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Share Name | Share Symbol | Market | Type |
---|---|---|---|
ATI Inc | NYSE:ATI | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.11 | 0.19% | 58.16 | 59.13 | 57.50 | 58.88 | 1,831,145 | 01:00:00 |
Second Quarter 2015 Results
Allegheny Technologies Incorporated (NYSE: ATI) reported second quarter 2015 sales of $1.02 billion and a net loss attributable to ATI of $16.4 million, or $(0.15) per share. Results were adversely affected by lower demand in both the Flat Rolled Products and High Performance Materials and Components segments. Sales declined 9% compared to the first quarter 2015, when ATI reported net income of $10.0 million, or $0.09 per share. Results for the second quarter 2014 were sales of $1.12 billion and a net loss from continuing operations attributable to ATI of $3.8 million, or $(0.03) per share.
“This was a challenging quarter due to business conditions in the Flat Rolled Products segment and further weakening in demand from the oil & gas market in the High Performance Materials and Components segment,” said Rich Harshman, Chairman, President and CEO.
“ATI sales to the aerospace market grew nearly 12% in the first half 2015 compared to the first half 2014. However, during the second quarter 2015, sales of our specialty materials to the aerospace market declined compared to the strong first quarter 2015 as supply chains were replenished in the first quarter and customers kept their inventories in line with the projected build rate.
“In the Flat Rolled Products segment, significant low-priced imports and distribution channel inventory reductions in response to falling base-selling prices and raw material surcharges negatively impacted results. Standard stainless sheet and plate product shipment volume was down 13% compared to the first quarter 2015 and 23% compared to the second quarter 2014, and sales of these products decreased by approximately 20% and 30%, respectively. ATI segment operating profit in the second quarter 2015 was also adversely affected by $10.6 million of start-up and qualification costs associated with our two strategic growth projects, the Hot-Rolling and Processing Facility (HRPF) and the Rowley premium-quality (PQ) titanium sponge facility.”
“Segment operating profit of $39 million, or 3.8% of sales, was over 50% below the prior quarter,” Mr. Harshman continued. “Operating profit in the High Performance Materials & Components segment was $42.6 million, or 8.3% of sales. Results reflect a decline in sales of our products to the oil & gas market, and a decline in sales to the aerospace market with a less favorable product mix compared to the first quarter. Segment operating profit continued to be negatively impacted by lower operating rates at our Rowley, UT titanium sponge facility and by our strategic decision to use ATI-produced titanium sponge rather than lower cost titanium scrap to manufacture certain products.
“Flat Rolled Products segment results were a loss of $3.4 million, the segment’s sixth quarterly operating loss over the last eight quarters. Base-selling prices for standard stainless steel sheet products were pressured by a surge of low-priced imports, primarily from China. Raw material surcharges continued to fall, primarily due to lower prices for nickel. Flat Rolled Products segment operating profit was reduced by $10.6 million of HRPF startup costs and inventory charges related to the market-based valuation of industrial titanium products.
“Cost reduction remains a strategic focus and we have targeted a minimum of $100 million in new gross cost reductions for 2015. Our operations achieved $53 million in gross cost reductions during the first half 2015. Managed working capital as a percentage of annualized sales increased to 39.5% at the end of June 2015 compared to 38.5% at year-end 2014 primarily due to lower sales volume in the second quarter 2015.
“Our balance sheet remains solid, with cash on hand of $251 million at the end of the second quarter 2015 and no borrowings outstanding under our $400 million domestic borrowing facility. Total debt to total capitalization of 37.0% at the end of the second quarter 2015 was unchanged from year-end 2014. Including expected payments associated with the HRPF project, we now expect 2015 capital expenditures to be approximately $250 million, of which $63 million has been spent in the first six months of 2015.”
Strategy and Outlook
“Our journey to sustainable, profitable growth continues in spite of the current challenging business conditions in several of our major markets. Important milestones were achieved during the second quarter 2015. ATI completed qualification for its premium-titanium products used in jet engine rotating parts made using ATI’s premium-quality (PQ) titanium sponge produced at our Rowley facility. This multi-year strategic project, which began operation in 2009, is an important component of ATI’s readiness for the expected strong ramp-up in aerospace market demand, and provides ATI with a secure, stable source of titanium raw materials. Additionally, we announced an expansion of our nickel-based superalloy powder capabilities. This project strengthens our position in the production of technically demanding powders to satisfy growing demand from the aerospace jet engine market and from the additive manufacturing industry, particularly for 3D printing applications.
