Good day, and welcome to the ATI Third Quarter Results Conference Call. . Please note, this event is being recorded. I would now like to turn the conference over to Scott Minder, VP, Treasurer and Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to ATI's Third Quarter 2021 Earnings Call. Today's discussion is being broadcast on our website. Participating in today's call are Bob Wetherbee, Board Chair President and CEO; and Don Newman, Senior Vice President and Chief Financial Officer. Bob and Don will focus on our third quarter highlights and key messages, but may refer to certain slides within their remarks. These slides are available on our website. They provide additional color and details on our results and outlook. After our prepared remarks, we'll open the line for questions. As a reminder, all forward-looking statements are subject to various assumptions and caveats. These are noted in the earnings release and in the slide presentation. Now I'll turn the call over to Bob.

Thanks, Scott. Good morning, and thanks for joining us today. It feels great to report that we returned to profitability in the third quarter, 3 months ahead of our expectations. This was no small achievement, as we overcame pandemic-induced disruptions, a 3-plus month labor strike and the challenges inherent in significant business transformation. Our success is due in equal parts to accelerated rates of recovery in our diverse end markets, our significant business restructuring and transformation efforts and the perseverance of the ATI team. Our third quarter adjusted earnings per share were $0.05. EPS improve to $0.35 per share when you factor in the net positive impacts from settling our recent labor strike, including the benefits from our new collective bargaining agreement, and the lingering strike-related costs as well as the gain from the Flowform Products divestiture. I'm proud of what our team has accomplished, overcoming the challenges of the past 2 years. We're winning on the top line through new business and by capturing share gains. We're winning on the bottom line by tightly managing costs and solidifying our financial foundation. We've begun to pivot to growth. We're excited about what we can achieve as the commercial aerospace recovery accelerates and our business operates at high utilization levels. Before I dig into our performance and outlook by end market, I'll provide a progress update on a few of our strategic initiatives. First, we took another step in our ongoing business transformation. We sold our Flowform business for $55 million, resulting in a gain on sale of nearly $14 million. While this business primarily serves the defense market, it had little connection to the broader ATI. There were a few material synergies, and its long-term success was linked to specific program volumes rather than our material science. The new owner…

Thanks, Bob. Bob already gave you my opening line. ATI returned to profitability in the third quarter, three months ahead of our expectations. A lot of hard work went into rightsizing the business and putting us on this path for growth. We'll celebrate for a moment, but in reality, we've already shifted our focus to capitalizing on this momentum, further expanding our business and generating shareholder value. Now for the details. Overall, Q3 revenue increased to $726 million, up 18% sequentially and 21% year-over-year. Q3-adjusted EBITDA grew to $80 million, up 49% sequentially and up 381% year-over-year. Q3 performance suggests a revenue run rate approaching $3 billion and an adjusted EBITDA run rate of $320 million. On a reported basis, ATI earned $0.35 per share in the third quarter. We earned $0.05 per share in the quarter after adjusting for a net $43 million of special items. These included gains for post-retirement medical benefits, resulting from the new SRP collective bargaining agreement and from Flowform products divestiture. Strike-related costs were also excluded. To better understand our results, I'll provide some color around each segment's performance. Starting with AA&S, sales grew by 35% sequentially and EBITDA by nearly 60% versus the prior quarter. Within the segment, the SRP team did an outstanding job accelerating post-strike production levels. This was against a backdrop of strong customer demand and elevated pricing opportunities. Their efforts produced tangible results, bringing us back to first quarter 2021 production rates by the end of September, as we had predicted. Our Precision Rolled Strip business in China once again had record sales and earnings due to continued strong demand across a variety of end markets. AA&S segment Q3 performance also compared favorably to Q3 2020. Revenue increased $49 million, and EBITDA increased $46 million. This impressive earnings growth…

