Exhibit 99.1
Allegheny Technologies Announces Third Quarter Results
PITTSBURGH--(BUSINESS WIRE)--Oct. 20, 2004--Allegheny Technologies
Incorporated (NYSE:ATI)
-- Sales of $731 million increased 51% compared to the third
quarter 2003
-- Operating profit increased to $53.3 million as a result of
improved performance across all business segments, especially
Flat-Rolled Products
-- Net income of $8.6 million, or $0.09 per share, compared to
net loss of $28.8 million, or $(0.36) per share for the third
quarter 2003
-- $50 million voluntary pension contribution made during the
third quarter
-- Gross cost reductions totaled $103 million in the first nine
months of 2004, already nearly achieving $104 million plan for
2004
Allegheny Technologies Incorporated (NYSE:ATI) reported net
income of $8.6 million, or $0.09 per share, on sales of $730.6 million
for the third quarter ended September 30, 2004. Results included a
LIFO (last-in, first-out) inventory valuation reserve charge of
$8.5 million, primarily due to continued increases in raw material
costs. Retirement benefit expense was $24.8 million in the quarter.
Third quarter 2004 results do not include an income tax provision or
benefit as a result of a deferred tax valuation allowance recorded in
the fourth quarter 2003.
In the third quarter 2003, ATI reported a net loss of
$28.8 million, or $(0.36) per share, on sales of $482.6 million.
Results included net non-recurring special charges of $3.0 million, or
$(0.04) per share, a LIFO inventory valuation reserve charge of
$10.5 million, and retirement benefit expense of $33.5 million.
Results for the nine months ended September 30, 2004, were a loss
of $15.2 million, or $(0.18) per share, on sales of $1,954.9 million,
compared to a net loss of $81.9 million, or $(1.01) per share, on
sales of $1,453.0 million for the first nine months of 2003. Nine
months 2004 results include a LIFO inventory valuation reserve charge
of $82.7 million, retirement benefit expense of $94.8 million, and a
$40.4 million, or $0.48 per share, special gain related to actions
taken to control certain retiree medical costs, net of costs related
to the new ATI Allegheny Ludlum labor agreement and the J&L asset
acquisition.
Nine months 2003 results included an income tax benefit of
$48.5 million, or $0.60 per share, special charges of $3.0 million, or
$(0.04) per share, a $1.3 million, or $(0.02) per share, charge for
the cumulative effect of change in accounting principle, a LIFO
inventory valuation reserve charge of $22.8 million, and retirement
benefit expense of $101.7 million.
"We made important strides in the third quarter to transition ATI
to profitability," said Pat Hassey, ATI's Chairman, President and
Chief Executive Officer. "In our Flat-Rolled Products segment, the
integration of our recently acquired stainless steel assets in
Midland, PA and Louisville, OH is progressing very well and the new
capabilities exceed our original expectations. The second new electric
arc furnace at our Brackenridge, PA melt shop started up ahead of
plan. The first group of retirements under the new Allegheny Ludlum
labor agreement occurred in the quarter.
"In our High Performance Metals segment, we commissioned our high
performance metals long products rolling mill in Richburg, SC on
October 11th. We believe the timing is right since we see further
indications that we are at the beginning of a recovery in the
commercial aerospace cycle.
"ATI sales of $731 million increased significantly in all three of
our business segments compared to the third quarter 2003. Operating
profit also increased in each of our segments.
"During the third quarter, our Flat-Rolled Products segment began
to show the benefits of the strategic transformation of our stainless
steel business. With our new capabilities, total shipments set an
all-time record of over 170,000 tons. Sales increased by 80% compared
to the same period last year. More importantly, operating profit
exceeded $26 million as a result of increased shipments, improved
demand, price restoration actions and cost reductions.
"In our High Performance Metals segment, shipments of our premium
titanium alloys increased by 7% compared to last year's third quarter.
