UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the Quarterly Period Ended March 30, 2025
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the Transition Period From to
Commission File Number 1-12001
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | ||||||||||
| incorporation or organization) | Identification No.) | ||||||||||
| (Address of Principal Executive Offices) | (Zip Code) | ||||||||||
(800 ) 289-7454
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
At April 11, 2025, the registrant had outstanding 141,067,578 shares of its Common Stock.
ATI INC.
SEC FORM 10-Q
Quarter Ended March 30, 2025
INDEX
| Page No. | |||||
| PART I. - FINANCIAL INFORMATION | |||||
| Item 1. Financial Statements | |||||
| Consolidated Balance Sheets | |||||
| Consolidated Statements of Operations | |||||
| Consolidated Statements of Comprehensive Income (Loss) | |||||
| Consolidated Statements of Cash Flows | |||||
| Statements of Changes in Consolidated Equity | |||||
| Notes to Consolidated Financial Statements | |||||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | |||||
| Item 4. Controls and Procedures | |||||
| PART II. - OTHER INFORMATION | |||||
| Item 1. Legal Proceedings | |||||
| Item 1A. Risk Factors | |||||
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | |||||
| Item 5. Other Information | |||||
| Item 6. Exhibits | |||||
| SIGNATURES | |||||
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ATI Inc. and Subsidiaries
Consolidated Balance Sheets
(In millions, except share and per share amounts)
(Current period unaudited)
| March 30, 2025 | December 29, 2024 | ||||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Short-term contract assets | |||||||||||
| Inventories, net | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total Current Assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Other assets | |||||||||||
| Total Assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Short-term contract liabilities | |||||||||||
| Short-term debt and current portion of long-term debt | |||||||||||
| Other current liabilities | |||||||||||
| Total Current Liabilities | |||||||||||
| Long-term debt | |||||||||||
| Accrued postretirement benefits | |||||||||||
| Pension liabilities | |||||||||||
| Other long-term liabilities | |||||||||||
| Total Liabilities | |||||||||||
| Equity: | |||||||||||
| ATI Stockholders’ Equity: | |||||||||||
Preferred stock, par value $ | |||||||||||
Common stock, par value $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
Treasury stock: | ( | ( | |||||||||
| Accumulated other comprehensive loss, net of tax | ( | ( | |||||||||
| Total ATI stockholders’ equity | |||||||||||
| Noncontrolling interests | |||||||||||
| Total Equity | |||||||||||
| Total Liabilities and Equity | $ | $ | |||||||||
The accompanying notes are an integral part of these statements.
1
ATI Inc. and Subsidiaries
Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)
| Quarter ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Sales | $ | $ | |||||||||
| Cost of sales | |||||||||||
| Gross profit | |||||||||||
| Selling and administrative expenses | |||||||||||
| Restructuring charges | |||||||||||
| Loss on asset sales and sales of businesses, net | |||||||||||
| Operating income | |||||||||||
| Nonoperating retirement benefit expense | ( | ( | |||||||||
| Interest expense, net | ( | ( | |||||||||
| Other income, net | |||||||||||
| Income before income taxes | |||||||||||
| Income tax provision | |||||||||||
| Net income | |||||||||||
| Less: Net income attributable to noncontrolling interests | |||||||||||
| Net income attributable to ATI | $ | $ | |||||||||
| Basic net income attributable to ATI per common share | $ | $ | |||||||||
| Diluted net income attributable to ATI per common share | $ | $ | |||||||||
The accompanying notes are an integral part of these statements.
2
ATI Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(In millions)
(Unaudited)
| Quarter ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Net income | $ | $ | |||||||||
| Currency translation adjustment | |||||||||||
| Unrealized net change arising during the period | ( | ||||||||||
| Reclassification adjustment included in net income | |||||||||||
| Total | ( | ||||||||||
| Derivatives | |||||||||||
| Net derivatives gain (loss) on hedge transactions | ( | ||||||||||
| Reclassification to net income of net realized loss | |||||||||||
| Income taxes on derivative transactions | |||||||||||
| Total | ( | ||||||||||
| Postretirement benefit plans | |||||||||||
| Actuarial loss | |||||||||||
| Amortization of net actuarial loss | |||||||||||
| Prior service cost | |||||||||||
| Amortization to net income of net prior service credits | ( | ( | |||||||||
| Income taxes on postretirement benefit plans | |||||||||||
| Total | |||||||||||
| Other comprehensive income (loss), net of tax | ( | ||||||||||
| Comprehensive income | |||||||||||
| Less: Comprehensive income attributable to noncontrolling interests | |||||||||||
| Comprehensive income attributable to ATI | $ | $ | |||||||||
The accompanying notes are an integral part of these statements.
3
ATI Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
| Quarter ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Operating Activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Share-based compensation | |||||||||||
| Deferred taxes | |||||||||||
| Net gains from disposal of property, plant and equipment | |||||||||||
| Loss on sales of businesses | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Inventories | ( | ( | |||||||||
| Accounts receivable | ( | ( | |||||||||
| Accounts payable | ( | ( | |||||||||
| Retirement benefits | ( | ( | |||||||||
| Accrued liabilities and other | ( | ( | |||||||||
| Cash used in operating activities | ( | ( | |||||||||
| Investing Activities: | |||||||||||
| Purchases of property, plant and equipment | ( | ( | |||||||||
| Proceeds from disposal of property, plant and equipment | |||||||||||
| Other | |||||||||||
| Cash used in investing activities | ( | ( | |||||||||
| Financing Activities: | |||||||||||
| Payments on long-term debt and finance leases | ( | ( | |||||||||
| Net payments under credit facilities | ( | ||||||||||
| Purchase of treasury stock | ( | ( | |||||||||
| Shares repurchased for income tax withholding on share-based compensation and other | ( | ( | |||||||||
| Cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | |||||||||||
| Decrease in cash and cash equivalents | ( | ( | |||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
The accompanying notes are an integral part of these statements.
4
ATI Inc. and Subsidiaries
Statements of Changes in Consolidated Equity
(In millions)
(Unaudited)
| ATI Stockholders | |||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Non- controlling Interests | Total Equity | |||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Employee stock plans | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||
| Balance, December 29, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Employee stock plans | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||
| Balance, March 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these statements.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note 1. Accounting Policies
The interim consolidated financial statements include the accounts of ATI Inc. and its subsidiaries. Unless the context requires otherwise, “ATI” and “the Company” refer to ATI Inc. 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.
New Accounting Pronouncements Adopted
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, with the exception of interim disclosures, was effective for the Company in fiscal year 2024, and the Company adopted this new accounting guidance for annual disclosures effective January 1, 2024. The interim disclosures are effective for the Company in fiscal year 2025. 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 11.
Pending Accounting Pronouncements
In December 2023, the FASB issued new accounting guidance related to income tax disclosures. This guidance requires an entity 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 includes annual disclosure requirements that 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.
In November 2024, the FASB issued new accounting guidance related to expense disaggregation disclosures. This guidance requires entities to disclose specified information about certain costs and expenses including (1) the amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization, (2) include certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same disclosure as the other disaggregation requirements, (3) a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, and (4) the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. This new guidance for annual disclosures will be effective for the Company for fiscal year 2027 and for interim disclosures will be effective for the Company for fiscal year 2028. The guidance can be applied prospectively
6
or 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.
