What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-24 compared with 2022-02-25 · 403 added, 531 removed, 1300 unchanged (42% of the section changed)

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Allegheny Technologies Incorporated and Subsidiaries

To the Stockholders and the Board of Directors of ATI Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Allegheny Technologies Incorporated and Subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), cash flows, and statements of changes in consolidated equity for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of ATI Inc.

and Subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), cash flows, and statements of changes in consolidated equity for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”.) In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2023 expressed an unqualified opinion thereon.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, in 2021 the Company elected to change its method of accounting for valuing inventories that previously used the last-in, first-out (LIFO) method to the average cost method for raw materials and to the first-in, first-out (FIFO) method for work-in-process and finished goods inventory for all years presented.

Basis for Opinion

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill impairment assessment

Goodwill impairment assessment- Forged Products reporting unit

Description of the Matter At December 31, 2022, the Company had $227.2 million of goodwill on its consolidated balance sheet.

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If the Company’s carrying amount of a reporting unit exceeds its fair value, an impairment loss would be measured as the excess of the carrying value over the calculated fair value.

Auditing the Company’s annual goodwill impairment analysis was complex and highly judgmental due to the significant estimation required to determine the fair value of the Company’s reporting units.

In particular, the fair value estimate of the Company’s Forged Products reporting unit was sensitive to significant assumptions, such as revenue growth, profitability and the weighted-average cost of capital.

These significant assumptions are forward looking and could be materially affected by future market or economic conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment evaluation process, including controls over management’s review of the significant assumptions described above.

Our audit procedures to test the estimated fair value of the Company’s reporting units included, among others, evaluating management’s significant assumptions described above and used within the fair value calculation, and testing the completeness and accuracy of the underlying data.

For example, we evaluated the reasonableness of management’s significant assumptions by analyzing the general economic environment and the economic environment of the Company’s industry.

We compared certain significant assumptions to existing market information and, where relevant, to the plans of the Company, including management’s expectations regarding the Company’s business model, customer base, product mix and other relevant factors.

We evaluated management’s ability to accurately project future operating results by comparing actual results to management’s historical forecasts.

Additionally, we performed sensitivity analyses of the significant assumptions to evaluate the changes in the fair value of the reporting units that would result from reasonably expected changes in the significant assumptions.

With the assistance of our valuation specialists, we evaluated the reasonableness of the Company’s valuation methodology and significant assumptions.

Our procedures, among others, included evaluating the selection of the discount rate by comparing the selected discount rate to the Company’s weighted average cost of capital, testing the source information underlying the determination of the discount rate, and developing a range of independent estimates and comparing those to the discount rate selected by management.

Furthermore, we tested management’s annual reconciliation of the fair value of the reporting units to the market capitalization of the Company.

In addition, we evaluated the impact of changes in management’s forecast from the annual impairment assessment date to December 31, 2021.

Auditing the Company’s annual goodwill impairment test for the Forged Products reporting unit was complex because the estimation of fair value involves subjective management assumptions, such as revenue growth, profitability and the weighted-average cost of capital, and a complex valuation methodology, such as the discounted cash flow.

Assumptions used in the Company’s valuation model are forward-looking, and changes in these assumptions can have a material effect on the determination of fair value.

Our audit procedures to test management’s impairment evaluation of the Forged Products reporting unit included, among others, assessing the valuation methodology and assumptions discussed above, and the underlying data used to develop such assumptions.

For example, we compared certain assumptions to current industry, market and economic trends.

Where appropriate, we evaluated whether changes to the Company’s business and other factors would affect the assumptions.

We also assessed the historical accuracy of management’s estimates and performed independent sensitivity analyses.

We involved our valuation specialists to assist us in evaluating the methodology and auditing the assumptions used to calculate the estimated fair value of the Forged Products reporting unit.

/s/ Ernst & Young LLP

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February 24, 2023

Allegheny Technologies Incorporated and Subsidiaries

and Subsidiaries

Consolidated Statements of Operations

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Restructuring charges (credits) ( 4.8 ) ( 11.3 ) 1,107.5

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

Operating income (loss) 287.3 117.6 ( 1,302.7 )

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Income (loss) before income taxes 162.0 10.6 ( 1,481.9 )

Income tax provision (benefit) 26.8 77.7 ( 28.5 )

Income tax provision 15.5 26.8 77.7

Net income (loss) 146.5 ( 16.2 ) ( 1,559.6 )

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Diluted net income (loss) attributable to ATI per common share $ 0.96 $ ( 0.30 ) $ ( 12.43 )

*Years ended December 31, 2020 and 2019 reflect the change in inventory accounting method, as described in Note 1 of the Notes to the Consolidated Financial Statements.

There were no adjustments to 2020 amounts as a result of this change.

The accompanying notes are an integral part of these statements.

Allegheny Technologies Incorporated and Subsidiaries

and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

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Unrealized net change arising during the period ( 43.5 ) ( 4.6 ) 32.5

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

Total ( 23.5 ) ( 4.6 ) 32.5

Net derivatives gain (loss) on hedge transactions 53.8 15.5 ( 2.8 )

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Amortization to net income (loss) of net prior service credits ( 0.5 ) ( 1.8 ) ( 3.1 )

Settlement gain ( 21.9 ) — —

Settlement loss (gain) included in net income (loss) 29.5 ( 21.9 ) —

Income taxes on postretirement benefit plans — ( 15.5 ) —

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Comprehensive income (loss) 394.7 220.5 ( 1,570.1 )

Comprehensive income attributable to noncontrolling interests 26.8 24.4 11.2

Comprehensive income (loss) attributable to noncontrolling interests ( 2.7 ) 26.8 24.4

Comprehensive income (loss) attributable to ATI $ 397.4 $ 193.7 $ ( 1,594.5 )

*Years ended December 31, 2020 and 2019 reflect the change in inventory accounting method, as described in Note 1 of the Notes to the Consolidated Financial Statements.

There were no adjustments to 2020 amounts as a result of this change.

The accompanying notes are an integral part of these statements.

Allegheny Technologies Incorporated and Subsidiaries

and Subsidiaries

Consolidated Balance Sheets

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Accounts receivable, net 579.2 470.0

Shot-term contract assets 53.9 38.9

Short-term contract assets 64.1 53.9

Inventories, net 1,195.7 1,046.3

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3,119,220 shares at December 31, 2022 and 231,857 shares at December 31, 2021

( 87.0 ) ( 4.8 )

Accumulated other comprehensive loss, net of tax ( 725.2 ) ( 991.7 )

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Total Liabilities and Stockholders’ Equity $ 4,445.6 $ 4,285.2

*December 31, 2020 reflects the change in inventory accounting method, as described in Note 1 of the Notes to the Consolidated Financial Statements.

There were no adjustments to December 31, 2020 amounts as a result of this change.

The accompanying notes are an integral part of these statements.

Allegheny Technologies Incorporated and Subsidiaries

and Subsidiaries

Consolidated Statements of Cash Flows

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Depreciation and amortization 142.9 143.9 143.3

Share-based compensation 26.0 21.1 2.9

Deferred taxes ( 0.1 ) 1.0 69.9

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Non-cash restructuring charges — — 1,041.5

Non-cash joint venture impairment charge — — 11.4

Change in operating assets and liabilities:

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Other 0.8 1.4 1.9

Cash provided by (used in) investing activities ( 77.3 ) ( 128.7 ) 81.7

Cash used in investing activities ( 126.7 ) ( 77.3 ) ( 128.7 )

Financing Activities:

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Payments on long-term debt and finance leases ( 23.1 ) ( 515.6 ) ( 212.1 )

Net borrowings under credit facilities 21.7 0.2 4.9

Net borrowings (payments) under credit facilities ( 5.6 ) 21.7 0.2

Purchase of convertible note capped call — — ( 19.4 )

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Debt extinguishment charge — ( 64.5 ) ( 19.1 )

Purchase of treasury stock ( 139.9 ) — —

Sale to noncontrolling interests 6.4 — —

Dividends paid to noncontrolling interests ( 34.0 ) — ( 7.2 )

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Cash provided by (used in) financing activities ( 201.9 ) 103.0 116.9

Increase in cash and cash equivalents 41.8 155.1 108.8

Increase (decrease) in cash and cash equivalents ( 103.7 ) 41.8 155.1

Cash and cash equivalents at beginning of year 687.7 645.9 490.8

Cash and cash equivalents at end of year $ 584.0 $ 687.7 $ 645.9

*Years ended December 31, 2020 and 2019 reflect the change in inventory accounting method, as described in Note 1 of the Notes to the Consolidated Financial Statements.

There were no adjustments to 2020 amounts as a result of this change.

Amounts presented on the Consolidated Statements of Cash Flows may not agree to the corresponding changes in consolidated balance sheet items due to the accounting for purchases and sales of businesses and the effects of foreign currency translation.

The accompanying notes are an integral part of these statements.

Allegheny Technologies Incorporated and Subsidiaries

and Subsidiaries

Statements of Changes in Consolidated Equity

ATI Stockholders

(In millions, except per share amounts) Common

(In millions) Common

Stock Additional

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Balance, December 31, 2019 $ 12.7 $ 1,618.0 $ 1,679.3 $ ( 18.2 ) $ ( 1,201.7 ) $ 103.1 $ 2,193.2

Net income — — 252.5 — — 12.5 265.0

Other comprehensive loss — — — — ( 67.9 ) ( 1.3 ) ( 69.2 )

Cumulative effect of change in accounting principle — — 5.1 — — — 5.1

Dividends paid to noncontrolling interest — — — — — ( 14.0 ) ( 14.0 )

Employee stock plans — 2.6 ( 0.3 ) 12.4 — — 14.7

Balance, December 31, 2019* $ 12.7 $ 1,618.0 $ 1,679.3 $ ( 18.2 ) $ ( 1,201.7 ) $ 103.1 $ 2,193.2

Net income (loss) — — ( 1,572.6 ) — — 13.0 ( 1,559.6 )

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

*December 31, 2020 and 2019 reflect the change in inventory accounting method, as described in Note 1 of the Notes to the Consolidated Financial Statements.

There were no adjustments to December 31, 2020 amounts as a result of this change.

Net income — — 130.9 — — 15.6 146.5

Other comprehensive income (loss) — — — — 266.5 ( 18.3 ) 248.2

Purchase of treasury stock — — — ( 139.9 ) — — ( 139.9 )

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

Dividends paid to noncontrolling interest — — — — — ( 34.0 ) ( 34.0 )

Sales of subsidiary shares to noncontrolling interest — — — — — 0.9 0.9

Employee stock plans 0.1 26.0 — ( 5.8 ) — — 20.3

Balance, December 31, 2022 $ 13.1 $ 1,668.1 $ 176.9 $ ( 87.0 ) $ ( 725.2 ) $ 111.3 $ 1,157.2

The accompanying notes are an integral part of these statements.

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Principles of Consolidation and Reporting

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

The consolidated financial statements include the accounts of ATI Inc.

and its subsidiaries.

The financial results of majority-owned joint ventures are consolidated into the Company’s operating results and financial position, with the minority ownership interest recognized in the consolidated statement of operations as net income attributable to noncontrolling interests, and as equity attributable to the noncontrolling interests within total stockholders’ equity.

The results for the Shanghai STAL Precision Stainless Steel Company Limited (STAL) are reported on a one month lag.

Investments in which the Company exercises significant influence, but which it does not control (generally a 20% to 50% ownership interest) are accounted for under the equity method of accounting, whereby ATI’s carrying value of the equity method investment on the statement of financial position is the capital investment and any undistributed profit or loss, and is classified in Other (noncurrent) assets.

Investments in which the Company exercises significant influence, but which it does not control (generally a 20% to 50% ownership interest) are accounted for under the equity method of accounting, whereby ATI’s carrying value of the equity method investment on the consolidated balance sheet is the capital investment and any undistributed profit or loss.

The investments are classified in other (noncurrent) assets on the consolidated balance sheet.

The profit or loss attributable to ATI from equity method investments is included in the consolidated statements of operations as a component of Other (non-operating) income (expense).

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Intercompany accounts and transactions have been eliminated.

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

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

and its subsidiaries.

Risks and Uncertainties and Use of Estimates

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Management believes that the estimates are reasonable.

Certain prior year amounts have been reclassified in order to conform with the 2021 presentation.

The Company markets its products to a diverse customer base, principally throughout the United States.

No single customer accounted for more than 10% of sales for any year presented.

The major end markets for the ATI’s products are customers in the aerospace & defense, energy, automotive, construction and mining, food equipment and appliances, and medical markets.

The major end markets for ATI’s products are customers in the aerospace & defense, energy, automotive, construction and mining, food equipment and appliances, and medical markets.

At December 31, 2022, ATI has approximately 6,700 active employees, of which approximately 15 % are located outside the United States.

Approximately 35 % of ATI’s workforce is covered by various collective bargaining agreements (CBAs), predominantly with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied & Industrial Service Workers International Union, AFL-CIO, CLC (USW).

The Company’s CBA with the USW involving approximately 1,100 active full- time represented employees located primarily within the AA&S segment operations, as well as a number of inactive employees, expired on February 28, 2021.

The Company’s CBA with the USW involving approximately 1,100 active full- time represented employees located primarily within the Advanced Alloys & Solutions (AA&S) segment operations, as well as a number of inactive employees, expired on February 28, 2021.

USW-represented employees continued to work under the terms of the expired CBA until March 30, 2021 when they engaged in a strike.

On July 14, 2021, ATI announced that a new four-year labor agreement with the USW was ratified, ending the strike.

The Company has CBAs with approximately 800 full-time employees that expire in 2022.

Change in Accounting Principle:

During the fourth quarter of 2021, the Company elected to change its method for valuing its inventories that previously used the last-in, first-out (LIFO) method to a current costing method consisting of the average cost method for raw materials and the first-in, first-out (FIFO) method for work-in-process and finished goods inventory, hereafter referred to as “current cost method”.

Total inventories accounted for under the LIFO method represented approximately 65 % of the Company’s total inventories prior to this change in method.

The Company believes that using the current cost method is preferable as it improves comparability with the Company’s peers, more closely resembles the physical flow of inventory, and aligns with how the Company internally manages the business.

The effects of the change in accounting principle of changing from LIFO to the current cost method have been retrospectively applied to all periods presented.

As a result of the retrospective application of the change in accounting principle, certain financial statement line items in the Company’s consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for the years ended December 31, 2019 were adjusted as necessary.

This change in accounting principle had no impact to any of the consolidated financial statements for 2020.

The following table reflects the effect of the change in the accounting principle on the 2021 consolidated financial statements:

For the Year Ending December 31, 2021 As Computed under LIFO As Computed under Current Cost Method Effect of Change

(dollars in millions, except per share data)

Statement of Operations

Cost of sales $ 2,559.2 $ 2,466.6 $ ( 92.6 )

Gross profit $ 240.6 $ 333.2 $ 92.6

Operating income $ 25.0 $ 117.6 $ 92.6

Income (loss) before income taxes $ ( 82.0 ) $ 10.6 $ 92.6

Net loss $ ( 108.8 ) $ ( 16.2 ) $ 92.6

Net loss attributable to ATI $ ( 130.8 ) $ ( 38.2 ) $ 92.6

Basic net loss per common share $ ( 1.03 ) $ ( 0.30 ) $ 0.73

Diluted net loss per common share $ ( 1.03 ) $ ( 0.30 ) $ 0.73

Statement of Comprehensive Income

Net loss $ ( 108.8 ) $ ( 16.2 ) $ 92.6

Comprehensive income $ 127.9 $ 220.5 $ 92.6

Comprehensive income attributable to ATI $ 101.1 $ 193.7 $ 92.6

Balance Sheet

Inventories, net $ 953.7 $ 1,046.3 $ 92.6

Total current assets $ 2,214.1 $ 2,306.7 $ 92.6

Total assets $ 4,192.6 $ 4,285.2 $ 92.6

Retained earnings (deficit) $ ( 19.9 ) $ 72.7 $ 92.6

Total ATI stockholders’ equity

$ 593.0 $ 685.6 $ 92.6

Total stockholders’ equity

$ 740.1 $ 832.7 $ 92.6

Total liabilities and stockholders’ equity

$ 4,192.6 $ 4,285.2 $ 92.6

Statement of Cash Flows

Net loss $ ( 108.8 ) $ ( 16.2 ) $ 92.6

Adjustments to reconcile net loss to net cash provided by operating activities:

Inventories $ 38.7 $ ( 53.9 ) $ ( 92.6 )

The following tables reflect the impact to the financial statement line items as a result of the change in accounting principle for the prior periods presented in the accompanying financial statements:

For the Year Ending December 31, 2019 As Reported Adjustments As Adjusted

(dollars in millions, except per share data)

Statement of Operations

Cost of sales $ 3,484.7 $ ( 0.2 ) $ 3,484.5

Gross profit $ 637.8 $ 0.2 $ 638.0

Operating income $ 366.1 $ 0.2 $ 366.3

Other income, net $ 69.7 $ ( 5.3 ) $ 64.4

Income before income taxes $ 241.6 $ ( 5.1 ) $ 236.5

Net income $ 270.1 $ ( 5.1 ) $ 265.0

Net income attributable to ATI $ 257.6 $ ( 5.1 ) $ 252.5

Basic net income per common share $ 2.05 $ ( 0.04 ) 2.01

Diluted net income per common share $ 1.85 $ ( 0.04 ) 1.81

Statement of Comprehensive Income

Net income $ 270.1 $ ( 5.1 ) $ 265.0

Comprehensive income $ 200.9 $ ( 5.1 ) $ 195.8

Comprehensive income attributable to ATI $ 189.7 $ ( 5.1 ) $ 184.6

Statement of Cash Flows

Net income $ 270.1 $ ( 5.1 ) $ 265.0

Adjustments to reconcile net income to net cash provided by operating activities:

Net loss from sales of businesses $ 1.8 $ 5.3 $ 7.1

Inventories $ 25.4 $ ( 0.2 ) $ 25.2

As a result of the accounting change, retained earnings as of January 1, 2019 increased from $ 1,422.0 million, as originally reported using the LIFO method, to $ 1,427.1 million using the current cost method.

