Document and Entity Information
Document and Entity Information (USD $) | |||
9 Months Ended
Sep. 30, 2009 | Oct. 30, 2009
| Jun. 30, 2008
| |
Document Information Line Items | |||
Document Type | 10-Q | ||
Document Period End Date | 2009-09-30 | ||
Amendment Flag | false | ||
Entity Information Line Items | |||
Entity Registrant Name | ALLEGHENY TECHNOLOGIES INCORPORATED | ||
Entity Central Index Key | 0001018963 | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Well Known Seasoned Issuer | Yes | ||
Entity Common Stock Shares Outstanding | 98,076,210 | ||
Entity Public Float | $5,930,000,000 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Millions | Sep. 30, 2009
| Dec. 31, 2008
|
Current Assets: | ||
Cash and cash equivalents | 826.3 | 469.9 |
Accounts receivable, net of allowances for doubtful accounts of $6.3 at both September 30, 2009 and December 31, 2008 | 415.8 | 530.5 |
Inventories, net | 737.3 | 887.6 |
Prepaid expenses and other current assets | 67.7 | 41.4 |
Total Current Assets | 2047.1 | 1929.4 |
Property, plant and equipment, net | 1852.5 | 1633.6 |
Cost in excess of net assets acquired | 196.3 | 190.9 |
Prepaid pension asset | 124.7 | 0 |
Deferred income taxes | 20.6 | 281.6 |
Other assets | 138.8 | 134.9 |
Total Assets | 4,380 | 4170.4 |
Current Liabilities: | ||
Accounts payable | 283 | 278.5 |
Accrued liabilities | 278.6 | 322 |
Deferred income taxes | 0.3 | 78.2 |
Short term debt and current portion of long-term debt | 20.2 | 15.2 |
Total Current Liabilities | 582.1 | 693.9 |
Long-term debt | 1050.4 | 494.6 |
Accrued postretirement benefits | 444.4 | 446.9 |
Pension liabilities | 33.6 | 378.2 |
Other long-term liabilities | 116 | 127.8 |
Total Liabilities | 2226.5 | 2141.4 |
ATI Stockholders' Equity: | ||
Preferred stock, par value $0.10: authorized-50,000,000 shares; issued-none | 0 | 0 |
Common stock, par value $0.10: authorized-500,000,000 shares; issued-102,404,256 shares at September 30, 2009 and December 31, 2008; outstanding- 98,077,853 shares at September 30, 2009 and 97,330,969 shares at December 31, 2008 | 10.2 | 10.2 |
Additional paid-in capital | 647.9 | 651.8 |
Retained earnings | 2210.8 | 2286.7 |
Treasury stock: 4,326,403 shares at September 30, 2009 and 5,073,287 shares at December 31, 2008 | 208.4 | 244.8 |
Accumulated other comprehensive loss, net of tax | -581.8 | -746.5 |
Total ATI stockholders' equity | 2078.7 | 1957.4 |
Noncntrolling interests | ||
Noncontrolling interests | 74.8 | 71.6 |
Total Stockholders' Equity | 2153.5 | 2,029 |
Total Liabilities and Equity | $4,380 | 4170.4 |
1_Consolidated Balance Sheets
Consolidated Balance Sheets (USD $) | ||
In Millions, except Share data | Sep. 30, 2009
| Dec. 31, 2008
|
Consolidated Balance Sheets | ||
Allowances for Doubtful Accounts | 6.3 | 6.3 |
Preferred stock, par value | 0.1 | 0.1 |
Preferred stock, authorized | 50,000,000 | 50,000,000 |
Preferred stock, issued | 0 | 0 |
Common stock, par value | 0.1 | 0.1 |
Common stock, authorized | 500,000,000 | 500,000,000 |
Common stock, issued | 102,404,256 | 102,404,256 |
Common stock, oustanding | 98,077,853 | 97,330,969 |
Treasury Stock | 4,326,403 | 5,073,287 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | ||||
In Millions | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Sales | 697.6 | 1392.4 | 2239.2 | $4,197 |
Costs and expenses: | ||||
Cost of sales | 603.5 | 1085.8 | 1989.2 | 3267.5 |
Selling and administrative expenses | 83.7 | 74.3 | 228.9 | 223.7 |
Income before interest, other income and income taxes | 10.4 | 232.3 | 21.1 | 705.8 |
Interest expense, net | 8.1 | 1.7 | 9.3 | 2.8 |
Debt extinguishment costs | 0 | 0 | -9.2 | 0 |
Other income, net | 0.3 | 0.4 | 0.3 | 2 |
Income before income tax provision (benefit) | 2.6 | 231 | 2.9 | 705 |
Income tax provision (benefit) | -1.4 | 83.9 | 5.3 | 243 |
Net income (loss) | 4 | 147.1 | -2.4 | 462 |
Less: Net income attributable to noncontrolling interests | 2.6 | 3 | 3.7 | 7 |
Net income (loss) attributable to ATI | 1.4 | 144.1 | -6.1 | $455 |
Basic net income (loss) attributable to ATI per common share | 0.01 | 1.46 | -0.06 | 4.54 |
Diluted net income (loss) attributable to ATI per common share | 0.01 | 1.45 | -0.06 | 4.51 |
Dividends declared per common share | 0.18 | 0.18 | 0.54 | 0.54 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $) | ||
In Millions | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Operating Activities: | ||
Net income (loss) | -2.4 | $462 |
Depreciation and amortization | 96.6 | 86.7 |
