Allegheny (ATI)

Scott Minder Vice President, Treasurer and Investor Relations
Robert Wetherbee President and Chief Executive Officer
Don Newman Senior Vice President and Chief Financial Officer
Josh Sullivan The Benchmark Company
Philip Gibbs KeyBanc Capital Markets
Gautam Khanna Cowen
Timna Tanners Bank of America
David Strauss Barclays
Paretosh Misra Berenberg
Matthew Fields Bank of America
Call transcript
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Good morning and welcome to the Allegheny Technologies Incorporated Third 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

today morning President earnings to being call. at Don the our Good Chief President third Officer; Chief Executive broadcast Allegheny Financial quarter website and call in Participating XXXX Today’s Senior atimetals.com. Bob and you. Wetherbee, the and Vice welcome Newman, Technologies on are and Thank discussion is Officer.

provide not comments additional will questions. as for Bob messages. speak. Their will For our on outlook. slides The and results today’s at remarks, line and They on color advance After slides call, details on are we display or our prepared the we our key focus will atimetals.com. highlighting and open Don website available

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

assumptions and noted the As a remainder, the all in forward-looking various caveats earnings in and statements release presentation. to are slide as subjects

Now, Bob. I'll over the turn to call

Robert Wetherbee

relentless guided key an market. morning. challenging we by to those outset share say the the morning, Thanks aerospace my three ATI commercial year It’s headwinds, all XXXX topics. challenge, thoughts a of who I'll of priorities at for the Scott. understatement us, on established rise leadership especially the Despite has the continues team been to pandemic. Good these the This served that to

control Thus, what strengthening control? First, and how are we taking cost accelerating of savings we can our position.

weather share capabilities. third, position thanks a Second, well fuel in us And for ATI's our gains ATI, puts strong our growth. storms and unique of view our to ahead, as to the sheet future an excellent in to our markets stronger confidence strategic balance as and

our flash taking So, We decisive first, forward-looking where soon began today? as red. are action signals demand we as

in structures and reshape assess From give insight inventory beyond. to thoughtfully the XXXX cost levels, we ATI critical changing our conviction decisions, with continues us gain and We've urgency connectivity expectations. acted for market to customer and make to moment. with demand Our aligning this, the dynamics to

through third our our at exceeded dark costs Minimize align these We the included costs. on proactive costs. execution from previous with result guidance. benefits a Reduced programs quarter implementation. overhead. reduced efforts, accelerated and eyelines our initiatives eliminated significantly restructuring capacity financial As our to With [ph] fixed of aggressive savings This results demand facility cost decline. quiet variable cold, our

the We off intensely our continuing variablized cost non-production administrative sync reviewed be we've control us what critical. actions now every viewed This which are and have Overall, with extraordinary. historically of to as and all, costs. Cost our only have significantly on people related our and the fixed taken tremendous crisis. over structure. turned was during gives we've demand, lasting Through impact expense, will a been

and production they're shifts made First and demand for been safe, delivering we've a them. easy Growing our critical end and customers. materials to adjustments while consistently components keeping to and deliberate personal recovers. crucial as take actions result. and I actions ability continue and continued entire The future the shared stronger to the economic a to economy demonstrate commitment and sacrifice. ATI's we've and The have as each fluctuated other team's to dedication sincerely frequent shift forecast appreciate effort schedules response company a in our market foremost, efficiently emerge are success. to not levels have Their taken will

we're recover. ahead, eventually Looking demand confident will

we're several of We to upcoming we reaching signs to bottom quarters come. for stability. continue expect some Yet difficult believe with these the times do

manageable levels balance and about ensure solid a ample puts sheet our debt diligently liquidity let's position in. Secondly, talk it schedule. maturity worked We've the us to and

balance and Our us future gives strong to crisis manage confidence our fuel through sheet the COVID growth.

ways. three in growth fueling are We

and to commitments, see that new in enable share strategic customer capital awards on XXXX. based to business First, we'll gains we're investing start

when finally, core material scale, our in capture expanding build pursue our profitable valued. organically economics capabilities rapidly the opportunities. expand right, time are adjacent science out and high value where by markets market expertise and presence acquisitions And Next, we'll is to

growth As our we intensify we and aerospace components. and accomplish will in goals, materials defense our presence

science aerospace along our the process like leveraging technologies and continue adjacent capabilities markets generate in to material margins advanced way. will We

reach demand Looking aerospace a efficient, it growth when We forward, But we're products We're positioning could no know side. could you're take, we'll it's not believe we confident be as get No to that predict for recovery what to at recover. deferred, economic the it recovery form will how you you'll L-shaped ATI matter emerge leaner the comes. a be could and the it U, it see bottom, V, more the commercial difficult when will lost. coming matter there. be other the stronger,

believe are some presence examples expanding just growth defense. markets doing how we're in I our We're of that. Here like

solid profitability. aerospace likely positions have in markets that can commercial aerospace recover like We to than generate adjacent are and faster

for our Defense to surprisingly, not markets on Lastly, view resulting Broadly efforts will across color the the notable going of a our and dividends our footprint, and remains lower while streamline QX impacted capital exception. our speaking costs pay manufacturing more deploying forward. downturn. were we economic little most negatively positive expect long-term. what growth pandemic by and ongoing sales A

