Ati Inc 10-Q for FY2021 Q1

Ati Inc (ATI)

10-Q 2021-04-29 For: 2021-03-31

Added on April 12, 2026

About this 10-Q

Ati Inc filed this 10-Q on April 29, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $692.5M; down 27.5% from $955.5M a year earlier
Net loss: $7.9M; compared with net income of $21.1M a year earlier
Diluted EPS: -$0.06; compared with $0.16 a year earlier

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Delaware		25-1792394
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1000 Six PPG Place
Pittsburgh,	Pennsylvania	15222-5479
(Address of Principal Executive Offices)		(Zip Code)


Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, par value $0.10	ATI	New York Stock Exchange


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐


			Page No.
PART I. - FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets			1

Consolidated Statements of Operations			2

Consolidated Statements of Comprehensive Income			3

Consolidated Statements of Cash Flows			4

Statements of Changes in Consolidated Equity			5

Notes to Consolidated Financial Statements			6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23

Item 3. Quantitative and Qualitative Disclosures About Market Risk			36

Item 4. Controls and Procedures			37

PART II. - OTHER INFORMATION

Item 1. Legal Proceedings			37

Item 1A. Risk Factors			38

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38

Item 6. Exhibits			39

SIGNATURES			40


	March 31, 2021		December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	541.7	$	645.9
Accounts receivable, net	423.9		345.8
Short-term contract assets	42.0		38.9
Inventories, net	1,047.8		997.1
Prepaid expenses and other current assets	38.0		38.3
Total Current Assets	2,093.4		2,066.0
Property, plant and equipment, net	1,478.7		1,469.2
Goodwill	241.6		240.7
Other assets	254.8		259.0
Total Assets	$	4,068.5	$	4,034.9
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	324.8	$	290.6
Short-term contract liabilities	118.7		111.8
Short-term debt and current portion of long-term debt	15.7		17.8
Other current liabilities	230.0		233.1
Total Current Liabilities	689.2		653.3
Long-term debt	1,598.4		1,550.0
Accrued postretirement benefits	321.7		326.7
Pension liabilities	642.8		673.6
Other long-term liabilities	207.1		189.9
Total Liabilities	3,459.2		3,393.5
Equity:
ATI Stockholders’ Equity:
Preferred stock, par value $0.10: authorized-50,000,000 shares; issued-none	—		—
Common stock, par value $0.10: authorized-500,000,000 shares; issued-127,429,740 shares at March 31, 2021 and 126,820,440 shares at December 31, 2020; outstanding-127,203,072 shares at March 31, 2021 and 126,817,768 shares at December 31, 2020	12.7		12.7
Additional paid-in capital	1,580.5		1,625.5
Retained earnings	103.0		106.5
Treasury stock: 226,668 shares at March 31, 2021 and 2,672 shares at December 31, 2020	(4.7)		—
Accumulated other comprehensive loss, net of tax	(1,208.6)		(1,223.6)
Total ATI stockholders’ equity	482.9		521.1
Noncontrolling interests	126.4		120.3
Total Equity	609.3		641.4
Total Liabilities and Equity	$	4,068.5	$	4,034.9


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three months ended March 31,
	2021		2020
Sales	$	692.5	$	955.5

Cost of sales	606.7		820.7
Gross profit	85.8		134.8
Selling and administrative expenses	54.0		58.4
Restructuring charges	—		8.0
Operating income	31.8		68.4
Nonoperating retirement benefit expense	(6.8)		(11.2)
Interest expense, net	(23.4)		(21.9)
Other income (expense), net	1.5		(0.9)
Income before income taxes	3.1		34.4
Income tax provision	5.5		10.8
Net income (loss)	(2.4)		23.6
Less: Net income attributable to noncontrolling interests	5.5		2.5
Net income (loss) attributable to ATI	$	(7.9)	$	21.1

