What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-11-03 · 168 added, 395 removed, 531 unchanged (51% of the section changed)

4 unchanged sentences

(Current period unaudited)

September 30,

2023 December 31,

27 unchanged sentences

authorized- 500,000,000 shares;

issued- 131,383,969 shares at September 30, 2022 and 127,484,902 shares at December 31, 2021;

outstanding- 129,417,664 shares at September 30, 2022 and 127,253,045 shares at December 31, 2021

issued- 132,228,508 shares at March 31, 2023 and 131,392,262 shares at December 31, 2022;

outstanding- 128,546,610 shares at March 31, 2023 and 128,273,042 shares at December 31, 2022

Additional paid-in capital 1,675.1 1,668.1

1 unchanged sentence

Treasury stock:

1,966,305 shares at September 30, 2022 and 231,857 shares at December 31, 2021

3,681,898 shares at March 31, 2023 and 3,119,220 shares at December 31, 2022

( 107.8 ) ( 87.0 )

8 unchanged sentences

(In millions, except per share amounts)

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

2022 2021 2022 2021

Three months ended March 31,

Sales $ 1,038.1 $ 834.1

5 unchanged sentences

Operating income 112.6 77.0

Nonoperating retirement benefit income (expense) ( 6.5 ) 57.9 ( 18.9 ) 44.3

Nonoperating retirement benefit expense ( 16.8 ) ( 5.8 )

Interest expense, net ( 19.9 ) ( 23.6 )

4 unchanged sentences

Net income attributable to noncontrolling interests 2.1 4.3

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

Basic net income (loss) attributable to ATI per common share $ 0.47 $ 0.38 $ 0.43 $ ( 0.07 )

Diluted net income (loss) attributable to ATI per common share $ 0.42 $ 0.35 $ 0.42 $ ( 0.07 )

Net income attributable to ATI $ 70.1 $ 30.9

Basic net income attributable to ATI per common share $ 0.55 $ 0.24

Diluted net income attributable to ATI per common share $ 0.48 $ 0.23

The accompanying notes are an integral part of these statements.

2 unchanged sentences

(In millions)

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

2022 2021 2022 2021

Three months ended March 31,

Net income $ 72.2 $ 35.2

1 unchanged sentence

Unrealized net change arising during the period 3.3 ( 6.8 )

Reclassification adjustment included in net income — — 20.0 —

Total ( 30.0 ) ( 5.0 ) ( 39.2 ) ( 2.8 )

Net derivatives gain on hedge transactions 7.7 6.7 48.4 14.1

Net derivatives gain (loss) on hedge transactions ( 15.0 ) 24.6

Reclassification to net income of net realized gain ( 5.5 ) ( 5.0 )

6 unchanged sentences

Amortization to net income of net prior service credits ( 0.1 ) ( 0.2 )

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

Income taxes on postretirement benefit plans — —

2 unchanged sentences

Comprehensive income 70.8 67.1

Comprehensive income (loss) attributable to noncontrolling interests ( 6.1 ) 5.7 ( 7.1 ) 18.5

Comprehensive income attributable to noncontrolling interests 6.5 5.0

Comprehensive income attributable to ATI $ 64.3 $ 62.1

3 unchanged sentences

(In millions)

Nine months ended September 30,

Three months ended March 31,

Operating Activities:

2 unchanged sentences

Depreciation and amortization 35.1 35.5

Share-based compensation 7.1 5.9

Deferred taxes 0.9 ( 1.2 )

Net gains from disposal of property, plant and equipment ( 0.3 ) ( 0.8 )

Loss (gain) on sales of businesses 141.0 ( 13.7 )

Loss on sales of businesses — 25.1

Changes in operating assets and liabilities:

8 unchanged sentences

Proceeds from disposal of property, plant and equipment 0.9 0.8

Proceeds (transaction costs) from sales of businesses, net ( 2.8 ) 53.0

Other 0.2 1.0

1 unchanged sentence

Financing Activities:

Borrowings on long-term debt — 675.7

Payments on long-term debt and finance leases ( 5.7 ) ( 5.0 )

Net (payments) borrowings under credit facilities ( 16.0 ) 3.6

Debt issuance costs — ( 9.3 )

Net payments under credit facilities ( 16.8 ) ( 14.6 )

Purchase of treasury stock ( 10.1 ) ( 89.9 )

2 unchanged sentences

Shares repurchased for income tax withholding on share-based compensation and other ( 10.7 ) ( 5.0 )

Cash provided by (used in) financing activities ( 158.2 ) 654.2

Increase (decrease) in cash and cash equivalents ( 358.6 ) 360.9

Cash used in financing activities ( 43.3 ) ( 129.6 )

Decrease in cash and cash equivalents ( 387.8 ) ( 371.0 )

Cash and cash equivalents at beginning of period 584.0 687.7

12 unchanged sentences

Interests Total

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

Net income — — 48.7 — — 6.5 55.2

Other comprehensive income (loss) — — — — 15.2 ( 0.8 ) 14.4

Employee stock plans — 4.6 — ( 0.1 ) — — 4.5

Balance, September 30, 2021 $ 12.7 $ 1,592.1 $ 102.5 $ ( 4.8 ) $ ( 1,161.1 ) $ 138.8 $ 680.2

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

Net income — — 61.1 — — 3.3 64.4

Other comprehensive loss — — — — ( 1.0 ) ( 9.4 ) ( 10.4 )

Purchase of treasury stock — — — ( 15.0 ) — — ( 15.0 )

Employee stock plans — 5.6 — ( 0.1 ) — — 5.5

Balance, September 30, 2022 $ 13.1 $ 1,662.2 $ 100.0 $ ( 51.9 ) $ ( 909.9 ) $ 124.9 $ 938.4

