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Item 2. Management’s Discussion and Analysis

2025-05-01 compared with 2024-10-29 · 170 added, 350 removed, 131 unchanged (80% of the section changed)

1 unchanged sentence

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

Our largest market is aerospace & defense, representing 61% of sale s for the year-to-date period ended September 29, 2024, led by products for jet engines and airframes.

Our largest market is aerospace & defense, representing 66% of sale s for the quarter ended March 30, 2025, led by products for jet engines and airframes.

Additionally, we have a strong presence in the specialty energy, medical and electronics markets.

In aggregate, these markets represented 77 % of our sales for the year-to-date period ended September 29, 2024.

In aggregate, these markets represented 77 % of our sales for the quarter ended March 30, 2025.

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

2 unchanged sentences

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.

Third quarter 2024 sales increased 2.5% to $1.05 billion, compared to $1.03 billion of sales for the third quarter 2023, as increases in sales to the aerospace & defense, specialty energy, medical and electronics markets were offset by continued softness in certain industrial markets, particularly conventional energy.

The increase in the aerospace & defense market was a result of sales increases in commercial jet engines and defense, partially offset by a decline in airframe sales.

Total aerospace & defense sales were $653.8 million, or 62% of total sales for the third quarter 2024, compared to $625.8 million, or 61% of total sales for the third quarter 2023.

Gross profit for the third quarter of 2024 was $224.8 million, or 21.4% of sales, compared to $194.6 million, or 19.0% of sales for the third quarter 2023.

Third quarter 2024 gross profit includes a benefit of $4.8 million related to the recognition of previously deferred employee retention tax credits.

The Company recognized $2.9 million of the benefit in the HPMC segment and $1.9 million in the AA&S segment.

Third quarter 2024 gross profit also includes restructuring and other credits/charges consisting of $2.5 million of start-up costs, partially offset by a $0.4 million credit for adjustments to inventory reserves related to the Company’s ongoing European restructuring.

Third quarter 2023 includes restructuring and other credits/charges consisting of $2.8 million of start-up costs and $1.9 million of costs associated with an unplanned outage at our Lockport, NY melt facility.

These restructuring and other credits/charges were excluded from segment EBITDA.

Selling and administrative expenses for the third quarter 2024 include $1.7 million of transaction costs, which are excluded from adjusted EBITDA.

Restructuring charges for the third quarter of 2024 were $0.5 million representing severance for the involuntary reduction of several domestic employees, compared to a credit of $0.5 million for the third quarter of 2023, primarily for revised workforce reduction estimates.

Interest expense increased to $28.0 million in the third quarter of 2024 compared to $23.8 million in the third quarter of 2023 as a result of the issuance in August 2023 of $425 million aggregate principal amount of 7.25% Senior Notes due 2030 (2030 Notes).

During the third quarter of 2024, we notified holders of the $291.4 million outstanding principal amount of our 3.5% Convertible Notes due 2025 (2025 Convertible Notes) that the 2025 Convertible Notes would be redeemed prior to their maturity date.

The holders of the outstanding 2025 Convertible Notes had the right to convert the principal amount of the notes into shares of ATI’s common stock prior to the redemption date.

As a result, $291.0 million principal amount of the outstanding notes was converted to 18.8 million shares of ATI common stock, with the remaining $0.4 million of outstanding principal balance that was not tendered for conversion paid in cash.

We also received $76.1 million in cash in settlement of the capped call transactions initiated as part of the issuance of the 2025 Convertible Notes.

Other nonoperating income for the third quarter 2024 includes a $3.7 million gain on the sale of certain oil and gas rights.

Third quarter 2024 pre-tax income was $114.9 million, compared to $99.0 million in the prior year period.

Our effective tax rate was 24.6%, resulting in an income tax provision of $28.3 million for the third quarter of 2024.

Our effective tax rate was 4.9%, resulting in an income tax provision of $4.9 million for the third quarter of 2023.

The effective tax rate for the third quarter of 2023 was impacted by the net valuation allowance position in the U.S.

and our foreign earnings.

Net income attributable to ATI was $82.7 million, or $0.57 per share, in the third quarter of 2024, compared to $90.2 million, or $0.62 per share, for the third quarter of 2023.

Adjusted EBITDA was $185.7 million, or 17.7% of sales, for the third quarter 2024, and $162.6 million, or 15.9% of sales, for the prior year third quarter.

EBITDA and Adjusted EBITDA are measures we use to analyze the performance and results of our business.

Further, we believe these measures are useful to investors and industry analysts because these measures are commonly used to analyze companies on the basis of operating performance, leverage and liquidity.

EBITDA and Adjusted EBITDA are non-GAAP measures and are not intended to represent, and should not be considered more meaningful than, or as alternatives to, a measure of operating performance as determined in accordance with U.S.

generally accepted accounting principles (U.S.

We define EBITDA as income from continuing operations before interest and income taxes, plus depreciation and amortization, goodwill impairment charges and debt extinguishment charges.

We define Adjusted EBITDA as EBITDA excluding significant non-recurring charges or credits, restructuring and other charges/credits, strike related costs, long-lived asset impairments, pension remeasurement gains and losses, other postretirement/pension curtailment and settlement gains and losses, and gains or losses on sales of businesses.

EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow for management’s discretionary use, as they do not consider certain cash requirements such as interest payments, tax payments and capital expenditures.

See the Liquidity and Financial Condition section of Management’s Discussion and Analysis for a reconciliation of amounts reported under U.S.

GAAP to these non-GAAP measures.

Sales to the HPMC and AA&S segments increased 2% and 3%, respectively, in the third quarter of 2024, compared to the third quarter of 2023, primarily due to increased demand in the aerospace & defense market.

Sales of aerospace & defense products increased 4% and 5% for the HPMC and AA&S business segments, respectively, in the third quarter 2024 c ompared to the third quarter 2023.

The increase in the aerospace & defense market for both segments was a result of sales increases in commercial jet engines and defense, partially offset by a decline in airframe sales.

Results for the year-to-date period ended September 29, 2024 included sales of $3.19 billion and income before tax of $311.1 million, compared to sales of $3.11 billion and income before tax of $287.1 million for the comparable 2023 period.

Our results for the year-to-date 2024 period reflect increased sales to the aerospace & defense, medical and electronics markets, partially offset by softness in certain industrial markets, particularly the conventional energy market.

Our gross profit was $649.6 million, or 20.4% of sales, for the year-to-date period ended September 29, 2024, compared to $596.9 million, or 19.2% of sales for the comparable 2023 period.

Year-to-date 2024 gross profit includes a benefit of $13.4 million related to the recognition of previously deferred employee retention tax credits.

The Company recognized $6.4 million of the benefit in the HPMC segment and $7.0 million in the AA&S segment.

Year-to-date 2024 gross profit also includes restructuring and other credits/charges consisting of $7.2 million of start-up costs and $5.1 million of charges for inventory write-downs related to the Company’s ongoing European restructuring.

Year-to-date 2023 gross profit includes restructuring and other credits/charges consisting of $8.5 million of start-up costs, $2.0 million of charges primarily for asset write-offs for the closure of our Robinson, PA operations, and $1.9 million of costs associated with an unplanned outage at our Lockport, NY melt facility.

These restructuring and other credits/charges were excluded from segment EBITDA.

Selling and administrative expenses for the year-to-date period of 2024 include $1.7 million of transaction costs, which are excluded from adjusted EBITDA.

