Third Quarter 2016 Results
- Sales were $771 million
- Business segment operating profit
was $26 million, or 3.4% of sales
- High Performance Materials &
Components segment operating profit improved by over 20% compared
to Q2 2016, to $47 million, or 10% of sales
- Flat Rolled Products segment
operating loss decreased over 30% compared to Q2 2016, to $21
million
- Q3 2016 segment results exclude
Rowley, UT titanium sponge operations
- Net loss attributable to ATI was
$531 million, or $(4.95) per share
- Q3 2016 results include $508
million, or $(4.74) per share of previously-announced Rowley idling
charges, Rowley excess operating costs, and income tax valuation
allowance charges
- Excluding the Rowley costs and
income tax charges, Q3 2016 net loss was $23 million, or $(0.21)
per share
Allegheny Technologies Incorporated (NYSE: ATI) reported third
quarter 2016 sales of $771 million and a net loss attributable to
ATI of $531 million, or $(4.95) per share. ATI’s third quarter 2016
results include pre-tax, non-cash impairment charges of $471
million for the previously announced idling of the Rowley, UT
titanium sponge production facility, and pre-tax shutdown, idling
and employee benefit costs of $29 million. Results in the third
quarter 2016 also include $9 million of Rowley excess operating
costs, which will not exist once the Rowley facility idling is
completed by the end of 2016. As a result of these charges, which
total $(3.13) per share, in accordance with accounting requirements
ATI also recorded $173 million, or $(1.61) per share, of non-cash
income tax valuation allowances related to U.S. federal tax
benefits. The total after tax charges, including the tax valuation
allowances, were $508 million, or $(4.74) per share. Excluding
these charges, the net loss attributable to ATI was $23 million, or
$(0.21) per share.
“Sales to the aerospace and defense market continued to drive
ATI’s improving financial performance. Our next-generation
differentiated jet engine product mix continued to grow and our
airframe titanium product shipments remained on schedule,” said
Rich Harshman, Chairman, President and Chief Executive Officer.
“Our Flat Rolled Products segment continued to make progress toward
returning to profitability in a challenging market
environment.”
- ATI’s sales to key global
differentiated markets were 81% of ATI sales for the nine months
ended September 30, 2016:
- Sales to the aerospace and defense
markets were $1.197 billion and represented 51% of ATI sales: 28%
jet engine, 15% airframe, 8% government aero/defense.
- Sales to the oil & gas/chemical and
hydrocarbon processing industry markets were $201 million and
represented 9% of ATI sales: 5% oil & gas, 4% chemical and
hydrocarbon processing industry.
- Sales to the electrical energy market
were $182 million and represented 8% of ATI sales.
- Sales to the automotive market were
$169 million and represented 7% of ATI sales.
- Sales to the medical market were $151
million and represented 6% of ATI sales.
- Direct international sales represented
41% of ATI’s 2016 sales.
- Sales of high-value products were 84%
of ATI third quarter 2016 sales.
“Third quarter 2016 High Performance Materials & Components
(HPMC) segment results continued to show improvement, with segment
operating profit increasing to $47 million, or 10% of sales,”
Harshman continued. “This was accomplished in spite of continuing
challenging business conditions and low demand from several
non-aerospace markets. Sales were $462 million, down 7% compared to
the second quarter 2016. We are seeing the transition to
next-generation from legacy aircraft and engines, and ATI is
benefitting. Our mix of differentiated jet engine alloys achieved
new record levels. Additionally, our isothermal and hot-die forge
presses are operating at or near record levels. Our available
capacity leaves us well positioned for the forecasted growth in
demand over the next several years. Sales to the aerospace and
defense market represented 77% of third quarter segment sales: 45%
jet engine, 20% airframe, and 12% government aero/defense. However,
market conditions remained difficult in several other HPMC segment
markets, as demand remained very low from the electrical energy,
oil & gas, and construction and mining equipment markets.
Beginning with the third quarter 2016, segment results exclude all
operating costs of our Rowley, UT titanium sponge facility, which
began to curtail operations following the indefinite idling action
that we announced on August 24, 2016.
