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Allegheny (ATI)

Participants
Scott Minder Vice President of Investor Relations
Robert Wetherbee President and Chief Executive Officer
Don Newman Chief Financial Officer
Philip Gibbs KeyBanc
Josh Sullivan The Benchmark Company
Gautam Khanna Cowen
Timna Tanners Bank of America Merrill Lynch
Paretosh Misra Berenberg Capital Market
David Strauss Barclays
Matthew Fields Bank of America
Call transcript
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Operator

Good morning and welcome to the Allegheny Technologies Incorporated Second Quarter 2020 Result Conference Call. All participants will be in a 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. sir. ahead go Please

Scott Minder

call Good Vice XXXX welcome is conference website and in on Chad. and Wetherbee, Technologies Executive and Chief being the Chief second our Officer; the Participating ATImetals.com. quarter call. Newman, at are morning you, Bob to President Senior and Don Allegheny broadcast today President Thank This Officer. call Financial

on via your to connected you Internet, you’ve the this call screen. see If slides should

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

questions. session, During limit the Q&A please yourself to X

We in to release on this allotted all the will noted assumptions get attempt note statements and shown forward-looking to as to earnings various the queue that the Please time. everyone slide. and within subjects are caveats call in

turn Now, call I’d Bob. over to the like to

Robert Wetherbee

Good Thanks Scott. morning.

get situation the and action. urgency right required created by The to significant Let's global pandemic comprehensive of it. the

took the first long-term safe kept in work has protocols, as positive global This They've Keeping recall a My thanks stronger operational continuing This value they diligent our cash quarantines, of aggressive the response. accomplished may to done growth as a strength tested and personally their through a These Across Don to COVID. even details discussion of we it we've foundation for to in challenge as uncertainty has priority unprecedented efforts our to growth leadership team periods for and our free today's stay themselves strong continue invest a great list. call. our to along priorities from our safe. emerge enabled employees quarter and their ATI job company. led make a for to for will us ATI as delivering focus ability our position are downturn. high liquidity and co-workers We generation actions cash more entire leave to over and of crisis; to and for discuss The doing was global on ensure the the on being has unprecedented that. to commitment top-line has action portion Less our health. than collaboratively of to co-workers foremost earnings their our with to X%, fewer have You will and I actions cleaning well continue entered what Where that Preserving is to disruption. solid maintaining still profitable better. ensure work that our employees customers. review. been than his for is together; team focused despite quarter the footprint speak monitoring focused of XX the our our our profitability safety. time of positive an maintain in remains of flow this actions the concern. the part our They necessary

actions deliberate demand with All our are of expectations. and actively investments capital and these schedules idled alignment thoughtful, weather staffing now with second We've to administrative significant our we've operations the locations positioned were quarters, results next and permanent prepared spend. in the We benefits. are accelerate levels inventories a We've the crewing employees been reduced curtailed order expect functions. aggressively XXXX. proactively results before where recovery. near-term and maintenance We've Many melting managing layoffs Driven salaries and the customer also levels been completely implemented for us to and by have significant for drops improved work adjusting the in across storm system. we three today, priorities actions to and other even focused demand reporting the us led reduced The operations delayed aerospace of multiple lower of new we time We've have our furloughed period necessary. weeks. quarter two

full we growth it's took but lost. to to take so a we back believe It confident actions may did there. we're the not Fundamentally. market immediate these few will with that recognition commercial aerospace years deferred recover. get growth XXXX get As will levels we we

committed As retain We imperative to will announced be mind the operators kept as gains recovery execution near we in to firmly market accelerates. that term this to when share to aerospace in the future of levels cadre in set. an crewing such XXXX. respond it's were appropriate set skilled market previously and the ready We're strong begin

second view defense revenues markets jet X and forward gave core at market last with of those as our we our as Starting potential supply. and market, consistent both view week of updates our the major our and expectations and slide on the market caveat. terms look several for conditions, resurgence demand applications quarter our continued engine is the with customers near-term COVID well in to move by let's and our So aerospace differentiated

saw starting be leap for we order Stabilization rate sales in recall may the the the through engines in quarter prior the second became The horizon. production late initial significantly the as XXX quarter of Subsequently of appears reductions evident. impact below reductions the were by triggered forward order pandemic accelerated You year. book on to XXXX stock. engine MAX the

more order production. for between that point the increases engine levels track lag lead product half supply four our early to XXXX XXXX the accounting order demand into expect and delivery levels. half the At to improving stretch realign underlying expect Thus OEM's the quarters XXXX. point time chain more from second to of real of demand engine in the the closely to we're delivery of the of We low in before second we projecting our

we've schedules As and minimize inventory mentioned to proactively institute adjust [month's] and/or operations. worked our duration idlings our in to facility short earlier excess stranded

destocking engine in for demand quarter second fleet when the order airframe we Airframe is be real results apparent materials to at demand. predict to reflect pace was the market. the chain, supply in and chains going accelerate will levels airframe XXXX. returns MAX to to service supply expected slower destocking grounded difficult to XXX provide a it's Regarding compared Until but the our jet to

end year if approach levels we'll lower needed XXXX to operations adjust our materials. align with for we as airframe order As and

reminder enhancement a and both business the share that gains will airframe begin actions margin we new engine in next significant and markets jet have As early year.

