Financial Information for Subsidiary and Guarantor Parent

9 Months Ended

Sep. 30, 2019

Condensed Financial Information Disclosure [Abstract]

Financial Information for Subsidiary and Guarantor Parent

The payment obligations under the $150 million 6.95% Debentures due 2025 issued by Allegheny Ludlum, LLC (the “Subsidiary”) are fully and unconditionally guaranteed by Allegheny Technologies Incorporated (the “Guarantor Parent”). In accordance with positions established by the Securities and Exchange Commission, the following financial information sets forth separately financial information with respect to the Subsidiary, the non-guarantor subsidiaries and the Guarantor Parent. The principal elimination entries eliminate investments in subsidiaries and certain intercompany balances and transactions.

ATI is the plan sponsor for the U.S. qualified defined benefit pension plans, which cover certain current and former employees of the Subsidiary and the non-guarantor subsidiaries. As a result, the balance sheets presented for the Subsidiary and the non-guarantor subsidiaries do not include any U.S. qualified defined benefit pension assets or liabilities, or the related deferred taxes and valuation allowances. These assets, liabilities and related deferred taxes and pension income or expense are recognized by the Guarantor Parent. Management and royalty fees charged to the Subsidiary and to the non-guarantor subsidiaries by the Guarantor Parent have been excluded solely for purposes of this presentation. The effects of income tax valuation allowances on U.S. Federal and State deferred tax assets are excluded from the Subsidiary’s financial results, and are reported by the Guarantor Parent or the non-guarantor subsidiaries, as applicable.

Allegheny Technologies Incorporated

Financial Information for Subsidiary and Guarantor Parent

Balance Sheets

September 30, 2019



(In millions)	Guarantor Parent		Subsidiary			Non-guarantor Subsidiaries		Eliminations			Consolidated
Assets:
Cash and cash equivalents	$	0.2	$	9.9		$	501.2	$	—		$	511.3
Accounts receivable, net	—		169.0			427.7		—			596.7
Intercompany notes receivable	—		—			4,344.9		(4,344.9		)	—
Short-term contract assets	—		—			37.8		—			37.8
Inventories, net	—		203.4			965.1		—			1,168.5
Prepaid expenses and other current assets	6.0		52.1			50.0		—			108.1
Total current assets	6.2		434.4			6,326.7		(4,344.9		)	2,422.4
Property, plant and equipment, net	6.3		1,531.2			870.0		—			2,407.5
Goodwill	—		—			523.8		—			523.8
Intercompany notes receivable	—		—			200.0		(200.0		)	—
Investment in subsidiaries	6,472.4		37.7			—		(6,510.1		)	—
Other assets	54.6		52.3			168.3		—			275.2
Total assets	$	6,539.5	$	2,055.6		$	8,088.8	$	(11,055.0	)	$	5,628.9
Liabilities and stockholders’ equity:
Accounts payable	$	5.7	$	144.7		$	265.4	$	—		$	415.8
Intercompany notes payable	2,339.5		2,005.4			—		(4,344.9		)	—
Short-term contract liabilities	—		45.1			52.0		—			97.1
Short-term debt and current portion of long-term debt	1.3		0.2			10.6		—			12.1
Other current liabilities	36.8		79.3			122.2		—			238.3
Total current liabilities	2,383.3		2,274.7			450.2		(4,344.9		)	763.3
Long-term debt	1,284.0		150.4			107.3		—			1,541.7
Intercompany notes payable	—		200.0			—		(200.0		)	—
Accrued postretirement benefits	—		254.3			47.1		—			301.4
Pension liabilities	555.6		3.5			42.8		—			601.9
Deferred income taxes	15.8		—			—		—			15.8
Other long-term liabilities	20.9		35.3			68.7		—			124.9
Total liabilities	4,259.6		2,918.2			716.1		(4,544.9		)	3,349.0
Total stockholders’ equity (deficit)	2,279.9		(862.6		)	7,372.7		(6,510.1		)	2,279.9
Total liabilities and stockholders’ equity	$	6,539.5	$	2,055.6		$	8,088.8	$	(11,055.0	)	$	5,628.9

