Allegheny Technologies Incorporated (NYSE: ATI): -0- *T -- Sales
were $1.39 billion -- Net income was $144.1 million, or $1.45 per
share -- Segment operating profit was $248.4 million, or 17.8% of
sales: -- High Performance Metals: 27.4% of sales -- Flat-Rolled
Products: 13.4% of sales -- Engineered Products: 5.2% of sales --
Year-to-date gross cost reductions of $104 million -- Return on
capital employed of 22.0% -- Return on stockholders' equity of
27.2% -- Net debt to total capitalization was 9.3% -- Total debt to
total capitalization improved to 17.9% -- Cash on hand was $273
million *T Allegheny Technologies Incorporated (NYSE: ATI) reported
net income for the third quarter 2008 of $144.1 million, or $1.45
per share, on sales of $1.39 billion. In the third quarter 2007,
ATI reported net income of $193.9 million, or $1.88 per share, on
sales of $1.33 billion. For the nine months ended September 30,
2008, net income was $455.0 million, or $4.51 per share, on sales
of $4.20 billion. For the nine months ended September 30, 2007, net
income was $598.2 million, or $5.81 per share, on sales of $4.18
billion. "During this time of great economic uncertainty, our solid
third quarter performance reflects ATI's transformation into a
globally-focused, diversified high-value specialty metals company
with strong cash flow and a quality balance sheet. We continue to
move our metallic units to meet the demands of changing global
markets," said L. Patrick Hassey, Chairman, President and Chief
Executive Officer. "Direct international sales were a record $400
million, or 29% of total third quarter sales. Third quarter 2008
shipments of ATI's total titanium products exceeded 12.5 million
pounds, an increase of over 19% compared to the third quarter 2007.
Shipments of titanium mill products in our High Performance Metals
segment, primarily to the aerospace market, increased 11%; total
shipments of these products in our Flat-Rolled Products segment,
including our joint venture, primarily to global industrial
markets, nearly doubled. Shipments of our exotic alloys increased
23%; and total shipments of our high-value flat-rolled products
posted a double-digit increase compared to the third quarter 2007.
"Segment operating margin, while respectable, was compressed during
the third quarter 2008 primarily due to a rapid decline in raw
materials costs which did not match raw materials surcharges due to
long production times. We also experienced a more competitive
pricing environment for most of our products and decreased demand
for our standard stainless sheet and plate products. "Key financial
metrics were strong. Return on capital employed was 22%. Return on
stockholders' equity was over 27%. Gross cost reductions for the
first nine months 2008 were nearly $104 million, which already
exceed our full year goal, as we remained focused on reducing costs
through operating efficiencies. "ATI is well-positioned during this
period of economic uncertainty. At the end of the third quarter
2008 we had nearly $273 million of cash, no borrowings under our
$400 million domestic credit facility, net debt to capitalization
of 9.3%, and no significant near-term debt maturities. This strong
financial position is after our self-funded investments during the
first nine months of 2008 of $185 million in managed working
capital, $365 million in capital expenditures, and nearly $242
million in share repurchases. We repurchased 3.4 million ATI shares
in the third quarter. "Our leadership team has been and continues
to be cautious in our financial and enterprise risk management. ATI
has grown and been transformed without the use of leverage. As a
result, our strong balance sheet enables us to continue to focus on
long-term profitable growth opportunities. We deploy our strong
cash flow with a balanced approach to create long-term value for
our shareholders. We are committed to this philosophy and can
adjust the timing of our self-funded capital projects accordingly.
"Although ATI is much more resilient to economic downturns than at
any time in the past, we are not immune to the economic fallout
from the global credit crisis. Demand and pricing for some of our
major products are clearly being impacted by the growing
uncertainties in the U.S. and global economies, the impact from the
strike at Boeing and the delay in its 787 program, and rapidly
falling prices of certain raw materials. Prices of many of the raw
materials we use have fallen significantly due to reduced global
demand and deleveraging of certain traded commodities. As a result,
some orders have slowed and we believe that a number of our
customers are adjusting the timing of their projects until these
raw material prices adjust and stabilize. We are responding to all
of these uncertainties by adjusting the production levels of some
of our products and ratcheting up our cost reduction goals for
2009. "We are focused on delivering solid financial results during
this period of uncertainty. We now expect our fourth quarter 2008
results to be in the range of $1.00 to $1.10 per share, resulting
in full year 2008 earnings of $5.51 to $5.61 per share. We expect
strong cash flow in the fourth quarter, including a significant
reduction in managed working capital. "We believe the long-term
growth opportunities of our major global end markets remain strong.
We intend to continue to enhance our leadership position in
specialty metals with a focus on near-term and long-term
opportunities in the aerospace and defense, chemical processing
industry, oil and gas, electrical energy generation and
distribution, and medical markets." -0- *T Three Months Ended Nine
Months Ended September 30 September 30 In Millions
------------------------------------------ 2008 2007 2008 2007
---------- --------- ---------- ---------- Sales $ 1,392.4 $
1,335.0 $ 4,197.0 $ 4,178.9 Net income $ 144.1 $ 193.9 $ 455.0 $
598.2 Per Diluted Share ------------------------------------------
Net income $ 1.45 $ 1.88 $ 4.51 $ 5.81 *T Third Quarter 2008
Financial Highlights -- Sales were $1.39 billion, 4.3% higher than
the third quarter 2007. Direct international sales increased to a
quarterly record of $402.1 million and represented 29% of total
sales. Compared to the third quarter 2007, sales increased 8% in
the Flat-Rolled Products segment, and 12% in the Engineered
Products segment, but declined 2% in the High Performance Metals
segment. -- Segment operating profit was $248.4 million, or 17.8%
of sales, compared to $324.5 million, or 24.3% of sales, for the
third quarter 2007. Third quarter 2008 results included a LIFO
inventory valuation reserve benefit of $41.0 million compared to a
LIFO inventory valuation reserve benefit of $61.2 million for the
2007 period. -- Net income was $144.1 million, or $1.45 per share,
compared to $193.9 million, or $1.88 per share, in the third
quarter 2007. -- Cash flow from operations for the 2008 first nine
months was $344.6 million as operating earnings more than offset a
further investment of $185.2 million in managed working capital.
