Allegheny Technologies Earnings Call Nuggets: Mid-Single Digits Growth and Boeing’s Inventory Levels
Allegheny Technologies Inc (NYSE:ATI) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.
Mid-Single Digits Growth
Richard Safran – Buckingham Research: Rich, I just wanted to first take a stab here at your guidance. Well, you say you expect moderate revenue growth and improvement in the segment operating margins. I wanted to know maybe if you could quantify that maybe a bit further for us, I mean for example, do you think you can do mid-single digits growth in ’13?
Richard J. Harshman – Chairman, President and CEO: Well, I think, the operative term being used is moderate, so we’re not specifically giving quantitative guidance. I think as you look past — as you look backwards for the last three years, beginning really in 2010, I think we entered each of the years of ’10, ’11 and ’12 with a view of improving global macroeconomic conditions, that’s what our plans assumed, and really through the first quarter, we were tracking very well to our plans and quite frankly, our view entering each one of those years was really no different than most economist views or I think most views across the industry is that we operate in. Then, in each of the last three years, for all of the issues that we’ve talked a lot about over the last two or three quarters, mainly the macroeconomic issues, the end markets began to weaken and really beginning in the second quarter of each of the last three years. As we entered 2013, I think that there is more general caution and concern because of the issues that remain unresolved, throughout the world. They’re mainly fiscal and economic related. So, the caution that we’re taking is just that, I think it’s prudent, I think it’s warranted. It’s how we’re managing our businesses. So, we’re not doing anything differently internally than what we’re communicating on this call. So I think that the term moderate means probably the same thing to most people I think its growth. It’s not zero. It’s not down but it’s certainly in the single-digit range
Richard Safran – Buckingham Research: And then just on the aerospace aftermarket and your comment about demand. I guess, starting with Investor Day you’ve been pretty cautious you noted that like, for example, the supply chain was managing tightly we seen GE spares demand leveling-off and Pratt’s 4Q orders also appear to be encouraging. So, I wanted to know if this now represents a change in view for you for the better and assuming you think demand is improving. I just want to know if maybe you could tell us how long you would expect to see – how long before you see the pull through before you see an increase in demand?
Richard J. Harshman – Chairman, President and CEO: Typically, what we see in that supply chain is some leading indicators of demand improvement from the distribution channel mainly and we are seeing a little bit of that in the first quarter but not enough to really make it trend. I think as we try to connect the dots and we listen to our customers and we look at the supply chain and we look at the fundamentals that really drive the spares market. I think that the latest projections are the expectation that you know the global airlines collectively will – the profitability will grow up to the level of about $8 billion in 2013 which is an increase compared to 2012. I think that the supply chain has done an excellent job of managing the inventory and lowering the inventory and we live that early through the second half of 2012. I don’t think that there is any, what I would call, robust signs that would indicate we are going to see a dramatic improvement in Q1, but I think as we kind of look at things and hear things and make the connections. There is a possibility of that in the second quarter and more likely in the second half of 2013.
Boeing’s Inventory Levels
Chris Olin – Cleveland Research: I just want to get some clarity on, I think going back to your comments regarding titanium and I guess you referenced the supply chain are getting better and I just wanted to see if your views had changed in terms of Boeing’s inventory levels and when those could be cleared out. I think previously you started thinking about 2014 in terms of balanced market, anything out there that would suggest it could be earlier or later?
Richard J. Harshman – Chairman, President and CEO: No, I mean, I still think that only Boeing really knows what their situation is and they haven’t really changed much the comments that some of their executives may publicly earlier in 2012 and then over the summer of 2012, and I think most of that would lead to the conclusion that the likely timing is more along the lines of ’14, and hopefully there is no disruption or change in the rate ramp from some of the issues that they’re dealing with on the batteries, and if that’s the case, I think that the logical conclusion is as we’re sitting here in the first quarter of 2013 we’re closer being in balance on the Boeing inventory than we were six months earlier.
Chris Olin – Cleveland Research: Just shifting gears a little bit. Just curious on the electrical steel market; I know you referenced a flat outlook. I was just curious, in terms of some of those silicone steel businesses, if you had seen any positive impact from the residential growth but more importantly the hurricane rebuild and if that had helped in terms of the volumes?
Richard J. Harshman – Chairman, President and CEO: I think to the extent we have, it might be at the margin level, as we look at the housing, the new housing construction and the improvement that evidenced in the U.S. housing start market certainly over the latter part of 2012, it’s really our view and our understanding that most of that is really in developed plots or developed projects where the infrastructure has already been built and put in place and had been sitting idle, as the economy worked through, very bad housing crisis and excess supply. So, I don’t think that we’ve really seen any dramatic improvement in demand from that side, when you have a natural disaster like the tragedy from the hurricane, you see some improvement there, but it really collectively is not significant enough to drive a big sustainable change in the market.