Exhibit 99.1
Allegheny Technologies Announces Strong Fourth Quarter And Full Year 2005
Results
PITTSBURGH--(BUSINESS WIRE)--Jan. 25, 2006--Allegheny Technologies
Incorporated (NYSE:ATI):
Fourth Quarter 2005 Results
-- Sales increased 15% to $894.4 million
-- Net income of $120.4 million, or $1.18 per share
-- Net income of $97.9 million, or $0.96 per share, before net
special gain
Full Year 2005 Results
-- Sales increased 30% to $3.54 billion
-- Net income of $361.4 million, or $3.58 per share
-- Net income of $338.9 million, or $3.36 per share, before net
special gain
-- Operating profit of $533 million, or 15% of sales
-- Segment operating profit:
-- High Performance Metals: $335 million, or 27% of sales
-- Flat-Rolled Products: $150 million, or 8% of sales
-- Engineered Products: $47.5 million, or 12% of sales
-- Cost reductions of $125 million, before the effects of
inflation
-- Net debt to total capitalization improved to 19.8%
-- Cash on hand increased to $363 million
Allegheny Technologies Incorporated (NYSE:ATI) reported net
income for the fourth quarter 2005 of $120.4 million, or $1.18 per
share, on sales of $894.4 million. Excluding the previously announced
net special gain, net income for the fourth quarter was $97.9 million,
or $0.96 per share.
In the fourth quarter 2004, ATI reported net income of
$35.0 million, or $0.35 per share, on sales of $778.1 million.
Net income for the full year 2005 was $361.4 million, or $3.58 per
share, on sales of $3.54 billion, compared to net income of
$19.8 million, or $0.22 per share, on sales of $2.73 billion for 2004.
Results for the 2005 fourth quarter and year included a $22.5
million, or $0.22 per share, net special gain. This net special gain
consisted primarily of the tax benefit associated with the reversal of
the Company's remaining valuation allowance for U.S. Federal net
deferred tax assets, partially offset by asset impairments and charges
for legal matters, and the cumulative effect of adopting FASB
Interpretation No. 47, "Accounting for Contingent Asset Retirement
Obligations." Results for 2004 included 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 June 2004 J&L asset acquisition.
"ATI's fourth quarter 2005 results were strong, concluding a year
of accelerating profitability," said L. Patrick Hassey, Chairman,
President and Chief Executive Officer. "For the full year 2005, sales
increased nearly 30% to $3.5 billion. Operating profit reached $533
million, or 15% of sales. Notably, over 70% of operating profit and
approximately 45% of sales were generated by our High Performance
Metals and Engineered Products segments, demonstrating the
transformation of ATI to a high-value-products driven company. Cash
flow was strong in 2005. We continued to invest in the business as
sales increased, and we improved the balance sheet with a $100 million
voluntary contribution to ATI's defined benefit pension plan. After
these investments, cash on hand still increased by 45% to $363
million. We remained focused on reducing costs in 2005 and achieved
cost reductions, before the effects of inflation, of $125 million. Our
2005 cost reduction target was $100 million.
"Looking ahead, we see 2006 as a year of continued profitable
growth. The outlook remains strong from our major markets, namely
aerospace, defense, chemical process industry, oil and gas, electrical
energy, and medical. ATI's strategic growth investments in high-value
titanium products and nickel-based alloys and superalloys are on
schedule and are expected to impact results positively during the
second half of the year.
"Turning to our segments, the outlook in our High Performance
Metals segment is robust for our premium titanium alloys and
nickel-based superalloys for jet engines, and we are increasing
shipments of our titanium alloys used in airframe components. A high
level of demand continues for our exotic alloys, particularly from
global corrosion markets and from the defense market.
"Overall business activity is improving in our Flat-Rolled
Products segment. Orders from key growth markets, namely oil and gas,
pollution control for electrical energy, power generation and
distribution, and armor for defense, remain on track for profitable
growth. Our service center customers report that their inventories of
commodity stainless sheet are at a lower level, and we expect our
shipments to improve as 2006 progresses.
