Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand our results of operations and financial condition or the year ended December 28, 2025 (fiscal year 2025) as compared to the year ended December 29, 2024 (fiscal year 2024). The MD&A includes certain statements that are forward-looking statements. Actual results or performance could differ materially from those encompassed within such forward-looking statements as a result of various factors, including those described below. The MD&A should be read in conjunction with our consolidated financial statements and notes thereto included in Part II, Item 8 (Financial statements and Supplementary Data) of this Form 10-K. Information on the Company’s results of operations, financial condition and liquidity for fiscal year 2024 as compared to the year ended December 31, 2023 (fiscal year 2023) is included in our Annual Report on Form 10-K in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” filed on February 21, 2025 and is incorporated herein by reference.
ATI Overview
ATI is a global manufacturer of technically advanced specialty materials and complex components. We are a market leader in manufacturing differentiated products that require our materials science capabilities and unique process technologies, including our new product development competence. Our largest markets are aerospace & defense, representing approximately 68% of total sales, led by products for jet engines and airframes. Additionally, we have a strong presence in the specialty energy end market, which includes products for nuclear and renewable energy applications. In aggregate, these markets represent over 73% of our total revenue. We also sell to several other end markets, including industrial, electronics and medical.
We operate in two business segments: HPMC and AA&S. The HPMC segment 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 components, and 3D-printed aerospace products. The HPMC segment’s primary focus is on maximizing jet engine materials and components growth, with
approximately 92% of its revenue derived from the aerospace & defense markets, including nearly 68% from products for commercial jet engines. Commercial aerospace products have been the main source of sales and EBITDA growth for HPMC over the last several years and are expected to continue to drive HPMC and overall ATI results in the future. HPMC has also experienced strong growth in defense products, with fiscal year 2025 sales growth of 24%. Sales of defense products comprise almost 11% of HPMC's total sales.
The AA&S segment produces nickel-based alloys, titanium and titanium-based alloys, and specialty alloys 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. AA&S continued its focus of growing sales to the aerospace & defense end markets, with fiscal year 2025 sales to those markets increasing 15%. Aerospace & defense now comprises approximately 41% of AA&S total revenue. AA&S also serves customers across several other markets, notably specialty energy and conventional energy, as well as electronics and certain industrial markets.
Overview of Fiscal Year 2025 Financial Performance
Sales in fiscal year 2025 increased 5%, to $4.6 billion, and gross profit increased 12%, to $1.0 billion, compared to fiscal year 2024, reflecting increased demand for products within our aerospace & defense end markets, partially offset by softness in the medical, other industrial, and specialty energy end markets. International sales, including both U.S. exports and foreign sales from our foreign operations, were $1.9 billion in fiscal year 2025 and represented 43% of total sales, compared to $1.8 billion or 42% of total sales in fiscal year 2024.
Results for fiscal year 2025 included $70 million of net pre-tax charges and fiscal year 2024 included $17 million of net pre-tax gains as further described in the Results of Operations section below. The Company’s net income for fiscal year 2025 was $404.3 million, or $2.85 per share. ATI Adjusted EBITDA for fiscal year 2025 was $859.3 million, or 18.7% of sales, compared to $729.1 million, or 16.7% of sales, for fiscal year 2024. See further explanation below for non-GAAP definitions and calculations.
A summary of our results is as follows:
Fiscal Year
(Dollars in millions, except per share amounts)
Sales
Gross profit
Gross profit % of sales
Operating income
Income before income taxes
Net income attributable to ATI
Diluted net income attributable to ATI per common share
Key financial highlights of fiscal year 2025 include the following:
• Year-over-year sales growth of approximately 5%, with ATI’s 2025 sales representing our highest total since 2012. Fiscal year 2025 sales to the aerospace & defense markets increased 14% and represented 68% of our total sales, compared to 62% of total sales in fiscal year 2024.
• Growth in aerospace & defense drove year-over-year increases in operating income of 5% and net income attributable to ATI of 10%. Adjusted EBITDA improved to $859.3 million compared to $729.1 million in 2024, an increase of 18%. Adjusted EBITDA as a percentage of sales was 18.7% for fiscal year 2025, an improvement of 200 basis points compared to fiscal year 2024.
• We generated cash flow of $614.3 million from operating activities in fiscal year 2025, an increase of almost 51% compared to fiscal year 2024, as we continued efforts to focus on operational improvements to positively impact the inventory intensity of our business and reduce the required investment of managed working capital in relation to our growth in sales. Managed working capital as a percent of sales was 32.5% as of December 28, 2025, compared to 30.9% as of December 29, 2024, primarily due to the timing of payments to vendors and the 5% increase in 2025 sales.
• We continued our disciplined approach to capital allocation, funding growth while returning cash to our shareholders through the repurchase of our stock. We repurchased approximately 6.4 million shares of ATI stock for $470 million in fiscal year 2025. We have approximately $120 million of share repurchase authorization remaining under the plan approved by our Board of Directors.
• We continued to deleverage our balance sheet, repaying $150 million of debentures in the fourth quarter of 2025. Further, we reduced our interest expense in fiscal year 2025 by approximately $9.0 million compared to fiscal year 2024, which was due to the redemption of the $291.4 million outstanding principal amount of 3.5% Convertible Senior Notes due 2025 (2025 Convertible Notes) during the third quarter of 2024.
Results of Operations
Fiscal Year 2025 Compared to Fiscal Year 2024
Sales
Fiscal year 2025 sales increased $225.3 million to $4.6 billion compared to fiscal year 2024, primarily due to increased demand for commercial jet engine products and defense applications. Total sales to the aerospace & defense markets increased by 14% compared to fiscal year 2024. This increase was partially offset by lower sales to the medical, specialty energy, and certain industrial end markets.