The change of $ 5.1 million is reflected as a cumulative change in accounting principle in the consolidated statements of shareholders’ equity.

The Company has no significant CBAs that expire in 2023.

Cash and Cash Equivalents

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Amounts are written-off against the reserve in the period it is determined that the receivable is uncollectible.

Inventories are stated at the lower of cost or net realizable value.

Inventories are stated at the lower of cost (first-in, first-out (FIFO) and average cost methods) or net realizable value.

Costs include direct material, direct labor and applicable manufacturing and engineering overhead, and other direct costs.

The term net realizable value is defined as estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.

During the fourth quarter of 2021, the Company elected to change its method for valuing its inventories that previously used the LIFO method to the average cost method for raw materials and the FIFO method for work-in-process and finished goods inventory.

The Company believes that the current cost method is preferable as it improves comparability with the Company’s peers, more closely resembles the physical flow of our inventory, and aligns with how the Company internally manages the business.

inventories, including the inventory of the Company’s non-U.S.

operations, will continue to be valued using the FIFO or average cost methods.

The effects of the change in accounting principle of LIFO to the current cost method have been retrospectively applied to all periods presented.

See above in “Change in Accounting Principle” section for more information.

The Company evaluates product lines on a quarterly basis to identify inventory carrying values that exceed estimated net realizable value.

The calculation of a resulting reserve, if any, is recognized as an expense in the period that the need for the reserve is identified.

It is the Company’s general policy to write-down to scrap value any inventory that is identified as slow-moving or aged more than twelve months, subject to sales, backlog and anticipated orders considerations.

It is the Company’s general policy to write-down to scrap value any inventory that is identified as slow-

moving or aged more than twelve months, subject to sales, backlog and anticipated order considerations.

In some instances this aging criterion is up to twenty-four months.

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Finance leases have front-loaded expense recognition which is reported as amortization expense and interest expense on the consolidated statement of operations.

ROU assets for operating leases are classified in other long-term assets , and ROU assets for finance leases are

classified in property, plant and equipment on the consolidated balance sheet.

ROU assets for operating leases are classified in other long-term assets , and ROU assets for finance leases are classified in property, plant and equipment on the consolidated balance sheet.

For operating leases, short-term lease liabilities are classified in other current liabilities , and long-term lease liabilities are classified in other long-term liabilities on the consolidated balance sheet.

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If this comparison reflects impairment, then the loss would be measured as the excess of the carrying value over the calculated fair value.

Generally accepted accounting standards provide the option to qualitatively assess goodwill for impairment before completing a quantitative assessment.

Generally accepted accounting principles provide the option to qualitatively assess goodwill for impairment before completing a quantitative assessment.

Under the qualitative approach, if, after assessing the totality of events or circumstances, including both macroeconomic, industry and market factors, and entity-specific factors, the Company determines it is likely (more likely than not) that the fair value of a reporting unit is greater than its carrying amount, then the quantitative impairment analysis is not required.

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The accruals are reviewed periodically and, as investigations and remediations proceed, adjustments of the accruals are made to reflect new information as appropriate.

Accruals for losses from environmental remediation obligations do not take into account the effects of inflation, and anticipated expenditures are not discounted to their present value.

Accruals for losses from environmental remediation obligations are not discounted to their present value.

The accruals are not reduced by possible recoveries from insurance carriers or other third parties, but do reflect allocations among potentially responsible parties (PRPs) at Federal Superfund sites or similar state-managed sites after an assessment is made of the likelihood that such parties will fulfill their obligations at such sites and after appropriate cost-sharing or other agreements are entered.

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Sales Recognition

The following is the Company’s accounting policy as it relates to Accounting Standards Codification Topic 606 (ASC 606), Revenue from Customers.

The following is the Company’s accounting policy as it relates to Accounting Standards Codification Topic 606 (ASC 606), Contracts with Revenue from Customers.

This guidance provides a five-step analysis of transactions to determine when and how revenue is recognized, and requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

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Contract costs are the incremental costs of obtaining and fulfilling a contract (i.e., costs that would not have been incurred if the contract had not been obtained) to provide goods and services to customers.

Contract costs for ATI largely consist of design and development costs for molds, dies and other tools that ATI will own and that will be used in producing the products under

the supply arrangement.

Contract costs for ATI largely consist of design and development costs for molds, dies and other tools that ATI will own and that will be used in producing the products under the supply arrangement.

Contract costs are classified as non-current assets and amortized to expense on a systematic and rational basis over a period consistent with the transfer to the customer of the goods or services to which the asset relates.

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Research and Development

Our research, development and technical service activities are closely interrelated and are directed toward development of new products, improvement of existing products, cost reduction, process improvement and control, quality assurance and control, development of new manufacturing methods, and improvement of existing manufacturing methods.

Research, development and technical service activities are closely interrelated and are directed toward development of new products, improvement of existing products, cost reduction, process improvement and control, quality assurance and control, development of new manufacturing methods, and improvement of existing manufacturing methods.

Research and development costs are expensed as incurred.

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Customer funded research and development costs were $ 1.4 million in 2022, $ 3.5 million in 2021, and $ 0.7 million in 2020.

Government Assistance

The Company enters into agreements with U.S.

federal agencies, U.S.

state and local governments, and foreign governments that provide financial assistance and incentives supporting both new capital projects to expand and enhance manufacturing capabilities and also to sustain and maintain existing operations.

Depending on the nature of the government program, the financial impacts may be recorded as a reduction to cost of sales through direct offset of labor and overhead costs or lower depreciation expense, or as a reduction of selling, general and administrative expenses for property tax abatement or other similar categories.

Benefits from government assistance are recognized as the activities are incurred, subject to ongoing assessments of meeting other relevant terms such as employment or expenditure levels.

In November 2021, ATI entered into an agreement with the U.S.

Department of Transportation under the Aviation Manufacturing Jobs Protection (AMJP) program for a grant of up to $ 22.2 million.

The receipt of the award was primarily conditioned upon the Company committing to not furlough or lay off a defined group of employees in High Performance Materials & Components (HPMC) segment operations during the six-month period of performance between November 2021 and May 2022.

The AMJP grant benefit was recognized over the six-month performance period as a reduction to cost of sales in proportion to the compensation expense that the award was intended to defray, with $ 16.6 million recognized in 2022 operating results.

Cash receipts from the AMJP program were $ 11.0 million in 2022, and this program is now completed.

ATI is a party to various U.S.

states’ economic development incentive programs that provide economic benefits in the forms of property tax relief or cash payments to offset capital expenditures.

These programs generally include requirements for levels of capital spending and/or employment to qualify for the government assistance.

For the year ended December 31, 2022, these state-level programs reduced selling, general and administrative expenses by $ 1.6 million and cash receipts were $ 2.8 million.

Receivables for ongoing programs are $ 3.7 million as of December 31, 2022.

Stock-based Compensation

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The evaluation includes the consideration of all available evidence, both positive and negative, regarding the estimated future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, historical taxable income in prior carryback periods if carryback is permitted, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused.

The verifiable evidence such as future reversals of existing temporary differences and the ability to carryback are considered before the subjective sources such as estimate future taxable income exclusive of temporary differences and tax planning strategies.

The verifiable evidence such as future reversals of existing temporary differences and the ability to carryback are considered before the subjective sources such as estimated future taxable income exclusive of temporary differences and tax planning strategies.

It is the Company’s policy to classify interest and penalties recognized on underpayment of income taxes as income tax expense.

It is also the Company’s policy to recognize deferred tax amounts stranded in accumulated other comprehensive income (AOCI), which result from tax rate differences on changes in AOCI balances, as an element of income tax expense in the period that the related balance sheet item associated with the AOCI balance ceases to exist.

It is also the Company’s policy to recognize deferred tax amounts stranded in accumulated other comprehensive

income (AOCI), which result from tax rate differences on changes in AOCI balances, as an element of income tax expense in the period that the related balance sheet item associated with the AOCI balance ceases to exist.

In the case of derivative financial instruments accounted for as hedges, or marketable securities, ATI uses the portfolio method where the stranded deferred tax amount is recognized when all items of a particular category, such as cash flow hedges of a particular risk such as a foreign currency hedge, are settled.

In the case of defined benefit pension and other postretirement benefit plans, the stranded deferred tax balance is recognized as an element of income tax expense in the period the benefit plan is extinguished.

Net Income Per Common Share

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New Accounting Pronouncements Adopted

In August 2020, the Financial Accounting Standards Board (FASB) issued new accounting guidance related to accounting for convertible instruments.

In November 2021, the Financial Accounting Standards Board (FASB) issued new accounting guidance related to disclosures about certain types of government assistance.

This new guidance requires business entities that account for transactions with a government by analogizing to a grant or contribution accounting model to make certain annual disclosures.

It requires disclosure of the nature and significant terms and considerations of the transactions, the accounting policies used and the effects of those transactions on an entity’s financial statements.

This new guidance is effective for the Company in fiscal year 2022, with early adoption permitted.

The Company adopted this new accounting guidance effective January 1, 2022.

The adoption of these changes did not have an impact on the Company’s consolidated financial statements other than the annual disclosure requirements included in the accounting policies discussion above.

In August 2020, the FASB issued new accounting guidance related to accounting for convertible instruments.

Under this new guidance, embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives, or that do not result in substantial premiums accounted for as paid-in capital.

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The new guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation, requiring the if-converted method, and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity.

This new guidance is effective for the Company in fiscal year 2022, with early adoption permitted.

The Company adopted this new accounting guidance related to accounting for convertible instruments effective January 1, 2021 using the modified transition approach with the cumulative effect recognized as an adjustment to the opening balance of retained earnings.

This new guidance is applicable to the Company’s 3.5 % Convertible Senior Notes due 2025 (the 2025 Convertible Notes) that were issued in June 2020, for which the embedded conversion option was required to be separately accounted for as a component of stockholders’ equity.

This new guidance was effective for the Company in fiscal year 2022, with early adoption permitted.

The Company early adopted this new accounting guidance related to accounting for convertible instruments effective January 1, 2021 using the modified transition approach with the cumulative effect recognized as an adjustment to the opening balance of retained earnings.

This new guidance was applicable to the Company’s 3.5 % Convertible Senior Notes due 2025 (the 2025 Convertible Notes) that were issued in June 2020, for which the embedded conversion option was required to be separately accounted for as a component of stockholders’ equity.

Upon adoption on January 1, 2021, long-term debt increased by $ 45.4 million and stockholders’ equity decreased by the same amount, representing the net impact of two adjustments:

(1) the $ 49.8 million value of the embedded conversion, which is net of allocated offering costs, previously classified in additional paid-in capital in stockholders’ equity, and (2) a $ 4.4 million increase to retained earnings for the cumulative effect of adoption primarily related to the non-cash interest expense recorded in fiscal year 2020 for the amortization of the portion of the 2025 Convertible Notes allocated to stockholders’ equity.

Prospectively, the reported interest expense for the 2025 Convertible Notes will no longer include the non-cash interest expense of the equity component as required under prior accounting standards and will be closer to the 3.5 % cash coupon rate.

Prospectively, the reported interest expense for the 2025 Convertible Notes no longer included the non-cash interest expense of the equity component as required under prior accounting standards and is closer to the 3.5 % cash coupon rate.

There was no impact to the Company’s earnings per share calculation as it previously applied the if-converted method to the 2025 Convertible Notes given ATI’s flexibility to settle conversions of the 2025 Convertible Notes in cash, shares of ATI’s common stock or a combination thereof, at ATI’s election.

Pending Accounting Pronouncements

In November 2021, the FASB issued new accounting guidance related to disclosures about certain types of government assistance.

This new guidance requires business entities that account for transactions with a government by analogizing to a grant or contribution accounting model to make certain annual disclosures.

This new guidance is effective for the Company in fiscal year 2022, with early adoption permitted.

The Company did not early adopt this guidance.

The adoption of these changes is not expected to have an impact on the Company’s consolidated financial statements other than the annual disclosure requirements.

In September 2022, the FASB issued new accounting guidance related to disclosures about supplier finance programs.

Supplier finance programs allow a buyer to offer its suppliers the option for access to payment in advance of an invoice due date, which is paid by a third-party finance provider or intermediary on the basis of invoices that the buyer has confirmed as valid.

This new guidance requires a buyer in a supplier finance program to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude, using both qualitative and quantitative information about its supplier finance programs.

guidance, with the exception of disclosures on rollforward information, will be effective for the Company in fiscal year 2023, with early adoption permitted.

The rollforward information disclosures are effective for the Company in fiscal year 2024, with early adoption permitted.

The Company does not plan to early adopt this guidance.

The adoption of these changes is not expected to have an impact on the Company’s consolidated financial statements other than disclosure requirements.

Revenue from Contracts with Customers

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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 fiscal years ended December 31, 2021, 2020 and 2019 were as follows:

Comparative information of the Company’s overall revenues (in millions) by global and geographical markets for the fiscal years ended December 31, 2022, 2021 and 2020 is as follows:

(in millions) 2022 2021 2020

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Aerospace & Defense:

Energy* 178.3 413.6 591.9 106.2 512.7 618.9 153.6 643.3 796.9

Jet-Engines- Commercial $ 975.7 $ 87.8 $ 1,063.5 $ 480.9 $ 36.3 $ 517.2 $ 542.7 $ 58.2 $ 600.9

Airframes- Commercial 184.1 284.8 468.9 132.8 129.9 262.7 219.8 191.0 410.8

Defense 158.2 183.0 341.2 221.8 131.0 352.8 184.4 163.9 348.3

Total Aerospace & Defense $ 1,318.0 $ 555.6 $ 1,873.6 $ 835.5 $ 297.2 $ 1,132.7 $ 946.9 $ 413.1 $ 1,360.0

Oil & Gas 35.0 441.7 476.7 42.2 290.1 332.3 37.3 328.5 365.8

Specialty Energy 113.6 163.0 276.6 136.1 123.5 259.6 68.9 184.2 253.1

Total Energy 148.6 604.7 753.3 178.3 413.6 591.9 106.2 512.7 618.9

Automotive 11.2 290.9 302.1 8.7 296.4 305.1 5.5 257.7 263.2

Electronics 2.4 197.6 200.0 1.2 213.9 215.1 0.9 176.8 177.7

Food Equipment & Appliances 0.1 153.0 153.1 — 159.2 159.2 0.3 205.5 205.8

Medical 60.3 71.2 131.5 47.7 71.4 119.1 85.4 87.0 172.4

Construction/Mining 34.1 142.3 176.4 24.0 98.2 122.2 18.6 123.4 142.0

Medical 73.2 89.9 163.1 60.3 71.2 131.5 47.7 71.4 119.1

Food Equipment & Appliances 0.2 158.3 158.5 0.1 153.0 153.1 — 159.2 159.2

Other 53.5 155.5 209.0 47.0 101.2 148.2 38.8 103.2 142.0

Total $ 1,641.2 $ 2,194.8 $ 3,836.0 $ 1,155.1 $ 1,644.7 $ 2,799.8 $ 1,164.6 $ 1,817.5 $ 2,982.1

*Includes the oil & gas, downstream processing, and specialty energy markets.

(in millions) 2022 2021 2020

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Germany 148.4 52.5 200.9 74.1 47.2 121.3 76.6 48.8 125.4

Hong Kong 76.3 0.9 77.2 19.0 1.2 20.2 0.9 0.4 1.3

France 125.7 31.5 157.2 48.7 9.8 58.5 66.5 18.4 84.9

Canada 46.2 41.2 87.4 36.3 39.6 75.9 28.3 40.6 68.9

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Total $ 1,641.2 $ 2,194.8 $ 3,836.0 $ 1,155.1 $ 1,644.7 $ 2,799.8 $ 1,164.6 $ 1,817.5 $ 2,982.1

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

In conjunction with the Company’s announced ongoing exit of lower-margin standard stainless sheet products in the fourth quarter of 2020 (see Note 19), ATI reclassified certain items as High-Value Products within AA&S segment results.

Prior period information reflects these reclassifications.

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

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.

