Good morning, and welcome to the Carpenter Technology Corporation’s Fiscal First Quarter of 2017 Conference Call. All participants will be in listen-only mode. [Operator Instruction] Please note this event is being recorded. I would now like to turn the conference over to Brad Edwards, Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Carpenter’s earnings conference call for the first quarter ended September 30, 2016. This call is also being broadcast over the Internet along with presentation slides. Please note, for those of you listening by phone, you may experience a time delay in slide movement. Speakers on the call today are Tony Thene, President and Chief Executive Officer; and Damon Audia, Senior Vice President and Chief Financial Officer. Statements made by management during this earnings presentation that are forward-looking statements are based on current expectations. Risk factors that could cause actual results to differ materially from those forward-looking statements can be found in Carpenter’s most recent SEC filings, including the Company's June 30, 2016 10-K and the exhibits attached to that filing. Please also note that in the following discussion, unless otherwise noted, when management discusses sales or revenue, that reference excludes surcharge. When discussing operating income, that reference excludes pension, earnings, interest and deferrals or EID and special items. When referring to operating margins, that is based on sales, excluding surcharges and operating income, excluding pension EID and special items. I will now turn the call over to Tony.

Thank you, Brad, and good morning to everyone. Starting with a brief review of our safety track record, slide four highlights our progress in reducing our total case incident rate, or TCIR, which finished at 1.8 for our fiscal first quarter. This compares to a TCIR of 2.2 for fiscal year 2016. We are continuing to emphasize a culture of safety across the organization, supported by strong set of standards of behavior aimed at helping our employees to work injury free. While we've made measurable progress in promoting safety and reducing injuries, we can and will always do more to improve our safety performance. As we stated before, a safe workforce is a more productive workforce. And we will continue to strive for a zero injury workplace. Turning to slide five, as expected we experienced normal seasonality patterns during the first quarter. But the results were magnified by various industry-wide challenges in specific sub-markets within our aerospace business. In addition, ongoing macroeconomic issues impacted our transportation and industrial demand in the quarter. The seasonality and market volatility in the quarter resulted in a $29 million sequential decline in pre-tax income, or approximately $0.44 per share, and pushed us below breakeven for the quarter. In addition net pension expense was sequentially higher in the first quarter, which resulted in a $3.4 million reduction in our pre-tax earnings. As Damon will discuss later, we took action in this quarter to freeze our largest defined benefit pension plan, which will result in lower net pension expense with a majority starting in the third quarter this year. Despite the volume challenges we faced in the markets this quarter, we were able to generate cost savings. The Carpenter operating model continues to deliver results, and is becoming a cornerstone of our operating performance. As we…

Thank you, Tony. Good morning everyone. Turning to slide nine, and the income statement summary, net sales in the first quarter were $389 million or $339.8 million, excluding surcharge. Sales excluding surcharge decreased 16% sequentially, reflecting lower volume driven by normal seasonality patterns, coupled with declines in certain aerospace sub-markets that Tony highlighted. On a year-over-year basis, revenue, excluding surcharge, decreased $45.3 million or 12% on 7% lower volume, reflecting the decline in our energy related end-use market. We anticipate the decline in the transportation, mainly related to lower heavy-truck demand, and lower than expected sales in certain aerospace sub-markets year-over-year. Operating income as a percent of sales when excluding pension EID and special items was 2.6%, a decrease from the 8.9% reported in the fourth quarter. Operating margin was also down compared to the 8.5% in the first quarter of last year with the decline attributable to lower volume in the current period coupled with the year-over-year decline in our PEP related business and the inclusion of the approximately $2.1 million in consulting costs, reflected in SG&A expense that was excluded last year. Our effective tax rate for the first fiscal quarter was negative 17% compared to 36.1% in the fourth quarter, and 44.7% in last year’s first fiscal quarter. The first quarter of fiscal year 2017 included a $2.1 million desecrate tax charge related to our decision to make a $100 million voluntary pension plan contribution. In the first quarter of fiscal year 2016 included a $2 million discrete tax charge related to our decision to sell an investment in India. The net loss in the first quarter was $6.2 million or a loss of $0.13 per share. On an adjusted basis, excluding special items, the net loss would have been $3.7 million or $0.08 per share. The…

