What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-04 · 327 added, 202 removed, 565 unchanged (48% of the section changed)

Financial Statements

Allegheny Technologies Incorporated and Subsidiaries

and Subsidiaries

Consolidated Balance Sheets

7 unchanged sentences

Inventories, net 1,270.9 1,046.3

Current assets held for sale 58.9 —

Prepaid expenses and other current assets 85.4 48.8

2 unchanged sentences

Goodwill 227.2 227.9

Long-term assets held for sale 26.2 —

Other assets 199.2 222.1

5 unchanged sentences

Short-term debt and current portion of long-term debt 32.6 131.3

Current liabilities held for sale 17.6 —

Other current liabilities 219.7 233.4

3 unchanged sentences

Pension liabilities 389.5 415.4

Long-term liabilities held for sale 1.5 —

Other long-term liabilities 195.0 211.0

5 unchanged sentences

authorized- 500,000,000 shares;

issued- 128,114,494 shares at March 31, 2022 and 127,484,902 shares at December 31, 2021;

outstanding- 124,121,350 shares at March 31, 2022 and 127,253,045 shares at December 31, 2021

issued- 131,377,024 shares at June 30, 2022 and 127,484,902 shares at December 31, 2021;

outstanding- 129,902,138 shares at June 30, 2022 and 127,253,045 shares at December 31, 2021

Additional paid-in capital 1,656.6 1,596.7

1 unchanged sentence

Treasury stock:

3,993,144 shares at March 31, 2022 and 231,857 shares at December 31, 2021

1,474,886 shares at June 30, 2022 and 231,857 shares at December 31, 2021

( 36.8 ) ( 4.8 )

5 unchanged sentences

The accompanying notes are an integral part of these statements.

Allegheny Technologies Incorporated and Subsidiaries

and Subsidiaries

Consolidated Statements of Operations

(In millions, except per share amounts)

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Sales $ 959.5 $ 616.2 $ 1,793.6 $ 1,308.7

2 unchanged sentences

Selling and administrative expenses 72.3 60.2 147.5 114.2

Restructuring charges (credits) ( 1.1 ) —

Loss (gain) on asset sales and sales of businesses, net 18.3 —

Operating income 77.0 31.8

Restructuring credits ( 1.3 ) ( 6.2 ) ( 2.4 ) ( 6.2 )

Loss on asset sales and sales of businesses, net 115.9 — 134.2 —

Operating income (loss) ( 11.6 ) ( 11.3 ) 65.4 20.5

Nonoperating retirement benefit expense ( 6.6 ) ( 6.8 ) ( 12.4 ) ( 13.6 )

Interest expense, net ( 23.4 ) ( 23.7 ) ( 47.0 ) ( 47.1 )

Other income (expense), net ( 7.5 ) 1.5

Income before income taxes 40.1 3.1

Other income, net 10.7 1.4 3.2 2.9

Income (loss) before income taxes ( 30.9 ) ( 40.4 ) 9.2 ( 37.3 )

Income tax provision 3.4 4.0 8.3 9.5

1 unchanged sentence

Net income attributable to noncontrolling interests 3.7 4.8 8.0 10.3

Net income (loss) attributable to ATI $ 30.9 $ ( 7.9 )

Basic net income (loss) attributable to ATI per common share $ 0.24 $ ( 0.06 )

Diluted net income (loss) attributable to ATI per common share $ 0.23 $ ( 0.06 )

Net loss attributable to ATI $ ( 38.0 ) $ ( 49.2 ) $ ( 7.1 ) $ ( 57.1 )

Basic net loss attributable to ATI per common share $ ( 0.31 ) $ ( 0.39 ) $ ( 0.06 ) $ ( 0.45 )

Diluted net loss attributable to ATI per common share $ ( 0.31 ) $ ( 0.39 ) $ ( 0.06 ) $ ( 0.45 )

The accompanying notes are an integral part of these statements.

Allegheny Technologies Incorporated and Subsidiaries

and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(In millions)

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Net income (loss) $ ( 34.3 ) $ ( 44.4 ) $ 0.9 $ ( 46.8 )

1 unchanged sentence

Unrealized net change arising during the period ( 22.4 ) 7.0 ( 29.2 ) 2.2

Reclassification adjustment included in net income (loss) 20.0 — 20.0 —

Total ( 2.4 ) 7.0 ( 9.2 ) 2.2

Net derivatives gain on hedge transactions 16.1 7.0 40.7 7.4

7 unchanged sentences

Amortization to net income (loss) of net prior service credits ( 0.1 ) ( 0.5 ) ( 0.3 ) ( 1.0 )

Settlement loss included in net income (loss) 29.5 — 29.5 —

Income taxes on postretirement benefit plans — — — —

1 unchanged sentence

Other comprehensive income, net of tax 41.9 34.2 73.8 49.8

Comprehensive income 67.1 13.2

Comprehensive income attributable to noncontrolling interests 5.0 6.1

Comprehensive income attributable to ATI $ 62.1 $ 7.1

Comprehensive income (loss) 7.6 ( 10.2 ) 74.7 3.0

Comprehensive income (loss) attributable to noncontrolling interests ( 6.0 ) 6.7 ( 1.0 ) 12.8

Comprehensive income (loss) attributable to ATI $ 13.6 $ ( 16.9 ) $ 75.7 $ ( 9.8 )

The accompanying notes are an integral part of these statements.

Allegheny Technologies Incorporated and Subsidiaries

and Subsidiaries

Consolidated Statements of Cash Flows

(In millions)

Three months ended March 31,

Six months ended June 30,

Operating Activities:

15 unchanged sentences

Proceeds from disposal of property, plant and equipment 1.0 2.7

Transaction costs from sales of businesses, net of proceeds ( 2.8 ) —

Other 0.9 ( 0.1 )

1 unchanged sentence

Financing Activities:

Borrowings on long-term debt — 0.7

Payments on long-term debt and finance leases ( 11.6 ) ( 7.1 )

9 unchanged sentences

The accompanying notes are an integral part of these statements.

Allegheny Technologies Incorporated and Subsidiaries

and Subsidiaries

Statements of Changes in Consolidated Equity

8 unchanged sentences

Interests Total

Balance, December 31, 2020 $ 12.7 $ 1,625.5 $ 106.5 $ — $ ( 1,223.6 ) $ 120.3 $ 641.4

Balance, March 31, 2021 $ 12.7 $ 1,580.5 $ 103.0 $ ( 4.7 ) $ ( 1,208.6 ) $ 126.4 $ 609.3

Net income (loss) — — ( 49.2 ) — — 4.8 ( 44.4 )

Other comprehensive income — — — — 32.3 1.9 34.2

Cumulative effect of adoption of new accounting standard — ( 49.8 ) 4.4 — — — ( 45.4 )

Employee stock plans — 7.0 — — — — 7.0

Balance, June 30, 2021 $ 12.7 $ 1,587.5 $ 53.8 $ ( 4.7 ) $ ( 1,176.3 ) $ 133.1 $ 606.1

Balance, March 31, 2022 $ 12.8 $ 1,602.5 $ 103.6 $ ( 99.7 ) $ ( 960.5 ) $ 137.0 $ 795.7

Net income (loss) — — ( 38.0 ) — — 3.7 ( 34.3 )

Other comprehensive income (loss) — — — — 51.6 ( 9.7 ) 41.9

Conversion of convertible notes 0.3 45.4 ( 26.7 ) 63.5 — — 82.5

Employee stock plans — 8.7 — ( 0.6 ) — — 8.1

Balance, June 30, 2022 $ 13.1 $ 1,656.6 $ 38.9 $ ( 36.8 ) $ ( 908.9 ) $ 131.0 $ 893.9

ATI Stockholders

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

Income (Loss) Non-

Interests Total

Balance, December 31, 2020 $ 12.7 $ 1,625.5 $ 106.5 $ — $ ( 1,223.6 ) $ 120.3 $ 641.4

Net income — — 30.9 — — 4.3 35.2

Net income (loss) — — ( 57.1 ) — — 10.3 ( 46.8 )

Other comprehensive income — — — 47.3 2.5 49.8

Cumulative effect of adoption of new accounting standard — ( 49.8 ) 4.4 — — — ( 45.4 )

Employee stock plans — 11.8 — ( 4.7 ) — — 7.1

Balance, June 30, 2021 $ 12.7 $ 1,587.5 $ 53.8 $ ( 4.7 ) $ ( 1,176.3 ) $ 133.1 $ 606.1

Balance, December 31, 2021 $ 12.7 $ 1,596.7 $ 72.7 $ ( 4.8 ) $ ( 991.7 ) $ 147.1 $ 832.7

Net income (loss) — — ( 7.1 ) — — 8.0 0.9

Other comprehensive income (loss) — — — — 82.8 ( 9.0 ) 73.8

Purchase of treasury stock — — — ( 89.9 ) — — ( 89.9 )

Conversion of convertible notes 0.3 45.4 ( 26.7 ) 63.5 — — 82.5

Dividends paid to noncontrolling interest — — — — — ( 16.0 ) ( 16.0 )

1 unchanged sentence

Employee stock plans 0.1 14.5 — ( 5.6 ) — — 9.0

Balance, March 31, 2022 $ 12.8 $ 1,602.5 $ 103.6 $ ( 99.7 ) $ ( 960.5 ) $ 137.0 $ 795.7

Balance, June 30, 2022 $ 13.1 $ 1,656.6 $ 38.9 $ ( 36.8 ) $ ( 908.9 ) $ 131.0 $ 893.9

The accompanying notes are an integral part of these statements.