Basic net income (loss) attributable to ATI per common share	$	(0.06)	$	0.17

Diluted net income (loss) attributable to ATI per common share	$	(0.06)	$	0.16


	ATI Stockholders
	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Non- controlling Interests		Total Equity
Balance, December 31, 2019	$	12.7	$	1,618.0	$	1,679.3	$	(18.2)	$	(1,201.7)	$	103.1	$	2,193.2
Net income	—		—		21.1		—		—		2.5		23.6
Other comprehensive loss	—		—		—		—		(14.9)		(0.8)		(15.7)
Employee stock plans	—		(25.9)		—		17.4		—		—		(8.5)
Balance, March 31, 2020	$	12.7	$	1,592.1	$	1,700.4	$	(0.8)	$	(1,216.6)	$	104.8	$	2,192.6
Balance, December 31, 2020	$	12.7	$	1,625.5	$	106.5	$	—	$	(1,223.6)	$	120.3	$	641.4
Net income (loss)	—		—		(7.9)		—		—		5.5		(2.4)
Other comprehensive income	—		—		—		—		15.0		0.6		15.6
Cumulative effect of adoption of new accounting standard	—		(49.8)		4.4		—		—		—		(45.4)
Employee stock plans	—		4.8		—		(4.7)		—		—		0.1
Balance, March 31, 2021	$	12.7	$	1,580.5	$	103.0	$	(4.7)	$	(1,208.6)	$	126.4	$	609.3


(in millions)	First quarter ended
	March 31, 2021						March 31, 2020
	HPMC		AA&S		Total		HPMC		AA&S		Total
Diversified Global Markets:
Aerospace & Defense	$	179.8	$	74.4	$	254.2	$	358.8	$	133.7	$	492.5
Energy*	30.5		118.6		149.1		24.1		146.5		170.6
Automotive	2.0		89.5		91.5		2.0		74.5		76.5
Electronics	0.3		55.3		55.6		0.3		32.9		33.2
Construction/Mining	5.1		37.4		42.5		5.3		38.3		43.6
Food Equipment & Appliances	—		35.4		35.4		—		50.4		50.4
Medical	11.2		17.8		29.0		17.0		21.6		38.6
Other	12.0		23.2		35.2		12.8		37.3		50.1
Total	$	240.9	$	451.6	$	692.5	$	420.3	$	535.2	$	955.5


(in millions)
Accounts Receivable - Reserve for Doubtful Accounts	March 31, 2021		March 31, 2020
Balance as of beginning of fiscal year	$	4.3	$	4.6
Expense to increase the reserve	0.2		0.1
Write-off of uncollectible accounts	(0.3)		(0.3)
Balance as of period end	$	4.2	$	4.4


(in millions)
Contract Assets
Short-term	March 31, 2021		March 31, 2020
Balance as of beginning of fiscal year	$	38.9	$	38.5
Recognized in current year	25.7		25.1
Reclassified to accounts receivable	(19.1)		(20.2)
Impairment	—		—
Reclassification to/from contract liability	(3.5)		—
Divestiture	—		0.1
Balance as of period end	$	42.0	$	43.5

Long-term	March 31, 2021		March 31, 2020
Balance as of beginning of fiscal year	$	—	$	0.1
Recognized in current year	—		—
Reclassified to accounts receivable	—		—
Impairment	—		—
Reclassification to/from short-term	—		(0.1)
Balance as of period end	$	—	$	—


(in millions)
Contract Liabilities
Short-term	March 31, 2021		March 31, 2020
Balance as of beginning of fiscal year	$	111.8	$	78.7
Recognized in current year	57.1		71.7
Amounts in beginning balance reclassified to revenue	(43.0)		(22.1)
Current year amounts reclassified to revenue	(4.0)		(17.1)
Other	—		(0.3)
Reclassification to/from long-term and contract asset	(3.2)		3.4
Balance as of period end	$	118.7	$	114.3

Long-term	March 31, 2021		March 31, 2020
Balance as of beginning of fiscal year	$	32.0	$	25.9
Recognized in current year	24.3		7.4
Amounts in beginning balance reclassified to revenue	(0.3)		(0.2)
Current year amounts reclassified to revenue	—		—
Other	—		—
Reclassification to/from short-term	(0.3)		(3.4)
Balance as of period end	$	55.7	$	29.7


	March 31, 2021		December 31, 2020
Raw materials and supplies	$	224.1	$	207.6
Work-in-process	736.0		690.7
Finished goods	164.0		181.6
Total inventories at current cost	1,124.1		1,079.9
Adjustment from current cost to LIFO cost basis	37.3		44.1
Inventory valuation reserves	(113.6)		(126.9)
Total inventories, net	$	1,047.8	$	997.1


	March 31, 2021		December 31, 2020
Land	$	34.8	$	34.8
Buildings	569.5		564.7
Equipment and leasehold improvements	2,768.4		2,736.9
	3,372.7		3,336.4
Accumulated depreciation and amortization	(1,894.0)		(1,867.2)
Total property, plant and equipment, net	$	1,478.7	$	1,469.2