Restructuring charges were a credit of $1.2 million for the year-to-date period ended September 29, 2024 primarily for revised workforce reduction estimates, partially offset by the charge in the third quarter 2024 discussed above for the involuntary reduction of several domestic employees.

The year-to-date period ended October 1, 2023 included restructuring charges of $2.2 million primarily for involuntary reductions across ATI’s domestic operations, partially offset by a credit in the third quarter 2023 discussed above for a reduction in severance-related reserves.

Year-to-date 2024 results include a $2.3 million gain on the sale of assets for our idled Houston, PA facility, which is reported in gain/loss on asset sales and sales of businesses, net.

Interest expense increased to $83.0 million in the year-to-date period ended September 29, 2024 compared to $65.0 million in the year-to-date period ended October 1, 2023 as a result of the issuance in August 2023 of the 2030 Notes.

Other nonoperating income for the 2024 year-to-date period includes a $3.7 million gain on the sale of certain oil and gas rights.

Our pre-tax income was $311.1 million in the year-to-date period ended September 29, 2024, compared to $287.1 million in the prior year period.

Our effective tax rate was 22.7%, resulting in an income tax provision of $70.5 million for the year-to-date period ended September 29, 2024.

Our effective tax rate was 4.5%, resulting in an income tax provision of $12.9 million for the year-to-date period ended October 1, 2023.

The effective tax rate for the year-to-date period ended September 29, 2024 includes discrete tax benefits of $4.5 million inclusive of $3.3 million for share-based compensation as well as the impact from the recognition of a stranded deferred tax valuation allowance in accumulated other comprehensive loss due to the maturity of our interest rate swap.

The effective tax rate for the year-to-date period ended October 1, 2023 was impacted by the net valuation allowance position in the U.S.

and our foreign earnings.

Net income attributable to ATI was $230.7 million, or $1.61 per share, in the year-to-date period ended September 29, 2024, compared to a net income attributable to ATI of $265.1 million, or $1.82 per share, for the prior year period.

Year-to-date 2024 period sales increased 7% in the HPMC business segment and decreased 2% in the AA&S business segment compared to the year-to-date 2023 period.

In aggregate, ATI’s aerospace & defense market sales increased 8% in the year-to-date period 2024 compared to the year-to-date 2023 period, reflecting increases in sales of commercial aerospace jet engine and airframe products as well as defense products.

Sales to the aerospace & defense market in the HPMC segment were 8% higher than the year-to-date period 2023, reflecting increases in sales of commercial aerospace jet engine and airframe products as well as defense products.

The decline in the AA&S segment reflects continued softness in certain general industrial end markets, particularly conventional energy, which were partially offset by a 7% increase in aerospace & defense sales and a 42% increase in medical market sales.

Comparative information regarding our overall revenues (in millions) by end market and their respective percentages of total revenues for the quarters and year-to-date periods ended September 29, 2024 and October 1, 2023 is shown below.

First quarter 2025 sales increased 9.7% to $1.14 billion, compared to $1.04 billion of sales for the first quarter 2024, as increases in sales to the aerospace & defense and industrial markets were offset by softness in the specialty energy, medical and electronics markets.

The increase in the aerospace & defense market was primarily a result of increases in commercial jet engines sales.

Total aerospace & defense sales were $754.4 million, or 66% of total sales for the first quarter 2025, compared to $615.7 million, or 59% of total sales for the first quarter 2024.

Gross profit for the first quarter of 2025 was $235.8 million, or 20.6% of sales, compared to $197.4 million, or 18.9% of sales for the first quarter 2024.

First quarter 2025 gross profit includes restructuring and other charges consisting of $4.0 million of start-up and transaction related costs, and $1.6 million of losses on the sale of accounts receivables .

First quarter 2024 gross profit includes $2.9 million of start-up costs.

These restructuring and other charges were excluded from segment EBITDA.

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

In addition, interest expense decreased to $23.0 million in the first quarter of 2025 compared to $26.6 million in the first quarter of 2024, primarily as a result of the redemption of the 2025 Convertible Notes in the third quarter of 2024.

Our pre-tax income was $121.5 million in the first quarter 2025, compared to $85.3 million in the prior year period.

Our effective tax rate was 17.3%, resulting in an income tax provision of $21.0 million for the first quarter of 2025.

Our effective tax rate was 19.8%, resulting in an income tax provision of $16.9 million for the first quarter of 2024.

Net income attributable to ATI was $97.0 million, or $0.67 per share, in the first quarter of 2025, compared to $66.1 million, or $0.46 per share, for the first quarter of 2024.

Adjusted EBITDA was $194.6 million, or 17.0% of sales, for the first quarter 2025, and $151.0 million, or 14.5% of sales, for the prior year first quarter.

ATI utilizes Adjusted EBITDA and Segment EBITDA, which are non-GAAP financial measures, to assist in assessing operating performance on a consistent basis across multiple reporting periods by removing the impact of special items, which can vary from period to period, that management does not believe are directly reflective of the Company’s core operations.

The Company defines special items as significant non-recurring or non-operational charges or credits, including restructuring charges or credits, gains or losses on the sale of accounts receivables, strike related costs, goodwill and long-lived asset impairments, debt extinguishment charges, pension remeasurement gains and losses, other postretirement/pension curtailment and settlement gains and losses, and gains or losses on sales of businesses.

We define Adjusted EBITDA as net income, excluding net interest expense, income taxes, depreciation and amortization, and special items.

Our measure of Segment EBITDA, which we use to analyze the performance and results of our business segments, excludes net interest expense, income taxes, depreciation and amortization, special charges, corporate expenses, closed operations and other income (expense).

Management believes presenting these non-GAAP financial measures is useful to investors because it (1) provides investors with meaningful supplemental information regarding financial and operating performance by excluding certain items management believes do not directly impact the Company’s core operations, (2) permits investors to view performance using the same metrics that management uses to forecast, evaluate performance, and make operating and strategic decisions, and (3) provides additional information useful to investors on a period-to-period consistent basis that are commonly used to analyze companies’ operating performance.

Management believes that consideration of these non-GAAP financial measures, together with our GAAP financial measures and the corresponding reconciliations, provides investors with additional understanding of the Company’s performance and trends that would be absent such disclosures.

Non-GAAP financial measures should be viewed in addition to, and not superior to or as an alternative for, the Company’s reported results prepared in accordance with GAAP.

The following table provides the reconciliation of net income attributable to ATI to the Adjusted EBITDA and Total segment EBITDA non-GAAP financial measures:

Quarter Ended

March 30, 2025 March 31, 2024

Net income attributable to ATI $ 97.0 $ 66.1

Net income attributable to noncontrolling interests 3.5 2.3

Net income 100.5 68.4

(+) Depreciation and amortization 40.8 36.0

(+) Interest expense 23.0 26.6

(+) Income tax provision 21.0 16.9

EBITDA $ 185.3 $ 147.9

Adjustments for special items, pre-tax:

(+) Restructuring and other charges 5.6 3.1

(+/-) Loss on sales of businesses, net 3.7 —

Adjusted EBITDA $ 194.6 $ 151.0

Corporate expenses 17.4 17.1

Closed operations and other (income) expense 2.4 1.3

Total segment EBITDA $ 214.4 $ 169.4

Comparative information regarding our overall revenues (in millions) by end market and their respective percentages of total revenues for the quarters ended March 30, 2025 and March 31, 2024 is shown below.

