Titanium

Speaking of commodities, this press release from one of what I consider a strategically critical commodity, titanium, makes interesting reading in relation to the present state of the economy.

DALLAS, TEXAS . . . February 28, 2008 . . . Titanium Metals Corporation ("TIMET" or the "Company") (TIE) reported net income attributable to common stockholders of $59.4 million, or $0.33 per diluted share, for the quarter ended December 31, 2007, compared to $110.6 million, or $0.61 per diluted share, for the quarter ended December 31, 2006. Net income attributable to common stockholders for the year ended December 31, 2007 was $263.1 million or $1.46 per diluted share, compared to $274.5 million or $1.53 per diluted share for the year ended December 31, 2006.
The Company's net sales were $298.6 million during the fourth quarter of 2007 compared to $323.5 million during the fourth quarter of 2006. Net sales for 2007 compared to 2006 increased 8% to $1.3 billion, due primarily to increased average selling prices, which more than offset an overall decline in aggregate sales volumes. The Company believes uncertainty regarding the build-out schedule for certain new generation commercial aircraft such as the Boeing 787 DreamlinerTM and Airbus A380 has contributed to short-term volatility in the overall market demand for both melted and mill products as adjustments are made at various levels in the aircraft supply chain.
Operating income for the fourth quarter of 2007 was $56.6 million compared to $109.5 million during the same period in 2006, and operating income for 2007 was $372.0 million compared to $382.8 million during 2006. Operating income was affected by increases in certain raw material costs, including titanium sponge and scrap. Over the past year, increases in global titanium sponge capacity and increased use of titanium in the manufacture of components and products have resulted in the increased availability of titanium sponge and scrap. As a result, the Company's cost of purchased titanium sponge and scrap has been declining during the latter part of 2007, and it is anticipated that this trend will continue into 2008. Operating income comparisons were also impacted by the December 2006 sale of the Company's interest in the VALTIMET joint venture, which contributed equity in earnings of $3.0 million in the fourth quarter of 2006 and $14.1 million for the full year of 2006 prior to the sale, as well as the Company's previous announcement during the fourth quarter of 2007 that it decided to indefinitely delay the construction of a new VDP sponge plant. The Company's design and engineering efforts for a new sponge facility have been substantially completed, providing the Company with the ability to have such a facility operational within approximately two years of commencement of construction. Although the design and engineering efforts provide the Company with additional flexibility and opportunity to consider alternative sponge supply options in the future, the indefinite delay requires the Company to expense $6.0 million of project costs previously capitalized ($0.02 per diluted share, net of income tax benefit).
The Company's results in the fourth quarter of 2007 include an $18.3 million non-operating gain ($0.10 per diluted share) related to the sale of its minority common stock ownership position in CompX International, Inc. The Company's results in the fourth quarter of 2006 include a $40.9 million non-operating gain ($0.24 per diluted share, including a net income tax benefit of $3.9 million) related to the sale of its minority interest in VALTIMET. TIMET utilized a portion of its capital loss carryforward, the benefit of which had previously not been recognized, to completely offset the current income taxes generated from both sales.
The Company's sales order backlog has remained strong at $1.0 billion at the end of December 2007 compared to $1.1 billion at the end of December 2006.
Steven L. Watson, Vice Chairman and Chief Executive Officer, said, "We achieved record levels of net sales in 2007, reflecting strong demand for titanium metal across all major market sectors. These results were largely driven by higher average selling prices for both melted and mill products as well as changes in product mix. We continue to pursue our strategic plans that focus on anticipated long-term favorable trends in demand by expanding our productive capacity with a focus on opportunities to improve our operating flexibility, efficiency and cost structure. In particular, we continue to expand our operating capabilities in the demanding aerospace industry segment in order to enhance our ability to meet our current and prospective customers' needs and strengthen our position as a reliable supplier in markets where technical ability and precision are critical. These efforts include strategic initiatives to assure we have the necessary availability of raw materials, melt capacity and mill product processing capabilities. While the recently announced delays of initial deliveries of the Boeing 787 DreamlinerTM commercial aircraft may contribute to short-term volatility in the overall market demand for our products as adjustments are made at various levels in the aircraft supply chain, we expect long-term industry-wide demand trends will continue to be favorable.