ATI Stockholders

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

Income (Loss) Non-

Interests Total

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

Net income (loss) — — ( 8.4 ) — — 16.8 8.4

Net income — — 30.9 — — 4.3 35.2

Other comprehensive income — — — 31.2 0.7 31.9

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

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

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

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

Employee stock plans 0.1 5.8 — ( 5.0 ) — — 0.9

Balance, September 30, 2021 $ 12.7 $ 1,592.1 $ 102.5 $ ( 4.8 ) $ ( 1,161.1 ) $ 138.8 $ 680.2

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

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

2 unchanged sentences

Purchase of treasury stock — — — ( 10.1 ) — — ( 10.1 )

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

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

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

Employee stock plans 0.1 7.0 — ( 10.7 ) — — ( 3.6 )

Balance, September 30, 2022 $ 13.1 $ 1,662.2 $ 100.0 $ ( 51.9 ) $ ( 909.9 ) $ 124.9 $ 938.4

Balance, March 31, 2023 $ 13.2 $ 1,675.1 $ 247.0 $ ( 107.8 ) $ ( 731.0 ) $ 117.8 $ 1,214.3

The accompanying notes are an integral part of these statements.

14 unchanged sentences

New Accounting Pronouncements Adopted

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 does not have an impact on the Company’s consolidated financial statements other than the annual disclosure requirements.

Pending Accounting Pronouncements

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.

In September 2022, the Financial Accounting Standards Board (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.

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

This new guidance, with the exception of disclosures on rollforward information, is effective for the Company in fiscal year 2023.

The Company adopted this new accounting guidance effective January 1, 2023.

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.

The Company did not early adopt this guidance.

The adoption of these changes did not have an impact on the Company’s consolidated financial statements other than disclosure requirements which are included in Note 6.

Revenue from Contracts with Customers

3 unchanged sentences

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

Comparative information of the Company’s overall revenues (in millions) by global and geographical markets for the third quarters and nine months ended September 30, 2022 and 2021 is included in the following tables.

(in millions) Third quarter ended

September 30, 2022 September 30, 2021

Comparative information regarding the Company’s overall revenues (in millions) by global and geographical markets for the first quarters ended March 31, 2023 and 2022 is included in the following tables.

(in millions) First quarter ended

March 31, 2023 March 31, 2022

HPMC AA&S Total HPMC AA&S Total

9 unchanged sentences

Automotive 6.3 53.1 59.4 2.9 88.1 91.0

Electronics 0.7 47.8 48.5 0.4 56.1 56.5

Construction/Mining 8.2 32.2 40.4 8.4 43.6 52.0

Medical 17.5 17.5 35.0 13.2 23.0 36.2

Food Equipment & Appliances 0.2 45.0 45.2 — 43.4 43.4

Other 14.1 36.6 50.7 10.1 28.7 38.8

Total $ 457.6 $ 574.4 $ 1,032.0 $ 300.0 $ 425.7 $ 725.7

(in millions) Nine months ended

September 30, 2022 September 30, 2021

HPMC AA&S Total HPMC AA&S Total

Diversified Global Markets:

Aerospace & Defense:

Jet Engines- Commercial $ 696.1 $ 61.8 $ 757.9 $ 338.3 $ 26.2 $ 364.5

Airframes- Commercial 130.9 200.3 331.2 95.6 88.3 183.9

Defense 120.6 123.6 244.2 172.0 97.9 269.9

Total Aerospace & Defense 947.6 385.7 1,333.3 605.9 212.4 818.3

Oil & Gas 32.1 323.3 355.4 29.0 202.0 231.0

Specialty Energy 88.0 109.3 197.3 107.6 95.0 202.6

Total Energy 120.1 432.6 552.7 136.6 297.0 433.6

Automotive 8.7 227.4 236.1 5.5 232.3 237.8

Electronics 0.5 33.9 34.4 0.5 51.1 51.6

Food Equipment & Appliances — 21.5 21.5 — 34.0 34.0

Construction/Mining 25.8 113.9 139.7 16.8 72.9 89.7

Medical 52.3 70.8 123.1 42.6 52.7 95.3

Other 15.9 45.6 61.5 11.8 31.0 42.8

Total $ 471.1 $ 567.0 $ 1,038.1 $ 341.6 $ 492.5 $ 834.1

(in millions) Third quarter ended

September 30, 2022 September 30, 2021

HPMC AA&S Total HPMC AA&S Total

Primary Geographical Market:

United States $ 221.6 $ 395.5 $ 617.1 $ 140.8 $ 256.5 $ 397.3

Europe 147.0 53.2 200.2 85.3 26.0 111.3

Asia 60.7 108.9 169.6 58.3 96.2 154.5

Canada 10.0 9.5 19.5 9.9 8.5 18.4

South America, Middle East and other 18.3 7.3 25.6 5.7 38.5 44.2

Total $ 457.6 $ 574.4 $ 1,032.0 $ 300.0 $ 425.7 $ 725.7

(in millions) Nine months ended

September 30, 2022 September 30, 2021

(in millions) First quarter ended

March 31, 2023 March 31, 2022

HPMC AA&S Total HPMC AA&S Total

6 unchanged sentences

Total $ 471.1 $ 567.0 $ 1,038.1 $ 341.6 $ 492.5 $ 834.1

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.

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

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

Third quarter ended

September 30, 2022 September 30, 2021

HPMC AA&S Total HPMC AA&S Total

Diversified Products and Services:

Nickel-based alloys and specialty alloys 52 % 57 % 54 % 46 % 45 % 45 %

Precision forgings, castings and components 32 % — % 15 % 35 % — % 15 %

Precision rolled strip products — % 22 % 12 % — % 33 % 19 %

Titanium and titanium-based alloys 16 % 7 % 11 % 19 % 7 % 12 %

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

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

Nine months ended

September 30, 2022 September 30, 2021

First quarter ended

March 31, 2023 March 31, 2022

HPMC AA&S Total HPMC AA&S Total

6 unchanged sentences

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

The Company maintained a backlog of confirmed orders totaling $ 2.7 billion and $ 1.7 billion at September 30, 2022 and 2021, respectively.