“Flat Rolled Products (FRP) segment sales in the third quarter
2016 were $309 million, a slight decrease compared to the second
quarter 2016. Segment operating loss decreased more than 30% to $21
million in the third quarter 2016, compared to a loss of $32
million in the second quarter 2016. Third quarter segment operating
results reflect a weaker product mix and low demand from project
business, partially offset by slowly improving selling prices, and
the benefits of improving operating performance following the end
of the work stoppage. Scheduled quarterly maintenance activities
also negatively impacted third quarter operating results.
“At September 30, 2016, cash on hand was $188 million and
available additional liquidity under our Asset Based Lending
facility was approximately $325 million. Cash used in operating
activities was $78 million in the third quarter 2016, including a
$115 million contribution to our U.S. defined benefit pension plan
in July 2016.
“We now expect full year 2016 capital expenditures to be
approximately $215 million, of which approximately $95 million is
related to scheduled HRPF payments. We expect 2017 capital
expenditures to be approximately $120 million including 2016
carryover and approximately $40 million for the expansion at our
60% owned Chinese joint venture, STAL. Beyond 2017, we continue to
expect capital expenditures to average no more $100 million
annually for the next several years.”
Strategy and Outlook
“We are focused on returning ATI to sustainable profitable
growth and building a business that has a strong balance sheet and
is capable of generating strong cash flow,” Harshman continued.
“This requires making decisions and taking actions that place a
priority on innovation, and maximize the growth of our
differentiated products that create value for our customers and
shareholders over the long term. It requires our businesses to be
lean and efficient, while creating great opportunities for our
people. The restructuring and rightsizing actions that we have been
implementing over the last year, while difficult, are integral to
returning ATI to sustainable profitability.
“Our HPMC segment is very well-positioned for profitable growth,
especially in the next-generation jet engine platforms. We expect
HPMC segment operating profit as a percentage of sales to further
improve in the fourth quarter 2016, compared to the third quarter
2016, and to continue to improve in 2017 and beyond.
“Our actions to idle the Rowley titanium sponge facility and
consolidate other higher-cost titanium operations are part of our
disciplined process to be more efficient and to strengthen and
enhance ATI’s ability to deliver sustainable profitable growth and
create value for our customers and shareholders over the long-term.
We expect to recognize approximately $10 million of additional
closure costs for the Rowley facility in the fourth quarter 2016 as
we complete an orderly wind-down of operations. These restructuring
actions and other facility consolidations are expected to improve
ATI’s operating earnings by approximately $50 million beginning in
2017, primarily in the HPMC segment.
“Our FRP segment continues to be impacted by uncertain end
market demand, low raw materials prices, and global commodity
stainless steel sheet and strip overcapacity. As we continue our
rightsizing and restructuring activities to streamline and simplify
this business, we have decided to permanently close the Midland, PA
commodity stainless steel melt and sheet finishing facility, and
the Bagdad, PA grain-oriented electrical steel (GOES) finishing
facility. These operations were idled earlier in 2016. Based on
current and forecasted market and competitive conditions, including
the expectation of continued significant excess global capacity for
commodity stainless steel sheet and GOES products, we have now
concluded that these facilities cannot be operated at an acceptable
rate of return. As a result of this decision and additional
rightsizing actions being implemented in the fourth quarter, we
expect fourth quarter 2016 results to include between $11 and $21
million of charges related to employee benefit costs and other
obligations associated with these actions. These additional actions
are expected to improve 2017 FRP segment operating profit by
approximately $10 million. We have made significant and steady
improvement in operating performance at our FRP operations over the
last few quarters, but market conditions remain challenging and we
do not expect much improvement in market conditions in the fourth
quarter. Looking beyond this year, we expect the FRP segment to be
profitable in 2017.”
