Good day, ladies and gentlemen, and welcome to the ATI Third Quarter Conference Call. My name is Whitley, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Dan Greenfield, Vice President, Investor Relations. Please proceed.

Thank you, Whitley, and good morning to -- and welcome to the Allegheny Technologies earnings conference call for the third quarter 2013. 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, Interim Chief Financial Officer. All references to net income and earnings in this conference call mean net income and earnings 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, www.atimetals.com. After some initial comments, we will ask for questions. [Operator Instructions] 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.

Thank you, Dan, and thanks to everyone joining today's call. As we've said in July, we expected the third quarter to be challenging. We certainly saw this with continued sluggish demand from many of our major end markets. Jet engine destocking at OEMs, while beginning to show signs of stabilizing, continued to impact shipments of both mill products and forged and machine components in our High Performance Metals segment. Lackluster economic growth in the U.S. and Europe, resulting in excess supply of natural gas, has temporarily softened demand from the oil and gas market. Global fiscal policy and economic uncertainties and slowing global GDP growth has reduced project-related demand for our Flat-Rolled Products segment, industrial titanium and nickel-based and specialty alloy sheet and plate products. Given these scenarios, we are focused on taking the necessary actions to navigate the current challenging global economic conditions while continuing -- while we continue to strengthen ATI's position for future profitable growth. The restructuring actions announced last week represent an important part of this strategy. While we can't control global macroeconomic conditions or raw material prices or the underlying demand for our products, we can, and will, continue to focus on taking actions within our control. These actions are designed to improve ATI's financial performance and financial flexibility in the short term and keep ATI well positioned for profitable growth over the long term, as economic and market conditions improve. Specifically, we continue to accelerate our cost reduction efforts. In the first 9 months of 2013, we have achieved over $123 million in gross cost reductions before the effects of inflation. We continue to take actions to improve ATI's liquidity and financial flexibility. This includes the previously announced sale of our tungsten materials business for $605 million. The transaction, which is subject to customary…

Your first question comes from the line of Chris Olin with Cleveland Research.

Just want to talk a little bit more about the Boeing contract because it seems to be a topic of discussion out there, especially how it relates to partnering for successful [ph] push coming from the OEM. And I guess -- I know you don't focus on volumes but it's conceptually easier for me to understand if I kind of talk it out. And essentially, if you think the jet delivery forecasts are going to stay in place, it looks like Boeing would need something in the neighborhood of 15 to 20 million pounds of additional titanium. I guess, historically, I would take that number and divide it by 3 and say that each of the suppliers, that's kind of what the volume outlook looks for that. I'm just wondering now if that multiple changes. And what do I do? I take the mix of more sheets that you're going to be getting and offset that by the concessions that seem to be coming out there in terms of cost reductions. And is that how we net out the value of this contract?

Okay. I think it's the -- first of all, I think that, and Boeing has said this, that they are continuing to reduce the buy-to-fly ratio by focusing on more near-net shapes than the traditional primary mill product forms of ingot and, in some cases, plate, et cetera. So the capability that ATI has to produce a wide variety of product forms, both from a mill product standpoint and also our increasing capability to produce more near-net shapes, is an important part of the strategy. So -- I mean, the responsiveness in terms of how does ATI position itself to create value for Boeing, as part of the partnering for success program, and also at the same time, create and enhance stockholder value, is the balance that we were looking. And I think that this contract and this extension certainly does that. It does that in terms of a richer product mix of more value-added parts and components. It does that in terms of giving us the opportunity to show Boeing the value proposition that some of our new and proprietary alloys, most notably, ATI 425, can give them that would be in addition to the contractual minimums that exist in the contract and the new extension. And it obviously extends it beyond 2018. So as we look at it, I think that the balance that we were trying to strike and, obviously, that Boeing that was trying to strike, of giving them what they needed and they were looking for from the standpoint of their objectives of partnering for success and our objectives of continuing to grow with Boeing as an important strategic supplier across the full breadth of the capabilities that we have, and at the same time, extending the existing agreement beyond 2018 into the next decade, we achieved. And Boeing achieved it as well, or we wouldn't have an agreement. So in total, I think, Chris, it's hard to specifically answer your question because your question is somewhat focused on volume by year and we are under an obligation with our customer to not disclose that. But I can tell you that there is growth in the extension, not only within the time frame of the years that were covered initially through 2018 but then also, obviously, beyond.

