Allegheny Technologies Incorporated : Allegheny Technologies Announces Fourth Quarter and Full Year 2011 Results
01/25/2012| 07:50am US/Eastern
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Allegheny Technologies Incorporated (NYSE: ATI):
Fourth Quarter 2011 Results
Sales increased to $1.25 billion, nearly 21% higher than fourth
quarter 2010
Segment operating profit of $114.4 million, or 9.1% of sales, 30%
higher than fourth quarter 2010
Net income attributable to ATI before special charges was $34.5
million, or $0.31 per share, 107% higher than fourth quarter 2010
Net income attributable to ATI was $31.7 million, or $0.29 per
share, including $2.8 million, or $0.02 per share, of special charges
Gross cost reductions of $36.0 million
Full Year 2011 Results
Sales increased to $5.18 billion, 28% higher than 2010
Segment operating profit of $612.0 million, or 11.8% of sales,
improved 72% compared to 2010
Net income attributable to ATI before special charges was $243.9
million, or $2.23 per share, 210% higher than 2010
Net income attributable to ATI was $214.3 million, or $1.97 per
share, including Ladish acquisition expenses of $22.1 million, or
$0.19 per share
Gross cost reductions of $123.5 million
Cash on hand at year end was $380.6 million
Net debt to total capitalization was 31.3%
Total debt to total capitalization was 37.8%
Allegheny Technologies Incorporated (NYSE: ATI) reported net income for
the fourth quarter 2011 of $31.7 million, or $0.29 per share, on sales
of $1.25 billion. Fourth quarter 2011 results were impacted by
restructuring and Ladish acquisition expenses, which reduced earnings by
$2.8 million, or $0.02 per share.
In the fourth quarter 2010, ATI reported net income of $15.1 million, or
$0.15 per share, on sales of $1.04 billion.
For the full year 2011, net income was $214.3 million, or $1.97 per
share, on sales of $5.18 billion. Results for 2011 included $29.6
million of charges, net of tax, for Ladish acquisition expenses,
accelerated recognition of equity compensation due to executive
retirements, and restructuring and start-up expenses, which reduced
earnings by $0.26 per share.
For the full year 2010, net income was $70.7 million, or $0.72 per
share, on sales of $4.05 billion. Results for 2010 included
non-recurring tax charges of $9.2 million, or $0.10 per share, primarily
due to the effects of the Patient Protection and Affordable Care Act and
the Small Business Jobs and Credit Act.
"Our 2011 results continued to demonstrate the benefits of ATI's recent
strategic investments and our focus on key global markets and high-value
differentiated products," said Rich Harshman, Chairman, President and
Chief Executive Officer. "Sales for 2011 were 28% higher than in 2010.
Segment operating profit, excluding inventory fair value adjustments
associated with the Ladish acquisition, was 12.3% of ATI sales, or
$639.3 million. This performance represents a 79% increase over 2010
segment operating profit. Earnings per share before special charges was
$2.23, 210% higher than 2010."
ATI's sales to the key global markets of aerospace and defense, oil
and gas/chemical process industry, electrical energy, and medical grew
33% compared to 2010 and represented 70% of ATI sales:
Sales to the aerospace and defense market grew 44% and represented
29% of ATI sales as the acquisition of Ladish augmented organic
growth.
Sales to the oil and gas/chemical process industry grew 41% and
represented 21% of ATI sales.
Sales to the electrical energy market grew 16% and represented 15%
of ATI sales.
Sales to the medical market grew 8% and represented 5% of ATI
sales.
Direct international sales increased $530.3 million, or 41%, compared
to 2010 and represented 35% of ATI 2011 sales.
"Our fourth quarter 2011 results were impacted by significantly lower
demand and historically low base prices for our standard stainless
products," said Mr. Harshman. "In addition, demand for some of our
high-value products in both the High Performance Metals and Flat-Rolled
Products segments was impacted by short-term actions to keep inventories
lean, which was partially driven by the expectation of lower raw
material surcharges in the first quarter 2012.
"As we look at our full year 2011 performance, in our High Performance
Metals segment 2011 sales increased 46% as demand continued to be strong
from the aerospace, oil and gas, electrical energy, and medical markets
and we benefited from the May 2011 acquisition of Ladish. Operating
profit in this segment was 20% of sales, excluding Ladish acquisition
expenses and startup costs related to our premium-titanium sponge
facility.
