ATI Stock

ATI Inc. (ATI) produces specialty materials, highly differentiated by the company's materials science expertise and advanced process technologies.

The company's core markets of aerospace & defense represent nearly 60% of total sales, led by products for jet engines. Additionally, the company has a strong presence in the energy markets, including specialty energy, oil & gas and downstream processing, as well as the medical and electronics markets. In aggregate, these markets represent almost 85% of the company's revenue.

A significant portion of the company's sales represent products sold to customers in the commercial aerospace industry.

The company operates in two business segments: High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions (AA&S).

The HPMC segment's primary focus is on maximizing aero-engine materials and components growth, with approximately 85% of its revenue derived from the aerospace & defense markets, including nearly 60% of its revenue from products for commercial jet engines. Other major HPMC end markets include medical and energy. HPMC produces a wide range of high performance materials, components, and advanced metallic powder alloys. These are made from nickel-based alloys and superalloys, titanium and titanium-based alloys, and a variety of other specialty materials. Capabilities range from cast/wrought and powder alloy development to final production of highly engineered finished components, and 3D-printed aerospace products.

The AA&S segment is focused on delivering high-value flat products primarily to the energy, aerospace, and defense end-markets, which comprise over 60% of its revenue. Other important end markets for AA&S include electronics, medical and automotive. AA&S produces nickel-based alloys, titanium and titanium-based alloys, and specialty alloys in a variety of forms, including plate, sheet, and strip products.

Strategic end-use markets for the company's products include:

Aerospace & Defense

The company is a world leader in the production of specialty materials and components for both commercial and military jet engines and airframes supporting customer needs for initial build requirements and for spare parts. Through alloy development, internal growth efforts, and long-term supply agreements on current and next-generation jet engines and airframes, the company is well-positioned with a fully qualified asset base to meet the expected multi-year demand growth from the commercial aerospace market.

Typical aerospace applications for nickel-based alloys and superalloys and advanced metallic powders include jet engine disks, blades, vanes, rings, casings and shafts. Nickel-based alloys and superalloys remain extremely strong at high temperatures and resist degradation under extreme conditions. The next-generation jet engines use advanced nickel-based superalloys and metallic powder alloys to enable increased fuel efficiency requirements that require hotter-burning engines. The company's specialty materials are also used in the manufacture of aircraft landing gear and structural components.

The company is a global industry leader in iso-thermal and hot-die forging technologies for advanced aerospace components. The company produces highly sophisticated components that have differing mechanical properties across a single product unit and are highly-resistant to fatigue and temperature effects. The company's precision forgings are used for jet engine components, structural components for aircraft, helicopters, space propulsion, and other demanding applications. ATI provides a full range of post-production inspection and machining with the certified quality needed to meet demanding application requirements.

Products and components made from titanium and titanium-based alloys, such as jet engine components, including disks, blades and vanes, and airframe components, such as structural members, landing gears, and hydraulic systems, are critical in aerospace applications. These materials and components possess an extraordinary combination of properties that help to increase jet engine fuel efficiency and product longevity, including superior strength-to-weight ratios, elevated temperature resistance, low coefficient of thermal expansion, and extreme corrosion resistance. Availability of titanium supply continues to be a critical issue across the aerospace & defense supply chain. As such, in the year ended December 31, 2023 (fiscal year 2023), the company restarted a significant amount of titanium melt capacity in Albany, Oregon with a modest investment and are continuing to invest in additional capacity at this facility, bringing online a fourth furnace in the first half of fiscal year 2024. In addition, the company is further investing in additional titanium melt capacity to meet this growing demand with the company's expansion in Richland, Washington, and the company is on track for the first melt in the fourth quarter of fiscal year 2024 at this facility. When the company's Richland, Washington expansion is at full production in late fiscal year 2025, the company's total titanium melt capacity is expected to be 80% greater than the company's fiscal year 2022 titanium melt capacity.

The company's specialty materials and components for defense applications include naval nuclear products, military jet engines, fixed wing and rotorcraft products, and armor applications. The company expects to increase its sales in government defense applications in future years.

The company continuously seeks to develop and manufacture innovative new alloys to better serve the needs of the aerospace & defense markets, and several of the alloys the company produces have won significant share in the current and next-generation jet engines. ATI's metallic powder technology delivers alloy compositions and refined microstructures that offer increased performance and longer useful lives in high-temperature aerospace environments, as well as improved efficiency of jet engines. The company continues to increase its production capacity for advanced metallic powders for use in next-generation aerospace products, including additive manufacturing applications. In fiscal year 2023, ATI announced that the company is establishing a dedicated additive manufacturing and post-processing facility outside Fort Lauderdale, Florida, which will allow ATI to tap into significant aerospace and defense demand for additively manufactured laser power bed fusion parts, serving both commercial and defense customers.

