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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 | |
---|---|---|---|---|---|---|---|---|
-0.38 | -0.65% | 58.47 | 59.6289 | 57.75 | 59.48 | 2,156,354 | 00:56:34 |
Fourth Quarter 2014 Results from Continuing Operations
Full Year 2014 Results from Continuing Operations
Allegheny Technologies Incorporated (NYSE: ATI) reported fourth quarter 2014 sales of $1.05 billion and income from continuing operations attributable to ATI of $19.9 million, or $0.18 per share. Fourth quarter 2014 results include $25.5 million of pre-tax curtailment and settlement gains from postretirement benefit changes, and $17.7 million of pre-tax Hot-Rolling and Processing Facility (HRPF) start-up costs and costs related to the Rowley titanium sponge facility Premium Quality (PQ) qualification process. Fourth quarter 2014 pre-tax results also included net inventory valuation reserve benefits of $13.2 million. Net loss from continuing operations attributable to ATI for the fourth quarter 2013 was $83.8 million, or $(0.79) per share, including restructuring charges and inventory valuation adjustments of $75.1 million net of tax, or $(0.71) per share.
For the full year 2014, ATI reported a loss from continuing operations attributable to ATI of $2.0 million, or $(0.02) per share, on $4.22 billion in sales. Full year 2014 results were impacted by $63.1 million of HRPF start-up costs and costs related to the Rowley titanium sponge facility PQ qualification process. Full year 2013 results from continuing operations were a loss of $98.8 million, or $(0.93) per share including the $75.1 million, or ($0.71) per share, fourth quarter restructuring charges and inventory valuation adjustments.
“We achieved several milestones during the fourth quarter that better position ATI to transition to a period of sustained profitable growth,” said Rich Harshman, Chairman, President and Chief Executive Officer. “The HRPF commissioning was completed for essentially all ATI flat rolled products; our Rowley, UT titanium sponge facility achieved approval as a PQ titanium sponge supplier for jet engines; and we secured several long-term agreements (LTAs) providing significant growth on next-generation and legacy single-aisle jet engines.
“During the fourth quarter, we booked additional orders for a large oil & gas project that uses our nickel-based alloy plate. We received a large share of this project due to the quality of our nickel-based alloy plate that is enabled by the 2008 upgrade of our plate mill. Shipments began in the fourth quarter 2014 and are expected to continue through the first half of 2015.”
High-value product sales represented approximately 77% of ATI’s 2014 sales. Sales of nickel-based alloys and specialty alloys represented 26% of 2014 sales. Sales of our titanium products, including Uniti joint venture conversion, represented 15% of 2014 sales. Total titanium product shipments, including flat-rolled titanium products, were 8.7 million pounds in the fourth quarter 2014, bringing the total 2014 shipments to 37.0 million pounds. Sales of precision forgings, castings and components represented approximately 13% of 2014 sales. Sales of flat rolled Precision Rolled Strip® products and engineered strip products represented 13% of 2014 ATI sales.
“Sales in our High Performance Materials & Components segment were $501 million, and segment operating profit improved to $73.4 million, or 14.7% of sales, in the fourth quarter 2014,” continued Rich Harshman. “Segment operating results included a net $2.4 million inventory valuation reserve benefit. Sales improved for our nickel-based alloy mill products and for our forgings, castings, and components compared to the third quarter. Our titanium investment castings business had another record year. Segment results continued to be negatively impacted by low operating rates at our Rowley titanium sponge facility and by low operating rates at our forgings operations due to push-outs in the aeroengine market for certain programs.
“Flat Rolled Products segment sales were $547 million and segment operating results were a loss of $6.4 million. HRPF start-up expenses were $10.1 million in the fourth quarter 2014. Volatile raw material prices resulted in a fourth quarter LIFO inventory valuation reserve benefit of $10.8 million. For the full year 2014, Flat Rolled Products segment results include a $40.2 million LIFO inventory valuation reserve charge, compared to a $30.5 million LIFO benefit for the full year 2013. Segment results for the fourth quarter were also impacted by $6.3 million of costs related to the PQ qualification process at the Rowley titanium sponge facility.