"In our Flat-Rolled Products segment, 2011 sales increased nearly 17%
and operating profit improved to nearly 8% of sales. This performance
demonstrates the ongoing transformation of this segment as strong
shipments of high-value products helped offset weak shipments of
standard stainless products. Shipments of our high-value products
increased 9% due to strong demand from the oil and gas, chemical process
industry, electrical energy, automotive, and telecommunications markets.
Shipments of our standard stainless products decreased 9% as shipments
weakened in the second half due to concerns about the Eurozone and the
pace of the U.S. recovery. Flat-Rolled Products segment operating profit
in the fourth quarter was negatively impacted by historically low
standard stainless base prices and weak shipments as customers destocked
during a period of economic uncertainty and falling nickel raw materials
prices. We are seeing early signs of improvement in 2012 for our
standard stainless products with higher base prices and better order
entry. We continued to further improve our standard stainless cost
structure during the fourth quarter 2011 by consolidating certain
finishing operations, which resulted in the temporary idling of our New
Castle, Indiana sheet finishing facility.
"In our Engineered Products segment, 2011 sales increased nearly 35% and
operating profit improved to nearly 7% of sales. Demand was strong from
the oil and gas, aerospace, and construction and mining markets.
"Total titanium mill product shipments for 2011 were 45 million pounds,
an increase of 20% compared to 2010. Titanium shipments in our High
Performance Metals segment benefited from a better value-added product
mix to the aerospace and medical markets. Titanium shipments in our
Flat-Rolled Products segment, including Uniti joint venture conversion,
were 19 million pounds, 51% higher than in 2010.
"High Performance Metals segment backlog grew to $1.5 billion at the end
of 2011, compared to $650 million at the end of 2010, reflecting strong
demand from growing global markets and the addition of ATI Ladish.
"We had record sales to Asia in 2011. Demand remains strong for global
oil and gas/chemical process industry and electrical energy projects,
including several large pending projects, and for telecommunications
applications. Demand for our products from Europe is mostly from the
aerospace, oil and gas, electrical energy, and medical markets, which at
this time are not being impacted by economic issues in the Eurozone.
"We continued to improve our cost structure with almost $124 million in
gross cost reductions in 2011. 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 $380 million and net debt to total capitalization of 31.3% at
the end of 2011.
"In 2011, capital expenditures were $278 million and we invested $273
million in managed working capital to support the growth in our
business. We also repaid $147 million of debt, including the remaining
$117 million of 2011 8.375% notes. In addition, during 2011, we added
over 2,200 employees, primarily in the U.S., with new hires throughout
ATI to support our growth, and as a result of the acquisition of ATI
Ladish.
"We continue to make progress at the Rowley, UT premium-titanium sponge
facility. With stable raw material input costs, higher production rates,
and improved plant efficiencies, we expect to produce more sponge at
lower costs in 2012, compared to 2011. We remain on track to complete
the standard qualification process by the end of the first quarter 2012.
"Construction at our Flat-Rolled Products segment Hot-Rolling and
Processing Facility 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. 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. Depreciation expense in 2012 is expected to be $194 million."
Outlook
"Our focus is to continue to deliver value for our customers and
profitable growth for our stockholders," Mr. Harshman continued. "Over
the next three to five years, we believe the demand drivers will remain
positive in our key global markets of aerospace, oil and gas/chemical
process industry, electrical energy, and medical.
"Our outlook for the commercial aerospace market remains bullish. We
expect to benefit from increased build rates for legacy and
next-generation aircraft and engines as well as from development work on
future-generation jet engines.
"We expect demand from the oil and gas/chemical process industry to
remain strong. In the oil and gas market, ATI benefits from the trend
toward horizontal and directional drilling, deep water projects, and
sour gas projects. In the chemical processing industry, ATI benefits
from projects requiring specialty metals that can withstand highly
corrosive and hot environments.
"ATI expects to benefit from growing global demand for safe, clean, and
efficient electrical energy. Our specialty metals are used in nuclear,
coal, and natural gas power generation including spent nuclear fuel and
pollution control equipment. Demand for our products is growing from
renewables, particularly solar and geothermal power.
"Demand for our products from the medical market is expected to remain
strong because of the aging population in developed countries and the
growth in procedures in developing countries.