Note 2. Revenue from Contracts with Customers
Disaggregation of Revenue
The Company operates in two business segments: High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions (AA&S). 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 by global and geographical markets for the quarters and year-to-date periods ended March 30, 2025 and March 31, 2024 is included in the following tables.
| (in millions) | Quarter ended | |||||||||||||||||||||||||
| March 30, 2025 | March 31, 2024 | |||||||||||||||||||||||||
| HPMC | AA&S | Total | HPMC | AA&S | Total | |||||||||||||||||||||
| Diversified Global Markets: | ||||||||||||||||||||||||||
| Aerospace & Defense: | ||||||||||||||||||||||||||
| Jet Engines- Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Airframes- Commercial | ||||||||||||||||||||||||||
| Defense | ||||||||||||||||||||||||||
| Total Aerospace & Defense | ||||||||||||||||||||||||||
| Specialty Energy | ||||||||||||||||||||||||||
| Medical | ||||||||||||||||||||||||||
| Electronics | ||||||||||||||||||||||||||
| Other Core Markets | ||||||||||||||||||||||||||
| Core End Markets | ||||||||||||||||||||||||||
| Conventional Energy | ||||||||||||||||||||||||||
| Automotive | ||||||||||||||||||||||||||
| Construction/Mining | ||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Industrial Markets | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| (in millions) | Quarter ended | |||||||||||||||||||||||||
| March 30, 2025 | March 31, 2024 | |||||||||||||||||||||||||
| HPMC | AA&S | Total | HPMC | AA&S | Total | |||||||||||||||||||||
| Primary Geographical Market: | ||||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Europe | ||||||||||||||||||||||||||
| Asia | ||||||||||||||||||||||||||
| Canada | ||||||||||||||||||||||||||
| South America, Middle East and other | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
7
Comparative information regarding the Company’s major products based on their percentages of sales is included in the following table. Hot-Rolling and Processing Facility (HRPF) conversion service sales in the AA&S segment are excluded from this presentation.
| Quarter ended | ||||||||||||||||||||||||||
| March 30, 2025 | March 31, 2024 | |||||||||||||||||||||||||
| HPMC | AA&S | Total | HPMC | AA&S | Total | |||||||||||||||||||||
| Diversified Products and Services: | ||||||||||||||||||||||||||
| Nickel-based alloys and specialty alloys | % | % | % | % | % | % | ||||||||||||||||||||
| Precision forgings, castings and components | % | % | % | % | % | % | ||||||||||||||||||||
| Titanium and titanium-based alloys | % | % | % | % | % | % | ||||||||||||||||||||
| Zirconium and related alloys | % | % | % | % | % | % | ||||||||||||||||||||
| Precision rolled strip products | % | % | % | % | % | % | ||||||||||||||||||||
| Total | % | % | % | % | % | % | ||||||||||||||||||||
The Company maintained a backlog of confirmed orders totaling $4.0 billion and $3.9 billion at March 30, 2025 and March 31, 2024, respectively. Due to the structure of the Company’s long-term agreements, approximately 70 % of this backlog at March 30, 2025 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 March 30, 2025 and December 29, 2024, accounts receivable from customers were $838.6 million and $724.2 million, respectively. The following represents the rollforward of accounts receivable - reserve for doubtful accounts and contract assets and liabilities for the year-to-date periods ended March 30, 2025 and March 31, 2024:
| (in millions) | ||||||||
| Accounts Receivable - Reserve for Doubtful Accounts | March 30, 2025 | March 31, 2024 | ||||||
| Balance as of beginning of year | $ | $ | ||||||
| Expense to increase the reserve | ||||||||
| Write-offs and recoveries of uncollectible accounts | ( | ( | ||||||
| Balance as of period end | $ | $ | ||||||
| (in millions) | ||||||||
| Contract Assets | ||||||||
| Short-term | March 30, 2025 | March 31, 2024 | ||||||
| Balance as of beginning of year | $ | $ | ||||||
| Recognized in current year | ||||||||
| Reclassified to accounts receivable | ( | ( | ||||||
| Balance as of period end | $ | $ | ||||||
8
| (in millions) | ||||||||
| Contract Liabilities | ||||||||
| Short-term | March 30, 2025 | March 31, 2024 | ||||||
| Balance as of beginning of year | $ | $ | ||||||
| Recognized in current year | ||||||||
| Amounts in beginning balance reclassified to revenue | ( | ( | ||||||
| Current year amounts reclassified to revenue | ( | ( | ||||||
| Other | ( | |||||||
| Reclassification to/from long-term | ||||||||
| Balance as of period end | $ | $ | ||||||
| Long-term (a) | March 30, 2025 | March 31, 2024 | ||||||
| Balance as of beginning of year | $ | $ | ||||||
| Recognized in current year | ||||||||
| Amounts in beginning balance reclassified to revenue | ( | |||||||
| Other | ( | |||||||
| Reclassification to/from short-term | ( | ( | ||||||
| Balance as of period end | $ | $ | ||||||
(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 $13.8 million and $12.0 million as of March 30, 2025 and December 29, 2024, respectively, and are reported in other long-term assets on the consolidated balance sheet. Contract cost amortization expense for the quarters ended March 30, 2025 and March 31, 2024 was $0.2 million and $0.3 million, respectively.
Note 3. Inventories
Inventories at March 30, 2025 and December 29, 2024 were as follows (in millions):
| March 30, 2025 | December 29, 2024 | ||||||||||
| Raw materials and supplies | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| Inventory valuation reserves | ( | ( | |||||||||
| Total inventories, net | $ | $ | |||||||||
Note 4. Property, Plant and Equipment
Property, plant and equipment at March 30, 2025 and December 29, 2024 was as follows (in millions):
| March 30, 2025 | December 29, 2024 | ||||||||||
| Land | $ | $ | |||||||||
| Buildings and leasehold improvements | |||||||||||
| Equipment | |||||||||||
| Accumulated depreciation and amortization | ( | ( | |||||||||
| Total property, plant and equipment, net | $ | $ | |||||||||
The construction in progress portion of property, plant and equipment at March 30, 2025 was $223.3 million. Capital expenditures on the consolidated statement of cash flows for the year-to-date periods ended March 30, 2025 and March 31,
9
Note 5. Divestitures
During the first quarter of 2025, the Company completed the sale of certain immaterial, non-core operations in Birmingham, UK and Dusseldorf, Germany, which were part of our European business in the HPMC Segment. A $3.7 million loss on sale of these operations is reported in loss on asset sales and sales of businesses, net, on the consolidated statement of operations for the quarter ended March 30, 2025, and is excluded from segment results. The Company will receive proceeds of approximately $9.7 million over the next 12 months for this sale, which is reported as an other receivable in prepaid expenses and other current assets on the consolidated balance sheet at March 30, 2025. In fiscal year 2024, these operations had external sales of approximately $39.1 million and income before tax of approximately $2.4 million.
Note 6. Joint Ventures
The financial results of majority-owned joint ventures are consolidated into the Company’s operating results and financial position, with the minority ownership interest recognized in the consolidated statements of operations as net income attributable to noncontrolling interests, and as equity attributable to the noncontrolling interests within total stockholders’ equity. Investments in which the Company exercises significant influence, but which it does not control (generally a 20% to 50% ownership interest), are accounted for under the equity method of accounting.
Majority-Owned Joint Ventures
STAL:
The Company has a 60 % interest in the Chinese joint venture known as STAL. 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 (PRS) stainless products mainly for the electronics and automotive markets located in Asia. Cash and cash equivalents held by STAL as of March 30, 2025 were $71.3 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; 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 30, 2025 were $1.0 million.
Equity Method Joint Ventures
A&T Stainless:
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. ATI accounts for the A&T Stainless joint venture under the equity method of accounting; however, as the net investment balance in the joint venture was zero as of December 29, 2024, ATI did not record the loss for the Company’s share of results of A&T Stainless for the quarter ended March 30, 2025. ATI’s share of A&T Stainless results were losses of $0.4 million for the quarter ended March 31, 2024, which is included within other income/expense, net, on the consolidated statements of operations and in the AA&S segment’s operating results.
10
Note 7. Supplemental Financial Statement Information
Other income (expense), net for the quarters ended March 30, 2025 and March 31, 2024 was as follows:
| (in millions) | Quarter ended | ||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Rent and royalty income | $ | $ | |||||||||
| Net equity loss on joint ventures (See Note 6) | ( | ||||||||||
| Total other income, net | $ | $ | |||||||||
Restructuring
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 are presented as a restructuring charge in the consolidated statements of operations and are excluded from segment results.
Restructuring reserves for severance cost activity is as follows:
| Severance and Employee | |||||
| Benefit Costs | |||||
| Balance at December 29, 2024 | $ | ||||
| Divestitures | ( | ||||
| Payments | ( | ||||
| Balance at March 30, 2025 | $ | ||||
During the first quarter ended March 30, 2025, the Company de-recognized $0.5 million of restructuring reserves in connection with the sale of non-core operations in Birmingham, UK and Dusseldorf, Germany (see Note 5 for further explanation). The $6.8 million restructuring reserve balance at March 30, 2025 is recorded in other current liabilities on the consolidated balance sheet.
Supplier Financing
The Company participates in supplier financing programs with two financial institutions to offer its suppliers the option for access to payment in advance of an invoice due date. Under such programs, 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 March 30, 2025 and December 29, 2024, the Company had $67.9 million and $34.8 million, respectively, reported in accounts payable on the consolidated balance sheets under such programs.
