Allegheny Technologies Announces Strong Second Quarter 2005 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. ):
-- Record sales of $904.2 million
-- Net income of $91.7 million, or $0.91 per share
-- Operating profit increased to $142 million, or 15.7% of sales
-- Segment operating margins as a percentage of sales:
-- Flat-Rolled Products 10.6%
-- High Performance Metals 25.4%
-- Engineered Products 11.7%
-- Cash flow from operations of $64.5 million for the quarter
-- Net debt to total capitalization improved to 34.3%
-- Cash on hand increased to $253 million
Allegheny Technologies Incorporated (NYSE:ATI) reported net income for the second quarter 2005 of $91.7 million, or $0.91 per share, on sales of $904.2 million. In the second quarter 2004, ATI reported net income of $26.6 million, or $0.31 per share, on sales of $646.5 million. Net income for the six months ended June June: see month. 30, 2005, was $152.7 million, or $1.53 per share, on sales of $1,783.8 million, compared to a net loss of $23.8 million, or $(0.30) per share, on sales of $1,224.3 million for the first six months of 2004. "Second quarter results are another milestone “Milemarker” redirects here. For the American indie rock band, see Milemarker (band). A milestone or kilometre sign is one of a series of numbered markers placed along a road at regular intervals, typically at the side of the road or in a median. that demonstrates the earnings potential of the transformed Allegheny Technologies. ATI revenue and 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. reached all-time all-time adj. Exceeding all others up to the present time: an all-time speed skating record. all-time Adjective Informal highs. Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses was nearly $65 million even after further investments of over $100 million in managed working capital," said L. Patrick Hassey, Chairman, President and Chief Executive Officer of Allegheny Technologies. "Robust demand from the early stage recovery of the commercial aerospace market and another strong quarter from 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. business drove the High Performance Metals segment sales and operating profit to record levels. Our High Performance Metals segment operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: exceeded 25% of sales. "Operating margins in our Flat-Rolled Products segment improved to nearly 11% of sales. Our high-value flat-rolled product mix was particularly strong due to demand for our flat-rolled nickel-based alloys, 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. steels, and 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. products from the oil and gas, electrical energy, aerospace, and chemical processing markets. Total flat-rolled shipments were less than the first quarter 2005 due to ongoing service center inventory reductions for certain stainless products. "Sales in our Engineered Products segment also reached record levels due to strong demand from the oil and gas, automotive, mining, and aerospace markets. Sales were aided by our April 2005 asset acquisition of Garryson Limited in the U.K. Segment operating margins were just under 12%. "We remain confident about the prospects for ATI and continue to build a foundation for further growth. As an example, sales of our nickel-based alloys, 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 , exotic alloys, and high-value specialty steels reached 40% of ATI's sales during the first half 2005, compared to 35% of sales during the first half 2004.This represents an increase of $275 million in sales. "We believe our second half 2005 earnings performance will be similar to the first half 2005 earnings performance." Following on, Hassey said, "Demand for our High Performance Metals products is expected to remain robust. Demand for our Engineered Products is expected to remain very good. Overall, third quarter 2005 earnings are likely to be lower than the fourth quarter 2005 due primarily to normal seasonal slowing in the Flat-Rolled Products segment. We expect to see reduced shipments of stainless commodity products through most of the third quarter 2005 from continuing inventory management actions throughout the supply chain. We are taking action in our flat-rolled products business to reduce inventory and are encouraged by published reports that many global 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. producers also are adjusting their production to market demand. Cash flow from operations during the second half 2005 is expected to be very strong as earnings are no longer anticipated to be offset by considerable investments in managed working capital."