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

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Diversified Products:

High-Value Products

Nickel-based alloys and specialty alloys 49 % 54 % 52 % 43 % 44 % 43 % 38 % 49 % 45 %

Precision rolled strip — % 33 % 19 % — % 25 % 15 % — % 23 % 12 %

Precision forgings, castings and components 34 % — % 15 % 38 % — % 16 % 34 % — % 14 %

Precision rolled strip — % 25 % 14 % — % 33 % 19 % — % 25 % 15 %

Titanium and titanium-based alloys 17 % 7 % 11 % 19 % 6 % 12 % 28 % 11 % 17 %

Zirconium and related alloys — % 14 % 8 % — % 17 % 10 % — % 15 % 9 %

Total High-Value Products 100 % 93 % 96 % 100 % 86 % 91 % 100 % 86 % 93 %

Standard Products

Standard stainless products — % 7 % 4 % — % 14 % 9 % — % 14 % 7 %

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

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Reclassification to/from long-term and contract liability ( 6.8 ) ( 2.6 ) 0.1

Divestiture — — ( 7.3 )

Balance as of period end $ 64.1 $ 53.9 $ 38.9

Long-term 2021 2020 2019

Long-term (a) 2022 2021 2020

Balance as of beginning of fiscal year $ — $ — $ 0.1

Recognized in current year — — —

Reclassified to accounts receivable — — —

Reclassification to/from short-term — — ( 0.1 )

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Balance as of period end $ 149.1 $ 116.2 $ 111.8

Long-term 2021 2020 2019

Long-term (a) 2022 2021 2020

Balance as of beginning of fiscal year $ 84.4 $ 32.0 $ 25.9

Recognized in current year 10.4 56.6 14.9

Amounts in beginning balance reclassified to revenue ( 1.0 ) ( 1.0 ) ( 1.1 )

Current year amounts reclassified to revenue — — —

Reclassification to/from short-term ( 28.0 ) ( 4.2 ) ( 8.8 )

Balance as of period end $ 66.8 $ 84.4 $ 32.0

Contract costs for obtaining and fulfilling a contract were $ 5.2 million and $ 5.4 million as of December 31, 2021 and 2020, respectively, which are reported in other long-term assets on the consolidated balance sheet.

(a) Long-term contract assets are included in Other long-term assets and long-term contract liabilities are included in Other long-term liabilities on the consolidated balance sheets.

Contract costs for obtaining and fulfilling a contract were $ 7.3 million and $ 5.2 million as of December 31, 2022 and 2021, respectively, which are reported in other long-term assets on the consolidated balance sheets.

Amortization expense for the fiscal years ended December 31, 2022, 2021 and 2020 of these contract costs was $ 1.0 million, $ 1.0 million, and $ 1.4 million, respectively.

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Finished goods 111.9 121.8

Total inventories at current cost 1,111.7 1,079.9

1,266.6 1,111.7

Inventory valuation reserves ( 70.9 ) ( 65.4 )

Total inventories, net $ 1,195.7 $ 1,046.3

* Previously, the Company utilized the LIFO method to account for a substantial portion of its inventory.

As described in Note 1, in the fourth quarter of 2021 the Company elected to change the method of accounting for the inventory under the LIFO method to the current cost method.

The effects of this change in accounting principle have been retrospectively applied to all periods presented.

The remaining inventories, including the inventory of the Company’s non-U.S.

operations, were not impacted by this change in accounting principle and continue to be valued using the FIFO and average cost methods, and these inventory values do not differ materially from current cost.

Inventories are stated at the lower of cost (FIFO and average cost methods) or net realizable value.

Property, Plant and Equipment

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Construction in progress at December 31, 2022 and 2021 was $ 262.1 million and $ 215.3 million, respectively.

Capital expenditures on the consolidated statement of cash flows for the year ended December 31, 2022 exclude $ 38.3 million of incurred but unpaid capital expenditures that were included in property, plant and equipment and accrued at December 31, 2022.

Depreciation and amortization for the years ended December 31, 2022, 2021 and 2020 was as follows:

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At December 31, 2022, the Company had $ 227.2 million of goodwill on its consolidated balance sheet, all of which relates to the HPMC segment.

Goodwill decreased $ 12.8 million in 2021 due to the allocation of $ 12.2 million to the sale of the Flowform Products business (see Note 6 for further information) and a $ 0.6 million decrease from the impact of foreign currency translation on goodwill denominated in functional currencies other than the U.S.

Goodwill decreased in 2022 by $ 0.7 million as a result of currency translation on goodwill denominated in functional currencies other than the U.S.

The Company performs its annual goodwill impairment evaluations in the fourth quarter of each year.

The $ 227.2 million of goodwill as of December 31, 2022 on the Company’s consolidated balance sheet is comprised of $ 161.2 million at the Forged Products reporting unit and $ 66.0 million at the Specialty Materials reporting unit.

For the Company’s annual goodwill impairment evaluation performed in the fourth quarter of 2021, quantitative goodwill assessments were performed for these two HPMC reporting units with goodwill.

Fair values were determined by using a quantitative assessment that may include discounted cash flow and multiples of cash earnings valuation techniques, plus valuation comparisons to recent public sale transactions of similar businesses, if any, which represents Level 3 unobservable information in the fair value hierarchy.

For the Company’s annual goodwill impairment evaluation in 2022, quantitative goodwill assessments were performed for these two HPMC reporting units with goodwill.

This quantitative fair value assessment may include discounted cash flow and multiples of cash earnings valuation techniques, plus valuation comparisons to recent public sale transactions of similar businesses, if any, which represents Level 3 unobservable information in the fair value hierarchy.

These impairment assessments and valuation methods require the Company to make estimates and assumptions regarding revenue growth, changes in working capital and capital expenditures, selling prices and profitability that drive cash flows, and the weighted average cost of capital.

Many of these assumptions are determined by reference to market participants the Company

has identified.

Many of these assumptions are determined by reference to market participants the Company has identified.

For example, the weighted average cost of capital used in the discounted cash flow assessment was 11.7 % and the long-term growth rates ranged from 3 % to 3.5 %.

In order to validate the reasonableness of the estimated fair values of the reporting units as of the valuation date, a reconciliation of the aggregate fair values of all reporting units to market capitalization was performed using a reasonable control premium.

Although the Company believes that the estimates and assumptions used were reasonable, actual results could differ from those estimates and assumptions.

The Specialty Materials reporting unit had a fair value that was significantly in excess of carrying value.

The Forged Products reporting unit had a fair value that exceeded carrying value by more than 40 %, representing an increase in fair value subsequent to the interim goodwill impairment charge recorded for this reporting unit in the second quarter of 2020 as discussed below, and the annual evaluation as of December 31, 2020.

As a result, no impairments were determined to exist from the annual goodwill impairment evaluation for the year ended December 31, 2021.

The Forged Products reporting unit had a fair value that exceeded carrying value by more than 50 % for the 2022 annual assessment, which increased compared to the annual evaluation for 2021.

No impairments were determined to exist from the annual goodwill impairment evaluation for the years ended December 31, 2022, 2021 or 2020.

During the second quarter of 2020, the Company performed an interim goodwill impairment analysis on the Forged Products reporting unit and its $ 460.4 million goodwill balance based on assessed potential indicators of impairment, including recent disruptions to the global commercial aerospace market resulting from the COVID-19 pandemic, and the increasing uncertainty of near-term demand requirements of aero-engine and airframe markets based on government responses to the pandemic and ongoing interactions with customers.

In the previous 2019 annual goodwill impairment evaluation, this reporting unit had a fair value that exceeded carrying value by approximately 30 %.

For the 2020 interim impairment analysis, fair value was determined by a quantitative assessment that used a discounted cash flow technique, which represents Level 3 unobservable information in the fair value hierarchy.

The impairment assessment and valuation method require the Company to make estimates and assumptions regarding future operating results, cash flows, changes in working capital and capital expenditures, selling prices, profitability, and the cost of capital.

Many of these assumptions are determined by reference to market participants the Company has identified.

For example, the weighted average cost of capital used in the discounted cash flow assessment was 11.6 %, and the long-term growth rate was 3.5 %.

Although the Company believes that the estimates and assumptions used were reasonable, actual results could differ from those estimates and assumptions.

As a result of the second quarter 2020 interim goodwill impairment evaluation, the Company determined that the fair value of the Forged Products reporting unit was below carrying value, including goodwill, by $ 287.0 million.

This was primarily due to changes in the timing and amount of expected cash flows resulting from lower projected revenues, profitability and cash flows due to near-term reductions in commercial aerospace market demand.

Consequently, during the second quarter of 2020, the Company recorded a $ 287.0 million impairment charge for the partial impairment of the Forged Products reporting unit goodwill, most of which was assigned from the Company’s 2011 Ladish acquisition that was not deductible for income tax purposes.

For the 2020 interim impairment analysis, fair value was determined by a quantitative assessment that used a discounted cash flow technique.

As a result of the 2020 interim goodwill impairment evaluation, the Company determined that the fair value of the Forged Products reporting unit was below carrying value, including goodwill, by $ 287.0 million, primarily due to changes in the timing and amount of expected cash flows resulting from lower projected revenues, profitability and cash flows due to near-term reductions in commercial aerospace market demand.

Consequently, during the second quarter of 2020, the Company recorded a $ 287.0 million charge for the partial impairment of the Forged Products reporting unit goodwill, most of which was assigned from the Company’s 2011 Ladish acquisition that was not

deductible for income tax purposes.

This goodwill impairment charge was excluded from 2020 HPMC business segment results.

No indicators of impairment were observed in 2022, 2021 and 2020 associated with any of the Company’s long-lived assets in the HPMC segment.

There were no goodwill impairments for the year ended December 31, 2019.

Accumulated goodwill impairment losses as of December 31, 2021 and 2020 were $ 528.0 million and as of 2019 were $ 241.0 million.

Accumulated goodwill impairment losses as of December 31, 2022, 2021 and 2020 were $ 528.0 million.

Other intangible assets, which are included in Other assets on the accompanying consolidated balance sheets as of December 31, 2022 and 2021 were as follows:

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Total amortizable intangible assets $ 134.8 $ ( 76.3 ) $ 134.8 $ ( 68.9 )

During 2021, total amortizable intangible assets net, decreased $ 14.0 million due to the sale of the Company’s Flowform Products business.

This decrease consisted of the sale of $ 21.4 million gross intangible assets, net of $ 7.4 million accumulated amortization, associated with the divested business.

See Note 6 for further information regarding the Flowform Products sale.

Amortization expense related to intangible assets was approximately $ 8 million, $ 8 million and $ 10 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Amortization expense related to intangible assets was approximately $ 8 million for each of the years ended December 31, 2022, 2021 and 2020.

For each of the years ending December 31, 2023 through 2027, annual amortization expense is expected to be approximately $ 7 million.

On May 12, 2022, the Company completed the sale of its 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.

A $ 141.0 million loss on sale of the Sheffield operations is reported in loss on asset sales and sales of businesses, net, on the consolidated statement of operations for 2022, 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 received proceeds, net of transaction costs, of $ 0.3 million in 2022, which is reported as an investing activity on the consolidated statement of cash flows.

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.

The Company completed the sale of the small Pico Rivera, CA operations, as part of the strategy to exit standard stainless products, on January 31, 2022.

The Company received cash proceeds of $ 6.2 million on the sale of these assets.

The Company recognized a $ 6.8 million pretax gain on sale, including de-recognizing certain lease liabilities, 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.

On August 13, 2021, the Company completed the sale of its Flowform Products business for $ 55 million.

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With $ 12.2 million of goodwill allocated to this operation from ATI’s Forged Products reporting unit, the Company recognized a $ 13.8 million pretax gain in 2021, which is recorded in other income/expense, net, on the consolidated statement of operations and is excluded from HPMC segment results.

This business is reported as part of the HPMC segment through the date of sale.

This business was historically reported as part of the HPMC segment through the date of sale.

Flowform Products’ sales were $ 26 million in 2020.

On June 3, 2019, the Company completed the sale of two non-core forging facilities for $ 37 million.

Located in Portland, IN and Lebanon, KY, these operations primarily use traditional forging methods to produce carbon steel forged products for use in the oil & gas, transportation and construction & mining industries.

The Company received cash proceeds, net of transaction costs and working capital adjustments, of $ 33.0 million on the sale of this business during the year ended December 31, 2019, which is reported as an investing activity on the consolidated statement of cash flows.

With $ 10.4 million of goodwill allocated to these operations from ATI’s Forged Products reporting unit, the Company recognized a $ 13.3 million pre-tax loss in 2019, which is recorded in other income, net, on the consolidated statement of income and is excluded from HPMC segment results.

This business is reported as part of the HPMC segment through the date of sale.

On July 22, 2019, the Company completed the sale of its Cast Products business, which produces titanium investment castings that are primarily used by aerospace & defense OEMs in the production of commercial jet airframes and engines.

As part of the $ 127 million transaction, ATI retained a small post-casting machining facility in Salem, OR.

The Company received cash proceeds, net of transaction costs and working capital adjustments, of $ 125.1 million on the sale of this business in 2019, which is reported as an investing activity on the consolidated statement of cash flows.

The Company recognized a $ 6.2 million gain in 2019, which included a $ 10.2 million impairment charge on the carrying value of long-lived assets of the retained Salem operation ($ 4.5 million for property, plant and equipment, $ 1.4 million for operating lease right of use assets, $ 1.0 million for finance lease right of use assets, and $ 3.3 million of finite-lived intangible assets).

This long-lived asset impairment charge was based on an analysis of the estimated fair values, including asset appraisals using market approaches, which represent Level 3 unobservable information in the fair value hierarchy.

This gain on the sale of the Cast Products business is recorded in other income, net, on the consolidated statement of income and is excluded from HPMC segment results.

This business is reported as part of the HPMC segment through the date of sale.

Joint Ventures

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Investments in which the Company exercises significant influence, but which it does not control (generally a 20% to 50% ownership interest) are accounted for under the equity method of accounting.

Stockholders’ equity includes undistributed earnings of investees accounted for under the equity method of accounting of approximately $ 13.8 million at December 31, 2021.

Stockholders’ equity includes undistributed

earnings of investees accounted for under the equity method of accounting of approximately $ 7.8 million at December 31, 2022.

Majority-Owned Joint Ventures

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Next Gen Alloys LLC:

During 2017, the Company formed Next Gen Alloys LLC, a joint venture with GE Aviation for the development of a new meltless titanium alloy powder manufacturing technology.

ATI owns a 51 % interest in this joint venture.

The titanium alloy powders are being developed for use in additive manufacturing applications, including 3D printing.

Next Gen Alloys LLC funds its development activities through the sale of shares to the two joint venture partners.

The Company has a 51 % interest in Next Gen Alloys LLC, a joint venture with GE Aviation for the development of a new meltless titanium alloy powder manufacturing technology.

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 December 31, 2022 were $ 1.2 million.

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The Company has a 50 % interest in A&T Stainless, a joint venture with an affiliate company of Tsingshan Group (Tsingshan) to produce 60-inch wide stainless sheet products for sale in North America.

Tsingshan purchased its 50 % joint venture interest in A&T Stainless in 2018 for $ 17.5 million, of which $ 12.0 million has been received by ATI.

Tsingshan purchased its 50 % joint venture interest in A&T Stainless in 2018 for $ 17.5 million, of which $ 12.0 million had been received by ATI through December 31, 2021.

ATI received the remaining $ 5.5 million from Tsingshan in the fourth quarter of 2022, which is reported as a financing activity on the consolidated statement of cash flows.

The A&T Stainless operations included the Company’s previously-idled direct roll and pickle (DRAP) facility in Midland, PA.

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ATI accounts for the A&T Stainless joint venture under the equity method of accounting.

In late March 2018, ATI filed for an exclusion from the Section 232 tariffs on behalf of A&T Stainless, which imports semi- finished stainless slab products from Indonesia.

In late March 2018, ATI filed for an exclusion from the Section 232 tariffs on behalf of A&T Stainless, which imported semi- finished stainless slab products from Indonesia.

In April 2019, the Company learned that this exclusion request was denied by the U.S.

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

In 2019, A&T Stainless evaluated its long-lived assets for impairment as the tariff exclusion denial represented a potential impairment indicator.

The joint venture partners had continued to evaluate longer-term solutions to return this strategic initiative to profitability, and determined during the fourth quarter of 2019 that idling this facility was probable if a near-term tariff exclusion was not received.

As a result, A&T Stainless recorded a $ 14.2 million non-cash impairment charge during December 2019 on its long-lived assets.

ATI recognized a $ 7.1 million equity loss for its 50 % share of this $ 14.2 million impairment.

In addition, ATI had net receivables for working capital advances and administrative services from A&T Stainless and evaluated these for collectability, and a $ 4.3 million reserve was recorded in December 2019 based on ATI’s share of the estimated fair value of the joint venture’s net assets.

The total $ 11.4 million joint venture impairment charge for the long-lived asset impairment and receivables reserve was reported within other income, net on the consolidated statement of operations in December 2019 and was excluded from AA&S segment results.

Due to repeated tariff exclusion denials, ATI announced on March 31, 2020 that A&T Stainless would be idling the DRAP facility in 2020, in an orderly shut down process that was completed in the third quarter of 2020.

A&T Stainless recorded a $ 4.8 million charge in 2020 for contractual termination benefits as a result of the idling decision.

ATI’s share of the A&T Stainless results were losses of $ 0.9 million, $ 10.6 million, and $ 19.3 million for the fiscal years ended December 31, 2021, 2020 and 2019, respectively, which is included within other income/expense, net, on the consolidated statements of operations.

