Fourth Quarter 2014 Results from Continuing
Operations
- Sales were $1.05 billion
- Segment operating profit was $67.0
million, or 6.4% of sales
- Income attributable to ATI was $19.9
million, or $0.18 per share
- $25.5 million of postretirement
benefit curtailment and settlement gains
- $17.7 million of HRPF commissioning
and Rowley PQ qualification costs
- HRPF product commissioning
completed
- Backlog is $1.7 billion
- Cash on hand at year end 2014 was
$270 million
Full Year 2014 Results from Continuing Operations
- Sales were $4.22 billion
- Loss attributable to ATI was $2.0
million, or $(0.02) per share
- $63.1 million of HRPF commissioning
and Rowley PQ qualification costs
Allegheny Technologies Incorporated (NYSE: ATI) reported fourth
quarter 2014 sales of $1.05 billion and income from continuing
operations attributable to ATI of $19.9 million, or $0.18 per
share. Fourth quarter 2014 results include $25.5 million of pre-tax
curtailment and settlement gains from postretirement benefit
changes, and $17.7 million of pre-tax Hot-Rolling and Processing
Facility (HRPF) start-up costs and costs related to the Rowley
titanium sponge facility Premium Quality (PQ) qualification
process. Fourth quarter 2014 pre-tax results also included net
inventory valuation reserve benefits of $13.2 million. Net loss
from continuing operations attributable to ATI for the fourth
quarter 2013 was $83.8 million, or $(0.79) per share, including
restructuring charges and inventory valuation adjustments of $75.1
million net of tax, or $(0.71) per share.
For the full year 2014, ATI reported a loss from continuing
operations attributable to ATI of $2.0 million, or $(0.02) per
share, on $4.22 billion in sales. Full year 2014 results were
impacted by $63.1 million of HRPF start-up costs and costs related
to the Rowley titanium sponge facility PQ qualification process.
Full year 2013 results from continuing operations were a loss of
$98.8 million, or $(0.93) per share including the $75.1 million, or
($0.71) per share, fourth quarter restructuring charges and
inventory valuation adjustments.
“We achieved several milestones during the fourth quarter that
better position ATI to transition to a period of sustained
profitable growth,” said Rich Harshman, Chairman, President and
Chief Executive Officer. “The HRPF commissioning was completed for
essentially all ATI flat rolled products; our Rowley, UT titanium
sponge facility achieved approval as a PQ titanium sponge supplier
for jet engines; and we secured several long-term agreements (LTAs)
providing significant growth on next-generation and legacy
single-aisle jet engines.
“During the fourth quarter, we booked additional orders for a
large oil & gas project that uses our nickel-based alloy plate.
We received a large share of this project due to the quality of our
nickel-based alloy plate that is enabled by the 2008 upgrade of our
plate mill. Shipments began in the fourth quarter 2014 and are
expected to continue through the first half of 2015.”
- ATI’s sales to the key global markets
of aerospace and defense, oil & gas/chemical process industry,
electrical energy, and medical represented 67% of ATI sales for
2014:
- Sales to the aerospace and defense
markets were $1.45 billion and represented 34% of ATI sales: 16%
jet engine, 11% airframe, 7% defense.
- Sales to the oil and gas/chemical
process industry market were $752 million and represented 18% of
ATI sales: 10% oil & gas, 8% chemical process industry.
- Sales to the electrical energy market
were $430 million and represented 10% of ATI sales.
- Sales to the medical market were $211
million and represented 5% of ATI sales.
- Direct international sales were $1.61
billion and represented 38% of ATI 2014 sales.
High-value product sales represented approximately 77% of ATI’s
2014 sales. Sales of nickel-based alloys and specialty alloys
represented 26% of 2014 sales. Sales of our titanium products,
including Uniti joint venture conversion, represented 15% of 2014
sales. Total titanium product shipments, including flat-rolled
titanium products, were 8.7 million pounds in the fourth quarter
2014, bringing the total 2014 shipments to 37.0 million pounds.
Sales of precision forgings, castings and components represented
approximately 13% of 2014 sales. Sales of flat rolled Precision
Rolled Strip® products and engineered strip products represented
13% of 2014 ATI sales.
“Sales in our High Performance Materials & Components
segment were $501 million, and segment operating profit improved to
$73.4 million, or 14.7% of sales, in the fourth quarter 2014,”
continued Rich Harshman. “Segment operating results included a net
$2.4 million inventory valuation reserve benefit. Sales improved
for our nickel-based alloy mill products and for our forgings,
castings, and components compared to the third quarter. Our
titanium investment castings business had another record year.
Segment results continued to be negatively impacted by low
operating rates at our Rowley titanium sponge facility and by low
operating rates at our forgings operations due to push-outs in the
aeroengine market for certain programs.
“Flat Rolled Products segment sales were $547 million and
segment operating results were a loss of $6.4 million. HRPF
start-up expenses were $10.1 million in the fourth quarter 2014.