Quarter ended Quarter ended

Markets September 29, 2024 October 1, 2023

Markets March 30, 2025 March 31, 2024

Aerospace & Defense:

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Total Aerospace & Defense 754.4 66 % 615.7 59 %

Conventional Energy 72.6 7 % 87.0 8 %

Specialty Energy 50.5 4 % 56.1 5 %

Total Energy 142.5 14 % 148.9 14 %

Automotive 63.8 6 % 48.1 5 %

Medical 42.4 4 % 59.1 6 %

Electronics 39.6 3 % 52.9 5 %

Construction/Mining 41.8 4 % 40.0 4 %

Food Equipment & Appliances 12.9 1 % 16.2 2 %

Other 34.2 3 % 54.3 5 %

Total $ 1,051.2 100 % $ 1,025.6 100 %

Year-to-date period ended Year-to-date period ended

Markets September 29, 2024 October 1, 2023

Aerospace & Defense:

Jet Engines- Commercial $ 1,029.9 32 % $ 981.2 32 %

Airframes- Commercial 581.7 18 % 537.7 17 %

Defense 341.8 11 % 289.4 9 %

Total Aerospace & Defense $ 1,953.4 61 % $ 1,808.3 58 %

Other Core Markets 132.5 11 % 168.1 16 %

Core End Markets 886.9 77 % 783.8 75 %

Conventional Energy 121.8 11 % 102.5 10 %

Specialty Energy 202.6 6 % 212.8 7 %

Total Energy 443.8 14 % 538.6 17 %

Automotive 60.6 5 % 56.0 5 %

Medical 173.9 6 % 124.4 4 %

Electronics 142.8 4 % 115.2 4 %

Construction/Mining 32.9 3 % 27.2 3 %

Food Equipment & Appliances 41.0 1 % 58.6 2 %

Other 42.2 4 % 73.4 7 %

Industrial Markets 257.5 23 % 259.1 25 %

Total $ 1,144.4 100 % $ 1,042.9 100 %

For the third quarter 2024, international sales decreased to $426 million, or 40% of total sales, from $469 million, or 46% of total sales, in the third quarter 2023.

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

Sales increased 10% in the first quarter of 2025, compared to the first quarter of 2024, primarily due to increased demand in the aerospace & defense market.

In aggregate, ATI’s aerospace & defense market sales increased 23% to $754 million in the first quarter 2025, compared to $616 million the first quarter 2024, reflecting a 25% increase in commercial aerospace and an 11%

increase in defense products.

These increases were partially offset by declines in other core markets of 28% in medical, 25% in electronics, and 10% in specialty energy.

For the first quarter 2025, international sales increased to $501 million, or 44% of total sales, from $471 million, or 45% of total sales, in the first quarter 2024.

ATI’s international sales are mostly to our core end markets.

Comparative information regarding our major products based on their percentages of revenues are shown below.

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

Quarter ended Year-to-date period ended

September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023

Quarter ended

March 30, 2025 March 31, 2024

Nickel-based alloys and specialty alloys 48 % 45 %

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Titanium and titanium-based alloys 19 % 18 %

Precision rolled strip products 9 % 9 % 9 % 9 %

Zirconium and related alloys 8 % 10 %

Precision rolled strip products 5 % 8 %

Total 100 % 100 %

Segment EBITDA for the third quarter 2024 was $196.8 million, or 18.7% of sales, compared to segment EBITDA of $178.7 million, or 17.4% of sales, for the third quarter of 2023.

Segment EBITDA for year-to-date period of 2024 was $567.5 million, or 17.8% of sales, compared to segment EBITDA of $527.8 million, or 17.0% of sales, for the year-to-date period of 2023.

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

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

Quarter ended Year-to-date period ended

September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023

Business Segment Results

Quarter Ended

March 30, 2025 March 31, 2024

High Performance Materials & Components $ 584.1 $ 529.9

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Total external sales $ 1,144.4 $ 1,042.9

Segment EBITDA:

High Performance Materials & Components $ 131.0 $ 97.6

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Total segment EBITDA $ 214.4 $ 169.4

% of Sales 18.7 % 17.4 % 17.8 % 17.0 %

Corporate expenses (13.4) (12.5) (49.9) (47.1)

Closed operations and other income (expense) 2.3 (3.6) 1.7 (6.8)

ATI Adjusted EBITDA 185.7 162.6 519.3 473.9

Depreciation & Amortization:

Interest expense, net (28.0) (23.8) (83.0) (65.0)

Restructuring and other charges (4.3) (4.2) (12.8) (14.6)

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

Income before income taxes 114.9 99.0 311.1 287.1

Income tax provision 28.3 4.9 70.5 12.9

Net income 86.6 94.1 240.6 274.2

Net income attributable to noncontrolling interests 3.9 3.9 9.9 9.1

Net income attributable to ATI $ 82.7 $ 90.2 $ 230.7 $ 265.1

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

We exclude the effects of inventory valuation reserves and reserves for uncollectible accounts receivable when computing this non-GAAP performance measure, which is not intended to replace Working Capital or to be used as a measure of liquidity.

We employ several strategies to actively manage our Managed Working Capital, seeking to effectively balance the need to maintain appropriate levels of Managed Working Capital to support our growth and operations, while deploying our cash efficiently.

Our strategies to actively manage our Managed Working Capital include, but are not limited to, taking advantage of favorable customer and supplier payment terms, participating in customer and supplier financing programs, managing the timing of purchases of raw materials, and leveling manufacturing process throughput and shipping to limit periodic increases in Managed Working Capital.

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

At September 29, 2024, Managed Working Capital increased as a percentage of annualized sales to 40.0% compared to 31.1% at December 31, 2023.

The increase in Managed Working Capital as a percentage of annualized sales was primarily due to increases in inventory and accounts receivable.

Days sales outstanding, which measures actual collection timing for accounts receivable, worsened by 18% as of September 29, 2024 compared to year end 2023.

Gross inventory turns, which measures how many times we turn over our inventory relative to cost of sales in a year, worsened by 19% as of September 29, 2024 compared to year end 2023.

We continue efforts to focus on operational improvements to positively impact the inventory intensity of our business and alleviate the required investment of Managed Working Capital in our growing business, however, during the third quarter of 2024, short-term uncertainty within our customer base, especially for commercial airframe products, unplanned outages and delayed shipments due to Hurricane Helene resulted in an increase in inventory levels.

In addition, these factors resulted in an increase in accounts receivable due to the timing of sales, which were weighted in the latter part of the quarter.

The computations of Managed Working Capital at September 29, 2024 and December 31, 2023, reconciled to the financial statement line items as computed under U.S.

GAAP, were as follows.

The September 29, 2024 amounts include management working capital balances that are classified as held for sale.

September 29, December 31,

(In millions) 2024 2023

Accounts receivable $ 730.2 $ 625.0

Short-term contract assets 90.5 59.1

Inventory 1,414.5 1,247.5

Accounts payable (528.5) (524.8)

Short-term contract liabilities (146.5) (163.6)

Subtotal 1,560.2 1,243.2

Allowance for doubtful accounts 2.6 3.2

Inventory valuation reserves 71.7 75.5

Net managed working capital held for sale 47.3 —

Managed working capital $ 1,681.8 $ 1,321.9

Annualized prior 3 months sales $ 4,205.1 $ 4,255.8

Managed working capital as a % of annualized sales 40.0 % 31.1 %

Business Segment Results

High Performance Materials & Components $ 19.7 $ 16.3

Advanced Alloys & Solutions 19.5 18.0

Other 1.6 1.7

Total depreciation & amortization $ 40.8 $ 36.0

High Performance Materials & Components Segment

Third quarter 2024 sales were $552.4 million, an increase of 2% compared to the third quarter 2023, primarily due to a 4% increase in sales to the aerospace & defense market, as well as a 29% increase in sales to the specialty energy market.

