• Sales of $956 million, down 5% compared to Q1 2019, in line with PY excluding divestitures
• Business segment operating profit of $81.2 million, or 8.5% of sales, up 32% vs. PY
• $639 million of cash on hand; managed working capital % sales in line with PY
• Net income attributable to ATI of $21.1 million, or $0.16 per share
  • Adjusted net income of $26.6 million, or $0.20 per share
  • Adjusted EBITDA of $101.6 million, or 10.6% of sales
• Impact of COVID-19 on 2020 uncertain; Full Year 2020 guidance withdrawn

PITTSBURGH — (BUSINESS WIRE) — May 5, 2020 — Allegheny Technologies Incorporated (NYSE: ATI) reported first quarter 2020 results, with sales of $956 million and net income attributable to ATI of $21.1 million, or $0.16 per share. First quarter 2020 results include an $8 million pretax restructuring charge for an early retirement incentive program to streamline ATI’s salaried workforce. Adjusted net income attributable to ATI was $26.6 million, or $0.20 per share excluding this item. Adjusted EBITDA was $101.6 million, or 10.6% of sales for the first quarter 2020.

For the first quarter 2019, sales were $1.0 billion and net income attributable to ATI was $15.0 million, or $0.12 per share. Results in 2019 included $48 million of sales and minimal segment operating profit related to divested businesses. Results in 2019 also included a low 5% tax rate due to the net valuation allowance position in the U.S. Adjusted Q1 2019 results using the first quarter 2020's 31% tax rate were net income attributable to ATI of $10.4 million, or $0.08 per share. Adjusted EBITDA for the prior year quarter was $80.6 million, or 8.0% of sales.

“We achieved solid first quarter results despite a significant deterioration in market conditions late in the quarter. This performance, along with our solid cash and liquidity positions, provide a strong foundation to respond to the economic challenges created by the COVID-19 pandemic. Our focus on safety, coupled with our team’s extraordinary support for each other’s health and welfare, have allowed us to maintain on-time delivery of the mission-critical parts and materials our customers need,” said Robert S. Wetherbee, President and CEO. “Thanks to close collaboration with our customers, we are adjusting our production to match the rapidly changing end-market demand requirements.”

At the start of 2020, ATI realigned its business segments to streamline operations and unlock synergies, proactively implementing workforce reduction initiatives in the fourth quarter 2019 and again in the first quarter 2020. The Company's approach to cost reductions is to align cost structures to demand levels and the efficient delivery of products to customers. The impact of COVID-19 has tested this cost reduction strategy and the process is performing very well, including delivering $115 million to $135 million of incremental cost reductions in 2020. To further mitigate the financial impact from reduced aerospace and consumer demand levels stemming from the COVID-19 pandemic, the company has expanded these cost reduction efforts to include the temporary idling of operations to reduce costs and inventory, reductions in base compensation for U.S. salaried employees, including a 20% reduction for executive leadership team members, reductions in non-employee Director compensation, reductions in and/or deferrals of 401(k) benefits for a substantial portion of our employees, furlough of non-essential positions, and significant reductions in capital expenditures and corporate expenses. The company will continue to evaluate its demand levels and operating rates and may take additional actions as warranted. “Beyond our cost mitigation actions and consistent with our strategy, we remain committed to maintaining a strong balance sheet, one with ample cash and liquidity and no near-term debt maturities," said Wetherbee.

"We've led through difficult times before. While these current challenges are unprecedented, we have an experienced leadership team that understands the need for quick and decisive actions to transform the business and I am confident that we will emerge a stronger company," Wetherbee said.

Operating Results by Segment

• HPMC sales decreased 15% in the first quarter 2020 year-over-year and decreased by 6% excluding sales from the recently divested titanium investment castings and industrial forgings businesses. Sales to the aerospace & defense markets were down 10%, or 3% excluding divested businesses. In the first quarter 2020, 85% of segment sales were to the aerospace and defense markets, with next-generation jet engine products sales representing 50% of total HPMC jet engine product sales.
• HPMC operating profit increased 10% compared to the prior year period, to $57.1 million, while segment operating profit margins grew by 320 basis points year-over-year to 13.6% of sales.
• Sales and operating results for the HPMC segment decreased sequentially versus fourth quarter 2019, primarily related to weaker sales for commercial airframe/engine and energy applications.

• AA&S first quarter 2020 sales were 5% higher compared to the prior year's quarter, and 3% higher than the fourth quarter 2019, primarily due to higher HRPF conversion services billings. Aerospace and defense markets sales also continued to expand, growing to 25% of first quarter 2020 segment sales.
• AA&S segment operating profit was $24.1 million, or 4.5% of sales, increasing 141% compared to the 2019 first quarter, but declining versus the fourth quarter 2019. Compared to the prior year, results from our STAL joint venture improved and higher raw material surcharges provided a tailwind. Sequentially, segment operating profit declines were driven primarily by lower raw material surcharges and reduced high-value product volumes. Compared to both prior year periods, AA&S segment results for the first quarter 2020 reflect lower retirement benefit expense of approximately $5 million.
• First quarter 2020 AA&S segment results include $3.9 million of losses from the A&T Stainless joint venture operations, which remained unprofitable due to Section 232 tariffs. As previously disclosed, the joint venture intends to idle its Midland, PA Direct Roll Anneal and Pickle (DRAP) facility mid-year 2020 due to a lack of relief from Section 232 tariffs.