Demand for our high performance metals remained strong for military
and commercial aerospace spare parts. In addition, demand improved
from the OEM market and we are encouraged by build forecasts for the
next few years in terms of the number and size of aircraft as well as
increased high performance metals content. Our exotic alloys business
continued to perform well. Demand remained strong from the government
and medical markets, and from corrosion markets, particularly in Asia.
"Sales in our Engineered Products segment increased as a result of
improved demand from several key markets such as oil and gas, mining,
transportation and wind energy, as well as a pickup in overall
manufacturing demand.
"The effects of the ATI Business System and our ongoing cost
reductions were apparent in the third quarter. Operating profit as a
percentage of sales improved to 7%. Managed working capital as a
percent of annualized sales improved to just over 26% at the end of
the quarter compared to nearly 31% at the end of 2003. We achieved
$103 million of cost reductions, before the effects of inflation, in
the first nine months of 2004 and have already nearly reached our
$104 million cost reduction goal for the full year 2004.
"In addition, we began to make progress toward achieving the
previously announced $200 million of cost structure improvements and
synergies from the J&L asset acquisition and new labor agreement at
ATI Allegheny Ludlum.
"During the third quarter, we improved our balance sheet. We
received net cash proceeds of $230 million from our public offering.
We made a $50 million voluntary cash contribution to our U.S. pension
plan to improve the plan's funded position. Net cash flow from
operations for the first nine months of 2004 was $58 million,
excluding the voluntary pension contribution. Cash flow from
operations is impressive since we invested nearly $148 million in cash
for increased managed working capital, excluding the effect of the J&L
asset acquisition, as business conditions improved. Cash outlays for
net capital investments, acquisitions and debt repayments totaled
$52 million in the first nine months of 2004. Cash on hand at the end
of the quarter was $263 million and we continued to have no cash
borrowings under our secured domestic credit facility.
"Looking at the fourth quarter 2004, we expect our operating
performance, before any LIFO inventory valuation reserve charge, to be
similar to the third quarter 2004, mainly due to seasonal inventory
management actions by customers. Current raw materials price
volatility makes it difficult to forecast the fourth quarter 2004 LIFO
inventory valuation reserve. Iron scrap prices are at an all-time high
and nickel prices on the LME have recently been unusually volatile. At
recent raw materials prices, our fourth quarter 2004 LIFO inventory
valuation reserve charge could be in the range of $15 to $20 million
higher than the third quarter 2004. On a cash basis, volatile raw
materials costs are mostly neutralized by our raw materials surcharge
and index pricing mechanisms.
"We see 2004 as a year in which we accomplish a transition to
profitability. We see encouraging signs that the recovery that began
earlier this year in most of our capital goods markets, including
commercial aerospace, should continue in 2005. We believe the
strategies that we put in place in 2004 are working and have
positioned ATI for significantly better earnings performance in 2005."
Three Months Ended Nine Months Ended
September 30 September 30
In Millions
--------------------------------------
2004 2003 2004 2003
-------- --------- --------- ---------
Sales $730.6 $482.6 $1,954.9 $1,453.0
Net income (loss) $ 8.6 $(28.8) $ (15.2) $ (81.9)
Special gain (charge), net - $ (3.0) $ 40.4 $ (3.0)
Cumulative effect of change in
accounting principle - - - $ (1.3)
Net income (loss) excluding
special gain (charge) and
before cumulative effect of
change in accounting principle $ 8.6 $(25.8) $ (55.6) $ (77.6)
Per Diluted Share
--------------------------------------
Net income (loss) $ 0.09 $(0.36) $ (0.18) $ (1.01)
Special gain (charge), net - $(0.04) $ 0.48 $ (0.04)
Cumulative effect of change in
accounting principle - - - $ (0.02)
Net income (loss) excluding
special gain (charge) and
before cumulative effect of
change in accounting principle $ 0.09 $(0.32) $ (0.66) $ (0.95)
Third Quarter 2004 Financial Highlights
-- Sales were $730.6 million, up 51% compared to the third
quarter 2003. Sales increased 80% in the Flat-Rolled Products
segment, 19% in the High Performance Metals segment, and 18%
in the Engineered Products segment.
