ATI Inc: Form 10-Q for the period ended Sep 27, 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 year-to-date period ended September 27, 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 72% 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 comprise approximately 44% 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

Third quarter 2026 sales increased approximately 26% to $1.42 billion, compared to $1.13 billion of sales for the third quarter 2025, primarily due to higher pricing and strong demand in the aerospace & defense markets, particularly for commercial jet engine and government defense products that increased by 39% and 34%, respectively. Commercial airframe products also increased by 11%. In aggregate, ATI’s aerospace & defense sales increased 25% to $994.5 million, or 69% of total sales in the third quarter 2026, compared to $792.7 million, or 70% of total sales in the third quarter 2025. Further, sales to other markets increased $96.4 million in the third quarter 2026 compared to the third quarter 2025, due to higher demand across various industrial markets, including specialty energy, conventional energy and automotive.

Sales for the year-to-date period ended September 27, 2026 increased approximately 12% to $3.84 billion, compared to $3.41 billion of sales for the year-to-date period ended September 28, 2025, primarily due to increased demand and favorable pricing in the aerospace & defense markets. On a year-to-date basis, commercial jet engine and defense sales increased 22% and 16%, respectively. In aggregate, ATI's aerospace & defense sales increased 15% to $2.65 billion, or 69% of total sales in the year-to-date period ended September 27, 2026, compared to $2.31 billion, or 68% of total sales in the year-to-date period ended September 28, 2025. On a year-to-date basis, sales to other markets increased by $81 million, or 7%, primarily for specialty energy, appliances and automotive.

Comparative information regarding our overall sales by end market, and their respective percentages of total sales for the quarters and year-to-date periods ended September 27, 2026 and September 28, 2025, is shown below:

(In millions)

(In millions)

For the third quarter 2026, international sales increased to $488 million, or 34% of total sales, from $445 million, or 40% of total sales, in the third quarter 2025.

For the year-to-date period ended September 27, 2026, international sales decreased to $1,410 million, or 37% of total sales, from $1,436 million, or 42% of total sales, in the year-to-date period ended September 28, 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 third quarter 2026 was $380.2 million, or 26.7% of sales, compared to $255.3 million, or 22.7% of sales, for the third quarter 2025. Third quarter 2026 gross profit includes $1.2 million of start-up costs, which are excluded from Adjusted EBITDA. Third quarter 2025 gross profit includes $7.0 million of start-up and transaction-related costs.

Our gross profit was $952.9 million, or 24.8% of sales, for the year-to-date period ended September 27, 2026, compared to $733.6 million, or 21.5% of sales for the year-to-date period ended September 28, 2025. Year-to-date period ended September 27, 2026 gross profit includes start-up and transaction-related costs of $15.3 million and $1.1 million of restructuring-related costs, which are excluded from Adjusted EBITDA. Year-to-date period ended September 28, 2025 gross profit includes a benefit of $7.2 million related to the recognition of previously deferred employee retention tax credits, of which $4.4 million related to the HPMC segment and $2.8 million related to the AA&S segment. Year-to-date period ended September 28, 2025 gross profit also includes $17.0 million of start-up and transaction costs.

Selling and Administrative Expenses

Selling and administrative expenses for the third quarter 2026 were $107.7 million, an increase of 13.8% compared to $94.6 million for the third quarter 2025. The increase was due to higher compensation costs, professional fees, and transformation and transaction-related costs. Third quarter 2026 and third quarter 2025 include $9.4 million and $3.8 million of transformation and transaction-related costs, respectively.

Selling and administrative expenses for the year-to-date period ended September 27, 2026 were $295.5 million, an increase of 12.6% compared to $262.4 million for the year-to-date period ended September 28, 2025. The increase was primarily due to higher transformation and transaction-related costs and compensation costs. Year-to-date periods ended September 27, 2026 and September 28, 2025 include $28.3 million and $4.9 million of transformation and transaction-related costs, respectively. These periods also include $7.9 million and $5.7 million of losses on the sale of customer accounts receivable, respectively.

Restructuring Charges (Credits)

Third quarter 2026 included a restructuring-related impairment charge of $0.9 million due to the rationalization of certain facilities initiated in second quarter 2026. Third quarter 2025 included a credit of $0.4 million due to a reduction in severance-related reserves based on revised workforce reduction estimates.

