Allegheny (ATI) 24 Jul 182018 Q2 Earnings call transcript

Good morning and welcome to the Allegheny Technologies Incorporated Second Quarter 2018 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, Treasurer and Investor Relations. ahead. go Please

and call Good second Andrea. being welcome the Officer; in to on President Harshman, Thank Chief and XXXX morning conference Technologies Executive Materials Vice Chief the of Bob segment; Wetherbee, Participating and atimetals.com. quarter Vice website DeCourcy, President Finance Senior is John and are Executive Components Vice call. Allegheny and Marketing President, Senior Vice Rich our & Sims, Rolled Chairman, you, Pat at Kevin Products Chief Commercial Group; Flat Officer; President Financial and President, Kramer, today This broadcast High Performance Officer. call Executive

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expansion share of In margin our power basis apparent XXXX. quarter. operating quarter revenue a In operating in predictable our quarter and as quarters product gains in and results. was aiding three customer end strong our revenue coupled performance exceeding noting on a operational covered XXXX enhancements changed and for and segment customers our has total quarter meeting roughly levels Materials strong second for schedule per in XX% quarter over in accretive ATI’s growth High more and ability XX% the and deliver expectations $X.XX the our time, Strong sales. and and $X.XX shift offerings second growth with quarter and growing the second in business XX% products to Materials margin segments the volumes from global utilization our our technologically XX% profit the for prior year-over-year business second the increased both segments up years. by nearly growth of $X segment grew benefits quarter It's points. most XXXX. total revenue business quarterly higher built worth quarter our results second and Both accounts than growth, XX% delivered first is majority aggregate, by earnings of of XXXX Performance on and technically that quarter segments vast across both versus billion The earnings defense, year, ATI service five since several time Performance significantly of than The drove past and agreements in ongoing operating advanced elevated markets, the and the second is segment their Component Component notably manufacturing the more aerospace long-term approximately This commitments. of from of reflecting which solid the ATI times of incremental towards revenue, complex better exceeded first share. product profit of High of good increasingly XXX asset second improvement quarter financial segment drove strong first and second clearly demonstrate markets our second mix per of the differentiated

of quarter years. the look to segments far financial second our a as we XX.X% results. continued significantly high a results which While and asset versus benefits. next we we related Taking by expected Operating profit driven represents expect to continue are products and the with was prior are performance, our over product demand and jet sales, increased next significantly for than contributed The our business XXX move both pleased utilization thus to XXXX in growth year. our we High financial improvements stronger quick satisfied, point levels generating solid Performance strong improvement in at not mix several year-over-year basis generation forward segment engine

Rolled delivered posting products grew segment Flat results, XX% X.X% good operating year-over-year. margin, they by on Our quarterly profit a revenues

successful opportunities be our our trade disputes, capitalizing enable across the improvements. financial materials products segment raw on and that high XXXX term out Continued our and is expertise remain Despite leverage unique Air the and solid well of time. by achieving financial our the I from global several favorable to sustainable near customer customer’s that innovative confident opportunities irrespective way We by growth demand and delivering advanced demanding control ATI. ahead on and in Having uncertainty and that returned and focus initiatives product blend technology sequential am for development I supported shareholders. Rolled for of technically within on our Farnborough on success policy. and value our the creates lie goals profitability we mid our year-over-year Flat capabilities. its customers to trade This levels seeking about markets just generating we surcharges quality continue confident will manufacturing for caused end Show,

forward report industry expertise many and acquired is and great expertise Performance to to Addaero’s the the powder segment additive the capabilities aerospace materials. High contributions. metallic Before performance developing in pleased a detail, manufacturing John manufacturing demonstrated ATI’s addition specialty by future ATI welcome to early their I Manufacturing, team We and in call look Addaero veterans Addaero Sims to at over I'm to led July in that hand the in discuss we

will results. discuss Flat comment Pat in as segment second well of for the Rolled product as second and half comments. our quarter Following John's comment Wetherbee XXXX, detail on some comments, our DeCourcy I more to on turn Bob will make would the outlook financial concluding

your then will open We questions. to the call

John. is Here

Rich. Thanks,

grew operational basis expanded in ongoing next profit, the specialty Compared produce the XXX phases produce by aerospace continuing to aerospace to long-term The materials points. expansion a in year across XXX gains asset quarter HPMC a employees increased the was two We levels challenges confident by our operating production and on demonstrated eight operating and significant increased These improve in and support that time for incremental the quality all XXXX growth nearly amounts excellence, second X. segments year impressive in operating and to revenue on support Sequentially dedication up, quarter We from is dependent margins. which Slide year-over-year way rates. delivery, increasing quarter on multi-year related basis remain resulting our potential develop expected acutely understand product superior margins segment of success build X% and still points. XXX production early basis and continued customer’s parts engine remain operating and of across financial by by expansion trend of profits XX%, leading on than XX% and and consecutive defense very represents quarter, results. operating all and strong spectrum. expansion relies we in better prior Turning possible. We efforts ramp heavily growth, year-over- focused growth that is forged least second generation and aircraft. year plans by revenues a This several performance their work our industry particularly of components to point our were second hard product first and quarter customer of success materials, recognize revenues testament fully to strong at margin the industry our to ATI. across growth on our aerospace represented we range and are driven to wide and platforms finished utilization to and increased improvements, and mix products ability will demand continued are airframe any a our industry materials by

In our mining markets, demand. performed including the a relatively performance grew other will our and markets slide. period year-over-year, quarter to in of engines in detail base modest several next of XX% than energy, which end a well airframes, all construction albeit electrical addition end more more by in growth cover from on after and I low use and we commercial jet second each across

like the our at progress investment castings Finally, titanium provide I business. on to an update would

work to of supplier our leading with customers titanium castings. industry aerospace employees profitable, sustainably continue a and diligently We develop our to investment further

We year-to-date profit breakeven have progress operating second as made substantial evidenced our quarter by near results, were improved which levels.