	Three months ended March 31,
	2021		2020
Operating Activities:
Net income (loss)	$	(2.4)	$	23.6
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	36.1		37.3
Deferred taxes	(0.4)		8.3
Net gains from disposal of property, plant and equipment	(1.2)		(2.5)
Changes in operating assets and liabilities:
Inventories	(50.8)		(25.8)
Accounts receivable	(78.1)		(39.2)
Accounts payable	34.1		(96.5)
Retirement benefits	(16.6)		(23.0)
Accrued liabilities and other	11.2		2.4
Cash used in operating activities	(68.1)		(115.4)
Investing Activities:
Purchases of property, plant and equipment	(26.4)		(29.1)
Proceeds from disposal of property, plant and equipment	1.4		2.9
Other	(0.1)		1.0
Cash used in investing activities	(25.1)		(25.2)
Financing Activities:
Payments on long-term debt and finance leases	(3.0)		(2.0)
Net borrowings (payments) under credit facilities	(3.3)		298.6
Shares repurchased for income tax withholding on share-based compensation and other	(4.7)		(7.8)
Cash provided by (used in) financing activities	(11.0)		288.8
Increase (decrease) in cash and cash equivalents	(104.2)		148.2
Cash and cash equivalents at beginning of period	645.9		490.8
Cash and cash equivalents at end of period	$	541.7	$	639.0


(in millions)	First quarter ended
	March 31, 2021						March 31, 2020
	HPMC		AA&S		Total		HPMC		AA&S		Total
Primary Geographical Market:
United States	$	128.3	$	271.6	$	399.9	$	227.3	$	378.8	$	606.1
Asia	20.1		122.6		142.7		25.1		94.2		119.3
Europe	79.1		34.0		113.1		133.5		37.6		171.1
Canada	8.2		9.1		17.3		11.6		10.4		22.0
South America, Middle East and other	5.2		14.3		19.5		22.8		14.2		37.0
Total	$	240.9	$	451.6	$	692.5	$	420.3	$	535.2	$	955.5


	First quarter ended
	March 31, 2021						March 31, 2020
	HPMC		AA&S		Total		HPMC		AA&S		Total
Diversified Products and Services:
High-Value Products
Nickel-based alloys and specialty alloys	36	%	28	%	31	%	40	%	31	%	35	%
Precision rolled strip products	—	%	31	%	20	%	—	%	22	%	12	%
Precision forgings, castings and components	43	%	—	%	15	%	35	%	—	%	16	%
Titanium and titanium-based alloys	21	%	7	%	12	%	25	%	11	%	18	%
Zirconium and related alloys	—	%	15	%	10	%	—	%	13	%	7	%
Total High-Value Products	100	%	81	%	88	%	100	%	77	%	88	%
Standard Products
Standard stainless products	—	%	19	%	12	%	—	%	23	%	12	%
Total	100	%	100	%	100	%	100	%	100	%	100	%


	March 31, 2021		December 31, 2020
Allegheny Technologies 5.875% Notes due 2023 (a)	$	500.0	$	500.0
Allegheny Technologies 5.875% Notes due 2027	350.0		350.0
Allegheny Technologies 3.5% Convertible Senior Notes due 2025	291.4		291.4
Allegheny Technologies 4.75% Convertible Senior Notes due 2022	84.2		84.2
Allegheny Ludlum 6.95% Debentures due 2025 (b)	150.0		150.0
Term Loan due 2024	200.0		200.0
U.S. revolving credit facility	—		—
Foreign credit facilities	2.2		5.5
Finance leases and other	51.4		48.0
Debt issuance costs	(15.1)		(14.5)
Equity component of convertible debt	—		(46.8)
Total debt	1,614.1		1,567.8
Short-term debt and current portion of long-term debt	15.7		17.8
Total long-term debt	$	1,598.4	$	1,550.0


	Severance and Employee
	Benefit Costs
Balance at December 31, 2020	$	43.4
Additions	—
Payments	(6.5)
Balance at March 31, 2021	$	36.9


(In millions) Asset derivatives	Balance sheet location	March 31, 2021		December 31, 2020
Derivatives designated as hedging instruments:
Foreign exchange contracts	Prepaid expenses and other current assets	$	0.1	$	—
Nickel and other raw material contracts	Prepaid expenses and other current assets	2.1		3.7
Natural gas contracts	Prepaid expenses and other current assets	0.5		0.2
Nickel and other raw material contracts	Other assets	0.4		0.7
Natural gas contracts	Other assets	0.1		0.2
Total derivatives designated as hedging instruments		$	3.2	$	4.8
Liability derivatives	Balance sheet location
Derivatives designated as hedging instruments:
Interest rate swap	Other current liabilities	$	1.0	$	1.0