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

The Company maintained a backlog of confirmed orders totaling $ 3.3 billion and $ 2.4 billion at March 31, 2023 and 2022, respectively.

Due to the structure of the Company’s long-term agreements, approximately 80 % of this backlog at March 31, 2023 represented booked orders with performance obligations that will be satisfied within the next 12 months.

The backlog does not reflect any elements of variable consideration.

Contract balances

As of September 30, 2022 and December 31, 2021, accounts receivable with customers were $ 682.0 million and $ 473.8 million, respectively.

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

As of March 31, 2023 and December 31, 2022, accounts receivable with customers were $ 733.0 million and $ 586.9 million, respectively.

The following represents the rollforward of accounts receivable - reserve for doubtful accounts and contract assets and liabilities for the three months ended March 31, 2023 and 2022:

(in millions)

Accounts Receivable - Reserve for Doubtful Accounts September 30,

2022 September 30,

Accounts Receivable - Reserve for Doubtful Accounts March 31,

2023 March 31,

Balance as of beginning of fiscal year $ 7.7 $ 3.8

4 unchanged sentences

Contract Assets

Short-term September 30,

2022 September 30,

Short-term March 31,

2023 March 31,

Balance as of beginning of fiscal year $ 64.1 $ 53.9

1 unchanged sentence

Reclassified to accounts receivable ( 31.8 ) ( 22.0 )

Reclassification to/from long-term and contract liability 0.1 ( 8.5 )

Balance as of period end $ 52.7 $ 50.8

1 unchanged sentence

Contract Liabilities

Short-term September 30,

2022 September 30,

Short-term March 31,

2023 March 31,

Balance as of beginning of fiscal year $ 149.1 $ 116.2

2 unchanged sentences

Current year amounts reclassified to revenue ( 0.4 ) ( 5.5 )

Divestiture — ( 0.8 )

Other 0.8 0.2

Reclassification to/from long-term and contract asset 19.1 9.2

Balance as of period end $ 149.7 $ 133.3

Long-term (a) September 30,

2022 September 30,

Long-term (a) March 31,

2023 March 31,

Balance as of beginning of fiscal year $ 66.8 $ 84.4

3 unchanged sentences

(a) 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 $ 5.1 million and $ 5.2 million as of September 30, 2022 and December 31, 2021, respectively, and are reported in other long-term assets on the consolidated balance sheet.

Contract cost amortization expense for the three and nine months ended September 30, 2022 was $ 0.2 million and $ 0.7 million, respectively.

Contract cost amortization for the three and nine months ended September 30, 2021 was $ 0.2 million and $ 0.7 million, respectively.

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

September 30,

Contract costs for obtaining and fulfilling a contract were $ 7.6 million and $ 7.3 million as of March 31, 2023 and December 31, 2022, respectively, and are reported in other long-term assets on the consolidated balance sheet.

Contract cost amortization expense for the three months ended March 31, 2023 and 2022 was $ 0.3 million and $ 0.2 million, respectively.

Inventories at March 31, 2023 and December 31, 2022 were as follows (in millions):

2023 December 31,

2 unchanged sentences

Finished goods 125.7 111.9

Total inventories at current cost 1,286.3 1,111.7

1,373.6 1,266.6

Inventory valuation reserves ( 79.8 ) ( 70.9 )

2 unchanged sentences

Property, Plant and Equipment

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

September 30,

Property, plant and equipment at March 31, 2023 and December 31, 2022 was as follows (in millions):

2023 December 31,

Land $ 31.5 $ 31.5

Buildings 595.0 575.5

Equipment and leasehold improvements 2,821.6 2,870.2

Buildings and leasehold improvements 612.1 601.6

Equipment 2,913.3 2,895.5

3,556.9 3,528.6

1 unchanged sentence

Total property, plant and equipment, net $ 1,551.8 $ 1,549.1

The construction in progress portion of property, plant and equipment at September 30, 2022 was $ 211.4 million.

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

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

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

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

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

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

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

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

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

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

During the first quarter of 2022, the Company completed the sale of the small Pico Rivera, CA operations as part of the strategy to exit standard stainless products.

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

The Company recognized a $ 6.8 million pretax gain on sale, including de-recognizing certain lease liabilities, in the first quarter of 2022, which is reported in

loss 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.

Located in Billerica, MA, this operation used flowforming process technologies to produce thin-walled components in net or near-net shapes across multiple alloy systems for use in the aerospace & defense and energy markets.

The Company received cash proceeds, net of transaction costs and net working capital adjustments, of $ 53 million on the sale of this business during the quarter ended September 30, 2021, which is reported as an investing activity on the consolidated statement of cash flows.

With $ 12.2 million of goodwill allocated to this operation from ATI’s Forged Products reporting unit, the Company recognized a $ 13.7 million pre-tax gain in the quarter ended September 30, 2021, which is recorded in other income/expense, net, on the consolidated statement of operations and is excluded from HPMC segment results.

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

The construction in progress portion of property, plant and equipment at March 31, 2023 was $ 270.9 million.

Capital expenditures on the consolidated statement of cash flows for the three months ended March 31, 2023 exclude $ 11.6 million of incurred but unpaid capital expenditures that were included in property, plant and equipment and accrued at March 31, 2023.

Joint Ventures

5 unchanged sentences

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

Cash and cash equivalents held by STAL as of September 30, 2022 were $ 65.3 million.

Cash and cash equivalents held by STAL as of March 31, 2023 were $ 52.9 million.

Next Gen Alloys LLC:

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.

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, 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 September 30, 2022 were $ 1.5 million.

Cash and cash equivalents held by this joint venture as of March 31, 2023 were $ 1.1 million.

