8-KOther EventsExhibits & Filings

ATI INC 8-K Report, Corporate Update (Jul 26, 2007)

Filed July 26, 2007For Securities:ATI

Summary

Allegheny Technologies Incorporated (ATI) filed an 8-K on July 26, 2007, to report the adoption of a new accounting standard related to planned major maintenance activities, effective January 1, 2007. This change, mandated by the Financial Accounting Standards Board's Staff Position (FASB SP), requires the company to switch from an "accrue-in-advance" method to a "deferral" method for accounting for plant outage costs and equipment rebuilds. Consequently, prior period financial statements have been restated. This accounting change resulted in a $10.3 million increase to retained earnings as of January 1, 2007, and retrospectively increased net income for 2006, 2005, and 2004 by $2.2 million, $2.6 million, and $1.6 million, respectively, or approximately $0.02 per share for each year.

Key Highlights

  • 1ATI adopted new accounting guidance (FASB SP) for planned major maintenance activities, effective January 1, 2007.
  • 2The company transitioned from an "accrue-in-advance" method to a "deferral" method for accounting for plant outage costs and major equipment rebuilds.
  • 3Major equipment rebuilds will now be capitalized and amortized over their useful lives, rather than expensed as incurred.
  • 4Planned plant outage costs will be recognized in the period the outage occurs, rather than accrued in advance.
  • 5The adoption of this standard resulted in a $10.3 million increase to retained earnings as of January 1, 2007.
  • 6Prior years' financial statements (2006, 2005, 2004) were restated to reflect the new accounting method, showing modest increases in net income and EPS for each year.
  • 7The filing includes restated audited consolidated financial statements and MD&A for the periods ending December 31, 2006 and prior.

Frequently Asked Questions

This 8-K is filed to report Allegheny Technologies Incorporated's adoption of a new accounting standard (FASB Staff Position) concerning how planned major maintenance activities are accounted for. This change became effective on January 1, 2007.

Previously, ATI used an "accrue-in-advance" method. Now, under the new "deferral" method, major equipment rebuilds will be capitalized and then amortized over their useful lives. Planned plant outage costs will be recognized entirely in the interim period when the outage actually occurs, instead of being accrued in advance throughout the year.

The adoption of this standard led to a $10.3 million increase in ATI's retained earnings as of January 1, 2007. Additionally, net income for the prior years 2006, 2005, and 2004 were retrospectively increased by $2.2 million, $2.6 million, and $1.6 million, respectively, which equates to approximately $0.02 per share for each of those years.

Yes, it will affect the timing of expense recognition. Capitalized equipment rebuild costs will be spread over their useful lives, and outage costs will be recognized in the period they occur. This means that reported expenses related to these activities may be recognized differently in future periods compared to the previous "accrue-in-advance" method.