Fourth Quarter 2015 Results
- Sales were $739 million
- High Performance Materials &
Components sales were $457 million
- Flat Rolled Products sales were $282
million
- Business segment results, which do
not include Flat Rolled Products asset impairments and other
charges, were a loss of $99 million
- High Performance Materials &
Components segment operating profit was $21 million, or 4.6% of
sales
- Net loss attributable to ATI was
$227 million, or $(2.12) per share, including $267 million of
pre-tax charges, or $167 million after-tax, or $(1.56) per
share
- Net loss attributable to ATI
excluding charges was $60 million, or $(0.56) per share
- Cash on hand was $150 million with
total liquidity of approximately $545 million
Full Year 2015 Results
- Sales were $3.7 billion
- Net loss attributable to ATI was
$378 million, or $(3.53) per share
- Significant operational
accomplishments of Rowley PQ parts qualification, new part
introductions for aerospace ramp-up readiness, and HRPF integration
overshadowed by weak market conditions, particularly in Flat Rolled
Products commodity businesses
Allegheny Technologies Incorporated (NYSE: ATI) reported fourth
quarter 2015 sales of $739 million and a net loss attributable to
ATI of $227 million, or $(2.12) per share. Fourth quarter 2015
results include $267 million of previously-announced, pre-tax
charges.
For the full year 2015, ATI reported a loss from continuing
operations attributable to ATI of $378 million, or $(3.53) per
share, on $3.7 billion in sales.
“2015 was an incredibly difficult year, and the fourth quarter
was the most challenging of the year,” said Rich Harshman,
Chairman, President and Chief Executive Officer. “Early indicators
in 2015 of increasing weakness in the oil and gas market and the
effects of low-priced commodity stainless sheet imports on flat
rolled products’ markets were only the beginning. While aerospace
market demand for products from the High Performance Materials
& Components segment remained good, an extended drop in demand
from the oil and gas market, and continued weakness in the global
construction and mining equipment market, adversely affected
profitability across both business segments. Despite these
headwinds, we continued our strategic focus on high-value,
differentiated products, which were 83% of ATI’s 2015 sales.”
- ATI’s sales to the key global markets
of aerospace and defense, oil & gas/chemical and hydrocarbon
processing industry, electrical energy, automotive and medical
represented 79% of ATI sales for 2015:
- Sales to the aerospace and defense
markets were $1.51 billion and represented 41% of ATI sales: 21%
jet engine, 13% airframe, 7% defense. ATI’s sales to the commercial
aerospace market increased 8% in 2015 compared to 2014.
- Sales to the oil and gas/chemical and
hydrocarbon processing industry market were $538 million and
represented 14% of ATI sales: 9% oil & gas, 5% chemical and
hydrocarbon processing industry. ATI’s sales to these markets
decreased 28% in 2015 compared to 2014.
- Sales to the electrical energy market
were $368 million and represented 10% of ATI sales. ATI’s sales to
this market decreased 14% in 2015 compared to 2014.
- Sales to the automotive market were
$294 million and represented 8% of ATI sales.
- Sales to the medical market were $221
million and represented 6% of ATI sales.
- Direct international sales were $1.6
billion and represented 42% of ATI’s 2015 sales.
“Sales in our High Performance Materials & Components
segment were $457 million in the fourth quarter 2015, compared to
$475 million in the third quarter 2015, while segment operating
profit improved slightly to $21 million, or 4.6% of sales, compared
to $19 million or 4.0% of sales in the third quarter 2015,”
continued Rich Harshman. “Sales decreased for titanium and titanium
alloys due to the timing of orders in the aerospace airframe
market, which were more heavily weighted to earlier periods of
2015. Sales for other products in the segment were similar to third
quarter 2015 results.