Equity Method Joint Ventures

1 unchanged sentence

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 through September 30, 2022.

In October 2022, ATI received the remaining $ 5.5 million from Tsingshan.

Tsingshan purchased its 50 % joint venture interest in A&T Stainless in 2018 for $ 17.5 million, of which $ 12.0 million was received by ATI through December 31, 2021 and the remaining $ 5.5 million was received in the fourth quarter of 2022.

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

6 unchanged sentences

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

In April 2022, ATI and A&T Stainless entered into a settlement agreement with the 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 the second quarter of 2022.

ATI’s share of A&T Stainless results was a loss of $ 0.5 million for the three months ended September 30, 2022 and income of $ 8.7 million for the nine months ended September 30, 2022, which included ATI’s $ 9.9 million share of the tariff refund and accrued interest.

ATI’s share of A&T Stainless results was income of $ 0.3 million for the three months ended September 30, 2021 and a net loss of $ 0.6 million for the nine months ended September 30, 2021.

ATI’s share of A&T Stainless results is included within other income/expense, net, on the consolidated statements of operations and in the AA&S segment’s operating results.

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

For the September 30, 2022 balance of net receivables, $ 0.5 million was reported in prepaid expenses and other current assets and $ 2.4 million in other long-term assets on the consolidated balance sheet, while for December 31, 2021, $ 0.7 million was reported in prepaid expenses and other current assets and $ 2.2 million in other long-term assets.

ATI’s share of A&T Stainless results was losses of $ 0.5 million and $ 0.3 million for the three months ended March 31, 2023 and 2022, respectively, which is included within other income/expense, net, on the consolidated statements of operations and in the AA&S segment’s operating results.

As of March 31, 2023 and December 31, 2022, ATI had net receivables for working capital advances and administrative services from A&T Stainless of $ 2.9 million and $ 3.2 million, respectively.

For the March 31, 2023 balance of net receivables, $ 0.5 million was reported in prepaid expenses and other current assets and $ 2.4 million in other long-term assets on the consolidated balance sheet, while for December 31, 2022, $ 0.4 million was reported in prepaid expenses and other current assets and $ 2.8 million in other long-term assets.

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

Uniti is accounted for under the equity method of accounting.

ATI’s share of Uniti’s income was $ 1.3 million and $ 2.5 million for the three and nine months ended September 30, 2022, respectively, and $ 0.1 million and $ 1.0 million for the three and nine months ended September 30, 2021, respectively, which is included in the AA&S segment’s operating results, and within other income/expense, net on the consolidated statements of operations.

ATI’s share of Uniti’s income was $ 0.2 million and $ 0.7 million for the three months ended March 31, 2023 and 2022, respectively, which is included in the AA&S segment’s operating results, and within other income/expense, net on the consolidated statements of operations.

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

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

The joint venture is expected to be dissolved in the second quarter of 2023.

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

Supplemental Financial Statement Information

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

(in millions) Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Other income (expense), net for the three months ended March 31, 2023 and 2022 was as follows:

(in millions) Three months ended March 31,

Rent and royalty income $ 0.6 $ 0.7

Gains from disposal of property, plant and equipment, net 0.3 —

Net equity income on joint ventures (See Note 6) 0.8 0.4 11.2 0.4

Gain from sale of business (See Note 5) — 13.7 — 13.7

Litigation reserve (see Note 16) ( 19.9 ) — ( 28.5 ) —

Other $ — $ 0.1 $ — $ 0.1

Net equity income (loss) on joint ventures (See Note 5) ( 0.3 ) 0.4

Litigation reserve — ( 8.6 )

Total other income (expense), net $ 0.6 $ ( 7.5 )

Restructuring

Restructuring charges for the third quarter and nine months ended September 30, 2022 were a credit of $ 2.6 million and $ 5.0 million, respectively, for a reduction in severance-related reserves related to approximately 60 and 110 employees, respectively, based on changes in planned operating rates and revised workforce reduction estimates.

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

Restructuring charges for the nine months ended September 30, 2021 were a net credit of $ 8.5 million, reflecting a $ 9.2 million reduction in severance-related reserves related to approximately 250 employees based on changes in planned operating rates and revised workforce reduction estimates, partially offset by $ 0.7 million of other costs related to facility idlings.

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

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

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

Restructuring reserves for severance cost activity is as follows:

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Balance at December 31, 2022 $ 9.8

Adjustments ( 5.0 )

Payments ( 0.2 )

Balance at September 30, 2022 $ 9.9

The $ 9.9 million restructuring reserve balance at September 30, 2022 includes $ 2.8 million recorded in other current liabilities and $ 7.1 million recorded in other long-term liabilities on the consolidated balance sheet.

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

September 30,

Balance at March 31, 2023 $ 9.6

The $ 9.6 million restructuring reserve balance at March 31, 2023 includes $ 5.2 million recorded in other current liabilities and $ 4.4 million recorded in other long-term liabilities on the consolidated balance sheet.

Supplier Financing

The Company participates in supplier financing programs with two financial institutions to offer its suppliers the option for access to payment in advance of an invoice due date.

Under such programs, the two financial institutions provide early payment to suppliers at their request for invoices that ATI has confirmed as valid at a pre-determined discount rate commensurate with the creditworthiness of ATI.

As of March 31, 2023 and December 31, 2022, the Company had $ 20.5 million and $ 23.7 million, respectively, reported in accounts payable on the consolidated balance sheets under such programs.

Debt at March 31, 2023 and December 31, 2022 was as follows (in millions):

2023 December 31,

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3.5 % Convertible Senior Notes due 2025

4.75 % Convertible Senior Notes due 2022

Allegheny Ludlum 6.95 % Debentures due 2025 (a)

Term Loan due 2027 200.0 200.0

ABL Term Loan 200.0 200.0

revolving credit facility — —

7 unchanged sentences

Revolving Credit Facility

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 and a $ 200 million term loan (Term Loan), and with the amendment now includes a swing loan facility of up to $ 60 million.