Volatile raw material prices resulted in a fourth quarter LIFO
inventory valuation reserve benefit of $10.8 million. For the full
year 2014, Flat Rolled Products segment results include a $40.2
million LIFO inventory valuation reserve charge, compared to a
$30.5 million LIFO benefit for the full year 2013. Segment results
for the fourth quarter were also impacted by $6.3 million of costs
related to the PQ qualification process at the Rowley titanium
sponge facility.
2014 Major
Accomplishments
“Throughout 2014 we focused on improving our market position and
completing our strategic investments to enhance ATI’s position as a
leading global specialty materials and components producer. These
actions are aimed at improving our future performance and
positioning ATI to benefit from long-term growth opportunities. A
few of our major strategic accomplishments during 2014 include:
- We successfully reached several
long-term agreements (LTAs) with strategic aerospace customers
during 2014 and early 2015 valued at over $4 billion. These
agreements secure significant growth on next-generation and legacy
airplanes and are enabled by the capital investments, acquisitions,
and technology innovations we have made during the past several
years.
- Commissioning of our Flat Rolled
Products segment Hot-Rolling and Processing Facility (HRPF) was
completed at the end of 2014. The HRPF is a critical part of our
strategy to transform our flat rolled products business into a more
competitive and consistently profitable business. It is designed to
significantly expand our product offering capabilities, shorten
manufacturing cycle times, reduce inventory requirements, and
improve the cost structure of our flat rolled products business. We
expect to realize the sales growth and cost reduction benefits as
we increase production volume during 2015. We plan to idle the
legacy equipment at the end of the first quarter 2015. We expect
fourth quarter 2015 operating profit to benefit at an annualized
run rate of $150 million, compared to 2014, which includes the
elimination of startup costs.
- Our Rowley, UT titanium sponge facility
was approved as a premium-quality (PQ) aero-engine supplier in
December 2014. The PQ qualification process for our products used
in jet engine rotating parts made with our sponge is expected to be
completed by mid-2015. We continue to achieve improvements in key
operational areas and expect to steadily increase production rates,
and realize lower titanium production costs per pound, as we
progress through 2015.
- We acquired two businesses for $92.9
million to expand our value-added capabilities to provide
components and near-net shape parts. ATI Flowform Products adds
precision flowforming process technologies to ATI’s capabilities.
ATI Cast Products Salem Operations adds precision machining
capability.
- We made several significant changes to
our retirement benefit programs. These changes are part of ATI’s
ongoing initiatives to create an integrated and aligned business
with a market competitive, cost competitive, and consistent health,
welfare and retirement benefit structure across our operations. As
a result of these changes, which are expected to gradually improve
our ability to control our retirement benefit obligations, we
expect to incur lower retirement benefit expense in future
years.
- We paid down $414.9 million of debt,
including $397.5 million paid at maturity on our 2014 convertible
notes, and payments on debt assumed in the 2011 Ladish
acquisition.
- We maintained a solid liquidity
position, with approximately $270 million in cash on hand and no
borrowings outstanding under our $400 million domestic borrowing
facility at the end of the year. Total debt to total capital was
37.1% at December 31, 2014, compared to 40.2% at the end of 2013.
We have no significant debt maturities for the next four
years.
- Capital expenditures in 2014, the
majority of which related to the HRPF, were approximately $226
million. This amount was lower than our 2014 estimate of $250
million because some HRPF payments are now scheduled to be made in
2015. We are near the end of a multi-year cycle of capital
expenditures on major strategic investments.
Strategy and Outlook
“ATI is positioned to begin a period of sustained profitable
growth and free cash flow. Our extraordinary capital expenditure
cycle is nearly behind us, with the HRPF in commercial operation
and our PQ titanium sponge facility nearly fully qualified. We have
LTAs in place that secure significant growth for ATI on legacy and
next-generation airplanes and the jet engines that power them.
Volume from these agreements is expected to provide significant
profitable growth and improved capacity utilization in our mill
product, forging, and titanium investment casting facilities,
particularly from 2016 through 2018, and into the next decade.
“In our High Performance Materials & Components segment, we
are seeing signs that demand for our products is becoming aligned
with the airframe and jet engine build rates as destocking runs its
course. We expect PQ titanium sponge qualification costs to impact
first half 2015 operating profit and costs attributable to
production inefficiencies to impact the second half 2015 until
optimum utilization levels are achieved.
“In our Flat Rolled Products segment, we expect improved volume
and a better product mix in 2015, as we begin to realize the full
range of capabilities of the HRPF. Start-up costs of approximately
$5 million are expected to be incurred through the first quarter
2015 as we transition to full production and idle the existing
legacy hot-rolling assets. First half demand for our specialty
plate products is strong, driven by our backlog of nickel-based
alloy plate for a large oil & gas project.
