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What changed in ATI INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ATI INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+399 added−364 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-24)

Top changes in ATI INC's 2023 10-K

399 paragraphs added · 364 removed · 273 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

48 edited+17 added−21 removed34 unchanged
Biggest changeIn addition, metal precursors – which use chemicals produced by ATI, such as hafnium – have a variety of important applications in consumer and industrial electronics. 4 Business Segments Our two business segments accounted for the following percentages of total revenues of $3.84 billion, $2.80 billion, and $2.98 billion for the years ended December 31, 2022, 2021, and 2020, respectively. 2022 2021 2020 High Performance Materials & Components 43 % 41 % 39 % Advanced Alloys & Solutions 57 % 59 % 61 % Information with respect to our business segments is presented below and in Note 18 of the notes to the consolidated financial statements.
Biggest changeFiscal Year Ended December 31, 2023 January 1, 2023 January 2, 2022 High Performance Materials & Components 51 % 43 % 41 % Advanced Alloys & Solutions 49 % 57 % 59 % Information with respect to our business segments is presented below and in Note 18 of the notes to the consolidated financial statements.
Some of these foreign sources are located in countries that may be subject to unstable political and economic conditions, which could disrupt supplies or affect the price of these materials. We purchase our nickel requirements principally from producers in Australia, Canada, Norway, Russia, and the Dominican Republic. We purchase zirconium raw materials primarily domestically and also from producers in China.
Some of these foreign sources are located in countries that may be subject to unstable political and economic conditions, which could disrupt supplies or affect the price of these materials. We purchase our nickel requirements principally from producers in Australia, Canada, Norway, and the Dominican Republic. We purchase zirconium raw materials primarily domestically and also from producers in China.
The use of our alloys in these replacement devices offers the potential for longer product lifespans versus previous implant generations. Our biocompatible nickel-titanium shape memory alloy is used for stents to support collapsed or clogged blood vessels. Reduced in diameter for insertion, these stents expand post-implant to the original tube-like shape due to the metal’s superelasticity.
The use of our alloys in these replacement devices offers the potential for longer product lifespans versus previous implant generations. Our biocompatible nickel-titanium (nitinol) shape memory alloy is used for stents to support collapsed or clogged blood vessels. Reduced in diameter for insertion, these stents expand post-implant to the original tube-like shape due to the metal’s superelasticity.
We could incur substantial cleanup costs, fines, civil or criminal sanctions, third party property damage or personal injury claims as a result of violations or liabilities under these laws or non- 7 compliance with environmental permits required at our facilities.
We could incur substantial cleanup costs, fines, civil or criminal sanctions, third party property damage or personal injury claims as a result of violations or liabilities under these laws or non-compliance with environmental permits required at our facilities.
ATI provides a full range of post-production inspection and machining with the certified quality needed to meet demanding application requirements. 3 Products and components made from titanium and titanium-based alloys, such as jet engine components including discs, blades and vanes, and airframe components such as structural members, landing gears, and hydraulic systems, are critical in aerospace applications.
ATI provides a full range of post-production inspection and machining with the certified quality needed to meet demanding application requirements. 3 Products and components made from titanium and titanium-based alloys, such as jet engine components including disks, blades and vanes, and airframe components such as structural members, landing gears, and hydraulic systems, are critical in aerospace applications.
Typical aerospace applications for nickel-based alloys and superalloys and advanced metallic powders include jet engine discs, blades, vanes, rings, casings and shafts. Nickel-based alloys and superalloys remain extremely strong at high temperatures and resist degradation under extreme conditions. The next-generation jet engines use advanced nickel-based superalloys and metallic powder alloys to enable increased fuel efficiency requirements that require hotter-burning engines.
Typical aerospace applications for nickel-based alloys and superalloys and advanced metallic powders include jet engine disks, blades, vanes, rings, casings and shafts. Nickel-based alloys and superalloys remain extremely strong at high temperatures and resist degradation under extreme conditions. The next-generation jet engines use advanced nickel-based superalloys and metallic powder alloys to enable increased fuel efficiency requirements that require hotter-burning engines.
Nickel alloys and Precision Rolled Strip ® (PRS) from SRP and our Asian PRS joint venture support computers and smart phones. The magnetic properties of nickel alloys are used in relay cores, magnets and magnetic shielding, while their thermal expansion is useful in glass-to-metal sealing applications such as monitors.
Nickel alloys and Precision Rolled Strip ® (PRS) from Specialty Rolled Products (SRP) and our Asian PRS joint venture support computers and smart phones. The magnetic properties of nickel alloys are used in relay cores, magnets and magnetic shielding, while their thermal expansion is useful in glass-to-metal sealing applications such as monitors.
Our HPMC segment has manufacturing capabilities for precision forging and machining in Poland, primarily serving the aerospace, construction & mining and transportation markets. In 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 HPMC segment.
Our HPMC segment has manufacturing capabilities for precision forging and machining in Poland, primarily serving the aerospace, construction & mining and transportation markets. In fiscal year 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 HPMC segment.
ATI’s metallic powder technology delivers alloy compositions and refined microstructures that offer increased performance and longer useful lives in high-temperature aerospace environments, as well as improves the efficiency of jet engines. We continue to increase our production capacity for advanced metallic powders for use in next-generation aerospace products, including additive manufacturing applications. Energy.
ATI’s metallic powder technology delivers alloy compositions and refined microstructures that offer increased performance and longer useful lives in high-temperature aerospace environments, as well as improved efficiency of jet engines. We continue to increase our production capacity for advanced metallic powders for use in next-generation aerospace products, including additive manufacturing applications.
Development and Employee Engagement : Developing talent and leaders at all levels of the organization and engaging our employees is critical to our long-term success. We have early career, leadership and management development programs as well as broad learning opportunities for our employees to support their career growth and advance their skills.
Learning and Development : Developing talent and leaders at all levels of the organization is critical to our long-term success. We have early career, technical, leadership and management development programs as well as broad learning opportunities for our employees to support their career growth and advance their skills.
In 2022, approximately 30% of our stainless sheet products by volume were sold to independent service centers, which have slitting, cutting or other processing facilities, with the remainder sold directly to end-use customers. Nickel-based alloy, titanium, and specialty alloy plate products are primarily used in aerospace & defense, and corrosion and industrial markets.
In fiscal year 2023, approximately 25% of our stainless sheet products by volume were sold to independent service centers, which have slitting, cutting or other processing facilities, with the remainder sold directly to end-use customers. Nickel-based alloy, titanium, and specialty alloy plate products are primarily used in aerospace & defense, and corrosion and industrial markets.
In 2022, approximately 85% of these products by volume were sold directly to end-use customers or through our own distribution network, with the remainder sold to independent service centers. Competitors for nickel-based alloys and superalloys and specialty alloys include Haynes International and VDM Metals GmbH, a subsidiary of Acerinox S.A.
In fiscal year 2023, approximately 90% of these products by volume were sold directly to end-use customers or through our own distribution network, with the remainder sold to independent service centers. Competitors for nickel-based alloys and superalloys and specialty alloys include Haynes International and VDM Metals GmbH, a subsidiary of Acerinox S.A.
Within our AA&S segment, our joint venture in China makes PRS products, which enables us to offer these products more effectively to markets in China and other Asian countries. Backlog, Seasonality and Cyclicality Our backlog of confirmed orders was approximately $2.9 billion at December 31, 2022 and $2.1 billion at December 31, 2021.
Within our AA&S segment, our joint venture in China makes PRS products, which enables us to offer these products more effectively to markets in China and other Asian countries. Backlog, Seasonality and Cyclicality Our backlog of confirmed orders was approximately $3.8 billion at December 31, 2023 and $2.9 billion at January 1, 2023.
Research and development expenditures for the years ended December 31, 2022, 2021, and 2020 included the following: (In millions) 2022 2021 2020 Company-Funded: High Performance Materials & Components $ 8.4 $ 9.0 $ 7.7 Advanced Alloys & Solutions 7.3 6.6 5.3 Corporate 0.6 0.9 1.1 16.3 16.5 14.1 Customer-Funded: High Performance Materials & Components 1.4 3.5 0.7 Total Research and Development $ 17.7 $ 20.0 $ 14.8 Our 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 expenditures for the fiscal years ended December 31, 2023, January 1, 2023, and January 2, 2022 included the following: Fiscal Year Ended (In millions) December 31, 2023 January 1, 2023 January 2, 2022 Company-Funded: High Performance Materials & Components $ 9.6 $ 8.4 $ 9.0 Advanced Alloys & Solutions 10.2 7.3 6.6 Corporate 0.9 0.6 0.9 20.7 16.3 16.5 Customer-Funded: High Performance Materials & Components 1.4 1.4 3.5 Total Research and Development $ 22.1 $ 17.7 $ 20.0 Our 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.
We expect that nearly 100% of the confirmed orders on hand at December 31, 2022 for this segment will be filled during the year ending December 31, 2023. 6 Demand for our products is cyclical over longer periods because specialty materials customers operate in cyclical industries and are subject to changes in general economic conditions and other factors both external and internal to those industries.
We expect that approximately 80% the confirmed orders on hand at December 31, 2023 for this segment will be filled during fiscal year 2024. 6 Demand for our products is cyclical over longer periods because specialty materials customers operate in cyclical industries and are subject to changes in general economic conditions and other factors both external and internal to those industries.
In 2022, approximately 55% of our plate products by volume were sold to independent service centers, with the remainder sold directly to end-use customers. 5 PRS products, which are under 0.015 inches thick, are used by customers to fabricate a variety of products primarily in the automotive and electronics markets.
In fiscal year 2023, approximately 40% of our plate products by volume were sold to independent service centers, with the remainder sold directly to end-use customers. PRS products, which are under 0.015 inches thick, are used by customers to fabricate a variety of products primarily in the automotive and electronics markets.
Large aircraft and jet engines are manufactured by a small number of companies, such as The Boeing Company, Airbus S.A.S. (an Airbus Group company) including the former operations of Bombardier Aerospace, and Embraer (Empresa Brasileira de Aeronáutica S.A.) for airframes.
Demand for our products is driven primarily by the commercial aerospace cycle. Large aircraft and jet engines are manufactured by a small number of companies, such as The Boeing Company, Airbus S.A.S. (an Airbus Group company) including the former operations of Bombardier Aerospace, and Embraer (Empresa Brasileira de Aeronáutica S.A.) for airframes.
Our overseas sales, marketing and distribution efforts are aided by our international marketing and distribution offices, ATI Europe, ATI Europe Distribution, and ATI Asia, or by independent representatives at various locations throughout the world. We believe that at least 50% of ATI’s 2022 sales were driven by global markets when we consider exports of our customers.
Our overseas sales, marketing and distribution efforts are aided by our international marketing team or by independent representatives at various locations throughout the world. We believe that at least 50% of ATI’s fiscal year 2023 sales were driven by global markets when we consider exports of our customers.