Allegheny Technologies Incorporated

Financial Information for Subsidiary and Guarantor Parent

Statements of Income and Comprehensive Income

For the three months ended September 30, 2019



(In millions)	Guarantor Parent			Subsidiary			Non-guarantor Subsidiaries			Eliminations			Consolidated
Sales	$	—		$	389.2		$	629.5		$	—		$	1,018.7
Cost of sales	3.2			361.9			493.9			—			859.0
Gross profit (loss)	(3.2		)	27.3			135.6			—			159.7
Selling and administrative expenses	29.6			8.9			26.7			—			65.2
Operating income (loss)	(32.8		)	18.4			108.9			—			94.5
Nonoperating retirement benefit expense	(12.0		)	(6.2		)	(0.3		)	—			(18.5		)
Interest income (expense), net	(36.7		)	(33.3		)	45.8			—			(24.2		)
Other income (loss) including equity in income of unconsolidated subsidiaries	200.5			(2.2		)	69.2			(200.3		)	67.2
Income (loss) before income tax provision (benefit)	119.0			(23.3		)	223.6			(200.3		)	119.0
Income tax provision (benefit)	3.7			(5.5		)	28.7			(23.2		)	3.7
Net income (loss)	115.3			(17.8		)	194.9			(177.1		)	115.3
Less: Net income attributable to noncontrolling interests	—			—			4.3			—			4.3
Net income (loss) attributable to ATI	$	115.3		$	(17.8	)	$	190.6		$	(177.1	)	$	111.0
Comprehensive income (loss) attributable to ATI	$	133.7		$	(14.5	)	$	178.9		$	(164.1	)	$	134.0

Allegheny Technologies Incorporated

Financial Information for Subsidiary and Guarantor Parent

Statements of Income and Comprehensive Income

For the nine months ended September 30, 2019



(In millions)	Guarantor Parent			Subsidiary			Non-guarantor Subsidiaries			Eliminations			Consolidated
Sales	$	—		$	1,091.4		$	2,012.5		$	—		$	3,103.9
Cost of sales	9.3			1,007.8			1,618.3			—			2,635.4
Gross profit (loss)	(9.3		)	83.6			394.2			—			468.5
Selling and administrative expenses	88.9			24.3			87.7			—			200.9
Operating income (loss)	(98.2		)	59.3			306.5			—			267.6
Nonoperating retirement benefit expense	(35.5		)	(18.5		)	(1.2		)	—			(55.2		)
Interest income (expense), net	(112.8		)	(101.5		)	139.4			—			(74.9		)
Other income (loss) including equity in income of unconsolidated subsidiaries	466.9			(8.8		)	90.6			(465.8		)	82.9
Income (loss) before income tax provision (benefit)	220.4			(69.5		)	535.3			(465.8		)	220.4
Income tax provision (benefit)	10.3			(16.6		)	85.8			(69.2		)	10.3
Net income (loss)	210.1			(52.9		)	449.5			(396.6		)	210.1
Less: Net income attributable to noncontrolling interests	—			—			9.0			—			9.0
Net income (loss) attributable to ATI	$	210.1		$	(52.9	)	$	440.5		$	(396.6	)	$	201.1
Comprehensive income (loss) attributable to ATI	$	279.5		$	(43.3	)	$	429.9		$	(392.6	)	$	273.5

Condensed Statements of Cash Flows

For the nine months ended September 30, 2019



(In millions)	Guarantor Parent			Subsidiary			Non-guarantor Subsidiaries			Eliminations			Consolidated
Cash flows provided by (used in) operating activities	$	25.4		$	(167.1	)	$	131.7		$	—		$	(10.0	)
Investing Activities:
Purchases of property, plant and equipment	(0.5		)	(15.1		)	(82.5		)	—			(98.1		)
Net receipts/(payments) on intercompany activity	—			—			(167.1		)	167.1			—
Proceeds from sale of businesses, net of transaction costs	—			—			155.9			—			155.9
Proceeds from disposal of property, plant and equipment	—			—			91.8			—			91.8
Other	(0.2		)	—			—			—			(0.2		)
Cash flows provided by (used in) investing activities	(0.7		)	(15.1		)	(1.9		)	167.1			149.4
Financing Activities:
Payments on long-term debt and finance leases	(0.4		)	(0.1		)	(4.8		)	—			(5.3		)
Net borrowings under credit facilities	—			—			5.1			—			5.1
Net receipts/(payments) on intercompany activity	(14.3		)	181.4			—			(167.1		)	—
Shares repurchased for income tax withholding on share-based compensation and other	(9.9		)	—			—			—			(9.9		)
Cash flows provided by (used in) financing activities	(24.6		)	181.3			0.3			(167.1		)	(10.1		)
Increase (decrease) in cash and cash equivalents	$	0.1		$	(0.9	)	$	130.1		$	—		$	129.3