1 unchanged sentence

Accounting Policies

The interim consolidated financial statements include the accounts of Allegheny Technologies Incorporated and its subsidiaries.

Unless the context requires otherwise, “Allegheny Technologies,” “ATI” and “the Company” refer to Allegheny Technologies Incorporated and its subsidiaries.

The interim consolidated financial statements include the accounts of ATI Inc.

and its subsidiaries.

Unless the context requires otherwise, “ATI” and “the Company” refer to ATI Inc.

and its subsidiaries.

These unaudited consolidated financial statements have been prepared in accordance with U.S.

18 unchanged sentences

Revenue is disaggregated within these two business segments by diversified global markets, primary geographical markets and diversified products.

Comparative information of the Company’s overall revenues (in millions) by global and geographical markets for the quarters ended March 31, 2022 and 2021 were as follows:

(in millions) First quarter ended

March 31, 2022 March 31, 2021

Comparative information of the Company’s overall revenues (in millions) by global and geographical markets for the second quarters and six months ended June 30, 2022 and 2021 were as follows:

(in millions) Second quarter ended

June 30, 2022 June 30, 2021

HPMC AA&S Total HPMC AA&S Total

9 unchanged sentences

Automotive 2.3 73.2 75.5 1.4 66.6 68.0

Construction/Mining 8.4 43.6 52.0 5.1 37.4 42.5

Food Equipment & Appliances — 62.7 62.7 0.1 20.6 20.7

Electronics 0.7 48.7 49.4 0.2 43.1 43.3

Construction/Mining 7.9 32.0 39.9 6.1 15.8 21.9

Medical 16.8 22.7 39.5 14.6 17.4 32.0

Other 12.8 43.0 55.8 11.0 19.8 30.8

Total $ 396.1 $ 563.4 $ 959.5 $ 300.6 $ 315.6 $ 616.2

(in millions) Six months ended

June 30, 2022 June 30, 2021

HPMC AA&S Total HPMC AA&S Total

Diversified Global Markets:

Aerospace & Defense:

Jet Engines- Commercial $ 410.4 $ 34.9 $ 445.3 $ 217.9 $ 17.8 $ 235.7

Airframes- Commercial 81.1 118.7 199.8 60.6 52.0 112.6

Defense 82.1 76.0 158.1 119.9 67.2 187.1

Total Aerospace & Defense 573.6 229.6 803.2 398.4 137.0 535.4

Oil & Gas 25.2 203.1 228.3 18.6 120.0 138.6

Specialty Energy 61.6 70.1 131.7 60.5 68.3 128.8

Total Energy 86.8 273.2 360.0 79.1 188.3 267.4

Automotive 5.2 161.3 166.5 3.4 156.1 159.5

Electronics 1.2 99.8 101.0 0.5 98.4 98.9

Food Equipment & Appliances — 96.7 96.7 0.1 56.0 56.1

Construction/Mining 16.3 75.6 91.9 11.2 53.2 64.4

Medical 30.0 45.7 75.7 25.8 35.2 61.0

Other 24.6 74.0 98.6 23.0 43.0 66.0

Total $ 737.7 $ 1,055.9 $ 1,793.6 $ 541.5 $ 767.2 $ 1,308.7

(in millions) First quarter ended

March 31, 2022 March 31, 2021

(in millions) Second quarter ended

June 30, 2022 June 30, 2021

HPMC AA&S Total HPMC AA&S Total

6 unchanged sentences

Total $ 396.1 $ 563.4 $ 959.5 $ 300.6 $ 315.6 $ 616.2

(in millions) Six months ended

June 30, 2022 June 30, 2021

HPMC AA&S Total HPMC AA&S Total

Primary Geographical Market:

United States $ 336.2 $ 710.1 $ 1,046.3 $ 285.9 $ 443.7 $ 729.6

Europe 256.3 87.4 343.7 165.4 61.1 226.5

Asia 94.7 219.5 314.2 60.7 217.3 278.0

Canada 23.0 20.4 43.4 17.5 19.8 37.3

South America, Middle East and other 27.5 18.5 46.0 12.0 25.3 37.3

Total $ 737.7 $ 1,055.9 $ 1,793.6 $ 541.5 $ 767.2 $ 1,308.7

Comparative information of the Company’s major products based on their percentages of sales is included in the following table.

The Company has nearly completed its previously-announced exit from standard stainless products, and therefore no longer presents these sales as a separate product category.

The Company no longer reports standard stainless product sales as a separate product category.

Prior period information includes these sales within the nickel-based alloys and specialty alloys category.

Hot-Rolling and Processing Facility (HRPF) conversion service sales in the AA&S segment are excluded from this presentation.

First quarter ended

March 31, 2022 March 31, 2021

Second quarter ended

June 30, 2022 June 30, 2021

HPMC AA&S Total HPMC AA&S Total

1 unchanged sentence

Nickel-based alloys and specialty alloys 48 % 55 % 52 % 45 % 31 % 38 %

Precision forgings, castings and components 35 % — % 15 % 36 % — % 18 %

Precision rolled strip products — % 24 % 14 % — % 39 % 19 %

Titanium and titanium-based alloys 17 % 6 % 11 % 19 % 6 % 13 %

Zirconium and related alloys — % 15 % 8 % — % 24 % 12 %

Total 100 % 100 % 100 % 100 % 100 % 100 %

Six months ended

June 30, 2022 June 30, 2021

HPMC AA&S Total HPMC AA&S Total

Diversified Products and Services:

Nickel-based alloys and specialty alloys 48 % 54 % 51 % 41 % 40 % 41 %

Precision rolled strip products — % 26 % 15 % — % 35 % 20 %

Precision forgings, castings and components 35 % — % 15 % 39 % — % 17 %

2 unchanged sentences

Total 100 % 100 % 100 % 100 % 100 % 100 %

The Company maintained a backlog of confirmed orders totaling $ 2.4 billion and $ 1.5 billion at March 31, 2022 and 2021, respectively.

Due to the structure of the Company’s long-term agreements, approximately 80 % of this backlog at March 31, 2022 represented booked orders with performance obligations that will be satisfied within the next 12 months.

The Company maintained a backlog of confirmed orders totaling $ 2.6 billion and $ 1.6 billion at June 30, 2022 and 2021, respectively.

Due to the structure of the Company’s long-term agreements, approximately 80 % of this backlog at June 30, 2022 represented booked orders with performance obligations that will be satisfied within the next 12 months.

The backlog does not reflect any elements of variable consideration.

Contract balances

As of March 31, 2022 and December 31, 2021, accounts receivable with customers were $ 562.0 million and $ 473.8 million, respectively.

The following represents the rollforward of accounts receivable - reserve for doubtful accounts and contract assets and liabilities for the three months ended March 31, 2022 and 2021:

As of June 30, 2022 and December 31, 2021, accounts receivable with customers were $ 631.0 million and $ 473.8 million, respectively.

