ATI Inc: Form 10-Q for the period ended Mar 29, 2026

Overview

ATI produces specialty materials, highly differentiated by our materials science expertise and advanced process technologies. Aerospace & defense, our largest end markets, represented 69% of sales for the quarter ended March 29, 2026, led by products for jet engines and airframes in addition to a wide range of defense applications. Additionally, we have a strong presence in the specialty energy market and serve customers in several other markets including conventional energy, medical, electronics and other industrial markets.

We operate in two business segments: High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions

(AA&S). HPMC produces a wide range of high performance materials, components, and advanced metallic powder alloys.

These products are made from nickel-based alloys and superalloys, titanium and titanium-based alloys, and a variety of other

specialty materials. HPMC’s capabilities range from cast/wrought and powder alloy development to production of highly

engineered finished components, and 3D-printed aerospace products. The HPMC segment’s primary focus is on maximizing jet

engine materials and components growth, with approximately 93% of its revenue derived from the aerospace & defense

markets, including approximately 70% from products for commercial jet engines.

The AA&S segment produces nickel-based alloys, titanium and titanium-based alloys, and specialty alloys, including

zirconium, hafnium, and niobium, in a variety of forms including plate, sheet, and strip products. AA&S focuses on high-value

materials that are utilized in technically challenging and extreme environments, which require materials that can withstand

extreme heat, radiation and corrosion. Sales to the aerospace & defense markets comprises approximately 43% of total AA&S

sales. AA&S also serves customers across several other markets, notably specialty energy and conventional energy, as

well as electronics and certain industrial markets.

ATI follows a 4-4-5 or 5-4-4 fiscal calendar, whereby each fiscal quarter consists of thirteen weeks grouped into two four-week months and one five-week month, and its fiscal year ends on the Sunday closest to December 31. Unless otherwise stated, references to years and quarters in this Quarterly Report on Form 10-Q relate to fiscal years and quarters, rather than calendar years and quarters.

Results of Operations

Sales

First quarter 2026 sales increased approximately 1% to $1.15 billion, compared to $1.14 billion of sales for the first quarter 2025, primarily due to increased demand and favorable pricing in the aerospace & defense markets, partially offset by a net decline in sales to our other markets, mostly in the conventional energy market. In aggregate, ATI’s aerospace & defense sales increased 6% to $797.6 million, or 69% of total sales in the first quarter 2026, compared to $754.4 million, or 66% of total sales in the first quarter 2025. The increase in aerospace & defense sales was driven by commercial jet engine and defense products, partially offset by a decline in sales of commercial airframe products.

Comparative information regarding our overall sales (in millions) by end market and their respective percentages of total sales for the quarterly periods ended March 29, 2026 and March 30, 2025 is shown below.

For the first quarter 2026, international sales increased to $459 million, or 40% of total sales, from $501 million, or 44% of total sales, in the first quarter 2025.

Comparative information regarding our major products based on their percentages of sales are shown below. Hot-Rolling and Processing Facility (HRPF) conversion service sales in the AA&S segment are excluded from this presentation.

Gross Profit

Gross profit for the first quarter of 2026 was $262.9 million, or 22.8% of sales, compared to $235.8 million, or 20.6% of sales, for the first quarter 2025. First quarter 2026 gross profit includes $7.9 million of start-up and transaction-related costs and $1.1 million of restructuring-related costs, which are excluded from Adjusted EBITDA. First quarter 2025 gross profit includes $4.0 million of start-up and transaction-related costs, which are excluded from Adjusted EBITDA.

Selling and Administrative Expenses

Selling and administrative expenses for the first quarter 2026 were $92.1 million, an increase of 8.4% compared to $85.0 million for the first quarter 2025. The increase was primarily due to $8.0 million of transformation and transaction-related costs and $2.4 million of losses on the sale of customer accounts receivable, which are excluded from Adjusted EBITDA. First quarter 2025 included $1.6 million of losses on the sale of customer accounts receivable, which are excluded from Adjusted EBITDA.