recovery While be the will will of from be benefits these as the in in gains to positive due the the wins momentum magnitude levels the lower XXXX. demand XXXX impact industry magnified market muted

by and Our States ultimately defense navy. and materials United year-over-year is customer strength for expansion continues growth. It's of solid our the post BWXT nuclear broad-based business sub-sectors. many This led demand naval to across support

missile increase our did used vehicles. our to materials component continue demand sales for land-based Additionally, for plate as titanium armor

the year the from We expect to our expand mostly in insulated programs the second remain COVID supply we defense revenues impacts. negative half as

next and technologies We development prime materials leading future. develop continue to work large contractors in opportunities research forces with ATI to labs the growth applications perform directly defense advanced ATI better and the to with that meaningful the generation armed process and science

primarily for demand expectations by business As as China-based quarter known modestly than served faster second electronics our domestic as expected. volumes precision improved strip STAL exceeded role

greatly and half this second support market economic potential but second the China-sourced has the the expect a on both of growth impact well-publicized related energy experience demand we regional year reliance worldwide demand recovery China's modest to global to to reduced. Today the based holiday negatively half been severely on the consumer has drilling was COVID imbalance COVID price significant continues Production electronics. impacts supply exploration and sales. activities significant offshore or given of In on and ahead were declines markets, the the demand anticipated year-end and curtailed. resurgence Looking

Our customers as on destocking focus are repair inventories they work.

oil for and industrial nuclear including markedly demand submarket refueling pollution energy alloy land-based turbines products in offshore other gas largest areas Asia. control ATI's systems, Although was specialty and gas applications drive particularly better from civilian

reduced Looking improve have ahead recover. Demand slowly gas to to begun producers prices started has supply. oil and as

to late expect of We that awarded continue for demand to deep projects expected are XXXX. with be in government year overall sponsored be year These the value to ultra half soft high water the require projects in this second materials. upside alloy from nickel of potential shipment energy

growth. MRIs Turning diagnostic to the pandemic. elective need to resurgent the and second sales The first return medical due market declined quarter after delayed for anticipated surgeries were the of quarter

to about will turn I We results expect remain depressed to a concerns Don? offer quarter over of detail will moderately end final our lingering financial that back for due for call to facilities medical non-critical the With balance we thoughts Don XXXX visiting I sales questions. more the line second year. the be and to open half environment. our before this the at in second your to in procedures few outlook for the cover

Don Newman

Bob. Thanks Great.

QX headwinds in term expected results. MAX XXX continued production Turning COVID slide X, create continued significantly well. our and driven the macro by delays impacted to challenges strong as near and They're

team business by we we and being demand focused our can on managing control remain by current de-risking keeping lockstep recovery costs what and staying with employees in ready. a As healthy, our

segment cover and by GAAP accepted environment significant Before generally the current were or the I there the rules. charges These level. by were driven charges were of corporate non-cash a results at accounting economic couple by required principles

our a forged for down profitable growth write a which long-term and million at with good we $XXX First, products goodwill partial business took charge prospects. remains

valuation loss largely allowances totaling The reserve NOLs. assets charge. approximately paid. carry triggered due to the taxes impairment charge, deferred valuation second valuation GAAP operating our rules related to net million or for is cash dollars tax The impact The does under $XXX was including not forwards reserve goodwill

we tax return not see U.S. profitability tax we for positive including long-term attributes and we have We growth the substantial potential NOLs taxes the profitability. a These business. federal provide shield underlying in come to charges from years do as to reflect to expect which

redemption aggregate convertible million. restructuring debt actions. extinguishment totaled and XXXX of severance for further these the pre-tax charges for recognized also In We partial our notes approximately and for $XX

an charges EPS better of was per prior $X.XX of $X.XX. these range $X.XX loss This share. EPS our guidance loss for than a Excluding to adjusted adjusted is

with already deteriorate work did conditions to XX% diligently melted deliver nearly and inventory. costs revenues our business from While materials year-over-year control down we