“On May 28, we announced that during routine maintenance a defective component was discovered in the rotary crop shear (RCS) at the HRPF. Shortly after this discovery, our team was able to reprogram the HRPF to produce most of our flat-rolled products without the RCS. During the second quarter and continuing until now, new product qualification and new product development has been taking place at a rapid pace, and we continued to work to capture the quality and productivity benefits of the HRPF. The component failure is expected to cause projected operating results benefits to shift to 2016. We remain confident that in the long-term the $150-$250 million annual operating profit benefit from cost reductions and new product sales enabled by the HRPF will be unaffected by the short-term impact from the RCS component failure. The RCS replacement is expected to be online by the end of September.
“In our High Performance Materials & Components segment, we expect to see demand for our mill products, forgings and investment castings improve over the next several years due to record backlogs and strong demand from airframe and jet engine OEMs. In this segment, demand from the oil & gas market, primarily for exploration applications, is expected to remain depressed through the end of 2015, and perhaps longer. We also expect segment results to continue to be negatively impacted by operating rates at the Rowley facility throughout 2015.
“In our Flat Rolled Products segment, we expect selling prices and demand for our standard stainless products to remain under pressure until raw material prices recover and the level of imports normalize. High-value products sales are expected to weaken in the second half of 2015 as new orders will not fully replace a large oil & gas pipeline project that benefitted first half results. We expect the annual $150 million operating profit benefit from the HRPF, which includes the elimination of startup costs compared to 2014, to now be realized in 2016 following the replacement of the RCS.
“As previously stated, the collective bargaining agreements between ATI and the USW at many of our Flat Rolled Products domestic facilities, one ATI titanium facility in Albany, OR, and a specialty melt shop in Lockport, NY ended on June 30, 2015. Currently, operations continue under the terms of the expired agreements. ATI remains committed to negotiate new agreements with the USW that are fair, competitive, and consistent with our goal of continually improving the competitive cost position of our businesses.”
Results of operations were as follows:
Three Months Ended
Six Months Ended June 30, March 31, June 30, June 30, June 30, 2015 2015 2014 2015 2014 In Millions Sales $ 1,022.5 $ 1,125.5 $ 1,119.0 $ 2,148.0 $ 2,106.3 Income (loss) from continuing operations attributable to ATI$
(16.4
)
$
10.0
$
(3.8
)
$
(6.4
)
$
(21.9
)
Per Diluted Share Diluted net income (loss) from continuing operations attributable to ATI per common share$
(0.15
)
$
0.09
$
(0.03
)
$
(0.06
)
$
(0.20
)
Percentage of Total ATI Sales
Three Months Ended
Six Months Ended June 30, March 31, June 30, June 30, June 30, High-Value Products 2015 2015 2014 2015 2014 Nickel-based alloys and specialty alloys 29 % 29 % 26 % 29 % 26 % Titanium and titanium alloys 16 % 16 % 14 % 16 % 15 % Precision forgings, castings and components 13 % 13 % 13 % 13 % 13 % Precision and engineered strip 13 % 12 % 13 % 12 % 13 % Zirconium and related alloys 7 % 5 % 6 % 6 % 6 % Grain-oriented electrical steel 4 % 4 % 4 % 4 % 4 % Total High-Value Products 82 % 79 % 76 % 80 % 77 %
Second Quarter 2015 Financial Results
High Performance Materials & Components Segment
Market Conditions
Second quarter 2015 compared to second quarter 2014
Flat Rolled Products Segment
Market Conditions
Second quarter 2015 compared to second quarter 2014
Other Expenses
ATI will conduct a conference call with investors and analysts on Tuesday, July 21, 2015, at 8:30 a.m. ET to discuss the financial results. The conference call will be broadcast, and accompanying presentation slides will be available, at www.ATImetals.com. To access the broadcast, click on “Conference Call”. Replay of the conference call will be available on the ATI website.