“Flat Rolled Products segment sales were $282 million, down 21%
sequentially, and segment operating results were a loss of $120
million, compared to a loss of $92 million in the third quarter
2015. Segment results, which exclude $181 million of goodwill and
other long-lived asset impairment charges, reflect the continued
challenging market conditions, primarily impacting commodity
stainless flat-rolled products. Fourth quarter market conditions
continued to deteriorate in this business, due in large part to a
surge of imports into the U.S. market, and excess North American
and global capacities for commodity stainless steel sheet.
Base-selling prices for commodity stainless steel sheet products
have fallen throughout 2015 and reached historic lows in December.
In addition, weakness continued in the oil and gas/chemical and
hydrocarbon processing industry market, which has been the
segment’s largest end market. Falling raw material prices
negatively affected results, as pricing mechanisms that are
designed to recover material costs through indexes and surcharges
fell faster than the length of the manufacturing cycle.
“In December 2015, we announced the idling of the
standard/commodity stainless melt shop and finishing operations at
our Flat Rolled Products’ Midland, PA facility, and the idling of
our grain-oriented electrical steel (GOES) operations, including
the Bagdad, PA facility, both of which are expected to be completed
in early 2016. A $54 million non-cash impairment charge was
recorded in fourth quarter 2015 results to reduce the carrying
value of these operations, along with a $4 million charge for
idling costs. We also wrote off all $127 million of goodwill in the
Flat Rolled Products business as a fourth quarter 2015 non-cash
charge.
“Our negotiations with the United Steelworkers resumed in late
December. We have met several times over the last three weeks.
Overall, the dialogue has been generally constructive and we
continue to focus on reaching a fair and more competitive labor
agreement. In the meantime, we will continue to operate with our
salaried employees and temporary workers.
“Capital expenditures were $145 million in 2015, almost half of
which was related to the HRPF. This amount was lower than our third
quarter 2015 estimate because some HRPF payments shifted to early
2016.
“We maintained a solid liquidity position with $150 million in
cash and a $400 million asset-based domestic lending (ABL) facility
with our bank group, which was undrawn at year-end 2015. The ABL
facility contains no leverage or interest coverage ratios and is
collateralized by the accounts receivable and inventory of ATI’s
domestic operations. Total debt to total capital was 42.0% at
December 31, 2015, compared to 37.0% at the end of 2014.
“We made significant progress in 2015 in qualifying and fully
integrating several long-term strategic capital projects that
position ATI to grow our high-value products. These strategic
capital projects, specifically the Hot Rolling and Processing
Facility (HRPF) and the Rowley titanium sponge facility, have been
multi-year investments that are expected to begin to provide a
return on our invested capital after extensive construction and
qualification phases.
Strategy and Outlook
“ATI’s results in 2016 will reflect two differently situated
businesses. Our High Performance Materials & Components (HPMC)
segment is positioned to begin a multi-year period of sustained
profitable growth, supported by long-term agreements that provide
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 improved capacity utilization and product
mix in our mill products, forgings, and titanium investment casting
facilities, beginning in the first quarter 2016. We expect to
increase the pace throughout our HPMC operations as we progress
through 2016, driven primarily by the commercial aerospace market,
with segment operating profit as a percentage of sales returning to
double-digit levels by the second half of the year. This represents
significant and continuing improvement toward our goals of
long-term profitable growth and consistently earning a premium to
our cost of capital.
“In our Flat Rolled Products (FRP) segment, our first half 2016
results will reflect the ongoing rightsizing and restructuring
activities, including idling the Midland facility and our GOES
operations, during a period of continuing low raw material prices
and uncertain end market demand. As we continue to reposition this
business to a higher value product mix, we expect shipments of our
specialty coil and plate products to improve throughout 2016 and
benefit from the HRPF capabilities, particularly for our 48”-wide
nickel-based alloy sheet. As a result of these initiatives we
expect the FRP segment to be modestly profitable by the second half
of 2016.
