655 4,333
Earnings per common share Basic ................................................................... $ Diluted ................................................................. $
0.13 0.13
$ $
0.21 0.21
Weighted average shares used to compute earnings per share: Basic ................................................................... 21,106,372 Diluted ................................................................. 21,452,858
20,811,856 20,902,590
RTI International Metals, Inc.
1st Quarter 2004
CONSOLIDATED BALANCE SHEET (Dollars in Thousands)
Assets Assets: Cash and cash equivalents ............................. Receivables—less allowance for doubtful accounts of $1,537 and $1,378……………… Inventories, net ............................................... Deferred income taxes .................................... Other current assets ........................................ Total current assets ...................................... Property, plant and equipment, net.................. Goodwill........................................................... Noncurrent deferred income tax asset............. Intangible pension asset.................................. Other noncurrent assets .................................. Total assets ..................................................
March 31, 2004 (Unaudited)
Dec. 31, 2003 (Audited)
$ 71,234
$ 67,970
33,574 145,886 5,182 4,056 259,932 84,369 34,133 3,907 3,186 564 $386,091
30,855 153,497 5,251 3,284 260,857 85,505 34,133 5,616 3,186 637 $389,934
Liabilities and Shareholders' Equity Liabilities: Accounts payable ............................................ $ 10,715 Accrued wages and other employee costs ...... 5,302 Billings in excess of costs and estimated revenues ....................................................... 5,798 Income taxes payable...................................... 73 Other accrued liabilities ................................... 1,593 Total current liabilities................................... 23,481 Long-term debt ................................................ — Accrued postretirement benefit cost ................ 20,617 Accrued pension cost ...................................... 13,129 Other noncurrent liabilities............................... 6,182 Total liabilities ............................................... 63,409 Commitments and contingencies Shareholders' equity: Common stock, $0.01 par value, 50,000,000 shares authorized; 21,598,414 and 21,337,002 shares issued; 21,177,698 and 20,934,663 shares outstanding……………... 216 Additional paid-in capital.................................. 248,281 Deferred compensation ................................... (2,898) Treasury stock, at cost; 421,614 and 402,339 shares........................................................... (3,906) Accumulated other comprehensive loss .......... (19,118) Retained earnings ........................................... 100,107 Total shareholders' equity............................. 322,682 Total liabilities and shareholders' equity ..... $386,091
$ 14,008 5,568 7,502 4,759 1,492 33,329 — 20,428 12,445 6,072 72,274
213 244,860 (2,009) (3,618) (19,118) 97,332 317,660 $389,934
RTI International Metals, Inc.
1st Quarter 2004
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (Dollars in Thousands)
Three Months Ended March 31, 2004 2003
Cash flows from operating activities: Net income.......................................................... $ 2,775 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization ........................ 2,987 Deferred income taxes .................................... 1,778 Stock-based compensation and other............. 324
$ 4,333 3,057 — 306
Changes in assets and liabilities (excluding cash): Receivables ...................................................... (2,886) Inventories ........................................................ 7,611 Accounts payable.............................................. (3,293) Other current liabilities ...................................... (6,390) Other assets and liabilities ................................ 116 Cash provided by operating activities ............ 3,022
(3,417) 4,284 (2,557) 962 668 7,636
Cash flows from investing activities: Capital expenditures ......................................... (1,858) Cash used in investing activities .................... (1,858)
(1,255) (1,255)
Cash flows from financing activities: Proceeds from exercise of employee stock options. ........................................................... Purchase of common stock held in treasury ..... Cash provided by (used in) financing activities ...................................................... Increase 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...............................
2,388 (288)
6 (224)
2,100 3,264
(218) 6,163
67,970 $71,234
40,666 $46,829
$ 99 $ 4,027
$ 101 $ 2,554
Non-cash financing activities: Issuance of common stock for restricted stock awards ........................................................... $ 1,036 Capital lease obligations incurred ..................... $ —
$ $
769 6
RTI International Metals, Inc.
1st Quarter 2004
SEGMENT REPORTING (Unaudited) (Dollars in Thousands)
Quarter Ended March 31, 2004 2003
Total sales Titanium Group ................................................ $37,718 Fabrication & Distribution Group...................... 45,110 Total.............................................................. 82,828
$32,742 46,049 78,791
Inter and intra segment sales Titanium Group ................................................ 24,618 Fabrication & Distribution Group...................... 4,098 Total.............................................................. 28,716
18,507 1,752 20,259
Total sales to external customers Titanium Group ................................................ 13,100 Fabrication & Distribution Group...................... 41,012 Total.............................................................. $54,112
14,235 44,297 $58,532
Operating (loss) income Allocated corporate items included in segment operating income below: Titanium Group ................................................ Fabrication & Distribution Group...................... Total.............................................................. Titanium Group ................................................ Fabrication & Distribution Group...................... Total..............................................................