-- Operating profit increased to $53.3 million as a result of
improved performance across all of the business segments. The
Flat-Rolled Products segment led this improvement with an
operating profit of $26.7 million. ATI results included a LIFO
inventory valuation reserve charge of $8.5 million, due
primarily to a third quarter 2004 increase in raw materials
costs, especially for nickel, chromium, molybdenum, iron
scrap, and titanium scrap. For the same 2003 period, the LIFO
inventory valuation reserve charge was $10.5 million.
-- Income before taxes was $8.6 million, compared to a loss of
$48.3 million in the third quarter 2003.
-- Retirement benefit expense was $24.8 million compared to $33.5
million last year, primarily as a result of actions taken in
the second quarter 2004 to control retiree medical costs.
-- ATI made a voluntary cash contribution of $50 million to its
U.S. defined benefit pension plan in September 2004 to improve
the plan's funded position.
-- Cash flow from operations, before the $50 million pension
contribution, was $58.5 million for the nine months of 2004 as
improved operating results offset a $147.7 million increase in
managed working capital. The significant increase in sales,
including the effects of raw material surcharges, resulted in
higher accounts receivable and inventory levels. Year-to-date
capital expenditures were $39.5 million.
-- Cash on-hand was $262.6 million at the end of the quarter. ATI
received net cash proceeds of $229.7 million from the sale of
13.8 million shares of common stock in a public offering at
$17.50 per share, which was completed on July 28, 2004. There
were no borrowings outstanding under the secured domestic
credit facility during the first nine months of 2004.
-- Cost reductions, before the effects of inflation, totaled $103
million company-wide for the first nine months. ATI's initial
2004 cost reduction goal was established at $104 million,
excluding the anticipated cost reductions and synergies from
the J&L asset acquisition and the new labor agreement for ATI
Allegheny Ludlum.
Flat-Rolled Products Segment
Market Conditions
-- Demand remained good from the automotive and appliance
markets. Demand continued to be strong from residential
construction and remodeling, and capital goods markets such as
chemical processing, oil and gas and power generation.
Third quarter 2004 compared to third quarter 2003
-- Sales increased 80% to $465.5 million primarily due to
improved demand, the impact of higher raw material surcharges
and base-selling price increases, and higher shipment volume
resulting from the recently acquired assets in Midland, PA and
Louisville, OH. Total finished tons shipped increased by over
50,000 tons, or 42%. Shipments of commodity products increased
49% and shipments of high-value products increased 24%.
Average transaction prices, which include surcharges, were 26%
higher. The average base-selling price, which excludes
surcharges, for stainless steel cold-rolled sheet increased
25% compared to the third quarter 2003.
-- The segment had operating income of $26.7 million compared to
an operating loss of $4.9 million last year. The benefits of
increased volume, additional surcharges, higher base-selling
prices and cost reductions were partially offset by higher raw
material costs, which resulted in a LIFO inventory valuation
reserve charge of $9.2 million, and approximately $2 million
of costs associated with flooding at our facilities in Western
Pennsylvania resulting from the remnants of Hurricane Ivan.
The 2003 third quarter included a LIFO inventory valuation
reserve charge of $7.5 million.
-- The J&L asset acquisition was completed on June 1, 2004. Since
the acquisition was accounted for as a purchase, third quarter
2004 results did not include any operating profit on sales of
purchased J&L inventory on hand at the acquisition date.
-- Energy costs increased $0.2 million, net of $0.4 million in
gains from natural gas derivatives.
-- Results benefited from $19.5 million in cost reductions,
before the effects of inflation.
High Performance Metals Segment
Market Conditions
-- The commercial aerospace market showed early signs of a
cyclical recovery as demand improved from the commercial OEM
market. Demand for high performance metals remained strong for
spare parts from the commercial and military aerospace
markets. Our exotic alloys business continued to benefit from
sustained high demand from government and medical markets, and
from corrosion markets, particularly in Asia.