Natural gas contracts	Other current liabilities	0.1		0.3
Nickel and other raw material contracts	Other current liabilities	0.9		0.1


Interest rate swap	Other long-term liabilities	1.7		2.5
Natural gas contracts	Other long-term liabilities	—		0.1

Total derivatives designated as hedging instruments		$	3.7	$	4.0


	Amount of Gain (Loss) Recognized in OCI on Derivatives				Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (a)
	Three months ended March 31,				Three months ended March 31,
Derivatives in Cash Flow Hedging Relationships	2021		2020		2021		2020
Nickel and other raw material contracts	$	(0.6)	$	(6.2)	$	1.5	$	(0.2)
Natural gas contracts	0.4		(1.2)		—		(1.0)
Foreign exchange contracts	0.1		(0.1)		—		—
Interest rate swap	0.4		(1.9)		(0.2)		(0.2)
Total	$	0.3	$	(9.4)	$	1.3	$	(1.4)


			Fair Value Measurements at Reporting Date Using
(In millions)	Total Carrying Amount		Total Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)
Cash and cash equivalents	$	541.7	$	541.7	$	541.7	$	—
Derivative financial instruments:
Assets	3.2		3.2		—		3.2
Liabilities	3.7		3.7		—		3.7
Debt (a)	1,629.2		1,938.4		1,684.8		253.6


	Pension Benefits				Other Postretirement Benefits
	Three months ended March 31,				Three months ended March 31,
	2021		2020		2021		2020
Service cost - benefits earned during the year	$	3.8	$	3.2	$	0.3	$	0.5
Interest cost on benefits earned in prior years	17.1		21.5		2.1		2.7
Expected return on plan assets	(34.1)		(33.6)		—		—
Amortization of prior service cost (credit)	0.2		0.2		(0.7)		(0.9)
Amortization of net actuarial loss	18.9		18.6		3.3		2.7
Total retirement benefit expense	$	5.9	$	9.9	$	5.0	$	5.0


	Three months ended
(In millions, except per share amounts)	March 31,
	2021		2020
Numerator:
Numerator for basic income (loss) per common share –
Net income (loss) attributable to ATI	$	(7.9)	$	21.1
Effect of dilutive securities:
4.75% Convertible Senior Notes due 2022	—		2.3
3.5% Convertible Senior Notes due 2025	—		—
Numerator for diluted income (loss) per common share –
Net income (loss) attributable to ATI after assumed conversions	$	(7.9)	$	23.4
Denominator:
Denominator for basic net income (loss) per common share – weighted average shares	126.8		126.1
Effect of dilutive securities:
Share-based compensation	—		0.4
4.75% Convertible Senior Notes due 2022	—		19.9
3.5% Convertible Senior Notes due 2025	—		—
Denominator for diluted net income (loss) per common share – adjusted weighted average shares and assumed conversions	126.8		146.4
Basic net income (loss) attributable to ATI per common share	$	(0.06)	$	0.17
Diluted net income (loss) attributable to ATI per common share	$	(0.06)	$	0.16


	Post- retirement benefit plans		Currency translation adjustment		Derivatives		Deferred Tax Asset Valuation Allowance		Total
Attributable to ATI:
Balance, December 31, 2020	$	(1,119.9)	$	(55.5)	$	2.1	$	(50.3)	$	(1,223.6)
OCI before reclassifications		—		(5.4)		0.3		—	(5.1)
Amounts reclassified from AOCI	(a)	16.5	(b)	—	(c)	(1.3)	(d)	4.9	20.1
Net current-period OCI		16.5		(5.4)		(1.0)		4.9	15.0
Balance, March 31, 2021	$	(1,103.4)	$	(60.9)	$	1.1	$	(45.4)	$	(1,208.6)
Attributable to noncontrolling interests:
Balance, December 31, 2020	$	—	$	21.2	$	—	$	—	$	21.2
OCI before reclassifications		—		0.6		—		—	0.6
Amounts reclassified from AOCI		—	(b)	—		—		—	—
Net current-period OCI		—		0.6		—		—	0.6
Balance, March 31, 2021	$	—	$	21.8	$	—	$	—	$	21.8