Deferred taxes | 95.5 | 64.5 |
Inventories | 150.2 | -167.8 |
Accounts receivable | 114.7 | -92.3 |
Accounts payable | 4.5 | 26.1 |
Retirement benefits | -289.8 | -16.7 |
Accrued income taxes | -31.6 | 11.6 |
Accrued liabilities and other | 11.7 | -29.5 |
Cash provided by operating activities | 149.4 | 344.6 |
Investing Activities: | ||
Purchases of property, plant and equipment | -308.1 | -365.1 |
Asset disposals and other | 5.5 | 1.3 |
Cash used in investing activities | -302.6 | -363.8 |
Financing Activities: | ||
Issuances of long-term debt | 752.5 | 0 |
Payments on long-term debt and capital leases | -194.5 | -14.8 |
Net borrowings under credit facilities | 5.1 | 2.6 |
Debt issuance costs | -18.1 | 0 |
Dividends paid to shareholders | -35.3 | -54.1 |
Dividends paid to noncontrolling interests | -0.8 | 0 |
Shares repurchased for income tax witholding on share-based compensation [N] | -0.7 | -15.5 |
Exercises of stock options | 0.5 | 1.1 |
Taxes on share-based compensation | 0.9 | (9) |
Purchase of treasury stock | 0 | -241.8 |
Cash provided by (used in) financing activities | 509.6 | -331.5 |
Increase (decrease) in cash and cash equivalents | ||
Increase (decrease) in cash and cash equivalents | 356.4 | -350.7 |
Cash and cash equivalents | 469.9 | 623.3 |
Cash and cash equivalents | 826.3 | 272.6 |
STATEMENTS OF CHANGES IN CONSOL
STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS EQUITY (USD $) | |||||||
In Millions | Common Stock
| Additional Paid-In Capital
| Retained Earnings
| Treasury Stock
| Accumulated Other Comprehensive Income (Loss)
| Noncontrolling Interests
| Total
|
Total Stockholders' Equity at Dec. 31, 2007 | 10.2 | 693.7 | 1830.7 | -75.4 | -237.2 | 57.2 | 2279.2 |
Net income (loss) | 455 | 7 | 462 | ||||
Other comprehensive income (loss) net of tax: | |||||||
Pension plans and other postretirement benefits | 6.1 | 6.1 | |||||
Foreign currency translation gains (losses) | -19.7 | 6.9 | -12.8 | ||||
Unrealized gains (losses) on derivatives | -0.2 | -0.2 | |||||
Comprehensive income (loss) | 455 | -13.8 | 13.9 | 455.1 | |||
Purchase of treasury stock | -241.8 | -241.8 | |||||
Effect of changing the measurement date for pension plans and other postretirement benefits, net of tax | 1.2 | 1.2 | |||||
Cash dividends on common stock ($0.54 per share) | -54.1 | -54.1 | |||||
Employee Stock Plans | 0 | -43.6 | -1.2 | 37.1 | -7.7 | ||
Total Stockholders' Equity at Sep. 30, 2008 | 10.2 | 650.1 | 2230.4 | -280.1 | -249.8 | 71.1 | 2431.9 |
Other comprehensive income (loss) net of tax: | |||||||
Total Stockholders' Equity at Dec. 31, 2008 | 10.2 | 651.8 | 2286.7 | -244.8 | -746.5 | 71.6 | 2,029 |
Net income (loss) | -6.1 | 3.7 | -2.4 | ||||
Other comprehensive income (loss) net of tax: | |||||||
Pension plans and other postretirement benefits | 111.1 | 111.1 | |||||
Foreign currency translation gains (losses) | 27.3 | 0.3 | 27.6 | ||||
Unrealized gains (losses) on derivatives | 26.3 | 26.3 | |||||
Comprehensive income (loss) | -6.1 | 164.7 | 4 | 162.6 | |||
Cash dividends on common stock ($0.54 per share) | -52.9 | -52.9 | |||||
Cash dividends paid to noncontrolling interests | -0.8 | -0.8 | |||||
Employee Stock Plans | 0 | -3.9 | -16.9 | 36.4 | 15.6 | ||
Total Stockholders' Equity at Sep. 30, 2009 | 10.2 | 647.9 | 2210.8 | -208.4 | -581.8 | 74.8 | 2153.5 |
Accounting Policies
Accounting Policies | |
9 Months Ended
Sep. 30, 2009 | |
Notes to Consolidated Financial Statements | |
Accounting Policies | Note 1. Accounting Policies Basis of PresentationThe interim consolidated financial statements include the accounts of Allegheny Technologies Incorporated and its subsidiaries. Unless the context requires otherwise, Allegheny Technologies, ATI and the Company refer to Allegheny Technologies Incorporated and its subsidiaries.These unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by U.S. generally accepted accounting principles for complete financial statements. In managements opinion, all adjustments (which include only normal recurring adjustments) considered necessary for a fair presentation have been included. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys 2008 Annual Report on Form 10-K. The results of operations for these interim periods are not necessarily indicative of the operating results for any future period. In preparing the financial statements for the period ended September 30, 2009, the Company has evaluated subsequent events through the date of issue, which was November 5, 2009. The December 31, 2008 financial information has been derived from the Companys audited financial statements, which were revised in the current period to reflect changes in the presentation of noncontrolling interests (formerly minority interests) in accordance with the required adoption of the accounting standard discussed below. Certain amounts from prior years have been reclassified to conform with the 2009 presentation. New Accounting Pronouncements AdoptedAs required, in the first quarter 2009, the Company adopted changes issued by the Financial Accounting Standards Board (FASB) to consolidation accounting and reporting. Early adoption of this accounting change was prohibited. These changes, among others, required that noncontrolling interests, formerly termed minority interests, be considered a component of equity for all periods presented. Noncontrolling interests were previously classified within other long-term liabilities. In addition, the practice of reporting minority interest expense or benefit changed. The statement of operations 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, for all periods presented. Absent a change in control, increases and decreases in the noncontrolling ownership interest amount are accounted for as equity transactions. As a result of adopting this accounting change, the balance sheet and the income statement have been recast retrospectively for the presentation of noncontrolling interest in the Companys STAL joint venture.On January1, 2009, the Company adopted changes issued by the FASB for fair value measurements as they relate |
Inventories
Inventories | |
9 Months Ended
Sep. 30, 2009 | |
Notes to Consolidated Financial Statements | |
Inventories | Note 2. Inventories Inventories at September 30, 2009 and December 31, 2008 were as follows (in millions): September 30, December 31, 2009 2008 Raw materials and supplies $ 158.1 $ 163.6 Work-in-process 620.3 772.6 Finished goods 108.2 164.9 Total inventories at current cost 886.6 1,101.1 Less allowances to reduce current cost values to LIFO basis (146.6) (205.6) Progress payments (2.7) (7.9) Total inventories, net $ 737.3 $ 887.6 Inventories are stated at the lower of cost (last-in, first-out (LIFO), first-in, first-out (FIFO), and average cost methods) or market, less progress payments. Most of the Companys inventory is valued utilizing the LIFO costing methodology. Inventory of the Companys non-U.S. operations is valued using average cost or FIFO methods. The effect of using the LIFO methodology to value inventory, rather than FIFO, decreased cost of sales by $59.0 million for the nine first months of 2009 compared to a decrease to cost of sales of $36.3 million for the first nine months of 2008. |
Supplemental Financial Statemen
Supplemental Financial Statement Information | |
9 Months Ended
Sep. 30, 2009 | |
Notes to Consolidated Financial Statements | |
Supplemental Financial Statement Information | Note 3. Supplemental Financial Statement Information The estimated fair value of financial instruments at September 30, 2009 and December 31, 2008 was as follows: (In millions) September 30, 2009 December 31, 2008 Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value Cash and cash equivalents $ 826.3 $ 826.3 $ 469.9 $ 469.9 Derivative financial instruments: Assets 17.8 17.8 17.2 17.2 Liabilities 20.1 20.1 61.5 61.5 Debt: Allegheny Technologies $402.5 million 4.25% Convertible Notes due 2014 402.5 478.0 - - Allegheny Technologies $350 million 9.375% Notes due 2019 350.0 404.7 - - Allegheny Technologies $300 million 8.375% Notes due 2011, net (a) 118.0 118.9 304.2 306.6 Allegheny Ludlum 6.95% debentures due 2025 150.0 138.8 150.0 144.3 Promissory note for JL asset acquisition 20.5 20.5 30.7 30.7 Foreign credit agreements 21.4 21.4 15.6 15.6 Industrial revenue bonds, due through 2020 8.1 8.1 9.0 9.0 Capitalized leases and other 0.1 0.1 0.3 0.3 (a)Includes fair value adjustments for settled interest rate swap contracts of $2.0 million at September 30, 2009, and $6.7 million at December 31, 2008The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:Cash and cash equivalents: The carrying amount on the balance sheet approximates fair value.Derivative financial instruments: Fair values for derivatives were measured using exchange-traded prices for the hedged items. The fair value was determined using Level 2 information, including consideration of counterparty risk and the Companys credit risk. Short-term and long-term debt: The fair values of the Allegheny Technologies 4.25% Convertible Notes, the Allegheny Technologies 9.375% Notes, the Allegheny Technologies 8.375% Notes, and the Allegheny Ludlum 6.95% debentures were based on quoted market prices. The carrying amounts of the other short-term and long-term debt approximate fair value.Property, plant and equipment at September 30, 2009 and December 31, 2008 were as follows (in millions): September 30, December 31, 2009 2008 Land $ 23.8 $ 23.1 Buildings 349.9 310.9 Equipment and leasehold improvements 2,769.3 2,508.5 3,143.0 2,842.5 Accumulated depreciation and amortization (1,290.5) (1,208.9) Total property, plant and equipment, net $ 1,852.5 $ 1,633.6 |
