What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-04 · 177 added, 152 removed, 312 unchanged (51% of the section changed)

1 unchanged sentence

ATI is a global manufacturer of technically advanced specialty materials and complex components.

Our largest markets are aerospace & defense, representing 45% of sales for the six months ended June 30, 2022, led by products for jet engines.

Our largest markets are aerospace & defense, representing over 45% of sales for the nine months ended September 30, 2022, led by products for jet engines.

Additionally, we have a strong presence in the energy markets, including oil & gas, downstream processing, and specialty energy, as well as the medical and electronics markets.

In aggregate, these markets represent 75% of our 2022 revenue.

In aggregate, these markets represent more than 75% of our 2022 revenue.

ATI is a market leader in manufacturing differentiated products that require our materials science capabilities and unique process technologies, including our new product development competence.

Our capabilities range from cast/wrought and powder alloy development to final production of highly engineered finished components, including those used in next-generation jet engines and 3D-printed aerospace products.

Second quarter 2022 sales increased 56% to $959.5 million, compared to sales of $616.2 million for the second quarter of 2021.

Our gross profit for the second quarter of 2022 was $175.3 million, or 18.3% of sales, a $132.6 million, or 1,140 basis point, increase, compared to the second quarter 2021, as our key end-markets continue to show sustained recovery, and prior year results included negative impacts from a labor strike.

Second quarter 2021 results include $40.3 million of strike related costs, which are excluded from segment results and primarily consist 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.

Second quarter 2022 results include a $115.9 million loss on the May 12, 2022 sale of the Sheffield, UK operations, which is reported in loss on asset sales and sales of businesses, net and primarily relates to a UK defined benefit pension plan that transferred as part of the sale, and cumulative foreign currency translation losses.

The Sheffield operations were part of the HPMC segment, and were not well-aligned with ATI’s strategic focus.

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.

Second quarter 2022 and 2021 results also include $1.3 million and $6.2 million, respectively, of net credits for restructuring charges, primarily related to lowered severance-related reserves based on changes in planned operating rates and revised workforce reduction estimates.

Both the loss on sale and restructuring credits are excluded from segment results.

Other nonoperating income (expense) for the second quarter of 2022 includes a $9.9 million benefit from the A&T Stainless joint venture’s settlement of Section 232 claims, which is included in AA&S segment results.

Our pretax loss was $30.9 million in the second quarter of 2022, compared to a loss of $40.4 million in the prior year period.

Income tax expense was $3.4 million and $4.0 million in the second quarters of 2022 and 2021, respectively, primarily related to our Asian precision rolled strip business.

Third quarter 2022 sales increased 42% to $1.03 billion, compared to sales of $725.7 million for the third quarter of 2021, primarily due to a significant recovery in demand for commercial aerospace products, which is our largest end market.

Our gross profit for the third quarter of 2022 was $183.8 million, or 17.8% of sales, compared to $82.5 million, or 11.4% of sales, for the third quarter 2021, a $101.3 million, or 640 basis point, increase reflecting benefits of our ongoing transformation with a focus on the key growth markets of aerospace and defense, and our streamlined value-add production capabilities.

Third quarter 2021 results included negative impacts from a labor strike of $22.9 million, which are excluded from our segment results and included costs for below-normal operating rates as production returned to normal levels following the end of the strike in mid-July 2021.

Third quarter 2022 and 2021 results include $2.6 million and $2.3 million, respectively, of net credits for previously-recognized restructuring charges, primarily related to lowered severance-related reserves based on changes in planned operating rates and revised workforce reduction estimates.

Third quarter 2021 results include a $64.9 million retirement benefit settlement gain related to a plan termination that eliminated certain postretirement medical benefit liabilities, which is recorded in nonoperating retirement benefit income/expense on the consolidated statement of operations.

Other nonoperating income (expense) for the third quarter of 2022 includes a $19.9 million charge for the settlement of litigation with U.S.

Magnesium, LLC related to the closed Rowley, UT titanium sponge production facility.

Other nonoperating income (expense) for the third quarter of 2021 includes a $13.7 million gain on the sale of our Flowform Products business.

All of these items are excluded from segment EBITDA.

Our pretax income was $67.4 million in the third quarter of 2022, compared to $77.2 million in the prior year period.

Income tax expense for the third quarter of 2022 was $3.0 million primarily related to our Asian precision rolled strip business, and income tax expense for the third quarter of 2021 was $22.0 million, including $15.5 million of discrete tax expense related to the retirement benefit settlement gain.

ATI continues to maintain a valuation allowance on its U.S.

deferred tax assets.

Net loss attributable to ATI was $38.0 million, or ($0.31) per share, in the second quarter of 2022, compared to a net loss attributable to ATI of $49.2 million, or ($0.39) per share, for the second quarter of 2021.

Adjusted EBITDA was $143.1 million, or 14.9% of sales, for the second quarter 2022, and $53.7 million, or 8.7% of sales, for the prior year second quarter.

Net income attributable to ATI was $61.1 million, or $0.42 per share, in the third quarter of 2022, compared to $48.7 million, or $0.35 per share, for the third quarter of 2021.

Adjusted EBITDA was $141.1 million, or 13.7% of sales, for the third quarter 2022, and $79.9 million, or 11.0% of sales, for the prior year third quarter.

EBITDA and Adjusted EBITDA are measures utilized by ATI that we believe are useful to investors because these measures are commonly used to analyze companies on the basis of operating performance, leverage and liquidity.

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GAAP to these non-GAAP measures.

Compared to the second quarter 2021, sales increased 32% in the HPMC business segment and 79% in the AA&S business segment.

In aggregate, ATI’s aerospace & defense markets sales increased 55% to $436 million in the second quarter 2022, compared to $281 million the second quarter 2021.

In HPMC, second quarter 2022 sales to the commercial jet engine market increased 90%.

Results for the first six months of 2022 were sales of $1.79 billion and income before tax of $9.2 million, compared to sales of $1.31 billion and loss before tax of $37.3 million for the first six months of 2021.

Our results for the first half of 2022 reflect the ongoing recovery across many of our key end markets, most notably jet engine materials and components, compared to the prior year period.

Our gross profit was $345 million, or 19.2% of sales, a $216 million or 940 basis point increase compared to the first six months of 2021.