Our 2022 OSHA Total Recordable Incident Rate was 1.22 per 200,000 hours and our Lost Time Case Rate was 0.38 per 200,000 hours, which we believe to be competitive with world-class performance for our industry. Nearly 100% of our domestic employees are reporting to an ATI facility that has achieved their OSHAS 45001 certification.
Our fiscal year 2023 OSHA Total Recordable Incident Rate was 1.08 per 200,000 hours and our Lost Time Case Rate was 0.27 per 200,000 hours, which we believe to be competitive with world-class performance for our industry. Nearly all of our domestic employees are reporting to an ATI facility that has achieved its OSHAS 45001 certification.
We expect that approximately 75% of the confirmed orders on hand at December 31, 2022 for this segment will be filled during the year ending December 31, 2023. Our AA&S segment’s backlog of confirmed orders was approximately $0.6 billion at December 31, 2022 and $0.5 billion at December 31, 2021.
We expect that approximately 65% of the confirmed orders on hand at December 31, 2023 for this segment will be filled during fiscal year 2024. Our AA&S segment’s backlog of confirmed orders was approximately $0.8 billion at December 31, 2023 and $0.6 billion at January 1, 2023.
Annually, we conduct a confidential company-wide employee engagement survey that offers our employees the ability to provide feedback and valuable insight to identify opportunities for improvement and support employee engagement and our overall human capital strategy.
We actively seek opportunities for listening and communication by our CEO and other senior executive leaders with our employees. Annually, we conduct a confidential company-wide engagement survey that offers our employees the ability to provide feedback and valuable insight to identify opportunities for improvement and support employee engagement and our overall human capital strategy.
Through alloy development, internal growth efforts, and long-term supply agreements on current and next-generation jet engines and airframes, we are well-positioned with a fully qualified asset base to meet the expected return to multi-year demand growth from the commercial aerospace market as business conditions impacted by the global COVID-19 pandemic recover to more normal levels.
Through alloy development, internal growth efforts, and long-term supply agreements on current and next-generation jet engines and airframes, we are well-positioned with a fully qualified asset base to meet the expected multi-year demand growth from the commercial aerospace market.
We expect that approximately 80% of confirmed orders on hand at December 31, 2022 will be filled during the year ending December 31, 2023. Our HPMC segment’s backlog of confirmed orders was approximately $2.3 billion at December 31, 2022 and $1.6 billion at December 31, 2021.
We expect that approximately 70% of confirmed orders on hand at December 31, 2023 will be filled during fiscal year 2024. Our HPMC segment’s backlog of confirmed orders was approximately $3.0 billion at December 31, 2023 and $2.3 billion at January 1, 2023.
The increased activity in 2022 and 2021 was largely related to materials and manufacturing methods for products supporting the aerospace & defense markets. The lower expenditures in 2020 are reflective of weakened market conditions due to the COVID-19 pandemic. We own hundreds of United States patents, many of which are also filed under the patent laws of other nations.
The increased activity in fiscal year 2023 was largely related to materials and manufacturing methods for products supporting the aerospace & defense markets. We own hundreds of United States patents, many of which are also filed under the patent laws of other nations.
Export Sales and Foreign Operations International sales represent approximately 42% of our total annual sales, with direct export sales by our U.S.-based operations to customers in foreign countries accounting for approximately 32% of our total sales.
However, overall industry shortages may impact our operations and scheduling. Export Sales and Foreign Operations International sales represent approximately 46% of our total annual sales, with direct export sales by our U.S.-based operations to customers in foreign countries accounting for approximately 36% of our total sales.
High Performance Materials & Components Segment Our HPMC segment produces a wide range of high performance specialty materials, parts and components for several major end markets, including the aerospace & defense, medical, and energy markets, with 80% of 2022 revenues derived from the aerospace & defense markets. Demand for our products is driven primarily by the commercial aerospace cycle.
High Performance Materials & Components Segment Our HPMC segment produces a wide range of high performance specialty materials, parts and components for several major end markets, including the aerospace & defense, medical, and energy markets, with 85% of fiscal year 2023 revenues derived from the aerospace & defense markets.
Certain key supplies used in melting and other processing operations, such as graphite electrodes and industrial gases including helium and argon, are from time-to-time limited in availability and may be subject to significant price inflation.
Certain key supplies used in melting and other processing operations, such as graphite electrodes and industrial gases including helium and argon, are from time-to-time limited in availability and may be subject to significant price inflation. We enter into long-term supply contracts where possible to ensure an adequate supply of these products.
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.
The HPMC segment’s primary focus is on maximizing aero-engine materials and components growth, with approximately 85% of its revenue derived from the aerospace & defense markets, including nearly 60% of its revenue from products for commercial jet engines.
We believe the structure of our compensation packages provides the appropriate incentives to attract, retain and motivate our employees. 8 The Personnel and Compensation Committee is responsible for establishing and administering the policies governing annual compensation and long-term compensation to ensure the policies are designed to align compensation with our overall business strategy and performance to link to the interests of our stockholders.
The Compensation and Leadership Development Committee of our Board is responsible for establishing and administering the policies governing annual compensation and long-term compensation to ensure the policies are designed to align compensation with our overall business strategy and performance to link to the interests of our stockholders.
Our core markets of aerospace & defense represent 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.
Our mission is to solve the world’s challenges through materials science. Our core markets of aerospace & defense represent nearly 60% 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, as well as the medical and electronics markets.
Additionally, in 2022, we announced the termination of the Uniti joint venture, which is expected to be dissolved in early 2023, and in 2020, we indefinitely idled the manufacturing operations of the A&T Stainless joint venture. Nickel-based alloys, titanium, and stainless sheet products are used in a wide variety of industrial and consumer applications.
On March 9, 2022, we announced the termination of Uniti, and this joint venture is expected to be fully dissolved in the first quarter of fiscal year 2024. 5 Nickel-based alloys, titanium, and stainless sheet products are used in a wide variety of industrial and consumer applications.
These materials and components possess an extraordinary combination of properties that help to increase jet engine fuel efficiency and product longevity, including superior strength-to-weight ratios, elevated temperature resistance, low coefficient of thermal expansion, and extreme corrosion resistance. Our specialty materials and components for defense applications include naval nuclear products, military jet engines, fixed wing and rotorcraft products, and armor applications.
These materials and components possess an extraordinary combination of properties that help to increase jet engine fuel efficiency and product longevity, including superior strength-to-weight ratios, elevated temperature resistance, low coefficient of thermal expansion, and extreme corrosion resistance. Availability of titanium supply continues to be a critical issue across the aerospace & defense supply chain.
Each operating company has an environmental management system that includes mechanisms for regularly evaluating environmental compliance and managing changes in business operations while assessing environmental impact. Human Capital Management We believe that our people and culture are a competitive differentiator.
Each operating company has an environmental management system that includes mechanisms for regularly evaluating environmental compliance and managing changes in business operations while assessing environmental impact. Safety is one of our core values. We strive for a zero injury culture committed to the safety of our people, our products, and the communities in which we operate.
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.
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 in the future. Other major HPMC end markets include medical and energy. HPMC produces a wide range of high performance materials, components, and advanced metallic powder alloys.
Compensation and Benefits : We provide market-based competitive compensation through our salary, annual incentive and long-term incentive programs and robust benefits packages that promote employee well-being across all aspects of their lives. Eligible employees are compensated for their contributions to our goals with both short-term cash incentives and long-term equity-based incentives.
More than 40% of the members of our Executive Council are women or minorities. Compensation and Benefits : We provide market-based competitive compensation through our salary, annual incentive and long-term incentive programs and robust benefits packages that promote the well-being of our employees across all aspects of their lives.
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.
The AA&S segment is focused on delivering high-value flat products primarily to the energy, aerospace, and defense end-markets, which comprise over 60% of its revenue. Other important end markets for AA&S include electronics, medical and automotive. 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.
As a result, management focuses on a number of human capital strategies and objectives, including the following: Inclusion and Diversity : We believe our business success is intricately tied to cultivating a culture in which all members of our workforce are included and empowered to do their best work.
We believe our business success is intricately tied to cultivating a culture in which all members of our workforce are included and empowered to do their best work. We recognize the benefits and importance of diversity amongst our board and management. Women comprise 30% of our Board, and 20% of our Directors are racially diverse.
Labor Relations and Collective Bargaining : We have approximately 6,700 active employees, of which about 15% are located outside the United States. Approximately 35% of our 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).
Further, the Committee oversees the Company’s human capital management policies and procedures, including its workforce and professional development and diversity and inclusion initiatives. 8 Labor Relations and Collective Bargaining : Approximately 35% of our 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).
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. Available Information Our Internet website address is www.atimaterials.com.
The Company has no significant CBAs that expire in fiscal year 2024. Available Information Our Internet website address is www.atimaterials.com.
PRS is selected for electronics and communications applications based on corrosion resistance, strength, wear resistance, electrical resistivity or thermal expansion.
PRS is selected for electronics and communications applications based on corrosion resistance, strength, wear resistance, electrical resistivity or thermal expansion. In addition, metal precursors – which use chemicals produced by ATI, such as hafnium – have a variety of important applications in consumer and industrial electronics.
We produce highly sophisticated components that have differing mechanical properties across a single product unit and are highly-resistant to fatigue and temperature effects. Our precision forgings are used for jet engine components, structural components for aircraft, helicopters, space propulsion, and other demanding applications.
Our precision forgings are used for jet engine components, structural components for aircraft, helicopters, space propulsion, and other demanding applications.
Our specialty materials are also used in the manufacture of aircraft landing gear and structural components. We are a global industry leader in iso-thermal and hot-die forging technologies for advanced aerospace components. In 2021, we completed capital investments for our fourth iso-thermal press and heat-treating capacity expansion at our Iso-Thermal Forging Center of Excellence in Cudahy, WI.
Our specialty materials are also used in the manufacture of aircraft landing gear and structural components. We are a global industry leader in iso-thermal and hot-die forging technologies for advanced aerospace components. We produce highly sophisticated components that have differing mechanical properties across a single product unit and are highly-resistant to fatigue and temperature effects.
In addition, our ultra fine diameter (0.002 inch/0.051 mm) titanium wire is used for screens to prevent blood clots from entering critical areas of the body. Electronics . ATI’s materials perform a variety of important roles in the growing consumer electronics market.
In addition, our ultra fine diameter (0.002 inch/0.051 mm) titanium wire is used for screens to prevent blood clots from entering critical areas of the body. We have recently announced our strategic partnership with Confluent Medical 4 Technologies (Confluent) whereby Confluent will provide a $50 million investment in our capacity expansion to produce nitinol.
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.
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, and 3D-printed aerospace products.
We maintain a formal talent review process to work in connection with performance management for systematic career development and succession planning at both the individual employee and enterprise levels. We engage in continuous listening by actively seeking opportunities for regular engagement and communication by our CEO and other senior executive leaders with our broader employee population.
