ATI New Business & Brand Platform Introduction/media/Files/A/ATIMetals-IR-V2/events-and... · Aerospace & Defense Market % of Revenue Commercial Aero 63% Jet Engine 44% ... Sustainable

© 2018 ATI. All rights reserved.

Cowen Aerospace & Defense Conference

Pat DeCourcy, SVP Finance & CFO

February 8, 2018


Forward-Looking Statements

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, 2016.


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

Unmatched materials technology and manufacturing

capabilities within our industry

Operates in two business segments:

• High Performance Materials & Components (HPMC)

• Flat Rolled Products (FRP)

FY 2017 Revenue by Market

FY 2017 Revenue by Segment

HPMC

59%

FRP

41%

Aerospace

& Defense

49%

Oil

& Gas

12%

Other

11%

Construction

& Mining

6%

Medical

5%

Electronics

4%

Electrical Energy

5%

Automotive

8%


2017 Revenue

Aerospace & Defense Market % of Revenue

Commercial Aero 63%

Jet Engine 44%

Airframe 19%

Government & Defense 13%

Total Aerospace & Defense 76%

Well-positioned to meet end-market demand growth and improve profitability

4

HPMC revenue: ~$2.1B Significant increases in revenue & operating margin driven

by aerospace growth

Capitalize on growth opportunities beyond core aerospace

markets utilizing technical and manufacturing capabilities

Leverage investments in powder alloy development and

production, including additive manufacturing

Expand economic moat through technology an capability

2018 execution:

• Focused on meeting aerospace customer next-generation

production ramps; improving HPMC product mix

• Significant profit improvement in castings business

• Aerospace qualification expected to significantly reduce

powder facility operational start-up costs

Strategy & Outlook

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

Aerospace & Defense 76%

Medical 8%

Electrical Energy 6%

Oil & Gas

3%

Construction & Mining

2% Other

5%


Next

Generation

2013 2014 2015 2016 2017F 2018F 2019F 2020F

Next

Generation

Legacy

Source: ATI Market Outlook, Airline Monitor, Forecast International

Nu

mber

of E

ngin

es

2017

~39% of ATI’s Jet Engine market sales

were next-generation products

+ nickel-based super-alloys

+ isothermal and hot-die forgings

+ titanium castings

+ powder metal alloys

+ advanced components

+ additive manufacturing

RR Trent XWB

CFM LEAP

Pure Power® Geared Turbofan™

©2017 United Technologies Corporation,

Reproduced with Permission – All Rights Reserved

5

Next-generation engines use more ATI Products; enabling a richer product mix

High Performance Materials & Components Well Positioned to Benefit from On-Going Trends in Aerospace Industry


0

10

20

30

40

50

60

70

80

901950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

2060

2070

2080

2090

2100

2110

2120

2130

2140

2150

2160

2170

2180

2190

2200

2210

2220

2230

2240

2250

2260

2270

2280

2290

2300

2310

Maturity R&D/Introduction Growth Decline

ATI 718TM

ATI’s differentiation in jet engines

drives next-generation growth

3D printing

Nickel-based and

specialty alloy powder

Titanium-alloy powder

Meltless titanium alloy

powder development

ATI 718Plus

ATI 720

Rene 65

Ni Powder Billet

Economic moat grows wider and deeper

High Performance Materials & Components Driven by Technology; Enabled by Manufacturing

6

• Highly differentiated products

• Next-generation applications

• Long product life spans

• More commoditized products

• Current generation applications

• Mid-to-late product life cycle


7

High Performance Materials & Components Focused on Growing Market Share via Transformative Technologies

Expanding capabilities and capacity to serve growing industry needs

Existing

Existing Enhanced

Expanded

Capability

Capacity

Robinson Mfg. (PA)

Oakdale (PA)

Bakers Powder Existing

(NC)

New Powder Expansion

(NC)

GE / ATI R&D JV

Richburg (SC)

Titanium Alloys

Nickel, Copper & Other Alloys

Commercial qualification process

ongoing

Recently approved expansion to produce

primarily standard titanium alloy powders

Produce meltless titanium alloy

powders initially for use in additive

manufacturing. Capacity and capability

increases as process matures.

Smaller batch sizes; primarily serves

current ATI additive mfg. demand

Larger batch sizes; primarily serves

current ATI forging demand

Robinson R&D (PA)

New alloy development, initial

production scale-up

New ATI investments

Ongoing Leadership in Aerospace Powder Alloys


Oil & Gas

24%

Food Equip.