Comparative information for our overall revenues by end market, and their respective percentages of total revenues, is as follows:
(In millions)
Fiscal Year
Aerospace & Defense:
Jet Engines- Commercial
Airframes- Commercial
Defense
Total Aerospace & Defense
Other Markets:
Specialty Energy
Electronics
Medical
Automotive
Conventional Energy
Construction/Mining
Other
Total Other Markets
Total
Comparative information for our major products, based on their percentages of revenues, is as follows. Hot-Rolling and Processing Facility (HRPF) conversion service sales in the AA&S segment are excluded from this presentation.
Fiscal Year
Nickel-based alloys and specialty alloys
Precision forgings, castings and components
Titanium and titanium-based alloys
Zirconium and related alloys
PRS products
Total
Sales by geographic area and as a percentage of total sales, were as follows:
(In millions)
Fiscal Year
United States
Europe
Asia
Canada
Other
Total sales
Gross Profit
Fiscal year 2025 gross profit was $1,007.0 million, or 22.0% of sales, a $108.8 million increase compared to fiscal year 2024. Gross profit in fiscal year 2025 includes $23.6 million of start-up and transaction-related costs, which are excluded from Adjusted EBITDA. Fiscal year 2025 gross profit also 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.
Fiscal year 2024 gross profit was $898.2 million, or 20.6% of sales, and included $15.3 million primarily for start-up and transaction-related costs, which are excluded from Adjusted EBITDA. Fiscal year 2024 gross profit also included a benefit of $16.7 million related to the recognition of previously deferred employee retention tax credits, of which $9.0 million of the benefit was recognized in the HPMC segment and $7.7 million in the AA&S segment.
The overall 140 basis points improvement in fiscal year 2025 gross profit margin as compared to fiscal year 2024 gross profit was primarily due to favorable sales mix and pricing as well as higher volumes.
Selling and Administrative Expenses
Selling and administrative expenses for fiscal year 2025 were $365.1 million, an increase of $22.8 million from 2024. The increase was primarily due to professional fees associated with transformation activities, losses on the sale of customer accounts receivable, and higher incentive compensation costs. Transformation-related costs were $17.1 million and losses on the sale of customer accounts receivable were $7.8 million. In addition, fiscal year 2025 selling and administrative expenses included $2.2 million of transaction-related costs. The charges for transformation-related costs, losses on the sale of customer accounts receivable, and transaction-related costs are excluded from Adjusted EBITDA.
Fiscal year 2024 included $2.7 million of transaction-related costs and costs associated with our European restructuring, which are excluded from Adjusted EBITDA. Fiscal year 2024 also included charges of $11.8 million primarily related to a commercial negotiation with a customer. HPMC segment results reflect $6.3 million of this charge, while the remaining $5.5 million is reflected in the AA&S segment results.
Restructuring (Credits) Charges
For the fiscal year ended December 28, 2025, restructuring credits were $1.9 million due to a reduction in severance-related reserves for a previous restructuring, primarily in the AA&S segment. These credits are excluded from Adjusted EBITDA.
For the fiscal year ended December 29, 2024, restructuring charges were $4.1 million for severance-related reserves primarily related to cost reduction actions in our domestic operations. These charges are excluded from Adjusted EBITDA.
Loss (Gain) on Asset Sales and Sales of Businesses, net
The fiscal year 2025 loss on assets sales and sales of businesses, net is comprised of an $0.8 million gain for the sale of a non-core business previously reported in the HPMC segment, for which ATI received $19.3 million of proceeds, net of transaction costs and a working capital adjustment. This gain is offset by a $3.7 million loss of the sale of certain non-core European operations from the HPMC segment for which ATI received $5.0 million of proceeds, net of transaction costs. The proceeds from both transactions were reported as an investing activity on the consolidated statement of cash flow.
The fiscal year 2024 gain on asset sales and sales of businesses, net was primarily due to a $52.9 million gain on the sale of our precision rolled strip operations, for which ATI received $48.0 million of proceeds, net of transaction costs, that were reported as an investing activity on the consolidated statement of cash flows.
Pension Remeasurement Gains and Losses
The Company recognizes gains and losses from the remeasurement of the projected benefit obligation and plan assets for defined benefit pension plans immediately in earnings through net periodic pension benefit cost. The Company completes the remeasurements of these plans in the fourth quarter of each fiscal year and, as a result, we recognized pension remeasurement losses of $18.6 million and $14.1 million in fiscal years 2025 and 2024, respectively. These losses are excluded from Adjusted EBITDA and recorded in nonoperating retirement benefit income/expense on the consolidated statements of operations.
Interest Expense, Net
Interest expense, net of interest income and interest capitalization, was $98.6 million in fiscal year 2025, compared to $108.2 million in fiscal year 2024. The decrease in fiscal year 2025 compared to fiscal year 2024 is due to the redemption of the 2025 Convertible Notes during the third quarter of 2024. Further, interest expense is presented net of interest income of $12.1 million in fiscal year 2025 and $16.0 million in fiscal year 2024. Interest expense in fiscal years 2025 and 2024 was reduced by $10.6 million and $11.8 million, respectively, related to interest capitalization on large, strategic capital projects.
Other Income, Net
Other income, net for fiscal year 2025 of $14.6 million included a gain of $10.5 million from the sale of certain oil and gas rights. Other income, net for fiscal year 2024 of $14.4 million included a gain of $11.6 million from the sale of certain oil and gas rights.