“Cash generation from operations will be a key focus throughout
2016. We do not expect to pay any U.S. federal taxes in 2016 due to
net operating loss carryforwards, and we intend to carefully
balance our working capital and other cash needs with the pace of
our capital expenditure requirements. We currently expect 2016
capital expenditures to be approximately $240 million, including
our nickel alloy powder expansion ($45 million), final payments on
the HRPF ($70 million), completion of the expansion of our titanium
investment castings capacity ($10 million), and the expansion of
manufacturing capabilities at our STAL joint venture in China ($35
million), which is consolidated within ATI’s financial results. The
STAL capital expansion will be fully funded by STAL’s operations.
Depreciation and amortization expense in 2016 is forecasted to be
approximately $180 million.
“We currently expect 2016 pre-tax retirement benefit expense to
be about $98 million, or approximately $21 million higher than
2015, due primarily to lower pension assets. We do not expect to
make significant cash contributions to the U.S. qualified pension
plan in 2016.”
Financial Review
Fourth Quarter 2015 Charges for asset impairments,
restructuring, inventory and other items were $267.5 million
pretax:
- ATI conducted its annual goodwill
impairment analysis in the fourth quarter of 2015, and determined
that the fair value of this business was below its carrying value.
As a result, fourth quarter 2015 results include a $126.6 million
pretax, non-cash charge to write off all goodwill in the Flat
Rolled Products business. This goodwill primarily resulted from the
1993 acquisition of Jessop Steel by Allegheny Ludlum, a predecessor
ATI company.
- Restructuring and other charges were
$89.7 million in the fourth quarter 2015, as follows:
- In December 2015, ATI announced
rightsizing actions in the Flat Rolled Products business which
included the prospective 2016 idlings of the standard stainless
melt shop and finishing operations in Midland, PA, and the GOES
operations in Western PA including the Bagdad facility. Fourth
quarter 2015 results include a $54.5 million pretax, non-cash
impairment charge to reduce the carrying values of these
facilities. Fourth quarter results also include $3.5 million of
charges for future idling costs at these facilities.
- In December 2015, based on current
market prices for non-PQ titanium sponge, ATI recorded a $25.4
million non-cash charge to revalue this inventory. The charge
includes revised assessments of the non-PQ titanium market
conditions and expected utilization of this inventory.
- As announced in October 2015, in the
fourth quarter 2015 ATI implemented a salaried workforce reduction
in both the High Performance Materials & Components segment and
at ATI’s headquarters. Severance charges of $6.3 million were
recorded in the fourth quarter for this action.
- Net Realizable Value inventory reserve
charges were $51.2 million, which are required to offset ATI’s
aggregate net debit LIFO inventory balance that exceeds current
inventory replacement cost. The NRV reserve increase offset LIFO
inventory valuation reserve benefits of $51.3 million recorded in
the fourth quarter of 2015.
Quarterly Results
Three Months Ended Dec. 31, Sept.
30, Dec. 31, 2015 (a) 2015 (b)
2014 In Millions Sales $ 738.9 $ 832.7 $
1,047.5 Income (loss) from continuing operations
attributable to ATI before charges $ (59.6 ) $ (31.2 ) $ 19.9
Charges (167.3 ) (113.4 ) —
Income (loss) from continuing operations attributable to ATI $
(226.9 ) $ (144.6 ) $ 19.9
Per Diluted Share
Continuing operations attributable to ATI before charges $ (0.56 )
$ (0.29 ) $ 0.18 Charges (1.56 ) (1.06 )
— Continuing operations attributable to ATI $ (2.12 )
$ (1.35 ) $ 0.18 (a) Results for the three months
ended December 31, 2015 include $216.3 million pretax ($135.3
million after-tax, or $(1.26) per share), of impairment and
restructuring charges, and Net Realizable Value (NRV) inventory
charges of $51.2 million pretax ($32.0 million after-tax, or
$(0.30) per share). (b) Results for the three months ended
September 30, 2015 include $113.4 million of after-tax charges, or
$(1.06) per share, including NRV inventory valuation adjustments of
$49.5 million, or $(0.46) per share, and income tax valuation
allowances of $63.9 million, or $(0.60) per share.