Managed working capital was reduced by $86.1 million in the third
quarter 2008, compared to the second quarter 2008. -- Cash on hand
was $272.6 million at the end of the third quarter 2008. -- Gross
cost reductions, before the effects of inflation, totaled $103.8
million company-wide in the first nine months of 2008. High
Performance Metals Segment Third Quarter Market Conditions --
Demand for our titanium alloys was good for jet engine
applications. Demand for our titanium alloys was steady from
airframe customers and improved from the biomedical market. Demand
for our nickel-based alloys and specialty alloys was softer from
the jet engine market and improved from the oil and gas and
electrical energy markets. Demand for our exotic alloys was strong
from the chemical process industry and was good from the aerospace
and defense and nuclear energy markets. Third quarter 2008 compared
to third quarter 2007 -- Sales were $510.2 million, 2% lower than
third quarter 2007. Shipments increased 11% for titanium and
titanium alloys and 23% for exotic alloys, but declined 6% for
nickel-based and specialty alloys. Average selling prices declined
12% for titanium and titanium alloys and 8% for nickel-based and
specialty alloys. Average selling prices for exotic alloys
increased 11%. The decline in the average selling price for
titanium and titanium-based alloys, and nickel-based and specialty
alloys was primarily due to lower raw material indices due to lower
raw material costs and a more competitive pricing environment. --
Segment operating profit was $139.6 million, or 27.4% of sales, a
$54.6 million decrease compared to the third quarter 2007. Third
quarter 2008 operating profit was compressed by rapidly declining
raw material costs, primarily titanium and titanium scrap, and
nickel and nickel-bearing scrap. This resulted in higher cost
material purchased earlier in the year flowing through cost of
sales and not matching raw material indices included in the selling
prices due to the long manufacturing cycle times of some of our
products. This compression was partially offset by a $16.7 million
reduction in the LIFO inventory valuation reserve, increased
shipments and selling prices for zirconium products, and the
benefits of gross cost reductions. The third quarter 2007 had a
LIFO inventory valuation reserve benefit of $43.1 million,
primarily due to lower raw material costs. -- Results benefited
from $18.2 million of gross cost reductions, bringing year-to-date
gross cost reductions in this segment to $49.6 million. Flat-Rolled
Products Segment Third Quarter Market Conditions -- Demand was
strong for our industrial titanium sheet, grain-oriented electrical
steel, and nickel-based and specialty alloy products from the oil
and gas, and electrical energy markets. Shipments of our standard
stainless products were weak and pricing was competitive. Service
center inventories of standard stainless products remained low and
direct customer shipments to the oil and gas market were solid.
Third quarter 2008 compared to third quarter 2007 -- Sales
increased to $764.6 million, 8% higher than the third quarter 2007,
due primarily to increased shipments for most products, including
higher foreign sales, partially offset by lower raw material
surcharges and lower base prices. Direct international sales
increased $41.0 million to 26.9% of total 2008 segment sales.
Shipments of standard stainless products increased 16% while total
high-value products shipments increased 10%. Within high-value
products, shipments of substantially all products, industrial
titanium sheet, grain-oriented electrical steel, nickel-based
alloys, and Precision Rolled Strip(R) products, exceeded year-ago
levels. Average transaction prices for all products were 4% lower,
primarily due to lower raw material surcharges, product mix, and
more competitive base prices for standard stainless sheet and
plate. -- Segment operating profit was $102.7 million, or 13.4% of
sales, a decrease of $20.3 million compared to the third quarter
2007, primarily as a result of lower average base selling prices
for standard stainless products and the timing difference between
raw material surcharges and costs. Third quarter 2008 operating
profit was negatively impacted by lower base prices for standard
stainless sheet and plate products. In addition, third quarter 2008
operating profit was compressed by a rapid decline in raw material
costs, primarily nickel and nickel bearing scrap. This resulted in
higher cost material purchased earlier in the year flowing through
cost of sales and not matching raw material surcharges included in
the selling prices due to the long manufacturing cycle times of
some of our products. This compression was partially offset by
increased shipments and higher selling prices for our
grain-oriented electrical steel, increased shipments of our
flat-rolled titanium products, increased shipments of standard
grade sheet products, and the benefits of gross cost reductions.
Declining raw material costs, primarily for nickel and nickel
scrap, resulted in a LIFO inventory valuation reserve benefit of
$25.1 million in the third quarter 2008. The third quarter 2007
included a LIFO inventory valuation benefit of $18.2 million. --
Results benefited from $14.3 million in gross cost reductions,
bringing 2008 first nine months gross cost reductions in this
segment to $47.5 million. Engineered Products Segment Third Quarter
Market Conditions -- Demand was solid for our forged products from
the construction and mining, and oil and gas markets. Demand for
our cast products was good from the electrical energy market,
particularly for wind and gas turbine components. Demand for our
tungsten and tungsten carbide products was down due to the work
stoppage in the aerospace supply chain and shipments were down to
the oil and gas and construction and mining markets due to
disruptions after Hurricane Ike. Demand from the aerospace market
remained good for our titanium precision metal processing
conversion services. Third quarter 2008 compared to third quarter
2007 -- Sales were $117.6 million, 12% higher than the third
quarter 2007. -- Segment operating profit was $6.1 million, or 5.2%
of sales, compared to $7.3 million, or 6.9% of sales, for the
comparable 2007 period. An increase in operating profit due to
increased sales was offset by $1.5 million of start-up expenses
with our Alpena, MI casting operation and the negative impact of
higher raw material costs. These higher raw materials costs
resulted in a LIFO inventory valuation reserve charge of $0.8
million. The third quarter 2007 included a LIFO inventory valuation
reserve charge of $0.1 million. -- Results benefited from $2.7
million of gross cost reductions, bringing 2008 first nine months
gross cost reductions in this segment to $6.7 million. Retirement
Benefit Expense -- Retirement benefit expense decreased to $2.5
million in the third quarter 2008, compared to $7.6 million in the
third quarter 2007, primarily as a result of higher than expected
returns on plan assets in 2007 and the positive benefits of the
voluntary pension contributions over the last several years. -- For
the third quarter 2008, retirement benefit expense included in cost
of sales was $1.6 million and in selling and administrative
expenses was $0.9 million. For the third quarter 2007, the amount
of retirement benefit expense included in cost of sales was $4.8
million, and the amount included in selling and administrative
expenses was $2.8 million. -- As of September 30, 2008, our U.S.
defined benefit pension plan was approximately 92% funded which
represents a decline in the funding level for this plan from the
beginning of the year and results primarily from a significant
decline in the value of equity investments held by the pension
fund. If the value of pension plan investments remains at this
level at year-end, the Company would recognize a significant
increase in pension expense in 2009 compared to 2008. Other
Expenses -- Corporate expenses for the third quarter 2008 were
$13.4 million, compared to $18.5 million in the year-ago period.
