What changed in this filing

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Item 1. Financial Statements

2024-04-30 compared with 2023-11-02 · 197 added, 364 removed, 517 unchanged (52% of the section changed)

4 unchanged sentences

(Current period unaudited)

September 30,

2024 December 31,

27 unchanged sentences

authorized- 500,000,000 shares;

issued- 132,292,666 shares at September 30, 2023 and 131,392,262 shares at December 31, 2022;

outstanding- 127,576,395 shares at September 30, 2023 and 128,273,042 shares at December 31, 2022

issued- 133,796,517 shares at March 31, 2024 and 132,300,971 shares at December 31, 2023;

outstanding- 124,441,401 shares at March 31, 2024 and 126,879,099 shares at December 31, 2023

Additional paid-in capital 1,703.1 1,697.1

Retained earnings 398.7 176.9

Retained loss ( 4.0 ) ( 70.1 )

Treasury stock:

4,716,271 shares at September 30, 2023 and 3,119,220 shares at December 31, 2022

9,355,116 shares at March 31, 2024 and 5,421,872 shares at December 31, 2023

( 360.1 ) ( 184.0 )

8 unchanged sentences

(In millions, except per share amounts)

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

2023 2022 2023 2022

Quarter ended

March 31, 2024 April 2, 2023

Sales $ 1,042.9 $ 1,038.1

2 unchanged sentences

Selling and administrative expenses 82.0 80.6

Restructuring charges (credits) ( 0.5 ) ( 2.6 ) 2.2 ( 5.0 )

Loss on asset sales and sales of businesses, net 0.1 — 0.8 134.2

Restructuring charges 0.2 —

Operating income 115.2 112.6

1 unchanged sentence

Interest expense, net ( 26.6 ) ( 19.9 )

Other income (expense), net — ( 18.5 ) 1.3 ( 15.3 )

Other income, net 0.4 0.6

Income before income taxes 85.3 90.9

9 unchanged sentences

(In millions)

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

2023 2022 2023 2022

Quarter ended

March 31, 2024 April 2, 2023

Net income $ 68.4 $ 86.6

1 unchanged sentence

Unrealized net change arising during the period ( 6.6 ) 3.3

Reclassification adjustment included in net income — — — 20.0

Total ( 9.2 ) ( 30.0 ) ( 14.0 ) ( 39.2 )

Net derivatives gain (loss) on hedge transactions ( 3.2 ) 7.7 ( 20.6 ) 48.4

Net derivatives loss on hedge transactions ( 1.8 ) ( 15.0 )

Reclassification to net income of net realized loss (gain) 1.7 ( 5.5 )

6 unchanged sentences

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

Settlement loss included in net income — — — 29.5

Income taxes on postretirement benefit plans 0.3 —

Total 0.9 1.4

Other comprehensive income (loss), net of tax 5.3 ( 10.4 ) 12.9 63.4

Other comprehensive loss, net of tax ( 5.8 ) ( 15.8 )

Comprehensive income 62.6 70.8

Comprehensive income (loss) attributable to noncontrolling interests 1.8 ( 6.1 ) 5.7 ( 7.1 )

Comprehensive income attributable to noncontrolling interests 2.1 6.5

Comprehensive income attributable to ATI $ 60.5 $ 64.3

3 unchanged sentences

(In millions)

Nine months ended September 30,

Quarter ended

March 31, 2024 April 2, 2023

Operating Activities:

5 unchanged sentences

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

Loss on sales of businesses 0.6 141.0

Changes in operating assets and liabilities:

2 unchanged sentences

Accounts payable ( 33.5 ) ( 77.8 )

Pension plan contributions — ( 50.0 )

Retirement benefits ( 3.4 ) ( 5.0 )

4 unchanged sentences

Proceeds from disposal of property, plant and equipment 1.0 0.9

Transaction costs from sales of businesses, net of proceeds ( 0.3 ) ( 2.8 )

Other 1.0 0.2

1 unchanged sentence

Financing Activities:

Borrowings on long-term debt 425.0 —

Payments on long-term debt and finance leases ( 7.1 ) ( 5.7 )

Net payments under credit facilities ( 4.9 ) ( 16.8 )

Debt issuance costs ( 6.1 ) —

Purchase of treasury stock ( 150.0 ) ( 10.1 )

Sale of noncontrolling interests — 0.9

Dividends paid to noncontrolling interests — ( 16.0 )

Shares repurchased for income tax withholding on share-based compensation and other ( 24.9 ) ( 10.7 )

Cash provided by (used in) financing activities 323.4 ( 158.2 )

Cash used in financing activities ( 186.9 ) ( 43.3 )

Decrease in cash and cash equivalents ( 349.5 ) ( 387.8 )

13 unchanged sentences

Interests Total

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

Balance, June 30, 2023 $ 13.2 $ 1,682.0 $ 323.0 $ ( 107.9 ) $ ( 716.3 ) $ 115.2 $ 1,309.2

Net income — — 75.7 — — 3.9 79.6

Other comprehensive income (loss) — — — — 7.4 ( 2.1 ) 5.3

Purchase of treasury stock — — — ( 45.4 ) — — ( 45.4 )

Employee stock plans — 7.5 — ( 0.3 ) — — 7.2

Balance, September 30, 2023 $ 13.2 $ 1,689.5 $ 398.7 $ ( 153.6 ) $ ( 708.9 ) $ 117.0 $ 1,355.9

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

Balance, January 1, 2023 $ 13.1 $ 1,668.1 $ ( 480.9 ) $ ( 87.0 ) $ ( 67.4 ) $ 111.3 $ 1,157.2

Net income — — 84.5 — — 2.1 86.6

1 unchanged sentence

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, April 2, 2023 $ 13.2 $ 1,675.1 $ ( 396.4 ) $ ( 107.8 ) $ ( 87.6 ) $ 117.8 $ 1,214.3

Balance, December 31, 2023 $ 13.2 $ 1,697.1 $ ( 70.1 ) $ ( 184.0 ) $ ( 83.2 ) $ 107.5 $ 1,480.5

Net income — — 66.1 — — 2.3 68.4

Other comprehensive income (loss) — — — — 16.3 ( 3.4 ) 12.9

Other comprehensive loss — — — — ( 5.6 ) ( 0.2 ) ( 5.8 )

Purchase of treasury stock — — — ( 151.2 ) — — ( 151.2 )

Employee stock plans 0.2 6.0 — ( 24.9 ) — — ( 18.7 )

Balance, September 30, 2023 $ 13.2 $ 1,689.5 $ 398.7 $ ( 153.6 ) $ ( 708.9 ) $ 117.0 $ 1,355.9

Balance, March 31, 2024 $ 13.4 $ 1,703.1 $ ( 4.0 ) $ ( 360.1 ) $ ( 88.8 ) $ 109.6 $ 1,373.2

The accompanying notes are an integral part of these statements.

