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Allegheny Technologies Incorporated | Investor Contact: | Media Contact: |
Corporate Headquarters | Scott A. Minder | Natalie Gillespie |
1000 Six PPG Place | 412-395-2720 | 412-394-2850 |
Pittsburgh, PA 15222-5479 U.S.A. | scott.minder@atimetals.com | natalie.gillespie@atimetals.com |
www.ATImetals.com |
• | Business segment operating profit of $81.2 million, or 8.5% of sales, up 32% vs. PY |
• | $639 million of cash on hand; managed working capital % sales in line with PY |
• | Net income attributable to ATI of $21.1 million, or $0.16 per share |
◦ | Adjusted net income of $26.6 million, or $0.20 per share |
◦ | Adjusted EBITDA of $101.6 million, or 10.6% of sales |
• | Impact of COVID-19 on 2020 uncertain; Full Year 2020 guidance withdrawn |
Three months ended | |||||||||||
High Performance Materials & Components (HPMC ($M)) | March 31 | December 31 | March 31 | ||||||||
2020 | 2019 | 2019 | |||||||||
Sales | $ | 420.3 | $ | 497.0 | $ | 496.6 | |||||
Segment Operating Profit | $ | 57.1 | $ | 73.1 | $ | 51.7 | |||||
% of Sales | 13.6 | % | 14.7 | % | 10.4 | % |
• | HPMC sales decreased 15% in the first quarter 2020 year-over-year and decreased by 6% excluding sales from the recently divested titanium investment castings and industrial forgings businesses. Sales to the aerospace & defense markets were down 10%, or 3% excluding divested businesses. In the first quarter 2020, 85% of segment sales were to the aerospace and defense markets, with next-generation jet engine products sales representing 50% of total HPMC jet engine product sales. |
• | HPMC operating profit increased 10% compared to the prior year period, to $57.1 million, while segment operating profit margins grew by 320 basis points year-over-year to 13.6% of sales. |
• | Sales and operating results for the HPMC segment decreased sequentially versus fourth quarter 2019, primarily related to weaker sales for commercial airframe/engine and energy applications. |
Three months ended | |||||||||||
Advanced Alloys & Solutions (AA&S ($M)) | March 31 | December 31 | March 31 | ||||||||
2020 | 2019 | 2019 | |||||||||
Sales | $ | 535.2 | $ | 521.6 | $ | 508.2 | |||||
Segment Operating Profit | $ | 24.1 | $ | 32.2 | $ | 10.0 | |||||
% of Sales | 4.5 | % | 6.2 | % | 2.0 | % |
• | AA&S first quarter 2020 sales were 5% higher compared to the prior year's quarter, and 3% higher than the fourth quarter 2019, primarily due to higher HRPF conversion services billings. |
• | AA&S segment operating profit was $24.1 million, or 4.5% of sales, increasing 141% compared to the 2019 first quarter, but declining versus the fourth quarter 2019. Compared to the prior year, results from our STAL joint venture improved and higher raw material surcharges provided a tailwind. Sequentially, segment operating profit declines were driven primarily by lower raw material surcharges and reduced high-value product volumes. Compared to both prior year periods, AA&S segment results for the first quarter 2020 reflect lower retirement benefit expense of approximately $5 million. |
• | First quarter 2020 AA&S segment results include $3.9 million of losses from the A&T Stainless joint venture operations, which remained unprofitable due to Section 232 tariffs. As previously disclosed, the joint venture intends to idle its Midland, PA Direct Roll Anneal and Pickle (DRAP) facility mid-year 2020 due to a lack of relief from Section 232 tariffs. |