The increase in aerospace & defense sales was primarily due to increases in commercial jet engine sales of 9% and defense sales of 24%, partially offset by a 19% decline in commercial airframe sales.

Overall aerospace & defense market sales were 86% of total HPMC sales in the third quarter of 2024.

Comparative information for our HPMC segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the quarters ended September 29, 2024 and October 1, 2023 is as follows:

First quarter 2025 sales were $584.1 million, an increase of 10% compared to the first quarter 2024, primarily due to a 21% increase in sales to the aerospace & defense market.

The increase in aerospace & defense sales was primarily due to increases in commercial jet engine sales of 34%, partially offset by declines in commercial airframe and defense sales of 5% and 3%, respectively.

Overall aerospace & defense market sales were 92% of total HPMC sales in the first quarter of 2025.

Comparative information for our HPMC segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the quarters ended March 30, 2025 and March 31, 2024 is as follows:

Quarter ended Quarter ended

Markets September 29, 2024 October 1, 2023

Aerospace & Defense:

Jet Engines- Commercial $ 341.9 62 % $ 312.5 58 %

Airframes- Commercial 84.1 15 % 104.0 20 %

Defense 48.9 9 % 39.7 7 %

Total Aerospace & Defense 474.9 86 % 456.2 85 %

Conventional Energy 2.4 — % 2.5 — %

Specialty Energy 26.3 5 % 20.2 4 %

Total Energy 28.7 5 % 22.7 4 %

Medical 28.6 5 % 28.9 5 %

Construction/Mining 4.9 1 % 7.7 1 %

Other 15.3 3 % 24.0 5 %

Total $ 552.4 100 % $ 539.5 100 %

International sales represented 48% of total segment sales for the third quarter 2024, compared to 55% in the prior year period.

Comparative information for the HPMC segment’s major product categories, based on their percentages of revenue for the quarters ended September 29, 2024 and October 1, 2023, is as follows:

Quarter ended

September 29, 2024 October 1, 2023

Nickel-based alloys and specialty alloys 43 % 42 %

Precision forgings, castings and components 36 % 33 %

Titanium and titanium-based alloys 21 % 24 %

Precision rolled strip products — % 1 %

Total 100 % 100 %

Segment EBITDA in the third quarter 2024 was $123.2 million, or 22.3% of total sales, compared to $117.2 million, or 21.7% of total sales, for the third quarter 2023.

The increase in segment EBITDA, as a percentage of sales, was primarily due to improved sales mix.

The third quarter of 2024 included $2.9 million of benefits related to the recognition of previously deferred employee retention tax credits, which were mostly offset by higher maintenance and outsourcing costs.

Sales for the year-to-date period ended September 29, 2024 were $1.64 billion, an increase of 7% compared to the year-to-date period ended October 1, 2023 , primarily due to strong demand in aerospace & defense market as well as increased medical market sales, which were up 38% compared to the 2023 comparable period.

Sales to the commercial aerospace market increased 7%, as airframe sales increased 9% and commercial jet engine sales increased 6%, and sales to the defense market increased 22%.

Sales to the energy markets decreased 10%, mainly due to lower specialty energy sales.

Comparative information for our HPMC segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the year-to-date periods ended September 29, 2024 and October 1, 2023 is as follows:

Year-to-date period ended Year-to-date period ended

Markets September 29, 2024 October 1, 2023

Markets March 30, 2025 March 31, 2024

Aerospace & Defense:

4 unchanged sentences

Medical 15.8 3 % 35.9 7 %

Conventional Energy 8.3 1 % 8.6 — %

Specialty Energy 12.4 2 % 18.2 3 %

Total Energy 75.3 5 % 83.6 5 %

Electronics — — % 1.0 — %

Other Core Markets 28.2 5 % 55.1 10 %

Core End Markets 565.7 97 % 497.7 94 %

Construction/Mining 7.1 1 % 6.7 1 %

Convention Energy 1.7 1 % 3.5 1 %

Automotive 1.4 — % 5.0 1 %

Other 8.2 1 % 17.0 3 %

Industrial Markets 18.4 3 % 32.2 6 %

Total $ 584.1 100 % $ 529.9 100 %

International sales represented 52% of total segment sales for the 2024 year-to-date period.

Comparative information for the HPMC segment’s major product categories, based on their percentages of revenue for the year-to-date periods ended September 29, 2024 and October 1, 2023 , is as follows:

Year-to-date period ended

September 29, 2024 October 1, 2023

International sales represented 46% of total segment sales for the first quarter 2025, compared to 55% in the prior year period.

Comparative information for the HPMC segment’s major product categories, based on their percentages of revenue for the quarters ended March 30, 2025 and March 31, 2024, is as follows:

Quarter ended

March 30, 2025 March 31, 2024

Nickel-based alloys and specialty alloys 41 % 39 %

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Total 100 % 100 %

Segment EBITDA in the 2024 year-to-date period increased to $334.6 million, or 20.4% of total sales, compared to $308.5 million, or 20.1% of total sales, for the 2023 year-to-date period.

Results in the 2024 year-to-date period included $6.4 million of benefits related to the recognition of previously deferred employee retention tax credits, which were partially offset by higher incentive compensation, maintenance and outsourcing costs.

Despite unplanned outages in third quarter 2024, the deferral of certain customer orders, and shipment delays due to Hurricane Helene, HPMC results for the first nine months of 2024 reflected year-over-year improved operating leverage as we continued to experience increasing demand from the aerospace & defense market.

We continue to invest to meet expected demand and capitalize on market opportunities, including the continuation of our titanium melt expansion in Richland, Washington.

Furthermore, our commitment to continuous improvement is resulting in adjustments to our work-flow processes to de-bottleneck our critical operations.

We believe that these investments, strong backlog and our LTAs with aerospace market OEMs for our specialty materials, including powders, parts and components, position the HPMC segment for profitable growth for the next several years.

Although the aerospace market OEMs have experienced near-term challenges and delays in their estimated production ramps, we believe the backlog of commercial aircraft, increasing requirements for maintenance, repair, and operations, and the current OEM production forecasts support our long-term growth expectations in this end market.

Segment EBITDA in the first quarter 2025 was $131.0 million, or 22.4% of total sales, compared to $97.6 million, or 18.4% of total sales, for the first quarter 2024.

The increase in segment EBITDA, as a percentage of sales, was primarily due to higher sales and improved sales mix as well as favorable pricing.

The Company’s investments to increase capacity and focus on continuous improvement are driving improvements to our work-flow processes and operations.

HPMC results for first quarter 2025 reflected year-over-year improved operating leverage and pricing as we continued to experience increasing demand from the aerospace & defense market.

Although macro risks and uncertainty increased during the latter part of the first quarter, we believe our capabilities, strong backlog and long-term agreements ( “ LTAs ” ) with aerospace market OEMs for our specialty materials, including powders, parts and components, position the HPMC segment for profitable growth for the next several years.