Income Taxes
The fiscal year 2025 effective tax rate was 19.9%, resulting in an income tax provision of $103.7 million, compared to an effective tax rate of 21.3%, resulting in an income tax provision of $103.4 million in fiscal year 2024. The effective tax rates for fiscal years 2025 and 2024 included discrete tax benefits of $6.0 million and $6.2 million, respectively. The discrete tax benefits in fiscal years 2025 and 2024 included $4.3 million and $3.3 million, respectively, for share-based compensation.
The 140 basis point decrease in the effective tax rate in fiscal year 2025 as compared to fiscal year 2024 was primarily due to higher deductions for benefits that were previously limited due to our net operating losses, such as foreign derived intangible income.
Net Income
Net income attributable to ATI was $404.3 million, or $2.85 per share, in fiscal year 2025, compared to $367.8 million, or $2.55 per share, for fiscal year 2024.
Results by Business Segment
As discussed above, we operate in two business segments: HPMC and AA&S. HPMC sales increased 7% in fiscal year 2025 compared to fiscal year 2024, primarily due to higher aerospace & defense market sales. Increased demand for commercial jet engines and defense applications resulted in a 14% increase in sales to the aerospace & defense markets. Full fiscal year 2025 AA&S sales increased 3% due to a 15% increase in aerospace & defense sales and a 10% increase in conventional energy market sales partially offset by softness in other certain other markets, including specialty energy, medical and electronics.
Comparative financial information (in millions) for our segments and corporate operations for the year-to-date periods ended December 28, 2025 and December 29, 2024 is shown below.
(In millions)
Fiscal Year Ended
December 28,
December 29,
December 31,
Sales:
High Performance Materials & Components
Advanced Alloys & Solutions
Total external sales
Segment EBITDA (a) :
High Performance Materials & Components
% of Sales
Advanced Alloys & Solutions
% of Sales
Corporate, Closed Operations and Other (income) expense (b) :
Corporate expenses
Closed operations and other (income) expense
Total Corporate, Closed Operations and Other expense
Depreciation & amortization
High Performance Materials & Components
Advanced Alloys & Solutions
Other
Total depreciation & amortization
(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 18 for the reconciliation of Segment EBITDA to Income before taxes.
(b) Amounts exclude depreciation and amortization.
High Performance Materials & Components
Fiscal Year
Fiscal Year
(In millions)
% Change
Sales to external customers
Segment EBITDA
Segment EBITDA as a percentage of sales
International sales as a percentage of sales
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.
Fiscal Year 2025 Compared to Fiscal Year 2024
Sales of $2.4 billion for the HPMC segment in fiscal year 2025 increased 7% compared to fiscal year 2024, primarily due to strong demand in aerospace & defense markets, which were up 14% compared to fiscal year 2024. Sales to the commercial aerospace market increased 13% due to an increase in commercial jet engine sales of 21%, which was partially offset by a decrease in commercial air frame sales of 16%. In addition, sales of defense products increased 24% compared to fiscal year 2024. These increases were partially offset by lower sales to the medical, specialty energy, and other industrial end markets.
Comparative information for our HPMC segment revenues by market, the respective percentages of overall segment revenues for the fiscal years 2025 and 2024, and the percentage change in revenues by market for fiscal year 2025 is as follows:
(In millions)
Fiscal Year
Market
Change
Aerospace & Defense:
Jet Engines- Commercial
Airframes- Commercial
Defense
Total Aerospace & Defense
Other Markets:
Specialty Energy
Medical
Electronics
Construction/Mining
Automotive
Conventional Energy
Other
Total Other Markets
Total
We utilize LTAs for our specialty materials, including powders, parts and components, with certain of our customers, including several aerospace market OEMs, to reduce their supply uncertainty. These LTAs cover sales of ATI’s specialty materials, precision forgings, components, and machined parts that are 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 Boeing. This LTA covers value-added titanium products and provides opportunities for greater use of ATI’s next generation and advanced titanium alloys in both long product and flat-rolled product forms. The agreement includes both long-product forms that are manufactured within the HPMC segment, and a significant amount of plate products that are manufactured utilizing assets of both the HPMC and AA&S segments. Revenues and profits associated with these titanium products covered by the Boeing LTA are included primarily in the results for the HPMC segment. The HPMC segment also includes revenues and profits under our LTA with Airbus for titanium airframe products.
We have LTAs with several aircraft engine manufacturers, including GE Aviation and 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 and with Pratt & Whitney to provide isothermal and conventional forgings for use in jet engines. We also supply products to other important parts of the aircraft market such as helicopters and rotary engine fixed wing aircraft.
New airframe designs contain a larger percentage of titanium alloys, and the jet engines that power them use newer nickel and titanium-based alloys for improved performance and more economical operating costs. Boeing and Airbus continue to have multi-year backlogs of orders for both legacy models and next-generation aircraft, and there are over 30,000 jet engines with firm orders (Aero Engine News, Fourth Quarter 2025). Due to manufacturing cycle times, demand for our specialty materials leads the deliveries of new aircrafts by approximately 6 to 12 months.
Use of these newer materials, particularly for jet engine applications, is expected to continue to increase for several years, with strong growth expected in powder metal alloys, including increased usage of iso-thermal forging and additive manufacturing production processes.
In addition, as our specialty materials are used in rotating components of jet engines, demand for our products for spare parts is impacted by aircraft flight activity and engine refurbishment requirements of U.S. and foreign aviation regulatory authorities. As the number of aircraft in service and flight activity increases, the need for our materials associated with engine refurbishment is expected to increase.
