Fourth Quarter 2017 Results
- Sales were $910 million, 14% higher
than Q4 2016
- High Performance Materials &
Components sales of $518 million, increased 9% versus prior
year
- Flat Rolled Products sales of $392
million, up 23% versus prior year
- Business segment operating profit
was $88.2 million, or 10% of sales
- HPMC segment operating profit was
$65.8 million, or 12.7% of sales
- FRP segment operating profit was
$22.4 million, or 5.7% of sales
- Net income attributable to ATI was
$1.7 million, or $0.01 per share
- Adjusted net income attributable to
ATI of $34.6 million, or $0.27 per share, excluding debt
extinguishment charge and tax legislation benefits
Full Year 2017 Results
- Sales were $3.5 billion, up 13%
versus prior year
- 49% of ATI sales to the aerospace
and defense markets
- Segment operating profit was $283.4
million, or 8% of sales
- HPMC segment operating profit was
$246.4 million, or 12% of sales
- FRP segment operating profit was
$37.0 million, or 3% of sales
- Net loss attributable to ATI was
$91.9 million, or $(0.83) per share
- Adjusted net income attributable to
ATI of $54.6 million, or $0.48 per share, excluding goodwill
impairment, debt extinguishment charges, and tax legislation
benefits
- HPMC sales and profit growth driven
by continued aerospace market ramp
- FRP segment returned to
profitability, driven by product mix and business
improvements
Allegheny Technologies Incorporated (NYSE: ATI) reported fourth
quarter 2017 results, with sales of $910 million and net income
attributable to ATI of $1.7 million, or $0.01 per share. Adjusted
fourth quarter 2017 net income attributable to ATI was $34.6
million, or $0.27 per share, excluding a debt extinguishment charge
of $37.0 million, net of tax, or $(0.29) per share, for the full
redemption of the $350 million, 9.375% Senior Notes due 2019, and
$4.1 million of tax benefits from the 2017 Tax Cuts and Jobs Act
legislation.
For full year 2017, sales increased 13%, to $3.5 billion, and
segment operating profit was $283.4 million, or 8.0% of sales. For
the full year 2017 the company reported a net loss attributable to
ATI of $91.9 million, or $(0.83) per share. Adjusted net income
attributable to ATI was $54.6 million, or $0.48 per share,
excluding goodwill impairment and debt extinguishment charges, and
tax legislation benefits.
“Fourth quarter results represented a solid finish to a year of
strategic accomplishments for ATI,” said Rich Harshman, Chairman,
President and Chief Executive Officer. “We achieved fourth quarter
profitability despite a $37 million debt extinguishment charge.
Adjusted fourth quarter results were $0.27 per share, with improved
year over year performance in both business segments. Continued
strong sales of next-generation jet engine products, which were up
26% versus the prior year quarter, drove fourth quarter High
Performance Materials & Components (HPMC) segment operating
profit margins to 12.7% of sales. HPMC segment sales of our
specialty materials, including powders, continued to meet our
growth expectations. Our titanium castings business continues to
improve and we are working diligently to meet elevated customer
demand levels. We expect the titanium castings business to be near
break-even for 2018, and return to profitability in 2019.
“Our Flat Rolled Products (FRP) segment performed solidly in the
fourth quarter, generating over $22 million of segment operating
profit, or nearly 6% of sales. This was our best quarter in the FRP
segment in the last five years. As expected, the third quarter’s
significantly negative out-of-phase raw material surcharge
condition proved to be temporary. Fourth quarter FRP results
benefitted from a stronger mix of high-value products, including
higher project-related demand, improved raw material surcharges,
and positive impacts from cost reductions.
“2017 was a year of important milestones in our ongoing journey
to deliver sustainable long-term profitable growth. In the HPMC
segment, our next-generation, differentiated jet engine product mix
continued to improve, with sales of these products up 35% compared
to 2016, and our airframe titanium product shipments remained
strong. We signed strategic long-term agreements that are expected
to drive HPMC’s growth trajectory for the next several years,
including a long-term agreement with Pratt & Whitney to supply
isothermal forgings and powder alloys for next-generation jet
engines. In addition, we formed Next Gen Alloys, a joint venture
with GE Aviation to develop a new meltless titanium alloy powder
manufacturing technology. Finally, we continued to develop our
advanced powder production capabilities. Our nickel-based powder
alloy expansion in North Carolina was completed and is expected to
be commercially qualified in early 2018, and we recently announced
plans for a titanium powder expansion to be located on the same
site.