AA&S segment results in 2021, 2020 and 2019 include equity method recognition of A&T Stainless operating losses of $ 0.9 million, $ 8.2 million and $ 12.2 million, respectively.

ATI’s share of the A&T Stainless charges for termination benefits in 2020 and long-lived asset impairment charges in 2019 were excluded from AA&S segment results.

No additional impairment charges were required during 2021 or 2020 on the long-lived assets of A&T Stainless or ATI’s receivables from the joint venture, based on ATI’s share of the estimated fair value of its net assets.

As of December 31, 2021, ATI had net receivables from A&T Stainless for working capital advances and administrative services, including the $ 4.3 million reserve, of $ 2.9 million, of which $ 0.7 million was reported in prepaid expenses and other current assets and $ 2.2 million in other long-term assets on the consolidated balance sheet.

Due to repeated tariff exclusion denials, the DRAP facility was idled in an orderly

shut down process that was completed in 2020.

A&T Stainless recorded a $ 4.8 million charge in 2020 for contractual termination benefits as a result of the idling decision, of which $ 1.8 million was reversed in 2022 as a result of revised estimates.

In April 2022, ATI and A&T Stainless entered into a settlement agreement with the United States pursuant to which the United States, 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 recorded tariff refunds and accrued interest of approximately $ 19.7 million, which was recognized as income by the joint venture in 2022.

ATI’s share of the A&T Stainless results were income of $ 9.1 million for the fiscal year ended December 31, 2022, which included ATI’s $ 9.9 million share of the tariff refund and accrued interest, and losses of $ 0.9 million and $ 10.6 million for the fiscal years ended December 31, 2021 and 2020, respectively, which is included within other income/expense, net, on the consolidated statements of operations.

AA&S segment results in 2022 include equity method recognition of A&T Stainless operating income of $ 8.2 million, and in 2021 and 2020 include operating losses of $ 0.9 million and $ 8.2 million, respectively.

ATI’s share of the A&T Stainless credits/charges for termination benefits in 2022 and 2020 were excluded from AA&S segment results.

As of December 31, 2022, ATI had net receivables from A&T Stainless for working capital advances and administrative services of $ 3.2 million, of which $ 0.4 million was reported in prepaid expenses and other current assets and $ 2.8 million in other long-term assets on the consolidated balance sheet.

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.

Sales to A&T Stainless, which are included in ATI’s consolidated statement of operations for the 2020 and 2019 fiscal years, were $ 18.4 million and $ 14.6 million, respectively.

There were no sales to A&T Stainless for the 2021 fiscal year.

There were no accounts receivable from A&T Stainless at December 31, 2021 or December 31, 2020.

As of December 31, 2021, ATI had net receivables from A&T Stainless for working capital advances and administrative services of $ 2.9 million, of which $ 0.7 million was reported in prepaid expenses and other current assets and $ 2.2 million in other long-term assets on the consolidated balance sheet.

Sales to A&T Stainless, which are included in ATI’s consolidated statement of operations for the 2020 fiscal year, were $ 18.4 million.

There were no sales to A&T Stainless for the 2022 and 2021 fiscal years.

ATI has a 50 % interest in the industrial titanium joint venture known as Uniti LLC (Uniti), with the remaining 50 % interest held by VSMPO, a Russian producer of titanium, aluminum, and specialty steel products.

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Accounts receivable from Uniti were $ 4.5 million and $ 6.1 million at December 31, 2022 and 2021, respectively.

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

The joint venture is expected to be dissolved in early 2023.

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

Asset Retirement Obligations

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The Company may determine that additional AROs are required to be recognized as new information becomes available.

In 2020, the Company finalized a settlement agreement for an indemnity claim concerning a conditional ARO with the buyer of a formerly-owned business and as a result, the Company reduced ARO reserves by $ 4.3 million, which is recorded in other income/expense, net, on the consolidated statements of operations (see Note 9).

The Company increased ARO reserves by $ 4.1 million in 2020 as a result of changes in the expected timing of payments on ARO’s resulting from facility idlings as discussed in Note 19, which is recorded in restructuring charges on the consolidated statement of operations.

Both of these 2020 items are presented as revisions of estimates in the table below.

Changes in asset retirement obligations for the years ended December 31, 2022 and 2021 were as follows:

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Payments ( 2.0 ) ( 5.6 )

Revisions of estimates — ( 0.2 )

Divestiture — ( 0.2 )

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Net equity income (loss) on joint ventures (See Note 7) 12.6 0.1 ( 7.0 )

Gain (loss) on sales of businesses, net (See Note 6) 13.8 — ( 7.1 )

Joint venture restructuring and impairment charges (See Note 7) — ( 2.4 ) ( 11.4 )

Adjustment to indemnification for conditional ARO costs (See Note 8) — 4.3 —

Gain on sales of businesses, net (See Note 6) — 13.8 —

Joint venture restructuring credit (charge) (See Note 7) 0.9 — ( 2.4 )

Adjustment to indemnification for conditional ARO costs — — 4.3

Litigation settlement (See Note 21) ( 28.5 ) — —

Other — 0.3 0.1

Total other income (expense), net $ ( 12.5 ) $ 18.2 $ ( 1.2 )

* The year ended December 31, 2019 reflects impacts from the change in inventory accounting method, as described in Note 1 of the Notes to the Consolidated Financial Statements.

Gains from disposal of property, plant and equipment, net for the years ended December 31, 2020 and 2019 include $ 2.5 million and $ 91.7 million, respectively, on sales of certain oil and gas rights in Eddy County, NM.

These cash gains are reported as an investing activity on the consolidated statement of cash flows for the years ended December 31, 2020 and 2019, and are excluded from segment operating results.

Gains from disposal of property, plant and equipment, net for the year ended December 31, 2020 include $ 2.5 million on sales of certain oil and gas rights in Eddy County, NM.

These cash gains are reported as an investing activity on the consolidated statement of cash flows for the year ended December 31, 2020, and are excluded from segment operating results.

These oil and gas rights were initially acquired in 1972 along with land purchased by Teledyne, Inc., which later became part of ATI.

The land was subsequently sold, with the Company retaining the underlying oil and gas rights that it sold in 2019 and 2020.

The land was subsequently sold, with the Company retaining the underlying oil and gas rights that it sold in 2020.

Debt at December 31, 2022 and 2021 was as follows:

(In millions) 2022 2021

Allegheny Technologies 5.875 % Senior Notes due 2023 (a)

Allegheny Technologies 5.875 % Senior Notes due 2027

Allegheny Technologies 5.125 % Senior 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

Allegheny Ludlum 6.95 % Debentures due 2025 (b)

Term Loan due 2024 200.0 200.0

5.875 % Senior Notes due 2027

5.125 % Senior 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)

ABL Term Loan 200.0 200.0

revolving credit facility — —

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Debt issuance costs ( 17.2 ) ( 20.8 )

Equity component of convertible debt — ( 46.8 )

Total short-term and long-term debt 1,748.0 1,842.9

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Total long-term debt $ 1,706.3 $ 1,711.6

(a) Bearing interest at 7.875 % effective February 15, 2016.

(b) The payment obligations of these debentures issued by Allegheny Ludlum, LLC are fully and unconditionally guaranteed by ATI.

(a) The payment obligations of these debentures issued by Allegheny Ludlum, LLC are fully and unconditionally guaranteed by ATI.

Interest expense was $ 92.1 million in 2022, $ 97.6 million in 2021, and $ 96.1 million in 2020.

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Scheduled principal payments during the next five years are $ 41.7 million in 2023, $ 19.9 million in 2024, $ 457.8 million in 2025, $ 10.5 million in 2026, and $ 557.4 million in 2027.

The 2022 amount includes $ 84.2 million of convertible debt that would be settled in shares of ATI stock if the conversion price target is reached;

see further discussion below in the section titled “2022 Convertible Notes”.

See Note 11, Leases, for the portion of these scheduled principal payments that are related to finance leases.

Debt Extinguishment Charges

In October 2021, ATI recognized a $ 65.5 million debt extinguishment charge on the redemption of the 5.875 % Senior Notes due 2023 (2023 Notes), which included a $ 64.5 million cash make-whole payment related to the early extinguishment of the 2023 Notes as required by the applicable indenture, and a $ 1.0 million charge for deferred debt issue costs, as further discussed below.

In June 2020, ATI recognized a $ 21.5 million debt extinguishment charge on the partial redemption of the 4.75 % Convertible Senior Notes due 2022 (the 2022 Convertible Notes), which included a $ 19.1 million cash make-whole payment related to the early extinguishment of the 2022 Convertible Notes partial redemption, as required by the applicable indenture, and a $ 2.4 million charge for deferred debt issue costs, as further discussed below.

In December 2019, the Company redeemed all $ 500 million aggregate principal amount outstanding of the 5.95 % Senior Notes due 2021 (2021 Notes), which had a January 15, 2021 maturity date, resulting in a $ 21.6 million pre-tax debt extinguishment charge, which included a $ 20.9 million cash make-whole payment related to the early extinguishment of the 2021 Notes as required by the applicable indenture, and a $ 0.7 million charge for deferred debt issue costs.

In October 2021, ATI recognized a $ 65.5 million debt extinguishment charge on the redemption of its 5.875 % Senior Notes due 2023 (2023 Notes), which included a $ 64.5 million cash make-whole payment related to the early extinguishment of the 2023 Notes as required by the applicable indenture, and a $ 1.0 million charge for deferred debt issue costs, as further discussed below.

In June 2020, ATI recognized a $ 21.5 million debt extinguishment charge on the partial redemption of its 4.75 % Convertible Senior Notes due 2022 (the 2022 Convertible Notes), which included a $ 19.1 million cash make-whole payment related to the early extinguishment of the 2022 Convertible Notes partial redemption, as required by the applicable indenture, and a $ 2.4 million charge for deferred debt issue costs, as further discussed below.

2029 and 2031 Notes

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Interest on the 2031 Notes is payable semi-annually in arrears at a rate of 5.125 % per year, and the 2031 Notes will mature on October 1, 2031.

Total combined net proceeds of $ 665.7 million from both of these issuances were primarily used to fund the full redemption of the $ 500 million aggregate principal amount outstanding of the 2023 Notes on October 14, 2021, including a make-whole payment and accrued interest, following a 30 day notice of redemption as required by the 2023 Notes indenture.

As such, in the fourth quarter 2021, the Company recognized a $ 65.5 million debt extinguishment charge.

Total combined net proceeds of $ 665.7 million from both of these issuances were primarily used to fund the full redemption of the $ 500 million aggregate principal amount outstanding of the 2023 Notes on October 14, 2021, including a make-whole payment and accrued interest, resulting in a $ 65.5 million debt extinguishment charge.

Underwriting fees and other third-party expenses for the issuance of the 2029 and 2031 Notes were $ 4.7 million each, and are being amortized to interest expense over the 8-year and 10-year terms of the 2029 and 2031 Notes, respectively.

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2025 Convertible Notes

In 2020, the Company issued $ 291.4 million aggregate principal amount of 2025 Convertible Notes.

In 2020, the Company issued $ 291.4 million aggregate principal amount of 3.5 % Convertible Senior Notes due 2025 (2025 Convertible Notes).

The Company used a portion of the net proceeds from the offering of the 2025 Convertible Notes to repurchase $ 203.2 million aggregate principal amount of its outstanding 2022 Convertible Notes, resulting in a $ 21.5 million debt extinguishment charge.

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The remainder of the net proceeds from the offering were used for general corporate purposes.

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

As of December 31, 2022 and 2021, the fair value of the 2025 Convertible Notes was $ 590 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, commencing December 15, 2020.

Including amortization of deferred issuance costs, the effective interest rate is 4.2 % for the year ended December 31, 2021 and 8.4 % for the year ended December 31, 2020.

The effective interest rate is lower in 2021 due to the early-adoption of new accounting guidance on January 1, 2021, as described below.

Including amortization of deferred issuance costs, the effective interest rate is 4.2 % for the years ended December 31, 2022 and 2021 and 8.4 % for the year ended December 31, 2020.

The effective interest rate is lower in 2022 and 2021 due to the early-adoption of new accounting guidance on January 1, 2021, as described below.

Remaining deferred issuance costs were $ 4.8 million and $ 6.5 million at December 31, 2022 and 2021, respectively.

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Effective January 1, 2021, ATI early-adopted new accounting guidance as discussed in Note 1 that eliminated the equity component classification of the embedded conversion option, as well as the phantom yield portion of interest expense on a prospective basis.

Upon adoption on

January 1, 2021, long-term debt increased by $ 45.4 million representing the $ 46.8 million equity component of convertible debt as of December 31, 2020 in the above table, net of reclassified debt issue costs.

Upon adoption on January 1, 2021, long-term debt increased by $ 45.4 million representing the $ 46.8 million equity component of convertible debt as of December 31, 2020, net of reclassified debt issue costs.

Holders of the 2025 Convertible Notes may require ATI to repurchase their 2025 Convertible Notes upon the occurrence of certain events that constitute a fundamental change under the indenture governing the 2025 Convertible Notes at a purchase price equal to 100 % of the principal amount thereof, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

In connection with certain corporate events or if ATI issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their 2025 Convertible Notes in connection with such corporate event or during the relevant redemption period.

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

In connection with the pricing of the 2025 Convertible Notes, ATI entered into privately negotiated capped call transactions with certain of the initial purchasers or their respective affiliates.

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.

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.

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 December 31, 2021, the Company had $ 84.2 million of aggregate principal amount of the 2022 Convertible Notes outstanding.

Interest on the 2022 Convertible Notes is payable in cash semi-annually in arrears on each January 1 and July 1, commencing January 1, 2017.

As of December 31, 2021, the fair value of the 2022 Convertible Notes is $ 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 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 fiscal years ended December 31, 2021, 2020 and 2019.

Remaining deferred issuance costs were $ 0.3 million and $ 0.7 million at December 31, 2021 and 2020, respectively.

In 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 at the July 1, 2022 maturity date.

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 fiscal years ended December 31, 2022, 2021 and 2020.

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

Interest expense on the 2022 Convertible Notes was as follows:

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Total interest expense $ 2.3 $ 4.5 $ 9.6

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 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 given to the holders.

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.

On November 22, 2019, ATI issued $ 350 million aggregate principal amount of 5.875 % Senior Note due 2027 (2027 Notes).

Interest on the 2027 Notes is payable semi-annually in arrears at a rate of 5.875 % per year and will mature on December 1, 2027.

Net proceeds of $ 344.5 million from this issuance, as well as cash on hand, were used to retire the 2021 Notes as discussed above.

Underwriting fees and other third-party expenses for the issuance of the 2027 notes were $ 5.5 million, and are being amortized to interest expense over the 8 -year term of the 2027 Notes.

The 2027 Notes are unsecured and unsubordinated obligations of the Company and equally ranked with all of its existing and future senior unsecured debt.

The 2027 Notes restrict the Company’s ability to create certain liens, to enter into sale leaseback transactions, guarantee indebtedness and to consolidate or merge all, or substantially all, of its assets.

The Company has the option to redeem the 2027 Notes, as a whole or in part, at any time or from time to time, on at least 30 days, but not more than 60 days, prior notice to the holders of the Notes at redemption prices specified in the 2027 Notes.

The 2027 Notes are subject to repurchase upon the occurrence of a change in control repurchase event (as defined in the 2027 Notes) at a repurchase price in cash equal to 101 % of the aggregate principal amount of the Notes repurchased, plus any accrued and unpaid interest on the 2027 Notes repurchased.

The 5.875 % stated interest rate payable on the 2023 Notes was subject to adjustment in the event of changes in the credit ratings on the 2023 Notes by either Moody’s or Standard & Poor’s.

Each notch of credit rating downgrade from the credit ratings in effect when the 2023 Notes were issued in July 2013 increased interest expense by 0.25 % on the 2023 Notes, up to a maximum 4 notches by each of the two rating agencies, or a total 2.0 % potential interest rate change up to 7.875 %.

The annual interest rate on the 2023 Notes has been at the maximum 7.875 % since February 2016 until their redemption in October 2021 as discussed above.

The annual interest rate on the 2023 Notes was at the maximum 7.875 % from February 2016 until their redemption in October 2021 as discussed above.

Credit Agreements

The Company has an Asset Based Lending (ABL) Credit Facility, which is collateralized by the accounts receivable and inventory of the Company’s 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 as of December 31, 2020, a $ 200 million term loan (Term Loan).

In June 2020, the Company exercised its right to borrow an additional $ 100 million under the term loan portion of the ABL, with the same September 2024 maturity date.

The Term Loan has an interest rate of 2.0 % plus a LIBOR spread and can be prepaid in increments of $ 25 million if certain minimum liquidity conditions are satisfied.

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

The Company has a $ 50 million floating-for-fixed interest rate swap that converts a portion of the Term Loan to a 4.21 % fixed interest rate.

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

As amended, the ABL facility also provides the Company 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, a $ 200 million term loan (ABL Term Loan), and a swing loan facility of up to $ 60 million.

The ABL Term Loan can be prepaid in increments of $ 25 million if certain minimum liquidity conditions are satisfied.