down ATI production significantly an as will MAX near were time, familiar the aerospace we're way year-over-year driven over quarter, remain start positive supply weak engine Aggregate recover. new Let's their continued future into in industry as will Aggressive demand. throughout Fourth XXX the share of aerospace. impact engine restrictions engine Both will wins will sales jet sales began remain likely XXXX the jet future couple align for and all sales for volumes applications will as will third subdued and quarters. business. quarter from materials and reductions airframe decline the forgings travel balance term engine lag the of rate likely customer In to inventory prior commercial chain. relatively and with quarantine, of jet product XX% wide-body impact airframe airframe ATI through low market the levels XXXX in factors versus production better these with gains slowly with, work production. XXXX, benefit increase by to additional year. Specialty recover. announced The from destocking

market, Our strength. second core source remains defense of a

armor, I aerospace titanium to capabilities and materials on is in by diversified naval accelerate Titanium growth nuclear for both develop power the both armor important science at plate domestic thoughts continued timing growth. talk the three my about due an military than led defense resources sales expect ATI were growth advanced year-over-year market, significantly in process investing were Near-term, more defense and We're components end XXXX. quarter and protect. adjacent material XX% Excluding sales to leveraging and a to and international program. we fourth our technologies and to produce markets. and suppose into down

quarter Third medical and saw gas and end submarket, of were worldwide. customer lack processing oil less significantly we up the down markets and electronics. in and in energy's downstream inventories to activities the and sales a When exploration resulting demand comes energy it reducing

mainly year-over-year, base specialty continue this large weak energy international spot to nuclear by grew expect in submarket, larger projects. outperform expect to hydrocarbon sales markets is control, energy renewables. Bright quarter. the the remain within fourth and quarter, market driven We we pollution These market energy to the the including fourth and the control in specialty pollution

challenges MRI Sales elective both in Our facility lower by the were materials. versus to categories, prior medical customers due year market equipment COVID. and access hospitals is implants biomedical to Patients principally mainly limited to surgeries and presented comprised of postponed suppliers.

COVID an medical ahead, effective to either confidence we believe medical reenter as will facilities, due accelerate Looking treatment disease sales vaccine to protocols. patients regained or

final consumer call production quarter. Finally, the growth trends cover higher holiday outlook Don product year-over-year. for electronic mainly your thoughts launches and anticipate I'll sales. balance goods fourth due to the supportive financial results to offer our that, in I'll back We new to of ongoing sales With the a move the This over to before we and open to continue turn questions. quarter year-end be for is line the year. third and few modest

Don Newman

the two, performance Bob. significantly balance in per than between and cash our minutes of next quarter look spend few and strong areas. third better our sheet of in key three, a financial sharing share. standpoint, Thanks and highlights previous expected of guidance QX per performance; the $X.XX loss XXXX One, $X.XX adjusted is our our at I'll $X.XX share a expectation. three From than a and QX better EPS position; loss

Our QX mix performance an improved and accelerated cost reflects our of reductions in business. portions

seen market we're our costs year, decline more managing factors The decisively. what XX% market focusing decremental deployment. control. Benefits those than making improvement foremost, drop value became XX% a Consider decremental action. improvement capital revenue, Despite and revenue third our not resulting clear we cost on demand drop to including declines in year, can year-over-year this, the within revenue earlier from and First quickly margin our captured from XX% business. a XX% QX, by due quarter headwinds, When can, this external be in was commercial our versus the QX. most high QX we're that meaningful of in responded quick in prior containment. margins results. XX% a and market were clear posted largely despite our drops we in aerospace to we We're That's efforts controlling the

and actions cost meaningful impact Our having they're accelerating. are

fluctuation. means the cash better are it, now prepared deal considered significantly in profitability are increasing we have future conversion. recovery, and fixed variabilized margins mind accelerate demand our to structure. cost structural keep expanding Also in that savings As Bob cost with described Costs This once variable. we will our

income are our free beyond reserve as Looking results flow statement, cash well. efforts the to producing

fantastic XXXX. cash. the through approximately million our million liquidity, protect our spending total quick convert cash be near-term, our in recovery flow into discipline take ready. want to I grow the the in with We to cash and teams. working This minute bank. of expect took while possible ability of maintaining cash actions and acknowledge free a We to is of including to $XXX to positive quarter operating to ability a capital the ended in efforts be They $XXX capital

also financial to debt Our adds profile our strength position. maturity

occurring drive will the to dynamic three sheet. our cycle. CapEx. fit At on on meaningful fiscal generation opportunities focus to actions in cash market enable coming next to capitalize We're XXXX, strong in cost areas levers end until continue our is and us protect manage we'll on Our these balance away. focusing levels, the three key debt These down Expect to to same continued adapt through demand. and three structures, as maturity not XXXX, cycle time, inventory business years we up the see

we terms aerospace. the inventory OEM Airframe outlook, better destocking This of increasing stabilization starts anticipate fourth align in persist working quarter, jet demand expected is demand is engine with looking levels. quarter. to In to OEM the in and ahead commercial production fourth to

namely Others, remain and recovery. Beyond modest levels. gas will low oil likely aerospace, markets some industrial are seeing at

a quarter's range result, quarter expect EPS $X.XX we fourth in adjusted adjusted per share loss similar our a EPS. As the to $X.XX of third to

cash free our flow to Turning guidance.

