01—Abstract
Summary
Summary of the 10-K filed February 28, 2019. Cited figures are marked; the original filing is the authoritative source.
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.
02—Key points
Key Highlights
- Achieved highest sales in four years ($4.05 billion) and first profitable year from continuing operations since 2012.
- High 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%.
- Flat Rolled Products (FRP) segment sales increased 17%, with notable growth in Oil & Gas and Aerospace & Defense markets.
- Strengthened balance sheet with $382 million in cash and available borrowing capacity, and reduced Debt to EBITDA ratio to 3.07.
- Invested $139 million in capital expenditures, including expansions in iso-thermal pressing, titanium powder production, and additive manufacturing capabilities.
- No debt maturities expected until 2021 following the redemption of Senior Notes in 2017.
- Continued focus on operational efficiency and cost structure improvements post-restructuring.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, ATI Inc kept $0.05.
- Revenue$4.05B100.0%
- Cost of revenue−$3.42B84.4%
- Gross profit$630.3M15.6%
- Operating costs−$268.2M6.6%
- Operating income$362.1M8.9%
- Interest, other & tax−$139.7M3.5%
- Net income$222.4M5.5%
Where FY2018 revenue went
$4.05B- Cost of revenue: $3.42B, 84% of revenue
- Net income: $222.4M, 5.5% of revenue
- R&D: $22.7M, 0.6% of revenue
- SG&A: $268.2M, 6.6% of revenue
- Interest, other & tax: $139.7M, 3.5% of revenue
Kept 5.5% as net incomeNet income $222.4M · 5.5%R&D $22.7M · 0.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 28, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $4.05B$3.53B | +14.8% |
| Cost of Revenue | $3.42B$3.03B | +12.8% |
| Gross Profit | $630.30M$497.00M | +26.8% |
| R&D Expenses | $22.70M$13.30M | +70.7% |
| SG&A Expenses | $268.20M$248.00M | +8.1% |
| Operating Income | $362.10M$134.60M | +169.0% |
| Interest Expense | $102.10M$134.90M | −24.3% |
| Net Income | $222.40M-$91.90M | +342.0% |
| EPS (Basic) | $1.78$-0.83 | +314.5% |
| EPS (Diluted) | $1.61$-0.83 | +294.0% |
| Shares Outstanding (Basic) | 125.20M110.10M | +13.7% |
| Shares Outstanding (Diluted) | 145.90M110.10M | +32.5% |
05—Questions
Frequently Asked Questions
What was the primary driver of ATI's improved financial performance in 2018?
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.
How did the company manage its debt and liquidity in 2018?
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.
What strategic investments did ATI make in 2018?
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.
What is the outlook for ATI's key end markets, particularly aerospace?
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.
06—Continue