The year-to-date period ended September 27, 2026 included restructuring-related severance, impairment, and other costs of $11.8 million due to the rationalization of certain facilities. The year-to-date period ended September 28, 2025 included a credit of $1.7 million, due to a reduction in severance-related reserves based on revised workforce reduction estimates.

Gain/Loss on Asset Sales and Sales of Businesses, net

The gain on asset sales and sales of businesses, net of $0.3 million during the quarter ended September 27, 2026 was primarily attributable to the sale of certain immaterial fixed assets. Third quarter 2025 included a gain on asset sales and sales of businesses net of $1.3 million, primarily for a $1.1 million gain on the sale of an immaterial, non-core operation that was part of the HPMC segment.

The gain on asset sales and sales of businesses, net of $10.1 million during the year-to-date period ended September 27, 2026 was primarily attributable to the sale of a previously closed manufacturing facility during the second quarter of 2026, which was part of the AA&S segment. The loss on asset sales and sales of businesses, net of $2.6 million, during the year-to-date period ended September 28, 2025 was primarily attributable to the sale of certain immaterial, non-core operations in the HPMC segment.

Interest Expense, Net

Interest expense, net decreased to $22.6 million in the third quarter of 2026 compared to $26.1 million in the third quarter of 2025. The decrease in interest expense, net was primarily related to the year-over-year increase in interest capitalization on strategic capital projects. Capitalized interest reduced interest expense by $3.9 million in the third quarter 2026 and $2.4 million in the third quarter 2025.

Interest expense, net decreased to $70.2 million in the year-to-date period ended September 27, 2026 compared to $74.5 million in the year-to-date period ended September 28, 2025. The decrease in interest expense, net was primarily due to lower rates on our outstanding debt and an increase in interest capitalization on strategic capital projects. Capitalized interest reduced interest expense by $10.1 million in the year-to-date period ended September 27, 2026 and $7.6 million in the year-to-date period ended September 28, 2025.

Other Income, Net

Other income, net for the third quarter 2026 decreased to $0.9 million compared to $12.2 million in the third quarter 2025. Other income, net for the year-to-date period ended September 27, 2026 decreased to $2.8 million compared to $15.5 million in the year-to-date period ended September 28, 2025. The change in both the quarter and year-to-date periods is primarily due to a $10.5 million gain from the sale of certain oil and gas rights in the prior year.

Income Taxes

Our third quarter 2026 effective tax rate was 21.0%, which was relatively unchanged from our effective tax rate for the third quarter 2025 of 21.4%. The effective tax rate for the third quarter of 2026 includes discrete tax benefits of $0.8 million, primarily for the release of a foreign valuation allowance, while the effective tax rate for the third quarter of 2025 includes discrete tax expense of $2.8 million, primarily related to return-to-provision adjustments for limitations of permanent benefits due to decreased taxable income.

For the year-to-date periods ended September 27, 2026 and September 28, 2025, our effective tax rates before discrete items were 20.9% and 20.8%, respectively. Our effective tax rate, including discrete items, for the year-to-date period ended September 27, 2026 was 18.5%, which was lower than the 20.4% effective rate in the prior year comparative period. The year-to-date period ended September 27, 2026 includes discrete tax benefits of $13.9 million, while the effective tax rate for the year-to-date period ended September 28, 2025 includes discrete tax benefits of $1.7 million. The discrete tax benefits in both periods were primarily for share-based compensation.

Net Income

Net income attributable to ATI was $189.8 million, or $1.37 per share, in the third quarter 2026, compared to $110.0 million, or $0.78 per share, for the third quarter 2025.

Net income attributable to ATI was $459.0 million, or $3.31 per share, in the year-to-date period ended September 27, 2026, compared to $307.7 million, or $2.16 per share, in the year-to-date period ended September 28, 2025.

Business Segment Results

Comparative financial information for our segments and corporate operations for the quarterly and year-to-date periods ended September 27, 2026 and September 28, 2025 is shown below.

(In millions)

(a) The Company’s Chief Operating Decision Maker (CODM) utilizes 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

Third quarter 2026 sales were $721.4 million, an increase of $118.5 million, or 20%, compared to the third quarter 2025, primarily due to sales growth in the aerospace & defense markets, which increased $121.5 million, or 22%. This increase was primarily driven by strong demand and pricing for commercial jet engine products, which grew more than 34% on a year-over-year basis.