2014 Major Accomplishments
“Throughout 2014 we focused on improving our market position and completing our strategic investments to enhance ATI’s position as a leading global specialty materials and components producer. These actions are aimed at improving our future performance and positioning ATI to benefit from long-term growth opportunities. A few of our major strategic accomplishments during 2014 include:
Strategy and Outlook
“ATI is positioned to begin a period of sustained profitable growth and free cash flow. Our extraordinary capital expenditure cycle is nearly behind us, with the HRPF in commercial operation and our PQ titanium sponge facility nearly fully qualified. We have LTAs in place that secure significant growth for ATI on legacy and next-generation airplanes and the jet engines that power them. Volume from these agreements is expected to provide significant profitable growth and improved capacity utilization in our mill product, forging, and titanium investment casting facilities, particularly from 2016 through 2018, and into the next decade.
“In our High Performance Materials & Components segment, we are seeing signs that demand for our products is becoming aligned with the airframe and jet engine build rates as destocking runs its course. We expect PQ titanium sponge qualification costs to impact first half 2015 operating profit and costs attributable to production inefficiencies to impact the second half 2015 until optimum utilization levels are achieved.
“In our Flat Rolled Products segment, we expect improved volume and a better product mix in 2015, as we begin to realize the full range of capabilities of the HRPF. Start-up costs of approximately $5 million are expected to be incurred through the first quarter 2015 as we transition to full production and idle the existing legacy hot-rolling assets. First half demand for our specialty plate products is strong, driven by our backlog of nickel-based alloy plate for a large oil & gas project.
“We currently expect 2015 pre-tax retirement benefit expense to be about $78 million, or approximately $18 million lower than 2014, excluding the 2014 $25.5 million pre-tax postretirement benefit curtailment and settlement gains. Most of the 2015 pension expense is expected to be non-cash.
“We currently expect 2015 capital expenditures to be approximately $290 million, approximately 50% of which is primarily related to the completion of payments associated with the HRPF project. Depreciation and amortization expense in 2015 is forecasted to be approximately $196 million.”
Fourth Quarter and Full Year 2014 Financial Results
Three Months Ended Year Ended December 31 December 31 In Millions 2014 20132014
2013 Sales from continuing operations $ 1,047.5 $ 915.3$
4,223.4
$ 4,043.5 Amounts attributable to ATI common stockholders: Income (loss) from continuing operations attributable to ATI (a)$
19.9
$
(83.8
)
$
(2.0
)
$
(98.8
)
Income (loss) from discontinued operations attributable to ATI (b)2.2
257.2
(0.6
)
252.8
Net income (loss) attributable to ATI $ 22.1 $ 173.4$
(2.6
) $ 154.0 Per Diluted Share Diluted net income (loss) per common share: (c) Continuing operations attributable to ATI per common share (a)$
0.18
$
(0.79
)
$
(0.02
)
$
(0.93
)
Discontinued operations attributable to ATI per common share (b)0.02
2.41
(0.01
)
2.37
Net income (loss) attributable to ATI per common share$
0.20
$
1.62
$
(0.03
)
$
1.44
(a) 2013 results from continuing operations include a $75.1 million after-tax charge, or $(0.71) per share, in the fourth quarter 2013 for restructuring charges. (b) 2013 results from discontinued operations include a $261.4 million after-tax gain on the sale of the tungsten materials business in the fourth quarter 2013. The fourth quarter 2013 and full year 2013 results include after-tax charges of $6.1 million, or $(0.06) per share, and $11.9 million, or $(0.11) per share, respectively, primarily related to asset impairment charges. (c) Diluted net income (loss) per common share for the full year 2014, and for the fourth quarter and full year 2013 do not include the effect of dilutive securities.High Performance Materials & Components Segment
Market Conditions
Fourth quarter 2014 compared to fourth quarter 2013
Flat Rolled Products Segment
Market Conditions
Fourth quarter 2014 compared to fourth quarter 2013
Other Expenses
Changes to Retirement Benefit Programs and Retirement Benefit Expense
ATI previously announced several significant changes to certain pension and other postretirement benefit programs effective in 2015 and future periods, including a defined benefit pension freeze and the elimination of Company-provided postretirement life insurance and medical coverage. These changes are part of ATI’s ongoing initiatives to create an integrated and aligned business with a more consistent health, welfare and retirement benefit structure across its operations.
The changes to postretirement benefits resulted in $25.5 million of pre-tax curtailment and settlement gains in the fourth quarter 2014. Also, as a result of these pension and other postretirement benefit plan changes, ATI expects to recognize lower retirement benefit expense (defined benefit pension expense and other postretirement benefit expenses; costs associated with defined contribution plans are included in segment operating profit or corporate expenses, as applicable) in 2015 and future periods.