Three Months Ended Six Months Ended
June 30 June 30
In Millions
--------------------------------------
2005 2004 2005 2004
--------- -------- --------- ---------
Sales $904.2 $646.5 $1,783.8 $1,224.3
Net income (loss) excluding
special gain $91.7 $(13.8) $152.7 $(64.2)
Special gain, net(a) - $40.4 - $40.4
Net income (loss) $91.7 $26.6 $152.7 $(23.8)
Per Diluted Share Per Diluted Share
Net income (loss) excluding
special gain $0.91 $(0.17) $1.53 $(0.78)
Special gain, net(a) - $0.48 - $0.48
Net income (loss) $0.91 $0.31 $1.53 $(0.30)
(a) Second quarter 2004 special gain, net was related to actions taken
to control certain salaried retiree medical costs, net of costs
associated with Allegheny Ludlum's new labor agreement and the J&L
asset acquisition.
Second Quarter 2005 Financial Highlights --Sales were $904.2 million, 40% higher than the second quarter 2004. Sales increased 32% in the Flat-Rolled Products segment, 57% in the High Performance Metals segment, and 35% in the Engineered Products segment. --Segment operating profit was $141.8 million, an increase of $103.7 million compared to the second quarter 2004, as a result of improved performance across all three business segments. Second quarter 2005 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 $26.3 million, due primarily to higher titanium scrap and 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. raw material costs. The LIFO inventory valuation reserve charge was $26.1 million in the second quarter 2004. --Net income was $91.7 million, or $0.91 per share. --Cash flow from operations was $59.8 million in the first half 2005 as significantly higher operating results more than offset the further investment of $222.5 million in managed working capital resulting from improved market conditions. --Cash on hand was $253.2 million at June 30, 2005. --Cost reductions, before the effects of inflation, totaled $37.0 million company-wide in the second quarter and $67.1 million for the first half of 2005. Our 2005 cost reduction goal is $100 million. Flat-Rolled Products Segment Market Conditions --Demand was strong for nickel-based alloys, specialty steels, and titanium products from the oil and gas, electrical energy, aerospace, and chemical processing markets. Inventory management actions at service centers and in the supply chain resulted in reduced shipments for stainless sheet and engineered strip. Second quarter 2005 compared to second quarter 2004 --Sales increased 32% to $501.8 million primarily due to improved demand, higher base-selling prices, higher raw material surcharges, and higher shipments including those from the facilities acquired in June 2004. Total finished tons (Transparent Optical Networking Services) A marketing term for providing dark fiber to a customer. The customer is responsible for generating the transmission signal and interpreting it at the other end. See dark fiber. shipped increased by 14,360 tons, or 11%. Shipments of commodity products increased 18% while shipments of high-value products decreased 6%, primarily due to lower shipments of stainless engineered strip products, which offset strong shipments of nickel-based alloys, specialty steels, and titanium products. Average transaction prices, which include surcharges, were 12% higher for commodity products and 42% higher for high-value products. --Segment operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was $53.4 million, an increase of $33.4 million, primarily as a result of increased shipments, higher base-selling prices, additional surcharges, lower LIFO valuation reserve charges, and the benefits of gross cost reductions. Second quarter 2005 results had a LIFO inventory valuation reserve charge of $3.9 million compared to a $15.2 million charge for the 2004 second quarter. --Results benefited from $26.6 million in gross cost reductions, before the effects of inflation. High Performance Metals Segment Market Conditions --Demand for our titanium alloys, nickel-based superalloys, and vacuum-melted specialty steels remained strong from the aerospace, biomedical bi·o·med·i·cal adj. 1. Of or relating to biomedicine. 2. Of, relating to, or involving biological, medical, and physical sciences. , and power generation markets. Our exotic alloys business continued to benefit from sustained high demand from government and medical markets, and from corrosion markets particularly in Asia. Second quarter 2005 compared to second quarter 2004 --Sales increased 57% to $301.6 million. Shipments increased 11% for titanium alloys, 14% for nickel-based and specialty steel alloys, and 7% for exotic alloys. Average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. increased 85% for titanium alloys, and 39% for nickel-based and specialty steel alloys, but declined 7% for exotic alloys primarily due to product mix. --Operating profit was $76.6 million, an increase of $64.0 million, as a result of increased shipments for most products, higher selling prices, and the benefits of gross cost reductions. Raw material cost inflation and higher inventory levels resulted in a LIFO inventory valuation reserve charge of $17.3 million in the second quarter 2005 compared to a $6.1 million charge in same 2004 period. --Results benefited from $8.9 million of gross cost reductions, before the effects of inflation. Engineered Products Segment Market Conditions --Demand for our tungsten products was strong from the oil and gas, automotive, mining, and aerospace 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, and construction and mining markets. Demand for our cast products was strong from the transportation, wind energy, and oil and gas markets. Second quarter 2005 compared to second quarter 2004 --Sales improved 35% to $100.8 million due to higher selling prices and increased volume, including shipments from our U.K.