Good morning, and welcome to the Allegheny Technologies Incorporated Third Quarter 2020 Results Conference Call. [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. Please go ahead, sir.

Thank you. Good morning, and welcome to the Allegheny Technologies Third Quarter 2020 Earnings Call. Today's discussion is being broadcast on our website at atimetals.com. Participating in the call today are Bob Wetherbee, President and Chief Executive Officer; and Donald Newman, Senior Vice President and Chief Financial Officer. For today's call, we will not display or advance slides as Bob and Don speak. Their comments will focus on highlights and key messages. The slides provide additional color and details on our results and outlook. They are available on our website at atimetals.com. [Operator Instructions] As a reminder, all forward-looking statements are subject to various assumptions and caveats as noted in the earnings release and in the slide presentation. Now I will turn the call over to Bob.

Thanks, Scott. Good morning. It's an understatement to say that 2020 has been a challenging year for all of us, especially those who serve the commercial aerospace market. Despite these headwinds, the relentless ATI team continues to rise to the challenge, guided by the leadership priorities we established at the outset of the pandemic. This morning, I'll share my thoughts on 3 key topics. First, how we're taking control of what we can control, thus accelerating cost savings and strengthening our position. Second, our strong balance sheet puts us in an excellent position to weather storms ahead as well as to fuel our growth. And third, our view of the markets and our confidence in a stronger future for ATI, thanks to strategic share gains and ATI's unique capabilities. So first, where we are today. We began taking decisive action as soon as our forward-looking demand signals flash red. Our customer connectivity continues to give us the insights to assess market dynamics in the moment. From this, we gain conviction to make critical decisions, aligning our cost structures and inventory levels with changing demand expectations. We've acted thoughtfully and with urgency to reshape ATI for 2021 and beyond. As a result of these proactive efforts, our third quarter financial results significantly exceeded our previous guidance. We accelerated benefits from our cost savings initiatives through aggressive implementation. This included capacity up, gold dark and quiet facility islands reduced our fixed costs, minimized variable costs with execution on our restructuring programs, eliminated costs to align with demand declines, reduced overhead. We've intensely reviewed every administrative and nonproduction related expense continuing only what was critical. Overall, we've significantly variabilized our cost structure. Costs historically viewed as fixed are now turned on and off in sync with demand, which gives us tremendous control over…

Thanks, Bob. I'll spend the next few minutes sharing highlights in 3 key areas: one, our better-than-expected third quarter financial performance; two, our strong balance sheet and cash position; and three, a look at our Q4 and 2021 expectation. From a performance standpoint, the adjusted EPS loss of $0.38 per share in Q3 is significantly better than our previous guidance of a loss of between $0.62 and $0.72 per share. Our Q3 performance reflects accelerated cost reductions and an improved mix in portions of our business. First and foremost, we are managing decisively. We are making the most of external demand despite market headwinds, and we're controlling what we can, our costs and capital deployment. Consider this, our third quarter revenue dropped by more than 40% versus prior year, including a 60% decline in our high-value commercial aerospace business. The revenue drop was largely due to market factors that were not within our control. When market declines became clear earlier this year, we responded quickly, focusing on cost containment. Benefits of those efforts can be seen in our Q3 results. Despite the 40% drop in revenue, we posted a 25% year-over-year decremental margin in Q3. That's a meaningful improvement from the 28% decremental margins captured in Q2, clear improvement resulting from quick action. Our cost actions are having meaningful impact and they're accelerating. As Bob described it, we have significantly variabilized our cost structure. Costs once considered fixed are now variable. This means we are better prepared to deal with future demand fluctuation. Also keep in mind that structural cost savings will accelerate profitability in the recovery, expanding margins and increasing our cash conversion. Looking beyond the income statement, our efforts to preserve free cash flow are producing results as well. We expect to be free cash flow positive in…

