Restructuring Charges

2016

For the year ended December 31, 2016, the Company recorded restructuring charges of $527.2 million, which are presented as restructuring charges in the consolidated statement of operations. These charges were comprised of $471.3 million in long-lived asset impairment charges, $31.7 million of facility shutdown and idling costs, and $24.2 million of employee benefit costs.

On August 24, 2016, the Company announced the indefinite idling of the Rowley, UT titanium sponge production facility and the consolidation of certain titanium manufacturing operations in the HPMC segment. Over the last several years, significant global capacity has been added to produce titanium sponge, which is a key raw material used to produce ATI’s titanium products. In addition, demand for industrial-grade titanium products from global markets continues to be weak. As a result of these factors, titanium sponge, including aerospace quality sponge, can now be purchased from qualified global producers under long-term supply agreements at prices lower than the production costs at ATI’s titanium sponge facility in Rowley, UT. ATI has entered into long-term cost competitive supply agreements with several producers of premium-grade and standard-grade titanium sponge. The lower cost titanium sponge purchased under these supply agreements will replace the titanium sponge produced at the Rowley facility. As a result of these actions, the Company recorded a non-cash impairment charge of $470.8 million during the quarter ended September 30, 2016 to reduce the carrying value of the Rowley, UT facility to an estimated fair value of $15.0 million. The long-lived asset impairment charge was based on an analysis of the estimated fair value, including asset appraisals using cost, income and market approaches, which represent Level 3 unobservable information in the fair value hierarchy. The indefinite idling of the Rowley, UT facility was completed in the fourth quarter 2016, as was the closure of a small titanium wire production facility in Frackville, PA, and the idling of certain titanium manufacturing operations in Albany, OR. In addition, during the fiscal ended December 31, 2016, the Company recognized $23.8 million of facility shutdown and idling costs, including contract termination costs, and $7.5 million of employee benefit costs including severance obligations for the elimination of approximately 180 positions associated with these and other HPMC restructuring actions. The Rowley facility is being idled in a manner that allows the facility to be restarted in the future if supported by market conditions.

On October 25, 2016, the Company announced the permanent closure of the Midland, PA commodity stainless steel melt and sheet finishing facility and the Bagdad, PA grain-oriented electrical steel (GOES) finishing facility. These facilities, which were part of the Company’s Flat Rolled Products (FRP) operations, were indefinitely idled earlier in 2016, and management concluded that the facilities cannot be operated at an acceptable rate of return. As a result of these actions, the Company recorded $8.4 million during the year ended December 31, 2016 of closure-related costs and asset impairments, and $4.9 million of employee benefit costs, including $3.4 million of special termination benefits for pension and other postretirement benefit plans.

Also during 2016, an $11.8 million charge was recorded for severance obligations in the FRP operations, for the reduction of approximately one-third of FRP’s salaried workforce through the elimination of over 250 positions, which was largely completed by the end of 2016.

2015

For the year ended December 31, 2015, the Company recorded restructuring charges of $64.3 million, which are presented as restructuring charges in the consolidated statement of operations. These charges were comprised of $54.5 million in long-lived asset impairment charges, $3.5 million in facility idling costs, and $6.3 million in employee severance charges. The long-lived asset impairment charges were based on analysis of the estimated fair values, including asset appraisals using income and market approaches, which represents Level 3 unobservable information in the fair value hierarchy.


•	In December 2015, the Company announced the following rightsizing actions to better align its Flat Rolled Products operations to the challenging market conditions for its commodity products:


•	Idling the commodity stainless melt and sheet finishing operations at the Midland, PA facility, which was completed in January 2016. A $24.2 million impairment charge was recognized to reduce the carrying value of the Midland facility to estimated fair value.


•	Idling GOES operations in Western PA, including the Bagdad, PA finishing facility, which was completed in April 2016. A $30.3 million impairment charge was recognized to reduce the carrying value of GOES operations assets to estimated fair value.

A $3.5 million charge for future idling costs of the Midland and GOES operations was also recognized.


•	As announced in October 2015, in the fourth quarter 2015 the Company implemented a salaried workforce reduction of approximately 100 employees, in response to business conditions, in both the HPMC segment and at ATI’s headquarters. Severance charges of $6.3 million were recorded in the fourth quarter for this action.

Reserves for restructuring charges at December 31, 2016 consist of severance and employee benefit costs and closure costs incurred in both 2015 and 2016, which are expected to be substantially paid in 2017. Restructuring reserves are as follows:



	Severance and Employee Benefit Costs			Closure Costs			Total Restructuring Reserves
Balance at December 31, 2015	$	4.5		$	3.6		$	8.1
Additions	20.8			28.0			48.8
Payments	(11.4		)	(12.4		)	(23.8		)
Balance at December 31, 2016	$	13.9		$	19.2		$	33.1