Results in the first six months of 2022 include $34.3 million of benefits from management actions to access available grants and other forms of COVID-19 relief available from previously-enacted U.S.

These benefits included $16.8 million of a $22.4 million grant under the Aviation Manufacturing Jobs Protection (AMJP) program for our operations in the HPMC segment, which helps fund ongoing wage and benefit costs for a six-month period through May 2022, and $17.5 million in employee retention credits applicable across all of ATI’s domestic operations, largely for preserving jobs throughout the global pandemic-related economic downturn.

Compared to the third quarter 2021, sales increased 53% in the HPMC business segment and 35% in the AA&S business segment.

In aggregate, ATI’s aerospace & defense markets sales increased 87% to $530 million in the third quarter 2022, compared to $283 million the third quarter 2021, reflecting increasing demand for commercial aerospace jet engine and

airframe products.

In the HPMC segment, third quarter 2022 sales of commercial jet engine products increased 137% compared to the prior year period.

Results for the first nine months of 2022 were sales of $2.83 billion and income before tax of $76.6 million, compared to sales of $2.03 billion and income before tax of $39.9 million for the first nine months of 2021.

Our results for the first nine months of 2022 reflect benefits of our ongoing transformation with a focus on the key growth markets of aerospace and defense, most notably jet engine materials and components, and our streamlined value-add production capabilities.

Our gross profit was $529 million, or 18.7% of sales, compared to gross profit of $211.0 million, or 10.4% of sales, for the first nine months of 2021, a $318 million, or 830 basis point, increase.

Results in the first nine months of 2022 include $34.3 million of benefits from management actions to access available grants and other forms of COVID-19 relief available from previously-enacted U.S.

These benefits included $16.8 million of a $22.4 million grant under the Aviation Manufacturing Jobs Protection (AMJP) program for our operations in the HPMC segment, which helped fund ongoing wage and benefit costs for a six-month period through May 2022, and $17.5 million in employee retention credits applicable across all of ATI’s domestic operations, largely for preserving jobs throughout the global pandemic-related economic downturn.

Additionally, our strategic transformation efforts within the AA&S segment to eliminate production of lower-margin standard stainless sheet products in the SRP business is now complete.

The 2021 results include the $40.3 million of strike related costs discussed above which are excluded from segment results.

The six month 2022 results include a $141.0 million loss on the sale of the Sheffield, UK operations, of which $25.1 million was recorded in the first quarter of 2022 primarily for the impairment of long-lived assets.

Loss on asset sales and sales of businesses, net, for the first six months of 2022 also included a $6.8 million gain from the sale of assets from our Pico Rivera, CA operations as part of the strategy to exit standard stainless products.

Six month 2022 and 2021 results also include $2.4 million and $6.2 million, respectively, of net credits for restructuring charges.

Both the gains/losses on sale and restructuring credits are excluded from segment results.

Other nonoperating income (expense) for the first six months of 2022 includes a $9.9 million benefit from the A&T Stainless joint venture’s settlement of Section 232 claims, which is included in AA&S segment results, and $8.6 million of expense for a litigation reserve.

Our pretax income was $9.2 million in the first six months of 2022, compared to a $37.3 million loss in the prior year period.

Net loss attributable to ATI was $7.1 million, or ($0.06) per share, in the first six months of 2022, compared to a net loss attributable to ATI of $57.1 million, or ($0.45) per share, for the first six months of 2021.

Compared to the first six months of 2021, sales increased 36% in the HPMC business segment and 38% in the AA&S business segment.

Sales to the aerospace & defense markets in the HPMC segment were 44% higher than the first six months of 2021, due to improvements in the commercial aerospace market.

AA&S sales reflect higher sales across all major markets, particularly a 68% increase in the aerospace & defense markets and 45% increase in the energy market.

The 2021 results include the $63.2 million of strike related costs which are excluded from segment results.

The nine month 2022 results include a $141.0 million loss on the May 12, 2022 sale of the Sheffield, UK operations, which is reported in loss on asset sales and sales of businesses, net.

The Sheffield operations were part of the HPMC segment, and were not well-aligned with ATI’s strategic focus.

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.

Loss on asset sales and sales of businesses, net, for the first nine months of 2022 also included a $6.8 million gain from the sale of assets from our Pico Rivera, CA operations as part of the strategy to exit standard stainless products.

Nine month 2022 and 2021 results also include $5.0 million and $8.5 million, respectively, of net credits for adjustments to previously-recognized restructuring charges.

The gains/losses on sale and restructuring credits are excluded from segment results.

Results for the first nine months of 2021 include a $64.9 million retirement benefit settlement gain related to a plan termination that eliminated certain postretirement medical benefit liabilities, which is recorded in nonoperating retirement benefit income/expense on the consolidated statement of operations.

Other nonoperating income (expense) for the first nine months of 2022 includes a $28.5 million charge for the settlement of litigation with U.S.

Magnesium, LLC related to the closed Rowley, UT titanium sponge production facility, partially offset by a $9.9 million benefit from the A&T Stainless joint venture’s settlement of Section 232 claims, which is included in AA&S segment results.

Other nonoperating income (expense) for the first nine months of 2021 includes a $13.7 million gain on the sale of our Flowform Products business.

Our pretax income was $76.6 million in the first nine months of 2022, compared to income of $39.9 million in the prior year period.

Income tax expense for the first nine months of 2022 was $11.3 million primarily related to our Asian precision rolled strip business, and income tax expense for the first nine months of 2021 was $31.5 million, including $15.5 million of discrete tax expense related to the retirement benefit settlement gain.

Net income attributable to ATI was $54.0 million, or $0.42 per share, in the first nine months of 2022, compared to a net loss attributable to ATI of $8.4 million, or ($0.07) per share, for the first nine months of 2021.

Compared to the first nine months of 2021, sales increased 42% in the HPMC business segment and 37% in the AA&S business segment.

Sales to the aerospace & defense markets in the HPMC segment were 56% higher than the first nine months of 2021, due to improvements in the commercial aerospace market.

AA&S sales reflect higher sales across most major markets, particularly an 82% increase in the aerospace & defense markets and a 46% increase in the energy market.

