ATI INC 10-Q

Item 1A. Risk Factors The following is an update to, and should be read in conjunction with Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. The ongoing conflict between Russia and Ukraine may adversely affect our business and results of operations. Since February of 2022, Russia and Ukraine have been engaged in active armed conflict. The length, impact, and outcome of the ongoing conflict and its potential impact on our business is highly volatile and difficult to predict. It has and could continue to cause significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, trade disputes or trade barriers, changes in consumer or purchaser preferences, and increases in cyberattacks and espionage. Governments in the European Union, the United States, the United Kingdom and other countries have enacted sanctions against Russia and Russian interests. These sanctions include controls on the export, re-export, and in-country transfer in Russia of certain goods, supplies, and technologies, and the imposition of restrictions on doing business with certain state-owned Russian customers and other investments and business activities in Russia. In early March 2022, we announced plans to terminate our Uniti, LLC joint venture with Russian-based VSMPO-AVISMA (Verkhnaya Salda Metallurgical Production Association - Berezniki Titanium-Magnesium Works), the purpose of which was to market and sell a range of commercially pure titanium products. However, conditions in the Ukraine and/or existing or future sanctions may disrupt supplies or affect the prices of materials that are necessary to our operations. For example, we source both nickel and chromium from Russian sources that could be impacted. If unable to obtain adequate and timely deliveries of required raw materials, we may be unable to timely manufacture sufficient quantities of products. This could cause us to lose sales, incur additional costs, delay new product introductions, or suffer harm to our reputation. Further, the broader consequences of the current conflict between Russia and Ukraine may also have the effect of heightening many other risks disclosed in our public filings, any of which could materially and adversely affect our business and results of operations. Such risks include, but are not limited to, adverse effects on global macroeconomic conditions; increased volatility in the price and demand of oil, natural gas and other commodities, increased exposure to cyberattacks; disruptions in global supply chains; and exposure to foreign currency fluctuations and potential constraints or disruption in the capital markets and our sources of liquidity. RISKS RELATED TO THE COVID-19 PANDEMIC Impacts on the End-Markets that We Serve and Demand for Our Products. The COVID-19 pandemic, including governmental and other actions taken or restrictions imposed to contain its spread and impact, has subjected our operations, financial performance and financial condition to a number of risks including, but not limited to, those discussed below. The significant macroeconomic impact of the ongoing COVID-19 pandemic and the measures designed to contain its spread impacted several of the Company’s end markets. Our sales to customers in markets that are affected by COVID-19 have been negatively impacted, and the possibility exists that there could be ongoing impacts to our operations and financial results. For example, a significant portion of our sales represent products sold to customers in the commercial aerospace industry, which in general were significantly impacted by the pandemic and took various measures in response, including efforts to reduce inventory and/or downward adjustments to their stated production rates. As the pandemic subsides and related travel and other restrictions are lifted, we are experiencing improved demand. Similarly, in recent years, our business has at times been negatively impacted by the downturn and slow recovery in the oil & gas industry, including as a result of the pandemic, and the ultimate strength and pace of recovery in the energy industry is uncertain. The ultimate breadth and duration of these trends and their impact on our business is difficult to predict. Impacts to Our Supply Chain . To date, we have not experienced significant disruption to our supply chain as a result of the pandemic. However, it remains possible at some point that due to the ongoing impact of the pandemic, one or more of our 44 suppliers may not have the materials, capacity, or capability to supply products that we require according to our schedule and specifications. In that case, we may need to seek alternate suppliers, which may be more expensive, may not be available or may result in delays in shipments to us and subsequently to our customers, each of which would affect our business, results of operations, financial condition and/or cash flows. Risk of Operational Disruption . In general throughout the pandemic, our facilities continued to operate with federal and state government approvals due to the qualification of our facilities as essential and critical. However, we have experienced and may again in the future experience the temporary shut down of facilities in response to employees being impacted by COVID-19 or changes in government policy. Currently, widespread and highly restrictive quarantine measures in Shanghai and other regions in China, and their associated supply chain and other impacts, are expected to impact the near-term results of our Chinese STAL joint venture. Although the joint venture has continued to operate throughout the current lockdown, it is subject to various supply chain and other constraints.