ATI US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are forward-looking statements. Actual results or performance could differ materially from those encompassed within such forward-looking statements as a result of various factors, including those described below. Net income and net income per share amounts referenced below are attributable to ATI Inc. and Subsidiaries. The following discussion on the Company’s results of operations, financial condition and liquidity for 2022 as compared to 2021 is presented. Information on the Company’s results of operations, financial condition and liquidity for 2021 as compared to 2020 is included in our Annual Report on Form 10-K in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” filed on February 25, 2022 and is incorporated herein by reference. Net income and net income per share amounts referenced below are attributable to ATI Inc. and Subsidiaries.

ATI Overview

ATI is a global manufacturer of technically advanced specialty materials and complex components. Our largest markets are aerospace & defense, representing nearly 50% of total sales, led by products for jet engines. Additionally, we have a strong presence in the energy markets, including specialty energy, oil & gas and downstream processing. In aggregate, these markets represent nearly 70% of our revenue. 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.

We operate in two business segments: High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions (AA&S). The HPMC segment’s primary focus is on maximizing aero-engine materials and components growth, with approximately 80% of its revenue derived from the aerospace & defense markets including approximately 60% of its revenue from products for commercial jet engines. Commercial aerospace products have been the main source of sales and EBITDA growth for HPMC over the last several years, and are expected to continue to drive HPMC and overall ATI results as demand from these markets recovers from reduced 2020 levels resulting from the COVID-19 pandemic. Other major HPMC end markets include medical and energy. HPMC produces a wide range of high performance materials, components, and advanced metallic powder alloys. These are made from nickel-based alloys and superalloys, titanium and titanium-based alloys, and a variety of other specialty materials. Capabilities range from cast/wrought and powder alloy development to final production of highly engineered finished components, including those used for next-generation jet engine forgings and 3D-printed aerospace products.

The AA&S segment is focused on delivering high-value flat products primarily to the energy, aerospace, and defense end-markets, which comprise over 50% of its revenue. Other important end markets for AA&S include automotive and electronics. AA&S produces nickel-based alloys, titanium and titanium-based alloys, and specialty alloys in a variety of forms including plate, sheet, and strip products. On December 2, 2020, we announced a strategic repositioning of our SRP business, which was substantially completed in 2022 and included exiting production of lower-margin standard stainless sheet products, streamlining the production footprint of the AA&S segment and making certain capital investments to increase our focus on higher-margin products and our aerospace & defense end markets.

Overview of 2022 Financial Performance

Sales in 2022 increased 37%, to $3.8 billion, while gross profit increased 114%, to $714 million, compared to 2021, as momentum in our core markets is driving profitable growth across the enterprise. Results for 2022 and 2021 included $157 million and $40 million, respectively, of net pre-tax charges as further described in the Results of Operations section below. The Company’s net income for 2022 was $130.9 million, or $0.96 per share. ATI Adjusted EBITDA for 2022 was $549.3 million, or 14.3% of sales, compared to $290.9 million, or 10.4% of sales, for 2021. See further explanation below for non-GAAP definitions and calculations.

Revenues in our largest end markets, aerospace & defense, increased $741 million, or 65%, compared to 2021, and represented 49% of our 2022 sales. International sales, including both U.S. exports and foreign sales from our foreign manufacturing operations, were $1.6 billion in 2022 and represented 42% of total sales.

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A summary of our results is as follows.

(Dollars in millions, except per share amounts) 2022 2021

Gross profit % of sales 18.6 % 11.9 %

Income before income taxes $ 162.0 $ 10.6

Diluted net income (loss) per common share $ 0.96 $ (0.30)

Our major accomplishments during 2022 include the following:

•A return to profitability after a net loss in 2021, with 2022 net income of $131 million. Sales in the fourth quarter 2022 were over $1 billion and net income was $77 million. These results were driven by improved demand in key end markets, led by commercial jet engine products. For the full year 2022, Adjusted EBITDA margins were 14.3%, a 390 basis point improvement from full year 2021.

•With the AA&S business transformation and footprint consolidation nearly complete, we are well positioned for continued future profitable growth. In 2022, AA&S’s sales increased 33% to over $2 billion. Aerospace and defense related sales in this segment increased 87% to $556 million. Stronger sales volumes and the improved product mix led to AA&S EBITDA margin expansion exceeding 300 basis points compared to 2021.

•We generated positive cash flow of $225 million from operating activities in 2022, while supporting a $68 million increase in managed working capital and making a $50 million contribution to ATI’s U.S. defined benefit pension trust. As a result of our constant focus on our financial condition, we ended the year with $584 million of cash on hand and over $1 billion of total liquidity including the undrawn capacity under our asset-based lending facility.

•On May 12, 2022, we completed the sale of the Sheffield, UK operations, which was previously part of the HPMC segment. With more than 80% of the operation’s $36 million 2021 sales focused on the oil and gas markets, it was not well-aligned with ATI’s strategic focus on the aerospace and defense markets. This divestiture also removed all obligations for a UK defined benefit pension plan.

•On September 9, 2022, the Company amended and restated its Asset Based Lending (ABL) Credit Facility, which extended the ABL facility, including the $200 million term loan, through September 2027 and included an increase of $100 million in the revolving credit facility, to $600 million, and continued a letter of credit sub-facility of up to $200 million.

•We continued to reduce our net pension liability, which was $219 million, or 88% funded on a financial reporting basis as of December 31, 2022, a substantial improvement over the $396 million, or 84% funded position at the end of 2021 due to cash contributions to the pension trust and benefits from higher discount rates at year-end 2022.

Results of Operations

2022 Compared to 2021

Results for 2022 included sales of $3.84 billion and income before tax of $162.0 million, compared to sales of $2.80 billion and income before tax of $10.6 million in 2021. Our gross profit was $714.2 million, or 18.6% of sales, a $381 million increase compared to 2021, as the momentum in our core markets drove profitable growth across the enterprise. Results in 2022 include $34 million of benefits from management actions to access available grants and other forms of COVID-19 relief available from previously-enacted U.S. legislation. These benefits included $17 million of a $22 million grant under the Aviation Manufacturing Jobs Protection (AMJP) program for our operations in the HPMC segment, which helped fund ongoing wage and benefit costs for a six-month period through May 2022, and $17 million in employee retention credits applicable across all of ATI’s domestic operations, largely for preserving jobs throughout the global pandemic-related economic downturn. Results for 2022 also included $157.0 million of net pre-tax charges which consisted of the following:

•$134.2 million in losses, net, primarily associated with the sale of the Sheffield, UK business which was sold in May 2022 for a $141 million loss. This business is reported as part of the HPMC segment through the date of sale and had sales of $36 million and a net loss before tax of $9 million in fiscal year 2021. This loss was partially offset by a gain on the sale of our small Pico Rivera, CA operations.

•$23.7 million of costs associated with restructuring and other charges, consisting of a $28.5 million charge associated with the settlement of litigation related to the 2016 idling of the Rowley, UT titanium sponge facility, partially offset by severance-related reserve reductions based on changes in planned operating rates and revised work force estimates.

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•$0.9 million of credits associated with restructuring activities at the A&T stainless joint venture.

Results for 2021 included $39.5 million of net pre-tax charges which consisted of the following:

•$65.5 million debt extinguishment charge related to the redemption of our $500 million of 5.875% Senior Notes due 2023 (2023 notes);

•$63.2 million of strike-related costs arising from the 3 1⁄2 month work stoppage by the USW, following expiration of a CBA, which began in March 2021, and predominantly impacted AA&S segment operations. A new CBA was ratified in July 2021. Strike-related costs primarily consisted of overhead costs recognized in the period due to below normal operating rates, higher costs for outside conversion activities, and signing bonuses for represented employees following CBA ratification;

•$64.9 million retirement benefit settlement gain for a plan termination that eliminated certain postretirement medical benefit liabilities as a result of the new USW CBA;

•$13.8 million gain on the sale of our Flowform Products business, which was sold for $55 million in cash in August 2021. This business is reported as part of the HPMC segment through the date of sale. Flowform Products’ sales were $26 million in fiscal year 2020;

•$10.5 million of net credits for restructuring and other charges, consisting of $11.3 million of restructuring credits primarily for a reduction in severance-related reserves based on changes in planned operating rates and revised workforce reduction estimates, partially offset by $0.8 million for inventory valuation reserves classified in cost of sales on the consolidated statement of operations.

All of these items discussed above are excluded from segment EBITDA. The net loss on sale of the businesses in 2022, restructuring charges/credits and strike-related costs are included in operating income on the consolidated statements of operations, which was $287.3 million for 2022, compared to $117.6 million for 2021.

Nonoperating items included $25.4 million in nonoperating retirement benefit expense in 2022, compared to income of $37.2 million in the prior year, reflecting the $64.9 million retirement benefit settlement gain in 2021. Other (nonoperating) income/expense in 2022 includes a $28.5 million litigation settlement charge discussed above partially offset by a $9.9 million benefit from the A&T Stainless joint venture’s settlement of Section 232 claims, which is included in AA&S segment results. Other (nonoperating) income/expense in 2021 includes a $65.5 million debt extinguishment charge and the $13.8 million gain on the sale of the Flowform Products business discussed above.

Results for 2022 included $15.5 million of income tax expense, primarily attributable to the Company’s foreign operations and state income tax expense associated with states that limit net operating loss utilization. ATI continues to maintain a valuation allowance on its U.S. deferred tax assets. Results for 2021 include $26.8 million of income tax expense, primarily for $15.5 million in discrete tax effects related to the retirement benefit settlement gain. Net income attributable to ATI was $130.9 million, or $0.96 per share, in 2022, compared to a net loss attributable to ATI of $38.2 million, or ($0.30) per share, for 2021.

Adjusted EBITDA was $549.3 million, or 14.3% of sales, for 2022, and $290.9 million, or 10.4% of sales, for 2021. EBITDA and Adjusted EBITDA are measures utilized by ATI that we believe are useful to investors because these measures are commonly used to analyze companies on the basis of operating performance, leverage and liquidity. Furthermore, analogous measures are used by industry analysts to evaluate operating performance. EBITDA and Adjusted EBITDA are non-GAAP measures and are not intended to represent, and should not be considered more meaningful than, or as alternatives to, a measure of operating performance as determined in accordance with U.S. generally accepted accounting principles (U.S. GAAP). We categorically define EBITDA as income from continuing operations before interest and income taxes, plus depreciation and amortization, goodwill impairment charges and debt extinguishment charges. We categorically define Adjusted EBITDA as EBITDA excluding significant non-recurring charges or credits, restructuring charges/credits, strike related costs, long-lived asset impairments and other postretirement/pension curtailment and settlement gains and losses. EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow for management’s discretionary use, as they do not consider certain cash requirements such as interest payments, tax payments and capital expenditures. See the Liquidity and Financial Condition section of Management’s Discussion and Analysis for a reconciliation of amounts reported under U.S. GAAP to these non-GAAP measures.

Results by Business Segment

During 2022, we operated in two business segments, HPMC and AA&S, and management evaluates financial results on this basis. Full year 2022 HPMC sales increased 42% compared to 2021, as a 58% increase in aerospace and defense market sales was partially offset by a 17% decrease in sales to energy markets. Fourth quarter 2022 HPMC sales were 42% higher than the fourth quarter 2021, as commercial aerospace end markets return to pre-COVID demand levels. Full year 2022 AA&S sales increased 33% compared to 2021 reflecting the benefits of the transformation and the strength of the aerospace and defense

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markets. Fourth quarter 2022 AA&S sales were 25% higher than the fourth quarter 2021 as aerospace and defense sales increased by 100%.

Total segment EBITDA was $623.8 million, or 16.3% of sales, in 2022, compared to total segment EBITDA of $351.6 million, or 12.6% of sales, in 2021. Our measure of segment EBITDA, which we use to analyze the performance and results of our business segments, categorically excludes all effects of income taxes, depreciation and amortization, corporate expenses, net interest expense, closed operations and other expenses, charges for goodwill and asset impairments, restructuring and other charges, debt extinguishment charges and gains or losses on asset sales and sales of businesses. Results on our management basis of reporting were as follows (in millions):

Fiscal Year Ended

December 31, December 31,

Sales:

High Performance Materials & Components $ 1,641.2 $ 1,155.1

EBITDA:

High Performance Materials & Components $ 296.0 $ 159.9

Corporate expenses (62.4) (55.9)

Closed operations and other expenses (12.1) (4.8)

Depreciation & amortization (142.9) (143.9)

Interest expense, net (87.4) (96.9)

Restructuring and other credits (charges) (23.7) 10.5

Strike related costs — (63.2)

Retirement benefit settlement gain — 64.9

Joint venture restructuring credit 0.9 —

Debt extinguishment charge — (65.5)

Gains (losses) on asset sales and sale of business, net (134.2) 13.8

Income before income taxes $ 162.0 $ 10.6

As part of managing the liquidity of our business, we focus on controlling managed working capital, which is defined as gross accounts receivable, short-term contract assets and gross inventories, less accounts payable and short-term contract liabilities. In measuring performance in controlling this managed working capital, we exclude the effects of inventory valuation reserves, and reserves for uncollectible accounts receivable which, due to their nature, are managed separately. We measure managed working capital as a percentage of the prior three months annualized sales to evaluate our performance based on recent levels of business volume. In 2022, managed working capital decreased to 30.1% of annualized total ATI sales compared to 37.5% of annualized sales at December 31, 2021, reflecting the Company’s ongoing efforts to improve managed working capital efficiency as well as a higher level of sales. The $67.5 million increase in overall managed working capital in 2022 is detailed in the table below. Days sales outstanding, which measures actual collection timing for accounts receivable, modestly improved at year-end 2022 compared to 2021. Gross inventory turns improved by 13% in 2022 compared to 2021, as improved inventory flow across our operations was an area of significant management focus in 2022. Accounts payable increased as a result of increased business volumes in 2022 and capital expenditures related to strategic projects that remained in accounts payable at December 31 2022.