The following represents the rollforward of accounts receivable - reserve for doubtful accounts and contract assets and liabilities for the six months ended June 30, 2022 and 2021:

(in millions)

Accounts Receivable - Reserve for Doubtful Accounts March 31,

2022 March 31,

Accounts Receivable - Reserve for Doubtful Accounts June 30,

2022 June 30,

Balance as of beginning of fiscal year $ 3.8 $ 4.3

4 unchanged sentences

Contract Assets

Short-term March 31,

2022 March 31,

Short-term June 30,

2022 June 30,

Balance as of beginning of fiscal year $ 53.9 $ 38.9

5 unchanged sentences

Contract Liabilities

Short-term March 31,

2022 March 31,

Short-term June 30,

2022 June 30,

Balance as of beginning of fiscal year $ 116.2 $ 111.8

4 unchanged sentences

Balance as of period end $ 125.7 $ 103.8

Long-term March 31,

2022 March 31,

Long-term June 30,

2022 June 30,

Balance as of beginning of fiscal year $ 84.4 $ 32.0

4 unchanged sentences

Balance as of period end $ 75.2 $ 70.7

Contract costs for obtaining and fulfilling a contract were $ 5.0 million and $ 5.2 million as of March 31, 2022 and December 31, 2021, respectively, and are reported in other long-term assets on the consolidated balance sheet.

Contract cost amortization expense for both the three months ended March 31, 2022 and 2021 was $ 0.2 million.

Inventories at March 31, 2022 and December 31, 2021 were as follows (in millions):

Contract costs for obtaining and fulfilling a contract were $ 4.9 million and $ 5.2 million as of June 30, 2022 and December 31, 2021, respectively, and are reported in other long-term assets on the consolidated balance sheet.

Contract cost amortization expense for the three and six months ended June 30, 2022 was $ 0.3 million and $ 0.5 million, respectively.

Contract cost amortization for the three and six months ended June 30, 2021 was $ 0.3 million and $ 0.5 million, respectively.

Inventories at June 30, 2022 and December 31, 2021 were as follows (in millions):

2022 December 31,

7 unchanged sentences

Property, Plant and Equipment

Property, plant and equipment at March 31, 2022 and December 31, 2021 was as follows (in millions):

Property, plant and equipment at June 30, 2022 and December 31, 2021 was as follows (in millions):

2022 December 31,

5 unchanged sentences

Total property, plant and equipment, net $ 1,491.3 $ 1,528.5

The construction in progress portion of property, plant and equipment at March 31, 2022 was $ 225.8 million.

As announced on March 3, 2022, ATI’s Board of Directors approved the divestiture of the Sheffield, UK operations, which includes facilities for melting and re-melting, machining and bar mill operations, and is part of the Specialty Materials business in the HPMC segment.

As a result, the Company’s Sheffield, UK operations are classified as held for sale at March 31, 2022, and the terms of sale resulted in indicators of impairment in the long-lived assets of this disposal group.

A $ 22.3 million long-lived asset impairment charge was recorded as part of the $ 25.1 million partial loss on sale of this business recorded in the first quarter 2022, which remains subject to UK government approval under the National Security and Investment Act 2021.

The construction in progress portion of property, plant and equipment at June 30, 2022 was $ 227.2 million.

As announced on March 3, 2022, ATI’s Board of Directors approved the divestiture of the Sheffield, UK operations, which included facilities for melting and re-melting, machining and bar mill operations, and was part of the Specialty Materials business in the HPMC segment.

As a result, the Company’s Sheffield, UK operations were classified as held for sale at March 31, 2022, and the terms of sale resulted in indicators of impairment in the long-lived assets of this disposal group.

A $ 22.3 million long-lived asset impairment charge was recorded as part of the $ 25.1 million partial loss on sale of this business recorded in the first quarter 2022.

This long-lived asset impairment charge was determined using the held for sale framework and represents Level 1 information in the fair value hierarchy.

The loss on sale is reported in loss (gain) on asset sales and sales of businesses, net, on the consolidated statement of operations and is excluded from HPMC segment results.

The following are the assets and liabilities of the Sheffield, UK operations, subsequent to the impairment loss discussed above, classified as held for sale and reported as separate amounts on the consolidated balance sheet as of March 31, 2022.

(in millions) March 31,

Accounts receivable, net $ 20.2

Inventories, net 38.6

Prepaid expenses and other current assets 0.1

Total current assets 58.9

Other assets 26.2

Total long-term assets 26.2

Total Assets 85.1

Accounts payable 17.6

Total current liabilities 17.6

Other long-term liabilities 1.5

Total Liabilities 19.1

Net assets held for sale $ 66.0

ATI expects to recognize an additional pre-tax loss of approximately $ 110 million upon the completion of this sale, which is projected to be completed in the second quarter 2022.

The expected loss includes approximately $ 55 million related to the UK defined benefit pension plan, of which $ 25 million is reported as a net pension asset but which is in a deficit funding position for UK statutory reporting purposes, and $ 30 million in accumulated other comprehensive loss on the consolidated ATI balance sheet.

The expected loss also includes approximately $ 15 million of cumulative translation adjustment foreign exchange losses since ATI’s acquisition of these operations in 1998.

On May 12, 2022, the Company completed the sale of its Sheffield, UK operations and recognized an additional $ 115.9 million loss in the second quarter of 2022, bringing the total loss on sale to $ 141.0 million for the six months ended June 30, 2022.

The loss on sale is reported in loss on asset sales and sales of businesses, net, on the consolidated statement of operations and is excluded from HPMC segment results.

The loss includes $ 55.6 million related to the UK defined benefit pension plan, of which $ 26.1 million was reported as a net pension asset but which was in a deficit funding position for UK statutory reporting purposes, and $ 29.5 million in accumulated other comprehensive loss on the consolidated ATI balance sheet.

The loss also includes $ 20.0 million of cumulative translation adjustment foreign exchange losses since ATI’s acquisition of these operations in 1998.

The Company paid transaction costs, net of proceeds received, of $ 2.8 million in the second quarter of 2022, which is reported as an investing activity on the consolidated statement of cash flows, and expects to receive an additional approximately $ 3 million cash consideration on the sale of this business by the end of fiscal year 2022.

In 2021, the Sheffield operations had external sales of $ 36 million, with over 80 % of its sales to energy markets, primarily oil & gas, and had a net loss before tax of $ 9 million.

1 unchanged sentence

The Company received cash proceeds of $ 6.2 million on the sale of these assets, which was primarily reported within operating activities on the consolidated statement of cash flows.

The Company recognized a $ 6.8 million pretax gain on sale, including de-recognizing certain lease liabilities, in the first quarter of 2022, which is reported in loss (gain) on asset sales and sales of businesses, net, on the consolidated statement of operations and is excluded from AA&S segment results.

The Company recognized a $ 6.8 million pretax gain on sale, including de-recognizing certain lease liabilities, in the first quarter of 2022, which is reported in loss on asset sales and sales of businesses, net, on the consolidated statement of operations and is excluded from AA&S segment results.

Joint Ventures

5 unchanged sentences

STAL is part of ATI’s AA&S segment and manufactures Precision Rolled Strip stainless products mainly for the electronics and automotive markets located in Asia.

Cash and cash equivalents held by STAL as of March 31, 2022 were $ 45.6 million.

Cash and cash equivalents held by STAL as of June 30, 2022 were $ 61.1 million.

Next Gen Alloys LLC:

2 unchanged sentences

Next Gen Alloys LLC funds its development activities through the sale of shares to the two joint venture partners, and in the first quarter of 2022 the Company received $ 0.9 million from sales of noncontrolling interests to its joint venture partner, which is reported as a financing activity on the consolidated statements of cash flows.

Cash and cash equivalents held by this joint venture as of March 31, 2022 were $ 2.3 million.

Cash and cash equivalents held by this joint venture as of June 30, 2022 were $ 1.8 million.

Equity Method Joint Ventures

11 unchanged sentences

Department of Commerce in the second quarter of 2020, and the 25% tariff remains in place.

Due to repeated tariff exclusion denials, the DRAP facility was idled in an orderly shut down process that was completed in the third quarter of 2020.

In April 2022, ATI and A&T Stainless entered into a settlement agreement with the U.S.

pursuant to which the U.S., without admitting liability, agreed to refund a substantial portion of the Section 232 tariffs previously paid by A&T Stainless.

As a result of the settlement agreement, A&T Stainless will receive tariff refunds of approximately $ 17.8 million plus accrued interest, which will be recognized as income by the joint venture in the second quarter of 2022.

Due to repeated tariff exclusion denials, the DRAP facility was idled in an orderly shut down process that was completed in the third quarter of 2020.

ATI’s share of A&T Stainless results was losses of $ 0.3 million and $ 0.5 million for the three months ended March 31, 2022 and 2021, respectively, which is included within other income/expense, net, on the consolidated statements of operations and in the AA&S segment’s operating results.