lower operating standard AA&S' quarter sales in commercial by declined STAL's XX% and From conversion segment JV partially lower we're unit grew aerospace year. in and our efforts Moving services. profits were idling offset costs from overhead and segment stainless and scrap were prices declined reductions. products related our causing offsetting to results, businesses quarter prior in and in our somewhat of on impact specialty a as businesses. SSSP negative the timing and material absorption rolled in were SRP and at created business, our surcharge lower components challenges. mismatch back HRPF versus down declined alloys partially meaningfully second defense, aggressive both at significant a growth revenues volumes year our inventory Declines these in cost business the facility our energy prices values; second and production AA&S electronics and decrease versus perspective negatives caused raw from modestly cost under stainless specialty prior a office Lower

from and increased efforts A&T forged schedule market products The commercial cost revenue We considerably defense inventory nearly markets primarily segment to decreases demand facility work also absorption. volumes to decreased and inefficiencies help due our overheads reduced while associated and the to and materials driven savings the the under largely offset nuclear Segment Cost production OEM HPMC levels. Stainless missile and materials. losses JV. in XX% operating and Shifting sustained specialty idling COVID sales pandemic to lower down by both is to year-over-year, energy manufacturing due response reduced costs at decline profits the declining related for businesses. the medical naval aerospace to

slide a our for current capital look flows cash liquidity, and Let's at X, turn to structure.

flexible cash lower and ample has a quarter, any In options storm of carry to or new to million continue more a levels best small and a X.X% ATI to convertible the years. after ability quarter, we The that for over-allotment a time time. opportunities we spent have liquidity settlement our team July versus convertible $XX.XX callable price $XXX cash manage capital to to considerable working value than and and new As share, including liquidity $XX.XX decisive possible per three In structure take represented. even prudent million XXXX XX% weather on issued to of notes invest share thrive the notes. business preserve are and over convertible our the ensure grow notes, we the second maturities higher maximize took leadership our redeeming interest actions to strategically rate X.XX%, opportunity we more further and $XXX versus in conversion debt per provide create

to healthy quarter. expired ABL we would are have favorable These inventory the at $XX three option a Today we hand than inventory revolver. for with borrowing our the steps next cases exercise progress years is billion we cash approximately impacts to We part approximately term million existing in base In that significant liquidity $XXX $XXX we end cash efforts collateral the a our capacity second see XXXX. trade-off rate million away continuing initiatives. addition, due our we opportunities opportunistically total lower maturity our $X add made debt the selling debt on end standpoint, rather the quarter through capital $XXX by absorption of of our from including in managed ABL low interest optimizing some levels meant reduced it all working ABL April million incremental available and cost generation. our liquidity million by to the producing, Further, even of schedule. in improve Well, second receivables convert second maturity ended quarter. inventory was and profile now under great quarter. into loan To facility of cash undrawn that our and support From a as that liquidity to of have on to

our avoid to to We stranded inventory. creating orders of customer discipline also maintained producing

we While year. working in expect to good reducing the half the we trend QX, progress of made favorable accelerate in inventory actually this second capital managed

and into are and market first uncertainty to for let's about EPS. out near-term revenues expectations it understand on we guide ATI's of our the demand May however, very full beyond. posts the talk visibility as slide Now and along and still orders and difficult aerospace year in XXXX Therefore around call makes plans. the to firm have thoughts some Similar cost XXXX particularly turn with initial with initial demand X estimate in better we on are end pace earnings and customer to from XXXX updated full QX next relevant XXXX The quarter our unable impact predict can, timing better precision. today. accurately the of to commercial my laid guidance savings still the We and comments recovery assumptions year quarter and any level predict beyond

past on three view have current Our these items the evolved months. over

First did production XXX as at the predicted. in MAX second rate low restart quarter a

last XXXX. will reported low the the ongoing Given recertification Boeing balance rate process for plane's week as the and by remain of production

they're to improved above average $X.XX prices nickel while Second, quarter, $X. and over our pound below original in the $X range the few of per second still past weeks been prices have

than prior the average likely higher quarter but levels. With third XXXX below year prices quarter second

impact to with to U.S. continued the The resurgence worldwide this result we deterioration seen on Finally, of had and spread as regards pronounced business has conditions a will current pandemic. markets a and continued the in end from continue have we've significant likely negative COVID the serve. impact and

On focus we was $XXX our announced XXXX our million. cost ready. recovery and a capabilities QX reductions response control. million we could million to rapid to calendar increased on in change what $XX in targets XXXX. and Those XXXX million or This our by we critical between a We remaining continue while earnings million to to QX reductions have $XXX of demand, $XXX new cost adjust as $XXX structures and efforts It maintaining XX%. savings decisive for the expectations and demand brings pursue call, cost our between range we continued

ramp rate cost lower idlings, savings controls drove production all the Additional third cost we severances full increase in aligned the our furloughs plant the initial Across annualized the and requirements expect quarter. in segments employee both our up and range. to run tighter to with

quarter. back savings rate in million These run market amount deteriorating help the additional will will XXXX. in reach mitigate of quarter's of second expected conditions fourth half to the $XX the The