“We currently expect 2015 pre-tax retirement benefit expense to
be about $78 million, or approximately $18 million lower than 2014,
excluding the 2014 $25.5 million pre-tax postretirement benefit
curtailment and settlement gains. Most of the 2015 pension expense
is expected to be non-cash.
“We currently expect 2015 capital expenditures to be
approximately $290 million, approximately 50% of which is primarily
related to the completion of payments associated with the HRPF
project. Depreciation and amortization expense in 2015 is
forecasted to be approximately $196 million.”
Fourth Quarter and Full Year 2014
Financial Results
Three Months Ended Year Ended December
31 December 31 In Millions 2014
2013
2014
2013 Sales from continuing operations $
1,047.5 $ 915.3
$
4,223.4
$ 4,043.5
Amounts attributable to ATI common stockholders:
Income (loss) from continuing operations attributable to ATI (a)
$
19.9
$
(83.8
)
$
(2.0
)
$
(98.8
)
Income (loss) from discontinued operations attributable to ATI (b)
2.2
257.2
(0.6
)
252.8
Net income (loss) attributable to ATI $ 22.1 $ 173.4
$
(2.6
) $ 154.0
Per Diluted Share Diluted net income
(loss) per common share: (c) Continuing operations attributable
to ATI per common share (a)
$
0.18
$
(0.79
)
$
(0.02
)
$
(0.93
)
Discontinued operations attributable to ATI per common share (b)
0.02
2.41
(0.01
)
2.37
Net income (loss) attributable to ATI per common share
$
0.20
$
1.62
$
(0.03
)
$
1.44
(a) 2013 results from continuing operations include a $75.1
million after-tax charge, or $(0.71) per share, in the fourth
quarter 2013 for restructuring charges. (b) 2013 results from
discontinued operations include a $261.4 million after-tax gain on
the sale of the tungsten materials business in the fourth quarter
2013. The fourth quarter 2013 and full year 2013 results include
after-tax charges of $6.1 million, or $(0.06) per share, and $11.9
million, or $(0.11) per share, respectively, primarily related to
asset impairment charges. (c) Diluted net income (loss) per common
share for the full year 2014, and for the fourth quarter and full
year 2013 do not include the effect of dilutive securities.
- Sales for the fourth quarter
2014 were $1.05 billion, 2% lower than the third quarter 2014,
but 14% higher than the fourth quarter of 2013. Compared to the
third quarter 2014, sales decreased 1% in the High Performance
Materials & Components segment, primarily due to lower sales of
titanium and titanium alloys. Flat Rolled Products segment sales
decreased 3% compared to the third quarter 2014 due to lower
shipments and lower selling prices of standard products.
- Sales for the full year 2014
increased 4% to $4.22 billion, compared to $4.04 billion for 2013.
Direct international sales were $1.6 billion and represented 38% of
total sales, compared to 39% for 2013. Compared to the full year
2013, sales increased 3% in the High Performance Materials &
Components segment and 6% in the Flat Rolled Products segment.
- Fourth quarter 2014 segment
operating profit was $67.0 million, or 6.4% of sales, and
included $23.2 million of LIFO inventory valuation reserve
benefits, which were partially offset by $10.0 million of net
realizable value inventory reserve charges, and $17.7 million of
HRPF commissioning and Rowley PQ qualification costs. Segment
operating results for the fourth quarter 2013 were a loss of $10.9
million, or (1.2%) of sales, including $41.8 million of LIFO
inventory valuation reserve benefits, offset by $55.5 million of
net realizable value and lower of cost or market inventory reserve
charges.
- Full year 2014 segment operating
profit was $246.3 million, or 5.8% of sales, including $63.1
million of HRPF commissioning and Rowley PQ qualification costs,
compared to $164.4 million, or 4.1% of sales, including
restructuring and inventory valuation charges in 2013.
- Pre-tax income from continuing
operations was $26.8 million for the fourth quarter 2014,
compared to a loss of $140.8 million in the fourth quarter 2013.
Results in 2013 included $67.5 million of restructuring charges,
primarily related to long-lived asset impairment charges, facility
closures, and related severance and termination benefit charges.
Additionally, fourth quarter 2013 pre-tax results included $55.5
million of inventory valuation reserve charges.
- Income from continuing operations
attributable to ATI for the fourth quarter 2014 was
$19.9 million, or $0.18 per share, compared to a loss of $83.8
million, or $(0.79) per share, for the fourth quarter 2013, which
included restructuring and inventory valuation charges of $75.1
million net of tax, or $(0.71) per share.
- Full year 2014 income (loss) from
continuing operations attributable to ATI was a loss of $2.0
million, or $(0.02) per share, compared to full year 2013 loss of
$98.8 million, or $(0.93) per share, including restructuring and
inventory valuation charges of $75.1 million, or $(0.71) per
share.
- Cash flow provided by
operations was $94.1 million in the fourth quarter 2014 and
$55.9 million for the full year 2014.