have decline. efforts to in reduced capital million consistent tangible by generate and steep the preserve the midst economic cash produced managed in of results. working Our the quarter third $XXX We

further QX. to reduce expect in We inventory

Just the full year. we lowering as to again to a better To team we're spending spending quickly match our reductions, end, CapEx our for managed pivoted capital that cost demand. target

$XXX Our CapEx is range of about million to XX% updated projection. XXXX $XXX the million, original forecast

in structures. XXXX million We're are very successful because million A working this to free achievements pension a midst in raising accomplishment capital, flow of do cash year cost the to $XXX environment. contribution. to before challenging great full We range of expectations a of CapEx our able the and $XXX

fourth stay to gains diligent beyond that on made preserve or Looking the even quarter, improve XXXX. in will we the we

to to for believe of XX% opportunity an the end of quarter, the working understand and represents those levels cash approximately we XXXX managed improvements that revenue. end further improvement. First, back XXXX. the it XX% compares what to takes further to flow of working in We At plan capital third make XXXX. This we was at capital get

improve the to lower continue with we'll to our levels. manufacturing need fund ongoing growth capital spending. balance and We'll close keep Next, demand efficiency a eye on

will we stay disciplined on Finally, costs.

closing game. volumes structural to fundamentally is than today I'll reductions business. With our work. we strive the that, return some operate additions preserve maintain the and We The way to over We'll minimize add turn Bob will to used we call carefully to fought as the hard back comments. to how different

Robert Wetherbee

Don. Thanks,

ATI were a time right our much our contributions It's in and appreciate of and effort everyone, team been suppliers. real of points a Your very part the uncertain on. customers

Our most at and what comments daily our shareholders of to today we priorities lead matters focused us. the to basis. on are on core a how These

adjusting of our we're safe. quickly great and That times match managing and structures in effectively our and to cost market demand, decisively includes First, we're uncertainty. keeping people inventories

for our preserving shareholders. ability maintaining liquidity. and cash accretively preserving We're our to deploy we're cash Secondly,

capitalizing volume strategic share growth, We recovery on new awards. our business as be gains ready, as will industry well and

who customers Finally, science technology. advanced working our material with we're process and new capabilities value and longstanding our

goal integral to together. success, challenges Our greater them is be their even solving to helping grow,

doing, We're earning business. focused to a so their taking an you. And share the and emerge from crisis more back to necessary leaner Scott, stronger, ever actions increasing of this ATI.

Scott Minder

concludes our for the That remarks. we prepared Bob. Operator, are ready first Thanks question.


will Company. begin [Operator comes today now session. our question Benchmark Josh We Sullivan question-and-answer And Instructions] the from of first The

Josh Sullivan

morning. Good Hey.

Robert Wetherbee

Good morning.

Josh Sullivan

XXXX carryover XXXX, highlighted today the Or Just it market just going forward. and we take share about do key into new this into you talk growth? years? as about you defense budgets program there? out is strength you Bob, can a think how looking Can defense is on

Robert Wetherbee

and Yeah. question morning. Yeah. Great good

when defense, it's supporting market what do we come nuclear good in able very so terms the specific. for what look that there, part we think propulsion strong floats, a we've anything. I of what program and expect as big in to fuel to at the replenishment years much to as a systems do be the being Clearly, you been of is navy

a fairly think I that's us. So, for growth solid opportunity

The propulsion, XX:XX. sticks craft military focus area both road we is helicopter, link clearly other on

very specific ground that programs on when we to growth enjoy side. implications And we that and to So last starting are those programs the vehicles, programs very of type are aftermarket consume on then international forever obviously And on gain things, portion growing see and continue or there. some opportunities select the have that to as we're internationally, traction for well. armor tend

gauge hafnium These and are and you lastly, to -- a that are material very when So, our And When SAMC that. contribute are and those mix for we growth business of things work you of the also a at like conium, products science alloyed literally specialty and HRPS on like. gauge applications a science things markets things, capability our temperature, think, about we and niobium all very future, take of rolling applications, confident. for real facilities tantalum look either our is in value there's together I our SAMC feel great high material the hypersonic lot which light doing to you and our to lot with. putting and because going type space zirconium, kinds capabilities could this catalyst think sure light year basically we to get we're programs to see be to synergy continuing defense earlier business, of the strong, make we that that were everything grow. But certainly involved with

Josh Sullivan

had I the Got And to very just airfoil on announcement Raytheon's do it. -- from have thoughts guys curious it. you if And more production. you Got then know turbine with relationship some comments good a company.

be Just doing might they on might what on thoughts and there. involved be you curious your how

announcement? as thinking what that Just is as your far

Robert Wetherbee

new the for to Raytheon. still adjusting We're name Yeah.

obviously And feel have basis. there in I the their good science with & grow strong engaged we but Pratt with they that's be so, we on and actively material future. our plans relationships really to comment what a what was it to on continue we connection need Whitney really very family are, can't some the --

