Allegheny Technologies Announces Third Quarter Results.* Sales were $697.6 million * Net income attributable to 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. common stockholders was $1.4 million, or $0.01 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. was $54.0 million, or 7.7% of sales * Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. gross cost reductions of $121.4 million * Cash on hand was $826.3 million * 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. was 10.5% * Total debt to total capitalization declined to 34% 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) reported net income for the third quarter 2009 of $1.4 million, or $0.01 per share, on sales of $697.6 million. In the third quarter 2008, ATI reported net income of $144.1 million, or $1.45 per share, on sales of $1.39 billion. Results for the nine months ended September September: see month. 30, 2009 are a net loss including special charges of $6.1 million, or $0.06 per share, on sales of $2.24 billion. The nine months ended September 30, 2009 included non-recurring after-tax charges of $17.0 million, or $0.17 per share, related to second quarter 2009 actions to retire debt and the tax consequences of our $350 million voluntary pension contribution. Excluding special charges, results for the nine months ended September 30, 2009 were net income of $10.9 million, or $0.11 per share. For the nine months ended September 30, 2008, net income was $455.0 million, or $4.51 per share, on sales of $4.20 billion. "Looking past the remainder of 2009, the worst appears to be behind us, and we remain confident in the intermediate 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. growth potential of our core markets," said L. Patrick Hassey, Chairman, President and Chief Executive Officer. "We are having success in the marketplace by developing and expanding strategic relationships with key global customers, and we are well positioned to meet their growing needs as economic conditions improve and our core markets recover. During the third quarter, we completed several new long-term agreements (LTAs) with key global customers. We are working on several more. These LTAs provide a foundation for future growth and position ATI with deep customer relationships in our core markets. "ATI's financial position is strong. Cash on hand was over $826 million at the end of the third quarter, and net debt to total capitalization was 10.5%. We achieved gross cost reductions of over $121 million in the first nine months, and expect to exceed our 2009 cost reduction goal of over $150 million. Our pension plan remains fully funded. "Our investments in unsurpassed manufacturing capabilities are progressing. Our new 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. and superalloy su·per·al·loy n. Any of several complex temperature-resistant alloys. forging facility began operation in the third quarter and the start-up Start-up The earliest stage of a new business venture. is going well. We now expect to begin production at our premium-grade titanium sponge facility before the end of 2009. By the end of October, we expect to close on the Crucible crucible, vessel in which a substance is heated to a high temperature, as for fusing or calcining. The necessary properties of a crucible are that it maintain its mechanical strength and rigidity at high temperatures and that it not react in an undesirable way with asset acquisition, which is an excellent entry point for ATI into advanced powder metal products. We now expect 2009 capital expenditures and asset acquisitions to be approximately $475 million, which includes the Crucible asset acquisition. "For the fourth quarter 2009 short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. outlook, we are seeing some positive data points in certain markets; however, many of our customers remain cautious due to the uncertain global economy and are keeping inventories low. This uncertainty is exaggerated by recent volatility in prices of raw materials, particularly nickel nickel, metallic chemical element; symbol Ni; at. no. 28; at. wt. 58.69; m.p. about 1,453°C;; b.p. about 2,732°C;; sp. gr. 8.902 at 25°C;; valence 0, +1, +2, +3, or +4. , which impacts customer buying patterns from month to month and at year-end. As a result of these conditions, and expected new facility start-up and other costs, we expect ATI's fourth quarter 2009 earnings performance to be similar to that achieved in the third quarter 2009. "Looking ahead, we expect our 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 performance to improve throughout 2010 as compared to 2009. We believe 2010 to be a transition year to the next growth cycle in most of our markets, particularly the aerospace and global infrastructure markets. "Although we expect only a modest economic recovery in 2010, we are focused on continuing to position ATI in targeted global markets. We expect to benefit greater than the recovery and growth in our core markets in 2010 and beyond by improving our position with key customers, adding new products to our unique specialty metals portfolio, improving our cost structure, maintaining our financial flexibility, and bringing on-line new world-class manufacturing capabilities." [TABLE OMITTED] * Net income (loss) and net income (loss) per share amounts presented above are attributable to Allegheny Technologies Incorporated common stockholders. As required, in the first