Further, we partner with top academic institutions and external professional organizations to enhance the diversity of our workforce to attract and retain top talent. We maintain a formal talent review process to work in connection with performance management for systematic career development and succession planning at both the individual employee and organizational levels.
Attracting, developing and retaining purpose and performance driven leaders who build teams with diverse, empowered and fulfilled employees who want to stay and grow with the company is foundational to our vision. At the center of our commitment to excellence are our values which drive how we succeed: Accountability, Integrity, Innovation, Safety & Sustainability, and Teamwork & Respect.
Attracting, developing, and retaining purpose and performance-driven leaders building teams with diverse, empowered and fulfilled employees who want to stay and grow with the company is foundational to our vision. As of December 31, 2023, we employed approximately 7,300 active employees, 15% of whom are located outside the United States across 15 countries.
References to “ATI,” the “Company,” “the Registrant,” “we,” “our” and “us” and similar terms mean ATI Inc. and its subsidiaries, unless the context otherwise requires. Our Business ATI produces specialty materials, highly differentiated by our materials science expertise and advanced process technologies. Our mission is to solve the world’s challenges through materials science.
References to “ATI,” the “Company,” “the Registrant,” “we,” “our” and “us” and similar terms mean ATI Inc. and its subsidiaries, unless the context otherwise requires. When used in this Annual Report on Form 10-K, unless the context otherwise requires or unless otherwise specified, any reference to “year” is to the Company’s fiscal year.
We continuously strive to cultivate and support a highly engaged and productive workforce.
Our Culture : At the center of our commitment to excellence are our values, which drive how we succeed: Accountability, Integrity, Innovation, Safety & Sustainability, and Teamwork & Respect. We continuously strive to cultivate and support a highly engaged and productive workforce.
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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.
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The Company follows a 4-4-5 or 5-4-4 fiscal calendar, whereby each fiscal quarter consists of thirteen weeks grouped into two four-week months and one five-week month, and its fiscal year ends on the Sunday closest to December 31. Fiscal years 2023, 2022 and 2021 ended on December 31, 2023, January 1, 2023 and January 2, 2022, respectively.
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On December 2, 2020, we announced a strategic repositioning of our Specialty Rolled Products (SRP) business, which was substantially completed in 2022 and included the exit 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.
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All fiscal years presented include 52 weeks of operations. The dates for prior fiscal years have been revised to more precisely reflect the exact day of the year end periods for these fiscal years given our 4-4-5 or 5-4-4 calendar. Our Business ATI produces specialty materials, highly differentiated by our materials science expertise and advanced process technologies.
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Significant global overcapacity for stainless flat-rolled products has intensified the price competition in the AA&S segment over the last several years, despite various anti-dumping and countervailing duties imposed by the United States government in various forms since 1999.
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In aggregate, these markets represent almost 85% of our revenue. We operate in two business segments: High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions (AA&S).
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On December 2, 2020, we announced a strategic repositioning of our SRP business, which 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 its focus on higher-margin products and its aerospace & defense end markets.
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As such, in fiscal year 2023, we restarted a significant amount of titanium melt capacity in Albany, Oregon with a modest investment and are continuing to invest in additional capacity at this facility, bringing online a fourth furnace in the first half of fiscal year 2024.
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We have exited the domestic commodity stainless sheet business, where we previously competed with North American Stainless, a subsidiary of Acerinox S.A., Outokumpu Stainless USA, LLC, and Cleveland-Cliffs Inc., as well as imports from numerous foreign producers, including Aperam, based in Europe.
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In addition, we are further investing in additional titanium melt capacity to meet this growing demand with our expansion in Richland, Washington, and we are on track for the first melt in the fourth quarter of fiscal year 2024 at this facility.
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We continue efforts toward improving the capacity utilization of our Hot-Rolling and Processing Facility (HRPF) in Brackenridge, PA for carbon steel hot-rolling third-party conversion services, and in 2022 we entered into additional LTAs to provide these services.
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When our Richland, Washington expansion is at full production in late fiscal year 2025, our total titanium melt capacity is expected to be 80% greater than our fiscal year 2022 titanium melt capacity. Our specialty materials and components for defense applications include naval nuclear products, military jet engines, fixed wing and rotorcraft products, and armor applications.
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We enter into long-term supply contracts where possible to ensure an adequate supply of these products, however, overall industry shortages may impact our operations and scheduling.
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In fiscal year 2023, ATI announced that we are establishing a dedicated additive manufacturing and post-processing facility outside Fort Lauderdale, Florida which will allow ATI to tap into significant aerospace and defense demand for additively manufactured laser power bed fusion parts, serving both commercial and defense customers. Energy.
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Cybersecurity The Company recognizes the increasing significance that cybersecurity has to our operations and the need to continually assess cybersecurity risk and evolve our response in the face of a rapidly and ever-changing environment.
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As a result of this expansion, we expect to more than triple our production of this life saving alloy by fiscal year 2027. Electronics . ATI’s materials perform a variety of important roles in the growing consumer electronics market.
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We have both a Chief Digital and Information Officer and, to enhance an already comprehensive cybersecurity program, a Chief Information Security Officer to lead our efforts to address and mitigate digital technology risks in partnership with ATI’s business leaders.
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Business Segments Our two business segments accounted for the following percentages of total revenues of $4.17 billion, $3.84 billion, and $2.80 billion for the fiscal years ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively.
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In 2022, the need to ensure cybersecurity while enabling a comprehensive and highly reliable remote working environment for a significant portion of our workforce continued to be a central component of our strategy.
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We expect that the balance of our operations will be OSHAS 45001 certified by fiscal year 2025. 7 Human Capital Management We believe that our people and culture are a competitive differentiator.
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Throughout 2022, special attention was and continues to be given to improving and implementing Cybersecurity Maturity Model Certification controls in support of protecting ATI’s technology and customer data. Additionally, we have a robust Cybersecurity Incident Response Plan which provides a documented framework for handling high severity security incidents and facilitates coordination across multiple parts of the Company.
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Governanc e : Our Corporate Guidelines for Business Conduct and Ethics establishes the baseline requirements of our integrity and compliance program and promotes an environment where everyone is treated ethically and with respect.
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We routinely perform simulations and drills at both a technical and management level. We incorporate external expertise and reviews in all aspects of our program, and all personnel receive regular cybersecurity awareness training. As part of its program of regular oversight, the Company’s Audit & Risk Committee is responsible for overseeing ATI’s cybersecurity risk.
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It outlines our pledge to recognize the dignity of each individual, respect each employee, provide compensation and benefits that are competitive, promote self-development through training, and value diversity of perspectives and ideas. Employees complete Business Conduct and Ethics training and, where permitted by law, must also certify each year that they will comply with the Code.
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The Audit & Risk Committee receives quarterly reports from the Chief Digital and Information Officer and the Chief Information Security Officer on ATI’s cybersecurity risk profile and enterprise cybersecurity program.
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Talent Acquisition and Management : Our performance and development process is integrated in the ATI business strategy, and is a key component to recruiting, hiring, and developing top-performing talent. Our hiring practices include a goal that 80% of position candidate slates include a minimum of 30% diverse candidates.
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Employing people from different backgrounds, cultures and experiences, amplifies our ability to gather insights and foster innovation. Our diversity recruitment strategy includes participation in national diversity conferences, having strong partnerships with universities and student chapters of diversity organizations, and selecting providers who align with our values of having a diverse workforce.
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We focus on building inclusive teams through training that reinforces our values and ensure our development programs have diverse representation. Inclusion and Diversity : Our long tradition of innovation and operational excellence demands the contributions of leaders and team members with a wide array of characteristics, backgrounds, experiences, knowledge, and skills.
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We have an enterprise-wide goal that 80% of position candidate slates include a minimum of 30% diverse candidates.
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Eligible employees are compensated for their contributions to achievement of our goals with both short-term cash incentives and long-term equity-based incentives. We believe the structure of our compensation packages provides the appropriate incentives to attract, retain, and motivate our employees.
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ATI’s employee-led IDEA (Inclusion, Diversity, Equity and Accessibility) Council, which originated within our Specialty Alloys & Components (SA&C) business, tracks best practices with regard to diversity and inclusion initiatives within our industry and the markets we serve and makes recommendations regarding these matters, both within SA&C and to the broader business.
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Our well-being focus addresses physical, mental, financial, and individual needs, providing benefits and resources to help employees and their families be their best, both personally and professionally. We implemented several campaigns to promote well-being and help provide visibility to resources and available benefits.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur substantial indebtedness could adversely affect our business, financial condition or results of operations and prevent us from fulfilling our obligations under our outstanding indebtedness. As of December 31, 2022, our total consolidated indebtedness was approximately $1.7 billion.
Biggest changeAs a result, our business, financial condition and results of operations could be materially adversely affected. RISKS ASSOCIATED WITH OUR INDEBTEDNESS; OTHER FINANCIAL AND FINANCIAL ACCOUNTING RISKS Risks Associated with Indebtedness. Our substantial indebtedness could adversely affect our business, financial condition or results of operations and prevent us from fulfilling our obligations under our outstanding indebtedness.
This could cause us to lose sales, incur additional costs, delay new product introductions, or suffer harm to our reputation. The ongoing conflict between Russia and Ukraine may adversely affect our business and results of operations. Since February of 2022, Russia and Ukraine have been engaged in active armed conflict.
This could cause us to lose sales, incur additional costs, delay new product introductions, or suffer harm to our reputation. The ongoing conflict between Russia and Ukraine may adversely affect our business and results of operations. Since February 2022, Russia and Ukraine have been engaged in active armed conflict.
Risks associated with such international trade include, among others: political and economic instability, including weak conditions in the world’s economies; accounts receivable collection; export controls; trade sanctions; changes in legal and regulatory requirements; policy changes affecting the markets for our products; changes in tax laws; and exchange rate fluctuations (which may affect sales to international customers and the value of profits earned on export sales when converted into dollars).
Risks associated with such international 13 trade include, among others: political and economic instability, including weak conditions in the world’s economies; accounts receivable collection; export controls; trade sanctions; changes in legal and regulatory requirements; policy changes affecting the markets for our products; changes in tax laws; and exchange rate fluctuations (which may affect sales to international customers and the value of profits earned on export sales when converted into dollars).
International acquisitions and other transactions could be affected by export controls, exchange rate fluctuations, domestic and foreign political conditions, changes in tax laws and a deterioration in domestic and foreign economic conditions. Risks Associated with Government Contracts . Some of our operating units perform contractual work directly or indirectly for the U.S.
International acquisitions and other transactions could be affected by export controls, exchange rate fluctuations, domestic and foreign political conditions, changes in tax laws and a deterioration in domestic and foreign economic conditions. 14 Risks Associated with Government Contracts . Some of our operating units perform contractual work directly or indirectly for the U.S.