The 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 an Asset Based Lending (ABL) Credit Facility, which is collateralized by the accounts receivable and inventory of the Company’s operations.

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.

The ABL facility, which matures in September 2027, includes a $ 600 million revolving credit facility, a letter of credit sub-facility of up to $ 200 million, a $ 200 million term loan (Term Loan), and a swing loan facility of up to $ 60 million.

The Term Loan has an interest rate of 2.0 % above adjusted Secured Overnight Financing Rate (SOFR) 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 $ 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 Term Loan to a 4.21 % fixed interest rate.

The swap matures in June 2024.

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

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

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

The 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) 10 % of the then applicable maximum loan amount under the revolving credit portion of the ABL and the outstanding Term Loan balance, or (ii) $ 60.0 million.

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

The Company was in compliance with the fixed charge coverage ratio as of March 31, 2023.

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 :

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

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

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

The Company also has foreign credit facilities, primarily in China, that total $ 58 million based on September 30, 2022 foreign exchange rates, under which $ 8.5 million and $ 27.4 million was drawn as of September 30, 2022 and December 31, 2021, respectively.

As of March 31, 2023, there were no outstanding borrowings under the revolving portion of the ABL facility, and $ 39.8 million was utilized to support the issuance of letters of credit.

There were no revolving credit borrowings under the ABL facility during the first three months of 2023 or 2022.

The Company also has foreign credit facilities, primarily in China, that total $ 61 million based on March 31, 2023 foreign exchange rates, under which $ 2.9 million and $ 19.4 million was drawn as of March 31, 2023 and December 31, 2022, respectively.

2025 Convertible Notes

As of September 30, 2022, the Company had $ 291.4 million aggregate principal amount of 3.5 % Convertible Notes due 2025 (2025 Convertible Notes) outstanding, which mature on June 15, 2025.

As of September 30, 2022 and December 31, 2021, the fair value of the 2025 Convertible Notes was $ 535 million and $ 379 million, respectively, based on the quoted market price, which is classified in Level 1 of the fair value hierarchy.

As of March 31, 2023, the Company had $ 291.4 million aggregate principal amount of 3.5 % Convertible Notes due 2025 (2025 Convertible Notes) outstanding, which mature on June 15, 2025.

As of March 31, 2023 and December 31, 2022, the fair value of the 2025 Convertible Notes was $ 753 million and $ 590 million, respectively, based on the quoted market price, which is classified in Level 1 of the fair value hierarchy.

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

Including amortization of deferred issuance costs, the effective interest rate is 4.2 % for the third quarters and nine months ended September 30, 2022 and 2021.

Remaining deferred issuance costs were $ 5.2 million and $ 6.5 million at September 30, 2022 and December 31, 2021, respectively.

Including amortization of deferred issuance costs, the effective interest rate is 4.2 % for the first quarters ended March 31, 2023 and 2022.

Remaining deferred issuance costs were $ 4.3 million and $ 4.8 million at March 31, 2023 and December 31, 2022, respectively.

Interest expense on the 2025 Convertible Notes was as follows:

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

Three months ended March 31,

(in millions) 2023 2022

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

The capped call transactions are expected generally to reduce potential dilution to ATI’s common stock upon any conversion of the 2025 Convertible Notes and/or offset any cash

payments ATI is required to make in excess of the principal amount of converted 2025 Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price.

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.

2022 Convertible Notes

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

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

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

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

Including amortization of deferred issuance costs, the effective interest rate was 5.4 % for the third quarter ended September 30, 2021 and nine months ended September 30, 2022 and 2021.

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

Interest expense on the 2022 Convertible Notes was as follows:

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

(in millions) 2022 2021 2022 2021

Contractual coupon rate $ — $ 1.0 $ 2.0 $ 3.0

Amortization of debt issuance costs — 0.2 0.3 0.4

Total interest expense $ — $ 1.2 $ 2.3 $ 3.4

Derivative Financial Instruments and Hedging

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

However, as of September 30, 2022, the Company had entered into financial hedging arrangements, primarily at the request of its customers related to firm orders, for an aggregate notional amount of approximately 6 million pounds of nickel with hedge dates through 2024.

However, as of March 31, 2023, the Company had entered into financial hedging arrangements, primarily at the request of its customers related to firm orders, for an aggregate notional amount of approximately 3 million pounds of nickel with hedge dates through 2024.

The aggregate notional amount hedged is approximately 5 % 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.

These derivative instruments are used to hedge the variability of a selling price that is based on the London Metal 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 September 30, 2022, the outstanding financial derivatives used to hedge the Company’s exposure to energy cost volatility included natural gas cost hedges.

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

At March 31, 2023, the outstanding financial derivatives used to hedge the Company’s exposure to energy cost volatility included natural gas cost hedges.

At March 31, 2023, the Company hedged approximately 75 % of its forecasted domestic requirements for natural gas for the remainder of 2023, approximately 50 % for 2024 and approximately 10 % for 2025.

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

5 unchanged sentences

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

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

At March 31, 2023, the Company had no significant outstanding foreign currency forward contracts.

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

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

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.

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

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

5 unchanged sentences

Asset derivatives

Balance sheet location September 30,

Balance sheet location March 31,

2023 December 31,

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Derivatives designated as hedging instruments:

Interest rate swap Other current liabilities $ — $ 0.9

Natural gas contracts Other current liabilities 5.0 2.0

Nickel and other raw material contracts Other current liabilities 0.4 2.1

Interest rate swap Other long-term liabilities — 0.7

Natural gas contracts Other long-term liabilities 1.1 0.5

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

Total derivatives designated as hedging instruments $ 6.5 $ 4.6

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

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

There were no outstanding fair value hedges as of March 31, 2023.