-based ATI Garryson Limited cutting tool operations acquired in April. --Operating profit improved to $11.8 million, a $6.3 million increase, due to higher sales volumes, improved pricing, and the benefits of gross cost reductions. Changes in raw material costs and inventory levels resulted in a LIFO inventory valuation reserve charge of $5.1 million in 2005 compared to a $4.8 million charge in 2004. --Results benefited from $1.5 million of cost reductions, before the effects of inflation. --As previously announced, on April 5, 2005 our ATI Metalworking Products operation acquired the assets of U.K.-based Garryson Limited, a leading producer of 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. burrs, rotary tooling A Rotary tool is a handheld power tool with a variety of rotating accessory bits and attachments that can be used for cutting, carving, sanding, polishing and many other applications. Popular brands include Dremel and Foredom. , and specialty abrasive abrasive, material used to grind, smooth, cut, or polish another substance. Natural abrasives include sand, pumice, corundum, and ground quartz. Carborundum (silicon carbide) and alumina (aluminum oxide) are important synthetically produced abrasives. wheels and discs, for approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $18 million in cash. Garryson had sales of over $30 million in 2004. Since the acquisition was accounted for as a purchase, second quarter results did not include operating profit on sales of the purchased Garryson inventory. Retirement Benefit Expense --Retirement benefit expense declined to $20.0 million in the second quarter 2005 compared to $34.0 million in the second quarter 2004, primarily as a result of actions taken in the second quarter 2004 to control retiree medical costs and the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. effect of the Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. prescription drug prescription drug Prescription medication Pharmacology An FDA-approved drug which must, by federal law or regulation, be dispensed only pursuant to a prescription–eg, finished dose form and active ingredients subject to the provisos of the Federal Food, Drug, legislation. --For the second quarter 2005, retirement benefit expense included in cost of sales was $14.1 million, and in selling and administrative expenses was $5.9 million. For the second quarter 2004, retirement benefit expense included in cost of sales was $25.3 million, and in selling and administrative expenses was $8.7 million. Other Expenses --Corporate expenses for the second quarter 2005 were $11.6 million compared to $8.9 million in the year-ago period. This increase is due primarily to expenses associated with performance-based incentive compensation programs. --Excluding the effects of retirement benefit expense, selling and administrative expenses as a percentage of sales was 6.6% in the second quarter 2005 compared to 7.6% in the same 2004 period. --Second quarter 2005 interest expense, net of interest income, increased to $10.6 million from $7.8 million in the year-ago period primarily related to interest associated with the financing of the June 2004 J&L asset acquisition and higher short-term interest rates Short-term interest rates Interest rates on loan contracts-or debt instruments such as Treasury bills, bank certificates of deposit or commerical paper-having maturities of less than one year. Often called money market rates. . Income Taxes 2005 results include a provision for income taxes of $3.0 million, which is principally related to foreign and state income taxes. No income tax provision or benefit was recognized in 2004. We maintain a valuation allowance for a major portion of our 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". Future tax provisions or benefits will be recognized when 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. exceeds net operating tax loss carry-forwards resulting in cash tax payments, or when tax losses, if any, are recoverable as cash refunds, or due to changes in our judgment regarding the realizability Realizability is a part of proof theory which can be used to handle information about formulas instead of about the proofs of formulas.