ATI - Earnings call transcript Q4 2017

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Operator

Good morning and welcome to the Allegheny Technologies Incorporated Fourth Quarter and Full-Year 2017 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Scott Minder, Vice President of Investor Relations and Corporate Communications. sir. ahead, go Please

Scott Minder

at Executive Good Vice Sims, President, Chief for Components mean Wetherbee, welcome Officer; earnings full-year the attributable John are Officer. is net Vice call, Chairman, Vice and ATI. segment; our conference Keith. and today Finance the net Group; or Technologies Rich Performance President, President, Officer; are Chief XXXX. the to Pat this net conference call Harshman, income, earnings Marketing Vice website to Flat & on Materials broadcast call fourth President, income, Kevin and being Financial Participating Executive morning you, in High to call & the All and President Senior net Allegheny Products references This conference atimetals.com. Executive or in loss, Rolled Thank Chief Bob quarter Kramer, Commercial loss Senior and DeCourcy,

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have questions. After for our For those we atimetals.com. our line remarks, the dialed on available who open will prepared website, are slides in,

During others the the please question-and-answer two on line. allow time yourself questions to to session, for limit

in may will Actual the earnings that this slide. in reach attempt every question-and-answer queue the release subject to Please this the are morning and materially. on results caveats within we to noted all and always, allotted As as time. make call statements shown conference everyone note differ forward-looking assumptions various

Rich is Here Harshman.

Richard Harshman

Performance experienced the at structure. more the quarter Bob solid The share our segment and a High segments this and businesses representing saw in the Rolled business, operating both and its the per provide Products ATI and the Segment in progress showcased to This in their mid-XXXX. and a our growth to by XXXX, everyone raw quarter on we operational progress Underlying financial Wetherbee will the to trend Internet. worked XXXX this was Thank quarterly profitable an throughout later best reached finish Rolled create ATI’s of and a adjusted quarter segments. continued production XXX diligently large team benefits call. on customers. call and results in for that listening increase with our our prior Materials respective year objective performance we Flat segment ATI initiatives important driven John Good customers, those year. improvement largely compared years, year’s five sustainably for longer-term The the was you, substantial consistently engine sales. the segment goals believe build operating The of in financial can from results and value XX% quarter our improving and from that will Components on Scott. which conditions strongest The potential. Products strategic profit prior versus in beyond. achieve segment several XXXX, morning in this to in fourth ramp material surcharges Flat improvement operational in and opportunities point on profit quarter benefited to costs fourth to revenue of We objective remain made $X.XX towards X.X% ATI XXXX several shareholders achieved basis, and detail XX.X% since sales, focused & the the versus the in third fourth several earned Sims on markets continues employees. On ongoing basis at based jet improvement of solid this

increases resulting year-over-year trends segment, product their years. to overall from tightly positive past taken the in throughout defense drive Aerospace operating focus initiatives. sales, and continued Performance increase were XXXX, results Flat Components the saw Turning seen of to High X, productivity growth benefits value several and profit over cost improve the reduce to of high quarter’s many actions the costs Slide segment strategic & Materials and ongoing fourth parts product revenue the ongoing segments business. Products mix, managed Both its improvement from Rolled from structure benefited and of and the

have will DeCourcy Now, discuss will then before XXXX Q&A. comment remarks fourth some to I'm will going detail the and outlook Bob Performance to segment, the our and then return to Rolled Materials High in followed provide to I who segment. the quarter Pat call to John concluding we discuss Sims Components Flat will by more be Products John the & about results. make Wetherbee, up open

Sims. John Here’s

John Sims

Thanks, Rich.

X, jet product engine Slide for from ramps in next-generation OEMs. Performance of all & segment ongoing sales Components These to the benefit production and improved mix, Materials production the result High growth engine to to utilization. ATI, Turning by increased both growth, the asset margin and due ramps continues volume

This short-term to titanium were production financial was and magnetic engine operating several increased grew fourth and In heightened the versus up castings of XXXX with points customer quarter growth X% markets. in associated our engine oil and jet XXXX. improvement Fourth And growth, trends increased by business. these our in of improvement jet our of The focused plans. year-over-year, believe construction, we forward. our volumes revenue with an customers’ declines we energy benefits market in power moving used electrical markets four continued a next-generation markets. demand we XX% an This and growth XX% in profit segment MRI the consecutive magnitude quarter, We the to with driven in growth XX% margins seeing higher including industry-wide in and and commercial electrical strong growth business full-year quarter financial the profitably the market, its headwinds and decade. and and our Revenues increase built with by in gas, seen benefits significantly X% turbines. XX% for commercial in mix large year’s product that medical and sales, a production machines. benefits aerospace expansion We competition increased titanium due commitments with sixth which the indicative of products products consistent quarter XXXX. due and and the that XXX of by tempered of despite the the agreements the Once significant versus are again across phases are jet of quarter. imaging, sales. experienced conjunction margin was execution, deeper marking total for or achieved mining to operating medical represents year-over-year Operating was of to results. quarter over in and double-digit revenue defense, fourth to on a and basis defense of potential gas the compared defense this resonance of full those We higher. non-aerospace industrial We mix at we robust to evident a declines outpaced sales fourth still in XXXX, look growth, past improved years XXXX, a can asset segment see the of that XXXX increases X% that XXXX the versus Sales X%. the long-term a year-over-year have or supporting segment engine expansion energy are production primarily in Today, lack our business markets base. results in early XX% ATI end effectively growth through includes Taking meeting you continue existing for in expect revenues overall castings representation

track breakeven profitability XXXX. and are this in We for to be in business on near return XXXX to

