Good morning, and welcome to the Allegheny Technologies, Inc. Second Quarter 2016 Results Conference Call. I will now like to turn the conference call over to Dan Greenfield, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Keith. Good morning, and welcome to the Allegheny Technologies conference call for the second quarter of 2016. 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 of 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 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 answer the 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 our forward looking statements this morning are subject to various assumptions and caveats as noted in the earnings release and on the 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. Second quarter results demonstrates steady improvement towards reaching our 2016 Operating Profit Outlook. Which is we expect our High Performance Materials and Components Segment operating profit as a percent of sales to return to low double digit levels in the second half of 2016. We continue to believe that our Flat-Rolled Products segment will return to a modest level of profitability in the 2016 fourth quarter. High Performance Materials…

Yes. Thank you. We will now begin the question-and-answer session. And first question comes from Richard Safran with Buckingham Research.

Rich, Pat, Dan, good morning. Richard J. Harshman - Chairman, President & Chief Executive Officer: Good morning, Rich. Patrick J. DeCourcy - Chief Financial Officer & Senior VP-Finance: Good morning, Rich.

First I have a question on the aftermarket. And, Rich, your comments about spare parts demand. Despite an increase in the installed base of used aircraft, we haven't seen really much of a pick-up in the aerospace aftermarket. Awhile back you were talking about destocking. That seems to have run its course. Is the lack of demand due to better diagnostics? Is it something else? If you could talk to the best you can about how you're looking at growth in the aerospace aftermarket as well. And maybe if you can to how that's going to trend next year. Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah, Rich, I think I've said before that I think that what's driving the current market and demand growth is really not aftermarket. It's the new builds. I think we see the products that we make are really supporting either the new engine builds or the aftermarket. So, at times, it's hard for us to differentiate. We listen to our customer. And I think the jet engine customers are saying that the growth rate in aftermarket is in the low to mid-single digits. That's by historical stands, that's probably lower than what it normally has been. But it's point and cycle specific, right. The big driver in aftermarket demand is more single aisle than it is double aisle. It's the shorter range. It's the stresses on the engine, the rotating parts, which is the take-off and the landing, not necessarily flying hours. So I think that the cycle will take care of itself. The growth in demand will be there. In some cases, depending upon where those airplanes are being flown, I think that in some of the parts they're actually seeing maybe a shorter life of where we are, of what they expected. So you're seeing some higher spare growth, but I think overall for this year and probably for next year, what's really going to drive the commercial aerospace market is new builds.

Okay. Thanks for that. And just shifting now to cash flow, I want to see if you – a bit of a multi-part question here. So for next year, could you discuss a bit about how much of a working capital benefit you're expecting? Rich, would you be willing to put some numbers around what you're thinking about for free cash flow for next year? Maybe a range? And also in cash deployment, I know you're near-term priority is paying down debt. Just wanted to know where you think the optimal debt cap ratio is. And also if you could discuss how you're thinking about buy-backs, dividends or M&A since you'll be generating cash. Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah, well there is a lot of elements to your question there, so I'll have Pat add at the end here on that. I think obviously as we look at 2017 and really beyond, we do expect to see earnings growth improvement. We do expect to see – so that will generate cash flow. We do expect to see a significant reduction in CapEx. We expect our CapEx for the next several years to be below annual depreciation, so that will generate cash flow. The managed working capital demands will be driven largely by the volume and the growth in demand of the products and support of the profitable growth. I think part of what we see on managed working capital is what are the fluctuating costs of raw materials, and how does that flow through our manufacturing process. But I think in total the managed working capital, we expect and we target managed working capital as a percentage of annualized sales on a longer term basis not at a quarter point in time but on…

Thanks, gentlemen. Appreciate it. Richard J. Harshman - Chairman, President & Chief Executive Officer: All right, Rich. Thank you.

Thank you. And the next question comes from Gautam Khanna with Cowen and Company.