Debt
Debt | |
9 Months Ended
Sep. 30, 2009 | |
Notes to Consolidated Financial Statements | |
Debt | Note 4. Debt Debt at September 30, 2009 and December 31, 2008 was as follows (in millions): September 30, December 31, 2009 2008 Allegheny Technologies $402.5 million 4.25% Convertible Notes due 2014 $ 402.5 $ - Allegheny Technologies $350 million 9.375% Notes due 2019 350.0 - Allegheny Technologies $300 million 8.375% Notes due 2011, net (a) 118.0 304.2 Allegheny Ludlum 6.95% debentures due 2025 150.0 150.0 Domestic Bank Group $400 million unsecured credit agreement - - Promissory note for JL asset acquisition 20.5 30.7 Foreign credit agreements 21.4 15.6 Industrial revenue bonds, due through 2020 8.1 9.0 Capitalized leases and other 0.1 0.3 Total short-term and long-term debt 1,070.6 509.8 Short-term debt and current portion of long-term debt (20.2) (15.2) Total long-term debt $ 1,050.4 $ 494.6 Includes fair value adjustments for settled interest rate swap contracts of $2.0 million at September 30, 2009 and $6.7 million at December 31, 2008. Convertible NotesIn June2009, the Company issued and sold $402.5 million in aggregate principal amount of 4.25% Convertible Senior Notes due 2014 (the Convertible Notes). Interest is payable semi-annually on June1 and December1 of each year. The Convertible Notes were issued under ATIs shelf registration statement and are not listed on any national securities exchange. Net proceeds of $390.2 million from the sale of the Convertible Notes were used to make a $350 million voluntary cash contribution to the Companys U.S. defined benefit pension plan, and the balance was used for general corporate purposes including funding of contributions to trusts established to fund retiree medical benefits. The Convertible Notes are unsecured and unsubordinated obligations of the Company and equally ranked with all of its existing and future senior unsecured debt. The underwriting fees and other third-party expenses for the issuance of the Convertible Notes were $12.3 million and will be amortized to interest expense over the 5-year term of the Convertible Notes.The Company does not have the right to redeem the Convertible Notes prior to the stated maturity date. Holders of the Convertible Notes have the option to convert their notes into shares of ATI common stock at any time prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date (June 1, 2014). The initial conversion rate for the Convertible Notes is 23.9263 shares of ATI common stock per $1,000 (in whole dollars) principal amount of notes (9,630,336 shares), equivalent to a conversion price of approximately $41.795 per share, subject to adjustment, as defined in the Convertible Notes. Other than receiving cash in lieu of fractional shares, holders do not have the option to receive cash instead of shares of common stock upon conversion. Accrued and unpaid interest that exists upon conversion of a note will be deemed paid by the delivery of shares of ATI common stock and no cash payment or additional shares will be given to holders.If the Company undergoes a fundamental change, as defined in the Convertible Note |
Per Share Information
Per Share Information | |
9 Months Ended
Sep. 30, 2009 | |
Notes to Consolidated Financial Statements | |