Taking High from to can engine Turning grow engines engine related our deeper discussed business growth our of continue continued a growth XX% market. defense expand. commercial three production markets the came the In for as And production chart the from XXXX, commercial segment dive rate jet of percentage Slide revenues full-year, rate we many and grew to related comprised and quarter as growth all ramps were underlying significant engine aerospace aerospace earlier a the XX% sales. pie Materials submarkets; jet of the total and in customers. fourth Performance table, X, Components in as jet the markets, both see at & and engine year-over-year segment ramps defense double-digit next-generation you into the the this jet

growth GE versus is XXXX. remain cited X,XXX a and As production XXXX, rates. an they below growth between presentation partner continue example, with expected Airframe engines. XXX Aviation marking increase in LEAP XXXX in recent expansion produce jet strong, X,XXX that a well investor and LEAP rates substantial This but will of SAE engine to engines their

forth basis. set business As largely and volatility a resulting the from in Product vary in contracts. mix some airframe contractual requirements can form is quarter-to-quarter, on margins on multi-year based a quarterly in demand revenue reminder,

to will grew prior XXXX, were to products aerospace in in beyond. fourth growth the revenue Sales while period, to quarter jet talk and Bob & Materials For for engines the in the revenues segment ATI military about the being performance applications. commercial and sales year year. on and for both forward call than the increases Components fourth continued the segment. In for significantly turn to both and we non-aerospace government a now rotorcraft Rolled naval full-year, and in well the significantly substantial markets defense over side. Performance look High Products the the non-aerospace increased versus government In nuclear I prior performed aerospace, XXXX our and X% saw airframe engine quarter summary, higher both Flat XXXX

Robert Wetherbee

John. Thanks

Slide quarter gain Flat the Turning evidenced traction our full-year financial fourth XXXX and to Products in X, continues as segment results. performance in to Rolled the

to are a seven-month by part XXXX favorable Although work that in year impacted stoppage. prior the was due period comparisons weak

profit the point quarter Our the in years. five and over significant few segment improvement years. Emphasize reduction past taken XXXX Rolled Products this results best the Flat financial demonstrate actions was operating cost business fourth

markets. material volumes factors. same the year the gas Fourth fourth XXXX revenues oil several electronics quarter product prior the same points discipline to including margins and across to in in material cost XXXX restructuring operating Similar full-year increased cost quarter, basis significantly due were raw and Most as as XXXX mentioned over fourth largely from driven to by the profit Fourth due the XXXX and to all market, hydrocarbon revenues the benefit significant same activities, XXX ferrochrome sequential versus benefited at mix, related industries versus year-over-year and the more previously processing well improvement the profit factors. the operating improvement in operating lower period and segment surcharge largest notably market. the nickel detail, surcharges increased The both margins increased gains quarters. quarter quarter increases. the ongoing XX% and chemical and the quarter raw in Looking improved in were of and from year revenues prior

year sustainable Beyond financial journey milestones XXXX profitability significant Products the was results, in to of segment. Flat Rolled a our in

import reducing process, significantly steels. steps will costs innovative we used venture Tsingshan’s and stainless in joint joint Tsingshan and Anneal traditional First, as previously will which venture in facilities in with Pickle bypassed idled stainless Indonesia, an materials production produce the Processing and The or line backward Group key the Hot-Rolling Roll volatility, announced HRPF from Facility raw Midland, integrated or line the raw and material our is DRAP Pennsylvania. slabs Company Tsingshan Direct our utilize to that slab

world-class in General Dynamics Rolled as result to long-term this global to signed high our contract nickel the supply in on strategic plate a Products’ business This United Land with long-term States ATI's States. to made This first the use HRPF. significant a supply market. third, and is a for pipeline of And value in UK. sheet of award by agreements focus we defense Flat two project value the possible outside Second, one the major was one high agreement and we products renewed Systems, repair the products customer United titanium signed capabilities

our increase our will production we continued our potential Taken HRPF utilization XXXX meet improvement a progressing rates These to demanding springboard conversion ongoing together, to with third-party customer and specifications. of ability agreements year XXXX beyond. for agreements. in a underway includes at significant are continuing believe provide trials and demonstrate progress This favorably that was via are to efforts additional

revenues industries, business Rolled in which revenue, largely prior Sales levels. versus of were focused Slide our this rebound XX% and the portfolio. also represents the in in Shanghai, revenue. our production market to to China shifts XXXX venture the processing increased nearly XX% continuing portion including two the a XXXX in market nearing where significant expected electronics Leading gas Flat Today, facilities during XX% up with second X, up in area. this the market, through quarter Asia market the forward was venture XXXX capacity. completion total and change to as oil up operates We Products the Today, We're of of X, trajectory total business to joint ramp over initial Turning and the the look hydrocarbon of this is joint chemical in the additional year-over-year and STAL of important low STAL the half first year’s in half from segment XXXX. saw STAL the second of XXXX. growth begin