Third quarter 2004 compared to third quarter 2003
-- Sales increased 19% to $192.5 million. Shipments were up 7%
for titanium alloys, while shipments declined 8% for
nickel-based and specialty steel alloys and 13% for exotic
alloys, both due in part to product mix. Average selling
prices increased 13% for titanium alloys, 41% for nickel-based
and specialty steel alloys, and 21% for exotic alloys. The
increase in selling prices for nickel-based and specialty
steel alloys was primarily due to mix and higher raw materials
indices.
-- Operating profit increased to $21.4 million compared to an
operating profit of $9.5 million for the prior year period as
a result of improved sales and pricing and cost reduction
initiatives. Changes from the second quarter 2004 in raw
material costs, inventory levels and mix resulted in a LIFO
inventory valuation reserve benefit of $2.1 million in 2004,
compared to $3.4 million charge in 2003.
-- Results benefited from $17.1 million of cost reductions,
before the effects of inflation.
Engineered Products Segment
Market Conditions
-- Demand for tungsten products was strong from the oil and gas,
mining, cutting tool and medical markets. Demand remained
strong for forged products from the Class 8 truck market and
improved from the oil and gas and off-road vehicle markets.
Demand for cast products improved from the transportation and
wind energy markets.
Third quarter 2004 compared to third quarter 2003
-- Sales improved 18% to $72.6 million.
-- Operating profit improved to $5.2 million compared to $1.2
million last year due to higher sales volumes, improved
pricing, and the benefits from cost reductions, which offset
higher raw material costs and approximately $0.5 million of
costs associated with flooding at our Rome Metals operation in
Western Pennsylvania resulting from the remnants of Hurricane
Ivan. The rise in raw material costs resulted in a LIFO
inventory valuation reserve charge of $1.4 million in 2004
compared to a $0.4 benefit in 2003.
-- Results benefited from $2.4 million of cost reductions, before
the effects of inflation.
Retirement Benefit Expense
-- Retirement benefit expense declined to $24.8 million in the
third quarter 2004, compared to $33.5 million in the third
quarter 2003, primarily as a result of actions taken in the
second quarter 2004 to control retiree medical costs.
-- For the third quarter 2004, retirement benefit expense
included in cost of sales was $17.7 million, and in selling
and administrative expenses was $7.1 million. For the third
quarter 2003, retirement benefit expense included in cost of
sales was $23.1 million, and in selling and administrative
expenses was $10.4 million.
-- ATI is not required to make cash contributions to its U.S.
defined benefit pension plan for 2004. During the third
quarter 2004, we made a $50 million voluntary cash
contribution to this defined benefit pension plan to improve
the plan's funded position. Based on current actuarial
studies, ATI does not expect to be required to make cash
contributions to its U.S. defined benefit pension plan during
the next several years. However, we may elect, depending upon
investment performance of the pension plan assets and other
factors, to make additional cash contributions to this pension
plan in the future.
2003 Net Special Charges
-- Results for the third quarter 2003 included net special
charges of $3.0 million after-tax, or $(0.04) per share.
Special charges included after-tax costs of $5.4 million
associated with the termination of certain employee benefit
plans, executive management transition, and workforce
reductions. These expenses were partially offset by $2.4
million, after-tax, of interest income related to a Federal
income tax settlement associated with prior years.
Other Expenses
-- Corporate expenses for the third quarter 2004 were $7.4
million compared to $4.1 million in the year-ago period. This
increase is primarily due to expenses associated with
incentive compensation programs and costs of complying with
Sarbanes-Oxley regulations, which more than offset savings
associated with reductions in staffing and other efforts to
control costs at the corporate office.
-- Excluding the effects of retirement benefit expense and an
increase of $1.8 million in non-cash stock-based compensation
expense compared to the prior year quarter, selling and
administrative expenses as a percentage of sales declined to
6.6% in the 2004 third quarter from 8.8% in the same period of
2003.