“In 2017, our FRP segment made significant progress in achieving
sustainable profitability. We took important steps toward improving
the capacity utilization of our Hot-Rolling and Processing
Facility, most notably with the announced Allegheny & Tsingshan
Stainless joint venture to manufacture 60” wide stainless sheet,
which is expected to be formed in early 2018.”
- ATI’s sales to the key global markets
of aerospace and defense, oil & gas, automotive, medical and
electrical energy represented 79% of ATI sales for 2017:
- Sales to the aerospace and defense
markets were $1.7 billion and represented 49% of ATI sales: 27%
commercial jet engine, 14% commercial airframe, 8% government
aero/defense.
- Sales to the oil & gas market were
$418 million and represented 12% of ATI sales.
- Sales to the automotive market were
$274 million and represented 8% of ATI sales.
- Sales to the electrical energy market
were $192 million and represented 5% of ATI sales.
- Sales to the medical market were $183
million and represented 5% of ATI sales.
- Direct international sales represented
41% of ATI’s 2017 sales.
“As of December 31, 2017, cash on hand was $142 million and
available additional liquidity under our asset-based lending (ABL)
credit facility was approximately $305 million, with no borrowings
under the revolving credit portion. We generated $76 million of
cash flow from operations in the fourth quarter, including a $30
million investment in managed working capital, primarily
attributable to large pipeline project orders, which will be
delivered to our customers in early 2018, along with initial
materials received to support the proposed Allegheny &
Tsingshan Stainless joint venture. Capital expenditures for 2017
were $123 million, including $37 million in the fourth
quarter.”
Strategy and Outlook
“Looking ahead to 2018, we expect continued revenue growth and
operating margin improvement in our HPMC segment resulting from
ongoing aerospace market demand growth and improved asset
utilization,” Harshman said. “We remain confident in the
continuation of our customers’ elevated order patterns stemming
from increasing jet engine build rates over the next several years.
Our focus continues to be on operational execution, continuous
improvement initiatives, and on meeting the aerospace production
ramp requirements. In addition, we anticipate that the 2017
financial challenges experienced in our castings business and
expenses associated with the start-up and qualification of our new
nickel alloys powder facility will provide meaningful profit
improvement opportunities in 2018.
“In 2018, we expect the FRP segment to build on the operational
improvements and product mix benefits achieved in 2017, and to
improve operating margins year over year. However, first quarter
results are expected to be negatively impacted by approximately $10
million, compared to fourth quarter 2017, due to required
accounting changes on retirement benefit cost capitalization in
inventory, as well as lower ferrochrome surcharges. We expect the
production ramp-up of the planned Allegheny & Tsingshan
Stainless joint venture to meaningfully benefit second half 2018
FRP results.
“Looking forward, we will be relentless in our drive to enhance
ATI’s technology leadership in differentiated specialty materials
and components, generate healthy cash flow from operations, improve
our competitive cost position, and strengthen our balance sheet,”
concluded Harshman.
The company expects 2018 consolidated capital expenditures to
range between $100 million to $125 million, reflecting continued
strategic investments in capacity to support business growth
requirements. This consolidated capital expenditure range includes
Next Gen Alloys, with approximately half of the total expected $25
million capital expenditure in 2018 funded by GE. Projected capital
expenditures for 2018 also include $22 million related to the
completion of the 60%-owned STAL joint venture expansion project in
China, which is funded entirely through joint venture cash and
operations. Following the common stock offering and redemption of
our 2019 Senior Notes, we expect 2018 interest expense to be lower
by approximately $32 million versus 2017. Defined benefit pension
and postretirement benefit plan expenses for 2018 are expected to
be lower by approximately $19 million compared to 2017.
Fourth Quarter and Full Year 2017 Financial Results
- Sales for the fourth quarter
2017 were $909.9 million, a 5% increase compared to the third
quarter 2017 and a 14% increase compared to the fourth quarter
2016. Sales for the full year 2017 increased 13% to $3.53 billion,
compared to $3.13 billion for 2016. Compared to the full year 2016,
sales increased 7% in the HPMC segment and 21% in the FRP segment.