As of March 31, 2022 and December 31, 2021, ATI had net receivables for working capital advances and administrative services from A&T Stainless of $ 2.5 million and $ 2.9 million, respectively.

For the March 31, 2022 balance of net receivables, $ 0.7 million was reported in prepaid expenses and other current assets and $ 1.8 million in other long-term assets on the consolidated balance sheet, while for December 31, 2021, $ 0.7 million was reported in prepaid expenses and other current assets and $ 2.2 million in other long-term assets.

As a result of the settlement agreement, A&T Stainless will receive tariff refunds and accrued interest of approximately $ 19.7 million, which was recognized as income by the joint venture in the second quarter of 2022.

ATI’s share of A&T Stainless results was income of $ 9.5 million and $ 9.2 million for the three and six months ended June 30, 2022, respectively, which included ATI’s $ 9.9 million share of the tariff refund and accrued interest, and losses of $ 0.4 million and $ 0.9 million for the three and six months ended June 30, 2021, respectively, which is included within other income/expense, net, on the consolidated statements of operations and in the AA&S segment’s operating results.

As of June 30, 2022 and December 31, 2021, ATI had net receivables for working capital advances and administrative services from A&T Stainless of $ 11.9 million and $ 2.9 million, respectively.

For the June 30, 2022 balance of net receivables, $ 0.5 million was reported in prepaid expenses and other current assets and $ 11.4 million in other long-term assets on the consolidated balance sheet, while for December 31, 2021, $ 0.7 million was reported in prepaid expenses and other current assets and $ 2.2 million in other long-term assets.

In addition, ATI evaluated the collectability of its remaining $ 5.5 million receivable from Tsingshan, which is reported in other long-term assets on the consolidated balance sheet, and concluded that no impairment or loss in expected value exists at this time.

1 unchanged sentence

Uniti is accounted for under the equity method of accounting.

ATI’s share of Uniti’s income was $ 0.7 million and $ 0.5 million for the three months ended March 31, 2022 and 2021, respectively, which is included in the AA&S segment’s operating results, and within other income/expense, net on the consolidated statements of operations.

ATI’s share of Uniti’s income was $ 0.5 million and $ 1.2 million for the three and six months ended June 30, 2022, respectively, and $ 0.4 million and $ 0.9 million for the three and six months ended June 30, 2021, respectively, which is included in the AA&S segment’s operating results, and within other income/expense, net on the consolidated statements of operations.

On March 9, 2022, the Company announced the termination of Uniti, LLC.

The joint venture is expected to wind up no later than year-end 2022.

The joint venture is expected to be dissolved by December 31, 2022.

No impairments were recorded as a result of the decision to terminate the Uniti joint venture.

Supplemental Financial Statement Information

Other income (expense), net for the three months ended March 31, 2022 and 2021 was as follows:

(in millions) Three months ended March 31,

Other income (expense), net for the three months ended June 30, 2022 and 2021 was as follows:

(in millions) Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Rent and royalty income $ 0.5 $ 0.2 $ 1.2 $ 0.5

2 unchanged sentences

Litigation reserve (see Note 16) — — ( 8.6 ) —

Total other income (expense), net $ ( 7.5 ) $ 1.5

Total other income, net $ 10.7 $ 1.4 $ 3.2 $ 2.9

Restructuring

Restructuring charges for the first quarter ended March 31, 2022 were a credit of $ 1.1 million for a reduction in severance-related reserves related to approximately 20 employees based on changes in planned operating rates and revised workforce reduction estimates.

This amount was presented as a restructuring credit in the consolidated statements of operations and is excluded from segment EBITDA.

Restructuring charges for the second quarter and six months ended June 30, 2022 were a credit of $ 1.3 million and $ 2.4 million, respectively, for a reduction in severance-related reserves related to approximately 30 and 50 employees, respectively, based on changes in planned operating rates and revised workforce reduction estimates.

Restructuring charges for the second quarter and six months ended June 30, 2021 were a net credit of $ 6.2 million, primarily related to $ 6.9 million for lowered severance-related reserves for approximately 200 employees based on changes in planned operating rates and revised workforce reduction estimates.

This was offset by $ 0.7 million of other costs related to facility idlings.

These amounts were presented as a restructuring charges/credit in the consolidated statements of operations and are excluded from segment EBITDA.

Restructuring reserves for severance cost activity is as follows:

4 unchanged sentences

Payments ( 2.1 )

Balance at March 31, 2022 $ 15.4

The $ 15.4 million restructuring reserve balance at March 31, 2022 includes $ 9.1 million recorded in other current liabilities and $ 6.3 million recorded in other long-term liabilities on the consolidated balance sheet.

Debt at March 31, 2022 and December 31, 2021 was as follows (in millions):

Balance at June 30, 2022 $ 13.2

The $ 13.2 million restructuring reserve balance at June 30, 2022 includes $ 6.4 million recorded in other current liabilities and $ 6.8 million recorded in other long-term liabilities on the consolidated balance sheet.

Debt at June 30, 2022 and December 31, 2021 was as follows (in millions):

2022 December 31,

Allegheny Technologies 5.875 % Notes due 2027

Allegheny Technologies 5.125 % Notes due 2031

Allegheny Technologies 4.875 % Notes due 2029

Allegheny Technologies 3.5 % Convertible Senior Notes due 2025

Allegheny Technologies 4.75 % Convertible Senior Notes due 2022

5.875 % Notes due 2027

5.125 % Notes due 2031

4.875 % Notes due 2029

3.5 % Convertible Senior Notes due 2025

4.75 % Convertible Senior Notes due 2022

Allegheny Ludlum 6.95 % Debentures due 2025 (a)

18 unchanged sentences

1.00 after an event of default has occurred and is continuing or if the undrawn availability under the ABL revolving credit portion of the facility is less than the greater of (i) $ 87.5 million, calculated as 12.5 % of the then applicable maximum advance amount under the revolving credit portion of the ABL and the outstanding Term Loan balance, or (ii) $ 62.5 million.

The Company does not meet this fixed charge coverage ratio at March 31, 2022.

As a result, the Company is unable to access 12.5 %, or $ 87.5 million, of the ABL facility until it meets the ratio.

Additionally, the Company must demonstrate minimum liquidity, as calculated in accordance with the terms of the ABL facility, during the 90 -day period immediately preceding the stated maturity date of the 4.75 % Convertible Notes due 2022.

The Company was in compliance with the fixed charge coverage ratio as of June 30, 2022.

The ABL also contains customary affirmative and negative covenants for credit facilities of this type, including limitations on the Company’s ability to incur additional indebtedness or liens or to enter into investments, mergers and acquisitions, dispositions of assets and transactions with affiliates, some of which are more restrictive, at any time during the term of the ABL when the Company’s fixed charge coverage ratio is less than 1.00 :

1.00 and its undrawn availability under the revolving portion of the ABL is less than the greater of (a) $ 150 million or (b) 30 % of the sum of the maximum advance amount under the revolving credit portion of the ABL and the outstanding Term Loan balance.

As of March 31, 2022, there were no outstanding borrowings under the revolving portion of the ABL facility, and $ 40.8 million was utilized to support the issuance of letters of credit.

There were no revolving credit borrowings under the ABL facility during the first quarters of 2022 or 2021.

The Company also has foreign credit facilities, primarily in China, that total $ 65 million based on March 31, 2022 foreign exchange rates, under which $ 12.7 million and $ 27.4 million was drawn as of March 31, 2022 and December 31, 2021, respectively.

As of June 30, 2022, there were no outstanding borrowings under the revolving portion of the ABL facility, and $ 40.8 million was utilized to support the issuance of letters of credit.

There were no revolving credit borrowings under the ABL facility during the first six months of 2022 or 2021.

The Company also has foreign credit facilities, primarily in China, that total $ 62 million based on June 30, 2022 foreign exchange rates, under which $ 12.7 million and $ 27.4 million was drawn as of June 30, 2022 and December 31, 2021, respectively.

2025 Convertible Notes

As of March 31, 2022, the Company had $ 291.4 million aggregate principal amount of 2025 Convertible Notes outstanding, which mature on December 15, 2025.

As of March 31, 2022, the fair value of the 2025 Convertible Notes is $ 550 million based on the quoted market price, which is classified in Level 1 of the fair value hierarchy.