This news release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements in this news release relate to future events and expectations and, as such, constitute forward-looking statements. Forward-looking statements include those containing such words as “anticipates,” “believes,” “estimates,” “expects,” “would,” “should,” “will,” “will likely result,” “forecast,” “outlook,” “projects,” and similar expressions. Forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which we are unable to predict or control, that may cause our actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: (a) material adverse changes in economic or industry conditions generally, including global supply and demand conditions and prices for our specialty metals; (b) material adverse changes in the markets we serve, including the aerospace and defense, electrical energy, oil and gas/chemical process industry, medical, automotive, construction and mining, and other markets; (c) our inability to achieve the level of cost savings, productivity improvements, synergies, growth or other benefits anticipated by management from strategic investments and the integration of acquired businesses, whether due to significant increases in energy, raw materials or employee benefits costs, project cost overruns or unanticipated costs and expenses, or other factors; (d) volatility of prices and availability of supply of the raw materials that are critical to the manufacture of our products; (e) declines in the value of our defined benefit pension plan assets or unfavorable changes in laws or regulations that govern pension plan funding; (f) significant legal proceedings or investigations adverse to us; (g) labor disputes or work stoppage; and (h) other risk factors summarized in our Annual Report on Form 10-K for the year ended December 31, 2014, and in other reports filed with the Securities and Exchange Commission. We assume no duty to update our forward-looking statements.
Creating Value Thru Relentless Innovation®
Allegheny Technologies Incorporated is one of the largest and most diversified specialty materials and components producers in the world with revenues of approximately $4.3 billion for the twelve months ended June 30, 2015. ATI has approximately 9,600 full-time employees world-wide who use innovative technologies to offer global markets a wide range of specialty materials solutions. Our major markets are aerospace and defense, oil and gas/chemical process industry, electrical energy, medical, automotive, food equipment and appliance, and construction and mining. The ATI website is www.ATImetals.com.
Allegheny Technologies Incorporated and Subsidiaries Consolidated Statements of Operations (Unaudited, dollars in millions, except per share amounts) Three Months Ended Six Months EndedJune 30,
March 31,
June 30,
June 30,
June 30,
2015 2015 2014 2015 2014 Sales $ 1,022.5 $ 1,125.5 $ 1,119.0 $ 2,148.0 $ 2,106.3 Costs and expenses: Cost of sales 945.5 1,016.0 1,029.5 1,961.5 1,946.6 Selling and administrative expenses 72.4 63.1 65.7 135.5 133.4 Income before interest, other income and income taxes 4.6 46.4 23.8 51.0 26.3 Interest expense, net (26.8 ) (26.7 ) (28.5 ) (53.5 ) (57.6 ) Other income, net 0.6 0.9 1.3 1.5 1.9 Income (loss) from continuing operations before income taxes (21.6 ) 20.6 (3.4 ) (1.0 ) (29.4 ) Income tax provision (benefit) (7.7 ) 8.0 (2.9 ) 0.3 (12.9 ) Income (loss) from continuing operations (13.9 ) 12.6 (0.5 ) (1.3 ) (16.5 ) Income (loss) from discontinued operations, net of tax - - (0.2 ) - (2.1 ) Net income (loss) $ (13.9 ) $ 12.6 $ (0.7 ) $ (1.3 ) $ (18.6 ) Less: Net income attributable to noncontrolling interests 2.5 2.6 3.3 5.1 5.4 Net income (loss) attributable to ATI $ (16.4 ) $ 10.0 $ (4.0 ) $ (6.4 ) $ (24.0 ) Basic net income (loss) per common share Continuing operations attributable to ATI per common share $ (0.15 ) $ 0.09 $ (0.03 ) $ (0.06 ) $ (0.20 ) Discontinued operations attributable to ATI per common share - - - - (0.02 ) Basic net income (loss) attributable