Thanks, Don. I'll close with four important points. Number one, ATI is focused on growth with the cost structure we need for success. Number two, we're well positioned in key markets to achieve higher than GDP growth over the long term. Number three, transformation of our product mix is largely on track and will deliver significant benefits. And number four, our people, the ATI team are the core of our competitive advantage. Together, we've accomplished much during an extended period of uncertainty, challenge and change. I laugh a little when I hear financial experts and market pundits describe what we've collectively weathered as headwinds. That's a tad bit understated. The ATI team has persevered to do what needed to be done, working safely and responding with urgency, always with the long-term interest of the company and our shareholders in mind. Has it been easy? No. Have we occasionally had to first convince ourselves it was possible and that we could do it? Yes. But to be clear, we've done what needed to be done. I'm proud of what we've accomplished together. Most importantly, I thank our team for all they've done and the enthusiasm they have for everything that is yet to come. With a clear strategy and consistent focused execution, we're accelerating our velocity to a very successful future. With that, I'll ask the operator to open the line for questions.

. At this time, we will pause momentarily to assemble our roster. And the first question will come from Richard Safran with Seaport Research Partners.

So I have two questions. First -- the second one is a bit more strategic in nature, but first, I just wanted to ask for a bit of a clarification at HP. It was interesting, sales driven by energy, aerospace with select defense down. You noted and you spoke about, Bob, higher forgings offsetting -- offset by Specialty Materials. Now correct me if I'm wrong, but materials are more of a long-lead item. And if aerospace production is increasing, why would materials be declining? I take it just from your remarks, that it's strictly due to destocking. And the other thing is, I think you said the issues would be resolved soon. So do I interpret that to mean you probably have a 4Q impact but not likely 2022?

All right. Rich, I'll take that question. A couple of things. You're right. The forgings business, a great example of that was the LEAP-1B. I'll give you a little factoid there. So in Q3, we shipped more LEAP-1B forgings than in all of 2020, right? So when you think about that, what you're seeing is the accordion effect of the supply chain. So the first thing we had to do is get the forgings to the customer. Now we're pulling through kind of some trapped inventory that was there, the billet that we supply or other supply. And then as that gets depleted here at the balance of the year and end of the year, which I think is a fair assumption that it will be gone towards the end of the year, so by the time we get to 2022, we should see a better synchronization of forgings and that longer lead time billet item. There's still some pockets out there, customer-specific, alloy-specific, depending on batches and pull rates. But we're definitely seeing it in the engine side where the demand and the order book, we're booking. If you wanted to order today, it'd be early Q2, probably for some of the longer just for forgings and some of the billets. So we're starting to see that demand build. We're obviously adjusting our crewing and capacity to accommodate it. So I think I answered your question, which is it's the accordion effect of pulling inventory out. And yes, we expect that supply chain that we're part of to kind of be back to kind of quarter demand levels and in sync with demand as we enter into 2022.

Okay. Second one, Don, I wanted to know if you'd be willing to expand on some of your cash flow remarks, and not just '22, but maybe, if you would, take a long-term view here. Could you discuss the major moving pieces that contribute to your cash flow, not just like improvements in net income, et cetera, but for example, you mentioned -- you made a brief mention about cash pension, working capital trends, also D&A, CapEx, et cetera. And I'm using these as examples, but I'm looking for trends in the big pieces that really kind of drive your long-term cash flow outlook. And if you could just tell us how you're thinking about it.

I'm happy to do that. Of course, you said not to include earnings, but of course, I have to, right? So the first major movement lever that's going to really drive the cash flow generation is going to be profitability. We've talked in the past, Rich, about the trajectory around our ability to generate increased profitability as our end markets recover. So that is a key. And we've walked you through the math, walked everybody through the math before. This is a business that 2019 volumes and mix, that should generate in excess of $600 million of EBITDA. That's important. When you think about the other key drivers around really cash flow, first thing that comes to mind after earnings is managed working capital. We are myopically focused on achieving our sub-30% target. What does that mean? What that means is that we're going to work down our managed working capital levels to be below 30% of revenue. We've been there before. It should take us probably a couple of years to get there from where we're at right now. We ended this last quarter north of 40%. We should end Q4 probably certainly well below 40%, maybe mid-30s. And then as we think about achieving that 30% target over the next couple of years, one way to think about it, Rich, is you take our exit rate out of Q4 of this year, and then you think achieving sub-30% 2 years from now and draw a line, right? That will be directionally how we think about continuing to work down our working capital investment. So that's important. Another key driver, of course, is CapEx. The way to think about CapEx, I'm going to give you a little bit of kind of a bifurcated view of CapEx. One is to…

Yes.