Prior year results included impacts from the USW labor strike, which predominantly affected the AA&S segment.

Comparative information for our overall revenues (in millions) by end market and their respective percentages of total revenues for the three and six month periods ended June 30, 2022 and 2021 were as follows:

Comparative information for our overall revenues (in millions) by end market and their respective percentages of total revenues for the three and nine month periods ended September 30, 2022 and 2021 is shown below.

Three months ended Three months ended

Markets June 30, 2022 June 30, 2021

Markets September 30, 2022 September 30, 2021

Aerospace & Defense:

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Automotive 69.6 7 % 78.3 11 %

Food Equipment & Appliances 62.7 6 % 20.7 3 %

Electronics 48.5 5 % 56.5 8 %

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Medical 47.4 4 % 34.3 5 %

Food Equipment & Appliances 45.2 4 % 43.4 6 %

Other 50.7 5 % 38.8 5 %

Total $ 1,032.0 100 % $ 725.7 100 %

Six months ended Six months ended

Markets June 30, 2022 June 30, 2021

Nine months ended Nine months ended

Markets September 30, 2022 September 30, 2021

Aerospace & Defense:

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Total $ 2,825.6 100 % $ 2,034.4 100 %

For the second quarter 2022, international sales of $391 million, or 41% of total sales, increased from $287 million in the second quarter 2021.

For the third quarter 2022, international sales of $421 million, or 41% of total sales, increased from $328 million in the third quarter 2021.

ATI’s international sales are mostly to the aerospace, energy, electronics, automotive and medical markets.

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HRPF conversion service sales in the AA&S segment are excluded from this presentation.

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

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Total 100 % 100 % 100 % 100 %

Segment EBITDA for the second quarter 2022 was $164.9 million, or 17.2% of sales, compared to segment EBITDA of $73.2 million, or 11.9% of sales, for the second quarter of 2021.

Segment EBITDA for the first six months of 2022 was $308.3 million, or 17.2% of sales, compared to segment EBITDA of $147.5 million, or 11.3% of sales, for the first six months of 2021.

Segment EBITDA for the third quarter 2022 was $161.6 million, or 15.7% of sales, compared to segment EBITDA of $94.2 million, or 13.0% of sales, for the third quarter of 2021.

Segment EBITDA for the first nine months of 2022 was $469.9 million, or 16.6% of sales, compared to segment EBITDA of $241.7 million, or 11.9% of sales, for the first nine months of 2021.

Our measure of segment EBITDA, which we use to analyze the performance and results of our business segments, categorically excludes income taxes, depreciation and amortization, corporate expenses, net interest expense, closed operations and other income (expense), charges for goodwill and asset impairments, restructuring and other credits/charges, strike related costs, debt extinguishment charges and gains or losses on asset sales and sales of businesses.

Results on our management basis of reporting were as follows (in millions):

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

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Strike related costs — (22.9) — (63.2)

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

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

Retirement benefit settlement gain — 64.9 — 64.9

Gain (loss) on asset sales and sales of businesses, net — 13.7 (134.2) 13.7

Income before income taxes 67.4 77.2 76.6 39.9

Income tax provision 3.0 22.0 11.3 31.5

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

Net income 64.4 55.2 65.3 8.4

Net income attributable to noncontrolling interests 3.3 6.5 11.3 16.8

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

Net income (loss) attributable to ATI $ 61.1 $ 48.7 $ 54.0 $ (8.4)

As part of managing the performance of our business, we focus on controlling Managed Working Capital, which we define as gross accounts receivable, short-term contract assets and gross inventories, less accounts payable and short-term contract liabilities.

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We assess Managed Working Capital performance as a percentage of the prior three months annualized sales to evaluate the asset intensity of our business.

At June 30, 2022, Managed Working Capital increased as a percentage of annualized total ATI sales to 38.5% compared to 37.5% at December 31, 2021, primarily due to higher accounts receivable and inventory balances.

Days sales outstanding, which measures actual collection timing for accounts receivable, worsened by 18% as of June 30, 2022 compared to year end 2021, primarily due to increased foreign sales that generally have a longer collection cycle.

Gross inventory turns remained consistent as of June 30, 2022 compared to year end 2021, as an improvement in the pace of inventory flow across our operations helped offset higher overall inventory levels due to both rising raw material values and management actions to secure adequate supplies of key raw materials in response to supply chain uncertainties.

The computations of Managed Working Capital at June 30, 2022 and December 31, 2021, reconciled to the financial statement line items as computed under U.S.

At September 30, 2022, Managed Working Capital decreased as a percentage of annualized total ATI sales to 36.5% compared to 37.5% at December 31, 2021, as the operating efficiency of the business improved.

Days sales outstanding, which measures actual collection timing for accounts receivable, worsened by 8% as of September 30, 2022 compared to year end 2021, primarily due to increased foreign sales that generally have a longer collection cycle.

Gross inventory turns improved 13% as of September 30, 2022 compared to year end 2021, as an improvement in the pace of inventory flow across our operations was partially offset by higher overall inventory levels due to both rising raw material values and management actions to secure adequate supplies of key raw materials in response to supply chain uncertainties.

The computations of Managed Working Capital at September 30, 2022 and December 31, 2021, reconciled to the financial statement line items as computed under U.S.

GAAP, were as follows.

June 30, December 31,

September 30, December 31,

(In millions) 2022 2021

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High Performance Materials & Components Segment

Second quarter 2022 sales were $396.1 million, increasing 32% compared to the second quarter 2021, reflecting higher sales across nearly all end markets, led by commercial jet engines.

Third quarter 2022 sales were $457.6 million, increasing 53% compared to the third quarter 2021, reflecting increasing commercial aerospace demand.

Sales to the commercial aerospace market increased 116%, reflecting a 137% increase in commercial jet engines, while defense sales declined 27% based on the timing of orders for the next phase of several defense programs.

Overall aerospace and defense market sales were 80% of total HPMC sales in the second quarter of 2022.

Sales to the energy markets decreased 18%, with declines in materials for both oil & gas and specialty energy applications.

Comparative information for our HPMC segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the three month periods ended June 30, 2022 and 2021 is as follows:

Overall aerospace and defense market sales were 82% of total HPMC sales in the third quarter of 2022.