Energy

The company also serves energy markets, including specialty energy, oil & gas, and downstream processing markets.

The company's specialty materials are widely used in the global electrical power generation and distribution industries. Clean energy needs, expanding environmental policies and the electrification of developing countries will continue to drive demand for the company's specialty materials and products for use in these industries over the long term.

For electrical power generation, the company's specialty materials, including corrosion-resistant alloys (CRAs), are used in nuclear, natural gas and other fuel source applications. The company's CRAs are used for pipe, tube, and heat exchanger applications in water systems and in pollution control scrubbers. For nuclear power plants, the company is an industry pioneer in producing nuclear reactor fuel cladding and structural components utilizing zirconium and hafnium alloys. The company is a technology leader for large diameter components used in natural gas land-based turbines for power generation. The company's alloys are also used for alternative energy generation, in solar, fuel cell and geothermal applications.

Both of the company's business segments produce specialty materials that are critical to the oil & gas industry. The environments in which oil & gas can be found in commercial quantities have become more challenging, involving deep offshore wells, high pressure and high temperature conditions in sour wells and unconventional sources. These challenging offshore environments are located further off the continental shelf, including locations in arctic and tropical waters where drilling is more difficult than previously-sourced locations. The company's specialty materials, including nickel-based alloys, duplex alloys and other specialty alloys, have the strength and corrosion-resistant properties necessary to meet these challenging operating conditions. The company enables its customers' success in these applications by developing and producing specialty materials for equipment that can operate for up to 30 years in these harsh environments.

Medical

ATI's advanced specialty materials are used in medical device products that enhance the quality of lives around the world.

Manufacturers of magnetic resonance imaging (MRI) devices rely on the company's niobium superconducting wire to help produce electromagnetic fields that allow physicians to safely scan the body's soft tissue. The company has a joint technology development agreement with Bruker Energy & Supercon Technologies to advance state-of-the-art niobium-based superconductors, including those used in MRI magnets for the medical industry, and preclinical MRI magnets used in the life-science tools industry.

The company's specialty alloys also are used for replacement knees, hips and other prosthetic devices. The use of the company's alloys in these replacement devices offers the potential for longer product lifespans versus previous implant generations.

The company's biocompatible nickel-titanium (nitinol) shape memory alloy is used for stents to support collapsed or clogged blood vessels. Reduced in diameter for insertion, these stents expand post-implant to the original tube-like shape due to the metal's superelasticity. In addition, the company's ultra fine diameter (0.002 inch/0.051 mm) titanium wire is used for screens to prevent blood clots from entering critical areas of the body. The company has recently announced its strategic partnership with Confluent Medical Technologies (Confluent) whereby Confluent will provide an investment in its capacity expansion to produce nitinol. As a result of this expansion, the company expects to more than triple its production of this life saving alloy by fiscal year 2027.

Electronics

ATI's materials perform a variety of important roles in the growing consumer electronics market. Nickel alloys and Precision Rolled Strip (PRS) from Specialty Rolled Products (SRP) and the company's Asian PRS joint venture support computers and smart phones. The magnetic properties of nickel alloys are used in relay cores, magnets and magnetic shielding, while their thermal expansion is useful in glass-to-metal sealing applications, such as monitors. PRS is selected for electronics and communications applications based on corrosion resistance, strength, wear resistance, electrical resistivity or thermal expansion.

In addition, metal precursors - which use chemicals produced by ATI, such as hafnium - have a variety of important applications in consumer and industrial electronics.

Business Segments

High Performance Materials & Components Segment

The company's HPMC segment produces a wide range of high performance specialty materials, parts and components for several major end markets, including the aerospace & defense, medical, and energy markets, with 85% of fiscal year 2023 revenues derived from the aerospace & defense markets. Demand for the company's products is driven primarily by the commercial aerospace cycle. Large aircraft and jet engines are manufactured by a small number of companies, such as The Boeing Company, Airbus S.A.S. (an Airbus Group company), including the former operations of Bombardier Aerospace, and Embraer (Empresa Brasileira de Aeronáutica S.A.) for airframes, GE Aerospace (a division of General Electric Company), Rolls-Royce plc, Pratt & Whitney (a division of Raytheon Technologies Corporation), Snecma (SAFRAN Group), and various joint ventures manufacture jet engines. These companies, and their suppliers, form a substantial part of the company's customer base in this business segment. The company has long-term agreements (LTAs) in place with most major aerospace market OEMs.