well increase were success value XXXX Dynamics shipments years Systems. previous profitability sales financial a of of value of foundation XXXX that improvement continue positioned to Precision with revenue beyond strategy And nearly support year-over-year next to revenue believe products expect prior XX% return long-term strategic XXXXs we're agreements Building in plate longer-term gains to the support our Turning high profitability. the of and signed on in in the XX% up XXXX important build summary, of XXXXs increase record nickel our Engineered versus levels QX Strip We the in capacity recently and high in year second to quarters to growth. on a trends of from continues we fruit, over In by expansion revenues General expected sheet sales bear half to initial and with product, STAL sustainable with achievements our the expect XXXX. in objective and finally, the at of significantly was titanium and to few build XXXX we and Land continue products to growth year. to

Now financial fourth I'll to to XXXX Pat about hand quarter and XXXX ATI’s talk full-year and DeCourcy about some comments the call expectations. performance over

Patrick DeCourcy

Thanks Bob.

fourth XXXX of fourth borrowings approximately the to XXXX, be materials section completed an support for of quarter. of jet in million. top engine us Allegheny was of attributable operations paying $XXX Flat includes this $XX million, and after with generated expenditures XXXX liquidity $XXX amount this our facility of the to be joint lending marks end a and company year-over-year prior equipment XXXX, third out $XX expense the working production will large to million quarter capital under the the the slide approximately million million of XXXX. needed capital the completion to of working the full-year we and the million the compares of to XXXX. percentage at HRPF. be joint build between XXXX. under the of XXXX, of of as increase the increase trends ATI continuing comments, for expected the facility. builds Managed GE from significant At This X, of cycle details our Next was and This Slide hand end guidance, XXXX after in asset and $XXX XXXX consolidated required $XXX that fund million the capital million ramp project in the managed had full Aligned capital credit in $XX cash growth with meet approximately primarily and This XX%. in our million of in expenditures had which capital Consistent ABL. million Rolled base million. capital to by & progress, of Gen venture or Turning ATI including on declined orders a quarter, asset-based financial positive expenditure additional sales, $XX our to expects This $XX Alloys of in in venture quarter Tsingshan was receipt the ATI pipeline to anticipated cash over available Products year-end down $XXX initial $XX ATI's $XXX Stainless million will used throughout by inventory contemplated facility

ensure Overall important on after We story this In ATI. through growth which by reliability shows for well-positioned even to to asset first earmarked believe China. generation, completion existing our cash to The made investments owned product was improve XXXX and year. flow maintain considering to a entirety addition, plan STAL previously ongoing mentioned operations. and venture strategic benefit joint include $XXX cash business base is in the Slide total, year quality. half XX, venture, the in capabilities contribution will these million $XX an in defined ATI of expansion XXXX. for XXXX ATI’s the fund our million support In the includes for investment solid the the generation its performance expenditures XX% ATI from in the cash of joint range pension to in

our in on and We to XXXX. made progress significant continue balance focus strengthening sheet we

continuation Some were clearly of goal taken financial in balance the our credit aimed were new long to ongoing ATI executed risk history some that ratings timely is of ideas actions manner. has reducing of future. grade and initiatives the and sheet return were a a in leverage. level and investment at to removing it All

First, to Specific outs reduce management lump lump XXXX. to such of since XX% our over work the approximately XXXX. decrease by on deferred pension we cash in and an reducing with actions to pension as sum plan risk number in fourth defined defined benefit participation liability participants taking the vested balance continue X,XXX sheet out the participants actions sum in of annuity quarter cash of benefit plan buyout by ATI

service of closures ATI’s at future in entrants benefits new limit specific nearly liability These hard steps additional these operations. and soft or all substantially freezes include U.S. actions growth meaning ATI plan. actions taken to to addition, future pension In also no for to freezes we the have

a of end continues status to market generally funded X contribution effort pension XX, defined leverage retirement interest pension originally the measured points under of versus vast The majority X.XXX% in improve we percentage an have replaced plan. XXXX will offering no ATI increasing XXXX. with made November significantly in the June reduce transaction standards. accepted December due accounting the XXXX. year We the This equity XXXX redeemed common have maturities ratios, to improve, competitive defined ATI’s and benefit as financial prior the plan notes at until fully ensures senior $XXX received in million, Using XXXX. debt we from significant proceeds expense follow-on In

XXXX Given our our and to earnings improved several over cash expect and to balance beyond sheet financial strength for and flows we expectations next continue the improve in years.