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The computations of Managed Working Capital at December 31, 2022 and 2021, reconciled to the financial statement line items as computed under U.S. GAAP, were as follows.

Short-term contract assets 64.1 53.9

Short-term contract liabilities (149.1) (116.2)

Allowance for doubtful accounts 7.7 3.8

Managed working capital as a % of annualized sales 30.1 % 37.5 %

December 31, 2022 change in managed working capital $ 67.5

Comparative information for our overall revenues (in millions) by end market, including divested businesses prior to sale, and their respective percentages of total revenues is as follows:

Aerospace & Defense:

Energy:

Comparative information for our major products, including divested businesses prior to sale, based on their percentages of revenues is as follows. We no longer report standard stainless product sales as a separate product category. Prior period information includes these sales within the nickel-based alloys and specialty alloys category. HRPF conversion service sales in the AA&S segment are excluded from this presentation.

Nickel-based alloys and specialty alloys 52 % 43 %

Precision forgings, castings and components 15 % 16 %

PRS products 14 % 19 %

Titanium and titanium-based alloys 11 % 12 %

Zirconium and related alloys 8 % 10 %

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Sales by geographic area (in millions), including divested businesses prior to sale, and as a percentage of total sales, were as follows:

Information with respect to our business segments follows.

High Performance Materials & Components

Segment EBITDA as a percentage of sales 18.0 % 13.8 %

International sales as a percentage of sales 54.7 % 50.5 %

Our HPMC segment produces a wide range of high performance materials, including titanium and titanium-based alloys, nickel- and cobalt-based alloys and superalloys, advanced powder alloys and other specialty materials, in long product forms such as ingot, billet, bar, rod, wire, shapes and rectangles, and seamless tubes, plus precision forgings, components, and machined parts.

2022 Compared to 2021

Sales of $1.64 billion for the HPMC segment in 2022 increased 42% compared to 2021. Sales to the aerospace & defense markets, which were 80% of 2022 HPMC sales, were 58% higher, reflecting an 89% increase in commercial aerospace sales, partially offset by a 29% decrease in defense sales. Sales of next generation jet engine products represented 54% of total 2022 HPMC jet engine product sales and were 131% higher than 2021 levels. In May 2022, we sold our Sheffield, UK operations, which included facilities for melting and re-melting, machining and bar mill operations, and had $36 million in sales in 2021. This business was reported as part of the HPMC segment through the date of sale. The divestiture is not expected to have a material impact on future HPMC results.

Comparative information for our HPMC segment revenues (in millions) by market, the respective percentages of overall segment revenues for the years ended 2022 and 2021, and the percentage change in revenues by market for 2022 is as follows:

Aerospace & Defense:

Energy:

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We utilize LTAs for our specialty materials, including powders, parts and components, with certain of our customers, including several aerospace market OEMs, to reduce their supply uncertainty. These LTAs, which are expected to drive HPMC’s growth trajectory for the next several years, cover sales of ATI’s specialty materials, parts and components used in both next-generation and legacy aircraft platforms, including jet engines. Our LTAs include a titanium products supply agreement for aircraft airframes and structural components with The Boeing Company (Boeing), which was extended in 2021. This LTA covers value-added titanium products and provides opportunity for greater use of ATI’s next generation and advanced titanium alloys in both long product and flat-rolled product forms, including highly engineered titanium forged products. The agreement includes both long-product forms that are manufactured within the HPMC segment, and a significant amount of plate products that are manufactured utilizing assets of both the HPMC and AA&S segments. Revenues and profits associated with these titanium products covered by the Boeing LTA are included primarily in the results for the HPMC segment.

We have LTAs with GE Aviation and Snecma (Safran) to supply premium titanium alloys, nickel-based alloys, and vacuum-melted specialty alloys products for commercial and military jet engine applications. In addition, we have LTAs with Rolls-Royce plc for the supply of disc-quality products and precision forgings for commercial jet engine applications. We also supply products to other important parts of the aviation market such as helicopters and rotary engine fixed wing aircraft.

New airframe designs contain a larger percentage of titanium alloys, and the jet engines that power them use newer nickel-based alloys and titanium-based alloys, in both cases for improved performance and more economical operating costs, compared to legacy airframe and engine designs.Boeing and Airbus continue to have multi-year backlogs of orders for both legacy models and next-generation aircraft, and there continues to be almost 26,000 jet engines with firm orders (Aero Engine News, February 2023).Due to manufacturing cycle times, demand for our specialty materials leads the deliveries of new aircrafts by approximately 6 to 12 months.

Use of these newer materials, particularly for jet engine applications, is expected to continue to increase for several years, with strong growth expected in powder metal alloys, including increased usage of iso-thermal forging and additive manufacturing production processes.

In addition, as our specialty materials are used in rotating components of jet engines, demand for our products for spare parts is impacted by aircraft flight activity and engine refurbishment requirements of U.S. and foreign aviation regulatory authorities. As the number of aircraft in service increases, the need for our materials associated with engine refurbishment is expected to increase.

Comparative information for HPMC’s major product categories based on their percentages of the segment’s overall revenue is as follows:

High-Value Products

Nickel-based alloys and specialty alloys 49 % 43 %

Precision forgings, castings and components 34 % 38 %

Titanium and titanium-based alloys 17 % 19 %

Total High-Value Products 100 % 100 %

HPMC segment EBITDA for 2022 increased 85% to $296.0 million, or 18.0% of sales, compared to $159.9 million, or 13.8% of sales, in 2021, reflecting an improved product mix and benefits from increased operating levels. Stronger operating margins reflect higher sales of next-generation jet engine products and higher facility utilization levels. HPMC’s full year 2022 sales associated with next-generation platforms were in line with full year 2019 deliveries. Results in 2022 include $27.5 million of benefits from the Aviation Manufacturing Jobs Protection (AMJP) program and employee retention credits, partially offset by labor and other costs related to ramp readiness. Strike-related costs of $3.5 million were excluded from HPMC 2021 results.

Current year results reflect growing momentum in our business. The aerospace market continues to recover, and we are seeing an ongoing improvement in demand in many of our key end markets, most notably jet engine materials and components. Worldwide economic recovery is increasing the demand for travel and efficient energy, which benefits ATI, and we believe we are well positioned to capture this growth in the future. Jet engine forgings and specialty materials demand remains strong, bolstered by share gains. Looking ahead to 2023, we anticipate strong year-over-year revenue and segment EBITDA growth primarily driven by the ongoing commercial aerospace recovery.

We believe that our HPMC segment is well-positioned for profitable growth through the continued recovery in commercial aerospace demand, especially in jet engine platforms where LTAs provide significant growth and share gains for ATI on next-generation airplanes and the jet engines that power them.

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Advanced Alloys & Solutions

Segment EBITDA as a percentage of sales 14.9 % 11.7 %

International sales as a percentage of sales 32.8 % 41.4 %

2022 Compared to 2021

Sales of $2.19 billion for the AA&S segment in 2022 increased 33% compared to 2021. The prior year period included impacts from a labor strike that ended in mid-July 2021, which reduced sales in that period. The segment had increased sales to almost all end markets, including an 87% increase in aerospace & defense market sales. In July 2022, ATI announced a new LTA with GKN Aerospace for titanium sheet and plate products for commercial and military airframes. Energy markets sales also increased 46% for both specialty energy and oil & gas applications. 2022 sales of nickel based alloys and specialty steels increased by 67% compared to 2021. Additionally, 2022 sales of titanium and titanium-based alloys increased by 41% compared to 2021.

Comparative information for our AA&S segment revenues (in millions) by market, the respective percentages of overall segment revenues, for the years ended 2022 and 2021, and the percentage change in revenues by market for 2022 is as follows:

Energy:

Aerospace & Defense:

Our AA&S segment produces zirconium and related alloys including hafnium and niobium, nickel-based alloys, titanium and titanium-based alloys, and specialty alloys in a variety of forms including plate, sheet, and PRS products. AA&S also provides hot-rolling conversion services at its HRPF, including carbon steel products under several LTAs.

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Comparative information for the AA&S segment’s major product categories, based on their percentages of revenue are presented in the following table. We no longer report standard stainless product sales as a separate product category. Prior period information includes these sales within the nickel-based alloys and specialty alloys category. HRPF conversion service sales are excluded from this presentation.

Nickel-based alloys and specialty alloys 54 % 44 %

PRS products 25 % 33 %

Zirconium and related alloys 14 % 17 %

Titanium and titanium-based alloys 7 % 6 %

Segment EBITDA was $327.8 million, or 14.9% of sales, a 71% increase from segment EBITDA of $191.7 million, or 11.7% of sales, in 2021. Results reflect a stronger product mix of nickel-alloy mill products as we completed our exit from production of standard stainless products. Increased sales of exotic materials from our Specialty Alloys & Components business and improved operating performance also drove AA&S segment EBITDA margin growth. The 2022 segment EBITDA includes a $9.9 million benefit from the A&T Stainless joint venture’s settlement of Section 232 tariff claims and $6.8 million of employee retention credits, partially offset by labor and other costs related to ramp readiness. Strike related costs of $59.7 million, primarily related to lower productivity and utilization levels, were excluded from AA&S segment 2021 results.

With the AA&S business transformation and footprint consolidation nearly completed, we are well positioned for continued future growth. Sales of commercial airframe flat-form products in the AA&S segment are projected to increase over the longer-term due in part to the repositioning of the commercial aerospace supply chain in response to the Russia/Ukraine conflict. While availability of raw materials for our melting processes remains adequate during the ongoing Russia/Ukraine conflict, changes in raw material prices may cause variability in profit margins based on the timing of index pricing mechanisms.

Corporate Expenses

Corporate expenses, which are included in selling and administrative expenses in the statement of operations, were $62.4 million in 2022 compared to $55.9 million in 2021. The current year increases reflect business transformation initiatives and higher incentive compensation costs compared to the prior year period.

Closed Operations and Other Expenses

Closed operations and other expenses are presented primarily in selling and administrative expenses in the consolidated statements of operations, and include legal, environmental, retirement benefit and insurance obligations associated with closed operations. Closed operations and other expenses were $12.1 million in 2022, compared to $4.8 million in 2021. This increase from the prior period reflects foreign currency remeasurement impacts primarily related to ATI’s European Treasury operation and higher legal costs for closed facilities.

Depreciation and Amortization

The following is depreciation & amortization by business segment:

Depreciation and amortization:

High Performance Materials & Components $ 68.3 $ 75.0

Advanced Alloys & Solutions 67.4 64.5

Interest Expense, Net

Interest expense, net of interest income and interest capitalization, was $87.4 million in 2022, compared to $96.9 million in 2021. The decrease in interest expense was in part due to the conversion of $82.5 million of the 4.75% Convertible Senior Notes due 2022 (2022 Notes) to 5.7 million shares of ATI stock on the July 1, 2022 maturity date of the 2022 Notes. Further, interest expense is presented net of interest income of $4.7 million in 2022 and $0.7 million in 2021. Interest expense in 2022

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and 2021 was reduced by $5.1 million and $4.3 million, respectively, related to interest capitalization on major strategic capital projects.

Restructuring and Other Charges/Credits

For the year ended December 31, 2022, restructuring and other charges were $23.7 million, which is excluded from segment results. This $23.7 million charge consisted primarily of $28.5 million of costs associated with the settlement of litigation related to the 2016 idling of the Rowley, UT titanium sponge facility, partially offset by $4.8 million of restructuring credits for reductions in severance-related reserves related to approximately 110 employees based on changes in planned operating rates and revised workforce estimates. Cash payments associated with prior restructuring programs were $3.1 million in 2022. Of the $9.8 million of remaining reserves associated with these restructuring actions as of December 31, 2022, $5.4 million are expected to be paid within the next year.

For the year ended December 31, 2021, restructuring and other charges were a net credit of $10.5 million, which is excluded from segment results. This $10.5 million net credit consisted primarily of $11.3 million of restructuring credits on the consolidated statement of operations, reflecting a $12.0 million reduction in severance-related reserves for approximately 350 employees based on changes in planned operating rates and revised workforce reduction estimates, partially offset by $0.7 million of other costs related to facility idlings and a $0.8 million charge for inventory valuation reserves, classified in cost of sales on the consolidated statement of operations, primarily related to excess raw material and work in process inventory at the idled Albany, OR primary titanium facility.