• | Corporate expenses in the first quarter 2020 were $12.8 million, or $3.8 million lower than the prior year period, primarily due to lower incentive compensation expense based on expected performance versus targeted metrics. |
• | An $8.0 million restructuring charge for a voluntary early retirement program to eligible salaried employees was recorded in the first quarter 2020. Costs for this program are expected to be paid through mid-2021 based on the timing of the benefits provided. |
• | Closed operations and other expenses in the first quarter 2020 were $6.6 million, or $3.5 million higher year-over-year, mainly due to legal-related costs. |
• | ATI had a 31% year-to-date effective tax rate for the first quarter 2020, higher than initially expected due primarily to higher overall state taxes based on income apportionment. Due to ongoing global economic uncertainty, the Company was unable to project a full-year effective tax rate for Q1 2020. No significant income tax benefit is expected to be realized from the recently enacted CARES Act. 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. |
• | Cash on hand at March 31, 2020 was $639.0 million, which included $300 million of borrowings under the revolving credit portion of the Company's asset-based lending (ABL) credit facility. Those first quarter ABL borrowings were repaid in April 2020. At March 31, 2020 available additional liquidity under the ABL was approximately $260 million. |
• | For the three months ended March 31, 2020, in line with prior years' seasonal patterns and our expectations, cash used in operating activities was $115.4 million, including $134.7 million for managed working capital. ATI contributed $27.9 million to the U.S. defined benefit pension trust during the quarter. Cash used in investing activities was $25.2 million, primarily related to capital expenditures of $29.1 million. |
Three Months Ended | |||||||||||
March 31 | December 31 | March 31 | |||||||||
2020 | 2019 | 2019 | |||||||||
Sales | $ | 955.5 | $ | 1,018.6 | $ | 1,004.8 | |||||
Cost of sales | 820.7 | 849.3 | 873.7 | ||||||||
Gross profit | 134.8 | 169.3 | 131.1 | ||||||||
Selling and administrative expenses | 58.4 | 66.3 | 68.0 | ||||||||
Restructuring charges | 8.0 | 4.5 | — | ||||||||
Operating income | 68.4 | 98.5 | 63.1 | ||||||||
Nonoperating retirement benefit expense | (11.2 | ) | (18.4 | ) | (18.3 | ) | |||||
Interest expense, net | (21.9 | ) | (24.1 | ) | (24.8 | ) | |||||
Debt extinguishment charge | — | (21.6 | ) | — | |||||||
Other expense, net | (0.9 | ) | (13.2 | ) | (2.9 | ) | |||||
Income before income taxes | 34.4 | 21.2 | 17.1 | ||||||||
Income tax provision (benefit) | 10.8 | (38.8 | ) | 0.8 | |||||||
Net income | $ | 23.6 | $ | 60.0 | $ | 16.3 | |||||
Less: Net income attributable to noncontrolling interests | 2.5 | 3.5 | 1.3 | ||||||||
Net income attributable to ATI | $ | 21.1 | $ | 56.5 | $ | 15.0 | |||||
Basic net income attributable to ATI per common share | $ | 0.17 | $ | 0.45 | $ | 0.12 | |||||
Diluted net income attributable to ATI per common share | $ | 0.16 | $ | 0.41 | $ | 0.12 |
Three Months Ended | |||||||||||
March 31 | December 31 | March 31 | |||||||||
2020 | 2019 | 2019 | |||||||||
Sales: | |||||||||||
High Performance Materials & Components | $ | 420.3 | $ | 497.0 | $ | 496.6 | |||||
Advanced Alloys & Solutions | 535.2 | 521.6 | 508.2 | ||||||||
Total external sales | |||||||||||