Per Share Information | Note 5. Per Share Information The following table sets forth the computation of basic and diluted net income (loss) per common share (in millions, except per share amounts): Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Numerator for basic and diluted net income (loss) per common share - net income (loss) attributable to ATI $ 1.4 $ 144.1 $ (6.1) $ 455.0 Denominator: Denominator for basic net income (loss) per common share-weighted average shares 97.2 99.0 97.2 100.2 Effect of dilutive securities: Option equivalents 0.4 0.5 - 0.5 Contingently issuable shares 0.4 0.2 - 0.2 Denominator for diluted net income (loss) per common share adjusted weighted average shares and assumed conversions 98.0 99.7 97.2 100.9 Basic net income (loss) attributable to ATI per common share $ 0.01 $ 1.46 $ (0.06) $ 4.54 Diluted net income (loss) attributable to ATI per common share $ 0.01 $ 1.45 $ (0.06) $ 4.51 Common stock that would be issuable upon the assumed conversion of the 2014 Convertible Notes and other option equivalents and contingently issuable shares were excluded from the computation of contingently issuable shares, and therefore, from the denominator for diluted earnings per share for the three months and nine months ended September 30, 2009, because the effect of inclusion would have been anti-dilutive. Excluded shares for the three months and nine months ended September 30, 2009 were 9.6 million and 5.1 million, respectively. |
Derivative Financial Instrument
Derivative Financial Instruments and Hedging | |
9 Months Ended
Sep. 30, 2009 | |
Notes to Consolidated Financial Statements | |
Derivative Financial Instruments and Hedging | Note 6. Derivative Financial Instruments and HedgingAs part of its risk management strategy, the Company, from time-to-time, utilizes derivative financial instruments to manage its exposure to changes in raw material prices, energy costs, foreign currencies, and interest rates. In accordance with applicable accounting standards, the Company accounts for all of these contracts as hedges. In general, hedge effectiveness is determined by examining the relationship between offsetting changes in fair value or cash flows attributable to the item being hedged, and the financial instrument being used for the hedge. Effectiveness is measured utilizing regression analysis and other techniques to determine whether the change in the fair market value or cash flows of the derivative exceeds the change in fair value or cash flow of the hedged item. Calculated ineffectiveness, if any, is immediately recognized on the statement of operations. The Company sometimes uses futures and swap contracts to manage exposure to changes in prices for forecasted purchases of raw materials, such as nickel, and natural gas. Generally under these contracts, which are accounted for as cash flow hedges, the price of the item being hedged is fixed at the time that the contract is entered into and the Company is obligated to make or receive a payment equal to the net change between this fixed price and the market price at the date the contract matures.The majority of ATIs products are sold utilizing raw material surcharges and index mechanisms. However, as of September 30, 2009, the Company had entered into financial hedging arrangements primarily at the request of its customers, related to firm orders, for approximately 5% of the Companys total annual nickel requirements through 2010. Any gain or loss associated with these hedging arrangements is included in the selling price to the customer requesting the hedge over the designated hedge period. At September 30, 2009, the outstanding financial derivatives used to hedge the Companys exposure to natural gas cost volatility represented approximately 50% of its forecasted requirements through 2011.While the majority of the Companys direct export sales are transacted in U.S. dollars, foreign currency exchange contracts are used, from time-to-time, to limit transactional exposure to changes in currency exchange rates for those transactions denominated in a non-U.S. currency. The Company sometimes purchases foreign currency forward contracts that permit it to sell specified amounts of foreign currencies expected to be received from its export sales for pre-established U.S. dollar amounts at specified dates. The forward contracts are denominated in the same foreign currencies in which export sales are denominated. These contracts are designated as hedges of the variability in cash flows of a portion of the forecasted future export sales transactions which otherwise would expose the Company to foreign currency risk. At September 30, 2009, the outstanding financial derivatives used to hedge the Companys exposure to foreign currency, primarily euros, represented approximately 6% of our forecasted total international sales through 2011 |
Income Taxes
Income Taxes | |
9 Months Ended
Sep. 30, 2009 | |
Notes to Consolidated Financial Statements | |