[1] A natural number n is said to realize a statement in the language of arithmetic of natural numbers. of our deferred tax assets. Cash Flow, Working Capital and Debt --Cash on hand was $253.2 million at June 30, 2005. --Cash flow from operations during the 2005 first half was $59.8 million as the significant improvement in 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 was partially offset by a $222.5 million investment in managed working capital. --The investment in managed working capital resulted from a $74.5 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 second quarter 2005 compared to the fourth quarter 2004, and a $149.7 million increase in inventory mostly as a result of higher raw material costs and increased business volumes, partially offset by a $1.7 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 June 30, 2005, managed working capital was 30.1% of 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. sales compared to 29.5% 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. 2004. We define managed working capital as accounts receivable and gross inventories less accounts payable. --Cash used in investing activities was $38.7 million in the 2005 first half and consisted primarily of capital expenditures of $19.8 million and $17.7 million for the acquisition of Garryson Limited. --Cash used in financing activities was $18.7 million in the 2005 first half and included a decrease in net borrowings of $13.5 million and payment of dividends of $11.5 million, which were partially offset by $6.3 million of proceeds received from the exercise of stock options. --Net debt as a percentage of 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 34.3% at June 30, 2005 from 43.8% at the end of 2004. --There were no borrowings outstanding during 2005 or 2004 under ATI's $325 million secured domestic borrowing facility, although a portion of the letters of credit capacity was utilized. New Accounting Pronouncement Adopted in 2005 In the first quarter 2005, the Company adopted Statement of Financial Accounting Standards No. 123R, "Share-Based Payment". Under the revised standard, companies may no longer account for share-based compensation transactions, such as stock options, restricted stock, and potential payments under programs such as our Total Shareholder Return plans, using the intrinsic value Intrinsic Value 1. The value of a company or an asset based on an underlying perception of the value. 2. For call options, this is the difference between the underlying stock's price and the strike price. method as defined in APB Opinion APB opinion A determination by the former Accounting Principles Board regarding the way a certain financial transaction is to be treated for reporting purposes. No. 25. Instead, companies are required to account for such equity transactions using an approach in which the fair value of an award is estimated at the date of grant and recognized as an expense over the requisite service period. Compensation expense is adjusted for equity awards that do not vest because service or performance conditions are not satisfied. However, compensation expense already recognized is not adjusted if market conditions are not met, such as stock options expiring ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. "out-of-the-money out-of-the-money Used to describe a call option with a strike price above the price of the underlying asset or a put option with a strike price below the price of the underlying asset. ". We adopted the new standard using the modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. prospective method and, beginning with the first quarter 2005, reflect compensation expense in accordance with the SFAS 123R transition provisions. Under the modified prospective method, the effect of the standard is recognized in the period of adoption and in future periods. Prior periods are not restated to reflect the impact of adopting the new standard at earlier dates. Second quarter 2005 compensation expense related to share-based incentive plans was $2.5 million compared to $8.9 million in the second quarter 2004. Second quarter 2005 share-based compensation expense includes $0.8 million related to expensing of stock options. Allegheny Technologies will conduct a conference call with investors and analysts on July July: see month. 27, 2005, 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 materials; (b) material adverse changes in the markets we serve, including the commercial aerospace, construction and mining, automotive, electrical energy, chemical process industry and oil and gas, government, 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 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, 2004, 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 materials producers in the world with revenues of approximately $2.7 billion in 2004. ATI has approximately 9,000 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 materials solutions. Our principle markets are aerospace, construction and mining, chemical processing/oil & gas, food equipment and appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. , automotive, electrical energy, machine and cutting tools, and medical. 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, silicon and tool steels, and forgings and castings. The Allegheny Technologies website is www.alleghenytechnologies.com.