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

The effects of derivative instruments in the tables below are presented net of related income taxes, excluding any impacts of changes to income tax valuation allowances affecting results of operations or other comprehensive income, when applicable (see Note 14 for further explanation).

Assuming market prices remain constant with those at September 30, 2022, a pre-tax gain of $ 11.8 million is expected to be recognized over the next 12 months.

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

Amount of Gain (Loss)

Recognized in OCI on

Derivatives Amount of Gain (Loss)

Reclassified from

Accumulated OCI

into Income (a)

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

Derivatives in Cash Flow Hedging Relationships 2022 2021 2022 2021

Nickel and other raw material contracts $ ( 0.7 ) $ ( 0.2 ) $ 0.8 $ 1.5

Natural gas contracts 5.4 5.6 4.1 1.0

Foreign exchange contracts 0.5 — 0.5 —

Interest rate swap 0.6 ( 0.2 ) — ( 0.2 )

Total $ 5.8 $ 5.2 $ 5.4 $ 2.3

Assuming market prices remain constant with those at March 31, 2023, a pre-tax loss of $ 2.3 million is expected to be recognized over the next 12 months.

Activity with regard to derivatives designated as cash flow hedges for the three month periods ended March 31, 2023 and 2022 was as follows (in millions):

Amount of Gain (Loss)

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into Income (a)

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

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

Derivatives in Cash Flow Hedging Relationships 2023 2022 2023 2022

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Fair Value of Financial Instruments

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

The estimated fair value of financial instruments at March 31, 2023 was as follows:

Fair Value Measurements at Reporting Date Using

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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.

Accounting standards established three levels of a fair value hierarchy that prioritizes the inputs used to measure fair value.

Accounting standards established three levels of a fair value hierarchy that prioritize the inputs used to measure fair value.

This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs.

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

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

2022 2021 2022 2021

Three months ended March 31,

High Performance Materials & Components $ 529.6 $ 380.8

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Advanced Alloys & Solutions 58.8 43.1

119.8 64.0 305.5 154.6

Sales to external customers:

2 unchanged sentences

$ 1,038.1 $ 834.1

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

2022 2021 2022 2021

Three months ended March 31,

High Performance Materials & Components $ 80.1 $ 68.1

5 unchanged sentences

Interest expense, net ( 19.9 ) ( 23.6 )

Restructuring and other credits (charges) ( 17.3 ) 2.3 ( 23.5 ) 8.5

Strike related costs — ( 22.9 ) — ( 63.2 )

Retirement benefit settlement gain (See Note 12) — 64.9 — 64.9

Gain (loss) on asset sales and sales of businesses, net (See Note 5) — 13.7 ( 134.2 ) 13.7

Restructuring and other charges ( 1.2 ) ( 7.5 )

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

Income before income taxes $ 76.5 $ 40.1

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

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

2022 2021 2022 2021

Three months ended March 31,

High Performance Materials & Components $ 17.4 $ 17.9

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

Results for the nine months ended September 30, 2022 include $ 34.3 million related to this government sponsored COVID relief in segment EBITDA.

HPMC segment nine month results include $ 27.5 million of benefits from the Aviation Manufacturing Jobs

Protection Program and employee retention credits, and AA&S segment nine month results include $ 6.8 million in employee retention credits.

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

Closed operations in the third quarter and nine months ended September 30, 2022 primarily relate to changes in foreign currency remeasurement impacts primarily related to ATI’s European Treasury Center operation and higher legal costs for closed facilities.

Restructuring and other charges for the third quarter and nine months ended September 30, 2022 relate to $ 2.6 million and $ 5.0 million, respectively, of restructuring credits for a reduction in severance-related reserves (see Note 7).

The third quarter and nine months ended September 30, 2022 also include a $ 19.9 million and $ 28.5 million charge, respectively, for a litigation reserve (see Note 16).

Restructuring charges for the third quarter and nine months ended September 30, 2021 were a net credit of $ 2.3 million and $ 8.5 million, respectively, primarily related to lowered severance-related reserves based on changes in planned operating rates and revised workforce reduction estimates (see Note 7).

During the third quarter of 2021, the Company recorded $ 22.9 million in strike related costs, of which $ 21.5 million were excluded from AA&S segment EBITDA and $ 1.4 million were excluded from HPMC segment EBITDA.

During the first nine months of 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 the nine months ended September 30, 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.

Gain (loss) on asset sales and sales of businesses, net, for the third quarter and nine months ended September 30, 2022 relates to a $ 13.7 million gain on the sale of the Company’s Flowform Products operations.

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

HPMC segment results for the first quarter of 2022 include $ 22 million of benefits from the Aviation Manufacturing Jobs Protection Program and employee retention credits, and AA&S segment results for the first quarter of 2022 include $ 7 million in employee retention credits.

Restructuring and other charges of $ 1.2 million for the first quarter of 2023 related to costs to restart the Company’s titanium operations in Albany, OR, which are included within cost of sales on the consolidated statements of operations.

Restructuring and other charges for the first quarter of 2022 relate to an $ 8.6 million charge for a litigation reserve, which is reported in other nonoperating income (expense) on the consolidated statement of operations, partially offset by a $ 1.1 million restructuring credit for a reduction in severance-related reserves.

Loss on asset sales and sales of businesses, net, for the first quarter of 2022 relate to a $ 25.1 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.

