Allegheny Technologies Announces First Quarter 2006 Results.PITTSBURGH Pittsburgh (pĭts`bərg), city (1990 pop. 369,879), seat of Allegheny co., SW Pa., at the confluence of the Allegheny and the Monongahela rivers, which there form the Ohio River; inc. 1816. -- Allegheny Technologies Allegheny Technologies, Inc. NYSE: ATI is a specialty metals company headquartered in Pittsburgh, Pennsylvania, USA. It is the 17th largest employer in Allegheny County and one of the last "steel" companies with its headquarters in "The Steel City" and major manufacturing Incorporated (NYSE NYSE See: New York Stock Exchange :ATI (ATI Technologies Inc., Markham Ontario, http://ati.amd.com) A leading manufacturer of graphics chips and display adapters. Founded in 1985 by K. Y. Ho, Benny Lau and Lee Lau, ATI chips and boards are widely used by OEMs. ): --Sales increased 18% to over $1.0 billion --Net income increased 68% to $102.5 million, or $1.00 per share --Segment operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. of $208 million, or 20% of sales:
-- High Performance Metals: 35% of sales
-- Flat-Rolled Products: 9% of sales
-- Engineered Products: 16% of sales
--Gross cost reductions of $28 million --Return on capital employed Capital Employed 1. The total amount of capital used for the acquisition of profits. 2. The value of all the assets employed in a business. 3. Fixed assets plus working capital. 4. Total assets less current liabilities. of 30% --Return on stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. of 48% --Net debt to total capitalization Total capitalization The total long-term debt and all types of equity of a company that constitutes its capital structure. total capitalization See capitalization. improved to 18% --Cash on hand was $359 million Allegheny Technologies Incorporated (NYSE:ATI) reported net income for the first quarter 2006 of $102.5 million, or $1.00 per share, on sales of $1.04 billion. Income before tax for the first quarter 2006 was $160.2 million. In the first quarter 2005, ATI reported net income of $61.0 million, or $0.61 per share, on sales of $879.6 million. Income before tax in the first quarter 2005 was $63.3 million. "ATI is off to an outstanding start in 2006, demonstrating strong after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. profitable growth results and future earnings power," said L. Patrick Hassey, Chairman, President and Chief Executive Officer. "Sales grew to over $1 billion, an increase of 18% compared to the first quarter 2005, and 16% higher than the fourth quarter 2005. Segment operating profit increased 83% compared to the first quarter 2005, and reached 20% of sales as operational execution continued to improve. Net income increased by 68% to $102.5 million, or 10% of sales. Income before tax increased by 153% to $160 million. "Our key growth markets, namely aerospace and defense, chemical process industry, oil and gas, electrical energy, and medical, remained strong, reaching 62% of ATI's first quarter 2006 sales. Aerospace and defense was the largest of our markets at 31% of first quarter 2006 sales. "Cash flow was strong and we continued to invest in the business. Capital investments in the first quarter were $52 million, 75% of which were directed towards our high-value products capabilities. We also invested $126 million in additional managed working capital due to significantly higher sales and operating levels. Cash on hand remained nearly flat at $359 million. "Key financial ratios were very strong in the first quarter 2006. Annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. return on capital employed Return on capital employed (ROCE) Indicator of profitability of the firm's capital investments. Determined by dividing Earnings Before Interest and Taxes by (capital employed plus short-term loans minus intangible assets). was over 30%, annualized return on stockholders' equity was over 48%, and net debt to total capitalization improved to 18%. "We remain focused on reducing costs in 2006 and achieved gross cost reductions of $28 million in the first quarter. Our 2006 cost reduction target is $100 million. "Demand in our High Performance Metals segment was robust for our premium titanium alloys Titanium alloys are metallic