Thanks, Don. Your points were right on. It's been a real team effort in a very uncertain time and much appreciate the contributions of everyone who's part of ATI, our customers and our suppliers. Our comments today focused on what matters most to our shareholders and to us. These priorities are at the core of how we lead on a daily basis. First, we're managing decisively in times of great market uncertainty. That includes quickly and effectively adjusting our cost structures and inventories to match demand, and we're keeping our people safe. Secondly, we're preserving cash and maintaining liquidity. We're preserving our ability to deploy cash accretively for our shareholders. We'll be recovery ready, capitalizing on industry volume growth as well as our strategic share gains and new business awards. Finally, we're working with our customers, new and long standing, who value our material science capabilities and advanced process technologies. Our goal is to be integral to their success, helping them grow, solving even greater challenges together, in so doing, earning an ever-increasing share of their business. We're taking the actions necessary to emerge from this crisis a stronger, leaner and more focused ATI. Scott, back to you.

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

[Operator Instructions] And our first question today comes from Josh Sullivan of the Benchmark Company.

Just you highlighted defense as the key market going forward. Can you just talk about how do you take share there? Or is it on new program growth? Just as we think about defense budgets, looking into '21 and '22, can the strength today carry over into the out years?

Yes. Great question. Yes, I think when you look at what we've been able to do in defense, it's being very program-specific. Clearly, a big part of what we do is supporting what floats. So the nuclear navy and the propulsion systems there, we expect that to be a good strong market for the years to come as much in terms of fuel replenishment as anything. So I think that's a fairly solid growth opportunity for us. The other area we focus on is clearly military propulsion, both helicopter, rotary -- rotorcraft, fixed-wing. So we're on very select programs that are growing, and we continue to see opportunities there. And those programs tend to last forever, and obviously, consume some portion of aftermarket type things that we enjoy as well. And then on ground vehicles, we're on very specific programs that are starting to gain traction internationally or have implications for international growth on the armor side. So we feel very confident. These are markets that value our material science capability. And certainly, things like HRPF and our facilities at SA&C also contributed to that. And then lastly, I think when you take material science and look to the future, a lot of work going on in hypersonic type space applications and either our very light gauge rolling capabilities and our -- things like -- when you think about our analytic mix, zirconium, hafnium, niobium, tantalum, all those kinds of things. There's a lot of great applications for high-temperature light gauge growth, which is -- was really the catalyst for putting our SA&C business together with our Specialty Rolled Products business earlier this year to get that synergy and to make sure we were doing everything we could to grow. But we see defense continuing to be strong basically because of the programs that we're involved with.

Got it. Got it. And then just curious if you had thoughts on comments from Raytheon's announcement to do some more turbine airflow production. I know you guys have a very good relationship with the company. Just curious on your thoughts on what they might be doing and how you might be involved there, just what you're thinking as far as that announcement?

Yes. We're still adjusting to the new name for Raytheon. And so our connection really, obviously, is with the Pratt & Whitney family that's there, and we feel we have some good strong relationships to grow in the future. I can't really comment on what their plans are, but we continue to be very actively engaged with what they need on a material science basis. And so we're confident that they still have a good growth projection -- profile.

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

Yes. No. That's a question you asked a couple of other times for us. And I think what we've always said is it's harder for us to see exactly where the aftermarket is. It's an important part of our business. Probably, I think we've said publicly 20%, 25% of what we do is in the aftermarket. And so we ask that we track it by basically the -- it's at the forging level, forging business, and we see that, that part specifically come through. But at this stage, we think it's still going to be there for a while. It's not a growth space for us when the engines start to go out of production. I think we're well positioned for that next generation, the -- obviously, the leaps in the geared turbofan. So that's really where the future is going to be for us.

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

So as you guys look at your cost reductions and your new targets for 2020, which, Don, I think you listed this morning. What's the implication in terms of how much incremental cost savings we can get in the fourth quarter relative to the third?