In addition, the A&T Stainless JV recorded a $1.8 million credit in 2022 for the reversal of restructuring reserves as a result of revised estimates, and ATI recognized a $0.9 million credit in 2022 for its equity method share of these reversals. These charges are excluded from segment operating results.

Strike Related Costs

Strike related costs were $63.2 million in 2021, of which $59.7 million were excluded from AA&S segment EBITDA and $3.5 million were excluded from HPMC segment EBITDA. These items primarily consisted of overhead costs recognized in the period due to below-normal operating rates, higher costs for outside conversion activities, and signing bonuses for represented employees.

Retirement Benefit Settlement Gain

ATI’s 2021 results include a $64.9 million retirement benefit settlement gain related to a plan termination that eliminated certain postretirement medical benefit liabilities. This was effective upon the July 2021 ratification of the new USW CBA. This gain, which is recorded in nonoperating retirement benefit income/expense on the consolidated statement of operations and is excluded from segment EBITDA, was comprised of $43.0 million of long-term postretirement benefit liabilities as of July 2021 and $21.9 million of amounts recorded in accumulated other comprehensive income at that date.

Debt Extinguishment Charge

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

Gains/Loss on Asset Sales and Sale of Business, Net

On May 12, 2022, we completed the sale of our Sheffield, UK operations and recognized a loss in 2022 on sale of $141.0 million. The Sheffield, UK operations were previously part of the Specialty Materials business in the HPMC segment. The loss on sale is reported in loss on asset sales and sales of businesses, net, on the consolidated statement of operations and is excluded from HPMC segment results. The loss includes $55.6 million related to the UK defined benefit pension plan, of which $26.1 million was reported as a net pension asset but which was in a deficit funding position for UK statutory reporting purposes, and $29.5 million in accumulated other comprehensive loss on the consolidated ATI balance sheet. The loss also includes $20.0 million of cumulative translation adjustment foreign exchange losses since ATI’s acquisition of these operations in 1998.

Also in 2022, we completed the sale of the small Pico Rivera, CA operations as part of the strategy to exit standard stainless products. We received cash proceeds of $6.2 million on the sale of these assets. We recognized a $6.8 million pretax gain on sale, including de-recognizing certain lease liabilities, which is reported in loss on asset sales and sales of businesses, net, on the consolidated statement of operations and is excluded from AA&S segment results.

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In 2021, we completed the sale of our Flowform Products business within the HPMC segment for $55.0 million, and recognized a $13.8 million gain. This gain is recorded in nonoperating income/expense on the consolidated statement of operations and is excluded from segment EBITDA.

Income Taxes

Results in 2022 and 2021 include impacts from income taxes that differ from applicable standard tax rates, primarily related to income tax valuation allowances. The provision for income taxes for 2022 was $15.5 million, which was primarily related to our profitable PRS joint venture in China. We continue to have minimal cash tax requirements in the U.S. due to the ongoing benefits of net operating loss tax carryforwards.

The provision for income taxes for 2021 was $26.8 million, which was primarily attributable to the $15.5 million in discrete tax effects related to the postretirement medical benefits gain discussed above, in accordance with ATI’s accounting policy for recognizing deferred tax amounts stranded in accumulated other comprehensive income.

Financial Condition and Liquidity

On September 9, 2022, we amended and restated our Asset Based Lending (ABL) Credit Facility, which is collateralized by the accounts receivable and inventory of our operations. As amended, 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. This amendment and restatement extended the ABL facility through September 2027 and includes an increase of $100 million in the revolving credit facility, to $600 million. The ABL continues to include a letter of credit sub-facility of up to $200 million, a $200 million term loan (ABL Term Loan), and a swing loan facility of up to $60 million. The ABL Term Loan can be prepaid in increments of $25 million if certain minimum liquidity conditions are satisfied. In addition, as amended, we have the right to request an increase of up to $300 million in the maximum amount available under the revolving credit facility for the duration of the ABL. We have a $50 million floating-for-fixed interest rate swap which converts a portion of the ABL Term Loan to a 4.21% fixed interest rate. The swap matures in June 2024.

As of December 31, 2022, there were no outstanding borrowings under the revolving credit portion of the ABL, and $39.8 million was utilized to support the issuance of letters of credit. There were no revolving credit borrowings under the ABL during 2022 or 2021.

The ABL, as amended, has interest rates that are consistent with the previous facility, replacing LIBOR with Secured Overnight Financing Rate (SOFR) plus an applicable SOFR adjustment. The ABL Term Loan, as amended, has an interest rate of 2.0% above adjusted SOFR. As amended, the applicable interest rate for revolving credit borrowings under the ABL facility includes interest rate spreads based on available borrowing capacity that range between 1.25% and 1.75% for SOFR-based borrowings and between 0.25% and 0.75% for base rate borrowings.

The ABL facility contains a financial covenant whereby we must maintain a fixed charge coverage ratio of not less than 1.00:1.00 after an event of default has occurred and is continuing or if the undrawn availability under the ABL revolving credit portion of the facility is less than the greater of (i) 10% of the then applicable maximum loan amount under the revolving credit portion of the ABL and the outstanding ABL Term Loan balance, or (ii) $60.0 million. We were in compliance with the fixed charge coverage ratio as of December 31, 2022. Costs associated with entering into the ABL amendment were $2.4 million, and are being amortized to interest expense over the extended term of the facility ending September 2027, along with $1.7 million of unamortized deferred costs previously recorded for the ABL.

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

On September 14, 2021, ATI issued $325 million aggregate principal amount of 4.875% Senior Notes due 2029 (2029 Notes) and $350 million aggregate principal amount of 5.125% Senior Notes due 2031 (2031 Notes). Underwriting fees and other third-party expenses for the issuance of the 2029 and 2031 Notes were each $4.7 million, and are being amortized to interest expense over the 8-year and 10-year terms of the 2029 and 2031 Notes, respectively. Total combined net proceeds of $665.7 million from both of these issuances were primarily used to fund the full redemption of the $500 million aggregate principal amount outstanding of the 2023 Notes on October 14, 2021, including a make-whole payment and accrued interest, resulting in a $65.5 million debt extinguishment charge, which includes a $64.5 million cash make-whole payment related to the early extinguishment of the 2023 Notes and a $1.0 million charge for the remaining unrecognized portion of the 2023 Notes deferred debt issue costs. As a result of these transactions, we significantly extended our debt maturity profile and, with the elimination of $500 million of debt currently bearing interest at 7.875% due to changes in our credit ratings, reduced annual interest expense by approximately $6 million.

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At December 31, 2022, we had $584 million of cash and cash equivalents, and available additional liquidity from the undrawn capacity under the ABL facility of approximately $538 million, for total liquidity of more than $1.1 billion. We continue to have minimal cash tax requirements in the U.S. due to the ongoing benefits of net operating loss tax carryforwards.

During 2021, we received approximately $53 million in cash, net of transaction costs and net working capital adjustments, for the sale of the Flowform Products business.

In 2022, the Company made $50 million in voluntary cash contributions to its U.S. qualified defined benefit pension plans to improve the plans’ funded position. As a result of the American Rescue Plan Act (ARPA) enacted in March 2021, the rules governing pension funding calculations changed. Based on current actuarial assumptions, we are not required to make any contributions to these pension plans during fiscal year 2023, and our prior contributions have generated a credit balance that may be utilized to offset future minimum required contributions. Using our long-term weighted average expected rate of return on pension plan assets and other actuarial assumptions, we do not expect to have any minimum cash funding requirements to these pension plans for the next few years. However, these funding estimates are subject to significant uncertainty including the actual pension trust assets’ fair value, and the discount rates used to measure pension liabilities. We voluntarily contributed $50 million to these plans in early 2023. We may elect to contribute additional amounts to these pension plans to improve their funded position, or we may elect to use a portion of our credit balance in lieu of cash contributions based on other capital allocation priorities.

On February 2, 2022, we announced that our Board of Directors authorized the repurchase of up to $150 million of ATI stock. Repurchases under the program may be made in the open market or in privately negotiated transactions, with the amount and timing of repurchases depending on market conditions and corporate needs. Open market repurchases are structured to occur within the pricing and volume requirements of SEC Rule 10b-18. The stock repurchase program does not obligate the Company to repurchase any specific number of shares and it may be modified, suspended, or terminated at any time by the Board of Directors without prior notice. In 2022, we used $139.9 million to repurchase 5.2 million of our common stock under this 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, including currently projected required contributions to our pension plans. We do not expect to pay any significant U.S. federal or state income taxes in the next several years due to net operating loss carryforwards. If we needed to obtain additional financing using the credit markets, the cost and the terms and conditions of such borrowings may be influenced by our credit rating. In addition, we regularly review our capital structure, various financing alternatives and conditions in the debt and equity markets in order to opportunistically enhance our capital structure. In connection therewith, we may seek to refinance or retire existing indebtedness, incur new or additional indebtedness or issue equity or equity-linked securities, in each case, depending on market and other conditions. We have no off-balance sheet arrangements as defined in Item 303(a)(4) of SEC Regulation S-K.

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

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Our Debt to Adjusted EBITDA Leverage Ratio improved in 2022 compared to 2021, primarily as a result of higher earnings. Our Net Debt to Adjusted EBITDA Leverage ratio also improved in 2022 compared to year-end 2021, despite a decreased cash balance, primarily due to higher earnings. 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:

Net income (loss) attributable to ATI $ 130.9 $ (38.2)

Net income attributable to noncontrolling interests 15.6 22.0

Depreciation and amortization 142.9 143.9

Strike related costs — 63.2

Retirement benefit settlement gain — (64.9)

Restructuring and other charges (credits) 23.7 (10.5)

Joint venture restructuring credit (0.9) —

Debt extinguishment charge — 65.5

Loss (gain) on asset sales and sale of business 134.2 (13.8)

Add: Debt issuance costs 17.2 20.8

Debt to Adjusted EBITDA 3.21 6.41

Net Debt to Adjusted EBITDA 2.15 4.04

Cash Flow

Cash provided by operations for 2022 was $224.9 million. Working capital balances, and consequently cash provided by operations, can fluctuate throughout any operating period based upon the timing of receipts from customers and payments to vendors. However, we actively manage our working capital to ensure the required flexibility to meet our strategic objectives. Increased cash from operations in 2022 as compared to 2021, resulted from our ongoing efforts to improve efficiency around accounts receivable and inventory levels despite significantly higher sales and operating levels in most operations. Increased business volumes and expenditures attributable to strategic capital projects contributed to higher accounts payable balances at December 31, 2022. Other significant 2022 operating cash flow items included $50 million in contributions to the U.S. defined benefit pension plans, payment of 2021 annual incentive compensation and receipt of $8.5 million for repayment of working capital advances from A&T Stainless. Cash provided by operations was $16.1 million in 2021, despite higher accounts receivable and inventory balances related to increased business activity and rising raw material costs. Other significant 2021 operating cash flow items included $67.5 million in contributions to the U.S. defined benefit pension plans and payment of 2020 annual incentive compensation, partially offset by receipt of advance payments from customers as part of long-term supply agreements in 2021.

Cash used in investing activities was $126.7 million in 2022, reflecting $130.9 million in capital expenditures primarily related to AA&S transformation projects. We expect to fund our capital expenditures with cash on hand and cash flow generated from our operations and, if needed, by using a portion of the ABL facility. Cash used in investing activities was $77.3 million in 2021, reflecting $152.6 million in capital expenditures, primarily related to AA&S transformation projects, and HPMC growth projects including the new iso-thermal press and heat-treating expansion in Cudahy, WI. These investing activity cash outflows were partially offset by $53.1 million of proceeds from the sale of the Flowform Products business and $20.8 million of proceeds from property, plant and equipment sales, which includes $16.2 million from the sale of ongoing construction in progress projects that were converted to leases.

Cash used in financing activities in 2022 was $201.9 million, and consisted primarily of $139.9 million toward the repurchase of ATI shares and $34.0 million in dividend payments to the 40% noncontrolling interest in our PRS joint venture in China. Cash provided by financing activities in 2021 was $103.0 million, and consisted primarily of $675.7 million of net proceeds

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from the issuance of the 4.875% Senior Notes due 2029 (2029 Notes) and 5.125% Senior Notes due 2031 (2031 Notes) and $21.7 million of borrowings under foreign credit facilities. These amounts were offset by the full redemption of the $500 million aggregate principal amount outstanding of the 2023 Notes, a $64.5 million cash make-whole payment related to the early extinguishment of the 2023 Notes as required by the applicable indenture, and $9.5 million for debt issuance costs associated with the newly-issued 2029 and 2031 Notes.

At December 31, 2022, cash and cash equivalents on hand totaled $584.0 million, a $103.7 million decrease from year-end 2021. Cash and cash equivalents held by our foreign subsidiaries was $102.6 million at December 31, 2022, of which $53.5 million was held by our PRS joint venture in China.

Contractual Obligations

A summary of required payments under financial instruments (excluding accrued interest) and other commitments are presented below.