quarter 2009 the Company adopted changes to the financial accounting standards regarding the presentation of noncontrolling interests in consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge . Under the provisions of this change in accounting standards, the income statement presentation has been revised to separately present consolidated net income (loss), which now includes the amounts attributable to the Company plus noncontrolling interests (minority interests), and net income (loss) attributable solely to the Company. Third Quarter 2009 Financial Results * Sales were $697.6 million, 50% lower than the third quarter 2008 as a result of significantly lower raw material surcharges and indices and lower shipments. Direct international sales represented 31.0% of total sales, compared to 29% for the 2008 comparable period. Compared to the third quarter 2008, sales decreased 45% in the High Performance Metals segment, 52% in the Flat-Rolled Products segment, and 54% in the Engineered Products segment. * Segment operating profit was $54.0 million, or 7.7% of sales, compared to $251.4 million, or 18.1% of sales, for the third quarter 2008. Third quarter 2009 results were negatively affected by lower shipments and by idle facility, workforce reduction, and start-up costs of $18.9 million. These negative impacts were partially offset by 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 benefit of $4.5 million. The third quarter 2009 LIFO inventory valuation reserve benefit was $22.5 million lower than the LIFO reserve benefit recognized in the second quarter 2009 due to rising raw material costs. The third quarter 2008 included a LIFO inventory valuation reserve benefit of $41.0 million. * Net income attributable to common stockholders was $1.4 million, or $0.01 per share, compared to net income attributable to common stockholders of $144.1 million, or $1.45 per share, in the third quarter 2008. * 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 for the first nine months 2009 was $149.4 million which benefited from a reduction in managed working capital of $344.8 million due to lower business activity and raw material costs, partially offset by a voluntary net cash pension contribution of $241.5 million ($350 million contribution less $108.5 million federal income tax refund Tax refund Money back from the government when too much tax has been paid or withheld from a salary. ) in the second quarter 2009. Excluding the voluntary net cash pension contribution, cash flow from operations was $390.9 million for the first nine months 2009. * Cash on hand at the end of the third quarter 2009 was $826.3 million, an increase of $356.4 million from year-end 2008. * Gross cost reductions, before the effects of inflation, totaled $121.4 million company-wide in the first nine months 2009. High Performance Metals Segment Market Conditions * Demand for our 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 our nickel-based 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. from the aerospace market was at significantly lower levels as the supply chain continued to adjust to aircraft production schedule pushouts and reduced demand from the aeroengine aftermarket Aftermarket See: Secondary market. aftermarket See secondary market. . Shipment volumes for our titanium alloys and our nickel-based alloys declined 8% and 20%, respectively, compared to the second quarter 2009. Shipments of our exotic alloys declined 23% compared to the second quarter 2009 primarily due to timing of projects for the chemical process industry. Third quarter 2009 compared to third quarter 2008 * Sales decreased 45% to $279.2 million. Shipments decreased 37% for both titanium and titanium alloys and nickel-based and specially alloys primarily due to lower demand from commercial aerospace market. Shipments of exotic alloys decreased 24% primarily due to the timing of projects for the chemical process industry. Average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. declined 23% for titanium and titanium alloys and 21% for nickel-based and specialty alloys. These average selling price decreases were primarily due to lower raw material indices as a result of lower raw material costs and a more competitive pricing environment. Average selling prices for exotic alloys increased 23% due to increased demand for certain products and a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. product mix. * Segment operating profit decreased to $51.3 million, or 18.4% of sales. The decrease in operating profit primarily resulted from lower base-selling prices for most products due to reduced demand and competitive pricing pressures and reduced shipments for most products. In addition, operating profit was negatively affected by approximately $11.7 million for idle facility, workforce reduction, and start-up costs. These negative impacts were partially offset by higher margins from exotic alloys and the benefits of gross cost reductions. A LIFO inventory valuation reserve benefit of $10.0 million was recognized in the 2009 third quarter. In the third quarter 2008, a LIFO inventory valuation benefit of $16.7 million was recognized. * Results benefited from $17.7 million of gross cost reductions, bringing the first nine months 2009 gross cost reductions in this segment to $58.3 million. Flat-Rolled Products Segment Market Conditions * Demand for certain high-value products, such as Precision Rolled Strip[R] products