to ATI per common share $ (0.15 ) $ 0.09 $ (0.03 ) $ (0.06 ) $ (0.22 ) Diluted net income (loss) per common share Continuing operations attributable to ATI per common share $ (0.15 ) $ 0.09 $ (0.03 ) $ (0.06 ) $ (0.20 ) Discontinued operations attributable to ATI per common share - - - - (0.02 ) Diluted net income (loss) attributable to ATI per common share $ (0.15 ) $ 0.09 $ (0.03 ) $ (0.06 ) $ (0.22 ) Amounts attributable to ATI common stockholders Income (loss) from continuing operations, net of tax $ (16.4 ) $ 10.0 $ (3.8 ) $ (6.4 ) $ (21.9 ) Income (loss) from discontinued operations, net of tax - - (0.2 ) - (2.1 ) Net income (loss) $ (16.4 ) $ 10.0 $ (4.0 ) $ (6.4 ) $ (24.0 )Weighted average common shares outstanding -- basic (millions)
107.3 107.2 107.1 107.2 107.0Weighted average common shares outstanding -- diluted (millions)
107.3 108.0 107.1 107.2 107.0Actual common shares outstanding -- end of period (millions)
109.2 109.2 108.7 109.2 108.7Allegheny Technologies Incorporated and Subsidiaries Sales and Operating Profit by Business Segment (Unaudited, dollars in millions) Three Months Ended Six Months Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2015 2015 2014 2015 2014 Sales: High Performance Materials & Components $ 511.1 $ 542.8 $ 514.1 $ 1,053.9 $ 998.5 Flat Rolled Products 511.4 582.7 604.9 1,094.1 1,107.8 Total External Sales $ 1,022.5 $ 1,125.5 $ 1,119.0 $ 2,148.0 $ 2,106.3 Operating Profit (Loss): High Performance Materials & Components $ 42.6 $ 75.9 $ 85.1 $ 118.5 $ 154.2 % of Sales 8.3 % 14.0 % 16.6 % 11.2 % 15.4 % Flat Rolled Products (3.4 ) 7.9 (19.9 ) 4.5 (45.5 ) % of Sales -0.7 % 1.4 % -3.3 % 0.4 % -4.1 % Operating Profit 39.2 83.8 65.2 123.0 108.7 % of Sales 3.8 % 7.4 % 5.8 % 5.7 % 5.2 % Corporate expenses (9.2 ) (11.8 ) (11.7 ) (21.0 ) (23.2 ) Interest expense, net (26.8 ) (26.7 ) (28.5 ) (53.5 ) (57.6 ) Closed company and other expenses (5.5 ) (5.4 ) (4.3 ) (10.9 ) (9.3 ) Retirement benefit expense (19.3 ) (19.3 ) (24.1 ) (38.6 ) (48.0 ) Income (loss) from continuing operations before income taxes $ (21.6 ) $ 20.6 $ (3.4 ) $ (1.0 ) $ (29.4 )Allegheny Technologies Incorporated and Subsidiaries Condensed Consolidated Balance Sheets (Current period unaudited, dollars in millions) June 30, December 31, 2015 2014 ASSETS Current Assets: Cash and cash equivalents $ 250.9 $ 269.5
Accounts receivable, net of allowances for doubtful accounts of $4.8 million at June 30, 2015 and December 31, 2014
593.4 603.6 Inventories, net 1,472.9 1,472.8 Prepaid expenses and other current assets 66.3 136.2 Total Current Assets 2,383.5 2,482.1 Property, plant and equipment, net 2,946.7 2,961.8 Cost in excess of net assets acquired 781.5 780.4 Other assets 357.6 358.3 Total Assets $ 6,469.3 $ 6,582.6 LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 487.5 $ 556.7 Accrued liabilities 314.4 323.2 Deferred income taxes 67.8 62.2Short term debt and current portion of long-term debt
18.3 17.8 Total Current Liabilities 888.0 959.9 Long-term debt 1,502.7 1,509.1 Accrued postretirement benefits 397.1 415.8 Pension liabilities 722.1 739.3 Deferred income taxes 143.6 80.9 Other long-term liabilities 103.0 156.2 Total Liabilities 3,756.5 3,861.2 Redeemable noncontrolling interest 12.1 12.1 Total ATI stockholders' equity 2,584.3 2,598.4 Noncontrolling interests 116.4 110.9 Total Equity 2,700.7 2,709.3 Total Liabilities and Equity $ 6,469.3 $ 6,582.6Allegheny Technologies Incorporated and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited - Dollars in millions) Six Months Ended June 30 2015 2014 Operating Activities: Net loss $ (1.3 ) $ (18.6 ) Depreciation and amortization 93.6 87.5 Deferred taxes (9.6 ) 10.5 Change in managed working capital (55.3 ) (127.6 ) Change in retirement benefits 5.0 10.9 Accrued liabilities and other 59.1 (0.2 ) Cash provided by (used in) operating activities 91.5 (37.5 ) Investing Activities: Purchases of property, plant and equipment (63.3 ) (97.9 ) Purchases of businesses, net of cash acquired (0.5 ) (92.5 ) Asset disposals and other - 2.1 Cash used in investing activities (63.8 ) (188.3 ) Financing Activities: Payments on long-term debt and capital leases (6.3 ) (403.4 ) Dividends paid to shareholders (38.6 ) (38.6 ) Taxes on share-based compensation and other (1.4 ) (3.9 ) Cash used in financing activities (46.3 ) (445.9 ) Decrease in cash and cash equivalents (18.6 ) (671.7 ) Cash and cash equivalents at beginning of period 269.5 1,026.8 Cash and cash equivalents at end of period $ 250.9 $ 355.1