half be provide second Oregon future that will results the believe XXXX. will earnings profitable cash ongoing on The and near improved team I quarterly in financial on to ATI results of in continue anticipated calls. We the and delivering is XXXX breakeven generate focused products financial will updates we in

prior in nearly with shows growth table and widespread accompanying in segment all forged to a by X. In growth by Customer and products year. provide specialty double-digit and The across demand quarter lines, continued versus comparison and year-over-year chart pie was our sales XXXX percentage defense. Turning second materials. the segment product grew revenues the sales increased by XX% market Slide total, largest markets, of market, including growth led aerospace HPMC

more the and product year. notably our increase a to construction a Sales and on energy sales the increases. engine declines aerospace than Imaging Electrical in and prior on defense used specialty prior mixed XX% for improved total quarter, nearly defense Looking isothermal market. versus in first sales forging and the due in markets nuclear X% market scrubber reversing was quarter in Demand due of primarily deeper a as in higher rates. the quarters submarkets. to modestly, major market engine increases. production initial production. materials smaller prior jet led sales XX%. year-over-year offset significant performance, growth energy sales building by growth biomedical to next by quarter to in grew revenue, production. elevated turbine the sales the was due gas were by market gas beyond market two by less revenue more, based or products to recent lower oil most MRI total. the of Magnetic and declines year-over-year materials expanded medical marine dive increased million $X the of mining second market Resonance ATI’s second that land demand generation into or pollution reached sales Commercial increase next grew Sales in used Sales aerospace gains the XX% Building to saw HPMC’s period markets, Taking XX%, versus sales materials of sales end the year-over-year by XX% – and than generation over in XX% markets forgings in product year XXXX castings jet

sales no products While engine the quarter. offsetting our generation legacy new our rotorcraft our exceeding ratio products. over business first next results. sales specialty market distribution gen quarter customer quarter have building our on demand prior late aerospace unprofitable in in will saw chain the HPMC first for our products. the models the products increased in and exceeded experienced to the decreased these naval Year-to-date, customer by line increase we or deliveries integrating primarily our In Commercial strong expect the steadily for Sales vary time, second We customers to strong related defense to by an improved production significantly customers sales OEM system we summary, a government year due next airframe and exit generation quarter, quarter. financial at sales sales nuclear major posted improve these new quarter of in from sales successful for of results XXXX. by - of our in expectations products materials, X% the to in year-over-year expectations in largest and the strong to first from quarter particularly that X% Military the and to recovered second XXXX. decline for segment quarter. airframe Sales our were to second supply orders demand disruptions of demand

operating commercial XX% engine sales levels to our Bob to to continue call will in throughout jet accretive sales. the sales Flat year-over-year jet prior should highly expand products by increased segment. These and HPMC over total turn almost now for accounted segment Rolled the over to Next of generation about our are engine margins XXXX. and products our year nearly I performance talk XX% Wetherbee

Thanks, John.

product raw period shipments with to guidance, in and good benefits that markets due first segment across that versus Segment the project, offset the not reoccur several with Slide related revenues record quarter sheet quarter first X. posted quarter. more to lower Despite XXXX oil sales in were to pipeline higher - to flat and a Segment did increased sales electrical results, XX% absence repair defense [ph] repair end XX% materials revenues aerospace our pipeline each nickel which energy to prior quarter, second ferrochrome versus year were was project. by the year-over-year but second line Aligned and than and related and by sequentially was the sales FRP demand the first gas sequential the both the markets major primarily prior quarter profit market over the to financial – service gas XXXX. that and generated a basis, significantly continued surcharges solid increased of XX%. and previously up were and On from the product oil Turning year-over-year. a mentioned operating increased nickel

higher continued increases our from asset raw surcharges to STAL joint the operating compared the at growth first benefits nearly profit venture. material by As increased and driven anticipated in utilization, by XXX% quarter,

were first to the of a accounting as capitalization, approximately retirement negative $X required due effects currency quarter As impacted reminder, foreign changes XXXX benefit million well negatively hedging on by gains. lower cost results as

our on the asset excellence, improved based current prices. to aggregate, indicative forward expect quarter on of the are we material the we higher results, raw the focus expect and compared segments impacts lower conditions. quarter and utilization quarter benefits ferrochrome raw In our to product third Looking second efforts as and material nickel rates structure. results improving in modestly second third quarter, prices market slightly increase across In to lower in base operational our summary, our cost mix financial

We to cycle, toward consistently our business across progress long-term of goal the regardless of profitable generating trade make continue policies. results

X. Slide to Turning

to the provide on Now, I'd three FRP update like you an initiative. with of important segments strategic

to what to to significant related countries are operate progress continue product on with uncertainty and control and goals. working around we on remain and focused we we can continual various steel make world, hard market the acted tariffs our While by

decision Our we exclusion that for are on the believe exclusion approval await while and A&T We of government's U.S. Stainless tariff joint the to the Department operate, firmly request underlying facts joint venture request. continues by compelling our Commerce. the an justify U.S. ventures

XXX slabs the the source. casting U.S. foremost, cast and sufficiently production melt fully is present steel - satisfies state criteria and slab Stainless at [ph] XX% available tariff a not U.S. The stainless First the slab currently capacity and are for stainless from of reasonably exclusion. U.S. operating utilization.

in integrated utilization for All One market from stainless to steel slabs aluminum. internally. to asset by own analysis, than rate which market utilization, In of The has a U.S. XX% been very the analysts addition high industry. above two maximize is encourages of This are stainless to confirmed credible, as producers and Commerce melting markets independent is our is ensures target vertically operating is major vastly Department and the unique being recently finishing. rates well that consumed carbon and this stainless fully producers are indicative XX% of stated the healthy U.S. different

