Investor Overview June 2020/media/Files/A/ATIMetals-IR-V2... · 2020-06-24 · Microsoft PowerPoint - Investor Overview June 2020 6/24/2020 4:37:47 PM

© 2020 ATI. All rights reserved.

Investor OverviewJune 2020


This presentation contains forward-looking statements. Actual results may differ

materially from results anticipated in the forward-looking statements due to various

known and unknown risks, many of which we are unable to predict or control. These and

additional risk factors are described from time to time in the Company’s filings with the

Securities and Exchange Commission, including its Annual Report on Form 10-K for the

year ended December 31, 2019.

Forward Looking Statements

2

© 2020 ATI. All rights reserved. 3

Extensive portfolio of highly differentiated products serving diverse end-markets

Jet Engine

Airframe

Defense

Aerospace & Defense Key Customers

Overview of ATI

Produce differentiated products with significant barriers to entry for a wide variety of end-markets, led by Aerospace & Defense

Unmatched materials science capabilities and manufacturing process technologies within our industry

Operates in two business segments:

High Performance Materials & Components (HPMC)

Advanced Alloys & Solutions (AA&S)

Full-Year 2019 Revenue by Market

Revenue by Segment

AA&S52%

HPMC 48%

Aerospace & Defense

52%Energy

19%

Medical4%

Electronics4%

Other21%

3

ATI Relentless Innovation®

AA&S57%

HPMC 43%

Full-Year 20192015

© 2020 ATI. All rights reserved. 4

Leadership Priorities

KEEP EMPLOYEES

SAFEBE “RECOVERY READY,”

LEVERAGING SHARE GAINS FOR GROWTH

OPTIMIZE COST STRUCTURE TO MATCH NEW DEMAND

EXPECTATIONS

Maintain a Solid Foundation to Ensure Long-Term Profitability and Growth

PRESERVE CASH & MAINTAIN LIQUIDITY

SUPPORT CUSTOMERS THROUGH CONTINUED STRONG EXECUTION


Reporting Segment Realignment (January 2020)Taking action to increase long-term profitable growth in each business segment

5

Allegheny Technologies Incorporated

PreviousSegments

NewSegments

High Performance Materials & Components (HPMC)*

► Forged Products

► Specialty Materials

Advanced Alloys & Solutions(AA&S)

► Specialty Alloys & Components

► Specialty Rolled Products► Specialty-grade flat products formed through unique process capabilities► Aero Titanium Plate

► Standard Stainless Sheet Products► Standard stainless sheet products for the North American market► Includes results from A&T Stainless JV

► Other Joint Ventures► STAL: precision rolled stainless strip► Uniti Titanium: commercially pure titanium products

High Performance Materials & Components (HPMC)

► Forged Products

► Specialty Materials

► Specialty Alloys & Components

► Aero Titanium Plate

Flat Rolled Products(FRP)

► Flat Rolled Products – U.S.

► Joint Ventures► STAL► A&T Stainless ► Uniti Titanium

*Salem operations remains under HPMC segment

Enhances position as a leading specialty materials producer; Enables further penetration of core markets


Increases long-term profitable growth potential in each segment

Extends and accelerates synergies between businesses

Creates broader market access with improved product offerings and cost competitiveness

Streamlines business structure

Proactive organizational cost management actions initiated in Q4 2019 and Q1 2020

6

High Performance Materials & Components Advanced Alloys & Solutions

Maximize Aero Engine and Airframe market growth opportunities

Long-term agreements position ATI to capture end-market

demand growth while improving profitability

High percentage of “material pull-through” within ATI drives

inventory efficiency and profitability

Capitalize on materials science capabilities and advanced

process technologies for revenue and margin growth

Maximize Defense, Airframe, and Energy market growth opportunities

Improve profitability & reduce earnings volatility

Drive high value flat product portfolio

De-emphasize standard value stainless products

Apply ATI Best Way

Create products more efficiently, with faster flow times

Gain share by leveraging capacity

Improve profitability through lower production costs

Segment Realignment BenefitsImproving profitability through enhanced growth opportunities and increased operational efficiency


