10-KPeriod: FY2018

ATI INC Annual Report, Year Ended Dec 31, 2018

Filed February 28, 2019For Securities:ATI

Summary

Allegheny Technologies Incorporated (ATI) reported a significant turnaround in 2018, achieving its highest sales since 2014 and its first profitable year from continuing operations since 2012. This financial recovery was driven by strong performance in its High Performance Materials & Components (HPMC) segment, largely propelled by robust demand from the aerospace and defense markets, particularly for next-generation jet engine components. The Flat Rolled Products (FRP) segment also showed substantial improvement, doubling its operating profit compared to the previous year. ATI's strategic focus on high-value specialty materials and components, combined with disciplined operational improvements and cost management from prior restructuring actions, yielded positive results. The company made strategic capital investments in key growth areas like additive manufacturing and powder metallurgy, aiming to enhance its capabilities and meet evolving customer needs, especially within the aerospace sector. The company's financial position strengthened, with increased cash on hand and a reduction in its debt-to-EBITDA ratio.

Financial Highlights

53 data points
Beta

Revenue

$4.05B

15.6% Gross Margin

Net Income

$222.40M

5.5% Net Margin

EPS (Diluted)

$1.61

Total Assets

$5.50B

Cash & Equivalents

$382.00M

Free Cash Flow

$392.80M

Financial Statements
Beta
Revenue$4.05B
Cost of Revenue$3.42B
Gross Profit$630.30M
R&D Expenses$22.70M
SG&A Expenses$268.20M
Operating Income$362.10M
Interest Expense$102.10M
Net Income$222.40M
EPS (Basic)$1.78
EPS (Diluted)$1.61
Shares Outstanding (Basic)125.20M
Shares Outstanding (Diluted)145.90M

Key Highlights

  • 1Achieved highest sales in four years ($4.05 billion) and first profitable year from continuing operations since 2012.
  • 2High Performance Materials & Components (HPMC) segment saw a 13% sales increase, driven by a 13% rise in Aerospace & Defense, with next-generation jet engine product sales up 49%.
  • 3Flat Rolled Products (FRP) segment sales increased 17%, with notable growth in Oil & Gas and Aerospace & Defense markets.
  • 4Strengthened balance sheet with $382 million in cash and available borrowing capacity, and reduced Debt to EBITDA ratio to 3.07.
  • 5Invested $139 million in capital expenditures, including expansions in iso-thermal pressing, titanium powder production, and additive manufacturing capabilities.
  • 6No debt maturities expected until 2021 following the redemption of Senior Notes in 2017.
  • 7Continued focus on operational efficiency and cost structure improvements post-restructuring.

Frequently Asked Questions

The primary driver of ATI's improved financial performance in 2018 was the strong demand from the aerospace and defense markets, particularly for components used in next-generation jet engines, which significantly boosted the High Performance Materials & Components (HPMC) segment. The company also benefited from operational improvements and cost management initiatives.

ATI strengthened its financial position by maintaining robust liquidity, with $382 million in cash and cash equivalents, and approximately $350 million in available borrowing capacity under its Asset Based Lending (ABL) facility. The company successfully reduced its debt-to-Adjusted EBITDA ratio to 3.07 and had no significant debt maturities until 2021.

In 2018, ATI invested $139 million in capital expenditures, focusing on strategic growth initiatives. Key investments included expanding its iso-thermal press and heat-treating capacity, increasing titanium powder production capabilities, and acquiring Addaero Manufacturing to enhance its metal alloy-based additive manufacturing capabilities.

The company anticipates continued strong demand from the aerospace and defense sectors, driven by the ongoing expansion in production of next-generation jet engines and aircraft. Long-term agreements with major aerospace customers are expected to support growth for the HPMC segment, with increased use of advanced materials like titanium and nickel-based alloys in new aircraft designs.