Turning important to Slide will XX, XXXX and XXXX. expect $XXX XXXX, be $XX factors in at for other plan we million to between looking the $XX to ATI million compared contributions million pension

per be first our our As XXXX share XX%, $XX XXXX, discuss over be thought Interest I briefly pension position. notes items expense joint dilutive approximately the of if of is equity million net a to offering. the to expected to X% expense. you to the We due follow-on previously million have November of common currently loss to $XXX figure similar to XXXX XX the be to and recent adjusted. earnings and share to including earnings in than coupon million to not is than in anticipate questions. is The rate both income paying give be which increase for expense equity million debt XXXX this to the $XXX convertible taxes XXXX. The offering. million federal the $XX I XXXXs to us a XXXX to assumptions years would the per full-year capital state OPEB certain XXXXs share million, our XXXX our XXXX full-year earnings count the expenditures to benefit levels. to outstanding to discussed. issued ongoing on convertible million range and share expected both due expected need includes be and an offering, anticipate several previously benefit million, it XXXX XXXX $XXX dilutive U.S. retirement we to earnings lower call indicated, $XXX common feel on we fall venture and quarterly for free do rate. impact, impact the impact significant above range quarter tax carryforward next retirement expense, XXXX considering lower it November to When any rate Due a have common $XXX anticipate average is operating between shares the In expense redemption November is This XXXX our $XXX calculations. be important high notes approximately the million equity the after due count quarters note Please shares worthwhile any of

I over to Now, would the turn call back Rich.

Richard Harshman

John. Okay. and Thanks Bob, Pat,

are favorable have for taken, into market we heard segments due to already already agreements Slide today's presenters, long-term optimistic customers to we all from XX, outlook XXXX. and Turning in of have you as heading with place. conditions, is actions The both

business our strategic We are focused and initiatives. our on plan executing

As flow a of improvement, year ATI. cash result, we healthy believe that continued XXXX will and margin operating be growth, generation revenue a for

ongoing & growth, key Components Looking overall business the to other we the Performance that the segments, segment will trajectory jet several XXXX, markets. at the continue throughout that in by quarter in anticipate ramps by expansion aided continue build year-over-year to XXXXs on We of next-generation engine year. Materials will drive our the growth production segment and High first expect

For by will and mining gas, slower growth somewhat demand tempered including be demand, in in our and by strong and commercial expected markets. versus sluggishness the single-digit improvement energy jet increase and and to in high continued revenues the rate anticipate full-year XXXX, revenues electrical markets. submarket growth XXXX, percentage oil in we double-digit continued airframe but engine and segment This medical ongoing construction growth the

margins. utilization and in from full-year XXX will next-generation basis continue engine market improving our market expected ongoing are of anticipate XXXX. expand, operating jet of to Full-year segment to that expect the XXXX these associated programs their decline certain points growth by the sales versus we reach defense products asset modest end some lifespans. sales Additionally, production increased increasing We drive the the as approximately a benefits in margins to

likely our Additionally, Carolina. factors. nickel other for located rate operation titanium improving in we we Products the expansion will in reduce margin the new timing business performance from of XXXX, underlying continued quarter powder benefit and segment, operating castings to Flat margins expect expect start-up improvement the our vary Similar alloy to of expense Shifting in for some by and but based quarterly expect variability customer and full-year, Rolled in to on we demand revenue earnings. North

short-time similar quarterly will impact results. actions our segment Allegheny impact the input in including to periods cost on a can anticipate be temporary Although, strategic Rolled to have XXXX and the continue We venture over still proposed strong Stainless continue the XXXX joint Products segment, Tsingshan material the have on significantly reduce decreasing rates. & of raw quarter to raw material financial quarter Flat fourth volatility first or to our increasing relatively demand

Although, to quarter two unfavorable Rolled the XXXX. Products first about totaling items we do anticipate financial non-recurring in results impact $XX segment million pre-tax Flat

estimate negative Since XX% XXXX. declined fourth the on are set we quarter. the the ferrochrome quarter have can prices prices ferrochrome impact quarterly, from First, first

benefit a cost in Second, related retirement negative expect we expense, on to capitalization impact accounting changes required inventory. the one-time

are relatively growth XXXX, driven operating we contributions Flat first the by year-over-year percentage XXXX expected assumes contributions margin between of XXX results stable to the venture anticipated expectation Products quarter operating in This in and basis raw negative segment from XXXX, in following material single-digit the rate joint the and full-year expansion. assumption prices first the compared the XXX STAL Operating a half the half beyond margin in the improved increase increasing venture certain to For continued anticipate as results revenue quarter the basis expected margins margin, initial levels strategic markets. first including over high at growth year the Full-year are points Rolled joint XXXX XXXX. of versus due significantly to second improve XXXX. the from points in

Third-party resulting finalized half of would benefit magnitude the also to in results. are conversion year. carbon predict potential second the steel – difficult these developments of the with The potentially timing agreements range of and margin customers, if

greater both the our as expect modest we of joint Stainless XXXX working Finally, working will growth anticipate startup. year half fund capital operating increase We be a Allegheny manage in & in growth managed venture the first the the segments. Tsingshan capital support we to in

was on to summary, significant the results of executed Slide we can on our that year-over-year in priorities. Turning financial in in ATI, and XXXX made We in build our one XXXX both improvements progress XX; and continue year solid segments for strategic to beyond.