Allegheny Technologies Incorporated and Subsidiaries
Consolidated Statements of Operations
(Unaudited - Dollars in millions, except per share amounts)
Three Months Six Months
Ended Ended
June 30 June 30
--------------- -------------------
2005 2004 2005 2004
------- ------- --------- ---------
Sales $904.2 $646.5 $1,783.8 $1,224.3
Costs and expenses:
Cost of sales 732.5 593.9 1,470.8 1,161.3
Selling and administrative
expenses 65.4 57.8 132.2 111.5
Curtailment gain, net of
restructuring costs - (40.4) - (40.4)
------- ------- --------- ---------
Income (loss) before interest,
other income (expense) and income
taxes 106.3 35.2 180.8 (8.1)
Interest expense, net (10.6) (7.8) (21.0) (16.0)
Other income (expense), net (1.0) (0.8) (1.8) 0.3
------- ------- --------- ---------
Income (loss) before income tax
provision 94.7 26.6 158.0 (23.8)
Income tax provision 3.0 - 5.3 -
------- ------- --------- ---------
Net income (loss) $91.7 $26.6 $152.7 $(23.8)
======= ======= ========= =========
Basic net income (loss) per common
share $0.96 $0.33 $1.60 $(0.30)
======= ======= ========= =========
Diluted net income (loss) per
common share $0.91 $0.31 $1.53 $(0.30)
======= ======= ========= =========
Weighted average common shares
outstanding -- basic (millions) 95.8 80.6 95.6 80.5
Weighted average common shares
outstanding -- diluted (millions) 100.3 84.6 100.1 80.5
Actual common shares outstanding--
end of period (millions) 96.5 81.4 96.5 81.4
Allegheny Technologies Incorporated and Subsidiaries
Sales and Operating Profit by Business Segment
(Unaudited - Dollars in millions)
Three Months Six Months
Ended Ended
June 30 June 30
--------------- -------------------
2005 2004 2005 2004
------- ------- --------- ---------
Sales:
Flat-Rolled Products $501.8 $379.2 $1,026.7 $708.8
High Performance Metals 301.6 192.5 564.3 371.2
Engineered Products 100.8 74.8 192.8 144.3
------- ------- --------- ---------
Total External Sales $904.2 $646.5 $1,783.8 $1,224.3
======= ======= ========= =========
Operating Profit:
Flat-Rolled Products $53.4 $20.0 $92.6 $9.0
% of Sales 10.6% 5.3% 9.0% 1.3%
High Performance Metals 76.6 12.6 140.1 20.4
% of Sales 25.4% 6.5% 24.8% 5.5%
Engineered Products 11.8 5.5 23.0 9.3
% of Sales 11.7% 7.4% 11.9% 6.4%
------- ------- --------- ---------
Operating Profit 141.8 38.1 255.7 38.7
% of Sales 15.7% 5.9% 14.3% 3.2%
Corporate expenses (11.6) (8.9) (21.9) (14.5)
Interest expense, net (10.6) (7.8) (21.0) (16.0)
------- ------- --------- ---------
Subtotal 119.6 21.4 212.8 8.2
Curtailment gain, net of
restructuring costs - 40.4 - 40.4
Other expenses, net of gains
on asset sales (4.9) (1.2) (14.6) (2.4)
Retirement benefit expense (20.0) (34.0) (40.2) (70.0)
------- ------- --------- ---------
Income (loss) before
income taxes $94.7 $26.6 $158.0 $(23.8)
======= ======= ========= =========
Allegheny Technologies Incorporated and Subsidiaries
Consolidated Balance Sheets
(Current period unaudited--Dollars in millions)
June 30, December 31,
2005 2004
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $253.2 $250.8
Accounts receivable, net of allowances for
doubtful accounts of $8.7 and $8.4 at
June 30, 2005 and December 31, 2004,
respectively 435.4 357.9
Inventories, net 628.7 513.0
Prepaid expenses and
other current assets 34.6 38.5
------------ ------------
Total current assets 1,351.9 1,160.2
Property, plant and equipment, net 701.4 718.3
Cost in excess of net assets acquired 203.9 205.3
Deferred pension asset 122.3 122.3
Deferred income taxes 61.6 53.0
Other assets 64.2 56.6
------------ ------------
Total Assets $2,505.3 $2,315.7
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $277.0 $271.2
Accrued liabilities 203.6 192.2
Short term debt and current portion of
long-term debt 20.2 29.4
------------ ------------
Total current liabilities 500.8 492.8
Long-term debt 548.1 553.3