And projection have so, growth still a they good profile. we're confident that

Josh Sullivan

like of this out OEM or any large-scale on side there look engines aftermarket of out And on Or production does out order that production commercial that poll engines? even those are altogether, of is engines the for OEM one for then for point? are large-scale those how last just the aftermarket, one at production flow demand

Robert Wetherbee

think think a to always us for aftermarket Probably it's XX%, what an is the we what is publicly us. the for is. we've -- of where business. a exactly times you our that's harder other couple No, I said asked said Yeah. I of in It's important see aftermarket. And question XX% do part we've yeah,

space when -- the at there for the specifically it leaps engine not Obviously, the track come through. be Then us turbofan. -- this think and so, parts It's We're forging have by generation. that level, of see forging to for still starts And growth that go the we we out well-positioned to we the geared next a stage, we for production. basically it's business. But awhile. at the going

us. that's So, to the for where going really be future is

Josh Sullivan

figure a Got question it. the to I'll out different ask way the time. next for Thanks time.

Robert Wetherbee

All We're right. early It's Well, it's okay. morning. in the ready.


with our question KeyBanc come Capital And from will Phil Gibbs next Markets.

Philip Gibbs

morning. good Hey,

Robert Wetherbee

morning. Good

Philip Gibbs

at you look you morning. cost how quarter the fourth cost What's -- can incremental of terms so relative as targets the think to the XXXX, third? reductions I So, and is this much Don, savings for implication your which in we lifted guys your in get new

Don Newman

about of We've perspective, the changes that going fantastic got made give if Yeah. market. captured the as you we $XX we $XX cost capture Phil, reductions That cost progress in on as of triggered the QX. QX. in we a in of think million size roughly early the initiatives about soon the saw terms To it, to twice some on we was that in million you

XXX as QX, the sets QX, improvement we take quarter. that So, for QX marginal think like to feel range range probably I rate for $XX would we've for That you in a hit good million some about kind you run still pace. probably up of but to relative in XXX in a the XXXX.

XX% the to XX%. And reductions lean keep I we before, be for are it our set value of with plus we would million our think are that's reductions to much on those of that, expanding I through $XXX margins you cost gifts cash some structural don't I structural? What's is, toward giving of which think to that want our gave generation. substantial And, and of about you rate. XX% cost you keep? structural targeting the math, guideline reductions those run if And our to that area up going of the cost we tell structural. they'll the you should course, beneficial is course, key They're going of And really for do shareholders. that would for to that the you were the be how enterprise the to we'll to we about math going And, says, I cycle. And increasing create reductions. said what stick so, benefits other up are a cost know cost

that had and far response cost so happy quick our we're with outcomes had the we've we've So, our on that really reduction the team. from

Philip Gibbs

the it looks the do did Thanks, be we a third going quarter, the to may we Don. What's in you have healthy -- XQ think fourth left What contributions which like contribution pension have was I the come? have quarter pension anticipated pretty in weighted. on to

Don Newman


quarter. You're $XX the right. $XXX had million core for still We're We about an left QX. excess in contributions of in year. targeting -- third That means you've in million million the the got full of $XX

glide plan over level pension diminish funded or -- So that for our to next minimis least getting this a at the de sets really up path us of on fully years. number

again, before $XXX And wrap so, head their you We've think that said as million for trying expectations. those is XXXX. everybody's about to XXXX around

be glide XXXX, a it's in path $XX with the still in with look We're to you clear XXXX for right direction, us. closer As should million to with and of the priority that range. our pension. XXXX we're we really $XXX pleased million Again, heading probably in kind to the averaging

Philip Gibbs

Okay. in it. Terrific. queue. back I'll Appreciate hop

Don Newman

bet. You


comes of from The Khanna next Cowen. question Gautam

Gautam Khanna

Thank guys. morning. you. Good Hey,

Robert Wetherbee

Hey, good morning.

Gautam Khanna

the of right terms what next likely to frame in of And that year. that? have jet recovery there core the your I engine about have is situation? What discussion visibility if in second how your next could second out visibility ask to -- a of dynamic now. kind a wanted half year? do airframe into just of the Do expected you you Or maybe half think or you look? on around have just was And confidence are Hey, just deliveries you visibility side aerospace your about

Robert Wetherbee

doing airframe question. our -- specific Gautam, always it's And they right? into supply there, we parts our what the stated understatement, the get a point But business the you kind the were you're chain there first and end OEM. I It's starting the I of the and At aggressive we of forging an Yeah. for specific benefit QX XXXX. that at environment. in activity, part with inventories that's quickly where and know is relationships really year of we're ultimate pretty thank question. evolving is of looking big ecosystem, starting is adjusting an tail the current The their the last dynamic programs

we pretty good So, think we're position. that in management a inventory

get a day-to-day be see of to we but and get different toward half actually into talking their activity. burn to able to it's it's really talking build be rates So, financial the the the of XXXX, we about analysts you. We honest as to We inputs. talk listened should who lot tactical based back inventory with and some that off, about customer, customers, on the to