Quarterly
Results
Three Months Ended Sept. 30, June
30, Sept. 30, 2016 2016 2015
In Millions Sales $ 770.5 $ 810.5 $ 832.7 Loss
attributable to ATI $ (530.8 ) $ (18.8 ) $ (144.6 ) Restructuring
and other charges, net of tax (329.1 ) (8.8 ) (49.5 ) Rowley excess
operating costs, net of tax (6.1 ) (6.0 ) (4.2 ) Income tax items
including valuation allowances (173.1 ) 11.4
(63.9 ) Loss attributable to ATI before
special items $ (22.5 ) $ (15.4 ) $ (27.0 )
Per Diluted
Share Loss attributable to ATI $ (4.95 ) $ (0.18 ) $ (1.35 )
Restructuring and other charges, net of tax (3.07 ) (0.08 ) (0.46 )
Rowley excess operating costs, net of tax (0.06 ) (0.06 ) (0.04 )
Income tax items including valuation allowances (1.61 )
0.11 (0.60 ) Loss attributable
to ATI before special items $ (0.21 ) $ (0.15 ) $ (0.25 )
The accompanying financial tables include a reconciliation and
additional explanations of financial information prepared in
accordance with U.S. generally accepted accounting principles
(GAAP) and non-GAAP financial measures.
Percentage of Total ATI Sales
Three Months Ended
Sept. 30, June 30, Sept. 30,
High-Value Products (excluding GOES) 2016
2016 2015 Nickel-based alloys and specialty
alloys 26% 27% 26% Titanium and titanium alloys 19% 19% 19%
Precision forgings, castings and components 17% 17% 14% Precision
and engineered strip 15% 13% 14% Zirconium and related alloys 7%
8% 8%
Total High-Value Products 84%
84% 81%
Third Quarter 2016 Financial Results
- Sales for the third quarter 2016
were $771 million, decreasing 5% compared to the second quarter
2016, and 7% from the third quarter 2015. Compared to the second
quarter 2016, sales decreased 7% in the High Performance Materials
& Components segment and 1% in the Flat Rolled Products
segment.
- Net loss attributable to ATI
for the third quarter 2016 was $530.8 million, or $(4.95)
per share, compared to a net loss of $18.8 million, or $(0.18) per
share, for the second quarter 2016. Results for the third quarter
2016 include $508.4 million of after-tax special charges, or
$(4.74) per share, including a $173.1 million, or $(1.61) per
share, income tax valuation allowance on U.S. federal deferred tax
assets. Results for the second quarter 2016 include $8.8 million of
after-tax charges, or $(0.08) per share, primarily related to
trailing work stoppage costs in the Flat Rolled Products segment.
These were offset by an $11.4 million benefit, or $0.11 per share,
for an above-normal tax rate benefit, compared to the tax benefit
that would apply using a standard 35% U.S. federal tax rate.
- Cash on hand was $188.4 million.
Cash used in operations for the first nine months of 2016 was
$111.7 million, and included a $115.0 million contribution to ATI’s
U.S. defined benefit pension plan, and a benefit of $39.0 million
from lower managed working capital balances. Cash used in investing
activities was $172.8 million, including $174.9 million for capital
expenditures. Cash provided by financing activities was $323.1
million, with $387.5 million of borrowings of long-term debt,
partially offset by $25.8 million of dividends paid to ATI
shareholders, and $16.0 million paid to the 40% noncontrolling
interest in our STAL joint venture.
High Performance Materials & Components Segment
Market Conditions – Third quarter 2016 compared to second
quarter 2016
- The third quarter 2016 reflected a
better product mix in the aerospace and defense market, and lower
sales to the electrical energy and medical markets. Sales to the
oil & gas/chemical and hydrocarbon processing industry market
remained at low levels. Sales to the commercial aerospace market
were 4% lower, due to normal seasonality at European forgers and
lower volume of titanium mill products. Sales to the defense market
were flat. Sales to the medical market were 16% lower, and sales to
the electrical energy market were 28% lower, reflecting both the
timing of orders and increasingly competitive market conditions.