Comparative information for HPMC’s major product categories based on their percentages of the segment’s overall revenue is as follows:
Fiscal Year
Nickel-based alloys and specialty alloys
Precision forgings, castings and components
Titanium and titanium-based alloys
Total
HPMC Segment EBITDA for fiscal year 2025 increased 25% to $575.8 million, or 23.6% of sales, compared to $461.4 million, or 20.3% of sales, in fiscal year 2024. The fiscal year 2025 increase in Segment EBITDA as a percentage of sales was primarily due to favorable sales mix and pricing as well as higher volumes. Results in fiscal year 2025 included $4.4 million of benefits related to the recognition of previously deferred employee retention tax credits. Results in fiscal year 2024 included $9.0 million of benefits related to the recognition of previously deferred employee retention tax credits, which were partially offset by a charge of approximately $6.3 million due to a commercial negotiation with a customer and higher incentive compensation, maintenance and outsourcing costs.
Advanced Alloys & Solutions
Fiscal Year
Fiscal Year
(In millions)
% Change
Sales to external customers
Segment EBITDA
Segment EBITDA as a percentage of sales
International sales as a percentage of sales
Fiscal Year 2025 Compared to Fiscal Year 2024
Sales of $2.1 billion for the AA&S segment in fiscal year 2025 increased 3% compared to fiscal year 2024, primarily due to an increase in aerospace & defense sales of 15%, driven by growth for commercial airframe products and jet engine products, as well as a 10% increase in sales to the conventional energy market. These increases were partially offset by lower sales to medical, construction and mining and other industrial markets.
Comparative information for our AA&S segment revenues by market, the respective percentages of overall segment revenues, for the fiscal years 2025 and 2024, and the percentage change in revenues by market for fiscal year 2024 is as follows:
(In millions)
Fiscal Year
Change
Aerospace & Defense:
Jet Engines- Commercial
Airframes- Commercial
Defense
Total Aerospace & Defense
Other Markets:
Electronics
Specialty Energy
Medical
Conventional Energy
Automotive
Construction/Mining
Other
Total Other Markets
Total
Our AA&S segment produces zirconium and related alloys including hafnium and niobium, nickel-based alloys, titanium and titanium-based alloys, and specialty alloys in a variety of forms including plate, sheet, and PRS products. AA&S also provides hot-rolling conversion services at its HRPF, including carbon steel products under several LTAs.
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.
Fiscal Year
Nickel-based alloys and specialty alloys
Zirconium and related alloys
Titanium and titanium-based alloys
PRS products
Total
Segment EBITDA was $349.0 million, or 16.3% of sales, an 9% increase from Segment EBITDA of $320.9 million, or 15.4% of sales, in fiscal year 2024. The margin increase compared to the prior year was primarily due to favorable pricing for exotic alloys and improved sales mix on higher demand for nickel-based alloys and titanium mill products. Results in fiscal year 2025 included $2.8 million of benefits related to the recognition of previously deferred employee retention tax credits. Fiscal year 2024 also included $7.7 million of benefits related to the recognition of previously deferred employee retention tax credits, which were partially offset by a charge of approximately $5.5 million due to a commercial negotiation with a customer and higher incentive compensation and maintenance costs.
Corporate Items
Corporate expenses, which are primarily included in selling and administrative expenses in the statement of operations, were $67.8 million in fiscal year 2025 compared to $64.0 million in fiscal year 2024. The increase in expenses in fiscal year 2025 as compared to fiscal year 2024 was primarily due to higher incentive compensation costs and prior year benefits due to insurance settlements.
Closed operations and other income/expenses are presented primarily in selling and administrative expenses in the consolidated statements of operations and include legal, environmental, retirement benefits and insurance obligations associated with closed operations as well as gains from the sale of non-core assets. Closed operations and other expenses provided income of $2.3
million in fiscal year 2025 and $10.8 million in fiscal year 2024. Fiscal year 2025 includes a $10.5 million gain on the sale of certain oil and gas rights, included within other income, net, on the consolidated statement of operations. This gain was offset by unfavorable foreign currency transaction impacts compared to the prior year period. Fiscal year 2024 includes an $11.6 million gain on the sale of certain oil and gas rights, included within other income, net, on the consolidated statement of operations. Fiscal year 2024 also includes a $2.3 million gain on the sale of assets for our idled Houston, PA facility included within gain on asset sales and sales of businesses, net, on the consolidated statement of operations.
Managed Working Capital
As part of managing the performance of our business, we focus on controlling Managed Working Capital, which we define as gross accounts receivable, short-term contract assets and gross inventories, less accounts payable and short-term contract liabilities. We exclude the effects of inventory valuation reserves and reserves for uncollectible accounts receivable when computing this non-GAAP performance measure, which is not intended to replace Working Capital or to be used as a measure of liquidity. 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 to actively manage our Managed Working Capital 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 to evaluate the asset intensity of our business.
At December 28, 2025, Managed Working Capital was 32.5% of annualized total ATI sales compared to 30.9% of annualized sales at December 29, 2024. The increase in Managed Working Capital as a percentage of annualized sales year over year was primarily due to inventory builds to support increased operating levels and the timing of shipments and vendor payments. The $80.8 million increase in overall Managed Working Capital in fiscal year 2025 is detailed in the table below. Days sales outstanding, which measures actual collection timing for accounts receivable, improved slightly by 3% as of December 28, 2025 compared to fiscal year 2024. Gross inventory turns, which measures how many times we turn over our inventory relative to cost of sales in a year, worsened by 8% in fiscal year 2025 compared to fiscal year 2024. We continue our focus on operational improvements to positively impact the inventory intensity of our business and reduce the required investment of Managed Working Capital in our growing business.
The computations of Managed Working Capital at December 28, 2025 and December 29, 2024 reconciled to the financial statement line items as computed under U.S. GAAP, were as follows.
(In millions)
December 28, 2025
December 29, 2024
Accounts receivable
Short-term contract assets
Inventory
Accounts payable
Short-term contract liabilities
Subtotal
Allowance for doubtful accounts
Inventory reserves
Net managed working capital held for sale
Managed working capital
Annualized prior 3 months sales
Managed working capital as a % of annualized sales
December 29, 2025 change in managed working capital
Financial Condition and Liquidity
On June 13, 2025, we amended our Asset Based Lending (ABL) Credit Facility, which is collateralized by the accounts receivable and inventory of our operations and also provides us with the option of including certain machinery and equipment as additional collateral for purposes of determining availability under the facility. This amendment extended the facility through June 2030. The amended ABL 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 amendment gives the Company 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 Term Loan and any Delayed-Draw 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.
As of December 28, 2025, there were no outstanding borrowings under the revolving credit portion of the ABL, and $29.3 million was utilized to support the issuance of letters of credit. There were average revolving credit borrowings of $2.6 million bearing an average annual interest rate of 6.5% under the ABL during fiscal year 2025. There were no revolving credit borrowings under the ABL during fiscal year 2024.
The ABL Term Loan and Delayed-Draw Term Loan have an interest rate of 2.0% above the adjusted Secured Overnight Financing Rate (SOFR). The applicable interest rate for revolving credit borrowings under the ABL credit facility includes interest rate spreads based on available borrowing capacity that range between 1.25% and 1.75% for SOFR-based borrowings and between 0.25% and 0.75% for base rate borrowings.
The ABL credit facility contains a financial covenant whereby we must maintain a fixed charge coverage ratio of not less than 1.00:1.00 after an event of default has occurred and is continuing or if the undrawn availability under the ABL revolving credit portion of the facility is less than the greater of (i) 10% of the then applicable maximum loan amount under the revolving credit portion of the ABL and the outstanding ABL Term Loan balance, or (ii) $60.0 million. We were in compliance with the fixed charge coverage ratio as of December 28, 2025.
During 2025, we received $26.8 million of proceeds from the sale of non-core businesses previously reported in the HPMC segment and proceeds of $11.1 million from property, plant and equipment sales, primarily for oil and gas rights.
At December 28, 2025, we had total liquidity of $1.1 billion, comprised of $417 million of cash and cash equivalents, $569 million of undrawn capacity under the ABL credit facility, and up to $100 million of availability under the Delayed-Draw Term Loan. Our next meaningful debt maturity is $350 million of Senior Notes in the fourth quarter of fiscal year 2027.
Our U.S. qualified defined benefit plan has approximately 2,000 participants. Based on current actuarial assumptions, we are required to make a $4 million contribution to the plan during fiscal year 2026. Using our long-term weighted average expected rate of return on pension plan assets and other actuarial assumptions, we expect to have approximately $40 million of minimum cash funding requirements to the defined benefit pension plan over the next ten years. Minimum cash funding requirements are not expected to be significant in any individual year. However, these funding estimates are subject to significant uncertainty including the actual pension trust assets and the discount rates used to measure pension liabilities.
Periodically, our Board of Directors authorizes the repurchase of ATI Common stock (the “Share Repurchase Program”), the most recent of which was $700 million that was announced in September 2024. In fiscal year 2025, ATI used $470 million to repurchase 6.4 million shares of its common stock under the Share Repurchase Program. As of December 28, 2025, there is $120 million of authorization remaining under the Share Repurchase Program. Repurchases under these programs can be made in the open market or in privately negotiated transactions, with the amount and timing of repurchases depending on market conditions and corporate needs. Open market repurchases are structured to occur within the pricing and volume requirements of SEC Rule 10b-18. The current Share Repurchase Program has no time limit, does not obligate the Company to repurchase any specific number of shares, and may be modified, suspended, or terminated at any time by the Board of Directors without prior notice.
In managing our overall capital structure, we focus on the ratio of net debt to Adjusted EBITDA, which we use as a measure of our ability to repay our incurred debt. We define net debt as the total principal balance of our outstanding indebtedness excluding deferred financing costs, net of cash, at the balance sheet date. See the explanations above for our definitions of Adjusted EBITDA and EBITDA, which are non-GAAP measures and are not intended to represent, and should not be considered more meaningful than, or as alternatives to, a measure of operating performance as determined in accordance with U.S. GAAP. Our ratio of net debt to Adjusted EBITDA (Adjusted EBITDA Leverage Ratio) measures net debt at the balance sheet date to Adjusted EBITDA as calculated on the trailing twelve-month period from this balance sheet date.
Our Debt to Adjusted EBITDA Leverage Ratio and Net Debt to Adjusted EBITDA Leverage ratio improved in fiscal year 2025 compared to fiscal year 2024, resulting from higher earnings and lower debt as a result of the redemption of the 2025 debentures. 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:
December 28,
December 29,
Net income attributable to ATI
Net income attributable to noncontrolling interests
Net income
Interest expense
Depreciation and amortization
Income tax provision (benefit)
Pension remeasurement loss
Restructuring and other charges
Loss (gain) on asset sales and sale of business
Adjusted EBITDA
Debt
Add: Debt issuance costs
Total debt
Less: Cash
Net debt
Debt to Adjusted EBITDA
Net Debt to Adjusted EBITDA
We believe that internally generated funds, current cash on hand and available borrowings under the ABL credit facility will be adequate to meet our liquidity needs, including the scheduled debt maturity in the fourth quarter of fiscal year 2027. 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 and reduce financing costs. 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. Further, in the event we seek additional or new financing, the cost, terms and conditions of such borrowings would be impacted by our credit rating. As of December 28, 2025, we have no off-balance sheet arrangements as defined in Item 303(a)(4) of SEC Regulation S-K.
Cash Flow
Cash provided by operations was $614.3 million for fiscal year 2025 and $407.2 million fiscal year 2024. The 2025 period improvement was due to higher net income and improved working capital changes compared to the 2024 period, including cash flows from accounts receivable. Accounts receivable were positively impacted by the sale of $80 million of accounts receivable in exchange for cash under the new 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. However, we actively manage our working capital to allow for the required flexibility to meet our strategic objectives. Other significant fiscal year 2025 operating cash flow items included payment of 2024 annual incentive compensation. Other significant fiscal year 2024 operating cash flow items included payment of 2023 annual incentive compensation.
Cash used in investing activities was $234.5 million in fiscal year 2025, reflecting $280.6 million in capital expenditures to grow our capacity and capabilities with a focus on our aerospace & defense market. These investing activity outflows were partially offset by $26.8 million of proceeds from the sale of non-core businesses previously reported in the HPMC segment and proceeds of $11.1 million from property, plant and equipment sales, primarily for oil and gas rights. We expect to fund our capital expenditures with cash on hand, cash flow generated from our operations and, if needed, by using a portion of the ABL credit facility. Cash used in investing activities was $159.6 million in fiscal year 2024, reflecting $239.1 million in capital expenditures to grow our capacity and capabilities with a focus on aerospace & defense. These investing activity outflows were partially offset by $48.0 million of proceeds from the sale of our New Bedford, MA operations and Remscheid, Germany operations and $27.6 million of proceeds from property, plant and equipment sales, which included $11.6 million of proceeds on the sale of certain oil and gas rights and $3.5 million of proceeds received for the sale of assets for our idled Houston, PA facility.
Cash used by financing activities in fiscal year 2025 was $699.9 million, which included $470.0 million to repurchase 6.4 million shares of ATI stock under our Share Repurchase Program, $150.0 million for the repayment of our 2025 debentures and $13.2 million in dividend payments to the 40% noncontrolling interest in our PRS joint venture in China. Cash provided by financing activities in fiscal year 2024 was $260.4 million, which included $260.0 million to repurchase 5.3 million shares of
ATI stock under our Share Repurchase Program and $16.0 million in dividend payments to the 40% noncontrolling interest in our PRS joint venture in China, partially offset by $76.1 million in cash received from the settlement of the capped call as a result of the redemption of the 2025 Convertible Notes.
At December 28, 2025, cash and cash equivalents on hand totaled $416.7 million, a $304.5 million decrease from fiscal year-end 2024. Cash and cash equivalents held by our foreign subsidiaries was $183.7 million at December 28, 2025, of which $97.6 million was held by our PRS joint venture in China.
Contractual Obligations
A summary of required payments under financial instruments (excluding accrued interest) and other commitments are presented below.
(In millions)
Total
Less than 1
year
years
years
After 5
years
Contractual Cash Obligations
Total Debt including Finance Leases (A)
Interest on Debt (B)
Operating Lease Obligations (C)
Other Long-term Liabilities
Pension and OPEB Obligations (D)
Unconditional Purchase Obligations
Raw Materials (E)
Capital expenditures
Other (F)
Total
Other Financial Commitments
Lines of Credit (G)
Guarantees
(A) Amounts exclude $72 million for certain finance lease contracts the Company has agreed to enter into. See Note 11, Leases for further information.
(B) Amounts include contractual interest payments using the interest rates in effect as of December 28, 2025 applicable to the Company’s ABL Term Loan due 2030, the 5.875% Senior Notes due 2027, the 4.875% Senior Notes due 2029, the 7.25% Senior Notes due 2030, and the 5.125% Senior Notes due 2031.
(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.
(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. 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. 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. We used current market prices as of December 28, 2025, for raw material obligations with variable pricing.
(F) We have various contractual obligations that extend through fiscal year 2031 for services involving production facilities, information technology services and administrative operations. Our purchase obligation as disclosed represents the estimated termination fees payable if we were to exit these contracts.
(G) At December 28, 2025, drawn amounts on the U.S. facility were $29.3 million utilized for standby letters of credit under the $600 million ABL credit facility, which renew annually. These standby letters of credit are used to support: $19.6 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 28, 2025, our reserves for environmental remediation obligations totaled approximately $15 million, of which $7 million was included in other current liabilities. These reserves included estimated probable future costs of: $2 million for federal Superfund and comparable state-managed sites; $7 million for formerly owned or operated sites for remediation or indemnification obligations; and $6 million for owned or controlled sites at which our operations have been or plan to be discontinued. We continue to evaluate whether we may be able to recover a portion of future costs for environmental liabilities from third parties and to pursue such recoveries where appropriate. The timing of expenditures depends on a number of factors that vary by site. ATI expects that it will expend present accruals over many years and that remediation of all sites with which it has been identified will be completed within thirty years.
Asset retirement obligations (AROs) recorded by the Company were $8 million at December 28, 2025. These AROs related to landfill closures, decommissioning costs, facility leases and conditional AROs associated with manufacturing activities using what may be characterized as potentially hazardous materials. During fiscal year 2024, we derecognized $10 million of AROs in connection with the sale of our precision rolled strip operations.
Based on currently available information, it is reasonably possible that the costs for active matters may exceed our recorded reserves by as much as $16 million. However, future investigation or remediation activities may result in the discovery of additional hazardous materials, potentially higher levels of contamination than discovered during prior investigation, and may impact costs of the success or lack thereof in remedial solutions. Therefore, future developments, administrative actions or liabilities relating to environmental matters could have a material adverse effect on the ATI’s consolidated financial condition or results of operations.