Sales to the energy markets decreased 43%, mainly due to lower specialty energy sales to Asian markets.

Three months ended Three months ended

Markets June 30, 2022 June 30, 2021

Markets September 30, 2022 September 30, 2021

Aerospace & Defense:

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Total $ 457.6 100 % $ 300.0 100 %

International sales represented 55% of total segment sales for the second quarter 2022, compared to 48% for the prior year period.

Comparative information for the HPMC segment’s major product categories, based on their percentages of revenue for the three months ended June 30, 2022 and 2021, is as follows:

Three months ended June 30,

International sales represented 53% of total segment sales for the third quarter 2022, which was consistent with the prior year period.

Comparative information for the HPMC segment’s major product categories, based on their percentages of revenue for the three months ended September 30, 2022 and 2021, is as follows:

Three months ended September 30,

Nickel-based alloys and specialty alloys 52 % 46 %

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Total 100 % 100 %

Segment EBITDA in the second quarter 2022 increased to $60.3 million, or 15.2% of total sales, compared to $37.2 million, or 12.4% of total sales, for the second quarter 2021.

Operating margins reflect higher sales of next-generation jet engine products and higher facility utilization levels.

Results in the second quarter 2022 include $5.6 million of benefits from AMJP program grants, which ended in mid-May 2022.

Sales for the first six months of 2022 were $737.7 million, increasing 36% compared to the first six months of 2021, reflecting higher sales across all end markets, led by commercial jet engines.

Consistent with the trends in quarterly results, sales to the commercial aerospace market increased 77%, reflecting an 88% increase in commercial jet engines, while defense sales declined 31% based on the timing of orders for the next phase of several defense programs.

Sales to the energy markets increased 10% with growth in materials for both oil & gas and specialty energy applications.

Comparative information for our HPMC segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the six month periods ended June 30, 2022 and 2021 is as follows:

Six months ended Six months ended

Markets June 30, 2022 June 30, 2021

Segment EBITDA in the third quarter 2022 increased to $85.8 million, or 18.8% of total sales, compared to $37.4 million, or 12.5% of total sales, for the third quarter 2021, a 630 basis point improvement in operating margins reflecting higher sales of next-generation jet engine products and higher facility utilization levels.

Sales for the first nine months of 2022 were $1.20 billion, increasing 42% compared to the first nine months of 2021, reflecting higher sales across most end markets, led by commercial jet engines.

Consistent with the trends in quarterly results, sales to the commercial aerospace market increased 91%, reflecting a 106% increase in commercial jet engines, while defense sales declined 30% based on the timing of orders for the next phase of several defense programs.

Sales to the energy markets decreased 12% with higher sales for oil & gas applications more than offset by declines in demand for specialty energy applications.

Comparative information for our HPMC segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the nine month periods ended September 30, 2022 and 2021 is as follows:

Nine months ended Nine months ended

Markets September 30, 2022 September 30, 2021

Aerospace & Defense:

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Total $ 1,195.3 100 % $ 841.5 100 %

International sales represented 54% of total segment sales for the first six months of 2022.

Comparative information for the HPMC segment’s major product categories, based on their percentages of revenue for the six months ended June 30, 2022 and 2021, is as follows:

Six months ended June 30,

International sales represented 54% of total segment sales for the first nine months of 2022.

Comparative information for the HPMC segment’s major product categories, based on their percentages of revenue for the nine months ended September 30, 2022 and 2021, is as follows:

Nine months ended September 30,

Nickel-based alloys and specialty alloys 50 % 43 %

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Total 100 % 100 %

Segment EBITDA in the first six months of 2022 increased to $128.4 million, or 17.4% of total sales, compared to $61.8 million, or 11.4% of total sales, for the first six months of 2021.

Operating margins reflect higher sales of next-generation jet engine products and higher facility utilization levels.

Results in the first half of 2022 include $27.5 million of benefits from the AMJP program and employee retention credits, partially offset by labor and other costs related to ramp readiness.

HPMC first half results reflect an ongoing recovery with improvements in many of our key end markets, most notably jet engine materials and components and specialty energy applications, as well as the continued benefits from our aggressive 2020 cost cutting actions and recent share gains.

Looking ahead to the remainder of 2022, we anticipate continued revenue growth primarily driven by demand for commercial aerospace products, with stronger demand for both jet engine mill products and forgings, bolstered by our recent share gains.

Segment EBITDA in the first nine months of 2022 increased to $214.2 million, or 17.9% of total sales, compared to $99.2 million, or 11.8% of total sales, for the first nine months of 2021, a 610 basis point improvement in operating margins reflecting higher sales of next-generation jet engine products and higher facility utilization levels.

Results in the first nine months of 2022 include $27.5 million of benefits from the AMJP program and employee retention credits, partially offset by labor and other costs related to ramp readiness.

HPMC first nine months of 2022 results reflect an ongoing recovery with improvements in many of our key end markets, most notably jet engine materials and components, as well as the continued benefits from our aggressive 2020 cost cutting actions and recent share gains.

Looking ahead to the fourth quarter of 2022, we anticipate continued strong demand for commercial aerospace products.

Demand for our commercial airframe long-form products in the HPMC segment is projected to increase over the longer-term due in part to the reordering of the commercial aerospace supply chain in response to the Russia/Ukraine conflict.

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Advanced Alloys & Solutions Segment

Second quarter 2022 sales were $563.4 million, increasing 79% compared to the second quarter of 2021, which included impacts from a multi-month labor strike which reduced sales in the prior year period.

Sales to the aerospace & defense markets increased 93%, due in part to a significant increase in commercial airframe demand for various flat-rolled product forms resulting from recent share gains.

Third quarter 2022 sales were $574.4 million, increasing 35% compared to the third quarter of 2021.

The prior year period included impacts from a labor strike that ended in mid-July 2021, which reduced sales in that period.

Sales to the aerospace & defense markets increased 107%, due in part to a significant increase in commercial airframe demand for various flat-rolled product forms.

Sales to the energy markets were 47% higher than the prior year quarter, led by chemical and hydrocarbon industry applications increasing 160%.

Increased sales prices, resulting from higher base prices and elevated raw material pass-through mechanisms, also drove revenue increases compared to the prior year period and help to offset inflationary impacts.