Income Taxes | Note 7. Income TaxesA $1.4 million tax benefit was recognized during the third quarter 2009. 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. The third quarter 2008 included an income tax provision of $83.9 million, or 36.3% of income before tax. For the first nine months of 2009, the provision for income taxes was $5.3 million compared to $243.0 million, or 34.5% of income before tax, for the first nine months of 2008. The 2009 provision included a non-recurring tax charge of $11.5 million, primarily associated with the tax consequences of the June 2009 $350 million voluntary contribution to the pension plan partially offset by net discrete income tax benefit adjustments of $7.3 million associated with prior years taxes. Primarily as a result of the $350 million voluntary pension contribution in June 2009 which was designated to pertain to the 2008 tax year, the Company received a U.S. Federal income tax refund of $108.5 million in the 2009 second quarter. |
Pension Plans and Other Postret
Pension Plans and Other Postretirement Benefits | |
9 Months Ended
Sep. 30, 2009 | |
Notes to Consolidated Financial Statements | |
Pension Plans and Other Postretirement Benefits | Note 8. Pension Plans and Other Postretirement BenefitsThe Company has defined benefit pension plans and defined contribution plans covering substantially all employees. Benefits under the defined benefit pension plans are generally based on years of service and/or final average pay. The Company funds the U.S. pension plans in accordance with the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code. In June 2009, the Company made a $350 million voluntary cash contribution to its U.S. defined benefit pension plan to improve the plans funded position. The Company also sponsors several postretirement plans covering certain salaried and hourly employees. The plans provide health care and life insurance benefits for eligible retirees. In most plans, Company contributions towards premiums are capped based on the cost as of a certain date, thereby creating a defined contribution. For the non-collectively bargained plans, the Company maintains the right to amend or terminate the plans at its discretion.For the three and nine month periods ended September 30, 2009 and 2008, the components of pension (income) expense and components of other postretirement benefit expense for the Companys defined benefit plans included the following (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Pension Benefits: Service cost - benefits earned during the year $ 5.6 $ 7.1 $ 17.7 $ 21.1 Interest cost on benefits earned in prior years 34.8 32.6 103.7 97.9 Expected return on plan assets (42.1) (50.3) (114.0) (150.7) Amortization of prior service cost 4.1 4.3 12.3 12.6 Amortization of net actuarial loss 17.4 3.3 59.2 9.8 Total pension (income) expense $ 19.8 $ (3.0) $ 78.9 $ (9.3) Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Other Postretirement Benefits: Service cost - benefits earned during the year $ 0.7 $ 0.8 $ 2.2 $ 2.3 Interest cost on benefits earned in prior years 8.1 7.9 24.4 23.7 Expected return on plan assets (0.4) (1.4) (1.2) (4.2) Amortization of prior service credit (4.8) (5.4) (14.4) (16.0) Amortization of net actuarial loss 1.6 1.3 4.8 3.9 Total other postretirement benefit expense $ 5.2 $ 3.2 $ 15.8 $ 9.7 Total retirement benefit expense defined benefit plans $ 25.0 $ 0.2 $ 94.7 $ 0.4 Other postretirement benefit costs for a defined contribution plan were $0.5 million and $1.5 million for the three and nine months ended September 30, 2009, respectively. For 2008, other postretirement costs for a defined contribution plan were $2.3 million and $5.4 million for the three and nine months ended September 30, 2008, respectively. |
Business Segments
Business Segments | |
9 Months Ended
Sep. 30, 2009 | |
Notes to Consolidated Financial Statements | |
Business Segments | Note 9. Business Segments Following is certain financial information with respect to the Company's business segments for the periods indicated (in millions): Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Total sales: High Performance Metals $ 292.8 $ 554.1 $ 1,036.5 $ 1,639.5 Flat-Rolled Products 369.2 779.1 1,098.3 2,390.6 Engineered Products 59.9 130.1 195.6 394.3 721.9 1,463.3 2,330.4 4,424.4 Intersegment sales: High Performance Metals 13.6 43.9 48.9 143.8 Flat-Rolled Products 5.0 14.5 20.7 45.0 Engineered Products 5.7 12.5 21.6 38.6 24.3 70.9 91.2 227.4 Sales to external customers: High Performance Metals 279.2 510.2 987.6 1,495.7 Flat-Rolled Products 364.2 764.6 1,077.6 