5 unchanged sentences

and its subsidiaries.

The Company follows a 4-4-5 or 5-4-4 fiscal calendar, whereby each fiscal quarter consists of thirteen weeks grouped into two four-week months and one five-week month, and its fiscal year ends on the Sunday closest to December 31.

Unless otherwise stated, references to years and quarters in this Quarterly Report on Form 10-Q relate to fiscal years and quarters, rather than calendar years and quarters.

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

3 unchanged sentences

In management’s opinion, all adjustments (which include only normal recurring adjustments) considered necessary for a fair presentation have been included.

Certain prior year amounts have been reclassified in order to conform with year 2024 presentation.

These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2023 Annual Report on Form 10-K.

5 unchanged sentences

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, 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.

This new guidance, with the exception of annual disclosures on rollforward information, was effective for the Company in fiscal year 2023, and the Company adopted this new accounting guidance effective January 2, 2023.

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

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.

Pending Accounting Pronouncements

In November 2023, the FASB issued new accounting guidance related to segment reporting disclosures.

This guidance requires additional disclosures on an annual and interim basis of segment information, including significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and the presentation and composition of other segment items, which is the difference between segment revenue less segment expenses and the measure of segment profit or loss.

The guidance also requires that all current segment disclosures required on an annual basis be provided on an interim basis and requires disclosure of the title and position of the CODM and how the CODM uses the reported measure of segment profit or loss in assessing performance and allocating resources.

This guidance does not change how an entity identifies its reportable segments.

This new guidance includes annual disclosure requirements that will be effective for the Company for fiscal year 2024 and quarterly disclosure requirements that will be effective for fiscal year 2025.

The guidance must be applied retrospectively and early adoption is permitted.

The Company does not expect to early adopt this guidance and does not expect these changes to have an impact on the Company’s consolidated financial statements other than disclosure requirements.

In December 2023, the FASB issued new accounting guidance related to income tax disclosures.

This guidance requires entities to disclose specific categories in its annual rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

This guidance also requires additional annual disclosures for income taxes paid and requires disaggregation of income before tax, between domestic and foreign, and income tax expense, between federal, state and foreign.

This guidance also eliminates several current disclosure requirements related to:

(1) the nature and estimate of the range of the reasonably possible change in the unrecognized tax benefits balance in the next 12 months, (2) making a statement that an estimate of the range cannot be made, and (3) disclosing the cumulative amount of each type of temporary difference when a deferred tax liability is not recognized because of the exceptions to comprehensive recognition of deferred taxes related to

subsidiaries and corporate joint ventures.

This new guidance will be effective for the Company for fiscal year 2025 and must be applied on a prospective basis with retrospective application permitted.

Early adoption of this guidance is also permitted.

The Company does not expect to early adopt this guidance and does not expect these changes to have an impact on the Company’s consolidated financial statements other than disclosure requirements.

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 regarding the Company’s overall revenues (in millions) by global and geographical markets for the third quarters and nine months ended September 30, 2023 and 2022 is included in the following tables.

(in millions) Third quarter ended

September 30, 2023 September 30, 2022

Comparative information regarding the Company’s overall revenues by global and geographical markets for the quarters ended March 31, 2024 and April 2, 2023 is included in the following tables.

(in millions) Quarter ended

March 31, 2024 April 2, 2023

HPMC AA&S Total HPMC AA&S Total

8 unchanged sentences

Total Energy 21.7 136.9 158.6 27.3 182.9 210.2

Automotive 7.2 40.9 48.1 3.5 66.1 69.6

Medical 35.9 23.2 59.1 17.5 17.5 35.0

Electronics 0.6 44.2 44.8 0.7 47.8 48.5

Construction/Mining 7.7 32.3 40.0 9.5 38.3 47.8

Food Equipment & Appliances — 16.2 16.2 0.2 45.0 45.2

Other 16.2 38.1 54.3 14.1 36.6 50.7

Total $ 539.5 $ 486.1 $ 1,025.6 $ 457.6 $ 574.4 $ 1,032.0

(in millions) Nine months ended

September 30, 2023 September 30, 2022

HPMC AA&S Total HPMC AA&S Total

Diversified Global Markets:

Aerospace & Defense:

Jet Engines- Commercial $ 914.2 $ 67.0 $ 981.2 $ 696.1 $ 61.8 $ 757.9

Airframes- Commercial 242.0 295.7 537.7 130.9 200.3 331.2

Defense 131.6 157.8 289.4 120.6 123.6 244.2

Total Aerospace & Defense 1,287.8 520.5 1,808.3 947.6 385.7 1,333.3

Oil & Gas 8.6 317.2 325.8 32.1 323.3 355.4

Specialty Energy 75.0 137.8 212.8 88.0 109.3 197.3

Total Energy 83.6 455.0 538.6 120.1 432.6 552.7

Automotive 5.0 51.0 56.0 6.3 53.1 59.4

Construction/Mining 26.9 101.9 128.8 25.8 113.9 139.7

Medical 70.7 53.7 124.4 52.3 70.8 123.1

Electronics 1.0 51.9 52.9 0.5 33.9 34.4

Construction/Mining 6.7 20.5 27.2 8.2 32.2 40.4

Food Equipment & Appliances — 11.9 11.9 — 21.5 21.5

1 unchanged sentence

Total $ 529.9 $ 513.0 $ 1,042.9 $ 471.1 $ 567.0 $ 1,038.1

(in millions) Third quarter ended

September 30, 2023 September 30, 2022

HPMC AA&S Total HPMC AA&S Total

Primary Geographical Market:

