Stockholders' Equity

12 Months Ended

Dec. 31, 2021

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Preferred Stock

Authorized preferred stock may be issued in one or more series, with designations, powers and preferences as shall be designated by the Board of Directors. At December 31, 2021, there were no shares of preferred stock issued.

Dividends

Under the ABL facility, there is no limit on dividend declarations or payments provided that the undrawn availability, after giving effect to a particular dividend payment, is at least the greater of $150 million and 30% of the maximum revolving credit availability, and no event of default under the ABL facility has occurred and is continuing or would result from paying the dividend.  In addition, there is no limit on dividend declarations or payments if the undrawn availability is less than the greater of $150 million and 30% of the maximum revolving credit advance amount but more than the greater of $75 million and 15% of the maximum revolving credit advance amount, if (i) no event of default has occurred and is continuing or would result from paying the dividend, (ii) the Company demonstrates to the administrative agent that, prior to and after giving effect to the payment of the dividend (A) the undrawn availability, as measured both at the time of the dividend payment and as an average for the 60 consecutive day period immediately preceding the dividend payment, is at least the greater of $75 million and 15% of the maximum revolving credit availability, and (B) the Company maintains a fixed charge coverage ratio of at least 1.00:1.00, as calculated in accordance with the terms of the ABL facility.

Share-based Compensation

In May 2020, the Company’s stockholders approved the Allegheny Technologies Incorporated 2020 Incentive Plan (the “2020 Incentive Plan”). Following adoption, all new share-based compensation awards are being made under the 2020 Incentive Plan. Shares previously remaining available for grant under prior incentive plans, or which become available for award due to the forfeiture or cancellation of prior awards under those prior plans, are available for award under the 2020 Incentive Plan. Outstanding grants previously made under prior incentive plans remain in effect in accordance with relevant terms.

Awards earned under the Company’s share-based incentive compensation programs are generally paid with shares held in treasury, if sufficient treasury shares are held, and any additional required share payments are made with newly issued shares. At December 31, 2021, 3.5 million shares of common stock were available for future awards under the 2020 Incentive Plan. The general terms of each arrangement granted under the 2020 Incentive Plan, and predecessor plans, the method of estimating fair value for each arrangement, and award activity is reported below.

Beginning in 2016, the Company implemented a new share-based incentive compensation program, the Long-Term Incentive Plan (LTIP). The LTIP consists of both Restricted Share Units (RSU) and Performance Share Units (PSU). These share units convey participants the right to receive shares of ATI common stock if the performance or market requirements, and service conditions, of the LTIP award are attained. The Company’s previous share-based compensation program included a Performance/Restricted Stock Program (PRSP) of nonvested stock awards for which vesting and expense continued into fiscal year 2020 for certain participants.

Nonvested stock awards/units:

Restricted Share Units: RSUs are rights to receive shares of Company stock when the award vests. The RSUs generally vest over three years based on employment service, with one-third of the award vesting on each of the first, second and third anniversaries of the grant date. RSU awards to non-employee directors vest in one year. No dividends are accumulated or paid on the RSUs. The fair value of the RSU award is measured based on the stock price at the grant date.

Nonvested stock awards: Prior to 2016, awards of nonvested stock were granted to employees under the PRSP, with either performance and/or service conditions. Awards of nonvested stock are also granted to non-employee directors, with service conditions. For nonvested stock awards, dividend equivalents, whether in stock or cash form, accumulate but are not paid until the underlying award vests.

The fair value of nonvested stock awards is measured based on the stock price at the grant date, adjusted for non-participating dividends, as applicable, based on the current dividend rate. For nonvested stock awards to employees in 2014 and 2015 under the Company’s PRSP, one-half of the nonvested stock (“performance shares”) vested only on the attainment of an income target, measured cumulatively over a three-year period. The remaining nonvested stock awarded to most employees under the 2015 PRSP vests over a service period of three years; for certain senior executives this service period is five years for the 2015 award. The remaining PRSP nonvested stock awarded to employees under the 2014 PRSP vest over a service period of five years, with accelerated vesting to three years if the performance shares’ vesting criterion was attained. Expense for each of these awards was recognized based on estimates of attaining the performance criterion, including estimated forfeitures. The three-year cumulative income statement metrics in 2014 and 2015 PRSP awards were not met, and the performance share portions were forfeited. The remaining service portions of the 2014 and 2015 PRSP awards vested at the completion of the applicable service periods.