Restructuring Charges

First quarter 2026 included restructuring-related severance and impairment costs of $7.0 million due to the rationalization of certain facilities, which are excluded from Adjusted EBITDA. There were no restructuring charges in first quarter 2025.

Loss on Asset Sales and Sales of Businesses, net

The loss on asset sales and sales of businesses, net of $3.9 million in first quarter 2025 was mostly attributable to the prior year sale of certain immaterial, non-core operations that were part of our European business in the HPMC segment.

Interest Expense, Net

Interest expense, net increased to $23.7 million in the first quarter of 2026 compared to $23.0 million in the first quarter of 2025. Capitalized interest reduced interest expense by $3.0 million in the first quarter 2026 and $3.1 million in the first quarter 2025. The increase in interest expense, net was primarily related to increased borrowings made on our revolving credit facility in the first quarter 2026.

Other Income, Net

Other income, net for the first quarter 2026 decreased to $0.8 million compared to $1.5 million in the first quarter 2025.

Income Taxes

Our effective tax rate for the first quarter of 2026 was 11.8%, resulting in an income tax provision of $16.1 million, and our effective tax rate for the first quarter of 2025 was 17.3%, resulting in an income tax provision of $21.0 million. The lower effective tax rate on a year-over-year basis was primarily due to the timing and amount of discrete tax benefits. The effective tax rate for the first quarter of 2026 includes discrete tax benefits of $11.9 million, while the effective tax rate for the first quarter of 2025 includes discrete tax benefits of $5.1 million. The discrete tax benefits in both periods were primarily for share-based compensation.

Net Income

Net income attributable to ATI was $118.2 million, or $0.85 per share, in the first quarter of 2026, compared to $97.0 million, or $0.67 per share, for the first quarter of 2025.

Business Segment Results

Comparative financial information (in millions) for our segments and corporate operations for the quarterly periods ended March 29, 2026 and March 30, 2025 is shown below.

(a) The Company’s Chief Operating Decision Maker (“CODM”) utilizes the Segment EBITDA as a key metric to evaluate segment performance. Our measure of Segment EBITDA, which we use to analyze the performance and results of our business segments, excludes net interest expense, income taxes, depreciation and amortization, special charges, unallocated corporate expenses, closed operations and other income (expense). See Note 11 for the reconciliation of Segment EBITDA to Income before taxes.

(b) Amounts exclude depreciation and amortization.

High Performance Materials & Components Segment

First quarter 2026 sales were $614.3 million, an increase of $30.2 million, or 5%, compared to the first quarter 2025, primarily due to sales growth in the the aerospace & defense markets, which increased $31.2 million, or 6%. This increase was primarily driven by strong demand for commercial jet engine products, which grew more than 8% on a year-over-year basis.

Comparative information for our HPMC segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the quarters ended March 29, 2026 and March 30, 2025 is as follows:

International sales represented 45% of total segment sales for the first quarter 2026, compared to 46% in the prior year period. Comparative information for the HPMC segment’s major product categories, based on their percentages of revenue for the quarters ended March 29, 2026 and March 30, 2025, is as follows:

Segment EBITDA in the first quarter 2026 was $152.9 million, or 24.9% of total sales, compared to $131.0 million, or 22.4% of total sales, for the first quarter 2025. The increase in segment margin rate was primarily due to higher volume and favorable sales mix and pricing.

The Company continues to invest in capacity and to improve work-flow processes and operations. HPMC results for first quarter 2026 reflected year-over-year improved operating leverage and pricing as we continued to experience strong demand in our key aerospace & defense markets, particularly for commercial jet engine products. We believe our long-term agreements with aerospace market OEMs and backlog for our specialty materials, including powders, parts and components, position the HPMC segment for continued growth.

