10-QPeriod: Q3 FY2013

ATI INC Quarterly Report for Q3 Ended Sep 30, 2013

Filed November 1, 2013For Securities:ATI

Summary

Allegheny Technologies Incorporated (ATI) reported a net loss of $14.0 million, or $(0.18) per share, for the nine months ended September 30, 2013, a significant decline from a net income of $154.3 million, or $1.32 per share, in the same period of 2012. This downturn was primarily driven by a substantial decrease in sales, which fell by 14% year-over-year to $3.13 billion. The company is undergoing strategic divestitures, including the announced sale of its tungsten materials business and the closure of its iron castings and fabricated components businesses. These actions are part of a broader restructuring to focus on its core High Performance Metals and Flat-Rolled Products segments. Despite the challenging top-line performance, ATI strengthened its financial position by issuing $500 million in senior notes and maintaining compliance with its amended revolving credit facility. The company anticipates improved liquidity following the completion of the tungsten materials divestiture. Management acknowledges current market uncertainties and plans to focus on cost reduction and aligning production with customer demand while positioning for anticipated long-term growth in key markets such as aerospace and defense.

Financial Highlights

49 data points
Beta

Revenue

$972.40M

5.5% Gross Margin

Net Income

-$33.80M

-3.5% Net Margin

EPS (Diluted)

$-0.32

Total Assets

$6.60B

Cash & Equivalents

$535.70M

Free Cash Flow

$169.40M

Financial Statements
Beta
Revenue$972.40M
Cost of Revenue$919.30M
Gross Profit$53.10M
SG&A Expenses$70.60M
Operating Income-$17.50M
Net Income-$33.80M
EPS (Basic)$-0.32
EPS (Diluted)$-0.32
Shares Outstanding (Basic)108.00M
Shares Outstanding (Diluted)106.80M

Key Highlights

  • 1Net loss of $14.0 million for the first nine months of 2013, compared to a net income of $154.3 million in the prior year period.
  • 2Sales decreased by 14% year-over-year to $3.13 billion for the first nine months of 2013.
  • 3Strategic divestitures underway, including the sale of the tungsten materials business and the closure of iron castings and fabricated components businesses.
  • 4Restructuring of the Engineered Products segment, integrating certain businesses into High Performance Metals and Flat-Rolled Products segments.
  • 5Issued $500 million in 5.875% Senior Notes due 2023 in July 2013.
  • 6Cash and cash equivalents increased to $535.7 million at September 30, 2013, up from $304.6 million at December 31, 2012.
  • 7Segment operating profit margin declined significantly in both High Performance Metals and Flat-Rolled Products segments.
  • 8Capital expenditures for the first nine months of 2013 were $395.5 million, primarily for the Hot-Rolling and Processing Facility (HRPF).

Frequently Asked Questions

The decrease in net income and sales was primarily due to sluggish demand across many of ATI's key end markets, including aerospace, oil & gas, and industrial sectors. This led to lower shipments, reduced base selling prices for many products, and a decrease in overall revenue for both the High Performance Metals and Flat-Rolled Products segments.

ATI is actively pursuing strategic divestitures and restructuring. This includes the announced sale of its tungsten materials business, the closure of its iron castings and fabricated components businesses, and the integration of certain operations into its core High Performance Metals and Flat-Rolled Products segments. These actions aim to streamline operations and focus on higher-value products and markets.

ATI issued $500 million in senior notes in July 2013, increasing its total debt. However, the company also increased its cash and cash equivalents significantly and amended its revolving credit facility. ATI expects improved liquidity upon completion of the tungsten materials sale, anticipating ending 2013 with approximately $1.4 billion in cash and available liquidity, and believes its current resources are adequate to meet foreseeable needs.

In the High Performance Metals segment, challenges include lower shipment volumes, higher raw material costs not aligned with falling indices for some products, and lower base selling prices. The Flat-Rolled Products segment is affected by historically low base selling prices for standard stainless products, lower overall demand for high-value products due to global economic conditions, and the strategic decision to use higher-cost ATI-produced titanium sponge.