$ | 955.5 | $ | 1,018.6 | $ | 1,004.8 | ||||||
Segment operating profit: | |||||||||||
High Performance Materials & Components | |||||||||||
% of Sales | $ | 57.1 | $ | 73.1 | $ | 51.7 | |||||
13.6 | % | 14.7 | % | 10.4 | % | ||||||
Advanced Alloys & Solutions | |||||||||||
% of Sales | 24.1 | 32.2 | 10.0 | ||||||||
4.5 | % | 6.2 | % | 2.0 | % | ||||||
Total segment operating profit | |||||||||||
% of Sales | 81.2 | 105.3 | 61.7 | ||||||||
8.5 | % | 10.3 | % | 6.1 | % | ||||||
LIFO and net realizable value reserves | — | — | (0.1 | ) | |||||||
Corporate expenses | (12.8 | ) | (16.2 | ) | (16.6 | ) | |||||
Closed operations and other expense | (6.6 | ) | (6.3 | ) | (3.1 | ) | |||||
Restructuring and other charges | (8.0 | ) | (4.5 | ) | — | ||||||
Joint venture impairment charge | — | (11.4 | ) | — | |||||||
Gain on asset sales | 2.5 | — | — | ||||||||
Debt extinguishment charge | — | (21.6 | ) | — | |||||||
Interest expense, net | (21.9 | ) | (24.1 | ) | (24.8 | ) | |||||
Income before income taxes | $ | 34.4 | $ | 21.2 | $ | 17.1 |
March 31 | December 31 | ||||||
2020 | 2019 | ||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 639.0 | $ | 490.8 | |||
Accounts receivable, net of allowances for doubtful accounts | 593.4 | 554.1 | |||||
Short-term contract assets | 43.5 | 38.5 | |||||
Inventories, net | 1,181.1 | 1,155.3 | |||||
Prepaid expenses and other current assets | 51.0 | 64.3 | |||||
Total Current Assets | 2,508.0 | 2,303.0 | |||||
Property, plant and equipment, net | 2,445.5 | 2,450.1 | |||||
Goodwill | 520.8 | 525.8 | |||||
Other assets | 332.8 | 355.7 | |||||
Total Assets | $ | 5,807.1 | $ | 5,634.6 | |||
LIABILITIES AND EQUITY | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 424.6 | $ | 521.2 | |||
Short-term contract liabilities | 114.3 | 78.7 | |||||
Short-term debt and current portion of long-term debt | 310.7 | 11.5 | |||||
Other current liabilities | 209.6 | 237.8 | |||||
Total Current Liabilities | 1,059.2 | 849.2 | |||||
Long-term debt | 1,390.0 | 1,387.4 | |||||
Accrued postretirement benefits | 307.5 | 312.5 | |||||
Pension liabilities | 694.3 | 731.5 | |||||
Other long-term liabilities | 163.5 | 160.8 | |||||
Total Liabilities | 3,614.5 | 3,441.4 | |||||
Total ATI stockholders' equity | 2,087.8 | 2,090.1 | |||||
Noncontrolling interests | 104.8 | 103.1 | |||||
Total Equity | 2,192.6 | 2,193.2 | |||||
Total Liabilities and Equity | $ | 5,807.1 | $ | 5,634.6 |
Three Months Ended | ||||||||
March 31 | March 31 | |||||||
2020 | 2019 | |||||||
Operating Activities: | ||||||||
Net income | $ | 23.6 | $ | 16.3 | ||||
Depreciation and amortization | 37.3 | 38.7 | ||||||
Deferred taxes | 8.3 | 1.6 | ||||||
Net (gain) loss from disposal of property, plant and equipment | (2.5 | ) | 0.8 | |||||
Change in managed working capital | (134.7 | ) | (121.0 | ) | ||||
Change in retirement benefits | (23.0 | ) | (18.4 | ) | ||||
Accrued liabilities and other | (24.4 | ) | (48.0 | ) | ||||
Cash used in operating activities | (115.4 | ) | (130.0 | ) | ||||
Investing Activities: | ||||||||
Purchases of property, plant and equipment | (29.1 | ) | (23.5 | ) | ||||
Proceeds from disposal of property, plant and equipment | 2.9 | — | ||||||
Other | 1.0 | (0.1 | ) | |||||
Cash used in investing activities | (25.2 | ) | (23.6 | ) | ||||
Financing Activities: | ||||||||
Payments on long-term debt and finance leases | (2.0 | ) | (1.5 | ) | ||||