Comparative information for our HPMC segment revenues by market and their respective percentages of the segment’s overall revenues for the quarters ended September 27, 2026 and September 28, 2025 is as follows:

(in millions)

International sales represented 36% of total segment sales for the third quarter 2026, compared to 44% in the prior year period. Comparative information for the HPMC segment’s major product categories, based on their percentages of revenue for the quarters ended September 27, 2026 and September 28, 2025, is as follows:

Segment EBITDA in the third quarter 2026 was $167.3 million, or 23.2% of total sales, compared to $145.8 million, or 24.2% of total sales, for the third quarter 2025. The decrease in segment EBITDA margin rate was primarily due to higher manufacturing and period costs, including costs associated with the transitioning a new nickel-based superalloy into commercial production. These increases were partially offset by increased volume and favorable pricing and mix.

Sales for the year-to-date period ended September 27, 2026 were $2.0 billion, an increase of $177.0 million, or 10%, compared to the year-to-date period ended September 28, 2025, primarily due to sales growth in the aerospace & defense markets, which increased $184.0 million, or 11%. The growth in the aerospace & defense markets was primarily driven by strong demand and pricing for commercial jet engine products, which grew more than 17% on a year-over-year basis.

Comparative information for our HPMC segment revenues by market and their respective percentages of the segment’s overall revenues for the year-to-date periods ended September 27, 2026 and September 28, 2025 is as follows:

(in millions)

International sales as a percentage of total segment sales represented 40% for the year-to-date period ended September 27, 2026, compared to 44% in the prior year period. Comparative information for the HPMC segment’s major product categories, based on their percentages of revenue for the year-to-date periods ended September 27, 2026 and September 28, 2025, is as follows:

Segment EBITDA in the year-to-date period ended September 27, 2026 increased to $473.7 million, or 24.0% of total sales, compared to $420.8 million, or 23.4% of total sales, for the year-to-date period ended September 28, 2025. The increase in segment EBITDA margin rate was primarily due to favorable pricing and mix, partially offset by higher manufacturing and period, including costs associated with transitioning a new nickel-based superalloy into commercial production and inefficiencies related to capacity expansion projects.

The Company continues to invest in capacity and to improve work-flow processes and operations. HPMC results for third 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

Third quarter 2026 sales were $702.3 million, an increase of $179.7 million, or 34%, compared to third quarter 2025, primarily driven by higher sales to the aerospace & defense and specialty energy markets. On a year-over-year basis, aerospace & defense sales grew by 34%, as sales of commercial jet engine products almost doubled and defense sales increased by 41%, reflecting higher demand and pricing. Aerospace & defense sales were 45% of the total AA&S sales in the third quarter 2026 compared to 46% in third quarter 2025. Sales to other industrial markets also increased on stronger demand, including conventional energy and automotive.

Comparative information regarding our AA&S segment revenues by market and their respective percentages of the segment’s overall revenues for the quarters ended September 27, 2026 and September 28, 2025 is shown below.

(in millions)

International sales represented 33% of total segment sales for the third quarter of 2026, compared to 35% in the prior year’s third quarter. Comparative information regarding the AA&S segment’s major product categories, based on their percentages of revenue for the quarters ended September 27, 2026 and September 28, 2025, is presented in the following table. HRPF conversion service sales are excluded from this presentation.

Segment EBITDA was $181.3 million, or 25.8% of sales, for the third quarter 2026, compared to segment EBITDA of $90.4 million, or 17.3% of sales, for the third quarter 2025. The increase in the segment EBITDA margin rate was primarily due to higher volume and pricing as well as a favorable sales mix.

Sales for the year-to-date period ended September 27, 2026 were $1.9 billion, an increase of $249.0 million, or 15%, compared to the year-to-date period ended September 28, 2025, primarily due to sales growth in the aerospace & defense markets, which increased $161.2 million, or 25%. This increase was primarily driven by sales growth to the defense market, which grew by 46%, as well as strong demand and pricing for commercial jet engine products, which grew 79% on a year-over-year basis. Sales to the specialty energy market also increased by 26% on demand for nuclear related products.

Comparative information for our AA&S segment revenues by market and their respective percentages of the segment’s overall revenues for the year-to-date periods ended September 27, 2026 and September 28, 2025 is as follows:

(in millions)

International sales as a percentage of total segment sales declined to 33% for the year-to-date period ended September 27, 2026, compared to 40% the prior year period. Comparative information for the AA&S segment’s major product categories, based on their percentages of revenue for the year-to-date periods ended September 27, 2026 and September 28, 2025, is presented in the following table. HRPF conversion service sales are excluded from this presentation.