$ (759) (1,617) $(2,376) $(4,145) (947) (5,092)
$ (735) $(1,605) $(2,340) $(3,375) 1,754 (1,621)
Income (loss) before income taxes Allocated corporate items included in segment income before income taxes below: Titanium Group ................................................ Fabrication & Distribution Group...................... Total.............................................................. Titanium Group ................................................ Fabrication & Distribution Group...................... Total..............................................................
$ 9,118 257 $ 9,375 $ 5,152 (929) $ 4,223
$ 8,308 $ (129) $ 8,179 $ 5,502 1,486 $ 6,988
###
1st Quarter 2004
To Our Shareholders RTI earned $0.13 per share in the first quarter on sales of $54 million. However, profitability did not come from operations. During the quarter the Company received its final payment under a 5-year take-or-pay contract with Boeing which contributed $0.28 per share. Operating results continued to reflect weak demand from commercial aerospace markets. The Titanium Group lost $4.1 million, most of which came from the Group’s Niles, Ohio plant where management employees operated the facility after hourly workers declined a new contract in October of 2003. To date, the work stoppage has not been an impediment to operational utilization or the booking of new orders. In fact, during the quarter, shipments of mill products increased slightly to 1.5 million pounds. The Fabrication and Distribution Group also had a loss of $0.9 million, despite a good performance by the Group’s domestic distribution businesses. There continues to be talk among industry insiders of signs of improving conditions in commercial aerospace, but evidence is not yet in hand. Airbus and Boeing have announced increased build rates and titanium order backlogs have increased some, but profitability within the airline industry remains elusive. Without profits, carriers cannot buy new planes. After the long drought in this market, everyone is eager for positive signs, but a measure of caution also seems appropriate.
Robert M. Hernandez Chairman of the Board July, 2004
Timothy G. Rupert President and Chief Executive Officer
RTI International Metals, Inc.
1st Quarter 2004
Focus on...
China
RTI International Metals opened a new office in Guangzhou, China, last year in order to increase our participation in a part of the world that is currently experiencing dramatic economic growth and development. It is this new effort that we “Focus on…” in this quarterly report to investors.
The opportunities for titanium mill products and business relationships in China and the Pacific Rim are as vast as the geography they cover. RTI’s office opened in September 2003, and during these past nine months, we have established numerous contacts and potential customers throughout the entire region. The Chinese titanium market has experienced rapid growth since 2000, due to the internal domestic needs for power plants, chemical facilities, and numerous other corrosion related applications as they continue to develop their infrastructure. Demand from China’s aerospace industries is also expanding, which bodes well for titanium alloys. In addition, the consumer markets continue to grow, requiring titanium in everything from bicycles to golf clubs, eyeglasses, pots and pans for cooking, jewelry, watches, medical implants, and architectural applications.
China, like the rest of the world, is an extremely competitive environment. Although RTI’s established presence on the ground is new, we have a long recognized history of providing products and services to that part of the world. Adding an RTI location in China has further established our commitment to working in and with the industries of that vast country. We hope that through our presence there, our customers will come to know RTI even better.
RTI International Metals, Inc.
1st Quarter 2004
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (Dollars in Thousands)
Quarter Ended March 31, 2004 2003 Sales ..................................................................... $ Operating costs: Cost of sales ......................................................... Selling, general and administrative expenses ....... Research, technical and product development expenses............................................................. Total operating costs ........................................ Operating (loss).....................................................
54,112
$
58,532
50,351 8,566
52,135 7,631
287 59,204 (5,092)
387 60,153 (1,621)
Other income ........................................................ Interest expense.................................................... Income before income taxes ................................. Provision for income taxes ................................... Net income ............................................................ $
9,318 (3) 4,223 1,448 2,775
$
8,777 (168) 6,988 2,655 4,333
Earnings per common share Basic ................................................................... $ Diluted ................................................................. $
0.13 0.13
$ $
0.21 0.21
Weighted average shares used to compute earnings per share: Basic ................................................................... 21,106,372 Diluted ................................................................. 21,452,858
20,811,856 20,902,590
RTI International Metals, Inc.
1st Quarter 2004
CONSOLIDATED BALANCE SHEET (Dollars in Thousands)
Assets Assets: Cash and cash equivalents ............................. Receivables—less allowance for doubtful accounts of $1,537 and $1,378……………… Inventories, net ............................................... Deferred income taxes .................................... Other current assets ........................................ Total current assets ...................................... Property, plant and equipment, net.................. Goodwill........................................................... Noncurrent deferred income tax asset............. Intangible pension asset.................................. Other noncurrent assets .................................. Total assets ..................................................