Full-Year 2019 Revenue

Aerospace & Defense Markets % of Revenue

Commercial Aero 75%

Jet Engine 55%

Airframe 20%

Government & Defense 7%

Total Aerospace & Defense 82%

Well-positioned to meet end-market demand growth upon industry recovery

7

Continued operational excellence to support customer needs

Expand competitive advantage through innovative technology and

advanced manufacturing capabilities

Multi-year revenue and operating margin growth potential driven

largely by long-term Aerospace & Defense contracts

Utilize existing capabilities to serve non-aerospace markets

Leverage powder alloy development and production investment,

including additive part design and manufacturing

Strategy & Outlook

High Performance Materials & ComponentsTechnology-Driven, Critical Supplier to Key Aerospace & Defense Customers

Aerospace & Defense

82%

Energy8%

Medical4%

Other6%

7

Nickel-based Alloys38%

Precision Forgings & Components

36%

Titanium-based Alloys

26%

Market Products


Segment Operating Profit ($M)

Strong operating profit leverage on continued revenue growth

Further revenue growth driven by:

Growing global demand for commercial aircraft led by higher revenue passenger miles in all regions

Increased usage of ATI materials and components for next-generation jet engines, airframes and defense applications

Enhanced growth and margin opportunities through long-term contract extensions signed in 2019

Revenue ($M)

Aerospace & Defense76%

Medical8%

1,5851,548

1,705

1,963 1,979

$1,200

$1,400

$1,600

$1,800

$2,000

$2,200

2015 2016 2017 2018 2019

+6% CAGR

97

122

191

270 272

6.1%

7.9%

11.2%

13.7% 13.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

$50

$100

$150

$200

$250

$300

$350

2015 2016 2017 2018 2019

Operating profit and margin drivers:

Increasing aircraft and next-generation jet engine production levels

Ongoing product mix improvements due to increased next-generation materials, forgings and components on a variety of new engine platforms

2019 operating profit growth limited by customer cash management actions and a steep decline in cobalt prices early in the year

Q4’19 operating profit margin of 14.7%

High Performance Materials & ComponentsFinancial Results and Outlook

8

+29% CAGR


Maximize Aerospace, Defense and Energy market growth opportunities

Gain share by leveraging world-class process technologies and deep materials science expertise to produce market-leading flat products

Enhanced profitability through product mix & operational excellence

Increased high-value product volumes: nickel, titanium, and zirconium

Utilize ATI Best Way to produce products more efficiently at lower costs

Increased cash generation through capital efficient capacity utilization

Oil & GasOther

Strategy & Outlook

9

Enhanced value-add customer solutions; Improving profitability and cash flow generation

Revenue by Market

Improving Product Mix

Aerospace & Defense: Strong demand growth; sales up 48% vs. 2017

Energy: Ongoing solid demand growth; sales up 31% vs. 2017

High Value Products*: Sales up 25% since 2017; led by nickel and titanium alloys

Demonstrates success of “value-over-volume” strategy and penetration of core markets

Advanced Alloys & SolutionsLeveraging assets and expertise to enhance core market growth opportunities

Energy30%

Aerospace & Defense

24%

Electronics8%

Other38%

9

Revenue by Product

FY 2019

Energy27%

Aerospace & Defense

18%

Electronics 8%

Other47%

FY 2017

High Value Products*

66%

Std. Value Stainless Products

34%High Value Products*

72%

Std. Value Stainless Products

28%

FY 2017 FY 2019

*Includes nickel, titanium and exotic alloys, and precision rolled strip


(182)

(117)

92

144

109

-8.5%

-7.4%

5.1%

6.9%

5.1%

-10.0%

-6.0%

-2.0%

2.0%

6.0%

($200)

($150)

($100)

($50)

$0

$50

$100

$150

$200

Segment Operating Profit (Loss) ($M)

“Value-over-volume” strategy improving product mix; Streamlined cost structure

10

2019 YOY revenue growth driven by:

Increased sales of high-value products into key end-markets

Higher volumes of nickel-based, titanium, and zirconium alloys

Significant demand from Aerospace, Defense and Energy markets

Lower sales of standard value stainless sheet products

Decreased demand from Automotive and consumer-facing end-markets

Revenue ($M)

2,134

1,587

1,820

2,0842,144

$0

$500

$1,000

$1,500

$2,000

$2,500

2015 2016 2017 2018 2019

2019 YOY operating profit performance:

Third straight year of profitability

Improved product mix through penetration of core markets

Increased HRPF conversion volumes

Negative impacts from section 232 tariffs, higher retirement benefit

expenses and cost inefficiencies from soft std. value product demand

20182017

20162015

Advanced Alloys & SolutionsRevenue and Margin Trends

2019

10


$-

$100

$200

$300

$400

$500

$600

2019 2020 2021 2022 2023 2024 2025 2026 2027

Notes Convertible Notes Term Loan

Debt Structure – Q2 2020 ProformaRecent Actions and Ongoing Efforts To Achieve Balance Sheet Goals