(In millions) Total Less than 1year 1-3years 4-5years After 5years

Contractual Cash Obligations

Unconditional Purchase Obligations

Other Financial Commitments

Guarantees $ 12.7

(A)Amounts include contractual interest payments using the interest rates in effect as of December 31, 2022 applicable to the Company’s ABL Term Loan due 2027, the 2025 Convertible Notes, the Allegheny Ludlum 6.95% Debentures due 2025, the 2027 Notes, the 2029 Notes and the 2031 Notes.

(B)Amounts include operating lease obligations at their undiscounted value. These obligations are presented in other current liabilities and other long-term liabilities on the consolidated balance sheets at their discounted value, using applicable interest rates. See Note 11, Leases for further information.

(C)Based on current actuarial studies, amounts include payments for the next 10 years to defined benefit pension plans, assuming the expected long-term returns on pension assets are achieved. Projections of minimum required payments to the U.S. qualified defined benefit pension plans are subject to significant uncertainty based on a number of factors including actual pension plan asset returns, changes in estimates of participant longevity, and changes in interest rates. Amounts also include actuarial projections of payments under other post employment benefit plans for the next 10 years. In most retiree healthcare plans, our contributions are capped based on the cost as of a certain date. See Note 14, Retirement Benefits for further information.

(D)We have contracted for physical delivery for certain of our raw materials to meet a portion of our needs. These contracts are based upon fixed or variable price provisions. We used current market prices as of December 31, 2022, for raw material obligations with variable pricing.

(E)We have various contractual obligations that extend through 2028 for services involving production facilities and administrative operations. Our purchase obligation as disclosed represents the estimated termination fees payable if we were to exit these contracts.

(F)At December 31, 2022, there was $19.4 million drawn under foreign credit agreements. Drawn amounts on the U.S. facility were $39.8 million utilized for standby letters of credit under the $600 million ABL facility, which renew annually. These standby letters of credit are used to support: $26.3 million in workers’ compensation and general insurance arrangements, $5.4 million related to environmental matters and $8.1 million for performance assurances.

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Commitments and Contingencies

At December 31, 2022, our reserves for environmental remediation obligations totaled approximately $13 million, of which $5 million was included in other current liabilities. These reserves included estimated probable future costs of: $3 million for federal Superfund and comparable state-managed sites; $8 million for formerly owned or operated sites for remediation or indemnification obligations; and $2 million for owned or controlled sites at which our operations have been or plan to be discontinued. We continue to evaluate whether we may be able to recover a portion of future costs for environmental liabilities from third parties and to pursue such recoveries where appropriate. The timing of expenditures depends on a number of factors that vary by site. ATI 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.

At December 31, 2022, we had recognized asset retirement obligations (AROs) of $18 million related to landfill closures, decommissioning costs, facility leases and conditional AROs associated with manufacturing activities using what may be characterized as potentially hazardous materials.

Based on currently available information, it is reasonably possible that the costs for active matters may exceed our recorded reserves by as much as $15 million. However, future investigation or remediation activities may result in the discovery of additional hazardous materials, potentially higher levels of contamination than discovered during prior investigation, and may impact costs of the success or lack thereof in remedial solutions. Therefore, future developments, administrative actions or liabilities relating to environmental matters could have a material adverse effect on the ATI’s consolidated financial condition or results of operations.

Labor Matters

We have no significant CBAs that expire in 2023. Approximately 1,100 USW-represented employees engaged in a 3 1⁄2 month strike in mid-2021, following the expiration of a CBA, primarily affecting operations in the AA&S segment. In July 2021, we announced that a new four-year labor agreement with the USW through February 28, 2025 was ratified, ending the strike.

Retirement Benefits

All of ATI’s defined benefit pension plans are now closed to new entrants, and at most ATI operations with pension participants, the plans are frozen for all future benefit accruals, with less than 10% of participants in ATI’s U.S. qualified defined benefit plans still earning additional pension service. Additionally, all of the remaining collectively-bargained defined benefit retiree health care plans at ATI’s operations are now closed to new entrants, with cost caps in place for these obligations. As a result of these actions, ATI’s retirement savings and other postretirement benefit programs have largely transitioned to a defined contribution structure. Since 2013, five annuity buyouts of retired participants and two voluntary cash out programs of deferred participants during this period have helped to reduce the total participants in ATI’s U.S. qualified defined benefit pension plans by more than 60%.

At December 31, 2022, our defined benefit pension plans were approximately 88% funded in accordance with generally accepted accounting principles, and were remeasured at that date using a 5.55% discount rate to measure the projected benefit obligation. For ERISA funding purposes, discount rates used to measure pension liabilities for U.S. qualified defined benefit plans are calculated on a different basis using an IRS-determined segmented yield curve. Funding requirements are also affected by IRS-determined mortality assumptions, which may differ from those used under accounting standards. As a result of the ARPA enacted in March 2021, the rules governing pension funding calculations changed. Based on current actuarial assumptions, we are not required to make any contributions to these pension plans during fiscal year 2023, and our prior contributions have generated a credit balance that may be utilized to offset future minimum required contributions. However, these estimates are subject to significant uncertainty, including the performance of our pension trust assets and the discount rates used to measure pension liabilities. Pension trust asset performance for both our accounting and ERISA funding calculations is determined using the market value of plan assets at the end of each year.

We have certain CBAs that include participation in a multiemployer pension plan. Under current law, an employer that withdraws or partially withdraws from a multiemployer pension plan may incur a withdrawal liability to the plan, which represents the portion of the plan’s underfunding that is allocable to the withdrawing employer under very complex actuarial and allocation rules. A subsidiary of the Company participates in the Steelworkers Western Independent Shops Pension Plan (WISPP) for union-represented employees of our primary titanium operations in Albany, OR, which is funded on an hours-worked basis. Manufacturing operations at this facility have been idled throughout 2021 and most of 2022, with a limited number of employees that participate in the WISPP remaining active in maintenance and other functions. It is reasonably possible that a significant reduction or the elimination of hours-worked contributions due to changes in operating rates at this facility could result in a withdrawal liability assessment in a future period. A complete withdrawal liability is estimated to be approximately $27 million on an undiscounted basis, based on information for the plan year ended September 30, 2021, which

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is the most recent information available from the Plan Administrator. If this complete withdrawal liability was incurred, ATI estimates that payments of the obligation would be required on a straight-line basis over a 15-year period.

Critical Accounting Policies

The accompanying consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles. When more than one accounting principle, or the method of its application, is generally accepted, management selects the principle or method that is most appropriate in our specific circumstances. Application of these accounting principles requires our management to make estimates about the future resolution of existing uncertainties; as a result, actual results could differ from these estimates. In preparing these consolidated financial statements, management has made its best estimates and judgments of the amounts and disclosures included in the financial statements giving due regard to materiality.

Asset Impairment

We monitor the recoverability of the carrying value of our long-lived assets. An impairment charge is recognized when the expected net undiscounted future cash flows from an asset’s use (including any proceeds from disposition) are less than the asset’s carrying value, and the asset’s carrying value exceeds its fair value. Changes in the expected use of a long-lived asset group, and the financial performance of the long-lived asset group and its operating segment, are evaluated as indicators of possible impairment. Future cash flow value may include appraisals for property, plant and equipment, land and improvements, future cash flow estimates from operating the long-lived assets, and other operating considerations.

On December 2, 2020, we announced a strategic repositioning of our SRP business within the AA&S segment, with a focus of increasing emphasis on the specialty rolled products portion of its product portfolio, which comprise titanium-based alloys including aerospace-grade titanium plate products, nickel-based alloys, and stainless products with more differentiated characteristics for specialty applications, including thin-gauge PRS. The December 2, 2020 decision to exit production of standard stainless products represented a significant indicator of impairment in the carrying value of certain long-lived assets. Based on projected cash flows of the Brackenridge, PA operations, including the HRPF, we completed a fair value analysis as of the beginning of the fourth quarter of 2020 and recognized a $1,032.6 million impairment charge for this facility based on an estimated fair value of $354 million. This long-lived asset impairment charge was determined using a held in use framework and an income approach, which represents Level 3 unobservable information in the fair value hierarchy. This impairment assessment and valuation method require us to make estimates and assumptions regarding future operating results, cash flows, changes in working capital and capital expenditures, selling prices, profitability, and the cost of capital. Many of these assumptions are determined by reference to market participants we have identified. For example, the weighted average cost of capital (WACC) used in our discounted cash flow assessment was 9.3% and the long-term growth rate was 2%. Although we believe that the estimates and assumptions used were reasonable, actual results could differ from those estimates and assumptions.

Goodwill is reviewed annually in the fourth quarter of each year for impairment or more frequently if impairment indicators arise. Other events and changes in circumstances may also require goodwill to be tested for impairment between annual measurement dates. At December 31, 2022, the Company had $227.2 million of goodwill on its consolidated balance sheet, all of which relates to the HPMC segment. Goodwill decreased $0.7 million in 2022 due to foreign currency translation on goodwill denominated in functional currencies other than the U.S. dollar.

For our annual goodwill impairment evaluation performed in the fourth quarter of 2022, quantitative goodwill assessments were performed for the two HPMC reporting units with goodwill. Fair values were determined by using a quantitative assessment that may include discounted cash flow and multiples of cash earnings valuation techniques, plus valuation comparisons to recent public sale transactions of similar businesses, if any, which represents Level 3 unobservable information in the fair value hierarchy. These impairment assessments and valuation methods require us to make estimates and assumptions regarding revenue growth, changes in working capital and capital expenditures, selling prices and profitability that drive cash flows, and the WACC. Many of these assumptions are determined by reference to market participants we have identified. For example, our WACC used in our discounted cash flow assessments was 11.7% and long-term growth rates ranged from 3% to 3.5%. The estimated effect of a 0.50% change in the WACC would result in a 10% change in the fair value of the Forged Products reporting unit. Although we believe that the estimates and assumptions used were reasonable, actual results could differ from those estimates and assumptions.

The $227.2 million of goodwill remaining as of December 31, 2022 on our consolidated balance sheet is comprised of $161.2 million at the Forged Products reporting unit and $66.0 million at the Specialty Materials reporting unit. For our annual goodwill impairment evaluation performed in the fourth quarter of 2022, the Specialty Materials reporting unit had a fair value that was significantly in excess of carrying value. The Forged Products reporting unit had a fair value that exceeded carrying value by more than 50% for the 2022 annual assessment, which increased compared to the annual evaluation for 2021. As a result, no impairments were determined to exist from the annual goodwill impairment evaluation for the years ended

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December 31, 2022, 2021 or 2020. In order to validate the reasonableness of the estimated fair values of the reporting units as of the valuation date, a reconciliation of the aggregate fair values of all reporting units to market capitalization was performed using a reasonable control premium. In addition, no indicators of impairment were observed in 2022 or 2021 associated with any of our long-lived assets in the HPMC segment.

During the second quarter of 2020, we performed an interim goodwill impairment analysis on the Forged Products reporting unit and its $460.4 million goodwill balance based on assessed potential indicators of impairment, including recent disruptions to the global commercial aerospace market resulting from the COVID-19 pandemic, and the increasing uncertainty of near-term demand requirements of aero-engine and airframe markets based on government responses to the pandemic and ongoing interactions with customers. For the 2020 interim impairment analysis, fair value was determined by a quantitative assessment that used a discounted cash flow technique. As a result of the second quarter 2020 interim goodwill impairment evaluation, we determined that the fair value of the Forged Products reporting unit was below carrying value, including goodwill, by $287.0 million. This was primarily due to changes in the timing and amount of expected cash flows resulting from lower projected revenues, profitability and cash flows due to near-term reductions in commercial aerospace market demand. Consequently, during the second quarter of 2020, we recorded a $287.0 million impairment charge for the partial impairment of Forged Products reporting unit goodwill, most of which was assigned from the Company’s 2011 Ladish acquisition that was not deductible for income tax purposes.

Income Taxes

The provision for income taxes includes deferred taxes resulting from temporary differences in income for financial and tax purposes using the liability method. Such temporary differences result primarily from differences in the carrying value of assets and liabilities. Future realization of deferred income tax assets requires sufficient taxable income within the carryback and/or carryforward period available under tax law. On a quarterly basis, we evaluate the realizability of our deferred tax assets.

The evaluation includes the consideration of all available evidence, both positive and negative, regarding the estimated future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, historical taxable income in prior carryback periods if carryback is permitted, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused. In situations where a three-year cumulative loss condition exists, accounting standards limit the ability to consider projections of future results as positive evidence to assess the realizability of deferred tax assets. Valuation allowances are established when it is estimated that it is more likely than not that the tax benefit of the deferred tax asset will not be realized.