Thank you, Damon. Moving to slide 16, Carpenter has built a leadership position across multiple attractive end-use markets, with our specialty alloy focus and commitment to be in a complete solutions provider for our customers. We remain well position in aerospace, including participation on all the new engine platforms. And believe that the industry headwinds will abate and inventory restocking will drive improve results. As I said, the current aerospace program transition is creating near-term headwind for participants across the industry. However, the market uncertainly does not temper our enthusiasm or industry’s long-term growth potential. The underlying fundamentals, such as total projected build rates, projected engine deliveries, and estimated global passenger growth, all point to an attractive long-term outlook for the industry. The transportation market also offers solid long-term growth potential for Carpenter as our solutions help OEMs address a number of industry regulations. Light vehicle remains highly attractive as overall global production is expected to grow in calendar year 2017, pushing the record level production. While volume demand in the heavy truck market has been lower recently, our high end alloys capture significant premium content per unit. We also continue to execute on our goal of unlocking new transportation sub-markets, such as marine and rail, where we believe our solutions and expertise address industry trends and challenges. Our market position in medical is strong, as our solutions are aligned with market trends, including the aging population and a growing focus on minimizing invasive procedures. While distributor consolidation will impact us in the short-term, we believe we have a strong growth potential given the breadth of our offerings, including titanium bar, titanium wire, premium nickel, and cobalt based alloys, as well as powder metal. In energy, as I mentioned, we are seeing some positive indicators in the market that suggest…

Thank you, sir. We will now begin the question-and-answer session [Operator Instructions]. Our first question comes from Gautam Khanna with Cowen and Company. Please go ahead.

I had a couple of questions, the first was just you know there's this commentary about uncertainties in the supply chain within aerospace. But what specifically is so uncertain? I mean, we know what the production rates are, I guess there's some debate on whether 777 goes down again. But what changed, do you know, with respect to your order book, as you said here three months ago. Did you just get cancellation? Is this all a non -- is this all a service center side phenomenon. Like, what specifically changed?

For us the uncertainty is really associated with the destocking on the platform changes, as well as customers delaying placing some of their orders. Remember, our lead-times are much shorter than they were a year ago, 10 to 12 weeks, or so, the visibility is a little less. So from our standpoint, the primary areas were on the distribution side, the fasteners side, and the structural side.

And on the structural side, is this the Latrobe landing gear business, or what specifically on the structural side did you see less demand for?

It was across all of the products, but it's not just Latrobe, it's here in Redding as well.

And then you're expecting the sequential pick-up, and is that supported in orders you received that you are sitting on right now? Or is this orders you anticipate you will get in the next month or so?

We've seen a pick-up in the first month of the quarter. I mean, if you look back over the last couple quarters, you've seen our backlog consistently drop. Some of that is obviously due to the energy market, but some on the aerospace side as we pull-in our lead-times. But as we look at these last and first four weeks of this quarter, we've seen an uptick across all of our aerospace sub-segments. So, we've seen a bit of a growth in the backlog, as well as the order intake.

And then could you talk about dynamics in pricing in the SAO segment. You mentioned some pressure in the industrial side. Is there pressures emerging elsewhere in other markets?

I wouldn't say that we’ve seen significant pressures. Obviously, as we speak with our customers, everybody is looking to maximize their value. I think we work with our customers very well to find a win-win situation.

So you're not seeing incremental price pressures on your side?

We have price pressure from product-to-product, but that's not something that we're calling out as a significant issue in the quarter.

Your next question comes from Phil Gibbs with KeyBanc Capital Markets. Please go ahead.

I have a question just on the engine business in general. Any help you could give us in terms of how big the jet engine business is within the aerospace and defense space portfolio right now in order of magnitude? Is it half the business is it 35% kind of the business?

Let me give you two rough numbers. If you look at total Carpenter revenue, aero-engines represents about 20% and there is -- that’s some plus and minuses, and obviously that’s changed a little bit over the last couple or several quarters because of the downturn in energy. But from approximate standpoint, I think 20% in total Carpenter. And if you look at the aerospace market only, engines would be roughly 40% there.