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

I'm wondering if you could, hey, guys. I was wondering if you could comment on where things stand on the HRPF partnership talks and if you have any sense of what form it might ultimately take, whether it's an equity investment or a conversion agreement? Or any color there would be helpful. Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. Well I don't think it's really appropriate for us to get into specifics. Needless to say, we are having some discussions. I think that there is, I know, that there is interest in the capabilities of the HRPF. It is doing everything that we designed it to do and that it set out to do. And the one challenge that we have, obviously, is we're not putting enough volume across that to realize the full capabilities of the size of the investment. I do, we are seeing significant, and we'll continue to see meaningful contributions of the HRPF. Not just in terms of expanding the product profile that it can make of differentiated products. But there are significant cost savings that we're beginning to realize and see by using that to, for example, break down ingot, both titanium and nickel, alloy ingot, break it down on the HRPF as opposed to either going outside or doing things on older assets. Those are significant annualized cost savings at our reduced volume level because we've idled the grain-oriented and a lot of the commodity stainless. We're obviously seeing productivity gains, the productivity on stainless alloys is at three times the level that it was on our hot strip mill. The quality costs are significantly lower, which they should be. That's how the asset was designed. The maintenance expenses are significantly lower because we're dealing with a much newer asset. So all of those advantages that we see I think others see as well. And that drives part of the discussion. So how and what shape it takes really is the subject of those discussions, right. What's in the best interest of ATI? And what's in the best interest of the other party? And I think that our thinking is that we will be flexible and open-minded in terms of the approach that gets taken. And there are additional alternatives. And when we work through that and when we have something more specific to say, we will say it.

Okay. Rich, I was hoping you could also elaborate on your comments about the Rowley facility and some of the ways you're looking to reduce the cost drag. What specifically are things that you're contemplating? And secondly, if you could just comment on what you think the jet engine sales growth rate will be next year, given that it's already been quite strong this year. I think it's similar to what you guided, mid-teens growth. What do you think it will be next year? Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. Well I think when you look at the one chart that we showed, you see an even more significant ramp from 2016 to 2017 and then 2017 to 2018. So assuming all those engines get built and looking on the jet engine side, looking at the profile and the content that we have I think you'll see a more significant growth in 2017 than we're seeing so far in 2016 on the engine side. As it pertains to Rowley, what we're looking at is several different alternatives that I don't want to get too specific on at this point in time. But really, the fundamental issue is the drive it in and then how do we get the most cost effective titanium raw material units? Because that's what this is all about, right? Rowley produces sponge which we use to make products out of, so it's a raw material. And our people in that facility have done a great job. Since that facility was completed and went through the journey of achieving PQ quality, I can't say enough about the attitude and the effort and the commitment of the people that we have at the Rowley facility, along with the leadership of John Sims on the executive side, but we have to look at what's the right decision for ATI to make in terms of getting the most competitive titanium raw material units as we can get and that's what we're currently evaluating. Can we adjust the production volume more, either up or down? What's the right decision to make? And we're in that process and when we make that decision, which isn't very far off, we will elaborate on it at that point in time.

All right, thanks a lot. Good luck guys. Richard J. Harshman - Chairman, President & Chief Executive Officer: Thank you.

Thank you.

Thank you. And the next question comes from Kevin Cohen with Imperial Capital.

Good morning, and thanks for taking the questions, helpful commentary. I guess as it relates to HRPF, I know the company had previously talked about an operating profit belt of between $150 to $250 million. I'm wondering if that is still the case or if that range has been tightened up at all? Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah, I think that certainly at the upper end of the range and even at the $150 million that was driven largely by volume increases remaining in the commodity stainless steel business and in the GOES business, and obviously we've idled that. I do think that we would be trending certainly more towards the lower end of that and it's a combination of significant cost reduction, significant improvement in manufacturing cycle time which lessens a negative impact when raw material costs are volatile and certainly fluctuate downward. That hurts our P&L because the surcharges end up being lower than the costs of the raw material that we melt. So the HRPF is a big accelerator in terms of manufacturing flow path. And more importantly, it's products that we can make on the HRPF that we couldn't make on the hot strip mill. And those are all differentiated products. It's the wide nickel; it's titanium. It's some of the higher end specialty alloys that are serving global markets, including aerospace. So I think it's still over time. It's certainly more towards the lower end of that range, and it will be a gradual build rate over the next two to five years to achieve that.

And then turning to the other segment in Flat-Rolled, can you give us just a little bit more commentary about how operating profit progressed during the quarter? You did mention it got progressively better. Just wondering what the exit was at the end of the quarter in June. If you can have any additional color on that. Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. Well, June was certainly better than April. You're talking Flat-Rolled, right? You said Flat-Rolled? Or did you mean High Performance?

Just Flat-Rolled. The other segment, Flat-Rolled. Richard J. Harshman - Chairman, President & Chief Executive Officer: Just Flat-Rolled. Yeah, no. I think when you look at the segment result there of $32 million, we were getting much closer to a break even in that business in the June timeframe than we were in April. So it was more heavily weighted towards the first half of the quarter. And we would expect the same thing in the third quarter as we flow through some of the higher cost raw materials that are still there, that are still lower – the surcharge is still lower – than what the cost it was melted at. And we flow through some of the unfavorable variances that were capitalized in inventory. So I think as we exit the third quarter, it will be in support of the fourth quarter achieving modest level profitability in the segment.