And the next question will be from David Strauss with Barclays.

The Q4 adjusted EPS guidance, let's just take the midpoint at $0.10. Bob, is that a good way to kind of -- is that a good place to build off of as we think about next year, given all the moving pieces here with the exit from stainless and metal prices? And kind of how should we think about building off of that as we model out next year?

This is Don. I'm going to take a run at the question, and Bob can mop up if it's needed. But yes, I think, to think about our exit out of 2021 from an earnings standpoint, that $0.07 to $0.13 of guidance is a helpful and interesting data point. But you want to consider a couple of things. First of all, we did note that we've got a planned strategic outage in Q4 in our SRP business. It's part and parcel to the transformation of that business to a specialty products business. And so we're going to have some out-of-pocket costs associated with that in Q4. Probably the right way to think about those out-of-pockets and under absorption impacts, I'm guessing it's something in the $10 million range, just as a placeholder. And then we also noted that we've got a $7 million good guy on the tax line. So if you're looking at EPS and projecting our EPS, that $7 million good guy in the tax line, you wouldn't want to extrapolate to all quarters in 2022 because it's a kind of once in a year item that we pick up in Q4. But as you think about our trajectory, what I would encourage you to think about and consider as you think about our future earnings, our Q3 run rate, almost $3 billion of revenue and $320 million of adjusted EBITDA. It is a dramatic turnaround in this business, but it's not by accident. It's not by accident because a meaningful portion of this is because of the changes we are making in the transformation. It's also the cost takeouts that we executed throughout 2020 and efficiencies that we're continuing to capture. And in addition to that, of course, we are expecting recovery in our key end markets. Aerospace, of course, is the star in that -- in those end markets from a profitability standpoint for us. So hopefully, that helps you.

Yes, it does. And I guess trying to put a finer point on the cash flow question. You're projecting, Don, this $600 million EBITDA. Would you -- at what rate can you convert EBITDA into cash? Is it a -- including pension, I mean, is it a 30% conversion? Is it a 40% conversion? What do you think about as kind of the right conversion rate of EBITDA into free cash?

Well, for that, I'd kind of -- I'd prefer to -- instead of giving you just a blunt percentage, what I'd like to do is just, again, give you a little bit of data point, right? So if you're starting with EBITDA, you want to remember that there's cash interest that you'd want to consider on that. Our interest expense runs in the range of about $100 million right now annually. So you want to consider that. We are tax-shielded. So taxes shouldn't have a big impact on what you're projecting. And then the other important part of it is working capital, right? So as you're modeling it, you want to consider our target. We wholly and completely believe we can get back to where you've already been. That doesn't sound very heroic when you say it like that. We were at 30% before. And so we've got some work to do that structurally and consistently, but we believe we can get there. And then the big question that you're going to want to strike an assumption on is how much growth CapEx is in a given period. You already know our maintenance CapEx because I just shared that. So if you're thinking about 2022, for example, what you can -- what I would do is I go back to the data point that we gave you at the beginning of 2020 before COVID raised its head, and that was $200 million of total CapEx. So I think with all those data points, you probably can take a view in terms of how to think about conversion.

Okay. And sorry, last one. Next year, including whatever you do from a pension perspective, would you expect free cash flow to be positive? So including pension, not excluding pension?