As of June 30, 2022, the Company had $ 291.4 million aggregate principal amount of 2025 Convertible Notes outstanding, which mature on December 15, 2025.

As of June 30, 2022 and December 31, 2021, the fair value of the 2025 Convertible Notes was $ 467 million and $ 379 million, respectively, based on the quoted market price, which is classified in Level 1 of the fair value hierarchy.

The 2025 Convertible Notes have a 3.5 % cash coupon rate that is payable semi-annually in arrears on each June 15 and December 15.

Including amortization of deferred issuance costs, the effective interest rate is 4.2 % for the quarters ended March 31, 2022 and 2021, respectively.

Remaining deferred issuance costs were $ 6.1 million and $ 6.5 million at March 31, 2022 and December 31, 2021, respectively.

Including amortization of deferred issuance costs, the effective interest rate is 4.2 % for the second quarters and six months ended June 30, 2022 and 2021.

Remaining deferred issuance costs were $ 5.6 million and $ 6.5 million at June 30, 2022 and December 31, 2021, respectively.

Interest expense on the 2025 Convertible Notes was as follows:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

(in millions) 2022 2021 2022 2021

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ATI entered into privately negotiated capped call transactions with certain of the initial purchasers of the 2025 Convertible Notes or their respective affiliates (collectively, the Counterparties).

The capped call transactions are expected generally to reduce potential dilution to ATI’s common stock upon any conversion of the 2025 Convertible Notes and/or offset any cash payments ATI is required to make in excess of the principal amount of converted 2025 Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price.

with such reduction and/or offset subject to a cap based on the cap price.

The cap price of the capped call transactions initially is approximately $ 19.76 per share, and is subject to adjustments under the terms of the capped call transactions.

2022 Convertible Notes

As of March 31, 2022, the Company had outstanding $ 84.2 million aggregate principal amount of the 2022 Convertible Notes, which mature on July 1, 2022.

As of March 31, 2022, the fair value of the 2022 Convertible Notes is $ 160 million based on the quoted market price, which is classified in Level 1 of the fair value hierarchy.

Interest on the 2022 Convertible Notes at the 4.75 % cash coupon rate is payable semi-annually in arrears on each January 1 and July 1.

Including amortization of deferred issuance costs, the effective interest rate is 5.4 % for the three months ended March 31, 2022 and 2021.

Remaining deferred issuance costs were $ 0.1 million and $ 0.3 million at March 31, 2022 and December 31, 2021, respectively.

During the second quarter of 2022, $ 82.5 million of the 2022 Convertible Senior Notes were converted into 5.7 million shares of ATI common stock, with the remaining $ 1.7 million of outstanding principal balance paid in cash for notes that were not converted.

The conversion rate for the 2022 Convertible Notes was 69.2042 shares of ATI common stock per $1,000 principal amount of the 2022 Convertible Notes, equivalent to a conversion price of $ 14.45 per share.

As of December 31, 2021, the fair value of the 2022 Convertible Notes was $ 102 million based on the quoted market price, which is classified in Level 1 of the fair value hierarchy.

Interest on the 2022 Convertible Notes at the 4.75 % cash coupon rate was payable semi-annually in arrears on each January 1 and July 1.

Including amortization of deferred issuance costs, the effective interest rate was 5.4 % for the second quarters and six months ended June 30, 2022 and 2021.

Remaining deferred issuance costs were $ 0.3 million at December 31, 2021.

Interest expense on the 2022 Convertible Notes was as follows:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

(in millions) 2022 2021 2022 2021

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Total interest expense $ 1.2 $ 1.1 $ 2.3 $ 2.2

The Company does not have the right to redeem the 2022 Convertible Notes prior to their stated maturity date.

Holders of the 2022 Convertible Notes have the option to convert their notes into shares of the Company’s common stock, at any time prior to the close of business on the business day immediately preceding the stated maturity date (July 1, 2022).

The initial conversion rate for the remaining $ 84.2 million of 2022 Convertible Notes is 69.2042 shares of ATI common stock per $1,000 (in whole dollars) principal amount of Notes ( 5.8 million shares), equivalent to a conversion price of $ 14.45 per share, subject to adjustment in certain events.

Other than receiving cash in lieu of fractional shares, holders do not have the option to receive cash instead of shares of common stock upon conversion.

Accrued and unpaid interest that exists upon conversion of a note will be deemed paid by the delivery of shares of ATI common stock, and no cash payment or additional shares will be paid to a converting holder for any accrued and upaid interest.

If the Company undergoes a fundamental change as defined in the agreement, holders of the 2022 Convertible Notes may require the Company to repurchase the notes in whole or in part for cash at a price equal to 100 % of the principal amount of the notes to be purchased plus any accrued and unpaid interest to, but excluding, the repurchase date.

Derivative Financial Instruments and Hedging

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The majority of ATI’s products are sold utilizing raw material surcharges and index mechanisms.

However, as of March 31, 2022, the Company had entered into financial hedging arrangements, primarily at the request of its customers related to firm orders, for an aggregate notional amount of approximately 12 million pounds of nickel with hedge dates through 2024.

However, as of June 30, 2022, the Company had entered into financial hedging arrangements, primarily at the request of its customers related to firm orders, for an aggregate notional amount of approximately 9 million pounds of nickel with hedge dates through 2024.

The aggregate notional amount hedged is approximately 15 % of a single year’s estimated nickel raw material purchase requirements.

1 unchanged sentence

Any gain or loss associated with these hedging arrangements is included in sales or cost of sales, depending on whether the underlying risk being hedged was the variable selling price or the variable raw material cost, respectively.

At March 31, 2022, the outstanding financial derivatives used to hedge the Company’s exposure to energy cost volatility included natural gas cost hedges.

At March 31, 2022, the Company hedged approximately 75 % of its forecasted domestic requirements for natural gas for the remainder of 2022, approximately 50 % for 2023 and approximately 15 % for 2024.

At June 30, 2022, the outstanding financial derivatives used to hedge the Company’s exposure to energy cost volatility included natural gas cost hedges.

At June 30, 2022, the Company hedged approximately 75 % of its forecasted domestic requirements for natural gas for the remainder of 2022, approximately 50 % for 2023 and approximately 15 % for 2024.

While the majority of the Company’s direct export sales are transacted in U.S.

5 unchanged sentences

In addition, the Company may also hedge forecasted capital expenditures and designate cash balances held in foreign currencies as hedges of forecasted foreign currency transactions.

At March 31, 2022, the Company had no significant outstanding foreign currency forward contracts.

At June 30, 2022, the Company had no significant outstanding foreign currency forward contracts.

The Company may enter into derivative interest rate contracts to maintain a reasonable balance between fixed- and floating-rate debt.

5 unchanged sentences

The counterparties to the Company’s derivative contracts are substantial and creditworthy commercial banks that are recognized market makers.

controls its credit exposure by diversifying across multiple counterparties and by monitoring credit ratings and credit default swap spreads of its counterparties.

The Company controls its credit exposure by diversifying across multiple counterparties and by monitoring credit ratings and credit default swap spreads of its counterparties.

The Company also enters into master netting agreements with counterparties when possible.

3 unchanged sentences

Asset derivatives

Balance sheet location March 31,

Balance sheet location June 30,

2022 December 31,

15 unchanged sentences

Natural gas contracts Other long-term liabilities — 0.2

Nickel and other raw material contracts Other long-term liabilities 0.2 —

Total derivatives designated as hedging instruments $ 3.9 $ 2.7

1 unchanged sentence

For derivative financial instruments that are designated as fair value hedges, changes in the fair value of these derivatives are recognized in current period results and are reported as changes within accrued liabilities and other on the consolidated statements of cash flows.

There were no outstanding fair value hedges as of March 31, 2022.

There were no outstanding fair value hedges as of June 30, 2022.

The Company did not use net investment hedges for the periods presented.

The effects of derivative instruments in the tables below are presented net of related income taxes, excluding any impacts of changes to income tax valuation allowances affecting results of operations or other comprehensive income, when applicable (see Note 15 for further explanation).

Assuming market prices remain constant with those at March 31, 2022, a pre-tax gain of $ 21.3 million is expected to be recognized over the next 12 months.

Activity with regard to derivatives designated as cash flow hedges for the three month periods ended March 31, 2022 and 2021 was as follows (in millions):

Assuming market prices remain constant with those at June 30, 2022, a pre-tax gain of $ 18.0 million is expected to be recognized over the next 12 months.