Sale of Receivables Program
During the fourth quarter of 2024, the Company entered into an accounts receivables purchase agreement (Receivables Purchase Agreement) with a third-party financial institution to periodically sell certain accounts receivables at a discount. These accounts receivable sales are accounted for as a sale of assets under ASC 860, Transfers and Servicing, as the Company’s continuing involvement is limited to servicing the accounts receivable, collecting the payments for the underlying accounts receivables and remitting such collections to the financial institution. The financial institution is responsible for any credit risk associated with the sold accounts receivables. The Company receives the purchase price, equal to the accounts receivable less the discount, at the time of the sale.
The Company sold $28.8 million of its receivables under this program during the first quarter of 2025, resulting in de-recognition of the receivables from the Company’s consolidated balance sheet. The Company had no amounts collected on behalf of the financial institution under the Receivables Purchase Agreement at March 30, 2025. The losses associated with these transactions of $0.2 million are reflected in the Company’s consolidated statement of operations for the quarter ended March 30, 2025 and are excluded from segment results. The cash received on these sales of accounts receivable during the quarter ended March 30, 2025 is presented in changes in receivables within operating activities in the consolidated statement of cash flows.
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Other Customer Receivable Sales
In the first quarter ended March 30, 2025 and March 31, 2024, the Company sold $72.6 million and $68.0 million, respectively, of certain customers’ accounts receivables through programs established by those customers with third-party financial institutions. These customers have extended payment terms and provide the programs to enable suppliers to receive more timely payments. The Company has no continuing involvement with the receivables sold under these programs, including no servicing requirement. The proceeds from these transactions are presented in changes in receivables within operating activities in the consolidated statement of cash flows. The losses associated with these transactions of $1.4 million and $1.6 million are reflected in the Company’s consolidated statements of operations for the quarters ended March 30, 2025 and March 31, 2024, respectively, and are excluded from segment results.
Note 8. Debt
Debt at March 30, 2025 and December 29, 2024 was as follows (in millions):
| March 30, 2025 | December 29, 2024 | ||||||||||
| $ | $ | ||||||||||
| ABL Term Loan | |||||||||||
| U.S. revolving credit facility | |||||||||||
| Foreign credit facilities | |||||||||||
| Finance leases and other | |||||||||||
| Debt issuance costs | ( | ( | |||||||||
| Debt | |||||||||||
| Short-term debt and current portion of long-term debt | |||||||||||
| Long-term debt | $ | $ | |||||||||
(a) The payment obligations of these debentures issued by Allegheny Ludlum, LLC are fully and unconditionally guaranteed by ATI.
Revolving Credit Facility
The Company has an Asset Based Lending (ABL) Credit Facility, which is collateralized by the accounts receivable and inventory of the Company’s operations. The ABL facility also provides the Company with the option of including certain machinery and equipment as additional collateral for purposes of determining availability under the facility. The ABL facility, which matures in September 2027, includes a $600 million revolving credit facility, a letter of credit sub-facility of up to $200 million, a $200 million term loan (Term Loan), and a swing loan facility of up to $60 million. The Term Loan has an interest rate of 2.0 % above the adjusted Secured Overnight Financing Rate (SOFR) and can be prepaid in increments of $25 million if certain minimum liquidity conditions are satisfied. In addition, the Company has the right to request an increase of up to $300 million in the maximum amount available under the revolving credit facility for the duration of the ABL.
The applicable interest rate for revolving credit borrowings under the ABL facility includes interest rate spreads based on available borrowing capacity that range between 1.25 % and 1.75 % for SOFR-based borrowings and between 0.25 % and 0.75 % for base rate borrowings. The ABL facility contains a financial covenant whereby the Company must maintain a fixed charge coverage ratio of not less than 1.00 :1.00 after an event of default has occurred and is continuing or if the undrawn availability under the ABL revolving credit portion of the facility is less than the greater of (i) 10 % of the then applicable maximum loan amount under the revolving credit portion of the ABL and the outstanding Term Loan balance, or (ii) $60.0 million. The Company was in compliance with the fixed charge coverage ratio as of March 30, 2025. Additionally, the Company must demonstrate minimum liquidity specified by the facility during the 90 -day period immediately preceding the stated maturity date of its 6.95 1.00 :1.00 and its undrawn availability under the revolving portion of the
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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 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. There were no 57 million based on March 30, 2025 foreign exchange rates, none of which was drawn as of March 30, 2025 or December 29, 2024.
Note 9. Derivative Financial Instruments and Hedging
As part of its risk management strategy, the Company, from time-to-time, utilizes derivative financial instruments to manage its exposure to changes in raw material prices, energy costs, foreign currencies, and interest rates. In accordance with applicable accounting standards, the Company accounts for most of these contracts as hedges.
The Company sometimes uses futures and swap contracts to manage exposure to changes in prices for forecasted purchases of raw materials, such as nickel, and natural gas. Under these contracts, which are generally accounted for as cash flow hedges, the price of the item being hedged is fixed at the time that the contract is entered into, and the Company is obligated to make or receive a payment equal to the net change between this fixed price and the market price at the date the contract matures.
The majority of ATI’s products are sold under contractual arrangements that include raw material surcharges and index mechanisms. However, as of March 30, 2025, 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 4 million pounds of nickel with hedge dates through 2027. The aggregate notional amount hedged is approximately 6 % 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 is the variable selling price or the variable raw material cost, respectively.
At March 30, 2025, the outstanding financial derivatives used to hedge the Company’s exposure to energy cost volatility consisted of natural gas cost hedges. At March 30, 2025, the Company hedged approximately 75 % of its forecasted domestic requirements for natural gas for the remainder of 2025 and approximately 35 % for 2026.
While the majority of the Company’s direct export sales are transacted in U.S. dollars, it uses foreign currency exchange contracts, from time-to-time, to limit transactional exposure to changes in currency exchange rates for those transactions denominated in a non-U.S. currency. The Company sometimes purchases foreign currency forward contracts that permit it to sell specified amounts of foreign currencies it expects to receive from its export sales for pre-established U.S. dollar amounts at specified dates. 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 March 30, 2025, 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. There were no outstanding derivative interest rate contracts at March 30, 2025.
There are no credit risk-related contingent features in the Company’s derivative contracts, and the contracts contain no provisions under which the Company has posted, or would be required to post, collateral. The counterparties to the Company’s derivative contracts are substantial and creditworthy commercial banks that are recognized market makers. The Company controls its credit exposure by diversifying across multiple counterparties and by monitoring credit ratings and credit default swap spreads of its counterparties. The Company also enters into master netting agreements with counterparties when possible.
The fair values of the Company’s derivative financial instruments are presented below, representing the gross amounts recognized which are not offset by counterparty or by type of item hedged. All fair values for these derivatives were measured using Level 2 information as defined by the accounting standard hierarchy, which includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs derived principally from or corroborated by observable market data.
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(In millions) Asset derivatives | Balance sheet location | March 30, 2025 | December 29, 2024 | |||||||||||||||||
| Derivatives designated as hedging instruments: | ||||||||||||||||||||
| Nickel and other raw material contracts | Prepaid expenses and other current assets | $ | $ | |||||||||||||||||
| Foreign exchange contracts | Prepaid expenses and other current assets | |||||||||||||||||||
| Natural gas contracts | Prepaid expenses and other current assets | |||||||||||||||||||
| Nickel and other raw material contracts | Other assets | |||||||||||||||||||
| Natural gas contracts | Other assets | |||||||||||||||||||
| Total derivatives designated as hedging instruments | $ | $ | ||||||||||||||||||
| Liability derivatives | Balance sheet location | |||||||||||||||||||
| Derivatives designated as hedging instruments: | ||||||||||||||||||||
| Nickel and other raw material contracts | Other current liabilities | $ | $ | |||||||||||||||||
| Natural gas contracts | Other current liabilities | |||||||||||||||||||
| Natural gas contracts | Other long-term liabilities | |||||||||||||||||||
| Nickel and other raw material contracts | Other long-term liabilities | |||||||||||||||||||
| Total derivatives designated as hedging instruments | $ | $ | ||||||||||||||||||
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. There were no outstanding fair value hedges as of March 30, 2025. 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 15 for further explanation).
Assuming market prices remain constant with those at March 30, 2025, a pre-tax gain of $2.6 million is expected to be recognized over the next 12 months.