Percentage of Total ATI Sales
Three Months Ended
Year Ended Dec. 31, Sept. 30,
Dec. 31, Dec. 31, Dec. 31,
High-Value Products 2015 2015
2014 2015 2014 Nickel-based alloys and
specialty alloys 27% 26% 27% 28% 26% Titanium and titanium alloys
18% 19% 15% 17% 15% Precision forgings, castings and components 16%
14% 13% 14% 13% Precision and engineered strip 14% 14% 13% 13% 13%
Zirconium and related alloys 9% 8% 6% 7% 6% Grain-oriented
electrical steel 3% 4% 4% 4% 4%
Total
High-Value Products 87% 85% 78% 83%
77%
Fourth Quarter and Full Year 2015 Financial Results
- Sales for the fourth quarter
2015 were $738.9 million, a decrease of 11% compared to the
third quarter 2015. Compared to the third quarter 2015, sales
decreased 4% in the High Performance Materials & Components
segment, primarily due to lower sales of titanium and titanium
alloys. Flat Rolled Products segment sales decreased 21% compared
to the third quarter 2015 due to lower shipments and lower selling
prices.
- Sales for the full year 2015
decreased 12% to $3.72 billion, compared to $4.22 billion for 2014.
Direct international sales were $1.6 billion and represented 42% of
total sales, compared to 38% for 2014. Compared to the full year
2014, sales decreased 1% in the High Performance Materials &
Components segment and 22% in the Flat Rolled Products
segment.
- Fourth quarter 2015 segment
operating loss was $99.1 million, or (13.4)% of sales, compared
to a loss of $73.0 million, or (8.8)% of sales in the third quarter
2015. High Performance Materials & Components segment operating
profit for the fourth quarter 2015 was $21.0 million, or 4.6% of
sales, compared to $18.8 million, or 4.0% of sales in the third
quarter 2015. Flat Rolled Products segment operating loss was
$120.1 million in the fourth quarter 2015, compared to a loss of
$91.8 million in the third quarter 2015.
- Full year 2015 segment operating
loss was $84.8 million, or (2.3)% of sales, compared to 2014
segment operating profit of $187.8 million, or 4.4% of sales. High
Performance Materials & Components segment operating profit for
the full year 2015 was $157.1 million, or 7.9% of sales, compared
to $234.8 million, or 11.7% of sales in 2014. Flat Rolled Products
segment operating loss was $241.9 million for the full year 2015,
compared to a loss of $47.0 million in 2014.
- The loss from continuing operations
attributable to ATI for the fourth quarter 2015 was $226.9
million, or $(2.12) per share, compared to a loss of $144.6
million, or $(1.35) per share, for the third quarter 2015. Results
for the fourth quarter 2015 included $167.3 million after-tax, or
$(1.56) per share, of impairment and restructuring charges and NRV
inventory charges compared to $113.4 million after-tax, or $(1.06)
per share of NRV inventory charges and income tax valuation
allowances in the third quarter 2015. Excluding these charges from
both 2015 periods, the loss from continuing operations was $59.6
million, or $(0.56) per share, in the fourth quarter compared to
$31.2 million, or $(0.29) per share, in the third quarter
2015.
- Full year 2015 loss from continuing
operations attributable to ATI was $377.9 million, or $(3.53)
per share, including all charges, compared to the full year 2014
loss of $2.0 million, or $(0.02) per share.
- Cash on hand at the end of 2015
was $149.8 million, a $119.7 million decrease from year-end 2014.
Cash flow provided by operations was $22.5 million in the fourth
quarter 2015 and $131.4 million for the full year 2015.