United States $ 242.6 $ 314.2 $ 556.8 $ 221.6 $ 395.5 $ 617.1

Europe 217.7 49.7 267.4 147.0 53.2 200.2

Asia 37.8 103.4 141.2 60.7 108.9 169.6

Canada 13.1 10.4 23.5 10.0 9.5 19.5

South America, Middle East and other 28.3 8.4 36.7 18.3 7.3 25.6

Total $ 539.5 $ 486.1 $ 1,025.6 $ 457.6 $ 574.4 $ 1,032.0

(in millions) Nine months ended

September 30, 2023 September 30, 2022

(in millions) Quarter ended

March 31, 2024 April 2, 2023

HPMC AA&S Total HPMC AA&S Total

8 unchanged sentences

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

Third quarter ended

September 30, 2023 September 30, 2022

HPMC AA&S Total HPMC AA&S Total

Diversified Products and Services:

Nickel-based alloys and specialty alloys 42 % 52 % 47 % 52 % 57 % 54 %

Titanium and titanium-based alloys 24 % 13 % 19 % 16 % 7 % 11 %

Precision forgings, castings and components 33 % — % 18 % 32 % — % 15 %

Precision rolled strip products 1 % 19 % 9 % — % 22 % 12 %

Zirconium and related alloys — % 16 % 7 % — % 14 % 8 %

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

Nine months ended

September 30, 2023 September 30, 2022

Quarter ended

March 31, 2024 April 2, 2023

HPMC AA&S Total HPMC AA&S Total

3 unchanged sentences

Titanium and titanium-based alloys 24 % 12 % 18 % 20 % 8 % 14 %

Precision rolled strip products 1 % 18 % 9 % — % 25 % 14 %

Zirconium and related alloys — % 20 % 10 % — % 13 % 7 %

Precision rolled strip products 1 % 17 % 8 % 1 % 19 % 10 %

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

The Company maintained a backlog of confirmed orders totaling $ 3.6 billion and $ 2.7 billion at September 30, 2023 and 2022, respectively.

Due to the structure of the Company’s long-term agreements, approximately 70 % of this backlog at September 30, 2023 represented booked orders with performance obligations that will be satisfied within the next 12 months.

The Company maintained a backlog of confirmed orders totaling $ 3.9 billion and $ 3.3 billion at March 31, 2024 and April 2, 2023, respectively.

Due to the structure of the Company’s long-term agreements, approximately 70 % of this backlog at March 31, 2024 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, 2023 and December 31, 2022, accounts receivable with customers were $ 686.7 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 nine months ended September 30, 2023 and 2022:

As of March 31, 2024 and December 31, 2023, accounts receivable from customers were $ 723.6 million and $ 628.2 million, respectively.

The following represents the rollforward of accounts receivable - reserve for doubtful accounts and contract assets and liabilities for the quarters ended March 31, 2024 and April 2, 2023:

(in millions)

Accounts Receivable - Reserve for Doubtful Accounts September 30,

2023 September 30,

Balance as of beginning of fiscal year $ 7.7 $ 3.8

Accounts Receivable - Reserve for Doubtful Accounts March 31,

2024 April 2,

Balance as of beginning of year $ 3.2 $ 7.7

Expense to increase the reserve — —

3 unchanged sentences

Contract Assets

Short-term September 30,

2023 September 30,

Balance as of beginning of fiscal year $ 64.1 $ 53.9

Short-term March 31,

2024 April 2,

Balance as of beginning of year $ 59.1 $ 64.1

Recognized in current year 28.0 20.4

Reclassified to accounts receivable ( 21.8 ) ( 31.8 )

Reclassification to/from long-term and contract liability — 0.1

Balance as of period end $ 65.3 $ 52.7

1 unchanged sentence

Contract Liabilities

Short-term September 30,

2023 September 30,

Balance as of beginning of fiscal year $ 149.1 $ 116.2

Short-term March 31,

2024 April 2,

Balance as of beginning of year $ 163.6 $ 149.1

Recognized in current year 38.1 33.6

1 unchanged sentence

Current year amounts reclassified to revenue ( 9.3 ) ( 0.4 )

Other ( 0.1 ) 0.8

Reclassification to/from long-term and contract asset 27.4 22.1

Reclassification to/from long-term 5.9 19.1

Balance as of period end $ 161.6 $ 149.7

Long-term (a) September 30,

2023 September 30,

Balance as of beginning of fiscal year $ 66.8 $ 84.4

Long-term (a) March 31,

2024 April 2,

Balance as of beginning of year $ 39.4 $ 66.8

Recognized in current year 0.6 1.0

2 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 $ 7.7 million and $ 7.3 million as of September 30, 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 and nine months ended September 30, 2023 was $ 0.2 million and $ 0.9 million, respectively.

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

Inventories at September 30, 2023 and December 31, 2022 were as follows (in millions):

September 30,

Contract costs for obtaining and fulfilling a contract were $ 8.2 million and $ 8.1 million as of March 31, 2024 and December 31, 2023, respectively, and are reported in other long-term assets on the consolidated balance sheet.

Contract cost amortization expense for the quarters ended March 31, 2024 and April 2, 2023 was $ 0.3 million.

Inventories at March 31, 2024 and December 31, 2023 were as follows (in millions):

2024 December 31,

7 unchanged sentences

Property, Plant and Equipment

Property, plant and equipment at September 30, 2023 and December 31, 2022 was as follows (in millions):

September 30,

Property, plant and equipment at March 31, 2024 and December 31, 2023 was as follows (in millions):

2024 December 31,

5 unchanged sentences

Total property, plant and equipment, net $ 1,688.9 $ 1,665.9

The construction in progress portion of property, plant and equipment at September 30, 2023 was $ 267.1 million.