Income Taxes
Allegheny Technologies will conduct a conference call with investors and analysts on Tuesday, January 20, 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 Allegheny Technologies website.
This news release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements in this news release relate to future events and expectations and, as such, constitute forward-looking statements. Forward-looking statements include those containing such words as “anticipates,” “believes,” “estimates,” “expects,” “would,” “should,” “will,” “will likely result,” “forecast,” “outlook,” “projects,” and similar expressions. Forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which we are unable to predict or control, that may cause our actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: (a) material adverse changes in economic or industry conditions generally, including global supply and demand conditions and prices for our specialty materials; (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; and (g) other risk factors summarized in our Annual Report on Form 10-K for the year ended December 31, 2013, 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 Materials Company™
Allegheny Technologies Incorporated is one of the largest and most diversified specialty materials and components producers in the world with revenues of approximately $4.2 billion in 2014. ATI has approximately 9,700 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 Fiscal Year Ended December 31 September 30 December 31 December 31 December 31 2014 2014 2013 2014 2013 Sales $ 1,047.5 $ 1,069.6 $ 915.3 $ 4,223.4 $ 4,043.5 Costs and expenses: Cost of sales 925.6 972.6 904.0 3,844.8 3,790.9 Selling and administrative expenses 70.4 68.7 66.3 272.5 276.4 Restructuring costs - - 67.5 - 67.5 Income (loss) before interest, other income and income taxes 51.5 28.3 (122.5 ) 106.1 (91.3 ) Interest expense, net (25.9 ) (25.2 ) (18.7 ) (108.7 ) (65.2 ) Other income, net 1.2 1.0 0.4 4.1 1.7 Income (loss) from continuing operations before income taxes 26.8 4.1 (140.8 ) 1.5 (154.8 ) Income tax provision (benefit) 3.7 0.5 (59.2 ) (8.7 ) (63.6 ) Income (loss) from continuing operations 23.1 3.6 (81.6 ) 10.2 (91.2 ) Income (loss) from discontinued operations, net of tax 2.2 (0.7 ) 257.2 (0.6 ) 252.8 Net income $ 25.3 $ 2.9 $ 175.6 $ 9.6 $ 161.6 Less: Net income attributable to noncontrolling interests 3.2 3.6 2.2 12.2 7.6 Net income (loss) attributable to ATI $ 22.1 $ (0.7 ) $ 173.4 $ (2.6 ) $ 154.0 Basic net income (loss) per common share Continuing operations attributable to ATI per common share $ 0.18 $ - $ (0.79 ) $ (0.02 ) $ (0.93 ) Discontinued operations attributable to ATI per common share 0.02 (0.01 ) 2.41 (0.01 ) 2.37 Basic net income (loss) attributable to ATI per common share $ 0.20 $ (0.01 ) $ 1.62 $ (0.03 ) $ 1.44 Diluted net income (loss) per common share Continuing operations attributable to ATI per common share $ 0.18 $ - $ (0.79 ) $ (0.02 ) $ (0.93 ) Discontinued operations attributable to ATI per common share 0.02 (0.01 ) 2.41 (0.01 ) 2.37 Diluted net income (loss) attributable to ATI per common share $ 0.20 $ (0.01 ) $ 1.62 $ (0.03 ) $ 1.44 Amounts attributable to ATI common stockholders Income (loss) from continuing operations, net of tax $ 19.9 $ - $ (83.8 ) $ (2.0 ) $ (98.8 ) Income (loss) from discontinued operations, net of tax 2.2 (0.7 ) 257.2 (0.6 ) 252.8 Net income (loss) $ 22.1 $ (0.7 ) $ 173.4 $ (2.6 ) $ 154.0Weighted average common shares outstanding -- basic (millions)
107.2 107.2 106.8 107.1 106.8Weighted average common shares outstanding -- diluted (millions)
107.9 108.0 106.8 107.1 106.8Actual common shares outstanding -- end of period (millions)