- makes As the Prior has idled ago stainless XXXX carefully restarted options on ever which reasonable wide forming sense. has definition a years. ATI the Pennsylvania US. shop this imports. market, melt been five the would not take timeframe melt available. for of nor including The cannot that to years any restart the slabs Midland unfairly to its a commodity traded any joint three stainless three of re-entry impact restart is into Midland XX-inch between be shop, result there venture, the reasonably steel in due By in A there merchant is our market stainless for to analyzed no

emissions. this a limits equipment to would of an completed melting shop critical me and to air of a equipment emission could the facility facility requires no the has V air custom melting treat case have longer emissions to complex The designed permit requirement scrap known. before The scrap Title appropriately to in of resulting operate situation. melt Title this some EPA the operation case color the V the Let add type. be In Midland design permit, be the increasingly furnaces

restart Midland expect million clarity, previous more three as shop with to the process to on and experts. much for would So cost or melt $XX any conversations that years five allow regulatory and authorities as of the we technical take based

required market slabs current stainless steel as is is sheet term. XXX be section joint from tariffs viable produce its a shop the melt joint Department on venture basis. exclusion relevant long- sufficiently products, that by the but Commerce or U.S. while to that Therefore the the not to from tariff requirements be Midland go of XXX and in such, positioned reasonably the the validated finished The to this available. forward requests. As second continues stainless the the financially exclusion quarter ventures defined venture for are operating model, venture In agreed joint an partners the XXX the joint found well considers

second morning STAL report opportunity at expanded facilities. - The produced this I second to pleased venture issue discuss in I'm this morning the coil that a early newly joint have first its that for its to July is -

domestic Although the are help energy. a weeks schedule, few expected Products up facility to new this several markets, new electronics, occurred produced of [ph] automotive behind production demand to solar satisfy expect quarters. with this this facility milestone we currently installs and the principally growing is for next continue effort consumer core ramping Chinese and

fully venture funded a this joint cash was As flows. reminder, by expansion

or and conversion Finally, our Facility - HRPF agreements. on an party Rolling update Hot and potential Rolling Processing third

resulted wide in single they gauges from and carbon fully varying unit exceptional a requirements progress for shipped for satisfying proposition of potential products trials, extensive to We successfully offers - which material to number of range technical that on a an partners. ability were continue widths HRPF’s of even make our products validation. or demonstrated a technical potential The input to with during end produce of partners a deals customers of steel value were handful some believe product and

are that We one our newly created fill two expect and that conversion XXXX. to actively believe continue to each joint progressing we In over at in and upside their agreement commercial capacity toward least significant ventures Stainless have we significant will agreements finalize STAL A&T summary, time.

segment utilization challenges achieve remain to sustainable initiatives us help on agreements, steel capacity manner trade goal profitability. successful be capital slowed conversion will in efficient and progress of current contribute asset our we have will long-term Each these signing XXXX. very confident we to that carbon and Although in segment a will of

Now, the quarter I’ll second Pat over to call to about financial our hand performance. DeCourcy talk

Bob. Thanks,

we or represent second $XXX our had quarter, Turning financial X. and million strategic under quarter and update I borrowing the had end risk. approximately based the some no borrowings quarter, on to additional on you additional lending a revolving available generate Slide free of credit. ABL’s cash we to of balance would the initiatives to end over first performance provide ABL. At cash flows hand improvements further reduce the versus quarter capacity few of to on you second of $XXX Both like the take these and of our to to totals asset second progress XXXX. on on our million our minutes agreement of At with line color sheet outstanding

$XX expenditures and We to million no for two first the Capital million reflecting we end. quarter elevated the borrowings outflows year the second totaled believe will end quarter third were $XX projects. and ABL quarter year-to-date, of continue the revolver that significant for have XXXX at

in capacity facilities our generated from venture fourth located stated with forging Wisconsin, Bob the China, of and second joint center joint venture. at as Cudahy, of by along excellence flows the which the in is – cash funded treating isothermal fourth expansion press our heat expansion First, isothermal STAL

stated call, segments. continue the the potential million quarter able our of $XX to by production next industry of commercial we production rate. on earnings As timing approximately growth quarter, continue are ensure both our desired the customers expenditures business capital to we rate meet work on primarily with aerospace over to to we the capital in second first Manage years understand our to working in the impact to support several that increase increases

accomplishment capital We the year-over-year As continued the significant and second working of company milestone. care a pension pleased closed improvement exposure plan quarter. is by as the working end completely sales, pension efforts the related has of percentage result the achieved basis second retirement pension manage year defined legacy progresses. ATI’s its years’ to reduce decreased points to anticipate capital plans obligations. report entrants. of and post to that new metrics now health manage and to a XX.X% quarter, significant stood In at care US benefit post in I'm several retirement XX health these a we This at

to control on costs will to liabilities work to pension continue over progress We related health report our and time. long-term our care and and

our contributions. I anticipate like outlay along ATI our years, our increases cash in guides. improvements $XX our acquisition the financial we earnings will next the we acquisition, intend of to cash flows to XXXX the in our in on excess call. cash throughout quarter and $XXX plan generate roughly balance continue ongoing build provided free in profits Finally, several million Addaero million, We the in metrics. recent XXXX including The first leverage not would guidance over segment to was for Addaero cash free operating Included expected with excluding we pension flow previous update XXXX included - that believe

grade over Rich. including and to stewards In ratings. for turn thoughtful cash. continue accretive investment will these remain will and the key are credit efforts a capital, return back deployment focused of of we’re for the We focus areas now over good objectives ATI. and prioritize call to These on I our a shareholder metrics being and cash time on to ourselves optimize summary, generation to position

Okay. Pat, John. and Bob Thanks,

X. Slide to Turning

results U.S. the solid and Our our strong strength operational second execution were first strong and in the quarter by economies. results driven build on other underlying and quarter world

with to than asset objectives. ability term to from robust demand and at a to and materials included segments the expected. factors generation performance financial segment Pat, ramp unprecedented related to continues mix and utilization. in the Bob toward These progress on long-term we next heard In aerospace As our customer combined improvements our John, near production you increases continue drive high from our broad in product strategic make and better moderately finance results requirements, faster customers order lower business outages meeting scheduled This demand demand ATI facilities. several due our modest third assist in a than forward the quarter seasonality where our growth normal pull to we patterns growing improve their the pace expected at expect and maintenance customer

we third As segment profit decline the a anticipate as a compared and a decrease result, modest modest quarter in second margins. quarter to operating revenues, corresponding in

from In addition customer expect negatively operation to the required non-ATI outages, nickel currently customary forging to by delays and billet. seasonal - source nickel maintenance of directed be powder slowdown impacted delivery we our a

to our the of term impact chain these work to continue with supply minimize delays. customers negative We near

chain provide We alloys super the additional a engine isothermally programs Carolina. continue North jet that through parts. qualify viable nickel These for and supply alloy also customers powder powder second to used are our billet assets for in forged sponsored source powder with processing billet

from now our prior We by to high and XX% the operating to programs We revenues digit components so estimating our his be far for have full high increase percentage increasing of XXXX segment profit a that expect an prior guidance revenue over and XXXX year XXXX, team we performance John increase to the years. two current one improvement. excellent fully the Sims XX% single In in year and year, to guidance. recognition next materials work full done expect versus all are qualified

increase level. Additionally, by margins basis improve we of segment from year-over-year, an points XXXX estimate XXX to prior XXX points guidance operating basis our

to of fully set far pace improvement strong and the I expect year-over-year XXXX growth in We thus have a continue.

