8-KFinancial EventsExhibits & Filings

ATI INC 8-K Report, Exit or Disposal Costs (Aug 24, 2016)

Filed August 24, 2016For Securities:ATI

Summary

Allegheny Technologies Incorporated (ATI) announced significant operational changes on August 24, 2016, which are expected to streamline its titanium business and improve profitability. The company is indefinitely idling its Rowley, Utah, titanium sponge production facility and consolidating certain titanium manufacturing operations in Albany, Oregon. These strategic moves are designed to enhance ATI's annual operating income by approximately $50 million starting in 2017 and are anticipated to generate about $50 million in cash flow by reducing titanium sponge inventory over the coming quarters. These restructuring efforts will result in substantial one-time charges. ATI expects to record pre-tax, non-cash impairment charges totaling approximately $470 million and pre-tax shutdown and idling costs of around $34 million, which includes $23 million in future cash outlays for contractual obligations and labor. Additionally, the company will recognize approximately $183 million in non-cash income tax valuation allowances. ATI has secured long-term supply agreements with global producers to replace the output from its Rowley facility, ensuring continued access to premium and standard-grade titanium sponge at a lower cost.

Key Highlights

  • 1ATI is idling its Rowley, Utah, titanium sponge production facility indefinitely.
  • 2Certain titanium manufacturing operations in Albany, Oregon, will be consolidated.
  • 3These actions are projected to boost annual operating income by approximately $50 million starting in 2017.
  • 4An estimated $50 million in cash flow is expected from reduced working capital (titanium sponge inventory) over the next several quarters.
  • 5The company anticipates recording total pre-tax, non-cash impairment charges of approximately $470 million.
  • 6Pre-tax shutdown and idling costs are estimated at $34 million, including $23 million in future cash expenditures.
  • 7ATI will record approximately $183 million in non-cash income tax valuation allowances.

Frequently Asked Questions

ATI is indefinitely idling its Rowley, Utah, titanium sponge production facility and consolidating certain titanium manufacturing operations in Albany, Oregon. This means the Rowley facility will cease production for the foreseeable future.

The company anticipates an improvement in annual operating income of roughly $50 million beginning in 2017. It also expects to generate approximately $50 million in cash flow from reduced working capital as titanium sponge inventory is lowered over the next few quarters. However, there will be significant one-time charges, including approximately $470 million in non-cash impairment charges and $34 million in shutdown/idling costs.

ATI has entered into long-term supply agreements with several global producers of premium-grade and standard-grade titanium sponge. These agreements will provide the necessary supply at a lower cost compared to its own production at the Rowley facility.

ATI expects to record substantial charges, including approximately $470 million in pre-tax, non-cash impairment charges related to the idling and consolidation. Additionally, there will be about $34 million in pre-tax shutdown and idling costs, which include future cash expenditures, and roughly $183 million in non-cash income tax valuation allowances.