March 31, 2004 (Unaudited)
Dec. 31, 2003 (Audited)
$ 71,234
$ 67,970
33,574 145,886 5,182 4,056 259,932 84,369 34,133 3,907 3,186 564 $386,091
30,855 153,497 5,251 3,284 260,857 85,505 34,133 5,616 3,186 637 $389,934
Liabilities and Shareholders' Equity Liabilities: Accounts payable ............................................ $ 10,715 Accrued wages and other employee costs ...... 5,302 Billings in excess of costs and estimated revenues ....................................................... 5,798 Income taxes payable...................................... 73 Other accrued liabilities ................................... 1,593 Total current liabilities................................... 23,481 Long-term debt ................................................ — Accrued postretirement benefit cost ................ 20,617 Accrued pension cost ...................................... 13,129 Other noncurrent liabilities............................... 6,182 Total liabilities ............................................... 63,409 Commitments and contingencies Shareholders' equity: Common stock, $0.01 par value, 50,000,000 shares authorized; 21,598,414 and 21,337,002 shares issued; 21,177,698 and 20,934,663 shares outstanding……………... 216 Additional paid-in capital.................................. 248,281 Deferred compensation ................................... (2,898) Treasury stock, at cost; 421,614 and 402,339 shares........................................................... (3,906) Accumulated other comprehensive loss .......... (19,118) Retained earnings ........................................... 100,107 Total shareholders' equity............................. 322,682 Total liabilities and shareholders' equity ..... $386,091
$ 14,008 5,568 7,502 4,759 1,492 33,329 — 20,428 12,445 6,072 72,274
213 244,860 (2,009) (3,618) (19,118) 97,332 317,660 $389,934
RTI International Metals, Inc.
1st Quarter 2004
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (Dollars in Thousands)
Three Months Ended March 31, 2004 2003
Cash flows from operating activities: Net income.......................................................... $ 2,775 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization ........................ 2,987 Deferred income taxes .................................... 1,778 Stock-based compensation and other............. 324
$ 4,333 3,057 — 306
Changes in assets and liabilities (excluding cash): Receivables ...................................................... (2,886) Inventories ........................................................ 7,611 Accounts payable.............................................. (3,293) Other current liabilities ...................................... (6,390) Other assets and liabilities ................................ 116 Cash provided by operating activities ............ 3,022
(3,417) 4,284 (2,557) 962 668 7,636
Cash flows from investing activities: Capital expenditures ......................................... (1,858) Cash used in investing activities .................... (1,858)
(1,255) (1,255)
Cash flows from financing activities: Proceeds from exercise of employee stock options. ........................................................... Purchase of common stock held in treasury ..... Cash provided by (used in) financing activities ...................................................... Increase 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...............................
2,388 (288)
6 (224)
2,100 3,264
(218) 6,163
67,970 $71,234
40,666 $46,829
$ 99 $ 4,027
$ 101 $ 2,554
Non-cash financing activities: Issuance of common stock for restricted stock awards ........................................................... $ 1,036 Capital lease obligations incurred ..................... $ —
$ $
769 6
RTI International Metals, Inc.
1st Quarter 2004
SEGMENT REPORTING (Unaudited) (Dollars in Thousands)
Quarter Ended March 31, 2004 2003
Total sales Titanium Group ................................................ $37,718 Fabrication & Distribution Group...................... 45,110 Total.............................................................. 82,828
$32,742 46,049 78,791
Inter and intra segment sales Titanium Group ................................................ 24,618 Fabrication & Distribution Group...................... 4,098 Total.............................................................. 28,716
18,507 1,752 20,259
Total sales to external customers Titanium Group ................................................ 13,100 Fabrication & Distribution Group...................... 41,012 Total.............................................................. $54,112
14,235 44,297 $58,532
Operating (loss) income Allocated corporate items included in segment operating income below: Titanium Group ................................................ Fabrication & Distribution Group...................... Total.............................................................. Titanium Group ................................................ Fabrication & Distribution Group...................... Total..............................................................
$ (759) (1,617) $(2,376) $(4,145) (947) (5,092)
$ (735) $(1,605) $(2,340) $(3,375) 1,754 (1,621)
Income (loss) before income taxes Allocated corporate items included in segment income before income taxes below: Titanium Group ................................................ Fabrication & Distribution Group...................... Total.............................................................. Titanium Group ................................................ Fabrication & Distribution Group...................... Total..............................................................
$ 9,118 257 $ 9,375 $ 5,152 (929) $ 4,223
$ 8,308 $ (129) $ 8,179 $ 5,502 1,486 $ 6,988
###