-- Third quarter 2004 interest expense, net of interest income,
increased to $9.3 million from $4.1 million in the year-ago
period primarily as a result of the recognition in the third
quarter 2003 of interest income of $4 million, pretax, related
to a Federal income tax settlement associated with prior
years, and interest associated with the financing of the June
1, 2004, J&L asset acquisition. In the third quarter 2004, we
terminated the "receive fixed, pay floating" interest rate
swap contracts outstanding and realized net cash proceeds of
$1.5 million. Since these interest rate swap contracts were
designated as a hedge of interest expense on our 10-year Notes
due 2011, the $1.5 million gain realized on termination of the
contracts will be recognized ratably into income over the
remaining life of the Notes as a reduction to interest
expense.
-- No income tax benefit was recognized for the first nine months
of 2004 since we cannot tax benefit current operating losses
due to cumulative losses incurred during 2001 through 2003. We
recorded a valuation allowance in the 2003 fourth quarter for
a major portion of our deferred tax assets in accordance with
SFAS No. 109, "Accounting for Income Taxes". Future tax
provisions or benefits will be recognized when taxable income
exceeds the 2003 net operating tax loss carry-forward, or when
tax losses, if any, are recoverable as cash refunds.
Cash Flow, Working Capital and Debt
-- Cash on hand was $262.6 million at September 30, 2004. On July
28, 2004, the sale of 13.8 million shares of ATI common stock
was completed in a public offering at $17.50 per share with
net cash proceeds of $229.7 million.
-- Cash flow from operations for the first nine months of 2004
was $8.5 million as improved operating results for 2004 and
the receipt of a $7.2 million Federal income tax refund
pertaining to our 2003 tax return offset a $147.7 million
increase in managed working capital and a $50 million
voluntary contribution to the Company's U.S. defined benefit
pension plan.
-- The increase in managed working capital was due to a $85.4
million increase in accounts receivable, which reflects the
higher level of sales in the third quarter 2004 compared to
the fourth quarter 2003, and a $133.1 million increase in
inventory mostly as a result of higher raw material costs,
partially offset by a $70.8 million increase in accounts
payable. Most of the increase in raw material costs should be
recovered through surcharge and index pricing mechanisms.
-- At September 30, 2004, managed working capital was 26.3% of
annualized sales, excluding the effect of the J&L asset
acquisition, compared to 30.7% of annualized sales at 2003
year-end. We define managed working capital as accounts
receivable and gross inventories less accounts payable. While
inventory and accounts receivable balances increased during
the first nine months of 2004, gross inventory turns, which
excludes the effect of LIFO inventory valuation reserves, and
days sales outstanding, which measures actual collection
timing for accounts receivable, both improved over 2003
year-end levels.
-- Cash used in investing activities was $46.5 million in the
first nine months of 2004 and consisted primarily of $37.1
million of capital expenditures, net of $2.4 million of
proceeds from the disposal of miscellaneous assets. Cash used
in investing activities also included $7.5 million for the J&L
asset acquisition.
-- Cash provided by financing activities was $221.0 million in
the first nine months of 2004, and included net proceeds of
$229.7 million from the sale of common stock, $1.5 million
received on the termination of the interest rate swap
arrangements discussed above, and $5.1 million of proceeds
received from the exercise of stock options, offset by a
decrease in net borrowings of $5.6 million, and payment of
dividends of $9.7 million.
-- Net debt to total capitalization ratio improved to 45.7% at
September 30, 2004 from 72.1% at the end of 2003.
-- There were no borrowings outstanding during the first nine
months of 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 2003
The adoption of Statement of Financial Accounting Standards No.
143, "Accounting for Asset Retirement Obligations" ("SFAS 143")
resulted in an after-tax charge of $1.3 million, or $(0.02) per share
in the 2003 first quarter. This charge is reported as a cumulative
effect of change in accounting principle.