Allegheny Technologies Incorporated and Subsidiaries Selected Financial Data - Mill Products (Unaudited) Three Months Ended Six Months Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2015 2015 2014 2015 2014 Shipment Volume: Flat Rolled Products (000's lbs.) High value 130,061 129,203 133,820 259,264 256,589 Standard 148,794 171,154 193,699 319,948 359,100 Flat Rolled Products total 278,855 300,357 327,519 579,212 615,689 Average Selling Prices: Flat Rolled Products (per lb.) High value $ 2.56 $ 2.75 $ 2.60 $ 2.65 $ 2.49 Standard $ 1.19 $ 1.30 $ 1.31 $ 1.25 $ 1.28 Flat Rolled Products combined average $ 1.83 $ 1.93 $ 1.84 $ 1.88 $ 1.79Allegheny 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 Six Months Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2015 2015 2014 2015 2014 Continuing operations: Numerator for Basic net income (loss) per common share - Income (loss) from continuing operations attributable to ATI $ (16.4 ) $ 10.0 $ (3.8 ) $ (6.4 ) $ (21.9 ) Redeemable noncontrolling interest - (0.1 ) - (0.1 ) - Numerator for Dilutive net income (loss) per common share -Income (loss) from continuing operations attributable to ATI after assumed conversions
$ (16.4 ) $ 9.9 $ (3.8 ) $ (6.5 ) $ (21.9 ) Denominator for Basic net income (loss) per common share - Weighted average shares outstanding 107.3 107.2 107.1 107.2 107.0 Effect of dilutive securities: Share-based compensation - 0.8 - - - Denominator for Diluted net income (loss) per common share - Adjusted weighted average assuming conversions 107.3 108.0 107.1 107.2 107.0Basic income (loss) from continuing operations attributable to ATI per common share
$ (0.15 ) $ 0.09 $ (0.03 ) $ (0.06 ) $ (0.20 )Diluted income (loss) from continuing operations attributable to ATI per common share
$ (0.15 ) $ 0.09 $ (0.03 ) $ (0.06 ) $ (0.20 )Allegheny Technologies Incorporated and Subsidiaries Other Financial Information Managed Working Capital (Unaudited, dollars in millions) June 30, December 31, 2015 2014 Accounts receivable $ 593.4 $ 603.6 Inventory 1,472.9 1,472.8 Accounts payable (487.5 ) (556.7 ) Subtotal 1,578.8 1,519.7 Allowance for doubtful accounts 4.8 4.8 LIFO reserve (9.3 ) (4.8 ) Inventory reserves 71.0 68.9 Corporate and other 4.5 5.9 Managed working capital $ 1,649.8 $ 1,594.5
Annualized prior 2 months sales
$ 4,180.2 $ 4,144.5Managed working capital as a % of annualized sales
39.5 % 38.5 %June 30, 2015 change in managed working capital
$ 55.3 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) June 30, December 31, 2015 2014 Total debt $ 1,521.0 $ 1,526.9 Less: Cash (250.9 ) (269.5 ) Net debt $ 1,270.1 $ 1,257.4 Net debt $ 1,270.1 $ 1,257.4 Total ATI stockholders' equity 2,584.3 2,598.4 Net ATI capital $ 3,854.4 $ 3,855.8 Net debt to ATI capital 33.0 % 32.6 % Total debt $ 1,521.0 $ 1,526.9 Total ATI stockholders' equity 2,584.3 2,598.4 Total ATI capital $ 4,105.3 $ 4,125.3 Total debt to total ATI capital 37.0 % 37.0 % In managing the overall capital structure of the Company, some of the measures that we focus on are net debt to net capitalization, which is the percentage of debt, net of cash that may be available to reduce borrowings, to the total invested and borrowed capital of ATI (excluding noncontrolling interest), and total debt to total ATI capitalization, which excludes cash balances.
View source version on businesswire.com: http://www.businesswire.com/news/home/20150721005764/en/
Allegheny Technologies IncorporatedDan L. Greenfield, 412-394-3004
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