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Allegheny Technologies Announces Second Quarter 2012 Results

Stocks in this article: ATI

Building the World’s Best Specialty Metals Company®

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 11,400 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

Consolidated Statements of Income
(Unaudited, dollars in millions, except per share amounts)
       
Three Months Ended Six Months Ended
June 30 June 30
2012 2011 2012 2011
 
Sales $ 1,357.4 $ 1,351.6 $ 2,709.9 $ 2,579.0
Costs and expenses:
Cost of sales 1,158.5 1,128.6 2,304.0 2,150.6
Selling and administrative expenses   90.7     99.3     194.1     188.0  
Income before interest, other income
and income taxes 108.2 123.7 211.8 240.4
Interest expense, net (18.6 ) (23.7 ) (38.5 ) (46.7 )
Other income, net   0.1     0.3     0.5     0.4  
Income before income tax provision 89.7 100.3 173.8 194.1
Income tax provision   31.0     34.3     56.8     69.4  
 
Net income 58.7 66.0 117.0 124.7
 
Less: Net income attributable to
noncontrolling interests   2.3     2.0     4.4     4.4  
 
Net income attributable to ATI $ 56.4   $ 64.0   $ 112.6   $ 120.3  
 
Basic net income attributable to
ATI per common share $ 0.53   $ 0.63   $ 1.06   $ 1.20  
 
Diluted net income attributable to
ATI per common share $ 0.50   $ 0.59   $ 1.00   $ 1.13  
 
Weighted average common shares
outstanding -- basic (millions) 106.1 102.1 106.0 99.9
 
Weighted average common shares
outstanding -- diluted (millions) 116.6 113.5 116.5 111.2
 
Actual common shares outstanding--
end of period (millions) 107.2 106.3 107.2 106.3
 

 
Allegheny Technologies Incorporated and Subsidiaries
Sales and Operating Profit by Business Segment
(Unaudited - Dollars in millions)
       
Three Months Ended Six Months Ended
June 30 June 30
2012 2011 2012 2011
Sales:
High Performance Metals $ 566.2 $ 497.2 $ 1,147.5 $ 896.6
Flat-Rolled Products 657.4 727.3 1,293.4 1,437.9
Engineered Products   133.8     127.1     269.0     244.5  
 
Total External Sales $ 1,357.4   $ 1,351.6   $ 2,709.9   $ 2,579.0  
 
Operating Profit:
 
High Performance Metals $ 102.2 $ 92.9 $ 206.3 $ 178.5
% of Sales 18.1 % 18.7 % 18.0 % 19.9 %
 
Flat-Rolled Products 44.5 73.7 91.3 137.1
% of Sales 6.8 % 10.1 % 7.1 % 9.5 %
 
Engineered Products 13.2 6.8 25.5 20.2
% of Sales   9.9 %   5.4 %   9.5 %   8.3 %
 
Operating Profit 159.9 173.4 323.1 335.8
% of Sales 11.8 % 12.8 % 11.9 % 13.0 %
 
Corporate expenses (15.8 ) (25.8 ) (37.5 ) (51.6 )
 
Interest expense, net (18.6 ) (23.7 ) (38.5 ) (46.7 )
 
Closed company and
other expenses (5.2 ) (4.2 ) (12.1 ) (4.7 )
 
Retirement benefit expense   (30.6 )   (19.4 )   (61.2 )   (38.7 )
 
Income before
income taxes $ 89.7   $ 100.3   $ 173.8   $ 194.1  
 

 
Allegheny Technologies Incorporated and Subsidiaries
Consolidated Balance Sheets
(Current period unaudited--Dollars in millions)
       
June 30, December 31,
2012 2011
ASSETS
 
Current Assets:
Cash and cash equivalents $ 210.3 $ 380.6
Accounts receivable, net of allowances for
doubtful accounts of $5.6 and $5.9 at
June 30, 2012 and December 31, 2011,
respectively 744.3 709.1
Inventories, net 1,512.5 1,384.3
Prepaid expenses and
other current assets   60.4   95.5
Total Current Assets 2,527.5 2,569.5
 
Property, plant and equipment, net 2,444.0 2,368.8
Cost in excess of net assets acquired 737.7 737.7
Other assets   370.8   370.9
 
Total Assets $ 6,080.0 $ 6,046.9
 
LIABILITIES AND EQUITY
 
Current Liabilities:
Accounts payable $ 451.7 $ 490.7
Accrued liabilities 327.9 320.3
Deferred income taxes 16.6 23.5
Short term debt and current
portion of long-term debt   27.3   27.3
Total Current Liabilities 823.5 861.8
 
Long-term debt 1,474.1 1,482.0
Accrued postretirement benefits 473.3 488.1
Pension liabilities 496.1 508.9
Deferred income taxes 20.0 9.8
Other long-term liabilities   117.5   124.7
Total Liabilities   3,404.5   3,475.3
 
Total ATI stockholders' equity 2,575.5 2,475.3
Noncontrolling interests   100.0   96.3
Total Equity   2,675.5   2,571.6
 
Total Liabilities and Equity $ 6,080.0 $ 6,046.9
 

 
Allegheny Technologies Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited - Dollars in millions)
    Six Months Ended
June 30
2012     2011
Operating Activities:
 