Activity with regard to derivatives designated as cash flow hedges for the three and six month periods ended June 30, 2022 and 2021 was as follows (in millions):

Amount of Gain (Loss)

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into Income (a)

Three months ended March 31, Three months ended March 31,

Three months ended June 30, Three months ended June 30,

Derivatives in Cash Flow Hedging Relationships 2022 2021 2022 2021

4 unchanged sentences

Total $ 12.3 $ 5.1 $ 15.5 $ 1.1

Amount of Gain (Loss)

Recognized in OCI on

Derivatives Amount of Gain (Loss)

Reclassified from

Accumulated OCI

into Income (a)

Six months ended June 30, Six months ended June 30,

Derivatives in Cash Flow Hedging Relationships 2022 2021 2022 2021

Nickel and other raw material contracts $ 17.3 $ 2.8 $ 14.5 $ 2.6

Natural gas contracts 11.8 2.4 5.0 0.2

Foreign exchange contracts 0.4 0.1 0.1 —

Interest rate swap 1.5 0.1 ( 0.3 ) ( 0.4 )

Total $ 31.0 $ 5.4 $ 19.3 $ 2.4

(a) The gains (losses) reclassified from accumulated OCI into income related to the derivatives, with the exception of the interest rate swap, are presented in sales and cost of sales in the same period or periods in which the hedged item affects earnings.

3 unchanged sentences

Fair Value of Financial Instruments

The estimated fair value of financial instruments at March 31, 2022 was as follows:

The estimated fair value of financial instruments at June 30, 2022 was as follows:

Fair Value Measurements at Reporting Date Using

49 unchanged sentences

Following is certain financial information with respect to the Company’s business segments for the periods indicated (in millions):

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

High Performance Materials & Components $ 439.8 $ 318.7 $ 820.6 $ 583.9

Advanced Alloys & Solutions 623.1 339.4 1,158.7 815.4

1,062.9 658.1 1,979.3 1,399.3

Intersegment sales:

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Advanced Alloys & Solutions 59.7 23.8 102.8 48.2

103.4 41.9 185.7 90.6

Sales to external customers:

2 unchanged sentences

$ 959.5 $ 616.2 $ 1,793.6 $ 1,308.7

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

High Performance Materials & Components $ 60.3 $ 37.2 $ 128.4 $ 61.8

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Corporate expenses ( 16.7 ) ( 15.9 ) ( 33.7 ) ( 28.1 )

Closed operations and other income (expense) ( 1.4 ) 0.5

Closed operations and other expense ( 5.1 ) ( 3.6 ) ( 6.5 ) ( 3.1 )

Depreciation & amortization (a) ( 36.0 ) ( 36.3 ) ( 71.5 ) ( 72.4 )

1 unchanged sentence

Restructuring and other credits (charges) 1.3 6.2 ( 6.2 ) 6.2

Gain (loss) on asset sales and sales of businesses, net (See Note 5) ( 18.3 ) —

Income before income taxes $ 40.1 $ 3.1

Strike related costs — ( 40.3 ) — ( 40.3 )

Loss on asset sales and sales of businesses, net (See Note 5) ( 115.9 ) — ( 134.2 ) —

Income (loss) before income taxes $ ( 30.9 ) $ ( 40.4 ) $ 9.2 $ ( 37.3 )

a) The following is depreciation & amortization by each business segment:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

High Performance Materials & Components $ 16.9 $ 19.2 $ 34.8 $ 38.8

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government enacted various relief packages in response to the COVID-19 pandemic.

First quarter 2022 results include $ 29 million related to this government sponsored COVID relief in segment EBITDA.

HPMC segment results include $ 22 million for the Aviation Manufacturing Jobs Protection Program and employee retention credits, and AA&S segment results include $ 7 million in employee retention credits.

Corporate expenses in the first quarter of 2022 reflect business transformation initiatives and higher incentive compensation costs compared to the prior year period.

Restructuring and other charges for the first quarter of 2022 relate to an $ 8.6 million charge for a litigation reserve, partially offset by $ 1.1 million restructuring credit for a reduction in severance-related reserves.

See Notes 16 and 7, respectively, for further explanation of these items.

Loss on asset sales and sales of businesses, net, for the first quarter of 2022 relate to a $ 25.1 million partial loss on the sale of the Company’s Sheffield, UK operations, partially offset by a $ 6.8 million gain from the sale of assets from the Pico Rivera, CA operations.

Results for the second quarter and six months ended June 30, 2022 include $ 5.6 million and $ 34.3 million, respectively, related to this government sponsored COVID relief in segment EBITDA.

HPMC segment second quarter and six month results include $ 5.6 million and $ 27.5 million, respectively, for the Aviation Manufacturing Jobs Protection Program and employee retention credits, and AA&S segment six month results include $ 6.8 million in employee retention credits.

Corporate expenses in the second quarter and six months ended June 30, 2022 reflect business transformation initiatives and higher incentive compensation costs compared to the prior year period.

Restructuring and other charges for the second quarter and six months ended June 30, 2022 relate to $ 1.3 million and $ 2.4 million, respectively, of restructuring credits for a reduction in severance-related reserves (see Note 7).

The six months ended June 30, 2022 also includes an $ 8.6 million charge for a litigation reserve (see Note 16).

Restructuring charges for the second quarter and six months ended June 30, 2021 were a net credit of $ 6.2 million, primarily related to $ 6.9 million for lowered severance-related reserves based on changes in planned operating rates and revised workforce reduction estimates, partially offset by $ 0.7 million of other costs related to facility idlings.

During the second quarter of 2021, the Company recorded $ 40.3 million in strike related costs, of which $ 38.2 million were excluded from AA&S segment EBITDA and $ 2.1 million were excluded from HPMC segment EBITDA.

These items primarily consisted of overhead costs recognized in the period due to below-normal operating rates, higher costs for outside conversion activities, and ongoing benefit costs for striking employees.

Loss on asset sales and sales of businesses, net, for the six months ended June 30, 2022 relate to a $ 141.0 million loss on the sale of the Company’s Sheffield, UK operations, including a partial loss recorded in the first quarter of 2022 primarily for the impairment of long-lived assets, partially offset by a $ 6.8 million gain from the sale of assets from the Pico Rivera, CA operations.

Loss on asset sales and sales of businesses, net, for the second quarter ended June 30, 2022 relates to the loss on the sale of the Company’s Sheffield, UK operations for the completion of the sale.

Retirement Benefits

8 unchanged sentences

All defined benefit pension and retiree health care plans are closed to new entrants.

For the three month periods ended March 31, 2022 and 2021, the components of pension and other postretirement benefit expense (income) for the Company’s defined benefit plans included the following (in millions):

For the three month periods ended June 30, 2022 and 2021, the components of pension and other postretirement benefit expense (income) for the Company’s defined benefit plans included the following (in millions):

Pension Benefits Other Postretirement Benefits

Three months ended March 31, Three months ended March 31,

Three months ended June 30, Three months ended June 30,

2022 2021 2022 2021

4 unchanged sentences

Amortization of net actuarial loss 15.9 18.9 3.3 3.3

Settlement loss 29.5 — — —

Total retirement benefit expense $ 33.9 $ 5.7 $ 5.3 $ 5.2

The provision for income taxes for the first quarters ended March 31, 2022 and 2021 was $ 4.9 million and $ 5.5 million, respectively.

Tax expense in both periods is mainly attributable to the Company’s foreign operations.

The tax expense for the first quarter of 2022 was based on an estimated annual effective tax rate calculation which included foreign, non-valuation allowance, operations combined with the U.S.

For the six month periods ended June 30, 2022 and 2021, the components of pension and other postretirement benefit expense (income) for the Company’s defined benefit plans included the following (in millions):

Pension Benefits Other Postretirement Benefits

Six months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Service cost - benefits earned during the year $ 6.0 $ 7.5 $ 0.5 $ 0.7

Interest cost on benefits earned in prior years 35.3 34.2 3.9 4.2

Expected return on plan assets ( 65.0 ) ( 68.2 ) — —

Amortization of prior service cost (credit) 0.2 0.3 ( 0.5 ) ( 1.3 )

Amortization of net actuarial loss 31.9 37.8 6.6 6.6

Settlement loss 29.5 — — —

Total retirement benefit expense $ 37.9 $ 11.6 $ 10.5 $ 10.2

On May 12, 2022, the Company completed the sale of its Sheffield, UK operations (see Note 5).