Capital expenditures on the consolidated statement of cash flows for the nine months ended September 30, 2023 exclude $ 28.9 million of incurred but unpaid capital expenditures that were included in property, plant and equipment and accrued at September 30, 2023.

The construction in progress portion of property, plant and equipment at March 31, 2024 was $ 343.3 million.

Capital expenditures on the consolidated statement of cash flows for the quarters ended March 31, 2024 and April 2, 2023 exclude $ 33.0 million and $ 11.6 million, respectively, of accrued capital expenditures that were included in property, plant and equipment at March 31, 2024 and April 2, 2023, respectively.

Joint Ventures

4 unchanged sentences

The remaining 40 % interest in STAL is owned by China Baowu Steel Group Corporation Limited, a state authorized investment company whose equity securities are publicly traded in the People’s Republic of China.

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, 2023 were $ 85.0 million.

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

Cash and cash equivalents held by STAL as of March 31, 2024 were $ 73.7 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;

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, 2023 were $ 1.0 million.

however, there is no active development at this time.

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

Cash and cash equivalents held by this joint venture as of March 31, 2024 were $ 1.0 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 was received by ATI through December 31, 2021 and the remaining $ 5.5 million was received in the fourth quarter of 2022.

Tsingshan purchased its 50 % joint venture interest in A&T Stainless in 2018 for $ 17.5 million.

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

ATI provided hot-rolling conversion services to A&T Stainless using the AA&S segment’s HRPF.

The DRAP facility has been idled since the third quarter of 2020.

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

In 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 April 2019, the Company learned that this exclusion request was denied by the United States Department of Commerce.

ATI filed new requests on behalf of A&T Stainless for exclusion from the Section 232 tariffs in October 2019.

These requests were denied by the United States Department of Commerce in the second quarter of 2020, and the 25% tariff remained in place.

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

ATI’s share of A&T Stainless results were losses of $ 0.5 million and $ 1.3 million for the three and nine months ended September 30, 2023, respectively, and 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 is included within other income/expense, net, on the consolidated statements of operations and in the AA&S segment’s operating results.

ATI’s share of A&T Stainless results for the nine months ended September 30, 2022 included $ 9.9 million for ATI’s share of the $ 19.7 million tariff refund and accrued interest recognized as income by the joint venture in the second quarter of 2022 resulting from a settlement agreement with the U.S.

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

As of September 30, 2023 and December 31, 2022, ATI had net receivables for working capital advances and administrative services from A&T Stainless of $ 1.9 million and $ 3.2 million, respectively.

For the September 30, 2023 balance of net receivables, $ 0.5 million was reported in prepaid expenses and other current assets and $ 1.4 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 results were losses of $ 0.2 million for the three months ended September 30, 2023 and income of $ 0.3 million for the nine months ended September 30, 2023, and income of $ 1.3 million and $ 2.5 million for the three and nine months ended September 30, 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.

ATI’s share of A&T Stainless results were losses of $ 0.4 million and $ 0.5 million for the quarters ended March 31, 2024 and April 2, 2023, 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, 2024 and December 31, 2023, ATI had net receivables for working capital advances and administrative services from A&T Stainless of $ 1.0 million and $ 1.5 million, respectively.

ATI had 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.

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

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

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

Uniti was accounted for under the equity method of accounting.

ATI’s share of Uniti’s results was income of $ 0.2 million for the quarter ended April 2, 2023, which was included in the AA&S segment’s operating results, and within other income/expense, net on the consolidated statements of operations.

The Company received its final distribution in the first quarter of 2024 as a result of the termination, with formal dissolution expected in the second half of 2024.

Supplemental Financial Statement Information

Other income (expense), net for the three and nine months ended September 30, 2023 and 2022 was as follows:

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

2023 2022 2023 2022

Other income (expense), net for the quarters ended March 31, 2024 and April 2, 2023 was as follows:

(in millions) Quarter ended

March 31, 2024 April 2, 2023

Rent and royalty income $ 0.8 $ 0.6

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

Net equity income (loss) on joint ventures (See Note 5) ( 0.7 ) 0.8 ( 1.0 ) 11.2

Litigation reserve — ( 19.9 ) — ( 28.5 )

Total other income (expense), net $ — $ ( 18.5 ) $ 1.3 $ ( 15.3 )

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

Total other income, net $ 0.4 $ 0.6

Restructuring

Restructuring charges for the third quarter ended September 30, 2023 were a credit of $ 0.5 million for a reduction in severance-related reserves related to approximately 10 employees based on changes in planned operating rates and revised workforce reduction estimates.

Restructuring charges for the nine months ended September 30, 2023 were a charge of $ 2.2 million and represent severance for the involuntary reduction of approximately 40 employees across ATI’s domestic operations in conjunction with the continued transformation, partially offset by the credit in the third quarter 2023 discussed above for a reduction in severance-related reserves.

Restructuring charges for the third quarter and nine months ended September 30, 2022 were a net 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.

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

Restructuring charges for the quarter ended March 31, 2024 were $ 0.2 million, primarily for the involuntary termination of several employees in ATI’s domestic operations.

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

Restructuring reserves for severance cost activity is as follows:

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Payments ( 1.5 )

Balance at September 30, 2023 $ 10.9

The $ 10.9 million restructuring reserve balance at September 30, 2023 includes $ 6.7 million recorded in other current liabilities and $ 4.2 million recorded in other long-term liabilities on the consolidated balance sheet.

Balance at March 31, 2024 $ 13.9

The $ 13.9 million restructuring reserve balance at March 31, 2024 includes $ 9.7 million recorded in other current liabilities and $ 4.2 million recorded in other long-term liabilities on the consolidated balance sheet.

Supplier Financing

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Under such programs, these 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 September 30, 2023 and December 31, 2022, the Company had $ 14.0 million and $ 23.7 million, respectively, reported in accounts payable on the consolidated balance sheets under such programs.

Debt at September 30, 2023 and December 31, 2022 was as follows (in millions):

September 30,

As of March 31, 2024 and December 31, 2023, the Company had $ 18.4 million and $ 15.6 million, respectively, reported in accounts payable on the consolidated balance sheets under such programs.