- Cash on hand at the end of 2014
was $269.5 million, a $757.3 million decrease from year-end 2013.
The majority of this decrease ($414.9 million) was used to pay down
debt.
High Performance Materials & Components Segment
Market Conditions
- Demand remained flat in the fourth
quarter 2014 for many of our products compared to the third quarter
2014. Mill product shipments of our nickel-based and specialty
alloys increased 7%. Shipments of our titanium and titanium alloys
declined 22%, primarily due to higher-than-normal ingot shipments
in the third quarter 2014. Shipments of zirconium and related
alloys declined 12%. Sales of precision forgings and castings
increased 5% compared to the third quarter 2014. Sales in the
fourth quarter 2014 to the aerospace market, the segment’s largest
end market, were flat compared to the third quarter 2014. Direct
international sales represented over 41% of total segment sales for
2014.
Fourth quarter 2014 compared to fourth quarter 2013
- Sales increased 15% to $500.6 million
compared to the fourth quarter 2013, primarily as a result of
higher mill product shipments and an increase in sales of precision
forgings, castings and components due to improved demand from the
jet engine, construction and mining, electrical energy, and oil and
gas markets. In addition, raw material surcharges were modestly
higher compared to the prior year period.
- Segment operating profit increased to
$73.4 million, or 14.7% of sales. This compares to $17.1 million,
or 3.9% of total sales, in the fourth quarter 2013, which includes
$35.0 million of 2013 LIFO-related net realizable value charges.
Improved segment operating profit excluding the effects of
inventory charges was primarily as a result of higher shipments.
Fourth quarter 2014 segment operating profit included a LIFO
inventory valuation reserve benefit of $12.4 million, which was
mostly offset by a $10.0 million net realizable value inventory
reserve charge, as the carrying value of our inventory as valued on
the LIFO inventory accounting method exceeded current replacement
cost. Fourth quarter 2013 segment operating profit included a LIFO
inventory valuation reserve benefit of $26.1 million, which was
partially offset by higher costs for raw materials, primarily
nickel, resulting from the misalignment of the raw material
surcharge with raw material costs due to the long manufacturing
cycle of certain products.
- Due to deflationary impacts primarily
related to zirconium products in 2014, and titanium products in
2013, the carrying value of our inventory as valued on the LIFO
inventory accounting method exceeded replacement cost, requiring
net realizable value reserves of $10.0 million and $35.0 million in
the fourth quarters 2014 and 2013, respectively. Segment results in
both periods were also impacted by the strategic decision to use
ATI-produced titanium sponge rather than lower cost titanium scrap
to manufacture certain titanium products.
- Results benefited from $22.8 million of
gross cost reductions in the fourth quarter 2014, bringing the full
year 2014 gross cost reductions in this segment to $75.1
million.
Flat Rolled Products Segment
Market Conditions
- Demand was lower compared to the third
quarter 2014 from the automotive, and food equipment and appliances
markets, mostly due to year-end inventory management actions by
customers. Demand improved in the oil & gas market following a
weak third quarter. Compared to the third quarter 2014, shipments
were flat for high-value products, which include titanium,
nickel-based alloys, Precision Rolled Strip® products, and
grain-oriented electrical steel products. Shipments for standard
stainless (sheet and plate) products were 4% lower. Fourth quarter
2014 Flat Rolled Products segment titanium shipments, including
Uniti joint venture conversion, were 2.4 million pounds, a 13%
increase compared to the third quarter 2014, due to improved demand
from global industrial markets. Flat Rolled Products segment
shipment information is presented in the attached Selected
Financial Data – Mill Products table.
Fourth quarter 2014 compared to fourth quarter 2013
- Sales were $546.9 million, 14% higher
than the prior year period, primarily due to higher raw material
surcharges and improved base prices for most products. Shipments of
high-value products increased 7% compared to the fourth quarter
2013, led by increased shipments of nickel-based alloys. Shipments
of standard stainless products decreased 6%. Average selling prices
improved 19% for standard stainless products and 8% for high-value
products.
- Segment operating results were a loss
of $6.4 million, or (1.2%) of total sales, compared to a 2013
segment operating loss of $28.0 million, or (5.9%) of sales, which
included $20.5 million of 2013 inventory charges related to the
market-based valuation of industrial titanium products. The fourth
quarter 2014 included a LIFO inventory valuation reserve benefit of
$10.8 million, compared to a LIFO inventory valuation reserve
benefit of $15.7 million for the fourth quarter 2013. Segment
results were also impacted by $10.1 million of costs related to the
HRPF commissioning as well as costs associated with the PQ
qualification process related to the Rowley titanium sponge
facility.
- Results benefited from $12.6 million in
gross cost reductions in the fourth quarter 2014, bringing the full
year 2014 gross cost reductions in this segment to $65.1
million.
