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Income Taxes | 12 Months Ended
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Dec. 29, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income (loss) before income taxes for the Company’s U.S. and non-U.S. operations was as follows:
|  | Fiscal Year
(In millions) |  | 2024 |  | 2023 |  | 2022
U.S. |  | $ | 421.1 |  |  | $ | 258.2 |  |  | $ | 394.3 |
Non-U.S. |  | 65.0 |  |  | 37.0 |  |  | (39.7) |
Income before income taxes |  | $ | 486.1 |  |  | $ | 295.2 |  |  | $ | 354.6 |
The income tax provision (benefit) was as follows:
|  | Fiscal Year
(In millions) |  | 2024 |  | 2023 |  | 2022
Current: |  |  |  |  |  |
Federal |  | $ | (0.3) |  |  | $ | 3.0 |  |  | $ | 5.0 |
State |  | 6.9 |  |  | 0.5 |  |  | 3.7 |
Foreign |  | 7.0 |  |  | 7.8 |  |  | 10.0 |
Total |  | 13.6 |  |  | 11.3 |  |  | 18.7 |
Deferred: |  |  |  |  |  |
Federal |  | 84.5 |  |  | (96.1) |  |  | (3.3) |
State |  | 4.3 |  |  | (42.5) |  |  | 0.2 |
Foreign |  | 1.0 |  |  | (0.9) |  |  | (0.1) |
Total |  | 89.8 |  |  | (139.5) |  |  | (3.2) |
Income tax provision (benefit) |  | $ | 103.4 |  |  | $ | (128.2) |  |  | $ | 15.5 |
The following is a reconciliation of income taxes computed at the statutory U.S. Federal income tax rate to the actual effective income tax provision (benefit):
|  | Fiscal Year
(In millions) |  | 2024 |  | 2023 |  | 2022
Taxes computed at the federal rate |  | $ | 102.0 |  |  | $ | 62.0 |  |  | $ | 74.5 |
State and local income taxes, net of federal tax benefit |  | 9.3 |  |  | 1.2 |  |  | 2.9 |
Valuation allowance |  | (0.3) |  |  | (198.8) |  |  | (84.4) |
Global Intangible Low Taxed Income (GILTI ) |  | 3.3 |  |  | 5.0 |  |  | — |
Restructuring/Divestitures |  | — |  |  | — |  |  | 23.0 |
Foreign earnings taxed at different rate |  | 3.4 |  |  | 2.7 |  |  | 3.2 |
Withholding taxes |  | 2.1 |  |  | 4.8 |  |  | 2.6 |
Preferential tax rate |  | (4.1) |  |  | (3.6) |  |  | (4.9) |
Other |  | (12.3) |  |  | (1.5) |  |  | (1.4) |
Income tax provision (benefit) |  | $ | 103.4 |  |  | $ | (128.2) |  |  | $ | 15.5 |
In fiscal year 2024, the income tax provision of $103.4 million includes discrete tax benefits of $6.2 million, which includes $3.3 million for share-based compensation and $0.8 million related to the recognition of a stranded deferred tax valuation allowance in accumulated other comprehensive loss that was associated with the Company’s interest rate swap due to its maturity (see Note 15). In fiscal year 2024, the amount of GILTI is representative of the amount after GILTI tax credits and deductions. In fiscal year 2023, the amount of GILTI represents a full inclusion due to ATI’s net operating loss utilization and inability to utilize GILTI tax credits. In fiscal year 2022, due to the loss on the sale of the Sheffield operations, there is no current year inclusion. The Company has elected to recognize GILTI liabilities as an element of income tax expense in the period incurred. Other benefits in the current year are primarily related to research and development benefits and the disallowance of the above the line income related to the Advanced Manufacturing Production Credit (AMPC) as discussed in Note 18. In the fourth quarter of fiscal year 2024, the Company was granted a preferential tax rate related to the PRS joint venture operations in China for tax years 2024 through 2026. The preferential tax rate is 15%, compared to the statutory rate of 25%. The Company must re-apply for the High and New-Technology Enterprise (HNTE) status every three years to be eligible for the preferential rate. This same preferential rate was in effect for tax years 2021-2023. The provision for income taxes for the fiscal year ended January 1, 2023, is mainly attributable to the Company’s foreign operations and state income tax expense associated with states that limit net operating loss utilization as the expense related to current year operations for federal and state purposes was mainly offset by the valuation allowance release attributable to that income. On May 12, 2022, the Company sold its Sheffield, U.K. operations which resulted in a pre-tax loss of $112.2 million (see Note 6 for further explanation) for which the benefit was disallowed for tax purposes, resulting in a $23.0 million tax expense impact as shown in the effective tax rate reconciliation table above. The Company’s income tax expense has been impacted by the effects of valuation allowances on federal and state deferred tax assets for fiscal years 2022 through 2023. The Company recognizes deferred tax assets to the extent it believes these deferred tax assets are more likely than not to be realized. Valuation allowances are established when it is estimated that it is more