High Performance Materials & Components Segment
Market Conditions
- Sales to the commercial jet engine
market in the fourth quarter 2015 were slightly higher compared to
the third quarter 2015. Government aerospace and defense sales were
also higher sequentially, while sales to the commercial airframe
market were weaker. Sales to the medical market were 2% higher,
while oil & gas/chemical and hydrocarbon processing industry
and construction and mining markets remained at lower levels. Sales
of our titanium and titanium alloys declined 15%, and sales of our
nickel-based and specialty alloys were flat compared to the third
quarter 2015. Sales of zirconium and related alloys improved 10%,
and sales of precision forgings and castings increased 2% compared
to the third quarter 2015. Direct international sales represented
over 43% of total segment sales for 2015.
Fourth quarter 2015 compared to fourth quarter 2014
- Sales decreased 9% to $457.3 million
compared to the fourth quarter 2014, primarily as a result of lower
mill product shipments. Sales to the aerospace market, which
represented over 60% of fourth quarter 2015 sales, were 6% lower
than the prior year quarter as higher sales to the commercial jet
engine market were offset by lower sales in commercial airframe
market due to the timing of orders. Sales to the oil &
gas/chemical and hydrocarbon processing industry decreased 68%
compared to the fourth quarter 2014 due to significant supply chain
rebalancing. Sales to the medical market comprised 11% of segment
sales and increased 9% compared to the fourth quarter 2014.
- Segment operating profit was $21.0
million, or 4.6% of sales. This compares to $72.3 million, or 14.4%
of sales in the fourth quarter 2014. Results for 2015 were
negatively impacted by lower operating levels due to lower demand
from the oil & gas/chemical and hydrocarbon processing industry
and construction and mining markets, which mainly affected nickel
and specialty steel alloys and precision forging products. Results
were also negatively impacted by the misalignment of raw material
costs due to the long manufacturing cycle of certain products not
matching lower raw material index values included in selling
prices.
Flat Rolled Products Segment
Market Conditions
- Weak market conditions, particularly
for commodity standard stainless products, continued to worsen in
the fourth quarter of 2015. Sales of standard grade stainless sheet
and plate products were 26% lower on 15% lower shipment volume, and
sales of high-value products were 20% lower on 17% lower shipment
volume, compared to the third quarter of 2015. Declining raw
material surcharges contributed to the decline in sales. Flat
Rolled Products segment shipment information is presented in the
attached Selected Financial Data – Mill Products table.
Fourth quarter 2015 compared to fourth quarter 2014
- Sales were $281.6 million, nearly 50%
below the prior year period, due to weak market conditions and
lower sales for all major products. Shipments of high-value
products decreased 32% compared to the fourth quarter 2014, and
shipments of standard stainless products decreased 43%. Average
selling prices were 12% lower for high-value products and 32% lower
for standard stainless products.
- Segment operating results were a loss
of $120.1 million, compared to a 2014 segment operating loss of
$14.3 million. The monthly average LME-traded price of nickel
declined from $7.22 per pound in December 2014 to $3.94 per pound
in December 2015. These changes combined with lower base selling
prices for most products had significant negative impacts on
segment results. Lower operating levels due primarily to weak
market conditions also negatively impacted segment results.
Income Taxes
- Fourth quarter results included a
benefit for income taxes of $135.8 million, using a 37.5% tax rate
applied to the pretax loss, and $1.3 million of discrete tax
benefits, net. ATI continues to record income tax valuation
allowances on a portion of its deferred tax assets with future
expiration dates, as a result of a three year cumulative loss from
U.S. operations. For the full year 2015, the total impact of income
tax valuation allowances was $68.4 million, which reduced the tax
benefit recognized on the 2015 pretax loss, and primarily related
to tax benefits recognized in prior periods. The Company expects to
continue to record income tax valuation allowances for a portion of
its deferred tax assets while it remains in this three-year
cumulative loss position.