In addition, as amended, the Company has 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 Company has a $ 50 million floating-for-fixed interest rate swap which converts a portion of the ABL Term Loan to a 4.21 % fixed interest rate.

The swap matures in June 2024.

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 LIBOR-based borrowings and between 0.25 % and 0.75 % for base rate borrowings.

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 ABL 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 the Company 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) $ 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 required fixed charge coverage ratio at December 31, 2021.

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

On September 30, 2019, the Company amended and restated the ABL and costs associated with entering into this amendment were $ 2.2 million, and are being amortized to interest expense over the term of the facility ending September 2024, along with $ 2.1 million of unamortized deferred costs that were previously recorded for the ABL.

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 ABL Term Loan balance, or (ii) $ 60.0 million.

The Company was in compliance with the fixed charge coverage ratio as of December 31, 2022.

Additionally, the Company 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 the Company’s 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 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) $ 120 million or (b) 20 % of the sum of the maximum loan amount under the revolving credit portion of the ABL and the outstanding ABL Term Loan balance.

As of December 31, 2022, there were no outstanding borrowings under the revolving portion of the ABL, and $ 39.8 million was utilized to support the issuance of letters of credit.

There were no revolving credit borrowings under the ABL during 2021.

Average borrowings under the revolving portion of the ABL for the fiscal year ended December 31, 2020 were $ 28 million, bearing an average annual interest rate of 2.2 %.

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

There were no revolving credit borrowings under the ABL during 2022 or 2021.

The Company also has foreign credit facilities, primarily in China, that total $ 60 million based on December 31, 2022 foreign exchange rates, under which $ 19.4 million and $ 27.4 million was drawn as of December 31, 2022 and 2021, respectively.

The Company has no off-balance sheet financing relationships as defined in Item 303(a)(4) of SEC Regulation S-K, with variable interest entities, structured finance entities, or any other unconsolidated entities.

At December 31, 2022, the Company had not guaranteed any third-party indebtedness.

The Company has entered into finance lease contracts with lenders for progress payments on machinery and equipment that is being constructed at the request and specification of the Company.

As of December 31, 2021, the lenders had made $ 22.0 million of progress payments on behalf of the Company, and $ 19.4 million of progress payments are scheduled to be paid.

Upon payment of the final progress payments by the lenders, finance leases will commence, and $ 41.4 million, discounted using the applicable discount rates at lease inceptions, of ROU assets and lease liabilities will be recognized by the Company.

Progress payments made on behalf of the Company in 2021 include $ 16.2 million received as proceeds on the sale of ongoing construction in progress projects that were converted to leases, which is presented as an investing activities source of cash on the consolidated statement of cash flows for the year ended December 31, 2021.

The following represents the components of lease cost and other information for both operating and financing leases for the years ending December 31, 2022, 2021 and 2020:

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Right of use assets obtained in exchange for new finance lease liabilities $ 15.3 $ 58.9 $ 42.3

Right of use assets obtained in exchange for new operating lease liabilities (a) $ 4.8 $ 12.4 $ 35.9

Right of use assets obtained in exchange for new operating lease liabilities $ 18.0 $ 4.8 $ 12.4

Weighted average remaining lease term - finance leases 4 years 5 years 4 years

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Weighted average discount rate - operating leases 6.8 % 6.5 % 6.9 %

(a) Several of the Company’s real property lease contracts include options to extend the lease term.

The Company reassesses the likelihood of exercising renewal clauses on at least an annual basis.

For the year ended December 31, 2019, ATI recorded $ 10.2 million of additional ROU assets and lease liabilities for likely renewals at certain leased locations.

The following table reconciles future minimum undiscounted rental commitments for operating leases to the operating lease liabilities recorded on the consolidated balance sheet as of December 31, 2022 (in millions):

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Finance lease liabilities $ 78.8

The Company has entered into certain finance lease contracts with lenders for progress payments on machinery and equipment that is being constructed at the request and specification of the Company.

As of December 31, 2022, the lenders had made $ 27.9 million of progress payments on behalf of the Company, and $ 13.7 million of progress payments are scheduled to be paid.

Upon payment of the final progress payments by the lenders, finance leases will commence, and $ 41.6 million, discounted using the applicable discount rates at lease inceptions, of ROU assets and lease liabilities will be recognized by the Company.

Progress payments made on behalf of the Company in 2022 and 2021 include $ 1.8 million and $ 16.2 million, respectively, received as proceeds on the sale of ongoing construction in progress projects that were converted to leases, which is presented as investing activities source of cash on the consolidated statements of cash flows for the years ended December 31, 2022 and 2021.

Derivative Financial Instruments and Hedging

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The aggregate notional amount hedged is approximately 8 % of a single year’s estimated nickel raw material purchase requirements.

These derivative instruments are used to hedge the variability of a selling price that is based on the London Metals Exchange (LME) index for nickel, as well as to hedge the variability of the purchase cost of nickel based on this LME index.

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

At December 31, 2021, the company hedged approximately 70 % of the Company’s annual forecasted domestic requirements for natural gas for 2022, approximately 35 % for 2023 and approximately 5 % for 2024.

At December 31, 2022, the company hedged approximately 70 % of the Company’s annual forecasted domestic requirements for natural gas for 2023 and approximately 25 % for 2024.

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

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

The Company has a $ 50 million floating-for-fixed interest rate swap that matures in June 2024 which converts half of the Term Loan to a 4.21 % fixed rate.

The Company designated the interest rate swap as a cash flow hedge of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings.

The ineffective portion at hedge inception, determined from the fair value of the swap immediately prior to amendment in July 2019, was amortized to interest expense over the initial Term Loan swap maturity date of January 12, 2021.

The Company has a $ 50 million floating-for-fixed interest rate swap that matures in June 2024 which converts half of the ABL Term Loan to a 4.21 % fixed rate.

The Company designated the interest rate swap as a cash flow hedge of the Company’s exposure to the variability of the payment of interest on a portion of its ABL Term Loan borrowings.

There are no credit risk-related contingent features in the Company’s derivative contracts, and the contracts contained no provisions under which the Company has posted, or would be required to post, collateral.

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

The fair values of the Company’s derivative financial instruments are presented below, representing the gross amounts recognized which are not offset by counterpart or by type of item hedged.

The fair values of the Company’s derivative financial instruments are presented below, representing the gross amounts recognized which are not offset by counterparty or by type of item hedged.

All fair values for these derivatives were measured using Level 2 information as defined by the accounting standard hierarchy, which includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs derived principally from or corroborated by observable market data.

3 unchanged sentences

Derivatives designated as hedging instruments:

Interest rate swap Prepaid expenses and other current assets $ 1.4 $ —

Natural gas contracts Prepaid expenses and other current assets 2.4 2.0

Nickel and other raw material contracts Prepaid expenses and other current assets 12.5 5.0

Interest rate swap Other assets 0.5 —

Natural gas contracts Other assets 0.7 0.5

17 unchanged sentences

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.

The 2019 income tax provision includes $ 6.0 million of tax expense for the recognition of a stranded deferred tax balance arising from deferred tax valuation allowances associated with a cash flow hedge portfolio that fully settled in the fourth quarter of 2019 (see Notes 15 and 17 for further explanation on tax impacts within accumulated other comprehensive income (loss)).

This tax impact is also excluded from the table below.

Activity with regard to derivatives designated as cash flow hedges for the years ended December 31, 2022 and 2021 were as follows (in millions):

13 unchanged sentences

Total $ 41.0 $ 11.7 $ 32.6 $ 8.7

(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 cost of sales in the same period or periods in which the hedged item affects earnings.

The gains (losses) reclassified from accumulated OCI into income on the interest rate swap are presented in interest expense in the same period as the interest expense on the Term Loan is recognized in earnings.

(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.

The gains (losses) reclassified from accumulated OCI into income on the interest rate swap are presented in interest expense in the same period as the interest expense on the ABL Term Loan is recognized in earnings.

The disclosures of gains or losses presented above for nickel and other raw material contracts and foreign currency contracts do not take into account the anticipated underlying transactions.

25 unchanged sentences

Debt (a) 1,863.7 2,003.2 1,690.1 313.1

(a) The total carrying amount for debt excludes debt issuance costs related to the recognized debt liability which is presented in the consolidated balance sheet as a direct reduction from the carrying amount of the debt liability.

The December 31, 2020 debt carrying value includes $ 46.8 million for the unamortized balance of the portion of the 2025 Convertible Notes recorded in stockholders’ equity due to the flexible settlement feature of the notes (see Note 10).

(a) The total carrying amount for debt excludes debt issuance costs related to the recognized debt liability which is presented in the consolidated balance sheets as a direct reduction from the carrying amount of the debt liability.

In accordance with accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

18 unchanged sentences

Short-term and long-term debt:

The fair values of the 2022 and 2025 Convertible Notes, the 2023 Notes (prior to redemption in October 2021), the Allegheny Ludlum 6.95 % Debentures due 2025, the 2027 Notes, the 2029 Notes and the 2031 Notes were determined using Level 1 information.

The fair values of the 2022 Convertible Notes (prior to conversion in the second quarter of 2022), the 2025 Convertible Notes, the Allegheny Ludlum 6.95 % Debentures due 2025, the 2027 Notes, the 2029 Notes and the 2031 Notes were determined using Level 1 information.

The fair values of other short-term and long-term debt were determined using Level 2 information.

9 unchanged sentences

defined benefit pension plans other than those subject to a CBA were frozen at the end of 2014, and subsequently CBAs were negotiated to close these plans to new entrants.

As a result of these actions, the Company has now completely closed all defined benefit pension plans to new entrants, and has substantially limited the number of employees still accruing benefit service to approximately 1,100 participants, or less than 10 % of the population in the U.S.

As a result of these actions, the Company has now completely closed all defined benefit pension plans to new entrants, and has substantially limited the number of employees still accruing benefit service to less than 900 participants, or approximately 7 % of the population in the U.S.

qualified defined benefit pension plans.

Additionally, all of ATI’s remaining collectively-bargained, capped defined benefit retiree health care plans are now closed to new entrants.

Additionally, all of ATI’s remaining collectively-bargained, capped defined benefit retiree health care plans are closed to new entrants.

These liability management actions have transitioned ATI’s retirement benefit and other postretirement benefit programs largely to a defined contribution structure.

1 unchanged sentence

qualified defined benefit pension plans by more than 60 %.

Beginning on June 1, 2020, in response to the economic challenges created by the COVID-19 pandemic, the Company reduced its qualified non-elective contribution percentage and suspended all Company match contributions for salaried participants in the ATI 401(k) Savings Plan, and deferred the funding temporarily of Company contributions to this plan until mid-2021, resulting in $ 7.3 million reported in other current liabilities for this deferral on the consolidated balance sheet as of December 31, 2020.

Costs for defined contribution retirement plans were $ 31.1 million in 2022, $ 20.4 million in 2021, and $ 29.9 million in 2020.

Company contributions to these defined contribution plans are funded with cash.

There were no other postretirement benefit costs for a defined contribution plan in 2021, and such costs were $ 0.7 million, and $ 1.0 million for the fiscal years ended December 31, 2020 and 2019, respectively.

From June 1, 2020 in response to the economic challenges created by the COVID-19 pandemic, the Company reduced its qualified non-elective contribution percentage and suspended all Company match contributions for salaried participants in the ATI 401(k) Savings Plan, and deferred the funding of Company contributions to this plan, until mid-2021.

In 2022, the Company implemented certain plan

design changes to the ATI 401(k) Savings Plan which decreased the qualified non-elective contribution percentage and increased the Company match contribution percentage.

Other postretirement benefit costs for a defined contribution plan under the terms of a CBA were $ 1.0 million and $ 0.7 million for the years ended December 31, 2022 and 2020, respectively.

There were no costs for this plan in 2021.

The components of pension and other postretirement benefit expense for the Company’s defined benefit plans included the following:

6 unchanged sentences

Amortization of net actuarial loss 63.5 75.6 74.5 13.2 13.9 10.8

Settlement gain — — — ( 64.9 ) — —

Settlement loss (gain) 29.5 — — — ( 64.9 ) —

Curtailment gain — — — — — ( 0.2 )

1 unchanged sentence

Total retirement benefit expense (income) $ 46.8 $ 23.3 $ 50.6 $ 21.1 $ ( 43.9 ) $ 26.5

On May 12, 2022, the Company completed the sale of its Sheffield, UK operations (see Note 6).

As a result of this sale, ATI recognized a $ 29.5 million settlement loss, 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.

Pension liabilities and assets for this UK defined benefit pension plan that were removed as a result of this divestiture are included below in the tables of changes in benefit obligations and changes in plan assets, respectively.

On July 14, 2021, ATI announced that a new four-year labor agreement with the USW was ratified (see Note 1 for further discussion).

As a result of this new CBA, ATI recognized a $ 64.9 million pretax settlement gain in the third quarter of 2021, which is recorded in nonoperating retirement benefit income/expense on the consolidated statement of operations, related to a plan termination that eliminated certain postretirement medical benefit liabilities, 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.

As a result of this new CBA, ATI recognized a $ 64.9 million pretax settlement gain, which is recorded in nonoperating retirement benefit income/expense on the consolidated statement of operations, related to a plan termination that eliminated certain postretirement medical benefit liabilities, 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.

Discrete tax effects related to this event were $ 15.5 million of income tax expense (see Note 17 for further discussion).

In the fourth quarter of 2020, the Company recorded a $ 17.4 million termination benefits charge for pension and postretirement medical obligations, net of a $ 0.2 million curtailment gain, related to facility closures in the AA&S segment resulting from the Company’s strategic shift to exit lower-margin standard stainless products.

In 2020, the Company recorded a $ 17.4 million termination benefits charge for pension and postretirement medical obligations, net of a $ 0.2 million curtailment gain, related to facility closures in the AA&S segment resulting from the Company’s strategic shift to exit lower-margin standard stainless products.

See Note 19 for further explanation.

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Rate of increase in future compensation levels 2.00 % - 3.00 %

1.00 % 1.00 % — — —

Weighted average expected long-term rate of return on assets 6.43 % 6.71 % 7.16 % — % — % — %

13 unchanged sentences

Subsidy received — — 0.3 0.4

Divestiture ( 75.8 ) — — —

Effect of currency rates ( 3.2 ) ( 1.3 ) — —

1 unchanged sentence

– other 11.1 53.7 ( 5.8 ) 0.7

Plan curtailments — — — ( 2.5 )

Settlement gain — — — ( 43.0 )

Termination benefits — 10.9 — 6.7

Benefit obligation at end of year $ 1,818.3 $ 2,517.0 $ 212.7 $ 287.3

7 unchanged sentences

Employer contributions 57.4 77.3 — —

Divestiture ( 101.8 ) — — —

Effect of currency rates ( 4.4 ) ( 1.6 ) — —

2 unchanged sentences

Pension benefit payments in 2021 include $ 70 million for the annuity buyout of smaller pension balances in a U.S.

defined benefit pension plan involving approximately 1,000 , or 7 % of participants.

Pension benefit payments in 2020 include $ 86 million for the annuity buyout of smaller pension balances in a U.S.

defined benefit pension plan involving approximately 1,200 , or 8 % of participants.

These actions were also part of ATI’s retirement benefit liability management strategy to reduce the overall size of the pension obligation and to lower administrative costs.

defined benefit pension plan.

This action was part of ATI’s retirement benefit liability management strategy to reduce the overall size of the pension obligation and to lower administrative costs.

Assets (liabilities) recognized in the consolidated balance sheets:

11 unchanged sentences

Amortization of prior service cost (credit) 0.4 0.6 ( 0.9 ) ( 2.4 )

Settlement gain — — ( 21.9 ) —

Settlement loss (gain) 29.5 — — ( 21.9 )

Remeasurements 101.9 147.6 53.1 8.3

36 unchanged sentences

As a result of these ARPA changes, ATI’s prior contributions have generated a credit balance that may be utilized to offset future minimum required contributions.

ATI made a $ 50 million voluntary cash contribution to the ATI Pension Plan in the third quarter 2021 to improve the plan’s funded position, bringing the total U.S.

qualified defined benefit

pension plan contributions to $ 67 million for fiscal year 2021.

The Company has no required cash contributions to its U.S.

qualified defined benefit pension plans in 2022, and expects to make voluntary cash contributions of approximately $ 50 million to these plans in 2022.

qualified defined benefit pension plans in 2023, and made a voluntary cash contribution of approximately $ 50 million to these plans in

In addition, for 2023, the Company expects approximately $ 6 million of payments for U.S.

nonqualified pension benefits and for contributions to its U.K.

defined benefit pension plan.

assets are pledged as collateral to the trustee of the U.K.

defined benefit pension plan to support statutory funding requirements.

This security agreement has a maximum value of approximately $ 62 million based on year-end 2021 exchange rates.

nonqualified pension benefits.

The following table summarizes expected benefit payments from the Company’s various pension and other postretirement defined benefit plans through 2032, and also includes estimated Medicare Part D subsidies projected to be received during this period based on currently available information.

Pension benefit payments for the U.S.

qualified defined benefit pension plans and the U.K.

defined benefit plan are made from pension plan assets.

qualified defined benefit pension plans are made from pension plan assets.

