Good morning, and welcome to the Allegheny Technologies Incorporated Third Quarter 2015 Results Conference Call. All participants will be in a listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Dan Greenfield, Vice President, Investor Relations and Corporate Communications. Please go ahead.

Thank you, Emily. Good morning and welcome to the Allegheny Technologies earnings conference call for the third quarter 2015. This conference call is being broadcast on our website at www.atimetals.com. Members of the media have been invited to listen to this call. Participating in the call today are Rich Harshman, Chairman, President, and Chief Executive Officer, and Pat DeCourcy, Senior Vice President, Finance and Chief Financial Officer. All references to net income, net loss or earnings in this conference call mean net income, net loss or earnings from continuing operations attributable to ATI. If you have connected to this call via the Internet, you should see slides on your screen. For those who have dialed in, slides are available on our website, again, www.atimetals.com. After some initial comments, we will ask for questions. During the question-and-answer session, please limit yourself to two questions to be considerate of others on the line. As always, we will make every attempt to reach everyone in the question-and-answer queue within the allotted conference call time. Please note that all forward-looking statements this morning are subject to various assumptions and caveats as noted in the earnings release and on this slide. Actual results may differ materially. Here is Rich Harshman. Richard J. Harshman - Chairman, President & Chief Executive Officer: Thank you, Dan. Good morning to everyone on the call or listening on the Internet. The third quarter was very challenging. In our Flat Rolled Products segment, business conditions impacting commodity stainless products weakened further during the quarter to levels we have not seen since the global recession of 2009. In the High Performance Materials and Components segment, demand further weakened from the oil and gas market and demand continued to be weak for our forged products from the construction and mining market. Total ATI…

Thanks, Rich. Turning to slide four. As previously announced in the quarter, we recorded a LIFO inventory valuation benefit of approximately $76 million and an offsetting $76 million pre-tax non-cash charge for a Net Realizable Value or NRV inventory reserves, which are required to offset ATI's consolidated net debit LIFO inventory balance that exceeds current inventory replacement cost. We're in an unusual inventory accounting situation due to the multi-year commodity and raw material deflation from most of our raw materials. Titanium scrap price deflation began in 2008. An overall decline in nickel prices over the last six years, as indicated by the chart on this slide, in particular, note the trajectory of nickel prices in 2015. As a result, ATI is in a consolidated net debit LIFO position. This essentially means we cannot offset raw materials' FIFO loses with LIFO benefits, which some of our competitors are able to do. Operating profit margins will likely be under pressure until end-market demand improves, base prices can begin to be increased and raw material prices stabilize and then begin to inflate. Turning to slide five. As previously announced in the third quarter 2015, we changed our method of reporting business segment results to better reflect our true cost and performance. Our prior business segment results have been restated to reflect this reporting change. Segment operating profit is now reporting excluding all LIFO inventory accounting and any related changes in net realizable value inventory reserves, which offset the company's aggregate net debit LIFO valuation balance. In addition, segment operating profit is now measured including all retirement benefit expense attributable to the business unit for both current and former employees. Previously, ATI excluded defined benefit pension expense and all defined benefit and defined contribution post-retirement medical and life insurance expense from segment operating profit.…

Thank you. Our first question is from Gautam Khanna of Cowen & Company. Please go ahead.

Yes. Thanks. Good morning, guys.

Good morning, Gautam. Richard J. Harshman - Chairman, President & Chief Executive Officer: Hi, Gautam. How are you?

Doing all right. Thanks. I just wanted to ask two questions. One on what your expectations are for your ending cash balance at year-end and if you could comment a little bit directionally on CapEx in 2016. Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. I'm going to let Pat answer the question on cash and then I'll respond to the question on CapEx.

Gautam, our cash balance is projected at $150 million at year-end. Richard J. Harshman - Chairman, President & Chief Executive Officer: And largely down because of the level of CapEx in the fourth quarter. A big part of that is some of the contractual withholds on the HRPF that we do expect to work through and make payment on, not all of them, but some of them. And then, as we look at 2016, we have not yet set our capital budget. I can tell you that there will be some carryover payments on the HRPF, both in terms of the final acceptance test payment as well as some spares that are critical spares as part of running the HRPF. And then, we have two strategic projects that we'll be completing. One is the expansion of the titanium investment casting facility in Albany, Oregon that will be completed early next year and then some significant spending on the $60 million new facility for powder materials in North Carolina. So – but in terms of other new spending, I expect it will be very low. If you exclude the carryover on the HRPF, I would expect our capital budget to be in the range of $150 million, with a big part of that being the two strategic projects I had mentioned.