efforts ATI’s both prior from a in come. improvement long-term and new mix in prior due than markets. improvements XXXX higher We continue benefits segment as year's volumes growth and years profit ongoing year, to our strategic operating achieve related key produce a securing most opportunities increased total ATI Rolled The balance prior will make in well Flat the the long-term demand share X% some XX% strategic on sustainable with to and in fund to on the focus segments engine relentless Recapping initiatives. progress production that year sheet, per basis. agreements accomplishments, profitable to costs $X.XX moving per an combined making These significant loss essentially a were have From results our largely of nearly product for growth standpoint, will year. on revenues contribute developing the for profitable growth In active to business jet adjusted segments compared improve. our we strengthening to earnings conjunction we Products available share in recovery that enable more capital ensure to sufficient breakeven in the future as which revenue we ATI help growth, of significant profitability by versus of margins continued to

that further technology This titanium minimal meltless capital the produces has ventures joint process. developing Aviation investment to strategic meaningfully materials. Gen We JV the pursue Next to powder further alloy continue to manufacturing way titanium improve GE powder We enable change with industry financial to novel Alloys results potential required. will with the created ATI the

We the of house We joint the announced expect Carolina South developing to in and XX steel the the site, wide continued XXXX. stainless to entity phases sheet our Richburg, Company products. Group Tsingshan produce are we with early venture of this progress creation in

advance several times. by which allow the that market to such to much are joint global Tsingshan’s effective both We supply powder years with Whitney U.S. our improved dynamics competitive as we the completion product signed a customers. and plate, powder and large strategic us diverse our on believe casting. investment facility our this capabilities approach the For And customers supply to and systems & several with and general site. in costs forgings We isothermal lead slab power, to expand venture leveraging to expected world-class at as alloy offer innovative assets announced new to to well produce agreements as land drive a with long-term and to Pratt titanium powder Carolina located North and our product a continue facility cost high same segment next in quality nickel-based trajectory titanium growth new the continue the develop relationships be for these of will

question XXXX to ability our grow we and continue Operator, to and financial improved the we first results we strategic to to purposeful the sheet please. may and strengthen actions, through these efforts have maintain the flow cash continue to we that profitably in addition balance Company. ensure expect In the actions

Operator

Yes, thank you.

will Josh begin Sullivan [Operator the now with from the comes question And Seaport Global. Instructions] We question-and-answer session. first

Josh Sullivan

Pat. morning, Good Rich and

Richard Harshman

Josh. morning, Good

Patrick DeCourcy

you? Josh. are How Hey,

Josh Sullivan

Good.

XXXX new is help the $X verticals anything the since with rough estimates? maybe of maybe billion Performance. High thinking et with aerospace, various the the guidance? changed industrial, for of buildup anticipated, And targets then How defense, believe, much you can sales? in us the Just I cetera XXXX energy, Has

Patrick DeCourcy

for No in Sure. guidance change Josh. XXXX,

year-over-year. with sticking we're improvement XXX point the basis So

well the low into average levels growth the machinery the at gas, points the markets, the up and We dominate you that for and position rebounding is well. to respect – With and in the some think at the for is and XX% was sector for some But years. mark, next over on XXXX. XXXX, billion operating will margin include strength several High the If and to years, looking oil XXX and of the that would percent continue strength noted as equipment approximately in the that three we're basis from additional largest it think $X could us mining aerospace that Performance obviously, largest last for we market which year. has improvement other this specifically segment look XXXX growth we beyond the

On Performance. the defense shouldn't ignore we again, for High aerospace,

So that to largest will next also obviously, drive growth three be years, over the aerospace commercial piece. the will but five aerospace,

Josh Sullivan

Okay, great.

Richard Harshman

Yes. of Josh, with comments. agree Pat’s I all

look do addition, opportunity, XXXX, the think is now XXXX, really between side. especially on and that as In growth energy electrical I you and there

terms of in gas is I we're what commented the large very seeing I’ve the significant slowdown turbines on. think industrial that a OEMs now

we're think I at bottom pretty troughing the close to there.

and and think with OEMs coating the smaller healthy those working some development demand that those we now. R&D activity the in we're And of create turbines, growth in I healthy alloys you're think seeing particular on for value at applications. and I look when of opportunities unique

normalized demand a to I return side. think a you're that gas to more XXXX, turbine XXXX on the between going see and now

Josh Sullivan

to that. operating margin XXXX in headwind breakeven for castings, way then Is in what the High was any on expected quantify in Performance? the the XXXX. thanks there Okay, And to with be

Patrick DeCourcy

in of you So the high year, in so yes, the between total for was it at $XX – terms $XX of the million. $XX and for dollars the million, the for full-year million last when millions teens XXXX, of look loss

close you get breakeven of the magnitude that's to Products. turnaround if Cast the in So

Josh Sullivan

jump I’ll in queue thanks. Okay, back the here.

Patrick DeCourcy

thanks. Okay,

Operator

next from the question Chris Olin Longbow And you. Thank Research. with comes

Chris Olin

good Hey, morning.

Richard Harshman

Hi, Chris. How are you?