Compensation expense related to all nonvested stock awards and units was $14.3 million in 2021, $9.6 million in 2020, and $9.8 million in 2019. Approximately $8.9 million of unrecognized fair value compensation expense relating to restricted stock units is expected to be recognized through 2024, with $6.6 million expected to be recognized in 2022, including estimates of service period forfeitures. Activity under the Company’s nonvested stock awards and restricted share units for the years ended December 31, 2021, 2020, and 2019 was as follows:

(Shares in thousands, $ in millions)	2021			2020			2019
	Number of shares/units	Weighted Average Grant Date Fair Value		Number of shares/units	Weighted Average Grant Date Fair Value		Number of shares	Weighted Average Grant Date Fair Value
Nonvested, beginning of year	929	$	17.9	756	$	19.6	1,055	$	23.7
Granted	1,033	17.5		647	10.1		396	10.8
Vested	(505)	(8.9)		(450)	(11.2)		(681)	(14.5)
Forfeited	(48)	(0.9)		(24)	(0.6)		(14)	(0.4)
Nonvested, end of year	1,409	$	25.6	929	$	17.9	756	$	19.6

Performance awards:

Performance Share Units: In 2016, the Company established the PSU award. The 2016 through 2020 PSU award opportunities are determined at a target number of units, and the number of shares awarded is based on attainment of two ATI financial performance metrics. PSU awards through 2020 are accounted for as performance condition plans with service vesting requirements, with compensation expense during the performance period recognized based on estimates of attaining the performance criteria, including estimated forfeitures, and is evaluated on a quarterly basis. The metrics for PSU awards through 2018 measured (1) net income attributable to ATI and (2) return on invested capital, over a three-year performance period. The metrics for the 2019 and 2020 PSU awards measured (1) net income attributable to ATI and (2) return on capital employed, over a three-year performance period. The 2019 and 2020 PSU awards each have a threshold attainment of 25% and a maximum attainment of 200% of the target financial performance metrics and target share units, measured over the applicable three-year performance period. For certain senior executives, the number of PSUs to be awarded based on the performance criteria is modified up or down by up to 20% based on the Company’s relative total shareholder return (TSR) over the performance measurement period (“TSR Modifier”), but not above the maximum number of PSUs to be vested. The TSR Modifier is measured as the return of the Company’s stock price (including assumed dividend reinvestment, if any) at the end of the performance period as compared to the stock prices (including assumed dividend reinvestment, if any) of a group of industry peers. The fair value of the PSU award is measured based on the stock price at the grant date, including the effect of the TSR Modifier. The fair value of the TSR Modifier is estimated using Monte Carlo simulations of stock price correlation, projected dividend yields and other variables over a three-year time horizon matching the TSR performance measurement period. Expense recognition varies with the level of performance achieved.

The 2021 PSU award opportunities are determined at a target number of share units, and the number of shares awarded is based on TSR, representing the measured return of the Company’s stock price (including assumed dividend reinvestment, if any) at the end of the three year period as compared to the stock prices (including assumed dividend reinvestment, if any) of a group of industry peers. The 2021 PSU award is accounted for as a market condition plan with service vesting requirements, with expense recognized over the service period without regard to the level of TSR attainment or shares awarded. The actual number of shares awarded at the end of the measurement period may range from a minimum of zero to a maximum of two times target. TSR is determined over eight distinct quarterly periods as measured from January 1, 2021 through the end of each quarterly period starting with the quarter ending March 31, 2022, through December 31, 2023; earned payouts from each TSR measurement period are banked and averaged to determine the final payout at the conclusion of the three-year period. The fair value for this award was estimated using Monte Carlo simulations of stock price correlation, projected dividend yields and other variables over the three-year time horizon matching the TSR measurement period.

At December 31, 2021, a maximum of 3.0 million shares have been reserved for issuance for the PSU awards. The Company recognized $6.8 million and $14.6 million of compensation expense in 2021 and 2019, respectively, for the PSU awards, and compensation income of $6.7 million in 2020 due to decreased financial performance attainment estimates, which required reversal of previously-recognized expense. Forfeited share units in 2019, 2020 and 2021 were 48,598, 50,050 and 71,801, respectively, with a weighted average grant date fair value of $1.1 million, $1.4 million and $1.7 million, respectively.

The estimated fair value of each PSU award, the target share units awarded and projected future compensation expense to be recognized for these awards, including actual and estimated forfeitures at December 31, 2021 was as follows:

(Shares in thousands, $ in millions)
PSU Award Performance Period	Award Fair Value		December 31, 2021 Unrecognized Compensation Expense		Compensation Expense Expected to be Recognized in the next 12 months		Target Share Units
2019-2021	$	14.7	$	—	$	—	479
2020-2022	$	13.5	—		—		674
2021-2023	$	9.3	6.6		3.1		459
Total			$	6.6	$	3.1

At December 31, 2021, the 2019 PSU awards vested with financial performance attainment between threshold and target and at -20% for the TSR Modifier, resulting in the issuance of 103,621 shares in the first quarter of 2022. At December 31, 2020, the 2018 PSU awards vested between threshold and target attainment, and at -10% for the TSR Modifier, resulting in 301,170 shares being issued in early 2021. At December 31, 2019, the 2017 PSU awards vested above target attainment and at +20% for the TSR Modifier, resulting in the issuance of 669,898 shares. Aggregate compensation expense recognized over the three year performance period for the 2020 PSU award could range from zero to $24 million, including estimated forfeitures, based on the actual financial performance attained. As of December 31, 2021, ATI projects that performance attainment will be below threshold for the 2020 PSU award.