Sales of nickel-based and specialty alloys and titanium and
titanium alloys both decreased 8% and sales of zirconium and
related alloys decreased 11%. Sales of precision forgings, castings
and components were 2% lower. International sales represented 46%
of total segment sales for the third quarter 2016.
Third quarter 2016 compared to third quarter 2015
- Sales decreased 3% to $461.8 million
compared to the third quarter 2015, with sales of titanium and
titanium-based alloys down 8% on lower titanium airframe volume
based on the timing of orders. Sales of nickel-based and specialty
alloys were down 5%, primarily due to lower specialty alloys
demand. Sales of zirconium and related alloys were down 10%,
primarily due to lower demand from the electrical energy and
hydrocarbon processing markets. Sales of precision forgings,
castings and components were 15% higher and sales to the aerospace
and defense market were 7% higher. Sales to the oil &
gas/chemical and hydrocarbon processing industry market declined
58%, sales to the medical market were 13% lower, and sales to the
electrical energy market were 23% lower, compared to the third
quarter 2015.
- Segment operating profit was $47.0
million, or 10.2% of total sales, compared to $18.8 million, or
4.0% of total sales, for the third quarter 2015. Third quarter 2016
results reflect improving utilization on increasing aerospace and
defense sales and the benefits of restructuring activities. HPMC
segment results exclude the Rowley, UT titanium sponge operations
beginning with the third quarter 2016. In August 2016, ATI
announced the indefinite idling of titanium sponge production at
Rowley, with shutdown activities continuing through December
2016.
Flat Rolled Products Segment
Market Conditions – Third quarter 2016 compared to second
quarter 2016
- Sales to the automotive, construction
and mining, and electronics, communications & computers markets
increased compared to the second quarter 2016; however, other key
end markets including oil & gas/chemical and hydrocarbon
processing remained challenging. Standard stainless (sheet and
plate) products sales were 8% higher, with improved pricing on
slightly lower volume. Sales of high-value products were 5% lower,
with improved sales of Precision Rolled Strip products offset by a
weaker mix of specialty and titanium sheet products. Second quarter
2016 also included trailing GOES volume prior to the production
idling. Third quarter 2016 Flat Rolled Products segment titanium
shipments, including Uniti joint venture conversion, decreased 21%
compared to the second quarter 2016, as low demand levels continued
due to weak demand from global industrial markets. International
sales represented 33% of total segment sales for the third quarter
2016.
Third quarter 2016 compared to third quarter 2015
- Sales were $308.7 million, 14% lower
than the third quarter 2015, due to lower shipments of certain
products due primarily to the idling of production facilities for
commodity stainless sheet and GOES. Shipments of high-value
products were 3% lower, excluding GOES volume in 2015 for
comparison, due to lower demand for Precision Rolled Strip
products. Shipments of standard stainless products decreased 2%.
Average selling prices decreased 6% for high-value products,
excluding GOES, primarily due to a weaker mix of nickel-based alloy
products. Average selling prices increased 2% for standard
stainless products, reflecting slowly improving selling prices,
partially offset by a weaker product mix. Flat Rolled Products
segment shipment information is presented in the attached Selected
Financial Data – Mill Products table.
- Segment operating loss was $20.8
million, or (6.7%) of sales, compared to a third quarter 2015 loss
of $91.8 million, or (25.6%) of sales. Segment operating results in
the third quarter 2016 reflect slowly improving selling prices and
the benefits of improving operating performance following the end
of the work stoppage, while also being negatively impacted by
scheduled quarterly maintenance activities. Results for the third
quarter 2015 include the effects of weakening base-selling prices
and falling raw material surcharges, and the effects of lower
operating levels following the mid-August 2015 lockout of
USW-represented employees.
Restructuring and Other Charges
- The third quarter 2016 includes $499.9
million of restructuring and other charges as a result of the
indefinite idling of the Rowley, UT titanium sponge facility.
Restructuring charges of $488.6 million include $471.3 million of
long-lived asset impairments and $17.3 million of charges for
shutdown, idling and employee benefit costs. Third quarter 2016
results also include $11.3 million of titanium sponge inventory
valuation adjustments that are classified in cost of sales.