(In millions) Pension

21 unchanged sentences

International equities 299.7 284.8 14.9 — —

Debt securities and cash:

Fixed income and cash equivalents 455.4 330.8 13.8 110.8 —

Floating rate 40.0 40.0 — — —

Private equity 224.3 224.3 — — —

Hedge funds 292.1 292.1 — — —

Real estate and other 25.8 25.8 — — —

Alternative investments- hedge funds, real estate and other 257.0 257.0 — — —

Total assets $ 1,599.5 $ 1,299.5 $ 189.2 $ 110.8 $ —

9 unchanged sentences

International equities 408.8 396.6 12.2 — —

Debt securities and cash:

Fixed income and cash equivalents 707.7 482.3 24.5 200.9 —

Floating rate 47.4 47.4 — — —

Private equity 176.7 176.7 — — —

Hedge funds 325.0 325.0 — — —

Real estate and other 26.9 26.9 — — —

Alternative investments- hedge funds, real estate and other 317.9 317.9 — — —

Total assets $ 2,120.9 $ 1,654.9 $ 265.1 $ 200.9 $ —

2 unchanged sentences

and International equities, and Fixed Income are predominantly held in common/collective trust funds and registered investment companies.

Some of these investments are publicly traded securities and are classified as Level 1, while others are public investment vehicles valued using the NAV provided by the administrator of the fund.

Some of these investments are publicly traded securities and are classified as Level 1, while others are public investment vehicles valued using the NAV provided by the administrator

The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding.

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Fair value of these investments is determined utilizing net asset values, and are not classified in the fair value hierarchy.

Hedge fund investments are made as a limited partner in hedge funds managed by a general partner.

Fair value of these investments is determined utilizing net asset values, and are not classified in the fair value hierarchy.

Real estate investments are made as a limited partner in a portfolio of properties managed by a general partner.

Alternative investments include hedge fund and real estate investments that are made as a limited partner in funds managed by a general partner.

Fair value of these investments is determined utilizing net asset values, and are not classified in the fair value hierarchy.

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Asset category Target asset allocation range

equity 18 % - 40 %

Global equity 10 % - 30 %

Debt securities and cash 15 % - 40 %

Equities 30 % - 70 %

Fixed income and cash equivalents 15 % - 40 %

Private equity 0 % - 30 %

Hedge funds 10 % - 20 %

Real estate and other 0 % - 10.0 %

Alternative investments- hedge funds, real estate and other 10 % - 30 %

As of December 31, 2022, the Company’s pension plans had outstanding commitments to invest up to $ 45 million in global debt securities, $ 125 million in private equity investments and $ 29 million in real estate investments.

5 unchanged sentences

If the Company ceases to have an obligation to contribute to the multiemployer plan in which it had been a contributing employer, it may be required to pay to the plan an amount based on the underfunded status of the plan and on the history of the Company’s participation in the plan prior to the cessation of its obligation to contribute.

The amount that an employer that has ceased to have an obligation to contribute to a multiemployer plan is required to pay to the plan is referred to as a withdrawal liability.

The amount that an

employer that has ceased to have an obligation to contribute to a multiemployer plan is required to pay to the plan is referred to as a withdrawal liability.

A subsidiary of the Company participates in the Steelworkers Western Independent Shops Pension Plan (WISPP) for union-represented employees of the primary titanium operations in Albany, OR, which is funded on an hours-worked basis.

ATI’s contributions to the WISPP exceed 5 % of this plan’s total contributions for the plan year ended September 30, 2020, which is the most recent information available from the Plan Administrator.

As of December 31, 2020, manufacturing operations at this facility were indefinitely idled, and a limited number of employees that participate in the WISPP remain active in maintenance and other functions.

It is reasonably possible that a significant reduction or the elimination of hours-worked contributions due to changes in operating rates at this facility could result in a withdrawal liability assessment in a future period.

A complete withdrawal liability is estimated to be approximately $ 35 million on an undiscounted basis.

Manufacturing operations at this facility have been idled throughout 2021 and most of 2022, with a limited number of employees that participate in the WISPP remaining active in maintenance and other functions.

It is at least reasonably possible that significant reductions in, or the elimination of hours-worked contributions due to changes in operating rates at this facility could result in a withdrawal liability assessment in a future period.

A complete withdrawal liability is estimated to be approximately $ 27 million on an undiscounted basis, based on information for the plan year ended September 30, 2021, which is the most recent information available from the Plan Administrator.

If this complete withdrawal liability was incurred, ATI estimates that payments of the obligation would be required on a straight-line basis over a 15 -year period.

10 unchanged sentences

Boilermakers-Blacksmiths National Pension Trust 48-6168020

/ 001 Yellow Yellow Yes 2.0 2.1 2.5 No 9/30/2026

/ 001 Green Yellow Yes 2.3 2.0 2.1 No 9/30/2026

IAM National Pension Fund 51-6031295

9 unchanged sentences

In April 2020, 2021 and 2022, the Company received notification from the IAM Fund that it was certified by its actuary as being in “red” zone status for the plan years beginning January 1, 2020 and 2021.

A 5% contribution surcharge was imposed as of June 1, 2019 for the rest of 2019, increasing to a 10% surcharge rate beginning January 1, 2020 in addition to the contribution rate specified in the applicable collective bargaining agreements.

The contribution surcharge ends when an employer begins contributing under a collective bargaining agreement that includes terms consistent with the rehabilitation plan.

A contribution surcharge was imposed as of June 1, 2019 in addition to the contribution rate specified in the applicable collective bargaining agreements.

The contribution surcharge remains in effect, and ends when an employer begins contributing under a collective bargaining agreement that includes terms consistent with the rehabilitation plan.

In April 2019, the Company received notifications from the Boilermakers-Blacksmiths National Pension Trust (Blacksmiths Trust) that it was certified by its actuary as being in “red” zone status for the plan year beginning January 1, 2019.

1 unchanged sentence

In April 2020 and 2021, the funding status improved for the Blacksmiths Trust as it was certified by its actuary as being in the “yellow” zone for the plan years beginning January 1, 2020 and 2021.

In April 2022, the funding status further improved to being in the "green" zone for the plan year beginning January 1, 2022.

(2) The “FIP / RP Status Pending / Implemented” column indicates whether a Funding Improvement Plan, as required under the Code by plans in the “yellow” zone, or a Rehabilitation Plan, as required under the Code to be adopted by plans in the “red” or “deep red” zones, is pending or has been implemented as of the end of the plan year that ended in 2022.

1 unchanged sentence

(4) The Company is party to five separate bargaining agreements that require contributions to this plan.

Expiration dates of these collective bargaining agreements range between February 27, 2022 and November 13, 2023.

Expiration dates of these collective bargaining agreements range between November 13, 2023 and July 14, 2028.

Accumulated Other Comprehensive Income (Loss)

4 unchanged sentences

OCI before reclassifications ( 99.3 ) 21.1 ( 2.0 ) — ( 80.2 )

Amounts reclassified from AOCI (a) 64.3 (b) — (c) ( 3.1 ) (d) 7.8 69.0

Amounts reclassified from AOCI (a) 62.5 (b) — (d) 4.6 (e) ( 8.8 ) 58.3

Net current-period OCI ( 36.8 ) 21.1 2.6 ( 8.8 ) ( 21.9 )

1 unchanged sentence

OCI before reclassifications 118.3 ( 9.4 ) 11.7 — 120.6

Amounts reclassified from AOCI (a) 62.5 (b) — (c) 4.6 (d) ( 8.8 ) 58.3

Amounts reclassified from AOCI (a) 53.9 (b) — (d) ( 8.7 ) (e) 66.1 111.3

Net current-period OCI 172.2 ( 9.4 ) 3.0 66.1 231.9

1 unchanged sentence

OCI before reclassifications 117.9 ( 25.2 ) 41.0 — 133.7

Amounts reclassified from AOCI (a) 53.9 (b) — (c) ( 8.7 ) (d) 66.1 111.3

Amounts reclassified from AOCI (a) 93.7 (c) 20.0 (d) ( 32.6 ) (e) 51.7 132.8

Net current-period OCI 211.6 ( 5.2 ) 8.4 51.7 266.5

14 unchanged sentences

Balance, December 31, 2022 $ — $ 7.7 $ — $ — $ 7.7

(a) Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 14).

(a) Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 14) 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 6).

(b) No amounts were reclassified to earnings.

(c) Amounts related to derivatives are included in cost of goods sold or interest expense in the period or periods the hedged item affects earnings (see Note 12).

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

(c) 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 6).

(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 12).

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

The 2021 income tax provision includes $ 6.4 million of tax expense for the recognition of a stranded deferred tax balance arising from deferred tax valuation allowances that was associated with certain postretirement medical benefits due to plan termination (see Notes 14 and 17).

The 2019 income tax provision includes $ 6.0 million of tax expense for the recognition of a stranded deferred tax balance arising from deferred tax valuation allowances that was associated with a cash flow hedge portfolio that fully settled in the fourth quarter of 2019.

Other comprehensive income (loss) amounts (OCI) reported above by category are net of applicable income tax expense (benefit) for each year presented.

4 unchanged sentences

Reclassifications out of AOCI for the fiscal years ended December 31, 2022, 2021 and 2020 were as follows:

Amount reclassified from AOCI (c)

Amount reclassified from AOCI (d)

Fiscal year ended

6 unchanged sentences

Actuarial losses ( 76.7 ) (a) ( 89.5 ) (a) ( 85.3 ) (a)

Settlement gain 21.9 (a) — —

( 65.8 ) (c) ( 82.2 ) (c) ( 84.6 ) (c) Total before tax

( 11.9 ) ( 19.7 ) ( 20.3 ) Tax benefit (d)

Settlement gain (loss) ( 29.5 ) (b) 21.9 (a) —

( 105.7 ) (d) ( 65.8 ) (d) ( 82.2 ) (d) Total before tax

( 12.0 ) ( 11.9 ) ( 19.7 ) Tax benefit (e)

$ ( 93.7 ) $ ( 53.9 ) $ ( 62.5 ) Net of tax

Nickel and other raw material contracts $ 7.1 (b) $ ( 0.8 ) (b) $ 5.1 (b)

Natural gas contracts 5.3 (b) ( 3.7 ) (b) ( 1.2 ) (b)

Foreign exchange contracts 0.1 (b) ( 0.1 ) (b) 0.7 (b)

Interest rate swap ( 1.1 ) (b) ( 1.4 ) (b) ( 0.5 ) (b)

11.4 (c) ( 6.0 ) (c) 4.1 (c) Total before tax

2.7 ( 1.4 ) 1.0 Tax provision (benefit) (d)

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

Nickel and other raw material contracts $ 26.9 (c) $ 7.1 (c) $ ( 0.8 ) (c)

Natural gas contracts 15.1 (c) 5.3 (c) ( 3.7 ) (c)

Foreign exchange contracts 0.9 (c) 0.1 (c) ( 0.1 ) (c)

Interest rate swap ( 0.1 ) (c) ( 1.1 ) (c) ( 1.4 ) (c)

42.8 (d) 11.4 (d) ( 6.0 ) (d) Total before tax

10.2 2.7 ( 1.4 ) Tax provision (benefit) (e)

$ 32.6 $ 8.7 $ ( 4.6 ) Net of tax

(a) Amounts are included in nonoperating retirement benefit expense (see Note 14).

(b) Amounts related to derivatives, with the exception of the interest rate swap, are included in 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 12).

(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 6).

(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 ABL Term Loan is recognized in earnings (see Note 12).

(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, including recognition of stranded balances (see Note 17 for further explanation).

(e) These amounts exclude the impact of any deferred tax asset valuation allowances, when applicable, including recognition of stranded balances (see Note 17 for further explanation).

Stockholders’ Equity

2 unchanged sentences

At December 31, 2022, there were no shares of preferred stock issued.

Under the ABL facility, there is no limit on dividend declarations or payments provided that the undrawn availability, after giving effect to a particular dividend payment, is at least the greater of $ 150 million and 30 % of the maximum revolving credit availability, and no event of default under the ABL facility has occurred and is continuing or would result from paying the dividend.

In addition, there is no limit on dividend declarations or payments if the undrawn availability is less than the greater of $ 150 million and 30 % of the maximum revolving credit advance amount but more than the greater of $ 75 million and 15 % of the maximum revolving credit advance amount, if (i) no event of default has occurred and is continuing or would result from paying the dividend, (ii) the Company demonstrates to the administrative agent that, prior to and after giving effect to the payment of the dividend (A) the undrawn availability, as measured both at the time of the dividend payment and as an average for the 60 consecutive day period immediately preceding the dividend payment, is at least the greater of $ 75 million and 15 % of the maximum revolving credit availability, and (B) the Company maintains a fixed charge coverage ratio of at least 1.00 :

Under the ABL facility, there is no limit on dividend declarations or payments provided that the undrawn availability, after giving effect to a particular dividend payment, is at least the greater of $ 120 million and 20 % of the total facility size, after giving effect to any repayment of term loans, and no event of default under the ABL facility has occurred and is continuing or would result from paying the dividend.

In addition, there is no limit on dividend declarations or payments if the undrawn availability is less than the greater of $ 120 million and 20 % of the total facility size, after giving effect to any repayment of term loans, but more than the greater of $ 75 million and 12.5 % of the total facility size, after giving effect to any repayment of term loans, if (i) no event of default has occurred and is continuing or would result from paying the dividend, (ii) the Company demonstrates to the administrative agent that, prior to and after giving effect to the payment of the dividend (A) the undrawn availability, as measured both at the time of the dividend payment and as an average for the 60 consecutive day period immediately preceding the dividend payment, is at least the greater of $ 75 million and 12.5 % of the total facility size, after giving effect to any repayment of term loans, and (B) the Company maintains a fixed charge coverage ratio of at least 1.00 :

1.00 , as calculated in accordance with the terms of the ABL facility.

Share-based Compensation

In May 2020, the Company’s stockholders approved the Allegheny Technologies Incorporated 2020 Incentive Plan (the “2020 Incentive Plan”).

In May 2022, the Company’s stockholders approved the ATI Inc.

2022 Incentive Plan (the “2022 Incentive Plan”).

Following adoption, all new share-based compensation awards are being made under the 2022 Incentive Plan.

4 unchanged sentences

The general terms of each arrangement granted under the 2022 Incentive Plan, and predecessor plans, the method of estimating fair value for each arrangement, and award activity is reported below.

Beginning in 2016, the Company implemented a new share-based incentive compensation program, the Long-Term Incentive Plan (LTIP).

The LTIP consists of both Restricted Share Units (RSU) and Performance Share Units (PSU).

These share units convey participants the right to receive shares of ATI common stock if the performance or market requirements, and service conditions, of the LTIP award are attained.

The Company’s previous share-based compensation program included a Performance/Restricted Stock Program (PRSP) of nonvested stock awards for which vesting and expense continued into fiscal year 2020 for certain participants.

Nonvested stock awards/units:

Restricted Share Units :

RSUs are rights to receive shares of Company stock when the award vests.

The Company’s share-based incentive compensation program consists of both service-based and performance/market-based awards.

These awards convey participants the right to receive shares of ATI common stock if the service conditions, and performance or market requirements, of the awards are attained.

Service-based awards:

Restricted share units (RSUs) are rights to receive shares of Company stock when the award vests.

The RSUs generally vest over three years based on employment service, with one-third of the award vesting on each of the first, second and third anniversaries of the grant date.

2 unchanged sentences

The fair value of the RSU award is measured based on the stock price at the grant date.

Nonvested stock awards :

Prior to 2016, awards of nonvested stock were granted to employees under the PRSP, with either performance and/or service conditions.

Awards of nonvested stock are also granted to non-employee directors, with service conditions.

For nonvested stock awards, dividend equivalents, whether in stock or cash form, accumulate but are not paid until the underlying award vests.

The fair value of nonvested stock awards is measured based on the stock price at the grant date, adjusted for non-participating dividends, as applicable, based on the current dividend rate.

For nonvested stock awards to employees in 2014 and 2015 under the Company’s PRSP, one-half of the nonvested stock (“performance shares”) vested only on the attainment of an income target, measured cumulatively over a three-year period.

The remaining nonvested stock awarded to most employees under the 2015 PRSP vests over a service period of three years ;

for certain senior executives this service period is five years for the 2015 award.

The remaining PRSP nonvested stock awarded to employees under the 2014 PRSP vest over a service period of five years , with accelerated vesting to three years if the performance shares’ vesting criterion was attained.

Expense for each of these awards was recognized based on estimates of attaining the performance criterion, including estimated forfeitures.

The three-year cumulative income statement metrics in 2014 and 2015 PRSP awards were not met, and the performance share portions were forfeited.

The remaining service portions of the 2014 and 2015 PRSP awards vested at the completion of the applicable service periods.

Compensation expense related to all nonvested stock awards and units was $ 14.3 million in 2021, $ 9.6 million in 2020, and $ 9.8 million in 2019.

Compensation expense related to RSU awards was $ 13.4 million in 2022, $ 14.3 million in 2021, and $ 9.6 million in 2020.

Approximately $ 8.2 million of unrecognized fair value compensation expense relating to restricted stock units is expected to be recognized through 2025, with $ 6.3 million expected to be recognized in 2023, including estimates of service period forfeitures.