ATI has prepared for the potential risks of tariffs for many years and we have taken actions to minimize the impact of these tariffs in our contracts and supply chains.

While we expect continued, near-term challenges, we believe the backlog of commercial aircraft production, increasing requirements for maintenance, repair, and operations, and the current OEM production forecasts support our long-term growth expectations in this end market.

Advanced Alloys & Solutions Segment

Third quarter 2024 sales were $498.8 million, an increase of 3% compared to the third quarter 2023, primarily due a 5% increase in aerospace & defense products and 32% increase in medical market sales, partially offset by continued softness in certain general industrial end markets, particularly conventional energy.

The increase in aerospace & defense sales was primarily due to higher commercial jet engine sales of 42% and defense sales of 9%, partially offset by a 3% decline in commercial airframe sales.

Comparative information regarding our AA&S segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the quarters ended September 29, 2024 and October 1, 2023 is shown below.

First quarter 2025 sales were $560.3 million, an increase of 9% compared to the first quarter 2024, primarily due a 25% increase in sales of aerospace & defense products and a 21% increase in sales to the conventional energy market.

These increases were partially offset by a 24% decrease in sales to the electronics market.

Quarter ended Quarter ended

Markets September 29, 2024 October 1, 2023

Markets March 30, 2025 March 31, 2024

Aerospace & Defense:

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Total Aerospace & Defense 216.9 38 % 173.1 34 %

Conventional Energy 70.2 14 % 84.5 17 %

Specialty Energy 38.1 7 % 37.9 7 %

Total Energy 113.8 23 % 126.2 26 %

Automotive 59.2 12 % 40.9 8 %

Electronics 39.6 7 % 51.9 10 %

Construction/Mining 36.9 7 % 32.3 7 %

Medical 26.6 5 % 23.2 5 %

Food Equipment & Appliances 12.9 2 % 16.2 3 %

Other 23.5 5 % 38.1 8 %

Total $ 498.8 100 % $ 486.1 100 %

International sales represented 32% of total segment sales for the third quarter of 2024, compared to 35% in the prior year’s third quarter.

Comparative information regarding the AA&S segment’s major product categories, based on their percentages of revenue for the quarters ended September 29, 2024 and October 1, 2023, are presented in the following table.

HRPF conversion service sales are excluded from this presentation.

Quarter ended

September 29, 2024 October 1, 2023

Nickel-based alloys and specialty alloys 50 % 52 %

Precision rolled strip products 21 % 19 %

Zirconium and related alloys 17 % 16 %

Titanium and titanium-based alloys 12 % 13 %

Total 100 % 100 %

Segment EBITDA was $73.6 million, or 14.8% of sales, for the third quarter 2024, compared to segment EBITDA of $61.5 million, or 12.7% of sales, for the third quarter 2023.

The margin increase compared to the prior year was primarily due to a favorable sales mix, as growth in exotic alloys offset weaker demand for nickel-based alloys.

Results in the third quarter of 2024 included $1.9 million of benefits related to the recognition of previously deferred employee retention tax credits, which were offset by higher maintenance costs.

Sales for the year-to-date period ended September 29, 2024 were $1.55 billion, a decrease of 2% compared to the year-to-date period ended October 1, 2023, as continued softness in certain general industrial end markets, especially conventional energy, was partially offset by a 7% increase in sales of aerospace & defense products, 23% increase in electronics sales, and 42% increase in medical market sales.

Comparative information regarding our AA&S segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the year-to-date periods ended September 29, 2024 and October 1, 2023 is shown below.

Year-to-date period ended Year-to-date period ended

Markets September 29, 2024 October 1, 2023

Aerospace & Defense:

Jet Engines- Commercial $ 59.3 4 % $ 67.0 4 %

Airframes- Commercial 318.2 20 % 295.7 19 %

Defense 180.9 12 % 157.8 10 %

Total Aerospace & Defense 558.4 36 % 520.5 33 %

Conventional Energy 232.9 15 % 317.2 20 %

Specialty Energy 135.6 9 % 137.8 9 %

Total Energy 368.5 24 % 455.0 29 %

Other Core Markets 104.3 19 % 113.0 22 %

Core End Markets 321.2 57 % 286.1 56 %

Convention Energy 120.1 21 % 99.0 19 %

Automotive 59.2 11 % 51.0 10 %

Electronics 139.8 9 % 113.4 7 %

Construction/Mining 25.8 5 % 20.5 4 %

Medical 76.4 5 % 53.7 4 %

Food Equipment & Appliances 41.0 3 % 58.6 4 %

Other 34.0 6 % 56.4 11 %

Industrial Markets 239.1 43 % 226.9 44 %

Total $ 560.3 100 % $ 513.0 100 %

International sales represented 33% of total segment sales for the year-to-date period ended September 29, 2024.

Comparative information regarding the AA&S segment’s major product categories, based on their percentages of revenue for the year-to-date periods ended September 29, 2024 and October 1, 2023, are presented in the following table.

International sales represented 42% of total segment sales for the first quarter of 2025, compared to 36% in the prior year’s first quarter.

Comparative information regarding the AA&S segment’s major product categories, based on their percentages of revenue for the quarters ended March 30, 2025 and March 31, 2024, is presented in the following table.

HRPF conversion service sales are excluded from this presentation.

Year-to-date period ended

September 29, 2024 October 1, 2023

Quarter ended

March 30, 2025 March 31, 2024

Nickel-based alloys and specialty alloys 55 % 51 %

Precision rolled strip products 19 % 18 %

Zirconium and related alloys 17 % 20 %

Titanium and titanium-based alloys 17 % 12 %

Precision rolled strip products 11 % 17 %

Total 100 % 100 %

Segment EBITDA was $232.9 million, or 15.1% of sales, for the year-to-date period ended September 29, 2024, compared to segment EBITDA of $219.3 million, or 14.0% of sales, for the year-to-date period ended October 1, 2023.

The margin increase compared to the prior year was primarily due to a favorable sales mix, as growth in titanium mill products and exotic alloys offset weaker demand for nickel-based alloys.

Results for the year-to-date period ended September 29, 2024 included $7.0 million of benefits related to the recognition of previously deferred employee retention tax credits, which were partially offset by higher incentive compensation and maintenance costs.

While unplanned outages and the deferral of certain customer orders impacted third quarter 2024, we continue to expect margin expansion within this segment through 2024 with improved sales mix and improving operating performance.

We have increased capacity at our titanium melt shop in Albany, Oregon in the first nine months of fiscal year 2024, and expect to reach full production capacity at that facility in the fourth quarter of fiscal year 2024.

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

Segment EBITDA was $83.4 million, or 14.9% of sales, for the first quarter 2025, compared to segment EBITDA of $71.8 million, or 14.0% of sales, for the first quarter 2024.

The margin increase compared to the prior year was primarily due to higher sales and a favorable sales mix on higher demand for nickel-based alloys.

First quarter 2025 also included a benefit of $2.6 million due to a customer recovery for previously reserved accounts receivable.

While our margin declined sequentially from the fourth quarter 2024, that quarter included a net benefit of $4.9 million due to the Advanced Manufacturing Production Credit and a customer commercial negotiation.

We continue to expect to see margin expansion through improved sales mix and improved operating performance, which was demonstrated by our year-over-year margin expansion.