Patrick DeCourcy

Chris. Hi,

Chris Olin

Good.

think there, speculation the are ATI guess Material High lot within a today portfolio somehow the had and on better I you has that getting channel of out now unlock I values do segment how assets forward value been there's Performance this FRP visibility, about question appropriate for to Rich, about hidden you specialty a these So like companies type segments here? going potentially is, value of spin-off the or especially there out there. the whether materials the is way

Richard Harshman

been it's Yes. – value better than or three the obviously, the is four over Well last I the today much years, right. think

challenge reward shareholder the this in I segments, the we value. the actions growth in to And for on being profile to the continue I both think ourselves meeting of, demonstrate continue a that earnings and in with had continue price lot we've to share fairness, question ask need being strategic calls So investors. with and in we terms do is growth taken? question and and rewarded the the mean And share

look that lot Flat So and dependent High A we side, are the Products what of the between clearly synergies on of Performance side, and technical asset there on both in operating upon at you capabilities the manufacturing on I the side. do versa. when the businesses, two the Rolled think segment the is vice two businesses side, on customer market

at emphasis – into the commodity line. really cost fundamental business from to we’re more of actually business time a away a years the significantly couple and has will the in primary we the really same been exiting and higher improve and change were Products focus Flat by driven contributing products structure simplify focus the that away and that the Rolled last So the taking bottom from value not focus

a done mean So ever that work think I a we at as doing extent. don't time look we've the I that. in both done I all these is think that to process large process you're businesses. of that

and think to for value and is together. of there continue value rewarded actions If the look for that that. you the I businesses being creator a other we're we think appropriately not then at consider shareholders strategic will I having do

Chris Olin

that's Okay, fair.

that well? still can yet, as Has be you you win update think could an that the give position contract? on Thanks. to happened Just quickly, GEXX decided us you

John Sims

of program contract with The that Hey, program Those been has let negotiations started. GE that on GEXX is Chris, and phase the We're is development in still this not John haven’t going kind well. Sims. yet.

Chris Olin

Okay.

Operator

and with question the And you. Gautam Cowen Thank from Khanna Company. next comes

Gautam Khanna

Thanks. Good morning, guys.

Richard Harshman

Gautam. Good morning,

Patrick DeCourcy

morning, Good Gautam.

Gautam Khanna

could with you I should about the still that still you milestones sort be testing, talk a and in we you're there out qualification bit some are little those anticipating I hoping discussions of just mentioned Rolled. more doing partnership what but what folks was where are you are know timing Flat at you perspective two following?

Robert Wetherbee

Good morning, Gautam. It’s Bob Wetherbee.

a So update. quick I can give you

then I going and we the so end So multiple. logistics, the escalation the out moved then several strength defining and are and normally trials XX What really time orders. on customer talked we four physical is start into XXX, actual properties, the product, think happens proven with of the move last is about to slabs they driven that to supporting end by moving there

flexibility different in expanded we from multiple the And and for end turn really is So not excite We around facilities the end first with very do I the that's problem in the the will many think one of continues in HRPF, slab the actual product actually through about the that anywhere would you and to with and proven user, exciting to products we've if those our progress a HRPF key have supporting half partners on milestones processed not slabs lead have world HRPF. grades brings companies the actually something but see is them concerns time and working and that of engaged dedicated to the can way rolling services customer logistics into skew that as can the do take of that team actually customers to world it in part and We've logistics. beyond that orders. certainly moved high several we offering. all the opportunities one end the we the a it's

long think scale to once see we'll customer just orders. that the of it's your towards up. a half, continued matter winded first end progress that question during I answer is So And happens, we then supporting believe

Gautam Khanna

Okay.

be should agreement. thing? you maybe that guys in So in an sign not maybe It’s QX, QX we kind official anticipating of

Robert Wetherbee

agreements Yes, advantage do and the it from the possible. comes people much long like as as to I for announcements and as the and is public see the competitive candidly they're of keep driven end HRPF themselves humanly that customer when pace on to think commercial ready go by actual the

So I more think realistic. probably QX is

Richard Harshman

are. likely most quarter HRPF half Gautam, think if what into terms And that the our it seeing months first the think continue will of I level qualification second the the second they done of that get indicated, the the I we a we're grow excitement become you volume dramatically. then capabilities pure six as quarter see is look through also and of in some on being expect progress would opportunities the more to the on the see when when what But increasing over these and as the they crystallized – mean would at the basis benefit customers continues year. level we work of conversion of Bob last the part I of

but think just opportunity it's a generate still So it ATI. and we XXXX, long-term a in for real long-term will not

Gautam Khanna

And the you of you haven't else exposure the think And the on kind reduce of done? is assuming done do some is contribution you of that pension on color can there. a) what us a like would one anything you be, sounds reduce hold? give you've already to It your there I cash XXXX could follow-up What all little out? assumptions lot b) mean, remarks. a that kind liability to

Patrick DeCourcy

Sure.

year upcoming cash expected for $XX total. contribution in is this the So between $XX million and million

are respect annuity type million last that take that the outs we've we and in the options for down $XXX can from additional to with So There years. the XXXX. substantially several actions employed cash already

that look a at So we'll taking as be close well.

be as other XXXX. potential looking this for that this to seen, We and operations soft good will to exists maybe here, year asset still returns. on are the that XXXX, the good finally we're quite remaining asset also We in we're actions that not year outstanding are focused a And in forward in focused well close, it had but freeze on that performance XXXX, potential would be a remains very to side. that

closed soft either would of all operations then our So be – now freeze hard or that pension. to the freeze would

we and that's the the So that are those level we of planned actions have contributions expect.