Activity under the Company’s nonvested stock awards and restricted share units for the years ended December 31, 2021, 2020, and 2019 was as follows:

Activity under the Company’s RSU awards for the years ended December 31, 2022, 2021, and 2020 was as follows:

(Shares in thousands, $ in millions) 2022 2021 2020

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Nonvested, end of year 1,479 $ 26.0 1,409 $ 25.6 929 $ 17.9

Performance awards:

Performance Share Units :

In 2016, the Company established the PSU award.

The 2016 through 2020 PSU award opportunities are determined at a target number of units, and the number of shares awarded is based on attainment of two ATI financial performance metrics.

PSU awards through 2020 are accounted for as performance condition plans with service vesting requirements, with compensation expense during the performance period recognized based on estimates of attaining the performance criteria, including estimated forfeitures, and is evaluated on a quarterly basis.

The metrics for PSU awards through 2018 measured (1) net income attributable to ATI and (2) return on invested capital, over a three-year performance period.

The metrics for the 2019 and 2020 PSU awards measured (1) net income attributable to ATI and (2) return on capital employed, over a three-year performance period.

The 2019 and 2020 PSU awards each have a threshold attainment of 25 % and a maximum attainment of 200 % of the target financial performance metrics and target share units, measured over the applicable three-year performance period.

For certain senior executives, the number of PSUs to be awarded based on the performance criteria is modified up or down by up to 20 % based on the Company’s relative total shareholder return (TSR) over the performance measurement period (“TSR Modifier”), but not above the maximum number of PSUs to be vested.

The TSR Modifier is measured as the return of the Company’s stock price (including assumed dividend reinvestment, if any) at the end of the performance period as compared to the stock prices (including assumed dividend reinvestment, if any) of a group of industry peers.

The fair value of the PSU award is measured based on the stock price at the grant date, including the effect of the TSR Modifier.

The fair value of the TSR Modifier is estimated using Monte Carlo simulations of stock price correlation, projected dividend yields and other variables over a three-year time horizon matching the TSR performance measurement period.

Expense recognition varies with the level of performance achieved.

The 2021 PSU award opportunities are determined at a target number of share units, and the number of shares awarded is based on TSR, representing the measured return of the Company’s stock price (including assumed dividend reinvestment, if any) at the end of the three year period as compared to the stock prices (including assumed dividend reinvestment, if any) of a group of industry peers.

The 2021 PSU award is accounted for as a market condition plan with service vesting requirements, with expense recognized over the service period without regard to the level of TSR attainment or shares awarded.

Performance condition awards:

The Company awarded performance share units (PSUs) with performance requirements through fiscal year 2020.

These PSU award opportunities, the last of which vested at the conclusion of its applicable three-year performance period on December 31, 2022, were determined at a target number of units, and the number of shares awarded was based on attainment of two ATI financial performance metrics.

The metrics for PSU awards granted through 2018 measured (1) net income attributable to ATI and (2) return on invested capital, over a three-year performance period.

The metrics for PSU awards granted in 2019 and 2020 measured (1) net income attributable to ATI and (2) return on capital employed, over a three-year performance period with a threshold attainment of 25 % and a maximum attainment of 200 % of the target financial performance metrics and target share units, measured over the applicable three-year performance period.

For certain senior executives, the number of PSUs to be awarded based on the performance criteria was modified up or down by up to 20 % based on the Company’s relative total shareholder return (TSR) over the performance measurement period (“TSR Modifier”), but not above the maximum number of PSUs to be vested.

The TSR Modifier measured the return of the Company’s stock price (including assumed dividend reinvestment, if any) at the end of the performance period as compared to the stock prices (including assumed dividend reinvestment, if any) of a group of industry peers.

The fair value of the PSU award was measured based on the stock price at the grant date, including the effect of the TSR Modifier.

The fair value of the TSR Modifier was determined by using Monte Carlo simulations of stock price correlation, projected dividend yields and other variables over a three-year time horizon matching the TSR performance measurement period.

Expense recognition varied with the level of performance achieved.

Market condition awards:

The Company awarded PSUs with market requirements in 2021 and 2022.

The 2021 and 2022 PSU award opportunities are determined at a target number of share units, and the number of shares awarded is based on TSR, representing the measured return of the Company’s stock price (including assumed dividend reinvestment, if any) at the end of the three year period as compared to the stock prices (including assumed dividend reinvestment, if any) of a group of industry peers.

The 2021 and 2022 PSU awards are accounted for as a market condition plan with service vesting requirements, with expense recognized over the service period without regard to the level of TSR attainment or shares awarded.

The actual number of shares awarded at the end of the measurement period may range from a minimum of zero to a maximum of two times target.

TSR is determined over eight distinct quarterly periods as measured from January 1, 2021 through the end of each quarterly period starting with the quarter ending March 31, 2022, through December 31, 2023;

earned payouts from each TSR measurement period are banked and averaged to determine the final payout at the conclusion of the three-year period.

The fair value for this award was estimated using Monte Carlo simulations of stock price correlation, projected dividend yields and other variables over the three-year time horizon matching the TSR measurement period.

At December 31, 2021, a maximum of 3.0 million shares have been reserved for issuance for the PSU awards.

The Company recognized $ 6.8 million and $ 14.6 million of compensation expense in 2021 and 2019, respectively, for the PSU awards, and compensation income of $ 6.7 million in 2020 due to decreased financial performance attainment estimates, which required reversal of previously-recognized expense.

TSR is determined over eight distinct quarterly periods as measured from January 1 of the grant year of the award through the end of each quarterly period starting with the first quarter ending in the second year following the grant of the award;

earned payouts from each TSR measurement period are averaged to determine the final payout at the conclusion of the three-year period.

The fair value for this award was determined by using Monte Carlo simulations of stock price correlation, projected dividend yields and other variables over the three-year time horizon matching the TSR measurement period.

In 2022, the Company awarded a new one-time grant of PSUs with market requirements, called the Breakout Performance Award (BPA).

The BPA has a target number of share units, and the number of shares awarded is based on the absolute return on the Company’s stock during a four-year measurement period.

The service vesting requirements of the BPA award are four years for one half of the award and five years for the remaining half.

The BPA award is accounted for as a market condition plan with service vesting requirements, with expense recognized over the service periods without regard to the level of absolute return attainment or shares awarded.

The actual number of BPA shares awarded at the end of the measurement period may

range from a minimum of zero to a maximum of three times target.

The fair value for this award was determined by using Monte Carlo simulations of stock price correlation, projected dividend yields and other variables over the four-year time horizon matching the BPA measurement period.

At December 31, 2022, a maximum of 5.2 million shares have been reserved for issuance for all PSU awards.

The Company recognized $ 12.6 million and $ 6.8 million of compensation expense in 2022 and 2021, respectively, for all PSU awards, and compensation income of $ 6.7 million in 2020 due to decreased financial performance attainment estimates, which required reversal of previously-recognized expense.

Forfeited share units in 2020, 2021 and 2022 were 50,050 , 71,801 and 159,298 , respectively, with a weighted average grant date fair value of $ 1.4 million, $ 1.7 million and $ 3.4 million, respectively.

The estimated fair value of each PSU award, the target share units awarded and projected future compensation expense to be recognized for these awards, including actual and estimated forfeitures at December 31, 2021 was as follows:

The fair value of each PSU award, the target share units awarded and projected future compensation expense to be recognized for these awards, including actual and estimated forfeitures at December 31, 2022 was as follows:

(Shares in thousands, $ in millions)

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2022-2024 $ 11.0 8.9 3.9 494

2022-2025 BPA $ 18.5 12.1 3.3 811

Total $ 24.1 $ 10.3

At December 31, 2022, the 2020 PSU awards vested with financial performance attainment between threshold and target and at 0 % for the TSR Modifier, resulting in the issuance of 182,628 shares in the first quarter of 2023.

At December 31, 2021, the 2019 PSU awards vested with financial performance attainment between threshold and target and at - 20 % for the TSR Modifier, resulting in the issuance of 103,621 shares in the first quarter of 2022.

At December 31, 2020, the 2018 PSU awards vested between threshold and target attainment, and at - 10 % for the TSR Modifier, resulting in 301,170 shares being issued in early 2021.

At December 31, 2019, the 2017 PSU awards vested above target attainment and at + 20 % for the TSR Modifier, resulting in the issuance of 669,898 shares.

Aggregate compensation expense recognized over the three year performance period for the 2020 PSU award could range from zero to $ 24 million, including estimated forfeitures, based on the actual financial performance attained.

As of December 31, 2021, ATI projects that performance attainment will be below threshold for the 2020 PSU award.

Income (loss) before income taxes for the Company’s U.S.

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Income (loss) before income taxes $ 162.0 $ 10.6 $ ( 1,481.9 )

*Years ended December 31, 2020 and 2019 reflect the change in inventory accounting method, as described in Note 1 of the Notes to the Consolidated Financial Statements.

There were no adjustments to 2020 amounts as a result of this change.

The income tax provision (benefit) was as follows:

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Total ( 3.2 ) 17.0 71.5

Income tax provision (benefit) $ 26.8 $ 77.7 $ ( 28.5 )

Income tax provision $ 15.5 $ 26.8 $ 77.7

The following is a reconciliation of income taxes computed at the statutory U.S.

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Repatriation of foreign earnings (GILTI ) — 2.0 0.2

Restructuring — — 4.2

Divestiture 29.1 — —

Recognition of stranded deferred tax balance — 3.9 —

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Other ( 1.4 ) ( 2.1 ) 3.8

Income tax provision (benefit) $ 26.8 $ 77.7 $ ( 28.5 )

*Years ended December 31, 2020 and 2019 reflect the change in inventory accounting method, as described in Note 1 of the Notes to the Consolidated Financial Statements.

There were no adjustments to 2020 amounts as a result of this change.

In 2021, the Company allocated $ 12.2 million of the goodwill from ATI’s Forged Products reporting unit to the sale of Flowform Products (see Note 6 for further explanation) which was non-deductible for tax purposes, resulting in a $ 2.6 million expense included as a reconciling item in the table above.

In 2020, the Company recorded a $ 287.0 million pre-tax charge for goodwill impairment (see Note 5 for additional information) which included a portion that was non-deductible for tax purposes, resulting in a $ 50.4 million expense included as a reconciling item in the table above.

The provision for income taxes for the year ended December 31, 2021 is mainly attributable to the $ 15.5 million in discrete tax effects related to the postretirement medical benefits settlement gain discussed in Note 14, in accordance with ATI’s accounting policy for recognizing deferred tax amounts stranded in accumulated other comprehensive income (loss) (AOCI).

This $ 15.5 million is presented within two lines in the above table, $ 11.6 million within valuation allowance and $ 3.9 million on the recognition of stranded deferred tax balance line which represents the difference between current and historical tax rates in AOCI.

The $ 11.6 million has two components:

$ 5.2 million of additional required valuation allowance on ATI’s net deferred tax assets following the reduction of deferred tax liabilities in AOCI associated with the recognition of the AOCI portion of the retirement benefit settlement gain of $ 21.9 million, and $ 6.4 million of “trapped” valuation allowances remaining in AOCI from prior periods that are now recognized upon extinguishment of the retirement benefit plan (see Notes 14 and 15).

Income tax provision $ 15.5 $ 26.8 $ 77.7

The Company’s income tax expense has been impacted by the effects of valuation allowances on federal and state deferred tax assets for years 2020 through 2022.

The Company recognizes deferred tax assets to the extent it believes these deferred tax assets are more likely than not to be realized.

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In making such determination, the Company considers all available evidence, both positive and negative, regarding the estimated future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, historical taxable income in prior carryback periods if carryback is permitted, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused.

In situations where a three-year cumulative loss position exists, the ability to consider projections of future results as positive evidence to assess the realizability of deferred tax assets is subjective.

If the Company determines that it would not be able to realize its deferred tax assets in the future in excess of their recorded net amount, an adjustment to the deferred tax asset valuation allowance would result.

In 2021, ATI incurred tax expense associated with the valuation allowance due to the postretirement medical benefit settlement gain along with the U.S.

operations plus permanent adjustments (goodwill and GILTI) being a loss.

The overall balance of the valuation allowance decreased in total mainly due to the overall change in AOCI associated with the Company’s retirement benefit plans.

In 2020, ATI’s U.S.

operations returned to a three-year cumulative loss position, limiting the ability to utilize future projections as verifiable sources of income when analyzing the need for a valuation allowance.

The consolidated income tax provision for

fiscal year 2020 included a $ 335.5 million increase to the deferred tax asset valuation allowance based on an analysis of the expected more likely than not realization of deferred tax assets and liabilities within applicable expiration periods, primarily on U.S.

The consolidated income tax provision for fiscal year 2020 included a $ 335.5 million increase to the deferred tax asset valuation allowance based on an analysis of the expected more likely than not realization of deferred tax assets and liabilities within applicable expiration periods, primarily on U.S.

federal and state tax attributes.

Previously, at December 31, 2019, the Company’s U.S.

results reported a three-year cumulative income position, allowing the Company to utilize forecasts of future profits as a verifiable source of income when evaluating whether it was more likely than not that the deferred tax assets would be realized.

The Company determined that a valuation allowance on certain net deferred tax asset balances for federal and certain state jurisdictions were no longer required.

Certain individual tax attributes still required a valuation allowance based on the expected utilization of the tax attributes was not more likely than not to be realized by the Company.

The change in the overall valuation allowance for 2019 included amounts utilized during the year as part of the reported effective tax rate, as well as a $ 45.1 million reduction at December 31, 2019 based on a change in judgment on the realizability of deferred tax assets.

In 2021, ATI incurred tax expense associated with the valuation allowance due to the postretirement medical benefit settlement gain along with the U.S.

operations plus permanent adjustments (goodwill and Global Intangible Low-Taxed Income (GILTI)) being a loss.

The overall balance of the valuation allowance decreased in total mainly due to the overall change in AOCI associated with the Company’s retirement benefit plans.

In 2022, ATI recorded a tax benefit associated with the valuation allowance due to the current year income for the U.S.

As a result of the current year income, ATI utilized net operating loss carryovers which in turn resulted in a release of the corresponding valuation allowance on the operating loss deferred tax assets.

The provision for income taxes for the year ended December 31, 2022, is mainly attributable to the Company’s foreign operations and state income tax expense associated with states that limit net operating loss utilization.

On May 12, 2022, the Company sold its Sheffield, UK operations which resulted in a pre-tax loss of $ 141.0 million (see Note 6 for further explanation) for which the benefit was disallowed for tax purposes, resulting in a $ 29.1 million tax expense impact as shown in the effective tax rate reconciliation table above.

This $ 15.5 million is presented within two lines in the above table, $ 11.6 million within valuation allowance and $ 3.9 million on the

recognition of stranded deferred tax balance line which represents the difference between current and historical tax rates in AOCI.

The $ 11.6 million has two components:

The Company also maintained valuation allowances on deferred tax amounts recorded in AOCI in 2022, 2021 and 2020 of $ 67.5 million, $ 15.8 million, and $ 50.3 million, respectively, which are not reflected in the preceding table reconciling amounts recognized in the income tax provision (benefit) recorded in the statement of operations (see Note 15).

The 2019 income tax provision includes $ 6.0 million of tax expense for the recognition of a stranded deferred tax balance in AOCI arising from deferred tax valuation allowances associated with a cash flow hedge portfolio that fully settled in the fourth quarter of 2019.

See Notes 12 and 15 for additional information on cash flow hedge activity.

Additionally, the Tax Cuts and Jobs Act (Tax Act) requires a current year inclusion in U.S.

federal taxable income of certain earnings of controlled foreign corporations, commonly referred to as Global Intangible Low-Taxed Income (GILTI).

In 2021 and 2019, GILTI represents an unfavorable rate item of $ 2.0 million and $ 3.5 million which is primarily related to the Company’s income associated with the PRS joint venture operations in China.

federal taxable income of certain earnings of controlled foreign corporations, commonly referred to as GILTI.

In 2022, due to the loss on the sale of the Sheffield operations, there is no current year inclusion.

In 2021, GILTI represents an unfavorable tax rate item of $ 2.0 million which is primarily related to the Company’s income associated with the PRS joint venture operations in China.

The impact in 2020 related to GILTI is minimal due to the global COVID-19 pandemic.

In 2019, the Company utilized pre-January 1, 2018 net operating losses (NOLs) to offset the 2019 income inclusion of $ 16.8 million ($ 3.5 million net tax effect).

The Company has elected to recognize GILTI liabilities as an element of income tax expense in the period incurred.

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This same preferential tax rate was in effect for tax years 2018 through 2020.

In 2019, the Company restructured certain foreign legal entities, including the elimination of entities that were no longer cost-effective following changes of the Tax Act, which resulted in $ 4.2 million of tax expense related to previously-recognized net operating loss carryforwards.

Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes, and differences between the fair value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases.

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Changes in the valuation allowance for deferred tax assets in 2022 in the above table compared to 2021 include the following:

• $ 17.6 million of additional valuation allowance recorded as income tax expense and included in the reconciliation of the current year income tax provision;

• $ 50 million of valuation allowance recorded as income tax benefit and included in the reconciliation of the current year income tax provision;

• reductions in the valuation allowance related to the benefit in AOCI of $ 51.7 million (as discussed in Note 15);

• the amount adjusted through additional paid-in capital and retained earnings of $ 12.3 million associated with new accounting methods adopted in the first quarter of 2021 (see Note 1);

• $ 13.6 million removal of valuation allowance associated with the sale of the Sheffield operations.