"Our Engineered Products segment is positioned to have another
excellent year in 2006. Demand from the oil and gas market is at a
record level, and demand from the transportation, and construction and
mining markets remains strong. In addition, demand for our titanium
precision metal processing capabilities from the aerospace market is
at a record level.
"In summary, we expect 2006 to improve on the profitable growth
achieved in 2005. We are enthusiastic about our major markets and
prospects for growth. We expect cash flow to be strong in 2006
enabling ATI to continue to make strategic investments and improve the
balance sheet. We have targeted $225 million of capital investments in
2006 in a self-funded growth strategy. We are focused on cost
reductions and have established a 2006 cost reduction goal of
$100 million, before the effects of inflation.
"We remain dedicated to our disciplined plan and vision as we move
to the profitable growth phase of building the world's best specialty
metals company."
Three Months Ended Twelve Months Ended
December 31 December 31
In Millions
---------------------------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Sales $894.4 $778.1 $3,539.9 $2,733.0
Net income (loss) before
special gain $97.9 $35.0 $338.9 $(20.6)
Special gain, net(a) $22.5 - $22.5 $40.4
Net income $120.4 $35.0 $361.4 $19.8
Per Diluted Share Per Diluted Share
Net income (loss) before
special gain $0.96 $0.35 $3.36 $(0.26)
Special gain, net(a) $0.22 - $0.22 $0.48
Net income $1.18 $0.35 $3.58 $0.22
(a) Fourth quarter 2005 special gain, net included the tax benefit
associated with the reversal of the Company's remaining valuation
allowance for U.S. Federal net deferred tax assets, partially offset
by asset impairments, charges for legal matters, and the cumulative
effect of adopting FASB Interpretation No. 47, "Accounting for
Contingent Asset Retirement Obligations". Second quarter 2004 special
gain, net was related to actions taken to control certain salaried
retiree medical costs, net of costs associated with ATI Allegheny
Ludlum's new labor agreement and the J&L asset acquisition.
Fourth Quarter and Full Year 2005 Financial Highlights
-- Sales in the fourth quarter 2005 were $894.4 million, 15%
higher than the fourth quarter 2004. Sales increased 55% in
the High Performance Metals segment and 31% in the Engineered
Products segment, but declined 7% in the Flat-Rolled Products
segment. For the full year, sales were $3.54 billion, 29.5%
higher than 2004. Sales increased 57% in the High Performance
Metals segment, 16% in the Flat-Rolled Products segment, and
33% in the Engineered Products segment.
-- Fourth quarter 2005 segment operating profit was $143.0
million, or 16.0% of sales, an increase of $67.9 million
compared to the fourth quarter 2004. Fourth quarter 2005
results included a LIFO inventory valuation reserve charge of
$1.6 million, due primarily to higher titanium scrap and
tungsten raw material costs. The LIFO inventory valuation
reserve charge was $29.5 million in the fourth quarter 2004.
-- Full year 2005 segment operating profit was $532.7 million, or
15.0% of sales, an increase of $365.6 million compared to
2004. Full year 2005 results included a LIFO inventory
valuation reserve charge of $45.8 million, due primarily to
higher titanium and nickel scrap, molybdenum, and tungsten raw
material costs. The LIFO inventory valuation reserve charge
was $112.2 million in 2004.
-- Net income before net special gain was $97.9 million, or $0.96
per share, in the fourth quarter 2005, and $338.9 million, or
$3.36 per share, for the full year 2005.
-- Net income was $120.4 million, or $1.18 per share, in the
fourth quarter 2005, and $361.4 million, or $3.58 per share,
for the full year 2005.
-- Cash flow from operating activities was $127.0 million in the
fourth quarter 2005 and $322.6 million for the 2005 year,
before a $100 million voluntary pension contribution made in
the fourth quarter 2005. The full year cash flow from
operating activities included the investment of $187.8 million
in managed working capital resulting from higher business
activity.