Accrued postretirement benefits 468.9 472.7
Pension liabilities 269.9 240.9
Other long-term liabilities 114.7 130.1
------------ ------------
Total liabilities 1,902.4 1,889.8
------------ ------------
Total stockholders' equity 602.9 425.9
------------ ------------
Total Liabilities and Stockholders' Equity $2,505.3 $2,315.7
============ ============
Allegheny Technologies Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited--Dollars in millions)
Six Months
Ended
June 30
---------------
2005 2004
------- -------
Operating Activities:
Net income (loss) $152.7 $(23.8)
Non-cash curtailment gain and restructuring
charges, net - (45.6)
Depreciation and amortization 37.0 37.9
Change in pension assets/liabilities 29.0 34.8
Change in managed working capital (222.5) (110.9)
Accrued liabilities and other 63.6 129.2
------- -------
Cash provided by operating activities 59.8 21.6
------- -------
Investing Activities:
Purchases of property, plant and equipment (19.8) (25.2)
Acquisition of business (17.7) (7.5)
Asset disposals and other (1.2) 1.0
------- -------
Cash used in investing activities (38.7) (31.7)
------- -------
Financing Activities:
Net decrease in debt (13.5) (3.2)
Dividends paid (11.5) (4.9)
Exercises of stock options 6.3 2.6
------- -------
Cash used in financing activities (18.7) (5.5)
------- -------
Increase (decrease) in cash and cash equivalents 2.4 (15.6)
Cash and cash equivalents at beginning of period 250.8 79.6
------- -------
Cash and cash equivalents at end of period $253.2 $64.0
======= =======
Allegheny Technologies Incorporated and Subsidiaries
Selected Financial Data
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------- -------------------
2005 2004 2005 2004
-------- -------- -------- --------
Volume:
Flat-Rolled Products
(finished tons) 148,118 133,758 320,905 258,745
-------- -------- -------- --------
Commodity 109,844 92,838 239,786 179,854
High value 38,274 40,920 81,119 78,891
High Performance Metals
(000's lbs.)
Nickel-based and
specialty steel alloys 9,866 8,644 20,215 17,588
Titanium mill products 6,304 5,656 12,441 10,679
Exotic alloys 1,155 1,082 2,182 2,267
Average Prices:
Flat-Rolled Products (per
finished ton) $ 3,383 $ 2,832 $ 3,193 $ 2,738
Commodity $ 2,444 $ 2,189 $ 2,390 $ 2,101
High value $ 6,077 $ 4,291 $ 5,566 $ 4,190
High Performance Metals
(per lb.)
Nickel-based and specialty
steel alloys $ 11.34 $ 8.15 $ 10.54 $ 7.94
Titanium mill products $ 20.72 $ 11.20 $ 19.07 $ 11.30
Exotic alloys $ 38.69 $ 41.41 $ 39.53 $ 38.75
Allegheny Technologies Incorporated and Subsidiaries
Other Financial Information
Managed Working Capital
(Unaudited - Dollars in millions)
June 30, December 31,
2005 2004
--------------- ---------------
Accounts receivable $435.4 $357.9
Inventory 628.7 513.0
Accounts payable (277.0) (271.2)
--------------- ---------------
Subtotal 787.1 599.7
Allowance for doubtful accounts 8.7 8.4
LIFO reserve 256.0 223.9
Corporate and other 30.9 20.6
--------------- ---------------
Managed working capital $1,082.7 $852.6
=============== ===============
Annualized prior 2 months
sales $3,591.9 $2,887.0
=============== ===============
Managed working capital as a
% of annualized sales 30.1% 29.5%
June 30, 2005 change in managed
working capital $230.1
Acquisition of managed working capital (7.6)
---------------
Net change in managed working capital $222.5
===============
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)
June 30, December 31,
2005 2004
------------ ------------
Total debt $568.3 $582.7
Less: Cash (253.2) (250.8)
------------ ------------
Net debt $315.1 $331.9
Net debt $315.1 $331.9
Stockholders' equity 602.9 425.9
------------ ------------
Total capital $918.0 $757.8
Net debt to capital ratio 34.3% 43.8%
============ ============
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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