The other question I had would be, did the new contract change the volume minimum requirements? And also, if we assume Boeing's going to need more material starting in 2015 based on what products you're now going to ship, does that determine that you'd be later in the Q? Or would you be further up before you benefit from the ramp in your delivery schedules?

No, I think that -- first of all, it did the extension and the new agreement does increase the minimums, just as a comparison of total volume, right? But importantly, it also increased the percentages of the value-added product. So in actuality, there are -- I guess, there are 2 ways to focus on volume, right? One is, you can increase the volume by shipping more ingot, right, which is not really the strategy that we have; or you could accomplish both, an increase in the volume and extension of the agreement and an increase in the percentage of value-added product forms, all at the same time, which is really what our strategy was and what we were successfully able to accomplish. And it also provided the value proposition that Boeing was looking for. So all in all, I'm very pleased with the agreement and ATI is pleased to be viewed by Boeing as a strategic supplier.

Your next question comes from the line of Sohail Tharani.

A quick question, first of all, on HRPF facility. Based on your current production volume, how much of that capacity will you be filling up? Or in future, also, let's say, once the market gets better, will you be fully utilizing it or do you have a lot of room in that facility?

Sohail, as we have said in the past, because of the unique power of the equipment in the facility that was designed and built to handle our full range of alloy systems, it's much like the position we have in our continuous automated bar finishing mill in South Carolina where both of those facilities have to be built powerful enough to handle the wide range of alloy systems that ATI produces. And as a result of that, we don't -- we won't fill up the available practical capacity of that equipment. And we deal with that in one way in Richburg by tolling for one of the stainless long products producers since we don't produce stainless long products. And the fundamental design and functionality of the HRPF has always incorporated the capability of finishing or hot rolling and handling certain carbon steel alloys that are considered to be advanced steels or advanced carbon steels for primarily the next generation of automotive sheet, as well as oil and gas market products. And this facility has the capability of doing that. And if we can use that capability to do something for a carbon steel producer that makes sense for them and makes sense for us, we will do that. The investment itself was not justified or supported on that basis. It was more of a thought and the knowledge that, given the capability of the mill, we're not going to fill it all up. So if there was a way for us to use that capability and capacity in a similar arrangement or in a more formal partnership with a carbon steel producer, that would be a very capital-efficient way for them to utilize the capability of the most powerful Hot Rolling and Processing Facility in the world, we would do that. And that hasn't changed really from the time period that we initiated the construction of the project.

So the $150 million to $250 million cost advantage you had mentioned in the past for the new facility does not include the -- if you get a tolling or some kind of joint venture agreement on this facility?

That is correct.

Your next question comes from the line of Timna Tanners of Bank of America Merrill Lynch.

A lot of things for us on your business model are terribly difficult to quantify, but I thought I'd take a stab at the nickel price direction and how to think about that conceptually. One of the things we are looking at in flat-rolled products in 2012 was, for the most part, a more stable nickel price at least in the latter part of the year than this year. And so if we think about, as an assumption, that next year nickel prices just don't move at all, all year long, would it be reasonable to assume that you could return to a margin that's more like last year or are there a lot of other moving parts? How do we think about a stable nickel price and the impact on your flat-rolled margins or margins overall?

Yes, I think that's one of the factors. I don't think that's the only factor. I mean, I think the fundamental -- the underlying fundamentals are important, right? What's the -- especially in stainless, because I assume, Timna, your question is more focused on the stainless side than it is on the higher nickel alloy side. Is that fair?

Well, if you want to answer both, that would be great. But yes, I'm thinking on stainless. But yes, both of those have an impact, yes.