2,345.6 Engineered Products 54.2 117.6 174.0 355.7 $ 697.6 $ 1,392.4 $ 2,239.2 $ 4,197.0 Operating Profit (Loss): High Performance Metals $ 51.3 $ 139.6 $ 146.6 $ 421.8 Flat-Rolled Products 11.3 105.7 41.3 322.2 Engineered Products (8.6) 6.1 (24.1) 22.8 Total operating profit 54.0 251.4 163.8 766.8 Corporate expenses (15.7) (13.4) (38.7) (46.5) Interest expense, net (8.1) (1.7) (9.3) (2.8) Other expense, net of gains on asset sales (2.1) (2.8) (7.5) (6.7) Debt extinguishment costs - - (9.2) - Retirement benefit expense (25.5) (2.5) (96.2) (5.8) Income before income taxes $ 2.6 $ 231.0 $ 2.9 $ 705.0 Retirement benefit expense represents defined benefit plan pension expense, and other postretirement benefit expense for both defined benefit and defined contribution plans. Operating profit with respect to the Companys business segments excludes any retirement benefit expense.Corporate expenses for the three months ended September 30, 2009 were $15.7 million, compared to $13.4 million for the three months ended September 30, 2008. This increase is due primarily to higher expenses associated with long-term performance-based incentive compensation programs.Other expense, net of gains on asset sales, primarily includes charges incurred in connection with closed operations and other non-operating income or expense. These items are presented primarily in selling and administrative expenses and in other expense in the statement of operations. These items resulted in net charges of $2.1 million for the three months ended September 30, 2009 and $2.8 million for the three months ended September 30, 2008. The decrease in the quarter was primarily related to lower expenses at closed operations. For the nine months ended 2009, other expense, net of gains on asset sales, was $7.5 million, compared to $6.7 million for the prior year period. This increase on a year to date basis was primarily related to lower foreign currency gains, and higher franchise and other non-income related taxes. |
Financial Information for Subsi
Financial Information for Subsidiary and Guarantor Parent | |
9 Months Ended
Sep. 30, 2009 | |
Notes to Consolidated Financial Statements | |
Financial Information for Subsidiary and Guarantor Parent | Note 10. Financial Information for Subsidiary and Guarantor Parent The payment obligations under the $150 million 6.95% debentures due 2025 issued by Allegheny Ludlum Corporation (the Subsidiary) are fully and unconditionally guaranteed by Allegheny Technologies Incorporated (the Guarantor Parent). In accordance with positions established by the Securities and Exchange Commission, the following financial information sets forth separately financial information with respect to the Subsidiary, the non-guarantor subsidiaries and the Guarantor Parent. The principal elimination entries eliminate investments in subsidiaries and certain intercompany balances and transactions. Investments in subsidiaries, which are eliminated in consolidation, are included in other assets on the balance sheets. Allegheny Technologies is the plan sponsor for the U.S. qualified defined benefit pension plan (the Plan) which covers certain current and former employees of the Subsidiary and the non-guarantor subsidiaries. As a result, the balance sheets presented for the Subsidiary and the non-guarantor subsidiaries do not include any Plan assets or liabilities, or the related deferred taxes. The Plan assets, liabilities and related deferred taxes and pension income or expense are recognized by the Guarantor Parent. Management and royalty fees charged to the Subsidiary and to the non-guarantor subsidiaries by the Guarantor Parent have been excluded solely for purposes of this presentation.Cash flows related to intercompany activity between the Guarantor Parent, the Subsidiary, and the non-guarantor subsidiaries are presented as financing activities on the condensed statements of cash flows. Allegheny Technologies Incorporated Financial Information for Subsidiary and Guarantor Parent Balance Sheets September 30, 2009 Guarantor Non-guarantor (In millions) Parent Subsidiary Subsidiaries Eliminations Consolidated Assets: Cash and cash equivalents $ 0.2 $ 606.6 $ 219.5 $ - $ 826.3 Accounts receivable, net 1.4 161.4 253.0 - 415.8 Inventories, net - 145.4 591.9 - 737.3 Prepaid expenses and other current assets 21.3 8.0 38.4 - 67.7 Total current assets 22.9 921.4 1,102.8 - 2,047.1 Property, plant and equipment, net 3.7 417.3 1,431.5 - 1,852.5 Cost in excess of net assets