materials which contain a mixture of titanium and other chemical elements. Such alloys have very high tensile strength and toughness (even at extreme temperatures), light weight, extraordinary corrosion resistance, and ability to withstand extreme and nickel-based superalloys for jet engines, and we increased shipments of our titanium alloys used in airframe components. Demand was strong for our exotic exotic not native, not indigenous. alloys This is a list of alloys for which an article exists in Wikipedia (or is proposed but not yet written). They are grouped by base metal, in order of increasing atomic number. Within these headings they are in no particular order. , particularly from global corrosion markets and from the aerospace and defense, medical, and electrical energy markets. Operating profit benefited from our ATI Business System (ATIBS) lean manufacturing Lean manufacturing is the production of goods using less of everything compared to mass production: less human effort, less manufacturing space, less investment in tools, and less engineering time to develop a new product. efforts, which delivered productivity improvements and faster flow of material through our operations. "In our Flat-Rolled Products segment, with sales essentially flat compared to the first quarter 2005, operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: improved to over 9% of sales due to cost reductions and an improved product mix. Demand was strong from the key growth markets for our flat-rolled products specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. metals, namely chemical process industry, oil and gas, pollution control for electrical energy, power generation and distribution, and aerospace and defense. Demand from our service center customers began to improve, compared to the second half 2005, as service center inventories returned to better balance and end-use demand was healthy. As overall business activity improved, first quarter 2006 order entry in pounds increased by 30% and 64% compared to the first and fourth quarters 2005, respectively. As a result of these improved conditions, we announced several price increases during the first quarter 2006 for many of our flat-rolled products. "Our Engineered Products segment had an excellent first quarter. Sales increased 21% due to continued strong demand across most end-use markets. Operating profit reached 16% of sales due to continued improvement in operational execution from ATIBS efforts. Demand from the oil and gas market was very strong, and demand from the transportation, construction and mining, and electrical energy markets remained strong. In addition, demand for our titanium titanium (tītā`nēəm, tĭ–) [from Titan], metallic chemical element; symbol Ti; at. no. 22; at. wt. 47.88; m.p. 1,675°C;; b.p. 3,260°C;; sp. gr. 4.54 at 20°C;; valence +2, +3, or +4. precision metal processing capabilities from the aerospace and defense market remained at a high level. "Our strategic investments for growth in titanium and titanium alloys, and nickel-based alloys and superalloys are on track. The initial start-up Start-up The earliest stage of a new business venture. at our Albany Albany, town, Australia Albany (ăl`bənē), town (1996 pop. 14,590), Western Australia, SW Australia. It is a port on Princess Royal Harbour of King George Sound. The town has woolen mills and fish canneries. , OR upgraded titanium sponge facility went well. We continue to expect increased shipments of our high-value products from these strategic investments by the fourth quarter quarter 2006. "We expect 2006 to be a year of continuing profitable growth for ATI. Major markets in our High Performance Metals and Engineered Products segments continue to be robust. We expect overall results in our Flat-Rolled Products segment to improve significantly in the second quarter 2006. We expect cash flow to continue to be strong in 2006 enabling ATI to continue to self-fund our strategic investments for growth, and to continue to improve our balance sheet. "In summary, we are ahead of schedule, committed, and focused on achieving our strategy and profitable growth objectives. We remain dedicated to our disciplined plan and vision of Building the World's Best Specialty Metals Company."
