10-QPeriod: Q2 FY2003

ATI INC Quarterly Report for Q2 Ended Jun 30, 2003

Filed August 8, 2003For Securities:ATI

Summary

ATI Inc. (ATI) reported a net loss of $26.0 million for the second quarter of 2003, translating to a loss of $0.32 per diluted share. This represents a worsening performance compared to the same period in 2002, which saw a net loss of $7.5 million or $0.09 per diluted share. For the first six months of 2003, the net loss widened significantly to $53.1 million ($0.66 per diluted share) from $18.6 million ($0.23 per diluted share) in the first half of 2002. The primary driver for the increased net loss appears to be a substantial rise in retirement benefit expenses, which were $33.4 million in Q2 2003 compared to $5.5 million in Q2 2002, and $68.2 million for the first six months of 2003 versus $11.2 million in the prior year period. This increase is attributed to the impact of declining equity markets on pension plan assets and a lower discount rate assumption for liabilities. While sales remained relatively stable year-over-year for the six-month period at $970.4 million (down 1%), the increased expenses led to a considerably larger net loss. The company has been actively pursuing cost reduction initiatives, aiming for $115 million in savings for 2003, with $56 million achieved through the first half of the year. Despite these efforts, challenging business conditions in end-markets, coupled with rising pension, healthcare, and energy costs, have weighed on profitability. ATI ended the quarter with $66.2 million in cash and cash equivalents. The company also entered into a new $325 million senior secured revolving credit facility, replacing a prior unsecured one, providing financial flexibility, though no borrowings were outstanding under either facility.

Key Highlights

  • 1Net loss for Q2 2003 was $26.0 million, or $0.32 per diluted share, an increase from a $7.5 million loss ($0.09 per share) in Q2 2002.
  • 2Year-to-date net loss for the first six months of 2003 was $53.1 million ($0.66 per share), compared to $18.6 million ($0.23 per share) in the same period of 2002.
  • 3Retirement benefit expenses significantly increased, impacting profitability: $33.4 million in Q2 2003 vs. $5.5 million in Q2 2002, and $68.2 million YTD 2003 vs. $11.2 million YTD 2002.
  • 4Sales for the first six months of 2003 were $970.4 million, a slight decrease of 1% from $984.3 million in the first six months of 2002.
  • 5The company is focused on cost reduction initiatives, achieving $56 million in savings in the first half of 2003, with a full-year target of $115 million.
  • 6ATI entered into a new $325 million senior secured revolving credit facility in Q2 2003, enhancing its liquidity position.
  • 7Despite challenges, the High Performance Metals segment showed revenue growth and improved operating profit in Q2 2003, driven by demand for exotic alloys.

Frequently Asked Questions

ATI Inc. reported a net loss of $26.0 million, or $0.32 per diluted share, for the second quarter ended June 30, 2003. This performance was weaker than the $7.5 million net loss ($0.09 per diluted share) reported in the same quarter of 2002.

The significant increase in net loss for the first six months of 2003, reaching $53.1 million compared to $18.6 million in the prior year, is largely attributable to a substantial rise in retirement benefit expenses. These expenses increased from $11.2 million in the first half of 2002 to $68.2 million in the first half of 2003, driven by market conditions affecting pension plan assets and actuarial assumptions.

ATI is actively pursuing cost reduction initiatives and aims for $115 million in savings for 2003. The company also entered into a new $325 million senior secured revolving credit facility in Q2 2003, which provides significant liquidity, although no borrowings were outstanding under this or the previous facility as of June 30, 2003. They ended the quarter with $66.2 million in cash and cash equivalents.

The Flat-Rolled Products segment experienced a decline in sales and an operating loss due to weakness in capital goods markets and higher costs. The High Performance Metals segment saw improved operating profit and sales growth in Q2 2003, driven by strong demand for exotic alloys, despite some weakness in commercial aerospace. The Industrial Products segment reported increased sales and operating profit.