As a result of this sale, ATI recognized a $ 29.5 million settlement loss in the second quarter of 2022, which is recorded in loss on asset sales and sales of businesses, net, on the consolidated statement of operations, related to the amount in accumulated other comprehensive loss for the UK defined benefit pension plan that transferred as part of the sale.

The provision for income taxes for the second quarter and six months ended June 30, 2022 was $ 3.4 million and $ 8.3 million, respectively.

The provision for income taxes for the second quarter and six months ended June 30, 2021 was $ 4.0 million and $ 9.5 million, respectively.

Tax expense in all periods is mainly attributable to the Company’s foreign operations.

The tax expense for the second quarter and six months ended June 30, 2022 was based on an estimated annual effective tax rate calculation which included foreign, non-valuation allowance, operations combined with the U.S.

jurisdiction.

The first quarter of 2021 utilized an annual effective tax rate calculation for its foreign, non-valuation allowance operations, combined with actual year-to-date tax expense related to its U.S.

The second quarter and six months ended June 30, 2021 utilized an annual effective tax rate calculation for its foreign, non-valuation allowance operations, combined with actual year-to-date tax expense related to its U.S.

jurisdiction.

Both calculations excluded the results related to the Company’s Sheffield, UK operations.

In the second quarter 2020, the Company entered into a three-year cumulative loss within the United States, limiting the Company’s ability to utilize future projections when analyzing the need for a valuation allowance, therefore limiting sources of income as part of the analysis.

In the second quarter 2020, the Company entered into a three-year cumulative loss within the United States, limiting the Company’s ability to utilize future projections when analyzing the need for a deferred tax asset valuation allowance, therefore limiting sources of income as part of the analysis.

ATI continues to maintain valuation allowances on its U.S.

2 unchanged sentences

The following table sets forth the computation of basic and diluted income (loss) per common share:

(In millions, except per share amounts) Three months ended March 31,

Numerator for basic income (loss) per common share –

Net income (loss) attributable to ATI $ 30.9 $ ( 7.9 )

(In millions, except per share amounts) Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Numerator for basic loss per common share –

Net loss attributable to ATI $ ( 38.0 ) $ ( 49.2 ) $ ( 7.1 ) $ ( 57.1 )

Effect of dilutive securities:

1 unchanged sentence

3.5% Convertible Senior Notes due 2025 — — — —

Numerator for diluted income (loss) per common share –

Net income (loss) attributable to ATI after assumed conversions $ 34.9 $ ( 7.9 )

Denominator for basic net income (loss) per common share – weighted average shares 126.4 126.8

Numerator for diluted net loss per common share –

Net loss attributable to ATI after assumed conversions $ ( 38.0 ) $ ( 49.2 ) $ ( 7.1 ) $ ( 57.1 )

Denominator for basic net loss per common share – weighted average shares 124.6 127.1 125.5 127.0

Effect of dilutive securities:

2 unchanged sentences

3.5% Convertible Senior Notes due 2025 — — — —

Denominator for diluted net income (loss) per common share – adjusted weighted average shares and assumed conversions 152.8 126.8

Basic net income (loss) attributable to ATI per common share $ 0.24 $ ( 0.06 )

Diluted net income (loss) attributable to ATI per common share $ 0.23 $ ( 0.06 )

Common stock that would be issuable upon the assumed conversion of the 2022 Convertible Notes and the 2025 Convertible Notes and other option equivalents and contingently issuable shares are excluded from the computation of contingently issuable shares, and therefore, from the denominator for diluted earnings per share, if the effect of inclusion is anti-dilutive.

There were no anti-dilutive shares for the three months ended March 31, 2022.

There were 25.7 million anti-dilutive shares for the three months ended March 31, 2021.

Denominator for diluted net loss per common share – adjusted weighted average shares and assumed conversions 124.6 127.1 125.5 127.0

Basic net loss attributable to ATI per common share $ ( 0.31 ) $ ( 0.39 ) $ ( 0.06 ) $ ( 0.45 )

Diluted net loss attributable to ATI per common share $ ( 0.31 ) $ ( 0.39 ) $ ( 0.06 ) $ ( 0.45 )

Common stock that would be issuable upon the assumed conversion of the 2025 Convertible Notes and other option equivalents and contingently issuable shares are excluded from the computation of contingently issuable shares, and therefore, from the denominator for diluted earnings per share, if the effect of inclusion is anti-dilutive.

The 2022 Convertible Notes were converted as of June 30, 2022 (see Note 8 for further explanation).

There were 26.1 million and 26.2 million anti-dilutive shares for the three and six months ended June 30, 2022, respectively.

There were 25.7 million anti-dilutive shares for the three and six months ended June 30, 2021.

On February 2, 2022, the Company’s Board of Directors authorized the repurchase of up to $ 150 million of ATI stock.

2 unchanged sentences

The stock repurchase program does not obligate the Company to repurchase any specific number of shares and it may be modified, suspended, or terminated at any time by the Board of Directors without prior notice.

In the first quarter of 2022, ATI used $ 89.9 million to repurchase 3.5 million shares of its common stock under this program.

In the six months ended June 30, 2022, ATI used $ 89.9 million to repurchase 3.5 million shares of its common stock under this program.

Accumulated Other Comprehensive Income (Loss)

The changes in AOCI by component, net of tax, for the three month period ended March 31, 2022 were as follows (in millions):

The changes in AOCI by component, net of tax, for the three month period ended June 30, 2022 were as follows (in millions):

benefit plans Currency

1 unchanged sentence

Attributable to ATI:

Balance, December 31, 2021 $ ( 947.7 ) $ ( 64.9 ) $ 5.1 $ 15.8 $ ( 991.7 )

Balance, March 31, 2022 $ ( 933.2 ) $ ( 72.4 ) $ 20.0 $ 25.1 $ ( 960.5 )

OCI before reclassifications — ( 12.7 ) 12.3 — ( 0.4 )

Amounts reclassified from AOCI (a) 14.5 (b) — (c) ( 3.8 ) (d) 9.3 20.0

Amounts reclassified from AOCI (a) 50.2 (b) 20.0 (d) ( 15.5 ) (e) ( 2.7 ) 52.0

Net current-period OCI 50.2 7.3 ( 3.2 ) ( 2.7 ) 51.6

Balance, June 30, 2022 $ ( 883.0 ) $ ( 65.1 ) $ 16.8 $ 22.4 $ ( 908.9 )

Attributable to noncontrolling interests:

Balance, March 31, 2022 $ — $ 26.7 $ — $ — $ 26.7

OCI before reclassifications — ( 9.7 ) — — ( 9.7 )

Amounts reclassified from AOCI — (c) — — — —

Net current-period OCI — ( 9.7 ) — — ( 9.7 )

Balance, June 30, 2022 $ — $ 17.0 $ — $ — $ 17.0

The changes in AOCI by component, net of tax, for the six month period ended June 30, 2022 were as follows (in millions):

benefit plans Currency

adjustment Derivatives Deferred Tax Asset Valuation Allowance Total

Attributable to ATI:

Balance, December 31, 2021 $ ( 947.7 ) $ ( 64.9 ) $ 5.1 $ 15.8 $ ( 991.7 )

OCI before reclassifications — ( 20.2 ) 31.0 — 10.8

Amounts reclassified from AOCI (a) 64.7 (b) 20.0 (d) ( 19.3 ) (e) 6.6 72.0

Net current-period OCI 64.7 ( 0.2 ) 11.7 6.6 82.8

Balance, June 30, 2022 $ ( 883.0 ) $ ( 65.1 ) $ 16.8 $ 22.4 $ ( 908.9 )

Attributable to noncontrolling interests:

1 unchanged sentence

OCI before reclassifications — ( 9.0 ) — — ( 9.0 )

Amounts reclassified from AOCI — (b) — — — —

Amounts reclassified from AOCI — (c) — — — —

Net current-period OCI — ( 9.0 ) — — ( 9.0 )

Balance, June 30, 2022 $ — $ 17.0 $ — $ — $ 17.0

(a) Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 12) and/or loss on asset sales and sales of businesses, net, as part of the loss on sale of the Sheffield, UK operations (see Note 5).

(b) Amounts were included in loss on asset sales and sales of businesses, net, as part of the loss on sale of the Sheffield, UK operations (see Note 5).

(d) Amounts related to derivatives are included in sales, cost of goods sold or interest expense in the period or periods the hedged item affects earnings (see Note 9).