Comparative information for our AA&S segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the three month periods ended June 30, 2022 and 2021 is as follows:

Sales at our STAL Precision Rolled Strip facility in China continue to be negatively impacted by Covid-related market interruptions.

Three months ended Three months ended

Markets June 30, 2022 June 30, 2021

Markets September 30, 2022 September 30, 2021

Oil & Gas $ 120.2 21 % $ 82.0 19 %

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Automotive 66.1 11 % 76.2 18 %

Food Equipment & Appliances 62.7 11 % 20.6 7 %

Electronics 47.8 8 % 56.1 13 %

Food Equipment & Appliances 45.0 8 % 43.4 10 %

Construction/Mining 38.3 7 % 19.7 5 %

1 unchanged sentence

Total $ 574.4 100 % $ 425.7 100 %

International sales represented 31% of total segment sales for the second quarter 2022, compared to 46% in the prior year’s second quarter.

Comparative information for the AA&S segment’s major product categories, based on their percentages of revenue for the three months ended June 30, 2022 and 2021, are presented in the following table.

International sales represented 31% of total segment sales for the third quarter 2022, compared to 40% in the prior year’s third quarter.

Comparative information for the AA&S segment’s major product categories, based on their percentages of revenue for the three months ended September 30, 2022 and 2021, are presented in the following table.

We no longer report standard stainless product sales as a separate product category.

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HRPF conversion service sales are excluded from this presentation.

Three months ended June 30,

Three months ended September 30,

Nickel-based alloys and specialty alloys 57 % 45 %

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Total 100 % 100 %

Segment EBITDA was $104.6 million, or 18.6% of sales, for the second quarter 2022, compared to segment EBITDA of $36.0 million, or 11.4% of sales, for the second quarter 2021.

Compared to the prior year period, results reflect a stronger product mix of nickel-alloy mill products as our exit of standard stainless products was completed.

Sales of exotic materials from our Specialty Alloys & Components business and improved operating performance also drove AA&S segment margin growth.

Second quarter 2022 AA&S results included a $9.9 million benefit from the A&T Stainless joint venture’s settlement of Section 232 tariff claims.

Sales for the first six months of 2022 were $1.06 billion, increasing 38% compared to the first six months of 2021, which included impacts from a multi-month labor strike which reduced sales in the prior year period.

Sales to the aerospace & defense markets increased 68%, due in part to a significant increase in commercial airframe demand for various flat-rolled product forms resulting from recent share gains.

Segment EBITDA was $75.8 million, or 13.2% of sales, for the third quarter 2022, compared to segment EBITDA of $56.8 million, or 13.3% of sales, for the third quarter 2021.

Although results reflect a stronger product mix of nickel-alloy mill products as our exit of standard stainless products was completed, declining raw material surcharges and negative impacts on our STAL Precision Rolled Strip facility in China from Covid-related market interruptions resulted in margins remaining flat to prior year.

Strike related costs of $21.5 million for the third quarter of 2021, primarily related to lower productivity and utilization levels, were excluded from AA&S segment results.

Sales for the first nine months of 2022 were $1.63 billion, increasing 37% compared to the first nine months of 2021, which included impacts from a multi-month labor strike which reduced sales in the prior year period.

Sales to the aerospace & defense markets increased 82%, due in part to a significant increase in commercial airframe demand for various flat-rolled product forms.

Sales to the energy markets were 46% higher led by chemical and hydrocarbon industry applications increasing 104%.

Comparative information for our AA&S segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the six month periods ended June 30, 2022 and 2021 is as follows:

Six months ended Six months ended

Markets June 30, 2022 June 30, 2021

Increased sales prices, resulting from higher base prices and elevated raw material pass-through mechanisms, also drove revenue increases compared to the prior year-to-date period and helped offset inflationary impacts.

Sales at our STAL Precision Rolled Strip facility in China continue to be negatively impacted by Covid-related market interruptions.

Comparative information for our AA&S segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the nine month periods ended September 30, 2022 and 2021 is shown below.

Nine months ended Nine months ended

Markets September 30, 2022 September 30, 2021

Oil & Gas 323.3 20 % 202.0 17 %

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Total $ 1,630.3 100 % $ 1,192.9 100 %

International sales represented 33% of total segment sales for the first six months of 2022.

Comparative information for the AA&S segment’s major product categories, based on their percentages of revenue for the six months ended June 30, 2022 and 2021, are presented in the following table.

International sales represented 32% of total segment sales for the first nine months of 2022.

Comparative information for the AA&S segment’s major product categories, based on their percentages of revenue for the nine months ended September 30, 2022 and 2021, are presented in the following table.

We no longer report standard stainless product sales as a separate product category.

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HRPF conversion service sales are excluded from this presentation.

Six months ended June 30,

Nine months ended September 30,

Nickel-based alloys and specialty alloys 55 % 42 %

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Total 100 % 100 %

Segment EBITDA was $179.9 million, or 17.0% of sales, for the first six months of 2022, compared to segment EBITDA of $85.7 million, or 11.2% of sales, for the first six months of 2021.

Segment EBITDA was $255.7 million, or 15.7% of sales, for the first nine months of 2022, compared to segment EBITDA of $142.5 million, or 11.9% of sales, for the first nine months of 2021.

Compared to the prior year period, results reflect a stronger product mix of nickel-alloy mill products as we completed our exit of standard stainless products.

Sales of exotic materials from our Specialty Alloys & Components business and improved operating performance also drove AA&S segment margin growth.

First half 2022 segment EBITDA includes a $9.9 million benefit from the A&T Stainless joint venture’s settlement of Section 232 tariff claims and $6.8 million of employee retention credits, partially offset by labor and other costs related to ramp readiness.

We expect AA&S sales to continue to increase in the second half of 2022 based on strong end-market demand.

Demand for our commercial airframe flat-form products in the AA&S segment is projected to increase over the longer-term due in part to the reordering of the commercial aerospace supply chain in response to the Russia/Ukraine conflict.

The 2022 segment EBITDA includes a $9.9 million benefit from the A&T Stainless joint venture’s settlement of Section 232 tariff claims and $6.8 million of employee retention credits, partially offset by labor and other costs related to ramp readiness.