-- Cash on hand increased to $362.7 million at December 31, 2005.
-- Cost reductions, before the effects of inflation, totaled $125
million for the year, which significantly exceeded our 2005
cost reduction plan of $100 million.
High Performance Metals Segment
Market Conditions
-- Demand for our titanium alloys, nickel-based superalloys, and
vacuum-melted specialty steels remained strong from the
aerospace, defense, medical, oil and gas, and power generation
markets. Our exotic alloys business continued to benefit from
demand from the aerospace, defense, chemical processing, and
medical markets.
Fourth quarter 2005 compared to fourth quarter 2004
-- Sales increased 55% to $357.1 million, a record level.
Shipment volumes, which can be significantly impacted by
product form mix, increased 1% for titanium alloys and
increased 18% for nickel-based and specialty steel alloys.
Shipments of exotic alloys declined 19%. Average selling
prices increased 96% for titanium alloys, and 29% for
nickel-based and specialty steel alloys. Average selling
prices declined 5% for exotic alloys, primarily due to product
mix.
-- Operating profit reached a record $107.3 million, an increase
of $64.3 million compared to 2004, as a result of increased
shipments for most products, higher selling prices, and the
benefits of gross cost reductions. Raw material cost inflation
and higher inventory levels resulted in a LIFO inventory
valuation reserve charge of $9.8 million in the fourth quarter
2005 compared to a $3.6 million charge in same 2004 period.
-- Results benefited from $9 million of gross cost reductions,
before the effects of inflation.
Flat-Rolled Products Segment
Market Conditions
-- Inventory management actions at service centers and in the
supply chain resulted in reduced shipments for stainless sheet
and engineered strip. Demand was strong for nickel-based
alloys, specialty stainless, and titanium products from the
oil and gas, electrical energy, and aerospace markets.
Fourth quarter 2005 compared to fourth quarter 2004
-- Sales decreased 7% to $434.8 million primarily due to a
decline in shipments and lower raw material surcharges,
partially offset by higher average base-selling prices due
primarily to product mix. Total finished pounds shipped
decreased by 20%. Shipments of commodity products decreased
22%. Shipments of high-value products decreased 18%, primarily
due to lower shipments of stainless engineered strip products,
which offset strong shipments of nickel-based alloys,
specialty stainless, and titanium products. Average
transaction prices, which include surcharges, were flat for
commodity products as lower surcharges were offset by higher
base selling prices as a result of product mix. Average
transaction prices for high-value products increased 34%.
-- Segment operating income was $23.9 million, a decrease of $1.9
million, primarily as a result of lower shipments offset by a
reduction in the LIFO inventory valuation reserve due
primarily to lower iron scrap and chrome raw material costs,
and the benefits of gross cost reductions. Fourth quarter 2005
results had a LIFO inventory valuation reserve benefit of $9.6
million compared to a $24.5 million charge for the 2004 fourth
quarter.
-- Results benefited from $14 million in gross cost reductions,
before the effects of inflation.
Engineered Products Segment
Market Conditions
-- Demand for our tungsten products was strong from the oil and
gas, mining, and automotive markets. Demand remained strong
for our forged products from the Class 8 truck, and
construction and mining markets. Demand for our cast products
was strong from the transportation and wind energy markets.
Demand was very strong for our titanium precision metal
processing conversion services.
Fourth quarter 2005 compared to fourth quarter 2004
-- Sales improved 31% to $102.5 million, a record level, due to
higher selling prices and increased volume, including
shipments from our U.K.-based ATI Garryson Limited cutting
tool operations acquired in April 2005.
-- Operating profit improved to $11.8 million, a $5.5 million
increase, due to higher sales volumes, improved pricing, and
the benefits of gross cost reductions. Changes in raw material
costs and inventory levels resulted in LIFO inventory
valuation reserve charges of $1.4 million in 2005 and 2004.
-- Results benefited from $2 million of cost reductions, before
the effects of inflation.