HPMC sales in 2017 reflect stronger demand for nickel-based and
specialty alloy products and components. FRP sales in 2017 include
a stronger mix of high-value products, particularly nickel-based
alloys.
- Net income attributable to ATI
for the fourth quarter 2017 was $1.7 million, or $0.01 per share,
and adjusted net income of $34.6 million, or $0.27 per share,
excluding the debt extinguishment charge and tax legislation
benefits. This compares to the third quarter 2017 net loss
attributable to ATI of $121.2 million, or $(1.12) per share, and an
adjusted loss of $7.6 million, or $(0.07) per share, excluding a
$113.6 million goodwill impairment charge, net of tax, and fourth
quarter 2016 net income attributable to ATI of $9.9 million, or
$0.09 per share, and an adjusted net loss attributable to ATI of
$3.9 million, or $(0.04) per share. For the full year 2017, the net
loss attributable to ATI was $91.9 million, or $(0.83) per share,
and on an adjusted basis was net income attributable to ATI of
$54.6 million, or $0.48 per share, excluding the above-mentioned
goodwill impairment and debt extinguishment charges, and tax
legislation benefits. Results include impacts from income taxes
which differ from a standard tax rate, primarily related to impacts
of income tax valuation allowances, as well as non-deductible
goodwill for the third quarter 2017.
Quarterly
Results
Three Months Ended Dec. 31, Sept.
30, Dec 31, 2017 2017 2016
In Millions Sales $ 909.9 $ 869.1 $ 796.1 Income
(loss) attributable to ATI $ 1.7 $ (121.2 ) $ 9.9 Adjusted for
special items: Debt extinguishment charge, net of tax 37.0 – –
Goodwill impairment, net of tax – 113.6 – Restructuring and other
charges, net of tax – – 18.6 Income tax items including valuation
allowances (4.1 ) – (32.4 ) Income
(loss) attributable to ATI before special items $ 34.6 $ (7.6 ) $
(3.9 )
Per Diluted Share Income (loss) attributable
to ATI $ 0.01 $ (1.12 ) $ 0.09 Adjusted for special items: Debt
extinguishment charge, net of tax 0.29 – – Goodwill impairment, net
of tax – 1.05 – Restructuring and other charges, net of tax – –
0.17 Income tax items including valuation allowances (0.03 )
– (0.30 ) Income (loss) attributable to ATI
before special items $ 0.27 $ (0.07 ) $ (0.04 )
- Cash on hand at December 31,
2017 was $141.6 million, with $76.2 million provided by operations
in the fourth quarter 2017. For the full year 2017, cash provided
by operations was $22.4 million, including a $135.0 million
contribution to the ATI Pension Plan, or $157.4 million excluding
the pension contribution. Cash used in investing activities was
$119.6 million, with $122.7 million for capital expenditures
slightly offset by cash proceeds from sales of miscellaneous
assets.
- We de-levered the balance sheet
in the fourth quarter 2017 through a common stock offering. In
November 2017, we issued 17 million shares of common stock at
$24.00 per share before expenses, and received $397.8 million, net
of transaction costs. Proceeds from the stock offering were used to
redeem all $350 million aggregate principal amount of our 9.375%
Senior Notes due 2019, resulting in a $37.0 million debt
extinguishment charge, which included a $35.8 million cash payment
as a make-whole provision on the early extinguishment of debt, and
a $1.2 million charge for previously-unrecognized debt issue costs.
For the full year 2017, cash provided by financing activities
including these actions was $9.2 million.
High Performance Materials & Components
SegmentMarket Conditions
- Aerospace and defense sales in the
fourth quarter 2017 were $399.0 million, 2% higher than the third
quarter 2017, and represented 77% of total segment sales. Compared
to the third quarter, commercial aerospace sales were flat and
government aero/defense sales were 17% higher. Sales to other key
end markets were comparable to the third quarter, as total HPMC
fourth quarter sales increased 1% over the third quarter 2017.
Sales of our nickel-based and specialty alloys were 12% higher,
while sales of other products were lower, compared to the third
quarter 2017. Direct international sales represented 47% of total
segment sales for the fourth quarter 2017.