Got it. Thank you. And just one other one on the HRPF, could you talk a little bit about how it's operating? And a couple of years back, you'd talked about $150 million to $250 million of EBIT improvement. That was a different demand environment, pricing environment, et cetera. But what should we expect on HRPF, given the current conditions in terms of its contribution to profits next year? Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. Well, it's certainly a different demand environment. The pricing environment has some impact on that, but really not a substantial amount, I think, early on. So, I think the – let me put it to you this way. Without the HRPF and the ability of us to really produce and hot-roll all of our various alloys from the standard gradient to the high-value side pretty much seamlessly during the work stoppage, we would never been able to do that without the HRPF. And I think that that demonstrates the automation and the level of automation and the level of sophistication of that asset. And we were doing that mainly until the end of September without the Rotary Crop Shear repaired. We haven't backed off at all our fundamental belief in terms of the benefits of the HRPF, both from the standpoint of cost reduction, efficiency, quality improvements, and then eventually the ability to produce products that we could not produce before. At the end of the day, in this market, in terms of looking at products like 60-inch wide commodity stainless sheet, in this market with demand where it is and where base prices where it is, we're not missing a whole heck of a lot by not producing that product. And that's part of the reason why we haven't restarted the Midland melt shop, which is where we really melt those wire slabs, and we won't until the market conditions improve.

Okay. Thank you. I'll get back on the queue. Richard J. Harshman - Chairman, President & Chief Executive Officer: Thanks, Gautam.

Thanks, Gautam.

Our next question is from Jorge Beristain of Deutsche Bank. Please go ahead.

Hi. Good morning, guys. I'm just trying to... Richard J. Harshman - Chairman, President & Chief Executive Officer: Good morning.

Good morning.

Good morning. Maybe another question for Pat, I'm just to trying to bridge your EBITDA for this quarter. And if you could just explain, of the $113.4 million of charges, are those all non-cash?

Yeah, the majority of them are non-cash. That's correct; the tax valuation allowance and the NRV.

The majority? Could you be more specific?

Yeah, virtually all non-cash, basically.

Okay. And then is it correct to be thinking about the income tax valuation as an operating level add-back or is that something that's really hitting below the operating line? Richard J. Harshman - Chairman, President & Chief Executive Officer: Below the...

Below the operating line.

Got it. Richard J. Harshman - Chairman, President & Chief Executive Officer: And on that issue, it's really dealing – you look at that from a tax jurisdiction standpoint, right? And that's really a U.S.-based issue, and we went through the same thing before back in 2003 at the last kind of deep trough of the cycle, which I – this feels an awful lot like that quite frankly, aside from the aerospace market. And there are very strict accounting rules in terms of that whole issue. And within two years, that valuation allowance was reversed and we would expect the same thing to happen.

Okay. And then just in terms of trying to put a normalized number on EBITDA, would you take the 70 – what is it – $72 million or something of your EBIT as your jumping off point and then simply add back the $48 million of depreciation, or is there something else we should also be thinking about in terms of add-backs to bridge back to a normalized EBITDA for the quarter? Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. Without getting into a lot of detail, the third quarter had a lot of unusual things going on, including the impact on P&L because of us building inventory early in the year in anticipation of a potential work stoppage, mainly a strike, quite frankly, was our thinking. And we built that at a time when nickel costs were much higher. So, now, when we're selling it, with surcharges based upon nickel at $4.50 or less than $5, that's an impact to our P&L that flows through in the third quarter that you could argue is somewhat unusual. And then the third quarter also had the impact of shutting down all the Flat Rolled operations, right, with the lockout, taking a week before really the plan began to roll out of how we were going to roll out the safe restarting of all those facilities, which really took, in essence, probably a total of about two to three weeks, and then the inefficiencies that we saw in the first month after that. So, when you add those numbers together in terms of what we would view as unusual type of events specific to that issue, I think you're probably in the range of about $50 million in total. A big part of that is the raw material surcharge mismatch because of the building of inventory at a higher cost.

Thanks. Yeah, that's the kind of color I'm after. So, of the $50 million, you said the vast majority or the bulk of that is the raw materials. And I was also going to follow up and ask about the impact of the strike, but to put a number, would it be sort of $35 million and $15 million of a split in total... Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. I would say it's probably closer to 50/50.