& Appliance

15%

Automotive

18%

Electrical Energy

6%

Aerospace

& Defense

10%

Construction

& Mining

10%

FRP revenue: ~$1.5B

Sustainable profitability and cash flow generation regardless of raw

materials or trade policy

• FY 2017 profitability; first since 2012

Profitable growth through product mix enhancements

• Increased shipments of nickel-based alloy and titanium products

• Continued penetration of oil & gas markets and aerospace markets

Focus on continuous improvement in cost structure and operations

Negotiate long-term agreements to increase key asset utilization

• JV and HRPF conversion agreement announced with Tsingshan

• Strong pipeline of 3rd party opportunities to drive HRPF utilization

Flat Rolled Products Operating Profit Improvement Driven by Product Mix and Cost Focus

Oil & Gas

Auto

Other

Revenue by Market Strategy & Outlook

8

Increasing asset utilization; Relentless focus on cost and mix optimization

Oil & Gas25%

Automotive15%

Food Equipment & Appliances

9%Aerospace & Defense

7%

Construction/Mining

11%

Electronics/Computers/Communication

7%

Electrical Energy

17%

Other9%

2012

2017

Improving Product Mix Oil & Gas: Strong rebound in 2017 after several years of low industry activity

Aerospace & Defense: Increasing share of FRP revenue; targeted to be

FRP’s second-largest market

Electronics / Computers / Communication: Higher revenue share driven by

increased market penetration through STAL JV (China)

Electrical Energy: Lower revenue contribution following exit from grain

oriented electrical steel (“GOES”) market

Other

7%

Electronics/Computers/

Communication

10%


50-50 Joint Venture, which will manufacture and sell 60 in.

wide stainless sheet in North America

• Tsingshan is the world’s largest stainless steel producer

and has developed innovative manufacturing technologies

• ATI is a global manufacturer of technically advanced

specialty materials, parts, and complex components

Conversion volume expected to significantly increase HRPF

utilization; utilize previously idled DRAP finishing facility

First customer shipments expected in first half 2018

Another step to position ATI FRP for sustainable profitability

9

Tsingshan’s Morowali Industrial Park

ATI’s HRPF

1. JV buys slabs from Tsingshan

• Sourced from new and unparalleled refining/casting

facility in Indonesia

2. Slabs are rolled under HRPF conversion agreement between

ATI and JV

3. Coils are finished on JV’s DRAP continuous automated facility

• Completes finishing process in minutes - conventional

process takes weeks

4. Highly efficient global supply chain to produce high quality

products and reduce raw material volatility.

Joint Venture Overview

Two Global Innovators – Unsurpassed Manufacturing

Flat Rolled Products ATI and Tsingshan to Form Innovative Joint Venture


-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2012 2013 2014 2015 2016 2017

Actives-Open Actives-Frozen Deferred Retiree

Proactively reducing pension plan population

• >20% of participants removed since 2012

through liability management actions

Nearly all operations frozen/closed to new entrants

Plan funded status improved

• Increased 6 percentage points 2017 YOY

Evaluating additional options to further reduce

pension liabilities

Strengthening Balance Sheet Positioning for long-term profitable growth

0

350

0

500 500

0

150

288

100

2018 2019 2020 2021 2022 2023 2024 2025

Notes Convertible Senior Notes Term LoanIn $ millions

Debt Maturity Profile ATI Pension Plan Participation

# participants

Eliminated in Q4’17

using follow on

common equity

proceeds

Redeemed $350 million debt @ 9.375% interest

rate due 2019

• Lower interest expense; ~$32M annual savings

• Used majority of proceeds from follow-on

equity offering (~$400 million)

No significant debt maturities until 2021

-1,700 Deferred

through lump

sum cash out

-3,700 Retirees

through annuity

buyout

2,600 actives

hard frozen YE

2014

-1,350 Deferred

through lump

sum cash out

Reduce Balance Sheet Leverage; Improve Cash Flow

10


$142 million cash on hand

$305 million available on ABL

• No outstanding borrowings on ABL/revolver

• Q3 ‘17 balance of $25 million

$76 million cash flow from operations in Q4 2017

Financial Update (as of 12/31/2017)

11

Cash and Liquidity

$123 million FY 2017

• Annual depreciation & amortization ~$160 million for FY ‘17

2018 capex expected to be $100 million - $125 million

• Incl. 100% of $25 million investment in Next Gen Alloys JV; GE to fund ~50%

• Incl. 100% of ongoing STAL JV expansion (China); fully funded via JV cash

Capital Expenditures


High Performance Materials & Components Segment Q1 2018 financial results expected to continue strong YOY growth trend

FY 2018 revenues expected to increase a high-single digit percentage YOY

• Commercial jet engine revenue growth > 10%

FY 2018 operating margins expected to increase by ~200 basis points YOY

• Ongoing next-generation aerospace growth and improving product mix

Flat Rolled Products Segment Q1 2018 customer demand patterns consistent with Q4 2017

Q1 2018 negatively impacted by ~$10 million due to:

• Lower raw material surcharges tied to ferrochrome decline

• Required retirement cost capitalization accounting change impact

• Low single-digit operating margins expected in Q1 2018

FY 2018 revenues expected to increase a high-single digit percentage YOY

• Continued recovery in key end markets

FY 2018 operating margins expected to improve 100 – 300 basis points YOY

• Increased JV contributions; new conversion agreements (both in H2’18)

• Continued operational improvements; product mix benefits

Strategy & Outlook (as of 1/23/2018)

12


Thank you for your interest in ATI.

Investor Contact:

Scott Minder (412) 395-2720

Documents

ATI New Business & Brand Platform Introduction/media/Files/A/ATIMetals-IR-V2/events-and... · Aerospace & Defense Market % of Revenue Commercial Aero 63% Jet Engine 44% ... Sustainable