Segment EBITDA in the year-to-date period ended September 27, 2026 increased to $425.9 million, or 22.9% of total sales, compared to $250.5 million, or 15.5% of total sales, for the year-to-date period ended September 28, 2025. The increase in segment EBITDA margin rate, compared to the prior year period was primarily due to higher volume and pricing as well as a favorable sales mix. Results for the year-to-date period September 28, 2025 include a benefit of $2.8 million from the recognition of previously deferred employee retention tax credits and a benefit of $2.6 million due to a customer recovery for previously reserved accounts receivable.

Corporate Items

Corporate expenses for the third quarter of 2026 increased to $18.8 million, compared to $15.6 million for the third quarter 2025. The increase was primarily due to higher professional fees and insurance costs. For the year-to-date period ended September 27, 2026, corporate expenses were $50.7 million, compared to $48.4 million for the year-to-date period ended September 28, 2025. The increase in expenses was primarily due to higher insurance and employee benefit costs.

Closed operations and other income/expense for the third quarter 2026 was expense of $1.9 million, compared to income of $4.5 million for the third quarter 2025. For the year-to-date period ended September 27, 2026, closed operations and other income/expense was expense of $4.9 million, compared to income of $4.5 million. Closed operations and other income/expense for the quarter and year-to-date periods ended September 28, 2025 benefited from a $10.5 million gain from the sale of oil and gas rights.

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

At September 27, 2026, Managed working capital increased as a percentage of annualized sales to 32.9% 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, did not change at September 27, 2026 compared to December 28, 2025. Days sales outstanding, which measures actual collection timing for accounts receivable, improved by 10% as of September 27, 2026 compared to December 28, 2025.

The computations of Managed working capital at September 27, 2026 and December 28, 2025 reconciled to the financial statement line items as computed under U.S. GAAP, were as follows.

(In millions)

Liquidity and Financial Condition

The Company's amended Asset Based Lending (ABL) Credit Facility, which is collateralized by the accounts receivable and inventory of our operations, consists of a $200 million term loan (Term Loan) and a $600 million revolving credit facility, which includes a letter of credit sub-facility of up to $200 million and a swing loan facility of up to $60 million. 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.

2033 Senior Notes

On June 3, 2026, the Company issued $450 million aggregate principal amount of 5.875% Senior Notes due 2033 (2033 Notes). Interest on the 2033 Notes is payable semi-annually in arrears at a rate of 5.875% per year. The 2033 Notes will mature on June 15, 2033. Net proceeds were $443.1 million from this issuance, of which approximately $350 million was used for the redemption of the Company’s 5.875% Senior Notes due 2027 (2027 Notes), and the remainder was used for liquidity and general corporate purposes.

The Company incurred underwriting fees and other third-party expenses related to the issuance of the 2033 Notes totaling $6.9 million, which were recorded as a reduction to the carrying value of the debt and are being amortized over the 7-year term of the 2033 Notes. The 2033 Notes are unsecured and unsubordinated obligations of the Company and equally ranked with all its existing and future senior unsecured debt. The 2033 Notes restrict the Company’s ability to incur certain liens, enter into sale leaseback transactions, guarantee certain indebtedness and consolidate or merge with or into another entity or sell, transfer or lease all, or substantially all, of its assets.

Prior to June 15, 2029, the Company has the option to redeem the 2033 Notes, as a whole or in part, at any time or from time to time, at redemption prices specified in the 2033 Notes. The 2033 Notes are subject to redemption upon the occurrence of a change in control repurchase event (as defined in the 2033 Notes) at a redemption price in cash equal to 101% of the aggregate principal amount of the Notes repurchased, plus any accrued and unpaid interest on the 2033 Notes repurchased.

Redemption of 2027 Senior Notes

On June 8, 2026, the Company exercised its right to redeem the entire outstanding $350 million aggregate principal amount of its 5.875% Notes due 2027 (2027 Notes), and The Bank of New York Mellon, as trustee, issued a notice of redemption to registered holders of the 2027 Notes. The 2027 Notes were fully redeemed on July 8, 2026 using a portion of the proceeds from the sale of the Company's 2033 Notes. The Company incurred debt extinguishment costs of approximately $1.2 million associated with the write-off of the related unamortized debt issuance costs.

