10-QPeriod: Q1 FY2014

ATI INC Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 5, 2014For Securities:ATI

Summary

ATI Inc. reported a net loss attributable to ATI of $20.0 million, or $(0.19) per share, for the first quarter of 2014. This contrasts with a net income of $10.0 million, or $0.09 per share, in the same period of the prior year. The decline was driven by a 10% decrease in sales to $987.3 million, impacted by lower shipment volumes and reduced selling prices across both the High Performance Materials & Components and Flat Rolled Products segments. Despite the reported loss, management noted signs of improvement as the quarter progressed, with the backlog reaching its highest point in two years. The company is seeing increased demand in key markets such as aerospace (jet engines) and oil & gas. Capital expenditures remain significant, with continued investment in the Hot-Rolling and Processing Facility (HRPF), and the company expects to achieve at or near break-even results in the second quarter of 2014. The company also completed a strategic acquisition of Dynamic Flowform Corp. to expand its capabilities in specialty materials components.

Financial Highlights

48 data points
Beta

Revenue

$987.30M

7.1% Gross Margin

Net Income

-$20.00M

-2.0% Net Margin

EPS (Diluted)

$-0.19

Total Assets

$6.92B

Cash & Equivalents

$837.70M

Free Cash Flow

-$56.90M

Financial Statements
Beta
Revenue$987.30M
Cost of Revenue$917.10M
Gross Profit$70.20M
SG&A Expenses$67.70M
Operating Income$2.50M
Net Income-$20.00M
EPS (Basic)$-0.19
EPS (Diluted)$-0.19
Shares Outstanding (Basic)108.17M
Shares Outstanding (Diluted)107.00M

Key Highlights

  • 1Net loss attributable to ATI of $20.0 million ($0.19 per share) for Q1 2014, compared to a net income of $10.0 million ($0.09 per share) in Q1 2013.
  • 2Total sales decreased by 10% to $987.3 million in Q1 2014 compared to $1,099.0 million in Q1 2013.
  • 3Operating profit decreased to $43.5 million in Q1 2014 from $77.5 million in Q1 2013, primarily due to lower shipments and selling prices.
  • 4Acquisition of 85% of Dynamic Flowform Corp. on February 7, 2014, for $73.1 million to expand capabilities in specialty materials components.
  • 5Backlog increased to $1.8 billion, the highest in two years, with signs of improving demand from key markets like aerospace and oil & gas.
  • 6Continued investment in the Hot-Rolling and Processing Facility (HRPF), with expected capital expenditures of approximately $300 million for 2014.
  • 74.25% Convertible Senior Notes with an aggregate principal of $402.5 million are due for repayment on June 1, 2014.

Frequently Asked Questions

ATI reported a net loss of $20.0 million, or $(0.19) per share, for the first quarter of 2014, compared to a net income of $10.0 million, or $0.09 per share, in the same period of 2013. Sales decreased by 10% to $987.3 million, driven by lower volumes and prices across both business segments.

The decline in sales and profitability was attributed to lower shipment volumes for most products, reduced selling prices (including the impact of lower raw material surcharges), and the strategic decision to use ATI-produced titanium sponge instead of lower-cost scrap, which negatively impacted operating results. The Flat Rolled Products segment experienced an operating loss of $25.6 million.

Despite a challenging first quarter, ATI noted improving business conditions and a backlog at its highest point in two years. They expect to achieve at or near break-even results from continuing operations in the second quarter of 2014, excluding HRPF start-up costs. Management sees early signs of sustainable improvement and demand growth across most end markets.

Key events included the acquisition of Dynamic Flowform Corp. to enhance specialty materials component production, ongoing progress on the Hot-Rolling and Processing Facility (HRPF), and the upcoming maturity of $402.5 million in convertible notes on June 1, 2014.