Well, that is certainly our target. That positive free cash flow is always our target, right? We understand the value creation that comes with positive cash generation. So one thing -- another data point that might be helpful to you, by the way, is, and you had asked and I missed it, how to think about pension contributions. So we're on this pension glide path. And I can't tell you how excited we are to see the potential to be out of the pension business. And we expect that -- we contributed $67 million to our pension plan in 2021. Our minimum required is more like $10 million or $12 million. What you should expect, as you're thinking about free cash flow generation and conversion is that we'll probably continue to make contributions in the $50 million to $70 million range for the next 2, 3 years. But it's all going to be driven by this ultimate objective of driving our net pension obligations to a de minimis level and making them irrelevant to you guys and to ourselves. And we're on that glide path. So very, very positive.

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

So the way that we're essentially looking at the fourth quarter with all the moving pieces here, and I think you hit on with David, and I don't want to get expectations too far out of the balance is that EBITDA, plus or minus, should be reasonably similar to 3Q, because you got HPMC moving up and you have AA&S moving down largely on the outage. Is that the way to think about it?

I think that's good math.

And then on your free cash flow being modestly positive -- breakeven or modestly positive for the year, excluding pension contributions, is that pension contribution number $67 million this year? Is that...

The first part of your question, Phil, broke up. Can you repeat the first -- can you repeat it?

Yes. I was saying in your free cash flow guide for the year of breakeven or modestly positive?

Yes, sir.

Excluding pension contributions. Is the pension contribution number, $67 million? Is that the number...

Yes, we're not -- yes, that's it. We're not anticipating making any additional pension contributions in 2021.

But that's the right number to be using, $67 million?

Yes. That's right. Yes, you've got it, Phil.

Okay. And then in your filings recently, you've been providing backlog for the business. What should we be thinking about in terms of the backlog at the end of this quarter versus the last quarter?

I think what you would expect for our SRP business, we -- I mentioned that we built our managed working capital for SRP. We were still working through the strike-related backlog. You would expect that we will be through that backlog by the end of this year. Beyond that, I would say backlog is generally in the same range at the end of Q4 as we saw at the end of Q3, just generally. What would you add to that, Bob?

Yes, I think that's right. I think, Phil, the way we're looking at it is kind of where are our lead times going and what's going on in the industry. So what we see for our Specialty Materials business is that lead times through the pandemic were less than 90 days. Now they're moving out to closer to Q2. So 120, 150, 180 days. So we're getting to the point where we're starting to see the orders actually align with this demand ramp. So from a backlog perspective, I think the lead times are the best indication that HPMC is really seeing the increase in the order book.

Okay. And then last one, just from a housekeeping perspective, on debt reduction, the refinancing didn't fully gel in 3Q in terms of the actual balance sheet. So how much debt, including accrued interest and other things, should we expect to be coming out of Q4 as those bonds are retired?

So the headline numbers on that would be, we had $500 million of par outstanding at the end of Q3 that we took out. We also paid about a $70 million premium to execute that redemption. And then both of those events obviously happened in mid-October. And then from an interest standpoint, there's about $6 million of interest that we ended up paying related to that redemption.

The next question will come from Seth Seifman with JPMorgan.

Just wanted to ask first about HPMC and the forging ramp that's ahead. Obviously, we've heard in a lot of different places about some of the challenges in ramping. It's historically been a challenge in aerospace forgings. I guess how prepared you feel for what's there in Q4? And what kind of work do you have to do for 2022?

Yes. So I think we're in good shape in our forging business for Q4. We actually supply a lot of the billet that goes into our forgings. So we feel we're in pretty good shape there. We do have isothermal forging and heat-treating capacity that we slowed down during the pandemic. That's coming and getting qualified here. So we feel really good going into 2022, 2023 with the capacity that we're going to have in place. And the things we're working hardest on at the moment are getting our workforce and our labor force back. And we have a pool of prior employees or people that got laid off as we went in. And so we're in the process of calling them back in Q4. Our headcount issues, probably we're going to end up increasing our headcount as we go into next year by 5%, 6% from where we are today, mostly on the direct labor side, and that's where we're spending most of our time. And it's the hiring and then followed by the requisite training to get them in the right spot. But we recognize the importance of getting our staffing in place. I would say our HR team is fully engaged in making sure we get people back. And our team has done a great job to avoid a lot of the COVID-related disruptions. But we obviously keep our eye on that, too. So I think the #1 issue for us is making sure our crewing is in place as we go into 2022.