We are also closely monitoring macro risks and uncertainty and have taken actions to minimize the impact of tariffs in our contracts and supply chains.

Corporate Items

Corporate expenses for the third quarter of 2024 were $13.4 million, compared to $12.5 million for the third quarter 2023.

For the year-to-date period ended September 29, 2024, corporate expenses were $49.9 million, compared to $47.1 million for the year-to-date period ended October 1, 2023.

The current year increases reflect higher incentive compensation costs compared to the prior year periods.

Closed operations and other income/expense for the third quarter 2024 was income of $2.3 million, compared to expense of $3.6 million for the third quarter 2023.

For the year-to-date period ended September 29, 2024, closed operations and other income/expense was income of $1.7 million, compared to expense of $6.8 million for the year-to-date period ended October 1, 2023.

Closed operations and other income /expense for the quarter ended September 29, 2024 includes a $3.7 million gain on the sale of certain oil and gas rights, included within other income, net, on the consolidated statement of operations, and favorable foreign currency transaction impacts as compared to the prior year period.

Closed operations and other income /expense for the year-to-date period ended September 29, 2024 also includes a $2.3 million gain on the sale of assets for our idled Houston, PA facility included within gain on asset sales and sales of businesses, net, on the consolidated statement of operations.

The Company received $3.5 million of proceeds from this sale, which was reported as an investing activity on the consolidated statement of cash flows.

The following table shows depreciation & amortization for the relevant periods by each business segment.

Quarter ended Year-to-date period ended

September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023

High Performance Materials & Components $ 18.6 $ 16.5 $ 52.8 $ 51.8

Advanced Alloys & Solutions 18.2 17.3 54.5 49.6

Other 1.7 1.8 5.1 5.2

$ 38.5 $ 35.6 $ 112.4 $ 106.6

Interest expense, net of interest income, in the third quarter 2024 increased to $28.0 million, compared to $23.8 million for the third quarter 2023.

Interest expense, net of interest income, for the year-to-date period ended September 29, 2024 was $83.0 million, compared to $65.0 million for the year-to-date period ended October 1, 2023.

These increases reflect the issuance of the 2030 Notes during the third quarter 2023.

Capitalized interest reduced interest expense by $2.9 million in the third quarter 2024 and $3.3 million in the third quarter 2023.

For the year-to-date periods ended September 29, 2024 and October 1, 2023, capitalized interest was $8.8 million and $10.0 million, respectively.

Restructuring and other charges of $4.3 million for the third quarter of 2024 include $2.5 million of start-up costs, partially offset by a $0.4 million credit for adjustments to inventory reserves related to our ongoing European restructuring, both of which are included within cost of sales on the consolidated statements of operations.

These charges also include $1.7 million of transaction costs, which are included within selling and administrative expenses on the consolidated statements of operations, and restructuring charges of $0.5 million.

Restructuring and other charges of $12.8 million for the year-to-date period ended September 29, 2024 include $7.2 million of start-up costs and $5.1 million of inventory write-downs related to our ongoing European restructuring, both of which are included within cost of sales on the consolidated statements of operations.

Restructuring and other charges of $4.2 million for the third quarter of 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 revised workforce reduction estimates.

Restructuring and other charges of $14.6 million for the year-to-date period ended October 1, 2023 include $2.2 million of severance-related restructuring charges 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.

These restructuring and other charges were excluded from segment and adjusted EBITDA.

Cash payments associated with prior restructuring programs were $5.2 million in the year-to-date

period ended September 29, 2024.

Of the $8.8 million of remaining reserves associated with these restructuring actions as of September 29, 2024, all are expected to be paid within the next year.

For the quarter and year-to-date period ended September 29, 2024, our effective tax rate was 24.6% and 22.7%, respectively, resulting in an income tax provision of $28.3 million and $70.5 million, respectively.

Discrete tax benefits for the year-to-date period ended September 29, 2024 were $4.5 million, which includes $3.3 million for share-based compensation and the recognition of a stranded deferred tax valuation allowance in accumulated other comprehensive loss that was associated with our interest rate swap due to its maturity.

The effective tax rates for the quarter and year-to-date period ended October 1, 2023 were impacted by the net valuation allowance position in the U.S.

and our foreign earnings.

Corporate expenses for the first quarter of 2025 were $17.4 million, compared to $17.1 million for the first quarter 2024.

Closed operations and other expense for the first quarter 2025 was $2.4 million, compared to $1.3 million for the first quarter 2024.

Interest expense, net of interest income, in the first quarter 2025 decreased to $23.0 million, compared to $26.6 million for the first quarter 2024, due to the conversion of the 2025 Convertible Notes during the third quarter 2024.

Capitalized interest reduced interest expense by $3.1 million in the first quarter 2025 and $4.0 million in the first quarter 2024.

Restructuring and other charges of $5.6 million for the first quarter of 2025 include $4.0 million of start-up and transaction related costs, and $1.6 million for losses on sale of accounts receivables .

Restructuring and other charges of $3.1 million for the first quarter of 2024 include $2.9 million of start-up costs and $0.2 million of restructuring costs.

Start up and transaction related costs are included within cost of sales in the consolidated statements of operations.

These restructuring and other charges were excluded from segment EBITDA.

Cash payments associated with prior restructuring programs were $1.7 million in the first quarter of 2025.

Of the $6.8 million of remaining reserves associated with these restructuring actions as of March 30, 2025, all are expected to be paid within the next year.

Managed Working Capital

As part of managing the performance of our business, we focus on Managed working capital, a non-GAAP financial measure that we define as gross accounts receivable, short-term contract assets and gross inventories, excluding the effects of reserves for uncollectible accounts receivable and inventory valuation reserves, less accounts payable and short-term contract liabilities.

We assess Managed working capital performance as a percentage of the prior three months annualized sales.

Managed working capital is not intended to replace working capital or other GAAP financial measures or to be used as a measure of liquidity.

Management believes this non-GAAP financial measure focuses on the assets and liabilities most closely attributable to our core operations, allowing Management to quantify and evaluate the asset intensity of our business.

Further, Management believes this non-GAAP financial measure provides investors with additional insights into the Company’s effectiveness in balancing the need to maintain appropriate asset levels to support sales growth and operations while deploying our cash effectively.

We employ several strategies to actively manage our Managed working capital, seeking to effectively balance the need to maintain appropriate levels of Managed working capital to support our growth and operations, while deploying our cash efficiently.

Our strategies include, but are not limited to, taking advantage of favorable customer and supplier payment terms, participating in supplier financing programs, accounts receivable factoring arrangements and other customer financing programs, managing the timing of purchases of raw materials, and leveling manufacturing process throughput and shipping to limit periodic increases in Managed working capital.

At March 30, 2025, Managed working capital increased as a percentage of annualized sales to 35.9% compared to 30.9% at December 29, 2024.

The increase in Managed working capital as a percentage of annualized sales was primarily due to seasonal inventory builds and the timing of shipments and vendor payments in the quarter.

Days sales outstanding, which measures actual collection timing for accounts receivable, worsened by 21% as of March 30, 2025 compared to year end 2024.

Gross inventory turns, which measures how many times we turn over our inventory relative to cost of sales in a year, worsened by 4% as of March 30, 2025 compared to year end 2024.

The computations of Managed working capital at March 30, 2025 and December 29, 2024, reconciled to the financial statement line items as computed under U.S.

GAAP, were as follows.

The December 29, 2024 amounts include management working capital balances that are classified as held for sale.