Three Months Ended
March 31
In Millions
----------------------
2006 2005
---------- ----------
Sales $1,040.5 $879.6
Net income $102.5 $61.0
Per Diluted Share
Net income $1.00 $0.61
First Quarter 2006 Financial Highlights --Sales were a record $1,040.5 million, 18% higher than the first quarter 2005. Sales increased 57% in the High Performance Metals segment and 21% in the Engineered Products segment, and declined about 1% in the Flat-Rolled Products segment. --Segment operating profit was a record $208.3 million, an increase of $94.4 million, or 83%, compared to the first quarter 2005, as a result of improved performance across all three business segments. First quarter 2006 results included a LIFO (Last In-First Out) A queueing method in which the next item to be retrieved is the item most recently placed in the queue. Contrast with FIFO. LIFO - stack inventory valuation reserve charge of $6.9 million, due primarily to higher titanium scrap costs. The LIFO inventory valuation reserve charge was $5.7 million in the first quarter 2005. --Net income was $102.5 million, or $1.00 per share, compared to the first quarter 2005 of $61.0 million, or $0.61 per share. Results for the first quarter 2006 included a provision for income taxes of $57.7 million, or 36% of income before tax, compared to a provision of $2.3 million, or 3.6% of income before tax, for the comparable 2005 quarter. The 2005 first quarter benefited from a lower income tax provision due to a reduction in the valuation allowances associated with deferred tax assets. --Cash flow from operations was $35.2 million as improved operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before more than offset a further investment of $126.0 million in managed working capital. --Cash on hand was $359.1 million at the end of the first quarter 2006. --Gross cost reductions, before the effects of inflation, totaled $27.8 million company-wide for the quarter. Our 2006 gross cost reduction goal is $100 million. High Performance Metals Segment Market Conditions --Demand for our titanium alloys, nickel-based superalloys, and vacuum-melted specialty alloys was robust from the aerospace and defense market, and strong from the medical, and oil and gas markets. Demand was strong for our exotic alloys from the global corrosion markets and from the aerospace and defense, medical, and electrical energy markets. First quarter 2006 compared to first quarter 2005 --Sales increased 57% to a record $412.1 million. Shipments increased 4% for titanium alloys, 6% for nickel-based and specialty alloys, and 15% for exotic alloys. Average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. increased 82% for titanium alloys and 32% for nickel-based and specialty alloys, and decreased 5% for exotic alloys, primarily due to product mix. --Segment operating profit reached a record $142.7 million, or 34.6% of sales, a $79.2 million increase compared to the first quarter 2005. The significant increase in operating profit primarily resulted from increased shipments for most products, higher selling prices, and the benefits of gross cost reductions. In addition, raw material cost inflation and higher inventory levels resulted in a LIFO inventory valuation reserve charge of $6.9 million in 2006, compared to a $6.0 million charge in the first quarter 2005. --Results benefited from $7.1 million of gross cost reductions. Flat-Rolled Products Segment Market Conditions --Total first quarter 2006 shipments increased by 24% compared to the fourth quarter 2005. Demand was strong for our nickel-based alloys, specialty stainless, grain-oriented silicon, and titanium products from the chemical process industry, oil and gas, electrical energy, and aerospace and defense markets. Shipments of stainless steel stainless steel: see steel. stainless steel Any of a family of alloy steels usually containing 10–30% chromium. The presence of chromium, together with low carbon content, gives remarkable resistance to corrosion and heat. to service centers began to improve in the first quarter 2006, compared to the second half 2005, as inventories returned to better balance and demand was healthy from major end markets. First quarter 2006 compared to first quarter 2005 --Sales were $517.2 million, 1% lower than the first quarter 2005, as an improved product mix, higher base-selling prices, and higher raw material surcharges nearly offset a 9% reduction in pounds shipped. The majority of the decrease in pounds shipped is due to our focus on improving product mix by reducing shipments of low-value products. Shipments of commodity flat-rolled products decreased 15%, while shipments of high-value flat-rolled products increased 1%. Average transaction prices, which include surcharges, were 1% higher for commodity products and 11% higher for high-value products. --Segment operating profit increased to $48.0 million, or 9.3% of sales, primarily as a result of improved product mix, higher base-selling prices and the benefits of gross cost reductions. No LIFO inventory valuation reserve charges were recorded in either the first quarter 2006 or the first quarter 2005. --Results benefited from $19.0 million in gross cost reductions. Engineered Products Segment Market Conditions --Demand for our tungsten tungsten (tŭng`stən) [Swed.,=heavy stone], metallic chemical element; symbol W; at. no. 74; at. wt. 183.85; m.p. about 3,410°C;; b.p. 5,660°C;; sp. gr. 19.3 at 20°C;; valence +2, +3, +4, +5, or +6. and tungsten carbide tungsten carbide n. An extremely hard, fine gray powder whose composition is WC, used in tools, dies, wear-resistant machine parts, and abrasives. products was very strong from the oil and gas market and strong from the automotive, and construction and mining markets. Demand remained strong for our forged forge 1 n. 1. A furnace or hearth where metals are heated or wrought; a smithy. 