Strike related costs, primarily related to lower productivity and utilization levels, were excluded from AA&S segment results.

We expect AA&S sales to be sequentially lower in the fourth quarter of 2022 based on falling raw material surcharges and planned operating rates to further reduce managed working capital.

Sales of commercial airframe flat-form products in the AA&S segment are projected to increase over the longer-term due in part to the repositioning of the commercial aerospace supply chain in response to the Russia/Ukraine conflict.

While availability of raw materials for our melting processes remains adequate during the ongoing Russia/Ukraine conflict, changes in raw material prices may cause variability in profit margins based on the timing of index pricing mechanisms.

Corporate Items

Corporate expenses for the second quarter of 2022 were $16.7 million, compared to $15.9 million for the second quarter 2021.

For the six months ended June 30, 2022, corporate expenses were $33.7 million, compared to $28.1 million for the six months ended June 30, 2021.

Corporate expenses for the third quarter of 2022 were $14.2 million, compared to $12.9 million for the third quarter 2021.

For the nine months ended September 30, 2022, corporate expenses were $47.9 million, compared to $41.0 million for the nine months ended September 30, 2021.

The current year increases reflect business transformation initiatives and higher incentive compensation costs compared to the prior year periods.

Closed operations and other expense for the second quarter 2022 was $5.1 million, compared to $3.6 million for the second quarter 2021.

For the six months ended June 30, 2022, closed operations and other expenses were $6.5 million, compared to $3.1 million for the six months ended June 30, 2021.

Increases in closed operations and other expense in 2022 are largely due to changes in foreign currency remeasurement impacts primarily related to ATI’s European Treasury operation.

Closed operations and other expense for the third quarter 2022 was $6.3 million, compared to $1.4 million for the third quarter 2021.

For the nine months ended September 30, 2022, closed operations and other expenses were $12.8 million, compared to $4.5 million for the nine months ended September 30, 2021.

Increases in closed operations and other expense in 2022 are largely due to changes in foreign currency remeasurement impacts primarily related to ATI’s European Treasury operation and higher legal costs for closed facilities.

The following is depreciation & amortization by each business segment:

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

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$ 35.6 $ 35.6 $ 107.1 $ 108.0

Interest expense, net of interest income, in the second quarter 2022 was $23.4 million, compared to $23.7 million for the second quarter 2021.

On a year-to-date basis, net interest expense was $47.0 million for the first six months of 2022 compared to $47.1 million for the first six months of 2021.

Capitalized interest reduced interest expense by $0.4 million in the second quarter 2022 and $1.2 million in the second quarter 2021.

For the six months ended June 30, 2022 and 2021, capitalized interest was $0.6 million and $2.5 million, respectively.

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

Restructuring and other charges for the six months ended June 30, 2022 were $6.2 million, as an $8.6 million charge for a litigation reserve relating to our indefinitely idled Rowley, UT titanium sponge production facility was partially offset by a $2.4 million restructuring credit for a reduction in severance-related reserves related to approximately 50 employees based on changes in planned operating rates and revised workforce reduction estimates.

Restructuring charges for the second quarter and first six months of 2021 were a net credit of $6.2 million, primarily related to $6.9 million of 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.

Interest expense, net of interest income, in the third quarter 2022 was $20.8 million, compared to $25.1 million for the third quarter 2021.

On a year-to-date basis, net interest expense was $67.8 million for the first nine months of 2022 compared to $72.2 million for the first nine months of 2021.

The declines reflect lower debt balances in 2022.

Capitalized interest reduced interest expense by $2.0 million in the third quarter 2022 and $1.3 million in the third quarter 2021.

For the nine months ended September 30, 2022 and 2021, capitalized interest was $2.6 million and $3.8 million, respectively.

Restructuring and other charges/credits were charges of $17.3 million and $23.5 million for the third quarter and nine months ended September 30, 2022, respectively, reflecting a $19.9 million and $28.5 million charge, respectively, for the settlement of litigation with U.S.

Magnesium, LLC related to the closed Rowley, UT titanium sponge production facility, partially offset by credits of $2.6 million and $5.0 million, respectively, for a reduction in severance-related reserves related to approximately 60 and 110 employees, respectively, based on changes in planned operating rates and revised workforce reduction estimates.

Restructuring charges for the third quarter ended September 30, 2021 were a net credit of $2.3 million for a reduction in severance-related reserves related to approximately 50 employees based on changes in planned operating rate and revised workforce reduction estimates.

Restructuring charges for the nine months ended September 30, 2021 were a net credit of $8.5 million, reflecting a $9.2 million reduction in severance-related reserves related to approximately 250 employees 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.

These items were excluded from segment EBITDA.

Cash payments associated with prior restructuring programs were $2.1 million in the first six months of 2022.

The majority of the $13.2 million of remaining reserves associated with these restructuring actions as of June 30, 2022 are expected to be paid within the next year.

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

Cash payments associated with prior restructuring programs were $2.8 million in the first nine months of 2022.

Of the $9.9 million of remaining reserves associated with these restructuring actions as of September 30, 2022, $2.8 million are expected to be paid within the next year.

Strike related costs were $22.9 million and $63.2 million in the third quarter and first nine months of 2021, respectively.

For the third quarter of 2021, $21.5 million were excluded from AA&S segment EBITDA and $1.4 million were excluded from HPMC segment EBITDA.

For the first nine months of 2021, $59.7 million were excluded from AA&S segment EBITDA and $3.5 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 second quarter of 2022 was $115.9 million for the loss on the sale of the Company’s Sheffield, UK operation.

Loss on asset sales and sales of businesses, net, for the first six months of 2022 was $134.2 million, including a $141.0 million loss on the sale of the Company’s Sheffield, UK operations, of which $25.1 million was recorded in the first quarter of 2022 primarily for the impairment of long-lived assets, and a $6.8 million gain from the sale of assets from our Pico Rivera, CA operations.

Third quarter 2021 results include a $64.9 million retirement benefit settlement gain related to a plan termination that eliminated certain postretirement medical benefit liabilities.

This was effective upon the July 2021 ratification of the new USW collective bargaining agreement.

This gain, which is recorded in nonoperating retirement benefit income/expense on the consolidated statement of operations and is excluded from segment EBITDA, was comprised of $43.0 million of long-term postretirement benefit liabilities as of July 2021 and $21.9 million of amounts recorded in accumulated other comprehensive income at that date.