Closed Operations and Other Expenses
- Closed operations and other expenses in
the third quarter 2016 increased $9.7 million compared to the
second quarter 2016, to $15.4 million, primarily due to Rowley
operating costs, which are classified in closed operations
beginning in the third quarter 2016 due to the indefinite idling
decision and ongoing shutdown activities. Other closed operations
costs including environmental, insurance and retirement benefits
expenses were comparable with prior periods.
Income Taxes
- The third quarter 2016 benefit for
income taxes was $4.3 million, or 0.8% of the pre-tax loss,
primarily due to a $173.1 million income tax valuation allowance
charge on ATI’s U.S. federal deferred tax assets due to cumulative
losses from U.S. operations, and $4.1 million of discrete charges.
The third quarter 2016 effective tax rate was 34.1% excluding these
charges. On a year-to-date basis, ATI’s tax rate was 9.1%,
including the effects of the income tax valuation allowance, and
the fourth quarter 2016 tax rate is also expected to be in this
range.
ATI will conduct a conference call with investors and analysts
on Tuesday, October 25, 2016, 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 ATI
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 metals; (b) material adverse changes
in the markets we serve, including the aerospace and defense,
electrical energy, oil and gas/chemical and hydrocarbon processing
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) continued decline in, or 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; (g) labor disputes or work stoppages; and (h) other risk
factors summarized in our Annual Report on Form 10-K for the year
ended December 31, 2015, and in other reports filed with the
Securities and Exchange Commission. We assume no duty to update our
forward-looking statements.
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 September 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.
Allegheny Technologies Incorporated and Subsidiaries
Consolidated Statements of Operations (Unaudited, dollars in
millions, except per share amounts)
Three Months Ended Nine Months
Ended September 30 June 30 September 30
September 30 September 30 2016 2016
2015 2016 2015 Sales $
770.5 $ 810.5 $ 832.7 $
2,338.5 $ 2,980.7 Cost of sales
720.3 762.3 861.4 2,273.3
2,822.9 Gross profit (loss) 50.2 48.2 (28.7 )
65.2 157.8 Selling and administrative expenses 60.5 59.3
62.5 182.4 198.0 Restructuring charges 488.6
1.0 - 498.6 -
Operating loss (498.9 ) (12.1 ) (91.2 ) (615.8 ) (40.2 ) Interest
expense, net (32.6 ) (30.3 ) (27.5 ) (91.2 ) (81.0 ) Other income,
net - 1.0 0.8 1.8
2.3 Loss before income taxes (531.5 ) (41.4 )
(117.9 ) (705.2 ) (118.9 ) Income tax provision (benefit)
(4.3 ) (25.9 ) 23.4 (64.4 ) 23.7
Net loss $ (527.2 ) $
(15.5 ) $ (141.3 ) $
(640.8 ) $ (142.6 ) Less: Net
income attributable to noncontrolling interests 3.6
3.3 3.3 10.0 8.4
Net loss attributable to ATI $ (530.8
) $ (18.8 ) $ (144.6
) $ (650.8 ) $ (151.0
) Basic net loss attributable to ATI per common
share $ (4.95 ) $ (0.18
) $ (1.35 ) $ (6.07
) $ (1.41 ) Diluted net loss
attributable to ATI per common share $ (4.95
) $ (0.18 ) $ (1.35
) $ (6.07 ) $ (1.41
)
Weighted average common shares outstanding
-- basic (millions)
107.3 107.3 107.3 107.3 107.3
Weighted average common shares outstanding
-- diluted (millions)
107.3 107.3 107.3 107.3 107.3
Actual common shares outstanding -- end of
period (millions)
108.9 108.9 109.2 108.9 109.2
Allegheny
Technologies Incorporated and Subsidiaries Sales and
Operating Profit by Business Segment (Unaudited, dollars in
millions)
Three Months
Ended Nine Months Ended September 30 June