This decrease was primarily due to lower expenses associated with
annual and long-term performance-based cash incentive compensation
programs. -- Third quarter 2008 interest expense, net of interest
income, was $1.7 million compared to $0.1 million in the year-ago
period. The increase in net interest expense was primarily due to
less interest income. Income Taxes Results for the third quarter
2008 included a provision for income taxes of $83.9 million, or
36.8% of income before tax, for U.S. Federal, foreign and state
income taxes. The third quarter 2007 included a provision of $100.1
million, or 34.0% of income before tax. Cash Flow, Working Capital
and Debt -- Cash on hand was $272.6 million at the end of the third
quarter 2008. -- Cash flow from operations during the 2008 first
nine months was $344.6 million as operating earnings were partially
offset by a further investment of $185.2 million in managed working
capital. Managed working capital was reduced by $86.1 million in
the third quarter 2008, compared to the second quarter 2008. -- The
investment in managed working capital during the first nine months
of 2008 resulted from a $92.5 million increase in accounts
receivable, which reflects the timing of sales in the third quarter
2008 compared to the fourth quarter 2007, and a $119.7 million
increase in inventory mostly as a result of increased business
activity, partially offset by a $27.0 million increase in accounts
payable. -- At September 30, 2008, managed working capital was
31.8% of annualized sales, compared to 32.2% of annualized sales at
year-end 2007. We define managed working capital as accounts
receivable plus gross inventories less accounts payable. -- Cash
used in investing activities was $363.8 million in the 2008 first
nine months and consisted primarily of capital expenditures. --
Cash used in financing activities was $331.5 million in the 2008
first nine months primarily due to the repurchase of 4.7 million
shares of the Company's common stock at a cost of $241.8 million,
dividend payments of $54.1 million, $24.5 million for taxes on
share-based compensation, and a reduction in borrowings of $12.2
million. As of the end of the third quarter 2008, the Company has
repurchased 5.4 million shares of stock for $303.1 million since
the share repurchase program was initiated in November 2007. -- Net
debt as a percentage of total capitalization was 9.3% at the end of
the third quarter 2008. This compares to a negative 4.5% at the end
of 2007 as cash on hand exceeded total debt. Total debt to total
capital improved to 17.9% at September 30, 2008, compared to 19.2%
at the end of 2007. -- There were no borrowings outstanding under
ATI's $400 million unsecured domestic borrowing facility, although
a portion of the letters of credit capacity was utilized. Allegheny
Technologies will conduct a conference call with investors and
analysts on October 22, 2008, at 1 p.m. ET to discuss the financial
results. The conference call will be broadcast live on
www.alleghenytechnologies.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 materially differ 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 credit market conditions and related issues, and 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, construction and mining, automotive,
electrical energy, chemical process industry, oil and gas, medical
and other markets; (c) our inability to achieve the level of cost
savings, productivity improvements, synergies, growth or other
benefits anticipated by management, including those anticipated
from strategic investments and the integration of acquired
businesses, whether due to significant increases in energy, raw
materials or employee benefits costs, the possibility of project
cost overruns or unanticipated costs and expenses, or other
factors; (d) volatility of prices and availability of supply of the
raw materials that are critical to the manufacture of our products;
(e) declines in the value of our defined benefit pension plan
assets or unfavorable changes in laws or regulations that govern
pension plan funding; (f) significant legal proceedings or
investigations adverse to us; (g) other risk factors summarized in
our Annual Report on Form 10-K for the year ended December 31,
2007, and in other reports filed with the Securities and Exchange
Commission. We assume no duty to update our forward-looking
statements. Building the World's Best Specialty Metals Company(TM)
Allegheny Technologies Incorporated is one of the largest and most
diversified specialty metals producers in the world with revenues
of $5.5 billion during 2007. ATI has approximately 9,700 full-time
employees world-wide who use innovative technologies to offer
growing global markets a wide range of specialty metals solutions.
Our major markets are aerospace and defense, chemical process
industry/oil and gas, electrical energy, medical, automotive, food
equipment and appliance, machine and cutting tools, and
construction and mining. Our products include titanium and titanium
alloys, nickel-based alloys and superalloys, grain-oriented
electrical steel, stainless and specialty steels, zirconium,
hafnium, and niobium, tungsten materials, and forgings and
castings. The Allegheny Technologies website is
www.alleghenytechnologies.com. -0- *T Allegheny Technologies
Incorporated and Subsidiaries Consolidated Statements of Income
(Unaudited, dollars in millions, except per share amounts) Three
Months Ended Nine Months Ended September 30 September 30
------------------- ------------------- 2008 2007 2008 2007
--------- --------- --------- --------- Sales $1,392.4 $1,335.0
$4,197.0 $4,178.9 Costs and expenses: Cost of sales 1,085.8 968.1
3,267.5 3,024.0 Selling and administrative expenses 74.3 73.5 223.7
224.3 --------- --------- --------- --------- Income before
interest, other income (expense) and income taxes 232.3 293.4 705.8
930.6 Interest expense, net (1.7) (0.1) (2.8) (7.0) Other income
(expense), net (2.6) 0.7 (5.0) 0.9 --------- --------- ---------
--------- Income before income tax provision 228.0 294.0 698.0
924.5 Income tax provision 83.9 100.1 243.0 326.3 ---------
--------- --------- --------- Net income $ 144.1 $ 193.9 $ 455.0 $
598.2 ========= ========= ========= ========= Basic net income per
common share $ 1.46 $ 1.90 $ 4.54 $ 5.88 ========= =========
========= ========= Diluted net income per common share $ 1.45 $
1.88 $ 4.51 $ 5.81 ========= ========= ========= ========= Weighted
average common shares outstanding -- basic (millions) 99.0 101.8
100.2 101.7 Weighted average common shares outstanding -- diluted
(millions) 99.7 103.1 100.9 103.0 Actual common shares outstanding
-- end of period (millions) 97.3 102.2 97.3 102.2 *T -0- *T
Allegheny Technologies Incorporated and Subsidiaries Sales and
Operating Profit by Business Segment (Unaudited - Dollars in
millions) Three Months Ended Nine Months Ended September 30
September 30 ------------------- ------------------- 2008 2007 2008
2007 --------- --------- --------- --------- Sales: High
Performance Metals $ 510.2 $ 520.5 $1,495.7 $1,555.6 Flat-Rolled
Products 764.6 709.2 2,345.6 2,297.5 Engineered Products 117.6
105.3 355.7 325.8 --------- --------- --------- --------- Total
External Sales $1,392.4 $1,335.0 $4,197.0 $4,178.9 =========
========= ========= ========= Operating Profit: High Performance
Metals $ 139.6 $ 194.2 $ 421.8 $ 541.9 % of Sales 27.4% 37.3% 28.2%
34.8% Flat-Rolled Products 102.7 123.0 315.2 449.5 % of Sales 13.4%
17.3% 13.4% 19.6% Engineered Products 6.1 7.3 22.8 30.6 % of Sales
5.2% 6.9% 6.4% 9.4% --------- --------- --------- ---------
Operating Profit 248.4 324.5 759.8 1,022.0 % of Sales 17.8% 24.3%
18.1% 24.5% Corporate expenses (13.4) (18.5) (46.5) (56.9) Interest
expense, net (1.7) (0.1) (2.8) (7.0) Other expense, net of gains on
asset sales (2.8) (4.3) (6.7) (10.9) Retirement benefit expense
(2.5) (7.6) (5.8) (22.7) --------- --------- --------- ---------
Income before income taxes $ 228.0 $ 294.0 $ 698.0 $ 924.5