Allegheny Technologies will conduct a conference call with
investors and analysts on October 20, 2004, 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
"Third Quarter Conference Call". In addition, the conference call will
be available through the CCBN website, located at www.ccbn.com.
This news release contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act 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 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/oil and gas, and other markets; (c) our
inability to achieve the level of cost savings, productivity
improvements, synergies, growth or other benefits anticipated by
management, including those anticipated from the integration of
acquired businesses, whether due to significant increases in energy,
raw materials or employee benefits costs 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 or investigations adverse to us; and
(g) the other risk factors summarized in our Annual Report on Form
10-K for the year ended December 31, 2003, and our Quarterly Reports
on Form 10-Q for the quarters ended March 31, 2004 and June 30, 2004,
and other reports filed with the Securities and Exchange Commission.
We assume no duty to update our forward-looking statements.
Allegheny Technologies Incorporated (NYSE:ATI) is one of the
largest and most diversified specialty materials producers in the
world, with revenues of approximately $2.4 billion during the 12-month
period ending September 30, 2004. The Company has approximately 9,000
full time employees world-wide and its talented people use innovative
technologies to offer growing global markets a wide range of specialty
materials. High-value products include nickel-based and cobalt-based
alloys and superalloys, titanium and titanium alloys, specialty
steels, super stainless steel, exotic alloys, which include zirconium,
hafnium and niobium, tungsten materials, and highly engineered strip
and Precision Rolled Strip(R) products. In addition, we produce
commodity specialty materials such as stainless steel sheet and plate,
silicon and tool steels, and forgings and castings. The Allegheny
Technologies website can be found at www.alleghenytechnologies.com.
Allegheny Technologies Incorporated and Subsidiaries
Consolidated Statements of Operations
(Unaudited - Dollars in millions, except per share amounts)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
2004 2003 2004 2003
-------- --------- --------- --------
Sales $730.6 $482.6 $1,954.9 $1,453.0
Costs and expenses:
Cost of sales 653.7 464.4 1,815.0 1,399.4
Selling and administrative
expenses 56.8 60.3 168.3 161.4
Curtailment (gain), net of
restructuring costs - 1.2 (40.4) 1.2
-------- -------- --------- ---------
Income (loss) before interest,
other expense and income taxes 20.1 (43.3) 12.0 (109.0)
Interest expense, net (9.3) (4.1) (25.3) (19.9)
Other expense, net (2.2) (0.9) (1.9) (0.2)
-------- -------- --------- ---------
Income (loss) before income tax
benefit and cumulative effect of
change in accounting principle 8.6 (48.3) (15.2) (129.1)
Income tax benefit - (19.5) - (48.5)
-------- -------- --------- ---------
Net income (loss) before
cumulative effect of change
in accounting principle 8.6 (28.8) (15.2) (80.6)
Cumulative effect of change in
accounting principle - - - (1.3)
-------- -------- --------- ---------
Net income (loss) $8.6 $(28.8) $(15.2) $(81.9)
======== ======== ========= =========
Basic net income (loss) per
common share before cumulative
effect of change in
accounting principle $0.10 $(0.36) $(0.18) $(0.99)
Cumulative effect of change in
accounting principle - - - (0.02)
-------- -------- --------- ---------
Basic net income (loss) per
common share $0.10 $(0.36) $(0.18) $(1.01)
======== ======== ========= =========
Diluted net income (loss) per
common share before cumulative
effect of change in accounting