Other Expenses
- Interest expense, net of interest
income and capitalized interest, for the fourth quarter 2014 was
$25.9 million, compared to $18.7 million in the fourth quarter
2013. The increase in interest expense was primarily due to reduced
capitalized interest, partially offset by lower debt following
maturity of the $402.5 million convertible notes in June 2014.
- Capitalized interest on major strategic
capital projects reduced interest expense by $0.8 million and $12.7
million for the 2014 and 2013 fourth quarters, respectively. Full
year 2014 and 2013 capitalized interest was $5.4 million and $45.7
million, respectively. Capitalized interest for all periods
primarily related to the HRPF project.
- Closed company and other expenses for
the fourth quarter 2014 totaled $4.4 million, compared to $3.2
million in the prior year period, and $21.2 million for the full
year 2014, compared to $14.2 million for the 2013 annual period.
Higher costs in 2014 primarily related to environmental and
insurance obligations of closed operations.
Changes to Retirement Benefit Programs
and Retirement Benefit Expense
ATI previously announced several significant changes to certain
pension and other postretirement benefit programs effective in 2015
and future periods, including a defined benefit pension freeze and
the elimination of Company-provided postretirement life insurance
and medical coverage. These changes are part of ATI’s ongoing
initiatives to create an integrated and aligned business with a
more consistent health, welfare and retirement benefit structure
across its operations.
The changes to postretirement benefits resulted in $25.5 million
of pre-tax curtailment and settlement gains in the fourth quarter
2014. Also, as a result of these pension and other postretirement
benefit plan changes, ATI expects to recognize lower retirement
benefit expense (defined benefit pension expense and other
postretirement benefit expenses; costs associated with defined
contribution plans are included in segment operating profit or
corporate expenses, as applicable) in 2015 and future periods.
- Fourth quarter 2014 retirement benefit
income of $1.1 million includes the previously mentioned $25.5
million of curtailment and settlement gains. Excluding these gains,
retirement benefit expense of $24.4 million was consistent with
other quarters of 2014. Retirement benefit expense was $29.8
million in the fourth quarter 2013, which included a $5 million
reduction in expense due to the remeasurement of pension expense
following the sale of the tungsten materials business.
Additionally, retirement benefit expense for the fourth quarter
2013 as presented excludes $6.1 million of termination benefits,
which are included in restructuring charges.
- Excluding the curtailment and
settlement gains, approximately 85% of 2014 retirement benefit
expense is included in cost of sales, with the remainder included
in selling and administrative expenses.
- We currently expect pre-tax retirement
benefit expense, which includes defined benefit pension expense and
defined benefit and defined contribution other postretirement
benefit expense, of approximately $78 million in 2015 compared to
$96.2 million in 2014 excluding the 2014 impact of the
postretirement benefit curtailment and settlement gains.
- Pension expense is expected to be
approximately $38 million in 2015 compared to pension expense of
$55.9 million in 2014. We expect most of the 2015 pension expense
to be non-cash. A longer amortization period for net actuarial
losses and lower service cost as a result of the pension freeze
will more than offset the higher expense impacts of a lower
discount rate used to value pension obligations, increased
longevity estimates and lower returns on plan assets. At December
31, 2014, our U.S. qualified defined benefit plan was approximately
76% funded, as measured for financial reporting purposes. We are
not required to make any contribution to this plan for 2015.
- Other postretirement benefit expense is
expected to be $40 million in 2015, which is unchanged from 2014,
as the reduction in expense from benefit changes will be offset by
the use of a lower discount rate to value postretirement benefit
obligations.
Income Taxes
- The fourth quarter 2014 provision for
income taxes on continuing operations was $3.7 million, and was
reduced by $3.8 million of discrete tax benefits, primarily related
to prior years’ taxes. Excluding these items, the fourth quarter
effective tax rate was 28.0%. The fourth quarter 2013 benefit for
income taxes on continuing operations was $59.2 million, or 42.0%
of the pre-tax loss.
Allegheny Technologies will conduct a conference call with
investors and analysts on Tuesday, January 20, 2015, at 8:30 a.m.
ET to discuss the financial results. The conference call will be
broadcast, and accompanying presentation slides will be available,
at www.ATImetals.com. To access the broadcast, click on “Conference
Call”. Replay of the conference call will be available on the
Allegheny Technologies website.