Climate related changes in prevailing weather patterns may impact, among other conditions, changes in sea levels and the propensity for flooding in coastal and other regions, long-term changes in precipitation patterns leading to flooding, drought or deterioration in water quality, and the frequency and severity of significant storms and other weather events and related natural hazards, such as wildfire risk.
Climate related changes in prevailing weather patterns may impact, among other conditions, changes in sea levels and the propensity for flooding in coastal and other regions, long-term changes in precipitation patterns leading to flooding, drought or deterioration in water quality, and increases in the frequency and severity of significant storms and other weather events and related natural hazards, such as wildfire risk.
Over time, widespread physical climate changes and risks could drive increases in other operational costs for our business, such as insurance costs. 12 Regulatory and Other Transition Risks . Increased worldwide focus on climate change has led to legislative and regulatory efforts to combat both potential causes and adverse impacts of climate change.
Over time, widespread physical climate changes and risks could drive increases in other operational costs for our business, such as insurance costs. Regulatory and Other Transition Risks . Increased worldwide focus on climate change has led to legislative and regulatory efforts to combat both potential causes and adverse impacts of climate change.
A labor dispute, which could lead to a strike, lockout, or other work stoppage by the employees covered by one or more of the collective bargaining agreements, could have a material adverse effect on production at one or more of our facilities and, depending upon the length of such dispute or work stoppage, 11 on our operating results.
A labor dispute, which could lead to a strike, lockout, or other work stoppage by the employees covered by one or more of the collective bargaining agreements, could have a material adverse effect on production at one or more of our facilities and, depending upon the length of such dispute or work stoppage, on our operating results.
It has and could continue 10 to cause significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, trade disputes or trade barriers, changes in consumer or purchaser preferences, and increases in cyberattacks and espionage.
It has and could continue to cause significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, trade disputes or trade barriers, changes in consumer or purchaser preferences, and increases in cyberattacks and espionage.
The pursuit of remedies for infringement or misappropriation of intellectual property is expensive and uncertain. Additionally, our competitors may develop technologies of their own that are similar or superior to our proprietary technologies, or design around our patents, to lawfully avoid our intellectual property rights.
The pursuit of remedies for infringement or misappropriation of intellectual property is expensive and uncertain. Additionally, our competitors may develop technologies of their own that are similar or superior to our proprietary technologies, or design 11 around our patents, to lawfully avoid our intellectual property rights.
Our suppliers may face similar challenges and incur additional compliance costs that are passed on to us. These direct and indirect costs may adversely impact our results. Market and Reputational Risks .
Our suppliers may face similar challenges and incur additional compliance costs that are passed on to us. These direct and indirect costs may adversely impact our results. 12 Market and Reputational Risks .
We intend to adjust our accruals to reflect new information as appropriate. Future adjustments could have a material adverse effect on our results of operations in a given period, but we cannot reliably predict the amounts of such future adjustments. At December 31, 2022, our reserves for environmental matters totaled approximately $13 million.
We intend to adjust our accruals to reflect new information as appropriate. Future adjustments could have a material adverse effect on our results of operations in a given period, but we cannot reliably predict the amounts of such future adjustments. At December 31, 2023, our reserves for environmental matters totaled approximately $13 million.
We intend to continue to strategically position our businesses in order to improve our ability to compete. Strategies we employ to accomplish this may include seeking new or expanding existing specialty market niches for our products, expanding our global presence, acquiring businesses complementary to existing strengths, and continually evaluating the performance and strategic fit of our existing business units.
We intend to continue to strategically position our businesses to improve our ability to compete. Strategies we employ to accomplish this may include seeking new or expanding existing specialty market niches for our products, expanding our global presence, acquiring businesses complementary to existing strengths, and continually evaluating the performance and strategic fit of our existing business units.
For example, in 2021, the USW engaged in a 3 ½ month strike primarily affecting our AA&S segment operations, and we incurred approximately $63 million in strike-related costs and had lower revenues during this period while we continued to operate affected facilities with replacement workers.
For example, in fiscal year 2021, the USW engaged in a 3 ½ month strike primarily affecting our AA&S segment operations, and we incurred approximately $63 million in strike-related costs and had lower revenues during this period while we continued to operate affected facilities with replacement workers.
Our involvement is limited or de minimis at approximately 20 of these sites, the potential loss exposure with respect to 16 individual sites is not considered to be material, and the potential loss exposure on the remaining 7 sites could be material. We are a party to various cost-sharing arrangements with other PRPs at many of the sites.
Our involvement is limited or de minimis at approximately 20 of these sites, the potential loss exposure with respect to 16 individual sites is not considered to be material, and the potential loss exposure on the remaining seven sites could be material. We are a party to various cost-sharing arrangements with other PRPs at many of the sites.
Depending on the timing and amount, a requirement that we fund the U.S. qualified defined benefit pension plans could have a material adverse effect on our results of operations and financial condition. Goodwill or Long-Lived Asset Impairments. We have various long-lived assets that are subject to impairment testing.
Depending on the timing and amount, a requirement that we fund the U.S. qualified defined benefit pension plan could have a material adverse effect on our results of operations and financial condition. Goodwill or Long-Lived Asset Impairments. We have various long-lived assets that are subject to impairment testing.
We continually work to strengthen our threat countermeasures, safeguard our systems and mitigate potential risks. Despite our efforts to fortify our cyber security and protect sensitive information and confidential and personal data, our facilities and systems and those of our third-party service providers may be vulnerable to security breaches.
We continually work to strengthen our threat countermeasures, safeguard our systems and mitigate potential risks. Despite our efforts to fortify our cybersecurity and protect sensitive information and confidential and personal data, our facilities and systems and those of our third-party service providers may be vulnerable to security breaches.
Risks Associated with Our Guidance and Other Targets and Expectations. From time to time, we may announce earnings guidance and other future targets or goals for our business. Such information, which consists of forward-looking statements, is based on our then current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which we operate.
From time to time, we may announce earnings guidance and other future targets or goals for our business. Such information, which consists of forward-looking statements, is based on our then current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which we operate.
In that case, we may need to seek alternate suppliers, which may be more expensive, may not be available or may result in delays in shipments to us and subsequently to our customers, each of which would affect our business, results of operations, financial condition and/or cash flows. Risk of Operational Disruption .
In that case, we may need to seek alternate suppliers, which may be more expensive, may not be available or may result in delays in shipments to us and subsequently to our customers, each of which would affect our business, results of operations, financial condition and/or cash flows.
Labor Matters. We have approximately 6,700 active employees, of which approximately 15% are located outside the United States. Approximately 35% of our workforce is covered by various CBAs, predominantly with the USW. At various times, our CBAs expire and are subject to renegotiation. Generally, collective bargaining agreements that expire may be terminated after notice by the union.
Labor Matters. We have approximately 7,300 active employees, of which approximately 15% are located outside the United States. Approximately 35% of our workforce is covered by various CBAs, predominantly with the USW. At various times, our CBAs expire and are subject to renegotiation. Generally, collective bargaining agreements that expire may be terminated after notice by the union.
As we integrate, implement and deploy new information technology processes and information infrastructure across our operations, we could experience disruptions in our business that could have an adverse effect on our business, financial condition, results of operations and cash flow. Cyber Security Threats.
As we integrate, implement and deploy new information technology processes and information infrastructure across our operations, we could experience disruptions in our business that could have an adverse effect on our business, financial condition, results of operations and cash flow. Cybersecurity Threats.
We expect that this end market will remain a highly cyclical industry, and future downturns could have an adverse effect on the prices at which we are able to sell our products, and our results of operations, business and financial condition could be materially adversely affected. Product Pricing.
We expect that these end markets will remain a highly cyclical industry, and future downturns could have an adverse effect on the prices at which we are able to sell our products, and our results of operations, business and financial condition could be materially adversely affected. 9 Product Pricing.
Recently, inflationary trends, certain critical raw material costs, such as nickel, titanium sponge, cobalt, chromium, and molybdenum and scrap containing iron, nickel, titanium, chromium, and molybdenum have been volatile.
Recently, due to inflationary trends, certain critical raw material costs, such as nickel, hafnium, titanium sponge, cobalt, chromium, and molybdenum and scrap containing iron, nickel, titanium, chromium, and molybdenum have been volatile.
However, these estimates are based on various assumptions and are subject to significant uncertainty, including with respect to the performance of our pension trust assets, and our expectations therefore could prove to be inaccurate. Lower than expected returns on our pension assets could result in great than anticipated pension contribution obligations in the future.
However, these estimates are based on various assumptions and are subject to significant uncertainty, including with respect to the performance of our pension trust assets, and our expectations therefore could prove to be inaccurate. Significantly lower than expected returns on our pension assets could result in otherwise unanticipated pension contribution obligations in the future.
The possibility exists that there could be ongoing impacts to our operations and financial results as a result of COVID-19 or a similar future pandemic, and the ultimate breadth and duration of these trends and their impact on our business is difficult to predict. Impacts to Our Supply Chain .
The possibility exists that there could be ongoing impacts to our operations and financial results as a result of COVID-19 or a similar future pandemic, and the ultimate breadth and duration of these trends and their impact on our business is difficult to predict. Political and Social Turmoil.
We believe that ATI faces the threat of such cyber attacks due to the markets we serve, the products we manufacture, the locations of our operations, and global interest in our technology. Due to the evolving nature of cyber security threats, the scope and impact of any incident cannot be predicted.
We believe that ATI faces the threat of such cyberattacks due to the markets we serve, the products we manufacture, the locations of our operations, and global interest in our technology. Due to the evolving nature of cybersecurity threats, the scope and impact of any incident cannot be predicted.
Cyclical and event-driven downturns in the commercial aerospace industry have had, and may in the future have, an adverse effect on the prices at which we are able to sell our products, and our results of operations, business and financial condition could be materially adversely affected. 9 Risks Associated with the Oil & Gas Industry.
Cyclical and event-driven downturns in the commercial aerospace industry have had, and may in the future have, an adverse effect on the prices at which we are able to sell our products, and our results of operations, business and financial condition could be materially adversely affected. Risks Associated with Cyclicality in General Industrial Markets.
A failure to sufficiently secure or successfully enforce our intellectual property rights could adversely affect our business and competitive position. Risks Associated with Information Technology. Information technology infrastructure is critical to supporting business objectives; failure of our information technology infrastructure to operate effectively could adversely affect our business. We depend heavily on information technology infrastructure to achieve our business objectives.
A failure to sufficiently secure or successfully enforce our intellectual property rights could adversely affect our business and competitive position. Risks Associated with Digital Technology. Information technology infrastructure is critical to supporting business objectives; failure of our information technology infrastructure to operate effectively could adversely affect our business.
For the 2022 annual goodwill impairment evaluation, both of our reporting units with goodwill had fair values that were in excess of carrying value.
For the fiscal year 2023 annual goodwill impairment evaluation, both of our reporting units with goodwill had fair values that were in excess of carrying value.
However, it remains possible at some point that, in the context of the COVID-19 pandemic or any future similar event, one or more of our suppliers may not have the materials, capacity, or capability to supply products that we require according to our schedule and specifications.