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Strong balance sheet and liquidity supported by ABL

Recently Completed Actions Reduce Refinancing Risk and add Liquidity Q2 2020: refinanced majority of 4.75% 2022 Convertible Notes

Issued $285M of Convertible Notes, due 2025, using proceeds to repurchase ~70% of existing 2022 Convertible Notes

Lower 3.5% coupon on new 2025 Notes

Added call feature provides increased flexibility and expanded settlement options

Q2 2020: Drew $100M Delayed Draw Term Loan 1

Provides low-cost term liquidity

2019 Actions Strengthened Balance Sheet Issued 2027 Notes, used proceeds to repay 2021 Notes

Reduced debt by $150M

Upsized ABL, extending maturity to 2024

Sold non-core assets, generating ~$250M of cash

Net Debt/EBITDA(2) Ratio: 2.1x

$ Millions

(1) Official draw date of 6/26/2020(2) EBITDA based on LTM Q1’20 financials as adjusted for special items. See appendix for

definition and reconciliations to the nearest GAAP measure.

© 2020 ATI. All rights reserved. 12January 2019

Plan Status; Closed to New Entrants

Proactively reduced pension plan population

>50% total participant reduction since 2012

Less than 16,000 participants remain,

including ~1,300 active-open

Proactive Steps to Reduce Participants

2016 annuity buyout reduced ~3,700 participants

Q4‘18 annuity buyout reduced ~3,700 participants

Q3’19 annuity buyout reduced ~1,800 participants

Actively pursuing options to reduce defined benefit pension plan participation

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Defined Benefit Pension Risk ReductionStrategic Efforts to Reduce Plan Participation

12

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2012 2013 2014 2015 2016 2017 2018 2019 2020

Actives-Open Actives-Frozen Deferred Retiree# participants

> 50% Reduction

Data as of the beginning of each year


2020 OutlookFull Year 2020

EPS FCF1

Suspended EPS Guidance

$110M - $140M

EPS ($0.07) – ($0.17)

Q2 2020

Earnings Drivers

737 MAX production restart in Q2 at low rate

prior assumption: Q2 restart at moderate rate

Nickel prices in expected range of $5.00/lb. - $5.50/lb.

prior assumption: $6.00/lb. to $6.50/lb.

Significant global impact from COVID-19 pandemic

prior assumption: minimal impact

$115M - $135M in expense cost reductions

prior assumption: modest cost reductions

Q1’20 effective tax rate of 31%; FY is uncertain

prior assumption: 23% to 25%

Cash Flow Drivers

Capex in the range of $130M - $150M

prior assumption: $200M - $210M

Managed working capital: significant source of cash

prior assumption: modest use of cash

U.S. pension contribution of $130M (no change)

Key Outlook Assumption

1 See appendix for reconciliation of non-GAAP financial measures

13


ATI competes by serving customers in:

Strategic Markets

Aerospace Defense Energy

Diversified Applications

Medical Electronics

Materials Science Advanced, Integrated Process Technologies

Relentless, Innovative People

Our CommitmentCreating long-term shareholder value through Relentless Innovation®

Our Values• Integrity: The cornerstone of our business

relationships. We do what we say we will, and we do things the right way.

• Safety & Sustainability: We strive for a Zero Injury Culture committed to the safety of our people, our products, and the communities in which we operate.

• Accountability: We take responsibility and hold ourselves accountable for our actions, performance and results.

• Teamwork and Respect: We work together for ATI’s long-term success. We welcome and respect others’ views, capabilities and experiences.

• Innovation: We drive sustainable value and meet our commitments through continuous transformation.