Debt at March 31, 2024 and December 31, 2023 was as follows (in millions):

2024 December 31,

7.25 % Notes due 2030

$ 425.0 $ 425.0

5.875 % Notes due 2027

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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, 2023.

The Company was in compliance with the fixed charge coverage ratio as of March 31, 2024.

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.

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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, 2023, there were no outstanding borrowings under the revolving portion of the ABL facility, and $ 31.7 million was utilized to support the issuance of letters of credit.

There were average revolving credit borrowings of $ 17 million bearing an average annual interest rate of 6.5 % under the ABL facility for the first nine months of 2023.

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

The Company also has foreign credit facilities, primarily in China, that total $ 57 million based on September 30, 2023 foreign exchange rates, under which $ 11.2 million and $ 19.4 million was drawn as of September 30, 2023 and December 31, 2022, respectively.

In August 2023, ATI issued $ 425 million aggregate principal amount of 7.25 % Senior Notes due 2030 (2030 Notes).

Interest on the 2030 Notes is payable semi-annually in arrears at a rate of 7.25 % per year.

The 2030 Notes will mature on August 15, 2030.

Net proceeds were $ 418.8 million from this issuance, of which $ 222 million was used to fund ATI’s U.S.

qualified defined benefit pension plan in order to facilitate a pension derisking strategy (see Note 16), and the remaining proceeds were used for liquidity and general corporate purposes.

Underwriting fees and other third-party expenses for the issuance of the 2030 Notes were $ 6.2 million, and are being amortized to interest expense over the 7-year term of the 2030 Notes.

The 2030 Notes are unsecured and unsubordinated obligations of the Company and equally ranked with all of its existing and future senior unsecured debt.

The 2030 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 2030 Notes, as a whole or in part, at any time or from time to time, on at least 15 days, but not more than 60 days, prior notice to the holders of the Notes at redemption prices specified in the 2030 Notes.

The 2030 Notes are subject to repurchase upon the occurrence of a change in control repurchase event (as defined in the 2030 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 2030 Notes repurchased.

As of March 31, 2024, there were no outstanding borrowings under the revolving portion of the ABL facility, and $ 31.7 million was utilized to support the issuance of letters of credit.

There were no revolving credit borrowings under the ABL facility during the first quarter of 2024 or 2023.

The Company also has foreign credit facilities, primarily in China, that total $ 57 million based on March 31, 2024 foreign exchange rates, none of which was drawn as of March 31, 2024 and $ 5.0 million of which was drawn as of December 31, 2023.

2025 Convertible Notes

As of September 30, 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 September 30, 2023 and December 31, 2022, the fair value of the 2025 Convertible Notes was $ 786 million and $ 590 million, respectively, based on the quoted market price, which is classified in Level 1 of the fair value hierarchy.

As of March 31, 2024, 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, 2024 and December 31, 2023, the fair value of the 2025 Convertible Notes was $ 967 million and $ 864 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, 2023 and 2022.

Remaining deferred issuance costs were $ 3.4 million and $ 4.8 million at September 30, 2023 and December 31, 2022, respectively.

Including amortization of deferred issuance costs, the effective interest rate is 4.2 % for the quarters ended March 31, 2024 and April 2, 2023.

Remaining deferred issuance costs were $ 2.4 million and $ 2.9 million at March 31, 2024 and December 31, 2023, respectively.

Interest expense on the 2025 Convertible Notes was as follows:

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

(in millions) 2023 2022 2023 2022

Quarter ended

(in millions) March 31, 2024 April 2, 2023

Contractual coupon rate $ 2.5 $ 2.5

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

However, as of September 30, 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 6 million pounds of nickel with hedge dates through 2024.

The aggregate notional amount hedged is approximately 9 % of a single year’s estimated nickel raw material purchase requirements.

However, as of March 31, 2024, 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 2 million pounds of nickel with hedge dates through 2024.

The aggregate notional amount hedged is less than 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 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, 2023, the outstanding financial derivatives used to hedge the Company’s exposure to energy cost volatility included natural gas cost hedges.

At September 30, 2023, the Company hedged approximately 80 % of its forecasted domestic requirements for natural gas for the remainder of 2023, approximately 55 % for 2024 and approximately 15 % for 2025.

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

At March 31, 2024, the outstanding financial derivatives used to hedge the Company’s exposure to energy cost volatility included natural gas cost hedges.

At March 31, 2024, the Company hedged approximately 70 % of its forecasted domestic requirements for natural gas for the remainder of 2024 and approximately 35 % for 2025.

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

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dollar amounts at specified dates.

The forward contracts are denominated in the same foreign currencies in which export sales are denominated.

These contracts are designated as hedges of the variability in cash flows of a portion of the forecasted future export sales transactions which otherwise would expose the Company to foreign currency risk, primarily euro.

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

At March 31, 2024, the Company had no material 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.

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 rate.

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 rate.

The swap matures in June 2024.

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 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 contain no provisions under which the Company has posted, or would be required to post, collateral.

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Asset derivatives

Balance sheet location September 30,

Balance sheet location March 31,

2024 December 31,

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Foreign exchange contracts Prepaid expenses and other current assets 0.1 0.1

Nickel and other raw material contracts Prepaid expenses and other current assets 2.5 12.5

Natural gas contracts Prepaid expenses and other current assets 0.1 2.4

Interest rate swap Other assets — 0.5

Nickel and other raw material contracts Other assets — 0.5

Natural gas contracts Other assets — 0.1

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Natural gas contracts Other long-term liabilities 0.8 1.1

Nickel and other raw material contracts Other long-term liabilities 0.5 —

Total derivatives designated as hedging instruments $ 10.7 $ 14.2

For derivative financial instruments that are designated as cash flow hedges, the gain or loss on the derivative is reported as a component of other comprehensive income (OCI) and reclassified into earnings in the same period or periods during which the hedged item affects earnings.

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, 2023.

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.

There were no outstanding fair value hedges as of March 31, 2024.

The cash flow impact for all derivative financial instruments is reported in cash flows provided by operating activities on the consolidated statement of cash flows.

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, 2023, a pre-tax loss of $ 4.3 million is expected to be recognized over the next 12 months.