Additionally, in the context of the COVID-19 pandemic or any future similar event, one or more of our suppliers may not have the materials, capacity, or capability to supply products that we require according to our schedule and specifications.
These or similar conditions may disrupt supplies or affect the prices of the materials that are necessary to our operations. If unable to obtain adequate and timely deliveries of required raw materials, we may be unable to timely manufacture sufficient quantities of products.
Some of these sources operate in countries that may be subject to unstable political and economic conditions. These or similar conditions may disrupt supplies or affect the prices of the materials that are necessary to our operations. If unable to obtain adequate and timely deliveries of required raw materials, we may be unable to timely manufacture sufficient quantities of products.
A “trade war” of this nature or other governmental action related to tariffs or international trade agreements or policies has the potential to adversely impact demand for our products, our costs, customers, suppliers and/or the U.S. economy or certain sectors thereof and, thus, to adversely impact our businesses. Political and Social Turmoil.
A “trade war” of this nature or other governmental action related to tariffs or international trade agreements or policies has the potential to adversely impact demand for our products, our costs, customers, suppliers and/or the U.S. economy or certain sectors thereof and, thus, to adversely impact our businesses. Risks Associated with Strategic Capital Projects and Maintenance Activities.
Any determination requiring the impairment of a significant portion of goodwill or other long-lived assets has had, and may in the future have, a negative impact on our financial condition and results of operations.
Any determination requiring the impairment of a significant portion of goodwill or other long-lived assets has had, and may in the future have, a negative impact on our financial condition and results of operations. Internal Controls Over Financial Reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Demand for our products is likewise subject to these trends, and in recent years, our business has at times been negatively impacted by depressed demand from the oil & gas industry.
Demand for our products, particularly within the AA&S segment, is subject to these trends, and in recent years, our business has at times been negatively impacted by depressed demand from general industrial markets.
The significant macroeconomic impact of the COVID-19 pandemic and the measures designed to contain its spread negatively impacted several of the Company’s most significant end markets, and our sales to customers in those markets.
However, we experienced, and may again in the context of future similar events experience, the temporary shut-down of facilities. The significant macroeconomic impact of the COVID-19 pandemic and the measures designed to contain its spread also negatively impacted several of the Company’s most significant end markets, and our sales to customers in those markets.
We voluntarily contributed $50 million to these plans in both 2022 and early 2023 to improve the plans’ funded position. 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.
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 significant minimum cash funding requirements to our pension plan for at least the next ten years.
Under government regulations, a company, or one or more of its operating divisions or units, can also be suspended or debarred from government contracts based on the results of investigations. 15 RISKS ASSOCIATED WITH OUR INDEBTEDNESS; OTHER FINANCIAL AND FINANCIAL ACCOUNTING RISKS Risks Associated with Indebtedness.
Under government regulations, a company, or one or more of its operating divisions or units, can also be suspended or debarred from government contracts based on the results of investigations. Risks Related to Wide-Spread Public Health Crises.
Internal Controls Over Financial Reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Risks Associated with Our Guidance and Other Targets and Expectations.
The COVID-19 pandemic, including governmental and other actions taken or restrictions imposed to contain its spread and impact, subjected our operations, financial performance and financial condition to a number of risks including, but not limited to, those discussed below.
The COVID-19 pandemic, including governmental and other actions taken or restrictions imposed to contain its spread and impact, subjected our operations, financial performance and financial condition to a number of risks. In general, our facilities continued to operate throughout the pandemic with federal and state government approvals because our facilities were deemed essential and critical.
OTHER OPERATIONAL AND STRATEGIC RISKS Risks Associated with Disruptions to our Manufacturing Processes. The manufacture of many of our products is a highly exacting and complex process.
Future developments, administrative actions or liabilities relating to environmental matters, however, could have a material adverse effect on our financial condition or results of operations. OTHER OPERATIONAL AND STRATEGIC RISKS Risks Associated with Disruptions to our Manufacturing Processes. The manufacture of many of our products is a highly exacting and complex process.
If unable to obtain adequate and timely deliveries of required raw materials, we may be unable to timely manufacture sufficient quantities of products. This could cause us to lose sales, incur additional costs, delay new product introductions, or suffer harm to our reputation.
This could cause us to lose sales, incur additional costs, delay new product introductions, or suffer harm to our reputation.
However, conditions in Ukraine and/or existing or future sanctions may disrupt supplies or affect the prices of materials that are necessary to our operations. For example, we source both nickel and chromium from Russian sources that could be impacted.
However, conditions in Ukraine and/or existing or future sanctions may disrupt supplies or affect the prices of materials that are necessary to our operations. If unable to obtain adequate and timely deliveries of required raw materials, we 10 may be unable to timely manufacture sufficient quantities of products.
Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all of our debt. Risks Associated with Retirement Benefits. At December 31, 2022, our defined benefit pension plans were approximately 88% funded as calculated in accordance with U.S. generally accepted accounting principles.
Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all of our debt. 15 Risks Associated with Retirement Benefits. On October 17, 2023, we purchased group annuity contacts from an insurer covering approximately 85% of our U.S. qualified defined benefit plan obligations.
The oil & gas industry, which historically has been a significant end market for ATI, is highly cyclical and subject to volatility as a result of worldwide economic activity and associated demand for oil and natural gas, anticipated future prices for oil and natural gas, fluctuation in the level of drilling activity, changes in applicable regulation, global geopolitical conditions and numerous other factors.
These markets tend to be highly cyclical and subject to volatility as a result of fluctuations in worldwide economic activity and associated demand, changes in applicable regulation, global geopolitical conditions and numerous other factors.
As a result, our business, financial condition and results of operations could be materially adversely affected. 14 Risks Associated with Strategic Capital Projects and Maintenance Activities. From time-to-time, we undertake strategic capital projects in order to enhance, expand and/or upgrade our facilities and operational capabilities.
From time to time, we undertake strategic capital projects in order to enhance, expand and/or upgrade our facilities and operational capabilities.
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Some of these sources operate in countries that may be subject to unstable political and economic conditions. For example, we source both nickel and chromium from Russian sources that could be impacted by current events involving Russia and the Ukraine and any U.S. or other international economic sanctions or other actions in response.
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Our exposure to general industrial markets is primarily in our AA&S segment, where we have sales to the oil & gas industry, automotive, food equipment & appliances and construction and mining markets.
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Future developments, administrative actions or liabilities relating to environmental matters, however, could have a material adverse effect on our financial condition or results of operations. 13 RISKS RELATED TO THE COVID-19 PANDEMIC Impacts on the End-Markets that We Serve and Demand for Our Products.
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As of December 31, 2023, our total consolidated indebtedness was approximately $2.2 billion. Our subsidiaries had the ability to borrow an additional approximately $530 million under our revolving credit facility as of December 31, 2023.
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To date, we have not experienced significant disruption to our supply chain as a result of the pandemic.
Added
Under these contracts, we transferred the pension obligations and associated assets for the significant majority of our remaining plan participants to the selected insurance company.
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In general throughout the pandemic, our facilities continued to operate with federal and state government approvals due to the qualification of our facilities as essential and critical.
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However, we have experienced and may again in the future experience the temporary shut down of facilities in response to employees being impacted by COVID-19, a similar future outbreak or any related changes in government policy. Currently, widespread COVID-19 impacts in China affecting customer supply chains are expected to impact the near-term results of our Chinese STAL joint venture.
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Impacts on Financial and Credit Markets. Financial market volatility as a result of any ongoing impact of the COVID-19 pandemic or any future similar event could pose heightened risks to our liquidity, access to capital markets and cost of funds, which could adversely affect our business, financial position, results of operations and/or cash flows.
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As a result of the American Rescue Plan Act (ARPA) enacted in March 2021, the rules governing pension funding calculations changed.
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Based on current actuarial assumptions, we were not required to make any contributions to our U.S. qualified defined benefit pension plans during fiscal year 2022, and our prior contributions have generated a credit balance that may be utilized to offset future minimum required contributions.
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In connection with our December 2020 announcements regarding our plans to cease production of certain lower-margin standard stainless sheet products, our 2020 results included $1,041.5 million of long-lived asset non-cash impairment charges, primarily related to our HRPF and certain stainless steel melting and finishing operations that are part of the AA&S segment’s Brackenridge, Pennsylvania operations.
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We also recognized an interim goodwill impairment charge of $287.0 million in the 16 second quarter of 2020 for the partial impairment of goodwill at our Forged Products reporting unit in the HPMC segment based on changes in the timing and amount of expected cash flows resulting from lower projected revenues, 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.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur principal AA&S locations for melting stainless steel and other flat-rolled specialty materials are located in Brackenridge and Latrobe, PA. Hot-rolling is performed at our domestic facilities in Brackenridge and Washington, PA. Finishing of our flat-rolled products takes place at our domestic facilities located in Vandergrift, Washington, Rochester, Monaca, and Zelienople, PA, and in New Bedford, MA, and Louisville, OH.
Biggest changeNickel melting operations are located in Lockport, NY (vacuum induction melting, vacuum arc re-melt, and electro-slag re-melt), and titanium melting operations are located in Albany, OR (vacuum arc 17 re-melt). Our principal AA&S locations for melting flat-rolled specialty materials are located in Brackenridge and Latrobe, PA. Hot-rolling is performed at our domestic facilities in Brackenridge and Washington, PA.
Production of high performance materials, most of which are in long product form, takes place at our domestic facilities in Monroe and Bakers, NC, Lockport, NY, Richburg, SC, and Oakdale, PA. Our production of highly engineered forgings and machined components takes place at facilities in Cudahy, Appleton and Coon Valley, WI, East Hartford, CT, and Irvine, CA.
Production of high performance materials, most of which are in long product form, takes place at our domestic facilities in Monroe and Bakers, NC, Richburg, SC, and Oakdale, PA. Our production of highly engineered forgings and machined components takes place at facilities in Cudahy, Appleton and Coon Valley, WI, East Hartford, CT, and Irvine, CA.
Item 2. Properties Our principal domestic facilities for our HPMC segment include melting operations and production facilities that perform processing and finishing operations. Domestic melting operations are located in Monroe and Bakers, NC, and Lockport, NY (vacuum induction melting, vacuum arc re-melt, electro-slag re-melt, plasma melting).
Item 2. Properties Our principal domestic facilities for our HPMC segment include melting operations and production facilities that perform processing and finishing operations. Domestic melting operations are located in Monroe and Bakers, NC, and Richland, WA (vacuum induction melting, vacuum arc re-melt, electro-slag re-melt, plasma melting, electron beam melting).
Substantially all of our properties are owned. We also own or lease facilities in a number of foreign countries, including France, Germany, the United Kingdom, Poland, and the People’s Republic of China. We own highly engineered forging and machining operations in Stalowa Wola, Poland.