Okay. Great. Great. And then, Don, I think you mentioned that if the year ended today, the pension liability will have shrunk from year-end. Can you tell us what that would be if the year ended today with today's discount rates and returns and the contributions that you made?

It's a fair question, but I'm actually not going to fully answer it, largely because there's a lot of science, a lot of work that has to be done around that. But what I can say is that we love the direction that key movers are going. And just for some context, when you look at the discount rate and the volatility around discount rates, for every 50 basis point move in discount rates, it has $150 million impact on the liability. And so if we were to see just a 50 basis point move in discount rates in our favor, then we would see $150 million good guy in our balance sheet, right? And I don't want to share with you how much have they moved so far this year because then, that kind of, I think, takes us into a level of detail I'm not prepared to talk about. But there are indicators of good guys, and we're certainly managing with the expectation that we'll continue to have very good returns on our investments. I think our advisers and our team have done a good job on that. And then there's not a whole lot we can do about discount rates, but we can at least cross our fingers and hope they hold or maybe even go even more in our direction.

And the next question will come from Gautam Khanna from Cowen.

Good results.

Thanks.

So a couple of questions. First, just what are you guys seeing with respect to titanium demand in 2022, given like all the noise around the 787 inventory overhang at Boeing and then the 737 ramp and how that plays out. I'm just curious, are you -- do you guys have pretty good visibility from the Boeing supply chain on what your titanium shipments will be next year? And are they going to be up or down year-over-year relative to '21?

Yes, good question. And we probably have more visibility than we'd like at times as to what's going on with titanium. So I'm going to limit the titanium question to airframe specifically. And then if you want to follow up, we'll go further. So I would say that 2021 is pretty much the low point, but 2022 will probably be flat to that on the titanium. I'll call it the mill product side that goes into airframe from the big B perspective. One of the benefits we have that offset some of that is a growing share position with the European OEM with our new long-term agreement there. So we should actually see our shipments be flat to up in 2022 for titanium mill products. But I think the industry will see flat through 2022. And it's really going to take, as you suggested, the 787 is going to have to come back to have some level of confidence. And certainly, the 737 needs to get to 31. Although from a titanium standpoint, it's really the 787 decision that I think we're all waiting for. Now we've taken a lot of our in-process inventory down, but there's a lot still in the pipeline. Did that help?

Okay. And just -- absolutely. That's very helpful. And then to expand that on the engine side, titanium and maybe also just on industrial tiling, do you guys have a view on '22 with respect to both of those end markets?

I think on the engine side, we see going up, and we see it going up for a couple of reasons. One is obviously the planes that are flying are the next-generation engines, for sure. Obviously, that's a big nickel part for us. In the industrial titanium area, we actually see very strong global demand there, which has been positive. We don't talk much about that because most of the questions we get are aerospace related. But I would say, industrial titanium will be up. And I think on the engines, we should see similar kind of growth rates as we're seeing in the forgings and billet business, not stellar and titanium because of the airframe problem. But other than that, it should be good enough.

Yes. And last one before I turn it over, just there's obviously Specialty Metals Corp has a strike. I don't know if there's any -- are you seeing any share gains not -- kind of unrelated to the GE contract that you signed that obviously conferred more share. But just because of competitor challenges due to whatever, whether it be strikes or supply chain or what have you, are you seeing kind of an improvement in emergent demand in any of the end markets? And if so, if you could just kind of -- how long might that last? What's your expectation there?