========= ========= ========= ========= *T -0- *T Allegheny
Technologies Incorporated and Subsidiaries Consolidated Balance
Sheets (Current period unaudited - Dollars in millions) September
30, December 31, 2008 2007 ------------- ------------ ASSETS
Current Assets: Cash and cash equivalents $ 272.6 $ 623.3 Accounts
receivable, net of allowances for doubtful accounts of $6.4 and
$6.3 at September 30, 2008 and December 31, 2007, respectively
744.5 652.2 Inventories, net 1,083.9 916.1 Deferred income taxes -
18.8 Prepaid expenses and other current assets 40.2 38.3
------------- ------------ Total Current Assets 2,141.2 2,248.7
Property, plant and equipment, net 1,523.4 1,239.5 Prepaid pension
asset 266.4 230.3 Cost in excess of net assets acquired 204.2 209.8
Deferred income taxes 35.2 42.1 Other assets 141.6 125.2
------------- ------------ Total Assets $ 4,312.0 $ 4,095.6
============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities: Accounts payable $ 414.4 $ 388.4 Accrued
liabilities 290.8 277.3 Accrued income taxes 29.0 17.4 Deferred
income taxes 42.7 - Short term debt and current portion of
long-term debt 20.9 20.9 ------------- ------------ Total Current
Liabilities 797.8 704.0 Long-term debt 495.0 507.3 Retirement
benefits 470.1 469.6 Other long-term liabilities 184.4 191.2
------------- ------------ Total Liabilities 1,947.3 1,872.1
------------- ------------ Total Stockholders' Equity 2,364.7
2,223.5 ------------- ------------ Total Liabilities and
Stockholders' Equity $ 4,312.0 $ 4,095.6 ============= ============
*T -0- *T Allegheny Technologies Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited -
Dollars in millions) Nine Months Ended September 30
----------------- 2008 2007 -------- -------- Operating Activities:
Net income $ 455.0 $ 598.2 Depreciation and amortization 86.7 75.2
Deferred taxes 64.5 2.0 Change in managed working capital (185.2)
(225.3) Accrued liabilities and other (76.4) 80.7 -------- --------
Cash provided by operating activities 344.6 530.8 -------- --------
Investing Activities: Purchases of property, plant and equipment
(365.1) (281.0) Asset disposals and other 1.3 (3.8) --------
-------- Cash used in investing activities (363.8) (284.8) --------
-------- Financing Activities: Net decrease in debt (12.2) (24.8)
Purchase of treasury stock (241.8) - Dividends paid (54.1) (39.8)
Taxes on share-based compensation (24.5) (25.5) Exercises of stock
options 1.1 5.4 -------- -------- Cash used in financing activities
(331.5) (84.7) -------- -------- Increase (decrease) in cash and
cash equivalents (350.7) 161.3 Cash and cash equivalents at
beginning of period 623.3 502.3 -------- -------- Cash and cash
equivalents at end of period $ 272.6 $ 663.6 ======== ======== *T
-0- *T Allegheny Technologies Incorporated and Subsidiaries
Selected Financial Data (Unaudited) Three Months Ended Nine Months
Ended September 30 September 30 ------------------
----------------- Volume: 2008 2007 2008 2007 --------- --------
-------- -------- High Performance Metals (000's lbs.) Titanium
mill products 8,707 7,815 25,184 22,692 Nickel-based and specialty
alloys 10,365 10,999 31,395 33,188 Exotic alloys 1,365 1,113 4,194
3,524 Flat-Rolled Products (000's lbs.) High value 133,322 121,674
386,113 370,351 Standard 130,888 113,083 481,372 424,200 ---------
-------- -------- -------- Flat-Rolled Products total 264,210
234,757 867,485 794,551 Average Prices: High Performance Metals
(per lb.) Titanium mill products $ 25.95 $ 29.43 $ 25.93 $ 31.31
Nickel-based and specialty alloys $ 18.82 $ 20.49 $ 18.55 $ 19.42
Exotic alloys $ 49.91 $ 45.16 $ 47.74 $ 42.07 Flat-Rolled Products
(per lb.) High value $ 3.44 $ 3.37 $ 3.29 $ 3.31 Standard $ 2.27 $
2.57 $ 2.18 $ 2.49 Flat-Rolled Products combined average $ 2.86 $
2.99 $ 2.68 $ 2.87 *T -0- *T Allegheny Technologies Incorporated
and Subsidiaries Other Financial Information Managed Working
Capital (Unaudited - Dollars in millions) September 30, December
31, 2008 2007 ------------- ------------ Accounts receivable $
744.5 $ 652.2 Inventory 1,083.9 916.1 Accounts payable (414.4)
(388.4) ------------- ------------ Subtotal 1,414.0 1,179.9
Allowance for doubtful accounts 6.4 6.3 LIFO reserve 338.4 374.6
Corporate and other 52.9 65.7 ------------- ------------ Managed
working capital $ 1,811.7 $ 1,626.5 ============= ============
Annualized prior 2 months sales $ 5,703.7 $ 5,058.5 =============
============ Managed working capital as a % of annualized sales
31.8% 32.2% September 30, 2008 change in managed working capital $
185.2 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 inventory valuation
reserves, excess and obsolete inventory reserves, and reserves for
uncollectible accounts receivable which, due to their nature, are
managed separately. *T -0- *T Allegheny Technologies Incorporated
and Subsidiaries Other Financial Information Debt to Capital
(Unaudited - Dollars in millions) September 30, December 31, 2008
2007 ------------- ------------ Total debt $ 515.9 $ 528.2 Less:
Cash (272.6) (623.3) ------------- ------------ Net debt (cash) $
243.3 $ (95.1) Net debt (cash) $ 243.3 $ (95.1) Stockholders'
equity 2,364.7 2,223.5 ------------- ------------ Net capital $
2,608.0 $ 2,128.4 Net debt to capital 9.3% -4.5% =============
============ Total debt $ 515.9 $ 528.2 Stockholders' equity
2,364.7 2,223.5 ------------- ------------ Total capital $ 2,880.6
$ 2,751.7 Total debt to total capital 17.9% 19.2% =============
============ In managing the overall capital structure of the
Company, some of the measures that we focus on are net debt to net
capitalization, which is the percentage of debt, net of cash that
may be available to reduce borrowings, to the total invested and
borrowed capital of the Company, and total debt to total
capitalization, which excludes cash balances. *T -0- *T Allegheny
Technologies Incorporated and Subsidiaries Other Financial
Information Financial Returns (Unaudited - Dollars in millions) For
the 12 month period ending September 30, December 31, 2008 2007
--------------- -------------- Return on Capital Employed: Net
income $ 603.9 $ 747.1 Add: Net interest expense, net of tax 0.4
3.1 --------------- -------------- Net income before interest
(income) expense $ 604.3 $ 750.2 Stockholders' equity, end of
period $ 2,364.7 $ 2,223.5 Total debt, end of period 515.9 528.2
--------------- -------------- Capital employed, end of period $
2,880.6 $ 2,751.7 Stockholders' equity, beginning of period $
2,072.9 $ 1,502.9 Total debt, beginning of period 529.5 553.6
--------------- -------------- Capital employed, beginning of
period $ 2,602.4 $ 2,056.5 Average capital employed $ 2,741.5 $
2,404.1 Return on capital employed 22.0% 31.2% ===============
============== Return on Stockholders' Equity: Net income $ 603.9 $
747.1 Stockholders' equity, end of period $ 2,364.7 $ 2,223.5
Stockholders' equity, beginning of period 2,072.9 1,502.9
--------------- -------------- Average stockholders' equity $
2,218.8 $ 1,863.2 Return on stockholders' equity 27.2% 40.1%
=============== ============== In managing the financial
performance of the Company, some of the measures that we focus on
are return on capital employed, which is net income excluding
financing costs compared to the average of the total invested and
borrowed capital of the Company, and return on stockholders'
equity, which measures net income compared to the average invested
capital of the Company. We measure these returns using trailing
twelve month periods. *T Allegheny Technologies Incorporated (NYSE:
ATI): -- Sales were $1.39 billion -- Net income was $144.1 million,
or $1.45 per share -- Segment operating profit was $248.4 million,
or 17.8% of sales: -- High Performance Metals: 27.4% of sales --
Flat-Rolled Products: 13.4% of sales -- Engineered Products: 5.2%
of sales -- Year-to-date gross cost reductions of $104 million --
Return on capital employed of 22.0% -- Return on stockholders'