March 30, December 29,

(In millions) 2025 2024

Accounts receivable $ 827.0 $ 709.2

Short-term contract assets 85.9 75.6

Inventory 1,396.9 1,353.0

Accounts payable (563.2) (609.1)

Short-term contract liabilities (187.1) (169.4)

Subtotal 1,559.5 1,359.3

Allowance for doubtful accounts 11.6 15.0

Inventory valuation reserves 74.2 68.5

Net managed working capital held for sale — 8.5

Managed working capital $ 1,645.3 $ 1,451.3

Annualized prior 3 months sales $ 4,577.7 $ 4,690.5

Managed working capital as a % of annualized sales 35.9 % 30.9 %

Our effective tax rate was 17.3%, resulting in an income tax provision of $21.0 million for the quarter ended March 30, 2025.

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

The effective tax rate for the quarterly periods ended March 30, 2025 and March 31, 2024 included discrete tax benefits of $5.1 million and $3.0 million, respectively, primarily for share-based compensation in.

Excluding discrete tax benefits, the Company’s operating tax rates for the quarters ended March 30, 2025 and March 31, 2024 were 21.5% and 23.3%, respectively.

Liquidity and Financial Condition

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

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

The ABL facility contains a financial covenant whereby we must maintain a fixed charge coverage ratio of not less than 1.00:1.00 after an event of default has occurred and is continuing or if the undrawn availability under the ABL revolving credit portion of the facility is less than the greater of (i) 10% of the then applicable maximum loan amount under the revolving credit portion of the ABL and the outstanding Term Loan balance, or (ii) $60.0 million.

We were in compliance with the fixed charge coverage ratio as of September 29, 2024.

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

The ABL also contains customary affirmative and negative covenants for credit facilities of this type, including limitations on our ability to incur additional indebtedness or liens or to enter into investments, mergers and acquisitions, dispositions of assets and transactions with affiliates, some of which are more restrictive, at any time during the term of the ABL when our fixed charge coverage ratio is less than 1.00:1.00 and our undrawn availability under the revolving portion of the ABL is less than the greater of (a) $120 million or (b) 20% of the sum of the maximum loan amount under the revolving credit portion of the ABL and the outstanding Term Loan balance.

As of September 29, 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.

At September 29, 2024, we had $407 million of cash and cash equivalents, and available additional liquidity under the ABL facility of approximately $551 million.

We have no significant debt maturities until the fourth quarter 2025.

During the third quarter of 2024, we notified holders of the $291.4 million outstanding principal amount of our 2025 Convertible Notes that they would be redeemed prior to their maturity date.

The holders of any outstanding 2025 Convertible Notes had the right to convert the principal amount of such notes into shares of ATI’s common stock prior to the maturity date.

Any 2025 Convertible Notes not tendered for conversion prior to the maturity date were redeemed in cash at a redemption price equal to the principal amount, plus accrued and unpaid interest.

We also settled the capped call transactions initiated as part of the issuance of the 2025 Convertible Notes for $76.1 million in cash, which is recorded as additional paid-in capital on the consolidated balance sheet and as a financing activity on the consolidated statement of cash flows.

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

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.

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 below for further explanation), and the remaining proceeds were used for liquidity and general corporate purposes.

In the first quarter 2023, we made $50 million in voluntary cash contributions to our U.S.

qualified defined benefit pension plans to improve the plans’ funded position, and in the third quarter of 2023, we made an additional $222 million in voluntary cash contributions to our U.S.

qualified defined benefit pension plans in order to fully fund remaining pension liabilities ahead of an annuity transaction that occurred in the fourth quarter of 2023 whereby we purchased group annuity contracts from an insurer covering approximately 85% of our U.S.

qualified defined benefit pension plan obligations and transferred the pension obligations and associated assets for approximately 8,200 plan participants to the selected insurance company.

As of March 30, 2025, there were no outstanding borrowings under the revolving portion of the ABL facility, and $30.5 million was utilized to support the issuance of letters of credit.

At March 30, 2025, we had $476 million of cash and cash equivalents, and available additional liquidity under the ABL facility of approximately $537 million.

Our next significant debt maturity are the 6.95% Debentures due 2025 issued by our wholly owned subsidiary, Allegheny Ludlum LLC.s in the fourth quarter of this year.

Periodically, our Board of Directors authorizes the repurchase of ATI common stock (the “Share Repurchase Program”), the most recent of which was $700 million that was announced in September 2024.

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Open market repurchases are structured to occur within the pricing and volume requirements of SEC Rule 10b-18.

In the quarter and year-to-date period ended September 29, 2024, ATI used $40.0 million and $190.0 million, respectively, to repurchase 0.7 million and 4.1 million, respectively, of its common stock under the Share Repurchase Program.

At September 29, 2024, ATI has utilized $40 million of the $700 million currently authorized under the Share Repurchase Program.

In the quarter ended October 1, 2023, ATI used $45.0 million to repurchase 1.0 million shares of its common stock under the Share Repurchase Program, and in the year-to-date period ended October 1, 2023, ATI used $55.1 million to repurchase 1.2 million shares of its common stock under the Share Repurchase Program.

The current Stock Repurchase Program has no time limit, does not obligate the Company to repurchase any specific number of shares, and may be modified, suspended, or terminated at any time by the Board of Directors without prior notice.

In the quarter ended March 30, 2025, ATI used $70.0 million to repurchase 1.2 million of its common stock under the Share Repurchase Program.

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.

At March 30, 2025, ATI has utilized $180 million of the $700 million currently authorized under the Share Repurchase Program.

We believe that internally generated funds, current cash on hand and available borrowings under the ABL facility will be adequate to meet our liquidity needs.

Based on current actuarial assumptions, we are not required to make any contributions to our pension plan during year 2024.

Also, we do not expect to pay any significant U.S.

federal or state income taxes in year 2024 due to net operating loss and tax attribute carryovers.

If we needed to obtain additional financing using the credit markets, the cost and the terms and conditions of such borrowings may be influenced by our credit rating.

In the event we decide to obtain additional financing, the cost and terms and conditions of such borrowings may be influenced by our credit rating.

In addition, we regularly review our capital structure, various financing alternatives, and conditions in the debt and equity markets in order to opportunistically enhance our capital structure.

In connection therewith, we may seek to refinance or retire existing indebtedness, incur new or additional indebtedness or issue equity or equity-linked securities, in each case, depending on market and other conditions.

As a result, we may seek to refinance or retire existing indebtedness, incur new or additional indebtedness or issue equity or equity-linked securities, in each case, depending on market and other conditions.

We have no off-balance sheet arrangements as defined in Item 303(a)(4) of SEC Regulation S-K.

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We define net debt as the total principal balance of our outstanding indebtedness excluding deferred financing costs, net of cash, at the balance sheet date.

See the explanations above for our definitions of Adjusted EBITDA and EBITDA, which are non-GAAP measures and are not intended to represent, and should not be considered more meaningful than, or as alternatives to, a measure of operating performance as determined in accordance with U.S.

See above for our definition of Adjusted EBITDA, which is a non-GAAP measures and is not intended to represent, and should not be considered more meaningful than, or as an alternative to, a measure of operating performance as determined in accordance with U.S.

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

Our Debt to Adjusted EBITDA Leverage and Net Debt to Adjusted EBITDA Leverage ratios improved in the third quarter of 2024 compared to year end 2023, resulting from higher earnings and lower debt as a result of the redemption of the 2025 Convertible Notes.