the reductions cost end these reductions of to of margins savings also XX% in All upcycle. XX% expand but improved downturn these To structural the become to decremental in we permanent. that the expect margins cost

assume to higher to market part in in share $X.XX poor revenue an QX marginally This result As in basis experienced lower than lose to engine and rate cash our full-year we decremental quarter. significant accelerating expect conditions margins estimate decline and $XXX the generate defined adjusted third to XXXX of due contributions. production these a mix. $X.XX tax guide maintaining free and rates, between to jet pension the $XXX We reserve million. levels on our a product per million assumes quarter. in efforts we cash, X% flow between unfavorable are This U.S. excludes Due benefit

improvement quarter fourth outside some third expect quarter primarily in we modest of the aerospace. the commercial beyond Looking

savings back orders This to our increasing We in production, the year. is supply our at gains, and customers, end continued the engine jet of XXXX the and the cost also the full in partially enhancement likely improvements due new our shared aligned leap of initiatives improvement anticipate destocking airframe is the impact to particularly actions; these business offsetting of improvements margin from the de-stocking meaningful half better engine chain.

aligned are production customers view, bodies to levels commercial years more aerospace narrow rapidly XXXX take rates belief wide-body the echoing to that four with longer We will recover returning industry their than term on our with three aircraft. to

commercial it I continue moment add call to to coupled quickly outlined case However, specific that end ATI's more aerospace grow. will benefits will to back now and is closing a help the the ago our that Bob with improve some likely the of markets company That softness. comments. will defense over ATI to other mitigate I in lingering turn

Robert Wetherbee

waters problems I the These It's relentless We say solutions apart. last pretty doing and if we're on all we everything us underpin to and lead commitment will the today's our focus update. our the started. the them success, scientists supporting to every leadership to who we so. than and from and we partnering is end these people what to find leads at path priorities XXX no and in and preserve and for It's active we're the with for to lead our profitability between choppy long-term the believe financial more ATI their I we sets our us shareholders, best us. is successful the team in. drive on Thanks Don. how delight challenging days that first serve customers do for time for wildly security R&D solve investing returns This things in where straightforward our ATI innovation our slide workers and we're Thanks members By to efforts for We to inevitable their a conditions. day. recovery. being challenges. This market and production toughest growth; matter on achieve fuel call and how create swimming

share So and was environment to We most a I and to dynamic a our forward-looking adjust less for conditions to our up-to-date forward current earnings are demand of pretty for and wanted investors know provide the expectations third important our these simple. and outlook. to decisions look our We provide share views. our current cash best to than on quarter give you possible that data. per perfect comprehensive ATI's picture We goal state today strive wanted complete our actions making at information full-year flows. with

differentiated can be as result people. ultimately tell I or process the you ATI get actions science, taking XXXX remain with the a innovative assure you stronger, on to crisis the fly value relentless globally our during and what advanced will can't in core when crisis. levels growth creating combination profitable our technologies will of XXX MAX We will shareholder markets end through I or more COVID is we're and this certified Now be will the this levels company material of focused of a long-term focused or but each demand when back exactly to when

to So you. Scott back

Scott Minder

question. remarks. Thanks ready first concludes Operator Bob. we're our for That prepared the

Operator

you. Thank

We first Gibbs question-and-answer Philip session. [Operator will ahead. Please will with Instructions] begin KeyBanc. question the go And today the from come

Philip Gibbs

Thank you. Good morning.

Robert Wetherbee

Good morning, Phil.

Philip Gibbs

of what you nature. With and this the I XXXX. those does XX% that that cost I to an you you've exit amount in point rate to that of in terms for just incremental done announced XX% this up Question on cuts be said actions think had was cost until all Don reductions structural will the morning

Don Newman

will Sure. I question. take that

cost XXX rate, you're to the I So think XXX kind target our pieces; think in of was the a one capture what would what on about our expect original you're million rate two is at terms do of the guidance you hit probably by about to probably run range. so asking XXX which and core our of our to hitting XXX QX I cost in is of $XX want reductions give early that was range QX savings we of idea there's end an is run tranche thinking kind to as you the and rate and of in QX say

run the on the that of discussion. this is QX. would rather second QX in The piece than earlier of to I be later is adding piece incremental we're range rate $XX going and million think that out The QX QX

we So of should the end have full rate by year. this run

Philip Gibbs

all equal So to does on million? to $XXX that closer to $XXX savings million cost basis an that else suggest are annualized

Don Newman

way the that's to want it. think Exactly Yes. about you

capabilities I and that maintain lay toward skilled rate to firmly you reductions of cost probably with to is pursuing to our as XX% I work range it cost has maintain workforce. our savings expect also then want out cost but going science that to an have pointed to the that much done managing noted importantly and to and reductions, the we'd our terms doing we're as the with one leadership permanent think structure and this and us our business and thing is going future. team million also materials to in million that is quickly our are reductions. We're and $XXX very-very a XXXX We're talk stay in in aggressively I about reductions this XX% really we run. build and cost cost how job As long those structural One this $XXX change of of make us towards clear annualized the the expecting Phil run as we're between to delivering stress not mind demand to structures in cost want thing a in obviously stay to we and incredible focusing new these have but our I to mortgaging meaningful for goal pivoted

thinking recovery recovery just and keep So these being are as about ready. you're in the mind reductions cost on we focused

delivering even the have savings in we these long term with So mind.