As of September 27, 2026, there were no 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 September 27, 2026, we had $442.3 million of cash and cash equivalents, and available additional liquidity under the ABL facility of approximately $570 million. Our next significant debt maturity is $325.0 million of 4.875% Senior Notes in the fourth quarter of fiscal year 2029.

Periodically, our Board of Directors authorizes the repurchase of ATI common stock (the “Share Repurchase Program”), most recently authorizing the repurchase of up to $700 million, as announced in September 2024, and an additional $500 million 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 and year-to-date periods ended September 27, 2026, ATI used $70.0 million and $195.0 million, respectively, to repurchase 0.4 million and 1.2 million, respectively, of its common stock under the Share Repurchase Program. At September 27, 2026, the Company has utilized all of the $700 million in repurchase authority announced in September 2024 and $75 million of the additional repurchase authority announced in February 2026. As of September 27, 2026, total share repurchase authorization remaining under the active Share Repurchase Program was $425 million.

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 Ratio and Net Debt to Adjusted EBITDA Leverage Ratio at September 27, 2026 improved as compared to December 28, 2025, primarily due to higher earnings. The reconciliations of our Adjusted EBITDA Leverage ratios to the balance sheet and income statement amounts as reported under U.S. GAAP are as follows:

(in millions)

Cash Flow

Cash provided by operations was $414.6 million in the year-to-date period ended September 27, 2026, a significant improvement compared to cash provided by operating activities of $298.5 million in the year-to-date period ended September 28, 2025. The increase in cash provided by operations was primarily due to higher income, which was partially offset by changes in working capital balances, primarily inventory. 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.

Cash used in investing activities was $195.8 million in the year-to-date period ended September 27, 2026, which included $216.6 million for capital expenditures primarily for various growth projects to support the aerospace & defense markets. Cash used in investing activities was $149.0 million in the year-to-date period ended September 28, 2025, reflecting $187.9 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 $194.5 million in the year-to-date period ended September 27, 2026, which included $450.0 million for the issuance of the 2033 Notes. This inflow was offset by $375.7 million in payments on long-term debt and finance lease obligations, which includes $350.0 million for the redemption of the 2027 Senior Notes, $195.0 million to repurchase 1.2 million shares of ATI stock under our Share Repurchase Program, and $82.2 million to repurchase shares associated with income tax withholdings on share-based compensation. For the year-to-date period ended September 28, 2025, cash used in financing activities was $512.6 million, which included $470.0 million to repurchase 6.4 million shares of ATI stock under our Share Repurchase Program.

At September 27, 2026, cash and cash equivalents on hand totaled $442.3 million, an increase of $25.6 million from year end 2025. Cash and cash equivalents held by our foreign subsidiaries was $173.2 million at September 27, 2026, of which $106.1 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:

(in millions)

(a) Third quarter 2026: Restructuring and other charges of $14.4 million include $2.2 million of start-up and transaction-related costs, which are primarily included within cost of sales on the consolidated statements of operations. These charges also include $0.9 million of restructuring-related impairment costs for facility rationalization activities, $8.4 million of transformation-related costs, and $2.9 million for losses on the sale of accounts receivable, which are reported in selling and administrative expenses on the consolidated statements of operations.

Third quarter 2025: Restructuring and other charges of $12.9 million include $7.2 million of start-up and transaction-related costs, which are primarily reported within cost of sales on the consolidated statements of operations, and $3.6 million of transformation-related costs and $2.5 million for losses on sale of accounts receivable, which are reported in selling and administrative expense on the consolidated statements of operation. These charges were partially offset by credits of $0.4 million due to a reduction in severance-related reserves for restructuring in the AA&S segment.

Year-to-date 2026: Restructuring and other charges of $64.4 million include $23.4 million of start-up and transaction-related costs and $1.1 million of restructuring-related costs, which are primarily included within cost of sales on the consolidated statements of operations, and $20.2 million of transformation-related costs, $11.8 million of restructuring-related severance, impairment, and other costs, and $7.9 million for losses on sale of accounts receivable, which are reported in selling and administrative expense on the consolidated statements of operations.