Within this segment, the company's products are manufactured from a wide range of advanced materials, including metallic powder alloys, made from nickel-based alloys and superalloys, titanium and titanium-based alloys, and a variety of other specialty materials. These materials are made into a variety of product forms that include precision forgings, machined parts and others. The company is integrated across these alloy systems in melt, forging, finishing, testing and machining processes. Most of the products in this segment are sold directly to end-use customers, and a substantial portion of the company's HPMC segment products are sold under multi-year agreements.

Principal competitors in the HPMC segment include: Berkshire Hathaway Inc., for nickel-based alloys and superalloys and specialty steel alloys, titanium and titanium-based alloys, and precision forgings through its ownership of Precision Castparts Corporation and subsidiaries; Howmet Aerospace Inc., for titanium and titanium-based alloys; Carpenter Technology Corporation for legacy nickel-based alloys and superalloys and specialty steel alloys; VSMPO-AVISMA (Verkhnaya Salda Metallurgical Production Association - Berezniki Titanium-Magnesium Works) for titanium and titanium-based alloys; and Aubert & Duval for precision forgings.

Advanced Alloys & Solutions Segment

The company's AA&S segment produces nickel-based alloys, titanium and titanium-based alloys, and specialty alloys in a variety of forms including plate, sheet, and PRS products. The major end markets for the company's flat rolled products are energy, aerospace & defense, automotive, and electronics markets. The operations in this segment include the company's SRP business, its Specialty Alloys & Components business and the Shanghai STAL Precision Stainless Steel Company Limited (STAL) PRS joint venture in China, in which the company holds a 60% interest. Segment results also include the company's 50% interest in the Uniti industrial titanium joint venture and the company's 50% interest in the A&T Stainless joint venture. On March 9, 2022, the company announced the termination of Uniti, and this joint venture is expected to be fully dissolved in the first quarter of fiscal year 2024.

Nickel-based alloys, titanium, and stainless sheet products are used in a wide variety of industrial and consumer applications. In fiscal year 2023, approximately 25% of the company's stainless sheet products by volume were sold to independent service centers, which have slitting, cutting or other processing facilities, with the remainder sold directly to end-use customers.

Nickel-based alloy, titanium, and specialty alloy plate products are primarily used in aerospace & defense, and corrosion and industrial markets. In fiscal year 2023, approximately 40% of the company's plate products by volume were sold to independent service centers, with the remainder sold directly to end-use customers.

PRS products, which are under 0.015 inches thick, are used by customers to fabricate a variety of products primarily in the automotive and electronics markets. In fiscal year 2023, approximately 90% of these products by volume were sold directly to end-use customers or through the company's own distribution network, with the remainder sold to independent service centers.

Competitors for nickel-based alloys and superalloys and specialty alloys include Haynes International and VDM Metals GmbH, a subsidiary of Acerinox S.A.

Export Sales and Foreign Operations

International sales represent approximately 46% of the company's total annual sales, with direct export sales by the company's U.S.-based operations to customers in foreign countries accounting for approximately 36% of the company's total sales. The company's overseas sales, marketing and distribution efforts are aided by the company's international marketing team or by independent representatives at various locations throughout the world. At least 50% of ATI's fiscal year 2023 sales were driven by global markets when the company considers exports of its customers.

The company's HPMC segment has manufacturing capabilities for precision forging and machining in Poland, primarily serving the aerospace, construction & mining and transportation markets. In 2022, the company completed the sale of its Sheffield, the U.K. operations, which included facilities for melting and re-melting, machining and bar mill operations, and was part of the HPMC segment. Within the company's AA&S segment, the company's joint venture in China makes PRS products, which enables the company to offer these products more effectively to markets in China and other Asian countries.

Seasonality

Historically, the HPMC segment typically has experienced modest seasonal weakness in the third quarter of each fiscal year (year ended December 2023) due to many European customers, particularly in the aerospace supply chain, taking plant outages during this summer period. ATI also typically performs corresponding annual preventative maintenance outages at several facilities during this same period.

Research and Development

The company funded research and development costs were $20.7 million in fiscal year 2023. Customer funded research and development costs were $1.4 million in fiscal year 2023.

History

The company was founded in 1996. It was incorporated in 1996. The company was formerly known as Allegheny Technologies Incorporated and changed its name to ATI Inc. in 2022.