Advanced Alloys & Solutions Segment

First quarter 2026 sales were $537.2 million, a decrease of $23.1 million, or 4%, compared to first quarter 2025, primarily driven by a $37.8 million decline in sales to the conventional energy market. This decrease was partially offset by higher sales to the aerospace & defense markets. The increase in aerospace & defense sales was mostly due to demand for commercial jet engine and defense products, partially offset by lower commercial airframe sales. Aerospace & defense sales were 43% of the total AA&S sales in the first quarter 2026 compared to 39% in first quarter 2025.

Comparative information regarding our AA&S segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the quarters ended March 29, 2026 and March 30, 2025 is shown below.

International sales represented 34% of total segment sales for the first quarter of 2026, compared to 42% in the prior year’s first quarter. Comparative information regarding the AA&S segment’s major product categories, based on their percentages of revenue for the quarters ended March 29, 2026 and March 30, 2025, is presented in the following table. HRPF conversion service sales are excluded from this presentation.

Segment EBITDA was $97.0 million, or 18.1% of sales, for the first quarter 2026, compared to segment EBITDA of $83.4 million, or 14.9% of sales, for the first quarter 2025. The margin rate increase compared to the prior year was primarily due to favorable sales mix changes and favorable pricing of exotic alloys.

Corporate Items

Corporate expenses for the first quarter of 2026 declined to $17.0 million, compared to $17.4 million for the first quarter 2025. This reduction was primarily due to lower incentive compensation costs.

Closed operations and other income/expense for the first quarter 2026 was expense of $1.2 million, compared to expense of $2.4 million for the first quarter 2025. The reduction in expense in was mostly due to the impact of foreign exchange losses in the prior year quarter.

Managed Working Capital

As part of managing the performance of our business, we focus on Managed working capital, a non-GAAP financial measure that we define as gross accounts receivable, short-term contract assets and gross inventories, excluding the effects of reserves for uncollectible accounts receivable and inventory valuation reserves, less accounts payable and short-term contract liabilities. Managed working capital is not intended to replace working capital or other GAAP financial measures or to be used as a measure of liquidity. Management believes this non-GAAP financial measure focuses on the assets and liabilities most closely attributable to our core operations, allowing Management to quantify and evaluate the asset intensity of our business. Further, Management believes this non-GAAP financial measure provides investors with additional insights into the Company’s effectiveness in balancing the need to maintain appropriate asset levels to support sales growth and operations while deploying our cash effectively.

We employ several strategies to actively manage our Managed working capital, seeking to effectively balance the need to maintain appropriate levels of Managed working capital to support our growth and operations while deploying our cash efficiently. Our strategies include, but are not limited to, taking advantage of favorable customer and supplier payment terms, participating in supplier financing programs, accounts receivable factoring arrangements and other customer financing programs, managing the timing of purchases of raw materials, and leveling manufacturing process throughput and shipping to limit periodic increases in Managed working capital. We assess Managed working capital performance as a percentage of the prior three months annualized sales.

At March 29, 2026, Managed working capital increased as a percentage of annualized sales to 34.8% compared to 32.5% at December 28, 2025. The increase in Managed working capital as a percentage of annualized sales was primarily due to seasonal inventory builds to support increased operating levels and the timing of shipments. As a result, gross inventory turns, which measures how many times we turn over our inventory relative to cost of sales in a year, worsened by 13% at March 29, 2026 compared to December 28, 2025. Days sales outstanding, which measures actual collection timing for accounts receivable, was relatively flat at March 29, 2026 compared to December 28, 2025.

The computations of Managed working capital at March 29, 2026 and December 28, 2025, reconciled to the financial statement line items as computed under U.S. GAAP, were as follows.

(In millions)

30

Liquidity and Financial Condition

The Company's amended Asset Based Lending (ABL) Credit Facility is collateralized by the accounts receivable and inventory of our operations and includes a $600 million revolving credit facility, a letter of credit sub-facility of up to $200 million, a $200 million term loan (Term Loan), and a swing loan facility of up to $60 million. Additionally, the Company has the ability, through June 13, 2026 and as long as no default or event of default has occurred and is continuing, to borrow an additional term loan of up to $100 million in total, using one or two draws (the Delayed-Draw Term Loan). The ABL facility also provides us with the option of including certain machinery and equipment as additional collateral for purposes of determining availability under the facility. The ABL term runs through June of 2030.