Retirement Benefit Expense
-- Retirement benefit expense declined to $17.5 million in the
fourth quarter 2005 compared to $25.0 million in the fourth
quarter 2004, primarily as a result of actions taken in the
second quarter 2004 to control retiree medical costs and the
favorable effect of the Medicare prescription drug
legislation.
-- For the fourth quarter 2005, retirement benefit expense
included in cost of sales was $12.7 million, and in selling
and administrative expenses was $4.8 million. For the fourth
quarter 2004, retirement benefit expense included in cost of
sales was $17.8 million, and in selling and administrative
expenses was $7.2 million.
-- ATI was not required to make cash contributions to its U.S.
defined benefit pension plan for 2005. During the fourth
quarter 2005, however, we made a $100 million voluntary cash
contribution to this defined benefit pension plan to improve
the plan's funded position. Based upon current regulations and
actuarial studies, we do not expect to be required to make
cash contributions to the U.S. defined benefit pension plan
for at least the next several years.
-- Retirement benefit expense is expected to increase to
approximately $83 million in 2006 from $78 million for 2005.
Pension expense for 2006 is expected to be approximately $64
million compared to $63 million in 2005 as the positive
benefits of the voluntary $100 million 2005 pension
contribution and higher than expected returns on pension
assets in 2005 are offset by the use of a lower assumed
discount rate to value pension liabilities. Postretirement
medical expense for 2006 is expected to increase to
approximately $19 million from $15 million in 2005 due
primarily to lower plan assets and the use of a lower assumed
discount rate to value obligations.
2005 Net Special Gain
-- Results for the fourth quarter 2005 included a previously
announced net special gain of $22.5 million, after-tax, or
$0.22 per share. The net special gain, which was primarily
non-cash included:
-- A $45.0 million, or $0.44 per share, net tax benefit
related to the reversal of ATI's remaining valuation
allowance for U.S. Federal net deferred tax assets.
-- A $14.4 million, or ($0.14) per share, after-tax charge
due to asset impairments, which is expected to result in
future cash expenditures of less than $2 million. This
asset impairment charge primarily relates to a 2005
year-end decision to indefinitely idle ATI Allegheny
Ludlum's West Leechburg, PA flat-rolled products finishing
facility. There are approximately 45 hourly production and
maintenance employees, and 25 laboratory employees at the
West Leechburg plant. These employees will be provided
positions at nearby Allegheny Ludlum facilities. ATI
expects the consolidation to result in annual cost
reductions of approximately $10 million in its Flat-Rolled
Products segment beginning in 2007.
-- A $6.1 million, or ($0.06) per share, after-tax charge for
legal matters.
-- A $2.0 million, or ($0.02) per share, after-tax charge
related to the cumulative effect of accounting change for
the adoption of FASB Interpretation No. 47, "Accounting
for Contingent Asset Retirement Obligations".
Other Expenses
-- Corporate expenses for the fourth quarter 2005 were $16.0
million compared to $13.0 million in the year-ago period. This
increase is due primarily to expenses associated with annual
and long-term performance-based incentive compensation
programs.
-- Excluding the effects of retirement benefit expense and
stock-based compensation expenses, selling and administrative
expenses as a percentage of sales was 7.8% in the fourth
quarter 2005 compared to 6.3% in the same 2004 period.
-- Fourth quarter 2005 interest expense, net of interest income,
decreased to $7.7 million from $10.2 million in the year-ago
period, primarily related to increased interest income
resulting from higher cash balances partially offset by higher
short-term interest rates on debt associated with the
financing of the June 2004 J&L asset acquisition.
Income Taxes
Fourth quarter 2005 results included an income tax benefit of
$57.7 million, which principally related to the reversal of ATI's
remaining valuation allowance for U.S. Federal net deferred tax assets
partially offset by accruals for U. S. Federal, foreign and state
income taxes. No income tax provision or benefit was recognized in
2004. Prior to the 2005 fourth quarter, we maintained a valuation
allowance for a major portion of our deferred tax assets in accordance
with SFAS No. 109, "Accounting for Income Taxes" due to uncertainty
regarding full utilization of our net deferred tax asset, including
the 2003 and 2004 unutilized net operating losses. In 2005, we
generated taxable income which exceeded the 2003 and 2004 net
operating losses allowing us to fully realize these tax benefits. This
realization of tax benefits, together with our improved profitability,
allowed us to reverse the remaining valuation allowance for U. S.