and nickel-based alloys, increased compared to the second quarter 2009 while demand for grain-oriented 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 remained at reasonably good levels. Third quarter Flat-Rolled Products segment titanium shipments including Uniti conversion were approximately 1.5 million pounds. Demand for most of our standard stainless products remained low, yet improved 7% compared to the second quarter 2009. In addition, average prices for standard stainless products increased 14% compared to the second quarter 2009 primarily due to higher base selling prices and raw material surcharges. Third quarter 2009 compared to third quarter 2008 * Sales were $364.2 million, 52% lower than the third quarter 2008, due primarily to lower shipments and reduced raw material surcharges. Shipments of standard stainless products (sheet and plate) decreased 3% while total high-value products shipments decreased 32%. Average transaction prices for all products, which include surcharges, were 42% lower due primarily to significantly reduced raw material surcharges. * Segment operating profit decreased to $11.3 million, or 3.1% of sales. Operating profit was negatively impacted by lower shipments and approximately $6.0 million of costs associated with idle facilities and workforce reductions. In addition, operating profit was negatively affected by a $6.8 million charge to adjust the LIFO inventory valuation reserve as a result of rising raw material costs. This segment recognized a $26.1 million benefit in both the first and second quarters 2009. The third quarter 2008 included a LIFO inventory valuation reserve benefit of $25.1 million. * Results benefited from $25.5 million in gross cost reductions, bringing the first nine months 2009 gross cost reductions in this segment to $53.5 million. 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, 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, and cast products remained weak. Demand for our precision finishing business was good. Third quarter 2009 compared to third quarter 2008 * Sales were $54.2 million, 54% lower than the third quarter 2008. * Segment operating results was a loss of $8.6 million primarily due to significantly lower shipments, reduced selling prices, and costs associated with workforce reductions and idle facilities, partially offset by a $1.3 million LIFO benefit and the benefits of gross cost reductions. The third quarter 2008 included a LIFO inventory valuation reserve charge of $0.8 million. * Results benefited from $4.0 million of gross cost reductions, bringing the 2009 first nine month gross cost reductions in this segment to $9.6 million. Other Expenses * Corporate expenses for the third quarter 2009 were $15.7 million, compared to $13.4 million in the year-ago period. This increase was primarily due to expenses associated with performance-based incentive compensation programs. * Interest expense, net of interest income, was $8.1 million, compared to $1.7 million in the third quarter 2008. The increase in interest expense was due to debt issuances completed in the second quarter 2009. * In June 2009, we completed the issuance of $350 million of new 9.375% 10-year Senior Notes and a tender offer for our existing $300 million 8.375% Notes due in 2011. As a result of the tender offer, in June 2009 we retired $183.3 million of the 2011 Notes, which resulted in a special charge for debt extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of $9.2 million pre-tax, or $5.5 million after-tax, in the second quarter 2009. Retirement Benefit Expense * Retirement benefit expense, which includes pension expense and other postretirement expense, increased to $25.5 million in the third quarter 2009, compared to $2.5 million in the third quarter 2008. This increase is primarily a result of lower returns on plan assets in 2008 partially offset by the positive benefits of voluntary pension contributions made over the last several years. * Retirement benefit expense of $25.5 million in the third quarter 2009 improved from $33.4 million in the second quarter 2009. This improvement resulted from a $350 million voluntary cash contribution to our U.S. defined pension benefit pension plan which significantly improved the plan's funded position. * For the third quarter 2009, retirement benefit expense of $15.9 million was included in cost of sales and $9.6 million was included in selling and administrative expenses. For the third quarter 2008, the amount of retirement benefit expense included in cost of sales was $1.6 million, and the amount included in selling and administrative expenses was $0.9 million. Income Taxes * Third quarter 2009 income taxes were a benefit of $1.4 million. This resulted from an effective tax rate of 39.6% reduced by an income tax benefit of $2.4 million for adjustment of taxes paid in a prior year. Third quarter 2008 included an income tax provision of $83.9 million, or 36.3% of income before tax. * The provision for income taxes for the first nine months of 2009 included a non-recurring charge of $11.5 million recognized in the second quarter 2009 primarily associated with the tax consequences of the June 2009 $350 million voluntary cash contribution to our pension plan. Cash Flow, Working Capital and Debt * Cash on hand was $826.3 million at the end of the third quarter 2009, an increase of $356.4 million from year-end 2008. * Cash flow from operations during the first nine months 