2. A workshop where pig iron is transformed into wrought iron. v. products from the Class 8 truck, construction and mining, and oil and gas markets. Demand for our cast products remained strong from the transportation, wind energy, and oil and gas markets. Demand remained very strong for our titanium precision metal processing conversion services. First quarter 2006 compared to first quarter 2005 --Sales increased to a record $111.2 million, a 21% increase over the first quarter 2005, due to increased volume and higher selling prices. --Segment operating profit improved to a record $17.6 million, or 15.8% of sales, primarily due to higher sales volumes, improved pricing, and the benefits of gross cost reductions. No LIFO inventory valuation reserve charges or benefits were recorded in the first quarter 2006, compared to a LIFO inventory benefit of $0.3 million for first quarter 2005. --Results benefited from $1.7 million of gross cost reductions. Retirement Benefit Expense --Retirement benefit expense was $20.6 million in the first quarter 2006, compared to $20.2 million in the first quarter 2005. --For the first quarter 2006, retirement benefit expense included in cost of sales was $13.4 million, and in selling and administrative expenses was $7.2 million. For the first quarter 2005, the amount of retirement benefit expense included in cost of sales was $14.2 million, and the amount included in selling and administrative expenses was $6.0 million. Other Expenses --Corporate expenses for the first quarter 2006 were $13.9 million, compared to $10.3 million in the year-ago period. This increase is due primarily to expenses associated with annual and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. performance-based incentive compensation programs. --Excluding the effects of retirement benefit expense, selling and administrative expenses as a percentage of sales declined to 6.3% in the 2006 first quarter from 6.9% in the same period of 2005. --First quarter 2006 interest expense, net of interest income, decreased to $7.5 million from $10.4 million in the year-ago period primarily due to increased interest income resulting from higher cash balances, partially offset by higher interest rates on floating rate debt. Income Taxes Results for the first quarter 2006 includes a provision for income taxes of $57.7 million, or 36.0% of income before tax, for U.S. Federal, foreign and state income taxes. The first quarter 2005 included a provision of $2.3 million, or 3.6% of income before tax, principally related to foreign and state income taxes. Prior to the fourth quarter 2005, we maintained a valuation allowance for a major portion of our U.S. Federal deferred tax assets in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 109, "Accounting for Income Taxes", due to uncertainty regarding full utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be of our net deferred tax asset, including the 2003 and 2004 unutilized net operating losses Net operating losses Losses that a firm can take advantage of to reduce taxes. . In 2005, we generated taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. which exceeded the 2003 and 2004 net operating losses allowing us to fully realize these U.S. Federal tax benefits. This realization (specification) realization - A UML semantic relationship between a classifier that specifies a contract and another classifier that guarantees to carry it out. [Handout by Mr. David Gillibrand]. of tax benefits, together with our improved profitability, required us to eliminate the remaining valuation allowance for U.S. Federal income taxes in the fourth quarter 2005 in accordance with SFAS No. 109. As a result, for 2006 and future periods we expect that our effective tax rate will return to a more normal percentage rate, such as that reflected in our first quarter 2006 results. Cash Flow, Working Capital and Debt --Cash on hand was $359.1 million at the end of the first quarter 2006, a decrease of $3.6 million from year end 2005. --Cash flow from operations during the first quarter 2006 was $35.2 million as improved operating earnings were partially offset by a further investment of $126.0 million in managed working capital, and payment of a previously accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. judgment of $26.2 million. --The investment in managed working capital resulted from a $70.4 million increase in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying , which reflects the significantly higher level of sales in the first quarter 2006 compared to the fourth quarter 2005, and a $109.0 million increase in inventory mostly as a result of higher raw material costs and increased operating volumes, partially offset by a $53.3 million increase in accounts payable. Most of the increase in raw material costs is expected to be recovered through surcharge An overcharge or additional cost. A surcharge is an added liability imposed on something that is already due, such as a tax on tax. It also refers to the penalty a court can impose on a fiduciary for breaching a duty. and index pricing mechanisms. --At March 31, 2006, managed working capital improved to 27.2% of annualized sales, compared to 30.3% of annualized sales at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2005. We define managed working capital as accounts receivable plus gross inventories less accounts payable. --Cash used in investing activities was $52.5 million in the first quarter 2006 and consisted primarily of capital expenditures. --Cash provided by financing activities was $13.7 million in the first quarter 2006 as $16.9 million of proceeds received from the exercise of stock options, and tax benefits on share-based compensation of $8.3 million, more than offset dividend payments of $9.9 million and reduction in foreign borrowings of $1.6 million. --Net debt as a percentage of total capitalization improved to 18.2% at the end of the first quarter 2006, compared to 19.8% at the end of 2005. --There were no borrowings outstanding during the first quarter 2006 or all of 2005 under ATI's $325 million secured domestic borrowing facility, although a portion of the letters of credit capacity was utilized during both periods. Allegheny Technologies will conduct a conference call with investors and analysts on April 26, 2006, at 1 p.m. ET to discuss the financial results. The conference call will be broadcast live on www.alleghenytechnologies.com. To access the broadcast, click on "Conference Call". In addition, the conference call will be available through the CCBN CCBN Central Coast Bancorp CCBN Charles County Business Network website, located at www.ccbn.com. This news release contains "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. 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, construction and mining, automotive, electrical energy, chemical process industry, oil and gas, and other markets; (c) our inability to achieve the level of cost savings, productivity improvements, synergies, growth or other benefits anticipated by management, including those anticipated from strategic investments and the integration of acquired businesses, whether due to significant increases in energy, raw materials or employee benefits costs, or other factors; (d) volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the 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 All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. or investigations adverse to us; and (g) the other risk factors summarized in our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2005, and other reports filed with the Securities and Exchange Commission. We assume no duty to update our forward-looking statements. Allegheny Technologies Incorporated is one of the largest and most diversified diversified (di·verˑ·s specialty metals producers in the world with revenues of $3.7 billion during the most recent four quarters ending March 31, 2006. ATI has approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 9,300 full-time full-time adj. Employed for or involving a standard number of hours of working time: a full-time administrative assistant. full employees world-wide who use innovative technologies to offer growing global markets a wide range of specialty metals solutions. Our major markets are aerospace and defense, chemical process industry/oil and gas, electrical energy, medical, automotive, food equipment and appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. , machine and cutting tools, and construction and mining. Our products include nickel-based alloys and superalloys, titanium and titanium alloys, stainless and specialty steels, zirconium zirconium (zərkō`nēəm), metallic chemical element; symbol Zr; at. no. 40; at. wt. 91.22; m.p. about 1,852°C;; b.p. 4,377°C;; sp. gr. 6.5 at 20°C;; valence +2, +3, or +4. , hafnium hafnium (hăf`nēəm), metallic chemical element; symbol Hf; at. no. 72; at. wt. 178.49; m.p. about 2,227°C;; b.p. 4,602°C;; sp. gr. 13.31 at 20°C;; valence +4. , and niobium niobium (nīō`bēəm), metallic chemical element; symbol Nb; at. no. 41; at. wt. 92.9064; m.p. about 2,468°C;; b.p. 4,742°C;; sp. gr. 8.57 at 20°C;; valence +2, +3, +4, or +5. , tungsten materials, grain-oriented silicon electrical steel Electrical steel, also called lamination steel, silicon electrical steel, silicon steel or transformer steel, is specialty steel tailored to produce certain magnetic properties, such as a small hysteresis area (small energy dissipation per cycle, or low and tool steels, and forgings and castings. The Allegheny Technologies website is www.alleghenytechnologies.com.