Fourth quarter 2017 compared to fourth quarter 2016
- Sales were $517.7 million, a 9%
increase compared to the fourth quarter 2016, primarily due to
higher sales of nickel-based and specialty alloys and forged and
cast components. Sales to the commercial aerospace market, which
represented 63% of fourth quarter 2017 sales, were 8% higher than
the fourth quarter 2016, including a 10% increase in sales to the
commercial jet engine market. Construction and mining market sales
were 65% higher, and sales to the oil & gas market improved 37%
in the fourth quarter 2017, both from low prior year demand levels.
Sales to the medical market were 16% lower primarily due to
increased competition in MRI end uses.
- Segment operating profit improved to
$65.8 million, or 12.7% of sales, compared to $53.8 million, or
11.3% of sales for the fourth quarter 2016. This operating profit
improvement reflects higher productivity from increasing aerospace
and defense sales, an improved product mix of next-generation
nickel alloys and forgings for the aero engine market, and the
benefits from the 2016 titanium operations restructuring
activities, including idling the Rowley, UT titanium sponge
operations.
Flat Rolled Products SegmentMarket Conditions
- In the fourth quarter 2017, market
conditions improved significantly in the oil & gas market,
including project-based demand for chemical and hydrocarbon
processing applications. Sales to the oil & gas market were
$114.3 million, a 36% increase compared to the third quarter 2017.
Sales were higher to the automotive and consumer durables markets,
and were stable in aerospace and defense and construction and
mining markets. Sales increased 18% for high-value products
compared to the third quarter 2017. Sales of standard grade
stainless sheet and plate products decreased 5% on lower shipment
volumes, as customers managed year-end inventory levels. Direct
international sales increased to 39% of total fourth quarter 2017
segment sales, largely due to international oil & gas
projects.
Fourth quarter 2017 compared to fourth quarter 2016
- Sales were $392.2 million, a $73.3
million, or 23%, increase compared to the prior year period, due to
higher shipment volume for high-value products, and slightly higher
selling prices for both high-value and standard stainless products.
Sales to the oil & gas market were $44.3 million higher,
representing 60% of the total sales increase.
- Segment operating profit was $22.4
million, or 5.7% of sales, compared to a fourth quarter 2016
segment operating loss of $0.8 million, or (0.3%) of sales. 2017
results were favorably impacted by an improved product mix,
particularly for nickel-alloy and titanium products, and more
stable raw material prices. 2017 results also reflect the benefits
of cost reductions and significant restructuring actions
implemented over the last few years.
Corporate Expenses
- Corporate expenses decreased $1.2
million compared to the third quarter 2017, due primarily to lower
incentive compensation costs. For the full year 2017, corporate
expenses were $7.1 million higher than 2016, primarily due to
higher incentive compensation costs as well as start-up and
research and development costs for Next Gen Alloys.
Closed Operations and Other Expenses
- Closed operations and other expenses in
the fourth quarter 2017 were $5.6 million, which was $6.6 million
lower than the third quarter 2017, and included a $3.7 million
benefit for reductions in liabilities for legacy employee benefit
programs, and lower costs of closed facilities. For the full year
2017, closed operations and other expenses were comparable to the
prior year, as lower closed facility costs, benefit program
changes, and higher royalty income were offset by increased foreign
currency exchange losses and other legacy costs of closed
operations, compared to prior year amounts.
Income Taxes
- ATI continues to maintain income tax
valuation allowances on its U.S. federal and state deferred tax
assets. As a result, the remeasurement of our deferred tax assets
and liabilities due to lower enacted tax rates in the Tax Cuts and
Jobs Act did not have a significant impact on fourth quarter
results. A $4.1 million tax benefit was recognized on the
remeasurement of certain tax attributes, mainly indefinite-lived
deferred tax liabilities.
- ATI does not expect to pay any
significant U.S. federal or state income taxes for the next few
years due to net operating loss carryforwards. Tax law changes in
the Tax Cuts and Jobs Act related to a liability for foreign
earnings are expected to be offset with these net operating loss
carryforwards or other tax attributes.