Federal income taxes. As a result, we expect to recognize U. S.
Federal, foreign and state income tax provisions, or benefits, on
future operating results.
Cash Flow, Working Capital and Debt
-- Cash on hand at the end of 2005 was $362.7 million, an
increase of $111.9 million from year-end 2004.
-- Cash flow from operations during the 2005 year was $322.6
million, before a $100 million voluntary pension contribution
made in the fourth quarter 2005, as the significant
improvement in operating earnings was partially offset by a
$187.8 million investment in managed working capital. We
define managed working capital as accounts receivable and
gross inventories less accounts payable.
-- The investment in managed working capital resulted from a
$80.9 million increase in accounts receivable, which reflects
the significantly higher level of sales in the fourth quarter
2005 compared to the fourth quarter 2004, and a $145.6 million
increase in inventory mostly as a result of higher raw
material costs and increased business volumes, partially
offset by a $38.7 million increase in accounts payable. Most
of the increase in raw material costs is expected to be
recovered through surcharge and index pricing mechanisms. At
December 31, 2005, managed working capital increased to 30.3%
of annualized sales compared to 29.5% of annualized sales at
year-end 2004 due primarily to the increase in High
Performance Metals business activity which has a longer
manufacturing cycle.
-- Cash used in investing activities was $109.2 million in the
2005 year and consisted primarily of capital expenditures of
$90.1 million and $18.3 million for the acquisition of
Garryson Limited.
-- Cash used in financing activities was $1.5 million in the 2005
year as a reduction in net borrowings of $25.7 million and
payment of dividends of $27.1 million were offset by $26.1
million of proceeds received from the exercise of stock
options and tax benefits on share-based compensation of $25.2
million.
-- Net debt as a percentage of total capitalization improved to
19.8% at December 31, 2005, from 43.8% at the end of 2004.
-- There were no borrowings outstanding during 2005 or 2004 under
ATI's $325 million secured domestic borrowing facility,
although a portion of the letters of credit capacity was
utilized.
-- For 2006, capital expenditures are expected to be
approximately $225 million and depreciation is expected to be
approximately $85 million.
New Accounting Pronouncements Adopted in 2005
In the fourth quarter 2005, as required, we adopted FASB
Interpretation No. 47, "Accounting for Contingent Asset Retirement
Obligations" ("FIN 47"), an interpretation of FASB Statement No. 143,
"Asset Retirement Obligations" ("SFAS 143"). FIN 47 clarifies that the
term "conditional asset retirement obligation" as used in SFAS 143
refers to a legal obligation to perform an asset retirement activity
in which the timing and (or) method of settlement are conditional on a
future event that may or may not be within the control of the entity.
An entity is required to recognize a liability for the fair value of a
conditional asset retirement obligation if the fair value of the
liability can be reasonably estimated, even if conditional on a future
event. For existing contingent asset retirement obligations which are
determined to be recognizable under FIN 47, the effect of applying FIN
47 is recognized as a cumulative effect of a change in accounting
principle. Our adoption of FIN 47 resulted in recognizing a charge of
$2.0 million, net of income taxes, or $0.02 per share, principally for
estimable asset retirement obligations related to remediation costs
which would be incurred if we were to cease certain manufacturing
activities which utilize what may be categorized as potentially
hazardous materials.