Philip Gibbs

for do how provided do cost for reductions a that. at Thanks stepping sounds And to the EBITDA blowing like you've that have implied is guidance quarter business and you a certainly has piece the to big down sequentially going China point better, be that it just this that capital more stepped is through down the that's networking impact. much margin to but due third revenue you're coming through and this due fact and of obviously all

part a through back in temporary the as half. bit that you it's So bleed probably of that inventory

So due assets? just much fact on that your drop this of trying to understand just how absorbed under to in you're profits is the

Don Newman

question. great a It's Yes.

not and inventory on right that we're our creates focused decisions under produce down You're to managing means as that levels making we're absorption.

then $X.XX of those and and cost right terms to haven't in a about upon to we're but in the share continue per comes it's our savings. going be right ability talked a going based capital magnitudes about on lot run a I we've maybe think assumptions $X.XX dynamic something of as our to deal I course QX, stay obviously to working We the sizing savings staying mean million-ish XX when number I contributor just which of a range production cost already it placeholder, to impacting would it's levels, would to a but in the you're hit reduction probably financial of in focused the great terms the kind under-absorption. of around QX the rate that whole talked

recovery of will guidance the XXXX parts of QX of the So they you're business be do we're QX shoots we seeing engine in effect QX see in decline QX our good anticipated the hitting the that green and and the be news is conditions jet meaningful in of should trough. and in could is The thought key and but terms thinking aerospace improve.

Philip Gibbs

And guidance your then million lastly for flow sequentially the liquidity by on year. improved could; here based full free roughly I XXX if cash your current

I liquidity intermingles unclear, plan free half think free all this that on the would cash but else that exit flow equal with that you implies the how back cash the the than ABL with I itself or guidance? more in mends but to where Thanks. more know year is

Don Newman

Yes.

kind that let in answer of me layers. So question

So as one QX you expect and your does what to answer like in at a look would generation QX look and it to cash generator cash we QX a be questions from standpoint, of QX.

impact the to are excludes that contributions of course plan Of of pension relief. the inventory the but pace we expecting

can initiative one down to then has the the XX efficient a taking taking cash all in how $XXX up we of last in we advantage that the historically a way between It's the release Phil rather -- that you days what inventory borrowing inventory in really pockets we're converting expect have started we Our inventory we're million that replenish is inventory about receivable Well to accounts in our pick way. greatest do was revolver. interplay think those base. and half balances and into undrawn conversion you the not instrument into availability cash the of as an been is second inventory included do the as cash and about of under the revolver and ABL

the of some working I got into doing range what's there we million to We internal result we've our do but a to expect that. added think could borrowing and I of in those meaningful our targets ABL upward are magnitude and it so of would meaningful, what can and get something be my banking target with $XXX is of group base as the adding

about cash is you at what end thought doing up a standpoint were QX as be heading QX, liquidity. of of ourselves generation; around billion ABL was end right the the our could liquidity which my So towards similar collateral a add position now and XXXX dollars of base we're we we of it's from that a course QX finding the in

and is right a to at So direction. there we're we're very position. a Again think looking but in I managing the think healthy enter in the all bit we're going XXXX out heading levers I

Operator

our come will and from with next Company. you Thank go Please question ahead. The Josh Sullivan Benchmark

Josh Sullivan

morning. good Hey,

Robert Wetherbee

Good Josh. morning,

Josh Sullivan

Yes.

completely up there, your involved inventory the you, might where growth are just much then what conversations? how questions Are you XX? comfortable following times pay and those point? concerned lead lean contract to taking they in this might are of looking in and or that you comfortable if inventory lead then base clean be Just take Are and is in they the how OEMs go at out on at ‘XX times about inventory and structures the how

Robert Wetherbee

morning good Josh. So

the has In terms demand down, as of inventory down well. your as of part our actually come flow question come times first have situation, the

So changes we pretty to ability emergent to in near-term or good have a demand respond actually upticks demand.