Allegheny Technologies Incorporated

Financial Information for Subsidiary and Guarantor Parent

Balance Sheets

December 31, 2018



	Guarantor					Non-guarantor
(In millions)	Parent		Subsidiary			Subsidiaries		Eliminations			Consolidated
Assets:
Cash and cash equivalents	$	0.1	$	10.8		$	371.1	$	—		$	382.0
Accounts receivable, net	—		126.3			401.5		—			527.8
Intercompany notes receivable	—		—			3,968.8		(3,968.8		)	—
Short-term contract assets	—		—			51.2		—			51.2
Inventories, net	—		216.1			995.0		—			1,211.1
Prepaid expenses and other current assets	12.9		29.3			32.4		—			74.6
Total current assets	13.0		382.5			5,820.0		(3,968.8		)	2,246.7
Property, plant and equipment, net	1.7		1,548.4			924.9		—			2,475.0
Goodwill	—		—			534.7		—			534.7
Intercompany notes receivable	—		—			200.0		(200.0		)	—
Investment in subsidiaries	6,096.4		37.7			—		(6,134.1		)	—
Other assets	35.6		30.7			179.1		—			245.4
Total assets	$	6,146.7	$	1,999.3		$	7,658.7	$	(10,302.9	)	$	5,501.8
Liabilities and stockholders’ equity:
Accounts payable	$	3.3	$	177.5		$	318.0	$	—		$	498.8
Intercompany notes payable	2,102.8		1,866.0			—		(3,968.8		)	—
Short-term contract liabilities	—		33.0			38.4		—			71.4
Short-term debt and current portion of long-term debt	0.2		0.7			5.7		—			6.6
Other current liabilities	59.1		71.7			129.3		—			260.1
Total current liabilities	2,165.4		2,148.9			491.4		(3,968.8		)	836.9
Long-term debt	1,278.8		151.8			104.9		—			1,535.5
Intercompany notes payable	—		200.0			—		(200.0		)	—
Accrued postretirement benefits	—		259.2			59.2		—			318.4
Pension liabilities	681.6		4.0			44.4		—			730.0
Deferred income taxes	12.9		—			—		—			12.9
Other long-term liabilities	16.4		17.6			42.5		—			76.5
Total liabilities	4,155.1		2,781.5			742.4		(4,168.8		)	3,510.2
Total stockholders’ equity (deficit)	1,991.6		(782.2		)	6,916.3		(6,134.1		)	1,991.6
Total liabilities and stockholders’ equity	$	6,146.7	$	1,999.3		$	7,658.7	$	(10,302.9	)	$	5,501.8

Allegheny Technologies Incorporated

Financial Information for Subsidiary and Guarantor Parent

Statements of Operations and Comprehensive Income

For the three months ended September 30, 2018



(In millions)	Guarantor Parent			Subsidiary			Non-guarantor Subsidiaries			Eliminations			Consolidated
Sales	$	—		$	357.4		$	662.8		$	—		$	1,020.2
Cost of sales	3.7			316.3			539.8			—			859.8
Gross profit (loss)	(3.7		)	41.1			123.0			—			160.4
Selling and administrative expenses	24.9			7.3			33.3			—			65.5
Operating income (loss)	(28.6		)	33.8			89.7			—			94.9
Nonoperating retirement benefit expense	(3.1		)	(4.9		)	(0.4		)	—			(8.4		)
Interest income (expense), net	(34.9		)	(29.5		)	39.6			—			(24.8		)
Other income (loss) including equity in income of unconsolidated subsidiaries	129.1			0.4			(0.1		)	(128.6		)	0.8
Income (loss) before income tax provision (benefit)	62.5			(0.2		)	128.8			(128.6		)	62.5
Income tax provision (benefit)	6.9			1.4			21.2			(22.6		)	6.9
Net income (loss)	55.6			(1.6		)	107.6			(106.0		)	55.6
Less: Net income attributable to noncontrolling interests	—			—			5.1			—			5.1
Net income (loss) attributable to ATI	$	55.6		$	(1.6	)	$	102.5		$	(106.0	)	$	50.5
Comprehensive income (loss) attributable to ATI	$	46.9		$	0.9		$	97.9		$	(94.9	)	$	50.8