XX. product Bob over segment several demonstrated Rolled return the past sustainable continued quarter acceptable have his the have profitability. the the this of XXXX to second business to Turning taken Flat an actions years level results In Wetherbee financial and team to Slide from benefits of

profit. profit operating the fact, second quarter XXXX In full equal year-to-=date is year operating to

benefit to ferrochrome. fundamentals minimum and well achieving U.S. second continued nickel benefits are in our a raw segment material $XXX to in way XXXX. of We significant and markets million solid the quarter, to In profit on industrial saw we operating related the from

our utilization segment facility, our Processing Rolling across Asset improved operating increases drive profitability particularly levels. class helped world operational and network, Hot at

utilization to ventures push and and higher carbon opportunities. party production via capital continue to We production third steel ensure efficient for agreements levels joint conversion expansion

is economic ahead surcharge Segment we lower to Rolled improvement. our the representing continued a end in and strong second sequentially, impact profit the to demand third the to operating versus raw and substantially products. be fundamentals slightly prior line year-over-year Flat higher are market due but quarter, year anticipate to lower maintenance. for our benefits Looking quarter, with materials downtime Revenues likely solid anticipated for facility annual the of planned be

production increase. from also year production to across beyond higher increase the a segment. on by an operating digit guidance now Wetherbee STAL believe the improvement team, for guidance Looking for the Flat will XX% we're increasing year to results the will margins prior our prior recognition markets the commissioned points Bob newly improve we full revenue capacity. XXX percentage year growth and versus demand financial that date strong – single to U.S., up anticipate revenue calling operating its Rolled joint basis ramp and base. high full venture Furthermore, We on year-over-year to XX%, continues several product end profit of benefit XXX achieved from now of his demand In year across

points. an XXX estimating prior basis to As improvement of guidance XXX the compared to

deploy to to will to cash continue as and to responsibly our well from ATI Finally, in cash as further as XXXX. on solid the to foundation continues DeCourcy, growth, sheet flow reduce Pat repair free you cash returning growth profitable long-term heard and anticipate for We financial ultimately risk shareholders. balance remain focused lay

will to quality may the question us made time we close strong book first we the to delivering high continue focus we have please? a XXXX, half As and customers. on thus far, has on Operator, what successful of our on parts first innovative solutions

Lipke comes go [Operator Instructions] Drew from question Our of first ahead. Stephens. Please

quarter. great a on Congrats guys. morning, Good

Drew. Morning,

you was on operations. powder delivery wondering, of ATF the talked I directed billet forging the to delays source about some

particularly You you gen have the been talk LEAP supply. documented, about can of third you know, next I ramps some CSM pretty engine of relates to well it sources the guess know, engine. to looked add second, as they've

has you we ATI and incremental those bottlenecks think chain? you supply from how do in we've how capture You term term longer this allowed these seen know, positions share that know, market about, the near to

across engine rate they're number of as calls levels all and said this platforms new, of in a prior that time. Drew, look are relatively first know, pretty historical rate Yeah. period much all – a in ramp - have this the short we is you build you of ramping it’s when significant,

the thus think supply job of of supply strain. and There chain global chain done are excellent areas the really keeping increasingly some complex clearly a have delivering. far - I an an OEM’s

isothermal the way the to which think than more it's just to is the I powder. the back process, actually back forging way forging the area goes all it's - and all one goes all billet, it

think challenges opportunities have occurred have I that represented of ATI. So the some for that

the clearly we we continue from. aim to think of product side forge emerging and on some the I to demand benefit benefited from

billet qualification process. the know, into powder you side is powder the process lengthy of a on think from going I a

a – for for still qualified been are different few number on grades. of that There a left. have We

we're their root there forgings. that customers qualified, are causes. customers issues directed the their with confident I'm have and others obviously working And an that we're the not know those been has what And the impact with source. that the time. on But deliver some getting customers issues through to So dependent on upon billet

get Boeing the do think opportunities. the know I those ATI the view opportunities, so build while the And engines it to Airbus. we'll realizing they the there, when products customers rate But and opportunities as I them build some by that need for focus they challenges to have and support opportunities. to So we that you tend and are those create to continue more realized of been on

body $XXX capital potential out - several of potential spending you comp And ramp in rate the helpful. or What CapEx million or then contemplated years? have is that to capacity know next address narrow for production That’s talked over for sort called increased about you - and the you so increases. know, production you do you then know, today what rate annual in you

we think Yeah, I contemplated that commented I the we've what have capital rate - announced is in think our spending on. current that

that above some know XXXX the been know, they do going that in than announced further increase, that marketplace on with the framers it know, OEM by the timeframe. you I'm is anything increase in think air possibly rate, in what I you production there you of has on coming online XXXX even single sure or discussion terms

to of around investment known what that it to within support have annual higher amortization total the something additional our capital as build be required some depreciation primarily it there supply our that think through had through our on would have discussions know level would billet, be investment manageable we to the arms rate. those customers, as iso I and part, with would be when powder, view the it pertains and would powder we've require you We rate. certainly chain and

Helpful, guys. luck. Thanks. Best of

you. Thank

comes Group. question Richard Our from Buckingham Safran of go Please ahead. Research next

Hey, Rich, How Scott, good Bob, you? morning. are Pat, John,

Morning, Rich. you? are How

ask your about like - you First about Pratt. off I'd to

currently while so please Pratt believe seems back you they've a to them. been you produce is know with you having. know, I'm correct at producing, given me wrong. if signed You deal issues a parts the It that were going I

help they use sooner some You than could rather later. know, maybe

if think that, impact to when have you great? I shipset targeting could numbers how that much to And on would that could you've maybe you're the know you'd Pratt, give it you idea if be this of content progress might know, discuss you you making care do the content any get with want if P&L? been you an So

to anything then the going feel I and Sims if John to. add I'll John, Rich, am I comment Yeah, need ask

Rich. Morning,

Morning.