Allegheny Technologies will conduct a conference call with
investors and analysts on Tuesday, January 26, 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
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 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 stoppage, including the current
lockout of USW-represented employees; and (h) other risk factors
summarized in our Annual Report on Form 10-K for the year ended
December 31, 2014, 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 $3.7 billion in 2015. At
December 31, 2015, ATI had approximately 9,200 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 and hydrocarbon
processing 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 2015
2015 2014 2015 2014 Sales
$ 738.9 $ 832.7 $ 1,047.5
$ 3,719.6 $ 4,223.4 Costs and expenses:
Cost of sales 811.0 861.4 925.6 3,633.9 3,844.8 Selling and
administrative expenses 40.8 62.5 70.4 238.8 272.5 Impairment of
goodwill 126.6 - - 126.6 - Restructuring and other charges
89.7 - - 89.7
- Income (loss) before interest, other income and
income taxes (329.2 ) (91.2 ) 51.5 (369.4 ) 106.1 Interest expense,
net (29.2 ) (27.5 ) (25.9 ) (110.2 ) (108.7 ) Other income
(expense), net (0.7 ) 0.8 1.2
1.6 4.1 Income (loss) from continuing
operations before income taxes (359.1 ) (117.9 ) 26.8 (478.0 ) 1.5
Income tax provision (benefit) (135.8 ) 23.4
3.7 (112.1 ) (8.7 )
Income (loss)
from continuing operations (223.3 ) (141.3
) 23.1 (365.9 ) 10.2 Income
(loss) from discontinued operations, net of tax -
- 2.2 - (0.6 )
Net income (loss) $ (223.3 ) $
(141.3 ) $ 25.3 $ (365.9
) $ 9.6 Less: Net income attributable to
noncontrolling interests 3.6 3.3
3.2 12.0 12.2
Net income
(loss) attributable to ATI $ (226.9 )
$ (144.6 ) $ 22.1
$ (377.9 ) $ (2.6 )
Basic net income (loss) per common share
Continuing operations attributable to ATI per common share
$ (2.12 ) $ (1.35 )
$ 0.18 $ (3.53 ) $
(0.02 ) Discontinued operations attributable to ATI
per common share - - 0.02
- (0.01 )
Basic net income (loss)
attributable to ATI per common share $ (2.12
) $ (1.35 ) $ 0.20
$ (3.53 ) $ (0.03 )
Diluted net income (loss) per common share
Continuing operations attributable to ATI per common share
$ (2.12 ) $ (1.35 )
$ 0.18 $ (3.53 ) $
(0.02 ) Discontinued operations attributable to ATI
per common share - - 0.02
- (0.01 )
Diluted net income (loss)
attributable to ATI per common share $ (2.12
) $ (1.35 ) $ 0.20
$ (3.53 ) $ (0.03 )
Amounts attributable to ATI common stockholders
Income (loss) from continuing operations, net of tax
$ (226.9 ) $ (144.6 )
$ 19.9 $ (377.9 ) $
(2.0 ) Income (loss) from discontinued operations,
net of tax - - 2.2
- (0.6 )
Net income (loss) $
(226.9 ) $ (144.6 ) $
22.1 $ (377.9 ) $
(2.6 )
Weighted average common shares outstanding
-- basic (millions)
107.3 107.3 107.2 107.3 107.1
Weighted average common shares outstanding
-- diluted (millions)