Gautam Khanna

do XXXX, what more… you do In and anticipate sorry, nothing I’m

Patrick DeCourcy

$XXX up around if – million. all holds would back we everything if be XXXX, together,

Gautam Khanna

Okay.

Patrick DeCourcy

assumptions, that's environment rate today's Based the at anticipated you given on look interest well. the but as today's when rates

there what So that at that as well, looking rate little we're but that's a on bias there's could today's upward for bit environment. XXXX based impact

Richard Harshman

plants, take this and it's utilization we very Gautam, mechanism plan The we think year Yes. – qualified a for that, true. businesses, why do the on in period, goes proactive right. rules credit been how to and participants Allegheny funding there mainly from think side the to – include addition, the and slower a I Teledyne is the prolonged Having mean bit, then we reason at – because we it back balance utilize obviously have stay that actions in rules funding, and number closed – of down participant all assumptions can when fully or which that from I – hold side, legacy all the time Teledyne XXXX the assuming said combined. up I level permitted goes by the that doesn't then that hope, the for and will comes control what within that a those – discontinued our which are number lower the looking when or under a are IRS significant little

ways at out structure there at could I that then in I are and that. have strengthening And There some the that So on further we a really are in And an annuitizing liability. have done and work sheet. look some in balance done proactive strategic continued the the further the of being pieces think that. would term, to and well, benefit the terms plan end team for we'll it of result be Pat could mean, look of to longer of reduce other a business. his job of that's the get planned larger opportunities further And outstanding we that looking drawing board way companies defined as out obviously, so continue that

Gautam Khanna

lot Thanks Appreciate guys. it. a

Operator

next question the Buckingham Richard Group. Safran Research Thank And from you. with comes

Richard Safran

you? morning. are good How Gentlemen,

Richard Harshman

Good. Rich. you? morning, Good How are

Richard Safran

Very sheet good, ask cash balance just I to and after Rich, about comments in have XXXX Pat you your improvement, about XXXX. thanks.

wrong. won't for correct this flow free guide You but a assuming feel I'm do cash year, that, I'm you so didn't issue me to if absolutely

make much ask progress beyond Could to way. different guess to do cash XXXX we’re a how topic, XXXX get you of in a And the to going bit year specifically, debt into and much discuss on maybe I maybe how And target? this talk intend capital I'm to do retire about deployment. and cetera? So conversion while coverage that you in intend you Pat, interest you your et

Patrick DeCourcy

improvement mentioned capital substantial definitely the $XXX So we flow within in range that the a CapEx million between $XXX as cash for being coming and we anticipate There's is in million, deployment, full-year. guidance XXXX. for

for we we'll throughout earnings share construct the did some more As generation. become help use the this go that evident can company. give items that information the more flow about that in and cash specific will year to flow We that cash release you

the So share we as gave we plans do out cash to in expand think retire to look continue generation. at pension beyond is more But help be have and very contribution, capital we we'll guidance. opportunity not gave the deployment there flow far as our that debt items as we will some CapEx XXXX that strategy, an in you any XXXX. to in we significant they'll guidance think year that We that the unfold. And

Richard Safran

a Bob, ramp something expecting discuss Okay. you to about or I benefit. want exactly expected what said remember your you you I maybe wanted benefit in? Now and in In modest XXXX could and you're that. that ask about you moderate a Thanks bit in don't if in to factoring for for the Tsingshan. much Tsingshan XXXX. you November, outlook, know how back XXXX more I a full

JV quickly how an to wanted and you update et up just get ramp I So will that get there cetera? think

Robert Wetherbee

to have initial our report line. Rich. and restarted activity up Tsingshan of morning. the well underway. that our We facilities announced with Yes, in DRAP am I We actually start November. as the Good pleased

which crewing full of the customers of great very positive we was the initial together. quality have our in needs market solid and metal have it and and in confirmation responses from of that. We coming to actually expectations the but our organizations complement are have from our a terms their meeting getting perspective, customer We anticipated,

in benefit of HRPF the the to the second and as awaiting in terms We're the up close still should clearance weeks joint the being well the see be here, as first during expect we of the to of expect able we both the manufacturing half and see sale up, of and In XXXX first regulatory venture. year few to final of the quarter. period utilization in the product start ramp which through the ramp half next

So impact. second half it's really a XXXX

Richard Safran

approval government? And Chinese from that's the regulatory

Robert Wetherbee

two. actually There's

has with one this have just The it's We them. approved of other it's we've one government. Chinese more and awaiting so this were through government particular – that of one been before

regulatory following any a problems don't of anticipate So it's just clearance. process, the but we with matter

Richard Safran

help. the for thanks Great,

Operator

Merrill And you. the Tanners from next America Timna Lynch. comes Bank with Thank question of

Timna Tanners

everyone. good Hi, morning,

Richard Harshman

Timna. morning, Good

Patrick DeCourcy

morning, Good Timna.