108.7 108.7 108.0 108.7 108.0Allegheny Technologies Incorporated and Subsidiaries Sales and Operating Profit by Business Segment (Unaudited, dollars in millions) Three Months Ended Fiscal Year Ended December 31 September 30 December 31 December 31 December 31 2014 2014 2013 2014 2013 Sales: High Performance Materials & Components $ 500.6 $ 507.7 $ 436.7 $ 2,006.8 $ 1,944.8 Flat Rolled Products 546.9 561.9 478.6 2,216.6 2,098.7 Total External Sales $ 1,047.5 $ 1,069.6 $ 915.3 $ 4,223.4 $ 4,043.5 Operating Profit (Loss): High Performance Materials & Components $ 73.4 $ 62.0 $ 17.1 $ 289.6 $ 209.1 % of Sales 14.7 % 12.2 % 3.9 % 14.4 % 10.8 % Flat Rolled Products (6.4 ) 8.6 (28.0 ) (43.3 ) (44.7 ) % of Sales -1.2 % 1.5 % -5.9 % -2.0 % -2.1 % Operating Profit (Loss) 67.0 70.6 (10.9 ) 246.3 164.4 % of Sales 6.4 % 6.6 % -1.2 % 5.8 % 4.1 % Corporate expenses (11.0 ) (10.0 ) (10.7 ) (44.2 ) (43.0 ) Interest expense, net (25.9 ) (25.2 ) (18.7 ) (108.7 ) (65.2 ) Restructuring costs - - (67.5 ) - (67.5 ) Closed company and other expenses (4.4 ) (7.5 ) (3.2 ) (21.2 ) (14.2 ) Retirement benefit income (expense) 1.1 (23.8 ) (29.8 ) (70.7 ) (129.3 ) Income (loss) from continuing operations before income taxes $ 26.8 $ 4.1 $ (140.8 ) $ 1.5 $ (154.8 )
Allegheny Technologies Incorporated and Subsidiaries Condensed Consolidated Balance Sheets (Current period unaudited, dollars in millions) December 31 2014 2013 ASSETS Current Assets: Cash and cash equivalents $ 269.5 $ 1,026.8
Accounts receivable, net of allowances for doubtful accounts of $4.8 and $5.3 at December 31, 2014 and 2013, respectively
603.6 528.2 Inventories, net 1,472.8 1,322.1 Prepaid expenses and other current assets 136.2 73.7 Total Current Assets 2,482.1 2,950.8 Property, plant and equipment, net 2,961.8 2,874.1 Cost in excess of net assets acquired 780.4 727.9 Other assets 358.3 345.7 Total Assets $ 6,582.6 $ 6,898.5 LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 556.7 $ 471.8 Accrued liabilities 323.2 315.8 Deferred income taxes 62.2 3.5Short term debt and current portion of long-term debt
17.8 419.9 Total Current Liabilities 959.9 1,211.0 Long-term debt 1,509.1 1,527.4 Accrued postretirement benefits 415.8 442.4 Pension liabilities 745.6 368.2 Deferred income taxes 79.6 206.6 Other long-term liabilities 156.2 148.2 Total Liabilities 3,866.2 3,903.8 Redeemable noncontrolling interest 12.1 - Total ATI stockholders' equity 2,593.4 2,894.2 Noncontrolling interests 110.9 100.5 Total Equity 2,704.3 2,994.7 Total Liabilities and Equity $ 6,582.6 $ 6,898.5Allegheny Technologies Incorporated and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited - Dollars in millions) Fiscal Year Ended December 31 2014 2013 Operating Activities: Net income $ 9.6 $ 161.6 Depreciation and amortization 176.8 189.9 Deferred taxes 31.7 70.1 Non-cash restructuring costs - 72.7 Gain on sale of business - (428.3 ) Change in managed working capital (148.0 ) 179.9 Change in retirement benefits 3.1 70.6 Accrued liabilities and other (17.3 ) 51.9 Cash provided by operating activities 55.9 368.4 Investing Activities: Purchases of property, plant and equipment (225.7 ) (612.7 ) Proceeds from sale of business, net of transaction costs - 600.9 Purchases of businesses, net of cash acquired (92.9 ) - Asset disposals and other 2.4 0.8 Cash used in investing activities (316.2 ) (11.0 ) Financing Activities: Borrowings on long-term debt - 500.0 Payments on long-term debt and capital leases (414.9 ) (17.1 ) Net repayments under credit facilities - (14.4 ) Debt issuance costs (1.2 ) (5.2 ) Dividends paid to shareholders (77.1 ) (76.9 ) Dividends paid to noncontrolling interest - (18.0 ) Taxes on share-based compensation and other (3.8 ) (3.6 ) Cash provided by (used in) financing activities (497.0 ) 364.8 Increase (decrease) in cash and cash equivalents (757.3 ) 722.2 Cash and cash equivalents at beginning of period 1,026.8 304.6 Cash and cash equivalents at end of period $ 269.5 $ 1,026.8