As of March 29, 2026, there was $75 million in outstanding borrowings under the revolving portion of the ABL facility, and $29.3 million was utilized to support the issuance of letters of credit. At March 29, 2026, we had $401.7 million of cash and cash equivalents, available additional liquidity under the ABL facility of approximately $495 million, and up to $100 million of availability under the Delayed-Draw Term Loan. Our next significant debt maturity is $350 million of 5.875% Senior Notes in the fourth quarter of fiscal year 2027.

Periodically, our Board of Directors authorizes the repurchase of ATI common stock (the “Share Repurchase Program”), the most recent of which was $500 million that was announced in February 2026. Repurchases under these programs are made in the open market or in privately negotiated transactions, with the amount and timing of repurchases depending on market conditions and corporate needs. Open market repurchases are structured to occur within the pricing and volume requirements of SEC Rule 10b-18. In the quarter ended March 29, 2026, ATI used $75 million to repurchase 0.5 million of its common stock under the Share Repurchase Program. At March 29, 2026, the Company has utilized $655 million of the $1.20 billion currently authorized under its currently active Share Repurchase Programs.

We believe that internally generated funds, current cash on hand and available borrowings under the ABL facility will be adequate to meet our liquidity needs. In the event we decide to obtain additional financing, the cost and terms and conditions of such borrowings may be influenced by our credit rating. In addition, we regularly review our capital structure, various financing alternatives, and conditions in the debt and equity markets in order to opportunistically enhance our capital structure. As a result, we may seek to refinance or retire existing indebtedness, incur new or additional indebtedness or issue equity or equity-linked securities, in each case, depending on market and other conditions. We have no off-balance sheet arrangements as defined in Item 303(a)(4) of SEC Regulation S-K.

In managing our overall capital structure, we focus on the ratio of both total and net debt to Adjusted EBITDA (Adjusted EBITDA Leverage ratios), which we use as a measure of our ability to repay our incurred debt. We define total debt as the total principal balance of our outstanding indebtedness including deferred financing costs. Net debt is defined as the total principal balance of our outstanding indebtedness excluding deferred financing costs, net of cash, at the balance sheet date. See below for our definition of Adjusted EBITDA, which is a non-GAAP measure and is not intended to represent, and should not be considered more meaningful than, or as an alternative to, a measure of operating performance as determined in accordance with U.S. GAAP. We calculate the Adjusted EBITDA Leverage ratios based on total or net debt at the balance sheet date and Adjusted EBITDA for the trailing twelve-month period from the balance sheet date.

Our Total Debt to Adjusted EBITDA Leverage and Net Debt to Adjusted EBITDA Leverage ratios remained consistent at March 29, 2026 as compared to December 28, 2025. The reconciliations of our Adjusted EBITDA Leverage ratios to the balance sheet and income statement amounts as reported under U.S. GAAP are as follows:

Cash Flow

Cash provided by operations was $128.2 million in the quarter ended March 29, 2026, a significant improvement compared to cash used in operating activities of $92.5 million in the quarter ended March 30, 2025. The 2026 period improvement was due to higher net income and improved working capital changes compared to the 2025 period. Cash provided by operations was also positively impacted by the sale of $40 million of accounts receivable in exchange for cash under the Receivables Facility. Working capital balances, and consequently cash from operations, can fluctuate throughout any operating period based upon the timing of receipts from customers and payments to vendors. Other significant first quarter 2026 and 2025 operating cash flow items included payment of the annual cash incentive compensation.

Cash used in investing activities was $53.6 million in the quarter ended March 29, 2026, which included $55.2 million for capital expenditures primarily for various growth projects to support the aerospace & defense markets. Cash used in investing activities was $50.6 million in the quarter ended March 30, 2025, reflecting $53.3 million in capital expenditures. We expect to fund our capital expenditures with cash on hand and cash flow generated from our operations and, if needed, borrowings under the ABL facility.