equity of 27.2% -- Net debt to total capitalization was 9.3% --
Total debt to total capitalization improved to 17.9% -- Cash on
hand was $273 million Allegheny Technologies Incorporated (NYSE:
ATI) reported net income for the third quarter 2008 of $144.1
million, or $1.45 per share, on sales of $1.39 billion. In the
third quarter 2007, ATI reported net income of $193.9 million, or
$1.88 per share, on sales of $1.33 billion. For the nine months
ended September 30, 2008, net income was $455.0 million, or $4.51
per share, on sales of $4.20 billion. For the nine months ended
September 30, 2007, net income was $598.2 million, or $5.81 per
share, on sales of $4.18 billion. �During this time of great
economic uncertainty, our solid third quarter performance reflects
ATI�s transformation into a globally-focused, diversified
high-value specialty metals company with strong cash flow and a
quality balance sheet. We continue to move our metallic units to
meet the demands of changing global markets,� said L. Patrick
Hassey, Chairman, President and Chief Executive Officer. �Direct
international sales were a record $400 million, or 29% of total
third quarter sales. Third quarter 2008 shipments of ATI�s total
titanium products exceeded 12.5 million pounds, an increase of over
19% compared to the third quarter 2007. Shipments of titanium mill
products in our High Performance Metals segment, primarily to the
aerospace market, increased 11%; total shipments of these products
in our Flat-Rolled Products segment, including our joint venture,
primarily to global industrial markets, nearly doubled. Shipments
of our exotic alloys increased 23%; and total shipments of our
high-value flat-rolled products posted a double-digit increase
compared to the third quarter 2007. �Segment operating margin,
while respectable, was compressed during the third quarter 2008
primarily due to a rapid decline in raw materials costs which did
not match raw materials surcharges due to long production times. We
also experienced a more competitive pricing environment for most of
our products and decreased demand for our standard stainless sheet
and plate products. �Key financial metrics were strong. Return on
capital employed was 22%. Return on stockholders� equity was over
27%. Gross cost reductions for the first nine months 2008 were
nearly $104 million, which already exceed our full year goal, as we
remained focused on reducing costs through operating efficiencies.
�ATI is well-positioned during this period of economic uncertainty.
At the end of the third quarter 2008 we had nearly $273 million of
cash, no borrowings under our $400 million domestic credit
facility, net debt to capitalization of 9.3%, and no significant
near-term debt maturities. This strong financial position is after
our self-funded investments during the first nine months of 2008 of
$185 million in managed working capital, $365 million in capital
expenditures, and nearly $242 million in share repurchases. We
repurchased 3.4 million ATI shares in the third quarter. �Our
leadership team has been and continues to be cautious in our
financial and enterprise risk management. ATI has grown and been
transformed without the use of leverage. As a result, our strong
balance sheet enables us to continue to focus on long-term
profitable growth opportunities. We deploy our strong cash flow
with a balanced approach to create long-term value for our
shareholders. We are committed to this philosophy and can adjust
the timing of our self-funded capital projects accordingly.
�Although ATI is much more resilient to economic downturns than at
any time in the past, we are not immune to the economic fallout
from the global credit crisis. Demand and pricing for some of our
major products are clearly being impacted by the growing
uncertainties in the U.S. and global economies, the impact from the
strike at Boeing and the delay in its 787 program, and rapidly
falling prices of certain raw materials. Prices of many of the raw
materials we use have fallen significantly due to reduced global
demand and deleveraging of certain traded commodities. As a result,
some orders have slowed and we believe that a number of our
customers are adjusting the timing of their projects until these
raw material prices adjust and stabilize. We are responding to all
of these uncertainties by adjusting the production levels of some
of our products and ratcheting up our cost reduction goals for
2009. �We are focused on delivering solid financial results during
this period of uncertainty. We now expect our fourth quarter 2008
results to be in the range of $1.00 to $1.10 per share, resulting
in full year 2008 earnings of $5.51 to $5.61 per share. We expect
strong cash flow in the fourth quarter, including a significant
reduction in managed working capital. �We believe the long-term
growth opportunities of our major global end markets remain strong.
We intend to continue to enhance our leadership position in
specialty metals with a focus on near-term and long-term
opportunities in the aerospace and defense, chemical processing
industry, oil and gas, electrical energy generation and
distribution, and medical markets.� � � Three Months Ended Nine
Months Ended September 30 September 30 In Millions 2008 � 2007 2008
� 2007 � Sales $ 1,392.4 $ 1,335.0 $ 4,197.0 $ 4,178.9 � Net income
$ 144.1 $ 193.9 $ 455.0 $ 598.2 � Per Diluted Share � Net income $
1.45 $ 1.88 $ 4.51 $ 5.81 � Third Quarter 2008 Financial Highlights
Sales were $1.39 billion, 4.3% higher than the third quarter 2007.
Direct international sales increased to a quarterly record of
$402.1 million and represented 29% of total sales. Compared to the
third quarter 2007, sales increased 8% in the Flat-Rolled Products
segment, and 12% in the Engineered Products segment, but declined
2% in the High Performance Metals segment. Segment operating profit
was $248.4 million, or 17.8% of sales, compared to $324.5 million,
or 24.3% of sales, for the third quarter 2007. Third quarter 2008
results included a LIFO inventory valuation reserve benefit of
$41.0 million compared to a LIFO inventory valuation reserve
benefit of $61.2 million for the 2007 period. Net income was $144.1
million, or $1.45 per share, compared to $193.9 million, or $1.88
per share, in the third quarter 2007. Cash flow from operations for
the 2008 first nine months was $344.6 million as operating earnings
more than offset a further investment of $185.2 million in managed
working capital. Managed working capital was reduced by $86.1
million in the third quarter 2008, compared to the second quarter
2008. Cash on hand was $272.6 million at the end of the third
quarter 2008. Gross cost reductions, before the effects of
inflation, totaled $103.8 million company-wide in the first nine
months of 2008. High Performance Metals Segment Third Quarter
Market Conditions Demand for our titanium alloys was good for jet
engine applications. Demand for our titanium alloys was steady from
airframe customers and improved from the biomedical market. Demand
for our nickel-based alloys and specialty alloys was softer from
the jet engine market and improved from the oil and gas and
electrical energy markets. Demand for our exotic alloys was strong
from the chemical process industry and was good from the aerospace
and defense and nuclear energy markets. Third quarter 2008 compared
to third quarter 2007 Sales were $510.2 million, 2% lower than
third quarter 2007. Shipments increased 11% for titanium and
titanium alloys and 23% for exotic alloys, but declined 6% for
nickel-based and specialty alloys. Average selling prices declined
12% for titanium and titanium alloys and 8% for nickel-based and
specialty alloys. Average selling prices for exotic alloys
increased 11%. The decline in the average selling price for
titanium and titanium-based alloys, and nickel-based and specialty
alloys was primarily due to lower raw material indices due to lower
raw material costs and a more competitive pricing environment.
