Financial Information for Subsidiary and Guarantor Parent | Financial Information for Subsidiary and Guarantor Parent The payment obligations under the $150 million 6.95% debentures due 2025 issued by Allegheny Ludlum, LLC (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. ATI 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. Allegheny Technologies Incorporated Financial Information for Subsidiary and Guarantor Parent Balance Sheets September 30, 2016 (In millions) Guarantor Parent Subsidiary Non-guarantor Subsidiaries Eliminations Consolidated Assets: Cash and cash equivalents $ 2.3 $ 4.3 $ 181.8 $ — $ 188.4 Accounts receivable, net 0.1 115.7 338.2 — 454.0 Intercompany notes receivable — — 2,955.8 (2,955.8 ) — Inventories, net — 137.6 941.3 — 1,078.9 Prepaid expenses and other current assets 3.3 4.9 32.6 — 40.8 Total current assets 5.7 262.5 4,449.7 (2,955.8 ) 1,762.1 Property, plant and equipment, net 1.5 1,587.7 925.2 — 2,514.4 Goodwill — — 644.4 — 644.4 Intercompany notes receivable — — 200.0 (200.0 ) — Investment in subsidiaries 5,363.3 37.7 — (5,401.0 ) — Other assets 22.1 26.1 223.2 — 271.4 Total assets $ 5,392.6 $ 1,914.0 $ 6,442.5 $ (8,556.8 ) $ 5,192.3 Liabilities and stockholders’ equity: Accounts payable $ 3.5 $ 123.9 $ 157.8 $ — $ 285.2 Accrued liabilities 35.6 91.0 184.3 — 310.9 Intercompany notes payable 1,442.1 1,513.7 — (2,955.8 ) — Short-term debt and current portion of long-term debt 0.7 0.3 4.4 — 5.4 Total current liabilities 1,481.9 1,728.9 346.5 (2,955.8 ) 601.5 Long-term debt 1,620.9 149.9 99.6 — 1,870.4 Intercompany notes payable — 200.0 — (200.0 ) — Accrued postretirement benefits — 245.1 66.5 — 311.6 Pension liabilities 658.9 4.7 45.0 — 708.6 Deferred income taxes 51.3 — — — 51.3 Other long-term liabilities 16.9 18.8 50.5 — 86.2 Total liabilities 3,829.9 2,347.4 608.1 (3,155.8 ) 3,629.6 Total stockholders’ equity (deficit) 1,562.7 (433.4 ) 5,834.4 (5,401.0 ) 1,562.7 Total liabilities and stockholders’ equity $ 5,392.6 $ 1,914.0 $ 6,442.5 $ (8,556.8 ) $ 5,192.3 Allegheny Technologies Incorporated Financial Information for Subsidiary and Guarantor Parent Statements of Operations and Comprehensive Income For the three months ended September 30, 2016 (In millions) Guarantor Parent Subsidiary Non-guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 253.0 $ 517.5 $ — $ 770.5 Cost of sales 14.0 266.6 439.7 — 720.3 Gross profit (loss) (14.0 ) (13.6 ) 77.8 — 50.2 Selling and administrative expenses 23.8 4.2 32.5 — 60.5 Restructuring charges — 0.5 488.1 — 488.6 Operating loss (37.8 ) (18.3 ) (442.8 ) — (498.9 ) Interest income (expense), net (36.5 ) (19.3 ) 23.2 — (32.6 ) Other income (loss) including equity in income of unconsolidated subsidiaries (457.2 ) 0.2 (0.2 ) 457.2 — Income (loss) before income tax provision (benefit) (531.5 ) (37.4 ) (419.8 ) 457.2 (531.5 ) Income tax provision (benefit) (4.3 ) (9.1 ) (165.8 ) 174.9 (4.3 ) Net income (loss) (527.2 ) (28.3 ) (254.0 ) 282.3 (527.2 ) Less: Net income attributable to noncontrolling interests — — 3.6 — 3.6 Net income (loss) attributable to ATI $ (527.2 ) $ (28.3 ) $ (257.6 ) $ 282.3 $ (530.8 ) Comprehensive income (loss) attributable to ATI $ (516.8 ) $ (27.0 ) $ (260.0 ) $ 285.0 $ (518.8 ) Allegheny Technologies Incorporated Financial Information for Subsidiary and Guarantor Parent Statements of Operations and Comprehensive Income For the nine months ended September 30, 2016 (In millions) Guarantor Parent Subsidiary Non-guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 727.7 $ 1,610.8 $ — $ 2,338.5 Cost of sales 43.0 852.0 1,378.3 — 2,273.3 Gross profit (loss) (43.0 ) (124.3 ) 232.5 — 65.2 Selling and administrative expenses 66.3 18.8 97.3 — 182.4 Restructuring charges — 9.5 489.1 — 498.6 Operating loss (109.3 ) (152.6 ) (353.9 ) — (615.8 ) Interest income (expense), net (101.4 ) (51.0 ) 61.2 — (91.2 ) Other income (loss) including equity in income of unconsolidated subsidiaries (494.5 ) 0.6 1.5 494.2 1.8 Income (loss) before income tax provision (benefit) (705.2 ) (203.0 ) (291.2 ) 494.2 (705.2 ) Income tax provision (benefit) (64.4 ) (70.1 ) (116.3 ) 186.4 (64.4 ) Net income (loss) (640.8 ) (132.9 ) (174.9 ) 307.8 (640.8 ) Less: Net income attributable to noncontrolling interests — — 10.0 — 10.0 Net income (loss) attributable to ATI $ (640.8 ) $ (132.9 ) $ (184.9 ) $ 307.8 $ (650.8 ) Comprehensive income (loss) attributable to ATI $ (592.6 ) $ (114.2 ) $ (199.0 ) $ 307.8 $ (598.0 ) Condensed Statements of Cash Flows For the nine months ended September 30, 2016 (In millions) Guarantor Parent Subsidiary Non-guarantor Subsidiaries Eliminations Consolidated Cash flows provided by (used in) operating activities $ (73.0 ) $ (183.7 ) $ 169.0 $ (24.0 ) $ (111.7 ) Investing Activities: Purchases of property, plant and equipment (0.5 ) (93.0 ) (81.4 ) — (174.9 ) Net receipts/(payments) on intercompany activity — — (102.0 ) 102.0 — Asset disposals and other — — 2.1 — 2.1 Cash flows provided by (used in) investing activities (0.5 ) (93.0 ) (181.3 ) 102.0 (172.8 ) Financing Activities: Borrowings on long-term debt 287.5 — 100.0 — 387.5 Payments on long-term debt and capital leases (0.5 ) (0.2 ) (1.7 ) — (2.4 ) Net borrowings under credit facilities — — 2.4 — 2.4 Debt issuance costs (9.4 ) — (1.0 ) — (10.4 ) Net receipts/(payments) on intercompany activity (176.4 ) 278.4 — (102.0 ) — Dividends paid to stockholders (25.8 ) — (24.0 ) 24.0 (25.8 ) Dividends paid to noncontrolling interests — — (16.0 ) — (16.0 ) Acquisition of noncontrolling interests — — (12.2 ) — (12.2 ) Cash flows provided by (used in) financing activities 75.4 278.2 47.5 (78.0 ) 323.1 Increase in cash and cash equivalents $ 1.9 $ 1.5 $ 35.2 $ — $ 38.6 Allegheny Technologies Incorporated Financial Information for Subsidiary and Guarantor Parent Balance Sheets December 31, 2015 Guarantor Non-guarantor (In millions) Parent Subsidiary Subsidiaries Eliminations Consolidated Assets: Cash and cash equivalents $ 0.4 $ 2.8 $ 146.6 $ — $ 149.8 Accounts receivable, net 0.1 100.3 299.9 — 400.3 Intercompany notes receivable — — 2,601.5 (2,601.5 ) — Inventories, net — 239.9 1,031.7 — 1,271.6 Prepaid expenses and other current assets 9.3 3.8 32.8 — 45.9 Total current assets 9.8 346.8 4,112.5 (2,601.5 ) 1,867.6 Property, plant and equipment, net 2.2 1,559.9 1,366.1 — 2,928.2 Goodwill — — 651.4 — 651.4 Intercompany notes receivable — — 200.0 (200.0 ) — Investment in subsidiaries 5,742.5 37.7 — (5,780.2 ) — Other assets 13.4 23.0 268.1 — 304.5 Total assets $ 5,767.9 $ 1,967.4 $ 6,598.1 $ (8,581.7 ) $ 5,751.7 Liabilities and stockholders’ equity: Accounts payable $ 4.8 $ 171.1 $ 204.9 $ — $ 380.8 Accrued liabilities 42.1 74.0 185.7 — 301.8 Intercompany notes payable 1,325.4 1,276.1 — (2,601.5 ) — Short-term debt and current portion of long-term debt 0.7 0.1 3.1 — 3.9 Total current liabilities 1,373.0 1,521.3 393.7 (2,601.5 ) 686.5 Long-term debt 1,341.7 149.7 0.4 — 1,491.8 Intercompany notes payable — 200.0 — (200.0 ) — Accrued postretirement benefits — 280.0 79.2 — 359.2 Pension liabilities 778.0 5.2 50.6 — 833.8 Deferred income taxes 75.6 — — — 75.6 Other long-term liabilities 15.2 20.7 72.4 — 108.3 Total liabilities 3,583.5 2,176.9 596.3 (2,801.5 ) 