Cash used in financing activities was $88.8 million in the quarter ended March 29, 2026, which included $81.1 million to repurchase shares associated with income tax withholdings on share-based compensation and $75.0 million to repurchase 0.5 million shares of ATI stock under our Share Repurchase Program. These outflows were offset by net borrowings under the Company's ABL of $75 million. For the quarter ended March 30, 2025, cash used in financing activities was $107.5 million, which included $70.0 million to repurchase 1.2 million shares of ATI stock under our Share Repurchase Program.

At March 29, 2026, cash and cash equivalents on hand totaled $401.7 million, a decrease of $15.0 million from year end 2025. Cash and cash equivalents held by our foreign subsidiaries was $156.8 million at March 29, 2026, of which $75.1 million was held by the STAL joint venture.

Reconciliation of Adjusted EBITDA to Net Income

ATI utilizes Adjusted EBITDA, which is a non-GAAP financial measure, to assist in assessing operating performance on a consistent basis across multiple reporting periods by removing the impact of special items, which can vary from period to period, that management does not believe are directly reflective of the Company’s core operations. The Company defines special items as significant non-recurring or non-operational charges or credits, including restructuring charges or credits, gains or losses on the sale of accounts receivable, strike related costs, goodwill and long-lived asset impairments, debt extinguishment charges, pension remeasurement gains and losses, other postretirement/pension curtailment and settlement gains and losses, and gains or losses on sales of businesses.

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

Management believes presenting this non-GAAP financial measure is useful to investors because it (1) provides investors with meaningful supplemental information regarding financial and operating performance by excluding certain items management believes do not directly impact the Company’s core operations, (2) permits investors to view performance using the same metrics that management uses to forecast, evaluate performance, and make operating and strategic decisions, and (3) provides additional information useful to investors on a period-to-period consistent basis that are commonly used to analyze companies’ operating performance. Management believes that consideration of Adjusted EBITDA, together with Net Income, and the corresponding reconciliation, provides investors with additional understanding of the Company’s performance and trends that would be absent such disclosures.

Non-GAAP financial measures should be viewed in addition to, and not superior to or as an alternative for, the Company’s reported results prepared in accordance with GAAP. The following table provides the reconciliation of net income attributable to ATI to the Adjusted EBITDA non-GAAP financial measures:

(a) First quarter 2026: Restructuring and other charges of $26.4 million include $11.1 million of start-up and transaction-related costs and $1.1 million of restructuring-related costs, which are primarily reported within cost of sales on the consolidated statements of operations, $7.0 million of restructuring-related severance and impairment costs, $4.8 million of transformation-related costs, and $2.4 million for losses on the sale of accounts receivable, which are reported in selling and administrative expenses on the consolidated statements of operations.

First quarter 2025: Restructuring and other charges of $5.6 million include $4.0 million of start-up and transaction-related costs, which are primarily reported within cost of sales on the consolidated statements of operations, and $1.6 million of losses on the sale of accounts receivable, which are reported in selling and administrative expense on the consolidated statements of operation.

(b) (Gain) loss on sales of businesses, net, of $3.7 million for the quarter ended March 30, 2025 represents a loss on the sale of certain non-core European operations from the HPMC segment.

Critical Accounting Policies

Our critical accounting policies are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 1 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 28, 2025.

The preparation of the financial statements in accordance with U.S. generally accepted accounting principles requires us to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities. Significant areas of uncertainty that require judgments, estimates and assumptions include the accounting for derivatives, retirement plans, income taxes, environmental and other contingencies, as well as asset impairment, inventory valuation and collectability of accounts receivable. We use historical and other information that we consider to be relevant to make these judgments and estimates. However, actual results may differ from those estimates and assumptions that are used to prepare our financial statements.

Pending Accounting Pronouncements

See Note 1 of the Notes to Consolidated Financial Statements for information on new and pending accounting pronouncements.