(e) Represents the net change in deferred tax asset valuation allowances on changes in AOCI balances between the balance sheet dates.

The changes in AOCI by component, net of tax, for the three month period ended June 30, 2021 were as follows (in millions):

benefit plans Currency

adjustment Derivatives Deferred Tax Asset Valuation Allowance Total

Attributable to ATI:

Balance, March 31, 2021 $ ( 1,103.4 ) $ ( 60.9 ) $ 1.1 $ ( 45.4 ) $ ( 1,208.6 )

(a) Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 12).

(b) No amounts were reclassified to earnings.

(c) Amounts related to derivatives are included in sales, cost of goods sold or interest expense in the period or periods the hedged item affects earnings (see Note 9).

(d) Represents the net change in deferred tax asset valuation allowances on changes in AOCI balances between the balance sheet dates.

The changes in AOCI by component, net of tax, for the three month period ended March 31, 2021 were as follows (in millions):

OCI before reclassifications — 5.1 5.1 — 10.2

Amounts reclassified from AOCI (a) 16.5 (b) — (c) ( 1.1 ) (d) 6.7 22.1

Net current-period OCI 16.5 5.1 4.0 6.7 32.3

Balance, June 30, 2021 $ ( 1,086.9 ) $ ( 55.8 ) $ 5.1 $ ( 38.7 ) $ ( 1,176.3 )

Attributable to noncontrolling interests:

Balance, March 31, 2021 $ — $ 21.8 $ — $ — $ 21.8

OCI before reclassifications — 1.9 — — 1.9

Amounts reclassified from AOCI — (b) — — — —

Net current-period OCI — 1.9 — — $ 1.9

Balance, June 30, 2021 $ — $ 23.7 $ — $ — $ 23.7

The changes in AOCI by component, net of tax, for the six month period ended June 30, 2021 were as follows (in millions):

benefit plans Currency

5 unchanged sentences

Net current-period OCI 33.0 ( 0.3 ) 3.0 11.6 47.3

Balance, March 31, 2021 $ ( 1,103.4 ) $ ( 60.9 ) $ 1.1 $ ( 45.4 ) $ ( 1,208.6 )

Balance, June 30, 2021 $ ( 1,086.9 ) $ ( 55.8 ) $ 5.1 $ ( 38.7 ) $ ( 1,176.3 )

Attributable to noncontrolling interests:

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Net current-period OCI — 2.5 — — $ 2.5

Balance, March 31, 2021 $ — $ 21.8 $ — $ — $ 21.8

Balance, June 30, 2021 $ — $ 23.7 $ — $ — $ 23.7

(a) Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 12).

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subsidiaries.

Reclassifications out of AOCI for the three month periods ended March 31, 2022 and 2021 were as follows:

Amounts reclassified to AOCI

Reclassifications out of AOCI for the three and six month periods ended June 30, 2022 and 2021 were as follows:

Amounts reclassified out of AOCI

Details about AOCI Components

(In millions)

Three months ended March 31, 2022 Three months ended March 31, 2021 Affected line item in the statements

Three months ended June 30, 2022 Three months ended June 30, 2021 Six months ended June 30, 2022 Six months ended June 30, 2021 Affected line item in the statements

of operations

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Actuarial losses ( 19.2 ) ( 22.2 ) ( 38.5 ) ( 44.4 ) (a)

( 19.1 ) ( 21.7 ) (c) Total before tax

( 4.6 ) ( 5.2 ) Tax expense (benefit) (d)

Settlement loss ( 29.5 ) — ( 29.5 ) — (b)

( 48.6 ) ( 21.7 ) ( 67.7 ) ( 43.4 ) (d) Total before tax

1.6 ( 5.2 ) ( 3.0 ) ( 10.4 ) Tax expense (benefit) (e)

$ ( 50.2 ) $ ( 16.5 ) $ ( 64.7 ) $ ( 33.0 ) Net of tax

Nickel and other raw material contracts $ 3.2 $ 2.0 (b)

Natural gas contracts 2.1 — (b)

Foreign exchange contracts — — (b)

Interest rate swap ( 0.3 ) ( 0.3 ) (b)

5.0 1.7 (c) Total before tax

1.2 0.4 Tax expense (benefit) (d)

Currency translation adjustment $ ( 20.0 ) $ — $ ( 20.0 ) $ — (b,d)

Nickel and other raw material contracts $ 15.9 $ 1.4 $ 19.1 $ 3.4 (c)

Natural gas contracts 4.5 0.3 6.6 0.3 (c)

Foreign exchange contracts 0.1 — 0.1 — (c)

Interest rate swap ( 0.1 ) ( 0.2 ) ( 0.4 ) ( 0.5 ) (c)

20.4 1.5 25.4 3.2 (d) Total before tax

4.9 0.4 6.1 0.8 Tax expense (e)

$ 15.5 $ 1.1 $ 19.3 $ 2.4 Net of tax

(a) Amounts are reported in nonoperating retirement benefit expense (see Note 12).

(b) Amounts related to derivatives, with the exception of the interest rate swap, are included in sales or cost of goods sold in the period or periods the hedged item affects earnings.

(b) Amounts in 2022 were included in loss on asset sales and sales of businesses, net, as part of the loss on sale of the Sheffield, UK operations (see Note 5).

(c) Amounts related to derivatives, with the exception of the interest rate swap, are included in sales or cost of goods sold in the period or periods the hedged item affects earnings.

Amounts related to the interest rate swap are included in interest expense in the same period as the interest expense on the Term Loan is recognized in earnings (see Note 9).

(d) For pretax items, positive amounts are income and negative amounts are expense in terms of the impact to net income.

Tax effects are presented in conformity with ATI’s presentation in the consolidated statements of operations.

(d) These amounts exclude the impact of any deferred tax asset valuation allowances, when applicable.

(e) These amounts exclude the impact of any deferred tax asset valuation allowances, when applicable.

Commitments and Contingencies

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Future adjustments could have a material adverse effect on the Company’s consolidated results of operations in a given period, but the Company cannot reliably predict the amounts of such future adjustments.

At March 31, 2022, the Company’s reserves for environmental remediation obligations totaled approximately $ 13 million, of which $ 5 million was included in other current liabilities.

The reserve includes estimated probable future costs of $ 4 million

for federal Superfund and comparable state-managed sites;

At June 30, 2022, the Company’s reserves for environmental remediation obligations totaled approximately $ 13 million, of which $ 6 million was included in other current liabilities.

The reserve includes estimated probable future costs of $ 4 million for federal Superfund and comparable state-managed sites;

$ 7 million for formerly owned or operated sites for which the Company has remediation or indemnification obligations;

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While the outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to the Company, management does not believe that the disposition of any such pending matters is likely to have a material adverse effect on the Company’s financial condition or liquidity, although the resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company’s consolidated results of operations for that period.

ATI Titanium LLC (ATI Titanium), a subsidiary of Allegheny Technologies Incorporated, is party to a lawsuit captioned US Magnesium, LLC v.

ATI Titanium LLC (ATI Titanium), a subsidiary of ATI Inc., is party to a lawsuit captioned US Magnesium, LLC v.

ATI Titanium LLC (Case No.

2 unchanged sentences

USM subsequently filed a claim challenging ATI Titanium’s right to suspend performance under the Supply Agreement, claiming that such suspension was a material breach of the Supply Agreement and seeking monetary damages, and ATI Titanium filed a counterclaim for breach of contract against USM.

In 2018, USM obtained leave of the court to add Allegheny Technologies Incorporated as a separate party defendant, and ATI Titanium filed a motion to dismiss the claim against Allegheny Technologies Incorporated, which the court denied on April 19, 2019.

After the conclusion of discovery, Allegheny Technologies Incorporated filed a motion for summary judgment.

On August 17, 2021, the court granted the motion, and entered summary judgment in favor of Allegheny Technologies Incorporated finding that it is not the alter ego of ATI Titanium and that it did not breach any obligations allegedly owed to USM.

In 2018, USM obtained leave of the court to add ATI Inc.

as a separate party defendant, and ATI Titanium filed a motion to dismiss the claim against ATI Inc., which the court denied on April 19, 2019.

After the conclusion of discovery, ATI Inc.

filed a motion for summary judgment.

On August 17, 2021, the court granted the motion, and entered summary judgment in favor of ATI Inc.

finding that it is not the alter ego of ATI Titanium and that it did not breach any obligations allegedly owed to USM.

A trial date has been set for October 11, 2022.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements