10-KPeriod: FY2023

ATI INC Annual Report, Year Ended Dec 31, 2023

Filed February 23, 2024For Securities:ATI

Summary

ATI Inc. demonstrated strong financial performance in fiscal year 2023, driven by a significant rebound in the aerospace and defense sectors, which now represent 59% of total sales. The company's High Performance Materials & Components (HPMC) segment saw a substantial increase in sales and EBITDA, fueled by strong demand in commercial jet engines and airframes. The Advanced Alloys & Solutions (AA&S) segment experienced a slight sales decline due to softness in industrial markets, though it saw growth in aerospace and defense applications. ATI continues to invest in capacity expansion, particularly in titanium melt capabilities, to meet growing market demand. The company also successfully executed a pension derisking strategy, significantly improving its pension plan's funded status and reducing future funding obligations. With a robust backlog of $3.8 billion, ATI is well-positioned for continued growth, especially as the commercial aerospace market recovery accelerates. The company maintains a strong liquidity position with over $1 billion in total liquidity.

Financial Highlights

51 data points
Beta

Revenue

$4.17B

19.2% Gross Margin

Net Income

$410.80M

9.8% Net Margin

EPS (Diluted)

$2.81

Total Assets

$4.99B

Cash & Equivalents

$584.00M

Free Cash Flow

$85.90M

Financial Statements
Beta
Revenue$4.17B
Cost of Revenue$3.37B
Gross Profit$802.60M
R&D Expenses$20.70M
SG&A Expenses$328.10M
Operating Income$466.40M
Interest Expense$105.80M
Net Income$410.80M
EPS (Basic)$3.21
EPS (Diluted)$2.81
Shares Outstanding (Basic)128.10M
Shares Outstanding (Diluted)150.00M

Key Highlights

  • 1Aerospace & Defense revenue increased by 32% to represent 59% of total sales in FY2023, driven by strong demand in the HPMC segment.
  • 2HPMC segment sales increased by 29% and EBITDA by 43% in FY2023, with commercial airframe product sales up 90% year-over-year.
  • 3Titanium products sales reached 17% of total sales, up from 11% in the prior year, supported by significant investments in restarting and expanding titanium melt capacity.
  • 4The company successfully derisked its U.S. qualified defined benefit pension plan by transferring approximately 85% of its obligations to a third-party insurer, resulting in a significantly improved funded status and no anticipated cash contributions for at least ten years.
  • 5Total backlog of confirmed orders reached $3.8 billion at December 31, 2023, with approximately 70% expected to be filled in fiscal year 2024.
  • 6ATI generated $85.9 million in operating cash flow in FY2023 and ended the year with $744 million in cash, along with over $1 billion in total liquidity.
  • 7The company repurchased $85 million of its stock in FY2023 and authorized an additional $150 million repurchase program in November 2023.

Frequently Asked Questions

ATI's primary markets are aerospace & defense (59% of sales), energy (17% of sales), and others including medical, electronics, automotive, and construction/mining. The aerospace & defense market showed significant strength, driving overall growth, while energy and other industrial markets experienced some softness.

ATI is significantly investing in expanding its titanium melt capacity. This includes restarting a significant portion of its Albany, Oregon facility and bringing online a fourth furnace in the first half of fiscal year 2024 at its Richland, Washington facility. When fully operational, the Richland expansion is expected to increase total titanium melt capacity by 80% compared to fiscal year 2022.

ATI has actively managed its pension liabilities through a derisking strategy. This involved voluntary cash contributions and, most significantly, the purchase of group annuity contracts that transferred approximately 85% of its U.S. qualified defined benefit pension plan obligations and associated assets to a third-party insurer. This action has substantially improved the plan's funded status, with no significant cash contributions expected for at least the next ten years.

ATI expects continued growth in its HPMC segment, driven by the ongoing ramp-up in commercial aerospace demand, supported by long-term agreements. The AA&S segment is anticipated to see margin expansion due to a richer sales mix, recovery in industrial demand, and improving operating performance. The company's substantial backlog provides good visibility for fiscal year 2024.