"Focusing 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 premium-titanium sponge facility, elimination of Ladish
acquisition-related cost, significantly lower Rowley start-up costs,
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 are seeing early signs
of improvement in demand for our standard stainless products. First
quarter order entry is good and base prices are higher than in the
fourth quarter 2011. The price increase announced in the fourth quarter
2011 of 10% or more has been implemented. We are cautiously optimistic
and will be watching for signs of sustained recovery and demand growth
for these products.
"In our Engineered Products segment, we see continued growth in demand
for our tungsten-based products and our industrial forgings and castings.
"We currently expect 2012 retirement benefit expense to be approximately
$122 million, or $44 million higher than 2011 (an increase of
approximately $0.25 per share after-tax), primarily as a result of the
utilization of a lower discount rate to value retirement benefit
obligations and lower than expected returns on plan assets. We expect
essentially all of the 2012 pension expense to be non-cash.
"Based on these views and the expectation of less volatile raw materials
costs, we expect revenue growth of at least 10% in 2012, compared to
2011, and expect segment operating profit in the range of 13% to 14% of
sales."
Three Months Ended
Year Ended
December 31
December 31
In Millions
2011
2010
2011
2010
Sales
$
1,251.4
$
1,037.6
$
5,183.0
$
4,047.8
Net income attributable to ATI before special charges
$
34.5
$
15.1
$
243.9
$
79.9
Acquisition expenses and other charges*
$
(2.8
)
$
-
$
(29.6
)
$
(9.2
)
Net income attributable to ATI
$
31.7
$
15.1
$
214.3
$
70.7
Per Diluted Share
Net income attributable to ATI before special charges
$
0.31
$
0.15
$
2.23
$
0.82
Acquisition expenses and other charges*
$
(0.02
)
$
-
$
(0.26
)
$
(0.10
)
Net income attributable to ATI
$
0.29
$
0.15
$
1.97
$
0.72
* Fourth quarter 2011 includes charges of $2.8 million for restructuring
costs and Ladish acquisition expenses. For the year ended December 31,
2011, charges include non-recurring Ladish acquisition expenses,
accelerated recognition of equity-based compensation expense due to
previously announced executive retirements, restructuring costs, and a
discrete tax charge. For the year ended December 31, 2010, charges were
related to the impact of tax law changes.
Fourth Quarter and Full Year 2011 Financial Results
Sales for the fourth quarter 2011 increased to $1.25 billion, a
20.6% improvement compared to the fourth quarter 2010, as shipments
and raw material surcharges were higher for most products.
Sales for the full year 2011 were $5.18 billion, an increase of
28% compared to 2010, as a result of higher shipments and higher base
prices for most high-value products, the acquisition of ATI Ladish in
May 2011, and higher raw material surcharges and indices for most
products. These benefits more than offset lower shipments and lower
base prices for standard stainless products. Direct international
sales increased $530.3 million and represented 35% of total sales,
compared to 32% for 2010. Compared to the full year 2010, sales
increased 46% in the High Performance Metals segment, 17% in the
Flat-Rolled Products segment, and 35% in the Engineered Products
segment.
Fourth quarter 2011 segment operating profit was $114.4
million, or 9.1% of sales, compared to $88.0 million, or 8.5% of
sales, for the comparable 2010 period. Results for the fourth quarter
2011 include a LIFO inventory valuation reserve benefit of $5.9
million, compared to a charge of $19.5 million in the fourth quarter
2010. Fourth quarter 2011 results were adversely affected by start-up
and idle facility costs of $10.3 million, compared to $20.4 million in
the fourth quarter 2010, and by $4.2 million of restructuring and
Ladish acquisition-related costs.
Full year 2011 segment operating profit was $612.0 million, or
11.8% of sales, compared to $356.5 million, or 8.8% of sales, for
2010. Results for 2011 included a LIFO inventory valuation reserve
benefit of $9.3 million, compared to a charge of $60.2 million for
2010. Start-up and idle facility costs were $47.1 million for the full
year 2011, compared to $62.4 million for 2010. Ladish
acquisition-related inventory fair value adjustments were $27.3
million in 2011.