likely than not the tax benefit of the deferred tax asset will not be realized. In making such determination, the Company considers 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. The verifiable evidence such as future reversals of existing temporary differences and the ability to carryback are considered before the subjective sources such as estimated future taxable income exclusive of temporary differences and tax planning strategies. In situations where a three-year cumulative loss position exists, the ability to consider projections of future results as positive evidence to assess the realizability of deferred tax assets is subjective. If the Company determines that it would not be able to realize its deferred tax assets in the future in excess of their recorded net amount, an adjustment to the deferred tax asset valuation allowance would result. In fiscal year 2023, ATI recorded a tax benefit associated with the valuation allowance due to the current year income for the U.S. operations and a $140.3 million additional benefit was recorded related to the valuation allowance release associated with ATI’s ability to utilize projections for future income. In fiscal year 2022, ATI recorded a tax benefit associated with the valuation allowance due to the current year income for the U.S. operations. As a result of the current year income, ATI utilized net operating loss carryovers which in turn resulted in a release of the corresponding valuation allowance on the operating loss deferred tax assets. The Company also maintained valuation allowances on deferred tax amounts recorded in AOCI in fiscal years 2024, 2023 and 2022 of $23.3 million, $24.1 million, and $23.9 million, respectively, which are not reflected in the preceding table reconciling amounts recognized in the income tax provision (benefit) recorded in the statement of operations (see Note 15). Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes, and differences between the fair value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred income taxes represent future tax benefits or costs to be recognized when those temporary differences reverse. The categories of assets and liabilities that have resulted in differences in the timing of the recognition of income and expense at December 29, 2024 and December 31, 2023 were as follows:
|  | Fiscal Year
(In millions) |  | 2024 |  | 2023
Deferred income tax assets |  |  |  |
Net operating loss tax carryovers |  | $ | 73.4 |  |  | $ | 133.0 |
Pensions |  | 6.0 |  |  | 2.2 |
Postretirement benefits other than pensions |  | 45.2 |  |  | 48.5 |
Tax credits |  | 44.0 |  |  | 43.5 |
Research and development |  | 25.7 |  |  | 20.7 |
Inventory valuation |  | 24.3 |  |  | 1.1 |
Other items |  | 102.8 |  |  | 107.5 |
Gross deferred income tax assets |  | 321.4 |  |  | 356.5 |
Valuation allowance for deferred tax assets |  | (57.7) |  |  | (60.3) |
Total deferred income tax assets |  | 263.7 |  |  | 296.2 |
Deferred income tax liabilities |  |  |  |
Basis of property, plant and equipment |  | 180.5 |  |  | 124.8 |
Basis of amortizable intangible assets |  | 13.4 |  |  | 14.9 |
Other items |  | 28.0 |  |  | 25.5 |
Total deferred tax liabilities |  | 221.9 |  |  | 165.2 |
Net deferred tax asset |  | $ | 41.8 |  |  | $ | 131.0 |
The Company’s valuation allowance for deferred taxes was $57.7 million at December 29, 2024, $60.3 million at December 31, 2023 and $266.9 million at January 1, 2023. The reduction in the valuation allowance in fiscal year 2024 was primarily due to a state valuation allowance release, which was mostly offset by the expiration of state tax attributes for income tax purposes. The change in the valuation allowance in fiscal year 2023 was due to a $206.6 million valuation allowance release due to taxable income during that fiscal year as well as projections of future years’ taxable income, of which $7.8 million was reflected as a state and local tax benefit. In fiscal year 2023, the deferred tax liability related to inventory changed from a deferred tax liability to a deferred tax asset. This change is related to the recognition of the deferred tax liability associated with the accounting policy change from the LIFO inventory cost method adopted by the Company during the fourth quarter of fiscal year 2021, which for tax purposes is recognized over four years versus one year for book purposes. Fiscal year 2024 is the final year of inclusion related to the recognition of the deferred tax liability associated with LIFO. The following summarizes the carryforward periods for the tax attributes related to NOLs and credits by jurisdiction. The following summarizes the carryforward periods for the tax attributes related to NOLs and credits by jurisdiction.