Gain/loss on asset sales and sales of businesses, net, for the first nine months of 2022 was a loss of $134.2 million, including a $141.0 million 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 our Pico Rivera, CA operations.

Gain/loss on asset sales and sales of businesses, net, for the third quarter and first nine months of 2021 was a $13.7 million gain on the sale of our Flowform Products business within the HPMC segment, which is recorded in nonoperating income/expense on the consolidated statement of operations.

These items are excluded from segment EBITDA.

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.

The provision for income taxes for the third quarter and nine months ended September 30, 2022 was $3.0 million and $11.3 million, respectively.

Tax expense in 2022 is mainly attributable to our foreign operations.

The tax expense for the third quarter and nine months ended September 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 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.

The provision for income taxes for the third quarter and nine months ended September 30, 2021 was $22.0 million and $31.5 million, respectively.

The 2021 tax expense includes $15.5 million of discrete tax expense related to the postretirement medical benefits gain discussed above, in accordance with ATI’s accounting policy for recognizing deferred tax amounts stranded in accumulated other comprehensive income.

The third quarter and nine months ended September 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.

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Liquidity and Financial Condition

We have an Asset Based Lending (ABL) Credit Facility, which is collateralized by the accounts receivable and inventory of our domestic operations.

The ABL facility, which matures in September 2024, includes a $500 million revolving credit facility, a letter of credit sub-facility of up to $200 million, and a $200 million term loan (Term Loan).

In addition, we have the right to request an increase of up to $200 million in the maximum amount available under the revolving credit facility for the duration of the ABL.

The ABL facility contains a financial covenant whereby we must maintain a fixed charge coverage ratio of not less than 1.00:1.00 after an event of default has occurred and is continuing or if the undrawn availability under the ABL revolving credit portion of the facility i s 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.

We were in compliance with the fixed charge coverage ratio as of June 30, 2022, and on that date, 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.

At June 30, 2022, we had $274 million of cash and cash equivalents, and available additional liquidity under the ABL facility of approximately $456 million.

On September 9, 2022, we amended and restated our Asset Based Lending (ABL) Credit Facility, which is collateralized by the accounts receivable and inventory of our operations.

As amended, the ABL facility also provides us with the option of including certain machinery and equipment as additional collateral for purposes of determining availability under the facility.

This amendment and restatement extended the ABL facility through September 2027 and includes an increase of $100 million in the revolving credit facility, to $600 million.

The ABL continues to include a letter of credit sub-facility of up to $200 million and a $200 million term loan (Term Loan), and with the amendment now includes a swing loan facility of up to $60 million.

In addition, as amended, we have the right to request an increase of up to $300 million in the maximum amount available under the revolving credit facility for the duration of the ABL.

The ABL, as amended, has interest rates that are consistent with the previous facility, replacing LIBOR with Secured Overnight Financing Rate (SOFR) plus an applicable SOFR adjustment.

The Term Loan, as amended, has an interest rate of 2.0% above adjusted SOFR.

As amended, the applicable interest rate for revolving credit borrowings under the ABL facility includes interest rate spreads based on available borrowing capacity that range between 1.25% and 1.75% for SOFR-based borrowings and between 0.25% and 0.75% for base rate borrowings.

The ABL facility contains a financial covenant whereby we must maintain a fixed charge coverage ratio of not less than 1.00:1.00 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) 10% of the then applicable maximum loan amount under the revolving credit portion of the ABL and the outstanding Term Loan balance, or (ii) $60.0 million.

We were in compliance with the fixed charge coverage ratio as of September 30, 2022.

Additionally, we must demonstrate minimum liquidity specified by the facility during the 90-day period immediately preceding the stated maturity date of its 3.5% Convertible Senior Notes due 2025 and the 6.95% Debentures due 2025 issued by our wholly owned subsidiary, Allegheny Ludlum LLC.

Costs associated with entering into the ABL amendment were $2.4 million, and are being amortized to interest expense over the extended term of the facility ending September 2027, along with $1.7 million of unamortized deferred costs previously recorded for the ABL.

The ABL, as amended, 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 our fixed charge coverage ratio is less than 1.00:1.00 and our undrawn availability under the revolving portion of the ABL is less than the greater of (a) $120 million or (b) 20% of the sum of the maximum loan amount under the revolving credit portion of the ABL and the outstanding Term Loan balance.

As of September 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.

At September 30, 2022, we had $329 million of cash and cash equivalents, and available additional liquidity under the ABL facility of approximately $550 million.

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.

During the third quarter of 2021, we issued $325 million aggregate principal amount of 4.875% Senior Notes due 2029 and $350 million aggregate principal amount of 5.125% Senior Notes due 2031.

Total combined net proceeds of $665.7 million from both of these issuances were primarily used to fund the redemption of all of the $500 million aggregate principal amount outstanding of the 5.875% Senior Notes due 2023 on October 14, 2021.

On February 2, 2022, we announced that our Board of Directors authorized the repurchase of up to $150 million of ATI stock.

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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.

We repurchased 3.5 million shares of ATI stock for $89.9 million, or an average of $25.57 per share, in the first quarter of 2022 under this program.

In the three and nine months ended September 30, 2022, we used $15.0 million and $104.9 million, respectively, to repurchase 0.5 million and 4.0 million shares, respectively, of our common stock under this program.

We believe that internally generated funds, current cash on hand and available borrowings under the ABL facility will be adequate to meet our liquidity needs, including currently projected required contributions to our pension plans.

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Our ratio of net debt to Adjusted EBITDA (Adjusted EBITDA Leverage Ratio) measures net debt at the balance sheet date to Adjusted EBITDA as calculated on the trailing twelve-month period from this balance sheet date.

Our Debt to Adjusted EBITDA Leverage Ratio improved in the second quarter of 2022 compared to year-end 2021, primarily as a result of higher earnings.

Our Net Debt to Adjusted EBITDA Leverage ratio also improved in the second quarter of 2022 compared to year-end 2021, despite a decreased cash balance, primarily due to higher earnings.

Our Debt to Adjusted EBITDA Leverage Ratio improved in the third quarter of 2022 compared to year-end 2021, primarily as a result of higher earnings.