2009 was $149.4 million including the voluntary net cash contribution in the second quarter 2009 to the Company's U.S. defined benefit pension plan. Excluding the $350.0 million voluntary cash pension contribution and the associated $108.5 million U.S. Federal income tax refund, cash flow from operations for the first nine months of 2009 was $390.9 million. * Managed working capital was reduced by $344.8 million in the first nine months 2009 primarily as a result of lower business activity and raw material costs. The reduction in managed working capital resulted from a $115.3 million decrease 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 , a $224.2 million decrease in inventory, and a $5.3 million increase in accounts payable. * At September 30, 2009, managed working capital was 35.0% 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 35.2% of annualized sales at year-end 2008. We define managed working capital as accounts receivable plus gross inventories less accounts payable. * Cash used in investing activities was $302.6 million in the first nine months 2009 and consisted primarily of capital expenditures. * Cash provided by financing activities was $509.6 million in the first nine months 2009 primarily due to receipt of $734.4 million of net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from the second quarter 2009 debt issuances, partially offset by debt retirements of $189.4 million and dividend payments of $35.3 million. * Net debt as a percentage of total capitalization was 10.5% at the end of the third quarter 2009, compared to 2.0% at the end of 2008. Total debt to total capital was 34.0% at September 30, 2009, compared to 20.7% at the end of 2008. * There were no borrowings outstanding under ATI's $400 million unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. domestic borrowing facility, although a portion of the letters of credit capacity was utilized. New Accounting Pronouncement Adopted in 2009 * As required, in the first quarter 2009, we adopted changes to the financial accounting standards related to the presentation of noncontrolling interests in consolidated financial statements. Early adoption of this change in accounting standards was prohibited pro·hib·it tr.v. pro·hib·it·ed, pro·hib·it·ing, pro·hib·its 1. To forbid by authority: Smoking is prohibited in most theaters. See Synonyms at forbid. 2. . The new accounting standard changes the classification of noncontrolling (minority) interests on the balance sheet and the accounting for and reporting of transactions between the reporting entity and holders of such noncontrolling interests. Under the new standard, net income encompasses the total income before minority interest expense or benefit. The income statement includes separate disclosure of the attribution at·tri·bu·tion n. 1. The act of attributing, especially the act of establishing a particular person as the creator of a work of art. 2. of income or loss between the controlling and noncontrolling interests. Increases and decreases in the noncontrolling ownership interest amount are accounted for as equity transactions. As a result of adopting the new standard, the balance sheet and the income statement have been recast re·cast tr.v. re·cast, re·cast·ing, re·casts 1. To mold again: recast a bell. 2. retrospectively ret·ro·spec·tive adj. 1. Looking back on, contemplating, or directed to the past. 2. Looking or directed backward. 3. Applying to or influencing the past; retroactive. 4. for the presentation of noncontrolling (minority) interest in our STAL joint venture. Allegheny Technologies will conduct a conference call with investors and analysts on October 21, 2009, 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". Replay of the conference call will be available on the Allegheny Technologies website. 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 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 credit market conditions and related issues, and 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, including those anticipated from strategic investments, whether due to significant increases in energy, raw materials or employee benefits costs, the possibility of project cost overruns Noun 1. cost overrun - excess of cost over budget; "the cost overrun necessitated an additional allocation of funds in the budget" cost - the total spent for goods or services including money and time and labor 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 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; (g) 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 31, 2008, 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[TM] Allegheny Technologies Incorporated is one of the largest and most diversified diversified (di·verˑ·s specialty metals producers in the world with revenues of $5.3 billion during 2008. ATI has approximately 8,500 full-time employees world-wide who use innovative technologies to offer global markets a wide range of specialty metals solutions. Our major markets are aerospace and defense, 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 titanium and titanium alloys, nickel-based alloys and superalloys, grain-oriented electrical steel, 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, and forgings and castings. The Allegheny Technologies website is www.alleghenytechnologies.com. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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