Georgia. I would their already having their say we with results. that The We work and that with are an agreement balancing requirements making on impact of Pratt. Pratt facility and we very out our really closely us is in Columbus, production between XXXX signed in progress impact

but for producing year now them not getting with forging forging over been that it a a really into that we're them. only and have also half for We forgings pre-forms, finished and includes

So at program as this I would the proceeding point is planned. say

program, agreement. long a that. just LIFO a That's few other Rich, a term Yeah, long-term on comments

of terms be powder of agreement ultimate that machine and over to that of essence, right, the think we're of finish part, long-term is supplier a contributing for but nothing but to is program, us will years move it, the that from didn't we we - contributing in the that defined to we couple for actual when pre-form grow that's only rate In each do product finished is life for. to Pratt not for John's integrated I in program what where the now, think defined powder there billetizing machine absolutely from type isothermal in it next vertically obviously announced really way that mix into a through part. it the the and volume meaningful the forge into it you objective I continue terms ramp of define build know first And we of years. the number we an Pratt’s for revenue, the an

Okay. Thanks for that.

- I wanted printing you about to XD ask initiative. kind know, interested you I Next was this in of

know, you're acquisition you component you metal this kind that - complete? the have an an it? powder, correct? a XD, alloys, now it, of few Addaero Are be is I'm into you an in make tetra now is I effort or do spoke Is vertically about titanium raises have of aftermarket does the of and OE have going you're if other going piece to you there here and portfolio other that acquisitions Addaero printing you're that and think focused with is assuming vertically then, and you this And to effort you the it like on kind to the now when curious impact that have activity think considering the you So are questions. then integrated think P&L? to chloride your convert finally also an integrated or

think Yeah. our don't No, portfolio is complete. I

knowledge using was form. the the actually powder Addaero part to accelerated in our designed that base acquisition think a very that the print acquisition important we I produce on a metallics XD

the produce cost of efficient really us ability production manufacturing a meet design and So it's volume - customer the process the requirements powder part not brings that it's in do repetitive how fit just to part, part to and print that. the having the Addaero latter you to

to very our - plays if you But It those sell will, additive we systems with So also because I a and and strategy that process that actually to have customer make that across described wide products that. products. of and through going powder Addaero and with think we you you know, also is the raw to mill products just design well. we strategy the wire you'd a looks continue sell those a the vertically the do alloys strategy be variety we'll to integrated also with material an at part

customers, see on as and think aerospace I - the and next over work we on the especially growing know, we with three, defense side opportunity our to more becoming five the the this meaningful you four years.

be timeframe in even a are there think on than opportunity might that basis you know of P&L and it commercial some other before that. aerospace. are think that be actually opportunities I defense quicker could defense on there a probably I where aerospace And outside meaningful more markets

of aerospace, et commercial looking from we're at oil So defense cetera. wide variety and a medical know - space, at looking that you we're opportunities, gas,

at strategically grow it global that's in differentiated technology ATI’s So of has part portfolio as be to think I and to continuing we look markets.

you. Thank

Thanks, Rich.

Khanna Gautam of go ahead. from Cowen comes Please question next and Our Company.

Good guys. Thanks. morning,

are doing? Gautam. How morning, Good you

call on may was actually not what happened... QX strong. looks if mind Well, curious it high to can recall you in as know sort the you in performance was QX color up question mentioned in, thanks. well. changed thereon, One through that the mix, came you pretty be know just you know, ended I you'd what at coming like of I If provide that any

a It's you the of new legacy the the first the especially chain know ramp what think - builds, in terms as supply aftermarket. side that jet the some overall had is terms part the know, in observation, as well you does question good have ramp are engine about volatility. and of you rate, we know that I of you to of quarter-to-quarter supply I create the on that of meaningful, build the recognize and chain the mean programs it still both there

where could a you than So you expect. quarter legacy a proven stronger is what have

chain the result depending the being can of in not - being the and through supply reverberates it's of aren't happened how point actively back the and the supply with vibrates quarters chain mean, some opportunities ATI’s very operational is the all I managed is present challenges in what through of the the quarter, And outs pools some not the the towards chain because upon time is quarter supply others can also of any and emerge surprise in I happened OEM’s for chain. and It quarter. supply of it's year, as in the one well. in where disruptions that built, the at because think only way prior late happens. second the quarter but this at has end supply as strong that's very push the the that chain end in the that's are by engines - push having

now, legacy from you're the you're transition think chain going in supply I next-gen of see the to that right where is and where So some volatility. a market where still to

have build know, we it You next that years. legacy as of couple the XXXX aircraft seeing as aftermarket in imagine I progress certainly to ��XX lesser except through going we're get into rate - and being think as of even you But ‘XX. built saw that demand, will volatility in the see would for I in even-out well. you we ‘XX. We're it the further

it. Got

want... you Do

sure. Yeah,

- forging that know, thing I you step get you you any just and follow flavour us won't then describe that was, - these mark? long do is be for kind that of can sort so of you any out splitter, customers can or on kind it other you kind when As you sort relatedly, curious fleeting emergent seen any versus legacy know, of was give And there emergent where the about you when for longer the is seeing tale give miss emergent opportunity of it the help of there's up fill latish you've a it guarantee you're from side the as side demand, up [ph] alloy the on you to us these needs, more on is to it any demand? next-gen, the you'll the as the and

assurance... Any

Hey, to try Gautam. is two. I'll John. This fill those

Thank you.

chain And on he of emergent combination new as and legacy through demand, next point new be as it's So for programs always us at of some in requirements emergent can programs, said, can and and a uncommon of said going supply recipient generation requirements that given move be any on. move in we've term can the the got or short Rich legacy can time those reverberations they to suppliers, not programs they be between that around those result can programs.