Activity with regard to derivatives designated as cash flow hedges for the three and nine month periods ended September 30, 2023 and 2022 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 2023 2022 2023 2022

Nickel and other raw material contracts $ ( 1.6 ) $ ( 0.7 ) $ ( 0.4 ) $ 0.8

Natural gas contracts ( 1.0 ) 5.4 ( 1.4 ) 4.1

Foreign exchange contracts 0.1 0.5 0.1 0.5

Interest rate swap 0.1 0.6 0.3 —

Total $ ( 2.4 ) $ 5.8 $ ( 1.4 ) $ 5.4

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 March 31, 2024, a pre-tax loss of $ 9.4 million is expected to be recognized over the next 12 months.

Activity with regard to derivatives designated as cash flow hedges for the quarters ended March 31, 2024 and April 2, 2023 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,

Derivatives in Cash Flow Hedging Relationships 2023 2022 2023 2022

Quarter ended Quarter ended

Derivatives in Cash Flow Hedging Relationships March 31, 2024 April 2, 2023 March 31, 2024 April 2, 2023

Nickel and other raw material contracts $ ( 0.2 ) $ ( 5.3 ) $ — $ 5.3

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Fair Value of Financial Instruments

The estimated fair value of financial instruments at September 30, 2023 was as follows:

The estimated fair value of financial instruments at March 31, 2024 was as follows:

Fair Value Measurements at Reporting Date Using

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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.

This hierarchy requires entities to maximize the use of

observable inputs and minimize the use of unobservable inputs.

The three levels of inputs used to measure fair value are as follows:

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Business Segments

The Company operates in two business segments:

The Company operates under two business segments:

High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions (AA&S).

The measure of segment EBITDA categorically excludes income taxes, depreciation and amortization, corporate expenses, net interest expense, closed operations and other income (expense), charges for goodwill and asset impairments, restructuring and other credits/charges, strike related costs, debt extinguishment charges and gains or losses on asset sales and sales of businesses.

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 credits/charges, strike related costs, pension remeasurement gains/losses, 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.

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,

2023 2022 2023 2022

Quarter ended

March 31, 2024 April 2, 2023

High Performance Materials & Components $ 571.9 $ 529.6

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Advanced Alloys & Solutions 47.7 58.8

104.3 119.8 351.8 305.5

Sales to external customers:

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$ 1,042.9 $ 1,038.1

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

2023 2022 2023 2022

Quarter ended

March 31, 2024 April 2, 2023

High Performance Materials & Components $ 97.6 $ 81.6

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Restructuring and other charges ( 3.1 ) ( 1.2 )

Loss on asset sales and sales of businesses, net — — ( 0.6 ) ( 134.2 )

Income before income taxes $ 85.3 $ 90.9

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

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

2023 2022 2023 2022

Quarter ended

March 31, 2024 April 2, 2023

High Performance Materials & Components $ 16.3 $ 17.4

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$ 36.0 $ 35.1

Beginning in 2020, the U.S.

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 2022 results include $ 27.5 million for the Aviation Manufacturing Jobs Protection Program and employee retention credits, and AA&S segment nine month 2022 results include $ 6.8 million in employee retention credits.

Restructuring and other charges of $ 4.2 million for the third quarter ended September 30, 2023 include $ 2.8 million of start up costs and $ 1.9 million of costs associated with an unplanned outage at our Lockport, NY facility, both of which are included within cost of sales on the consolidated statements of operations.

These charges were partially offset by a $ 0.5 million pre-tax credit for restructuring charges, primarily related to lowered severance-related reserves based on changes in planned operating rates and revised workforce reduction estimates (see Note 6).

Restructuring and other charges of $ 14.6 million for the nine months ended September 30, 2023 include $ 2.2 million of severance-related restructuring charges (see Note 6) as well as $ 8.5 million of start up costs, $ 1.9 million of costs associated with an unplanned outage at our Lockport, NY facility, and $ 2.0 million primarily for asset write-offs for the closure of our Robinson, PA operations, all of which are included within cost of sales on the consolidated statements of operations.

Restructuring and other charges for the third quarter and nine months ended September 30, 2022 include a $ 19.9 million and $ 28.5 million charge, respectively, for a litigation reserve, which is reported in other nonoperating income (expense) on the consolidated statement of operations, partially offset by $ 2.6 million and $ 5.0 million, respectively, of restructuring credits for a reduction in severance-related reserves (see Note 6).

Depreciation expense in the nine months ended September 30, 2023 includes $ 0.8 million of accelerated depreciation on fixed assets for the closure of our Robinson, PA operations.

Loss on asset sales and sales of businesses, net, for the nine months ended September 30, 2023 is related to a $ 0.6 million loss on the sale of the Company’s Northbrook, IL operations, for which no proceeds were received but $ 0.3 million of transaction costs were paid and reported as an investing activity on the consolidated statement of cash flows.

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.

Restructuring and other charges of $ 3.1 million for the quarter ended March 31, 2024 include $ 2.9 million of start up costs, which are included within cost of sales on the consolidated statements of operations, and $ 0.2 million of restructuring charges (see Note 6).

Restructuring and other charges for the quarter ended April 2, 2023 include $ 1.2 million of start up costs, which are classified within cost of sales on the consolidated statements of 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, 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

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

2023 2022 2023 2022

Service cost - benefits earned during the year $ 1.5 $ 3.0 $ 0.2 $ 0.3

Interest cost on benefits earned in prior years 24.0 17.2 2.7 1.9

Expected return on plan assets ( 25.7 ) ( 31.6 ) — —

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

Amortization of net actuarial loss 14.5 15.8 1.5 3.3

Total retirement benefit expense $ 14.4 $ 4.5 $ 4.2 $ 5.3

For the nine month periods ended September 30, 2023 and 2022, the components of pension and other postretirement benefit expense for the Company’s defined benefit plans included the following (in millions):

For the quarters ended March 31, 2024 and April 2, 2023, 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,

2023 2022 2023 2022

Quarter ended Quarter ended

March 31, 2024 April 2, 2023 March 31, 2024 April 2, 2023

Service cost - benefits earned during the year $ 1.5 $ 1.6 $ 0.1 $ 0.2

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Amortization of net actuarial loss — — 1.3 1.5

Settlement loss — 29.5 — —

Total retirement benefit expense $ 1.6 $ — $ 3.7 $ 4.2

In May 2022, the Company completed the sale of its Sheffield, UK operations.