Yes. All right. I always have to make sure my attorneys are happy when I speak on a call like this, Gautam, but I'll answer your question. The answer is yes. We are seeing opportunities emerging from other competitors' supply disruptions. And I would say it's hard to quantify how long any of these labor disruptions or these supply disruptions will last. But we are seeing it, and it's a good business for us. And then about half of what we get in emergent gets converted to LTAs, right? So the first calls you get are transactional calls, and then the next opportunities are certainly converting those to LTAs, which is our goal. So I think it's a combination of nickel and titanium opportunities across the board. But is it going to move the needle significantly for the company? It's probably going to be in our Specialty Rolled Products business is where we're seeing a lot of opportunities, a little bit in Specialty Materials. But it's been positive for us. We're just glad we resolved our issues and have moved on.

The next question will be from Josh Sullivan with The Benchmark Company.

Just a follow-up on the titanium theme. Your raw titanium supply agreements, have you seen any impact from the magnesium shortages? Or as you just noted, our current inventories and demand for '22, just not a huge pull in that right now anyways?

Yes. I think the simple answer to the question on mag is no. We haven't seen any major issues yet. We watch it because it's an indicative issue of all other kind of supply chain issues that are out there, but not yet, right?

Got it. And then on the commercial space project, the discrete one that you mentioned, is this an existing customer that's switching material? Or is this a new customer?

See, it's a good question. It's a long-term customer that's been in the space business. They're supplying, obviously, the commercial space activity. I would say it's kind of a bulk buy, right? They're kind of buying ahead. And I think that's prudent as the capacity they want will probably get sucked up by the increasing commercial aerospace recovery. So it's an exaggerated buy from -- it's a multiyear buy is probably what I would say. And so we're -- we're glad to have it and it leverages our material science and advanced process technologies pretty well. So I think that answered your -- is that close enough, Josh, to answering your question?

Yes. Yes.

The next question will be from Paretosh Misra from Berenberg.

Bob, Don and Scott, just, I guess, a question on 787 given the issues they had in Q3. Do you think your shipments for that program were in line with 5-per-month production? Or you were running lower than that during Q3?

Good question. I think they were still a ways away from being in line with 5. I think we're probably lower than that. I mean the situation, I think, on titanium with COVID and various other things kind of got out of whack. I think it's probably -- I don't know if it's the worst that the industry has ever seen, but it's pretty significant in terms of working that through. So I think what -- the difference between double-digit 787 and 5 was the biggest gap we were running into. I think it's probably going to extend the destocking. What we thought would probably be by third quarter, it's probably going to extend it through the balance of the year, and it's really the destocking issue. I think there's a desire by that particular OEM to smooth out the solution, so people can do it as economically as possible. And we're seeing that, but it's to a degree. But I think the answer to your question is no, we hadn't gotten justified. We were still kind of working the destocking issue. And so it's just an extended -- extension of the titanium recovery from midyear to probably the end of the year to catch up.

Got it. Got it. And then how should we think about your Specialty Rolled Product sales in the next two quarters as you exit some commodity business? Should it be down, say, about $100 million sequentially in Q4 because you idled, what, $400 million, $500 million of capacity? Or some of that was already captured in your Q3 results?

Yes, I think it's -- I would say, I don't see it going down. I think the issue that we're dealing with is we're going to end up with some margin compression because of the work we're doing with the outages to get prepared or finish off our transformation, which is actually ongoing now. But I think, in general, we probably see 10% growth in the top line. And why Don was signaling the outages issue is that if I have this $10 million issue that we're dealing with for the maintenance issue. Is that fair, Don?

Right. And then the outage, of course, was related to SRP.

Right.

But it will be a headwind relative to our otherwise performance.

Right, the overall business.

I see. Okay. And then maybe a last one. Just in terms of 737 MAX ramp-up, is your exposure to that platform similar to your exposure to 320neo? Or MAX is bigger or much bigger than that?