Allegheny Technologies Incorporated and Subsidiaries Selected Financial Data - Mill Products (Unaudited) Three Months Ended Fiscal Year Ended December 31 September 30 December 31 December 31 December 31 2014 2014 2013 2014 2013 Shipment Volume: Flat Rolled Products (000's lbs.) High value 125,926 126,238 117,918 508,753 468,551 Standard 156,186 162,736 165,331 678,022 665,977 Flat Rolled Products total 282,112 288,974 283,249 1,186,775 1,134,528 Average Selling Prices: Flat Rolled Products (per lb.) High value $ 2.58 $ 2.54 $ 2.39 $ 2.53 $ 2.63 Standard $ 1.39 $ 1.46 $ 1.17 $ 1.35 $ 1.28 Flat Rolled Products combined average $ 1.92 $ 1.93 $ 1.68 $ 1.86 $ 1.84
Allegheny Technologies Incorporated and Subsidiaries Computation of Basic and Diluted Earnings Per Share Attributable to ATI (Unaudited, in millions, except per share amounts) Three Months Ended Fiscal Year Ended December 31 September 30 December 31 December 31 December 31 2014 2014 2013 2014 2013 Continuing operations: Numerator for Basic net income (loss) per common share - Income (loss) from continuing operations attributable to ATI $ 19.9 $ - $ (83.8 ) $ (2.0 ) $ (98.8 ) Redeemable noncontrolling interest (0.3 ) - - (0.3 ) - Numerator for Dilutive net income (loss) per common share -
Income (loss) from continuing operations attributable to ATI after assumed conversions
$ 19.6 $ - $ (83.8 ) $ (2.3 ) $ (98.8 ) Denominator for Basic net income (loss) per common share - Weighted average shares outstanding 107.2 107.2 106.8 107.1 106.8 Effect of dilutive securities: Share-based compensation 0.7 0.8 - - - Denominator for Diluted net income (loss) per common share - Adjusted weighted average assuming conversions 107.9 108.0 106.8 107.1 106.8Basic income (loss) from continuing operations attributable to ATI per common share
$ 0.18 $ - $ (0.79 ) $ (0.02 ) $ (0.93 )Diluted income (loss) from continuing operations attributable to ATI per common share
$ 0.18 $ - $ (0.79 ) $ (0.02 ) $ (0.93 )Allegheny Technologies Incorporated and Subsidiaries Other Financial Information Managed Working Capital (Unaudited, dollars in millions) December 31 2014 2013 Accounts receivable $ 603.6 $ 528.2 Inventory 1,472.8 1,322.1 Accounts payable (556.7 ) (471.8 ) Subtotal 1,519.7 1,378.5 Allowance for doubtful accounts 4.8 5.3 LIFO reserve (4.8 ) (29.4 ) Inventory reserves 68.9 84.3 Corporate and other 5.9 2.7
Managed working capital of discontinued operations
- 5.1 Managed working capital $ 1,594.5 $ 1,446.5Annualized prior 2 months sales
$ 4,144.5 $ 3,675.0Managed working capital as a % of annualized sales
38.5 % 39.4 %December 31, 2014 change in managed working capital
148.0As part of managing the liquidity in our business, we focus on controlling managed working capital, which is defined as gross accounts receivable and gross inventories, less accounts payable. In measuring performance in controlling this managed working capital, we exclude the effects of LIFO and other inventory valuation reserves and reserves for uncollectible accounts receivable which, due to their nature, are managed separately.
Allegheny Technologies Incorporated and Subsidiaries Other Financial Information Debt to Capital (Unaudited, dollars in millions) December 31 2014 2013 Total debt $ 1,526.9 $ 1,947.3 Less: Cash (269.5 ) (1,026.8 ) Net debt $ 1,257.4 $ 920.5 Net debt $ 1,257.4 $ 920.5 Total ATI stockholders' equity 2,593.4 2,894.2 Net ATI capital $ 3,850.8 $ 3,814.7 Net debt to ATI capital 32.7 % 24.1 % Total debt $ 1,526.9 $ 1,947.3 Total ATI stockholders' equity 2,593.4 2,894.2 Total ATI capital $ 4,120.3 $ 4,841.5 Total debt to total ATI capital 37.1 % 40.2 %
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 ATI (excluding noncontrolling interest), and total debt to total ATI capitalization, which excludes cash balances.
Allegheny Technologies IncorporatedDan L. Greenfield, 412-394-3004
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