In the first quarter 2005, the Company adopted Statement of
Financial Accounting Standards No. 123R, "Share-Based Payment". Under
the revised standard, companies may no longer account for share-based
compensation transactions, such as stock options, restricted stock,
and potential payments under programs such as our Total Shareholder
Return plans, using the intrinsic value method as defined in APB
Opinion No. 25. Instead, companies are required to account for such
equity transactions using an approach in which the fair value of an
award is estimated at the date of grant and recognized as an expense
over the requisite service period. Compensation expense is adjusted
for equity awards that do not vest because service or performance
conditions are not satisfied. However, compensation expense already
recognized is not adjusted if market conditions are not met, such as
stock options expiring "out-of-the-money". We adopted the new standard
using the modified prospective method and, beginning with the first
quarter 2005, reflect compensation expense in accordance with the SFAS
123R transition provisions. Under the modified prospective method, the
effect of the standard is recognized in the period of adoption and in
future periods. Prior periods are not restated to reflect the impact
of adopting the new standard at earlier dates.
Fourth quarter 2005 compensation expense related to share-based
incentive plans was $1.9 million compared to $8.6 million in the
fourth quarter 2004. Fourth quarter 2005 share-based compensation
expense includes $0.3 million related to expensing of stock options.
For the full year 2005, compensation expense related to share-based
incentive plans was $9.4 million compared to $20.6 million for 2004.
Compensation expense relating to expensing of stock options was
$2.6 million for the full year 2005.
Allegheny Technologies will conduct a conference call with
investors and analysts on January 25, 2006, at 1 p.m. ET to discuss
the financial results. The conference call will be broadcast live on
www.alleghenytechnologies.com. To access the broadcast, click on
"Conference Call". In addition, the conference call will be available
through the CCBN 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 aerospace,
defense, construction and mining, automotive, electrical energy,
chemical process industry and 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 strategic investments and
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, 2004, and other reports
filed with the Securities and Exchange Commission. We assume no duty
to update our forward-looking statements.
Allegheny Technologies Incorporated is one of the largest and most
diversified specialty metals producers in the world with revenues of
over $3.5 billion in 2005. ATI has approximately 9,000 full-time
employees world-wide who use innovative technologies to offer growing
global markets a wide range of specialty metals solutions. Our major
markets are aerospace, defense, construction and mining, chemical
processing/oil & gas, food equipment and appliance, automotive,
electrical energy, machine and cutting tools, and medical. Our
products include nickel-based alloys and superalloys, titanium and
titanium alloys, stainless and specialty steels, zirconium, hafnium,
and niobium, tungsten materials, silicon and tool steels, and forgings
and castings. The Allegheny Technologies website is
www.alleghenytechnologies.com.
Allegheny Technologies Incorporated and Subsidiaries
Consolidated Statements of Income
(Quarterly periods unaudited - Dollars in millions, except per share
amounts)
Three Months Ended Twelve Months Ended
December 31 December 31
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Sales $894.4 $778.1 $3,539.9 $2,733.0
Costs and expenses:
Cost of sales 720.1 673.1 2,889.7 2,488.1
Selling and administrative
expenses 76.6 65.0 273.2 233.3
Restructuring costs and
curtailment (gain), net 23.9 - 23.9 (40.4)
--------- --------- --------- ---------
Income before interest, other
income (expense) and income
taxes 73.8 40.0 353.1 52.0
Interest expense, net (7.7) (10.2) (38.6) (35.5)
Other income (expense), net (1.4) 5.2 (4.8) 3.3
--------- --------- --------- ---------
Income before income tax
benefit and cumulative effect
of change in accounting
principle 64.7 35.0 309.7 19.8
Income tax benefit (57.7) - (53.7) -
--------- --------- --------- ---------
Net income beforecumulative
effect of change in accounting