Results in 2022, 2021 and 2020 include impacts from income taxes that differ from applicable standard tax rates, primarily related to income tax valuation allowances. In 2020, ATI’s U.S. operations returned to a three-year cumulative loss position, limiting our ability to utilize future projections as sources of income when analyzing the need for a valuation allowance. The consolidated income tax provision of $77.7 million for fiscal year 2020 primarily relates to increases to deferred tax asset valuation allowances based on an analysis of the expected realization of deferred tax assets and liabilities within applicable expiration periods. In 2021 and 2022, ATI continued to maintain income tax valuation allowances on its U.S. Federal and state deferred tax assets. In addition, we have $67.5 million of valuation allowances on amounts recorded in other comprehensive loss on the consolidated balance sheet as of December 31, 2022.

While we remain in a cumulative loss condition, our ability to evaluate the realizability of deferred tax assets is generally limited to the ability to offset timing differences on taxable income associated with deferred tax liabilities. Therefore, a change in estimate of deferred tax asset valuation allowances for federal, state, or foreign jurisdictions during this cumulative loss condition period will primarily be affected by changes in estimates of the time periods that deferred tax assets and liabilities will be realized, or on a limited basis to tax planning strategies that may result in a change in the amount of taxable income realized.

Retirement Benefits

We have defined contribution retirement plans or benefit pension plans covering substantially all of our employees. We also sponsor several postretirement plans covering certain hourly and salaried employees and retirees. These plans provide health care and life insurance benefits for eligible employees. Company contributions to defined contribution retirement plans are generally based on a percentage of eligible pay or based on hours worked, and are funded with cash. All of ATI’s defined benefit pension plans are closed to new entrants, and at most ATI operations with pension participants the plans are frozen for all future benefit accruals, with less than 10% of participants in ATI’s U.S. qualified defined benefit plans still earning additional pension service. Additionally, all of the remaining, collectively-bargained defined benefit retiree health care plans at ATI’s operations are closed to new entrants, with cost caps in place for these obligations. As a result of these actions, ATI’s retirement savings and other postretirement benefit programs have largely transitioned to a defined contribution structure.

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Under U.S. generally accepted accounting principles, amounts recognized in financial statements for defined benefit pension plans are determined on an actuarial basis, rather than as contributions are made to the plan. A significant element in determining our pension income or expense in accordance with the accounting standards is the expected investment return on plan assets. In establishing the expected return on plan investments, which is reviewed annually in the fourth quarter, we take into consideration input from our third party pension plan asset managers and actuaries regarding the types of securities the plan assets are invested in, how those investments have performed historically, and expectations for how those investments will perform in the future. Our weighted average expected long-term return on pension plan investments was 6.43% in 2022, and the weighted average expected long-term rate of return on pension plan investments for 2023 will be 6.57%. We apply the assumed rate of return to the market value of plan assets at the end of the previous year. This produces the expected return on plan assets that is included in annual pension expense for the current year. The actual returns on pension plan assets for the last five years have been (14.5)% for 2022, 12.4% for 2021, 15.2% for 2020, 15.1% for 2019, and (4.8)% for 2018. The effect of increasing, or lowering, the expected return on pension plan investments by 0.25% would result in additional pre-tax annual income, or expense, of approximately $4 million. The cumulative difference between the expected return and the actual return on plan assets is deferred and amortized into pension income or expense over future periods. The amount of expected return on plan assets can vary significantly from year-to-year since the calculation is dependent on the market value of plan assets as of the end of the preceding year. U.S. generally accepted accounting principles allow companies to calculate the expected return on pension assets using either an average of fair market values of pension assets over a period not to exceed five years, which reduces the volatility in reported pension income or expense, or their fair market value at the end of the previous year. However, the U.S. Securities and Exchange Commission currently does not permit companies to change from the fair market value at the end of the previous year methodology, which is the methodology that we use, to an averaging of fair market values of plan assets methodology. As a result, our results of operations and those of other companies, including companies with which we compete, may not be comparable due to these different methodologies in calculating the expected return on pension investments.

In accordance with accounting standards, we determine the discount rate used to value pension plan liabilities as of the last day of our fiscal year. The discount rate reflects the current rate at which the pension liabilities could be effectively settled. In estimating this rate, we receive input from our actuaries regarding the rates of return on high quality, fixed-income investments with maturities matched to the expected future retirement benefit payments. Based on this assessment, we established a discount rate of 5.55% for valuing the pension liabilities as of December 31, 2022, and for determining the pension expense for 2023. We had previously assumed a discount rate of 2.95% at the end of 2021 and 2.60% at the end of 2020. The estimated effect of changing the discount rate by 0.50% would decrease pension liabilities in the case of an increase in the discount rate, or increase pension liabilities in the case of a decrease in the discount rate, by approximately $90 million. Such a change in the discount rate would decrease pension expense in the case of an increase in the discount rate, or increase pension expense in the case of a decrease in the discount rate, by less than $2 million. The effect on pension liabilities for changes to the discount rate, as well as the net effect of other changes in actuarial assumptions and experience, are deferred and amortized over future periods in accordance with the accounting standards.

As discussed above, gains and losses due to differences between actual and expected results for investment returns on plan assets, changes in the discount rate used to value benefit obligations, and other changes in estimates such as participant life expectancy are deferred and recognized in the consolidated statement of operations over future periods. However, for balance sheet presentation, these gains and losses are included in the determination of benefit obligations, net of plan assets, included on the year-end consolidated balance sheet. At December 31, 2022, the Company had approximately $1.2 billion of pre-tax net actuarial losses on its pension obligations, primarily related to an extended decline in prior years in the discount rate used to value the pension obligations. These actuarial losses have been recognized on the consolidated balance sheet through a reduction in stockholders’ equity, and are being recognized in the consolidated statement of operations through expense amortizations over future years. Due to all of ATI’s defined benefit plans being closed to new entrants, with the population predominately frozen for future benefit accruals, the amortization period for accumulated other comprehensive loss recognition for all of these plans is average remaining life expectancy, which is approximately 17 years on a weighted average basis.

With respect to our postretirement plans, under most of the plans, our contributions towards retiree medical premiums are capped based upon the cost as of certain dates, thereby creating a defined contribution. In accordance with U.S. generally accepted accounting standards, postretirement expenses recognized in financial statements associated with defined benefit plans are determined on an actuarial basis, rather than as benefits are paid. We use actuarial assumptions, including the discount rate and the expected trend in health care costs, to estimate the costs and benefit obligations for these plans. The discount rate, which is determined annually at the end of each fiscal year, is developed based upon rates of return on high quality, fixed-income investments. At the end of 2022, we determined the rate to be 5.45%, compared to a 2.80% discount rate in 2021, and a 2.45% discount rate in 2020. The estimated effect of changing the discount rate by 0.50% would decrease postretirement obligations in the case of an increase in the discount rate, or increase postretirement obligations in the case of a decrease in the discount rate, by approximately $7 million. Such a change in the discount rate would decrease postretirement benefit expense in the case of an increase in the discount rate, or increase postretirement benefit expense in the case of a decrease in the

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discount rate, by less than $1 million. Based upon predictions of continued significant medical cost inflation in future years, the annual assumed rate of increase in the per capita cost of covered benefits of health care plans is 7.8% in 2023 and is assumed to gradually decrease to 4.0% in the year 2048 and remain level thereafter. Assumed health care cost trend rates can have a significant effect on the benefit obligation for health care plans, however, the Company’s contributions for most of its retiree health plans are capped based on a fixed premium amount, which limits the impact of future health care cost increases.

Forward-Looking Statements

From time-to-time, the Company has 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. Such forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which the Company is unable to predict or control, that may cause our actual results or performance to materially differ from any future results or performance expressed or implied by such statements. Various of these factors are described in Item 1A, Risk Factors, of this Annual Report on Form 10-K and will be described from time-to-time in the Company filings with the SEC, including the Company’s Annual Reports on Form 10-K and the Company’s subsequent reports filed with the SEC on Form 10-Q and Form 8-K, which are available on the SEC’s website at www.sec.gov and on the Company’s website at www.atimetals.com. We assume no duty to update our forward-looking statements.

Item 7A. 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 that are our counterparty 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 ATI’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. ATI has a $50 million floating-for-fixed interest rate swap which converts a portion of the ABL Term Loan to a 4.21% fixed rate. The swap matures in June 2024. We designated the interest rate swap as a cash flow hedge of our exposure to the variability of the payment of interest on a portion of its ABL Term Loan borrowings. The ineffective portion at hedge inception, determined from the fair value of the swap immediately prior to amendment in July 2019, was amortized to interest expense over the initial ABL Term Loan swap maturity date of January 12, 2021. Any gain or loss associated with this hedging arrangement is included in interest expense. At December 31, 2022, the net mark-to-market valuation of the outstanding interest rate swap was an unrealized pre-tax gain of $1.9 million, comprised of $1.4 million in prepaid expenses and other current assets and $0.5 million in other assets on the balance sheet.

Volatility of Energy Prices. Energy resources 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, 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 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 financial condition or results of operations from volatile energy prices. These approaches include incorporating an energy surcharge on many of our products and using financial derivatives or physical hedges to reduce exposure to energy price volatility.

At December 31, 2022, the outstanding financial derivatives used to hedge our exposure to energy cost volatility included natural gas hedges. At December 31, 2022, we hedged approximately 70% of our annual forecasted domestic requirements for natural gas for 2023 and approximately 25% for 2024. At December 31, 2022, the net mark-to-market valuation of the outstanding natural gas hedges was an unrealized pre-tax gain of $0.6 million, comprised of $2.4 million in prepaid expenses and other current assets, $0.7 million in other assets, $2.0 million in other current liabilities and $0.5 million in other long-term liabilities on the balance sheet. For the year ended December 31, 2022, the effects of natural gas hedging activity decreased cost of sales by $15.1 million.

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Volatility of Raw Material Prices. We use raw materials 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 2022 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 December 31, 2022, we had entered into financial hedging arrangements, primarily at the request of our customers, related to firm orders, for an aggregate amount of approximately 6 million pounds of nickel with hedge dates through 2024. The aggregate notional amount hedged is approximately 8% of a single year’s estimated nickel raw material purchase requirements. These derivative instruments are used to hedge the variability of a selling price that is based on the London Metals Exchange (LME) index for nickel, as well as to hedge the variability of the purchase cost of nickel based on this LME index. Any gain or loss associated with these hedging arrangements is included in sales or cost of sales, depending on whether the underlying risk being hedged was the variable selling price or the variable raw material cost, respectively. At December 31, 2022, the net mark-to-market valuation of our outstanding raw material hedges was an unrealized pre-tax gain of $10.9 million, comprised of $12.5 million in prepaid expenses and other current assets, $0.5 million in other assets, and $2.1 million in other current 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 expected to be received from our export sales for pre-established U.S. dollar amounts at specified dates. The forward contracts are denominated in the same foreign currencies in which export sales are denominated. These contracts are designated as hedges of the variability in cash flows of a portion of the forecasted future export sales transactions which otherwise would expose the Company to foreign currency risk, primarily the euro. 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 December 31, 2022, we had no significant outstanding foreign currency forward contracts.

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Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

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

Opinion on the Financial Statements

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

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

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Goodwill impairment assessment- Forged Products reporting unit

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1996.

Pittsburgh, Pennsylvania

February 24, 2023

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ATI Inc. and Subsidiaries

Consolidated Statements of Operations

(In millions, except per share amounts)

Impairment of goodwill — — 287.0

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

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

Nonoperating retirement benefit income (expense) (25.4) 37.2 (62.1)

Debt extinguishment charge — (65.5) (21.5)

Other income (loss), net (12.5) 18.2 (1.2)

Less: Net income attributable to noncontrolling interests 15.6 22.0 13.0

Net income (loss) attributable to ATI $ 130.9 $ (38.2) $ (1,572.6)

The accompanying notes are an integral part of these statements.

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ATI Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(In millions)

Currency translation adjustment

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

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

Derivatives

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

Income taxes on derivative transactions — — —

Postretirement benefit plans

Actuarial loss

Amortization of net actuarial loss 76.7 89.5 85.3

Net gain (loss) arising during the period 155.0 155.9 (128.4)

Prior service cost

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

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

Income taxes on postretirement benefit plans — (15.5) —

Other comprehensive income (loss), net of tax 248.2 236.7 (10.5)

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

The accompanying notes are an integral part of these statements.

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ATI Inc. and Subsidiaries

Consolidated Balance Sheets

Assets

Cash and cash equivalents $ 584.0 $ 687.7

Short-term contract assets 64.1 53.9

Prepaid expenses and other current assets 53.4 48.8

Liabilities and Stockholders’ Equity

Short-term contract liabilities 149.1 116.2

Short-term debt and current portion of long-term debt 41.7 131.3

Accrued postretirement benefits 184.9 258.1

Equity:

ATI Stockholders’ Equity:

Preferred stock, par value $0.10: authorized-50,000,000 shares; issued-none — —

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

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

The accompanying notes are an integral part of these statements.