Net income attributable to ATI for the fourth quarter 2011 was
$31.7 million, or $0.29 per share, compared to $15.1 million, or $0.15
per share, in the fourth quarter 2010. Fourth quarter 2011 net income
was impacted by restructuring and Ladish acquisition expenses, which
reduced earnings by $2.8 million, or $0.02 per share, and by start-up
and idle facility pre-tax costs of $10.3 million, partially offset by
a pre-tax LIFO inventory reserve benefit of $5.9 million. Fourth
quarter 2010 net income included a $19.5 million pre-tax LIFO
inventory reserve charge and $20.4 million of pre-tax start-up and
idle facility costs.
Full year 2011 net income attributable to ATI was $214.3
million, or $1.97 per diluted share, compared to $70.7 million, or
$0.72 per diluted share, for 2010. Full year 2011 net income included
$29.6 million of acquisition expenses and other charges, including
Ladish acquisition-related expenses of $22.1 million, accelerated
recognition of equity-based compensation expense due to executive
retirements, and restructuring charges for facility closure costs
primarily related to severance and employee benefits.
Cash flowprovided by operations for 2011 was $296.8
million, including $189.3 million in the fourth quarter 2011.
Increased profitability was partially offset by an investment of
$273.3 million in managed working capital due to a higher level of
business activity.
Cash on hand at the end of 2011 was $380.6 million, a decrease
of $51.7 million from the end of 2010. During the fourth quarter 2011
we retired the remaining $117 million of maturing 2011 8.375% Notes.
Gross cost reductions, before the effects of inflation, totaled
$36.0 million company-wide in the fourth quarter 2011. Gross cost
reductions for the full year 2011 totaled $123.5 million.
High Performance Metals Segment
Market Conditions
Demand for our titanium and titanium alloy and our nickel-based and
specialty alloy mill products was strong from the aerospace, medical,
electrical energy, and oil and gas markets. Demand for our titanium
alloy, nickel-based alloy and specialty alloy forgings and castings
was strong from the aerospace jet engine and airframe markets and the
construction and mining market. Demand for our exotic alloys was
strong from the aerospace and defense, electrical energy and medical
markets. Major markets in this segment by percentage of 2011 sales are
aerospace and defense: 64%, oil and gas/chemical process industry: 9%,
electrical energy: 9%, and medical: 9%. Direct international sales
were 40% of segment sales.
Fourth quarter 2011 compared to fourth quarter 2010
Sales were $524.6 million, 50% higher than the fourth quarter 2010.
Mill product shipments increased 13% for nickel-based and specialty
alloys. While shipments of titanium and titanium alloys were
essentially flat with the prior year, sales benefited from a better
value-added product mix in the fourth quarter 2011. Exotic alloys
shipments were slightly lower due to the timing of project based
demand in the chemical process industry. Average mill product selling
prices increased 16% for titanium and titanium alloys and 9% for
nickel-based and specialty alloys primarily due to a favorable product
mix, higher raw material indices and improving base prices. Average
selling prices for exotic alloys increased 6% primarily due to a
favorable mix.
Segment operating profit increased to $90.3 million, or 17.2% of
sales, compared to $63.5 million, or 18.2% of sales, for the fourth
quarter 2010. Segment operating profit included $6.2 million of
start-up, qualification and idle capacity costs associated with our
titanium sponge operations. Segment operating profit for the full year
2011, excluding inventory fair value adjustments associated with the
Ladish transaction, was $391.8 million, or 20.0% of sales. Fourth
quarter 2010 operating profit was impacted by approximately $18.4
million of start-up and idle facility costs. LIFO inventory valuation
reserve benefits of $6.0 million and $13.5 million were recognized in
the fourth quarter 2011 and 2010, respectively.
Results benefited from $20.7 million of gross cost reductions in the
fourth quarter 2011, bringing the full year 2011 gross cost reductions
in this segment to $62.8 million.
Flat-Rolled Products Segment
Market Conditions
Demand was strong for high-value products from the oil and
gas/chemical process industry and aerospace markets and improved from
the global automotive market. Fourth quarter 2011 segment titanium
shipments, including Uniti joint venture conversion, were 3.9 million
pounds, a 30% increase compared to the fourth quarter 2010. For our
standard stainless sheet and plate products, demand was weak and
prices were historically low due to economic uncertainty and rapidly
falling raw material surcharges, which resulted in customers delaying
purchases and managing inventory levels. Major markets in this segment
by percentage of 2011 sales are aerospace and defense: 7%, oil and
gas/chemical process industry: 29%, electrical energy: 21%, medical:
2%, and consumer durables: 21%. Direct international sales were 34% of
segment sales.