We also own or lease facilities in a number of foreign countries, including France, Germany, the United Kingdom, Poland, and the People’s Republic of China. We own highly engineered forging and machining operations in Stalowa Wola, Poland. Through our STAL joint venture, we operate facilities for finishing PRS products in the Xin-Zhuang Industrial Zone, Shanghai, China.
Although our facilities vary in terms of age and condition, we believe that they have been well maintained and are in sufficient condition for us to carry on our activities. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of these impacts.
Our corporate headquarters in Dallas, TX and employee resource center in Pittsburgh, PA are leased. Although our facilities vary in terms of age and condition, we believe that they have been well maintained and are in sufficient condition for us to carry on our activities. See Item 7.
Metal alloy-based additive manufacturing for the aerospace & defense industries takes place in New Britain, CT. Within the AA&S segment, our production of zirconium and related specialty alloys takes place at facilities located in Millersburg, OR and Huntsville, AL. Titanium melting operations are located in Richland, WA (electron beam melting), and Albany, OR (vacuum arc re-melt).
Metal alloy-based additive manufacturing for the aerospace & defense industries takes place in New Britain, CT, and will begin to take place in fiscal year 2024 in our newly leased facility in Fort Lauderdale, Florida. Within the AA&S segment, our production of zirconium, hafnium, niobium and related specialty alloys takes place at facilities located in Millersburg, OR and Huntsville, AL.
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Through our STAL joint venture, we operate facilities for finishing PRS products in the Xin-Zhuang Industrial Zone, Shanghai, China. Our corporate headquarters in Dallas, TX and employee resource center in Pittsburgh, PA are leased.
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Finishing of our flat-rolled products takes place at our domestic facilities located in Vandergrift, Washington, Rochester, Monaca, and Zelienople, PA, and in New Bedford, MA. Additionally, the AA&S segment will benefit from the expanded capabilities at our new Pageland, SC location. Substantially all of our properties are owned.
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“Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of these impacts.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe resolution in any reporting period of one or more of these matters, including those described above, however, could have a material adverse effect on our results of operations for that period. Information relating to legal proceedings is included in Note 21. Commitments and Contingencies of the Notes to Consolidated Financial Statements and incorporated herein by reference.
Biggest changeThe resolution in any reporting period of one or more of these matters, including those described above, however, could have a material adverse effect on our results of operations for that period. Information relating to legal proceedings is included in Note 21. Commitments and Contingencies of the Notes to Consolidated Financial Statements and incorporated herein by reference. Item 4.
While we cannot predict the outcome of any lawsuit, claim or proceeding, our management 17 believes that the disposition of any pending matters is not likely to have a material adverse effect on our financial condition or liquidity.
While we cannot predict the outcome of any lawsuit, claim or proceeding, our management believes that the disposition of any pending matters is not likely to have a material adverse effect on our financial condition or liquidity.
Removed
ATI Titanium LLC (ATI Titanium), a subsidiary of ATI Inc., was party to a lawsuit captioned US Magnesium, LLC v. ATI Titanium LLC (Case No. 2:17-cv-00923-DB) and filed in federal district court in Salt Lake City, UT, pertaining to a Supply and Operating Agreement between US Magnesium LLC (USM) and ATI Titanium entered into in 2006 (the Supply Agreement).
Removed
In 2016, ATI Titanium notified USM that it would suspend performance under the Supply Agreement in reliance on certain terms and conditions included in the Supply Agreement. USM subsequently filed a claim challenging ATI Titanium’s right to suspend performance under the Supply Agreement.
Removed
ATI Titanium and USM reached a litigation settlement in 2022 for $28.5 million, which was paid in the year ended December 31, 2022. Item 4. Mine Safety Disclosures Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total Number of Shares (or Units) Purchased (a) Average Price Paid per Share (or Unit) (b) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs October 1-31, 2022 18 $ 27.07 — $ 45,129,442 November 1-30, 2022 2,770 $ 28.74 — $ 45,129,442 December 1-31, 2022 1,150,127 $ 30.45 1,150,127 $ 10,129,450 Total 1,152,915 $ 30.44 1,150,127 $ 10,129,450 (a) Includes shares repurchased by ATI from employees to satisfy employee-owed taxes on share based compensation.
Biggest changeFiscal Period Total Number of Shares (or Units) Purchased (a) Average Price Paid per Share (or Unit) (b) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs October 2-29, 2023 531 $ 40.56 — $ 30,000,006 October 30-November 26, 2023 705,070 $ 42.69 702,787 $ — November 27-December 31, 2023 — $ — — $ 150,000,000 Total 705,601 $ 42.69 702,787 $ 150,000,000 (a) Includes shares repurchased by ATI from employees to satisfy employee-owed taxes on share-based compensation.
The graph assumes that $100 was invested on December 31, 2017. The stock performance information included in this graph is based on historical results and is not necessarily indicative of future stock price performance.
The graph assumes that $100 was invested on December 31, 2018. The stock performance information included in this graph is based on historical results and is not necessarily indicative of future stock price performance.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Prices Our common stock is traded on the New York Stock Exchange (symbol ATI). At February 7, 2023, there were 2,057 record holders of ATI Inc. common stock. We do not currently pay a quarterly dividend.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Prices Our common stock is traded on the New York Stock Exchange (symbol ATI). At February 2, 2024, there were 1,861 record holders of ATI Inc. common stock. We do not currently pay a quarterly dividend.
“Financial Statements and Supplementary Data.” Sales of Equity Securities Set forth below is information regarding the Company’s stock repurchases during the fourth quarter of 2022, comprised of shares repurchased by ATI under the $150 million repurchase program authorized by the Company’s Board of Directors on February 2, 2022 and shares repurchased by ATI from employees to satisfy employee-owed taxes on share-based compensation.
“Financial Statements and Supplementary Data.” 18 Sales of Equity Securities Set forth below is information regarding our stock repurchases during the fourth quarter of fiscal year 2023, comprised of shares repurchased by ATI under the $75 million repurchase program authorized by our Board of Directors in April 2023 and shares repurchased by ATI from employees to satisfy employee-owed taxes on share-based compensation.
(b) Share repurchases are inclusive of amounts for any relevant commissions. 18 Cumulative Total Stockholder Return The graph set forth below shows the cumulative total stockholder return (i.e., price change plus reinvestment of dividends) on our common stock from December 31, 2017 through December 31, 2022, as compared to the S&P 500 Index, the S&P MidCap 400 Industrials Index and the Russell 2000 Index.
Cumulative Total Stockholder Return The graph set forth below shows the cumulative total stockholder return (i.e., price change plus reinvestment of dividends) on our common stock from December 31, 2018 through December 31, 2023, as compared to the S&P 500 Index, the S&P MidCap 400 Industrials Index and the Russell 2000 Index.
Removed
Company / Index Dec 2017 Dec 2018 Dec 2019 Dec 2020 Dec 2021 Dec 2022 ATI 100.00 90.18 85.58 69.47 65.99 123.70 S&P 500 Index 100.00 95.62 125.72 148.85 191.58 156.88 S&P MidCap 400 Industrials Index 100.00 85.11 113.67 132.41 170.07 150.52 Russell 2000 Index 100.00 88.99 111.70 134.00 153.85 122.41 Source: Standard & Poor’s
Added
In November 2023, our Board of Directors authorized the repurchase of an additional $150 million of ATI stock. No shares were repurchased under this new program in the fourth quarter of fiscal year 2023.
Added
(b) Share repurchases are inclusive of amounts for any relevant commissions. (c) Excludes excise taxes incurred on share repurchases.
Added
Company / Index Dec 2018 Dec 2019 Dec 2020 Dec 2021 Dec 2022 Dec 2023 ATI 100.00 94.90 77.03 73.17 137.16 208.87 S&P 500 Index 100.00 131.49 155.68 200.37 164.08 207.21 S&P MidCap 400 Industrials Index 100.00 133.55 155.57 199.82 176.84 232.43 Russell 2000 Index 100.00 125.53 150.58 172.90 137.56 160.85 Source: Standard & Poor’s Item 6. [Reserved] 19

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults on our management basis of reporting were as follows (in millions): Fiscal Year Ended December 31, December 31, 2022 2021 Sales: High Performance Materials & Components $ 1,641.2 $ 1,155.1 Advanced Alloys & Solutions 2,194.8 1,644.7 Total external sales $ 3,836.0 $ 2,799.8 EBITDA: High Performance Materials & Components $ 296.0 $ 159.9 % of Sales 18.0 % 13.8 % Advanced Alloys & Solutions 327.8 191.7 % of Sales 14.9 % 11.7 % Total segment EBITDA 623.8 351.6 % of Sales 16.3 % 12.6 % Corporate expenses (62.4) (55.9) Closed operations and other expenses (12.1) (4.8) Total ATI Adjusted EBITDA 549.3 290.9 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.
Biggest changeResults on our management basis of reporting were as follows (in millions): Fiscal Year Ended December 31, January 1, January 2, 2023 2023* 2022* Sales: High Performance Materials & Components $ 2,120.2 $ 1,641.2 $ 1,155.1 Advanced Alloys & Solutions 2,053.5 2,194.8 1,644.7 Total external sales $ 4,173.7 $ 3,836.0 $ 2,799.8 EBITDA: High Performance Materials & Components $ 433.6 $ 303.4 $ 170.3 % of Sales 20.5 % 18.5 % 14.7 % Advanced Alloys & Solutions 276.6 375.3 246.8 % of Sales 13.5 % 17.1 % 15.0 % Total segment EBITDA 710.2 678.7 417.1 % of Sales 17.0 % 17.7 % 14.9 % Corporate expenses (62.3) (60.3) (53.7) Closed operations and other income (expenses) (13.3) (5.6) 3.1 Total ATI Adjusted EBITDA 634.6 612.8 366.5 Depreciation & amortization (146.1) (142.9) (143.9) Interest expense, net (92.8) (87.4) (96.9) Restructuring and other credits (charges) (31.4) (23.7) 10.5 Strike related costs — — (63.2) Retirement benefit settlement gain (loss) (41.7) — 64.9 Pension remeasurement gain (loss) (26.8) 100.3 147.2 Joint venture restructuring credit — 0.9 — Debt extinguishment charge — — (65.5) Gains (losses) on asset sales and sale of business, net (0.6) (105.4) 13.8 Income before income taxes $ 295.2 $ 354.6 $ 233.4 *Fiscal years ended January 1, 2023 and January 2, 2022 reflect the change in accounting principle as described in Note 1 of the Notes to the Consolidated Financial Statements.
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.
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 Financial Condition and Liquidity section of Management’s Discussion and Analysis for a reconciliation of amounts reported under U.S. GAAP to these non-GAAP measures.
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.
Projections of minimum required payments to the U.S. qualified defined benefit pension plan 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.
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.
Additionally, all of the remaining collectively-bargained defined benefit retiree health care plans at ATI’s operations are now closed to new 39 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.
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.
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, pension remeasurement gains and losses, and other postretirement/pension curtailment and settlement gains and losses.
