10-QPeriod: Q3 FY2021

ATI INC Quarterly Report for Q3 Ended Sep 30, 2021

Filed November 2, 2021For Securities:ATI

Summary

Allegheny Technologies Incorporated (ATI) reported a significant turnaround in its financial performance for the third quarter of 2021 compared to the same period in the prior year. Sales increased by 36% year-over-year, driven by strong demand in key end-markets, particularly aerospace and defense, and energy. The company achieved profitability in the quarter, a notable improvement from the loss reported in Q3 2020. This positive shift was supported by operational efficiencies, cost-saving measures implemented in 2020, and a favorable product mix with an increasing contribution from high-value products. ATI successfully managed its debt structure by issuing new senior notes and using the proceeds to redeem higher-cost debt. While the company experienced strike-related costs impacting its Advanced Alloys & Solutions (AA&S) segment, the overall financial results demonstrate a robust recovery. The company's strategic focus on high-value products and disciplined cost management positions it favorably for continued operational and financial improvement.

Financial Highlights

47 data points
Beta

Revenue

$725.70M

11.4% Gross Margin

Net Income

$48.70M

6.7% Net Margin

EPS (Diluted)

$0.35

Total Assets

$4.63B

Cash & Equivalents

$1.01B

Free Cash Flow

-$142.20M

Financial Statements
Beta
Revenue$725.70M
Cost of Revenue$643.20M
Gross Profit$82.50M
SG&A Expenses$54.90M
Operating Income$29.90M
Net Income$48.70M
EPS (Basic)$0.38
EPS (Diluted)$0.35
Shares Outstanding (Basic)127.20M
Shares Outstanding (Diluted)152.60M

Key Highlights

  • 1Sales increased by 36% to $725.7 million in Q3 2021 compared to $598.0 million in Q3 2020, indicating a strong market recovery.
  • 2The company returned to profitability, reporting net income attributable to ATI of $48.7 million ($0.35 per diluted share) in Q3 2021, a significant improvement from a net loss of $50.1 million ($0.40 per diluted share) in Q3 2020.
  • 3Total Segment EBITDA improved substantially to $94.2 million (13.0% of sales) in Q3 2021 from $27.8 million (4.6% of sales) in Q3 2020, reflecting enhanced operational performance.
  • 4ATI successfully refinanced its debt, issuing $675 million in new senior notes and using proceeds to redeem $500 million of higher-cost debt, improving its debt maturity profile.
  • 5The High Performance Materials & Components (HPMC) segment saw a 36% sales increase to $300.0 million, driven by strong demand in aerospace & defense, particularly commercial jet engines.
  • 6The Advanced Alloys & Solutions (AA&S) segment reported a 13% sales increase to $425.7 million, benefiting from a richer product mix and improved pricing, despite strike-related costs.
  • 7The company generated $1.01 billion in cash and cash equivalents as of September 30, 2021, providing strong liquidity.

Frequently Asked Questions

The primary drivers for the sales increase were the recovery in key end-markets, particularly aerospace & defense (especially commercial jet engines) and the energy sector. Improved demand, combined with the company's strategic focus on high-value products and increased production rates, contributed to the robust sales growth.

ATI experienced a significant turnaround in profitability. The company reported a net income attributable to ATI of $48.7 million in Q3 2021, a substantial improvement from the net loss of $50.1 million in the prior year's quarter. This was driven by higher sales, improved gross margins, and benefits from cost-saving initiatives.

The company experienced strike-related costs primarily in the Advanced Alloys & Solutions (AA&S) segment, totaling $22.9 million in Q3 2021. These costs included overhead, outside conversion activities, and signing bonuses. While these costs impacted segment EBITDA, they were excluded from the adjusted EBITDA calculation, and the overall financial results still showed strong improvement, indicating resilience.

ATI actively managed its debt by issuing $675 million in new senior notes with longer maturities and lower interest rates, and using these proceeds to redeem $500 million of higher-cost debt. This strategic move improved the company's debt maturity profile. As of September 30, 2021, the company held $1.01 billion in cash and cash equivalents, indicating a strong liquidity position.