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ATI Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In millions)

Operating Activities:

Impairment of goodwill — — 287.0

Debt extinguishment charge — 65.5 21.5

Gain from disposal of property, plant and equipment, net (0.9) (2.9) (2.9)

Net loss (gain) from sales of businesses 141.0 (13.8) —

Non-cash restructuring charges — — 1,041.5

Change in operating assets and liabilities:

Accrued income taxes 2.5 (2.6) 2.4

Investing Activities:

Purchases of property, plant and equipment (130.9) (152.6) (136.5)

Proceeds from disposal of property, plant and equipment 3.1 20.8 5.9

Proceeds from sales of businesses, net of transaction costs 0.3 53.1 —

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

Financing Activities:

Borrowings on long-term debt — 675.7 391.4

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

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

Purchase of convertible note capped call — — (19.4)

Debt issuance costs — (9.5) (9.1)

Debt extinguishment charge — (64.5) (19.1)

Purchase of treasury stock (139.9) — —

Sale to noncontrolling interests 6.4 — —

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

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

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

Cash and cash equivalents at beginning of year 687.7 645.9 490.8

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

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

The accompanying notes are an integral part of these statements.

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ATI Inc. and Subsidiaries

Statements of Changes in Consolidated Equity

ATI Stockholders

Other comprehensive income (loss) — — — — (21.9) 11.4 (10.5)

Equity component of convertible note — 49.8 — — — — 49.8

Convertible note capped call — (19.4) — — — — (19.4)

Dividends paid to noncontrolling interest — — — — — (7.2) (7.2)

Employee stock plans — 21.0 — (4.8) — — 16.2

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

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

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

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

The accompanying notes are an integral part of these statements.

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Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies

Principles of Consolidation and Reporting

The consolidated financial statements include the accounts of ATI Inc. and its subsidiaries. The financial results of majority-owned joint ventures are consolidated into the Company’s operating results and financial position, with the minority ownership interest recognized in the consolidated statement of operations as net income attributable to noncontrolling interests, and as equity attributable to the noncontrolling interests within total stockholders’ equity. The results for the Shanghai STAL Precision Stainless Steel Company Limited (STAL) are reported on a one month lag. Investments in which the Company exercises significant influence, but which it does not control (generally a 20% to 50% ownership interest) are accounted for under the equity method of accounting, whereby ATI’s carrying value of the equity method investment on the consolidated balance sheet is the capital investment and any undistributed profit or loss. The investments are classified in other (noncurrent) assets on the consolidated balance sheet. The profit or loss attributable to ATI from equity method investments is included in the consolidated statements of operations as a component of Other (non-operating) income (expense). See Note 7 for further explanation of the Company’s joint ventures. Intercompany accounts and transactions have been eliminated. Unless the context requires otherwise, “ATI” and the “Company” refer to ATI Inc. and its subsidiaries.

Risks and Uncertainties and Use of Estimates

The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Management believes that the estimates are reasonable.

The Company markets its products to a diverse customer base, principally throughout the United States. No single customer accounted for more than 10% of sales for any year presented. The major end markets for ATI’s products are customers in the aerospace & defense, energy, automotive, construction and mining, food equipment and appliances, and medical markets.

At December 31, 2022, ATI has approximately 6,700 active employees, of which approximately 15% are located outside the United States. Approximately 35% of ATI’s workforce is covered by various collective bargaining agreements (CBAs), predominantly with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied & Industrial Service Workers International Union, AFL-CIO, CLC (USW). The Company’s CBA with the USW involving approximately 1,100 active full- time represented employees located primarily within the Advanced Alloys & Solutions (AA&S) segment operations, as well as a number of inactive employees, expired on February 28, 2021. USW-represented employees continued to work under the terms of the expired CBA until March 30, 2021 when they engaged in a strike. On July 14, 2021, ATI announced that a new four-year labor agreement with the USW was ratified, ending the strike. The Company has no significant CBAs that expire in 2023.

Cash and Cash Equivalents

Cash equivalents are highly liquid investments that are readily convertible to cash with original maturities of three months or less.

Accounts Receivable

Accounts receivable are presented net of a reserve for doubtful accounts of $7.7 million and $3.8 million at December 31, 2022 and 2021, respectively. Trade credit is extended based upon evaluations of each customer’s ability to perform its obligations, which are updated periodically. The Company’s accounts receivable reserves are determined based on expected credit losses. Amounts are written-off against the reserve in the period it is determined that the receivable is uncollectible.

Inventories

Inventories are stated at the lower of cost (first-in, first-out (FIFO) and average cost methods) or net realizable value. Costs include direct material, direct labor and applicable manufacturing and engineering overhead, and other direct costs. The term net realizable value is defined as estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.

The Company evaluates product lines on a quarterly basis to identify inventory carrying values that exceed estimated net realizable value. The calculation of a resulting reserve, if any, is recognized as an expense in the period that the need for the reserve is identified. It is the Company’s general policy to write-down to scrap value any inventory that is identified as slow-

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moving or aged more than twelve months, subject to sales, backlog and anticipated order considerations. In some instances this aging criterion is up to twenty-four months. Inventory valuation reserves also include amounts pertaining to intercompany profit elimination between different subsidiaries.

Long-Lived Assets

Property, plant and equipment are recorded at cost, including capitalized interest, and include long-lived assets acquired under finance leases. Depreciation is primarily recorded using the straight-line method. Prior to December 2020, property, plant and equipment associated with the Hot-Rolling and Processing Facility (HRPF) in the AA&S segment was being depreciated utilizing the units of production method of depreciation, which the Company believed provided a better matching of costs and revenues. However, based on changed business conditions resulting from the decision to exit production of standard stainless sheet products and the recognition of an impairment charge on the property, plant and equipment associated with the HRPF in December 2020 (see Note 19 for further discussion), depreciation of the remaining carrying value of the HRPF began using the straight-line method in December 2020. The Company periodically reviews estimates of useful life and production capacity assigned to new and in service assets. Significant enhancements, including major maintenance activities that extend the lives of property and equipment, are capitalized. Costs related to repairs and maintenance are charged to expense in the period incurred. The cost and related accumulated depreciation of property and equipment retired or disposed of are removed from the accounts and any related gains or losses are included in income.

The Company monitors the recoverability of the carrying value of its long-lived assets. An impairment charge is recognized when an indicator of impairment occurs and the expected net undiscounted future cash flows from an asset’s use (including any proceeds from disposition) are less than the asset’s carrying value and the asset’s carrying value exceeds its fair value. If an impairment loss is recognized, the adjusted carrying value of the long-lived asset is its new cost basis and this new cost basis is depreciated over the remaining useful life of the asset. Assets to be disposed of by sale are stated at the lower of their fair values or carrying amounts and depreciation is no longer recognized.

Leases

The Company classifies leases as either operating or financing, and records a right-of-use (ROU) asset and a lease liability on the consolidated balance sheets as further discussed below. The lease liability is equal to the present value of the minimum lease payments for the term of the lease, including any optional renewal periods determined to be reasonably certain to be exercised, using the discount rate determined at lease commencement. This discount rate is the rate implicit in the lease, if known; otherwise, the incremental borrowing rate (IBR) for the expected lease term is used. The Company’s IBRs approximate the rate the Company would have to pay to borrow on a collateralized basis over a similar term at lease inception. The ROU asset is equal to the initial measurement of the lease liability plus any lease payments made to the lessor at or before the commencement date and any unamortized initial direct costs incurred by the lessee, less any unamortized lease incentives received. The Company has elected to not separate lease components from non-lease components for all asset classes, and has made an accounting policy election to apply the short-term exception, which does not require the capitalization of leases with terms of 12 months or less.

The Company has lease contracts for real property and machinery and equipment, primarily for mobile, office and information technology equipment. At inception of a contract, the Company determines whether the contract is or contains a lease. If the Company has a right to obtain substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the asset, then the contract contains a lease. Several of the Company’s real property lease contracts include options to extend the lease term, and the Company reassesses the likelihood of renewal on at least an annual basis. In addition, several real property leases include variable lease payments, for items such as common area maintenance and utilities, which are expensed as incurred as variable lease expense.

There are two types of leases: operating leases and finance leases. Lease classification is determined at lease commencement. A finance lease exists when specific criteria are met that indicate that all the risk and rewards related to the leased assets are transferred to the lessee. All other leases not meeting the finance lease criteria are classified as operating leases. Operating lease expense is recognized on a straight-line basis on the consolidated statement of operations. Finance leases have front-loaded expense recognition which is reported as amortization expense and interest expense on the consolidated statement of operations. ROU assets for operating leases are classified in other long-term assets, and ROU assets for finance leases are classified in property, plant and equipment on the consolidated balance sheet. For operating leases, short-term lease liabilities are classified in other current liabilities, and long-term lease liabilities are classified in other long-term liabilities on the consolidated balance sheet. For finance leases, short-term lease liabilities are classified in short-term debt, and long-term lease liabilities are classified in long-term debt on the consolidated balance sheet. On the cash flow statement, payments for operating leases are classified as operating activities. Payments for finance leases are classified as a financing activity, with the exception of the interest component of the payment which is classified as an operating activity.

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Goodwill

Goodwill is reviewed annually for impairment, or more frequently if impairment indicators arise. The review for goodwill impairment requires a comparison of the fair value of each reporting unit that has goodwill associated with its operations with its carrying amount, including goodwill. If this comparison reflects impairment, then the loss would be measured as the excess of the carrying value over the calculated fair value.

Generally accepted accounting principles provide the option to qualitatively assess goodwill for impairment before completing a quantitative assessment. Under the qualitative approach, if, after assessing the totality of events or circumstances, including both macroeconomic, industry and market factors, and entity-specific factors, the Company determines it is likely (more likely than not) that the fair value of a reporting unit is greater than its carrying amount, then the quantitative impairment analysis is not required. The quantitative assessment may be performed each year for a reporting unit at the Company’s option without first performing a qualitative assessment. The Company’s quantitative assessment of goodwill for possible impairment includes estimating the fair market value of a reporting unit which has goodwill associated with its operations using discounted cash flow and multiples of cash earnings valuation techniques, plus valuation comparisons to recent public sale transactions of similar businesses, if any. These impairment assessments and valuation methods require the Company to make estimates and assumptions regarding revenue growth, changes in working capital and capital expenditures, selling prices and profitability that drive cash flows, and the weighted average cost of capital. Many of these assumptions are determined by reference to market participants identified by the Company. Although management believes that the estimates and assumptions used were reasonable, actual results could differ from those estimates and assumptions.

Other events and changes in circumstances may also require goodwill to be tested for impairment between annual measurement dates. While a decline in stock price and market capitalization is not specifically cited as a goodwill impairment indicator, a company’s stock price and market capitalization should be considered in determining whether it is more likely than not that the fair value of a reporting unit is less that its carrying value. Additionally, a significant decline in a company’s stock price may suggest that an adverse change in the business climate may have caused the fair value of one or more reporting units to fall below carrying value. A sustained decline in market capitalization below book value may be determined to require an interim goodwill impairment review.

Environmental

Costs that mitigate or prevent future environmental contamination or extend the life, increase the capacity or improve the safety or efficiency of property utilized in current operations are capitalized. Other costs that relate to current operations or an existing condition caused by past operations are expensed. Environmental liabilities are recorded when the Company’s liability is probable and the costs are reasonably estimable, but generally not later than the completion of the feasibility study or the Company’s recommendation of a remedy or commitment to an appropriate plan of action. The accruals are reviewed periodically and, as investigations and remediations proceed, adjustments of the accruals are made to reflect new information as appropriate. Accruals for losses from environmental remediation obligations are not discounted to their present value. The accruals are not reduced by possible recoveries from insurance carriers or other third parties, but do reflect allocations among potentially responsible parties (PRPs) at Federal Superfund sites or similar state-managed sites after an assessment is made of the likelihood that such parties will fulfill their obligations at such sites and after appropriate cost-sharing or other agreements are entered. The measurement of environmental liabilities by the Company is based on currently available facts, present laws and regulations, and current technology. Such estimates take into consideration the Company’s prior experience in site investigation and remediation, the data concerning cleanup costs available from other companies and regulatory authorities, and the professional judgment of the Company’s environmental experts in consultation with outside environmental specialists, when necessary.

Foreign Currency Translation

Assets and liabilities of international operations are translated into U.S. dollars using year-end exchange rates, while revenues and expenses are translated at average exchange rates during the period. The resulting net translation adjustments are recorded as a component of accumulated other comprehensive income (loss) in stockholders’ equity.

Sales Recognition

The following is the Company’s accounting policy as it relates to Accounting Standards Codification Topic 606 (ASC 606), Contracts with Revenue from Customers. This guidance provides a five-step analysis of transactions to determine when and how revenue is recognized, and requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

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The following is the Company’s accounting policy as it relates to the five-step analysis for revenue recognition:

1.Identify the contract: The Company has determined that the contract with the customer is established when the customer purchase order is accepted or acknowledged. Long-term agreements (LTAs), which typically extend multiple years, are used by the Company and certain of its customers for its specialty materials, in the form of mill products, powders, parts and components, to reduce their supply uncertainty. While these LTAs generally define commercial terms including pricing, termination clauses and other contractual requirements, they do not represent the contract with the customer.

2.Identify the performance obligation in the contract: When the Company accepts or acknowledges the customer purchase order, the type of good or service is defined on a line by line basis. Individual performance obligations are established by virtue of the individual line items identified on the sales order acknowledgment at the time of issuance. Generally, the Company’s revenue relates to the sale of goods and contains a single performance obligation for each distinct good. Conversion services that transform customer-owned inventory to a different dimension, product form, and/or changed mechanical properties are classified as “goods”.