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 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 mill products and precision forgings for commercial jet engine applications.
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.
Stronger operating margins reflect higher sales of next-generation jet engine products and higher facility utilization levels. HPMC’s full fiscal year 2022 sales associated with next-generation platforms were in line with full fiscal year 2019 deliveries.
Forward-looking statements include those containing such words as “anticipates,” “believes,” “estimates,” “expects,” “would,” “should,” “will,” “will likely result,” “forecast,” “outlook,” “projects,” and similar expressions.
Forward-looking statements include those containing such words as 42 “anticipates,” “believes,” “estimates,” “expects,” “would,” “should,” “will,” “will likely result,” “forecast,” “outlook,” “projects,” and similar expressions.
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.
Strike Related Costs Strike related costs were $63.2 million in fiscal year 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.
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.
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. (E) 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.
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.
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, 2023 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.
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.
The provision for income taxes for fiscal year 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.
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.
Other significant fiscal year 2022 operating cash flow items included $50 million in contributions to the U.S. defined benefit pension plans, payment of fiscal year 2021 annual incentive compensation and receipt of $8.5 million for repayment of working capital advances from A&T Stainless.
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 fiscal year 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.
(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) 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.
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.
At December 31, 2023, 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.
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.
Working capital balances, and consequently cash from operations, can fluctuate throughout any operating period based upon the timing of receipts from customers and payments to vendors. However, we actively manage our working capital to ensure the required flexibility to meet our strategic objectives.
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 used in financing activities in fiscal year 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.
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.
Other (nonoperating) income/expense in fiscal year 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. 23 Results for fiscal year 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.
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.
During the second quarter of fiscal year 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.
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.
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 fiscal year 2022, we completed the sale of the 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.
As amended, the applicable interest rate for revolving credit borrowings under the ABL facility includes interest rate spreads based on available borrowing capacity that range between 1.25% and 1.75% for SOFR-based borrowings and between 0.25% and 0.75% for base rate borrowings.
The applicable interest rate for revolving credit borrowings under the ABL facility includes interest rate spreads based on available borrowing capacity that range between 1.25% and 1.75% for SOFR-based borrowings and between 0.25% and 0.75% for base rate borrowings.
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 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 $7 million in fiscal year 2021.
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.
Fair values were determined by using a quantitative assessment that includes 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.
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 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 fiscal year 2023, we determined the rate to be 5.40%, compared to a 5.45% discount rate in fiscal year 2022, and a 2.80% discount rate in fiscal year 2021.
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.
Based on currently available information, it is reasonably possible that the costs for active matters may exceed our recorded reserves by as much as $17 million.
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.
For example, our WACC used in our discounted cash flow assessments was 12.0% 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 40 Products reporting unit.
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.
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 7.2% in 2024 and is assumed to gradually decrease to 4.0% in the year 2048 and remain level thereafter.
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.
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, strike-related costs, pension remeasurement gains/losses, debt extinguishment charges and gains or losses on asset sales and sales of businesses.
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.
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 fiscal year 2024.
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.
In addition, the A&T Stainless joint venture recorded a $1.8 million credit in fiscal year 2022 for the reversal of restructuring reserves as a result of revised estimates, and ATI recognized a $0.9 million credit in fiscal year 2022 for its equity method share of these reversals. These charges are excluded from segment operating 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.
These charges 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.
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.
We used current market prices as of December 31, 2023, for raw material obligations with variable pricing. (F) We have various contractual obligations that extend through fiscal year 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.
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 ½ month work stoppage by the USW, following expiration of a CBA, which began in March 2021, and predominantly impacted AA&S segment operations.
Results for fiscal year 2021 included $107.7 million of net pre-tax benefits 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 ½ month work stoppage by the USW, following expiration of a CBA, which began in March 2021, and predominantly impacted AA&S segment operations.
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.
The decrease in interest expense in fiscal year 2022 compared to fiscal year 2021 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.
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.
We expect to have minimal cash tax requirements in the U.S. in fiscal year 2024 due to the ongoing benefits of net operating loss tax carryforwards. During fiscal year 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.
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.
ATI continued to maintain a valuation allowance on its U.S. deferred tax assets in fiscal year 2022. Results for fiscal year 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.
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.
The ABL Term Loan can be prepaid in increments of $25 million if certain minimum liquidity conditions are satisfied. In addition, we have the right to request an increase of up to $300 million under the revolving credit facility for the duration of the ABL.
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.
All of these items discussed above are excluded from segment EBITDA. The net loss on sale of the businesses in fiscal year 2022, restructuring charges/credits and strike-related costs are included in operating income on the consolidated statements of operations, which was $316.1 million for fiscal year 2022, compared to $117.6 million for fiscal year 2021.
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.
For our annual goodwill impairment evaluation performed in the fourth quarter of fiscal year 2023, the Specialty Materials reporting unit had a fair value that was significantly in excess of carrying value.
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%.
From fiscal years 2013 to 2022, five annuity buyouts of retired participants and two voluntary cash out programs of deferred participants during this period helped to reduce the total participants in ATI’s U.S. qualified defined benefit pension plans by more than 60%.
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 includes $26.8 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 $0.7 million in accumulated other comprehensive loss on the consolidated ATI balance sheet.
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.
At December 31, 2023, our defined benefit pension plans were approximately 97% funded in accordance with generally accepted accounting principles, and were remeasured at that date using a 5.60% discount rate to measure the projected benefit obligation.
(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.
(D) Based on current actuarial studies, amounts include payments for the next 10 years, which are not significant, to defined benefit pension plans, assuming the expected long-term returns on pension assets are achieved.
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 28 and 2021 was reduced by $5.1 million and $4.3 million, respectively, related to interest capitalization on major strategic capital projects.
Further, interest expense is presented net of interest income of $13.0 million in fiscal year 2023, $4.7 million in fiscal year 2022 and $0.7 million in fiscal year 2021. Interest expense in fiscal years 2023, 2022 and 2021 was reduced by $13.5 million, $5.1 million and $4.3 million, respectively, related to interest capitalization on major strategic capital projects.
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.
Open market repurchases are structured to occur within the pricing and volume requirements of SEC Rule 10b-18. The Company’s ongoing stock repurchase 36 programs do not obligate the Company to repurchase any specific number of shares and may be modified, suspended, or terminated at any time by the Company’s Board of Directors without prior notice.
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.
Boeing and Airbus continue to have multi-year backlogs of orders for both legacy models and next-generation aircraft, and there are over 28,000 jet engines with firm orders (Aero Engine News, December 2023). Due to manufacturing cycle times, demand for our specialty materials leads the deliveries of new aircrafts by approximately 6 to 12 months.
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.
For our annual goodwill impairment evaluation performed in the fourth quarter of fiscal year 2023, quantitative goodwill assessments were performed for the two HPMC reporting units with goodwill.
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. 33 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 standby letters of credit are used to support: $22.0 million in workers’ compensation and general insurance arrangements, $5.4 million related to environmental matters and $4.3 million for performance assurances. Commitments and Contingencies At December 31, 2023, our reserves for environmental remediation obligations totaled approximately $13 million, of which $7 million was included in other current liabilities.
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.
Financial Condition and Liquidity We have an Asset Based Lending (ABL) Credit Facility, which is collateralized by the accounts receivable and inventory of our operations. The ABL facility also provides us with the option of including certain machinery and equipment as additional collateral for purposes of determining availability under the facility.
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.
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. • $147.2 million of pension remeasurement gains from the annual remeasurement of these plans in the fourth quarter of fiscal year 2021.
For the Years Ended December 31, 2022 2021 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 % Total 100 % 100 % 24 Sales by geographic area (in millions), including divested businesses prior to sale, and as a percentage of total sales, were as follows: For the Years Ended December 31, 2022 2021 United States $ 2,218.6 58 % $ 1,534.9 55 % Europe 785.2 20 % 475.1 17 % Asia 641.6 17 % 593.8 21 % Canada 87.4 2 % 75.9 3 % Other 103.2 3 % 120.1 4 % Total sales $ 3,836.0 100 % $ 2,799.8 100 % Information with respect to our business segments follows.
Fiscal Year 2023 2022 2021 Nickel-based alloys and specialty alloys 49 % 52 % 43 % Precision forgings, castings and components 17 % 15 % 16 % Titanium and titanium-based alloys 17 % 11 % 12 % PRS products 10 % 14 % 19 % Zirconium and related alloys 7 % 8 % 10 % Total 100 % 100 % 100 % Sales by geographic area (in millions), including divested businesses prior to sale, and as a percentage of total sales, were as follows: Fiscal Year 2023 2022 2021 United States $ 2,250.8 54 % $ 2,218.6 58 % $ 1,534.9 55 % Europe 1,051.0 25 % 785.2 20 % 475.1 17 % Asia 591.9 14 % 641.6 17 % 593.8 21 % Canada 111.0 3 % 87.4 2 % 75.9 3 % Other 169.0 4 % 103.2 3 % 120.1 4 % Total sales $ 4,173.7 100 % $ 3,836.0 100 % $ 2,799.8 100 % Information with respect to our business segments follows.
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.
These reserves included estimated probable future costs of: $3 million for federal Superfund and comparable state-managed sites; $7 million for formerly owned or operated sites for remediation or indemnification obligations; $2 million for owned or controlled sites at which our operations have been or plan to be discontinued; and $1 million for sites utilized by the Company in its ongoing operations.
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.
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 significant minimum cash funding requirements to the defined benefit pension plan for at least the next ten years.
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: Market 2022 2021 Change Energy: Oil & Gas $ 441.7 20 % $ 290.1 18 % $ 151.6 52 % Specialty Energy 163.0 8 % 123.5 7 % 39.5 32 % Total Energy 604.7 28 % 413.6 25 % 191.1 46 % Aerospace & Defense: Jet Engines- Commercial 87.8 4 % 36.3 2 % 51.5 142 % Airframes- Commercial 284.8 13 % 129.9 8 % 154.9 119 % Defense 183.0 8 % 131.0 8 % 52.0 40 % Total Aerospace & Defense 555.6 25 % 297.2 18 % 258.4 87 % Automotive 290.9 13 % 296.4 18 % (5.5) (2) % Electronics 197.6 9 % 213.9 13 % (16.3) (8) % Food Equipment & Appliances 158.3 7 % 153.0 10 % 5.3 3 % Construction/Mining 142.3 7 % 98.2 6 % 44.1 45 % Medical 89.9 4 % 71.2 4 % 18.7 26 % Other 155.5 7 % 101.2 6 % 54.3 54 % Total $ 2,194.8 100 % $ 1,644.7 100 % $ 550.1 33 % 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.
