10-QPeriod: Q2 FY2011

ATI INC Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 4, 2011For Securities:ATI

Summary

Allegheny Technologies Incorporated (ATI) reported a significant increase in sales and net income for the six months ended June 30, 2011, compared to the same period in 2010. This growth was driven by strong performance across its business segments, particularly High Performance Metals and Flat-Rolled Products, fueled by demand from key markets like Aerospace & Defense, Oil & Gas, and Electrical Energy. The company also successfully integrated the acquisition of Ladish Co., Inc. in May 2011, expanding its capabilities in high-strength, high-technology metal components. ATI's financial position strengthened with increased revenues and operating profits, although the company saw a rise in total debt primarily due to the Ladish acquisition financing and a new senior notes issuance. Managed working capital also increased significantly, reflecting higher business activity and raw material costs. Despite these increases, the company maintained adequate liquidity, expecting internally generated funds and existing credit lines to cover foreseeable needs. Management expressed confidence in future growth driven by new alloys, diversified markets, and ongoing strategic investments.

Financial Highlights

49 data points
Beta

Revenue

$1.35B

16.5% Gross Margin

Net Income

$64.00M

4.7% Net Margin

EPS (Diluted)

$0.59

Total Assets

$6.05B

Cash & Equivalents

$367.80M

Free Cash Flow

-$21.70M

Financial Statements
Beta
Revenue$1.35B
Cost of Revenue$1.13B
Gross Profit$223.00M
SG&A Expenses$99.30M
Operating Income$123.70M
Net Income$64.00M
EPS (Basic)$0.63
EPS (Diluted)$0.59
Shares Outstanding (Basic)103.41M
Shares Outstanding (Diluted)113.50M

Key Highlights

  • 1Total sales for the first six months of 2011 increased by 32% to $2.6 billion compared to the prior year period.
  • 2Net income attributable to ATI for the six months ended June 30, 2011, was $120.3 million, a substantial increase from $54.6 million in the same period of 2010.
  • 3The company completed the acquisition of Ladish Co., Inc. on May 9, 2011, for $897.6 million, adding advanced forging and casting capabilities to its High Performance Metals segment.
  • 4Operating profit increased significantly across all three business segments: High Performance Metals, Flat-Rolled Products, and Engineered Products.
  • 5Total debt increased to $1,650.7 million at June 30, 2011, from $1,063.3 million at December 31, 2010, largely due to the Ladish acquisition and a new $500 million debt issuance.
  • 6Managed working capital increased by $625.6 million, reflecting higher business activity and raw material costs, with a significant portion ($170.5 million) acquired from Ladish.
  • 7The company reaffirmed its expectation for full-year 2011 revenues between $5.4 to $5.5 billion, reflecting the impact of the Ladish acquisition.

Frequently Asked Questions

ATI's sales growth was driven by higher shipments of high-value products, increased raw material surcharges, and improved average base selling prices across its segments. Strong demand from key markets such as Aerospace & Defense, Oil & Gas/Chemical Process Industry, and Electrical Energy also contributed significantly.

The acquisition of Ladish Co., Inc. on May 9, 2011, significantly boosted sales and operating profit in the High Performance Metals segment. It added advanced forging and casting capabilities and contributed approximately $1.2 billion in assets, including goodwill and intangible assets, to the balance sheet. The integration of Ladish was a key factor in the company's increased revenue guidance for 2011.

ATI expects continued strong demand from its key markets, particularly aerospace and oil & gas. The company anticipates revenues of $5.4 to $5.5 billion for the full year 2011, with segment operating profit expected to be 13% to 14% of revenues. For the next 3-5 years, ATI expects continued growth from new alloys, diversified global markets, and ongoing investments in capacity and capabilities.

ATI's total debt increased to $1.65 billion at June 30, 2011, mainly due to the Ladish acquisition and a new senior note issuance. Despite this increase, the company maintains adequate liquidity, with $367.8 million in cash and cash equivalents and available borrowings under existing credit lines, which management believes are sufficient to meet foreseeable liquidity needs.