I all also think they wide-body production. more side, supply consuming needing XXXX, MAX. with airframe were on chain into the was recognized the the They situation the airframe that lower see than we was

us with doesn't necessarily kind do of have match up what that So, trapped -- one measures kind the of current we of manage great demand. actually inventory is for -- order

great As about than over ratio. the we're kind of to better that right We XX% XX% a to Don closer for of should now, is, if opportunities not one at the working capital term. sales said, us much be

that's our the own supply of chain. of So, kind where indicator is internal

when trapped January off. happen, and me As and on materials they've it tell let's still assume going see to the start we happens, But challenge, we our tell you burn February. coming in but real start return will visibility happens, that that once to is it's the think I think, And I service. to to back waiting to that MAX you started we're that release

-- -- is to investing recovery certainly that's levels, time. But to looking the think lack what of key with I MAX look going at matter we'll suppliers surface on. there's at that's look the for card talking our and when us no of conversation our a going get return wild like. point. the still inventory to it's the It's first is at biggest customers true And this

Gautam Khanna

And Bob. -- just -- Rich follow-up, I maybe as sorry I a apologize. am

Robert Wetherbee

lots Gautam, it's by go I names. okay. of different

Gautam Khanna

because is guys I deck. you in here, that you you curious, jet watermark, maybe QX engine kind half mean, shape today. think of slide -- in QX destocking below low below actually kind just versus But I'm level, or was -- think the even little guys like, consumption into just Do you going this, end do revealed be hanging just of a marks think a maybe a next the mark kind year-end. will? the you that a what that always lower, out what's feeling calendar from I is the of of point? do are or do a mean, that trying there's underlying user, channel you the that first -- of Just It will, sales destocked QX, what at -- you year? low this to will quarter the level if what underlying I if is consumption we're you understand, like of to

Robert Wetherbee


caveat. I'll comments my with I you give one think,

that kind a think, they So, was took you QX, of little all resemble pattern. quarter. kind the of still same transition if QX, I of have QX, bit a and QX

are we think off the bouncing bottom. I

down, XXX XXX for to my across it's hard last Some of that would up today, news I days. than it's days, more the it's say I looked desk, believe is comes only -- where that been the when at

we've down that mostly this in type stuff. Negative So, been was right, pandemic right?

has mood a the quite shifted think I So, bit.

I for think QX flat So, the to QX demand. QX, probably

all tough that through going get a we're a their And they you demand forward, And working -- the OEM others, track we in of But good that tend I and you'll record. to our of couple at to sequentially, see, forward going particularly. as not as tidbits are wait kind adjustments we're have have if QX I some it's of think business effective there's more the think then right? of is right? guys to So, their one think, I that look friends in QX. comps do always managing

players. get could some I corrections bottom -- we we two at core the customers that think still in engine we're next or decremental -- I the on flatten upon think So, one should But for our space, modest mind. for And we still depend margins, for be the jet inventory the should and be we're still quarters. here it certainly, going the it doing on work to of the think couple


Gautam Khanna

luck again. appreciate I thanks Well, everything. the and the insight. answers Good with

Robert Wetherbee

Thank Yeah. you.


next from of Timna of America. Bank The come will question Tanners

Robert Wetherbee

morning, Timna. Good

Timna Tanners

Good morning.

there. the delay about Sorry

for all that thanks So, detail.

little that was comment You the And cut, bit forward. could a on it going elaborate on where a about discussion more this also. and go on CapEx I then can possible there detail how acquisition it low was and caught also a wanted system, more little

Don Newman

Don. is This Sure.

take question. at run that a me Let

right-size million. standpoint, demand When seeing CapEx CapEx to very, entered expecting the we very quickly $XXX reacted were we we a of our excess where First an to really going. we spend were from year,

you're million. a going at to run look you to our what If QX numbers, rate $XXX of closer see Timna, is

positive. So, a very

have to spent of it any we're the ahead to And believe interested going CapEx needs be we when are highest from dismantling the cuts spend pretty really at where spending then growth to get when the happened? dropped comes across a going capital In of priorities the all really whatsoever, it's we're, we at we our it certain broad-based with in structures. that be maintenance And prioritizing that of it looking dime spending. just the We're of we're investments. We're returns CapEx. and segments. we're have what but We're growing, cost where been can't a these to terms like get course, It's looking about to our at standpoint.

similar similar of you've customer the market. XXXX, in should what the demand discipline, flexing seen you in to So, in based and what what end upon needs see XXXX, are expect levels the

part that? would you second The your question, of repeat

Timna Tanners

Acquisitions. Sure. Yeah.