Comparative information for our AA&S segment revenues (in millions) by market, the respective percentages of overall segment revenues, for the fiscal years 2022 and 2021, and the percentage change in revenues by market for fiscal year 2022 is as follows: Fiscal Year Market 2022 2021 Change Energy: Oil & Gas $ 441.7 20 % $ 290.1 18 % $ 151.6 52 % Specialty Energy 163.0 8 % 123.5 7 % 39.5 32 % Total Energy 604.7 28 % 413.6 25 % 191.1 46 % Aerospace & Defense: Jet Engines- Commercial 87.8 4 % 36.3 2 % 51.5 142 % Airframes- Commercial 284.8 13 % 129.9 8 % 154.9 119 % Defense 183.0 8 % 131.0 8 % 52.0 40 % Total Aerospace & Defense 555.6 25 % 297.2 18 % 258.4 87 % Automotive 290.9 13 % 296.4 18 % (5.5) (2) % Electronics 197.6 9 % 213.9 13 % (16.3) (8) % Food Equipment & Appliances 158.3 7 % 153.0 10 % 5.3 3 % Construction/Mining 142.3 7 % 98.2 6 % 44.1 45 % Medical 89.9 4 % 71.2 4 % 18.7 26 % Other 155.5 7 % 101.2 6 % 54.3 54 % Total $ 2,194.8 100 % $ 1,644.7 100 % $ 550.1 33 % Comparative information for the AA&S segment’s major product categories, based on their percentages of revenue are presented in the following table.
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.
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.
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. 21 • $0.9 million of credits associated with restructuring activities at the A&T stainless joint venture.
This loss was partially offset by a gain on the sale of our 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 workforce estimates. • $100.3 million of pension remeasurement gains from the annual remeasurement of these plans in the fourth quarter of fiscal year 2022. • $0.9 million of credits associated with restructuring activities at the A&T Stainless joint venture.
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.
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.
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.
For the fiscal year ended January 2, 2022, restructuring and other charges were a net credit of $10.5 million, which is excluded from segment results.
(In millions) December 31, 2022 December 31, 2021 Accounts receivable $ 579.2 $ 470.0 Short-term contract assets 64.1 53.9 Inventory 1,195.7 1,046.3 Accounts payable (553.3) (375.5) Short-term contract liabilities (149.1) (116.2) Subtotal 1,136.6 1,078.5 Allowance for doubtful accounts 7.7 3.8 Inventory reserves 70.9 65.4 Managed working capital $ 1,215.2 $ 1,147.7 Annualized prior 3 months sales $ 4,041.9 $ 3,061.5 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: Market 2022 2021 Aerospace & Defense: Jet Engines- Commercial $ 1,063.5 28 % $ 517.2 19 % Airframes- Commercial 468.9 12 % 262.7 9 % Defense 341.2 9 % 352.8 13 % Total Aerospace & Defense 1,873.6 49 % 1,132.7 41 % Energy: Oil & Gas 476.7 13 % 332.3 12 % Specialty Energy 276.6 7 % 259.6 9 % Total Energy 753.3 20 % 591.9 21 % Automotive 302.1 8 % 305.1 11 % Electronics 200.0 5 % 215.1 8 % Construction/Mining 176.4 5 % 122.2 4 % Medical 163.1 4 % 131.5 5 % Food Equipment & Appliances 158.5 4 % 153.1 5 % Other 209.0 5 % 148.2 5 % Total $ 3,836.0 100 % $ 2,799.8 100 % Comparative information for our major products, including divested businesses prior to sale, based on their percentages of revenues is as follows.
(In millions) December 31, 2023 January 1, 2023 Accounts receivable $ 625.0 $ 579.2 Short-term contract assets 59.1 64.1 Inventory 1,247.5 1,195.7 Accounts payable (524.8) (553.3) Short-term contract liabilities (163.6) (149.1) Subtotal 1,243.2 1,136.6 Allowance for doubtful accounts 3.2 7.7 Inventory reserves 75.5 70.9 Managed working capital $ 1,321.9 $ 1,215.2 Annualized prior 3 months sales $ 4,255.8 $ 4,041.9 Managed working capital as a % of annualized sales 31.1 % 30.1 % December 31, 2023 change in managed working capital $ 106.7 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: Fiscal Year Market 2023 2022 2021 Aerospace & Defense: Jet Engines- Commercial $ 1,333.5 32 % $ 1,063.5 28 % $ 517.2 19 % Airframes- Commercial 739.4 18 % 468.9 12 % 262.7 9 % Defense 401.9 9 % 341.2 9 % 352.8 13 % Total Aerospace & Defense 2,474.8 59 % 1,873.6 49 % 1,132.7 41 % Energy: Oil & Gas 414.6 10 % 476.7 13 % 332.3 12 % Specialty Energy 273.2 7 % 276.6 7 % 259.6 9 % Total Energy 687.8 17 % 753.3 20 % 591.9 21 % Automotive 210.7 5 % 302.1 8 % 305.1 11 % Medical 176.9 4 % 163.1 4 % 131.5 5 % Construction/Mining 162.9 4 % 176.4 5 % 122.2 4 % Electronics 159.9 4 % 200.0 5 % 215.1 8 % Food Equipment & Appliances 71.9 2 % 158.5 4 % 153.1 5 % Other 228.8 5 % 209.0 5 % 148.2 5 % Total $ 4,173.7 100 % $ 3,836.0 100 % $ 2,799.8 100 % 26 Comparative information for our major products, including divested businesses prior to sale, based on their percentages of revenues is as follows.
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.
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 800 participants still accruing benefit service.
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.
Results in fiscal year 2022 include $27.5 million of benefits from the 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 fiscal year 2021 results.
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 $193.2 million in fiscal year 2023, reflecting $200.7 million in capital expenditures primarily related to AA&S transformation projects and various HPMC growth 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.
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.
Retirement Benefits 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 800 participants still accruing benefit service.
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.
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 have an insignificant impact to postretirement benefit expense.
Depreciation and Amortization The following is depreciation & amortization by business segment: (In millions) 2022 2021 Depreciation and amortization: High Performance Materials & Components $ 68.3 $ 75.0 Advanced Alloys & Solutions 67.4 64.5 Other 7.2 4.4 $ 142.9 $ 143.9 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.
Fiscal Year (In millions) 2023 2022 2021 Depreciation and amortization: High Performance Materials & Components $ 71.1 $ 68.3 $ 75.0 Advanced Alloys & Solutions 67.9 67.4 64.5 Other 7.1 7.2 4.4 $ 146.1 $ 142.9 143.9 Interest Expense, Net Interest expense, net of interest income and interest capitalization, was $92.8 million in fiscal year 2023, compared to $87.4 million in fiscal year 2022 and $96.9 million in fiscal year 2021.
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. 29 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.
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.
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.
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.
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.
Results for fiscal year 2022 also included $27.9 million of net pre-tax charges which consisted of the following: • $105.4 million in losses, net, primarily associated with the sale of the Sheffield, UK business which was sold in May 2022 for a $112.2 million loss.
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.
On May 12, 2022, we completed the sale of our Sheffield, UK operations and recognized a loss in fiscal year 2022 on sale of $112.2 million. The Sheffield, UK operations were previously part of the Specialty Materials business in the HPMC segment.
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.
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.
(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.
(G) At December 31, 2023, there was $5.0 million drawn under foreign credit agreements. Drawn amounts on the U.S. facility were $31.7 million utilized for standby letters of credit under the $600 million ABL facility, which renew annually.
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.
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 $20 million. Such a change in the discount rate would have an insignificant impact to pension expense.
AA&S also provides hot-rolling conversion services at its HRPF, including carbon steel products under several LTAs. 27 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.
AA&S also provides hot-rolling conversion services at its HRPF, including carbon steel products under several LTAs. Comparative information for the AA&S segment’s major product categories, based on their percentages of revenue are presented in the following table. HRPF conversion service sales are excluded from this presentation.
High Performance Materials & Components (In millions) 2022 % Change 2021 Sales to external customers $ 1,641.2 42 % $ 1,155.1 Segment EBITDA $ 296.0 85 % $ 159.9 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.
High Performance Materials & Components Fiscal Year Fiscal Year Fiscal Year (In millions) 2023 % Change 2022 % Change 2021 Sales to external customers $ 2,120.2 29 % $ 1,641.2 42 % $ 1,155.1 Segment EBITDA $ 433.6 43 % $ 303.4 78 % $ 170.3 Segment EBITDA as a percentage of sales 20.5 % 18.5 % 14.7 % International sales as a percentage of sales 56.8 % 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.
Additionally, 2022 sales of titanium and titanium-based alloys increased by 41% compared to 2021.
Fiscal year 2022 sales of nickel based alloys and specialty steels increased by 67% compared to fiscal year 2021. Additionally, fiscal year 2022 sales of titanium and titanium-based alloys increased by 41% compared to fiscal year 2021.
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.
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.
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.
The fiscal year 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.
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. 31 Our Debt to Adjusted EBITDA Leverage Ratio improved in 2022 compared to 2021, primarily as a result of higher earnings.
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.
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.
We are seeing an ongoing improvement in demand in many of our key end markets, most notably in commercial aerospace. Increasing demand for travel benefits ATI, and we believe we are well positioned to capture this growth in the future.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIncreases 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.
Biggest changeTo 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.
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.
For example, in fiscal year 2023 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.
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.
At December 31, 2023, the net mark-to-market valuation of the outstanding natural gas hedges was an unrealized pre-tax loss of $6.6 million, comprised of $0.1 million in other assets, $5.6 million in other current liabilities and $1.1 million in other long-term liabilities on the balance sheet.
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.
At December 31, 2023, the net mark-to-market valuation of the outstanding interest rate swap was an unrealized pre-tax gain of $0.7 million, comprised of $0.7 million in prepaid expenses and other current 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.
For the year ended December 31, 2022, the effects of natural gas hedging activity decreased cost of sales by $15.1 million. 38 Volatility of Raw Material Prices.
For the year ended December 31, 2023, the effects of natural gas hedging activity increased cost of sales by $7.5 million. Volatility of Raw Material Prices.
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.
However, as of December 31, 2023, we had entered into financial hedging arrangements, primarily at the request of our customers, related to firm orders, for an aggregate amount of approximately 4 million pounds of nickel with hedge dates through fiscal year 2024.
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.
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.
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.
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. 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, 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.
At December 31, 2023, the net mark-to-market valuation of our outstanding raw material hedges was an unrealized pre-tax loss of $7.5 million, comprised of $7.5 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.
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 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.
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.
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, we hedged approximately 70% of our annual forecasted domestic requirements for natural gas for 2023 and approximately 25% for 2024.
At December 31, 2023, the outstanding financial derivatives used to hedge our exposure to energy cost volatility included natural gas hedges. At December 31, 2023, we hedged approximately 75% of our annual forecasted domestic requirements for natural gas for fiscal year 2024 and approximately 35% for fiscal year 2025.
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. 39
At December 31, 2023, we had no significant outstanding foreign currency forward contracts. 44
Removed
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.
Added
The aggregate 43 notional amount hedged is approximately 6% of a single year’s estimated nickel raw material purchase requirements.
Removed
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.

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