3,555.2 Redeemable noncontrolling interest — — 12.1 — 12.1 Total stockholders’ equity (deficit) 2,184.4 (209.5 ) 5,989.7 (5,780.2 ) 2,184.4 Total liabilities and stockholders’ equity $ 5,767.9 $ 1,967.4 $ 6,598.1 $ (8,581.7 ) $ 5,751.7 Allegheny Technologies Incorporated Financial Information for Subsidiary and Guarantor Parent Statements of Operations and Comprehensive Income For the three months ended September 30, 2015 (In millions) Guarantor Parent Subsidiary Non-guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 286.3 $ 546.4 $ — $ 832.7 Cost of sales 9.2 363.5 488.7 — 861.4 Gross profit (loss) (9.2 ) (77.2 ) 57.7 — (28.7 ) Selling and administrative expenses 22.9 9.3 30.3 — 62.5 Operating income (loss) (32.1 ) (86.5 ) 27.4 — (91.2 ) Interest income (expense), net (29.5 ) (12.6 ) 14.6 — (27.5 ) Other income (loss) including equity in income of unconsolidated subsidiaries (56.3 ) 0.2 0.7 56.2 0.8 Income (loss) before income tax provision (benefit) (117.9 ) (98.9 ) 42.7 56.2 (117.9 ) Income tax provision (benefit) 23.4 (35.1 ) 11.0 24.1 23.4 Net income (loss) (141.3 ) (63.8 ) 31.7 32.1 (141.3 ) Less: Net income attributable to noncontrolling interests — — 3.3 — 3.3 Net income (loss) attributable to ATI $ (141.3 ) $ (63.8 ) $ 28.4 $ 32.1 $ (144.6 ) Comprehensive income (loss) attributable to ATI $ (163.5 ) $ (60.5 ) $ 16.7 $ 44.6 $ (162.7 ) Allegheny Technologies Incorporated Financial Information for Subsidiary and Guarantor Parent Statements of Operations and Comprehensive Income For the nine months ended September 30, 2015 (In millions) Guarantor Parent Subsidiary Non-guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 1,231.5 $ 1,749.2 $ — $ 2,980.7 Cost of sales 22.0 1,296.5 1,504.4 — 2,822.9 Gross profit (loss) (22.0 ) (65.0 ) 244.8 — 157.8 Selling and administrative expenses 70.1 30.4 97.5 — 198.0 Operating income (loss) (92.1 ) (95.4 ) 147.3 — (40.2 ) Interest income (expense), net (86.1 ) (37.3 ) 42.4 — (81.0 ) Other income (loss) including equity in income of unconsolidated subsidiaries 59.3 0.8 1.8 (59.6 ) 2.3 Income (loss) before income tax provision (benefit) (118.9 ) (131.9 ) 191.5 (59.6 ) (118.9 ) Income tax provision (benefit) 23.7 (46.3 ) 67.4 (21.1 ) 23.7 Net income (loss) (142.6 ) (85.6 ) 124.1 (38.5 ) (142.6 ) Less: Net income attributable to noncontrolling interests — — 8.4 — 8.4 Net income (loss) attributable to ATI $ (142.6 ) $ (85.6 ) $ 115.7 $ (38.5 ) $ (151.0 ) Comprehensive income (loss) attributable to ATI $ (140.4 ) $ (76.0 ) $ 101.9 $ (30.5 ) $ (145.0 ) Condensed Statements of Cash Flows For the nine months ended September 30, 2015 (In millions) Guarantor Parent Subsidiary Non-guarantor Subsidiaries Eliminations Consolidated Cash flows provided by (used in) operating activities $ (61.3 ) $ (171.1 ) $ 341.3 $ — $ 108.9 Investing Activities: Purchases of property, plant and equipment (0.1 ) (45.0 ) (54.4 ) — (99.5 ) Purchases of businesses, net of cash acquired — — (0.5 ) — (0.5 ) Net receipts/(payments) on intercompany activity — — (333.3 ) 333.3 — Asset disposals and other — 0.2 (0.2 ) — — Cash flows provided by (used in) investing activities (0.1 ) (44.8 ) (388.4 ) 333.3 (100.0 ) Financing Activities: Payments on long-term debt and capital leases (0.4 ) (0.1 ) (22.8 ) — (23.3 ) Net receipts/(payments) on intercompany activity 124.2 209.1 — (333.3 ) — Dividends paid to stockholders (57.9 ) — — — (57.9 ) Other (1.3 ) — 1.6 — 0.3 Cash flows provided by (used in) financing activities 64.6 209.0 (21.2 ) (333.3 ) (80.9 ) Increase (decrease) in cash and cash equivalents $ 3.2 $ (6.9 ) $ (68.3 ) $ — $ (72.0 ) |