Fourth quarter 2011 compared to fourth quarter 2010
Sales were $598.5 million, 2% higher than the fourth quarter 2010,
primarily due to increased shipments and higher base-selling prices
for most high-value products, which offset declining surcharges and
weak demand for standard stainless products. Shipments of high-value
products increased 4% while shipments of standard stainless products
(sheet and plate) decreased 14%. Average transaction prices, which
include surcharges, for high-value products increased 13% while
average transaction prices for standard stainless products decreased
9%.
Segment operating profit decreased to $17.5 million, or 2.9% of sales,
compared to $24.2 million, or 4.1% of sales, for the fourth quarter
2010. In addition to weak demand and low base selling prices for
standard stainless products, the fourth quarter 2011 included a LIFO
inventory valuation reserve benefit of $5.0 million, due primarily to
declining nickel prices, and facility restructuring charges of $2.6
million, primarily related to severance and benefit costs associated
with the temporary idling of the segment's New Castle, IN finishing
operation. A LIFO inventory valuation reserve charge of $30.2 million
was recognized in the 2010 fourth quarter due to higher raw material
costs, especially for nickel. In addition, operating profit in the
fourth quarter 2010 was negatively impacted by approximately $1.2
million of idle facility costs.
Results benefited from $12.5 million in gross cost reductions in the
fourth quarter 2011, bringing the full year 2011 gross cost reductions
in this segment to $47.2 million.
Engineered Products Segment
Market Conditions
Demand remained strong from the oil and gas, transportation,
aerospace, electrical energy, and automotive markets, but remained
weak from the wind energy market. Major markets in this segment by
percentage of 2011 sales are aerospace and defense: 8%, oil and
gas/chemical process industry: 27%, electrical energy: 7%, medical:
2%, machine and cutting tools: 17%, and construction and mining: 14%.
Direct international sales were 23% of segment sales.
Fourth quarter 2011 compared to fourth quarter 2010
Sales were $128.3 million, 27% higher than in the fourth quarter 2010
as a result of the improved demand for most products.
Segment operating profit was significantly improved at $6.6 million in
the fourth quarter 2011, compared to $0.3 million in the fourth
quarter 2010. Results included LIFO inventory valuation reserve
charges of $5.1 million in 2011 and $2.8 million in 2010, due to
higher raw material costs.
Results benefited from $2.8 million in gross cost reductions in the
fourth quarter 2011, bringing the full year 2011 gross cost reductions
in this segment to $13.5 million.
Other Expenses
Corporate expenses for the fourth quarter 2011 were $20.0 million,
compared to $23.4 million in the year-ago period. The decrease in
corporate expenses in the fourth quarter 2011 was primarily due to
lower corporate-funded R&D costs and Ladish acquisition expenses.
Interest expense, net of interest income for the fourth quarter 2011
was $22.2 million, compared to $16.3 million in the fourth quarter
2010. The increase in interest expense was primarily due to the
January 7, 2011 issuance of $500 million of 5.95% Notes due 2021 and
debt assumed in the Ladish acquisition.
Capitalized interest on major strategic capital projects reduced
interest expense by $3.7 million and $2.5 million for the 2011 and
2010 fourth quarters, respectively. Full year 2011 and 2010
capitalized interest was $12.1 million and $12.5 million, respectively.
Other expenses, which include expenses related to closed operations,
for the fourth quarter 2011 were $2.3 million, compared to $3.0
million in the year-ago period. The decrease is primarily related to
lower legal expenses of closed operations and foreign currency gains.
Retirement Benefit Expense
Retirement benefit expense, which includes pension expense and other
postretirement expense, decreased to $20.0 million in the fourth
quarter 2011, compared to $22.7 million in the fourth quarter 2010.
This decrease was primarily due to higher than expected returns on
pension plan assets in 2010 and the benefits resulting from our
voluntary pension contributions made over the last several years.
For the fourth quarter 2011, retirement benefit expense of $14.3
million was included in cost of sales and $5.7 million was included in
selling and administrative expenses. For the fourth quarter 2010,
retirement benefit expense of $16.5 million was included in cost of
sales and $6.2 million was included in selling and administrative
expenses.
For the full year 2011, retirement benefit expense of $55.1 million
was included in cost of sales, and $22.8 million was included in
selling and administrative expenses, compared to full year 2010
retirement benefit expense of $64.6 million in cost of sales and $25.5
million in selling and administrative expenses.