Got it. Okay. Thank you. Richard J. Harshman - Chairman, President & Chief Executive Officer: You're welcome.

Our next question is from Josh Sullivan of Sterne CRT. Please go ahead. And, Josh, your line is live. Perhaps it's muted on your end. Richard J. Harshman - Chairman, President & Chief Executive Officer: Okay, Emily. Josh – he can get back in queue then.

And the next question is from Richard Safran of Buckingham Research Group. Please go ahead.

Hi. Good morning, everybody. Richard J. Harshman - Chairman, President & Chief Executive Officer: Good morning, Rich. How are you?

Good morning.

Very good. Thanks. Rich, I think this is a question for you, and it's a bit of a two-parter here. Listening to your comments on the stainless outlook, you noted challenging conditions. It just doesn't appear that you think the market is going to improve any time soon or in 2016, demand, imports, industry capacity, et cetera. So, first question is, based on your experience, do you think that's a correct read of the situation? The second part is this, and it's kind of dependent on your first answer, your strategy in stainless. You've been pretty clear the HRPF is your enabler of your stainless strategy. You have maintained your intent to remain in the stainless business. But given the market outlook and what's transpired, continued pressure for inputs and stuff, is now the time to start looking at maybe separating your stainless business from the aerospace part of the business? Richard J. Harshman - Chairman, President & Chief Executive Officer: Okay. Well, first on the stainless market side, I don't have the view that the depth of the challenges in 2015 that are impacting stainless are necessarily going to continue into 2016. I think the magnitude of the surge of China imports that really were, to some extent, largely directed to Europe, and then the Europeans brought a trade case and that flow of material was destined for an export market. They couldn't bring it in the – this is our view, right? They couldn't bring it in to Europe and then it found its way into the U.S. really at a time where underlying demand was not great. It was okay, it was not great. But that was enough of a volume that really wrecked havoc on base prices and drove it to the level it is today.…

Okay. You know what? I'll stick to that one two-parter. Thanks, Rich. Richard J. Harshman - Chairman, President & Chief Executive Officer: Thank you.

Our next question is from Timna Tanners of Bank of America Merrill Lynch. Please go ahead.

Yeah. Hi. Good morning. Richard J. Harshman - Chairman, President & Chief Executive Officer: Good morning, Timna.

Good morning, Timna.

Hey, Timna. You're cutting. We can't...

Can you hear me now?

Yeah. We can hear you.

Yeah. Thanks. So, yeah, wanted to explore a little bit more the commentary on demand, and you noted that your inventory was high in the third quarter because you were caught with the surprise on the weaker demand environment as I understood it. So, if you could talk a little bit about what it was in the quarter that caught you off guard? And then your opinion on the oil and gas sector, in particular, if we're near bottom or what the outlook is there? Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. No, I don't think I said that, Timna, about inventory and being caught off guard if that's how you interpret it, maybe I...

No, I found it in the release. Yeah. Richard J. Harshman - Chairman, President & Chief Executive Officer: No. No. That's okay. The comment on inventory is we built inventory under a customer protection plan in Flat Rolled Products in the first six months of the year in anticipation of a potential work stoppage because of the challenge of the upcoming contract negotiation. And largely, what we were expecting was the possibility of a strike, quite frankly, because that had been threatened before in the previous negotiation and we would've been unprepared for that. So, I was not going to be unprepared in that scenario. So, we went about targeting an inventory build. And then Flat Rolled, it represented about an $85 million inventory build in the first six months of the year. Now, that inventory build sustained us in terms of helping us meet the customer demands in the third quarter. And arguably, it will continue to some smaller degree in the fourth quarter, because we did end up having a work stoppage, right? Not a strike, but a lockout. But what we didn't anticipate and I don't think what anybody anticipated was that instead of dealing with $5.75 or $6 nickel, which is what it was when we melted it, we'd be dealing with the surcharge that was based on something less than $5. So, that was our comment on inventory.

Okay. Can you address the question about the oil and gas market then, please? Richard J. Harshman - Chairman, President & Chief Executive Officer: Oh, yeah. Well, it's a tough market and it has continued. I think maybe you're referring to a conversation we had in the second quarter earnings release about the depth and the breadth of the inventory correction in the oil and gas market was a surprise. It was a surprise to us and, quite frankly, it was a surprise to most of our customers and I think that the underlying demand in oil and gas, while there are some areas that are okay, for the most part, it is very, very weak. And we don't expect that to be changing based upon our assessment of the market or our conversations with our customers, which are wide and varied across different aspects of the oil and gas market. We don't believe that that's likely to change in the first half of 2016. I think there are some views that there will begin to be some moderate demand improvement in the second half of 2016. That would be great.