ongoing that any we So an unusual means ramp. given no and basis on in by see that's

we share shifts call seen the As permanent would and normal given meaning a levels. over them back there customer them, we been we've far say to where point I seen requirements, them both as the get and the point, there's duration move those emergent a of in be some, we've short contract seen pinch instances, we've then help pinch within more nature, very term have

I agree Yeah. John with said. absolutely what

rate market to to you alloy right be an grow throughout customers you ramp when The any position you market to done in right think the would that engine developer XX. that I the isn't in I the And has jet you XX other from the the earns years create grow a earns cast just this value when thing standpoint, like in us - position for we is for us that know know, of ATI what that from to than particular and earns right Rene ATI know selected this reputation and different you you - future. longer suggest term that

to customer have we that help that create extent the at the we So these out our capacity opportunities and to we customer. can and the look value

do will We that.

going opportunity and we And business. capacity this to rate become us others are have and ramp less. available you to have I up that their the into supply for the have volumes further in - execute as up know chain think step will get increase to others

you guys. very Thank enough. Fair much,

Sullivan of Please comes question Seaport ahead. next Our Josh Global. go from

Great morning. quarter Good here.

Morning, Josh.\

on the XXXX Indonesia support even you just Flat there million does get $XXX that here? the without comments can an for Rolled, minimum pricing exemption or the for assume given in the Just exemption

Josh. This morning, Bob Good Wetherbee. Hey. is

of Rich trade said, committed business As and irrespective we're goals to achieving policy. financial our

of the our So to to venture achieving We're we successful. be want but the joint the confident committed compelling, we're regardless that $XXX million venture. is case joint

its that we the with customers. to that JV good exclusion making I it's very but it's good in will know have question. and and now. than you has, U.S. the Yeah. hoping ATI, I the think it’s support. question, and that do in agree going what great it product that's I that. a valid with process – creative facts asset for ATI’s creating prevail A&T the know for this that. team's of the the helpful And revenue our it's that It's believe we're a the involvement I proven $XXX facts the And for you value would and I good we're eventually only of would kind and really and that's be prove granted before to given the being JV better right We've making fair shareholders for be Stainless million, that the segment Bob that JV exceeding be million base minimum, good say not because we market and decision to his with Washington said satisfied in for minimum, to market you think because $XXX know, be with it's are the that

you're Okay. were details the any more at give moving exposed point Can GEXX towards discussions upcoming that us And maturity. or any then how opportunity you incremental? this Farmborough engine maybe on at

John. is this Josh,

We and the in their partners. are discussions GE with still

program discussion, raw as secured raw we of on forging. as longer into but and supply XX we also the materials that continue move have both active not only some development, in agreements we On on still production and material range

on marine the out there know that the it Okay. that scrubbers And market ATI? can one, you does you some and shippers How for advantage. that are been sales then that arbitrage materials play you and an for seeing have mentioned reports expand global just pollution is

We've Kevin seeing both old lot throughout a Asia. a the Kramer. opportunities. Hi, China the Josh. There's fabrication balance of in in and benefiting next seen five on Europe the products the the scrubber defined really business. marine and This flat fairly years. and specification and opportunity It's rolled is We're seven between timeline

far. that we're think So coordinating pretty well so I

idea of frame size opportunity and to Any it? market way

$XXX that's in FRP would $XXX million revenue I market. million market, between It's of it's say [ph] and a Yeah, the - year. the

that meaningful market. we you it. and a are you meaningful And know, market, and the a Bob his have we focused opportunity capability on It's team of serving know

That's right.

application. private that’s market been the us a know in in has grades the then think the know, both for we've States the developing in and but the differentiation. really really conventional talent for been an great of core in is a you ago, engineering critical in have some long lot from the together been we capabilities. Europe designs you desulfurization, The I offering United as And and time, ATI application opportunities the terms put the of to gas X HRPF it's products market for peak offshoot a [ph] to XX years developed flue States United that and

XX market run - the a year So probably horizon is market. it's the significant, for

us. pretty So front it's in got opportunity good a of

that you lined things we're I us for globally stretch at if of that. think XX% think have share I compete. that products to market to unique our of some know, know, us we look help target you and XX% you will get of have know, a go You up that kind where market is aligned And

you. Thank Okay.

go from Our David of Please Strauss next ahead. question Barclays. comes

morning. Good Thanks.

Morning, David.

I look the next-gen of assumptions second growth. ask the question, your to you if wanted about, half engine year, First at around the

you of for - that implies much you full - the at the margin points the think up year? Does around in the the XXX XXX raised know, assumption half. than HPM, up over you the margin I second in obviously know the - know, was points, know, You year-to-date first talking we less you've the are saw half improvement your for guidance engine basis year guide second said you're in mainly the margins half still next-gen basis about still ramp revolve

Again, going pretty that impact Yeah. European see Dave, this have, customers our got year fluctuations. earlier, impacts number the to planned well like is to John of every related We've Harsh as the Sims. we're we summer seasonal much we the QX related maintenance. have shutdowns to said as quarter-to-quarter that normal

And consistently. we a QX in the quarter a like us, But have then for we end we So pull. in lower into seen is stronger of we've and little generally in impacts QX, that as generally again year. the XXXX bit saw tail see guidance our to XXXX

have we know, and you see So wait those guidance we reflect as our year closer. get our end pulls to how in in

- incorporating the year kind of year not you growth half fair next-gen of are in kind second a the that the Is assume in to not - it your the that saw first the the and you're forecast half on you side?

early in to consistent. a year, - what movement in statements, incorporating from standpoint generation stronger year. expected the than we're me from seeing year I think our particularly from We're some No is think within a demand, prepared said as just products we're see I going we the next earlier

those from we'll coming compared we annual it's see general in into expect on planned we think as to basis year full for year margin coming be year the some saw for into consistent. the standpoint But expansion pretty what than the products it. so we higher year the we'll And full and an full I for in said to

is this Dave, Rich. Yeah,

volume when it just at the year, very think we arguments divided well not the doesn't airframe It know by whatever on four. but make years work pulls engine basis, chain for been supply the the that because order saying annual way. production in the prior work market that consistent I just on in on doesn't when that jet at pattern year-over-year - as you reason. airframe that the that the the we've and The could aren't a even we way this look know same look we you you

on on So annual when our, together core you put our a estimates we've right. basis, know - an

across going then to time terms rates are rates engine good the we generation build and so the the lead engines board. increasing part when And that on And as a to pretty there material view delivery build actually are have in is the and be, what delivered. gets the significantly next of there