Our Net Debt to Adjusted EBITDA Leverage ratio also improved in the third quarter of 2022 compared to year-end 2021, despite a decreased cash balance, primarily due to higher earnings.

The reconciliations of our Adjusted EBITDA Leverage Ratios to the balance sheet and income statement amounts as reported under U.S.

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Three months ended Latest 12 months ended Fiscal year ended

June 30, 2022 June 30, 2021 June 30, 2022 December 31, 2021

September 30, 2022 September 30, 2021 September 30, 2022 December 31, 2021

Net income (loss) attributable to ATI $ 61.1 $ 48.7 $ 24.2 $ (38.2)

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Net Debt to Adjusted EBITDA 2.81 4.04

For the six months ended June 30, 2022, cash used in operations was $222.4 million, primarily related to higher accounts receivable and inventory balances, despite improved operating results.

For the nine months ended September 30, 2022, cash used in operations was $99.4 million, primarily related to higher accounts receivable and inventory balances.

Increased operating levels, higher sales including longer collection cycles, increased raw material values and strategic inventory purchase actions to ensure adequate raw material availability all contributed to these operating cash flow uses.

Other significant 2022 operating cash flow items included the payment of 2021 annual incentive compensation.

For the six months ended June 30, 2021, cash used in operations was $102.6 million, primarily due to higher accounts receivable and inventory balances related to increased business activity.

Other significant 2022 operating cash flow items included the payment of 2021 annual incentive compensation and receipt of $8.5 million for repayment of working capital advances from A&T Stainless.

For the nine months ended September 30, 2021, cash used in operations was $244.8 million, primarily due to higher accounts receivable and inventory balances related to increased business activity, rising raw material costs and the lingering strike impacts.

Other significant 2021 operating cash flow items included $67.5 million in contributions to a U.S.

defined benefit pension plan and payment of 2020 annual incentive compensation, partially offset by receipt of advance payments as part of long-term supply agreements in 2021.

Cash used in investing activities was $55.7 million in the first six months of 2022, reflecting $54.8 million in capital expenditures primarily related to AA&S transformation projects and various HPMC growth projects.

Cash used in investing activities was $101.0 million in the first nine months of 2022, reflecting $100.5 million in capital expenditures primarily related to AA&S transformation projects and various HPMC growth projects.

We expect to fund our capital expenditures with cash on hand and cash flow generated from our operations and, if needed, by using a portion of the ABL facility.

Cash used in financing activities was $135.6 million in the first six months of 2022 and consisted primarily of $89.9 million for the repurchase of 3.5 million shares of ATI stock under the $150 million repurchase program authorized by our Board of Directors on February 2, 2022, and a $16.0 million dividend payment to the 40% noncontrolling interest in our PRS joint venture in China.

At June 30, 2022, cash and cash equivalents on hand totaled $274.0 million, a decrease of $413.7 million from year end 2021.

Cash and cash equivalents held by our foreign subsidiaries was $91.2 million at June 30, 2022, of which $61.1 million was held by the STAL joint venture.

Cash used in financing activities was $158.2 million in the first nine months of 2022 and consisted primarily of $104.9 million for the repurchase of 4.0 million shares of ATI stock under the $150 million repurchase program authorized by our Board of Directors on February 2, 2022, and a $16.0 million dividend payment to the 40% noncontrolling interest in our PRS joint venture in China.

At September 30, 2022, cash and cash equivalents on hand totaled $329.1 million, a decrease of $358.6 million from year end 2021.

Cash and cash equivalents held by our foreign subsidiaries was $106.6 million at September 30, 2022, of which $65.3 million was held by the STAL joint venture.

Critical Accounting Policies

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As of March 31, 2022, our Sheffield, UK operations were classified as held for sale, 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 in the first quarter 2022, reported as part of the $141.0 million loss on sale of this business for the six months ended June 30, 2022.

A $22.3 million long-lived asset impairment charge was recorded in the first quarter 2022, reported as part of the $141.0 million loss on sale of this business for the nine months ended September 30, 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.

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Other events and changes in circumstances may also require goodwill to be tested for impairment between annual measurement dates.

At June 30, 2022, we had $227.2 million of goodwill on our consolidated balance sheet.

At September 30, 2022, we had $227.2 million of goodwill on our consolidated balance sheet.

All goodwill relates to reporting units in the HPMC segment.

Management concluded that, other than the Sheffield, UK business, none of ATI’s reporting units or long-lived assets experienced any triggering event that would have required an interim impairment analysis at June 30, 2022.

The provision for, or benefit from, income taxes includes deferred taxes resulting from temporary differences in income for financial and tax purposes using the liability method.

The provision for income taxes includes deferred taxes resulting from temporary differences in income for financial and tax purposes using the liability method.

Such temporary differences result primarily from differences in the carrying value of assets and liabilities.

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Federal and state deferred tax assets.

In addition, we have $22.4 million of valuation allowances on amounts recorded in other comprehensive loss as of June 30, 2022.

In addition, we have $27.1 million of valuation allowances on amounts recorded in other comprehensive loss as of September 30, 2022.

While we remain in a cumulative loss condition, our ability to evaluate the realizability of deferred tax assets is generally limited to the ability to offset timing differences on taxable income associated with deferred tax liabilities.

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In estimating this rate, we receive input from our actuaries regarding the rate of return on high quality, fixed income investments with maturities matched to the expected future retirement benefit payments.

Based on current market conditions, discount rates are above the rates in effect at the year-end 2021 remeasurement date, when a 2.95% discount rate was used for valuing pension liabilities.

The estimated effect at the year-end 2021 valuation date of an increase in the discount rate by 0.50% would decrease pension liabilities by approximately $145 million.

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Important factors that could cause actual results to differ materially from those in the forward-looking statements include:

(a) material adverse changes in economic or industry conditions generally, including global supply and demand conditions and prices for

our specialty metals and changes in international trade duties and other aspects of international trade policy;

adverse changes in economic or industry conditions generally, including global supply and demand conditions and prices for our specialty metals and changes in international trade duties and other aspects of international trade policy;

(b) material adverse changes in the markets we serve;

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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 2. Management’s Discussion and Analysis