Allegheny Technologies Announces Actions to Improve Future Financial Performance
August 24 2016 - 4:20PM
Business Wire
Allegheny Technologies Incorporated (NYSE:ATI) today announced
several actions to improve the Company’s future financial
performance, which include the indefinite idling of the Rowley, UT
titanium sponge production facility and consolidating certain
titanium manufacturing operations in Albany, OR.
These actions are expected to improve ATI’s annual operating
income by approximately $50 million beginning in 2017. In addition,
these actions are expected to generate approximately $50 million of
cash flow from lower managed working capital as titanium sponge
inventory is reduced over the next several quarters.
As a result of these actions, ATI expects to record total
pre-tax, non-cash impairment charges of approximately $470 million
for idled facilities ($317 million after tax, or $2.96 per share),
and pre-tax shutdown and idling costs of approximately $34 million
($23 million after tax, or $0.22 per share). As a result of these
charges, in accordance with accounting requirements, ATI will also
record approximately $183 million, or $1.71 per share, in non-cash
income tax valuation allowances related to U.S. federal tax
benefits. The total charges, including the tax valuation allowance,
are expected to be $4.89 per share, of which $4.83 per share is
expected to be recognized in the third quarter 2016 and the
remainder in the fourth quarter 2016.
“We are focused and committed to return ATI to sustainable
profitable growth and improve cash flow”, said Rich Harshman, ATI’s
Chairman, President and Chief Executive Officer. “Using a
disciplined process, we continually review all of our operations
and facilities from both a strategic and cost competitiveness
viewpoint. These reviews take into account current and expected
future market conditions, including forecasted growth in demand for
our products from all end markets and assessments of global supply
and demand dynamics. This disciplined process is a key part of our
commitment to make the tough decisions that are required to
strengthen and enhance ATI’s ability to deliver sustainable
profitable growth, and create value for our customers and our
shareholders over the long-term.”
As a result of this ongoing process, ATI is taking several
actions to improve the profitability and enhance the
competitiveness of ATI’s High Performance Materials &
Components segment:
- Over the last several years significant
global capacity has been added to produce titanium sponge, which is
a key raw material used to produce ATI’s titanium products. In
addition, demand for industrial-grade titanium products from global
markets continues to be weak. As a result of these factors,
titanium sponge, including aerospace quality sponge, can now be
purchased from qualified global producers under long-term supply
agreements at prices lower than the production costs at ATI’s
titanium sponge facility in Rowley, UT.In support of ATI’s growing
titanium products business and to ensure a reliable supply of high
quality and cost effective titanium sponge, ATI has entered into
long-term, cost competitive supply agreements with several leading
global producers of premium-grade and standard-grade titanium
sponge. The lower cost titanium sponge purchased under these supply
agreements will replace the titanium sponge produced at ATI’s
Rowley facility.As a result, ATI’s Rowley, UT titanium sponge
facility will be idled by the end of 2016 resulting in impairment,
shutdown and idling charges that will be included in ATI’s third
quarter 2016 and fourth quarter 2016 results. The Rowley facility
will be idled in a manner that allows the facility to be restarted
in the future if supported by market conditions.
- To improve manufacturing efficiencies
and asset utilization, ATI is consolidating certain higher cost
titanium hot-working operations in Albany, OR. These actions are
expected to reduce costs and improve ATI’s financial performance
beginning in 2017.
“Our High Performance Materials & Components (HPMC) business
is very well-positioned for profitable growth, especially in the
next-generation jet engine platforms,” Harshman continued. “Our
financial performance over the first six months of 2016 supports
this view and we expect to see continued profitable growth in HPMC
over the next several years. The actions announced today are
expected to improve ATI’s operating earnings by approximately $50
million beginning in 2017.”
Creating Value Thru Relentless Innovation™
Allegheny Technologies Incorporated is one of the largest and
most diversified specialty materials and components producers in
the world with revenues of approximately $3.1 billion for the
twelve month period ending June 30, 2016. ATI employees use
innovative technologies to offer global markets a wide range of
specialty materials solutions. Our major markets are aerospace and
defense, oil & gas/chemical and hydrocarbon process industry,
electrical energy, medical, automotive, food equipment and
appliance, and construction and mining. The ATI website is
www.ATImetals.com.
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Allegheny TechnologiesDan Greenfield412-394-3004
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