Defense contracts face scrutiny from U.S. secretary

By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
WEATHERSFIELD -- With millions of dollars in government contracts at stake, officials with RMI Titanium and its parent, RTI International, are waiting expectantly for the release of a U.S. Secretary of Defense budget review.
RMI has long-standing contracts to provide titanium for 339 F-22 fighter planes, said president and chief executive Timothy Rupert, and the company hopes that number will stand up to the scrutiny of Donald H. Rumsfeld, U.S. secretary of defense.
Rumsfeld, who took over the helm of the department with the Bush administration, is conducting a top-to-bottom study of the defense department budget, including the $2.1 billion F-22 fighter project.
Positive signs: While results of the study are still under wraps, Rupert said the Weathersfield-based titanium manufacturer has seen some positive indicators. RMI received new orders last week for some F-22 titanium components, its first since the fighter plane project was put on hold about a year and a half ago.
"We see that as a very good sign," he said, addressing analysts, stockholders and reporters in a telephone press conference Tuesday.
Rupert said insiders don't expect the F-22 project to be canceled because it has strong support in the military, but a reduction in the number of planes is possible.
Key figures: RTI reported second quarter profits of $600,000 on sales of $74.9 million, or 3 cents per share, for its second quarter, compared to profits of $1.2 million, or 5 cents per share, on sales of $63.3 million in the same period a year ago.
The totals exclude $6 million lump-sum settlements the company received both years from the Boeing Co., one of RTI's largest customers. The aircraft maker made the payments in the second quarter of 2000 and the first quarter of 2001 because it failed to purchase the 3.25 million pounds of titanium it promised to buy under a long-term contract.
Reports show RTI's titanium group, which includes RMI in Weathersfield, earned $100,000 on sales of $38.5 million last quarter and increased its product deliveries 25 percent over last quarter to three million pounds.
Profit margin was much better for the fabrication and distribution group, which earned $1.3 million on sales of $36.4 million.
Price-cut: Rupert said RMI has been forced to cut its titanium prices to stay competitive in the past year because of a downturn in the aerospace industry, and that's why its profit was low even though sales were up. "We're very proud of the fact that we even made money at all during this period when all our competitors have been losing money," he said.
The higher profit margins of the fabricating and distribution group are no surprise, he said, because those plants handle a wider variety of value-added metal products and have a wider customer base. RTI added the division several years ago to bring more stability and to help the company to weather the volatility of the titanium market.
Second quarter profits were reduced by about 4 cents per share, Rupert said, because of higher- than-expected start-up expenses at a new RTI extrusion facility in Houston. Tropical Storm Allison caused flooding that forced the company to postpone plans to start operations there, but the opening day will likely be set sometime this quarter.
With headquarters in Weathersfield, RTI employs 1,250, including 595 at RMI Titanium, also based in Weathersfield. It has plants in six states and plants or sales offices in England, Germany, France and Italy.
RTI stock, which trades on the New York Stock Exchange, closed Tuesday at $13.25 a share. Its price over the past 52 weeks has ranged from a low of $11.87 to a high of $17.75.
vinarsky@vindy.com