Retirement Benefits
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 700 participants still accruing benefit service. Additionally, all of the remaining collectively-bargained defined benefit retiree health care plans at ATI’s operations are now closed to new entrants, with cost caps in place for these obligations. As a result of these actions, ATI’s retirement savings and other postretirement benefit programs have largely transitioned to a defined contribution structure. From fiscal years 2013 to 2022, five annuity buyouts of retired participants and two voluntary cash out programs of deferred participants helped to reduce the total participants in ATI’s U.S. qualified defined benefit pension plans by more than 60%. During the fourth quarter of fiscal year 2023, we purchased group annuity contracts from an insurer covering approximately 85% of our U.S. qualified defined benefit pension plan obligations. Under these contracts, we transferred the pension obligations and associated assets for approximately 8,200 plan participants to the selected insurance company. To facilitate this pension derisking strategy, we completed a voluntary cash out for term vested employees and contributed $222 million to our pension plan in the third quarter of fiscal year 2023, to fully fund remaining pension liabilities ahead of this annuity transaction. After these actions, our U.S. qualified defined pension plan includes approximately 2,000 participants.
At December 28, 2025, our defined benefit pension plans were approximately 86% funded in accordance with U.S. GAAP, and were remeasured at that date using a 5.90% discount rate to measure the projected benefit obligation. Discount rates used to measure pension liabilities for U.S. qualified defined benefit plans for ERISA funding purposes are calculated on a different basis using an IRS-determined segmented yield curve. Funding requirements are also affected by IRS-determined mortality assumptions, which may differ from those used under accounting standards. Based on current actuarial assumptions, we are required to make a $4 million contribution to our qualified defined benefit pension plan during fiscal year 2026. Using our long-term weighted average expected return on pension plan assets and other actuarial assumptions, we expect to have approximately $40 million of minimum cash funding requirements to the qualified defined benefit pension plan over the next ten years. Minimum cash funding requirements are not expected to be significant in any individual year. However, these estimates are subject to significant uncertainty, including the performance of our pension trust assets and the discount rates used to measure pension liabilities. Pension trust asset performance for both our accounting and ERISA funding calculations is determined using the market value of plan assets at the end of each year.
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:
Earnings before interest, taxes, depreciation and amortization (EBITDA)
Fiscal Year Ended
December 28, 2025
December 29, 2024
Net income attributable to ATI
Net income attributable to noncontrolling interests
Net income
(+) Depreciation and amortization
(+) Interest expense
(+) Income tax provision
EBITDA
Adjustments for special items, pre-tax:
(+) Restructuring and other charges (a)
(+) Pension settlement loss (b)
(+/-) Loss (gain) on sales of businesses (c)
Adjusted EBITDA
Adjusted EBITDA as a % of sales
Critical Accounting Policies
The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP. When more than one accounting principle, or the method of its application, is generally accepted, management selects the principle or method that is most appropriate in our specific circumstances. Application of these accounting principles requires our management to make estimates about the future resolution of existing uncertainties; as a result, actual results could differ from these estimates. In preparing these consolidated financial statements, management has made its best estimates and judgments of the amounts and disclosures included in the financial statements giving due regard to materiality.
Asset Impairment
We monitor the recoverability of the carrying value of our long-lived assets. An impairment charge is recognized when the expected net undiscounted future cash flows from an asset’s use (including any proceeds from disposition) are less than the asset’s carrying value, and the asset’s carrying value exceeds its fair value. Changes in the expected use of a long-lived asset group, and the financial performance of the long-lived asset group and its operating segment, are evaluated as indicators of possible impairment. Future cash flow value may include appraisals for property, plant and equipment, land and improvements, future cash flow estimates from operating the long-lived assets, and other operating considerations.
Goodwill is reviewed annually in the fourth quarter of each fiscal year for impairment or more frequently if impairment indicators arise. Other events and changes in circumstances may also require goodwill to be tested for impairment between annual measurement dates. At December 28, 2025, the Company had $225.2 million of goodwill on its consolidated balance sheet, all of which relates to the HPMC segment.
We performed quantitative goodwill assessments for the two HPMC reporting units with goodwill during the fourth quarter of fiscal year 2025. Fair values were determined using discounted cash flows, which represents Level 3 unobservable information in the fair value hierarchy. These quantitative assessments and valuations require us to make estimates and assumptions regarding revenue growth, changes in working capital, capital expenditures, selling prices, income taxes, and profitability, all of which impact estimated future cash flows. In addition, discounted cash flow valuations are impacted by the determination of our weighted cost of capital (WACC), which also requires us to exercise judgment and make estimates. Although we believe that the estimates and assumptions used were reasonable, actual results could differ from those estimates and assumptions. For example, the WACC utilized in our discounted cash flow assessments was 10.5% and long-term growth rates ranged from 3% to 3.5%. The estimated effect of a 1% change in the WACC would result in a 15% change in the fair value of the Specialty Materials reporting unit and less than a 2% change in the fair value of the Forged Products reporting unit.
Further, to validate the reasonableness of the estimated fair values of the reporting units as of the valuation date, a reconciliation of the aggregate fair values of all reporting units to our market capitalization is performed, taking into account a reasonable control premium.
The $225.2 million of goodwill remaining as of December 28, 2025 on our consolidated balance sheet is comprised of $159.2 million at the Forged Products reporting unit and $66.0 million at the Specialty Materials reporting unit. The goodwill impairment assessment performed in the fourth quarter of fiscal year 2025 determined that our Specialty Materials and Forged Products reporting units' had fair values in excess of their respective carrying values. As a result, no impairments were determined to exist. In addition, no indicators of impairment were observed in fiscal year 2025 associated with any of our long-lived assets.
Income Taxes
The provision for income taxes includes deferred taxes resulting from temporary differences in income for financial and tax purposes using the liability method. Such temporary differences result primarily from differences in the carrying value of assets and liabilities. Future realization of deferred income tax assets requires sufficient taxable income within the carryback and/or carryforward period available under tax law. On a quarterly basis, we evaluate the realizability of our deferred tax assets.