We currently expect pre-tax retirement benefit expense to be
approximately $44 million higher in 2012 than in 2011, primarily as a
result of the utilization of a lower discount rate to value retirement
benefit obligations. Pension expense is expected to be approximately
$98 million in 2012 compared to pension expense of $56.4 million in
2011. As a result, we expect 2012 pre-tax retirement benefit expense,
which includes pension expense and other postretirement benefits
expense, of approximately $122 million compared to $77.9 million in
2011. We expect essentially all of the 2012 pension expense to be
non-cash. At December 31, 2011, our U.S. qualified defined benefit
plan was approximately 84% funded, and we are not required to make any
contribution to this plan for 2012.
Income Taxes
The fourth quarter 2011 provision for income taxes was $15.7 million,
or 31.5% of income before tax. The fourth quarter 2010 provision for
income taxes was $5.2 million, or 23.0% of income before tax. The
fourth quarter 2010 included a favorable discrete net benefit of $2.3
million primarily associated with adjustment of prior years' taxes.
The provision for income taxes for the full year 2010 included
non-recurring tax charges of $9.2 million, primarily due to the
effects of the Patient Protection and Affordable Care Act and the
Small Business Jobs and Credit Act.
Cash Flow, Working Capital and Debt
Cash on hand was $380.6 million at year-end 2011, a decrease of $51.7
million from year-end 2010.
Cash flow from operations for 2011 was $296.8 million, including
$189.3 million in the fourth quarter, as improved profitability was
partially offset by an investment of $273.3 million in managed working
capital, primarily due to a significant increase in the level of
business activity.
The $273.3 million growth in managed working capital resulted from a
$79.8 million increase in accounts receivable and a $244.9 million
increase in inventory partially offset by a $51.4 million increase in
accounts payable.
At December 31, 2011, managed working capital was 37.8% of annualized
sales, compared to 34.4% of annualized sales at year-end 2010. We
define managed working capital as accounts receivable plus gross
inventories less accounts payable.
Cash used in investing activities was $624.7 million in 2011,
including $349.2 million for the Ladish acquisition and $ 278.2
million of capital expenditures.
Cash provided by financing activities was $276.2 million in 2011 and
included $495.0 million in net proceeds from the issuance of $500
million of 5.95% Notes due January 2021, partially offset by debt
retirements of $146.9 million, including the remaining $117 million of
8.375% Notes which matured in December 2011, and dividend payments of
$74.7 million.
Net debt as a percentage of total capitalization was 31.3% at the end
of 2011, compared to 23.6% at the end of 2010. Total debt to total
capital was 37.8% at December 31, 2011, compared to 34.3% at the end
of 2010.
There were no borrowings outstanding under ATI's $400 million
unsecured domestic borrowing facility, although a portion of the
letters of credit capacity was utilized.
Allegheny Technologies will conduct a conference call with investors and
analysts on January 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, 2010, 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®
Allegheny Technologies Incorporated is one of the largest and most
diversified specialty metals producers in the world with revenues of
$5.2 billion during 2011. 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
(Dollars in millions, except per share amounts)
Three Months Ended
Twelve Months Ended
December 31
December 31
2011
2010
2011
2010
Sales
$
1,251.4
$
1,037.6
$
5,183.0
$
4,047.8
Costs and expenses:
Cost of sales
1,082.4
910.3
4,369.8
3,557.5
Selling and administrative expenses
97.4
88.8
382.1
304.9
Income before interest, other income and income taxes
71.6
38.5
431.1
185.4
Interest expense, net
(22.2
)
(16.3
)
(92.3
)
(62.7
)
Other income, net
0.5
0.4
0.6
3.0
Income before income tax provision
49.9
22.6
339.4
125.7
Income tax provision
15.7
5.2
116.3
47.0
Net income
34.2
17.4
223.1
78.7
Less:
Net income attributable to noncontrolling interests
2.5
2.3
8.8
8.0
Net income attributable to ATI