Yes. We've made fantastic progress in terms of the cost initiatives that we triggered early on as soon as we saw the changes going on in the market. To give you some perspective, Phil, if you think about it, we captured about $60 million to $65 million of cost reductions in Q3. That was roughly twice the size of the capture that we got in Q2. So as you think about Q4, we feel like we've kind of hit a good pace. I would take some marginal improvement in Q4 relative to Q3, but still in that, probably $65 million range for the quarter. That sets you up for a run rate in the $260 million to probably $275 million range for 2021. And so I think that's why you want to think about run rate. And of course, the other key area of the cost reductions is how much of those cost reductions are we going to keep, what's structural. And for that, I would stick with the guideline that we gave you before, which is we said we were targeting 40% to 50% of our cost reductions to be structural. I would lean toward the 40%, and that, as you do the math, will set you up for about $100 million plus of structural cost reductions. And of course, I don't know have to tell you the math on that, those structural cost benefits are gifts that are going to keep giving through the up-cycle. They're going to be beneficial to expanding our margins and increasing our cash generation. And it should create some really substantial enterprise value for our shareholders. So we're really happy with the outcome that we've had so far on our cost reduction and the quick response that we've had from our team.

What's the -- because it looks like you did have a pretty healthy pension contribution in the third quarter, which I think we may have anticipated was going to be 4Q weighted. What do we have left on the pension contributions in the fourth quarter to come?

Yes, you're right. We had in excess of $60 million of contributions in the third quarter. We're still targeting $130 million for the full year. That means you've got about $35 million left in Q4. So that sets us up on this glide path for getting our pension plan really fully funded or at least to a de minimis level over the next number of years. And so as you think about, again, 2021, as everybody is trying to wrap their head around those expectations, we've said before that $130 million for 2020. As you look to 2021 to 2023, we should be averaging closer to probably $80 million, with 2021 kind of in the $100 million range. Again, really pleased with the glide path that we're in with our pension. We're heading in the right direction, and it's still a clear priority for us.

The next question comes from Gautam Khanna of Cowen.

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

Yes. At the tail end there, that's the ultimate question. But thanks for the question. There's a supply chain. And as an understatement, it's an ecosystem, right? It's always evolving in a current dynamic environment. But what we're doing is we really get the benefit of, I'd say, the forging business is kind of our starting point, where you're looking at part-specific activity with specific programs and our relationships with the big OEMs. And we know that they were pretty aggressive in adjusting their inventories quickly, starting Q4 of last year into the first part of 2020. So we think that we're in a pretty good inventory management position. So from -- as we get into the back half of 2021, we should be able to see that inventory burn off. But it's based on day-to-day talking to the customer, to be honest with you. We get a lot of different inputs. We actually listened to some financial analysts who talk about the build rates and talking to the customer and it's really about their tactical activity. I think on the airframe side, we all recognize that the airframe supply chain was consuming more than they were needing in 2019 with the situation with the MAX. We also see lower wide-body production. So one of the great measures for us is actually kind of what kind of inventory do we have trapped that doesn't necessarily manage -- match up with current order demand. As Don said, one of the great opportunities for us is, right now, we're at about 50% working capital to sales kind of ratio. We should be much closer to 30%, if not better than that, over the long term. So that's kind of our internal indicator of where is the supply chain. As we start to release our trapped materials, I will tell you that they've started to burn off. But the real challenge, I think, is we're still waiting on the MAX return to service. And I think once that happens, you tell me when it's going to happen, but let's assume it happens and we start to see visibility coming back in January and February. I think that's when we'll get our first true look at what the recovery is going to look like. But it's still looking at inventory levels, talking to key suppliers and certainly investing with our customers at time. There's no lack of conversation going on. It's a matter of -- the biggest wildcard for us is the MAX return to service at this point.