Allegheny Technologies will conduct a conference call with
investors and analysts on Tuesday, January 23, 2018, 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 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, which may contain such
words as “anticipates,” “believes,” “estimates,” “expects,”
“would,” “should,” “will,” “will likely result,” “forecast,”
“outlook,” “projects,” and similar expressions, 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. Our performance or achievements may differ
materially from those expressed or implied in any forward-looking
statements due to the following factors, among others: (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; (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; (d) volatility in the price and
availability 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) labor
disputes or work stoppages; (g) equipment outages and (h) other
risk factors summarized in our Annual Report on Form 10-K for the
year ended December 31, 2016, 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™
ATI is a global manufacturer of technically advanced specialty
materials and complex components. With revenue of $3.5 billion for
the twelve month period ended December 31, 2017, our largest market
is aerospace & defense, particularly jet engines. We also have
a strong presence in the oil & gas, electrical energy, medical,
automotive, and other industrial markets. ATI is a market leader in
manufacturing differentiated specialty alloys and forgings that
require our unique manufacturing and precision machining
capabilities and our innovative new product development competence.
We are a leader in producing powders for use in next-generation jet
engine forgings and 3D-printed aerospace products.
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 2017 2017
2016 2017 2016 Sales $
909.9 $ 869.1 $ 796.1 $
3,525.1 $ 3,134.6 Cost of sales
779.3 775.8 698.8 3,076.1
2,972.1 Gross profit 130.6 93.3 97.3 449.0
162.5 Selling and administrative expenses 61.9 66.2 65.3
254.3 247.7 Impairment of goodwill - 114.4 - 114.4 - Restructuring
charges - - 28.6 -
527.2 Operating income (loss) 68.7 (87.3 ) 3.4
80.3 (612.4 ) Interest expense, net (31.6 ) (34.2 ) (32.8 ) (133.8
) (124.0 ) Debt extinguishment charge (37.0 ) - - (37.0 ) - Other
income, net 0.3 0.2 0.6
4.0 2.4 Income (loss) before income
taxes 0.4 (121.3 ) (28.8 ) (86.5 ) (734.0 ) Income tax benefit
(4.8 ) (1.9 ) (42.5 ) (6.8 )
(106.9 )
Net income (loss) $ 5.2 $
(119.4 ) $ 13.7 $ (79.7
) $ (627.1 ) Less: Net income
attributable to noncontrolling interests 3.5
1.8 3.8 12.2 13.8
Net income (loss) attributable to ATI $ 1.7
$ (121.2 ) $ 9.9
$ (91.9 ) $ (640.9 )
Basic net income (loss) attributable to ATI per common
share $ 0.01 $ (1.12
) $ 0.09 $ (0.83 )
$ (5.97 ) Diluted net income (loss)
attributable to ATI per common share $ 0.01
$ (1.12 ) $ 0.09
$ (0.83 ) $ (5.97 )
Weighted average common shares outstanding -- basic
(millions) 117.5 107.7 107.3 110.1 107.3 Weighted average common
shares outstanding -- diluted (millions) 118.6 107.7 108.7 110.1
107.3 Actual common shares outstanding-- end of period (millions)
125.9 108.9 108.9 125.9 108.9
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 2017
2017 2016 2017 2016 Sales: High
Performance Materials & Components $ 517.7 $ 512.9 $ 477.2 $
2,067.4 $ 1,930.4 Flat Rolled Products 392.2
356.2 318.9 1,457.7
1,204.2
Total External Sales $
909.9 $ 869.1 $
796.1 $ 3,525.1 $
3,134.6 Operating Profit (Loss): High
Performance Materials & Components $ 65.8 $ 61.7 $ 53.8 $ 246.4