Allegheny Technologies Incorporated and Subsidiaries
Consolidated Statements of Income
(Unaudited - Dollars in millions, except per share amounts)
Three Months Ended
March 31
---------------------
2006 2005
---------- ----------
Sales $1,040.5 $879.6
Costs and expenses:
Cost of sales 798.6 738.3
Selling and administrative expenses 72.9 66.8
---------- ----------
Income before interest, other income
(expense) and income taxes 169.0 74.5
Interest expense, net (7.5) (10.4)
Other income (expense), net (1.3) (0.8)
---------- ----------
Income before income tax provision 160.2 63.3
Income tax provision 57.7 2.3
---------- ----------
Net income $102.5 $61.0
========== ==========
Basic net income per common share $1.04 $0.64
========== ==========
Diluted net income per common share $1.00 $0.61
========== ==========
Weighted average common shares
outstanding -- basic (millions) 98.7 95.4
Weighted average common shares
outstanding -- diluted (millions) 102.7 99.9
Actual common shares outstanding--
end of period (millions) 100.0 96.4
Allegheny Technologies Incorporated and Subsidiaries
Sales and Operating Profit by Business Segment
(Unaudited - Dollars in millions)
Three Months Ended
March 31
---------------------
2006 2005
---------- ----------
Sales:
High Performance Metals $412.1 $262.7
Flat-Rolled Products 517.2 524.9
Engineered Products 111.2 92.0
---------- ----------
Total External Sales $1,040.5 $879.6
========== ==========
Operating Profit:
High Performance Metals $142.7 $63.5
% of Sales 34.6% 24.2%
Flat-Rolled Products 48.0 39.2
% of Sales 9.3% 7.5%
Engineered Products 17.6 11.2
% of Sales 15.8% 12.2%
---------- ----------
Operating Profit 208.3 113.9
% of Sales 20.0% 12.9%
Corporate expenses (13.9) (10.3)
Interest expense, net (7.5) (10.4)
---------- ----------
Subtotal 186.9 93.2
Other expense, net of
gains on asset sales (6.1) (9.7)
Retirement benefit expense (20.6) (20.2)
---------- ----------
Income before
income taxes $160.2 $63.3
========== ==========
Allegheny Technologies Incorporated and Subsidiaries
Consolidated Balance Sheets
(Current period unaudited--Dollars in millions)
March 31, December 31,
2006 2005
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $359.1 $362.7
Accounts receivable, net of allowances for
doubtful accounts of $8.5 and $8.1 at
March 31, 2006 and December 31, 2005,
respectively 512.2 442.1
Inventories, net 701.7 607.1
Deferred income taxes 27.7 22.8
Prepaid expenses and
other current assets 34.3 49.3
------------ ------------
Total Current Assets 1,635.0 1,484.0
Property, plant and equipment, net 742.9 704.9
Cost in excess of net assets acquired 200.6 199.7
Deferred income taxes 156.9 155.3
Deferred pension asset 100.6 100.6
Other assets 88.1 87.1
------------ ------------
Total Assets $2,924.1 $2,731.6
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $368.0 $312.9
Accrued liabilities 220.8 216.1
Accrued income taxes 49.6 18.5
Short term debt and current
portion of long-term debt 18.0 13.4
------------ ------------
Total Current Liabilities 656.4 560.9
Long-term debt 540.9 547.0
Accrued postretirement benefits 459.2 461.5
Pension liabilities 257.8 242.9
Other long-term liabilities 109.8 119.4
------------ ------------
Total Liabilities 2,024.1 1,931.7
------------ ------------
Total Stockholders' Equity 900.0 799.9
------------ ------------
Total Liabilities and Stockholders' Equity $2,924.1 $2,731.6
============ ============
Allegheny Technologies Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited--Dollars in millions)
Three Months Ended
March 31
------------------
2006 2005