The evaluation includes the consideration of all available evidence, both positive and negative, regarding the estimated future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, historical taxable income in prior carryback periods if carryback is permitted, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused. In situations where a three-year cumulative loss condition exists, accounting standards limit the ability to consider projections of future results as positive evidence to assess the realizability of deferred tax assets. Valuation allowances are established when it is estimated that it is more likely than not that the tax benefit of the deferred tax asset will not be realized.
Retirement Benefits
We have defined contribution retirement plans or benefit pension plans covering substantially all of our employees. We also sponsor several postretirement plans covering certain hourly and salaried employees and retirees that 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.
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 700 participants still accruing benefit service. Additionally, all of the remaining collectively-bargained defined benefit retiree health care plans at ATI’s operations are now closed to new entrants, with cost caps in place for these obligations. As a result of these actions, ATI’s retirement savings and other postretirement benefit programs have largely transitioned to a defined contribution structure.
Under U.S. GAAP, amounts recognized in financial statements for defined benefit pension plans are determined on an actuarial basis, rather than as contributions are made to the plan. A significant element in determining our pension income or expense in accordance with the accounting standards is the expected investment return on plan assets. In establishing the expected return on plan investments, which is reviewed annually in the fourth quarter, we take into consideration input from our third-party pension plan asset managers and actuaries regarding the types of securities the plan assets are invested in, how those investments have performed historically, and expectations for how those investments will perform in the future. Our weighted average expected long-term return on pension plan investments was 5.80% in fiscal year 2025. The expected long-term rate of return on pension plan investments for fiscal year 2026 will be 5.80%. We apply the assumed rate of return to the market value of plan assets at the end of the previous year. This produces the expected return on plan assets that is included in annual pension expense for the current year. The actual returns on pension plan assets for fiscal year 2025 was 5.9%. The effect of increasing, or lowering, the expected return on pension plan investments by 0.25% would result in additional pre-tax annual income, or expense, of approximately $1 million. The cumulative difference between the expected return and the actual return on plan assets is immediately recognized in earnings through net periodic pension benefit cost within nonoperating retirement expense on the consolidated statements of operations when pension plans are remeasured annually in the fourth quarter or on an interim basis as triggering events require remeasurement. The amount of expected return on plan assets can vary significantly from year-to-year since the calculation is dependent on the market value of plan assets as of the end of the preceding year. U.S. GAAP allows companies to calculate the expected return on pension assets using either an average of fair market values of pension assets over a period not to exceed five years, which reduces the in reported pension income or expense, or their fair market value at the end of the previous year. However, the SEC does not permit companies to change from the fair market value at the end of the previous year methodology, which is the methodology that we use, to an averaging of fair market values of plan assets methodology. As a result, our results of operations and those of other companies, including companies with which we compete, may not be comparable due to these different methodologies in calculating the expected return on pension investments.
We also determine the discount rate used to value pension plan liabilities as of the last day of our fiscal year. The discount rate reflects the current rate at which the pension liabilities could be effectively settled. In estimating this rate, we receive input from our actuaries regarding the rates of return on high quality, fixed-income investments with maturities matched to the expected future retirement benefit payments. Based on this assessment, we established a discount rate of 5.90% for valuing the pension liabilities as of December 28, 2025, and for determining the pension expense for fiscal year 2026. 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. The effect on pension liabilities for changes to the discount rate, as well as the net effect of other changes in actuarial assumptions and experience, are immediately recognized in earnings through net periodic pension benefit cost within nonoperating retirement benefit expense on the consolidated statements of operations when pension plans are remeasured annually in the fourth quarter or on an interim basis as triggering events require remeasurement.
With respect to our postretirement plans, under most of the plans, our contributions towards retiree medical premiums are capped based upon the cost as of certain dates, thereby creating a defined contribution. In accordance with U.S. GAAP, postretirement expenses recognized in financial statements associated with defined benefit plans are determined on an actuarial basis, rather than as benefits are paid. We use actuarial assumptions, including the discount rate and the expected trend in health care costs, to estimate the costs and benefit obligations for these plans. The discount rate, which is determined annually at the end of each fiscal year, is developed based upon rates of return on high quality, fixed-income investments. At the end of fiscal year 2025, we determined the rate to be 5.30%, compared to a 5.60% discount rate in fiscal year 2024, and a 5.40% discount rate in fiscal year 2023. 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 $6 million. Such a change in the discount rate would have an insignificant impact to postretirement benefit expense. 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 8.5% in 2026 and is assumed to gradually decrease to 4.0% in the year 2051 and remain level thereafter. Assumed health care cost trend rates can have a significant effect on the obligation for health care plans, however, the Company’s contributions for most of its retiree health plans are capped based on a fixed premium amount, which limits the impact of future health care cost increases.
Forward-Looking Statements
From time-to-time, the Company has made and may continue to make “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements in this report relate to future events and expectations and, as such, constitute forward-looking statements. Forward-looking statements include those containing such words as “anticipates,” “believes,” “estimates,” “expects,” “would,” “should,” “will,” “will likely result,” “forecast,” “outlook,” “projects,” and similar expressions. Such forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which the Company is unable to predict or control, that may cause our actual results or performance to materially differ from any future results or performance expressed or implied by such statements. Various of these factors are described in Item 1A, Risk Factors, of this Annual Report on Form 10-K and will be described from time-to-time in the Company filings with the SEC, including the Company’s Annual Reports on Form 10-K and the Company’s subsequent reports filed with the SEC on Form 10-Q and Form 8-K, which are available on the SEC’s website at www.sec.gov and on the Company’s website at www.atimetals.com. We assume no duty to update our forward-looking statements.