And just maybe as a follow-up, Rich -- I'm sorry, Bob, I apologize. It's -- I was just curious, the jet engine sales number that you guys revealed in the slide deck, do you think that is a low watermark, if you will? I mean, from here, do you -- I mean maybe Q4 dips a little lower because there's always kind of channel destocking into the calendar year-end. But do you think that marks this quarter -- Q3, Q4 will mark kind of the low point? It is a destocked level, if you will, below underlying consumption of the end user? Or do you think we're going to be hanging out at a level like this or maybe even below that in the first half of next year? Just what's the shape of that kind of -- I'm just trying to understand like what is underlying consumption versus what you guys are actually feeling today?

Yes. I think I'll give you my comments with one caveat. So I think if you took Q3, it was still a little bit of a transition quarter. Q4, Q1 and Q2, they all kind of have that -- they kind of resemble the same pattern. I think we are bouncing off the bottom. Some of that is, when I look at the news that comes across my desk, I would say, today, it's more up than down. Where for the last 180 days, it's hard to believe it's only been 180 days that we've been in this pandemic, that was mostly down, right, negative type stuff. So I think the mood has shifted quite a bit. So I think Q4 to Q1 to Q2, probably flat for the demand. I think a couple of the tidbits we're working through is that we're going to have some tough comps going forward, right, in Q1, particularly. But I think if you look sequentially, I think you'll get a good track record. And then not all our friends in the OEM business are as effective at managing their forward demand as others, right? So there's always one of the guys that we kind of have to wait and see and they tend to do more of their adjustments in Q1. So we could still get some modest inventory corrections from 1 or 2 players. But I think for the core customers that we depend upon in the jet engine space, I think -- we think we're at the bottom and it should flatten here for the next couple of quarters. And certainly, the work we're doing on the decremental margins, it should still be -- still going to be on our mind. So...

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

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

Sure. This is Don. Let me take a run at that question. First, from a CapEx standpoint, we reacted very, very quickly to right size our CapEx where we were seeing demand going. When we entered the year, we were expecting to spend in excess of $200 million. If you look at our Q3 numbers, Timna, what you're going to see is a run rate closer to $120 million. So very positive. In terms of where the cuts have happened, it's really been pretty broad-based across all of the segments. And it's really about prioritizing where we're spending the CapEx. We're looking at it just like our cost structures. We're dismantling our capital spending. We're looking at what the highest priorities are from a maintenance standpoint. And then when it comes to any growth CapEx whatsoever, we're, of course, interested in growing, but we can't spend a dime ahead of when it needs to be spent. And we have to be dropped dead certain that we're going to get the returns that we believe we're going to get with these investments. So what you've seen in 2020, you should expect to see in 2021. Similar discipline, similar flexing based upon what the customer needs and what the demand levels are in the end market. The second part of your question, would you repeat that?

Yes. Sure.

Acquisitions. Acquisition, that's right.

Yes. M&A.

Okay. So the way to think about it is it really comes down to what's your priorities with your capital. And our priorities around capital allocation, Timna, has not changed. Number one, we have to ensure that we have adequate liquidity in the business to keep it healthy. And we're there, check that box, $950 million of liquidity. Second priority is we make sure that we're taking care of our people and we make sure that we're maintaining our assets. Check, we're doing that. Third, we are on a glide path to the pension. We're going to continue to make our pension contributions and see ourselves work down that pension commitment to a de minimis level over the next several years. Check, we've got that covered. At that point, our priorities really are focused on where we deploy capital to do kind of effectively 2 things, prudently grow and the second is really take care of our maturing debt facilities. So let's focus on the growth. It's organic or inorganic and we do measure the differences. We understand that organic growth will only get us so far in terms of our business. Inorganic growth may be an enhancer. How do we look at that inorganic growth and are we open to inorganic growth is what you're asking us, Timna. And the reality is, we are. We have put ourselves very intentionally in a position to have choices, but it's also choices that are going to be executed based upon the discipline you've seen over these last few quarters. And as we look at M&A, it's also important to understand our priorities there. Our priority is aerospace and defense growth. That's our core. That's where we make our highest margins. That's where we've experienced the healthiest growth. And so as we deploy capital to growth, whether it's internal or external, it has the priority toward -- a preference toward aerospace and defense. And we'll be opportunistic. We see opportunities really often and we're pretty discerning and pretty careful as we make those decisions. But we do see it as a possibility.