$
31.7
$
15.1
$
214.3
$
70.7
Basic net income attributable to ATI per common share
$
0.30
$
0.16
$
2.09
$
0.73
Diluted net income attributable to ATI per common share
$
0.29
$
0.15
$
1.97
$
0.72
Weighted average common shares outstanding -- basic (millions)
105.1
97.5
102.5
97.4
Weighted average common shares outstanding -- diluted (millions)
116.6
98.8
113.9
98.7
Actual common shares outstanding -- end of period (millions)
106.4
98.5
106.4
98.5
Allegheny Technologies Incorporated and Subsidiaries
Sales and Operating Profit by Business Segment
(Dollars in millions)
Three Months Ended
Twelve Months Ended
December 31
December 31
2011
2010
2011
2010
Sales:
High Performance Metals
$
524.6
$
349.0
$
1,955.9
$
1,337.5
Flat-Rolled Products
598.5
587.4
2,726.0
2,338.5
Engineered Products
128.3
101.2
501.1
371.8
Total External Sales
$
1,251.4
$
1,037.6
$
5,183.0
$
4,047.8
Operating Profit:
High Performance Metals
$
90.3
$
63.5
$
364.5
$
257.8
% of Sales
17.2
%
18.2
%
18.6
%
19.3
%
Flat-Rolled Products
17.5
24.2
213.4
85.9
% of Sales
2.9
%
4.1
%
7.8
%
3.7
%
Engineered Products
6.6
0.3
34.1
12.8
% of Sales
5.1
%
0.3
%
6.8
%
3.4
%
Operating Profit
114.4
88.0
612.0
356.5
% of Sales
9.1
%
8.5
%
11.8
%
8.8
%
Corporate expenses
(20.0
)
(23.4
)
(92.5
)
(64.1
)
Interest expense, net
(22.2
)
(16.3
)
(92.3
)
(62.7
)
Other expense, net of gains on asset sales
(2.3
)
(3.0
)
(9.9
)
(13.9
)
Retirement benefit expense
(20.0
)
(22.7
)
(77.9
)
(90.1
)
Income before income taxes
$
49.9
$
22.6
$
339.4
$
125.7
Allegheny Technologies Incorporated and Subsidiaries
Consolidated Balance Sheets
(Dollars in millions)
December 31,
December 31,
2011
2010
ASSETS
Current Assets:
Cash and cash equivalents
$
380.6
$
432.3
Accounts receivable, net of allowances for doubtful accounts of
$5.9 and $5.6 at December 31, 2011 and 2010, respectively
709.1
545.4
Inventories, net
1,384.3
1,024.5
Prepaid expenses and other current assets
95.5
112.9
Total Current Assets
2,569.5
2,115.1
Property, plant and equipment, net
2,368.8
1,989.3
Cost in excess of net assets acquired
737.7
206.8
Other assets
370.9
182.4
Total Assets
$
6,046.9
$
4,493.6
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable
$
490.7
$
394.1
Accrued liabilities
320.3
249.9
Deferred income taxes
23.5
5.6
Short term debt and current portion of long-term debt
27.3
141.4
Total Current Liabilities
861.8
791.0
Long-term debt
1,482.0
921.9
Accrued postretirement benefits
488.1
423.8
Pension liabilities
501.4
58.3
Deferred income taxes
12.7
68.6
Other long-term liabilities
124.6
100.6
Total Liabilities
3,470.6
2,364.2
Total ATI stockholders' equity
2,480.0
2,040.8
Noncontrolling interests
96.3
88.6
Total Equity
2,576.3
2,129.4
Total Liabilities and Equity
$
6,046.9
$
4,493.6
Allegheny Technologies Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Dollars in millions)
Twelve Months Ended
December 31
2011
2010
Operating Activities:
Net income
$
223.1
$
78.7
Depreciation and amortization
174.4
141.5
Deferred taxes
52.7
102.2
Change in managed working capital
(273.3
)
(318.5
)
Change in retirement benefits
19.6
34.3
Accrued liabilities and other
100.3
(11.1
)
Cash provided by operating activities
296.8
27.1
Investing Activities:
Purchases of property, plant and equipment
(278.2
)
(219.1
)
Acquisition of business
(349.2
)
-
Asset disposals and other
2.7
2.3
Cash used in investing activities
(624.7
)
(216.8
)
Financing Activities:
Borrowings on long-term debt
500.0
-
Payments on long-term debt and capital leases
(143.8
)
(11.3
)
Net borrowings (repayments) under credit facilities
(3.1
)
2.9
Debt issuance costs
(5.0
)
-
Dividends paid to shareholders
(74.7
)
(70.8
)
Dividends paid to noncontrolling interests
(7.2
)
-
Exercises of stock options
1.6
1.4
Taxes on share-based compensation and other
8.4
(9.0
)
Cash provided by (used in) financing activities
276.2
(86.8
)
Decrease in cash and cash equivalents
(51.7
)
(276.5
)
Cash and cash equivalents at beginning of period
432.3
708.8
Cash and cash equivalents at end of period
$
380.6
$
432.3
Allegheny Technologies Incorporated and Subsidiaries
Selected Financial Data - Mill Products
Three Months Ended
Twelve Months Ended
December 31
December 31
Mill Products Volume:
2011
2010
2011
2010
High Performance Metals (000's lbs.)