Retirement Benefits

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

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

Pension Benefits Other Postretirement Benefits

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

2022 2021 2022 2021

Service cost - benefits earned during the year $ 3.0 $ 3.8 $ 0.3 $ 0.4

Interest cost on benefits earned in prior years 17.2 17.1 1.9 1.9

Expected return on plan assets ( 31.6 ) ( 34.1 ) — —

Amortization of prior service cost (credit) 0.1 0.2 ( 0.2 ) ( 0.6 )

Amortization of net actuarial loss 15.8 18.9 3.3 3.6

Settlement gain — — — ( 64.9 )

Total retirement benefit expense (income) $ 4.5 $ 5.9 $ 5.3 $ ( 59.6 )

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

For the three month periods ended March 31, 2023 and 2022, the components of pension and other postretirement benefit expense for the Company’s defined benefit plans included the following (in millions):

Pension Benefits Other Postretirement Benefits

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

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

2023 2022 2023 2022

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Amortization of net actuarial loss 14.4 16.0 1.5 3.3

Settlement loss (gain) 29.5 — — ( 64.9 )

Total retirement benefit expense (income) $ 42.4 $ 17.5 $ 15.8 $ ( 49.4 )

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

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

On July 14, 2021, ATI announced that a new four-year labor agreement with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied & Industrial Service Workers International Union, AFL-CIO, CLC (USW) was ratified.

As a result of this new agreement, ATI recognized a $ 64.9 million pretax 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.

Discrete tax effects related to this event were $ 15.5 million of income tax expense (see Note 13 for further discussion).

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

Tax expense in 2022 is mainly attributable to the Company’s foreign operations.

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

jurisdiction.

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

The 2021 tax expense includes $ 15.5 million of discrete tax expense related to the postretirement medical benefits gain discussed in Note 12, in accordance with ATI’s accounting policy for recognizing deferred tax amounts stranded in accumulated other comprehensive income.

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

Total retirement benefit expense $ 14.4 $ 4.0 $ 4.2 $ 5.2

The provision for income taxes for the first quarters ended March 31, 2023 and 2022 was $ 4.3 million and $ 4.9 million, respectively.

Tax expense in both periods is mainly attributable to the Company’s foreign operations and was based on an estimated annual effective tax rate calculation which included foreign, non-valuation allowance, operations combined with the U.S.

jurisdiction.

The first quarter of 2022 calculation excluded the results related to the Company’s Sheffield, UK operations, which was sold in the second quarter of 2022.

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

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Per Share Information

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

(In millions, except per share amounts) Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Numerator for basic income (loss) per common share –

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

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

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

Numerator for basic income per common share –

Net income attributable to ATI $ 70.1 $ 30.9

Effect of dilutive securities:

1 unchanged sentence

3.5 % Convertible Senior Notes due 2025

Numerator for diluted net income (loss) per common share –

Net income (loss) attributable to ATI after assumed conversions $ 63.9 $ 52.7 $ 54.0 $ ( 8.4 )

Denominator for basic net income (loss) per common share – weighted average shares 129.8 127.2 126.9 127.0

Numerator for diluted net income per common share –

Net income attributable to ATI after assumed conversions $ 72.7 $ 34.9

Denominator for basic net income per common share – weighted average shares 128.5 126.4

Effect of dilutive securities:

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3.5 % Convertible Senior Notes due 2025

18.8 18.8 — —

Denominator for diluted net income (loss) per common share – adjusted weighted average shares and assumed conversions 150.8 152.6 128.9 127.0

Basic net income (loss) attributable to ATI per common share $ 0.47 $ 0.38 $ 0.43 $ ( 0.07 )

Diluted net income (loss) attributable to ATI per common share $ 0.42 $ 0.35 $ 0.42 $ ( 0.07 )

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

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

There were no anti-dilutive shares for the three months ended September 30, 2022, and 22.5 million anti-dilutive shares for the nine months ended September 30, 2022.

There were no anti-dilutive shares for the three months ended September 30, 2021, and 25.6 million anti-dilutive shares for the nine months ended September 30, 2021.

Denominator for diluted net income per common share – adjusted weighted average shares and assumed conversions 150.1 152.8

Basic net income attributable to ATI per common share $ 0.55 $ 0.24

Diluted net income attributable to ATI per common share $ 0.48 $ 0.23

Common stock that would be issuable upon the assumed conversion of the 2025 Convertible Notes, the 2022 Convertible Notes prior to their maturity on June 30, 2022, and other option equivalents and contingently issuable shares are excluded from the computation of contingently issuable shares, and therefore, from the denominator for diluted earnings per share, if the effect of inclusion is anti-dilutive.

There were no anti-dilutive shares for the three months ended March 31, 2023 or 2022.

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

2 unchanged sentences

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

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

In the three months ended March 31, 2023 and 2022, ATI used $ 10.1 million and $ 89.9 million, respectively, to repurchase 0.2 million and 3.5 million shares, respectively, of its common stock under this program.

Accumulated Other Comprehensive Income (Loss)

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

benefit plans Currency

adjustment Derivatives Deferred Tax Asset Valuation Allowance Total

Attributable to ATI:

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

OCI before reclassifications — ( 20.6 ) 5.8 — ( 14.8 )

Amounts reclassified from AOCI (a) 14.5 (c) — (d) ( 5.4 ) (e) 4.7 13.8

Net current-period OCI 14.5 ( 20.6 ) 0.4 4.7 ( 1.0 )

Balance, September 30, 2022 $ ( 868.5 ) $ ( 85.7 ) $ 17.2 $ 27.1 $ ( 909.9 )

Attributable to noncontrolling interests:

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

OCI before reclassifications — ( 9.4 ) — — ( 9.4 )

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

Net current-period OCI — ( 9.4 ) — — ( 9.4 )

Balance, September 30, 2022 $ — $ 7.6 $ — $ — $ 7.6

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

The changes in AOCI by component, net of tax, for the three month period ended March 31, 2023 were as follows (in millions):

benefit plans Currency

3 unchanged sentences

OCI before reclassifications — ( 1.1 ) ( 11.4 ) — ( 12.5 )

Amounts reclassified from AOCI (a) 79.2 (b) 20.0 (d) ( 24.7 ) (e) 11.3 85.8

Net current-period OCI 79.2 ( 20.8 ) 12.1 11.3 81.8

Balance, September 30, 2022 $ ( 868.5 ) $ ( 85.7 ) $ 17.2 $ 27.1 $ ( 909.9 )