Net borrowings (repayments) under credit facilities | 298.6 | — | ||||||
Taxes on share-based compensation and other | (7.8 | ) | (9.9 | ) | ||||
Cash provided by (used in) financing activities | 288.8 | (11.4 | ) | |||||
Increase (decrease) in cash and cash equivalents | 148.2 | (165.0 | ) | |||||
Cash and cash equivalents at beginning of period | 490.8 | 382.0 | ||||||
Cash and cash equivalents at end of period | $ | 639.0 | $ | 217.0 |
Three Months Ended | |||||||||||
March 31 | March 31 | ||||||||||
2020 | 2019 | ||||||||||
Market | |||||||||||
Aerospace & Defense: | |||||||||||
Jet Engines | $ | 272.2 | 29 | % | $ | 292.4 | 29 | % | |||
Airframes | 134.9 | 14 | % | 157.8 | 16 | % | |||||
Government Aerospace & Defense | 85.4 | 9 | % | 75.4 | 7 | % | |||||
Total Aerospace & Defense | $ | 492.5 | 52 | % | $ | 525.6 | 52 | % | |||
Energy* | 170.6 | 18 | % | 168.5 | 17 | % | |||||
Automotive | 76.5 | 8 | % | 76.9 | 8 | % | |||||
Food Equipment & Appliances | 50.4 | 5 | % | 53.2 | 5 | % | |||||
Construction/Mining | 43.6 | 5 | % | 57.9 | 6 | % | |||||
Medical | 38.6 | 4 | % | 46.1 | 5 | % | |||||
Electronics/Computers/Communications | 33.2 | 3 | % | 34.1 | 3 | % | |||||
Other | 50.1 | 5 | % | 42.5 | 4 | % | |||||
Total | $ | 955.5 | 100 | % | $ | 1,004.8 | 100 | % |
Three Months Ended | ||||||||
March 31 | December 31 | March 31 | ||||||
2020 | 2019 | 2019 | ||||||
Percentage of Total ATI Sales | ||||||||
High-Value Products | ||||||||
Nickel-based alloys and specialty alloys | 32 | % | 32 | % | 30 | % | ||
Titanium and titanium-based alloys | 17 | % | 19 | % | 19 | % | ||
Precision forgings, castings and components | 16 | % | 17 | % | 19 | % | ||
Precision rolled strip products | 12 | % | 12 | % | 11 | % | ||
Zirconium and related alloys | 7 | % | 6 | % | 6 | % | ||
Total High-Value Products | 84 | % | 86 | % | 85 | % | ||
Standard Products | ||||||||
Standard stainless products | 16 | % | 14 | % | 15 | % | ||
Grand Total | 100 | % | 100 | % | 100 | % |
Three Months Ended | ||||||||||||
March 31 | December 31 | March 31 | ||||||||||
2020 | 2019 | 2019 | ||||||||||
Numerator for Basic net income per common share - | ||||||||||||
Net income attributable to ATI | $ | 21.1 | $ | 56.5 | $ | 15.0 | ||||||
Effect of dilutive securities: | ||||||||||||
4.75% Convertible Senior Notes due 2022 | 2.3 | 3.1 | — | |||||||||
Numerator for Diluted net income per common share - | ||||||||||||
Net income attributable to ATI after assumed conversions | $ | 23.4 | $ | 59.6 | $ | 15.0 | ||||||
Denominator for Basic net income per common share - | ||||||||||||
Weighted average shares outstanding | 126.1 | 125.9 | 125.4 | |||||||||
Effect of dilutive securities: | ||||||||||||
Share-based compensation | 0.4 | 1.3 | 0.7 | |||||||||
4.75% Convertible Senior Notes due 2022 | 19.9 | 19.9 | — | |||||||||
Denominator for Diluted net income per common share - | ||||||||||||
Adjusted weighted average shares assuming conversions | 146.4 | 147.1 | 126.1 | |||||||||
Basic net income attributable to ATI per common share | $ | 0.17 | $ | 0.45 | $ | 0.12 | ||||||
Diluted net income attributable to ATI per common share | $ | 0.16 | $ | 0.41 | $ | 0.12 |
March 31 | December 31 | ||||||
2020 | 2019 | ||||||
Accounts receivable | $ | 593.4 | $ | 554.1 | |||
Short-term contract assets | 43.5 | 38.5 | |||||
Inventory | 1,181.1 | 1,155.3 | |||||
Accounts payable | (424.6 | ) | (521.2 | ) | |||
Short-term contract liabilities | (114.3 | ) | (78.7 | ) | |||