3.Determine the transaction price: Pricing is also defined on a sales order acknowledgment on a line item basis and includes an estimate of variable consideration when required by the terms of the individual customer contract. Variable consideration is when the selling price of the good is not known or is subject to adjustment under certain conditions. Types of variable consideration may include volume discounts, customer rebates and surcharges. ATI also provides assurances that goods or services will meet the product specifications contained within the acknowledged customer contract. As such, returns and refunds reserves are estimated based upon past product line history or, at certain locations, on a claim by claim basis.

4.Allocate the transaction price to the performance obligation: Since a customer contract generally contains only one performance obligation, this step of the analysis is generally not applicable to the Company.

5.Recognize revenue when or as the performance obligation is satisfied: Performance obligations generally occur at a point in time and are satisfied when control passes to the customer. For most transactions, control passes at the time of shipment in accordance with agreed upon delivery terms. On occasion, shipping and handling charges occur after the customer obtains control of the good. When this occurs, the shipping and handling services are considered activities to fulfill the promise to transfer the good.

Certain customer agreements involving production of parts and components require revenue to be recognized over time due to there being no alternative use for the product without significant economic loss and an enforceable right to payment including a normal profit margin from the customer in the event of contract termination. The Company uses an input method for determining the amount of revenue, and associated standard cost, to recognize over-time revenue, cost and gross margin for these customer agreements. The input methods used for these agreements include costs incurred and labor hours expended, both of which give an accurate representation of the progress made toward complete satisfaction of that particular performance obligation.

Contract assets are recognized when ATI’s conditional right to consideration for goods or services have transferred to the customer. A conditional right indicates that additional performance obligations associated with the contract are yet to be satisfied. Contract assets are assessed separately for impairment purposes. If ATI’s right to consideration from the customer is unconditional, this asset is accounted for as a receivable and presented separately from other contract assets. A right is unconditional if nothing other than the passage of time is required before payment of that consideration is due. Performance obligations that are recognized as revenue at a point-in-time and are billed to the customer are recognized as accounts receivable. Payment terms vary from customer to customer depending upon credit worthiness, prior payment history and other credit considerations.

Contract costs are the incremental costs of obtaining and fulfilling a contract (i.e., costs that would not have been incurred if the contract had not been obtained) to provide goods and services to customers. Contract costs for ATI largely consist of design and development costs for molds, dies and other tools that ATI will own and that will be used in producing the products under the supply arrangement. Contract costs are classified as non-current assets and amortized to expense on a systematic and rational basis over a period consistent with the transfer to the customer of the goods or services to which the asset relates.

Contract liabilities are recognized when ATI has received consideration from a customer to transfer goods or services at a future point in time when the Company performs under the contract. Elements of variable consideration discussed above may be recorded as contract liabilities. In addition, progress billings and advance payments from customers for costs incurred to date are also reported as contract liabilities.

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Research and Development

Research, development and technical service activities are closely interrelated and are directed toward development of new products, improvement of existing products, cost reduction, process improvement and control, quality assurance and control, development of new manufacturing methods, and improvement of existing manufacturing methods. Research and development costs are expensed as incurred. Company funded research and development costs were $16.3 million in 2022, $16.5 million in 2021, and $14.1 million in 2020. Customer funded research and development costs were $1.4 million in 2022, $3.5 million in 2021, and $0.7 million in 2020.

Government Assistance

The Company enters into agreements with U.S. federal agencies, U.S. state and local governments, and foreign governments that provide financial assistance and incentives supporting both new capital projects to expand and enhance manufacturing capabilities and also to sustain and maintain existing operations. Depending on the nature of the government program, the financial impacts may be recorded as a reduction to cost of sales through direct offset of labor and overhead costs or lower depreciation expense, or as a reduction of selling, general and administrative expenses for property tax abatement or other similar categories. Benefits from government assistance are recognized as the activities are incurred, subject to ongoing assessments of meeting other relevant terms such as employment or expenditure levels.

In November 2021, ATI entered into an agreement with the U.S. Department of Transportation under the Aviation Manufacturing Jobs Protection (AMJP) program for a grant of up to $22.2 million. The receipt of the award was primarily conditioned upon the Company committing to not furlough or lay off a defined group of employees in High Performance Materials & Components (HPMC) segment operations during the six-month period of performance between November 2021 and May 2022. The AMJP grant benefit was recognized over the six-month performance period as a reduction to cost of sales in proportion to the compensation expense that the award was intended to defray, with $16.6 million recognized in 2022 operating results. Cash receipts from the AMJP program were $11.0 million in 2022, and this program is now completed.

ATI is a party to various U.S. states’ economic development incentive programs that provide economic benefits in the forms of property tax relief or cash payments to offset capital expenditures. These programs generally include requirements for levels of capital spending and/or employment to qualify for the government assistance. For the year ended December 31, 2022, these state-level programs reduced selling, general and administrative expenses by $1.6 million and cash receipts were $2.8 million. Receivables for ongoing programs are $3.7 million as of December 31, 2022.

Stock-based Compensation

The Company accounts for stock-based compensation transactions, such as nonvested restricted stock or stock units and performance equity awards, using fair value. Compensation expense for an award is estimated at the date of grant and is recognized over the requisite service period. Compensation expense is adjusted for equity awards that do not vest because service or performance conditions are not satisfied. However, compensation expense already recognized on plans which vest based solely on the attainment of market conditions, such as total shareholder return measures, is not adjusted based on the award attainment status at the end of the measurement period. Compensation expense is adjusted for estimated forfeitures over the award measurement period.

Income Taxes

The provision for, or benefit from, income taxes includes deferred taxes resulting from temporary differences in income for financial and tax purposes using the liability method. Such temporary differences result primarily from differences in the carrying value of assets and liabilities. Future realization of deferred income tax assets requires sufficient taxable income within the carryback and/or carryforward period available under tax law.

The Company evaluates on a quarterly basis whether, based on all available evidence, it is probable that the deferred income tax assets are realizable. Valuation allowances are established when it is estimated that it is more likely than not that the tax benefit of the deferred tax asset will not be realized. The evaluation includes the consideration of all available evidence, both positive and negative, regarding the estimated future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, historical taxable income in prior carryback periods if carryback is permitted, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused. The verifiable evidence such as future reversals of existing temporary differences and the ability to carryback are considered before the subjective sources such as estimated future taxable income exclusive of temporary differences and tax planning strategies.

It is the Company’s policy to classify interest and penalties recognized on underpayment of income taxes as income tax expense. It is also the Company’s policy to recognize deferred tax amounts stranded in accumulated other comprehensive

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income (AOCI), which result from tax rate differences on changes in AOCI balances, as an element of income tax expense in the period that the related balance sheet item associated with the AOCI balance ceases to exist. In the case of derivative financial instruments accounted for as hedges, or marketable securities, ATI uses the portfolio method where the stranded deferred tax amount is recognized when all items of a particular category, such as cash flow hedges of a particular risk such as a foreign currency hedge, are settled. In the case of defined benefit pension and other postretirement benefit plans, the stranded deferred tax balance is recognized as an element of income tax expense in the period the benefit plan is extinguished or divested.

Net Income Per Common Share

Basic and diluted net income per share are calculated by dividing the net income available to common stockholders by the weighted average number of common shares outstanding during the year. Diluted amounts assume the issuance of common stock for all potentially dilutive share equivalents outstanding. The calculations of all diluted income/loss per share figures for a period exclude the potentially dilutive effect of dilutive share equivalents if there is a net loss since the inclusion in the calculation of additional shares in the net loss per share would result in a lower per share loss and therefore be anti-dilutive.

New Accounting Pronouncements Adopted

In November 2021, the Financial Accounting Standards Board (FASB) issued new accounting guidance related to disclosures about certain types of government assistance. This new guidance requires business entities that account for transactions with a government by analogizing to a grant or contribution accounting model to make certain annual disclosures. It requires disclosure of the nature and significant terms and considerations of the transactions, the accounting policies used and the effects of those transactions on an entity’s financial statements. This new guidance is effective for the Company in fiscal year 2022, with early adoption permitted. The Company adopted this new accounting guidance effective January 1, 2022. The adoption of these changes did not have an impact on the Company’s consolidated financial statements other than the annual disclosure requirements included in the accounting policies discussion above.

In August 2020, the FASB issued new accounting guidance related to accounting for convertible instruments. Under this new guidance, embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives, or that do not result in substantial premiums accounted for as paid-in capital. As such, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the reported interest rate of convertible debt instruments typically will be closer to the coupon interest rate. The new guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation, requiring the if-converted method, and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity. This new guidance was effective for the Company in fiscal year 2022, with early adoption permitted.

The Company early adopted this new accounting guidance related to accounting for convertible instruments effective January 1, 2021 using the modified transition approach with the cumulative effect recognized as an adjustment to the opening balance of retained earnings. This new guidance was applicable to the Company’s 3.5% Convertible Senior Notes due 2025 (the 2025 Convertible Notes) that were issued in June 2020, for which the embedded conversion option was required to be separately accounted for as a component of stockholders’ equity. Upon adoption on January 1, 2021, long-term debt increased by $45.4 million and stockholders’ equity decreased by the same amount, representing the net impact of two adjustments: (1) the $49.8 million value of the embedded conversion, which is net of allocated offering costs, previously classified in additional paid-in capital in stockholders’ equity, and (2) a $4.4 million increase to retained earnings for the cumulative effect of adoption primarily related to the non-cash interest expense recorded in fiscal year 2020 for the amortization of the portion of the 2025 Convertible Notes allocated to stockholders’ equity. Prospectively, the reported interest expense for the 2025 Convertible Notes no longer included the non-cash interest expense of the equity component as required under prior accounting standards and is closer to the 3.5% cash coupon rate. There was no impact to the Company’s earnings per share calculation as it previously applied the if-converted method to the 2025 Convertible Notes given ATI’s flexibility to settle conversions of the 2025 Convertible Notes in cash, shares of ATI’s common stock or a combination thereof, at ATI’s election.

Pending Accounting Pronouncements

In September 2022, the FASB issued new accounting guidance related to disclosures about supplier finance programs. Supplier finance programs allow a buyer to offer its suppliers the option for access to payment in advance of an invoice due date, which is paid by a third-party finance provider or intermediary on the basis of invoices that the buyer has confirmed as valid. This new guidance requires a buyer in a supplier finance program to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude, using both qualitative and quantitative information about its supplier finance programs. This new

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guidance, with the exception of disclosures on rollforward information, will be effective for the Company in fiscal year 2023, with early adoption permitted. The rollforward information disclosures are effective for the Company in fiscal year 2024, with early adoption permitted. The Company does not plan to early adopt this guidance. The adoption of these changes is not expected to have an impact on the Company’s consolidated financial statements other than disclosure requirements.

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

HPMC AA&S Total HPMC AA&S Total HPMC AA&S Total

Diversified Global Markets:

Aerospace & Defense:

Energy:

HPMC AA&S Total HPMC AA&S Total HPMC AA&S Total

Primary Geographical Market:

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Comparative information of the Company’s major products based on their percentages of sales is included in the following table. The Company no longer reports standard stainless product sales as a separate product category. Prior period information includes these sales within the nickel-based alloys and specialty alloys category. HRPF conversion service sales in the AA&S segment are excluded from this presentation.

HPMC AA&S Total HPMC AA&S Total HPMC AA&S Total

Diversified Products:

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

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

The Company maintains a backlog of confirmed orders totaling $2.9 billion, $2.1 billion and $1.4 billion at December 31, 2022, 2021 and 2020, respectively. Due to the structure of the Company’s LTAs, 80% of this backlog at December 31, 2022 represented booked orders with performance obligations that will be satisfied within the next twelve months. The backlog does not reflect any elements of variable consideration.

Accounts Receivable

As of December 31, 2022 and 2021, accounts receivable with customers were $586.9 million and $473.8 million, respectively. The following represents the rollforward of accounts receivable - reserve for doubtful accounts for the fiscal years ended December 31, 2022, 2021 and 2020:

(in millions)

Accounts Receivable - Reserve for Doubtful Accounts

Expense to increase the reserve 0.2

Write-off of uncollectible accounts (0.5)

Expense to increase the reserve 0.3

Write-off of uncollectible accounts (0.8)

Expense to increase the reserve 4.6

Write-off of uncollectible accounts (0.7)

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Contract balances

The following represents the rollforward of contract assets and liabilities for the fiscal years ended December 31, 2022, 2021 and 2020:

(in millions)

Contract Assets

Balance as of beginning of fiscal year $ 53.9 $ 38.9 $ 38.5

Reclassified to accounts receivable (88.0) (76.2) (83.9)

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

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

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

Balance as of period end $ — $ — $ —

(in millions)

Contract Liabilities

Balance as of beginning of fiscal year $ 116.2 $ 111.8 $ 78.7

Amounts in beginning balance reclassified to revenue (99.8) (85.1) (55.9)

Current year amounts reclassified to revenue (72.3) (72.9) (90.1)

Divestiture — (0.8) —

Reclassification to/from long-term and contract asset 21.2 1.6 8.8

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

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

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

Contract costs for obtaining and fulfilling a contract were $7.3 million and $5.2 million as of December 31, 2022 and 2021, respectively, which are reported in other long-term assets on the consolidated balance sheets. Amortization expense for the fiscal years ended December 31, 2022, 2021 and 2020 of these contract costs was $1.0 million, $1.0 million, and $1.4 million, respectively.