Activity with regard to derivatives designated as cash flow hedges for the quarters and year-to-date periods ended March 30, 2025 and March 31, 2024 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) | ||||||||||||||||||||||
| Quarter ended | Quarter ended | ||||||||||||||||||||||
| Derivatives in Cash Flow Hedging Relationships | March 30, 2025 | March 31, 2024 | March 30, 2025 | March 31, 2024 | |||||||||||||||||||
| Nickel and other raw material contracts | $ | $ | ( | $ | ( | $ | |||||||||||||||||
| Natural gas contracts | ( | ( | |||||||||||||||||||||
| Foreign exchange contracts | ( | ||||||||||||||||||||||
| Interest rate swap | |||||||||||||||||||||||
| Total | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
The disclosures of gains or losses presented above for nickel and other raw material contracts and foreign currency contracts do not take into account the anticipated underlying transactions. Since these derivative contracts represent hedges, the net effect of any gain or loss on results of operations may be fully or partially offset.
The Company may also use derivative instruments that are not designated as hedges to protect the Company’s results from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by
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Note 10. Fair Value of Financial Instruments
The estimated fair value of financial instruments at March 30, 2025 was as follows:
| Fair Value Measurements at Reporting Date Using | |||||||||||||||||||||||
| (In millions) | Total Carrying Amount | Total Estimated Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | |||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
| Derivative financial instruments: | |||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Debt (a) | |||||||||||||||||||||||
The estimated fair value of financial instruments at December 29, 2024 was as follows:
| Fair Value Measurements at Reporting Date Using | |||||||||||||||||||||||
| (In millions) | Total Carrying Amount | Total Estimated Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | |||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
| Derivative financial instruments: | |||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Debt (a) | |||||||||||||||||||||||
In accordance with accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards established three levels of a fair value hierarchy that 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. The three levels of inputs used to measure fair value are as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The availability of observable market data is monitored to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period.
The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:
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Cash and cash equivalents: Fair value was determined using Level 1 information.
Derivative financial instruments: Fair values for derivatives were measured using exchange-traded prices for the hedged items. The fair value was determined using Level 2 information, including consideration of counterparty risk and the Company’s credit risk.
Short-term and long-term debt: The fair values of the Company’s publicly traded debt were based on Level 1 information. The fair values of the other short-term and long-term debt were determined using Level 2 information.
Note 11. Business Segments
The Company operates under two
Intersegment sales are generally recorded at full cost or market. Following is certain financial information with respect to the Company’s business segments for the periods indicated (in millions):
| Quarter ended March 30, 2025 | Quarter ended March 31, 2024 | ||||||||||||||||||||||
| HPMC | AA&S | Total | HPMC | AA&S | Total | ||||||||||||||||||
| Sales to external customers | $ | $ | $ | $ | $ | $ | |||||||||||||||||
| Intersegment sales | |||||||||||||||||||||||
| Total sales | |||||||||||||||||||||||
| Reconciliation of sales | |||||||||||||||||||||||
| Elimination of intersegment sales | ( | ( | |||||||||||||||||||||
| Total consolidated sales | $ | $ | |||||||||||||||||||||
Less(1): | |||||||||||||||||||||||
Allocated corporate overhead(2) | |||||||||||||||||||||||
Other segment items(3) | |||||||||||||||||||||||
| Segment EBITDA | |||||||||||||||||||||||
| Reconciliation of segment EBITDA | |||||||||||||||||||||||
| Corporate expenses | ( | ( | |||||||||||||||||||||
| Closed operations and other income (expenses) | ( | ( | |||||||||||||||||||||
| Depreciation & amortization | ( | ( | |||||||||||||||||||||
| Interest expense, net | ( | ( | |||||||||||||||||||||
| Restructuring and other charges | ( | ( | |||||||||||||||||||||
| Loss on sales of business, net | ( | ||||||||||||||||||||||
| Income before taxes | $ | $ | |||||||||||||||||||||
(1) The CODM is regularly provided with allocated corporate overhead and segment EBITDA, which is used to assess operating performance. Therefore, the significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. Intersegment expenses are included within the amounts shown.
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(2) The increase in corporate overhead costs over the time periods presented represent the consolidation and centralization of certain functions, including information technology, human resources and talent acquisition, payroll and accounts payable, into the Company’s corporate shared services function. Such amounts are subject to change from year to year as allocation methodologies are revised to match the nature of these corporate costs.
(3) Other segment items for each reportable segment include: cost of sales, general and administrative expenses, and gain/loss on asset sales. General & administrative expenses consist of non-manufacturing payroll and benefits, office expenses, professional service and legal expenses, occupancy expenses including rent and lease expense, and travel expense.
Total international sales for the quarters ended March 30, 2025 and March 31, 2024 were $500.6 million and $471.3 million, respectively. Of these amounts, sales by operations in the U.S. to customers in other countries for the quarters ended March 30, 2025 and March 31, 2024 were $414.9 million and $361.3 million, respectively.
Restructuring and other charges of $5.6 million for the quarter ended March 30, 2025 include $4.0 million of start-up and transaction related costs, which are included within cost of sales on the consolidated statements of operations and $1.6 million of losses on the sale of accounts receivables. 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).
Certain additional information regarding the Company’s business segments is presented below:
| Quarter ended | ||||||||||||||
| (In millions) | March 30, 2025 | March 31, 2024 | ||||||||||||
| Depreciation and amortization: | ||||||||||||||
| High Performance Materials & Components | $ | $ | ||||||||||||
| Advanced Alloys & Solutions | ||||||||||||||
| Other | ||||||||||||||
| Total depreciation and amortization | $ | $ | ||||||||||||
| Capital expenditures: | ||||||||||||||
| High Performance Materials & Components | $ | $ | ||||||||||||
| Advanced Alloys & Solutions | ||||||||||||||
| Corporate | ||||||||||||||
| Total capital expenditures | $ | $ | ||||||||||||
| Identifiable assets: | March 30, 2025 | December 29, 2024 | ||||||||||||
| High Performance Materials & Components | $ | $ | ||||||||||||
| Advanced Alloys & Solutions | ||||||||||||||
| Corporate: | ||||||||||||||
| Deferred Taxes | ||||||||||||||
| Cash and cash equivalents and other | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| ($ in millions) | March 30, 2025 | Percent of total | December 29, 2024 | Percent of total | ||||||||||||||||||||||
| Total assets: | ||||||||||||||||||||||||||
| United States | $ | % | $ | % | ||||||||||||||||||||||
| China | % | % | ||||||||||||||||||||||||
| Other | % | % | ||||||||||||||||||||||||
| Total Assets | $ | % | $ | % | ||||||||||||||||||||||
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Note 12. Retirement Benefits
The Company has defined contribution retirement plans or defined benefit pension plans covering substantially all employees. Company contributions to defined contribution retirement plans are generally based on a percentage of eligible pay or based on hours worked. Benefits under the defined benefit pension plans are generally based on years of service and/or final average pay. The Company funds the U.S. pension plans in accordance with the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended. The Company also sponsors several postretirement plans covering certain collectively-bargained salaried and hourly employees. The plans provide health care and life insurance benefits for eligible retirees. In most retiree health care plans, Company contributions towards premiums are capped based on the cost as of a certain date, thereby creating a defined contribution. All defined benefit pension and retiree health care plans are closed to new entrants.
For the quarters ended March 30, 2025 and March 31, 2024, 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 | ||||||||||||||||||||||
| Quarter ended | Quarter ended | ||||||||||||||||||||||
| March 30, 2025 | March 31, 2024 | March 30, 2025 | March 31, 2024 | ||||||||||||||||||||
| Service cost - benefits earned during the year | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost on benefits earned in prior years | |||||||||||||||||||||||
| Expected return on plan assets | ( | ( | |||||||||||||||||||||
| Amortization of prior service cost (credit) | ( | ( | |||||||||||||||||||||
| Amortization of net actuarial loss | |||||||||||||||||||||||
| Total retirement benefit expense | $ | $ | $ | $ | |||||||||||||||||||
Note 13. Income Taxes
The Company’s effective tax rate was 17.3 %, resulting in an income tax provision of $21.0 million for the quarter ended March 30, 2025. 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 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. 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.