30 September 30 September 30 September 30
2016 2016 2015 2016 2015 Sales:
High Performance Materials & Components $ 461.8 $ 498.4 $ 474.7
$ 1,453.2 $ 1,528.6 Flat Rolled Products 308.7
312.1 358.0 885.3 1,452.1
Total External Sales $ 770.5
$ 810.5 $ 832.7
$ 2,338.5 $ 2,980.7
Operating Profit (Loss): High Performance Materials
& Components $ 47.0 $ 38.8 $ 18.8 $ 114.9 $ 136.1 % of Sales
10.2 % 7.8 % 4.0 % 7.9 % 8.9 % Flat Rolled Products (20.8 )
(31.8 ) (91.8 ) (162.2 ) (121.8 ) % of Sales -6.7 %
-10.2 % -25.6 % -18.3 % -8.4 %
Operating Profit (Loss) 26.2 7.0 (73.0
) (47.3 ) 14.3 % of Sales 3.4 % 0.9 %
-8.8 % -2.0 % 0.5 % LIFO and net realizable value
reserves - 0.4 (0.2 ) 0.4 - Corporate expenses (9.8 ) (11.8
) (10.7 ) (32.6 ) (33.6 ) Closed operations and other
expenses (15.4 ) (5.7 ) (6.5 ) (24.6 ) (18.6 ) Restructuring
and other charges (499.9 ) (1.0 ) - (509.9 ) - Interest
expense, net (32.6 ) (30.3 ) (27.5 )
(91.2 ) (81.0 )
Loss before income
taxes $ (531.5 ) $ (41.4
) $ (117.9 ) $ (705.2
) $ (118.9 ) Allegheny
Technologies Incorporated and Subsidiaries Condensed
Consolidated Balance Sheets (Unaudited, dollars in millions)
September 30 December 31, 2016
2015 ASSETS Current Assets: Cash and
cash equivalents $ 188.4 $ 149.8
Accounts receivable, net of allowances for
doubtful accounts
454.0 400.3 Inventories, net 1,078.9 1,271.6 Prepaid expenses and
other current assets 40.8 45.9
Total Current
Assets 1,762.1 1,867.6 Property, plant and
equipment, net 2,514.4 2,928.2 Goodwill 644.4 651.4 Other assets
271.4 304.5
Total Assets $
5,192.3 $ 5,751.7 LIABILITIES AND
EQUITY Current Liabilities: Accounts payable $
285.2 $ 380.8 Accrued liabilities 310.9 301.8
Short term debt and current portion of
long-term debt
5.4 3.9
Total Current Liabilities 601.5
686.5 Long-term debt 1,870.4 1,491.8 Accrued
postretirement benefits 311.6 359.2 Pension liabilities 708.6 833.8
Deferred income taxes 51.3 75.6 Other long-term liabilities
86.2 108.3
Total Liabilities 3,629.6
3,555.2 Redeemable noncontrolling
interest - 12.1 Total ATI stockholders'
equity 1,471.8 2,082.8 Noncontrolling interests 90.9
101.6
Total Equity 1,562.7
2,184.4 Total Liabilities and Equity $
5,192.3 $ 5,751.7
Allegheny Technologies Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited,
dollars in millions)
Nine Months Ended September
30 2016 2015 Operating Activities:
Net loss $ (640.8 ) $ (142.6 ) Depreciation and
amortization 130.2 141.4 Non-cash restructuring and other charges
471.3 - Deferred taxes (78.1 ) 9.6 Change in managed working
capital 39.0 27.1 Change in retirement benefits (a) (94.6 ) 7.9
Accrued liabilities and other 61.3 65.5
Cash provided by (used in) operating activities
(111.7 ) 108.9 Investing
Activities: Purchases of property, plant and equipment (174.9 )
(99.5 ) Purchases of businesses, net of cash acquired - (0.5 )
Asset disposals and other 2.1 -
Cash
used in investing activities (172.8 )
(100.0 ) Financing Activities: Borrowings on
long-term debt 387.5 - Payments on long-term debt and capital
leases (2.4 ) (23.3 ) Net borrowings under credit facilities 2.4
1.7 Debt issuance costs (10.4 ) - Dividends paid to shareholders
(25.8 ) (57.9 ) Dividends paid to noncontrolling interests (16.0 )
- Acquisition of noncontrolling interests (12.2 ) - Taxes on
share-based compensation and other - (1.4 )
Cash provided by (used in) financing activities
323.1 (80.9 ) Increase
(decrease) in cash and cash equivalents 38.6
(72.0 ) Cash and cash equivalents at beginning of
period 149.8 269.5
Cash and cash
equivalents at end of period $ 188.4
$ 197.5
(a) Includes $(115) million contribution
to the U.S. defined benefit pension plan in 2016.