Segment operating profit was $139.6 million, or 27.4% of sales, a
$54.6 million decrease compared to the third quarter 2007. Third
quarter 2008 operating profit was compressed by rapidly declining
raw material costs, primarily titanium and titanium scrap, and
nickel and nickel-bearing scrap. This resulted in higher cost
material purchased earlier in the year flowing through cost of
sales and not matching raw material indices included in the selling
prices due to the long manufacturing cycle times of some of our
products. This compression was partially offset by a $16.7 million
reduction in the LIFO inventory valuation reserve, increased
shipments and selling prices for zirconium products, and the
benefits of gross cost reductions. The third quarter 2007 had a
LIFO inventory valuation reserve benefit of $43.1 million,
primarily due to lower raw material costs. Results benefited from
$18.2 million of gross cost reductions, bringing year-to-date gross
cost reductions in this segment to $49.6 million. Flat-Rolled
Products Segment Third Quarter Market Conditions Demand was strong
for our industrial titanium sheet, grain-oriented electrical steel,
and nickel-based and specialty alloy products from the oil and gas,
and electrical energy markets. Shipments of our standard stainless
products were weak and pricing was competitive. Service center
inventories of standard stainless products remained low and direct
customer shipments to the oil and gas market were solid. Third
quarter 2008 compared to third quarter 2007 Sales increased to
$764.6 million, 8% higher than the third quarter 2007, due
primarily to increased shipments for most products, including
higher foreign sales, partially offset by lower raw material
surcharges and lower base prices. Direct international sales
increased $41.0 million to 26.9% of total 2008 segment sales.
Shipments of standard stainless products increased 16% while total
high-value products shipments increased 10%. Within high-value
products, shipments of substantially all products, industrial
titanium sheet, grain-oriented electrical steel, nickel-based
alloys, and Precision Rolled Strip� products, exceeded year-ago
levels. Average transaction prices for all products were 4% lower,
primarily due to lower raw material surcharges, product mix, and
more competitive base prices for standard stainless sheet and
plate. Segment operating profit was $102.7 million, or 13.4% of
sales, a decrease of $20.3 million compared to the third quarter
2007, primarily as a result of lower average base selling prices
for standard stainless products and the timing difference between
raw material surcharges and costs. Third quarter 2008 operating
profit was negatively impacted by lower base prices for standard
stainless sheet and plate products. In addition, third quarter 2008
operating profit was compressed by a rapid decline in raw material
costs, primarily nickel and nickel bearing scrap. This resulted in
higher cost material purchased earlier in the year flowing through
cost of sales and not matching raw material surcharges included in
the selling prices due to the long manufacturing cycle times of
some of our products. This compression was partially offset by
increased shipments and higher selling prices for our
grain-oriented electrical steel, increased shipments of our
flat-rolled titanium products, increased shipments of standard
grade sheet products, and the benefits of gross cost reductions.
Declining raw material costs, primarily for nickel and nickel
scrap, resulted in a LIFO inventory valuation reserve benefit of
$25.1 million in the third quarter 2008. The third quarter 2007
included a LIFO inventory valuation benefit of $18.2 million.
Results benefited from $14.3 million in gross cost reductions,
bringing 2008 first nine months gross cost reductions in this
segment to $47.5 million. Engineered Products Segment Third Quarter
Market Conditions Demand was solid for our forged products from the
construction and mining, and oil and gas markets. Demand for our
cast products was good from the electrical energy market,
particularly for wind and gas turbine components. Demand for our
tungsten and tungsten carbide products was down due to the work
stoppage in the aerospace supply chain and shipments were down to
the oil and gas and construction and mining markets due to
disruptions after Hurricane Ike. Demand from the aerospace market
remained good for our titanium precision metal processing
conversion services. Third quarter 2008 compared to third quarter
2007 Sales were $117.6 million, 12% higher than the third quarter
2007. Segment operating profit was $6.1 million, or 5.2% of sales,
compared to $7.3 million, or 6.9% of sales, for the comparable 2007
period. An increase in operating profit due to increased sales was
offset by $1.5 million of start-up expenses with our Alpena, MI
casting operation and the negative impact of higher raw material
costs. These higher raw materials costs resulted in a LIFO
inventory valuation reserve charge of $0.8 million. The third
quarter 2007 included a LIFO inventory valuation reserve charge of
$0.1 million. Results benefited from $2.7 million of gross cost
reductions, bringing 2008 first nine months gross cost reductions
in this segment to $6.7 million. Retirement Benefit Expense
Retirement benefit expense decreased to $2.5 million in the third
quarter 2008, compared to $7.6 million in the third quarter 2007,
primarily as a result of higher than expected returns on plan
assets in 2007 and the positive benefits of the voluntary pension
contributions over the last several years. For the third quarter
2008, retirement benefit expense included in cost of sales was $1.6
million and in selling and administrative expenses was $0.9
million. For the third quarter 2007, the amount of retirement
benefit expense included in cost of sales was $4.8 million, and the
amount included in selling and administrative expenses was $2.8
million. As of September 30, 2008, our U.S. defined benefit pension
plan was approximately 92% funded which represents a decline in the
funding level for this plan from the beginning of the year and
results primarily from a significant decline in the value of equity
investments held by the pension fund. If the value of pension plan
investments remains at this level at year-end, the Company would
recognize a significant increase in pension expense in 2009
compared to 2008. Other Expenses Corporate expenses for the third
quarter 2008 were $13.4 million, compared to $18.5 million in the
year-ago period. This decrease was primarily due to lower expenses
associated with annual and long-term performance-based cash
incentive compensation programs. Third quarter 2008 interest
expense, net of interest income, was $1.7 million compared to $0.1
million in the year-ago period. The increase in net interest
expense was primarily due to less interest income. Income Taxes
Results for the third quarter 2008 included a provision for income
taxes of $83.9 million, or 36.8% of income before tax, for U.S.