Don Newman


Timna Tanners


Don Newman

That's right.

around we priorities your in down way we're really liquidity. not we it $XXX And million it changed. is, one, your about box, our Number the business to keep with the adequate that that capital to healthy. to So, allocation, to ensure of comes Check priorities And have liquidity have Timna, has there. what's it think capital.

priority Second sure and is third. doing assets. that we we're our that that of people, maintaining were we made taking Check, we sure care our we're make

are where pension covered. pension level path do and a to focused two down next maturing that Check, debt really work We're pension. At we to kind to of continue commitment take grow we Third, prudently de is on things, care to our going that our several a to ourselves the got deploy capital the we've the make minimis years. facilities. over that see glide of our point, on really priorities effectively and are contributions second

to It's in focus the an How inorganic inorganic, we inorganic look asking We the let's growth are growth differences. is are. that that are get growth is we do at reality understand enhancer. organic on Timna. we us open measure growth inorganic And organic the we you're so will maybe terms and our or far and So, what do growth. us, of business,

to these executed very based that as quarters. look also it's going And ourselves M&A, in priorities to position be at last understand are intentionally you've upon put a to the important our discipline also choices seen have it's over We we but have few there. choices,

experienced defense growth. where where we aerospace Our highest we've our priority make That's core. our margins. healthiest and That's is the growth. That's

but make really or internal aerospace and to the pretty we pretty it we're and whether toward as possibility. see it's opportunistic. as often to external, so be we'll as a careful And defense. it capital that those see opportunities We has discerning we priority decisions, preference and And do we growth, deploy

Robert Wetherbee


I Don. think right, that's

capabilities and end chain near material into might we for be differentiation, that but understand into being plays some material end have -- actually of components, can science lumberyard expanding accuse really leveraging happens we state before capabilities, our almost to business. our advanced is sell, form it there The temperature for of science. everything defense the see opportunity an you metallurgy about right? else go the our value We are coming And game. that it's and science structures, processes think our us the -- there's We into high times, we to material powder appetites aspects going further where think I gets we business in it certainly use. the unique in on some to something up Timna,

color hopefully helps that the you looking with for. were So,

Timna Tanners

that. Okay. for Thanks Yeah.

try about I understand go forge M&A you're if to of -- going like, to follow-up I CapEx ahead. forward. can those some relative to press and thinking finish going Just or where the stands would be would offline. that priorities But isothermal ask how

Don Newman

our in in for Timna, But put it's due really when can upon meet the to for we --that dependent money. market They're that rush front the in what time. be assets going answer of you. I time. yes still to in need good demand the the answer is actually going The spend demand to question would And to to investments those right be customers We're the place us. not at is.

Timna Tanners

That makes sense.

days. as election impact obviously if the if spot, one insights just my day to on of put specifically way question comment you or any all, could to wondering other And if we you was the So, I could, just trade. you at on a have in couple was another

it's thoughts the if roll at example, late to defense rolling -- revive, opportunities and regard slightly For mill or some with spending, to and the of there. the -- not too any

Robert Wetherbee


think spending. defense I I the star with

to the term, think defense I spending in will -- near near-term think medium continue. I

but threats defense the politics, a by that period global opportunities time, not specifically programs the feel long think and that we're relatively strong needs. I by necessarily on for of for driven

So, of we lot spend time. a

a of in various Pentagon the folks. have lot and spending team dedicated is time who We a DC with

think we defense, strong. so, relatively And feel on I

that And, service, in we In a capability. to in assets such but our get deemphasize that think interested inquiries there's lot continue idle always we they're We still could position we Pennsylvania cash returned they terms using to of that stainless. I generation. that opportunities. be the idle, of have HRPF might for using we're still think in about We

been capability a get came to up over the capacity, last and all and a to do we days. and for have down As with was it markets it we inquiries still that. The remember, XXX XXX built

little go. want our to where clearly that That's aerospace So, But on think tell and harder a focus go. we where defense. might I is to

places -- known good There in our the been we've like actually assets adjacent markets are time-to-time. space. tend invest sell have And medical We to to also profitability the opportunities we're have there those ranges. aerospace, in they from electronics, markets. going in are And to

along comes somebody if to space. take value a So, like and We're that. to says, we'd that Hey, really risk in open lower

Timna Tanners

guys. of Best luck. Thanks, Okay.

Robert Wetherbee

Thanks, Timna.


of Barclays. The next question from comes Strauss David

David Strauss

morning. Thanks. Good

Robert Wetherbee

David. morning, Good

David Strauss

late comments versus I cash CapEx, call. in CapEx, XXXX have as and there the of asked. contribution, working capital, both taxes, -- you the and Apologies, think between would moving it flow, about on from pension another pieces grow and cash, if excluding to but joined XXXX? XXXX expect including we I been Free I heard any guess these

Don Newman

Hey, David. Don. This is

guidance XXXX, some haven't give We me yet but you given let for color.

It's pre-challenging levers and do expecting there? generate free cash Of XXXX, million to million $XXX that there's way we're course, about in environment. it's $XXX flow our managing. XXXX about in around get working we're one, between to leverage. same How discipline number we our three the is same see, of a cost somewhere capital. you're Well, structure, The it's think about about the our going and CapEx, to

in cost look talked continue being our work XXXX. to about to savings million going we we're a the at savings to I've in hard captured very and As already recovery. $XXX we've that the structures, structural capture gains maintain the of range already even the cost

to When million expect see spend, run after it our positive discipline and down very very, a to shaped from our QX about took you that. $XXX that XXXX I million. $XXX same where it very rate So, feel comes CapEx demand, to took in CapEx, at we see about to the new that the what lever give we I working as really and XXXX. our we're in is, cash capital likely market look guidance And managed viewing about thinking will demand this XXXX. applied then our to discount last flow reflected we're key is And the when be free I same at how how we understand for really think the is which it levels.