Titanium mill products
5,688
5,707
26,518
25,457
Nickel-based and specialty alloys
11,852
10,453
47,913
37,272
Exotic alloys
1,048
1,077
4,094
4,382
Flat-Rolled Products (000's lbs.)
High value
122,763
117,662
497,079
454,874
Standard
121,693
141,572
587,648
642,255
Flat-Rolled Products total
244,456
259,234
1,084,727
1,097,129
Mill Products Average Prices:
High Performance Metals (per lb.)
Titanium mill products
$
23.90
$
20.66
$
22.01
$
19.37
Nickel-based and specialty alloys
$
15.41
$
14.19
$
15.58
$
14.03
Exotic alloys
$
67.05
$
63.46
$
66.31
$
60.68
Flat-Rolled Products (per lb.)
High value
$
3.27
$
2.90
$
3.32
$
2.83
Standard
$
1.57
$
1.72
$
1.80
$
1.62
Flat-Rolled Products combined average
$
2.42
$
2.25
$
2.49
$
2.12
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
(In millions, except per share amounts)
Three Months Ended
Twelve Months Ended
December 31
December 31
2011
2010
2011
2010
Numerator for Basic net income per common share -
Net income attributable to ATI
$
31.7
$
15.1
$
214.3
$
70.7
Effect of dilutive securities:
4.25% Convertible Notes due 2014
2.4
-
9.9
-
Numerator for Dilutive net income per common share -
Net income attributable to ATI after assumed conversions
$
34.1
$
15.1
$
224.2
$
70.7
Denominator for Basic net income per common share -
Weighted average shares outstanding
105.1
97.5
102.5
97.4
Effect of dilutive securities:
Share-based compensation
1.9
1.3
1.8
1.3
4.25% Convertible Notes due 2014
9.6
-
9.6
-
Denominator for Diluted net income per common share -
Adjusted weighted average assuming conversions
116.6
98.8
113.9
98.7
Basic net income attributable to ATI per common share
$
0.30
$
0.16
$
2.09
$
0.73
Diluted net income attributable to ATI per common share
$
0.29
$
0.15
$
1.97
$
0.72
Allegheny Technologies Incorporated and Subsidiaries
Other Financial Information
Managed Working Capital
(Dollars in millions)
December 31,
December 31,
2011
2010
Accounts receivable
$
709.1
$
545.4
Inventory
1,384.3
1,024.5
Accounts payable
(490.7
)
(394.1
)
Subtotal
1,602.7
1,175.8
Allowance for doubtful accounts
5.9
5.6
LIFO reserve
153.7
163.0
Corporate and other
60.9
35.3
Managed working capital
$
1,823.2
$
1,379.7
Annualized prior 2 months sales
$
4,820.6
$
4,007.7
Managed working capital as a % of annualized sales
37.8
%
34.4
%
December 31, 2011 change in managed working capital
$
443.5
Managed working capital acquired
(170.2
)
Net change in managed working capital
$
273.3
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
(Dollars in millions)
December 31,
December 31,
2011
2010
Total debt
$
1,509.3
$
1,063.3
Less: Cash
(380.6
)
(432.3
)
Net debt
$
1,128.7
$
631.0
Net debt
$
1,128.7
$
631.0
Total ATI stockholders' equity
2,480.0
2,040.8
Net ATI capital
$
3,608.7
$
2,671.8
Net debt to ATI capital
31.3
%
23.6
%
Total debt
$
1,509.3
$
1,063.3
Total ATI stockholders' equity
2,480.0
2,040.8
Total ATI capital
$
3,989.3
$
3,104.1
Total debt to total ATI capital
37.8
%
34.3
%
Allegheny Technologies Incorporated Dan L. Greenfield, 412-394-3004
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