$ 168.7 % of Sales 12.7 % 12.0 % 11.3 % 11.9 % 8.7 % Flat
Rolled Products 22.4 (7.3 ) (0.8 ) 37.0 (163.0 ) % of Sales
5.7 % -2.0 % -0.3 % 2.5 % -13.5 %
Operating Profit 88.2 54.4 53.0
283.4 5.7 % of Sales 9.7 % 6.3 % 6.7 % 8.0 % 0.2 %
LIFO and net realizable value reserves - (0.1 ) 0.4
(0.2 ) 0.8 Corporate expenses (13.6 ) (14.8 ) (10.8 ) (50.5
) (43.4 ) Closed operations and other expenses (5.6 ) (12.2
) (10.0 ) (34.0 ) (34.6 ) Impairment of goodwill - (114.4 )
- (114.4 ) - Restructuring and other charges - - (28.6 ) -
(538.5 ) Debt extinguishment charge (37.0 ) - - (37.0 ) -
Interest expense, net (31.6 ) (34.2 )
(32.8 ) (133.8 ) (124.0 )
Income
(loss) before income taxes $ 0.4 $
(121.3 ) $ (28.8 ) $
(86.5 ) $ (734.0 )
Allegheny Technologies Incorporated and
Subsidiaries Condensed Consolidated Balance Sheets
(Unaudited, dollars in millions)
December 31,
December 31, 2017 2016 ASSETS
Current Assets: Cash and cash equivalents $ 141.6 $ 229.6
Accounts receivable, net of allowances for doubtful accounts 545.3
452.1 Inventories, net 1,176.1 1,037.0 Prepaid expenses and other
current assets 52.7 47.8
Total Current Assets 1,915.7
1,766.5 Property, plant and equipment, net 2,495.7
2,498.9 Goodwill 531.4 641.9 Other assets 242.6 262.7
Total Assets $ 5,185.4 $ 5,170.0
LIABILITIES AND EQUITY Current Liabilities:
Accounts payable $ 420.1 $ 294.3 Accrued liabilities 282.4 309.3
Short term debt and current portion of long-term debt 10.1 105.1
Total Current Liabilities 712.6 708.7
Long-term debt 1,530.6 1,771.9 Accrued postretirement benefits
317.8 317.7 Pension liabilities 697.0 827.9 Deferred income taxes
9.7 15.6 Other long-term liabilities 73.2 83.4
Total
Liabilities 3,340.9 3,725.2 Total ATI
stockholders' equity 1,739.4 1,355.2 Noncontrolling interests 105.1
89.6
Total Equity 1,844.5 1,444.8
Total Liabilities and Equity $ 5,185.4 $
5,170.0 Allegheny
Technologies Incorporated and Subsidiaries Condensed
Consolidated Statements of Cash Flows (Unaudited, dollars in
millions)
Fiscal Year Ended December 31
2017 2016 Operating Activities:
Net loss $ (79.7 ) $ (627.1 ) Depreciation and amortization
160.8 170.3 Impairment of goodwill 114.4 - Non-cash restructuring
and other charges - 471.3 Debt extinguishment charge 37.0 -
Deferred taxes (1.4 ) (119.8 ) Change in managed working capital
(111.8 ) 91.7 Change in retirement benefits (a) (110.3 ) (80.0 )
Accrued liabilities and other 13.4 49.9
Cash provided by (used in) operating activities
22.4 (43.7 ) Investing
Activities: Purchases of property, plant and equipment (122.7 )
(202.2 ) Asset disposals and other 3.1 2.2
Cash used in investing activities
(119.6 ) (200.0 ) Financing
Activities: Borrowings on long-term debt 8.5 387.5 Payments on
long-term debt and capital leases (353.0 ) (2.7 ) Net borrowings
under credit facilities 1.6 3.1 Debt issuance costs (0.8 ) (10.4 )
Debt extinguishment charge (35.8 ) - Issuance of common stock 397.8
- Dividends paid to shareholders - (25.8 ) Dividends paid to
noncontrolling interests (8.0 ) (16.0 ) Sale (purchase) of
noncontrolling interests 3.7 (12.2 ) Taxes on share-based
compensation and other (4.8 ) -
Cash
provided by financing activities 9.2
323.5 Increase (decrease) in cash and cash
equivalents (88.0 ) 79.8 Cash and cash
equivalents at beginning of period 229.6 149.8
Cash and cash equivalents at end of period $
141.6 $ 229.6
(a) Includes $(135) million contribution to the U.S. defined
benefit pension plan in 2017 and $(115) million contribution to the
U.S. defined benefit pension plan in 2016.