Year-to-date 2025: Restructuring and other charges of $25.9 million include $17.2 million of start-up and transaction-related costs, which are primarily included within cost of sales on the consolidated statements of operations, and $4.7 million of transformation-related costs and $5.7 million for losses on the sale of accounts receivable, which are reported in selling and administrative expenses on the consolidated statements of operations. These charges were partially offset by credits of $1.7 million due to a reduction in severance-related reserves for a previous restructuring in the AA&S segment.

(b) (Gain) loss on sales of businesses, net, for the third quarter of 2025 includes a $1.1 million gain on the sale of a non-core operation in the HPMC segment. (Gain) loss on sales of businesses, net of $2.6 million for the year-to-date period ended September 28, 2025 also includes a $3.7 million loss on the sale of certain non-core European operations from the HPMC segment.

(c) Third quarter and year-to-date 2026 includes a pre-tax debt extinguishment charge of $1.2 million for the write-off of unamortized debt issuance costs related to the redemption of the $350 million of 5.875% Senior Notes due 2027.

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 September 27, 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 September 27, 2026, the outstanding financial derivatives used to hedge our exposure to energy cost volatility consisted of natural gas hedges covering approximately 80% of our forecasted domestic requirements for natural gas for the remainder of 2026, approximately 55% for 2027, and approximately 15% for 2028. At September 27, 2026, the net mark-to-market valuation of the outstanding natural gas hedges was an unrealized pre-tax loss of $2.7 million, comprised of $0.2 million in prepaid expenses and other current assets, $0.5 million in other long-term assets, $3.0 million in other current liabilities and $0.4 million in other long-term liabilities on the balance sheet. For the quarter ended September 27, 2026, natural gas hedging activity increased cost of sales by $1.1 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 September 27, 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 5 million pounds of nickel with hedge dates through 2027. The aggregate notional amount hedged is approximately 7% 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 September 27, 2026, the net mark-to-market valuation of our outstanding raw material hedges was an unrealized pre-tax loss of $2.5 million, comprised of $1.0 million in prepaid expenses and other current assets and $3.5 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. 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 September 27, 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. We recognized $0.8 million of expense, net for settled foreign currency forward contracts that were not designated as hedges during the quarter ended September 27, 2026, and we recognized $1.8 million of expense, net for settled foreign currency forward contracts that were not designated as hedges during the year-to-date period ended September 27, 2026. We recognized $0.6 million and $2.3 million, respectively, of income, net, during the quarter and year-to-date periods ended September 28, 2025, which offset foreign currency gains/losses in the relevant currency. We have no significant outstanding hedges that are not designated as of September 27, 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 September 27, 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 September 27, 2026 conducted by our Chief Executive Officer and Chief Financial Officer, that occurred during the quarter ended September 27, 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.

Risks Associated with Current or Future Litigation and Claims.

A number of lawsuits, claims and proceedings have been or may be asserted against us relating to the conduct of our currently and formerly owned businesses, including those pertaining to product liability, patent infringement, commercial disputes, government contracting, employment matters, employee and retiree benefits, taxes, environmental matters, personal injury and health and safety and occupational disease, and stockholder and corporate governance matters. Due to the uncertainties of litigation, we can give no assurance that we will prevail on all claims made against us in the lawsuits that we currently face or that additional claims will not be made against us in the future. While the outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to us, we do not believe that the disposition of any such pending matters is likely to have a material adverse effect on our financial condition or liquidity. However, the resolution in any reporting period of one or more of these matters could have a material adverse effect on our results of operations for that period. Also, we can give no assurance that any other claims brought in the future will not have a material effect on our financial condition, liquidity or results of operations.

In August 2024, the Company received notice that it and certain of its affiliates are parties to two lawsuits, filed in federal district court for the Western District of Pennsylvania (the District Court), that assert various claims associated with the Company’s October 2023 purchase of group annuity contracts to transfer a portion of its U.S. qualified defined benefit pension plan obligations to Athene Annuity and Life Company and Athene Annuity & Life Assurance of New York. These two lawsuits were consolidated in late 2024, and in January 2025, we filed a motion to dismiss the consolidated claims. Following an August 2025 hearing on the motion to dismiss, the magistrate judge covering the Motion issued a report recommending that all of the plaintiffs’ claims be dismissed for lack of standing. In July 2026, the District Court granted the Company’s Motion to Dismiss. In August 2026, Plaintiffs noticed an appeal of the District Court's decision to the Court of Appeals for the Third Circuit. The Company disputes and intends to vigorously defend against these claims but cannot predict their outcome or estimate any range of reasonably possible loss at this time.