principle 122.4 35.0 363.4 19.8
Cumulative effect of change in
accounting principle, net of
tax (2.0) - (2.0) -
--------- --------- --------- ---------
Net income $120.4 $35.0 $361.4 $19.8
========= ========= ========= =========
Basic net income per common
share before cumulative effect
of change in accounting
principle $1.26 $0.37 $3.78 $0.23
Cumulative effect of change in
accounting principle (0.02) - (0.02) -
--------- --------- --------- ---------
Basic net income per common
share $1.24 $0.37 $3.76 $0.23
========= ========= ========= =========
Diluted net income per common
share before cumulative effect
of change in accounting
principle $1.20 $0.35 $3.60 $0.22
Cumulative effect of change in
accounting principle (0.02) - (0.02) -
--------- --------- --------- ---------
Diluted net income per common
share $1.18 $0.35 $3.58 $0.22
========= ========= ========= =========
Weighted average common shares
outstanding -- basic
(millions) 97.2 94.9 96.2 86.6
Weighted average common shares
outstanding -- diluted
(millions) 101.8 99.2 100.8 90.5
Actual common shares
outstanding -- end of period
(millions) 98.2 95.8 98.2 95.8
Allegheny Technologies Incorporated and Subsidiaries
Sales and Operating Profit by Business Segment
(Quarterly periods unaudited - Dollars in millions)
Three Months Ended Twelve Months Ended
December 31 December 31
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Sales:
High Performance Metals $357.1 $230.4 $1,246.0 $794.1
Flat-Rolled Products 434.8 469.6 1,900.5 1,643.9
Engineered Products 102.5 78.1 393.4 295.0
--------- --------- --------- ---------
Total External Sales $894.4 $778.1 $3,539.9 $2,733.0
========= ========= ========= =========
Operating Profit:
High Performance Metals $107.3 $43.0 $335.3 $84.8
% of Sales 30.0% 18.7% 26.9% 10.7%
Flat-Rolled Products 23.9 25.8 149.9 61.5
% of Sales 5.5% 5.5% 7.9% 3.7%
Engineered Products 11.8 6.3 47.5 20.8
% of Sales 11.5% 8.1% 12.1% 7.1%
--------- --------- --------- ---------
Operating Profit 143.0 75.1 532.7 167.1
% of Sales 16.0% 9.7% 15.0% 6.1%
Corporate expenses (16.0) (13.0) (51.7) (34.9)
Interest expense, net (7.7) (10.2) (38.6) (35.5)
--------- --------- --------- ---------
Subtotal 119.3 51.9 442.4 96.7
Restructuring charges and
curtailment gain, net (23.9) - (23.9) 40.4
Other expenses, net of gains
on asset sales (13.2) 8.1 (31.2) 2.5
Retirement benefit expense (17.5) (25.0) (77.6) (119.8)
--------- --------- --------- ---------
Income before income taxes (A) $64.7 $35.0 $309.7 $19.8
========= ========= ========= =========
(A) Income before income taxes for the 2005 fourth quarter and year
includes special charges totaling $33.9 million, which consists of
asset impairments of $23.9 million (presented as Restructuring
Charges) and charges for legal matters of $10 million (presented in
Other Expenses).
Allegheny Technologies Incorporated and Subsidiaries
Consolidated Balance Sheets
(Dollars in millions)
December 31, December 31,
2005 2004
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ASSETS
Current Assets:
Cash and cash equivalents $362.7 $250.8
Accounts receivable, net of allowances for
doubtful accounts of $8.1 and $8.4 at
December 31, 2005 and December 31, 2004,
respectively 442.1 357.9
Inventories, net 607.1 513.0
Deferred income taxes 22.8 -
Prepaid expenses and other current assets 49.3 38.5
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Total current assets 1,484.0 1,160.2
Property, plant and equipment, net 704.9 718.3
Cost in excess of net assets acquired 199.7 205.3
Deferred income taxes 154.3 53.0
Deferred pension asset 100.6 122.3
Other assets 87.1 56.6
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Total Assets $2,730.6 $2,315.7
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $312.9 $271.2
Accrued liabilities 213.5 192.2
Accrued income taxes 18.5 -
Short-term debt and current portion of
long-term debt 13.4 29.4
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Total current liabilities 558.3 492.8
Long-term debt 547.0 553.3
Accrued postretirement benefits 461.5 472.7
Pension liabilities 242.9 240.9
Other long-term liabilities 119.4 130.1
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Total liabilities 1,929.1 1,889.8
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Total stockholders' equity 801.5 425.9
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Total Liabilities and Stockholders' Equity $2,730.6 $2,315.7