about already home at revenue. but Bob know metrics -- see in a We that you David, that methodology XXXX, capital percent we to important massive cash is. make QX we we drive revenue as was ended creating that on it And that how I ended a today. and be delta new inventories. managed inventory stranded we're XXXX, aggressively XX%. as we working pretty a working should metric after have sure opportunity, that So, going of XX% this, with And capital unfold And touched are That not want we of us. at a managed the XX% for solid it's and a release really really significant of to any generation as to applies going in captured source this

David Strauss

Great. That's helpful.

lever that you than on to of towards and the side, biggest get is to range in inventory more receivables anything So, down XX% terms think so be still the payables. back done

Don Newman

Yeah. that. the job Receivables, no in we're not down working way to doing normal no seeing delays. good are any The receivables around DPOs. payables, think a way the the Payables, We're about their with change issues, in step course.

favor -- really a it's couple around of And up step payables, it's is opportunity our days what picked mind, in real on I'm and not a inventory. a in a opportunity. expecting have really here, our there. focused We we're The big change but

David Strauss

trajectory look we the the a Should over next in margins right margins What of on half about? continue couple here -- think, far. starting things decremental like talking think you've decrementals expect about the next to a thus bit you second doing the to level the thinking of on and you better. Or shrink and expect kind of was what Between quarter? XX% from job decremental that I then Is there, done year that would maybe think I mean, which aero is, year And about and of Okay. great here? quarters? should the we way when you're the those get that you're to will

Robert Wetherbee

you the Yeah. I'm question. glad asked

good around margins. decremental at we that We right. XX%. our worked XX%. to You're We made progress some were Last really down X, quarter

it's the is is, are end the really continue really about cost as what our created margins, going One that. modeling to So, decremental up about moving fact our those how or at us which the I you're XX% XX% as and enable I two it, look in about to what's that There's want should you our initiatives. structures, basket is flex going variablized variable to favorable cost related to to range. markets as call to we down. baskets think think decremental forward? decrementals think, we Remember Really,

shape in there. we're So, good

those decremental The several up you you I through structural it and and is XXXX mentioned our but as even times, beyond. continue XXXX are know that guys to other and are benefit key thing, thinking important cycle it margins about it changes. will go the I've quite

we margins, decremental savings and $XXX As not to that also keep contribute but going a keeps as giving of structural, beneficial that flow. incremental million incremental just that's it's cash margins gift and to our

David Strauss

has decrementals terms -- with to the much levels of able you past I be business Bob, of gotten we've how -- guess, this XX%, been on XX% mean, hold is what mean, in we I following at to approach Okay. in kind in are that, time allow seeing? what to different of I decremental. I this kind used then, to the lower mean up

Robert Wetherbee

actually They our six we're making We David, have been right sure I we that We've higher on idle -- very are facilities aggressive, cost were running an Yeah. this facilities. actually checked morning, on today. facilities. the indefinite

And take have the challenge cold, costs candidly there you dark term the offline the so is and quiet maximum. use to the we that and floating eliminate those to

in capacity. facilities in the they structural back Now, justified viable be that for and those did the when to come that facilities justified, be they'd working add the to to online, obviously And making capital has those changes reinvest back. meantime, to come justified

time driven have ever take the able to more by what's were the So, before. economic situation. this think we We of I magnitude than the change and primarily different is probably structural duration

been that's to color to that. some add huge want a so to more question? And you David's contributor Don, do

Don Newman


facing waste I unprecedented crisis. one models internally good our a is don't of we're think, times certainly, key and

-- to And us difficult fundamental so past the make up the changes driven more markets COVID in end to more for really thing a opened difficult have the opportunities to changes dramatic maybe that do. by in for new

and in the teammates for on the everything's So for us table. our operations

situation hadn't And bad. with crisis. seen new actually opportunities outcome it's really others It's that in tough of opens not so the that past. really And up good a a maybe

Robert Wetherbee


recovery conservative candidly, really be to on need we other candidly look driven the of by what a customers. not do time where lead the when the in that to our customers we need the as we the to to there, those. but cost it's be to what's reports we've for I right? key ready crisis It's to that. is generic specific a in taken you've basis on a and some achieve try or supply weekly gets I put And view, to out us term near-term what gather be and blank actually ready, is analysts, more do basis, think of be and to at positioned actions a look a forward we're take would being And going we think, that to check, recognize demand our looking important out We chain. take recovery

David Strauss

very Okay. the Appreciated. much Thanks for color.