Timna Tanners

in half stainless all and a normalize a at not on year of strong for So the and in thoughts think nickel-based company, but the of so the you move? a huge you are volume nickel XXXX fully have us? the we seen us Is can by rallied of Can of nickel third any normalized second move aware give assumingly? historically year how and price, benefit that's of nickel margin something you quantified the about moves in alloys nickel have both that kind that should delta from on, some second half the to and

Richard Harshman

impact moves in we're the about some and it's a quarter-over-quarter of quarterly of impacts the There short So were specifically fluctuations. the basis, but on the timeframe. going more because to not a nickel really it's disclose change

did we down year. moves So aggressive some some and there up year, during of the course was the but back movement the in the gradual pretty of have half

with specific be to going on the not to XXXX. we're respect So impact

Patrick DeCourcy

we’re obviously lot we because that buy think I Timna, Hi, aware nickel. a of

stainless nickel. that a company nickel company are and consumes a alloy We we’re

important So it's an element. cost

control As for the the going time, that, don't we be, the a really have is market level forces. is, you said level over know, to long whatever we've any

would preference right, price our nickel is. or stability whatever So be cost for the more of

of yourself standpoint market of from plan. the the others fundamentals at the we of input that dynamics how and the standpoint firms the nickel think construct such producers, the investment in a lot terms as traders, our look from from of of I and use the standpoint So underlying of we

range, view you would be. to over of relative we stability longer the that $X.XX a fundamentals think $X.XX when pound at I a in think standpoint, term I look nickel

from now. that away not far we're that all So

the turn to typically how in in a we of how I generates that are really But scheme very a falling at we units things, which does. important short-term volatility – is everything more the impact inventories. for buy, try stainless our side, of because short-term, and the is the one first results with rising strategy than we can LME of our really think terms we buy. of that time price the more mitigate favorable how speaking Tsingshan a the is we that really the that to in produce, of And great component that the the venture better on volume ever we joint largest nickel

be volatile particular before, those so. have the than to ability on products less commodity ever We

Timna Tanners

Fully appreciate that.

figure any since did it trying an in out we Just get as QX, on handle results that? to out strong if FRP item to contributed call you could that

Patrick DeCourcy

was negative That that Yes. I real that on QX. on actually we think that – I the of that we absence in the of surcharge actually the out-of-phase was experienced impact the yes, impact think had. QX more chrome

If you surcharge look the at the XXXX the impact the of in full-year. think Flat side, really was the on of full-year fluctuation I Rolled minimal

Richard Harshman

Right.

Patrick DeCourcy

QX. and We part then XXXX real chrome in the negative of favorable in had the impact side benefit had we the early in of a

a was not QX the cost lot QX and raw think on favorable the side. I more benefits to normalized I would attribute material performance of

Richard Harshman

and year for early and the second Even price full-year ups the was… stability some hits on in the in nickel, then we half, had but some it

Patrick DeCourcy

first first short-term on downward side chrome the had surcharges. XXXX, of we negatively that, in out-of-phase of we is the impact to And mean, of gave were the quarter I significant a other with hit evidence as in going fluctuation guidance period XXXX some of because being of quarter the that that a

impacted world stability there perfect So a in say when issues. we that's I these would you're not because by prefer out-of-phase surcharge

Timna Tanners

given share ask helpful. issue not necessary? the that you you some think forecast will shares? the to quarter investment again to more wanting your think and by Do need I about I in you were current outright. to people any That's grade. talked Okay. be you just Do issuance achieve wanted know surprised

Richard Harshman

don't cash we transaction. necessary. through shares. We substantially our think forward flow, needs be additional that We don't we the look reduced will that see Yes. with to building And as leverage issue any any

Timna Tanners

the taxes can the you talked U.S., in. can numbers Okay. NOLs several Great. help have if just more know I wondered so that? we squeeze I are one And for extending could in what NOL remind but on impact our us no lower years you about levels to run

Patrick DeCourcy

of amount the but the don't total in through footnote that covered at XX-K. We are And in the disclose at our outstanding, projections we the the end what the be NOLs of decade, to believe we're disclosure the basically, look at.

Richard Harshman

Yes. It at federal be look but don't will the in think be a financial long our we the XXXX. in safe expect assume, XX-K, forecasts, footnote to I when to it's the through significant we at level taxpayer range

Timna Tanners

Thank Okay. right. you. All

Richard Harshman

Thanks. right. Q&A of End All

Operator

Thank you.

Richard Harshman

joining much on Okay. Yes, for thank today. us call very you the

you thank always your Scott? in ATI. continuing As interest for

Scott Minder

call. us Rich. you, today. you are concludes conference XXXX the full-year joining fourth and That for all who our And Thank thank quarter listeners

Operator

Thank you.

attending Thank conference the you for presentation. today's mentioned, concluded. As has now

disconnect. now may You

ATI (ATI) 23 Jan 182017 Q4 Earnings call transcript