Yes, I'll try to answer both. I think for both, the volatility of nickel is a factor, right? And so -- and it can either be a positive or a negative factor. When nickel is running up, it's a positive factor, both from the standpoint of demand because if the underlying demand is there then the customers are really trying to get ahead of the higher cost of the product by putting orders in. And then also, because of the lagging nature of the metal flow-through production not being matched up ideally to how the surcharge or index works, then we get the benefit on the upside as well. And we've seen that in past years. When it goes the other way, which it's been going for the last couple of years, it has the opposite effect. I mean, there's the wait-and-see attitude, there's the not ideal matching scenario, especially where you have a longer manufacturing cycle. Some of the sheet products that we turn inventory 6 or 7 times a year are better aligned. Some of the longer high-nickel alloy products that the inventory turns because the nature of the manufacturing process is much slower, we get out of sync and that also impacts our precision rolled strip products as well. But the real issue, I think -- so that becomes one of the factors. But the real issue becomes underlying demand, right? That's the bigger factor, is underlying demand and its impact not only on volume but also on base prices. And the underlying demand factor is also -- supply is also a factor. So when you look at the stainless market, if it's in an oversupply position and the importance of volume in that business, not only for us but for the other producers as well, given…

I fully appreciate the stainless challenges, and I think that was a great overview. I guess what I was trying to figure out is let's just assume, all else equal, total oversimplification, I completely understand that. But all else equal, if we have a flat nickel price and sort of a declining nickel price, how can we think about the incremental benefit? As you said, there'll be some benefit, assuming stainless stays oversupplied. Assuming all the rest, how can we think about the incremental benefit?

I think flat is better than falling.

Your next question comes from the line of Gautam Khanna of Cowen and Company.

I was just wondering -- a couple of questions. One, if you could just comment on what you're seeing in terms of the competitive dynamics in titanium, given all we hear about PCP and TIMET out there. Is that becoming an incremental force? Or do you think it's just kind of general oversupply conditions that are pressuring some of the transactional business?

Well, I mean, I have to say, we hear a lot of things, Gautam, because we're in a lot of markets and we have a lot of customers and it is a global marketplace. I can honestly say that we are not only hearing PCC and TIMET. I mean, there are other significant competitors in the industry. There are a wide variety of end markets. We're focused on all of them. We participate in all of them. We have significant positions in most of the end markets for titanium products, not only mill products but also forgings and investment castings. We tend to focus on where we think the opportunities are in the markets and with the customers and, quite frankly, worry less about what our competitors may or may not be doing because we can't control that. So I think it's a real oversimplification to just focus on one. Are they an important factor in the market? Yes, of course, both from a size and a capability standpoint. And it's a good company and we respect them. But we know what we have to do, we know where our opportunities are and those are the things that we're focused on.

And just as a follow-up to that. Do you still -- or do you believe that, at some point, we will see kind of spot titanium prices move up again? And if so, when and what do you think the catalyst for that would be?

Yes, I do you think we will. I think we'll see them, quite frankly, first in the spot market in aerospace before we'll see it in the spot market of industrial. And I'll answer that this way. The capabilities and the qualification in the aerospace market, as well as in some of the other higher-end markets, are much more -- much tougher than they are in some of the industrial markets. So I think as you -- and it will be led by the aerospace rate ramp. And is that -- and as you look at the supply chain, what's been going on really for over a year in aero engine, from an inventory correction and a management standpoint, and it obviously differs by OEM. Some OEMs have been more aggressive in their supply chain management than others. But on the aero engine side, I think we're nearing the end of the aggressive inventory corrections that have been going on, first, led by aftermarket and then led by just the matching up, if you will, of the supply chain for aero engine for new airplane delivery to what the airplane -- the airframe OEM rate ramps are ending up to be. And I think that that's something that I don't think we're going to see any dramatic changes over the rest of this calendar year simply because the fourth quarter tends to be a time period where not many customers tend to get very aggressive. But as we get into 2014, will it be the first quarter? Will it be the second quarter? Will it be the second half in terms of improving fundamentals on jet engine -- the jet engine market? I would tend to view that more conservatively and say that it's probably more likely to be the…

May I just ask one last one. On nickel alloys, your carpenters' building the facility down in Athens and I just wondered how does that overlap, if at all, with your product portfolio? And does it have any implications for share of pricing, given what you can see today? I appreciate it.