107.3 107.3 107.9 107.3 107.1
Actual common shares outstanding -- end of
period (millions)
109.2 109.2 108.7 109.2 108.7
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 2015 2015
2014 2015 2014 Sales: High Performance
Materials & Components $ 457.3 $ 474.7 $ 500.6 $ 1,985.9 $
2,006.8 Flat Rolled Products 281.6 358.0
546.9 1,733.7 2,216.6
Total External Sales $ 738.9
$ 832.7 $ 1,047.5
$ 3,719.6 $ 4,223.4
Operating Profit (Loss): High Performance Materials
& Components $ 21.0 $ 18.8 $ 72.3 $ 157.1 $ 234.8 % of Sales
4.6 % 4.0 % 14.4 % 7.9 % 11.7 % Flat Rolled Products (120.1
) (91.8 ) (14.3 ) (241.9 ) (47.0 ) % of Sales -42.6 %
-25.6 % -2.6 % -14.0 % -2.1 %
Operating Profit (Loss) (99.1 ) (73.0
) 58.0 (84.8 ) 187.8 % of Sales
-13.4 % -8.8 % 5.5 % -2.3 % 4.4 % LIFO and net
realizable value reserves 0.1 (0.2 ) 13.2 0.1 0.3 Corporate
expenses (11.1 ) (10.7 ) (12.3 ) (44.7 ) (49.6 ) Closed
company and other expenses (3.5 ) (6.5 ) (6.2 ) (22.1 ) (28.3 )
Impairment of goodwill (126.6 ) - - (126.6 ) -
Restructuring and other charges (89.7 ) - - (89.7 ) -
Interest expense, net (29.2 ) (27.5 ) (25.9 )
(110.2 ) (108.7 )
Income (loss) from
continuing operations before income taxes $
(359.1 ) $ (117.9 ) $
26.8 $ (478.0 ) $
1.5 Allegheny Technologies Incorporated and
Subsidiaries Condensed Consolidated Balance Sheets
(Unaudited, dollars in millions)
December
31, December 31, 2015 2014 * ASSETS
Current Assets: Cash and cash equivalents $ 149.8 $
269.5
Accounts receivable, net of allowances for
doubtful accounts of $4.5 million and $4.8 million at December 31,
2015 and 2014, respectively
400.3 603.6 Inventories, net 1,271.6 1,472.8 Prepaid expenses and
other current assets 45.9 136.2
Total Current
Assets 1,867.6 2,482.1 Property, plant and
equipment, net 2,928.2 2,961.8 Cost in excess of net assets
acquired 651.4 780.4 Other assets 304.5 347.4
Total Assets $ 5,751.7 $ 6,571.7
LIABILITIES AND EQUITY Current
Liabilities: Accounts payable $ 380.8 $ 556.7 Accrued
liabilities 301.8 323.2
Short term debt and current portion of
long-term debt
3.9 17.8
Total Current Liabilities
686.5 897.7 Long-term debt 1,491.8 1,498.2
Accrued postretirement benefits 359.2 415.8 Pension liabilities
833.8 739.3 Deferred income taxes 75.6 143.1 Other long-term
liabilities 108.3 156.2
Total Liabilities
3,555.2 3,850.3 Redeemable
noncontrolling interest 12.1 12.1 Total
ATI stockholders' equity 2,082.8 2,598.4 Noncontrolling interests
101.6 110.9
Total Equity 2,184.4
2,709.3 Total Liabilities and Equity
$ 5,751.7 $ 6,571.7 * Due to the
retrospective adoption of new accounting standards in 2015, the
December 31, 2014 balance sheet now reflects $10.9 million of debt
issuance costs reclassified from other assets to long-term debt and
$62.2 million of deferred income tax liabilities reclassified from
accrued liabilities to noncurrent deferred income taxes.