Federal, foreign and state income taxes. The third quarter 2007
included a provision of $100.1 million, or 34.0% of income before
tax. Cash Flow, Working Capital and Debt Cash on hand was $272.6
million at the end of the third quarter 2008. Cash flow from
operations during the 2008 first nine months was $344.6 million as
operating earnings were partially offset by a further investment of
$185.2 million in managed working capital. Managed working capital
was reduced by $86.1 million in the third quarter 2008, compared to
the second quarter 2008. The investment in managed working capital
during the first nine months of 2008 resulted from a $92.5 million
increase in accounts receivable, which reflects the timing of sales
in the third quarter 2008 compared to the fourth quarter 2007, and
a $119.7 million increase in inventory mostly as a result of
increased business activity, partially offset by a $27.0 million
increase in accounts payable. At September 30, 2008, managed
working capital was 31.8% of annualized sales, compared to 32.2% of
annualized sales at year-end 2007. We define managed working
capital as accounts receivable plus gross inventories less accounts
payable. Cash used in investing activities was $363.8 million in
the 2008 first nine months and consisted primarily of capital
expenditures. Cash used in financing activities was $331.5 million
in the 2008 first nine months primarily due to the repurchase of
4.7 million shares of the Company�s common stock at a cost of
$241.8 million, dividend payments of $54.1 million, $24.5 million
for taxes on share-based compensation, and a reduction in
borrowings of $12.2 million. As of the end of the third quarter
2008, the Company has repurchased 5.4 million shares of stock for
$303.1 million since the share repurchase program was initiated in
November 2007. Net debt as a percentage of total capitalization was
9.3% at the end of the third quarter 2008. This compares to a
negative 4.5% at the end of 2007 as cash on hand exceeded total
debt. Total debt to total capital improved to 17.9% at September
30, 2008, compared to 19.2% at the end of 2007. There were no
borrowings outstanding under ATI�s $400 million unsecured domestic
borrowing facility, although a portion of the letters of credit
capacity was utilized. Allegheny Technologies will conduct a
conference call with investors and analysts on October 22, 2008, at
1 p.m. ET to discuss the financial results. The conference call
will be broadcast live on www.alleghenytechnologies.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 materially differ 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 credit market conditions and related issues,
and 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, construction and
mining, automotive, electrical energy, chemical process industry,
oil and gas, medical and other markets; (c) our inability to
achieve the level of cost savings, productivity improvements,
synergies, growth or other benefits anticipated by management,
including those anticipated from strategic investments and the
integration of acquired businesses, whether due to significant
increases in energy, raw materials or employee benefits costs, the
possibility of project cost overruns or unanticipated costs and
expenses, or other factors; (d)�volatility of prices and
availability of supply of the raw materials that are critical to
the manufacture of our products; (e) declines in the value of our
defined benefit pension plan assets or unfavorable changes in laws
or regulations that govern pension plan funding; (f)�significant
legal proceedings or investigations adverse to us; (g) other risk
factors summarized in our Annual Report on Form 10-K for the year
ended December 31, 2007, and in other reports filed with the
Securities and Exchange Commission. We assume no duty to update our
forward-looking statements. Building the World�s Best Specialty
Metals Company� Allegheny Technologies Incorporated is one of the
largest and most diversified specialty metals producers in the
world with revenues of $5.5 billion during 2007. ATI has
approximately 9,700 full-time employees world-wide who use
innovative technologies to offer growing global markets a wide
range of specialty metals solutions. Our major markets are
aerospace and defense, chemical process industry/oil and gas,
electrical energy, medical, automotive, food equipment and
appliance, machine and cutting tools, and construction and mining.
Our products include titanium and titanium alloys, nickel-based
alloys and superalloys, grain-oriented electrical steel, stainless
and specialty steels, zirconium, hafnium, and niobium, tungsten
materials, and forgings and castings. The Allegheny Technologies
website is www.alleghenytechnologies.com. � � � Allegheny
Technologies Incorporated and Subsidiaries Consolidated Statements
of Income (Unaudited, dollars in millions, except per share
amounts) � Three Months Ended Nine Months Ended September 30
September 30 2008 2007 2008 2007 � Sales $ 1,392.4 $ 1,335.0 $
4,197.0 $ 4,178.9 Costs and expenses: Cost of sales 1,085.8 968.1
3,267.5 3,024.0 Selling and administrative expenses � 74.3 � � 73.5
� � 223.7 � � 224.3 � Income before interest, other income
(expense) and income taxes 232.3 293.4 705.8 930.6 Interest
expense, net (1.7 ) (0.1 ) (2.8 ) (7.0 ) Other income (expense),
net � (2.6 ) � 0.7 � � (5.0 ) � 0.9 � Income before income tax
provision 228.0 294.0 698.0 924.5 Income tax provision � 83.9 � �
100.1 � � 243.0 � � 326.3 � � Net income $ 144.1 � $ 193.9 � $
455.0 � $ 598.2 � � Basic net income per common share $ 1.46 � $
1.90 � $ 4.54 � $ 5.88 � � Diluted net income per common share $
1.45 � $ 1.88 � $ 4.51 � $ 5.81 � � � Weighted average common
shares outstanding -- basic (millions) 99.0 101.8 100.2 101.7 �
Weighted average common shares outstanding -- diluted (millions)
99.7 103.1 100.9 103.0 � Actual common shares outstanding -- end of
period (millions) 97.3 102.2 97.3 102.2 � Allegheny Technologies
Incorporated and Subsidiaries Sales and Operating Profit by
Business Segment (Unaudited - Dollars in millions) � � � � Three
Months Ended Nine Months Ended September 30 September 30 2008 2007
2008 2007 Sales: High Performance Metals $ 510.2 $ 520.5 $ 1,495.7
$ 1,555.6 Flat-Rolled Products 764.6 709.2 2,345.6 2,297.5
Engineered Products � 117.6 � � 105.3 � � 355.7 � � 325.8 � � Total
External Sales $ 1,392.4 � $ 1,335.0 � $ 4,197.0 � $ 4,178.9 � �
Operating Profit: � High Performance Metals $ 139.6 $ 194.2 $ 421.8
$ 541.9 % of Sales 27.4 % 37.3 % 28.2 % 34.8 % � Flat-Rolled
Products 102.7 123.0 315.2 449.5 % of Sales 13.4 % 17.3 % 13.4 %
19.6 % � Engineered Products 6.1 7.3 22.8 30.6 % of Sales � 5.2 % �
6.9 % � 6.4 % � 9.4 % � Operating Profit 248.4 324.5 759.8 1,022.0
% of Sales 17.8 % 24.3 % 18.1 % 24.5 % � Corporate expenses (13.4 )