This news release contains “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995. Certain statements in this news release relate to future
events and expectations and, as such, constitute forward-looking
statements. Forward-looking statements include those containing
such words as “anticipates,” “believes,” “estimates,” “expects,”
“would,” “should,” “will,” “will likely result,” “forecast,”
“outlook,” “projects,” and similar expressions. Forward-looking
statements are based on management’s current expectations and
include known and unknown risks, uncertainties and other factors,
many of which we are unable to predict or control, that may cause
our actual results, performance or achievements to differ
materially from those expressed or implied in the forward-looking
statements. Important factors that could cause actual results to
differ materially from those in the forward-looking statements
include: (a) material adverse changes in economic or industry
conditions generally, including global supply and demand conditions
and prices for our specialty materials; (b) material adverse
changes in the markets we serve, including the aerospace and
defense, electrical energy, oil and gas/chemical process industry,
medical, automotive, construction and mining, and other markets;
(c) our inability to achieve the level of cost savings,
productivity improvements, synergies, growth or other benefits
anticipated by management from strategic investments and the
integration of acquired businesses, whether due to significant
increases in energy, raw materials or employee benefits costs,
project cost overruns or unanticipated costs and expenses, or other
factors; (d) volatility of prices and availability of supply
of the raw materials that are critical to the manufacture of our
products; (e) declines in the value of our defined benefit pension
plan assets or unfavorable changes in laws or regulations that
govern pension plan funding; (f) significant legal proceedings
or investigations adverse to us; and (g) other risk factors
summarized in our Annual Report on Form 10-K for the year ended
December 31, 2013, and in other reports filed with the Securities
and Exchange Commission. We assume no duty to update our
forward-looking statements.
Building the World’s Best Specialty Materials
Company™
Allegheny Technologies Incorporated is one of the largest and
most diversified specialty materials and components producers in
the world with revenues of approximately $4.2 billion in 2014. ATI
has approximately 9,700 full-time employees world-wide who use
innovative technologies to offer global markets a wide range of
specialty materials solutions. Our major markets are aerospace and
defense, oil and gas/chemical process industry, electrical energy,
medical, automotive, food equipment and appliance, and construction
and mining. The ATI website is www.ATImetals.com.
Allegheny Technologies Incorporated and
Subsidiaries
Consolidated Statements of Operations (Unaudited, dollars in
millions, except per share amounts)
Three Months Ended Fiscal
Year Ended December 31 September 30 December
31 December 31 December 31 2014
2014 2013 2014 2013 Sales
$ 1,047.5 $ 1,069.6 $
915.3 $ 4,223.4 $ 4,043.5 Costs
and expenses: Cost of sales 925.6 972.6 904.0 3,844.8 3,790.9
Selling and administrative expenses 70.4 68.7 66.3 272.5 276.4
Restructuring costs - - 67.5
- 67.5 Income (loss) before
interest, other income and income taxes 51.5 28.3 (122.5 ) 106.1
(91.3 ) Interest expense, net (25.9 ) (25.2 ) (18.7 ) (108.7 )
(65.2 ) Other income, net 1.2 1.0
0.4 4.1 1.7 Income (loss)
from continuing operations before income taxes 26.8 4.1 (140.8 )
1.5 (154.8 ) Income tax provision (benefit) 3.7
0.5 (59.2 ) (8.7 ) (63.6 )
Income (loss) from continuing operations 23.1
3.6 (81.6 ) 10.2 (91.2 )
Income (loss) from discontinued operations, net of tax 2.2
(0.7 ) 257.2 (0.6 ) 252.8
Net income $ 25.3 $ 2.9
$ 175.6 $ 9.6 $ 161.6
Less: Net income attributable to noncontrolling interests
3.2 3.6 2.2 12.2
7.6
Net income (loss) attributable to ATI
$ 22.1 $ (0.7 ) $
173.4 $ (2.6 ) $
154.0 Basic net income (loss) per common
share Continuing operations attributable to ATI per common
share $ 0.18 $ - $
(0.79 ) $ (0.02 ) $
(0.93 ) Discontinued operations attributable to ATI
per common share 0.02 (0.01 ) 2.41
(0.01 ) 2.37
Basic net income (loss)
attributable to ATI per common share $ 0.20
$ (0.01 ) $ 1.62
$ (0.03 ) $ 1.44
Diluted net income (loss) per common share Continuing