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Note 14. Per Share Information
The following table sets forth the computation of basic and diluted income per common share:
| (In millions, except per share amounts) | Quarter ended | ||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Numerator: | |||||||||||
| Numerator for basic income per common share – | |||||||||||
| Net income attributable to ATI | $ | $ | |||||||||
| Effect of dilutive securities: | |||||||||||
| Numerator for diluted net income per common share – | |||||||||||
| Net income attributable to ATI after assumed conversions | $ | $ | |||||||||
| Denominator: | |||||||||||
| Denominator for basic net income per common share – weighted average shares | |||||||||||
| Effect of dilutive securities: | |||||||||||
| Share-based compensation | |||||||||||
| Denominator for diluted net income per common share – adjusted weighted average shares and assumed conversions | |||||||||||
| Basic net income attributable to ATI per common share | $ | $ | |||||||||
| Diluted net income attributable to ATI per common share | $ | $ | |||||||||
Common stock that would be issuable upon the assumed conversion of the 2025 Convertible Notes, prior to their redemption during the third quarter of 2024, 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
Periodically, the Company’s Board of Directors authorizes the repurchase of ATI common stock (the “Share Repurchase Program”), most recently authorizing the repurchase of up to $700 million, as announced in September 2024. 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. 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. At March 30, 2025, the Company has utilized $180 million of the $700 million currently authorized 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.
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Note 15. Accumulated Other Comprehensive Income (Loss)
The changes in AOCI by component, net of tax, for the quarter ended March 30, 2025 were as follows (in millions):
| Post- retirement benefit plans | Currency translation adjustment | Derivatives | Deferred Tax Asset Valuation Allowance | Total | |||||||||||||||||||||||||||||||||||||
| Attributable to ATI: | |||||||||||||||||||||||||||||||||||||||||
| Balance, December 29, 2024 | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||
| OCI before reclassifications | |||||||||||||||||||||||||||||||||||||||||
| Amounts reclassified from AOCI | (a) | (b) | (d) | (e) | |||||||||||||||||||||||||||||||||||||
| Net current-period OCI | |||||||||||||||||||||||||||||||||||||||||
| Balance, March 30, 2025 | $ | ( | $ | ( | $ | $ | $ | ( | |||||||||||||||||||||||||||||||||
| Attributable to noncontrolling interests: | |||||||||||||||||||||||||||||||||||||||||
| Balance, December 29, 2024 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||
| OCI before reclassifications | |||||||||||||||||||||||||||||||||||||||||
| Amounts reclassified from AOCI | (c) | ||||||||||||||||||||||||||||||||||||||||
| Net current-period OCI | |||||||||||||||||||||||||||||||||||||||||
| Balance, March 30, 2025 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||
(a)Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 12).
(b)Amounts were included in loss of asset sales and sales of businesses, net, as part of the loss on sale of the Birmingham, UK and Dusseldorf, Germany operations (see Note 5).
(c)No amounts were reclassified to earnings.
(d)Amounts related to derivatives are included in sales, cost of goods sold or interest expense in the period or periods the hedged item affects earnings (see Note 9).
(e)Represents the net change in deferred tax asset valuation allowances on changes in AOCI balances between the balance sheet dates.
The changes in AOCI by component, net of tax, for the quarter ended March 31, 2024 were as follows (in millions):
| Post- retirement benefit plans | Currency translation adjustment | Derivatives | Deferred Tax Asset Valuation Allowance | Total | |||||||||||||||||||||||||||||||||||||
| Attributable to ATI: | |||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||
| OCI before reclassifications | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||
| Amounts reclassified from AOCI | (a) | (b) | (c) | (d) | |||||||||||||||||||||||||||||||||||||
| Net current-period OCI | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||
| Attributable to noncontrolling interests: | |||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||
| OCI before reclassifications | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Amounts reclassified from AOCI | (b) | ||||||||||||||||||||||||||||||||||||||||
| Net current-period OCI | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||
(a)Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 12).
(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 9).
(d)Represents the net change in deferred tax asset valuation allowances on changes in AOCI balances between the balance sheet dates.
20
Other comprehensive income (loss) amounts (OCI) reported above by category are net of applicable income tax expense (benefit) for each period presented. Income tax expense (benefit) on OCI items is recorded as a change in a deferred tax asset or liability. Amounts recognized in OCI include the impact of any deferred tax asset valuation allowances, when applicable. Foreign currency translation adjustments, including those pertaining to noncontrolling interests, are generally not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries.
Reclassifications out of AOCI for the quarters ended March 30, 2025 and March 31, 2024 were as follows:
Details about AOCI Components (In millions) | Three months ended March 30, 2025 | Three months ended March 31, 2024 | Affected line item in the statements of operations | ||||||||||||||
| Postretirement benefit plans | |||||||||||||||||
| Prior service credit | $ | (a) | |||||||||||||||
| Actuarial losses | ( | ( | (a) | ||||||||||||||
| ( | ( | (d) | Total before tax | ||||||||||||||
| ( | ( | Tax benefit (e) | |||||||||||||||
| $ | ( | $ | ( | Net of tax | |||||||||||||
| Currency translation adjustment | $ | ( | $ | (b,d) | |||||||||||||
| Derivatives | |||||||||||||||||
| Nickel and other raw material contracts | $ | ( | $ | (c) | |||||||||||||
| Natural gas contracts | ( | (c) | |||||||||||||||
| Foreign exchange contracts | (c) | ||||||||||||||||
| Interest rate swap | (c) | ||||||||||||||||
| ( | ( | (d) | Total before tax | ||||||||||||||
| ( | ( | Tax benefit (e) | |||||||||||||||
| $ | ( | $ | ( | Net of tax | |||||||||||||
(a)Amounts are reported in nonoperating retirement benefit expense (see Note 12).
(b)Amounts in 2025 were included in loss on asset sales and sales of businesses, net, as part of the loss on sale of the Birmingham, UK and Dusseldorf, Germany operations (see Note 5).
(c)Amounts related to derivatives, with the exception of the interest rate swap, are included in sales or cost of goods sold in the period or periods the hedged item affects earnings. Amounts related to the interest rate swap are included in interest expense in the same period as the interest expense on the Term Loan is recognized in earnings (see Note 9).
(d)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.
Note 16. Commitments and Contingencies
The Company is subject to various domestic and international environmental laws and regulations that govern the discharge of pollutants and disposal of wastes, and which may require that it investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations. The Company could incur substantial cleanup costs, fines, and civil or criminal sanctions, third party property damage or personal injury claims as a result of violations or liabilities under these laws or noncompliance with environmental permits required at its facilities. The Company is currently involved in the investigation and remediation of a number of its current and former sites, as well as third party sites.
Environmental liabilities are recorded when the Company’s liability is probable and the costs are reasonably estimable. In many cases, however, the Company is not able to determine whether it is liable or, if liability is probable, to reasonably estimate the loss or range of loss. Estimates of the Company’s liability remain subject to additional uncertainties, including the nature and extent of site contamination, available remediation alternatives, the extent of corrective actions that may be required, and the number, participation, and financial condition of other potentially responsible parties (PRPs). The Company adjusts its accruals to reflect new information as appropriate. Future adjustments could have a material adverse effect on the Company’s
21
consolidated results of operations in a given period, but the Company cannot reliably predict the amounts of such future adjustments.
At March 30, 2025, the Company’s reserves for environmental remediation obligations totaled approximately $15 million, of which $6 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; $6 million for formerly owned or operated sites for which the Company has remediation or indemnification obligations; and $6 million for owned or controlled sites at which Company operations have been or plan to be discontinued. The timing of expenditures depends on a number of factors that vary by site. The Company expects that it will expend present accruals over many years and that remediation of all sites with which it has been identified will be completed within thirty years. The Company continues to evaluate whether it may be able to recover a portion of past and future costs for environmental liabilities from third parties and to pursue such recoveries where appropriate.
Based on currently available information, it is reasonably possible that costs for recorded matters may exceed the Company’s recorded reserves by as much as $16 million. Future investigation or remediation activities may result in the discovery of additional hazardous materials or potentially higher levels of contamination than discovered during prior investigation, and may impact costs associated with the success or lack thereof in remedial solutions. Therefore, future developments, administrative actions or liabilities relating to environmental matters could have a material adverse effect on the Company’s consolidated financial condition or results of operations and cash flows.
A number of other lawsuits, claims and proceedings have been or may be asserted against the Company relating to the conduct of its currently and formerly owned businesses, including those pertaining to product liability, environmental, health and safety matters and occupational disease (including as each relates to alleged asbestos exposure), as well as patent infringement, commercial, government contracting, construction, employment, employee and retiree benefits, taxes, environmental, and stockholder and corporate governance matters. While the outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to the Company, management does not believe that the disposition of any such pending matters is likely to have a material adverse effect on the Company’s financial condition or liquidity, although the resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company’s consolidated results of operations for that period.