(18.5 ) (46.5 ) (56.9 ) � Interest expense, net (1.7 ) (0.1 ) (2.8
) (7.0 ) � Other expense, net of gains on asset sales (2.8 ) (4.3 )
(6.7 ) (10.9 ) � Retirement benefit expense � (2.5 ) � (7.6 ) �
(5.8 ) � (22.7 ) � Income before income taxes $ 228.0 � $ 294.0 � $
698.0 � $ 924.5 � � � Allegheny Technologies Incorporated and
Subsidiaries Consolidated Balance Sheets (Current period unaudited
- Dollars in millions) � September 30, December 31, 2008 2007
ASSETS � Current Assets: Cash and cash equivalents $ 272.6 $ 623.3
Accounts receivable, net of allowances for doubtful accounts of
$6.4 and $6.3 at September 30, 2008 and December 31, 2007,
respectively 744.5 652.2 Inventories, net 1,083.9 916.1 Deferred
income taxes - 18.8 Prepaid expenses and other current assets �
40.2 � 38.3 Total Current Assets 2,141.2 2,248.7 � Property, plant
and equipment, net 1,523.4 1,239.5 Prepaid pension asset 266.4
230.3 Cost in excess of net assets acquired 204.2 209.8 Deferred
income taxes 35.2 42.1 Other assets � 141.6 � 125.2 � Total Assets
$ 4,312.0 $ 4,095.6 � LIABILITIES AND STOCKHOLDERS' EQUITY �
Current Liabilities: Accounts payable $ 414.4 $ 388.4 Accrued
liabilities 290.8 277.3 Accrued income taxes 29.0 17.4 Deferred
income taxes 42.7 - Short term debt and current portion of
long-term debt � 20.9 � 20.9 Total Current Liabilities 797.8 704.0
� Long-term debt 495.0 507.3 Retirement benefits 470.1 469.6 Other
long-term liabilities � 184.4 � 191.2 Total Liabilities � 1,947.3 �
1,872.1 � Total Stockholders' Equity � 2,364.7 � 2,223.5 � Total
Liabilities and Stockholders' Equity $ 4,312.0 $ 4,095.6 � �
Allegheny Technologies Incorporated and Subsidiaries Condensed
Consolidated Statements of Cash Flows (Unaudited - Dollars in
millions) � � Nine Months Ended September 30 2008 2007 � Operating
Activities: � Net income $ 455.0 $ 598.2 � Depreciation and
amortization 86.7 75.2 Deferred taxes 64.5 2.0 Change in managed
working capital (185.2 ) (225.3 ) Accrued liabilities and other �
(76.4 ) � 80.7 � Cash provided by operating activities � 344.6 � �
530.8 � Investing Activities: Purchases of property, plant and
equipment (365.1 ) (281.0 ) Asset disposals and other � 1.3 � �
(3.8 ) Cash used in investing activities � (363.8 ) � (284.8 )
Financing Activities: Net decrease in debt (12.2 ) (24.8 ) Purchase
of treasury stock (241.8 ) - Dividends paid (54.1 ) (39.8 ) Taxes
on share-based compensation (24.5 ) (25.5 ) Exercises of stock
options � 1.1 � � 5.4 � Cash used in financing activities � (331.5
) � (84.7 ) Increase (decrease) in cash and cash equivalents (350.7
) 161.3 Cash and cash equivalents at beginning of period � 623.3 �
� 502.3 � Cash and cash equivalents at end of period $ 272.6 � $
663.6 � � Allegheny Technologies Incorporated and Subsidiaries
Selected Financial Data (Unaudited) � � � � � Three Months Ended
Nine Months Ended September 30 September 30 Volume: 2008 2007 2008
2007 High Performance Metals (000's lbs.) Titanium mill products
8,707 7,815 25,184 22,692 Nickel-based and specialty alloys 10,365
10,999 31,395 33,188 Exotic alloys 1,365 1,113 4,194 3,524 �
Flat-Rolled Products (000's lbs.) High value 133,322 121,674
386,113 370,351 Standard � 130,888 � 113,083 � 481,372 � 424,200
Flat-Rolled Products total 264,210 234,757 867,485 794,551 � � �
Average Prices: High Performance Metals (per lb.) Titanium mill
products $ 25.95 $ 29.43 $ 25.93 $ 31.31 Nickel-based and specialty
alloys $ 18.82 $ 20.49 $ 18.55 $ 19.42 Exotic alloys $ 49.91 $
45.16 $ 47.74 $ 42.07 � Flat-Rolled Products (per lb.) High value $
3.44 $ 3.37 $ 3.29 $ 3.31 Standard $ 2.27 $ 2.57 $ 2.18 $ 2.49
Flat-Rolled Products combined average $ 2.86 $ 2.99 $ 2.68 $ 2.87 �
Allegheny Technologies Incorporated and Subsidiaries Other
Financial Information Managed Working Capital (Unaudited - Dollars
in millions) � September 30, December 31, 2008 2007 � Accounts
receivable $ 744.5 $ 652.2 Inventory 1,083.9 916.1 Accounts payable
� (414.4 ) � (388.4 ) Subtotal 1,414.0 1,179.9 � Allowance for
doubtful accounts 6.4 6.3 LIFO reserve 338.4 374.6 Corporate and
other � 52.9 � � 65.7 � Managed working capital $ 1,811.7 � $
1,626.5 � � Annualized prior 2 months sales $ 5,703.7 � $ 5,058.5 �
� Managed working capital as a % of annualized sales 31.8 % 32.2 %
� September 30, 2008 change in managed working capital $ 185.2 � �
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 inventory valuation
reserves, excess and obsolete inventory 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, 2008 2007 �
Total debt $ 515.9 $ 528.2 Less: Cash � (272.6 ) � (623.3 ) Net
debt (cash) $ 243.3 $ (95.1 ) � Net debt (cash) $ 243.3 $ (95.1 )
Stockholders' equity � 2,364.7 � � 2,223.5 � Net capital $ 2,608.0
$ 2,128.4 � Net debt to capital � 9.3 % � -4.5 % � Total debt $
515.9 $ 528.2 Stockholders' equity � 2,364.7 � � 2,223.5 � Total
capital $ 2,880.6 $ 2,751.7 � Total debt to total capital � 17.9 %
� 19.2 % � In managing the overall capital structure of the
Company, some of the measures that we focus on are net debt to net
capitalization, which is the percentage of debt, net of cash that
may be available to reduce borrowings, to the total invested and
borrowed capital of the Company, and total debt to total
capitalization, which excludes cash balances. � � Allegheny
Technologies Incorporated and Subsidiaries Other Financial
Information Financial Returns (Unaudited - Dollars in millions) �
For the 12 month period ending September 30, December 31, 2008 2007
Return on Capital Employed: Net income $ 603.9 $ 747.1 Add: Net
interest expense, net of tax � 0.4 � � 3.1 � Net income before
interest (income) expense $ 604.3 $ 750.2 � Stockholders' equity,
end of period $ 2,364.7 $ 2,223.5 Total debt, end of period � 515.9
� � 528.2 � Capital employed, end of period $ 2,880.6 $ 2,751.7 �
Stockholders' equity, beginning of period $ 2,072.9 $ 1,502.9 Total
debt, beginning of period � 529.5 � � 553.6 � Capital employed,
beginning of period $ 2,602.4 $ 2,056.5 � Average capital employed
$ 2,741.5 $ 2,404.1 � Return on capital employed � 22.0 % � 31.2 %
� � Return on Stockholders' Equity: Net income $ 603.9 $ 747.1 �
Stockholders' equity, end of period $ 2,364.7 $ 2,223.5
Stockholders' equity, beginning of period � 2,072.9 � � 1,502.9 �
Average stockholders' equity $ 2,218.8 $ 1,863.2 � Return on
stockholders' equity � 27.2 % � 40.1 % � In managing the financial
performance of the Company, some of the measures that we focus on
are return on capital employed, which is net income excluding
financing costs compared to the average of the total invested and
borrowed capital of the Company, and return on stockholders'
equity, which measures net income compared to the average invested
capital of the Company. We measure these returns using trailing
twelve month periods.
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