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

Okay. Yes, I'm just trying to understand like if you're going to finish some of the isothermal forge press CapEx or where that stands relative to thinking about M&A and how those priorities would be going forward, but I can follow-up offline. I would also -- go ahead.

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

That makes sense. So my other question was just to put you on the spot, if we could. Obviously, election day in a couple of days. And I was just wondering if you could comment at all if you have any insights as to the impact one way or another, specifically on trade, for example, if it's not too late to revive the -- some of the slab rerolling opportunities at the rolling mill or with regard to defense spending? Any thoughts there?

Yes. I think I'll start with the defense spending. I think in the near term -- near to medium term, I think the defense spending will continue. I think that the opportunities for the programs that we're on specifically feel relatively strong for a long period of time, not necessarily driven by politics, but by global threats and defense needs. So we spend a lot of time. We have a dedicated team in D.C., who's spending a lot of time with the Pentagon and various folks. And so I think on defense, we feel relatively strong. In terms of assets that we might have idled, they're always idled such that they could be returned to service, but we continue to deemphasize our position in stainless. And I think we're interested in using the HRPF that we have in Pennsylvania for cash generation. We think there's still a lot of opportunities. We still get inquiries about using that capability. As we all remember, it was built for a capability and it came with a capacity and we still get inquiries to do that. The markets have been up and down over the last 180 to 200 days. So it's a little harder to tell where that might go. But I think our focus is clearly on aerospace and defense. That's where we want to go. We also have our adjacent markets in electronics, medical space. And they tend to have -- the places we're going to invest actually are in the aerospace-like profitability ranges. There are good opportunities there in those markets. And if we've been known to sell assets from time to time. So if somebody comes along and says, "Hey, we'd really like to take a risk in that lower-value space," we're open to that.

The next question comes from David Strauss of Barclays.

Apologies if any of these have been asked. I joined late from another call. Free cash flow, as we think about '21 and the moving pieces there between -- I heard the comments on CapEx. But CapEx, working capital, cash taxes and I guess, both including and excluding pension contribution, would you expect it to grow in '21 versus '20?

David, this is Don. We haven't given guidance yet for 2021, but let me give you some color. Of course, in 2020, we're expecting to generate somewhere between $135 million and $150 million of free cash flow in a pretty challenging environment. How do we get there? Well, there's 3 levers that we're managing: it's about our cost structures, it's about our CapEx and it's about our working capital. The way to think about 2021 is you're going to see, number one, the same discipline around the same levers. As we look at our cost structures, we're going to work very hard to continue to capture cost savings and maintain the gains that we've already captured in 2020. I've already talked about the structural savings in the range of $100 million even in the recovery. So I feel very positive about that. When it comes to our CapEx, the same discipline that you see in 2020, where we took our CapEx spend, really shaped it to the new demand, took it from $200 million down to a run rate after Q3 at about $120 million. I expect to see that very, very same discipline applied as we look at what the market demand is in 2021. And then the last lever and what's, I think, really key to understand how we're viewing 2021 and this will likely be reflected when we give our guidance for free cash flow, is how we're thinking about our managed working capital levels. So Bob already touched on this, but I want to drive home how important this is. We ended Q3 with a managed working capital as a percent of revenue at about 50%. And you know, David, that we ended in 2019, that metric was managed working capital at 30% of revenue. That 20% delta, we see as a massive opportunity and we are going after it aggressively today. And it's really going to unfold in 2021 as we released the captured inventory that we have and really apply some pretty solid methodologies to make sure that we're not creating any new stranded inventories. And that should be a significant source of cash generation for us.

Great. That's helpful. So you think the biggest lever to get back down towards that 30% range is on the inventory side more so than anything still to be done in terms of receivables and payables?

