10-QPeriod: Q1 FY2011

ATI INC Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 5, 2011For Securities:ATI

Summary

Allegheny Technologies Incorporated (ATI) reported a significant increase in sales and net income for the first quarter of 2011 compared to the same period in 2010. Sales grew by 36% to $1.23 billion, driven by higher shipments and transactional prices across all business segments, particularly in High Performance Metals, Flat-Rolled Products, and Engineered Products. Net income attributable to ATI more than tripled, reaching $56.3 million ($0.54 per share) from $18.2 million ($0.18 per share) in Q1 2010, excluding certain special charges and tax items. The company's financial position was strengthened by a substantial increase in cash and cash equivalents, rising to $816.3 million from $432.3 million at year-end 2010, primarily due to the issuance of $500 million in Senior Notes. Despite increased operating activity and raw material costs leading to higher working capital needs, ATI maintains a solid financial footing, with debt-to-capitalization ratios at manageable levels. The company also provided a positive outlook for 2011, expecting revenue growth of 15-20% and segment operating profit of approximately 15% of sales, supported by strength in key markets and planned capital investments.

Financial Highlights

49 data points
Beta

Revenue

$1.23B

16.7% Gross Margin

Net Income

$56.30M

4.6% Net Margin

EPS (Diluted)

$0.54

Total Assets

$5.19B

Cash & Equivalents

$816.30M

Free Cash Flow

-$50.30M

Financial Statements
Beta
Revenue$1.23B
Cost of Revenue$1.02B
Gross Profit$205.40M
SG&A Expenses$88.70M
Operating Income$116.70M
Net Income$56.30M
EPS (Basic)$0.58
EPS (Diluted)$0.54
Shares Outstanding (Basic)98.77M
Shares Outstanding (Diluted)109.00M

Key Highlights

  • 1Revenue increased by 36% year-over-year to $1.23 billion, driven by strong performance across all business segments.
  • 2Net income attributable to ATI surged to $56.3 million ($0.54 per share) in Q1 2011, a significant improvement from $18.2 million ($0.18 per share) in Q1 2010.
  • 3Cash and cash equivalents increased substantially to $816.3 million by the end of Q1 2011, up from $432.3 million at year-end 2010, bolstered by a $500 million debt issuance.
  • 4Segment operating profit rose to $162.4 million, representing 13.2% of sales, compared to $88.2 million (9.8% of sales) in the prior year's quarter.
  • 5The company expects 2011 revenue growth of 15-20% and segment operating profit of approximately 15% of sales, indicating continued optimism.
  • 6ATI is making significant capital investments, with expected expenditures between $300-$350 million in 2011, including a new advanced hot-rolling and processing facility.
  • 7The company is proceeding with the planned acquisition of Ladish Co., Inc., with a shareholder meeting scheduled and expected closing shortly thereafter.

Frequently Asked Questions

The substantial increase in sales and net income was primarily driven by a broad-based improvement in demand across ATI's key markets, including aerospace & defense, oil & gas, and medical. Higher shipments and improved transactional prices across all three business segments (High Performance Metals, Flat-Rolled Products, and Engineered Products) contributed significantly to the top-line growth, which in turn led to higher profitability.

ATI issued $500 million in 5.95% Senior Notes due 2021 in January 2011. This significantly increased total debt and also boosted cash and cash equivalents to $816.3 million by the end of the quarter. While overall debt increased, the company maintained a manageable net debt to total capitalization ratio, indicating a strong liquidity position to fund operations and strategic initiatives.

ATI is optimistic about its 2011 prospects, projecting revenue growth of 15-20% and segment operating profit of approximately 15% of sales. Key priorities include significant capital expenditures, such as the new advanced specialty metals hot-rolling facility, and the pending acquisition of Ladish Co., Inc. The company is also focused on cost reductions and operational execution to achieve its financial goals.

For the first quarter of 2011, special charges included approximately $9.8 million for idle facility and start-up costs related to titanium sponge operations and $3.9 million for a LIFO inventory valuation reserve. Additionally, there was a $2.7 million discrete tax charge. Excluding these items, adjusted net income attributable to ATI would have been higher. The prior year's comparable quarter also included specific charges, such as a non-recurring tax charge related to the Affordable Care Act.