would from customers very. nervous I'd say, not think I how be our So

daily most I think we're cases if with in them for in good weekly staying other touch not cases. the

we're and getting and maintain, said is able working readiness. managing as value to I not other think very and looking melt streams how they we're the such way melt flow ahead we're of on we're our ready as those Don to our go aggressively recovery and that issue be what at

lean I should our go? ever and So been. get be of good our levels to as it's can we very lean We respond as can how think terms in inventory ability

of many could areas our hang the melting to people said decision specific we certainly in activities as our on a improvement continuous and highly made trained continuum. we as and earlier As downstream we've to

helps. that hopefully So

Josh Sullivan

And pay portion then take a that is just on meaningful those or structures look? how or

Don Newman

they're some that, that a element. a do take our certainly or I'll driver We but not wouldn't are structures. so have Don. material say contract is take pays in This Yes. meaningful I

Josh Sullivan

into portfolio, moving the bit? Can aviation defense growth like then And in the can visibility carry the into platforms? to XXXX the a through What strength over that little well? just as maritime you dig on does that or look

Robert Wetherbee

yes. is answer Simple Yes.

that into things break look to down the down. of simply kind and that defense when way it our things easiest really it So we roll. things breaks That's quite business, at fly that float,

there. look the pretty that things long programs; are navy principally nuclear areas; the So forward float strong visibility

should pretty XXXX So carry us that well. into

stuff demand any again the that's decline On in there. haven't flying we seen

our think demand. the say to rolls is good see and visibility on order stuff that I'd continue I we So good

do So we I XXXX see would say growth. into

products, I nuclear nervous go in into got XXXX a range the few certainly a get we strong little the with BWXT contract signed it's probably it's quarters ago. titanium in in but the think a through we but the particular is navy alloys as to double-digit program

strong So still and in beyond applications feel for those to to defense. harder new actually of all probably XXXX we a come will portfolio those predict pretty are that XXXX but bear are have progressing how we

Josh Sullivan

Thank you time. for the

Robert Wetherbee

Josh. thanks Yes

Operator

The next ahead. Gautam question Cowen. come go from with Khanna Please will

Gautam Khanna

Hi. morning. Thanks guys. Good

Robert Wetherbee

Hey, good morning.

Gautam Khanna

in has I in the give was year, XXXX down minimum there [indiscernible] adjusted curious leg the and for contractual minimums? Boeing have is earlier with contract we wondering fall or if titanium kind particular? to kind contracted I you on program and I'm guys that the just out you of some have compare the that us you that's you on, could of color another for think below now played look to were as

Robert Wetherbee

Yes.

airframe a So the say in a step demand, close got, on XXXX. our things going if where's one is couple been OEM back to targets take we we've contractual and

numbers destocking We've confident destocking in be that look those seen As start. not forward, a and you little will bit we're sustained starting that will of QX.

levels we then That the on for next our airframe be probably out would XXXX the two in the that said balance expect years that we and of year those kind where participation quarter announced lower and be we were think business. We the airframe or level the side. expanding of to sustained quite it I expect last three

airframe the some That that we'll XXXX. pick third other that of to half help really could kick probably share should Boeing and and position a offset will in some manufacturers and coming a of problem XXXX the with out up So contract. of some start we in that see

Gautam Khanna

A rates relative like rates? on production how then the some helpful. declines and see the the or do before I channel, all of are appreciate you we I also customers destocking that as engine are underlying various now your follow-up. still to curious production a business it mean should to the think destocking may I'm to aligned are you much well demand signals Bob B, That's amplify and just folks in just see see longer clear your terms

Robert Wetherbee

say, day. believe part them I a near-term are That's every would Yes. with question customers our we engage demand. most every the do the week, customers engine I with for our ask, aligned

quarters the probably with demand mid-year where get XXXX half is the then of see be to this destocking balance really in should two alignment first time So with we expect they taking pretty the by our orders. through first of are correlating and space and today true probably good the XXXX we we the year the engine place into about to

and couple end engines they well little think a because we've week. fairly I a to ever spoke it's departures issues are of take lag ever certainly running to it but with there with their significant decline another last market about those So quarters GE a the talked was bit you for as that going as in and of

them be expect I think to mid-year. we by in line

mid-year Our inventories inventories their year. by and next

Operator

Thank you.

Bank come will Tanners with from Timna Merrill question Please next of Our America ahead. go Lynch.