	Amounts reclassified to AOCI
Details about AOCI Components (In millions)	Three months ended March 31, 2021		Three months ended March 31, 2020			Affected line item in the statements of operations
Postretirement benefit plans
Prior service credit	$	0.5	$	0.7	(a)
Actuarial losses	(22.2)		(21.3)		(a)
	(21.7)		(20.6)		(c)	Total before tax
	(5.2)		(4.9)			Tax benefit (d)
	$	(16.5)	$	(15.7)		Net of tax
Derivatives
Nickel and other raw material contracts	$	2.0	$	(0.3)	(b)
Natural gas contracts	—		(1.3)		(b)
Foreign exchange contracts	—		—		(b)
Interest rate swap	(0.3)		(0.2)		(b)
	1.7		(1.8)		(c)	Total before tax
	0.4		(0.4)			Tax expense (benefit) (d)
	$	1.3	$	(1.4)		Net of tax


Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations


	Three months ended				Three months ended
Markets	March 31, 2021				March 31, 2020
Aerospace & Defense:
Jet Engines- Commercial	$	106.1	15	%	$	272.2	29	%
Airframes- Commercial	58.2		9	%	134.9		14	%
Defense	89.9		13	%	85.4		9	%
Total Aerospace & Defense	$	254.2	37	%	$	492.5	52	%
Energy:
Oil & Gas	82.5		12	%	118.1		12	%
Specialty Energy	66.6		10	%	52.5		6	%
Total Energy	149.1		22	%	170.6		18	%
Automotive	91.5		13	%	76.5		8	%
Electronics	55.6		8	%	33.2		3	%
Construction/Mining	42.5		6	%	43.6		5	%
Food Equipment & Appliances	35.4		5	%	50.4		5	%
Medical	29.0		4	%	38.6		4	%
Other	35.2		5	%	50.1		5	%
Total	$	692.5	100	%	$	955.5	100	%


	March 31,			December 31,
(In millions)	2021			2020
Accounts receivable	$	423.9		$	345.8
Short-term contract assets	42.0			38.9
Inventory	1,047.8			997.1
Accounts payable	(324.8)			(290.6)
Short-term contract liabilities	(118.7)			(111.8)
Subtotal	1,070.2			979.4
Allowance for doubtful accounts	4.2			4.3
Adjustment from current cost to LIFO cost basis	(37.3)			(44.1)
Inventory valuation reserves	113.6			126.9
Managed working capital	$	1,150.7		$	1,066.5
Annualized prior 3 months sales	$	2,770.0		$	2,633.2
Managed working capital as a % of annualized sales	41.5		%	40.5		%
Change in managed working capital from December 31, 2020	$	84.2


	Three months ended				Latest 12 months ended		Fiscal year ended
	March 31, 2021		March 31, 2020		March 31, 2021		December 31, 2020

Income (loss) before income taxes	$	3.1	$	34.4	$	(1,513.2)	$	(1,481.9)
Interest expense	23.4		21.9		95.9		94.4
Depreciation and amortization	36.1		37.3		142.1		143.3
Restructuring and other charges	—		8.0		1,124.1		1,132.1
Joint venture restructuring charge	—		—		2.4		2.4
Impairment of goodwill	—		—		287.0		287.0
Debt extinguishment charge	—		—		21.5		21.5
Gain on asset sales	—		(2.5)		—		(2.5)
Adjusted EBITDA	$	62.6	$	99.1	$	159.8	$	196.3

Total debt (a)					$	1,629.2	$	1,629.1
Less: Cash					(541.7)		(645.9)
Net debt					$	1,087.5	$	983.2

Debt to Adjusted EBITDA					10.20		8.30
Net Debt to Adjusted EBITDA					6.81		5.01


Item 3.			Quantitative and Qualitative Disclosures About Market Risk


Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds


Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1-31, 2021	907	$	16.69	—	$	—
February 1-28, 2021	186,458	$	21.06	—	$	—
March 1-31, 2021	36,631	$	20.69	—	$	—
Total	223,996	$	20.98	—	$	—


10.1						Consulting Agreement dated February 28, 2021 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated March 2, 2021).

31.1						Certification of Chief Executive Officer required by Securities and Exchange Commission Rule 13a – 14(a) or 15d – 14(a) (filed herewith).

31.2						Certification of Chief Financial Officer required by Securities and Exchange Commission Rule 13a – 14(a) or 15d – 14(a) (filed herewith).

32.1						Certification pursuant to 18 U.S.C. Section 1350 (furnished herewith).

101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						Inline XBRL Taxonomy Extension Schema Document.

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104						Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.