Okay. And then I have one from Ron, who wanted me to ask a little bit on the aerospace supply side. Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah.

He referred some comments lately from Alcoa, talking about greater competitiveness, also greater opportunity, but also increased competitiveness among suppliers. And he wanted to know, in addition, with PCP being privatized or taken more private, what do you think that means in terms of their competitiveness or how they'll operate as a competitor? Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. Well, I mean, look, PCC is a big company that has very important strategic positions with virtually all of the OEMs in both the engine and airframe side. I don't see that changing. I think that the OEMs like a diversified supply base. They don't like to be overly reliant on one supplier. I think that creates opportunities. But you have to have a good product, you have to have good technology, and you have to be competitive. And that has been the case, quite frankly, for the last three or four years, if not longer. I think that will continue to be the case and we don't intend to shrink from that.

Okay. Thanks. Richard J. Harshman - Chairman, President & Chief Executive Officer: Thank you.

Our next question is from Steve Levenson of Stifel Nicolaus. Please go ahead. Stephen E. Levenson - Stifel, Nicolaus & Co., Inc.: Thanks. Good morning, everybody. Richard J. Harshman - Chairman, President & Chief Executive Officer: Hi, Steve.

Hi, Steve. Stephen E. Levenson - Stifel, Nicolaus & Co., Inc.: Has anything come up that would give you any reason to think there is a change in demand for jet engine parts in 2016 and 2017, particularly for the LEAP engine? For example, anything that would interrupt the schedule. Richard J. Harshman - Chairman, President & Chief Executive Officer: No. As a matter of fact, it's probably the reverse. Its more inquiries about can you ramp higher and faster? Stephen E. Levenson - Stifel, Nicolaus & Co., Inc.: And is that limited to LEAP or is that other engines like Trent XWB, for example? Richard J. Harshman - Chairman, President & Chief Executive Officer: Well, I think most of it is really limited to the LEAP. I think that there are some – obviously, the XWB family and the large order on the A380 is having an impact on increased demand from Rolls that was unanticipated before that order. And I think that the demand for powder and isothermal forgings as it pertains to the wide-body, next-generation engines from two of the OEMs is very significant. And is quite frankly an aggressive rate ramp in 2016 and 2017 and 2018. And we think we're well positioned for that. But to answer your question of do – if we've seen any signs maybe of anybody backing off that, the answer is absolutely not. Stephen E. Levenson - Stifel, Nicolaus & Co., Inc.: Okay. Thanks. And second, can you tell us what's going on between operations at Rowley and purchased PQ sponge? Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. As we said in the second quarter call, we are operating Rowley at what we – and we will continue to operate Rowley at what we consider to be the minimum level of efficiency, which means, in total, we'll probably producing between 13 million and 14 million pounds of sponge at Rowley in 2016. The largest percentage of that will obviously be PQ, premium quality sponge, although as part of the normal manufacturing process you also produce some SQ sponge with that as well. We have our external purchases or the vast majority of our external purchases secured through 2018 with pricing and supply arrangements that we believe are good and competitive. Stephen E. Levenson - Stifel, Nicolaus & Co., Inc.: Got it. Thank you very much. Richard J. Harshman - Chairman, President & Chief Executive Officer: Thank you.

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

Hey, good morning. Tyler Kenyon in for Phil Gibbs. Richard J. Harshman - Chairman, President & Chief Executive Officer: Hi, Tyler. How are you?

Good morning, Tyler.

Good, good. Just a question on the inventory. In an environment where you see, call it, $4.5 billion, $5 billion in sales, what kind of level of inventory do you see as being appropriate for that type of an environment? Richard J. Harshman - Chairman, President & Chief Executive Officer: Well, I'll tell you – I'll answer the question this way. Our inventories are too high. And that's more from an operational efficiency and a continuous – and a lean manufacturing concept than anything else. When I look at our inventories on a consolidated basis, I think at this point in time we should have inventory turns that are, at a minimum, four times. We are not at that level. We're closer to three. Now, there are pieces of our business, for example – setting aside the CPP inventory in Flat Rolled, our inventory turns on the commodity sheet product are very good. We turn that inventory seven or eight times a year, if not more. We do have more elongated manufacturing cycle times that have inventory turns that are much lower than that. But from our planning standpoint and our strategic plan and our 2016 planning and our execution, our goal is to achieve and sustain inventory turns on a consolidated basis of four times. Pat, do you want to add?