principle $0.09 $(0.36) $(0.18) $(0.99)
Cumulative effect of changein
accounting principle - - - (0.02)
-------- -------- --------- ---------
Diluted net income (loss) per
common share $0.09 $(0.36) $(0.18) $(1.01)
======== ======== ========= =========
Weighted average common shares
outstanding -- basic (millions) 89.9 81.1 83.7 80.9
Weighted average common shares
outstanding -- diluted (millions) 94.1 81.1 83.7 80.9
Actual common shares outstanding--
end of period (millions) 95.5 80.7 95.5 80.7
Allegheny Technologies Incorporated and Subsidiaries
Sales and Operating Profit (Loss) by Business Segment
(Unaudited - Dollars in millions)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -------------------
2004 2003 2004 2003
--------- -------- --------- ---------
Sales:
Flat-Rolled Products $465.5 $258.9 $1,174.3 $774.9
High Performance Metals 192.5 162.3 563.7 490.1
Engineered Products 72.6 61.4 216.9 188.0
--------- -------- --------- ---------
Total External Sales $730.6 $482.6 $1,954.9 $1,453.0
========= ======== ========= =========
Operating Profit (Loss):
Flat-Rolled Products $26.7 $(4.9) $35.7 $(12.4)
% of Sales 5.7% -1.9% 3.0% -1.6%
High Performance Metals 21.4 9.5 41.8 29.4
% of Sales 11.1% 5.9% 7.4% 6.0%
Engineered Products 5.2 1.2 14.5 6.2
% of Sales 7.2% 2.0% 6.7% 3.3%
--------- -------- --------- ---------
Operating Profit 53.3 5.8 92.0 23.2
% of Sales 7.3% 1.2% 4.7% 1.6%
Corporate expenses (7.4) (4.1) (21.9) (14.2)
Interest expense, net (9.3) (4.1) (25.3) (19.9)
--------- -------- --------- ---------
Subtotal 36.6 (2.4) 44.8 (10.9)
Curtailment gain, net of
restructuring costs - - 40.4 -
Management transition and
restructuring costs - (8.6) - (8.6)
Other expenses, net of gains
on asset sales (3.2) (3.8) (5.6) (7.9)
Retirement benefit expense (24.8) (33.5) (94.8) (101.7)
--------- -------- --------- ---------
Income (loss) before
income taxes $8.6 $(48.3) $(15.2) $(129.1)
========= ======== ========= =========
Allegheny Technologies Incorporated and Subsidiaries
Consolidated Balance Sheets
(Current period unaudited--Dollars in millions)
September 30, December 31,
2004 2003
------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $262.6 $79.6
Accounts receivable, net of allowances for
doubtful accounts of $11.2 and $10.2 at
September 30, 2004 and December 31, 2003,
respectively 365.2 248.8
Inventories, net 460.8 359.7
Income tax refunds receivable - 7.2
Prepaid expenses and other current assets 31.0 48.0
------------- ------------
Total current assets 1,119.6 743.3
Property, plant and equipment, net 727.2 711.1
Cost in excess of net assets acquired 204.6 198.4
Deferred pension asset 144.0 144.0
Deferred income taxes 34.3 34.3
Other assets 59.2 53.8
------------- ------------
Total Assets $2,288.9 $1,884.9
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $259.1 $172.3
Accrued liabilities 218.7 194.6
Short-term debt and current portion
of long-term debt 33.9 27.8
------------- ------------
Total current liabilities 511.7 394.7
Long-term debt 557.3 504.3
Accrued postretirement benefits 473.8 507.2
Pension liabilities 248.2 220.6
Other long-term liabilities 107.6 83.4
------------- ------------
Total liabilities 1,898.6 1,710.2
------------- ------------
Total stockholders' equity 390.3 174.7
------------- ------------
Total Liabilities and Stockholders' Equity $2,288.9 $1,884.9
============= ============
Allegheny Technologies Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited--Dollars in millions)
Nine Months Ended
September 30
------------------
2004 2003
--------- --------
Operating Activities:
Net loss $(15.2) $(81.9)
Cumulative effect of change in accounting
principle - 1.3
Non-cash curtailment gain and restructuring
charges, net (45.6) -
Depreciation and amortization 56.4 55.7
Deferred income taxes - (40.7)
Pension contribution (50.0) -