Attributable to noncontrolling interests:

Balance, December 31, 2021 $ — $ 26.0 $ — $ — $ 26.0

OCI before reclassifications — ( 18.4 ) — — ( 18.4 )

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

Net current-period OCI — ( 18.4 ) — — ( 18.4 )

Balance, September 30, 2022 $ — $ 7.6 $ — $ — $ 7.6

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

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

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

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

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

benefit plans Currency

adjustment Derivatives Deferred Tax Asset Valuation Allowance Total

Attributable to ATI:

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

OCI before reclassifications — ( 4.2 ) 5.2 — 1.0

Amounts reclassified from AOCI (a) 12.1 (b) — (c) ( 4.2 ) (d) ( 1.2 ) 6.7

Net current-period OCI 12.1 ( 1.1 ) ( 15.6 ) ( 1.2 ) ( 5.8 )

Balance, September 30, 2021 $ ( 1,082.9 ) $ ( 60.0 ) $ 8.0 $ ( 26.2 ) $ ( 1,161.1 )

Balance, March 31, 2023 $ ( 724.0 ) $ ( 71.2 ) $ ( 2.1 ) $ 66.3 $ ( 731.0 )

Attributable to noncontrolling interests:

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

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

OCI before reclassifications — 4.4 — — 4.4

1 unchanged sentence

Net current-period OCI — 4.4 — — 4.4

Balance, September 30, 2021 $ — $ 22.9 $ — $ — $ 22.9

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

Balance, March 31, 2023 $ — $ 12.1 $ — $ — $ 12.1

(a) Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 11).

(b) No amounts were reclassified to earnings.

(c) Amounts related to derivatives are included in sales, cost of goods sold or interest expense in the period or periods the hedged item affects earnings (see Note 8).

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

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

benefit plans Currency

5 unchanged sentences

Net current-period OCI 14.5 ( 7.5 ) 14.9 9.3 31.2

Balance, September 30, 2021 $ ( 1,082.9 ) $ ( 60.0 ) $ 8.0 $ ( 26.2 ) $ ( 1,161.1 )

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

Attributable to noncontrolling interests:

3 unchanged sentences

Net current-period OCI — 0.7 — — $ 0.7

Balance, September 30, 2021 $ — $ 22.9 $ — $ — $ 22.9

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

(a) Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 11).

7 unchanged sentences

subsidiaries.

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

Amounts reclassified out of AOCI

Reclassifications out of AOCI for the three month periods ended March 31, 2023 and 2022 were as follows:

Details about AOCI Components

(In millions)

Three months ended September 30, 2022 Three months ended September 30, 2021 Nine months ended September 30, 2022 Nine months ended September 30, 2021 Affected line item in the statements

Three months ended March 31, 2023 Three months ended March 31, 2022 Affected line item in the statements

of operations

2 unchanged sentences

Actuarial losses ( 15.9 ) ( 19.3 ) (a)

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

( 19.0 ) ( 0.2 ) ( 86.7 ) ( 43.6 ) (d) Total before tax

( 4.5 ) 3.8 ( 7.5 ) ( 6.6 ) Tax expense (benefit) (e)

( 15.8 ) ( 19.1 ) (c) Total before tax

( 3.7 ) ( 4.6 ) Tax benefit (d)

$ ( 12.1 ) $ ( 14.5 ) Net of tax

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

Nickel and other raw material contracts $ 1.0 $ 2.0 $ 20.1 $ 5.4 (c)

Natural gas contracts 5.4 1.3 12.0 1.6 (c)

Foreign exchange contracts 0.7 — 0.8 — (c)

Interest rate swap — ( 0.3 ) ( 0.4 ) ( 0.8 ) (c)

7.1 3.0 32.5 6.2 (d) Total before tax

1.7 0.7 7.8 1.5 Tax expense (e)

Nickel and other raw material contracts $ 6.9 $ 3.2 (b)

Natural gas contracts ( 1.8 ) 2.1 (b)

Foreign exchange contracts 0.1 — (b)

Interest rate swap 0.3 ( 0.3 ) (b)

5.5 5.0 (c) Total before tax

1.3 1.2 Tax expense (d)

$ 4.2 $ 3.8 Net of tax

(a) Amounts are reported in nonoperating retirement benefit expense (see Note 11).

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

Amounts in 2021 are reported in nonoperating retirement benefit expense (see Note 12).

(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.

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

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 8).

(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.

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

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

Commitments and Contingencies

6 unchanged sentences

The Company adjusts its accruals to reflect new information as appropriate.

Future adjustments could have a material adverse effect on the Company’s

consolidated results of operations in a given period, but the Company cannot reliably predict the amounts of such future adjustments.

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

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

At March 31, 2023, 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;

$ 8 million for formerly owned or operated sites for which the Company has remediation or indemnification obligations;

$ 8 million for formerly owned or operated sites for which the

Company has remediation or indemnification obligations;

and $ 2 million for owned or controlled sites at which Company operations have been or plan to be discontinued.

7 unchanged sentences

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.

2:17-cv-00923-DB) and filed in federal district court in Salt Lake City, UT, pertaining to a Supply and Operating Agreement between US Magnesium LLC (USM) and ATI Titanium entered into in 2006 (the Supply Agreement).

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.

ATI Titanium and USM reached a settlement for $ 28.5 million.

The Company recorded a $ 28.5 million litigation reserve on this matter for the nine months ended September 2022, of which $ 19.9 million was recorded in the third quarter of 2022 and is reported within other (nonoperating) expense on the consolidated statement of operations.

Based on the terms of the settlement, the Company expects to pay the $ 28.5 million in the fourth quarter of 2022.

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

What changed 10-Q

Item 1. Financial Statements