Timna Tanners

good morning. Hey

Robert Wetherbee

Timna. Hey

Timna Tanners

high a . good morning Just hello level,

level Just any of a comments end might how or just early of year? question to a next ask vaccine there if not high your year, were wanted change

Robert Wetherbee

a number vaccine. if Well, hear cheering us one there's you'd

well builds which the the us vaccine. seen we've I feel the faster of think stuff aerospace of lead give a, for retiring in think that and a one we the I increased old in lot are recovery that airlines would travel things the is industry call well-positioned would would us think the the for it with it impetus and to positions to side a improvement spare and I I clearly new air for

generation engines feel next plus. next products the So a be that we our would with generation on

acceleration of new spares demand for followed So acceleration the stuff. by of

see would we a be vaccine. more once we bullish So

Timna Tanners

then No, clearly reconcile to considering I'm to destocking there destocking the actual that if terms trying wondering of would then we that's so terms quarters be the engines to and that I ways positive and so in or of and timing going I'm are just for next lot regard in a with airframes four is where destocking. jet in the different guess demand markets we're end continue of in

mining more the know So likely more it's construction kind recover although to I quickly small. by automotive confused of obviously

these go to could So pivot us just if tell can quickly recover? of wondering and things through if were you how some

Robert Wetherbee

Yes.

of decent I automotive stainless you construction a are mentioned today parts So They business our and but recovery. our we're role think there. smaller as in we've de-emphasized seeing

precision as shoots, pretty business It's is but think it should appears we consumer the automotive actually side U.S. the in it. construction get referred I have that and about the capital XXXX We it we into a cycle others confidence see feel and to see relatively automotive quickly. Asia good China. spending through in Don some I recovering green roll early strip we we think that in in

yes think the aerospace, jet quarters be else side markets. I probably XXXX the should good in but the four don't recovering pretty about So other I feel we I think the early engine would in everything

Timna Tanners

Thank very Okay. That's it for me. you much.

Robert Wetherbee

Thanks Timna.

Operator

question The Market. Misra go Berenberg is next ahead. with Please Capital from Paretosh

Paretosh Misra

you. Thank and Good morning Don. Bob

should years, had just back four production guess next your gains the generation contracts, in high in you've long-term just new that to potential, rates be airplane it do fair last the and performance of XXXX whether in I sales XX repricing is when progress on the the rates engines. it's the share higher So revenue the than or to penetration so also aerospace when say years XXXX, they given opportunities three market business months, higher your question come first run the

Robert Wetherbee

won. we share the expect business, benefit positions A and longer margin the simple is do and a gains enhancements new the term we've from answer the that to yes, new

that defense we growth think about growth defense. I the is we couples in continued long-term thing that other the talked with earlier see

but to being best. be the components. That's our materials and defense, Some play on really bullish great programs where coming down the core of and pipe we're aerospace ATI funded obviously they the strengths have

of So cost reaches that performance financial better with and much then obviously a the couple you savings the structural point. company the

Paretosh Misra

And change makes, white Would versus how sensitive that I body are you guess? body narrow the to anything?

Robert Wetherbee

tend nutshell, content quantity tends be bodies So important. you more look to obviously wide unit in to per at a but when the narrow the metallic bodies have equally

and performance narrow think would product tell going body the we're engines I So to that airplane anywhere happy in between wide And what those on built frames. based and on world. with body I on those we're be every you our gets

we're excited. So

about getting So that say I'd concerned built. gets they what are just built less

Paretosh Misra

one your pretty in QX. it's could it sales but was just I at one engines look ask ratio lower if and airframe it to than that quick jet Got you one? to to two much If typically a

two next think revert we of year? next to of the half near that should year, term and to would back how in one So it second

Robert Wetherbee

Yes.

is supply XXXX chain think little frame. going supply I the in but chain historical just We'd the I think will a jet the year second sit just historical that balance to time through those we of think that destock where especially it think next with would half be numbers I half in share take the of by destocking to make of I first but as the the you're back return that to the yes yes I going of positions little think with longer, engine year, the, right to the I over probably it's comps. because airframe a we time I think term funky work long think

Operator

you. Thank

Our next go question Barclays. will with ahead. Strauss come from Please David

David Strauss

Good Thanks. morning.

Robert Wetherbee

morning. good Hey

David Strauss

I the explanation destocking know of side maybe ’XX? for bit, is this the airframe in airframe down think where the a versus difference me we've destocking through to what over the you engine terms is terms in and but all timing extend going difference the around airframe can way it in engine us you of between been dumb the Bob side and tell

Robert Wetherbee

Yes.

has issue gotten So I think think engine destocking real the group I from going is the first. standpoint,

we ahead. much reacted shift the faster, I'll pretty guys out line very a saw announcements late saw in QX major quickly on So just a quickly. the get so I on, think that with they've very occurred engine the in to what gotten and the MAX We disruption going quick and say was and desire

through engine what that implications the working on the to deliveries airplane the think on supply length them that side I taken of airframe starting and long-term of think what I to side. been because and XXXX they've the is MAX when in are we chain saw of on the COVID longer of understand QX happen coming it's back,

I airframe on think XXXX QX the of QX is happening and in side.