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Allegheny Technologies Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Dollars in millions)
Twelve Months Ended
December 31
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2005 2004
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Operating Activities:
Net income $361.4 $19.8
Cumulative effect of change in accounting
principle 2.0 -
Non-cash restructuring charges and curtailment
gain, net 22.4 (45.6)
Depreciation and amortization 77.3 76.1
Deferred income taxes (91.0) (0.4)
Change in managed working capital (187.8) (203.3)
Change in pension assets/liabilities 57.7 68.2
Pension contribution (100.0) (50.0)
Accrued liabilities and other 80.6 159.3
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Cash provided by operating activities 222.6 24.1
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Investing Activities:
Purchases of property, plant and equipment (90.1) (49.9)
Acquisition of business (18.3) (7.5)
Asset disposals and other (0.8) 2.8
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Cash used in investing activities (109.2) (54.6)
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Financing Activities:
Dividends paid (27.1) (21.2)
Net decrease in debt (25.7) (15.9)
Exercises of stock options 26.1 7.6
Tax benefit on share-based compensation 25.2 -
Issuance of Common Stock - 229.7
Interest rate swap termination - 1.5
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Cash provided by (used in) financing activities (1.5) 201.7
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Increase in cash and cash equivalents 111.9 171.2
Cash and cash equivalents at beginning of period 250.8 79.6
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Cash and cash equivalents at end of period $362.7 $250.8
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Allegheny Technologies Incorporated and Subsidiaries
Selected Financial Data
(Unaudited)
Three Months Ended Twelve Months Ended
December 31 December 31
--------------------- ---------------------
2005 2004 2005 2004
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Volume:
High Performance Metals
(000's lbs.)
Nickel-based and
specialty steel alloys 10,103 8,538 39,939 34,353
Titanium mill products 6,272 6,203 24,882 22,012
Exotic alloys 928 1,139 4,018 4,318
Flat-Rolled Products
(000's lbs.)
High value 73,830 89,842 308,580 329,618
Commodity 178,706 227,812 840,158 845,888
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Flat-Rolled Products
total 252,536 317,654 1,148,738 1,175,506
Average Prices:
High Performance Metals
(per lb.)
Nickel-based and
specialty steel alloys $12.24 $9.48 $11.25 $8.60
Titanium mill products $27.37 $13.99 $22.75 $12.34
Exotic alloys $39.32 $41.20 $40.38 $40.95
Flat-Rolled Products
(per lb.)
High value $2.98 $2.22 $2.88 $2.15
Commodity $1.17 $1.17 $1.19 $1.10
Flat-Rolled Products
combined average $1.70 $1.47 $1.64 $1.39
Allegheny Technologies Incorporated and Subsidiaries
Other Financial Information
Managed Working Capital
(Unaudited - Dollars in millions)
December 31, December 31,
2005 2004
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Accounts receivable $442.1 $357.9
Inventory 607.1 513.0
Accounts payable (312.9) (271.2)
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Subtotal 736.3 599.7
Allowance for doubtful accounts 8.1 8.4
LIFO reserve 269.7 223.9
Corporate and other 33.9 20.6
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Managed working capital $1,048.0 $852.6
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Annualized prior 2 months sales $3,461.1 $2,887.0
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Managed working capital as a % of annualized
sales 30.3% 29.5%
December 31, 2005 change in managed working
capital $195.4
Acquisition of managed working capital (7.6)
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Net change in managed working capital 187.8
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)
December 31, December 31,
2005 2004
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Total debt $560.4 $582.7
Less: Cash (362.7) (250.8)
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Net debt $197.7 $331.9
Net debt $197.7 $331.9
Stockholders' equity 801.5 425.9
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Total capital $999.2 $757.8
Net debt to capital ratio 19.8% 43.8%
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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