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.

During the third quarter of 2023, ATI contributed $ 222 million to its U.S.

qualified defined benefit pension plan in order to facilitate a pension derisking strategy (see Note 16), bringing contributions for the first nine months of 2023 to $ 272 million.

The provision for income taxes for the third quarter and nine months ended September 30, 2023 was $ 4.9 million and $ 12.9 million, respectively.

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 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 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.

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

federal and state deferred tax assets, as well as for certain foreign jurisdictions.

The Company’s effective tax rate was 19.8 %, resulting in an income tax provision of $ 16.9 million for the quarter ended March 31, 2024.

The Company’s effective tax rate was 4.7 %, resulting in an income tax provision of $ 4.3 million for the quarter ended April 2, 2023.

The effective tax rate for the quarter ended March 31, 2024 included discrete tax benefits, primarily $ 3.0 million for share-based compensation.

The Company’s effective tax rate for the quarter ended April 2, 2023 was impacted by the net valuation allowance position in the U.S.

and the Company’s foreign earnings.

Per Share Information

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

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

2023 2022 2023 2022

(In millions, except per share amounts) Quarter ended

March 31, 2024 April 2, 2023

Numerator for basic income per common share –

2 unchanged sentences

3.5 % Convertible Senior Notes due 2025

2.7 2.8 7.9 —

Numerator for diluted net income per common share –

4 unchanged sentences

3.5 % Convertible Senior Notes due 2025

18.8 18.8 18.8 —

Denominator for diluted net income per common share – adjusted weighted average shares and assumed conversions 147.5 150.1

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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.

There were no anti-dilutive shares for the three and nine months ended September 30, 2023.

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.

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

In addition, in April 2023, the Company’s Board of Directors authorized the repurchase of an additional $ 75 million of ATI stock.

In the three months ended September 30, 2023, ATI used $ 45.0 million to repurchase 1.0 million shares of its common stock under the $ 75 million program, and in the nine months ended September 30, 2023, ATI used $ 55.1 million to repurchase 1.2 million shares of its common stock under both programs.

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 the $ 150 million program.

Effective January 1, 2023, the Company’s share repurchases are subject to a 1% excise tax as a result of the Inflation Reduction Act of 2022.

Excise taxes incurred in 2023 on share repurchases represent direct costs of the repurchase and are recorded as part of the cost basis of the shares within treasury stock.

The cost of share repurchases for the nine months ended September 30, 2023 of $ 55.5 million differs from the repurchases of common stock amounts in the consolidated statements of cash flows due to these excise taxes.

Repurchases under these programs were or 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.

There were no anti-dilutive shares for the quarters ended March 31, 2024 and April 2, 2023.

Periodically, the Company’s Board of Directors authorizes the repurchase of ATI common stock (the “Share Repurchase Program”), the most recent of which was $ 150 million in November 2023.

Repurchases under these programs are 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 Company’s ongoing stock repurchase programs do not obligate the Company to repurchase any specific number of shares and may be modified, suspended, or terminated at any time by the Company’s Board of Directors without prior notice.

In the quarter ended March 31, 2024, ATI used $ 150.0 million to repurchase 3.4 million shares of its common stock under the Share Repurchase Program.

In the quarter ended April 2, 2023, ATI used $ 10.1 million to repurchase 0.2 million shares of its common stock under the Share Repurchase Program.

At March 31, 2024, the Company has utilized the full amount currently authorized under the Share Repurchase Program.

The Company’s share repurchases are subject to a 1% excise tax as a result of the Inflation Reduction Act of 2022.

Excise taxes incurred on share repurchases represent direct costs of the repurchase and are recorded as part of the cost basis of the shares within treasury stock.

The cost of share repurchases for the quarter ended March 31, 2024 of $ 151.2 million differs from the repurchases of common stock amounts in the consolidated statements of cash flows due to these excise taxes.

Accumulated Other Comprehensive Income (Loss)

The changes in AOCI by component, net of tax, for the three month period ended September 30, 2023 were as follows (in millions):

benefit plans Currency

adjustment Derivatives Deferred Tax Asset Valuation Allowance Total

Attributable to ATI:

Balance, June 30, 2023 $ ( 712.0 ) $ ( 73.6 ) $ ( 1.1 ) $ 70.4 $ ( 716.3 )

OCI before reclassifications — ( 7.1 ) ( 2.4 ) — ( 9.5 )

Amounts reclassified from AOCI (a) 12.1 (b) — (c) 1.4 (d) 3.4 16.9

Net current-period OCI 12.1 ( 7.1 ) ( 1.0 ) 3.4 7.4

Balance, September 30, 2023 $ ( 699.9 ) $ ( 80.7 ) $ ( 2.1 ) $ 73.8 $ ( 708.9 )

Attributable to noncontrolling interests:

Balance, June 30, 2023 $ — $ 6.4 $ — $ — $ 6.4

OCI before reclassifications — ( 2.1 ) — — ( 2.1 )

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

Net current-period OCI — ( 2.1 ) — — ( 2.1 )

Balance, September 30, 2023 $ — $ 4.3 $ — $ — $ 4.3

The changes in AOCI by component, net of tax, for the nine month period ended September 30, 2023 were as follows (in millions):

The changes in AOCI by component, net of tax, for the quarter ended March 31, 2024 were as follows (in millions):

benefit plans Currency

5 unchanged sentences

Net current-period OCI 0.9 ( 6.4 ) ( 0.1 ) — ( 5.6 )

Balance, September 30, 2023 $ ( 699.9 ) $ ( 80.7 ) $ ( 2.1 ) $ 73.8 $ ( 708.9 )

Balance, March 31, 2024 $ ( 31.6 ) $ ( 74.8 ) $ ( 6.5 ) $ 24.1 $ ( 88.8 )