Forward-Looking and Other Statements

From time to time, we have made and may continue to make “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements in this report relate to future events and expectations and, as such, constitute forward-looking statements. Forward-looking statements include those containing such words as “anticipates,” “believes,” “estimates,” “expects,” “would,” “should,” “will,” “will likely result,” “forecast,” “outlook,” “projects,” and similar expressions. Forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which we are unable to predict or control, that may cause our actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: (a) material adverse changes in economic or industry conditions generally, including global supply and demand conditions and prices for our specialty materials and changes in international trade duties and other aspects of international trade policy; (b) material adverse changes in the markets we serve; (c) our inability to achieve the level of cost savings, productivity improvements, synergies, growth or other benefits anticipated by management, from strategic investments and the integration of acquired businesses; (d) volatility in the price and availability of the raw materials that are critical to the manufacture of our products; (e) declines in the value of our defined benefit pension plan assets or unfavorable changes in laws or regulations that govern pension plan funding; (f) labor disputes or work stoppages; (g) equipment outages; (h) the risks of business and economic disruption associated with extraordinary events beyond our control, such as war, terrorism, international conflicts, public health issues, such as epidemics or pandemics, natural disasters and climate-related events that may arise in the future; and (i) other risk factors summarized in our Annual Report on Form 10-K for the year ended December 28, 2025, and in other reports filed with the Securities and Exchange Commission. We assume no duty to update our forward-looking statements.

As part of our risk management strategy, we utilize derivative financial instruments, from time to time, to hedge our exposure to changes in energy and raw material prices, foreign currencies, and interest rates. We monitor the third-party financial institutions which are our counterparties to these financial instruments daily and diversify our transactions among counterparties to minimize exposure to any one of these entities. Fair values for derivatives were measured using exchange-traded prices for the hedged items including consideration of counterparty risk and the Company’s credit risk. Our exposure to volatility in interest rates is presently not material, as nearly all of our debt is at fixed interest rates.

Volatility of Interest Rates. We may enter into derivative interest rate contracts to maintain a reasonable balance between fixed- and floating-rate debt. Any gain or loss associated with this hedging arrangement was included in interest expense. There are no outstanding derivative interest rate contracts at March 29, 2026.

Volatility of Energy Prices. Energy resource markets are subject to conditions that create uncertainty in the prices and availability of energy resources. The prices for and availability of electricity, natural gas, oil and other energy resources are subject to volatile market conditions. These market conditions often are affected by political and economic factors beyond our control. Increases in energy costs, or changes in costs relative to energy costs paid by competitors, have and may continue to adversely affect our profitability. To the extent that these uncertainties cause suppliers and customers to be more cost sensitive, increased energy prices may have an adverse effect on our results of operations and financial condition. We use approximately 6 to 8 million MMBtu’s of natural gas annually, depending upon business conditions, in the manufacture of our products. These purchases of natural gas expose us to the risk of higher gas prices. For example, a hypothetical $1.00 per MMBtu increase in the price of natural gas would result in increased annual energy costs of approximately $6 to $8 million. We use several approaches to minimize any material adverse effect on our results of operations or financial condition from volatile energy prices. These approaches include incorporating an energy surcharge on many of our products and using financial derivatives to reduce exposure to energy price volatility.

At March 29, 2026, the outstanding financial derivatives used to hedge our exposure to energy cost volatility consisted of natural gas hedges covering approximately 60% of our forecasted domestic requirements for natural gas for the remainder of 2026 and approximately 25% for 2027. At March 29, 2026, the net mark-to-market valuation of these outstanding natural gas hedges was an unrealized pre-tax loss of $1.8 million, comprised of $0.5 million in prepaid expenses and other current assets, $0.1 million in other long-term assets, $2.0 million in other current liabilities, and $0.4 million in other long-term liabilities on the balance sheet. For the quarter ended March 29, 2026, natural gas hedging activity increased cost of sales by $2.1 million.

