RTI’s Q2 Earnings Miss, Profit Slumps

Titanium mill products maker RTI International (RTI) reported earnings of 5 cents per share from continuing operations in second-quarter 2013, down from 15 cents a share recorded a year ago. The results fell shy of the Zacks Consensus Estimate by 9 cents. Profit from continuing operations plummeted roughly 70% year over year to $1.4 million, hurt by higher interest expense.

Interest expense shot up nearly five-fold year over year to $20.7 million. It includes a pre-tax charge of $13.7 million on early extinguishment of long-term convertible debt.

Revenues climbed 18% year over year to $215.8 million, ahead of the Zacks Consensus Estimate of $187 million. Sales include the impact of the change in RTI International’s contract accounting revenue recognition policy, which resulted in roughly $18.2 million increase in net sales.

Titanium mill product shipments were 4.1 million pounds at an average realized price of $19.57 per pound in the reported quarter versus 4.3 million pounds at an average realized price of $19.00 per pound logged a year ago. Boeing 787 seat track deliveries reached seven ship sets per month run rate at the end of the quarter. RTI International ended the quarter with an estimated backlog of roughly $560 million.

Following a change in reporting structure, RTI International now has two reporting segments – Titanium Segment (combining the former Titanium and Distribution Groups) and the Engineered Products and Services Segment (the former Fabrication Group).

Revenues from the Titanium Segment slipped roughly 11% year over year to $85.1 million in the reported quarter as lower prime mill product shipments and lower sales to European commercial aerospace customers more than offset higher selling prices. Lower shipments to non-titanium specialty metals market also contributed to the fall.

The Engineered Products and Services Segment had sales of $130.7 million in the quarter, a roughly 50% year over year surge. Barring the impact of the change in the company’s contract accounting revenue recognition policy, the increase in revenues was due to higher volumes across commercial aerospace, energy and defense markets.

RTI International had cash and cash equivalents of $231.4 million as of Jun 30, 2013, more than double compared with $99.5 million a year ago.

RTI International has backed its earlier announced guidance for 2013 based on its results for the first half and expectations for improved profitability from its core operating activities in the back half of the year. The company continues to see total mill product shipments reaching 16.5 million pounds and sales approaching or surpassing $775 million in 2013. Operating income for the year is expected in the range of $65 million to $75 million.

RTI International continues to reinforce its position as an advanced titanium engineering, precision machining and fabrication source of supply. The company and United Technologies Corp.’s (UTX) unit Pratt & Whitney, in Jun 2013, signed a 13-year agreement, under which, RTI International will supply rotor-quality titanium mill products for the latter’s PurePower family of Geared Turbofan jet engines.

Moreover, RTI International signed a long-term contract with Bombardier Aerospace (Bombardier) to supply precision machined components and assemblies for different Bombardier aircraft models.

RTI International, which is among the prominent specialty steel companies along with Carpenter Technology Corp. (CRS) and Allegheny Technologies Inc. (ATI), currently carries a Zacks Rank #3 (Hold).