Allegheny Technologies Incorporated
and Subsidiaries Selected Financial Data - Mill Products
(Unaudited)
Three Months Ended Nine Months
Ended September 30 June 30 September 30
September 30 September 30 2016 2016
2015 2016 2015 Shipment Volume:
Flat Rolled Products (000's lbs.) High value 73,481 77,711 75,578
217,835 251,965 Standard 102,252 103,558
104,690 272,846 424,638 Flat Rolled Products total
175,733 181,269 180,268 490,681 676,603
Average
Selling Prices: Flat Rolled Products (per lb.) High
value $ 2.64 $ 2.52 $ 2.82 $ 2.61 $ 3.23 Standard $ 1.10 $ 1.01 $
1.08 $ 1.04 $ 1.21 Flat Rolled Products combined average $ 1.75 $
1.66 $ 1.81 $ 1.73 $ 1.96
Note: High value products exclude GOES for all periods
presented.
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 Nine Months Ended September 30 June
30 September 30 September 30 September 30
2016 2016 2015 2016 2015
Numerator for Basic net loss per common share - Net loss
attributable to ATI $ (530.8 ) $ (18.8 ) $ (144.6 ) $ (650.8 ) $
(151.0 ) Redeemable noncontrolling interest - - (0.2 ) - (0.3 )
Effect of dilutive securities: 4.75% Convertible Senior Notes due
2022 - - - -
- Numerator for Dilutive net loss per common
share - Net loss attributable to ATI after assumed conversions $
(530.8 ) $ (18.8 ) $ (144.8 ) $ (650.8 ) $ (151.3 )
Denominator for Basic net loss per common share - Weighted average
shares outstanding 107.3 107.3 107.3 107.3 107.3 Effect of dilutive
securities: Share-based compensation - - - - - 4.75% Convertible
Senior Notes due 2022 - - -
- - Denominator for Diluted net
loss per common share - Adjusted weighted average assuming
conversions 107.3 107.3 107.3
107.3 107.3 Basic loss
attributable to ATI per common share
$ (4.95 )
$ (0.18 ) $ (1.35 )
$ (6.07 ) $ (1.41 )
Diluted loss attributable to ATI per common share
$
(4.95 ) $ (0.18 ) $
(1.35 ) $ (6.07 ) $
(1.41 ) Allegheny Technologies Incorporated
and Subsidiaries Other Financial Information Managed
Working Capital (Unaudited, dollars in millions)
September 30 December 31 2016 2015
Accounts receivable $ 454.0 $ 400.3 Inventory 1,078.9
1,271.6 Accounts payable (285.2 ) (380.8 ) Subtotal
1,247.7 1,291.1 Allowance for doubtful accounts 4.6 4.5 LIFO
reserve (113.3 ) (136.4 ) Inventory reserves 187.5
206.3 Managed working capital $ 1,326.5 $
1,365.5
Annualized prior 3 months sales
$ 3,082.2 $ 2,955.5
Managed working capital as a % of
annualized sales
43.0 % 46.2 %
September 30, 2016 change in managed
working capital
$ (39.0 )
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)
September 30
December 31 2016 2015 Total debt (a) $
1,893.8 $ 1,505.2 Less: Cash (188.4 ) (149.8 ) Net
debt $ 1,705.4 $ 1,355.4 Net debt $ 1,705.4 $ 1,355.4 Total
ATI stockholders' equity 1,471.8 2,082.8
Net ATI capital $ 3,177.2 $ 3,438.2
Net debt to
ATI capital 53.7 % 39.4
% Total debt (a) $ 1,893.8 $ 1,505.2 Total ATI
stockholders' equity 1,471.8 2,082.8
Total ATI capital $ 3,365.6 $ 3,588.0
Total debt to total
ATI capital 56.3 % 42.0
% (a) Excludes debt issuance costs.