Volatility of Raw Material Prices. We use raw material surcharge and index mechanisms to offset the impact of increased raw material costs; however, competitive factors in the marketplace can limit our ability to institute such mechanisms, and there can be a delay between the increase in the price of raw materials and the realization of the benefit of such mechanisms. For example, in 2025, we used approximately 70 million pounds of nickel; therefore, a hypothetical change of $1.00 per pound in nickel prices would result in increased costs of approximately $70 million. While we enter into raw materials futures contracts from time-to-time to hedge exposure to price fluctuations, such as for nickel, we cannot be certain that our hedge position adequately reduces exposure. We believe that we have adequate controls to monitor these contracts, but we may not be able to accurately assess exposure to price volatility in the markets for critical raw materials.

The majority of our products are sold utilizing raw material surcharges and index mechanisms. However, as of March 29, 2026, we had entered into financial hedging arrangements, primarily at the request of our customers related to firm orders, for an aggregate notional amount of approximately 1 million pounds of nickel with hedge dates through 2027. The aggregate notional amount hedged is approximately 2% of a single year’s estimated nickel raw material purchase requirements. These derivative instruments are used to hedge the variability of a selling price that is based on the London Metal Exchange (LME) index for nickel, as well as to hedge the variability of the purchase cost of nickel based on this LME index. Any gain or loss associated with these hedging arrangements is included in sales or cost of sales, depending on whether the underlying risk being hedged was the variable selling price or the variable raw material cost, respectively. At March 29, 2026, the net mark-to-market valuation of our outstanding raw material hedges was an unrealized pre-tax gain of $1.1 million, comprised of $1.1 million in prepaid expenses and other current assets, $0.1 million in other long-term assets, and $0.1 million in other current liabilities on the balance sheet.

Foreign Currency Risk. Foreign currency exchange contracts are used, from time-to-time, to limit transactional exposure to changes in currency exchange rates. We sometimes purchase foreign currency forward contracts that permit us to sell specified amounts of foreign currencies we expect to receive from our export sales for pre-established U.S. dollar amounts at specified dates. In addition, we may also hedge forecasted capital expenditures and designate cash balances held in foreign currencies as hedges of forecasted foreign currency transactions. At March 29, 2026, we had no material outstanding foreign currency forward contracts.

We may also use derivative instruments that are not designated as hedges to protect our results from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies. Changes in the fair value of these foreign exchange contract derivatives not designated as hedging instruments are recorded in cost of sales or selling, general and administrative expenses on the consolidated statement of operations, and we recognized $1.0 million of expense, net for settled foreign currency forward contracts that were not designated as hedges during the quarter ended March 29, 2026, and $1.8 million of income, net, during the quarter ended March 30, 2025, which offset foreign currency gains/losses in the relevant currency. We have no significant outstanding hedges that are not designated as of March 29, 2026.

(a) Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of March 29, 2026, and they concluded that these disclosure controls and procedures are effective.

(b) Changes in Internal Controls

There was no change in our internal controls over financial reporting identified in connection with the evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of March 29, 2026 conducted by our Chief Executive Officer and Chief Financial Officer, that occurred during the quarter ended March 29, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The following is an update to and should be read in conjunction with Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 28, 2025. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10- K for the year ended December 28, 2025, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

The conflict between the United States, Israel, and Iran and related geopolitical instability may adversely affect our business and results of operations.

In February 2026, the United States and Israel launched coordinated military strikes against Iran, which retaliated with missile attacks across the region. Although we do not have material operations in the Middle East, the ongoing conflict and any further escalation, including additional military actions, retaliatory measures, sanctions, disruptions to trade or transportation routes, cyberattacks, or other governmental or market responses, could lead to significant disruption of global energy supplies and increases in global energy prices, heighten inflationary pressures on our input costs and supply chain, adversely affect global supply chains, energy markets, commodity prices, currency exchange rates, financial markets and overall macroeconomic conditions, and adversely impact customer spending patterns in markets in which we operate. While we do not expect the impacts of conflict between the United States, Israel, and Iran to have a significant effect on our business, financial condition and results of operations, we are unable to predict the extent or nature of potential future impacts at this time.