Our Total Debt to Adjusted EBITDA Leverage ratio improved in the first quarter of 2025 compared to year end 2024, while our Net Debt to Adjusted EBITDA Leverage ratio worsened in the first quarter of 2025 compared to year end 2024, largely due to a decreased cash balance.

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

GAAP are as follows:

Quarter ended Trailing 12-month period ended Year ended

September 29, 2024 October 1, 2023 September 29, 2024 December 31, 2023

Trailing 12-month period ended Year ended

March 30, 2025 December 29, 2024

Net income attributable to ATI $ 398.7 $ 367.8

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Pension remeasurement loss 14.1 14.1

Pension settlement loss — — 41.7 41.7

Restructuring and other charges 24.6 22.1

8 unchanged sentences

Net Debt to Adjusted EBITDA 1.85 1.63

Cash provided by operations was $26.3 million in the year-to-date period ended September 29, 2024, compared to cash used in operations of $331.3 million in the year-to-date period ended October 1, 2023, which included $272 million in contributions to the U.S.

defined benefit pension plans.

Both periods reflect higher accounts receivable and higher inventory balances due to increased operating levels, but these conditions impacted 2024 to a much lesser extent than 2023.

Cash used in operations was $92.5 million in the first quarter of 2025, compared to cash used in operations of $98.8 million in the first quarter of 2024.

Both periods reflect higher accounts receivable and higher inventory balances due to increased operating levels as well as seasonal inventory builds.

Working capital balances, and consequently cash from operations, can fluctuate throughout any operating period based upon the timing of receipts from customers and payments to vendors.

However, we actively manage our working capital to allow for the required flexibility to meet our strategic objectives.

Other significant year-to-date 2024 operating cash flow items included payment of 2023 annual incentive compensation.

Other significant year-to-date 2023 operating cash flow items included payment of 2022 annual incentive compensation.

Cash used in investing activities was $178.2 million in the year-to-date period ended September 29, 2024.

Capital expenditures of $191.8 million primarily related to various growth projects to support the aerospace & defense and aero-like markets and included customer funded amounts of approximately $11.0 million.

Proceeds from disposals of property, plant and equipment in the year-to-date period ended September 29, 2024 of $10.6 million largely relate to $3.7 million of proceeds on the sale of certain oil and gas rights and $3.5 million of proceeds received for the sale of assets for our idled Houston, PA facility.

For the year-to-date period ended October 1, 2023, cash used in investing activities was $143.2 million, reflecting $147.3 million in capital expenditures.

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

Cash used in financing activities was $166.2 million in the year-to-date period ended September 29, 2024, which included $190.0 million to repurchase 4.1 million shares of ATI stock under our Share Repurchase Program authorized by our Board of Directors offset by $76.1 million in cash received for the settlement of the capped call as a result of the redemption of the 2025 Convertible Notes.

For the year-to-date period ended October 1, 2023, cash provided by financing activities was $323.4 million, and included $418.8 million of net proceeds from the issuance of the 2030 Notes during the third quarter of 2023 and $55.1 million of payments for the repurchase of 1.2 million shares of ATI stock under our repurchase programs authorized by our Board of Directors.

At September 29, 2024, cash and cash equivalents on hand totaled $406.6 million, a decrease of $337.3 million from year end 2023.

Cash and cash equivalents held by our foreign subsidiaries, excluding the $19.2 million of cash held for sale, was $178.3 million at September 29, 2024, of which $102.3 million was held by the STAL joint venture.

Other significant first quarter 2025 and 2024 operating cash flow items included payment of the annual cash incentive compensation.

Cash used in investing activities was $50.6 million in the first quarter of 2025, which included $53.3 million for capital expenditures.

Cash used in investing activities was $63.8 million in the first quarter of 2024, which included $65.8 million for capital expenditures.

We expect to fund our capital expenditures with cash on hand and cash flow generated from our operations and, if needed, borrowings under the ABL facility.

Cash used in financing activities was $107.5 million in the first quarter of 2025, which included $70.0 million to repurchase 1.2 million shares of ATI stock.

Cash used in financing activities was $186.9 million in the first quarter of 2024, which included $150.0 million to repurchase 3.4 million shares of ATI stock.

All share repurchases were made pursuant to the Share Repurchase Program authorized by our Board of Directors.

At March 30, 2025, cash and cash equivalents on hand totaled $475.8 million, a decrease of $245.4 million from year end 2024.

Cash and cash equivalents held by our foreign subsidiaries was $198.8 million at March 30, 2025, of which $71.3 million was held by the STAL joint venture.

Critical Accounting Policies

Asset Impairment

We monitor the recoverability of the carrying value of our long-lived assets.

An impairment charge is recognized when the expected net undiscounted future cash flows from an asset’s use (including any proceeds from disposition) are less than the asset’s carrying value, and the asset’s carrying value exceeds its fair value.

Changes in the expected use of a long-lived asset group, and the financial performance of the long-lived asset group and its operating segment, are evaluated as indicators of possible impairment.

Future cash flow value may include appraisals for property, plant and equipment, land and improvements, future cash flow estimates from operating the long-lived assets, and other operating considerations.

In the fourth quarter of each year in conjunction with the annual business planning cycle, or more frequently if new material information is available, we evaluate the recoverability of idled facilities.

Goodwill is reviewed annually in the fourth quarter of each year for impairment or more frequently if impairment indicators arise.

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

At September 29, 2024, we had $227.2 million of goodwill on our consolidated balance sheet.

All goodwill relates to reporting units in the HPMC segment.

Management concluded that none of ATI’s reporting units or long-lived assets experienced any triggering event that would have required an interim impairment analysis at September 29, 2024.

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

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

Future realization of deferred income tax assets requires sufficient taxable income within the carryback and/or carryforward period available under tax law.

On a quarterly basis, we evaluate the realizability of our deferred tax assets.

The evaluation includes the consideration of all available evidence, both positive and negative, regarding historical operating results including recent years with reported losses, the estimated timing of future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused.

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

Valuation allowances are established when it is estimated that it is more likely than not that the tax benefit of the deferred tax asset will not be realized.

Retirement Benefits

In accordance with accounting standards, we determine the discount rate used to value pension plan liabilities as of the last day of each year.

The discount rate reflects the current rate at which the pension liabilities could be effectively settled.

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

The effect on pension liabilities for changes to the discount rate, the difference between expected and actual plan asset returns, and the net effect of other changes in actuarial assumptions and experience are immediately recognized in earnings through net periodic pension benefit cost within nonoperating retirement benefit expense on the consolidated statements of operations when pension plans are remeasured annually in the fourth quarter or on an interim basis as triggering events require remeasurement.

This immediate recognition is in accordance with the accounting standards.

For ERISA (Employee Retirement Income Security Act of 1974, as amended) funding purposes, discount rates used to measure pension liabilities for U.S.

qualified defined benefit plans are calculated on a different basis using an IRS-determined segmented yield curve, which currently results in a higher discount rate than the discount rate methodology required by accounting standards.

Funding requirements are also affected by IRS-determined mortality assumptions, which may differ from those used under accounting standards.

Other Critical Accounting Policies

A summary of other significant accounting policies is discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 1 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2023.

Our critical accounting policies are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 1 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 29, 2024.

The preparation of the financial statements in accordance with U.S.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis