ATI (ATI) Q4 2020 earnings summary

Executive summary

• 2020 sales fell 28% YoY to $2.98B amid COVID-19 demand disruption; net loss was $1.57B, including major asset and goodwill impairments. Adjusted EBITDA was $196.3M, or 6.6% of sales.

• Priorities centered on preserving liquidity, lowering costs, shifting toward higher-value aerospace and defense products, and preparing for market recovery.

Financial highlights

• Sales were $2,982.1M vs. $4,122.5M in 2019; gross profit was $292.8M, down $345.0M, and gross margin was 9.8% vs. 15.5%.

• Operating loss was $1,302.7M vs. operating income of $366.1M; net loss attributable to ATI was $1,572.6M, or $(12.43) diluted EPS, vs. net income of $257.6M and $1.85 EPS.

• Adjusted net loss was $65M, or $(0.52) per diluted share; adjusted EBITDA was $196.3M vs. $439.4M in 2019.

• Operating cash flow was $166.9M, including a $156.6M managed working-capital reduction; capital expenditures were $136.5M.

Outlook and guidance

• Cost savings from 2020 actions expected at $90M annually in 2021 and $100M when fully implemented in 2023; total structural reductions estimated near $150M annually.

• Commercial aerospace conditions expected to remain weak through at least H1 2021; demand was expected to improve in H2, led by narrow-body engine production, share gains, and airframe business.

• Exiting standard stainless sheet products was expected to reduce AA&S revenue by approximately $450M vs. a 2019 baseline once actions were complete; five locations were planned to cease production by year-end 2021.

• Expected 2021 U.S. qualified pension contributions were $87M; average annual funding needs were projected at $50M for the following few years, subject to asset returns and discount rates.