And then if I could sneak in just a third one really quick. Pension. Can you remind us the incremental funding and the timing of that as you look ahead to next year? Patrick J. DeCourcy - Chief Financial Officer & Senior VP-Finance: We're looking at a contribution around the January timeframe of around $135 million which would complete our total of $250 million. And that should, given all the other assumptions staying the same, should take care of our liability for 2017.

Super helpful. Thanks so much and continued best of luck. Richard J. Harshman - Chairman, President & Chief Executive Officer: Thanks, Kevin.

Thank you. And the next question comes from Timna Tanners with Bank of America Merrill Lynch.

Hi. Good morning, guys. Richard J. Harshman - Chairman, President & Chief Executive Officer: Hi, Timna. Patrick J. DeCourcy - Chief Financial Officer & Senior VP-Finance: Good morning, Timna.

Okay. I'm going to ask a stereotypical metals and mining person question, and then I'm going to ask one on aero from Ron's suggestion. So given higher nickel price outlook and the stainless trade case but also your lessened exposure to the commodity side, can you remind us how to think about the impact of higher stainless and nickel prices read-through through the products that you still make? Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. Well, we're still targeting about 100,000 tons of – annually of commodity stainless sheet, so that's basically about a third of what we used to be, right? And the majority of that is austenitic rather than ferritic, so it will – we expect at 100,000 tons that's about $200 million in revenue. Obviously nickel moving upward and you understand how that works and the surcharge mechanism and everything, that's better than nickel moving downwards, both in terms of timing of the surcharge, as well as in the component of the surcharge. It also has – will have a – we've announced significant price increases on a differentiated product, precision-rolled strip, which you won't see much of a benefit in 2016 because most of the business is on contract. But the price increases are out there in terms of supporting the contract renewal and negotiation and supported through 2017. So I think we've always said that on balance we would prefer nickel being more stable than volatile. I do think that because of how the surcharge mechanism works that nickel – when nickel is below $6 a pound it's still not as attractive as it would be from a pricing and a margin standpoint on the commodity products when it's above $6 a pound. And then there is a tightening of the…

Okay. Cool. Before I ask the aerospace question, on the auto side, I was intrigued by your comment about a secular shift there to more nickel-based and specialty demand if we do think that auto is nearing a peak volume-wise. Are you saying that you could continue to see stable to growing contribution? Is this going to be very material or just incremental? Richard J. Harshman - Chairman, President & Chief Executive Officer: No. I think it's, I do think we will see a continued increase even, I agree with you, that the total auto build rate probably is at a peak. But I think this is a material substitution change, if you will, going into some of these higher nickel alloys because much for the same reasons on the jet engine side, right. Operating at higher temperatures you need alloy systems that are more capable of operating in that kind of an environment. And they're being specked in. So I think that we view it as a differentiated product. We do view it as a growth driver going forward, even with the possibility of less cars being made. The other thing that's happening is you're seeing the same secular shift going on in Europe, right, with the build rate on autos in Europe and also in China, right. So we have our STAL joint venture in China, and that expansion will be underway here as we work through the government approval process to expand the STAL facility. And one of the markets that the expansion is designed to support is the growth in these kind of materials in the automotive build rate in China.

Okay. If I could then on the aerospace side, the concern that Ron voiced is that some of the suppliers are saying that Boeing is not paying on a timely basis and has been a bit delinquent. We know that they've been a bit challenged in terms of profitability, or at least that's his view. I was just wondering if you could give us any updated thoughts on the Boeing situation, about your ability to get paid on a timely basis. Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. Well we had this question at the air show. And we have no problems and no concerns with being paid from Boeing. As a matter of fact, when I look at – we spend a lot of time looking at the risk profile obviously of customers and collections because at the end of the day a sale really isn't a sale until you get paid. And I can tell you with a high degree of confidence not only today but for all my career, the one end market that you worry the least amount about is aerospace. And Boeing is paying within their terms as they always have.

Okay. Great. Thanks.

Thank you. And the next question comes from Jorge Bernstein with Deutsche Bank.

Hey. Good morning, guys. Richard J. Harshman - Chairman, President & Chief Executive Officer: Good morning.