($ in millions, U.S. and U.K. NOL amounts are pre-tax, all other items are after-tax, and state is before federal benefit)
Jurisdiction | Attribute | Amount | Expiration Period | Amount expiring within 5 years | Amount expiring in 5-20 years
U.S. | NOL | $83 | Indefinite | $— | $—
U.S. | Foreign Tax Credit | $22 | 10 years | $22 | $—
U.S. | Research and Development Credit | $13 | 20 years | $— | $13
State | NOL | $73 | Various | $14 | $59
State | NOL | $1 | Indefinite | $— | $—
State | Credits | $8 | Various | $4 | $4
U.K. | NOL | $9 | Indefinite | $— | $—
Poland | Economic Zone Credit | $3 | 7 years | $3 | $—
Income taxes paid and amounts received as refunds were as follows:
|  | Fiscal Year
(In millions) |  | 2024 |  | 2023 |  | 2022
Income taxes paid |  | $ | 18.2 |  |  | $ | 16.7 |  |  | $ | 18.9 |
Income tax refunds received |  | (3.2) |  |  | (0.9) |  |  | (0.4) |
Income taxes paid, net |  | $ | 15.0 |  |  | $ | 15.8 |  |  | $ | 18.5 |
Deferred taxes of $9.9 million have been recorded for foreign withholding taxes on earnings expected to be repatriated to the U.S. The Company does not intend to distribute previously taxed earnings resulting from the one-time transition tax under the Tax Act, and has not recorded any deferred taxes related to such amounts. The remaining excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries is indefinitely reinvested, and the determination of any deferred tax liability on this amount is not practicable. Uncertain tax positions are recorded using a two-step process based on (1) determining whether it is more-likely-than-not the tax positions will be sustained on the basis of the technical merits of the position and (2) for those positions that meet the more-likely-than-not recognition threshold, the Company records the largest amount of the tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The changes in the liability for unrecognized income tax benefits for the fiscal years ended December 29, 2024, December 31, 2023 and January 1, 2023 were as follows:
|  | Fiscal Year
(In millions) |  | 2024 |  | 2023 |  | 2022
Balance at beginning of fiscal year |  | $ | 8.9 |  |  | $ | 9.1 |  |  | $ | 14.2 |
Increases in prior period tax positions |  | — |  |  | 1.2 |  |  | — |
Decreases in prior period tax positions |  | (0.9) |  |  | — |  |  | (3.3) |
Settlements |  | (0.2) |  |  | — |  |  | — |
Expiration of the statute of limitations |  | — |  |  | (1.4) |  |  | (1.8) |
Balance at end of fiscal year |  | $ | 7.8 |  |  | $ | 8.9 |  |  | $ | 9.1 |
For fiscal years ended December 29, 2024, December 31, 2023 and January 1, 2023, the liability includes $6.9 million, $7.2 million and $7.8 million, respectively, of unrecognized tax benefits that are classified within deferred income taxes as a reduction of NOL carryforwards and other tax attributes. The total estimated unrecognized tax benefit that, if recognized, would affect ATI’s effective tax rate is approximately $0.9 million. At this time, the Company believes that it is reasonably possible that approximately $0.5 million of the estimated unrecognized tax benefits as of December 29, 2024 will be recognized within the next twelve months based on the expiration of statutory review periods. The Company recognizes accrued interest and penalties related to uncertain tax positions as income tax expense. The amounts accrued for interest and penalty charges for the fiscal years 2024, 2023 and 2022 were not significant. At December 29, 2024 and December 31, 2023, the accrued liabilities for interest and penalties related to unrecognized tax benefits were $0.8 million and $1.3 million, respectively. The Company, and/or one of its subsidiaries, files income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. A summary of tax years that remain subject to examination, by major tax jurisdiction, is as follows:
Jurisdiction |  | Earliest Year Open to Examination
U.S. Federal |  | 2024
States: |  |
Pennsylvania |  | 2021
Illinois |  | 2021
California |  | 2020
Foreign: |  |
China |  | 2021
Poland |  | 2018

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