In response to Gautam's question, did and you say that in your December quarter that you’re seeing a little bit of a pick-up in both engine and structural applications?

Yes, we’ve seen a bit of a pick-up across all of the aero sub-segments, so far this quarter.

And in terms of your total backlog, you pointed at aerospace creeping up a little bit. Has your company-wide backlog stabilized and started to move up here?

Yes, it has. We’ve seen that over the last month to a month and half, we’ve seen that level off.

And then with -- question for Damon here. With the pension contribution this coming quarter, I think it is $100 million or so. And with still muted EBITDA momentum at least here in the next three months, are you anticipating that you will have to take out some short-term debt to make that payment? And can you remind us what your availability is on your ability to do that?

So, historically we have used the credit facility to revolver that we have for seasonal working capital needs. We have the revolver outstanding at the end of the first quarter last year as well as the end of the second quarter. And then as we start to generate more of our cash flow in the back half of the second year, we’ve repaid the revolver as we’ve repaid at year-end. I would anticipate the same seasonal pattern leveraging -- putting pension contribution here this month. Obviously, that would likely -- portion of that will go on revolver, which we’ll work to pay down in the second half. The revolver itself is $500 million, matures in June of 2018. As of the end of the first quarter, we have about $495 million of available on that facility. So, no major issues from a liquidity standpoint. And as you know, we have no debt maturities up until -- or major debt maturities until fiscal year 2022, so no near-term calls on our cash.

Was that pension expense that you had given for the second half, I think you said $31 million for the first, $17 million for the second. Is that net of the expected pick-up in the defined contribution payments?

Yes, so there will be about $5 million of incremental defined contribution cost in the second half. So the ‘17 is not. Actually you have to start, Phil it's $12 million, I apologize.

$12 million net, so that just, pension we are talking about in ‘17? And then lastly on the energy side of the equation, I think you pointed to some pick-up in your IGT business at least in the after-market. Can you give us a bigger picture of what is going on there? Because that market has been seemingly a malaise or holding pattern for three or four year on the OEM side, you're citing after-market picking up. But what are the big OEMs telling you right now in terms of their willingness or wantingness to increase production?

The IGT market for us, Phil, is a positive right now, primarily on the spares, as you saw the big build on the IGT in the 2008-2009 timeframe. Now you're having the replacement parts come through. And we're seeing a nice pick-up there.

Anything different on the OEM side, Tony? On the new builds?

Well, it's always going to be a bit choppy, right. That's a bit sporadic. But nothing new there than what we've seen here in recent history.

The next question comes from Josh Sullivan with Seaport Global. Please go ahead.

If we look at the effect of aerospace production uncertainty, do you think the supply chain is under ordering relative to the build rates as the OEMs have communicated? Or are we seeing any additional de-risking around where build rates may go?

Well, I think it's a lot of items that's driving this. Obviously, you have the change in the build rate, the destocking on the fastener side. So it doesn't take a whole lot to move the needle. If I can digress just a bit, if you just think about Carpenter as a Company, we only have about 47 million shares outstanding. So that means 700,000 of pre-tax is one penny of EPS. So if you were just to do some quick math and say okay we’ve lost $0.08 this quarter. If you would flip that to an $0.08 positive, that's only $11 million of pre-tax. And if you put that in terms of volume, you know to answer your question in terms of aerospace side, that's less than 3,000 tons in the quarter. So you're talking less than 3,000 tons would take me from a minus $0.08 to a positive $0.08. That means I just would had to ship about 10% more in the quarter. So, it doesn't take a lot of change in the aerospace market for Carpenter with our size and our amount of shares outstanding to make a significant move in our earnings per share from quarter-to-quarter.

And then I’ll just switch over to energy. On the uptick that you are potentially seeing, is there any way to do any between consumption versus longer life oriented products?

Ask that again Josh, I'm not sure I followed your question.

More short-term consumption related energy, oil and gas products, versus longer life, forging the energy related products.

Certainly, I mean, we play on the rental side with our Amega West business, which is more short-term and obviously is a consumable.

[Operator Instructions] This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Brad Edwards for any closing remarks.

Thank you, Zelda. And thanks everyone for joining us for today’s conference call. Have a good day.