14

Our VisionSolving the World’s Challenges through Materials Science

Additional Materials Appendix


Non-GAAP Financial Measures

16

(a) Full year 2019 results include an $11.4 million pre-tax joint venture impairment charge for the Allegheny & Tsingshan Stainless joint venture, which included ATI's 50% share of the JV's impairment charge on the carrying value of long-lived assets at the Midland, PA production facility. (b) Full year 2019 results include a $21.6 million pre-tax debt extinguishment charge for the full redemption of the $500 million, 5.95% Senior Notes due 2021. Full year 2017 results include a $37.0 million pre-tax debt extinguishment charge for the full redemption of the $350 million, 9.375% Senior Notes due 2019.(c) The 2017 goodwill impairment charge was to write-off goodwill for our Cast Products business. The 2015 goodwill impairment charge was to write-off all the goodwill for our Flat Rolled Products business. (d) 2016 results include $3.4 million of employee benefit costs for special termination benefits for pension and other postretirement benefit plans.(e) Restructuring costs in 2016 consist primarily of charges related to the indefinite idling of the Rowley, UT titanium sponge production facility. Restructuring costs in 2015 consist of $54.5 million of long-lived asset impairment charges, $3.5 million of facility closure costs and $6.3 million of employee severance. (f) Costs in 2015 include costs to qualify the Company's titanium sponge at its Rowley, UT facility as premium quality. Fiscal years 2015 and 2016 include $24.5 million and $17.7 million, respectively, in inventory valuation charges related to market-based valuation of titanium products. Additionally, 2015 includes a $25.4 million charge to revalue inventory based on current market prices for non-premium quality grades of titanium sponge and 2016 includes an $11.3 million charge to revalue titanium sponge inventory based on revised assessments of industrial grade titanium market conditions and expected utilization. Finally, 2016 includes the above market production costs and other operating expenses for the Rowley, UT facility, net of expected ongoing carrying costs. (g) Represents costs associated with the work stoppage and return-to-work of USW-represented employees including reduced operating efficiencies, out-of-phase raw material costs, and provision of the new labor agreements. (h) Represents products commissioning costs for the Company's Hot-Rolling and Processing Facility.

Free cash flow as defined by ATI includes the total of cash provided by (used in) operating activities and investing activities as presented on the consolidated statements of cash flows, adjusted to exclude cash contributions to the Company’s U.S. qualified defined benefit pension plans.

Free cash flow

Earnings before interest, taxes, depreciation and amortization (EBITDA)

© 2020 ATI. All rights reserved. 17January 2019

Non-GAAP Financial Measures

17

Free Cash Flow

($ in millions) 2015 2016 2017 2018 2019Cash provided by (used in) operating activities 131.4$ (43.7)$ 22.4$ 392.8$ 230.1$ Cash (used in) provided by investing activities (145.1) (200.0) (119.6) (145.1) 81.7 Add back: cash contributions to ATI Pension Plan 0.3 115.0 135.0 40.4 145.0 Free Cash Flow as defined (13.4)$ (128.7)$ 37.8$ 288.1$ 456.8$

Adjusted Sales Information Industrial Forgings($ in millions) and Cast Products

Reported Businesses Adjusted

Total ATI Sales- Q4 2019 1,018.6$ -$ 1,018.6$ Total ATI Sales- Q4 2018 1,037.9 (48.0) 989.9 Percentage Change -1.9% 2.9%

Total ATI Sales- Full Year 2019 4,122.5$ (95.3)$ 4,027.2$ Total ATI Sales- Full Year 2018 4,046.6 (182.8) 3,863.8 Percentage Change 1.9% 4.2%

HPMC Sales- Q4 2019 602.8$ -$ 602.8$ HPMC Sales- Q4 2018 596.1 (48.0) 548.1 Percentage Change 1.1% 10.0%

HPMC Sales- Full Year 2019 2,398.1$ (95.3)$ 2,302.8$ HPMC Sales- Full Year 2018 2,334.2 (182.8) 2,151.4 Percentage Change 2.7% 7.0%

HPMC Aerospace & Defense Markets Sales- Full Year 2019 1,879.1$ (68.0)$ 1,811.1$ HPMC Aerospace & Defense Markets Sales- Full Year 2018 1,771.3 (108.1) 1,663.2 Percentage Change 6.1% 8.9%

For the Years Ended December 31,

Free cash flow as defined by ATI includes the total of cash provided by (used in) operating activities and investing activities as presented on the consolidated statements of cash flows, adjusted to exclude cash contributions to the Company’s U.S. qualified defined benefit pension plans.


Thank you for your interest in ATI.Investor Contact:Scott Minder: (412) 395-2720

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Investor Overview June 2020/media/Files/A/ATIMetals-IR-V2... · 2020-06-24 · Microsoft PowerPoint - Investor Overview June 2020 6/24/2020 4:37:47 PM