Robert Wetherbee

Thanks, David. Yeah.


question of Paretosh Misra Berenberg. comes next from Our

Paretosh Misra

and into volume any and because next mainly from business. recovering. engine look contribution we you year? story expecting new a some also as stabilizing as -- look top maybe to year your volumes starting about next gradually Or the regarding Are Question morning. your year new airframe line with contracts Good we XXXX increase are it's you. price Thank calendar jet

Robert Wetherbee

to say that. Yeah. morning, good -- Paretosh. I components Three would

Some and margin of mix. unit contract did have, of one enhancement two be we -- the It product it came renewals could it price, but could also we be had sources. call from

So, the mix we that to able spaces, we product to we've as and the space to that in of in been share get products engine jet a favorable get better alloys airframe some more drive and/or more our even continue dimension plays make. we

but would volume. in increasing be So, I'd of be majority going some are by the that, is it say there that driven to

Paretosh Misra

Got inventory around that six give or it. jet airframe is regard higher? three your that the months side And on the take, carry the to with product typically, your customers or side, and to of or engine

Robert Wetherbee

say to can time don't six bolted they I how but know seen from a lead inventory historically, the a a be exactly would se, I on being forging we've months. from shipping carry se, much lead plan per Yeah. per time perspective,

maybe Now, an months cases. a it best tends tighter, little the in on can to nice as that's as a uptick, four get short be And average.

into that's what to six So, a four product can get XX you're of months. and forging, to long challenge chain. months you extend and other pillars XX of an or the to products asking, if supply they depending from be difficult like build, supplied on delivery by us When part can plate, to the closer how engine a the the that or engine as --

Paretosh Misra

ask decremental structural to right? margin. could it on I that's saying a quick the XX% one that's that it. the -- it's if understand just Did correctly. last I XX%. think Like And the target, last a if guess follow-up that question I on because of you're Got about saving, your correctly? I you keep I didn't could close -- But it closer apologize decremental I cost understand to

Don Newman

annualized affect change about once of a amount the think what line. is can structural how consistent I me about you decremental What going XX% comment revenue think gifts it's Where the range And to plus. those the the of of and in Partially. XX% through is really to to But be the delivered our was of XXX keep saying how consider forward, beyond you $XXX about giving a there think those margins as benefits around of what's them down to in is we've range. XXX overall, think of bottom was I themselves changes We, and would And significant we're the about key that how structural have the raised the that changes, recovery, the savings. happens million XXXX, you Yeah. go in as about reductions are cost that's magnitude much cost that taken. keep? How in to cycle. in actions that and in the

to. that's what referring And I so was

know going off our are that the to deep think and we're those decremental the in incremental As important robust. I once it's going margins pretty XXXX -- to as said, you about forward margins into future, decrementals recovery, especially be past

Paretosh Misra

that. appreciate guys. I Thanks Understood.


will Bank our from of of next And America. come Matthew question Fields

Robert Wetherbee

Matthew. Hi,

Matthew Fields

Hey, guys. Hi.

Just want to ask about liquidity.

a borrowing of about noticed I obviously You've working dropped in that of But managing flow kind and capital. availability that. your How shrunk available? ABL squeezing think out between because the quarter presumably of the done with kind the of this ABL cash you trade-off fantastic base managing accordance that kind do job

Robert Wetherbee

really you glad asked I'm that question.

is on think usually, capital, you're hey, with of aware your your some but into there what's mechanics. the those between ABL. are about losing cash, right, on working trade-off of it availability going very when We, course, So, a your release of get you of availability,

really borrowing our group we're There's your ABL we're our free international What looking doing. we're we're third included our existing even collateral you working borrowing the with Matt. baskets. targeting, inventory way, though what if that? been benefit base very collateral doing may that some have base, of baskets course, healthy we're at included are base What's that some There -- borrowing capturing about borrowing and initiatives here's Of that our exist of that of is of get into going forward. is it's So, in replenishing banking those that cash, you're have think collateral converting categories that the collateral to kind things with are it set and you're some a We collateral not of those parties. it actually baskets in historically of base, like receivables.

can And us. so, beneficial to very, very it be

with to in look drive the utilized in going in have overall that now baskets -- we're a goal by to right And to going right to continue our add maintain of million been thing challenging our increasing is to environment past. It's shape do. continuing Our $XXX We're great balances. under even we're liquidity. liquidity, the cash to

the us doing to in we're in us a put -- healthy keep position. right to So, things

Matthew Fields

do about your longer policy? plenty you kind of maturity XXXX. initially and do first of you've into a That's deep Any a thoughts you great. with wanting -- feel that size isn't you obviously on about XX built war think now That's schedule you that very think be liquidity we're time, helpful. maturity downturn. Do until or days window, And you for comfortable that's runway chest of as kind a won't feared? up that your obviously, another of that this, of how the still or maturity downturn as But

Robert Wetherbee

we've great kind Yeah. around ultimately manage with were we great our debt some maturities. to or We're I our excuse runway things of around and give a do And the choice around maturities. reality ourselves of cash you're that describing. liquidity shape our me got like in the shape. is maturities? choices debt these now think -- in We're have just How debt right our lot -- objectives you

growth a opportunities that are to the to in the structure time brought In that refinance terms capital I'll are up. your of a of bonds Timna call when we maturing -- that There's going funding lot maybe be lot business, XXXX, manage game going decision. and your a dynamics

we're fantastic the also, as right now, So, in is markets a course, to able healthy been be to And choices. make which have spot supportive helpful. and those well, of


Minder back our I closing this to session. question-and-answer concludes conference the over any would And turn remarks. to for like Scott

Scott Minder

to today. you all Thank and quarter Laura. call. XXXX for us participants our conference Thanks, concludes the listeners joining That third


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