So you on planning our basis when a our thought is processes the you The year know second of will real third of process. is goes into we're of quarter. the with volatility see that. the if of lumpiness and half when quarter-to-quarter are all the the we that involved you given we One of number there or - a factors clear how seasonality

build doesn't quarter-to-quarter mean basis market our even a to impact the that from ‘XX from ‘XX and in it doesn't taking ‘XX the basis. a of ‘XX second That's ‘XX. everything It to outages, is in viewpoint third change ‘XX and from from rate year-over-year ‘XX were outages that the just ‘XX from the not terms just at quarter this on The on to doesn't largely is planned how to the increase going that be to it all works.

color Pat, pieces remains million, about you given talk but things. the maybe you how $XXX on a Appreciate the Thanks. obviously free to the for relative then just thinking, year, that mean moving unchanged but forecast, then you viewing how you know flow and Can lot year operating you're you cash one impacts the forecast maybe working for that you're ago? what you CapEx? know there. capital you Obviously a what know quarter can Okay. and better the thinking a were have through things of

cash our the Sure. contributions. noted pension of in the we flow, included increased that million We in guidance you'll comment excluding script, Addaero we actually acquisition as $XXX the because see free

in our So half. guidance second we have the increased

in basis, a as to working range, on going we year the And to to manage generate million the the implies working of the bill will continue side, percentage capital out On balance $XX half. percentage for $XX estimate the a which second on manage cash full million improvement the the we're see stated we capital be to some for year. total sales of in of

and increased the full So strong for we've cash our year. we'll see good again actually flow guidance

guys. right. All Thanks,

Jeremy Our next question comes from Deutsche ahead. Kliewer Please of Bank. go

Hey. Good morning.

Morning.

a you're You level guess guys to timeframe trying and guys that pension, but the what total some trying I you're funded work on obtain do or have liabilities? to you reduce good done have your

Sure.

closure the with target. track recent new on to the negotiations entirely, So and on and entrants we're

is goal long-term to fully Our funded. get

on for on in which help. that liability around the rates decade further by could well. bias early closing year period the happens work this on interest we've part believe all end. But is XX% the years. plan to an the long-term We see We expect contribution we as will And think anticipate a to we achieve we help the the of obviously what over goal. we'll date But year sometime year the there that that trend liability rate the entrants think We're next done be new some next can of several we upward requirements basis side over prior on end. interest There should side time relief. as is and

and years we several provide respect active participants, utilizations to can the So who be toward participate some continue that early our with actions funded to other of some we're early we'll we of fully those for business. sticking those our also goal. and sometime goal and actions - decade plan have with – the pension Obviously in as have will in other next to next end out take DP but

voluntary on contributions the of any have than All commentary Do right. you mandatories... kind other

in more plus and $XX million a of range here Well, in weeks, what the couple it's years. next but for the we've provided several queue the update

by that Yeah, that out can Jeremy, I with anything quicker, that equity by would would also that's that, or this certainly achieve do we not issuance we is like borrowing or do those that to doing we the of do an agree to would issue that way balance in long-term And I not ways the with you we But terms think shareholder be interested deploy would is old cash extent cash Rich. that's the everything fashion we the from if way said. in through think that. to going that objectives happen of generating variety the the to know the and and to enhance of a permanently. best better business one and ways value I get to of it's creation off sheet and

kind to exemption you switching your of is And prepared say partner Okay. know, status. there then in remarks the you potential delayed a by and HRPF the it's

So would that just have also there? to they slab import implying

bit that of for consumed the the with in on, you sources biggest the the bringing status there, or HRPF to, know same that's negotiating issue of different But by been and terms from people back the the through at talking in going conversion conversion slab Wetherbee, Bob tariff know, opportunity industry end for commercial carbon a that contracted carbon is the This you are negotiations businesses their little they've is their were customer. the U.S. of time single for and getting to partner perspective we’re leaders the or end

or the there and turbulent about like. jumbled pricing sourcing different been slab it's little been in looks conversations than what the past is is So a more

and to when they're to are at people agreement. much it's imported it just people the slab from different North term A continued merchant to There our the evaluation, labs world. lot about HRPF that first carbon just you very of And But at sources in to commercial chain turbulence go, believe market room to commercial do that allowed and turbulent through seeing be not the excited of supply the from little for a rock But the people the what require is wherever - just we produced are source America, signing the necessarily capability it more the Could moment. U.S., it's are the product can close are room domestically. for very we're sort looking aligning or they are ready ready have the options the they doesn't be a off customers we steel and a So in when the do. come. I finalizing validating that may the short HRPF, roll, technical out. United know working

you. Good Thanks. Okay. Thank luck.

Thank you.

of Our from next KeyBanc. comes Please Gibbs ahead. Phil go question

Hey, good morning.

Morning, Phil.

you for Flat then also just $XXX Flat I million Rolled for second of And on curious and confirm minimum observing get a Just profit so you the the you quarter. things, that wanted think couple accretive venture that can in side, much that Rolled was segment? And at a to this the said by that if you operating the tariff? how year were joint

clarity. Number believe Bob. A is of $XXX things. the we're making are of our million we cost a our spending couple number and products, number do think price product is seeing core improving mix. we're some target. variety target two, investing things. This improvement through in significant one, Okay. time We structure, lot progress I there for XXXX our Certainly just one, of in a

those of three are things core business. So combination the the really helping

venture coming fairly joint STAL market and the about consumer talked and strong servicing the the electronics in also expansion in We Asia. a online automotive

a in the be going said satisfied on million get of that. there. terms of not as clearly But to line we're sight to with XXXX, So $XXX by Rich

the successful successful to was and the we there sure in job to and We QX, phenomenal in is that contributed but done marketplace. product a and long-term know that to you had make exclusion it it back making employees was have be sure know, accretive. scale joint do have over fits the terms the sell partners need earnings. into it to our the up In to you you our ramp the QX We've our know, to of volume venture, everything accretive

Do you to on… comment want

Yes.