Subtotal | 1,279.1 | 1,148.0 | |||||
Allowance for doubtful accounts | 4.4 | 4.6 | |||||
LIFO reserve | (45.6 | ) | (33.6 | ) | |||
Inventory reserves | 119.9 | 104.1 | |||||
Managed working capital | $ | 1,357.8 | $ | 1,223.1 | |||
Annualized prior 3 months sales | $ | 3,821.9 | $ | 4,074.4 | |||
Managed working capital as a | |||||||
% of annualized sales | 35.5 | % | 30.0 | % | |||
March 31, 2020 change in managed | |||||||
working capital | $ | 134.7 |
March 31 | December 31 | ||||||
2020 | 2019 | ||||||
Total debt (a) | $ | 1,712.4 | $ | 1,411.2 | |||
Less: Cash | (639.0 | ) | (490.8 | ) | |||
Net debt | $ | 1,073.4 | $ | 920.4 | |||
Net debt | $ | 1,073.4 | $ | 920.4 | |||
Total ATI stockholders' equity | 2,087.8 | 2,090.1 | |||||
Net ATI capital | $ | 3,161.2 | $ | 3,010.5 | |||
Net debt to ATI capital | 34.0 | % | 30.6 | % | |||
Total debt (a) | $ | 1,712.4 | $ | 1,411.2 | |||
Total ATI stockholders' equity | 2,087.8 | 2,090.1 | |||||
Total ATI capital | $ | 3,800.2 | $ | 3,501.3 | |||
Total debt to total ATI capital | 45.1 | % | 40.3 | % | |||
(a) Excludes debt issuance costs. |
Three Months Ended | ||||||
March 31, 2020 | ||||||
Net income attributable to ATI | $ | 21.1 | ||||
Adjust for special items: | ||||||
Restructuring, net of tax (a) | 5.5 | |||||
Net income attributable to ATI excluding special items | $ | 26.6 | ||||
Per Diluted Share * | ||||||
Net income attributable to ATI | $ | 0.16 | ||||
Adjust for special items: | ||||||
Restructuring, net of tax | 0.04 | |||||
Net income attributable to ATI excluding special items | $ | 0.20 | ||||
Earnings before interest, taxes, depreciation and amortization (EBITDA) | ||||||
Three Months Ended | ||||||
March 31, 2020 | March 31, 2019 | |||||
Net income | $ | 23.6 | $ | 16.3 | ||
(+) Depreciation and Amortization | 37.3 | 38.7 | ||||
(+) Interest Expense | 21.9 | 24.8 | ||||
(+) Income Tax Provision | 10.8 | 0.8 | ||||
EBITDA | $ | 93.6 | $ | 80.6 | ||
Adjustments: | ||||||
(+) Restructuring (a) | 8.0 | — | ||||
Adjusted EBITDA | $ | 101.6 | $ | 80.6 |
First Quarter 2019 | ||||||
Net Income | Per Diluted Share | |||||
Net income attributable to ATI | $ | 15.0 | $ | 0.12 | ||
Tax rate impact (i) | (4.6 | ) | (0.04 | ) | ||
Adjusted net income attributable to ATI | $ | 10.4 | $ | 0.08 |
Industrial Forgings and | |||||||||||
Reported | Cast Products Businesses | Adjusted | |||||||||
Total ATI Sales- Q1 2020 | $ | 955.5 | $ | — | $ | 955.5 | |||||
Total ATI Sales- Q1 2019 | 1,004.8 | (47.5 | ) | 957.3 | |||||||
Percentage Change | (4.9 | )% | (0.2 | )% | |||||||
HPMC Sales- Q1 2020 | $ | 420.3 | $ | — | $ | 420.3 | |||||
HPMC Sales- Q1 2019 | 496.6 | (47.5 | ) | 449.1 | |||||||
Percentage Change | (15.4 | )% | (6.4 | )% | |||||||
HPMC Aerospace & Defense Markets Sales- Q1 2020 | $ | 358.8 | $ | — | $ | 358.8 | |||||
HPMC Aerospace & Defense Markets Sales- Q1 2019 | 400.6 | (29.8 | ) | 370.8 | |||||||
Percentage Change | (10.4 | )% | (3.2 | )% |
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Allegheny Technologies Inc's Definitive Proxy Statement (Form DEF 14A) filed after their 2020 10-K Annual Report includes:
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Ticker: ATIEvents:
CIK: 1018963
Form Type: 8-K Corporate News
Accession Number: 0001628280-20-006356
Submitted to the SEC: Tue May 05 2020 7:49:18 AM EST
Accepted by the SEC: Tue May 05 2020
Period: Tuesday, May 5, 2020
Industry: Steel Pipe And Tubes