No, I think that's it. We target our managed working capital as a percent of sales at 30% or lower. So, we will get back to those historic levels as we move in through 2016 and the CPP is fully utilized.

Thanks. I appreciate it. This is Phil now jumping back on. Richard J. Harshman - Chairman, President & Chief Executive Officer: Hi, Phil.

I had a question – hey. Good morning. I had a question, too, on Brackenridge. In your slide deck you had said that it got to 70%. And so, I was just curious what that 70% meant in terms of utilization or how you're thinking about that number, what it's related to? Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. I think that probably means 70% of where we were during a more normal demand market in the second quarter. So, we're probably mixing up there the level of production from a volume standpoint versus productivity. When I look at the productivity on a machine hours basis, a machine per pound, right, which is how you really run the HRPF, if you look at the five weeks prior to the work stoppage compared to the last five weeks, we are at the same level of productivity in the last five weeks as we were at the five weeks prior to the work stoppage at HRPF.

That's extremely helpful. And I just have a higher level philosophical question, Rich. On the dividend, I know that you are in a low point in both of your businesses because of commodity prices and destocking, but how do you look at setting that dividend over the course of the cycle? Is it based on a targeted payout ratio? Is it based on cash flow generation? What are we thinking, that that's free cash? How do you view setting that dividend policy? Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. I think both of those metrics are important metrics through a cycle. Obviously, if you look at our dividend payout here over the last several years based upon a percentage of earnings, or lack thereof, the dividend has been higher than what one would normally target for. But I believe and our board believes that the dividend is an important component of total shareholder return. I think a stock like ATI needs to do everything in its power to make sure that it can pay and sustain a dividend. It fundamentally is – you have to earn it over the long-term and you have to generate the free cash flow to do that. We have been able to navigate the last several years in maintaining our dividend. And my preference would be for us to continue to do that and to figure out how to do that. And I think we have the capability to do that. And ultimately, it's a board decision, but the board would look to me and our recommendation in terms of what we think. But the dividend is an important part of our strategy of creating value for shareholders.

Our next question is from Josh Sullivan of Sterne CRT. Go ahead.

Good morning.

Good morning, Josh. Richard J. Harshman - Chairman, President & Chief Executive Officer: Josh, good to hear you.

The High Performance business, assuming oil and gas next year, (56:33) what kind of margins were you looking for in 2016, just including some of this restructuring, the higher utilization on the aerospace assets and, again, just trying to understand the High Performance segment right now. Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. I think – we're in the process right now of finalizing our 2016 and our next five-year strategic plan. I think we'll be – the easy thing for me to say and the obvious thing is better than – higher than 2015, right? But from where we are in the fourth quarter, that's not heroic. So, what we have said from a long-term standpoint, that's a business, that's a segment that the segment operating profit should start with a 2, and be double-digit, right? And is that possible in 2016, where we think some of the end-markets are? Well, maybe not. But we're going to do the best we can. And I still think that that segment, when you look at where we're positioned, not only in aerospace, but in other important markets, we didn't talk a lot about – the oil and gas market right now is tough and challenging, but there's a tremendous amount of technology development and activity we have going on with major oil and gas customers that will begin to be realized when the demand recovers and the market returns. So, nobody is sitting there saying, oh, woe is us, what can we do? Nobody really wants to buy anything. There's a lot of activity going on from a product development and a technology development that will pay dividends in the future, so – and a large part of that is not only within High Performance Materials and Components, but it's also within Flat Rolled Products. So, I think we'll be better equipped with more facts as opposed to views and opinions when we talk about the fourth quarter and we have fully completed our 2016 plan.

Okay. Thank you. Richard J. Harshman - Chairman, President & Chief Executive Officer: Thank you.

Thanks, Josh.

This concludes our question-and-answer session. I'd like to turn the conference back over to Rich Harshman for any closing remarks. Richard J. Harshman - Chairman, President & Chief Executive Officer: Okay. Emily, thank you, and thank you for joining us in the call today. And as always, thank you for your continuing interest in ATI.

Thank you, Rich, and thanks to all of the listeners for joining us today. That concludes our conference call.

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