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 Incorporated and Subsidiaries
Non-GAAP Financial Measures (Unaudited, dollars in millions,
except per share amounts)
The Company reports its financial results in accordance with
accounting principles generally accepted in the United States of
America ("GAAP"). However, management believes that certain
non-GAAP financial measures, used in managing the business, may
provide users of this financial information with additional
meaningful comparisons between current results and results in prior
periods. Non-GAAP financial measures should be viewed in addition
to, and not as an alternative for, the Company's reported results
prepared in accordance with GAAP. The following table provides the
calculation of the non-GAAP financial measures discussed in the
Company's press release dated October 25, 2016:
Three Months Ended September 30 June 30
September 30 2016 2016 2015
Loss attributable to ATI $ (530.8 ) $ (18.8 ) $ (144.6 )
Adjustments: Restructuring and other charges, net of tax (a) (329.1
) (8.8 ) (49.5 ) Rowley excess operating costs, net of tax (b) (6.1
) (6.0 ) (4.2 ) Income tax items including valuation allowances (c)
(173.1 ) 11.4 (63.9 ) Loss attributable
to ATI excluding special items $ (22.5 ) $ (15.4 ) $ (27.0 )
Per Diluted Share Loss attributable to ATI $ (4.95 ) $ (0.18
) $ (1.35 ) Adjustments: Restructuring and other charges, net of
tax (a) (3.07 ) (0.08 ) (0.46 ) Rowley excess operating costs, net
of tax (b) (0.06 ) (0.06 ) (0.04 ) Income tax items including
valuation allowances (c) (1.61 ) 0.11
(0.60 ) Loss attributable to ATI excluding special items $ (0.21 )
$ (0.15 ) $ (0.25 )
(a) Restructuring and other charges include the following:
For the three months ended September 30, 2016, $471.3 of pre-tax
asset impairment charges ($310.3 after-tax), or $(2.89) per share,
and $28.6 of pre-tax shutdown, idling and employee benefit costs
($18.8 after-tax), or $(0.18) per share for the Rowley, UT
facility.
For the three months ended June 30, 2016, $22.4 of pre-tax
charges ($8.4 after-tax), or $(0.08) per share, for costs
associated with the previous work stoppage in ATI’s Flat Rolled
Products operations, and $1.0 of pre-tax charges ($0.4 after-tax)
for severance charges in ATI’s HPMC segment.
For the three months ended September 30, 2015, $75.8 of pre-tax
Net Realizable Value inventory valuation adjustments ($49.5
after-tax), or $(0.46) per share.
(b) During the third quarter of 2016, the Company indefinitely
idled its titanium sponge production facility in Rowley, UT. These
amounts represent the above-market production costs and other
operating expenses for this facility for the periods indicated, net
of expected ongoing carrying costs, and have been adjusted out of
the Company's GAAP amounts to provide Company results that are more
representative of the future, which will exclude these costs.
(c) Amounts for the three months ended September 30, 2016 and
2015 include $173.1, or $(1.61) per share, and $63.9, or $(0.60)
per share, respectively, of income tax valuation allowances
recorded on U.S. federal deferred tax assets due to cumulative
losses from U.S. operations. For the three months ended June 30,
2016, the benefit of $11.4, or $0.11 per share, represents
above-normal income tax benefits compared to those that would apply
at a standard 35% tax rate.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161025005855/en/
Allegheny Technologies IncorporatedDan L. Greenfield,
412-394-3004www.ATIMetals.com
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