operations attributable to ATI per common share $
0.18 $ - $ (0.79 )
$ (0.02 ) $ (0.93 )
Discontinued operations attributable to ATI per common share
0.02 (0.01 ) 2.41 (0.01 )
2.37
Diluted net income (loss) attributable to ATI per
common share $ 0.20 $ (0.01
) $ 1.62 $ (0.03 )
$ 1.44 Amounts attributable to ATI
common stockholders Income (loss) from continuing
operations, net of tax $ 19.9 $ -
$ (83.8 ) $ (2.0 )
$ (98.8 ) Income (loss) from discontinued
operations, net of tax 2.2 (0.7 ) 257.2
(0.6 ) 252.8
Net income (loss)
$ 22.1 $ (0.7 ) $
173.4 $ (2.6 ) $
154.0
Weighted average common shares outstanding
-- basic (millions)
107.2 107.2 106.8 107.1 106.8
Weighted average common shares outstanding
-- diluted (millions)
107.9 108.0 106.8 107.1 106.8
Actual common shares outstanding -- end of
period (millions)
108.7 108.7 108.0 108.7 108.0
Allegheny
Technologies Incorporated and Subsidiaries Sales and
Operating Profit by Business Segment (Unaudited, dollars in
millions)
Three Months
Ended Fiscal Year Ended December 31 September
30 December 31 December 31 December 31
2014 2014 2013 2014 2013 Sales:
High Performance Materials & Components $ 500.6 $ 507.7 $ 436.7
$ 2,006.8 $ 1,944.8 Flat Rolled Products 546.9
561.9 478.6 2,216.6
2,098.7
Total External Sales $
1,047.5 $ 1,069.6 $
915.3 $ 4,223.4 $
4,043.5 Operating Profit (Loss): High
Performance Materials & Components $ 73.4 $ 62.0 $ 17.1 $ 289.6
$ 209.1 % of Sales 14.7 % 12.2 % 3.9 % 14.4 % 10.8 % Flat
Rolled Products (6.4 ) 8.6 (28.0 ) (43.3 ) (44.7 ) % of Sales
-1.2 % 1.5 % -5.9 % -2.0 % -2.1
%
Operating Profit (Loss) 67.0 70.6
(10.9 ) 246.3 164.4 % of Sales 6.4 %
6.6 % -1.2 % 5.8 % 4.1 % Corporate expenses (11.0 ) (10.0 )
(10.7 ) (44.2 ) (43.0 ) Interest expense, net (25.9 ) (25.2
) (18.7 ) (108.7 ) (65.2 ) Restructuring costs - - (67.5 ) -
(67.5 ) Closed company and other expenses (4.4 ) (7.5 ) (3.2
) (21.2 ) (14.2 ) Retirement benefit income (expense)
1.1 (23.8 ) (29.8 ) (70.7 )
(129.3 )
Income (loss) from continuing operations
before income taxes $ 26.8 $
4.1 $ (140.8 ) $
1.5 $ (154.8 )
Allegheny Technologies Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets (Current period
unaudited, dollars in millions)
December 31 2014 2013 ASSETS
Current Assets: Cash and cash equivalents $ 269.5 $ 1,026.8
Accounts receivable, net of allowances for
doubtful accounts of $4.8 and $5.3 at December 31, 2014 and 2013,
respectively
603.6 528.2 Inventories, net 1,472.8 1,322.1 Prepaid expenses and
other current assets 136.2 73.7
Total Current
Assets 2,482.1 2,950.8 Property, plant and
equipment, net 2,961.8 2,874.1 Cost in excess of net assets
acquired 780.4 727.9 Other assets 358.3 345.7
Total Assets $ 6,582.6 $ 6,898.5
LIABILITIES AND EQUITY Current
Liabilities: Accounts payable $ 556.7 $ 471.8 Accrued
liabilities 323.2 315.8 Deferred income taxes 62.2 3.5
Short term debt and current portion of
long-term debt
17.8 419.9
Total Current Liabilities
959.9 1,211.0 Long-term debt 1,509.1 1,527.4
Accrued postretirement benefits 415.8 442.4 Pension liabilities
745.6 368.2 Deferred income taxes 79.6 206.6 Other long-term
liabilities 156.2 148.2
Total Liabilities
3,866.2 3,903.8 Redeemable
noncontrolling interest 12.1 - Total ATI
stockholders' equity 2,593.4 2,894.2 Noncontrolling interests
110.9 100.5
Total Equity 2,704.3
2,994.7 Total Liabilities and Equity
$ 6,582.6 $ 6,898.5
Allegheny Technologies Incorporated and
Subsidiaries Condensed Consolidated Statements of Cash
Flows (Unaudited - Dollars in millions)
Fiscal Year
Ended December 31 2014 2013
Operating Activities: Net income $ 9.6 $ 161.6
Depreciation and amortization 176.8 189.9 Deferred taxes 31.7 70.1
Non-cash restructuring costs - 72.7 Gain on sale of business -
(428.3 ) Change in managed working capital (148.0 ) 179.9 Change in
retirement benefits 3.1 70.6 Accrued liabilities and other
(17.3 ) 51.9
Cash provided by operating
activities 55.9 368.4
Investing Activities: Purchases of property, plant and equipment
(225.7 ) (612.7 ) Proceeds from sale of business, net of
transaction costs - 600.9 Purchases of businesses, net of cash
acquired (92.9 ) - Asset disposals and other 2.4
0.8
Cash used in investing activities
(316.2 ) (11.0 ) Financing
Activities: Borrowings on long-term debt - 500.0 Payments on
long-term debt and capital leases (414.9 ) (17.1 ) Net repayments
under credit facilities - (14.4 ) Debt issuance costs (1.2 ) (5.2 )
Dividends paid to shareholders (77.1 ) (76.9 ) Dividends paid to