--------- --------
Operating Activities:
Net income $102.5 $61.0
Depreciation and amortization 18.8 17.8
Change in managed working capital (126.0) (122.2)
Change in pension assets/liabilities 14.5 14.7
Postretirement benefits (2.3) (2.2)
Accrued liabilities and other 27.7 26.2
--------- --------
Cash provided by (used in) operating activities 35.2 (4.7)
--------- --------
Investing Activities:
Purchases of property, plant and equipment (52.3) (7.2)
Asset disposals and other (0.2) (0.6)
--------- --------
Cash used in investing activities (52.5) (7.8)
--------- --------
Financing Activities:
Net decrease in debt (1.6) (5.8)
Dividends paid (9.9) (5.8)
Exercises of stock options 16.9 4.5
Tax benefits on share-based compensation 8.3 -
--------- --------
Cash provided by (used in) financing activities 13.7 (7.1)
--------- --------
Decrease in cash and cash equivalents (3.6) (19.6)
Cash and cash equivalents at beginning of period 362.7 250.8
--------- --------
Cash and cash equivalents at end of period $359.1 $231.2
========= ========
Allegheny Technologies Incorporated and Subsidiaries
Selected Financial Data
(Unaudited)
Three Months Ended
March 31
-------------------
2006 2005
--------- ---------
Volume:
High Performance Metals (000's lbs.)
Nickel-based and specialty alloys 10,977 10,349
Titanium mill products 6,391 6,137
Exotic alloys 1,177 1,027
Flat-Rolled Products (000's lbs.)
High value 127,758 126,816
Commodity 185,445 218,758
--------- ---------
Flat-Rolled Products total 313,203 345,574
Average Prices:
High Performance Metals (per lb.)
Nickel-based and specialty alloys $12.92 $9.77
Titanium mill products $31.58 $17.37
Exotic alloys $38.30 $40.48
Flat-Rolled Products (per lb.)
High value $2.23 $2.01
Commodity $1.23 $1.22
Flat-Rolled Products combined average $1.64 $1.51
Volume and Average Price data for Flat-Rolled Products includes the
classification of grain-oriented silicon electrical steel and tool
steel as high-value products for all periods presented.
Allegheny Technologies Incorporated and Subsidiaries
Other Financial Information
Managed Working Capital
(Unaudited - Dollars in millions)
March 31, 2006
March 31, December 31, Change in Managed
2006 2005 Working Capital
--------- ------------ -----------------
Accounts receivable $512.2 $442.1
Inventory 701.7 607.1
Accounts payable (368.0) (312.9)
--------- ------------
Subtotal 845.9 736.3
Allowance for doubtful
accounts 8.5 8.1
LIFO reserve 276.6 269.7
Corporate and other 43.0 33.9
--------- ------------
Managed working capital $1,174.0 $1,048.0 $126.0
========= ============ =================
Annualized prior 2 months
sales $4,309.2 $3,461.1
========= ============
Managed working capital as a
% of annualized sales 27.2% 30.3%
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
Net Debt to Capital
(Unaudited - Dollars in millions)
March 31, December 31,
2006 2005
----------- ------------
Total debt $558.9 $560.4
Less: Cash (359.1) (362.7)
----------- ------------
Net debt $199.8 $197.7
Net debt $199.8 $197.7
Stockholders' equity 900.0 799.9
----------- ------------
Total capital $1,099.8 $997.6
Net debt to capital ratio 18.2% 19.8%
=========== ============
In managing the overall capital structure of the Company, one of the
measures on which we focus is net debt to total capitalization, which
is the percentage of debt to the total invested and borrowed capital
of the Company. In determining this measure, debt and total
capitalization are net of cash on hand which may be available to
reduce borrowings.
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