Yes. I mean, I don't know what some of the alloy systems that they talk about are, so I don't know what an ultra premium alloy is. I know what 718 is, I know what 720 is, I know what 718Plus is and things like that. So we're focused on end markets and applications for the alloys and the product forms that we make. I assume they're focused the same way. They're much bigger than we are in air melt and structural steels and lower-end alloy systems, I would call it, the 600 series and the 300 to 400 series that go into landing gear and structural components. On that side, we're not a real big player. On the mill products side, we're a bigger player on the forging side, interestingly enough, of those -- using those alloy systems. So they have their strategy and we have our strategy and that's what makes it an interesting world.

Your next question comes from the line of Julie Yates Stewart of Crédit Suisse. Julie Yates - Crédit Suisse AG, Research Division: Rich, maybe as a follow-up to the question kind of on the competitive landscape. How do you view the impact of the recent announcement that Alcoa and VSMPO are teaming up?

Well, I mean, I think it's interesting. I think that Alcoa, in the Engineered Products side, has -- certainly has some capabilities in terms of titanium-based products, and VSMPO, obviously, is more integrated, going all the way back to sponge through melting and through making a wide variety of parts and components. So what the specifics -- you probably know better than I in terms of what the specifics of that joint venture agreement are. I think everything will depend upon that, more so than anything else. Julie Yates - Crédit Suisse AG, Research Division: Okay, okay. And then inventory management at the OEMs has clearly been a big factor, as you just referenced, in both airframe and jet engines. And as we get closer to 10 a month and now that Boeing has formally increased their rate beyond that, how do we think about, just from a high level, from just aerospace top line, when ATI will see the benefit of that rate increase in both airframe and jet engines, so when you guys will be more aligned with the actual production rates? I mean, it sounds like, from your comments, that, that will be almost kind of a 2015 event, but I just want to make sure I'm clear.

Yes. And I think on the jet engine side, I think you'll start seeing it both in mill products and forgings, at some point, in 2014. And I would say second half. If I had to predict, I would say second half. I think on the airframe side, I think there'll be some modest opportunities in '14 and maybe '15, but the greater growth opportunity probably is in '16, maybe late, second half of '15. But I also think that from the programs that we're positioned on with our alloy systems, like 718Plus and Rene 65, and on the forging side and the programs that we're positioned on with the new jet -- with the new engine programs, there will be -- you'll see growth in '14 and '15. But the substantial growth, because of the ramp-up and where the jet engine OEMs are and where they're positioned in those airframe OEM platforms, we see the biggest growth going from '15 to '16. Julie Yates - Crédit Suisse AG, Research Division: Okay. And then switching gears back to the HRPF. How do we think about start-up costs as we go through the year as you achieve the cold commissioning and the hot commissioning and as the old facilities are still operational as well?

Yes, we're -- one of the things that we intend on doing is managing -- I mean, you're seeing some start-up costs now, quite frankly, that are flowing through that under the accounting rules like training. There's quite a bit of training that is going on with our hourly workforce right now on new equipment and the new control systems, et cetera, because it's a pretty big change from -- going from a 60-plus-year-old hot strip mill to a -- this HRPF. So some of that's happening now. The real issue is when we begin the commissioning process, first, the cold commissioning, but more significantly, the hot commissioning. And part of our strategy to manage that, and a lot of work is going in upfront in terms of theoretical testing and to make sure that everything is working the way we -- it was designed. And then that gets somewhat validated in the cold commissioning. But when we do the hot commissioning, it's our plan to actually do that on production orders. And so that gives maybe an indication of the confidence level that we have that the facility will be ready to produce good product early on. And by doing it on production orders, that's actually a more cost-efficient way for us to do it. There will be some startup costs, obviously inherent, because we're going to be running 2 facilities, at least through most of 2014. Once a particular grade or product gets qualified and completes the hot commissioning on the HRPF, all of the product then -- and all of the customer orders will be produced on the HRPF. So if you think about it, it will be, at some point, probably around midyear or maybe beginning of the third quarter, we'll start to see a crossover where the HRPF is producing more production orders than the old hot strip mill. That runs its course through the end of, for the most part, through the end of 2014. And then in 2015, everything is produced and all the full benefits and range of benefit opportunities begin to take effect in 2015. So we're going to see startup costs that are probably in the range of maybe $15 million to $25 million in 2014. And we'll identify that as we begin -- as it becomes more significant. We're not identifying it today because, quite frankly, in the great scheme of things, it's not all that significant. Maybe it's $1 million or something like that. But as we begin the process in '14, we'll identify that by quarter, so that the investment community has an understanding of what's nonrecurring because it is a nonrecurring effort.

