Derivatives

9 Months Ended

Sep. 30, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

NOTE H. DERIVATIVES

The Company is subject to interest rate risk related to the Senior Secured Credit Facility and entered into interest rate swaps to manage a portion of this exposure. The interest rate swaps are designated as cash flow hedges that qualify for hedge accounting under the hypothetical derivative method. During the first quarter of 2024, the Company and ATI entered into the Amendment to the Credit Agreement that changed critical terms of the hedged item. Therefore, the Company performed a quantitative assessment that demonstrated a highly effective hedging relationship that qualifies for hedge accounting under the hypothetical derivative method.

As of September 30, 2024, the Company held interest rate swap contracts that, in the aggregate, effectively hedge $500 million of the variable rate debt associated with the Term Loan at the Term SOFR weighted average fixed rate of 2.81% through September 2025.

Fair value adjustments are recorded as a component of Accumulated other comprehensive loss, net of tax (“AOCL”) in the Condensed Consolidated Balance Sheets. Balances in AOCL are reclassified to earnings when transactions related to the underlying risk are settled. See "Note F. Fair Value of Financial Instruments” for information regarding the fair value of the Company’s interest rate swaps.

The following tabular disclosures further describe the Company’s interest rate derivatives qualifying and designated for hedge accounting and their impact on the financial condition of the Company (dollars in millions):


		Fair Value
	Balance Sheet Location	September 30, 2024		December 31, 2023
Derivative Assets:
Interest rate swaps	Other current assets	$	6	$	7
	Other non-current assets		—		5
Total derivative assets		$	6	$	12

The balance of net derivative gains recorded in AOCL as of September 30, 2024 and December 31, 2023 was $6 million and $12 million, respectively. See "Note O. Accumulated Other Comprehensive Loss” for information regarding activity recorded as a component of AOCL during the three and nine months ended September 30, 2024 and 2023. As of September 30, 2024, all derivative gains recorded in AOCL are expected to be reclassified to earnings within the next twelve months.