Allegheny Technologies Incorporated
and Subsidiaries Selected Financial Data (Unaudited)
Three Months Ended Fiscal Year Ended
December 31 September 30 December 31
December 31 December 31 2017 2017
2016 2017 2016 Percentage of Total ATI
Sales High-Value Products Nickel-based alloys and
specialty alloys 31 % 28 % 26 % 28 % 27 % Precision forgings,
castings and components 18 % 19 % 18 % 18 % 18 % Titanium and
titanium-based alloys 16 % 17 % 18 % 17 % 19 % Precision and
engineered strip 14 % 14 % 14 % 14 % 13 % Zirconium and related
alloys 5 % 6 % 8 % 6 % 8 % Total
High-Value Products, excluding GOES 84 % 84 % 84 % 83 % 85 %
Grain-oriented electrical steel (GOES) 0 % 0 %
0 % 0 % 1 % Total High-Value Products, including GOES
84 % 84 % 84 % 83 % 86 %
Standard Products Stainless steel sheet 8 % 9 % 10 % 9 % 7 %
Specialty stainless sheet 4 % 4 % 4 % 4 % 4 % Stainless steel plate
and other 4 % 3 % 2 % 4 % 3 %
Total Standard Products 16 % 16 % 16 %
17 % 14 %
Grand Total 100 % 100 %
100 % 100 % 100 %
Three
Months Ended Fiscal Year Ended December 31
September 30 December 31 December 31
December 31 Shipment Volume: 2017 2017
2016 2017 2016 Flat Rolled Products
(000's lbs.) High value* 90,332 83,637 75,708 323,391 293,589
Standard 100,973 115,907 112,164
446,542 385,010 Flat Rolled
Products total 191,305 199,544 187,872 769,933 678,599
Average Selling Prices: Flat Rolled Products
(per lb.) High value* $ 2.94 $ 2.69 $ 2.54 $ 2.81 $ 2.59 Standard $
1.23 $ 1.13 $ 1.11 $ 1.21 $ 1.06 Flat Rolled Products combined
average $ 2.04 $ 1.78 $ 1.68 $ 1.88 $ 1.72
* High value products exclude GOES for the quarter and twelve
months ended December 31, 2016.
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
2017 2017 2016 2017 2016
Numerator for Basic net income (loss) per common share - Net income
(loss) attributable to ATI $ 1.7 $ (121.2 ) $ 9.9 $ (91.9 ) $
(640.9 ) Effect of dilutive securities: 4.75% Convertible Senior
Notes due 2022 - - - -
- Numerator for Diluted net income (loss) per common
share - Net income (loss) attributable to ATI after assumed
conversions $ 1.7 $ (121.2 ) $ 9.9 $ (91.9 ) $ (640.9 )
Denominator for Basic net income (loss) per common share - Weighted
average shares outstanding 117.5 107.7 107.3 110.1 107.3 Effect of
dilutive securities: Share-based compensation 1.1 - 1.4 - - 4.75%
Convertible Senior Notes due 2022 - - -
- - Denominator for Diluted net income
(loss) per common share - Adjusted weighted average shares assuming
conversions 118.6 107.7 108.7
110.1 107.3 Basic net income (loss)
attributable to ATI per common share
$ 0.01 $
(1.12 ) $ 0.09 $ (0.83
) $ (5.97 ) Diluted net income
(loss) attributable to ATI per common share
$ 0.01
$ (1.12 ) $ 0.09 $
(0.83 ) $ (5.97 )
Allegheny Technologies Incorporated and Subsidiaries
Other Financial Information Managed Working Capital
(Unaudited, dollars in millions)
December 31
December 31 2017 2016 Accounts
receivable $ 545.3 $ 452.1 Inventory 1,176.1 1,037.0 Accounts
payable (420.1 ) (294.3 ) Subtotal 1,301.3 1,194.8
Allowance for doubtful accounts 5.9 7.3 LIFO reserve (43.1 )
(97.3 ) Inventory reserves 121.5 169.0
Managed working capital $ 1,385.6 $ 1,273.8
Annualized prior 3 months sales $ 3,639.5 $ 3,184.2
Managed working capital as a % of annualized sales 38.1 %
40.0 % December 31, 2017 change in managed working capital $
111.8
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 December 31 2017 2016 Total debt
(a) $ 1,553.8 $ 1,894.1 Less: Cash (141.6 ) (229.6 )
Net debt $ 1,412.2 $ 1,664.5 Net debt $ 1,412.2 $ 1,664.5
Total ATI stockholders' equity 1,739.4 1,355.2
Net ATI capital $ 3,151.6 $ 3,019.7
Net debt to
ATI capital 44.8 % 55.1
% Total debt (a) $ 1,553.8 $ 1,894.1 Total ATI
stockholders' equity 1,739.4 1,355.2
Total ATI capital $ 3,293.2 $ 3,249.3
Total debt to total
ATI capital 47.2 % 58.3
%
(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
SubsidiariesNon-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 January 23, 2018:
Three Months Ended Fiscal Year
Ended December 31 September 30
December 31 December 31 2017 2017
2016 2017 2016 Income (loss)
attributable to ATI $ 1.7 $ (121.2 ) $ 9.9 $ (91.9 ) $ (640.9 )