The Company received employee retention tax credits under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) during 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 30, 2025, the Company has approximately $11.5 million of remaining deferred retention tax credits, of which the statute of limitations expires for $7.0 million in the second quarter of 2025, with the remaining expirations occurring in 2027.
In August 2024, the Company received notice that it and certain of its affiliates are parties to two lawsuits captioned (1) William L. Schoen, Mary J. Nesbit, Robin L. Rosewicz, George E. Poole and James E. Swartz, Jr., individually and as representatives of a class of participants and beneficiaries of the Allegheny Technologies Incorporated Pension Plan v. ATI Inc., The Allegheny Technologies Incorporated Pension Plan Administrative Committee, State Street Global Advisors Trust Co., and John Does 1-5 (Case No. 2:24-cv-01109) and (2) John Souza and Karen Souza, individually and as representatives on behalf of a class of similarly situated persons v. ATI Inc. and State Street Global Advisors Trust Co. (Case No. 2:24-cv-01214), both of which are filed in federal district court for the Western District of Pennsylvania. These lawsuits, which were consolidated in late 2024, assert various claims associated with the Company’s October 2023 purchase of group annuity contracts to transfer a portion of its U.S. qualified defined benefit pension plan obligations to Athene Annuity and Life Company and Athene Annuity & Life Assurance of New York. The Company filed a Motion to Dismiss the consolidated claims on January 27, 2025, and briefing on the Motion has been completed. The Company disputes and intends to vigorously defend against these claims, but given the preliminary nature of these matters, cannot predict their outcome or estimate any range of reasonably possible loss at this time.
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||
Overview
ATI is a global manufacturer of technically advanced specialty materials and complex components. Our largest market is aerospace & defense, representing 66% of sales 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 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. Our capabilities range from cast/wrought and powder alloy development to final production of highly engineered finished components, including those used in latest generation jet engines and 3D-printed aerospace products.
ATI 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.
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.
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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 | March 30, 2025 | March 31, 2024 | |||||||||||||||||||||
| Aerospace & Defense: | |||||||||||||||||||||||
| Jet Engines- Commercial | $ | 421.4 | 37 | % | $ | 311.2 | 30 | % | |||||||||||||||
| Airframes- Commercial | 205.8 | 18 | % | 190.1 | 18 | % | |||||||||||||||||
| Defense | 127.2 | 11 | % | 114.4 | 11 | % | |||||||||||||||||
| Total Aerospace & Defense | 754.4 | 66 | % | 615.7 | 59 | % | |||||||||||||||||
| Specialty Energy | 50.5 | 4 | % | 56.1 | 5 | % | |||||||||||||||||
| Medical | 42.4 | 4 | % | 59.1 | 6 | % | |||||||||||||||||
| Electronics | 39.6 | 3 | % | 52.9 | 5 | % | |||||||||||||||||
| 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 | % | |||||||||||||||||
| Automotive | 60.6 | 5 | % | 56.0 | 5 | % | |||||||||||||||||
| Construction/Mining | 32.9 | 3 | % | 27.2 | 3 | % | |||||||||||||||||
| Other | 42.2 | 4 | % | 73.4 | 7 | % | |||||||||||||||||
| Industrial Markets | 257.5 | 23 | % | 259.1 | 25 | % | |||||||||||||||||
| Total | $ | 1,144.4 | 100 | % | $ | 1,042.9 | 100 | % | |||||||||||||||
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%
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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 | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Nickel-based alloys and specialty alloys | 48 | % | 45 | % | |||||||
| Precision forgings, castings and components | 20 | % | 19 | % | |||||||
| Titanium and titanium-based alloys | 19 | % | 18 | % | |||||||
| Zirconium and related alloys | 8 | % | 10 | % | |||||||
| Precision rolled strip products | 5 | % | 8 | % | |||||||
| Total | 100 | % | 100 | % | |||||||
Business Segment Results
| Quarter Ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Sales: | |||||||||||
| High Performance Materials & Components | $ | 584.1 | $ | 529.9 | |||||||
| Advanced Alloys & Solutions | 560.3 | 513.0 | |||||||||
| Total external sales | $ | 1,144.4 | $ | 1,042.9 | |||||||
| Segment EBITDA: | |||||||||||
| High Performance Materials & Components | $ | 131.0 | $ | 97.6 | |||||||
| % of Sales | 22.4 | % | 18.4 | % | |||||||
| Advanced Alloys & Solutions | 83.4 | 71.8 | |||||||||
| % of Sales | 14.9 | % | 14.0 | % | |||||||
| Total segment EBITDA | $ | 214.4 | $ | 169.4 | |||||||
| Depreciation & Amortization: | |||||||||||
| High Performance Materials & Components | $ | $ | |||||||||
| Advanced Alloys & Solutions | |||||||||||
| Other | |||||||||||
| Total depreciation & amortization | $ | $ | |||||||||
25
High Performance Materials & Components Segment
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 | March 30, 2025 | March 31, 2024 | |||||||||||||||||||||
| Aerospace & Defense: | |||||||||||||||||||||||
| Jet Engines- Commercial | $ | 397.3 | 68 | % | $ | 296.9 | 56 | % | |||||||||||||||
| Airframes- Commercial | 81.8 | 14 | % | 85.7 | 16 | % | |||||||||||||||||
| Defense | 58.4 | 10 | % | 60.0 | 12 | % | |||||||||||||||||
| Total Aerospace & Defense | 537.5 | 92 | % | 442.6 | 84 | % | |||||||||||||||||
| Medical | 15.8 | 3 | % | 35.9 | 7 | % | |||||||||||||||||
| Specialty Energy | 12.4 | 2 | % | 18.2 | 3 | % | |||||||||||||||||
| 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 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 | % | |||||||
| Precision forgings, castings and components | 39 | % | 36 | % | |||||||
| Titanium and titanium-based alloys | 20 | % | 24 | % | |||||||
| Precision rolled strip products | — | % | 1 | % | |||||||
| Total | 100 | % | 100 | % | |||||||
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.
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Advanced Alloys & Solutions Segment
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.
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 March 30, 2025 and March 31, 2024 is shown below.
| Quarter ended | Quarter ended | ||||||||||||||||||||||
| Markets | March 30, 2025 | March 31, 2024 | |||||||||||||||||||||
| Aerospace & Defense: | |||||||||||||||||||||||
| Jet Engines- Commercial | $ | 24.1 | 4 | % | $ | 14.3 | 3 | % | |||||||||||||||
| Airframes- Commercial | 124.0 | 22 | % | 104.4 | 20 | % | |||||||||||||||||
| Defense | 68.8 | 12 | % | 54.4 | 11 | % | |||||||||||||||||
| Total Aerospace & Defense | 216.9 | 38 | % | 173.1 | 34 | % | |||||||||||||||||
| Specialty Energy | 38.1 | 7 | % | 37.9 | 7 | % | |||||||||||||||||
| Electronics | 39.6 | 7 | % | 51.9 | 10 | % | |||||||||||||||||
| Medical | 26.6 | 5 | % | 23.2 | 5 | % | |||||||||||||||||
| 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 | % | |||||||||||||||||
| Construction/Mining | 25.8 | 5 | % | 20.5 | 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 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.
| Quarter ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Nickel-based alloys and specialty alloys | 55 | % | 51 | % | |||||||
| 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 $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.
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Corporate Items
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.
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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 | $ | $ | |||||||||
| Short-term contract assets | |||||||||||
| Inventory | |||||||||||
| 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 | % | |||||||
Income Taxes
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
We have an Asset Based Lending (ABL) Credit Facility, which is collateralized by the accounts receivable and inventory of our operations. The ABL facility also provides us with the option of including certain machinery and equipment as additional collateral for purposes of determining availability under the facility. The ABL facility, which matures in September 2027, includes a $600 million revolving credit facility, a letter of credit sub-facility of up to $200 million, a $200 million term loan (Term Loan), and a swing loan facility of up to $60 million.