Attributable to noncontrolling interests:

3 unchanged sentences

Net current-period OCI — ( 0.2 ) — — ( 0.2 )

Balance, September 30, 2023 $ — $ 4.3 $ — $ — $ 4.3

Balance, March 31, 2024 $ — $ 7.1 $ — $ — $ 7.1

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

2 unchanged sentences

(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 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 quarter ended April 2, 2023 were as follows (in millions):

benefit plans Currency

1 unchanged sentence

Attributable to ATI:

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

Balance, January 1, 2023 $ ( 34.7 ) $ ( 70.1 ) $ 13.5 $ 23.9 $ ( 67.4 )

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

Amounts reclassified from AOCI (a) 1.1 (b) — (c) ( 4.2 ) (d) ( 4.6 ) ( 7.7 )

Net current-period OCI 1.1 ( 1.1 ) ( 15.6 ) ( 4.6 ) ( 20.2 )

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

Balance, April 2, 2023 $ ( 33.6 ) $ ( 71.2 ) $ ( 2.1 ) $ 19.3 $ ( 87.6 )

Attributable to noncontrolling interests:

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

Balance, January 1, 2023 $ — $ 7.7 $ — $ — $ 7.7

OCI before reclassifications — 4.4 — — 4.4

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

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

Net current-period OCI — 4.4 — — $ 4.4

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 11) and/or loss on asset sales and sales of businesses, net, as part of the loss on sale of the Sheffield, UK operations.

(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.

(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 8).

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

Balance, April 2, 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.

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

3 unchanged sentences

subsidiaries.

Reclassifications out of AOCI for the three and nine month periods ended September 30, 2023 and 2022 were as follows:

Reclassifications out of AOCI for the quarters ended March 31, 2024 and April 2, 2023 were as follows:

Details about AOCI Components

(In millions)

Three months ended September 30, 2023 Three months ended September 30, 2022 Nine months ended September 30, 2023 Nine months ended September 30, 2022 Affected line item in the statements

Three months ended March 31, 2024 Three months ended April 2, 2023 Affected line item in the statements

of operations

2 unchanged sentences

Actuarial losses ( 1.3 ) ( 1.5 ) (a)

Settlement loss — — — ( 29.5 ) (b)

( 15.9 ) ( 19.0 ) ( 47.4 ) ( 86.7 ) (d) Total before tax

( 3.8 ) ( 4.5 ) ( 11.2 ) ( 7.5 ) Tax expense (benefit) (e)

( 1.2 ) ( 1.4 ) (c) Total before tax

( 0.3 ) ( 0.3 ) Tax benefit (d)

$ ( 0.9 ) $ ( 1.1 ) Net of tax

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

Nickel and other raw material contracts $ ( 0.5 ) $ 1.0 $ 4.6 $ 20.1 (c)

Natural gas contracts ( 1.8 ) 5.4 ( 6.0 ) 12.0 (c)

Foreign exchange contracts 0.2 0.7 0.3 0.8 (c)

Interest rate swap 0.3 — 1.0 ( 0.4 ) (c)

( 1.8 ) 7.1 ( 0.1 ) 32.5 (d) Total before tax

( 0.4 ) 1.7 — 7.8 Tax expense (benefit) (e)

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

Natural gas contracts ( 2.4 ) ( 1.8 ) (b)

Foreign exchange contracts 0.3 0.1 (b)

Interest rate swap 0.4 0.3 (b)

( 1.7 ) 5.5 (c) Total before tax

( 0.4 ) 1.3 Tax expense (benefit) (d)

$ ( 1.3 ) $ 4.2 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.

(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 pre-tax items, positive amounts are income and negative amounts are expense in terms of the impact to net income.

(c) For pre-tax 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, 2023, 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, 2024, the Company’s reserves for environmental remediation obligations totaled approximately $ 14 million, of which $ 7 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;

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

and $ 3 million for owned or controlled sites at which Company operations have been or plan to be discontinued.

$ 3 million for owned or controlled sites at which Company operations have been or plan to be discontinued;

and $ 1 million for sites utilized by the Company in its ongoing operations.

The timing of expenditures depends on a number of factors that vary by site.

6 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.

Subsequent Event

In October 2023, the Company purchased group annuity contracts from an insurer covering approximately 85 % of the Company’s U.S.

qualified defined benefit pension plan obligations.

Under these contracts, the Company transferred the pension obligations and associated assets for approximately 8,200 plan participants to the selected insurance company.

This transaction had no impact on the amount, timing or form of the retirement benefit payments to the affected retirees and beneficiaries.

To facilitate this pension derisking strategy, the Company completed a voluntary cash out for term vested employees and contributed $ 222 million to its pension plan in the third quarter of 2023, to fully fund remaining pension liabilities ahead of this annuity transaction.

After these actions, the Company’s U.S.

qualified defined benefit plan will include approximately 1,900 participants.

In connection with this transaction, the Company expects to recognize a non-cash, non-operating settlement gain in the fourth quarter 2023.

The actual settlement gain will depend on the finalization of the actuarial calculations.

Beginning in 2020, the U.S.

government enacted various relief packages in response to the COVID-19 pandemic, one of which was the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

The CARES Act included, among other items, provisions relating to refundable employee retention payroll tax credits.

The Company applied for these employee retention tax credits and recognized a portion of the benefit from these credits as they were received in the statement of operations in the fiscal year ended December 31, 2022.

Due to the complex nature of the employee retention credit computations, the Company deferred recognition of a portion of the tax credits pending the completion of any potential audit or examination, or the expiration of the related statute of limitations.

As of March 31, 2024, we have approximately $ 28 million of deferred retention tax credits with statute of limitations beginning to expire during the second quarter of 2024 and continuing through 2027.

Based on when the Company received the retention tax credits, $ 17 million of the deferred retention tax credits have a statute of limitations that expire in 2024 with the remaining expirations occurring in 2025 and 2027.

There is pending legislation that could extend the statute of limitations, which would impact the timing of the expected recognition of these credits if and when such legislation is passed.

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