Summary
Allegheny Technologies Incorporated (ATI) reported improved financial results for the second quarter and first six months of 2017 compared to the prior year, marked by a significant increase in gross profit and a return to net income. Sales increased across both of ATI's segments, High Performance Materials & Components (HPMC) and Flat Rolled Products (FRP), driven by demand in aerospace & defense, oil & gas, and automotive markets. The HPMC segment showed strong performance, particularly in commercial jet engines, while the FRP segment benefited from higher operating levels and restructuring actions. Despite a cash outflow from operations due to a significant pension contribution, the company maintained a healthy liquidity position with substantial cash on hand and available credit facilities. Key areas of focus for investors include the continued recovery in segment operating profit, the successful integration of restructuring actions, and management's strategy to enhance technology leadership and balance sheet strength. Investors should also note the ongoing efforts to remediate a material weakness in internal controls related to deferred tax asset valuation allowances, with a target completion date of December 31, 2017.
Financial Highlights
46 data points| Revenue | $880.20M |
| Cost of Revenue | $755.90M |
| Gross Profit | $124.30M |
| SG&A Expenses | $65.00M |
| Operating Income | $59.30M |
| Net Income | $10.10M |
| EPS (Basic) | $0.09 |
| EPS (Diluted) | $0.09 |
| Shares Outstanding (Basic) | 108.90M |
| Shares Outstanding (Diluted) | 128.30M |
Key Highlights
- 1Net income attributable to ATI was $10.1 million ($0.09 per diluted share) for Q2 2017, a significant improvement from a net loss of $18.8 million ($(0.18) per diluted share) in Q2 2016. For the six months ended June 30, 2017, net income was $27.6 million ($0.25 per diluted share) compared to a net loss of $120.0 million ($(1.12) per diluted share) in the prior year period.
- 2Total sales increased to $880.2 million in Q2 2017 and $1,746.1 million for the first six months of 2017, up from $810.5 million and $1,568.0 million in the respective prior year periods.
- 3Gross profit significantly improved, reaching $112.3 million in Q2 2017 (12.8% of sales) and $225.1 million for the first six months (12.9% of sales), compared to $48.2 million (6.0% of sales) and $15.0 million (1.0% of sales) in the respective prior year periods.
- 4The High Performance Materials & Components (HPMC) segment reported operating profit of $68.0 million in Q2 2017 (12.9% of sales), up from $38.8 million (7.8% of sales) in Q2 2016. For the first six months, HPMC operating profit was $118.9 million (11.5% of sales), up from $67.9 million (6.8% of sales).
- 5The Flat Rolled Products (FRP) segment shifted from an operating loss of $31.8 million ($(10.2)% of sales) in Q2 2016 to an operating profit of $2.9 million (0.8% of sales) in Q2 2017. For the first six months, FRP moved from a loss of $141.4 million ($(24.5)% of sales) to a profit of $21.9 million (3.1% of sales).
- 6Cash used in operating activities for the first six months of 2017 was $85.5 million, impacted by a $135 million contribution to the ATI Pension Plan. However, the company maintained a strong liquidity position with $154.6 million in cash and cash equivalents and approximately $250 million in available liquidity under its ABL facility as of June 30, 2017.
- 7The company is actively working to remediate a material weakness in internal control over financial reporting related to the calculation and review of deferred tax asset valuation allowances, with an expected completion by December 31, 2017.