Adjust for special items: Debt extinguishment charge, net of tax
(a) $ 37.0 $ - $ - 37.0 - Impairment of goodwill, net of tax (b) -
113.6 - 113.6 - Restructuring and other charges, net of tax (c) - -
18.6 - 354.8 Rowley excess operating costs, net of tax (d) - - - -
19.3 Work stoppage and return-to-work costs (e) - - - - 28.1 Income
tax items including valuation allowances (f) (4.1 ) -
(32.4 ) (4.1 ) 141.3 Income
(loss) attributable to ATI excluding special items $ 34.6 $
(7.6 ) $ (3.9 ) $ 54.6 $ (97.4 )
Per Diluted Share
* Per Diluted Share * Income (loss) attributable to ATI
$ 0.01 $ (1.12 ) $ 0.09 $ (0.83 ) $ (5.97 ) Adjust for special
items: Debt extinguishment charge, net of tax (a) $ 0.29 $ - $ -
0.29 - Impairment of goodwill, net of tax (b) - 1.05 - 1.05 -
Restructuring and other charges, net of tax (c) - - 0.17 - 3.30
Rowley excess operating costs, net of tax (d) - - - - 0.18 Work
stoppage and return-to-work costs (e) - - - - 0.27 Income tax items
including valuation allowances (f) (0.03 ) -
(0.30 ) (0.03 ) 1.31 Income (loss)
attributable to ATI excluding special items $ 0.27 $ (0.07 )
$ (0.04 ) $ 0.48 $ (0.91 )
* Presentation of adjusted results per diluted share includes
the effects of convertible debt, if dilutive.
(a) Fourth quarter and fiscal year ended December 31, 2017
results include a debt extinguishment charge of $37.0 after-tax, or
$(0.29) per share, for the full redemption of the $350, 9.375%
Senior Notes due 2019.
(b) During the third quarter of 2017, the Company performed an
interim goodwill impairment analysis, as required by accounting
standards, for our Cast Products business and determined that all
goodwill assigned to this business unit was impaired. As a result,
the Company recorded a $114.4 pre-tax non-cash goodwill impairment
charge ($113.6 after-tax), or $(1.05) per share.
(c) For the three months ended December 31, 2016, $28.6 of
pre-tax restructuring charges ($18.6 after-tax at a standard 35%
tax rate), or $(0.17) per share, including $13.0 for additional
HPMC segment titanium operations closure-related actions at the
Rowley, UT, Frackville, PA and Albany, OR titanium operations, and
$15.6 for FRP closure-related costs at the Midland and Bagdad, PA
facilities and for additional FRP severance charges for salaried
workforce reductions. These restructuring charges, which are
excluded from business segment results, include contractual
obligations, closure costs, severance and supplemental unemployment
benefits. FRP restructuring costs also include $3.4 of special
termination benefits for pension and other postretirement benefit
plans.
In addition to the amounts for the three months ended December
31, 2016 above, the twelve months ended December 31, 2016 includes
$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, which are excluded from HPMC segment
results. The remaining $7.1 after-tax, or $(0.06) per share,
includes additional charges for severance actions.
(d) 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 period 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 exclude these costs.
(e) For the first six months of fiscal year 2016, the Company
incurred costs associated with the work stoppage and return-to-work
of USW-represented employees including reduced operating
efficiencies, out-of-phase raw material costs, and provisions of
the new labor agreements.
(f) Amounts for the three months and fiscal year ended December
31, 2017 include $4.1 of tax benefits, or $0.03 per share, from the
2017 Tax Cuts and Jobs Act legislation. Amounts for the three
months ended December 31, 2016 include $32.4, or $0.30 per share,
of above-normal income tax benefits compared to those that would
apply at a standard 35% tax rate, primarily related to income tax
valuation allowance changes. Amounts for the fiscal year ended
December 31, 2016 include $141.3 or $(1.31) per share, of
below-normal income tax benefits on the $734.0 pretax loss due
primarily to valuation allowances recorded on U.S. federal deferred
tax assets.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180123005778/en/
Allegheny Technologies IncorporatedScott Minder,
412-395-2720www.ATImetals.com
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