acquired - 112.1 84.2 - 196.3 Prepaid pension asset 124.7 - - - 124.7 Deferred income taxes 20.6 - - - 20.6 Investments in subsidiaries and other assets 3,917.7 1,282.8 1,029.6 (6,091.3) 138.8 Total assets $ 4,089.6 $ 2,733.6 $ 3,648.1 $ (6,091.3) $ 4,380.0 Liabilities and stockholders equity: Accounts payable $ 3.0 $ 139.6 $ 140.4 $ - $ 283.0 Accrued liabilities 1,007.2 63.2 607.1 (1,398.9) 278.6 Deferred income taxes 0.3 - - - 0.3 Short-term debt and current portion of long-term debt - 10.5 9.7 - 20.2 Total current liabilities 1,010.5 213.3 757.2 (1,398.9) 582.1 Long-term debt 870.5 361.3 18.6 (200.0) 1,050.4 Accrued postretirement benefits - 263.0 181.4 - 444.4 Pension liabilities 9.5 2.8 21.3 - 33.6 Other long-te |
Commitments and Contingencies
Commitments and Contingencies | |
9 Months Ended
Sep. 30, 2009 | |
Notes to Consolidated Financial Statements | |
Commitments and Contingencies | Note 11. Commitments and Contingencies The Company is subject to various domestic and international environmental laws and regulations that govern the discharge of pollutants and disposal of wastes, and which may require that it investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations. The Company could incur substantial cleanup costs, fines, and civil or criminal sanctions, third party property damage or personal injury claims as a result of violations or liabilities under these laws or noncompliance with environmental permits required at its facilities. The Company is currently involved in the investigation and remediation of a number of its current and former sites, as well as third party sites.Environmental liabilities are recorded when the Companys liability is probable and the costs are reasonably estimable. In many cases, however, the Company is not able to determine whether it is liable or, if liability is probable, to reasonably estimate the loss or range of loss. Estimates of the Companys liability remain subject to additional uncertainties, including the nature and extent of site contamination, available remediation alternatives, the extent of corrective actions that may be required, and the number, participation, and financial condition of other potentially responsible parties (PRPs). The Company expects that it will adjust its accruals to reflect new information as appropriate. Future adjustments could have a material adverse effect on the Companys results of operations in a given period, but the Company cannot reliably predict the amounts of such future adjustments.Based on currently available information, the Company does not believe that there is a reasonable possibility that a loss exceeding the amount already accrued for any of the sites with which the Company is currently associated (either individually or in the aggregate) will be an amount that would be material to a decision to buy or sell the Companys securities. Future developments, administrative actions or liabilities relating to environmental matters, however, could have a material adverse effect on the Companys financial condition or results of operations.At September 30, 2009, the Companys reserves for environmental remediation obligations totaled approximately $17 million, of which $8 million was included in other current liabilities. The reserve includes estimated probable future costs of $5 million for federal Superfund and comparable state-managed sites; $6 million for formerly owned or operated sites for which the Company has remediation or indemnification obligations; $3 million for owned or controlled sites at which Company operations have been discontinued; and $3 million for sites utilized by the Company in its ongoing operations. The Company continues to evaluate whether it may be able to recover a portion of future costs for environmental liabilities from third parties.The timing of expenditures depends on a number of factors that vary by site. The Company expects that it will expend present accruals over many years and that remediation of all sites with which it has been ident |
Subsequent Event
Subsequent Event | |
9 Months Ended
Sep. 30, 2009 | |
Notes to Consolidated Financial Statements | |
Subsequent Event | Note 12. Subsequent Event On October 23, 2009, the Company acquired the assets of Crucible Compaction Metals and Crucible Research, a western Pennsylvania producer of advanced powder metal products, for $40.95 million. This business has been named ATI Powder Metals and will be part of the High Performance Metals business segment. |