PITTSBURGH, Apr 25, 2012 (BUSINESS WIRE) --Allegheny Technologies Incorporated (NYSE: ATI) reported net income for
the first quarter 2012 of $56.2 million, or $0.50 per share, on sales of
$1.35 billion. For the first quarter 2011, ATI reported net income of
$56.3 million, or $0.54 per share. First quarter 2012 weighted average
diluted shares outstanding were 7.45 million higher than the first
quarter 2011 primarily due to shares issued as part of the Ladish
acquisition in May 2011. Additionally, results for the first quarter
2012 were impacted by higher retirement benefit expenses of $7.3
million, net of tax, or $0.06 per share, compared to the first quarter
Results in the first quarter 2011 included a special charge of $3.1
million, net of tax, related to the accelerated recognition of
equity-based compensation expense due to executive retirements.
Excluding this charge, first quarter 2011 net income was $59.4 million,
or $0.57 per share, on sales of $1.23 billion.
Compared to the fourth quarter 2011, sales increased $101 million, or
8%, and net income increased $24.5 million, or 77%. Fourth quarter 2011
results were impacted by restructuring and Ladish acquisition expenses,
which reduced earnings by $2.8 million, or $0.02 per share.
"The first quarter 2012 was consistent with our expectations as strong
secular growth continued in our key global markets and demand improved
moderately from the domestic GDP sensitive markets for our short-cycle
products," said Rich Harshman, Chairman, President and Chief Executive
"In our High Performance Metals segment, sales increased 46% compared to
the first quarter 2011 and 11% compared to the fourth quarter 2011,"
said Mr. Harshman. "Demand remained strong for our titanium and titanium
alloys, nickel-based and specialty alloys, and forged and cast
components. We continue to see significant profitable growth
opportunities and operating benefits from the integration of ATI Ladish.
Comments from our OEM customers regarding ATI's integrated supply chain
capabilities have been positive and we are seeing many new opportunities
for sales to our key growth markets.
"Our Rowley, UT titanium sponge facility achieved a significant
milestone in March with the completion of the standard-grade
qualification (SQ) process. Titanium sponge produced at the Rowley
facility can now be applied to many products used for aerospace
airframe, medical, and industrial applications. Production volumes are
increasing and costs are decreasing. First quarter 2012 operating profit
in our High Performance Metals segment, at 17.9% of segment sales, was
impacted by approximately $6 million of higher raw material costs due to
surcharge misalignment on our long manufacturing cycle nickel-based
alloys products. In addition, demand for our exotic alloys was weaker
than expected as the nuclear electrical energy market balances
supply/demand dynamics with the shutdown of reactors in Japan, refueling
cycles for operating reactors, and construction of new reactors in
several areas of the world.
"In our Flat-Rolled Products segment, as expected, demand for our
standard stainless products rebounded from the historically weak fourth
quarter 2011. While standard stainless volume improved by 29% from the
fourth quarter 2011 and base-price increases were implemented,
base-prices remain relatively low primarily due to low-priced imports.
Sales of our high-value products in the Flat-Rolled Products segment
benefited from continued strong demand from the aerospace and the oil
and gas markets, including several large oil and gas projects. Demand
for grain-oriented electrical steel continued to be impacted by the weak
housing construction market.
"In our Engineered Products segment, first quarter 2012 sales increased
over 15% compared to the first quarter 2011 and over 5% compared to the
fourth quarter 2011. Operating profit approached our minimum expectation
level at just over 9% of sales. Demand was strong from the oil and gas,
aerospace, and construction and mining markets.
"We continued to improve our cost structure with almost $29 million in
gross cost reductions during the first quarter 2012. Cost reduction
remains a strategic focus and we have targeted a minimum of $100 million
in new gross cost reductions for 2012. Our balance sheet remains solid
with cash on hand of over $250 million and net debt to total
capitalization of 33.4% at the end of the first quarter 2012.
"Construction at our Flat-Rolled Products segment Hot-Rolling and
Processing Facility (HRPF) is progressing on schedule and on budget. As
previously stated, project construction is expected to be completed by
the end of 2013 with commissioning occurring during the first half of
2014. We expect to further improve the cost structure and capabilities
of our Flat-Rolled Products segment with the completion of the HRPF.
Including investments associated with this project, we currently expect
2012 capital expenditures to be approximately $485 million, all of which
we expect to fund from operating cash flow and available cash on hand.
Strategy and Outlook
"We remain focused on long-term value creation for our stockholders
while delivering superior value for our customers. Our industry-leading
specialty metals technologies, diversified alloy systems and product
forms, global and diversified market focus, unsurpassed manufacturing
capabilities, and integrated capabilities from alloy development to raw
materials (titanium sponge) to melting and hot-working, to finished
value-added components and parts are unique in the world. This strategy
has ATI well-positioned to achieve significant revenue and earnings
growth over the next three to five years. We expect strong secular
growth in our key global markets of aerospace, oil and gas/chemical
process industry, electrical energy, and medical. We have identified and
targeted nearly $2 billion in potential new annual revenue growth within
the next five years from our new manufacturing capabilities and
innovative new products.
"As we focus on 2012, in our High Performance Metals segment, we expect
to benefit from strong growth in demand from our key global markets, a
full year of results and increasing synergies from ATI Ladish, a lower
cost structure at our Rowley titanium sponge facility, additional
premium-titanium melt capacity from our new PAM 4 furnace, and the
growth in demand for new products.
"In our Flat-Rolled Products segment, we expect to benefit from the
growth in demand for our high-value products. We now expect the benefits
from several upcoming large projects in the oil and gas/chemical process
industry market, including desalination, to begin in the third quarter
2012, a delay of about one quarter. We are cautiously optimistic of
sustained demand growth for standard stainless products.
"In our Engineered Products segment, we see continued growth in demand
for our tungsten-based products and our industrial forgings and castings.
"While uncertainties remain about the euro-zone debt crisis, and the
pace of GDP growth in the U.S. and China, ATI's diversification and
focus on high-value global markets with strong secular growth gives us
continued expectation of revenue growth of at least 10% in 2012,
compared to 2011, and segment operating profit in the range of 13% to
14% of sales."
First Quarter 2012 Financial Results
High Performance Metals SegmentMarket Conditions
First quarter 2012 compared to first quarter 2011
Flat-Rolled Products SegmentMarket Conditions
Engineered Products SegmentMarket Conditions
Retirement Benefit Expense
Cash Flow, Working Capital and Debt
Allegheny Technologies will conduct a conference call with investors and
analysts on April 25, 2012, at 1:00 p.m. ET to discuss the financial
results. The conference call will be broadcast live on www.ATImetals.com.
To access the broadcast, click on "Conference Call". Replay of the
conference call will be available on the Allegheny Technologies website.
This news release contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Certain
statements in this news release relate to future events and expectations
and, as such, constitute forward-looking statements. Forward-looking
statements include those containing such words as "anticipates,"
"believes," "estimates," "expects," "would," "should," "will," "will
likely result," "forecast," "outlook," "projects," and similar
expressions. Forward-looking statements are based on management's
current expectations and include known and unknown risks, uncertainties
and other factors, many of which we are unable to predict or control,
that may cause our actual results, performance or achievements to
materially differ from those expressed or implied in the forward-looking
statements. Important factors that could cause actual results to differ
materially from those in the forward-looking statements include: (a)
material adverse changes in economic or industry conditions generally,
including global supply and demand conditions and prices for our
specialty metals; (b) material adverse changes in the markets we serve,
including the aerospace and defense, electrical energy, chemical process
industry, oil and gas, medical, automotive, construction and mining, and
other markets; (c) our inability to achieve the level of cost savings,
productivity improvements, synergies, growth or other benefits
anticipated by management, from strategic investments and the
integration of acquired businesses, whether due to significant increases
in energy, raw materials or employee benefits costs, the possibility of
project cost overruns or unanticipated costs and expenses, or other
factors; (d) volatility of prices and availability of supply of the raw
materials that are critical to the manufacture of our products; (e)
declines in the value of our defined benefit pension plan assets or
unfavorable changes in laws or regulations that govern pension plan
funding; (f) significant legal proceedings or investigations adverse to
us; and (g) other risk factors summarized in our Annual Report on Form
10-K for the year ended December 31, 2011, and in other reports filed
with the Securities and Exchange Commission. We assume no duty to update
our forward-looking statements.
Building the World's Best Specialty Metals Company(R)
Allegheny Technologies Incorporated is one of the largest and most
diversified specialty metals producers in the world with revenues of
approximately $5.3 billion for the last twelve months. ATI has
approximately 11,500 full-time employees world-wide who use innovative
technologies to offer global markets a wide range of specialty metals
solutions. Our major markets are aerospace and defense, oil and
gas/chemical process industry, electrical energy, medical, automotive,
food equipment and appliance, machine and cutting tools, and
construction and mining. Our products include titanium and titanium
alloys, nickel-based alloys and superalloys, grain-oriented electrical
steel, stainless and specialty steels, zirconium, hafnium, and niobium,
tungsten materials, forgings, castings and fabrication and machining
capabilities. The ATI website is www.ATImetals.com.
Allegheny Technologies Incorporated and Subsidiaries
Income before interest, other income and income taxes
Net income attributable to noncontrolling interests
Basic net income attributable to ATI per common share
Diluted net income attributable to ATI per common share
Weighted average common shares outstanding -- basic (millions)
Weighted average common shares outstanding -- diluted (millions)
Actual common shares outstanding -- end of period (millions)
Closed company and other expenses
Income before income taxes
Accounts receivable, net of allowances for doubtful accounts of
$5.3 and $5.9 at March 31, 2012 and December 31, 2011, respectively
Prepaid expenses and other current assets
Short term debt and current portion of long-term debt
Allegheny Technologies Incorporated and SubsidiariesCondensed
Consolidated Statements of Cash Flows(Unaudited -
Dollars in millions)
Mill Products volume and average price information includes shipments to
ATI Ladish for all periods presented. High Performance Metals mill
product forms include ingot, billet, bar, shapes and rectangles, rod,
wire, and seamless tubes.
Annualized prior 2 months sales
Managed working capital as a % of annualized sales
March 31, 2012 change in managed working capital
As part of managing the liquidity in our business, we focus on
controlling managed working capital, which is defined as gross
accounts receivable and gross inventories, less accounts payable.
In measuring performance in controlling this managed working
capital, we exclude the effects of LIFO inventory valuation
reserves, excess and obsolete inventory reserves, and reserves for
uncollectible accounts receivable which, due to their nature, are
In managing the overall capital structure of the Company, some of
the measures that we focus on are net debt to net capitalization,
which is the percentage of debt, net of cash that may be available
to reduce borrowings, to the total invested and borrowed capital
of ATI (excluding noncontrolling interest), and total debt to
total ATI capitalization, which excludes cash balances.
SOURCE: Allegheny Technologies Incorporated
Allegheny Technologies IncorporatedDan L. Greenfield, 412-394-3004
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