Allegheny Technologies Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited,
dollars in millions)
Fiscal Year Ended
December 31 2015 2014
Operating Activities: Net income (loss) $ (365.9 ) $
9.6 Depreciation and amortization 189.9 176.8 Impairment of
goodwill 126.6 - Non-cash restructuring and other charges 54.5 -
Deferred taxes (118.0 ) 31.7 Change in managed working capital
229.0 (148.0 ) Change in retirement benefits 14.3 3.1 Accrued
liabilities and other 1.0 (17.3 )
Cash
provided by operating activities 131.4
55.9 Investing Activities: Purchases of
property, plant and equipment (144.5 ) (225.7 ) Purchases of
businesses, net of cash acquired (0.5 ) (92.9 ) Asset disposals and
other (0.1 ) 2.4
Cash used in investing
activities (145.1 ) (316.2
) Financing Activities: Payments on long-term debt and
capital leases (23.6 ) (414.9 ) Net borrowings under credit
facilities 1.5 - Debt issuance costs - (1.2 ) Dividends paid to
shareholders (66.5 ) (77.1 ) Dividends paid to noncontrolling
interests (16.0 ) - Taxes on share-based compensation and other
(1.4 ) (3.8 )
Cash used in financing
activities (106.0 ) (497.0
) Decrease in cash and cash equivalents (119.7
) (757.3 ) Cash and cash equivalents at
beginning of period 269.5 1,026.8
Cash and cash equivalents at end of period $
149.8 $ 269.5
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 2015
2015 2014 2015 2014 Shipment
Volume: Flat Rolled Products (000's lbs.) High value
86,155 104,042 125,926 449,461 508,753 Standard 89,397
104,690 156,186 514,035 678,022 Flat
Rolled Products total 175,552 208,732 282,112 963,496 1,186,775
Average Selling Prices: Flat Rolled
Products (per lb.) High value $ 2.26 $ 2.34 $ 2.58 $ 2.51 $ 2.53
Standard $ 0.94 $ 1.08 $ 1.39 $ 1.16 $ 1.35 Flat Rolled Products
combined average $ 1.59 $ 1.71 $ 1.92 $ 1.79 $ 1.86
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
2015 2015 2014 2015 2014
Continuing operations: Numerator for Basic net income (loss)
per common share - Income (loss) from continuing operations
attributable to ATI $ (226.9 ) $ (144.6 ) $ 19.9 $ (377.9 ) $ (2.0
) Redeemable noncontrolling interest -
(0.2 ) (0.3 ) (0.3 ) (0.3 ) Numerator for
Dilutive net income (loss) per common share -
Income (loss) from continuing operations
attributable to ATI after assumed conversions
$ (226.9 ) $ (144.8 ) $ 19.6 $ (378.2 ) $ (2.3 )
Denominator for Basic net income (loss) per common share - Weighted
average shares outstanding 107.3 107.3 107.2 107.3 107.1 Effect of
dilutive securities: Share-based compensation -
- 0.7 - -
Denominator for Diluted net income (loss) per common share -
Adjusted weighted average assuming conversions 107.3
107.3 107.9 107.3
107.1
Basic income (loss) from continuing
operations attributable to ATI per common share
$ (2.12 ) $ (1.35 )
$ 0.18 $ (3.53 ) $
(0.02 )
Diluted income (loss) from continuing
operations attributable to ATI per common share
$ (2.12 ) $ (1.35 )
$ 0.18 $ (3.53 ) $
(0.02 ) Allegheny Technologies Incorporated
and Subsidiaries Other Financial Information Managed
Working Capital (Unaudited, dollars in millions)
December 31 2015 2014 Accounts
receivable $ 400.3 $ 603.6 Inventory 1,271.6 1,472.8 Accounts
payable (380.8 ) (556.7 ) Subtotal 1,291.1 1,519.7
Allowance for doubtful accounts 4.5 4.8 LIFO reserve 5.1
(4.8 ) Inventory reserves 64.8 68.8 Corporate and other -
6.0 Managed working capital $ 1,365.5 $
1,594.5
Annualized prior 2 months sales
$ 2,688.8 $ 4,144.5
Managed working capital as a % of
annualized sales
50.8 % 38.5 %
December 31, 2015 change in managed
working capital
$ (229.0 )
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
2015 2014 Total debt (a) $ 1,505.2 $ 1,526.9
Less: Cash (149.8 ) (269.5 ) Net debt $ 1,355.4 $
1,257.4 Net debt $ 1,355.4 $ 1,257.4 Total ATI stockholders'
equity 2,082.8 2,598.4 Net ATI capital
$ 3,438.2 $ 3,855.8
Net debt to ATI capital
39.4 % 32.6 % Total debt
(a) $ 1,505.2 $ 1,526.9 Total ATI stockholders' equity
2,082.8 2,598.4 Total ATI capital $ 3,588.0 $
4,125.3
Total debt to total ATI capital
42.0 % 37.0 % (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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160126005783/en/
Allegheny Technologies IncorporatedDan L. Greenfield,
412-394-3004
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