10-QPeriod: Q1 FY2021

ATI INC Quarterly Report for Q1 Ended Mar 31, 2021

Filed April 29, 2021For Securities:ATI

Summary

ATI Inc. reported a net loss attributable to ATI of $7.9 million ($0.06 per share) for the first quarter of 2021, a significant decrease from the net income of $21.1 million ($0.16 per share) in the same period of the previous year. This decline was primarily driven by a substantial drop in sales, which fell 27.5% to $692.5 million, largely due to continued weakened market conditions stemming from the COVID-19 pandemic, particularly impacting the aerospace and defense sectors. Despite the overall decline, the company is beginning to see a modest recovery, especially in the aerospace market, and is actively managing its cost structure through workforce reductions and strategic transformations, such as exiting standard stainless product lines. ATI maintained a solid balance sheet with $541.7 million in cash and cash equivalents at the end of the quarter. However, the company did not meet a key financial covenant in its Asset Based Lending (ABL) Credit Facility, restricting access to a portion of its credit line. This is a critical point for investors to monitor. The company is also navigating a labor strike with the USW union, which began in late March 2021, though its immediate financial impact was minimal. ATI is focused on improving segment profitability and cash flow through long-term customer agreements and strategic initiatives.

Financial Highlights

46 data points
Beta

Revenue

$692.50M

12.4% Gross Margin

Net Income

-$7.90M

-1.1% Net Margin

EPS (Diluted)

$-0.06

Total Assets

$4.07B

Cash & Equivalents

$541.70M

Free Cash Flow

-$68.10M

Financial Statements
Beta
Revenue$692.50M
Cost of Revenue$606.70M
Gross Profit$85.80M
SG&A Expenses$54.00M
Operating Income$31.80M
Net Income-$7.90M
EPS (Basic)$-0.06
EPS (Diluted)$-0.06
Shares Outstanding (Basic)126.80M
Shares Outstanding (Diluted)126.80M

Key Highlights

  • 1Net loss attributable to ATI of $7.9 million in Q1 2021, compared to net income of $21.1 million in Q1 2020.
  • 2Sales decreased 27.5% year-over-year to $692.5 million, impacted by COVID-19 related market weakness, especially in aerospace.
  • 3High Performance Materials & Components (HPMC) segment sales decreased 43%, while Advanced Alloys & Solutions (AA&S) segment sales decreased 16%.
  • 4The company did not meet a financial covenant in its ABL Credit Facility, limiting access to $87.5 million of its credit line.
  • 5A strike by USW union employees began on March 30, 2021, though its impact on Q1 results was minimal.
  • 6Cash and cash equivalents stood at $541.7 million as of March 31, 2021.
  • 7ATI is undergoing a strategic transformation, including exiting standard stainless product production by the end of 2021.

Frequently Asked Questions

The primary driver of ATI's decreased profitability was a significant decline in sales, down 27.5% year-over-year to $692.5 million. This was largely attributed to continued weakened market conditions resulting from the COVID-19 pandemic, which particularly affected the aerospace and defense markets.

ATI not meeting its Fixed Charge Coverage Ratio covenant in its Asset Based Lending (ABL) Credit Facility means it is currently unable to access the remaining $87.5 million of that credit line. This could impact the company's financial flexibility and liquidity if additional funding is required.

A strike by USW-represented employees began on March 30, 2021. While the strike did not have a significant impact on the first quarter results, its continuation could lead to operational disruptions and financial impacts if not resolved quickly. ATI is actively negotiating to reach a new labor agreement.

ATI is focusing on several strategies, including proactive cost structure alignment through workforce reductions, exiting less profitable product lines like standard stainless steel, and securing long-term customer agreements. The company is also managing its balance sheet and cash position to support its operations and expects a modest recovery in key markets like aerospace.