Yes. Receivables, we're doing a good job around that. We're not seeing any issues, no delays. The receivables are working their way down in the normal course. Payables, the way to think about payables, no step change in the DPOs. We have picked up a couple of days in our favor around payables, but I'm not expecting a step change there. The real opportunity here and what we're focused on is really inventory and it's -- in our mind, it's a really big opportunity.

Okay. And then thinking about the trajectory on aero and what you're talking about, in the second half of the year or next year, things may be starting to get a bit better. Between here and there, should we expect that your -- I mean, you've done a great job on incremental margins thus far. Should we expect that the level of decremental margins would continue to shrink from here? Or you think kind of 25% decrementals, which is, I think, what you did in the quarter, is that the right way to think about what those will look like over the next couple of quarters?

Yes. I'm glad you asked the question. You're right. We made some really good progress around our decremental margins. Last quarter 2, we were at 28%. We worked that down to 25%. So how should we think about decremental margins going forward? Really, I think as you're modeling it, you want to think about our decrementals in the 25% to 30% range. Remember the fact that as we look at what's created those really favorable decremental margins, it's really about our cost initiatives. There's 2 baskets to that. One basket is what I'd call variable related. We're variablizing our cost structures, which is going to enable us to continue to flex as the end markets are moving up and down. So we're in good shape there. The other key thing and it will continue to benefit our decremental margins as you go through 2021 and even the up-cycle are those structural changes. I know I've mentioned it several times, but it is quite important. As you guys are thinking about 2021 and beyond, as we keep that $100 million of incremental savings as structural, that's a gift that keeps giving. And it's going to contribute not just to beneficial decremental margins and incremental margins, but also our cash flow.

Okay. I guess in -- following up on that. I mean, Bob, what -- I mean with this kind of business, in the past, we've gotten used to 40%, 50% kind of decrementals. I mean, what is -- how has the approach been different this time to allow you to be able to hold at much lower levels in terms of the decrementals we're seeing?

Yes. We've been very aggressive, David, on making sure we're running to the right facilities. We actually -- I checked this morning, we have 6 facilities that are actually on an indefinite idle today. They were our higher-cost facilities. And so the challenge there is we use the term cold, dark and quiet, candidly, that you have to take those facilities off-line and eliminate the cost to the maximum. Now for those facilities to come back online, obviously, they have to be justified, justified to reinvest the working capital and justified to add the capacity. And in the meantime, making structural changes in those facilities that they'd be viable when they did come back. So I think what's different this time is primarily driven by the magnitude and probably the duration of the economic situation, and we were able to take more structural change than we ever had before. And so that's been a huge contributor to that. Don, did you want to add some more color to Dave's question?

Yes. I think, certainly, we're facing unprecedented times. And one of our key models internally is don't waste a good crisis. And so really the dramatic changes in the end markets driven by COVID have opened up new opportunities for us to make fundamental changes that may be in the past were a more difficult thing to do. So for us and for our teammates in the operations, everything is on the table. And so that opens up new opportunities that maybe others hadn't seen in the past. And it's not bad. It's actually a really good outcome of a really tough situation with the crisis.

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

Our next question comes from Paretosh Misra of Berenberg.

A question about next year 2021 regarding your jet engine and airframe business. Are you expecting any contribution from price increase also to your top line because maybe some new contracts starting with the new calendar year? Or it's mainly a volume story as we look into next year, volumes stabilizing and gradually recovering?

Yes. I would say 3 components to that. Some of the contract renewals we had -- did have, we call it, margin enhancement and it came from 1 of 2 sources. It could be unit price, but it also could be product mix. So we continue to drive as we get more share in the jet engine space. And even in some of our airframe spaces, we've been able to get a better product mix that plays more favorably to either the alloys and/or dimensions of products that we make. So I'd say there's some that is going to be driven by that, but the majority of it would be increasing in volume.

Got it. And with regard to the inventory of your products that your customers carry on the jet engine side and the airframe side, is that around 3 to 6 months typically or -- give or take or higher?