Allegheny Technologies Incorporated

Financial Information for Subsidiary and Guarantor Parent

Statements of Operations and Comprehensive Income

For the nine months ended September 30, 2018



(In millions)	Guarantor Parent			Subsidiary			Non-guarantor Subsidiaries			Eliminations			Consolidated
Sales	$	—		$	1,047.0		$	1,961.7		$	—		$	3,008.7
Cost of sales	11.7			962.8			1,551.5			—			2,526.0
Gross profit (loss)	(11.7		)	84.2			410.2			—			482.7
Selling and administrative expenses	73.0			25.2			97.1			—			195.3
Operating income (loss)	(84.7		)	59.0			313.1			—			287.4
Nonoperating retirement benefit expense	(9.7		)	(14.6		)	(1.2		)	—			(25.5		)
Interest income (expense), net	(102.1		)	(83.3		)	109.6			—			(75.8		)
Other income (loss) including equity in income of unconsolidated subsidiaries	405.0			19.5			0.6			(402.7		)	22.4
Income (loss) before income tax provision (benefit)	208.5			(19.4		)	422.1			(402.7		)	208.5
Income tax provision (benefit)	16.8			(2.9		)	66.3			(63.4		)	16.8
Net income (loss)	191.7			(16.5		)	355.8			(339.3		)	191.7
Less: Net income attributable to noncontrolling interests	—			—			10.4			—			10.4
Net income (loss) attributable to ATI	$	191.7		$	(16.5	)	$	345.4		$	(339.3	)	$	181.3
Comprehensive income (loss) attributable to ATI	$	223.0		$	(9.3	)	$	334.7		$	(330.6	)	$	217.8

Condensed Statements of Cash Flows

For the nine months ended September 30, 2018



(In millions)	Guarantor Parent			Subsidiary			Non-guarantor Subsidiaries			Eliminations			Consolidated
Cash flows provided by (used in) operating activities	$	(102.9	)	$	(126.7	)	$	361.2		$	(15.0	)	$	116.6
Investing Activities:
Purchases of property, plant and equipment	(1.4		)	(19.2		)	(80.7		)	—			(101.3		)
Net receipts/(payments) on intercompany activity	—			—			(236.0		)	236.0			—
Purchases of businesses	—			—			(10.0		)	—			(10.0		)
Proceeds from disposal of property, plant and equipment	—			1.3			0.1			—			1.4
Other	0.8			—			—			—			0.8
Cash flows provided by (used in) investing activities	(0.6		)	(17.9		)	(326.6		)	236.0			(109.1		)
Financing Activities:
Borrowings on long-term debt	—			—			7.1			—			7.1
Payments on long-term debt and finance leases	(0.2		)	(0.6		)	(3.8		)	—			(4.6		)
Net borrowings under credit facilities	—			—			4.0			—			4.0
Net receipts/(payments) on intercompany activity	109.2			126.8			—			(236.0		)	—
Dividends paid to stockholders	—			—			(15.0		)	15.0			—
Dividends paid to noncontrolling interests	—			—			(10.0		)	—			(10.0		)
Sale to noncontrolling interests	—			11.7			2.7			—			14.4
Shares repurchased for income tax withholding on share-based compensation	(6.5		)	—			—			—			(6.5		)
Cash flows provided by (used in) financing activities	102.5			137.9			(15.0		)	(221.0		)	4.4
Increase (decrease) in cash and cash equivalents	$	(1.0	)	$	(6.7	)	$	19.6		$	—		$	11.9