noncontrolling interest - (18.0 ) Taxes on share-based compensation
and other (3.8 ) (3.6 )
Cash provided by (used in)
financing activities (497.0 )
364.8 Increase (decrease) in cash and cash
equivalents (757.3 ) 722.2 Cash and cash
equivalents at beginning of period 1,026.8
304.6
Cash and cash equivalents at end of period
$ 269.5 $ 1,026.8
Allegheny Technologies Incorporated and Subsidiaries
Selected Financial Data - Mill Products (Unaudited)
Three Months Ended Fiscal
Year Ended December 31 September 30 December
31 December 31 December 31 2014
2014 2013 2014 2013 Shipment
Volume: Flat Rolled Products (000's lbs.) High value
125,926 126,238 117,918 508,753 468,551 Standard 156,186
162,736 165,331 678,022 665,977 Flat
Rolled Products total 282,112 288,974 283,249 1,186,775 1,134,528
Average Selling Prices: Flat Rolled
Products (per lb.) High value $ 2.58 $ 2.54 $ 2.39 $ 2.53 $ 2.63
Standard $ 1.39 $ 1.46 $ 1.17 $ 1.35 $ 1.28 Flat Rolled Products
combined average $ 1.92 $ 1.93 $ 1.68 $ 1.86 $ 1.84
Allegheny Technologies Incorporated
and Subsidiaries Computation of Basic and Diluted Earnings
Per Share Attributable to ATI (Unaudited, in millions, except
per share amounts)
Three Months Ended Fiscal Year
Ended December 31 September 30 December 31
December 31 December 31 2014 2014
2013 2014 2013 Continuing operations:
Numerator for Basic net income (loss) per common share - Income
(loss) from continuing operations attributable to ATI $ 19.9 $ - $
(83.8 ) $ (2.0 ) $ (98.8 ) Redeemable noncontrolling
interest (0.3 ) - - (0.3 )
- Numerator for Dilutive net income (loss) per common
share -
Income (loss) from continuing operations
attributable to ATI after assumed conversions
$ 19.6 $ - $ (83.8 ) $ (2.3 ) $ (98.8 ) Denominator
for Basic net income (loss) per common share - Weighted average
shares outstanding 107.2 107.2 106.8 107.1 106.8 Effect of dilutive
securities: Share-based compensation 0.7 0.8
- - - Denominator for
Diluted net income (loss) per common share - Adjusted weighted
average assuming conversions 107.9 108.0
106.8 107.1 106.8
Basic income (loss) from continuing
operations attributable to ATI per common share
$ 0.18 $ - $ (0.79
) $ (0.02 ) $ (0.93
)
Diluted income (loss) from continuing
operations attributable to ATI per common share
$ 0.18 $ - $ (0.79
) $ (0.02 ) $ (0.93
) Allegheny Technologies Incorporated and
Subsidiaries Other Financial Information Managed
Working Capital (Unaudited, dollars in millions)
December 31 2014 2013 Accounts
receivable $ 603.6 $ 528.2 Inventory 1,472.8 1,322.1 Accounts
payable (556.7 ) (471.8 ) Subtotal 1,519.7 1,378.5
Allowance for doubtful accounts 4.8 5.3 LIFO reserve (4.8 )
(29.4 ) Inventory reserves 68.9 84.3 Corporate and other 5.9 2.7
Managed working capital of discontinued
operations
- 5.1 Managed working capital $ 1,594.5
$ 1,446.5
Annualized prior 2 months sales
$ 4,144.5 $ 3,675.0
Managed working capital as a % of
annualized sales
38.5 % 39.4 %
December 31, 2014 change in managed
working capital
148.0
As part of managing the liquidity in our
business, we focus on controlling managed working capital, which is
defined as gross accounts receivable and gross inventories, less
accounts payable. In measuring performance in controlling this
managed working capital, we exclude the effects of LIFO and other
inventory valuation reserves and reserves for uncollectible
accounts receivable which, due to their nature, are managed
separately.
Allegheny Technologies Incorporated and Subsidiaries
Other Financial Information Debt to Capital
(Unaudited, dollars in millions)
December 31 2014 2013 Total debt $
1,526.9 $ 1,947.3 Less: Cash (269.5 ) (1,026.8 ) Net
debt $ 1,257.4 $ 920.5 Net debt $ 1,257.4 $ 920.5 Total ATI
stockholders' equity 2,593.4 2,894.2
Net ATI capital $ 3,850.8 $ 3,814.7
Net debt to ATI
capital 32.7 % 24.1 %
Total debt $ 1,526.9 $ 1,947.3 Total ATI stockholders'
equity 2,593.4 2,894.2 Total ATI
capital $ 4,120.3 $ 4,841.5
Total debt to total ATI
capital 37.1 % 40.2 %
In managing the overall capital structure
of the Company, some of the measures that we focus on are net debt
to net capitalization, which is the percentage of debt, net of cash
that may be available to reduce borrowings, to the total invested
and borrowed capital of ATI (excluding noncontrolling interest),
and total debt to total ATI capitalization, which excludes cash
balances.
Allegheny Technologies IncorporatedDan L. Greenfield,
412-394-3004
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