and the a the And its XX% content. the the in in bonded point to we tariff arrives that paying in volume time and probably very we the running cost resulting the in so total the real about slab time actually around until limited production So for the We're to basically moment. the of question tariff. in material is with terms can it But we're at the are the here consumption of hold out, of pull we bringing actually withdrawal the your the your better warehouse it's United the revenue. that we volume key States at port

would it the the that are importing, grades. like of metal intense the more cannot tariff but we I grades Some to the be do call with it

there that's So under much add have import when the the grades makes increasing you metallic of content Stainless more to an And market. just impossible know the percentage XX% that then XXX tariff tariff. you are some

restraining of that's joint are ability potential and the really its for. to the tariffs venture the pulling So reach what customers our full are

the products have we're the metal continue. the prices been that that June, in we've customer some that venture. get run fortunate continue of We getting joint also would But benefit been pull and don't really in July buying good May the shipping anticipate to in for of rising we and of delivering short and and

So it QX. accretive in was

paring the We but the are long-term for it's exclusion. tariffs, without sustainable not the

pension then closed lower got the entrants rates actions to else new you Just these would the where feel market you on know, And things and LLC you've given expect get trying do more expense said all you interest know your looking Pat where for kind like constant, a stock pension, to for XXXX? it now [ph] now, you that. to are they If to costs. you in the reduce completely a question of held and move maintained is

Its few with consistent seen as of well. years the kind what we've Yeah. in past

Thank you.

Thanks, Phill.

ahead. comes of go from Research. Longbow Olin next Our question Please Chris

morning. good Hey,

Hey, are Chris. you? How

Good.

Just that the place with a structure you the about framers side. bit little titanium want to contract the talk have air in on

terms margins have or that Is where of move multi-year pass terms have risk do in As you some to these mechanisms there that some the are absorb, fully raw any you'll potentially or say, through? roof in you of covered of tile agreements or other raw higher, material? material cost sponge

back on covered are We back covered to we’re sponge. –

see side airframe - that have things us those in no pass So actually the exposure on long the contract that term kind through and alloy those mechanisms allow of have we there. we cost so agreements that to delivery periods higher have to and long-term contracts, master sponge we very our for through

Got you.

I to curious side the on was one just [ph] away you frame with has customers of referred not were disruption your You if that disruption channel factor? still larger is in it and or gone order the that. by impacted lingering

we're We aware we're of dealings all that and in program. all And of our that's well met is that we're delivery of. proceeding that's the we June. thing airframe only control The can large with our all customer with very new aware requirements

do QX beyond. to we're the well And and same speak that expect and working with program implementation ourselves. can we're We in - new about only but very

aware problem customer have with a airplanes. cause build able chain But have so we year in working speak know to the this you as point or resources implementation we know last they to - have supply of the them, didn't needed that year not ourselves The that else can't some you a and happen to Chris, Pat it with in by that Hey, is was anybody Rich. the over including than I deliver thing that that one should IT them other and information new. is work our we pulling we directly began for you I didn't implementation over has said. and problem a being to mean, right. not ago on that a didn't been that material accounts three months, just

perspective. look can from know only our we it So you at

ATI make both from the team of commercial think only also and the a organization working we did of went least problem job for it outstanding to we're because I job an outstanding a segments, the that IT going they pertains of the was supplying organization, there, when flat control. wide an wasn't organization, with product the as product can did forms the as including sure touches forms standpoint ATI year to customer really at operational live it there the which be a to thing over variety

great. Okay,

side. on winners, good you winner there to some losers, like it's see some Sounds were

the curious is they half, is have with next a the channel. LEAP I I'm the that think shipping you've weeks lumpiness. want about you the five half? impact way you real on the generation some question, talked with aggressive or would in does order the material your schedule, into you about I Just guess, engine understand in to I behind would've last were been first lead reason by XXX I should the times engines the I But look four these second about they now. what at with running ask source of and outlook I way OEM’s they to know XXX I are units assumed quick they know, that always is side more talking think there if

talking rates other are. John. the about We engine you're is engine around this what Chris, are whether The requirements the programs the engines, understood. LEAP build well understand

We have there. for frequent there communications with our customers, surprise so is us really no

going some, of how assembly on see product technical said, from see Rich a particular and the But that As is. very time have far to away we entirely he we copyrighted. point term time is you're that depends called that it to from lumpiness, invented, Rich

very are point the assembly. castings of and forgings obviously So to close

we So there. product offset visibility much is have shorter, clearer

mill other tiers chain. further in side they the the away through assembly supply can product from of be point go On

there impact and other really overall a that there, standpoint ramps we there are we term there uncommon and standpoint. said build to that's there's adjust here that seen short some not be can We've ramp. in move quarter-to-quarter on. just disruptions from turbulence in it earlier as there and so but And the noise change rates that and can more can And rates, no be an turbulence from or

upon lumpiness we're you recently maybe I way that material happens Chris of air half. with the the tell including be schedules we has you strong as to the happening. in conversations that delivering telling that can that have by you're see we late to not do have as if our the is because the how opinion framers half engine could - customers airlines. of what just the that on right. is We second that see my in the that forecasting, in But Show, the in per emergent Yeah, demand none based we could asking the they're as the with just that at delivery has first all into None We're we what schedule them is none Air wrong, or wanting the which today, things right. of

shipment build that essence As can want well, every us. ramp is is you you how engine single delay bit the a had the slower that was of get fact, a slow And at we Air the to anticipated. matter not, much more question was us more the know Show going asked than give of conversation we to your because little we rate

all no, on deliver We we continue going the OEM’s you these going we'd fact, the saying are schedule, engines, book to As a back on we're we're accelerate. time ramp deliver that matter by of rate on the need you. order more way the will to to get to with and everything on you like have from schedule engine

what that's we're we're hearing. what that's and So seeing

turn the our over concludes session. like for Richard back This conference Harshman remarks. to any would I closing to question-and-answer

everybody thank ATI. and you call Thank for the interest your Okay. in you for always as us continuing on joining today

the conference to the Rich and all That and you, Thank XXXX listeners our for today. concludes participants thank call joining quarter second call. you

for attending has you conference presentation. now today's concluded. The Thank

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