Good morning. I was just trying to get a sense of what your normal run rates are going to be going forward for your standard grade Flat-Rolled Product. I mean we did see quite a sequential jump there. I'm just trying to understand, is that – You mentioned in your press release there was some sort of an impact from the employees returning back to work but were you clearing out inventories, or could we expect a slightly higher run rate going forward in the standard product? Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. No, I think as I said earlier, I think when we look at the standard product which is more commodity stainless sheet at this point, we think there's a market opportunity there for about a 100,000 tons for us. So if you think about what that means from the standpoint of the total volume of Flat-Rolled Product sales it's around 30%. So the rest of the product would be more differentiated. It would be plate, specialty plate, higher alloy and differentiated sheet product including nickel and titanium precision-rolled strip product, a more engineered strip product, etcetera. So I think in the second quarter you saw a significant improvement in volume as our represented employees came back and we got the finishing facilities ramping back up. The materials started to flow better and we built on that. As we were exiting the second quarter, we continue to build on it here in September in terms of getting product out. And whether you'll see the same total volume of shipment in the third quarter as the second quarter is somewhat dependent upon the market demand, because as I said the third quarter traditionally is a weaker quarter on a seasonal basis. But I think the progress that you saw in the second quarter we would continue to build on in the second half of 2016.

Well, maybe if I could just clarify. We just talked about tons. You just said that your guidance for that type of product is about 100,000 tons per year. You did 30,000 tons in first quarter, jumping up to 77,000 tons in the – sorry, 47,000 tons in the second quarter. So first-half is 77,000. Your full year guidance is 100,000, so I'm just trying to understand is there other product that is comingled in there? Or... Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. There is. Yeah here is. When I talk 100,000, I'm talking the standard, the standard stainless commodity sheet. The other thing that's in that number that you quote is strip and some other product, so yeah. And if you have any more specific questions, just give Dan a call and he'll work with you on the breakdown.

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

Thank you. And the next question comes from Chris Olin with Rosenblatt Securities.

Hey. Thanks for taking my call. Richard J. Harshman - Chairman, President & Chief Executive Officer: Go ahead, Chris.

Could you provide us with an idea on what your titanium mill lead times look like? I guess how far are you booking into 2017? I guess to add on to that, right now how would you characterize titanium inventories within the frame channel? I know historically there's been a lot of excess material in the channel which has caused these like lumpy order trends, and I'm wondering if that's changed at all? Richard J. Harshman - Chairman, President & Chief Executive Officer: Yeah. First of all, most of our titanium business is contracted, Chris, under long-term supply agreements. So typically what happens is as we get into the late third quarter and early fourth quarter, the customers tell us what their load is going to be for 2017. But each of the contracts, I mean in some cases there are minimums; in other cases, there are shared percentages, so all that really gets settled out before the end of 2016. Needless to say, the capacity is there, obviously, to support what the intent was under the long-term supply agreement. I think the bigger issue is more the transactional-orientated business, right, which is what I think is more relevant to your question. That's a much smaller piece of our titanium business, and we're booking in some case, depending on the product form, we're booking into the fourth quarter from a lead-time standpoint. In other cases, we're still booking into the third quarter. I don't think on the transaction business anybody at this point in time would really be looking at 2017 at this point. That's just not how – that's not where the lead times are anywhere, and that's not how the process works. I think that our view on the titanium side is that inventories are being managed very…

Just as a quick follow-on. I thought I saw Uniti volumes were pretty strong for the quarter and I was just wondering if there was anything behind that given kind of what you're thinking on the industrial side of the markets. Richard J. Harshman - Chairman, President & Chief Executive Officer: No, I think that some of its project related, right? So it's always lumpy. I think that a large part of that demand is really – a significant part has really come from the U.S. market, right? As opposed to the more traditional international markets. I think pricing is still extremely competitive on any project because the asset utilization not only by the U.S. suppliers but also the international suppliers, be it from Japan or Korea. The US obviously – when I say US I mean the Uniti assets which are really a combination of VSMPO and ATI. So I think the capacity availability is there which keeps a lid on pricing. At the lower end pricing is really pretty nasty and quite frankly Uniti doesn't participate at those levels, right? So I think Uniti is being very selective in terms of which projects and how we participate. And we'll continue to do that because we're focused on it, not from a volume standpoint, but from a profitability standpoint.

Okay. Thank you, Rich. Richard J. Harshman - Chairman, President & Chief Executive Officer: Okay. Thank you. Richard J. Harshman - Chairman, President & Chief Executive Officer: All right. Thank you very much for joining us on the call today. And again, 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.

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