Let's see. So I think it depends on a couple of things. We do -- we like every airplane ever built, it flies today, period. So we're on every program. We love them all. I would say when you look at the A320 series, there's clearly engine preferences that people have. And some of them don't always pick the LEAP, but we're -- they might go with the geared turbofans. So I think that's the biggest differential between them is 100% LEAP on 1 program and probably 60% LEAP plus gear turbofan on the 320. So -- but it's -- we're getting to the point where we're happy when every -- any airplane gets built anywhere in the world. So our material is there, but maybe a slight advantage to LEAP-powered airplanes versus geared turbofan-powered airplanes, but we love them. We love them all.

The next question will be from Matthew Fields from Bank of America Merrill Lynch.

I don't want to beat the working capital horse to death here, but your receivables kind of jumped up a lot this particular quarter. Is that kind of initial deposits on the LEAP engines that's going to reverse when you get cash in the door? Is that something else? Can you just talk about kind of why the accounts receivable was so dramatically higher in the third quarter?

Sure. Of course, we had the growth in the revenue. But I also mentioned that for SRP, SRP, of course, was coming out of the strike and the recovery in Q3. And so they were ramping throughout Q3. A lot of their sales were back-end loaded in the quarter. And because of that, that drove the AR balance up at quarter end. That will, of course, be collected in Q4, and so we should see that release.

Okay. And that's part of the working capital flip in the fourth quarter that will get you to at least the cash flow guidance?

That is -- yes. Yes, that's a great interpretation. And we'll see a similar good guy in the release of inventory for SRP, similar in mechanic or direction, not similar in magnitude.

Okay. Great. That's helpful. And then kind of next up, you chopped a lot of wood on the balance sheet getting rid of that near-term maturity. What -- can you talk a little bit about the next kind of couple of steps of the deleveraging plan? You mentioned $50 million to $70 million pension contributions for the next few years. After that, is it kind of paying down the '22 converts at maturity or hopefully with equity from -- hopefully, from the credit side? I know there's other parties on the call, but what are the kind of next steps in your mind towards kind of deleveraging the balance sheet?

Sure. Well, step one, first and foremost, maximize our earnings and the drop-through to cash conversion, right? So -- but when you get past that, what are we going to do with the cash? Well, we think in terms of, we know we're going to delever in the normal course because of the ramp that's already happening in our profitability, right? From a net debt ratio standpoint, we took our net debt-to-EBITDA ratio down 130 basis points in just the last quarter. That is going to continue to drive down that metric. So we have that benefit. Then when you talk about the maturity profile, you're right, our Treasury team did a phenomenal job with this refinancing, pushing maturities out and really solidifying a pretty strong maturity schedule. The nearest term maturities we have 2 are from -- 2 maturities that are in the more near term our convertible debt, right? So the likelihood of both of those converting is very, very high. The nearest term on that is about $84 million, and that hits us in 2022. And again, we expect it will convert. If for some reason, it didn't convert, we're in a healthy financial position to deal with it. But believe me, I'm expecting it's going to convert. And beyond that, other actions to take, what we would love to do is not just rely on the net debt ratio. It's great to just work it down because we're more profitable. But we've got $1.6 billion of debt. We want to pay it off. So we'll, over time, attack these maturities with cash and pay those down at the appropriate times. Of course, you also need to make sure that you're not launching your growth opportunities by over-allocating to reduce your debt position. So we'll be balanced in that. Then as far as other delevering, the pension, I mean, we've already said we're on a glide path. I shared, as you had mentioned, what we're going to do around contributions. We think that we're on a very natural plan to see that delevering happen without any extraordinary efforts on our part. Maybe another -- just a question -- answering a question you didn't necessarily ask yet. But as we think about our leverage levels, I'd like to see our balance sheet levered at below 2x net debt. And we are definitely on that glide path to work down there over not too far distant future, just with what's happening in our business in the normal course.

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

Thanks to everyone who's joined us today. We appreciate your continued interest in ATI. This concludes our third quarter 2021 earnings call.

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