• $ 43.4 million related to the presentation of state taxes and certain adjustments that have a direct valuation allowance offset, resulting in no net tax expense or benefit.

Due to the change in future tax rates in Pennsylvania, the Company recorded an overall decrease in deferred tax assets and liabilities which resulted in an offsetting removal of the valuation allowance.

As part of the Tax Act in 2017, a limitation on deductible interest expense was created, which limits deductible interest expense to 30% of adjusted taxable income, as defined in the Tax Act, for various periods.

As part of the 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the limitation was increased from 30% of adjusted taxable income to 50% of adjusted taxable income, as defined, for tax years 2019 and 2020.

Additionally, a taxpayer was able to utilize the 2019 adjusted taxable income calculation for the 2020 tax year.

The Company has calculated an interest expense limitation as part of the 2021 income tax provision and has reflected a deferred tax asset associated with the limitation within the “other items” asset category above at December 31, 2021.

The Company was not limited in its deductible interest expense in years 2020 or 2019.

The Company is not limited in its deductible interest expense for 2022 and is utilizing part of the carryover amount associated with the 2021 disallowance of interest expense.

A deferred tax asset associated with the carryover limitation is within the “other items” asset category above at December 31, 2022 and December 31, 2021.

The following summarizes the carryforward periods for the tax attributes related to NOLs and credits by jurisdiction.

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Balance at beginning of year $ 14.2 $ 15.2 $ 14.4

Increases in prior period tax positions — — —

Decreases in prior period tax positions ( 3.3 ) — —

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Expiration of the statute of limitations ( 1.8 ) ( 1.3 ) ( 1.9 )

Settlements — — —

Balance at end of year $ 9.1 $ 14.2 $ 15.2

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The amounts accrued for interest and penalty charges for the years ended December 31, 2022, 2021 and 2020 were not significant.

December 31, 2021 and 2020, the accrued liabilities for interest and penalties related to unrecognized tax benefits were $ 1.9 million and $ 2.3 million, respectively.

At December 31, 2022 and 2021, the accrued liabilities for interest and penalties related to unrecognized tax benefits were $ 1.4 million and $ 1.9 million, respectively.

The Company, and/or one of its subsidiaries, files income tax returns in the U.S.

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HPMC is comprised of the Specialty Materials and Forged Products businesses, as well as the ATI Europe distribution operations.

Approximately 75 % of its revenue is derived from the aerospace & defense markets including over 40 % of its revenue from products for commercial jet engines.

Approximately 80 % of its revenue is derived from the aerospace & defense markets including nearly 60 % of its revenue from products for commercial jet engines.

Other major HPMC end markets include medical and energy.

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Capabilities range from cast/wrought and powder alloy development to final production of highly engineered finished components, including those used for next-generation jet engine forgings and 3D-printed aerospace products.

The AA&S segment includes the Specialty Alloys & Components business, including the primary titanium operations in Richland, WA, the Specialty Rolled Products business, the 60 %-owned STAL PRS joint venture, and the Uniti and A&T Stainless 50 %-owned joint ventures that are reported in AA&S segment results under the equity method of accounting.

The AA&S segment includes the Specialty Alloys & Components business, the Specialty Rolled Products business, the 60 %-owned STAL PRS joint venture, and the Uniti and A&T Stainless 50 %-owned joint ventures that are reported in AA&S segment results under the equity method of accounting.

See Note 7 for further information on the Company’s joint ventures.

AA&S is focused on delivering high-value flat products primarily to the energy, aerospace, and defense end-markets, which comprise approximately 45 % of its revenue.

AA&S is focused on delivering high-value flat products primarily to the energy, aerospace, and defense markets, which comprise approximately 50 % of its revenue.

Other important end markets for AA&S include automotive and electronics.

AA&S produces nickel-based alloys, titanium and titanium-based alloys, and specialty alloys in a variety of forms including plate, sheet, and strip products.

On December 2, 2020, the Company announced a strategic repositioning of its SRP business, which includes exiting lower-margin standard stainless sheet products, streamlining the production footprint of the AA&S segment and making certain capital investments to increase its focus on higher-margin products and its aerospace & defense end markets.

On December 2, 2020, the Company announced a strategic repositioning of its SRP business, which includes exiting production of lower-margin standard stainless sheet products, streamlining the production footprint of

the AA&S segment and making certain capital investments to increase its focus on higher-margin products and its aerospace & defense end markets.

See Note 19 for further discussion of this strategic realignment and its associated long-lived asset impairments, restructuring and other charges recorded in the fourth quarter of 2020.

The measure of segment EBITDA excludes income taxes, depreciation and amortization, corporate expenses, net interest expense, closed operations and other expenses, charges for goodwill and asset impairments, restructuring and other charges, debt extinguishment charges and non-operating gains or losses.

The measure of segment EBITDA categorically excludes income taxes, depreciation and amortization, corporate expenses, net interest expense, closed operations and other expenses, charges for goodwill and asset impairments, restructuring and other charges, strike related costs, debt extinguishment charges and gains or losses on asset sales and sales of businesses.

Management believes segment EBITDA, as defined, provides an appropriate measure of controllable operating results at the business segment level.

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Closed operations and other expenses ( 12.1 ) ( 4.8 ) ( 7.4 )

Total ATI Adjusted EBITDA 290.9 196.3 439.5

Depreciation & amortization ( 142.9 ) ( 143.9 ) ( 143.3 )

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Impairment of goodwill (See Note 5) — — ( 287.0 )

Joint venture restructuring and impairment charge (See Note 7) — ( 2.4 ) ( 11.4 )

Joint venture restructuring credit (charge) (See Note 7) 0.9 — ( 2.4 )

Debt extinguishment charge (See Note 10) — ( 65.5 ) ( 21.5 )

Gain on asset sales and sale of business, net 13.8 2.5 84.6

Gain (loss) on asset sales and sale of business, net ( 134.2 ) 13.8 2.5

Income (loss) before income taxes $ 162.0 $ 10.6 $ ( 1,481.9 )

*Years ended December 31, 2020 and 2019 reflect the change in inventory accounting method, as described in Note 1 of the Notes to the Consolidated Financial Statements.

There were no adjustments to 2020 amounts as a result of this change.

Beginning in 2020, the U.S.

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

Results for the fiscal year ended December 31, 2022 include $ 34 million related to this government sponsored COVID relief in segment EBITDA.

HPMC segment results for 2022 include $ 27 million of benefits from the AMJP Program and employee retention credits, and AA&S segment results for 2022 include $ 7 million in employee retention credits.

Corporate expenses are primarily classified as selling and administrative expenses in the consolidated statement of operations, and consist of salaries and benefits, incentive compensation, facility leases and other costs of ATI’s corporate functions.

Corporate expenses in 2022 reflect business transformation initiatives and higher incentive compensation costs compared to the prior year periods.

Closed operations and other expenses are primarily presented in selling and administrative expenses in the consolidated statements of operations.

These items included costs at closed facilities, including legal matters, environmental, real estate and other facility costs, and changes in foreign currency remeasurement impacts primarily related to ATI’s European Treasury Center operation.

Closed operations and other expenses were lower in 2021 and 2020 compared to 2019, reflecting lower legal and retirement benefit expense of closed operations, foreign currency impacts in 2021 and a $4.3 million gain from settlements of contract indemnity obligations in 2020.

Closed operations and other expenses in 2022 primarily relate to unfavorable foreign currency remeasurement impacts primarily related to ATI’s European Treasury Center operation and higher legal costs for closed facilities compared to prior year periods.

During the fiscal year ended December 31, 2021, the Company recorded $ 63.2 million in strike related costs, of which $ 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.

Gain (loss) on asset sales and sales of businesses, net, for 2022 relate to 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 the Pico Rivera, CA operations.

The $ 13.8 million net gain on asset sales in 2021 consists of a gain on the sale of the Company’s Flowform Products business.

See Note 6 for further explanation regarding the sale of business transactions in 2022 and 2021.

The $ 2.5 million net gain on asset sales in 2020 consists of a gain on the sale of certain oil and gas rights (see Note 9).

The $ 84.6 million net gain on asset sales in 2019 consists of a $ 91.7 million gain on the sale of certain oil and gas rights (see Note 9) and a $ 6.2 million gain on the sale of the Company’s Cast Products business, partially offset by a $ 13.3 million loss on the

sale of two non-core forging facilities, located in Portland, IN and Lebanon, KY.

See Note 6 for further explanation regarding the sale of business transactions.

Certain additional information regarding the Company’s business segments is presented below:

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Total Assets $ 4,445.6 100 % $ 4,285.2 100 % $ 4,034.9 100 %

*December 31, 2020 and 2019 reflects the change in inventory accounting method, as described in Note 1 of the Notes to the Consolidated Financial Statements.

Restructuring and other charges

For the year ended December 31, 2022, restructuring and other charges were $ 23.7 million, which included a $ 28.5 million charge for a litigation settlement (see Note 21), partially offset by $ 4.8 million of restructuring credits for reductions in severance-related reserves related to approximately 110 employees based on changes in planned operating rates and revised workforce estimates.

For the year ended December 31, 2021, restructuring and other charges were a net benefit of $ 10.5 million, which primarily included $ 11.3 million of reversals of previously-recognized restructuring charges separately classified on the consolidated statement of operations, as well as an $ 0.8 million charge for inventory valuation reserves classified in cost of sales on the consolidated statement of operations related to the 2020 idling of the Albany, OR primary titanium facility.

Restructuring items in 2021 include a $ 12.0 million reduction in severance-related reserves related to approximately 350 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.

For the year ended December 31, 2020, the Company recorded restructuring and other charges of $ 1,132.1 million, predominantly related to the Company’s December 2020 announcement to cease production of standard stainless sheet products, which are excluded from business segment results.

On December 2, 2020, the Company announced a strategic repositioning of its SRP business within the AA&S segment, with a focus of increasing emphasis on the specialty rolled products portion of its product portfolio, which comprise titanium-based alloys including aerospace-grade titanium plate products, nickel-based alloys, and stainless products with more differentiated characteristics for specialty applications, including thin-gauge PRS.

On December 2, 2020, the Company announced a strategic repositioning of its SRP business within the AA&S segment, with a focus of increasing emphasis on the specialty rolled products portion of its product portfolio, which is comprised of titanium-based alloys including aerospace-grade titanium plate products, nickel-based alloys, and stainless products with more differentiated characteristics for specialty applications, including thin-gauge PRS.

Restructuring charges recorded on the consolidated statement of operations for the year ended December 31, 2020 were $ 1,107.5 million, comprised of $ 1,041.5 million of non-cash asset impairment charges, $ 60.5 million of employee benefit-related costs, and $ 5.5 million of other costs related to facility idlings.

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For example, the weighted average cost of capital used in the discounted cash flow assessment was 9.3 % and the long-term growth rate was 2 %.

Although the Company believes that the estimates and assumptions used were reasonable, actual results could differ from those estimates and assumptions.

Other long-lived asset impairment charges of $ 8.9 million were also recognized for various AA&S segment operations identified for closure as part of the standard stainless sheet exit decision.

Restructuring charges also include $ 60.5 million of employee benefit costs, representing severance, supplemental unemployment and medical benefits for the elimination of approximately 1,400 positions related to the standard stainless exit, as well as for employees impacted by the idling of the Albany, OR primary titanium operations in the fourth quarter of 2020, and workforce right-sizing actions, including both involuntary reductions and voluntary retirement incentive programs implemented throughout 2020 to better match the Company’s cost structure to expected demand, primarily as a result of economic challenges created by the COVID-19 pandemic.

Other costs of $ 5.5 million included in 2020 restructuring charges primarily relate to asset retirement and environmental obligations (see Note 8 for further explanation) associated with facility idlings.

Other long-lived asset impairment charges of $ 8.9 million were also recognized in 2020 for various AA&S segment operations identified for closure as part of the standard stainless sheet exit decision.

Restructuring charges in 2020 also include $ 60.5 million of employee benefit costs, representing severance, supplemental unemployment and medical benefits for the elimination of approximately 1,400 positions related to the standard stainless exit, as well as for employees impacted by the idling of the Albany, OR primary titanium operations in the fourth quarter of 2020, and workforce right-sizing actions, including both involuntary reductions and voluntary retirement incentive programs implemented throughout 2020 to better match the Company’s cost structure to expected demand, primarily as a result of economic challenges created by the COVID-19 pandemic.

Other costs of $ 5.5 million included in 2020 restructuring charges primarily relate to asset retirement and environmental obligations associated with facility idlings.

Other charges for the year ended December 31, 2020 include:

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• $ 7.2 million of other charges for inventory valuation reserves, classified in cost of sales on the consolidated statement of operations, primarily related to excess raw material and work in process inventory at the idled Albany, OR primary titanium facility.

Restructuring charges for the fiscal year ended December 31, 2019 of $ 4.5 million which are reported as restructuring charges on the consolidated statement of operations and excluded from business segment results, are comprised of severance obligations for the reduction of approximately 70 positions in order to streamline ATI’s salaried workforce primarily to improve the cost competitiveness of the U.S.-based SRP business.

Restructuring reserves for severance cost activity is as follows:

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Diluted net income (loss) attributable to ATI per common share $ 0.96 $ ( 0.30 ) $ ( 12.43 )

*Years ended December 31, 2020 and 2019 reflect the change in inventory accounting method, as described in Note 1 of the Notes to the Consolidated Financial Statements.

There were no adjustments to 2020 amounts as a result of this change.

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 25.6 million and 22.8 million anti-dilutive shares for 2021 and 2020, respectively.

Common stock that would be issuable upon the assumed conversion of the 2025 Convertible Notes, and the 2022 Convertible Notes prior to their maturity, 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 10 for further explanation).

There were no anti-dilutive shares for 2022.

There were 25.6 million and 22.8 million anti-dilutive shares for 2021 and 2020, respectively.

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

Repurchases under the program may be made in the open market or in privately negotiated transactions, with the amount and timing of repurchases depending on market conditions and corporate needs.

Open market repurchases are structured to occur within the pricing and volume requirements of SEC Rule 10b-18.

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 2022, ATI used $ 139.9 million to repurchase 5.2 million shares of its common stock under this program.

Commitments and Contingencies

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In many cases, however, the Company is not able to determine whether it is liable or, if liability is probable, to reasonably estimate the loss or range of loss.

Estimates of the Company’s liability remain subject to additional uncertainties, including the nature and extent of site contamination, available remediation alternatives, the extent of corrective actions that may be required, and the number, participation, and financial condition of other PRPs.

The Company adjusts its accruals to reflect new information as appropriate.

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At December 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 $ 3 million

for federal Superfund and comparable state-managed sites;

The reserve includes estimated probable future costs of $ 3 million for federal Superfund and comparable state-managed sites;

$ 8 million for formerly owned or operated sites for which the Company has remediation or indemnification obligations;

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Based on currently available information, it is reasonably possible that the costs for active matters may exceed the Company’s recorded reserves by as much as $ 15 million.

Future investigation or remediation activities may result in the discovery of additional hazardous materials, potentially higher levels of contamination than discovered during prior investigation, and may impact costs of the success or lack thereof in remedial solutions.

Future investigation or remediation activities may result in the discovery of additional hazardous materials, potentially higher levels of contamination than discovered during prior investigation, and may impact costs associated with the success or lack thereof in remedial solutions.

Therefore, future developments, administrative actions or liabilities relating to environmental matters could have a material adverse effect on the Company’s consolidated financial condition or results of operations.

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The Company expects that it will expend present accruals over many years and that remediation of all sites with which it has been identified will be completed within thirty years.

A number of other lawsuits, claims and proceedings have been or may be asserted against the Company relating to the conduct of its currently and formerly owned businesses, including those pertaining to product liability, patent infringement, commercial, government contracting, construction, employment, employee and retiree benefits, taxes, environmental, health and safety, occupational disease, and stockholder and corporate governance matters.

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 consolidated 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.

A number of other lawsuits, claims and proceedings have been or may be asserted against the Company relating to the conduct of its currently and formerly owned businesses, including those pertaining to product liability, environmental, health and safety matters and occupational disease (including as each relates to alleged asbestos exposure), as well as patent infringement, commercial, government contracting, construction, employment, employee and retiree benefits, taxes, environmental, and stockholder and corporate governance matters.

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 ATI Inc., was party to a lawsuit captioned US Magnesium, LLC v.

ATI Titanium LLC (Case No.

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In 2016, ATI Titanium notified USM that it would suspend performance under the Supply Agreement in reliance on certain terms and conditions included in the Supply Agreement.

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.

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

While ATI Titanium intends to vigorously defend against and pursue these claims, it cannot predict their outcomes at this time.

USM subsequently filed a claim challenging ATI Titanium’s right to suspend performance under the Supply Agreement.

ATI Titanium and USM reached a litigation settlement in 2022 for $ 28.5 million, which is reported within other (nonoperating) expense on the consolidated statement of operations and was paid in the year ended December 31, 2022.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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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-K

Item 8. Financial Statements and Supplementary Data