Change in pension assets/liabilities 51.9 66.0
Income tax refunds receivable - (17.1)
Income tax refunds received 7.2 48.5
Change in managed working capital (147.7) (36.2)
Postretirement benefits 20.0 8.7
Accrued liabilities and other (a) 131.5 47.8
--------- --------
Cash provided by operating activities 8.5 52.1
--------- --------
Investing Activities:
Purchases of property, plant and equipment (39.5) (51.5)
Acquisition of business (7.5) -
Asset disposals and other 0.5 4.5
--------- --------
Cash used in investing activities (46.5) (47.0)
--------- --------
Financing Activities:
Net increase (decrease) in debt (5.6) 13.3
Interest rate swap termination 1.5 15.3
Issuance of common stock 229.7 -
Dividends paid (9.7) (14.6)
Exercises of stock options 5.1 -
--------- --------
Cash provided by financing activities 221.0 14.0
--------- --------
Increase in cash and cash equivalents 183.0 19.1
Cash and cash equivalents at beginning of period 79.6 59.4
--------- --------
Cash and cash equivalents at end of period $262.6 $78.5
========= ========
(a) Includes LIFO inventory valuation reserves of $82.7 million and
$22.8 million for the nine months ended September 30, 2004 and 2003,
respectively, which are excluded from managed working capital.
Supplemental non-cash investing and financing activities
On June 1, 2004, the Company acquired substantially all of the assets
of J&L Specialty Steel, LLC for consideration of $67.2 million. Cash
paid at closing was $7.5 million, with promissory notes payable to the
seller of $59.7 million.
Allegheny Technologies Incorporated and Subsidiaries
Selected Financial Data
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
2004 2003 2004 2003
--------- -------- -------- --------
Volume:
Flat-Rolled Products (finished
tons) 170,181 119,564 428,926 359,082
--------- -------- -------- --------
Commodity 129,184 86,519 309,038 257,348
High value 40,997 33,045 119,888 101,734
High Performance Metals
(000's lbs.)
Nickel-based and
specialty steel alloys 8,227 8,965 25,815 27,114
Titanium mill products 5,130 4,813 15,809 14,045
Exotic alloys 912 1,052 3,179 3,144
Average Prices:
Flat-Rolled Products (per
finished ton) $2,732 $2,165 $2,736 $2,156
Commodity $2,198 $1,570 $2,141 $1,561
High value $4,418 $3,722 $4,268 $3,660
High Performance Metals (per
lb.)
Nickel-based and specialty
steel alloys $9.09 $6.44 $8.30 $6.54
Titanium mill products $12.53 $11.05 $11.70 $11.68
Exotic alloys $46.12 $38.16 $40.86 $38.01
Allegheny Technologies Incorporated and Subsidiaries
Other Financial Information
Managed Working Capital
(Unaudited - Dollars in millions)
September 30, December 31,
2004 2003
------------- ------------
Accounts receivable $365.2 $248.8
Inventory 460.8 359.7
Accounts payable (259.1) (172.3)
------------- ------------
Subtotal 566.9 436.2
Allowance for doubtful accounts 11.2 10.2
LIFO reserve 194.4 111.7
Corporate and other 24.5 17.4
------------- ------------
Managed working capital $797.0 $575.5
============= ============
Annualized prior 2 months sales $3,026.0 $1,874.0
============= ============
Managed working capital as a
% of annualized sales 26.3% 30.7%
September 30, 2004 change in managed
working capital $221.5
Acquisition of J&L managed working capital (73.8)
-------------
Net change in managed working capital $147.7
=============
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)
September 30, December 31,
2004 2003
------------- ------------
Total debt $591.2 $532.1
Less: Cash (262.6) (79.6)
------------- ------------
Net debt $328.6 $452.5
Net debt $328.6 $452.5
Stockholders' equity 390.3 174.7
------------- ------------
Total capital $718.9 $627.2
Net debt to capital ratio 45.7% 72.1%
============= ============
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.
CONTACT: Allegheny Technologies Incorporated
Dan L. Greenfield, 412-394-3004