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. 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. 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. 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. 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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In managing our overall capital structure, we focus on the ratio of net debt to Adjusted EBITDA, which we use as a measure of our ability to repay our incurred debt. 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 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. GAAP. 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 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:
| Trailing 12-month period ended | Year ended | |||||||||||||
| March 30, 2025 | December 29, 2024 | |||||||||||||
| Net income attributable to ATI | $ | 398.7 | $ | 367.8 | ||||||||||
| Net income attributable to noncontrolling interests | 16.1 | 14.9 | ||||||||||||
| Net income | 414.8 | 382.7 | ||||||||||||
| Interest expense | 104.6 | 108.2 | ||||||||||||
| Depreciation and amortization | 156.3 | 151.5 | ||||||||||||
| Income tax provision (benefit) | 107.5 | 103.4 | ||||||||||||
| Pension remeasurement loss | 14.1 | 14.1 | ||||||||||||
| Restructuring and other charges | 24.6 | 22.1 | ||||||||||||
| Loss on asset sales and sale of businesses, net | (49.2) | (52.9) | ||||||||||||
| Adjusted EBITDA | $ | 772.7 | $ | 729.1 | ||||||||||
| Debt | $ | 1,893.2 | $ | 1,895.3 | ||||||||||
| Add: Debt issuance costs | 13.5 | 14.2 | ||||||||||||
| Total debt | 1,906.7 | 1,909.5 | ||||||||||||
| Less: Cash | (475.8) | (721.2) | ||||||||||||
| Net debt | $ | 1,430.9 | $ | 1,188.3 | ||||||||||
| Total Debt to Adjusted EBITDA | 2.47 | 2.62 | ||||||||||||
| Net Debt to Adjusted EBITDA | 1.85 | 1.63 | ||||||||||||
Cash Flow
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. 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.
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Critical Accounting Policies
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. generally accepted accounting principles requires us to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities. Significant areas of uncertainty that require judgments, estimates and assumptions include the accounting for derivatives, retirement plans, income taxes, environmental and other contingencies, as well as asset impairment, inventory valuation and collectability of accounts receivable. We use historical and other information that we consider to be relevant to make these judgments and estimates. However, actual results may differ from those estimates and assumptions that are used to prepare our financial statements.
Pending Accounting Pronouncements
See Note 1 of the Notes to Consolidated Financial Statements for information on new and pending accounting pronouncements.
Forward-Looking and Other Statements
From time to time, we have made and may continue to make “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements in this report relate to future events and expectations and, as such, constitute forward-looking statements. Forward-looking statements include those containing such words as “anticipates,” “believes,” “estimates,” “expects,” “would,” “should,” “will,” “will likely result,” “forecast,” “outlook,” “projects,” and similar expressions. Forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which we are unable to predict or control, that may cause our actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: (a) material adverse changes in economic or industry conditions generally, including global supply and demand conditions and prices for our specialty materials and changes in international trade duties and other aspects of international trade policy; (b) material adverse changes in the markets we serve; (c) our inability to achieve the level of cost savings, productivity improvements, synergies, growth or other benefits anticipated by management, from strategic investments and the integration of acquired businesses; (d) volatility in the price and availability of the raw materials that are critical to the manufacture of our products; (e) declines in the value of our defined benefit pension plan assets or unfavorable changes in laws or regulations that govern pension plan funding; (f) labor disputes or work stoppages; (g) equipment outages; (h) the risks of business and economic disruption associated with extraordinary events beyond our control, such as war, terrorism, international conflicts, public health issues, such as epidemics or pandemics, natural disasters and climate-related events that may arise in the future; and (i) other risk factors summarized in our Annual Report on Form 10-K for the year ended December 29, 2024, and in other reports filed with the Securities and Exchange Commission. We assume no duty to update our forward-looking statements.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | ||||
As part of our risk management strategy, we utilize derivative financial instruments, from time to time, to hedge our exposure to changes in energy and raw material prices, foreign currencies, and interest rates. We monitor the third-party financial institutions which are our counterparties to these financial instruments on a daily basis and diversify our transactions among counterparties to minimize exposure to any one of these entities. Fair values for derivatives were measured using exchange-traded prices for the hedged items including consideration of counterparty risk and the Company’s credit risk. Our exposure to volatility in interest rates is presently not material, as nearly all of our debt is at fixed interest rates.
Volatility of Interest Rates. We may enter into derivative interest rate contracts to maintain a reasonable balance between fixed- and floating-rate debt. Any gain or loss associated with this hedging arrangement was included in interest expense. There are no outstanding derivative interest rate contracts at March 30, 2025.
Volatility of Energy Prices. Energy resource markets are subject to conditions that create uncertainty in the prices and availability of energy resources. The prices for and availability of electricity, natural gas, oil and other energy resources are subject to volatile market conditions. These market conditions often are affected by political and economic factors beyond our control. Increases in energy costs, or changes in costs relative to energy costs paid by competitors, have and may continue to adversely affect our profitability. To the extent that these uncertainties cause suppliers and customers to be more cost sensitive,
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increased energy prices may have an adverse effect on our results of operations and financial condition. We use approximately 6 to 8 million MMBtu’s of natural gas annually, depending upon business conditions, in the manufacture of our products. These purchases of natural gas expose us to the risk of higher gas prices. For example, a hypothetical $1.00 per MMBtu increase in the price of natural gas would result in increased annual energy costs of approximately $6 to $8 million. We use several approaches to minimize any material adverse effect on our results of operations or financial condition from volatile energy prices. These approaches include incorporating an energy surcharge on many of our products and using financial derivatives to reduce exposure to energy price volatility.
At March 30, 2025, the outstanding financial derivatives used to hedge our exposure to energy cost volatility consisted of natural gas hedges covering approximately 75% of our forecasted domestic requirements for natural gas for the remainder of 2025 and approximately 35% for 2026. At March 30, 2025, the net mark-to-market valuation of these outstanding natural gas hedges was an unrealized pre-tax gain of $5.5 million, comprised of $4.6 million in prepaid expenses and other current assets and $0.9 million in other long-term assets on the balance sheet. For the quarter ended March 30, 2025, natural gas hedging activity decreased cost of sales by $0.2 million.
Volatility of Raw Material Prices. We use raw material surcharge and index mechanisms to offset the impact of increased raw material costs; however, competitive factors in the marketplace can limit our ability to institute such mechanisms, and there can be a delay between the increase in the price of raw materials and the realization of the benefit of such mechanisms. For example, in 2024, we used approximately 70 million pounds of nickel; therefore, a hypothetical change of $1.00 per pound in nickel prices would result in increased costs of approximately $70 million. While we enter into raw materials futures contracts from time-to-time to hedge exposure to price fluctuations, such as for nickel, we cannot be certain that our hedge position adequately reduces exposure. We believe that we have adequate controls to monitor these contracts, but we may not be able to accurately assess exposure to price volatility in the markets for critical raw materials.
The majority of our products are sold utilizing raw material surcharges and index mechanisms. However, as of March 30, 2025, we had entered into financial hedging arrangements, primarily at the request of our customers related to firm orders, for an aggregate notional amount of approximately 4 million pounds of nickel with hedge dates through 2027. The aggregate notional amount hedged is approximately 6% 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 March 30, 2025, the net mark-to-market valuation of our outstanding raw material hedges was an unrealized pre-tax loss of $2.0 million, comprised of $0.3 million in prepaid expenses and other current assets, $0.1 million in other long-term assets, $2.3 million in other current liabilities and $0.1 million in other long-term liabilities on the balance sheet.
Foreign Currency Risk. Foreign currency exchange contracts are used, from time-to-time, to limit transactional exposure to changes in currency exchange rates. We sometimes purchase foreign currency forward contracts that permit us to sell specified amounts of foreign currencies we expect to receive from our export sales for pre-established U.S. dollar amounts at specified dates. In addition, we may also hedge forecasted capital expenditures and designate cash balances held in foreign currencies as hedges of forecasted foreign currency transactions. At March 30, 2025, we had no material outstanding foreign currency forward contracts.
We may also use derivative instruments that are not designated as hedges to protect our results from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies. Changes in the fair value of these foreign exchange contract derivatives not designated as hedging instruments are recorded in cost of sales or selling, general and administrative expenses on the consolidated statement of operations, and we recognized $1.8 million of income, net, for settled foreign currency forward contracts that were not designated as hedges during the quarter ended March 30, 2025, which offset foreign currency gains/losses in the relevant currency. We have no significant outstanding hedges that are not designated as of March 30, 2025.
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| Item 4. | Controls and Procedures | ||||
(a) Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of March 30, 2025, and they concluded that these disclosure controls and procedures are effective.