will So demand. in start be late they a the back the as result engines XXXX pop-up to see we of a we think more half in got because will I just and second

say airframe I about thing airframe the so up, think just the travel history the what out tend they we're airline will a think is them up, that's spares things over takes one is builders whereas and good and out. would the get time seeing. I in to smooth will to be of longer that there We've previous little leveling said be conversations kind

for frames. the So quicker a slower up slower and down a be quicker engines, down and up the it'll on the

David Strauss

the are adjusted range. I the in for divestiture this number? terms engine helpful. that Okay. side, you're aerospace airframe And EPS low in at you in much what down looking think you number in aerospace the How in for Yes, we're and can that's and then in help an out a at think that bakes baking you revenue of all EPS QX, as about you on in quarter QX decline XX% the in down on were us between that

Don Newman

we given guidance. revenue haven't Well,

it. So think to cheeky decremental want We putting here about but guidance you your to out helpful math. the one would there. do I math mean can be you margins. don't I can to doing of don't tell you I'm information out additional be what be is do reticent Clearly piece math the I just in to

So think we our QX divestiture decremental in XX% impacts. about excluding year-over-year if XXXX at margins margins sitting you about decremental were

forward in the QX expect XX% was in going the QX to out. engine out look but and Be little margins widening I decremental it's blow XX% some mix. Bob the declines jet talking you wider expect a not it As that you and bit to about range. because should QX

maybe of XX%. think in So terms

can revenue just I to to be earnings our you publicly. hate take that it do are you back modeling quantify with expectations that some guidance a on certainly our you to and going lower. If will find view certainty and get you into will

David Strauss

an contribution I the in decriminal guess a or last the on, That helpful one what expense Don like Yes. this standpoint piece standpoint update margin is at point? thoughts any ‘XX might and Okay. on in look you and from cash side pension

Don Newman

the Yes. It's is of. and then said kind yes answer I

XXXX now. of should I will XXXX. about expect that drop I have down And would based So some. We million expense to be know modestly our right $XX would expect that down expense in what I upon

a XXXX, third certainty down given average The about terms those know guidance year will end gave contributions that $XX XXXX. we of we've of I to year. and what Should be is won't reality the In couple then the between but would of about and averaging actuarial the that with little neighborhood those in million. in the the is numbers kind that look for and help? contributions we the million XXXX of first our we dropping run higher expected figures you right XXXX until in bit I in valuations that years like just assume $XX hold at calendar But now

Operator

come Our Bank will with America. ahead. Please from next Fields of question Matthew go

Matthew Fields

or question XQ? pension XQ the that for for expected take just year is guys me, modeling to Hey this XXXth place in a contribution

Don Newman

XXX, the That's in for estimated phone. defined of benefit at the so look on the the that's you everyone benefit XXXX. plan as the So the into deposits

I be of QX. million end contributed QX will cash range the $XX from neighborhood the XXX that think would XXX of the So will be the the in that QX. going contributed about lower a between and balance then probably in in to the in contributed, million we've balance standpoint to and to $XX of about way XX million probably contribute we're QX expect of

Matthew Fields

billion helpful. then of liquidity at about the of expect and liquidity good the on far job All that comments I you side Is end well. boosting That's done so as right. year the to that And liquidity you've appreciate a a total of that for billion you down you two year of make further? kind in into moves extra couple or dollar do kind another level you that comfortable think of a need results or even boost and of to to aerospace heading there's adequate

Robert Wetherbee

liquidity our mean until maturity a term like next nearest first course standpoint feel in good XXXX. isn't I Yes. all spot really-really from of a of we're I and

to very lined to and up to the be cost to profile you the structures, guide new course as good of position very our continue a watch capital feel in we're our placed around healthy to expenditures shape we'll XXXX. a also continue we'll healthy June. So We demand liquidity for and to business initiatives levers but position. working was capital and I continue our pull demand look convert about good financing out past very, the a in did liquidity That

of you're moves are, those cash is other up really and in got we're terms we maturities generally a of able I XXXX course we've be We on easily. need from manage book think $XXX million should cash anywhere to you We end those needs. the cash the we'll needs opportunistic, million In $XX meet quite kind of in in the bringing business some what due a but typically to give business.

we billion So be. to and I spot fortunate feel position we're balance liquidity. and of very-very position a liquidity to good healthy dollars is are our sit be that sheet with our the in that very with a in a in

Operator

this closing I any session. remarks. like back our to would gentlemen Ladies Bob for turn and Wetherbee to the concludes question-and-answer over conference

Robert Wetherbee

the about remain position, the aerospace we've ready significant actions as and recovery COVID occurs. heard to ATI strong new as the reality industry taken talk recovery to believe outpace Thank you certainly adjust that on the positioning also strong liquidity but call us for our and and to will structures for demand cost our Clearly reset we we commercial talked joining it today. industries about the relates us our product

continued in So your for ATI. thank you interest

Scott Minder

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