Note 3. Inventories

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

Raw materials and supplies $ 213.6 $ 160.3

Inventory valuation reserves (70.9) (65.4)

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

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Note 4. Property, Plant and Equipment

Property, plant and equipment at December 31, 2022 and 2021 was as follows:

Equipment and leasehold improvements 2,895.5 2,870.2

Accumulated depreciation and amortization (1,979.5) (1,951.6)

Total property, plant and equipment, net $ 1,549.1 $ 1,528.5

Construction in progress at December 31, 2022 and 2021 was $262.1 million and $215.3 million, respectively. Capital expenditures on the consolidated statement of cash flows for the year ended December 31, 2022 exclude $38.3 million of incurred but unpaid capital expenditures that were included in property, plant and equipment and accrued at December 31, 2022. Depreciation and amortization for the years ended December 31, 2022, 2021 and 2020 was as follows:

Depreciation of property, plant and equipment $ 115.4 $ 117.4 $ 119.5

Software and other amortization 27.5 26.5 23.8

Note 5. Goodwill and Other Intangible Assets

At December 31, 2022, the Company had $227.2 million of goodwill on its consolidated balance sheet, all of which relates to the HPMC segment. Goodwill decreased in 2022 by $0.7 million as a result of currency translation on goodwill denominated in functional currencies other than the U.S. dollar.

The Company performs its annual goodwill impairment evaluations in the fourth quarter of each year. The $227.2 million of goodwill as of December 31, 2022 on the Company’s consolidated balance sheet is comprised of $161.2 million at the Forged Products reporting unit and $66.0 million at the Specialty Materials reporting unit. For the Company’s annual goodwill impairment evaluation in 2022, quantitative goodwill assessments were performed for these two HPMC reporting units with goodwill. This quantitative fair value assessment may include discounted cash flow and multiples of cash earnings valuation techniques, plus valuation comparisons to recent public sale transactions of similar businesses, if any, which represents Level 3 unobservable information in the fair value hierarchy. These impairment assessments and valuation methods require the Company to make estimates and assumptions regarding revenue growth, changes in working capital and capital expenditures, selling prices and profitability that drive cash flows, and the weighted average cost of capital. Many of these assumptions are determined by reference to market participants the Company has identified. For example, the weighted average cost of capital used in the discounted cash flow assessment was 11.7% and the long-term growth rates ranged from 3% to 3.5%. In order to validate the reasonableness of the estimated fair values of the reporting units as of the valuation date, a reconciliation of the aggregate fair values of all reporting units to market capitalization was performed using a reasonable control premium. Although the Company believes that the estimates and assumptions used were reasonable, actual results could differ from those estimates and assumptions. The Specialty Materials reporting unit had a fair value that was significantly in excess of carrying value. The Forged Products reporting unit had a fair value that exceeded carrying value by more than 50% for the 2022 annual assessment, which increased compared to the annual evaluation for 2021. No impairments were determined to exist from the annual goodwill impairment evaluation for the years ended December 31, 2022, 2021 or 2020.

During the second quarter of 2020, the Company performed an interim goodwill impairment analysis on the Forged Products reporting unit and its $460.4 million goodwill balance based on assessed potential indicators of impairment, including recent disruptions to the global commercial aerospace market resulting from the COVID-19 pandemic, and the increasing uncertainty of near-term demand requirements of aero-engine and airframe markets based on government responses to the pandemic and ongoing interactions with customers. For the 2020 interim impairment analysis, fair value was determined by a quantitative assessment that used a discounted cash flow technique. As a result of the 2020 interim goodwill impairment evaluation, the Company determined that the fair value of the Forged Products reporting unit was below carrying value, including goodwill, by $287.0 million, primarily due to changes in the timing and amount of expected cash flows resulting from lower projected revenues, profitability and cash flows due to near-term reductions in commercial aerospace market demand. Consequently, during the second quarter of 2020, the Company recorded a $287.0 million charge for the partial impairment of the Forged Products reporting unit goodwill, most of which was assigned from the Company’s 2011 Ladish acquisition that was not

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deductible for income tax purposes. This goodwill impairment charge was excluded from 2020 HPMC business segment results.

No indicators of impairment were observed in 2022, 2021 and 2020 associated with any of the Company’s long-lived assets in the HPMC segment. Accumulated goodwill impairment losses as of December 31, 2022, 2021 and 2020 were $528.0 million.

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

Amortization expense related to intangible assets was approximately $8 million for each of the years ended December 31, 2022, 2021 and 2020. For each of the years ending December 31, 2023 through 2027, annual amortization expense is expected to be approximately $7 million.

Note 6. Divestitures

On May 12, 2022, the Company completed the sale of its Sheffield, UK operations, which included facilities for melting and re-melting, machining and bar mill operations, and was part of the Specialty Materials business in the HPMC segment. A $141.0 million loss on sale of the Sheffield operations is reported in loss on asset sales and sales of businesses, net, on the consolidated statement of operations for 2022, and is excluded from HPMC segment results. The loss includes $55.6 million related to the UK defined benefit pension plan, of which $26.1 million was reported as a net pension asset but which was in a deficit funding position for UK statutory reporting purposes, and $29.5 million in accumulated other comprehensive loss on the consolidated ATI balance sheet. The loss also includes $20.0 million of cumulative translation adjustment foreign exchange losses since ATI’s acquisition of these operations in 1998. The Company received proceeds, net of transaction costs, of $0.3 million in 2022, which is reported as an investing activity on the consolidated statement of cash flows. In 2021, the Sheffield operations had external sales of $36 million, with over 80% of its sales to energy markets, primarily oil & gas, and had a net loss before tax of $9 million.

The Company completed the sale of the small Pico Rivera, CA operations, as part of the strategy to exit standard stainless products, on January 31, 2022. The Company received cash proceeds of $6.2 million on the sale of these assets. The Company recognized a $6.8 million pretax gain on sale, including de-recognizing certain lease liabilities, which is reported in loss on asset sales and sales of businesses, net, on the consolidated statement of operations and is excluded from AA&S segment results.

On August 13, 2021, the Company completed the sale of its Flowform Products business for $55 million. Located in Billerica, MA, this operation uses flowforming process technologies to produce thin-walled components in net or near-net shapes across multiple alloy systems for use in the aerospace & defense and energy markets. The Company received cash proceeds, net of transaction costs and working capital adjustments, of $53.1 million on the sale of this business during the year ended December 31, 2021, which is reported as an investing activity on the consolidated statement of cash flows. With $12.2 million of goodwill allocated to this operation from ATI’s Forged Products reporting unit, the Company recognized a $13.8 million pretax gain in 2021, which is recorded in other income/expense, net, on the consolidated statement of operations and is excluded from HPMC segment results. This business was historically reported as part of the HPMC segment through the date of sale. Flowform Products’ sales were $26 million in 2020.

Note 7. 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 statement 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. Stockholders’ equity includes undistributed

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

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 December 31, 2022 were $53.5 million.

Next Gen Alloys LLC:

The Company has a 51% interest in Next Gen Alloys LLC, a joint venture with GE Aviation for the development of a new meltless titanium alloy powder manufacturing technology. Next Gen Alloys LLC funds its development activities through the sale of shares to the two joint venture partners, and in the first quarter of 2022 the Company received $0.9 million from sales of noncontrolling interests to its joint venture partner, which is reported as a financing activity on the consolidated statements of cash flows. Cash and cash equivalents held by this joint venture as of December 31, 2022 were $1.2 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. Tsingshan purchased its 50% joint venture interest in A&T Stainless in 2018 for $17.5 million, of which $12.0 million had been received by ATI through December 31, 2021. ATI received the remaining $5.5 million from Tsingshan in the fourth quarter of 2022, which is reported as a financing activity on the consolidated statement of cash flows. The A&T Stainless operations included the Company’s previously-idled direct roll and pickle (DRAP) facility in Midland, PA. ATI provided hot-rolling conversion services to A&T Stainless using the AA&S segment’s Hot-Rolling and Processing Facility. ATI accounts for the A&T Stainless joint venture under the equity method of accounting.

In late March 2018, ATI filed for an exclusion from the Section 232 tariffs on behalf of A&T Stainless, which imported semi- finished stainless slab products from Indonesia. In April 2019, the Company learned that this exclusion request was denied by the U.S. Department of Commerce. ATI filed new requests on behalf of A&T Stainless for exclusion from the Section 232 tariffs in October 2019. These requests were denied by the U.S. Department of Commerce in the second quarter of 2020, and the 25% tariff remains in place. Due to repeated tariff exclusion denials, the DRAP facility was idled in an orderly

shut down process that was completed in 2020. A&T Stainless recorded a $4.8 million charge in 2020 for contractual termination benefits as a result of the idling decision, of which $1.8 million was reversed in 2022 as a result of revised estimates. In April 2022, ATI and A&T Stainless entered into a settlement agreement with the United States pursuant to which the United States, without admitting liability, agreed to refund a substantial portion of the Section 232 tariffs previously paid by A&T Stainless. As a result of the settlement agreement, A&T Stainless recorded tariff refunds and accrued interest of approximately $19.7 million, which was recognized as income by the joint venture in 2022. ATI’s share of the A&T Stainless results were income of $9.1 million for the fiscal year ended December 31, 2022, which included ATI’s $9.9 million share of the tariff refund and accrued interest, and losses of $0.9 million and $10.6 million for the fiscal years ended December 31, 2021 and 2020, respectively, which is included within other income/expense, net, on the consolidated statements of operations. AA&S segment results in 2022 include equity method recognition of A&T Stainless operating income of $8.2 million, and in 2021 and 2020 include operating losses of $0.9 million and $8.2 million, respectively. ATI’s share of the A&T Stainless credits/charges for termination benefits in 2022 and 2020 were excluded from AA&S segment results.

As of December 31, 2022, ATI had net receivables from A&T Stainless for working capital advances and administrative services of $3.2 million, of which $0.4 million was reported in prepaid expenses and other current assets and $2.8 million in other long-term assets on the consolidated balance sheet. As of December 31, 2021, ATI had net receivables from A&T Stainless for working capital advances and administrative services of $2.9 million, of which $0.7 million was reported in prepaid expenses and other current assets and $2.2 million in other long-term assets on the consolidated balance sheet.

Sales to A&T Stainless, which are included in ATI’s consolidated statement of operations for the 2020 fiscal year, were $18.4 million. There were no sales to A&T Stainless for the 2022 and 2021 fiscal years.

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Uniti:

ATI has a 50% interest in the industrial titanium joint venture known as Uniti LLC (Uniti), with the remaining 50% interest held by VSMPO, a Russian producer of titanium, aluminum, and specialty steel products. Uniti is accounted for under the equity method of accounting. ATI’s share of Uniti’s income was $4.4 million in 2022, $1.0 million in 2021, and $1.2 million in 2020, which is included in AA&S segment’s operating results, and within other income/expense, net, on the consolidated statements of operations. Sales to Uniti, which are included in ATI’s consolidated statements of operations, were $45.0 million in 2022, $45.8 million in 2021, and $36.7 million in 2020. Accounts receivable from Uniti were $4.5 million and $6.1 million at December 31, 2022 and 2021, respectively.

On March 9, 2022, the Company announced the termination of Uniti, LLC. The joint venture is expected to be dissolved in early 2023. No impairments were recorded as a result of the decision to terminate the Uniti joint venture.

Note 8. Asset Retirement Obligations

The Company maintains reserves where a legal obligation exists to perform an asset retirement activity and the fair value of the liability can be reasonably estimated. These asset retirement obligations (AROs) include liabilities where the timing and (or) method of settlement may be conditional on a future event, that may or may not be within the control of the entity. At December 31, 2022, the Company had recognized AROs of $17.8 million related to landfill closures, decommissioning costs, facility leases and conditional AROs associated with manufacturing activities using what may be characterized as potentially hazardous materials.

Estimates of AROs are evaluated annually in the fourth quarter, or more frequently if material new information becomes known. Accounting for asset retirement obligations requires significant estimation and in certain cases, the Company has determined that an ARO exists, but the amount of the obligation is not reasonably estimable. The Company may determine that additional AROs are required to be recognized as new information becomes available.

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

Balance at beginning of year $ 19.0 $ 24.0

Accretion expense 0.8 0.8

Divestiture — (0.2)

Balance at end of year $ 17.8 $ 19.0

Note 9. Supplemental Financial Statement Information

Cash and cash equivalents at December 31, 2022 and 2021 were as follows:

Total cash and cash equivalents $ 584.0 $ 687.7