[Operator Instructions] Your next question comes from the line of Phil Gibbs with KeyBanc Capital Markets.

Rich, I had a question on -- just a follow-up to this past question that was asked. The cost that you had targeted, this $15 million to $25 million of startup in '14, would that be inclusive or exclusive of redundancies of running both your hot mills effectively?

That would be inclusive. Yes, that would be -- that would have the inefficiencies built in because we're running 2 facilities.

Okay. And how should we think about the CapEx in 2014, as far as the trajectory of it, as we move into the back half of the year?

Yes, it'll be significantly less. I mean, part of the reason for the higher projected CapEx in 2013 than the last guidance we gave is that we're in good shape on the HRPF and some of the funds that have been projected to be spent in the first quarter of '14 have moved into '13, which is a good sign. I mean, it's not that the overall budget is increasing, it's just the timing of it. So that's a good thing. I -- as we look -- we haven't really set our -- and had any discussions with our board on our 2014 capital plan yet other than I can tell you that it will be significantly less. And I don't really see that number being more than half of this year. So if you want to use an outside number, it's no more than $300 million. And about 2/3 of that, by the way, will be the final spend of the HRPF. There's a significant amount of the cash outflow in HRPF that doesn't get paid to the equipment manufacturers until the completion of the hot commissioning. So that's part of the contractual retention and withhold based upon the completion of the commissioning process. So that spend will run really through most of 2014, with the heaviest period being in the first quarter as we complete the cash spend on the completion of the facility itself. But in total, it will be less than $300 million.

Our final question will come from the line of Dave Martin with Deutsche Bank.

Wanted to come back to the Boeing agreement, just had a couple of follow-ups there first. Rich, responding to Chris' comments about the minimums, you had said that they would be increased. And when you say increased, do you mean versus the old agreement or year-over-year? And then secondly, where does the Boeing LTA stand with other products, including forgings, which weren't mentioned in your most recent release?

Yes. And the Boeing agreement that we have, that we've just extended, is for mill products only. The forging and the parts and components is a different set of negotiations, a different set of contractual arrangements, either directly with Boeing or with a higher tier in their supply chain. So those are -- we have positions in that, but those are also ongoing as the whole supply chain is preparing for the rate ramp across the Boeing platforms. The answer to the first question is, really, the simplest way to say it is, yes. It's really yes to both. It's an increase from the previous to the current and it's an increase year-over-year, primarily moving from '15 to '16.

Okay, that's helpful. And then lastly, I just wanted to get your latest thinking, Rich, on the dividend. Does your increased liquidity and the fact that CapEx will be coming down make you comfortable, more comfortable, with the current levels of your dividend? Or do you take more of an approach in which maybe it needs to be rightsized, given the near-term outlook?

No, I don't -- I think it's -- I would answer it as more comfortable. I mean, obviously, that's a decision by our board based upon my and management's recommendation. But our sense is that, and the board's sense is, that the dividend is an important part of the total shareholder return picture and we need to have the discipline, from a cash deployment standpoint, to focus on those shareholder valuation issues. And so I think that the amount of capital investments that we've made, we need to generate returns on those capital investments. And I think we're positioned to do that. I think we're capable of doing that. That doesn't mean that we won't have other projects that will be very strategically important for us, including perhaps some in 2014 that will become part of that CapEx number in 2014. But the dividend is a very important component of the picture and I think the things that we've done give us, even though the economic times remain challenging, I think it gives us more confidence that, that can remain in place. Thanks to everybody 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.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.