(b) Changes in Internal Controls
There was no change in our internal controls over financial reporting identified in connection with the evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of March 30, 2025 conducted by our Chief Executive Officer and Chief Financial Officer, that occurred during the quarter ended March 30, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
| Item 1. | Legal Proceedings | ||||
A number of lawsuits, claims and proceedings have been or may be asserted against the Company relating to the conduct of its currently or formerly owned businesses, including those pertaining to product liability, environmental, health and safety matters and occupational disease (including as each relates to alleged asbestos exposure), as well as patent infringement, commercial, government contracting, construction, employment, employee and retiree benefits, taxes, environmental, and stockholder and corporate governance matters. Certain of such lawsuits, claims and proceedings are described in our Annual Report on Form 10-K for the year ended December 29, 2024, and addressed in Note 16 to the unaudited interim financial statements included herein. 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 results of operations for that period.
Pension Annuitization Litigation. In August 2024, the Company received notice that it and certain of its affiliates are parties to two lawsuits captioned (1) William L. Schoen, Mary J. Nesbit, Robin L. Rosewicz, George E. Poole and James E. Swartz, Jr., individually and as representatives of a class of participants and beneficiaries of the Allegheny Technologies Incorporated Pension Plan v. ATI Inc., The Allegheny Technologies Incorporated Pension Plan Administrative Committee, State Street Global Advisors Trust Co., and John Does 1-5 (Case No. 2:24-cv-01109) and (2) John Souza and Karen Souza, individually and as representatives on behalf of a class of similarly situated persons v. ATI Inc. and State Street Global Advisors Trust Co. (Case No. 2:24-cv-01214), both of which are filed in federal district court for the Western District of Pennsylvania. These lawsuits, which were consolidated in late 2024, assert various claims associated with the Company’s October 2023 purchase of group annuity contracts to transfer a portion of its U.S. qualified defined benefit pension plan obligations to Athene Annuity and Life Company and Athene Annuity & Life Assurance of New York. The Company filed a Motion to Dismiss the consolidated claims on January 27, 2025, and briefing on the Motion has been completed. The Company disputes and intends to vigorously defend against these claims, but given the preliminary nature of these matters, cannot predict their outcome or estimate any range of reasonably possible loss at this time.
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Richland Operations Local Air Permitting. In late 2024, Benton Clean Air Agency (“BCAA”) issued a Notice of Violation (“NOV”) to our subsidiary, International Hearth Melting, LLC d/b/a ATI Specialty Materials (“ATISM”) for failure to identify and quantify air pollutants in the original 1997 permit application for the Richland, Washington (“Richland”) electron beam furnace, which was purchased by ATISM in 1998, in alleged violation of certain provisions of the Washington Administrative Code (“WAC”). BCAA also issued an Order of Correction directing ATI to submit an application for installation of a pollution control device for the existing furnace and to install the approved pollution control device. On March 26, 2025, BCAA issued a second NOV to ATISM for failure to obtain an order of approval prior to construction of a second electron beam furnace, in alleged violation of the WAC. A permit approving the construction of the second furnace was issued March 17, 2025. On April 8, 2025, the Company received a draft settlement offer from BCAA to resolve these matters. The Company is currently engaged in discussions with BCAA. While the possibility exists that any such resolution may require ATISM to make additional investments in the Richland facility and/or pay a penalty to resolve allegations regarding its alleged WAC violations, the Company does not currently anticipate such investment and/or penalty, if any, will be material to its business or consolidated financial performance.
| Item 1A. | Risk Factors | ||||
The following is an update to, and should be read in conjunction with Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 29, 2024. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10- K for the year ended December 29, 2024, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Labor Matters. We have approximately 7,800 active employees, of which approximately 10% are located outside the United States. Approximately 35% of our workforce is covered by various CBAs, predominantly with the USW. At various times, our CBAs expire and are subject to renegotiation. Generally, collective bargaining agreements that expire may be terminated after notice by the union. After termination, the union may authorize a strike. A labor dispute, which could lead to a strike, lockout, or other work stoppage by the employees covered by one or more of the collective bargaining agreements, could have a material adverse effect on production at one or more of our facilities and, depending upon the length of such dispute or work stoppage, on our operating results. There can be no assurance that we will succeed in concluding collective bargaining agreements to replace those that expire. On April 22, 2025, we reached agreements with the USW for new CBAs that cover nearly 1,000 USW represented full-time employees within our AA&S operations for a six-year term that extends through February 28, 2031.
Risks Associated with Current or Future Litigation and Claims. A number of lawsuits, claims and proceedings have been or may be asserted against us relating to the conduct of our currently and formerly owned businesses, including those pertaining to product liability, patent infringement, commercial disputes, government contracting, employment matters, employee and retiree benefits, taxes, environmental matters, health and safety and occupational disease, and stockholder and corporate governance matters. Due to the uncertainties of litigation, we can give no assurance that we will prevail on all claims made against us in the lawsuits that we currently face or that additional claims will not be made against us in the future. While the outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to us, we do not believe that the disposition of any such pending matters is likely to have a material adverse effect on our 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 our results of operations for that period. Also, we can give no assurance that any other claims brought in the future will not have a material effect on our financial condition, liquidity or results of operations.
In August 2024, the Company received notice that it and certain of its affiliates are parties to two lawsuits, filed in federal district court for the Western District of Pennsylvania, that assert various claims associated with the Company’s October 2023 purchase of group annuity contracts to transfer a portion of its U.S. qualified defined benefit pension plan obligations to Athene Annuity and Life Company and Athene Annuity & Life Assurance of New York. These two lawsuits were consolidated in late 2024. In January 2025, we filed a Motion to Dismiss the consolidated claims, and briefing on the Motion has been completed. We intend to vigorously defend against these claims, but given the preliminary nature of these matters, cannot predict their outcome or estimate any range of reasonably possible loss at this time.
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| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||||
Set forth below is information regarding the Company’s stock repurchases during the period covered by this report, comprised of shares repurchased by ATI under the $700 million Share Repurchase Program authorized by the Company’s Board of Directors in September 2024 and shares repurchased by ATI from employees to satisfy employee-owed taxes on share-based compensation. The Company’s 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.
Period | Total Number of Shares (or Units) Purchased (a) | Average Price Paid per Share (or Unit) (b) (c) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
| December 30, 2024 - February 2, 2025 | 466,632 | $ | 56.49 | — | $ | 590,000,054 | ||||||||||||||||||||
| February 3, 2025 - March 2, 2025 | 809,780 | $ | 60.18 | 780,877 | $ | 542,950,377 | ||||||||||||||||||||
| March 3, 2025 - March 30, 2025 | 426,342 | $ | 57.27 | 400,913 | $ | 520,000,141 | ||||||||||||||||||||
| Total | 1,702,754 | $ | 58.44 | 1,181,790 | $ | 520,000,141 | ||||||||||||||||||||
(a) Includes shares repurchased by ATI from employees to satisfy employee-owed taxes on share based compensation.
(b) Share repurchases are inclusive of amounts for any relevant commissions.
(c) Excludes excise taxes incurred on share repurchases
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| Item 5. | Other Information | ||||
Rule 10b5-1 Plan Elections
During the quarter ended March 30, 2025, none of the Company’s directors or officers, as defined in Section 16 of the Securities Exchange Act of 1934, adopted or terminated On February 26, 2025 , David J. Morehouse , who is a member of the Company’s Board of Directors , entered into a non-10b5-1 trading arrangement , as such term is defined in Item 408(c), pursuant to which he made an irrevocable election to contribute 17,000 shares of the Company’s common stock to an exchange fund in exchange for shares of the exchange fund. The shares of the Company’s common stock that Mr. Morehouse elected to contribute were held in a separate escrow account from the time of his irrevocable election until the exchange transaction settled on April 1, 2025 .
| Item 6. | Exhibits | ||||
(a) Exhibits
| 31.1 | ||||||||
| 31.2 | ||||||||
| 32.1 | ||||||||
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 104 | Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ATI INC.
(Registrant)
| Date: | May 1, 2025 | By | /s/ Donald P. Newman | ||||||||||||||
| Donald P. Newman | |||||||||||||||||
| Executive Vice President, Finance and Chief Financial Officer (Principal Financial Officer) | |||||||||||||||||
| Date: | May 1, 2025 | By | /s/ Michael B. Miller | ||||||||||||||
| Michael B. Miller | |||||||||||||||||
| Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer) | |||||||||||||||||
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