Net income $ 117.0 $ 124.7
 
Depreciation and amortization 96.2 80.6
Deferred taxes (17.6 ) (13.1 )
Change in managed working capital (205.4 ) (455.1 )
Change in retirement benefits 26.8 6.5
Accrued liabilities and other   42.8     184.4  
Cash provided by (used in) operating activities   59.8     (72.0 )
Investing Activities:
Purchases of property, plant and equipment (165.7 ) (97.7 )
Acquisition of business - (349.2 )
Asset disposals and other   0.9     2.6  
Cash used in investing activities   (164.8 )   (444.3 )
Financing Activities:
Borrowings on long-term debt - 500.0
Payments on long-term debt and capital leases (5.8 ) (11.0 )
Net borrowings under credit facilities 0.3 2.3
Debt issuance costs - (5.0 )
Dividends paid to shareholders (38.2 ) (36.7 )
Exercises of stock options 0.8 1.1
Taxes on share-based compensation and other   (22.4 )   1.1  
Cash provided by (used in) financing activities   (65.3 )   451.8  
Decrease in cash and cash equivalents (170.3 ) (64.5 )
Cash and cash equivalents at beginning of period   380.6     432.3  
Cash and cash equivalents at end of period $ 210.3   $ 367.8  
 

 
Allegheny Technologies Incorporated and Subsidiaries
Selected Financial Data - Mill Products
(Unaudited)
       
Three Months Ended Six Months Ended
June 30 June 30
2012 2011 2012 2011
Mill Products Volume:
High Performance Metals (000's lbs.)
Titanium 6,554 7,304 13,581 14,057
Nickel-based and specialty alloys 14,367 12,789 28,777 24,613
Exotic alloys 987 991 1,916 2,070
 
Flat-Rolled Products (000's lbs.)
High value 128,793 129,785 249,297 251,812
Standard   183,555   149,726   340,875   320,054
Flat-Rolled Products total 312,348 279,511 590,172 571,866
 
 
 
Mill Products Average Prices:
High Performance Metals (per lb.)
Titanium $ 23.79 $ 21.13 $ 22.83 $ 21.19
Nickel-based and specialty alloys $ 15.17 $ 15.67 $ 15.18 $ 15.28
Exotic alloys $ 70.93 $ 66.72 $ 70.49 $ 63.83
 
Flat-Rolled Products (per lb.)
High value $ 2.90 $ 3.35 $ 3.05 $ 3.27
Standard $ 1.52 $ 1.93 $ 1.54 $ 1.90
Flat-Rolled Products combined average $ 2.09 $ 2.59 $ 2.18 $ 2.50
 

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.

 
Allegheny Technologies Incorporated and Subsidiaries
Computation of Basic and Diluted Earnings Per Share
(Unaudited, in millions, except per share amounts)
         
Three Months Ended Six Months Ended
June 30 June 30
2012 2011 2012 2011
Numerator for Basic net income per common share -
Net income attributable to ATI $ 56.4 $ 64.0 $ 112.6 $ 120.3
Effect of dilutive securities:
4.25% Convertible Notes due 2014   2.1   2.5   4.4   5.0
Numerator for Dilutive net income per common share -
Net income attributable to ATI after assumed
conversions $ 58.5 $ 66.5 $ 117.0 $ 125.3
 
Denominator for Basic net income per common share -
Weighted average shares outstanding 106.1 102.1 106.0 99.8
Effect of dilutive securities:
Share-based compensation 0.9 1.8 0.9 1.8
4.25% Convertible Notes due 2014   9.6   9.6   9.6   9.6
Denominator for Diluted net income per common share -
Adjusted weighted average assuming conversions   116.6   113.5   116.5   111.2
 
Basic net income attributable to ATI per common share $ 0.53 $ 0.63 $ 1.06 $ 1.20
 
Diluted net income attributable to ATI per common share $ 0.50 $ 0.59 $ 1.00 $ 1.13
 

 
Allegheny Technologies Incorporated and Subsidiaries
Other Financial Information
Managed Working Capital
(Unaudited - Dollars in millions)
     
June 30, December 31,
2012 2011
 
Accounts receivable $ 744.3 $ 709.1
Inventory 1,512.5 1,384.3
Accounts payable   (451.7 )   (490.7 )
Subtotal 1,805.1 1,602.7
 
Allowance for doubtful accounts 5.6 5.9
LIFO reserve 146.6 153.7
Corporate and other   71.3     60.9  
Managed working capital $ 2,028.6   $ 1,823.2  
 
Annualized prior 2 months
sales $ 5,430.5   $ 4,820.6  
 
Managed working capital as a
% of annualized sales 37.4 % 37.8 %
 
Year to date change in managed
working capital $ 205.4
 

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 managed separately.

 
Allegheny Technologies Incorporated and Subsidiaries
Other Financial Information
Debt to Capital
(Unaudited - Dollars in millions)
     
June 30, December 31,
2012 2011
 
Total debt $ 1,501.4 $ 1,509.3
Less: Cash   (210.3 )   (380.6 )
Net debt $ 1,291.1 $ 1,128.7
 
Net debt $ 1,291.1 $ 1,128.7
Total ATI stockholders' equity   2,575.5     2,475.3  
Net ATI capital $ 3,866.6 $ 3,604.0
 
Net debt to ATI capital   33.4 %   31.3 %
 
Total debt $ 1,501.4 $ 1,509.3
Total ATI stockholders' equity   2,575.5     2,475.3  
Total ATI capital $ 4,076.9 $ 3,984.6
 
Total debt to total ATI capital   36.8 %   37.9 %
 

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.

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