Yes. I don't know exactly how much inventory they carry per se. But I would say from a lead time perspective, historically, we've seen the lead time from shipping of forging per se to being bolted on a plane can be 6 months. Now that's a nice average. And on an uptick, it tends to get a little tighter. It can be as short as 4 months may be in the best cases. So if that's what you're asking, how long from build of -- -- delivery of an engine to a part supplied by us that's forging, that can be 4 to 6 months. When you get into other products like billets and plate, it can extend closer to 12 to 15 months, depending on the product and the difficult -- the challenge of the supply chain.

Got it. And if I could just ask one quick follow-up on -- with -- on the last question about decremental margin. I apologize if didn't understand it correctly, but I think you're saying that you could keep the decremental close to 25% because of the structural cost saving, right? Like that's the target, I guess, it's closer to 25%. Did I understand it correctly?

Yes, partially. What I was saying was, as you think about our decremental margins going forward, consider them in the 25% to 30% range. And that would be consistent as you go through 2021 and think about how the change in revenue would affect the bottom line. Where I raised the comment about structural changes is really around how to think -- once we're in the recovery, how to think about the benefits of the cost actions that we've taken. We overall have delivered a significant amount of cost reductions in themselves in the range of $260 million to $275 million of annualized savings. But what's key to me is what happens beyond the down cycle? How much of that can you keep? And there, it's the structural changes and those are those gifts that keep giving. And that's in the magnitude of about $100 million plus. And so that's what I was referring to. As I said, as you think about decremental margins off into the future, especially past 2021, once we're deep into the recovery, it's important to know that those decrementals and our incremental margins going forward are going to be pretty robust.

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

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

Yes. I'm really glad you asked that question. So when you think about what's going on with availability, you're right. Usually, there is a trade-off between the release of working capital, get it into your cash, but hey, you're losing some of your availability on your ABL. We, of course, are very aware of those mechanics. So here's what we're doing. We actually have a very healthy set of initiatives that we're targeting and we're capturing that are looking at our existing collateral baskets. There are some of those collateral baskets that have historically not been included in our borrowing base, things like international receivables. There are some inventory categories that may exist with third parties. What we're doing is we're working with our banking group to get those baskets of collateral included in our ABL borrowing base going forward. What's the benefit of that? Of course, it is that even though you're converting some of your base -- borrowing base into cash, you're replenishing the collateral, and it's really kind of free collateral, if you think about it that way, Matt. And so it can be very, very beneficial to us. Our goal is we're in great shape right now with $950 million of liquidity. We're going to continue to drive increasing our cash balance because it's the right thing to do. And we're going to look to maintain our overall liquidity even in a challenging environment by continuing to add baskets that have been underutilized in the past. So we're doing the right things to put us in -- to keep us in a healthy position.

That's great. That's very helpful. And obviously, you've built up a kind of war chest of liquidity for a downturn. But now that we're another 90 days to this, how do you feel about your maturity window? Obviously, your first maturity of size isn't until 2023. Do you think that that's still plenty of time? Or do you think about wanting a longer runway? Or are you comfortable that the downturn won't be as deep as you initially feared? Any thoughts on that kind of maturity schedule, the policy?

Yes. We're in great shape around our debt maturities. And the reality is with the kind of cash and liquidity that we have right now, ultimately, our choice -- or excuse me, our objectives were to give ourselves some choices around things like you're just describing, how do you manage these debt maturities? I think we've got a lot of runway around our debt maturities. We're in great shape. In terms of when we may be refinance the bonds that are going to be maturing in 2023, I'll call that a game-time decision. There's a lot of dynamics that go in to managing capital structure and funding your business, the growth opportunities that Timna brought up. So right now, we're in a fantastic spot be able to make those choices. And the markets have been healthy and supportive as well, which is also, of course, helpful.

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

Thanks, Laura, and thank you to all the participants and listeners for joining us today. That concludes our third quarter 2020 conference call.

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