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Allegheny Technologies (ATI) Rich Harshman on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Earnings Conference Call

April 26, 2016 8:30 am ET

Executives

Dan Greenfield - Vice President, Investor Relations and Corporate Communications

Rich Harshman - Chairman, President and Chief Executive Officer

Pat DeCourcy - Senior Vice President of Finance and Chief Financial Officer

Analysts

Richard Safran - Buckingham Research

Chris Olin - Rosenblatt Securities

Josh Sullivan - Sterne Agee

Gautam Khanna - Cowen and Company

Kevin Cohen - Imperial Capital

John Tumazos - John Tumazos Very Independent Research LLC

Phil Gibbs - KeyBanc

Operator

Good morning and welcome to the Allegheny Technologies Incorporated First Quarter 2016 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Dan Greenfield, Vice President, Investor Relations and Corporate Communications. Please go ahead.

Dan Greenfield

Thank you, Andrew. Good morning and welcome to the Allegheny Technologies conference call for the first quarter 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. After some initial comments, we will ask for 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 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.

Rich Harshman

Thank you, Dan. Good morning to everyone on the call or listening on the Internet. The first-quarter 2016 results reflect the current positions of our two business segments. Our High Performance Materials and Components segment is well positioned for profitable growth over the next five years, driven primarily by strong and growing demand from commercial aerospace.

We are committed to making the tough decisions to return our flat rolled products segment to sustain profitability. This requires the business to be repositioned and restructured and to be more focused on differentiated products that have higher technical barriers to entry and serve markets that are global with attractive long-term growth prospects.

The commercial aerospace ramp for which we have been preparing is upon us. We saw the beginning of improving sales and operating performance in the first quarter 2016 results. ATI sales to the aerospace and defense markets grew 12% in the first quarter of 2016, compared to the fourth quarter 2015. Breaking that growth rate down by specific end markets, sales to commercial aerospace market grew approximately 20%, with jet engine sales growth of nearly 15% and airframe sales growth of nearly 30%.

Sales to the defense market were down approximately 17% in the first quarter due primarily to the timing and shipments of our products for naval nuclear applications. I believe that ATI has opportunities to grow and diversify our position in serving the defense market. We are taking actions to better focus our technical and product capabilities on these opportunities. For all of ATI, first quarter sales to the aerospace and defense market reached 52% of total ATI sales, compared to 41% of sales for the full-year 2015.